PRESTIGE BRANDS HOLDINGS, INC.
ANNOUNCES SECOND QUARTER RESULTS;
CONFIRMS GUIDANCE FOR BALANCE OF FISCAL 2006
Internal Review Results in Restatement of Previously Issued Financial Statements
FOR IMMEDIATE RELEASE
Irvington, New York (November 15, 2005) -- Prestige Brands Holdings, Inc. (NYSE:
PBH), a consumer products company with a diversified portfolio of
well-recognized brand names, today announced results for the second fiscal
quarter ended September 30, 2005, and provided its outlook for the balance of
the fiscal year.
The Company also announced that management and the Audit Committee of the
Company's Board of Directors recently completed an internal review of certain
accounting practices at the Company. As a result of that review, the Company
concluded that certain prior period financial statements could no longer be
relied upon and has reclassified certain cooperative advertising expenses,
changed the time at which it recognizes revenue and restated the reported number
of common shares outstanding used in the computation of earnings per share. As a
result of the conclusion with respect to prior financial statements, the company
will restate certain of its historical results. All references in this release
to prior period results are to the restated results.
September Quarter Results
Results for the quarter and six months were generally in line with management's
expectations as provided in its earnings release of July 27, 2005, and in its
conference call of July 28, 2005. Net sales for the quarter ended September 30,
2005, were $73.3 million, compared to net sales of $80.0 million for the prior
year quarter. Operating income of $20.8 million compares to operating income of
$26.8 million in the second quarter of fiscal 2005. The decline was due to lower
sales, a slightly less favorable gross margin as a percentage of sales, as well
as a 21% increase in advertising and promotion expenditures compared to prior
year.
Net income for the second quarter of fiscal year 2006 was $7.4 million or $0.15
per basic share and $0.15 per diluted share, compared to net income of $9.9
million in the comparable quarter last year.
Results for First Half of Fiscal 2006
Net sales for the six months ended September 30, 2005, were $136.8 million, 1.4%
below net sales of $138.7 million for the comparable period last year. Despite
the sales shortfall, operating income of $39.1 million was 14% above operating
income of $34.4 million in the first six months of fiscal 2005. Fiscal 2005
included a charge of $5.2 million due to an inventory step up adjustment related
to the acquisition of Bonita Bay Holdings, Inc. Adjusting for that charge, the
$39.1 million of operating income in this year's first half represents a 1.5%
decline from last
year's adjusted operating income of $39.7 million. The decline
compared to last year was due to the sales decline partially offset by a small
improvement in gross margin as a percentage of sales due to mix. Advertising and
promotional spending was essentially even with the prior year.
Net income for the first six months of fiscal year 2006 was $12.2 million or
$0.25 per basic share and $0.24 per diluted share. This represents an
improvement over the prior year comparable period for which we reported net
income of $2.8 million. When the prior year results are adjusted to remove
one-time expenses arising from the acquisition of Bonita Bay Holdings, Inc.,
adjusted net income last year would have been $10.0 million. The results for the
first half of fiscal year 2006 are a 21 % improvement over the prior year
adjusted net income. Please refer to the consolidated financial data at the end
of this earnings release for a reconciliation of such amounts.
For the first six months, the Company's effective tax rate increased to 44.5 %.
This resulted from a one-time charge, recorded in the quarter ended June 30,
2005, of approximately $1.2 million due to an increase in the graduated federal
income tax rate from 34% to 35% and its related impact on the Company's deferred
tax liabilities.
Results by Segment
September Quarter
The reported sales decline in fiscal 2006 affected each of the Company's three
business segments: Over-the-Counter medicines (OTC), Household Cleaning products
and Personal Care products. For the OTC segment, net sales of $40.8 million were
5% less than last year's second quarter reported net sales of $42.7 million.
Fiscal year 2006 results include strong sales of the Little Remedies(R) line of
children's health care products which were acquired by the Company late in
calendar year 2004 and therefore, were not included in the prior year period's
results. Little Remedies contributed $3.9 million to current quarter sales
compared to no sales in the prior year. The decline for the segment is
attributable to sales declines for Compound W(R) and New Skin(R). Partially
offsetting the declines on Compound W and New Skin were gains for
Chloraseptic(R) sore throat treatment, Clear eyes(R) eye care products and
Dermoplast(R) first aid treatment. In addition, Little Remedies revenues grew
strongly over the year ago quarter before the Company owned the brand.
Net sales for the Household Cleaning products segment were $25.2 million, or 8%
below last year's comparable quarter net sales of $27.6 million. The decline was
primarily due to the discontinuation of the Comet(R) Clean & Flush product line.
Net sales of $7.3 million for the Personal Care segment were $2.4 million lower
than last year's comparable quarter. This reflects continued softness in the
Denorex(R) shampoo line and weaker category trends for nail polish removers
affecting Cutex(R).
