EX-99.1 2 february52007pressrelease.htm PRESS RELEASE DATED FEBRUARY 5, 2007 Press Release dated February 5, 2007



PRESTIGE BRANDS HOLDINGS, INC. REPORTS THIRD QUARTER FISCAL 2007 RESULTS

Net Income of $10.6 Million Up 14% on Total Revenues of $80.l Million

Irvington, NY, February 5, 2007—Prestige Brands Holdings, Inc. (NYSE-PBH), a consumer products company with a diversified portfolio of well-recognized brands, today announced results for the third fiscal quarter and nine month period ended December 31, 2006. Highlights of the quarter include:
·  
Net income of $10.6 million, or $0.21 per diluted share, up 14% over the prior year comparable period
·  
Total revenues of $80.1 million, slightly higher than the prior year comparable period
·  
Free cash flow of $12.4 million was 12% higher than the prior year comparable period
·  
Term loan debt reduced by $18.5 million in the third fiscal quarter

Total revenues for the third quarter ended December 31, 2006 were $80.1 million, slightly higher than total revenues of $79.9 million in the prior year comparable period. Excluding the impact of the acquisitions of Chore Boy®, Dental Concepts and Wartner®, organic revenue declined by 6%. Chore Boy and Dental Concepts were acquired in October and November 2005, respectively; the Wartner® brand was acquired in September, 2006.

Operating income for the third quarter ended December 31, 2006 was $24.5 million, or 1% below the operating income of $24.7 million in the third quarter of fiscal 2006. The decline in operating income period to period resulted primarily from increases in advertising and promotion spending behind key brands.

Net income for the quarter grew 14% to $10.6 million or $0.21 per diluted share over net income of $9.3 million or $0.19 per diluted share for the comparable prior year period. Net income includes a $1.7 million tax benefit resulting from a reduction in the deferred income tax rate from 39.1% to 38.6% as a result of the implementation of certain tax planning strategies.


  Q3 Results by Segment
 
The Company conducts operations through three principal business segments: Over-the-Counter Drug (OTC), Household Products, and Personal Care products.

OTC Drug

Revenues of the over-the-counter drug products segment for the third quarter ended December 31, 2006 were $45.6 million, 8% higher than the prior year comparable period net revenues of $42.1 million. Increases in this segment resulted from sales gains in several key brands including The Doctor’s®, Clear eyes®, Little Remedies®, Dermoplast® and New Skin®. These gains were partially offset by sales declines in the Chloraseptic® and Compound W® brands.

Household Products

Revenues for the household products segment for the third quarter ended December 31, 2006 were $28.7 million, 7% less than the prior year comparable period net revenues of $30.8 million. Comet® and Spic and Span®, the two core brands in this segment, each recorded declines, while Chore Boy® experienced increased sales.

The Comet and Spic and Span declines were primarily the result of comparisons against unusually strong year ago shipments, which included pipeline shipments supporting new distribution and significant promotional sales to one dollar store customer. However, both brands continued to post strong consumer consumption gains during the current quarter.

Personal Care

Revenues for the personal care segment for the third quarter ended December 31, 2006 were $5.8 million, 17% less than the prior year comparable period net revenues of $7.0 million. The decline in revenues was generally in line with the Company’s expectations.

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 December 31, 2006 was $12.4 million, composed of operating cash flows of $12.5 million, less capital expenditures of $0.1 million. Free cash flow for the nine month period ended December 31, 2006 was $54.9 million, composed of operating cash flows of $55.3 million, less capital expenditures of $0.4 million. The Company’s free cash flow in 2006 is higher than reported net income as a result of the amortization of intangibles, changes in the components of working capital and the relatively low capital expenditures.

During the third fiscal quarter, the Company used free cash flow to reduce its term loan debt by $18.5 million, bringing debt reduction during the nine month period ended December 31, 2006 to a total of $27.4 million. The Company’s debt has been reduced to $471.2 million at December 31, 2006, from $498.6 million at March 31, 2006.
 

