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Prestige Brands Holdings, Inc. Reports Second Quarter & Six Months Fiscal 2011 Results For the Quarter, EPS of $0.23 vs. $0.18; Income from Continuing Operations Up 28%; Completes Acquisition of Blacksmith Brands on Nove

Thursday, November 4, 2010 7 min read
Key Takeaway: Prestige Brands Holdings, Inc. Reports Second Quarter & Six Months Fiscal 2011 Results For the Quarter, EPS of $0.23 vs. $0.18; Income from Continuing Operations Up 28%; Completes Acquisition of Blacksmith Brands on November 1 Irvington, NY-November 4, 2010-Prestige Brands Hold

Full Press Release Details

Prestige Brands Holdings, Inc. Reports Second Quarter & Six Months Fiscal 2011 Results
For the Quarter, EPS of $0.23 vs. $0.18; Income from Continuing Operations Up 28%; Completes Acquisition of Blacksmith Brands on November 1
Irvington, NY-November 4, 2010-Prestige Brands Holdings, Inc. (NYSE-PBH) today announced results for the second quarter and first half of fiscal year 2011, which ended on September 30, 2010. The Company also announced the completion on November 1, 2010 of the acquisition of Blacksmith Brands, Inc., which added five over-the-counter healthcare products to its business.
Income from continuing operations for the second fiscal quarter was $11.4 million, 28% higher than the prior year comparable period's results of $8.9 million resulting in earnings per share of $0.23 compared to $0.18 a year ago1. Net revenues from continuing operations for the second fiscal quarter were $78.3 million, $2.4 million or 3% below the prior year's comparable quarter net revenues of $80.7 million. Gross margin improved by 1.4 basis points for the quarter while advertising and promotion (A&P) and general and administrative (G&A) expenditures decreased compared to the second quarter in the prior fiscal year.
"We are pleased with our results for the quarter as we continue to make progress against our stated primary objectives of growing our core OTC brands which grew once again this quarter. Overall, revenues were in line with previously stated expectations as a result of heavy prior year H1N1 retailer buy in and continued competitive pressure in Household products. Profitability improved significantly as a result of gross margin improvement as well as prudent advertising and promotion investment in our priority brands," said Matthew Mannelly, President and CEO. "In addition, we are excited by the recent acquisition of Blacksmith Brands which closed on November 1st," he said. "This is a transformational event for Prestige, positioning the Company for growth, and taking a meaningful step toward our long-term commitment to OTC brands as the Company's focus. We will begin supporting these wonderful brands immediately in our efforts to accelerate their momentum in the marketplace. Furthermore, as we look to the second half of the fiscal year, we remain cautiously optimistic given the sluggish retail environment. We will continue to view this
1 The reported results reflect the September 1, 2010 divestiture of Cutex nail polish remover. Revenues from this brand are now classified as discontinued operations, and the results of both the second fiscal quarter and the prior year comparable quarter reflect this classification. Beginning with the second fiscal quarter of FY11 and going forward, the remaining brands in the personal care segment will be reported as part of the over-the-counter healthcare segment since they account for less than one half of one percent of total revenues.
as an opportunity to build our brands and invest in our future growth. As we stated at the start of the year, we expect modest A&P growth over the course of the year as we build our brands and we are on track with those investments as we enter the heart of the cough/cold season."
First Half of Fiscal 2011
Net revenues from continuing operations for the first six months of fiscal 2011 were $149.5 million, an increase of 0.5% over the prior year's comparable period's results of $148.8 million. Income from continuing operations was $20.6 million, an increase of 27.2%, compared to $16.2 million in the prior year's comparable period. This resulted in EPS from continuing operations of $0.41 per share, 28.1% higher than the prior year's comparable period's results of $0.32 per share.
Free Cash Flow and Debt
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 here because management believes it is a commonly used measure of liquidity, and indicative of cash available for debt repayment and acquisitions. The Company defines "free cash flow" as operating cash flow from continuing operations less capital expenditures.
The Company's free cash flow for the second quarter ended September 30, 2010 was $22.0 million, an increase of $300,000 or 1.4% over the prior year comparable quarter. Free cash flow is composed of operating cash flow from continuing operations of $22.1 million less capital expenditures of $100,000. This compares to the prior year comparable quarter's free cash flow of $21.7 million, composed of operating cash flow from continuing operation of $21.8 million less capital expenditures of $100,000.
Total indebtedness at September 30, 2010 was $295.5 million; however, subsequent to the end of the quarter, indebtedness increased $215.0 million as a result of indebtedness incurred to acquire Blacksmith Brands. At September 30, 2010, cash on the balance sheet totaled $55.0 million.
Second Quarter Results by Segment
Net revenues for the over-the-counter healthcare segment were $50.8 million, $900,000 lower than the prior year comparable quarter. Increases in Clear Eyes , Little Remedies , and Compound W were off set by decreases in Chloraseptic and the Allergen Block products. Net revenues for the household cleaning segment were $27.5 million, $1.5 million or 5% less than the prior year comparable quarter. Comet and Spic and Span experienced declines in the competitive household category.