First Six Months of Fiscal 2006
For the OTC segment, net sales of $74.1 million were 3% greater than last year's
comparable period reported net sales of $72.1 million. The increase in sales for
the segment was driven by six months of sales of Little Remedies compared to no
sales last year, plus sales increases for the Chloraseptic, Clear eyes and
Dermoplast brands, offset by declines on the Compound W and New Skin brands due
to category softness. Had Little Remedies been owned from the beginning of
fiscal year 2005, the OTC segment would have shown a decline of 5% compared to
the comparable period last year.
Net sales for the Household Cleaning products segment were $48.1 million, or
3.0% below last year's comparable period net sales of $49.6 million. The prior
year period included sales of discontinued Comet items previously mentioned
which account for the majority of the decline.
Net sales of $14.6 million for the Personal Care segment were 14% or $2.4
million below last years comparable net sales. The decline resulted from
continuing softness on the Denorex and Cutex brands.
Restatement of Prior Period Financial Statements
As a result of a review of certain accounting practices performed in conjunction
with the Company's assessment of internal controls over financial reporting
under Section 404 of the Sarbanes-Oxley Act of 2002, the Company determined it
may have erroneously applied generally accepted accounting principles as they
relate to the recognition of revenue, the classification of certain trade
promotion allowances, and the computation of earnings per share. At the
direction of the Audit Committee of the Company's Board of Directors, an
independent review of these issues was performed.
Management and the Audit Committee concluded that, in light of the accounting
errors discussed above, the financial statements for the years ended March 31,
2005, 2004 and 2003 and the quarterly data for the years ended March 31, 2005
and 2004 included in the Company's Annual Report on Forms 10-K and 10-K/A for
the year ended March 31, 2005 and the financial statements for the quarters
ended June 30, 2005 and 2004 included in the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 2005 should no longer be relied upon. The
Company will file an amended Form 10-Q/A for the quarter ended June 30, 2005 and
an amended Form 10-K/A for the year ended March 31, 2005 as soon as practicable.
Because of the review and restatement described above, the Company was unable to
file its Quarterly Report on Form 10-Q by November 14, 2005, its due date. The
Company will file a Notice on Form 12b-25 with respect to that report today and
expects to file the report on or before the extended due date of November 21,
2005.
With respect to revenue recognition, Staff Accounting Bulletin No. 104 sets
forth the criteria for revenue recognition, one of which is that risk of loss
has passed to the customer. The Company, consistent with its published pricing
and shipping terms, has historically recognized revenue upon shipment of product
to the customer. Upon closer examination of its shipping practices and terms,
the Company determined that it often was unclear when, from a legal standpoint,
risk of loss of its products passed to its customers. Accordingly, the Company
has concluded that revenue should not be recognized until product is received by
its customers (referred to as "FOB destination point"), unless the risk of loss
transfers to the customer at the point of shipment. The Company will restate its
previously issued financial statements to reflect its conclusions with respect
to how revenue should be recognized. Peter C. Mann, Chairman and Chief Executive
Officer said, "Although a restatement is a serous matter, this is not a case of
revenues that did not exist; the practical effect of this change is to move the
last few days of sales from the end of a quarter to the beginning of the next
quarter. It is an issue only of timing; however, it is important to us as a
company that we do record our revenues at the appropriate time." The effects of
these adjustments for each fiscal period are reflected in Exhibit A, attached to
this news release.
With respect to the classification of trade promotions and allowances, Emerging
Issues Task Force Issue 01-09 sets forth the criteria for classifying such
promotions and allowances as an expense or a reduction of revenue. Upon review,
the Company determined that it had incorrectly classified certain promotion and
allowance amounts as expense rather than as a reduction of revenue. The Company
will restate its previously issued financial statements for the periods referred
to above to correct these misclassifications. These adjustments do not affect
net income, operating income or cash flows from operations. The effects of these
adjustments are reflected in Exhibit A, attached to this news release.
With respect to earnings per share, Statement of Financial Accounting Standards
No. 128 sets forth the criteria for computing basic and diluted earnings per
share. Upon examination of its earnings per share calculations, the Company
determined that certain issued and outstanding, but unvested, shares held by
management were improperly reflected in the basic earnings per share
computations. The effects of this revision are reflected in Exhibit A, attached
to this news release.
Commentary and Outlook
Commenting on the results of the quarter and the first half, Mann said, "Results
were generally in line with the expectations we announced in July, but were
below our historical growth rates. Virtually all of the sales softness in this
six-month period was related to specific short-term issues which we believe are
now largely behind us. The fundamental strength of our business model has not
changed, and so the long-term prognosis for the Company continues to be good. We
have strong brand names, many of which gained market share during the quarter,
and we are fiscally sound with impressive cash earnings and low capital
expenditures to enable us to reduce debt and fund acquisitions."
"As a result of the sales weakness in the first half of the year, we continue to
anticipate revenues and profits, excluding the impact of acquisitions, will be
essentially flat compared to the restated results for our last fiscal year."