Year-To-Date Results

For the nine month period ended December 31, 2006, total revenues of $240.6 million were 11% higher than the prior period results of $216.7 million. Excluding the effects of acquisitions, year-to-date organic sales were up 3%. For the same period, operating income was up 13% largely as a result of the increase in sales, and lower advertising and promotion spending, partially offset by the increase in general and administrative expenses. Net income for the nine month period ended December 31, 2006 was $27.7 million, an increase of 22% over the comparable period last year.

Outlook

The Company expects its full year organic revenue growth will be in line with its previously stated long-term growth range of 3-4%. Total revenues will increase at a greater rate due to acquisitions. Net income is expected to grow less rapidly than total revenue growth.


Conference Call
 
The Company will host a conference call to review its third quarter and nine month results on Tuesday, February 6th at 8:30am EST. The toll free number is 866-770-7125 within North America and 617-213-8066 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 12780289.

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 products, 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 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.

Contact: Dean Siegal
914-524-6819


Prestige Brands Holdings, Inc.
Consolidated Statements of Operations
(Unaudited)


   
Three Months
Ended December 31
  
Nine Months
Ended December 31
  
(In thousands, except per share data)
  
2006
  
2005
  
2006
  
2005
  
Revenues
                  
Net sales
  
$
79,564
  
$
79,829
  
$
239,164
  
$
216,577
  
Other revenues
    
560
    
27
    
1,434
    
77
  
Total revenues
    
80,124
    
79,856
    
240,598
    
216,654
  
                           
Cost of Sales
                          
Costs of sales
    
36,766
    
38,726
    
114,350
    
103,224
  
Gross profit
    
43,358
    
41,130
    
126,248
    
113,430
  
                           
Operating Expenses
                          
Advertising and promotion
    
8,952
    
7,385
    
25,809
    
26,307
  
General and administrative
    
7,068
    
6,159
    
20,761
    
15,182
  
Depreciation
    
177
    
520
    
616
    
1,495
  
Amortization of intangible assets
    
2,627
    
2,314
    
7,013
    
6,610
  
   Total operating expenses
    
18,824
    
16,378
    
54,199
    
49,594
  
                           
   Operating income
    
24,534
    
24,752
    
72,049
    
63,836
  
                           
Other income (expense)
                          
Interest income
    
199
    
144
    
787
    
451
  
Interest expense
    
(10,355
)
  
(9,670
)
  
(30,478
)
  
(27,158
)
   Total other income (expense)
    
(10,156
)
  
(9,526
)
  
(29,691
)
  
(26,707
)
                           
Income before provision for
   income taxes
    
14,378
    
15,226
    
42,358
    
37,129
  
                           
Provision for income taxes
    
3,735
    
5,881
    
14,675
    
14,481
  
   Net income
  
$
10,643
  
$
9,345
  
$
27,683
  
$
22,648
  
                           
                           
Basic earnings per share
  
$
0.21
  
$
0.19
  
$
0.56
  
$
0.46
  
                           
Diluted earnings per share
  
$
0.21
  
$
0.19
  
$
0.55
  
$
0.45
  
                           
Weighted average shares outstanding:
Basic
    
49,535
    
48,929
    
49,425
    
48,874
  
Diluted
    
50,024
    
50,010
    
50,016
    
50,007
  



Prestige Brands Holdings, Inc.
Consolidated Balance Sheets
(Unaudited)

(In thousands)
  
