Prestige Brands Holdings, Inc. Reports First Quarter Fiscal 2009 Results

Prestige Brands Holdings, Inc. (NYSE:PBH), a consumer products company with a diversified portfolio of well-known brands, today announced results for the first quarter of fiscal year 2009, which ended on June 30, 2008. Total revenues for the first fiscal quarter ended June 30, 2008 were $73.5 million, a 6.5% decrease from total revenues of $78.6 million in the prior year comparable quarter. As indicated in our news release of July 23rd, this decline is largely attributable to pricing dynamics in the cryogenic segment of the over-the-counter wart treatment category affecting our Compound W® and Wartner® brands. A secondary factor is the continued absence of the Little Remedies® pediatric cough/cold products, which were voluntarily withdrawn from the marketplace in the fall of calendar year 2007. In addition, The Doctor’s® NightGuard™ brand continued to experience declining sales due to the competition which came into the marketplace in last fiscal year’s first quarter. Operating income of $21.2 million for the first quarter was $1.9 million, or 8.2% below last year’s operating income of $23.1 million. The decline from last year was due to the sales decline, partially offset by favorable cost of sales and lower advertising and promotion expenses. G&A expenses were higher than prior year, primarily due to increased stock based compensation expenses. Interest expense of $8.8 million was $1.1 million lower than prior year due to lower debt outstanding, the Company having repaid $52.1 million during the previous fiscal year. Net income for the first quarter was $7.8 million, or $0.16 fully diluted earnings per share, 6.5% below last year’s reported net income of $8.3 million, or $0.17 fully diluted earnings per share. Results by Segment for the First Fiscal Quarter Over-the-Counter Healthcare Products Revenues of $39.2 million were $3.2 million or 7.5% less than the prior year comparable period. The decline is primarily attributable to sales declines on the Compound W® and Wartner® wart treatment brands, largely attributed to negative pricing dynamics in the cryogenic segment. The continued absence of the Little Remedies® pediatric cough/cold products voluntarily withdrawn in the fall of calendar year 2007 and The Doctor’s® Night Guard™ brand, which continued to experience intense competitive pressures, were secondary factors. These declines were partially offset by increases on the Clear Eyes®, Murine™ ear care, Chloraseptic® and New Skin® brands. Household Products Revenues of $29.0 million were $0.9 million or $2.9% less than the prior year period. Sales increases for the Comet® brand, led by Comet Mildew SprayGel were offset by declines in the Spic and Span® and Chore Boy® brands. Personal Care Products Revenues for this segment were $5.3 million, $1.0 million less than the prior year quarter, in line with expectations. Free Cash Flow & Debt Repayment Free cash flow is a "non-GAAP” 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 is an indication 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 first quarter ended June 30, 2008 was $15.3 million, composed of operating cash flow of $15.4 million less capital expenditures of $0.1 million, a $7.0 million increase over free cash flow of $8.3 million, composed of operating cash flow of $8.4 million less capital expenditures of $0.1 million generated in the prior year comparable quarter. During the quarter, the Company repaid $15.0 million of senior bank debt, bringing total debt to $396.2 million at June 30, 2008. Commentary According to Mark Pettie, Chairman and CEO, "Despite this quarter’s results, we remain confident in the 2-4% revenue increase we have projected for the full fiscal year, with strengthened third and fourth quarter growth in particular. We expect this performance will be fueled by our innovative new products, many of which are currently launching, as well as continued growth of our focus brands. For the full year, we expect that net income will grow more rapidly than revenue. Looking at the current quarter, we will be investing heavily in advertising and promotion support behind our new Allergen Block products. Much of the revenue impact from this increased second quarter advertising and promotion support will be realized in the second half.” Conference Call The Company will host a conference call to review its first fiscal quarter results on Thursday, August 7th at 8:30 a.m. EST. The dial in number is 866-578-5801. International callers may dial 617-213-8058. The passcode is ‘prestige”. The Company will provide a live internet webcast of the call, as well as an archived replay, which can be accessed by dialing 888-286-8010, or for international callers, 617-801-6888. The passcode for replay only is 53732046. 