Mann noted that the Company has closed two important transactions within the
past few weeks. "On October 28th, we acquired the Chore Boy(R) brand of
household scrubbers from Reckitt Benckiser, and we are already making good
progress in implementing plans to grow that brand in the United States and
beyond. And, just last week, we closed the transaction whereby we acquired
essentially all the assets of Dental Concepts, LLC. The two main product lines
within Dental Concepts --The Doctors(R) NightGuard and BrushPicks(R)
interproximal cleaning devices -- are exciting, growing OTC brands to which we
believe Prestige can add meaningful value. In combination, these two
acquisitions are expected to add approximately $30 million in new annual
revenues."
Mann added, "The restatement of previously issued financial statements announced
today, while a serious matter, does not affect the Company's fundamental trends
or business model. These accounting issues had to be addressed appropriately by
us in order for the Company to be 404 compliant at the end of this year. The
adjustments and the recent review put us in a better position to do that."
Conference Call
The Company will hold a conference all to review its second quarter fiscal 2006
results on Tuesday , November 15, 2005, at 8:30 a.m. (EST). The toll free dial
in number for the call is 1-800-857-1849. International callers may dial
1-210-234-0036. The conference password is "Prestige". We will have a live
internet web cast of the conference call, as well as an archived replay, which
can be accessed from the investor relations page of www.prestigebrandsinc.com.
Forward Looking Statements
All statements, other than statements of historical fact included in this
release, are forward-looking statements, as that term is defined in 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. There are certain factors that could cause actual
results to differ materially from those anticipated by some of the statements
made. These include: (1) the ability to achieve business plans; (2) successfully
executing, managing and integrating key acquisitions (including the Chore Boy
and Dental Concepts acquisitions); (3) the ability to manage and maintain key
customer relationships; (4) the ability to maintain key manufacturing and supply
sources; (5) the ability to successfully manage regulatory, tax and legal
matters (including product liability matters), and to resolve pending matters
within current estimates; (6) the ability to successfully manage increases in
the prices of raw materials used to make the Company's products; (7) the ability
to stay close to consumers in an era of increased media fragmentation; and (8)
the ability to stay on the leading edge of innovation. For additional
information concerning factors that could cause actual results to materially
differ from those projected herein, please refer to our most recent 10-K, 10-Q
and 8-K reports.
About Prestige Brands Holdings
Located in Irvington, New York, Prestige Brands Holdings is a marketer and
distributor of brand name over-the-counter drug, personal care and household
cleaning products sold throughout the U.S. and Canada. 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 cleaning products and other well-known
brands.
PRESTIGE BRANDS HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except share and per share data)
Three months ended September 30, Six months ended September 30,
2005 2004 2005 2004
----------------- ----------------- ----------------- -----------------
(Restated) (Restated)
REVENUES:
Net sales $73,320 $79,932 $136,748 $138,612
Other revenues 25 26 50 101
----------------- ----------------- ----------------- -----------------
Total revenues 73,345 79,958 136,798 138,713
COST OF SALES:
Cost of sales 35,549 37,941 64,498 71,079
----------------- ----------------- ----------------- -----------------
Gross profit 37,796 42,017 72,300 67,634
----------------- ----------------- ----------------- -----------------
OPERATING EXPENSES:
Advertising and promotion 10,217 8,449 18,922 19,234
General and administrative 4,117 4,502 9,028 9,423
Depreciation 487 452 970 938
Amortization of intangible assets 2,148 1,802 4,296 3,605
----------------- ----------------- ----------------- -----------------
Total operating expenses 16,969 15,205 33,216 33,200
----------------- ----------------- ----------------- -----------------
Operating income 20,827 26,812 39,084 34,434
----------------- ----------------- ----------------- -----------------
OTHER INCOME (EXPENSE):
Interest income 226 59 307 87
Interest expense (8,897) (10,893) (17,488) (21,970)
Loss on extinguishment of debt - - - (7,567)
----------------- ----------------- ----------------- -----------------
Total other income (expense) (8,671) (10,834) (17,181) (29,450)
----------------- ----------------- ----------------- -----------------
Income before income taxes 12,156 15,978 21,903 4,984
Provision for income taxes (4,782) (6,076) (9,747) (2,173)
----------------- ----------------- ----------------- -----------------
Net income $7,374 $9,902 $12,156 $2,811
Cumulative preferred dividends on Senior
Preferred and Class B Preferred units - (3,827) - (7,446)
----------------- ----------------- ----------------- -----------------
Net income (loss) available to members and
common shareholders $ 7,374 $ 6,075 $ 12,156 $ (4,635)
================= ================= ================= =================
Net income (loss) per common share:
Basic $ 0.15 $ 0.25 $ 0.25 $ (0.19)
================= ================= ================= =================
Diluted $ 0.15 $ 0.23 $ 0.24 $ (0.19)
================= ================= ================= =================
Weighted average shares outstanding:
Basic 48,790,856 24,615,066 48,756,535 24,563,238
================= ================= ================= =================
Diluted 49,949,432 26,512,017 49,932,199 24,563,238
================= ================= ================= =================
Three months ended September 30, Six months ended September 30,
----------------------------------- -----------------------------------
Adjusted Operating Income 2005 2004 2005 2004
- ------------------------- ----------------- ----------------- ----------------- -----------------
(dollars in thousands)
Operating Income $ 20,827 $ 26,812 $ 39,084 $ 34,434
Charges due to inventory step-up - - - 5,249
----------------- ----------------- ----------------- -----------------
Adjusted Operating Income $ 20,827 $ 26,812 $ 39,084 $ 39,683
================= ================= ================= =================
Adjusted Net Income
- -------------------
(dollars in thousands)
Net Income $ 7,374 $ 9,902 $ 12,156 $ 2,811
Loss on extinguishment of debt, net of taxes - - - 4,267
Charges due to inventory step-up, net of taxes - - - 2,960
----------------- ----------------- ----------------- -----------------
Adjusted Net Income $ 7,374 $ 9,902 $ 12,156 $ 10,038
================= ================= ================= =================
Prestige Brands Holdings, Inc.