The Company will host a conference call to review its second quarter and six month results on Thursday, November 4, 2010 at 8:30am EST. The toll-free dial in numbers are 1-800-383-8119 within North America and 1-617- 597-5344 outside of North America. The conference passcode is "prestige". Telephonic replays will be available for two weeks following the completion of the call and can be accessed at 1-888-286-8010 within North America and at 617-801-6888 outside North America. The passcode is 49548893.
About Prestige Brands Holdings, Inc.
The Company markets and distributes brand name over-the-counter and household cleaning products throughout the U.S., Canada, and certain international markets. Key brands include Chloraseptic sore throat, Clear Eyes eye care, Compound W wart treatment, The Doctor's NightGuard , The Little Remedies line of pediatric over-the-counter products, Comet cleanser and, effective November 1st, PediaCare children's over-the-counter products, Efferdent and Effergrip denture care products, Luden's cough drops, and NasalCrom allergy treatment.
Note Regarding Forward-Looking Statements
This news release contains "forward-looking statements" within the meaning of the federal securities laws and that are 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 our intentions regarding development of the brands that it acquired on November 1, 2010 in the Blacksmith acquisition as well as the outlook for Prestige Brands Holdings' market and its core brands as well as prospects for the industry. These 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 expected as a result of a variety of 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 reports filed with the Securities and Exchange Commission.
Contact: Dean Siegal
Prestige Brands Holdings, Inc.
Consolidated Statements of Operations
Three Months Ended September 30 Six Months Ended September 30
(In thousands, except share data) 2010 2009 2010 2009
Revenues
Net sales $ 77,488 $ 80,308 $ 148,009 $ 147,805
Other revenues 815 421 1,529 1,037
Total revenues 78,303 80,729 149,538 148,842
Cost of Sales
Cost of sales (exclusive of depreciation shown below) 35,713 37,936 68,977 69,526
Gross profit 42,590 42,793 80,561 79,316
Operating Expenses
Advertising and promotion 8,240 9,675 15,726 18,343
General and administrative 8,101 10,481 15,514 18,675
Depreciation and amortization 2,413 2,703 4,823 4,911
Total operating expenses 18,754 22,859 36,063 41,929
Operating income 23,836 19,934 44,498 37,387
Other expense
Interest expense, net 5,373 5,642 10,835 11,295
Loss on extinguishment of debt - - 300 -
Total other expense 5,373 5,642 11,135 11,295
Income from continuing operations before income taxes 18,463 14,292 33,363 26,092
Provision for income taxes 7,053 5,417 12,745 9,889
Income from continuing operations 11,410 8,875 20,618 16,203
Discontinued Operations
Income from discontinued operations, net of income tax 162 1,048 560 2,045
Loss on sale of discontinued operations, net of income tax benefit (550 ) - (550 ) -
Net income $ 11,022 $ 9,923 $ 20,628 $ 18,248
Basic earnings per share:
Income from continuing operations $ 0.23 $ 0.18 $ 0.41 $ 0.32
Net income $ 0.22 $ 0.20 $ 0.41 $ 0.36
Diluted earnings per share:
Income from continuing operations $ 0.23 $ 0.18 $ 0.41 $ 0.32
Net income $ 0.22 $ 0.20 $ 0.41 $ 0.36
Weighted average shares outstanding:
Basic 50,053 50,012 50,045 49,997
Diluted 50,141 50,055 50,123 50,080
Prestige Brands Holdings, Inc.
Consolidated Balance Sheets
(In thousands) Assets September 30, 2010 March 31, 2010
Current assets
Cash and cash equivalents $ 55,032 $ 41,097
Accounts receivable 32,256 30,621
Inventories 24,997 27,676
Deferred income tax assets 6,663 6,353
Prepaid expenses and other current assets 3,203 4,917
Current assets of discontinued operations 14 1,486
Total current assets 122,165 112,150
Property and equipment 1,207 1,396
Goodwill 111,489 111,489
Intangible assets 549,855 554,359
Other long-term assets 6,456 7,148
Long-term assets of discontinued operations - 4,870
Total Assets $ 791,172 $ 791,412
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $ 13,980 $ 12,771
Accrued interest payable 6,428 1,561
Other accrued liabilities 9,912 11,733
Current portion of long-term debt 1,500 29,587
Total current liabilities 31,820 55,652
Long-term debt
Principal amount 294,000 298,500
Less unamortized discount (3,658 ) (3,943 )
Long-term debt, net of unamortized discount 290,342 294,557
Deferred income tax liabilities 117,630 112,144
Total Liabilities 439,792 462,353
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 - 50,175 shares at September 30, 2010 and 50,154 shares at March 31, 2010 502 502
Additional paid-in capital 385,771 384,027
Treasury stock, at cost - 131 shares at September 30, 2010 and 124 shares at March 31, 2010 (114 ) (63 )
Retained earnings (accumulated deficit) (34,779 ) (55,407 )
Total Stockholders' Equity 351,380 329,059
Total Liabilities and Stockholders' Equity $ 791,172 $ 791,412
Prestige Brands Holdings, Inc.
