Prestige Brands Holdings, Inc. Reports Record First Quarter EPS of $0.40 vs. $0.29, Up 37.9%

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Prestige Brands Holdings, Inc. Reports Record First Quarter EPS of $0.40 vs. $0.29, Up 37.9%

Revenue Estimate Updated for Acquisition of Care Pharmaceuticals

TARRYTOWN, N.Y.--(BUSINESS WIRE)-- Prestige Brands Holdings, Inc. (NYSE-PBH) today announced results for the first quarter of fiscal year 2014, which ended June 30, 2013, and updated its full year revenue estimate to reflect the Company's acquisition of Care Pharmaceuticals on July 1, 2013.


In addition to financial results reported in accordance with generally accepted accounting principles (GAAP), we have provided certain non-GAAP financial information in this release to aid investors in understanding the Company's performance. Each non-GAAP financial measure is defined and reconciled to its most closely related GAAP financial measure in the "About Non-GAAP Financial Measures" section at the end of this earnings release.

Revenues for the first fiscal quarter were $143.0 million. Excluding the $1.6 million impact from the sale of Phazyme® on the prior year, this quarter's results would have been 1.9% below the prior year's adjusted revenues of $145.8 million, or 2.7% below last year's reported sales of $147.0 million. These results reflect the transitional year the Company anticipated as a result of the return of competitive brands to the market and the impact of the divestiture of Phazyme.

Reported net income for the first fiscal quarter was $20.7 million, or $0.40 per diluted share, 41.2% higher than the prior year comparable quarter's results of $14.7 million, or $0.29 per diluted share. The prior year's net income would have been $17.9 million, or $0.35 per diluted share, were it not for transition and integration costs and other items associated with the acquisition of the GSK brands. The first fiscal quarter of 2014 included $0.4 million in items related to the acquisition of Care Pharmaceuticals. Excluding these items, net income would have been $21.1 million with no effect on earnings per share.

Gross profit for the first fiscal quarter was $83.5 million, in line with the comparable quarter's gross profit of $83.6 million. The Company reached a record gross margin of 58.4% in the first quarter of fiscal 2014 compared to 57.2% in the prior year comparable period. The year-over-year improvement in gross margin is a result of the higher proportion of revenue derived from the Over-the-Counter Healthcare (OTC) segment, as well as cost improvements.

Revenues for the OTC segment were $122.9 million. Excluding the $1.6 million impact from the sale of Phazyme on the prior year, this quarter's results would have been 1.6% below the prior year's adjusted revenues of $125.0 million, or 2.6% below last year's reported sales of $126.2 million. Revenues for the Household Cleaning segment, which represent approximately 14% of overall Company revenues and 7% of contribution margin, were $20.0 million, a decrease of 4% over the prior year's first quarter results of $20.8 million.

Commentary & Outlook

"We are pleased with our performance in the first quarter against our stated strategy to create long-term shareholder value through continued earnings per share growth," said Matthew Mannelly, CEO. "In addition, we executed against our M&A strategy with the acquisition of Care Pharmaceuticals, an OTC healthcare products company from New South Wales, Australia. Care is a great match for Prestige with a similar business model and a portfolio of strong OTC brands. This is our first international acquisition, one that strategically establishes a beachhead in the attractive Asia Pacific region. This platform allows us to accelerate new product and distribution opportunities and expand our existing Murine® and Clear Eyes® business. As a result of the acquisition, we now anticipate revenue for the full fiscal year to be in the range of $638-$643 million, which includes approximately $13 million in revenue from Care ($15 million AUD). In addition, we expect accretion of $0.04 in earnings per share from this acquisition," he said.

"Brand building continues to be a key part of our strategy for increasing shareholder value," Mr. Mannelly continued. "In the first quarter, we introduced three innovative new products: Goody's® Headache Relief Shots, BC® Cherry, and Fiber Choice® Fruity Bites. We will continue to focus on building our core brands during this transitional year with proven marketing and advertising support. As a company with a long-term focus, it is our intention to stay the course that has yielded strong results--investing in building our core brands, innovating in new product development, managing our excellent free cash flow, and being aggressive and disciplined in M&A," he said. Mr. Mannelly continued, "Our industry-leading free cash flow is an important component of our shareholder value creation strategy. Using our free cash flow to reduce debt adds to our earnings per share by reducing interest expense and increasing the Company's capacity to fund M&A activity."

Free Cash Flow and Debt Reduction

The Company's record free cash flow ("FCF") for the first fiscal quarter ended June 30, 2013 was $21.4 million, an increase of $7.9 million over the prior year comparable period's free cash flow of $13.5 million. The prior year comparable period's FCF and working capital were impacted by $13.8 million related to the timing of the GSK Transition Services Agreement. On a per share basis, free cash flow for the fiscal first quarter ended June 30, 2013 translates to $0.41 per share compared to $0.27 per share for the first quarter ended June 30, 2012.

The Company's net debt at June 30, 2013 was $941 million, reflecting recent net debt repayments of $18 million during the first fiscal quarter. At June 30, 2013, the Company's covenant-defined leverage ratio was approximately 4.16, down from approximately 5.25 at the time of the closing on the acquisition of the GSK brands on January 31, 2012.