Consolidated Balance Sheet
(Unaudited)
September 30, 2005
(Dollars in thousands) --------------------
Assets
Current assets
Cash $ 27,585
Accounts receivable 32,552
Inventories 32,887
Deferred income tax assets 6,682
Prepaid expenses and other current assets 3,256
--------------------
Total current assets 102,962
Property and equipment 1,647
Goodwill 294,731
Intangible assets 604,316
Other long-term assets 14,718
--------------------
Total Assets $ 1,018,374
====================
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable $ 22,725
Accrued liabilities 12,110
Current portion of long-term debt 3,730
--------------------
Total current liabilities 38,565
Long-term debt 489,765
Deferred income tax liabilities 94,759
--------------------
Total liabilities 623,089
--------------------
Shareholders' Equity
Preferred stock - $0.01 par value
Authorized - 5,000,000 shares
Issued and outstanding - None --
Common stock - $.01 par value
Authorized - 250,000,000 shares
Issued and outstanding - 50,055,776 shares 501
Additional paid-in capital 378,297
Treasury stock - 14,886 shares at cost (25)
Accumulated other comprehensive income 229
Retained earnings 16,283
--------------------
Total shareholders' equity 395,285
--------------------
Total Liabilities and Shareholders' Equity $ 1,018,374
====================
####
EXHIBIT A - FISCAL YEAR 2006
PRESTIGE BRANDS HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Restated Fiscal Year 2006
(in thousands, except share and per share data)
Three months ended June 30, 2005
----------------------------------------------------------
Cooperative
Previously Revenue Trade Expense
Reported Recognition Reclass As Restated
----------------------------------------------------------
REVENUES:
Net sales $ 63,530 $ 1,928 $ (2,030) $ 63,428
Other revenues 25 - - 25
----------------------------------------------------------
Total revenues 63,555 1,928 (2,030) 63,453
COST OF SALES:
Cost of sales 28,339 610 - 28,949
----------------------------------------------------------
Gross profit 35,216 1,318 (2,030) 34,504
----------------------------------------------------------
OPERATING EXPENSES:
Advertising and promotion 10,714 21 (2,030) 8,705
General and administrative 4,911 - - 4,911
Depreciation 483 - - 483
Amortization of intangible assets 2,148 - - 2,148
----------------------------------------------------------
Total operating expenses 18,256 21 (2,030) 16,247
----------------------------------------------------------
Operating income 16,960 1,297 - 18,257
----------------------------------------------------------
OTHER INCOME (EXPENSE):
Interest income 81 - - 81
Interest expense (8,591) - - (8,591)
----------------------------------------------------------
Total other income (expense) (8,510) - - (8,510)
----------------------------------------------------------
Income before income taxes 8,450 1,297 - 9,747
Provision for income taxes (4,443) (522) - (4,965)
----------------------------------------------------------
Net income $ 4,007 $ 775 $ - $ 4,782
==========================================================
Net income (loss) per common share:
Basic $ 0.08 $ 0.10
=============== ==============
Diluted $ 0.08 $ 0.10
=============== ==============
Weighted average shares outstanding:
Basic
49,997,647 48,722,342
=============== ==============
Diluted
49,997,647 49,997,647
=============== ==============
Prestige Brands Holdings, Inc.
