Irinquiries@prestigebrands.com
Prestige Consumer Healthcare Inc.
660 White Plains Road – Ste 250
Tarrytown, NY 10591
Telephone: 914-524-6819
[
X ]
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934
|
[ ]
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934
|
Delaware
|
20-1297589
|
|
(State
or other jurisdiction of
incorporation
or organization)
|
(I.R.S.
Employer Identification No.)
|
90
North Broadway
Irvington,
New York 10533
|
(Address
of Principal Executive Offices, including zip code)
|
(914)
524-6810
|
(Registrant’s
telephone number, including area
code)
|
Large accelerated filer o | Accelerated filer x | Non-accelerated filer o |
PART
I.
|
FINANCIAL
INFORMATION
|
|
Item
1.
|
Consolidated
Financial Statements
|
|
Consolidated
Statements of Operations – three months ended September 30, 2007 and
2006 and six months ended September 30, 2007 and 2006
(unaudited)
|
2
|
|
|
||
Consolidated
Balance Sheets – September 30, 2007 and March 31, 2007
(unaudited)
|
3
|
|
Consolidated
Statement of Changes in Stockholders’ Equity and Comprehensive
Income – six months ended September 30, 2007
(unaudited)
|
4
|
|
|
|
|
Consolidated
Statements of Cash Flows – three months ended September 30, 2007 and
2006 and six months ended September 30, 2007 and 2006
(unaudited)
|
5
|
|
|
|
|
Notes
to Unaudited Consolidated Financial Statements
|
6
|
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and
Results of Operations
|
24
|
Item
3.
|
Quantitative
and Qualitative Disclosure About Market Risk
|
41
|
Item
4.
|
Controls
and Procedures
|
41
|
PART
II.
|
OTHER
INFORMATION
|
|
Item
1.
|
Legal
Proceedings
|
42
|
Item
1A.
|
Risk
Factors
|
43
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
43
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
43
|
Item
6.
|
Exhibits
|
44
|
|
Signatures
|
45
|
PART
I
|
FINANCIAL
INFORMATION
|
Item
1.
|
FINANCIAL
STATEMENTS
|
Three
Months
Ended
September 30
|
Six
Months
Ended
September 30
|
|||||||||||||||
(In
thousands, except per share data)
|
2007
|
2006
|
2007
|
2006
|
||||||||||||
Revenues
|
||||||||||||||||
Net
sales
|
$ |
86,840
|
$ |
84,033
|
$ |
164,881
|
$ |
159,600
|
||||||||
Other
revenues
|
497
|
518
|
1,067
|
874
|
||||||||||||
Total
revenues
|
87,337
|
84,551
|
165,948
|
160,474
|
||||||||||||
Cost
of Sales
|
||||||||||||||||
Costs
of sales
|
42,770
|
41,259
|
80,092
|
77,584
|
||||||||||||
Gross
profit
|
44,567
|
43,292
|
85,856
|
82,890
|
||||||||||||
Operating
Expenses
|
||||||||||||||||
Advertising
and promotion
|
11,017
|
9,455
|
18,803
|
16,857
|
||||||||||||
General
and administrative
|
10,184
|
7,259
|
17,830
|
13,693
|
||||||||||||
Depreciation
|
129
|
219
|
253
|
439
|
||||||||||||
Amortization
of intangible assets
|
2,627
|
2,193
|
5,254
|
4,386
|
||||||||||||
Total
operating expenses
|
23,957
|
19,126
|
42,140
|
35,375
|
||||||||||||
Operating
income
|
20,610
|
24,166
|
43,716
|
47,515
|
||||||||||||
Other
income (expense)
|
||||||||||||||||
Interest
income
|
173
|
403
|
360
|
588
|
||||||||||||
Interest
expense
|
(9,768 | ) | (10,146 | ) | (19,642 | ) | (20,123 | ) | ||||||||
Total
other income (expense)
|
(9,595 | ) | (9,743 | ) | (19,282 | ) | (19,535 | ) | ||||||||
Income
before provision for
income taxes
|
11,015
|
14,423
|
24,434
|
27,980
|
||||||||||||
Provision
for income taxes
|
4,186
|
5,639
|
9,285
|
10,940
|
||||||||||||
Net
income
|
$ |
6,829
|
$ |
8,784
|
$ |
15,149
|
$ |
17,040
|
||||||||
Basic
earnings per share
|
$ |
0.14
|
$ |
0.18
|
$ |
0.30
|
$ |
0.35
|
