Prestige Brands Holdings, Inc. (NYSE:PBH) today announced results for the second quarter and first half of fiscal year 2011, which ended on September 30, 2010. The Company also announced the completion on November 1, 2010 of the acquisition of Blacksmith Brands, Inc., which added five over-the-counter healthcare products to its business.
“In addition, we are excited by the recent acquisition of Blacksmith Brands which closed on November 1st”
Income from continuing operations for the second fiscal quarter was $11.4 million, 28% higher than the prior year comparable period's results of $8.9 million resulting in earnings per share of $0.23 compared to $0.18 a year ago. Net revenues from continuing operations for the second fiscal quarter were $78.3 million, $2.4 million or 3% below the prior year's comparable quarter net revenues of $80.7 million. Gross margin improved by 1.4 basis points for the quarter while advertising and promotion (A&P) and general and administrative (G&A) expenditures decreased compared to the second quarter in the prior fiscal year.
Commentary
"We are pleased with our results for the quarter as we continue to make progress against our stated primary objectives of growing our core OTC brands which grew once again this quarter. Overall, revenues were in line with previously stated expectations as a result of heavy prior year H1N1 retailer buy in and continued competitive pressure in Household products. Profitability improved significantly as a result of gross margin improvement as well as prudent advertising and promotion investment in our priority brands," said Matthew Mannelly, President and CEO. "In addition, we are excited by the recent acquisition of Blacksmith Brands which closed on November 1st," he said. "This is a transformational event for Prestige, positioning the Company for growth, and taking a meaningful step toward our long-term commitment to OTC brands as the Company's focus. We will begin supporting these wonderful brands immediately in our efforts to accelerate their momentum in the marketplace. Furthermore, as we look to the second half of the fiscal year, we remain cautiously optimistic given the sluggish retail environment. We will continue to view this as an opportunity to build our brands and invest in our future growth. As we stated at the start of the year, we expect modest A&P growth over the course of the year as we build our brands and we are on track with those investments as we enter the heart of the cough/cold season."
First Half of Fiscal 2011
Net revenues from continuing operations for the first six months of fiscal 2011 were $149.5 million, an increase of 0.5% over the prior year's comparable period's results of $148.8 million. Income from continuing operations was $20.6 million, an increase of 27.2%, compared to $16.2 million in the prior year's comparable period. This resulted in EPS from continuing operations of $0.41 per share, 28.1% higher than the prior year's comparable period's results of $0.32 per share.
Free Cash Flow and Debt
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 here because management believes it is a commonly used measure of liquidity, and indicative of cash available for debt repayment and acquisitions. The Company defines "free cash flow" as operating cash flow from continuing operations less capital expenditures.
The Company's free cash flow for the second quarter ended September 30, 2010 was $22.0 million, an increase of $300,000 or 1.4% over the prior year comparable quarter. Free cash flow is composed of operating cash flow from continuing operations of $22.1 million less capital expenditures of $100,000. This compares to the prior year comparable quarter's free cash flow of $21.7 million, composed of operating cash flow from continuing operation of $21.8 million less capital expenditures of $100,000.
Total indebtedness at September 30, 2010 was $295.5 million; however, subsequent to the end of the quarter, indebtedness increased $215.0 million as a result of indebtedness incurred to acquire Blacksmith Brands. At September 30, 2010, cash on the balance sheet totaled $55.0 million.
Second Quarter Results by Segment
Net revenues for the over-the-counter healthcare segment were $50.8 million, $900,000 lower than the prior year comparable quarter. Increases in Clear Eyes®, Little Remedies®, and Compound W® were off set by decreases in Chloraseptic and the Allergen Block products. Net revenues for the household cleaning segment were $27.5 million, $1.5 million or 5% less than the prior year comparable quarter. Comet® and Spic and Span® experienced declines in the competitive household category.
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