Consolidated Balance Sheet
(Unaudited)
(Dollars in thousands) June 30, 2005
--------------------------------------------
As Previously
Assets Reported As Restated
-------------------- -------------------
Current assets
Cash $ 13,945 $ 13,945
Accounts receivable 32,489 26,442
Inventories 27,946 30,589
Deferred income tax assets 6,965 6,965
Prepaid expenses and other current assets 4,039 4,039
-------------------- -------------------
Total current assets 85,384 81,980
Property and equipment 2,043 2,043
Goodwill 294,544 294,731
Intangible assets 606,465 606,465
Other long-term assets 14,344 14,344
-------------------- -------------------
Total Assets $ 1,002,780 $ 999,563
==================== ===================
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable $ 18,626 $ 18,626
Accrued liabilities 10,705 9,365
Current portion of long-term debt 3,730 3,730
-------------------- -------------------
Total current liabilities 33,061 31,721
Long-term debt 490,698 490,698
Deferred income tax liabilities 89,916 89,916
-------------------- -------------------
Total liabilities 613,675 612,335
-------------------- -------------------
Shareholders' Equity
Preferred stock - $0.01 par value
Authorized - 5,000,000 shares
Issued and outstanding - None -- --
Common stock - $.01 par value
Authorized - 250,000,000 shares
Issued and outstanding - 50,000,000 shares 500 500
Additional paid-in capital 378,188 378,188
Treasury stock - 2,353 shares at cost (4) (4)
Accumulated other comprehensive loss (365) (365)
Retained earnings 10,786 8,909
-------------------- -------------------
Total shareholders' equity 389,105 387,228
-------------------- -------------------
Total Liabilities and Shareholders' Equity $ 1,002,780 $ 999,563
==================== ===================
EXHIBIT A - FISCAL YEAR 2005
PRESTIGE BRANDS HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Restated Fiscal Year 2005
(in thousands, except share and per share data)
Three months ended June 30, 2004
----------------------------------------------
Cooperative
Trade
Previously Revenue Expense
Reported Recognition Reclass As Restated
----------------------------------------------
REVENUES:
Net sales $67,682 $ (6,142) $ (2,860) $58,680
Other revenues 75 - - 75
----------------------------------------------
Total revenues 67,757 (6,142) (2,860) 58,755
COST OF SALES:
Cost of sales 36,123 (2,985) - 33,138
----------------------------------------------
Gross profit 31,634 (3,157) (2,860) 25,617
----------------------------------------------
OPERATING EXPENSES:
Advertising and
promotion 13,771 (126) (2,860) 10,785
General and
administrative 4,921 - - 4,921
Depreciation 486 - - 486
Amortization of
intangible assets 1,803 - - 1,803
----------------------------------------------
Total operating
expenses 20,981 (126) (2,860) 17,995
----------------------------------------------
Operating income 10,653 (3,031) - 7,622
----------------------------------------------
OTHER INCOME (EXPENSE):
Interest income 28 - - 28
Interest expense (11,077) - - (11,077)
Loss on
extinguishment of debt (7,567) - - (7,567)
----------------------------------------------
Total other income
(expense) (18,616) - - (18,616)
----------------------------------------------
Income (loss)
before income taxes (7,963) (3,031) - (10,994)
(Provision) Benefit for
income taxes 2,826 1,076 - 3,902
----------------------------------------------
Net income (loss) $ (5,137) $ (1,955) $ - $ (7,092)
=====================
Cumulative preferred dividends
on Senior Preferred and Class B
Preferred units (3,619) (3,619)
------------ ------------
Net income (loss) available
to members and common
shareholders $ (8,756) $(10,711)
============ ============
Net income (loss) per common share:
Basic $(0.33) $ (0.44)
============ ============
Diluted $ (0.33) $ (0.44)
============ ============
Weighted average shares
outstanding:
Basic 26,515,916 24,511,337
============ ============
Diluted 26,515,916 24,511,337
============ ============
Three months ended September 30, 2004 Three months ended December 31, 2004
------------------------------------------ ---------------------------------------------
Cooperative Cooperative
Trade Trade
Previously Revenue Expense Previously Revenue Expenses
Reported Recognition Reclass As Restated Reported Recognition Reclass As Restated
---------------------------------------------- ---------------------------------------------
REVENUES:
Net sales $81,320 $ 501 $ (1,889) $ 79,932 $ 75,829 $ (732) $(2,079) $73,018
Other revenues 26 - - 26 25 - - 25
---------------------------------------------- ---------------------------------------------
Total revenues 81,346 501 (1,889) 79,958 75,854 (732) (2,079) 73,043
COST OF SALES:
Cost of sales 37,843 98 - 37,941 33,923 (682) - 33,241
---------------------------------------------- ---------------------------------------------
Gross profit 43,503 403 (1,889) 42,017 41,931 (50) (2,079) 39,802
---------------------------------------------- ---------------------------------------------
OPERATING EXPENSES:
Advertising and
promotion 10,304 34 (1,889) 8,449 7,265 (18) (2,079) 5,168
General and
administrative 4,502 - - 4,502 5,690 - - 5,690
Depreciation 452 - - 452 457 - - 457
Amortization of
intangible assets 1,802 - - 1,802 2,148 - - 2,148
---------------------------------------------- ---------------------------------------------