Consolidated Statements of Cash Flows
Six Months Ended September 30
(In thousands) 2010 2009
Operating Activities
Net income $ 20,628 $ 18,248
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 5,052 6,084
Loss on sale of discontinued operations 890 -
Deferred income taxes 5,176 3,687
Amortization of deferred financing costs 504 956
Stock-based compensation costs 1,744 848
Loss on extinguishment of debt 300 -
Amortization of debt discount 285 -
Loss on disposition of equipment 125 -
Changes in operating assets and liabilities
Accounts receivable (1,635 ) (3,127 )
Inventories 2,679 405
Inventories held for sale 1,100 82
Prepaid expenses and other current assets 1,714 (1,102 )
Accounts payable 1,209 5,546
Accrued liabilities 3,046 8,253
Net cash provided by operating activities 42,817 39,880
Investing Activities
Purchases of equipment (254 ) (232 )
Proceeds from sale of discontinued operations 4,122 -
Net cash used for investing activities 3,868 (232 )
Financing Activities
Payment of deferred financing costs (112 ) -
Repayment of long-term debt (32,587 ) (40,000 )
Purchase of treasury stock (51 ) -
Net cash used for financing activities (32,750 ) (40,000 )
Increase (decrease) in cash 13,935 (352 )
Cash - beginning of period 41,097 35,181
Cash - end of period $ 55,032 $ 34,829
Interest paid $ 5,179 $ 10,350
Income taxes paid $ 5,103 $ 6,307
Prestige Brands Holdings, Inc.
Consolidated Statements of Operations
For the Three Months Ended September 30, 2010
Over-the- Counter Healthcare Household Cleaning Consolidated
(In thousands)
Net sales $ 50,658 $ 26,830 $ 77,488
Other revenues 181 634 815
Total revenues 50,839 27,464 78,303
Cost of sales 17,798 17,915 35,713
Gross profit 33,041 9,549 42,590
Advertising and promotion 6,912 1,328 8,240
Contribution margin $ 26,129 $ 8,221 34,350
Other operating expenses 10,514
Operating income 23,836
Other expense 5,373
Provision for income taxes 7,053
Income from continuing operations 11,410
Income from discontinued operations, net of income tax 162
Loss on sale of discontinued operations, net of income tax benefit (550 )
Net income $ 11,022
For the Six Months Ended September 30, 2010
Over-the- Counter Healthcare Household Cleaning Consolidated
(In thousands)
Net sales $ 95,364 $ 52,645 $ 148,009
Other revenues 195 1,334 1,529
Total revenues 95,559 53,979 149,538
Cost of sales 33,649 35,328 68,977
Gross profit 61,910 18,651 80,561
Advertising and promotion 12,075 3,651 15,726
Contribution margin $ 49,835 $ 15,000 64,835
Other operating expenses 20,337
Operating income 44,498
Other expense 11,135
Provision for income taxes 12,745
Income from continuing operations 20,618
Income from discontinued operations, net of income tax 560
Loss on sale of discontinued operations, net of income tax benefit (550 )
Net income $ 20,628
Prestige Brands Holdings, Inc.
Consolidated Statements of Operations
For the Three Months Ended September 30, 2009
Over-the- Counter Healthcare Household Cleaning Consolidated
(In thousands)
Net sales $ 51,706 $ 28,602 $ 80,308
Other revenues 10 411 421
Total revenues 51,716 29,013 80,729
Cost of sales 19,453 18,483 37,936
Gross profit 32,263 10,530 42,793
Advertising and promotion 7,390 2,285 9,675
Contribution margin $ 24,873 $ 8,245 33,118
Other operating expenses 13,184
Operating income 19,934
Other expense 5,642
Provision for income taxes 5,417
Income from continuing operations 8,875
Income from discontinued operations, net of income tax 1,048
Net income $ 9,923
For the Six Months Ended September 30, 2009
Over-the- Counter Healthcare Household Cleaning Consolidated
(In thousands)
Net sales $ 92,362 $ 55,443 $ 147,805
Other revenues 20 1,017 1,037
Total revenues 92,382 56,460 148,842
Cost of sales 33,242 36,284 69,526
Gross profit 59,140 20,176 79,316
Advertising and promotion 14,139 4,204 18,343
Contribution margin $ 45,001 $ 15,972 60,973
Other operating expenses 23,586
Operating income 37,387
Other expense 11,295
Provision for income taxes 9,889
Income from continuing operations 16,203
Income from discontinued operations, net of income tax 2,045
Net income $ 18,248
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Last updated: Nov 4, 2010