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 healthcare, personal care and household cleaning products sold throughout the U.S., Canada, and in certain international markets. Key brands include Compound W® wart remover, Chloraseptic® sore throat treatments, New-Skin® liquid bandage, Clear Eyes® and Murine® eye and ear care products, Little Remedies® pediatric over-the-counter products, The Doctor’s® NightGuard™ dental protector, Cutex® nail polish remover, Comet® and Spic and Span® household cleaners, and other well-known brands. Forward-Looking Statements Note: This news release contains "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. Prestige Brands Holdings, Inc. Consolidated Statements of Operations (Unaudited)   Three Months Ended June 30 (In thousands, except share data) 2008   2007 Revenues     Net sales $ 72,916 $ 78,041 Other revenues   618     570   Total revenues 73,534 78,611   Costs of Sales Costs of sales   34,272     37,322   Gross profit   39,262     41,289     Operating Expenses Advertising and promotion 7,319 7,786 General and administrative 7,973 7,646 Depreciation and amortization   2,756     2,751   Total operating expenses   18,048     18,183     Operating income   21,214     23,106     Other (income) expense Interest income (73 ) (187 ) Interest expense   8,756     9,874   Total other (income) expense   8,683     9,687     Income before income taxes 12,531 13,419   Provision for income taxes   4,750     5,099   Net income $ 7,781   $ 8,320     Basic earnings per share $ 0.16   $ 0.17     Diluted earnings per share $ 0.16   $ 0.17     Weighted average shares outstanding: Basic   49,880     49,660   Diluted   50,035     50,038   Prestige Brands Holdings, Inc. Consolidated Balance Sheets (Unaudited) (In thousands)     Assets June 30, 2008 March 31, 2008 Current assets Cash and cash equivalents $ 6,370 $ 6,078 Accounts receivable 38,325 44,219 Inventories 28,811 29,696 Deferred income tax assets 3,006 3,066 Prepaid expenses and other current assets   4,004     2,316   Total current assets 80,516 85,375   Property and equipment 1,365 1,433 Goodwill 308,915 308,915 Intangible assets 644,056 646,683 Other long-term assets   7,316     6,750     Total Assets $ 1,042,168   $ 1,049,156     Liabilities and Stockholders’ Equity Current liabilities Accounts payable $ 17,935 $ 20,539 Accrued interest payable 2,604 5,772 Income taxes payable 1,762 -- Other accrued liabilities 6,328 8,030 Current portion of long-term debt   3,550     3,550   Total current liabilities 32,179 37,891   Long-term debt 392,675 407,675 Other long-term liabilities 2,377 2,377 Deferred income tax liabilities   125,781     122,140     Total Liabilities   553,012     570,083     Stockholders’ Equity Preferred stock - $0.01 par value Authorized – 5,000 shares Issued and outstanding – None -- -- Common stock - $0.01 par value Authorized – 250,000 shares Issued – 50,060 shares at June 30 and March 31, 2008 501 501 Additional paid-in capital 380,993 380,364 Treasury stock, at cost – 101 shares and 59 shares at June 30 and March 31, 2008, respectively (57 ) (47 ) Accumulated other comprehensive income 684 (999 ) Retained earnings   107,035     99,254   Total stockholders’ equity   489,156     479,073     Total Liabilities and Stockholders’ Equity $ 1,042,168   $ 1,049,156   Prestige Brands Holdings, Inc. Consolidated Statements of Cash Flows (Unaudited)   Three Months Ended June 30 (In thousands) 2008   2007 Operating Activities Net income $ 7,781 $ 8,320 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,756 2,751 Deferred income taxes 2,669 2,934 Amortization of deferred financing costs 622 780 Stock-based compensation 629 460 Changes in operating assets and liabilities Accounts receivable 5,894 (1,948 ) Inventories 885 1,663 Prepaid expenses and other current assets (1,688 ) (483 ) Accounts payable (1,077 ) (2,911 ) Income taxes payable 1,762 1,144 Accrued liabilities   (4,870 )   (4,302 ) Net cash provided by operating activities   15,363     8,408     Investing Activities Purchases of equipment   (61 )   (111 ) Net cash used for investing activities   (61 )   (111 )   Financing Activities Repayment of long-term debt (15,000 ) (15,887 ) Purchase of common stock for treasury   (10 )   (4 ) Net cash used for financing activities   (15,010 )   (15,891 )   Increase (Decrease) in cash 292 (7,594 ) Cash - beginning of period   6,078     13,758     Cash - end of period $ 6,370   $ 6,164     Interest paid $ 11,302   $ 12,036   Income taxes paid $ 440   $ 551   Prestige Brands Holdings, Inc. Consolidating Statements of Operations (Unaudited)   Three Months Ended June 30, 2008 Over-the-Counter Healthcare   Household Cleaning   Personal Care     Consolidated   Net sales $ 39,246 $ 28,404 $ 5,266 $ 72,916 Other revenues   --   618   --   618   Total revenues 39,246 29,022 5,266 73,534 Cost of sales   13,208   17,923   3,141   34,272   Gross profit 26,038 11,099 2,125 39,262 Advertising and promotion   5,037   2,070   212   7,319   Contribution margin $ 21,001 $ 9,029 $ 1,913 31,943 Other operating expenses   10,729   Operating income 21,214 Other (income) expense 8,683 Provision for income taxes   4,750   Net income $ 7,781 Three Months Ended June 30, 2007 Over-the-Counter Household Personal Healthcare Cleaning Care Consolidated   Net sales $ 42,426 $ 29,345 $ 6,270 $ 78,041 Other revenues   --   542   28   570   Total revenues 42,426 29,887 6,298 78,611 Cost of sales   15,386   18,393   3,543   37,322   Gross profit 27,040 11,494 2,755 41,289 Advertising and promotion   5,881   1,628   277   7,786   Contribution margin $ 21,159 $ 9,866 $ 2,478 33,503 Other operating expenses   10,397   Operating income 23,106 Other (income) expense 9,687 Provision for income taxes   5,099   Net income $ 8,320