Total operating 17,060 34 (1,889) 15,205 15,560 (18) (2,079) 13,463
---------------------------------------------- ---------------------------------------------
Operating income 26,443 369 - 26,812 26,371 (32) - 26,339
---------------------------------------------- ---------------------------------------------
OTHER INCOME (EXPENSE):
Interest income 59 - - 59 48 - - 48
Interest expense (10,893) - - (10,893) (12,042) - - (12,042)
Loss on
extinguishment of debt - - - - - - - -
---------------------------------------------- ----------------------------------------------
Total other income
(expense) (10,834) - - (10,834) (11,994) - - (11,994)
---------------------------------------------- ----------------------------------------------
Income (loss)
before income taxes 15,609 369 - 15,978 14,377 (32) - 14,345
(Provision) Benefit for
income taxes (5,936) (140) - (6,076) (5,230) 12 - (5,218)
---------------------------------------------- ---------------------------------------------
Net income (loss) $9,673 $229 $ - $9,902 $9,147 $ (20) $ - $9,127
=================== ======================
Cumulative preferred dividends
on Senior Preferred and Class B
Preferred units (3,827) (3,827) (3,895) (3,895)
------------ ------------ ------------ ------------
Net income (loss) available
to members and common
shareholders $5,846 $6,075 $5,252 $5,232
============ ============ ============ ============
Net income (loss) per common share:
Basic $ 0.22 $ 0.25 $ 0.20 $ 0.21
============ ============ ============ ============
Diluted $ 0.22 $ 0.23 $ 0.20 $ 0.20
============ ============ ============ ============
Weighted average shares
outstanding:
Basic 26,512,017 24,615,066 26,612,876 24,725,182
============ ============ ============ ============
Diluted 26,512,017 26,512,017 26,612,876 26,612,876
============ ============ ============ ============
Three months ended March 31, 2005 Twelve months ended March 31, 2005
-------------------------------------------------- --------------------------------------------------
Cooperative Cooperative
Trade Trade
Previously Revenue Expense Previously Revenue Expenses
Reported Recognition Reclass As Restated Reported Recognition Reclass As Restated
-------------------------------------------------- -----------------------------------------------------
REVENUES:
Net sales $78,336 $762 $ (1,810) $77,288 $ 303,167 $ (5,611) $ (8,638) $288,918
Other revenues 25 - - 25 151 - - 151
------------------------------------------------- -----------------------------------------------------
Total revenues 78,361 762 (1,810) 77,313 303,318 (5,611) (8,638) 289,069
COST OF SALES:
Cost of sales 33,459 1,230 - 34,689 141,348 (2,339) - 139,009
------------------------------------------------- -----------------------------------------------------
Gross profit 44,902 (468) (1,810) 42,624 161,970 (3,272) (8,638) 150,060
------------------------------------------------- -----------------------------------------------------
OPERATING EXPENSES:
Advertising and promotion 7,062 43 (1,810) 5,295 38,402 (67) (8,638) 29,697
General and administrative 5,085 - - 5,085 20,198 - - 20,198
Depreciation 504 - - 504 1,899 - - 1,899
Amortization of intangible
assets 2,148 - - 2,148 7,901 - - 7,901
--------------------------------------------- -----------------------------------------------------
Total operating expenses 14,799 43 (1,810) 13,032 68,400 (67) (8,638) 59,695
--------------------------------------------- -----------------------------------------------------
Operating income 30,103 (511) - 29,592 93,570 (3,205) - 90,365
--------------------------------------------- -----------------------------------------------------
OTHER INCOME (EXPENSE):
Interest income 236 - - 236 371 - - 371
Interest expense (11,085) - - (11,085) (45,097) - - (45,097)
Loss on extinguishment of
debt (19,296) - - (19,296) (26,863) - - (26,863)
---------------------------------------------- -----------------------------------------------------
Total other income
(expense) (30,145) - - (30,145) (71,589) - - (71,589)
---------------------------------------------- -----------------------------------------------------
Income (loss) before
income taxes (42) (511) - (553) 21,981 (3,205) - 18,776
(Provision) Benefit for income
taxes (182) 165 - (17) (8,522) 1,113 - (7,409)
---------------------------------------------- -----------------------------------------------------
Net income (loss) $ (224) $ (346) $ - $ (570) $ 13,459 $ (2,092) $ - $11,367
======================= ======================
Cumulative preferred dividends on Senior
Preferred and Class B
Preferred units (14,054) (14,054) (25,395) (25,395)
-------------- ---------- ------------- ---------------
Net income (loss) available to members and
common shareholders $ (14,278) $ (14,624) $ (11,936) $ (14,028)
============== ========== ============== ===============
Net income (loss) per common share:
Basic $ (0.37) $ (0.40) $ (0.41) $ (0.51)
============== ========== ============== ===============
Diluted $ (0.37) $ (0.40) $ (0.41) $ (0.51)
============== ========== ============== ===============
Weighted average shares outstanding:
Basic 38,074,074 36,496,869 29,389,329 27,545,898
============== =========== ============== ===============
Diluted 38,074,074 36,496,869 29,389,329 27,545,898
============== =========== ============== ===============
Prestige Brands Holdings, Inc.