Q1 Conference Call & Accompanying Slide Presentation

The Company will host a conference call to review its first quarter results on August 1, 2013 at 9:30 am EDT. The toll-free dial-in numbers are 866-270-6057 within North America and 617-213-8891 outside of North America. The conference pass code is "prestige". The Company will provide a live Internet webcast, a slide presentation to accompany the call, as well as an archived replay, all of which can be accessed from the Investor Relations page of the Company's website at http://prestigebrands.com. The slide presentation can be accessed just before the call from the Investor Relations page of the website by clicking on Webcasts and Presentations. Telephonic replays will be available for two weeks following the 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 89207139.

About Prestige Brands Holdings, Inc.

The Company markets and distributes brand name over-the-counter and household cleaning products throughout the U.S. and Canada, and in certain international markets. Core brands include Chloraseptic® sore throat treatments, Clear Eyes® eye care products, Compound W® wart treatments, The Doctor's® NightGuard® dental protector, the Little Remedies® and PediaCare® lines of pediatric over-the-counter products, Efferdent® denture care products, Luden's® throat drops, Dramamine® motion sickness treatment, BC® and Goody's® pain relievers, Beano® gas prevention, Debrox® earwax remover, and Gaviscon® antacid in Canada. Visit the Company's website at www.prestigebrands.com.

Note Regarding Forward-Looking Statements

This news release contains "forward-looking statements" within the meaning of the federal securities laws that are 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," "strategy," "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 creating shareholder value, the impact and complementary nature of acquisitions, future operating results, our strategy and focus, our intention to support our core brands with marketing and advertising, development of innovative products, management of free cash flow, and aggressive and disciplined M&A. These 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 expected as a result of a variety of factors, including the impact of our advertising and promotional initiatives, competition in our industry, and the success of our new product introductions and integration of newly acquired products. A discussion of other factors that could cause results to vary is included in the Company's Annual Report on Form 10-K for the year ended March 31, 2013, Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, and other periodic reports filed with the Securities and Exchange Commission.

 

Prestige Brands Holdings, Inc.

Consolidated Statements of Income and Comprehensive Income

(Unaudited)

     

Three Months Ended

June 30,

 
(In thousands, except per share data)2013   2012
Revenues
Net sales$142,101$145,920
Other revenues870 1,077 
Total revenues142,971146,997
 
Cost of Sales
Cost of sales (exclusive of depreciation shown below)59,488 63,393 
Gross profit83,483 83,604 
 
Operating Expenses
Advertising and promotion19,14020,325
General and administrative11,63416,151
Depreciation and amortization3,268 3,295 
Total operating expenses34,042 39,771 
Operating income49,441 43,833 
 
Other (income) expense
Interest income(3)(2)
Interest expense15,908 19,850 
Total other expense15,905 19,848 
 
Income before income taxes33,53623,985
Provision for income taxes12,844 9,330 
Net income$20,692 $14,655 
 
Earnings per share:
Basic$0.40 

$

0.29

 
Diluted$0.40 $0.29 
 
 
Weighted average shares outstanding:
Basic51,222 50,342 
Diluted52,040 51,106 
 
Comprehensive income, net of tax:
Currency translation adjustments1 (42)
Total other comprehensive income (loss)1 (42)
Comprehensive income$20,693 $14,613 
 
 

Prestige Brands Holdings, Inc.

Consolidated Balance Sheets

(Unaudited)

        
(In thousands)

Assets

June 30,
2013
March 31,
2013
Current assets
Cash and cash equivalents$19,306$15,670
Accounts receivable, net61,98173,053
Inventories66,91760,201
Deferred income tax assets6,0676,349
Prepaid expenses and other current assets8,713 8,900 
Total current assets162,984164,173
 
Property and equipment, net10,6979,896
Goodwill167,546167,546
Intangible assets, net1,370,5351,373,240
Other long-term assets24,332 24,944 
Total Assets$1,736,094 $1,739,799 
 
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable$42,222$51,376
Accrued interest payable13,72113,894
Other accrued liabilities25,792 31,398 
Total current liabilities81,73596,668
 
Long-term debt
Principal amount960,000978,000
Less unamortized discount(6,755)(7,100)
Long-term debt, net of unamortized discount953,245 970,900 
 
Deferred income tax liabilities200,803 194,288 
Total Liabilities1,235,783 1,261,856 
 
 
Stockholders' Equity
Preferred stock - $0.01 par value
Authorized - 5,000 shares
Issued and outstanding - None
Preferred share rights283283
Common stock - $0.01 par value
Authorized - 250,000 shares
Issued - 51,364 shares at June 30, 2013 and 51,311 shares at March 31, 2013514513
Additional paid-in capital403,643401,691
Treasury stock, at cost - 191 shares at June 30, 2013 and 181 shares March 31, 2013(965)(687)
Accumulated other comprehensive loss, net of tax(103)(104)
Retained earnings96,939 76,247 
Total Stockholders' Equity500,311 477,943 
Total Liabilities and Stockholders' Equity$1,736,094 $1,739,799 
 
     

Prestige Brands Holdings, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

 
Three Months Ended June 30,
(In thousands)2013   2012
Operating Activities
Net income$20,692$14,655
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization3,2683,295
Deferred income taxes6,7977,076
Amortization of deferred financing costs8921,048
Stock-based compensation costs1,193913
Amortization of debt discount345404
(Gain) loss on sale or disposal of equipment(2)21
Changes in operating assets and liabilities, net of effects of acquisitions
Accounts receivable11,070(9,214)
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