||||||||
Diluted
earnings per share
|
$ |
0.14
|
$ |
0.18
|
$ |
0.30
|
$ |
0.34
|
||||||||
Weighted
average shares outstanding:
Basic
|
49,710
|
49,451
|
49,686
|
49,389
|
||||||||||||
Diluted
|
50,046
|
49,994
|
50,042
|
49,991
|
Assets
|
September
30, 2007
|
March
31, 2007
|
||||||
Current
assets
|
||||||||
Cash
and cash equivalents
|
$ |
8,799
|
$ |
13,758
|
||||
Accounts
receivable
|
46,512
|
35,167
|
||||||
Inventories
|
27,783
|
30,173
|
||||||
Deferred
income tax assets
|
3,337
|
2,735
|
||||||
Prepaid
expenses and other current assets
|
3,628
|
1,935
|
||||||
Total
current assets
|
90,059
|
83,768
|
||||||
Property
and equipment
|
1,391
|
1,449
|
||||||
Goodwill
|
308,915
|
310,947
|
||||||
Intangible
assets
|
651,903
|
657,157
|
||||||
Other
long-term assets
|
8,310
|
10,095
|
||||||
Total
Assets
|
$ |
1,060,578
|
$ |
1,063,416
|
||||
Liabilities
and Stockholders’ Equity
|
||||||||
Current
liabilities
|
||||||||
Accounts
payable
|
$ |
21,318
|
$ |
19,303
|
||||
Accrued
interest payable
|
7,556
|
7,552
|
||||||
Other
accrued liabilities
|
12,771
|
10,505
|
||||||
Current
portion of long-term debt
|
3,550
|
3,550
|
||||||
Total
current liabilities
|
45,195
|
40,910
|
||||||
Long-term
debt
|
433,563
|
459,800
|
||||||
Other
long-term liabilities
|
2,801
|
2,801
|
||||||
Deferred
income tax liabilities
|
117,609
|
114,571
|
||||||
Total
Liabilities
|
599,168
|
618,082
|
||||||
Commitments
and Contingencies – Note 13
|
||||||||
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
|
380,371
|
379,225
|
||||||
Treasury
stock, at cost – 57 shares at September 30, 2007
and
55 shares at March 31, 2007
|
(44 | ) | (40 | ) | ||||
Accumulated
other comprehensive income
|
98
|
313
|
||||||
Retained
earnings
|
80,484
|
65,335
|
||||||
Total
stockholders’ equity
|
461,410
|
445,334
|
||||||
Total
Liabilities and Stockholders’ Equity
|
$ |
1,060,578
|
$ |
1,063,416
|
Common
Stock
Par
Shares
Value
|
Additional
Paid-in
Capital
|
Treasury
Stock
Shares
Amount
|
Accumulated
Other
Comprehensive
Income
|
Retained
Earnings
|
Totals
|
|||||||||||||||||||||||||||
(In
thousands)
|
||||||||||||||||||||||||||||||||
Balances
- March 31, 2007
|
50,060
|
$ |
501
|
$ |
379,225
|
55
|
$ | (40 | ) | $ |
313
|
$ |
65,335
|
$ |
445,334
|
|||||||||||||||||
Stock-based
compensation
|
--
|
--
|
1,146
|
--
|
--
|
--
|
--
|
1,146
|
||||||||||||||||||||||||
Purchase
of common stock for treasury
|
--
|
--
|
--
|
2
|
(4 | ) |
--
|
--
|
(4 | ) | ||||||||||||||||||||||
Components
of comprehensive income:
|
||||||||||||||||||||||||||||||||
Net
income
|
--
|
--
|
--
|
--
|
--
|
--
|
15,149
|
15,149
|
||||||||||||||||||||||||
Amortization
of interest rate caps reclassified into earnings, net of income tax
expense of $139
|
--
|
--
|
--
|
--
|
--
|
218
|
--
|
218
|
||||||||||||||||||||||||
Unrealized
loss on interest rate caps, net of income tax benefit of
$277
|
--
|
--
|
--
|
--
|
--
|
(433 | ) |
--
|
(433 | ) | ||||||||||||||||||||||
Total
comprehensive income
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
14,934
|
||||||||||||||||||||||||
Balances
– September 30, 2007
|
50,060
|
$ |
501
|
$ |
380,371
|
57
|
$ | (44 | ) | $ |
98
|
$ |
80,484
|
$ |
461,410
|
Six
Months Ended September 30
|
||||||||
(In
thousands)
|
2007
|
2006
|
||||||
Operating
Activities
|
||||||||
Net
income
|
$ |
15,149
|
$ |
17,040
|
||||
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||
Depreciation
and amortization
|
5,507
|
4,825
|
||||||
Deferred
income taxes
|
4,622
|
6,197
|
||||||