Consolidated Balance Sheet
(Dollars in thousands) March 31, 2005
--------------------------------------------
As Previously
Assets Reported As Restated
-------------------- -------------------
Current assets
Cash $ 5,334 $ 5,334
Accounts receivable 43,893 35,918
Inventories 21,580 24,833
Deferred income tax assets 5,699 5,699
Prepaid expenses and other current assets 3,152 3,152
-------------------- -------------------
Total current assets 79,658 74,936
Property and equipment 2,324 2,324
Goodwill 294,544 294,731
Intangible assets 608,613 608,613
Other long-term assets 15,996 15,996
-------------------- -------------------
Total Assets $ 1,001,135 $ 996,600
==================== ===================
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable $ 21,705 $ 21,705
Accrued liabilities 13,472 11,589
Current portion of long-term debt 3,730 3,730
-------------------- -------------------
Total current liabilities 38,907 37,024
Long-term debt 491,630 491,630
Deferred income tax liabilities 84,752 84,752
-------------------- -------------------
Total liabilities 615,289 613,406
-------------------- -------------------
Shareholders' Equity
Preferred stock - $0.01 par value
Authorized - 5,000,000 shares
Issued and outstanding - None -- --
Common stock - $.01 par value
Authorized - 250,000,000 shares
Issued and outstanding - 50,000,000 shares 500 500
Additional paid-in capital 378,251 378,251
Treasury stock - 2,353 shares at cost (4) (4)
Accumulated other comprehensive income 320 320
Retained earnings 6,779 4,127
-------------------- -------------------
Total shareholders' equity 385,846 383,194
-------------------- -------------------
Total Liabilities and Shareholders' Equity $ 1,001,135 $ 996,600
==================== ===================
EXHIBIT A - FISCAL YEARS 2003 and 2004
PRESTIGE BRANDS HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Restated Fiscal Years 2003 and 2004
(in thousands, except share and per share data)
Twelve months ended March 31, 2003
--------------------------------------------------------
Cooperative
Trade
Previously Revenue Expense
Reported Recognition Reclass As Restated
--------------------------------------------------------
REVENUES:
Net sales $ 76,048 $(1,567) $ (3,138) $ 71,343
Other revenues - related parties 391 - - 391
--------------------------------------------------------
Total revenues 76,439 (1,567) (3,138) 71,734
COST OF SALES:
Cost of sales 27,475 (458) - 27,017
--------------------------------------------------------
Gross profit 48,964 (1,109) (3,138) 44,717
--------------------------------------------------------
OPERATING EXPENSES:
Advertising and promotion 14,274 (20) (3,138) 11,116
General and administrative 12,075 - - 12,075
Depreciation 301 - - 301
Amortization of intangible assets 4,973 - - 4,973
Loss on forgiveness of related party receivable - -
--------------------------------------------------------
Total operating expenses 31,623 (20) (3,138) 28,465
--------------------------------------------------------
Operating income 17,341 (1,089) - 16,252
--------------------------------------------------------
OTHER INCOME (EXPENSE):
Interest income 59 - - 59
Interest expense (9,806) - - (9,806)
Loss on extinguishment of debt (685) - - (685)
--------------------------------------------------------
Total other income (expense) (10,432) - - (10,432)
--------------------------------------------------------
Income before income taxes 6,909 (1,089) - 5,820
Provision for income taxes (3,902) 615 - (3,287)
--------------------------------------------------------
Income from continuing operations 3,007 (474) - 2,533
============================
Discontinued Operations
Loss from operations of discontinued Pecos
reporting unit, net of income tax benefit of
$1,848 (3,385) (3,385)
Loss on disposal of Pecos reporting unit, net of
income tax benefit of $1,233 (2,259) (2,259)
--------------- ---------------
Income (loss) before cumulative effect of
change in accounting principle (2,637) (3,111)
Cumulative effect of change in accounting principle,
net of income tax benefit of $6,467 (11,785) (11,785)
--------------- ---------------
Net income (loss) $ (14,422) $ (14,896)
=============== ================
April 1, 2003 to February 5, 2004
---------------------------------------------------------
Cooperative
Trade
Previously Revenue Expense
Reported Recognition Reclass As Restated
---------------------------------------------------------
REVENUES:
Net sales $ 68,726 $ 1,930 $ (2,587) $ 68,069
Other revenues - related parties 333 - - 333
---------------------------------------------------------
Total revenues 69,059 1,930 (2,587) 68,402
COST OF SALES:
Cost of sales 26,254 601 - 26,855
---------------------------------------------------------
Gross profit 42,805 1,329 (2,587) 41,547
---------------------------------------------------------
OPERATING EXPENSES:
Advertising and promotion 12,601 47 (2,587) 10,061
General and administrative 12,068 - - 12,068
Depreciation 247 - - 247
Amortization of intangible assets 4,251 - - 4,251
Loss on forgiveness of related party receivable 1,404 1,404
---------------------------------------------------------
Total operating expenses 30,571 47 (2,587) 28,031
---------------------------------------------------------
Operating income 12,234 1,282 - 13,516
---------------------------------------------------------
OTHER INCOME (EXPENSE):
Interest income 38 - - 38
