Exhibit 99.1
ASCENDIA BRANDS, INC. ANNOUNCES PRELIMINARY SECOND QUARTER RESULTS
Hamilton, NJ – October 10, 2007 -- Ascendia Brands, Inc. (AMEX: ASB) today reported results for its thirteen weeks and twenty-six weeks ended August 25, 2007.
Consolidated net sales for the thirteen weeks ended August 25, 2007 increased by $9.5 million or 38.9% compared to the thirteen weeks ended August 26, 2006, from $24.4 million to $33.9 million. The Calgon™ and the healing garden brands® acquired from Coty Inc. on February 9, 2007 contributed $12.5 million to current quarter net sales. Excluding the impact of this acquisition, net sales decreased by $3.0 million.
Consolidated gross profit increased by $5.0 million to $9.4 million for the thirteen weeks ended August 25, 2007, compared to $4.4 million for the comparable period in the prior year. As a percentage of net sales, the second quarter gross profit margin was 27.8% compared to 18.3% in the prior year. Gross profit and gross profit margin were favorably impacted by the acquired Coty brands, which contributed $7.8 million to the current quarter. Included in the increase in gross profit is $4.2 million received from Coty as a production credit against the inventory purchased from them during the quarter.
Consolidated selling, general and administrative expenses increased by $6.5 million, to $11.6 million, for the thirteen weeks ended August 25, 2007, compared to $5.1 million for the comparable period in the prior year. Contributing to the increase were costs associated with the acquired Coty brands, including $2.6 million from the amortization of intangible assets identified as part of the purchase price allocation, $0.1 million in costs related to services provided by Coty under a transition services agreement, $0.2 million in sales brokerage costs, and $0.1 million in advertising and consumer promotion in support of the acquired brands. Additional expenses contributing to the increase compared to the prior period were executive salaries and bonuses of $2.6 million, non-cash stock compensation expense of $0.3 million, and outside services of $0.5 million.
Consolidated other income increased by $27.6 million to $32.1 million for the thirteen weeks ended August 25, 2007, compared to $4.5 million for the comparable period in the prior year. Contributing to the increase were higher income of $31.3 million from the change in fair value of the Company’s compound derivative liability net of amortization expense, and foreign exchange gains of $0.8 million in the current quarter, partially offset by interest expense increases of $4.5 million.
Net income from continuing operations increased by $26.1 million to $29.9 million, or $(0.03) loss per diluted share, for the thirteen weeks ended August 25, 2007, compared to $3.8 million, or $(0.14) loss per diluted share, for the comparable period in the prior year. The increase in income is due primarily to the increased gain in the fair value of the Company’s compound derivative liability.
Net loss from discontinued operations was lower by $0.5 million as a result of reduced expense at the Company’s Cenuco subsidiary. This subsidiary ceased operations effective June 30, 2007.
- 1 -
Twenty-six weeks results
Consolidated net sales for the twenty-six weeks ended August 25, 2007 increased by $26.6 million or 51.6% compared to the twenty-six weeks ended August 26, 2006, from $49.2 million to $75.8 million. The Calgon™ and the healing garden brands® acquired from Coty Inc. on February 9, 2007 contributed $29.0 million to the increase.
Consolidated gross profit increased by $12.7 million to $21.8 million for the six months ended August 25, 2007, compared to $9.1 million for the comparable period in the prior year. As a percentage of net sales, the second quarter gross profit margin was 28.8%, compared to 18.5% in the prior year. The gross profit and gross profit margin were favorably impacted by the acquired Coty brands, which contributed $15.8 million to the current quarter. Included in the increase in gross profit is $6.8 million received from Coty as a production credit against the inventory purchased from Coty during the six months.
Consolidated selling, general and administrative expenses increased by $14.7 million, to $23.8 million, for the twenty-six weeks ended August 25, 2007, compared to $9.1 million for the comparable period in the prior year. Contributing to the increase were costs associated with the acquired Coty brands, including $4.9 million from the amortization of intangible assets identified as part of the purchase price allocation, $1.9 million in costs related to services provided by Coty under a transition services agreement, $0.2 million in sales brokerage costs, and $1.1 million in advertising and consumer promotion in support of the acquired brands. Additional expenses contributing to the increase compared to the prior period were executive salaries and bonuses of $4.2 million, non-cash stock compensation expense of $0.9 million, and outside services of $0.5 million.