Amortization
of deferred financing costs
|
1,561
|
1,609
|
||||||
Stock-based
compensation
|
1,146
|
224
|
||||||
Changes
in operating assets and liabilities
|
||||||||
Accounts
receivable
|
(11,345 | ) |
2,595
|
|||||
Inventories
|
2,390
|
5,202
|
||||||
Prepaid
expenses and other current assets
|
(1,692 | ) | (1,047 | ) | ||||
Accounts
payable
|
1,884
|
4,494
|
||||||
Income
taxes payable
|
--
|
(1,731 | ) | |||||
Accrued
liabilities
|
2,270
|
3,326
|
||||||
Net
cash provided by operating activities
|
21,492
|
42,734
|
||||||
Investing
Activities
|
||||||||
Purchases
of equipment
|
(194 | ) | (313 | ) | ||||
Purchase
of business
|
(16 | ) | (31,242 | ) | ||||
Net
cash used for investing activities
|
(210 | ) | (31,555 | ) | ||||
Financing
Activities
|
||||||||
Repayment
of long-term debt
|
(26,237 | ) | (8,865 | ) | ||||
Purchase
of common stock for treasury
|
(4 | ) | (6 | ) | ||||
Net
cash used for financing activities
|
(26,241 | ) | (8,871 | ) | ||||
Increase
(decrease) in cash
|
(4,959 | ) |
2,308
|
|||||
Cash
- beginning of period
|
13,758
|
8,200
|
||||||
Cash
- end of period
|
$ |
8,799
|
$ |
10,508
|
||||
Interest
paid
|
$ |
18,078
|
$ |
18,306
|
||||
Income
taxes paid
|
$ |
5,664
|
$ |
6,287
|
See
accompanying notes.
|
1.
|
Business
and Basis of Presentation
|
Nature
of Business
|
Basis
of Presentation
|
Years
|
|
Machinery
|
5
|
Computer
equipment
|
3
|
Furniture
and fixtures
|
7
|
Leasehold
improvements
|
5
|
Accounts
Receivable
|
September
30,
2007
|
March
31,
2007
|
|||||||
Accounts
receivable
|
$ |
48,679
|
$ |
35,274
|
||||
Other
receivables
|
1,286
|
1,681
|
||||||
49,965
|
36,955
|
|||||||
Less
allowances for discounts, returns and
uncollectible
accounts
|
(3,453 | ) | (1,788 | ) | ||||
$ |
46,512
|
$ |
35,167
|
Inventories
|
September
30,
2007
|
March
31,
2007
|
|||||||
Packaging
and raw materials
|
$ |
2,281
|
$ |
2,842
|
||||
Finished
goods
|
25,502
|
27,331
|
||||||
$ |
27,783
|
$ |
30,173
|
|
4.
|
Property
and Equipment
|
September 30,
2007
|
March
31,
2007
|
|||||||
Machinery
|
$ |
1,397
|
$ |
1,480
|
||||
Computer
equipment
|
477
|
566
|
||||||
Furniture
and fixtures
|
205
|
247
|
||||||
Leasehold
improvements
|
319
|
372
|
||||||
2,398
|
2,665
|
|||||||
Accumulated
depreciation
|
(1,007 | ) | (1,216 | ) | ||||
$ |
1,391
|
$ |
1,449
|
5.
|
Goodwill
|
Over-the-Counter
Healthcare
|
Household
Cleaning
|
Personal
Care
|
Consolidated
|
|||||||||||||
Balance
– March 31, 2007
|
$ |
235,647
|
$ |
72,549
|
$ |
2,751
|
$ |
310,947
|
||||||||
Acquisition
purchase price adjustments
|
(2,032 | ) |
--
|
--
|
(2,032 | ) | ||||||||||
Balance
– September 30, 2007
|
$ |
233,615
|
$ |
72,549
|
$ |
2,751
|
$ |
308,915
|
6.
|
Intangible
Assets
|
Indefinite
Lived
Trademarks
|
Finite
Lived
Trademarks
|
Non
Compete
Agreement
|
Totals
|
|||||||||||||
Carrying
Amounts
|
||||||||||||||||
Balance
– March 31, 2007
|
$ |
544,963
|
$ |
139,470
|
$ |
196
|
$ |
684,629
|
||||||||
Additions
|
--
|
--
|
--
|
--
|
||||||||||||
Balance
– September 30, 2007
|
$ |
544,963
|
$ |
139,470
|
$ |
196
|
$ |
684,629
|
||||||||
Accumulated
Amortization
|
||||||||||||||||
Balance
– March 31, 2007
|
$ |
--
|
$ |
27,375
|
$ |
97
|
$ |
27,472
|
||||||||
Additions
|
--
|
5,232
|
22
|
5,254
|
||||||||||||
Balance
– September 30, 2007
|
$ |
--
|
$ |
32,607
|
$ |
119
|
$ |
32,726
|
Year
Ending September 30
|
||||
2008
|
$ |
10,507
|
||
2009
|
9,799
|
|||
2010
|
9,071
|
|||
2011
|
9,071
|
|||
2012
|
9,071
|
|||
Thereafter
|
59,421
|
|||
$ |
106,940
|
7.