Interest expense (8,195) - - (8,195)
Loss on extinguishment of debt - - - -
---------------------------------------------------------
Total other income (expense) (8,157) - - (8,157)
---------------------------------------------------------
Income before income taxes 4,077 1,282 - 5,359
Provision for income taxes (1,684) (530) - (2,214)
---------------------------------------------------------
Income from continuing operations 2,393 752 - 3,145
=============================
Discontinued Operations
Loss from operations of discontinued Pecos
reporting unit, net of income tax benefit of
$1,848 - -
Loss on disposal of Pecos reporting unit, net of
income tax benefit of $1,233 - -
--------------- ---------------
Income (loss) before cumulative effect of
change in accounting principle 2,393 3,145
Cumulative effect of change in accounting principle,
net of income tax benefit of $6,467 - -
--------------- ---------------
Net income (loss) $ 2,393 $ 3,145
=============== ===============
February 6, 2004 to March 31, 2004
---------------------------------------------------------
Cooperative
Trade
Previously Revenue Expense
Reported Recognition Reclass As Restated
---------------------------------------------------------
REVENUES:
Net sales $ 18,807 $ (1,597) $ (388) $ 16,822
Other revenues - related parties 54 - - 54
---------------------------------------------------------
Total revenues 18,861 (1,597) (388) 16,876
COST OF SALES:
Cost of sales 10,023 (672) - 9,351
---------------------------------------------------------
Gross profit 8,838 (925) (388) 7,525
---------------------------------------------------------
OPERATING EXPENSES:
Advertising and promotion 1,689 (34) (388) 1,267
General and administrative 1,649 - - 1,649
Depreciation 41 - - 41
Amortization of intangible assets 890 - - 890
Loss on forgiveness of related party receivable - -
---------------------------------------------------------
Total operating expenses 4,269 (34) (388) 3,847
---------------------------------------------------------
Operating income 4,569 (891) - 3,678
---------------------------------------------------------
OTHER INCOME (EXPENSE):
Interest income 10 - - 10
Interest expense (1,735) - - (1,735)
Loss on extinguishment of debt - - - -
---------------------------------------------------------
Total other income (expense) (1,725) - - (1,725)
---------------------------------------------------------
Income before income taxes 2,844 (891) - 1,953
Provision for income taxes (1,054) 330 - (724)
---------------------------------------------------------
Income from continuing operations 1,790 (561) - 1,229
=============================
Discontinued Operations
Loss from operations of discontinued Pecos
reporting unit, net of income tax benefit of
$1,848 - -
Loss on disposal of Pecos reporting unit, net of
income tax benefit of $1,233 - -
--------------- ---------------
Income (loss) before cumulative effect of
change in accounting principle 1,790 1,229
Cumulative effect of change in accounting principle,
net of income tax benefit of $6,467 - -
--------------- ---------------
Net income (loss) $ 1,790 $ 1,229
Cumulative preferred dividends on Senior
Preferred and Class B Preferred units (1,390) (1,390)
--------------- ---------------
Net income (loss) available to members and
common shareholders $ 400 $ (161)
=============== ===============
Net income (loss) per common share:
Basic $ 0.02 $ (0.01)
=============== ===============
Diluted $ 0.02 $ (0.01)
=============== ===============
Weighted average shares outstanding:
Basic 26,571,155 24,471,597
=============== ===============
Diluted
26,571,155 24,471,597
=============== ===============
Prestige Brands Holdings, Inc.
Consolidated Balance Sheet
(Dollars in thousands) March 31, 2004
--------------------------------------------
As Previously
Assets Reported As Restated
-------------------- -------------------
Current assets
Cash $ 3,393 $ 3,393
Accounts receivable 15,732 13,369
Inventories 9,748 10,660
Deferred income tax assets 1,647 1,647
Prepaid expenses and other current assets 234 234
-------------------- -------------------
Total current assets 30,754 29,303
Property and equipment 880 880
Goodwill 55,594 55,781
Intangible assets 236,611 236,611
Other long-term assets 2,783 2,783
-------------------- -------------------
Total Assets $ 326,622 $ 325,358
==================== ===================
Liabilities and Members' and Shareholders' Equity
Current liabilities
Accounts payable $ 5,281 $ 5,281
Accrued liabilities 7,264 6,561
Current portion of long-term debt 2,000 2,000
-------------------- -------------------
Total current liabilities 14,545 13,842
Long-term debt 146,694 146,694
Deferred income tax liabilities 38,874 38,874
-------------------- -------------------
Total liabilities 200,113 199,410
-------------------- -------------------
Members' and Shareholders' Equity
Senior Preferred Units - 22,500 units issued and outstanding 17,768 17,768
Class B Preferred Units - 106,656 units issued and outstanding 96,807 96,807
Common Units - 57,901,655 units issued and outstanding 5,273 5,273
Additional paid-in capital 4,871 4,871
Retained earnings 1,790 1,229
-------------------- -------------------
Total members' and shareholders' equity 126,509 125,948
-------------------- -------------------
Total Liabilities and Members' and Shareholders' Equity $ 326,622 $ 325,358
==================== ===================