December 31, 2006
  
March 31, 2006
  
Assets
          
Current assets
          
Cash and cash equivalents
  
$
4,802
  
$
8,200
  
Accounts receivable
    
35,230
    
40,042
  
Inventories
    
31,780
    
33,841
  
Deferred income tax assets
    
2,522
    
3,227
  
Prepaid expenses and other current assets
    
1,466
    
701
  
Total current assets
    
75,800
    
86,011
  
               
Property and equipment
    
1,453
    
1,653
  
Goodwill
    
303,928
    
297,935
  
Intangible assets
    
659,784
    
637,197
  
Other long-term assets
    
11,200
    
15,849
  
               
Total Assets
  
$
1,052,165
  
$
1,038,645
  
               
Liabilities and Stockholders’ Equity
              
Current liabilities
              
Accounts payable
  
$
20,500
  
$
18,065
  
Accrued interest payable
    
4,872
    
7,563
  
Income taxes payable
    
211
    
1,795
  
Other accrued liabilities
    
10,167
    
4,582
  
Current portion of long-term debt
    
3,550
    
3,730
  
Total current liabilities
    
39,300
    
35,735
  
               
Long-term debt
    
467,688
    
494,900
  
Other accrued liabilities
    
2,801
    
--
  
Deferred income tax liabilities
    
105,490
    
98,603
  
               
Total Liabilities
    
615,279
    
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 - 50,060 shares at December 31, 2006 and
   50,056 shares at March 31, 2006
    
501
    
501
  
Additional paid-in capital
    
379,009
    
378,570
  
Treasury stock, at cost - 55 shares at December 31, 2006
    and 18 shares at March 31, 2006
    
(40
)
  
(30
)
Accumulated other comprehensive income
    
476
    
1,109
  
Retained earnings
    
56,940
    
29,257
  
Total stockholders’ equity
    
436,886
    
409,407
  
               
Total Liabilities and Stockholders’ Equity
  
$
1,052,165
  
$
1,038,645
  



Prestige Brands Holdings, Inc.
Consolidated Statements of Cash Flows
(Unaudited)

   
Nine Months Ended December 31
  
(In thousands)
  
2006
  
2005
  
Operating Activities
          
Net income
  
$
27,683
  
$
22,648
  
Adjustments to reconcile net income to net cash provided by operating activities:
              
Depreciation and amortization
    
7,629
    
8,105
  
Deferred income taxes
    
7,686
    
11,543
  
Amortization of deferred financing costs
    
2,422
    
1,727
  
Stock-based compensation
    
439
    
230
  
Changes in operating assets and liabilities
              
Accounts receivable
    
4,812
    
2,681
  
Inventories
    
2,707
    
(6,997
)
Prepaid expenses and other current assets
    
(765
)
  
271
  
Accounts payable
   
1,366
    
(3,549
)
Income taxes payable
    
(1,584
)
  
(2,135
)
Accrued liabilities
    
2,894
    
1,312
  
Net cash provided by operating activities
    
55,289
    
35,836
  
               
Investing Activities
              
Purchases of equipment
    
(429
)
  
(452
)
Purchase of intangibles
    
--
    
(22,623
)
Purchase of business
    
(30,856
)
  
(30,555
)
Net cash used for investing activities
    
(31,285
)
  
(53,630
)
               
               
Financing Activities
              
Proceeds from the issuance of notes
    
--
    
30,000
  
Repayment of long-term debt
    
(27,392
)
  
(7,797
)
Payment of deferred financing costs
    
--
    
(13
)
Purchase of common stock for treasury
    
(10
)
  
(21
)
Additional costs associated with initial public offering
    
--
    
(63
)
Net cash provided by (used for) financing activities
    
(27,402
)
  
22,106
  
               
Increase (decrease) in cash
    
(3,398
)
  
4,312
  
Cash - beginning of period
    
8,200
    
5,334
  
               
Cash - end of period
  
$
4,802
  
$
9,646
  
               
Supplemental Cash Flow Information
              
Fair value of assets acquired
  
$
34,710
  
$
33,909
  
Fair value of liabilities assumed
    
(3,854
)
  
(3,354
)
Cash paid to purchase business
  
$
30,856
  
$
30,555
  
               
Interest paid
  
$
30,749
  
$
28,206
  
Income taxes paid
  
$
8,790
  
$
1,335
  



Prestige Brands Holdings, Inc.
Statements of Segment Operations
(Unaudited)


   
Three Months Ended December 31, 2006
  
   
Over-the-Counter
Drug
  
 
Household
Cleaning
  
 
Personal
Care
  
 
 
Consolidated
  
(In thousands)
                  