|
Other
Accrued Liabilities
|
|
September
30,
2007
|
March
31,
2007
|
||||||
|
||||||||
Accrued
marketing costs
|
$ |
7,820
|
$ |
5,687
|
||||
Accrued
payroll
|
3,100
|
3,721
|
||||||
Accrued
commissions
|
357
|
335
|
||||||
Other
|
1,494
|
762
|
||||||
|
$ |
12,771
|
$ |
10,505
|
8.
|
Long-Term
Debt
|
September
30,
2007
|
March
31,
2007
|
|||||||
Senior
revolving credit facility (“Revolving Credit Facility”), which expires on
April 6, 2009 and is available for maximum borrowings of up to $60.0
million. The Revolving Credit Facility bears interest at the
Company’s option at either the prime rate plus a variable margin or LIBOR
plus a variable margin. The variable margins range from 0.75%
to 2.50% and at September 30, 2007, the interest rate on the Revolving
Credit Facility was 8.75% per annum. The Company is also
required to pay a variable commitment fee on the unused portion of
the
Revolving Credit Facility. At September 30, 2007, the
commitment fee was 0.50% of the unused line. The Revolving
Credit Facility is collateralized by substantially all of the Company’s
assets.
|
$ |
--
|
$ |
--
|
||||
Senior
secured term loan facility (“Tranche B Term Loan Facility” and together
with the Revolving Credit Facility, the “Senior Credit Facility”) that
bears interest at the Company’s option at either the prime rate plus a
margin of 1.25% or LIBOR plus a margin of 2.25%. At September
30,
2007, the average interest rate on the Tranche B Term Loan Facility
was 7.74%. Principal payments of $887,500 plus accrued interest
are payable quarterly. At September 30, 2007, the Company may
borrow up to a maximum amount of $200.0 million under the Tranche
B Term
Loan Facility. Current amounts outstanding under the Tranche B
Term Loan Facility mature on April 6, 2011, while any additional
amounts
borrowed will mature on October 6, 2011. The Tranche B Term
Loan Facility is collateralized by substantially all of the Company’s
assets.
|
311,113
|
337,350
|
||||||
Senior
Subordinated Notes that bear interest at 9.25% which is payable on
April
15th
and
October 15th
of each
year. The Senior Subordinated Notes mature on April 15, 2012;
however, the Company may redeem some or all of the Senior Subordinated
Notes on or prior to April 15, 2008 at a redemption price equal to
100%
plus a make-whole premium, and after April 15, 2008, at redemption
prices
set forth in the Indenture governing the Senior Subordinated
Notes. The Senior Subordinated Notes are unconditionally
guaranteed by Prestige Brands Holdings, Inc. and its domestic wholly-owned
subsidiaries other than Prestige Brands, Inc., the issuer. Each
of these guarantees is joint and several. There are no
significant restrictions on the ability of any of the guarantors
to obtain
funds from their subsidiaries.
|
126,000
|
126,000
|
||||||
437,113
|
463,350
|
|||||||
Current
portion of long-term debt
|
(3,550 | ) | (3,550 | ) | ||||
$ |
433,563
|
$ |
459,800
|
Year
Ending September 30
|
||||
2008
|
$ |
3,550
|
||
2009
|
3,550
|
|||
2010
|
3,550
|
|||
2011
|
300,463
|
|||
2012
|
126,000
|
|||
$ |
437,113
|
9.
|
Stockholders’
Equity
|
10.
|
Earnings
Per Share
|
Three
Months Ended
September
30
|
Six
Months Ended
September
30
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
Numerator
|
||||||||||||||||
Net
income
|
$ |
6,829
|
$ |
8,784
|
$ |
15,149
|
$ |
17,040
|
||||||||
Denominator
|
||||||||||||||||
Denominator
for basic earnings per share – weighted average shares
|
49,710
|
49,451
|
49,686
|
49,389
|
||||||||||||
Dilutive
effect of unvested restricted common stock
|
336
|
543
|
356
|
602
|
||||||||||||
Denominator
for diluted earnings
per
share
|
50,046
|
49,994
|
50,042
|
49,991
|
||||||||||||
Earnings
per Common Share:
|
||||||||||||||||
Basic
|
$ |
0.14
|
$ |
0.18
|
$ |
0.30
|
$ |
0.35
|
||||||||
Diluted
|
$ |
0.14
|
$ |
0.18
|
$ |
0.30
|
$ |
0.34
|
11.
