Prestige Brands Holdings, Inc. Reports Second Quarter & Six Months Fiscal 2007 Results
Q2: Revenues Up 15%; Net Income of $0.18 per Share Up 19%; Free Cash Flow Up 45%
Irvington, NY—November 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® and The Doctor’s® 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® and The Doctor’s® 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® oral care line acquired in November 2005. Chloraseptic®, Clear eyes®, Compound W®, Little Remedies®, and Murine® 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® and Spic and Span®, 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®, 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®, Clear eyes®, Compound W®, Little Remedies®, Murine®, Dermoplast®, as well as sales of The Doctor’s® 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® and Spic and Span® brands, as well as the Chore Boy® 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® and Denorex® 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® 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® 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® wart remover, Chloraseptic® sore throat treatment, New-Skin® liquid bandage, Clear eyes® and Murine® eye care products, Little Remedies® pediatric over-the-counter products, Cutex® nail polish remover, Comet® and Spic and Span® 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.
Contact: Dean Siegal
914-524-6819
Prestige Brands Holdings, Inc.
Consolidated Statements of Operations
(Unaudited)
| | | Three Months Ended September 30 | | Six Months 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-Counter Drug | | Household Cleaning | | Personal Care | | Consolidated | |
(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-Counter Drug | | Household Cleaning | | Personal Care | | Consolidated | |
(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-Counter Drug | | Household Cleaning | | Personal Care | | Consolidated | |
(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-Counter Drug | | Household Cleaning | | Personal Care | | Consolidated | |
(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 | |
| | | | | | | | |