Net sales
  
$
45,574
  
$
28,155
  
$
5,835
  
$
79,564
  
Other revenues
    
--
    
560
    
--
    
560
  
                           
Total revenues
    
45,574
    
28,715
    
5,835
    
80,124
  
Cost of sales
   
15,800
    
17,787
    
3,179
    
36,766
  
                           
Gross profit
    
29,774
    
10,928
    
2,656
    
43,358
  
Advertising and promotion
    
7,089
    
1,595
    
268
    
8,952
  
                           
Contribution margin
  
$
22,685
  
$
9,333
  
$
2,388
    
34,406
  
Other operating expenses
                      
9,872
  
                           
Operating income
                      
24,534
  
Other (income) expense
                      
10,156
  
Provision for income taxes
                      
3,735
  
                           
Net income
                    
$
10,643
  


   
Nine Months Ended December 31, 2006
  
   
Over-the-Counter
Drug
  
 
Household
Cleaning
  
 
Personal
Care
  
 
 
Consolidated
  
(In thousands)
                  
Net sales
  
$
131,427
  
$
88,625
  
$
19,112
  
$
239,164
  
Other revenues
    
--
    
1,434
    
--
    
1,434
  
                           
Total revenues
    
131,427
    
90,059
    
19,112
    
240,598
  
Cost of sales
   
48,198
    
54,882
    
11,270
    
114,350
  
                           
Gross profit
    
83,229
    
35,177
    
7,842
    
126,248
  
Advertising and promotion
    
19,572
    
5,305
    
932
    
25,809
  
                           
Contribution margin
  
$
63,657
  
$
29,872
  
$
6,910
    
100,439
  
Other operating expenses
                      
28,390
  
                           
Operating income
                      
72,049
  
Other (income) expense
                      
29,691
  
Provision for income taxes
                      
14,675
  
                           
Net income
                    
$
27,683
  


Prestige Brands Holdings, Inc.
Statements of Segment Operations
(Unaudited)


   
Three Months Ended December 31, 2005
  
   
Over-the-Counter
Drug
  
 
Household
Cleaning
  
 
Personal
Care
  
 
 
Consolidated
  
(In thousands)
                  
Net sales
  
$
42,051
  
$
30,771
  
$
7,007
  
$
79,829
  
Other revenues
    
--
    
27
    
--
    
27
  
                           
Total revenues
    
42,051
    
30,798
    
7,007
    
79,856
  
Cost of sales
   
15,821
    
18,951
    
3,954
    
38,726
  
                           
Gross profit
    
26,230
    
11,847
    
3,053
    
41,130
  
Advertising and promotion
    
4,926
    
1,735
    
724
    
7,385
  
                           
Contribution margin
  
$
21,304
  
$
10,112
  
$
2,329
    
33,745
  
Other operating expenses
                      
8,993
  
                           
Operating income
                      
24,752
  
Other (income) expense
                      
9,526
  
Provision for income taxes
                      
5,881
  
                           
Net income
                    
$
9,345
  


   
Nine Months Ended December 31, 2005
  
   
Over-the-Counter
Drug
  
 
Household
Cleaning
  
 
Personal
Care
  
 
 
Consolidated
  
(In thousands)
                  
Net sales
  
$
116,199
  
$
78,783
  
$
21,595
  
$
216,577
  
Other revenues
    
--
    
77
    
--
    
77
  
                           
Total revenues
    
116,199
    
78,860
    
21,595
    
216,654
  
Cost of sales
   
43,044
    
47,873
    
12,307
    
103,224
  
                           
Gross profit
    
73,155
    
30,987
    
9,288
    
113,430
  
Advertising and promotion
    
18,192
    
5,245
    
2,870
    
26,307
  
                           
Contribution margin
  
$
54,963
  
$
25,742
  
$
6,418
    
87,123
  
Other operating expenses
                      
23,287
  
                           
Operating income
                      
63,836
  
Other (income) expense
                      
26,707
  
Provision for income taxes
                      
14,481
  
                           
Net income
                    
$
22,648