|
Share-Based
Compensation
|
Restricted
Shares
|
Shares
(000)
|
Weighted-Average
Grant-Date
Fair
Value
|
||||||
Nonvested
at March 31, 2006
|
198.0
|
$ |
12.32
|
|||||
Granted
|
156.5
|
9.83
|
||||||
Vested
|
(13.1 | ) |
10.67
|
|||||
Forfeited
|
(39.0 | ) |
12.82
|
|||||
Nonvested
at September 30, 2006
|
302.4
|
$ |
11.04
|
|||||
Nonvested
at March 31, 2007
|
294.4
|
$ |
11.05
|
|||||
Granted
|
292.0
|
12.52
|
||||||
Vested
|
(24.8 | ) |
10.09
|
|||||
Forfeited
|
(23.2 | ) |
11.39
|
|||||
Nonvested
at September 30, 2007
|
538.4
|
$ |
11.88
|
2007
|
2006
|
|||||||
Expected
volatility
|
33.2 | % |
--
|
|||||
Expected
dividends
|
--
|
--
|
||||||
Expected
term in years
|
6.0
|
--
|
||||||
Risk-free
rate
|
4.5 | % |
--
|
Options
|
Shares
(000)
|
Weighted-Average
Exercise
Price
|
Weighted-
Average
Remaining
Contractual
Term
|
|||||||||
Outstanding
at March 31, 2006
|
61.8
|
$ |
12.95
|
4.3
|
||||||||
Granted
|
--
|
--
|
--
|
|||||||||
Exercised
|
--
|
--
|
--
|
|||||||||
Forfeited
or expired
|
(61.8 | ) |
12.95
|
--
|
||||||||
Outstanding
at September 30, 2006
|
--
|
$ |
--
|
--
|
||||||||
Outstanding
at March 31, 2007
|
--
|
$ |
--
|
--
|
||||||||
Granted
|
255.1
|
12.86
|
10.0
|
|||||||||
Exercised
|
--
|
--
|
--
|
|||||||||
Forfeited
or expired
|
--
|
--
|
--
|
|||||||||
Outstanding
at September 30, 2007
|
255.1
|
$ |
12.86
|
10.0
|
||||||||
Exercisable
at September 30, 2007
|
--
|
$ |
--
|
--
|
2007
|
2006
|
|||||||
Expected
volatility
|
--
|
50.0 | % | |||||
Expected
dividends
|
--
|
--
|
||||||
Expected
term in years
|
--
|
2.8
|
||||||
Risk-free
rate
|
--
|
5.0 | % |
SARS
|
Shares
(000)
|
Grant
Date
Stock
Price
|
Weighted-
Average
Remaining
Contractual
Term
|
|||||||||
Outstanding
at March 31, 2006
|
--
|
$ |
--
|
--
|
||||||||
Granted
|
16.1
|
9.97
|
2.75
|
|||||||||
Forfeited
or expired
|
--
|
--
|
--
|
|||||||||
Outstanding
at September 30, 2006
|
16.1
|
$ |
9.97
|
2.5
|
||||||||
Exercisable
at September 30, 2006
|
--
|
$ |
--
|
--
|
||||||||
Outstanding
at March 31, 2007
|
16.1
|
$ |
9.97
|
2.00
|
||||||||
Granted
|
--
|
--
|
--
|
|||||||||
Forfeited
or expired
|
--
|
--
|
--
|
|||||||||
Outstanding
at September 30, 2007
|
16.1
|
$ |
9.97
|
1.50
|
||||||||
Exercisable
at September 30, 2007
|
--
|
$ |
--
|
--
|
12.
|
Income
Taxes
|
Commitments
and Contingencies
|
Facilities
|
Equipment
|
Total
|
||||||||||
Year
Ending September 30,
|
||||||||||||
2008
|
$ |
650
|
$ |
122
|
$ |
772
|
||||||
2009
|
362
|
98
|
460
|
|||||||||
2010
|
--
|
67
|
67
|
|||||||||
2011
|
--
|
4
|
4
|
|||||||||
$ |
1,012
|
$ |
291
|
$ |
1,303
|
Concentrations
of Risk
|
15.