Consolidated other income increased by $24.7 million, to $25.7 million for the six months ended August 25, 2007 compared to $1.0 million for the comparable period in the prior year. Contributing to the increase was an increase in income of $32.5 million from the change in fair value of the Company’s compound derivative liability net of amortization expense, and an increase of foreign exchange gains of $1.2 million, partially offset by interest expense increases of $9.0 million.
Net income from continuing operations increased by $22.7 million to $23.7 million, $(0.05) per diluted share, for the six months ended August 25, 2007, compared to $1.0 million, $(0.37) per diluted share, for the comparable period in the prior year. The increase in income is due primarily to the gain on the fair value of the Company’s compound derivative liability.
Net loss from discontinued operations was lower by $0.8 million as a result of reduced expense at the Company’s Cenuco subsidiary.
On October 10, 2007, the Company also announced that it had entered into agreements with its senior lenders amending the financial covenants in its credit agreements applicable to the fiscal period ended August 25, 2007.
In addition, the Company announced that it requires additional time to prepare its quarterly report on Form 10-Q for the thirteen week and twenty-six week periods ended August 25, 2007. The Company expects to file its quarterly report on Form 10-Q by October 15, 2007.
- 2 -
Ascendia Brands, Inc. and Subsidiaries
Consolidated Balance Sheets
(Amounts in thousands, except for share and per share data)
| August 25, 2007 | | February 28, 2007 |
| (unaudited) | | | | |
ASSETS | | | | | | |
Current Assets: | | | | | | |
Cash and cash equivalents | $ | 767 | | $ | 3,303 | |
Trade receivables, net of allowances of | | | | | | |
$4,948 at August 25, 2007 and $2,913 at February 28, 2007 | | 16,715 | | | 9,444 | |
Inventories | | 35,074 | | | 28,633 | |
Miscellaneous receivables | | - | | | 1,517 | |
Prepaid expenses and other | | 5,121 | | | 5,761 | |
|
Total current assets | | 57,677 | | | 48,658 | |
|
Property, plant and equipment, net | | 9,155 | | | 6,500 | |
Intangibles, net | | 145,032 | | | 151,634 | |
Other assets, net | | 9,560 | | | 10,103 | |
|
Total assets | $ | 221,424 | | $ | 216,895 | |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | |
Current Liabilities: | | | | | | |
Accounts payable | $ | 11,634 | | $ | 8,943 | |
Accrued expenses | | 6,033 | | | 5,480 | |
Accrued interest | | 3,569 | | | 1,146 | |
Reserve for customer returns | | 419 | | | 4,479 | |
Current portion of long-term debt | | 231,624 | | | 2,000 | |
Total current liabilities | | 253,279 | | | 22,048 | |
Long-term debt, less current portion | | 21,382 | | | 271,317 | |
Long-term pension obligation | | 689 | | | 668 | |
Total liabilities | | 275,350 | | | 294,033 | |
|
Stockholders’ Equity: | | | | | | |
Convertible preferred stock, par value $.001 per share; Authorized | | | | | | |
1,000,000 shares; issued and outstanding 330 Class B & B-1 shares | | | | | | |
at August 25, 2007 and at February 28, 2007 | | — | | | — | |
Common stock, par value $.001 per share; Authorized 225,000,000 | | | | | | |
shares; issued and outstanding 41,973,590 shares at August 25, 2007 | | | | | | |
and 36,758,541 at February 28, 2007 | | 42 | | | 37 | |
Additional paid in capital | | 75,472 | | | 74,828 | |
Accumulated deficit | | (128,339 | ) | | (151,435 | ) |
Accumulated comprehensive loss | | (1,101 | ) | | (568 | ) |
Total stockholders’ deficit | | (53,926 | ) | | (77,138 | ) |
Total liabilities and stockholders’ deficit | $ | 221,424 | | $ | 216,895 | |
- 3 -
Ascendia Brands, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
(Amounts in thousands, except for share and per share data)
| | For the thirteen weeks ended | | For the twenty-six weeks ended | |
| | August 25, 2007 | | August 26, 2006 | | August 25, 2007 | | August 26, 2006 | |