|
Business
Segments
|
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
|
Three
Months Ended September 30, 2006
|
||||||||||||||||
Over-the-Counter
Healthcare
|
Household
Cleaning
|
Personal
Care
|
Consolidated
|
|||||||||||||
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-Counter
Healthcare
|
Household
Cleaning
|
Personal
Care
|
Consolidated
|
|||||||||||||
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
|
Over-the-Counter
|
Household
|
Personal
|
||||||||||||||
Healthcare
|
Cleaning
|
Care
|
Consolidated
|
|||||||||||||
Goodwill
|
$ |
233,615
|
$ |
72,549
|
$ |
2,751
|
$ |
308,915
|
||||||||
Intangible
assets
|
||||||||||||||||
Indefinite
lived
|
374,070
|
170,893
|
--
|
544,963
|
||||||||||||
Finite
lived
|
90,986
|
15
|
15,939
|
106,940
|
||||||||||||
465,056
|
170,908
|
15,939
|
651,903
|
|||||||||||||
$ |
698,671
|
$ |
243,457
|
$ |
18,690
|
$ |
960,818
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
|
Three
Month Period Ended September 30, 2007 compared to
the
|
|
Three
Month Period Ended September 30,
2006
|
2007
Revenues
|
%
|
2006
Revenues
|
%
|
Increase
(Decrease)
|
%
|
|||||||||||||||||||
OTC
Healthcare
|
$ |
50,003
|
57.2
|
$ |
46,255
|
54.7
|
$ |
3,748
|
8.1
|
|||||||||||||||
Household
Cleaning
|
31,422
|
36.0
|
31,250
|
37.0
|
172
|
0.6
|
||||||||||||||||||
Personal
Care
|
5,912
|
6.8
|
7,046
|
8.3
|
(1,134 | ) | (16.1 | ) | ||||||||||||||||
$ |
87,337
|
100.0
|
$ |
84,551
|
100.0
|
$ |
2,786
|
3.3
|
2007
Gross
Profit
|
%
|
2006
Gross
Profit
|
%
|
Increase
(Decrease)
|
%
|
|||||||||||||||||||
OTC
Healthcare
|
$ |
30,315
|
60.6
|
$ |
28,254
|
61.1
|
$ |
2,061
|
7.3
|
|||||||||||||||
Household
Cleaning
|
11,835
|
37.7
|
12,309
|
39.4
|
(474 | ) | (3.9 | ) | ||||||||||||||||
Personal
Care
|
2,417
|
40.9
|
2,729
|
38.7
|
(312 | ) | (11.4 | ) | ||||||||||||||||
$ |
44,567
|
51.0
|
$ |
43,292
|
51.2
|
$ |
1,275
|
2.9
|
2007
Contribution
Margin
|
%
|
2006
Contribution
Margin
|
%
|
Increase
(Decrease)
|
%
|
|||||||||||||||||||
OTC
Healthcare
|
$ |
22,161
|
44.3
|
$ |
21,196
|
45.8
|
$ |
965
|
4.6
|
|||||||||||||||
Household
Cleaning
|
9,260
|
29.5
|
10,289
|
32.9
|
(1,029 | ) | (10.0 | ) | ||||||||||||||||
Personal
Care
|
2,129
|
36.0
|
2,352
|
33.4
|
(223 | ) | (9.5 | ) | ||||||||||||||||
$ |
33,550
|
38.4
|
$ |
33,837
|
40.0
|
$ | (287 | ) | (0.8 | ) |
|
Six
Month Period Ended September 30, 2007 compared to
the
|
|
Six
Month Period Ended September 30,
2006
|
2007
Revenues
|
%
|
2006
Revenues
|
%
|
Increase
(Decrease)
|
%
|
|||||||||||||||||||
OTC
Healthcare
|
$ |
92,429
|
55.7
|
$ |
85,853
|
53.5
|
$ |
6,576
|
7.7
|
|||||||||||||||
Household
Cleaning
|
61,309
|
36.9
|
61,344
|
38.2
|
(35 | ) | (0.1 | ) | ||||||||||||||||
Personal
Care
|
12,210
|
7.4
|
13,277
|
8.3
|
(1,067
|
) | (8.0 | ) | ||||||||||||||||
$ |
165,948
|
100.0
|
$ |
160,474
|
100.0
|
$ |
5,474
|
3.4
|
2007
Gross
Profit
|
%
|
2006
Gross
Profit
|
%
|
Increase
(Decrease)
|
%
|
|||||||||||||||||||
OTC
Healthcare
|
$ |
57,355
|
62.1
|
53,455
|
62.3
|
$ |
3,900
|
7.3
|
||||||||||||||||
Household
Cleaning
|
23,329
|
38.1
|
24,249
|
39.5
|
(920 | ) | (3.8 | ) | ||||||||||||||||
Personal
Care
|
5,172
|
42.4
|
5,186
|
39.1
|
(14 | ) | (0.3 | ) | ||||||||||||||||
$ |
85,856
|
51.7
|
$ |
82,890
|
51.1
|
$ |
2,966
|
3.6
|
2007
Contribution
Margin
|
%
|
2006
Contribution
Margin
|
%
|
Increase
(Decrease)
|
%
|
|||||||||||||||||||
OTC
Healthcare
|
$ |
43,320
|
46.9
|
$ |
40,972
|
47.7
|
$ |
2,348
|
5.7
|
|||||||||||||||
Household
Cleaning
|
19,126
|
31.2
|
20,539
|
32.5
|
(1,413 | ) | (6.9 | ) | ||||||||||||||||
Personal
Care
|
4,607
|
37.7
|
4,522
|
34.1
|
85
|
1.9
|
||||||||||||||||||
$ |
67,053
|
40.4
|
$ |
66,033
|
41.1
|
$ |
1,020
|
1.5
|
Six
Months Ended September 30
|
||||||||
(In
thousands)
|
2007
|
2006
|
||||||
Cash
provided by (used for):
|
||||||||
Operating
Activities
|
$ |
21,492
|
$ |
42,734
|
||||
Investing
Activities
|
(210 | ) | (31,555 | ) | ||||
Financing
Activities
|
(26,241 | ) | (8,871 | ) |
·
|
A
decrease of net income of $1.9 million from $17.0 million for 2006
to
$15.1 million for 2007, and
|
·
|
An
increase in the components of working capital caused primarily by
an
increase in accounts receivable resulting from the timing of sales
in
advance of the cough/cold season, as well as an increase in accrued
liabilities resulting from the recognition of costs associated with
the
voluntary withdrawal from the marketplace of two medicated pediatric
cough and cold products marketed under the Little Remedies
brand.
|
·
|
$311.1
million of borrowings under the Tranche B Term Loan Facility,
and
|
·
|
$126.0
million of 9.25% Senior Subordinated Notes due
2012.
|
·
|
Have
a leverage ratio of less than 4.5 to 1.0 for the quarter ended September
30, 2007, decreasing over time to 3.75 to 1.0 for the quarter ending
September 30, 2010, and remaining level
thereafter,
|
·
|
Have
an interest coverage ratio of greater than 2.75 to 1.0 for the quarter
ended September 30, 2007, increasing over time to 3.25 to 1.0 for
the
quarter ending March 31, 2010, and
|
·
|
Have
a fixed charge coverage ratio of greater than 1.5 to 1.0 for the
quarter
ended September 30, 2007, and for each quarter thereafter until the
quarter ending March 31, 2011.
|
Over-the-Counter
Healthcare
|
Household
Cleaning
|
Personal
Care
|
Consolidated
|
|||||||||||||
Goodwill
|
$ |
233,615
|
$ |
72,549
|
$ |
2,751
|
$ |
308,915
|
||||||||
Intangible
assets
|
||||||||||||||||
Indefinite
lived
|
374,070
|
170,893
|
--
|
544,963
|
||||||||||||
Finite
lived
|
90,986
|
15
|
15,939
|
106,940
|
||||||||||||
465,056
|
170,908
|
15,939
|
651,903
|
|||||||||||||
$ |
698,671
|
$ |
243,457
|
$ |
18,690
|
$ |
960,818
|
·
|
Brand
History
|
·
|
Market
Position
|
·
|
Recent
and Projected Sales Growth
|
·
|
History
of and Potential for Product
Extensions
|
·
|
Reviews
period-to-period sales and profitability by
brand,
|
·
|
Analyzes
industry trends and projects brand growth
rates,
|
·
|
Prepares
annual sales forecasts,
|
·
|
Evaluates
advertising effectiveness,
|
·
|
Analyzes
gross margins,
|
·
|
Reviews
contractual benefits or
limitations,
|
·
|
Monitors
competitors’ advertising spend and product
innovation,
|
·
|
Prepares
projections to measure brand viability over the estimated useful
life of
the intangible asset, and
|
·
|
Considers
the regulatory environment, as well as industry
litigation.
|
·
|
Type
of instrument (i.e.: restricted shares vs. an option, warrant or
performance shares),
|
·
|
Strike
price of the instrument,
|
·
|
Market
price of the Company’s common stock on the date of
grant,
|
·
|
Discount
rates,
|
·
|
Duration
of the instrument, and
|
·
|
Volatility
of the Company’s common stock in the public
market.
|
·
|
Rules
and regulations promulgated by regulatory
agencies,
|
·
|
Sufficiency
of the evidence in support of our
position,
|
·
|
Anticipated
costs to support our position, and
|
·
|
Likelihood
of a positive outcome.
|
·
|
General
economic conditions affecting our products and their respective
markets,
|
·
|
The
high level of competition in our industry and
markets,
|
·
|
Our
dependence on a limited number of customers for a large portion of
our
sales,
|
·
|
Disruptions
in our distribution center,
|
·
|
Acquisitions
or other strategic transactions diverting managerial resources, or
incurrence of additional liabilities or integration problems associated
with such transactions,
|
·
|
Changing
consumer trends or pricing pressures which may cause us to lower
our
prices,
|
·
|
Increases
in supplier prices,
|
·
|
Increases
in transportation fees and fuel
charges,
|
·
|
Changes
in our senior management team,
|
·
|
Our
ability to protect our intellectual property
rights,
|
·
|
Our
dependency on the reputation of our brand
names,
|
·
|
Shortages
of supply of sourced goods or interruptions in the manufacturing
of our
products,
|
·
|
Our
level of debt, and ability to service our
debt,
|
·
|
Any
adverse judgment rendered in any pending litigation or
arbitration,
|
·
|
Our
ability to obtain additional financing,
and
|
·
|
The
restrictions imposed by our financing agreements on our
operations.