| | | | | | | | | | | | | |
Net sales | | $ | 33,871 | | $ | 24,377 | | $ | 75,822 | | $ | 49,224 | |
Cost of sales | | | 24,456 | | | 19,928 | | | 54,021 | | | 40,121 | |
| | | | | | | | | | | | | |
Gross Profit | | | 9,415 | | | 4,449 | | | 21,801 | | | 9,103 | |
| | | | | | | | | | | | | |
Operating expenses: | | | | | | | | | | | | | |
Selling and marketing | | | 2,337 | | | 1,456 | | | 6,727 | | | 2,857 | |
General and administrative | | | 9,297 | | | 3,636 | | | 17,127 | | | 6,267 | |
Total operating expenses | | | 11,634 | | | 5,092 | | | 23,854 | | | 9,124 | |
| | | | | | | | | | | | | |
Income (loss) from operations | | | (2,219 | ) | | (643 | ) | | (2,053 | ) | | (20 | ) |
| | | | | | | | | | | | | |
Interest expense | | | (7,497 | ) | | (3,045 | ) | | (14,549 | ) | | (5,530 | ) |
Amortization of finance fees and debt discount | | | (803 | ) | | (439 | ) | | (1,637 | ) | | (1,610 | ) |
Gain on revaluation of compound derivative | | | 39,598 | | | 7,975 | | | 40,533 | | | 7,975 | |
Other income (expense) | | | 834 | | | (12 | ) | | 1,387 | | | 133 | |
Total other income | | | 32,132 | | | 4,479 | | | 25,734 | | | 968 | |
| | | | | | | | | | | | | |
Income from continuing operations before income taxes | | | 29,913 | | | 3,836 | | | 23,681 | | | 948 | |
| | | | | | | | | | | | | |
Income taxes | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | | |
Net income from continuing operations | | | 29,913 | | | 3,836 | | | 23,681 | | | 948 | |
| | | | | | | | | | | | | |
Loss from discontinued operations | | | (299 | ) | | (708 | ) | | (585 | ) | | (1,354 | ) |
| | | | | | | | | | | | | |
Net income (loss) | | | 29,614 | | | 3,138 | | | 23,096 | | | (406 | ) |
| | | | | | | | | | | | | |
Series A Preferred stock beneficial conversion | | | | | | | | | | | | | |
feature accreted as a dividend | | | — | | | — | | | — | | | 204 | |
| | | | | | | | | | | | | |
Net income (loss) available to common stockholders | | $ | 29,614 | | $ | 3,138 | | $ | 23,096 | | $ | (610 | ) |
| | | | | | | | | | | | | |
Basic income per share – continuing operations | | $ | 0.72 | | $ | 0.29 | | $ | 0.57 | | $ | 0.07 | |
Basic loss per share – discontinued operations | | $ | (0.01 | ) | $ | (0.06 | ) | $ | (0.02 | ) | $ | (0.11 | ) |
Basic income (loss) per common share | | $ | 0.71 | | $ | 0.23 | | $ | 0.55 | | $ | (0.04 | ) |
Diluted loss per common share | | $ | (0.03 | ) | $ | (0.14 | ) | $ | (0.05 | ) | $ | (0.37 | ) |
- 4 -
About Ascendia Brands
Ascendia Brands, Inc. is a leader in the value and premium value segments of the health and beauty care products sector. In November 2005, Ascendia expanded its range of product offerings through the acquisition of a series of brands, including Baby Magic®, Binaca®, Mr. Bubble® and Ogilvie®, and in February 2007 it acquired the Calgon™* and the healing garden® brands. The Company is headquartered in Hamilton, New Jersey, and operates two manufacturing facilities, in Binghamton, New York, and Toronto, Canada. Visit http://www.ascendiabrands.com for additional information.
Certain statements contained herein may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, 21E of the Exchange Act of 1934 and/or the Private Securities Litigation Reform Act of 1995. Such statements include, without limitation, statements regarding business plans, future regulatory environment and approval and, the Company’s ability to comply with the rules and policies of independent regulatory agencies. Although the Company believes the statements contained herein to be accurate as of the date they were made, it can give no assurance that such expectations will prove to be correct. The Company undertakes no obligation to update these forward-looking statements.
*Calgon is a licensed trademark.
Ascendia Contact: John D. Wille Chief Financial Officer (609) 219-0930 ext 150 jwille@ascendiabrands.com | Investor Relations Contact: John G. Nesbett IMS, Inc. (203) 972-9200 jnesbett@institutionalms.com |
- 5 -