|
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
ITEM 4. | CONTROLS AND PROCEDURES |
OTHER
INFORMATION
|
ITEM
1.
|
LEGAL
PROCEEDINGS
|
ITEM 1A. | RISK FACTORS |
ITEM
2.
|
UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
|
ITEM
4.
|
SUBMISSION
OF MATTERS TO A VOTE OF SECURITY
HOLDERS
|
For
|
Withheld
|
||||||
Mark Pettie |
47,678,543
|
428,426
|
|||||
L. Dick Buell |
47,813,986
|
292,983
|
|||||
John E. Byom |
47,723,268
|
383,701
|
|||||
Gary E. Costley |
47,783,333
|
323,636
|
|||||
David A. Donnini |
26,036,225
|
22,070,744
|
|||||
Ronald Gordon |
47,659,068
|
447,901
|
|||||
Vincent J. Hemmer |
47,609,448
|
497,521
|
|||||
Patrick Lonergan |
47,723,173
|
383,796
|
|||||
Peter C. Mann |
47,609,948
|
497,021
|
|||||
Raymond P. Silcock |
47,701,121
|
405,848
|
For
|
Against
|
Withheld
|
|||||
47,598,174
|
506,149
|
2,646
|
|||||
ITEM 6. | EXHIBITS |
Prestige Brands Holdings, Inc. | |||
Registrant
|
|||
Date: | November 8, 2007 | By: /s/ PETER J. ANDERSON | |
Peter J. Anderson | |||
Chief Financial Officer | |||
(Principal Financial Officer and | |||
Duly Authorized Officer) | |||
31.1
|
Certification
of Principal Executive Officer of Prestige Brands Holdings, Inc.
pursuant
to Rule 13a-14(a) of the Securities Exchange Act of 1934.
|
31.2
|
Certification
of Principal Financial Officer of Prestige Brands Holdings, Inc.
pursuant
to Rule 13a-14(a) of the Securities Exchange Act of 1934.
|
32.1
|
Certification
of Principal Executive Officer of Prestige Brands Holdings, Inc.
pursuant
to Rule 13a-14(b) and Section 1350 of Chapter 63 of Title 18 of the
United
States Code.
|
32.2
|
Certification
of Principal Financial Officer of Prestige Brands Holdings, Inc.
pursuant
to Rule 13a-14(b) and Section 1350 of Chapter 63 of Title 18 of the
United
States Code.
|
1.
|
I
have reviewed this Quarterly Report on Form 10-Q of Prestige Brands
Holdings, Inc.;
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement
of a
material fact or omit to state a material fact necessary to make
the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects
the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
4.
|
The
registrant’s other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15(d)-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15(d)-15(f)) for the registrant and
have:
|
(a)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is
being
prepared;
|
(b)
|
Designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision,
to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
(c)
|
Evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness
of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation;
and
|
(d)
|
Disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely
to
materially affect, the registrant’s internal control over financial
reporting; and
|
5.
|
The
registrant’s other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting,
to the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent
functions):
|
(a)
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
|
(b)
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
|
Date:
November 8, 2007
|
/s/
Mark Pettie
|
Mark
Pettie
|
|
Chief
Executive Officer
|
1.
|
I
have reviewed this Quarterly Report on Form 10-Q of Prestige Brands
Holdings, Inc.;
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement
of a
material fact or omit to state a material fact necessary to make
the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects
the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
4.
|
The
registrant’s other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15(d)-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15(d)-15(f)) for the registrant and
have:
|
(a)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is
being
prepared;
|
(b)
|
Designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision,
to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
(c)
|
Evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness
of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation;
and
|
(d)
|
Disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely
to
materially affect, the registrant’s internal control over financial
reporting; and
|
5.
|
The
registrant’s other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting,
to the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent
functions):
|
(a)
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
|
(b)
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
|
Date:
November 8, 2007
|
/s/
Peter J. Anderson
|
Peter
J. Anderson
|
|
Chief
Financial Officer
|
/s/
Mark Pettie
|
|
Name:
Mark Pettie
|
|
Title:
Chief Executive Officer
|
|
Date:
November 8, 2007
|
/s/
Peter J. Anderson
|
|
Name: Peter
J. Anderson
|
|
Title: Chief
Financial Officer
|
|
Date: November
8, 2007
|