Prestige Brands Holdings, Inc. (NYSE: PBH) today announced results for the fiscal 2012 third quarter ended December 31, 2011, including net revenues of $106.3 million, an increase of 17.3% over the prior year's comparable quarter of $90.6 million. Net revenues for the nine month period of fiscal 2012 were $307.1 million, an increase of 27.9% over the prior year's comparable period of $240.1 million. This growth is largely driven by the fiscal 2011 acquisitions of Blacksmith Brands and Dramamine®, and the growth of the Company's legacy core Over-The-Counter (OTC) products. Net revenues for the Company's legacy core OTC brands were 3.2% and 5.7% higher than the prior year's comparable quarter and nine month periods, respectively, representing the sixth consecutive quarter of organic growth, excluding acquisitions.
Operating income for the third quarter of fiscal 2012 was $23.6 million, 81.4% higher than the prior year's comparable quarter of $13.0 million. Operating income for the first nine months of fiscal 2012 was $80.3 million, 39.5% higher than the prior year's comparable period of $57.5 million. These increases include the impact of the acquisitions completed in fiscal 2011, as well as expenses related to the acquisition of the brands from GSK.
Income from continuing operations for the third quarter of fiscal 2012 was $9.5 million, compared to $2.1 million in the prior year's comparable quarter. The current and prior year's fiscal third quarters were impacted by acquisition-related costs of $3.0 million and $8.2 million, respectively, net of tax of $1.9 million and $3.1 million, respectively. Excluding the impact of these charges, income from continuing operations for the third quarter of fiscal 2012 would have been $12.5 million, 21.5% higher than the prior year's comparable quarter of $10.3 million. Income from continuing operations for the first nine months of fiscal 2012 was $37.2 million, 63.5% higher than the prior year's comparable period of $22.8 million.
The current fiscal nine month period included the net impact of the $3.0 million of GSK acquisition-related costs, which was largely offset by a net gain associated with a legal settlement, and other net costs totaling approximately $2.9 million. The prior year's fiscal nine month period included the net impact of the $8.2 million Blacksmith acquisition-related costs. Excluding the impact of these charges, income from continuing operations for the first nine months of fiscal 2012 would have been $37.3 million, 20.7% higher than the prior year's comparable quarter of $30.9 million.
Reported net income for the third quarter of fiscal 2012 was $9.5 million, or $0.19 per diluted share, 336.6% higher than the prior year's comparable quarter of $2.2 million, or $0.04 per diluted share. Excluding the costs mentioned above in each of the respective periods, net income for the current third fiscal quarter would have been $12.5 million, or EPS of $0.25, compared to $10.3 million in the prior year's comparable quarter, or EPS of $0.21.
Reported net income for the first nine months of fiscal 2012 was $37.2 million, or 63.2% higher than the prior year's comparable period of $22.8 million. Excluding the amounts mentioned above in each of the respective periods, net income would have been $37.3 million for the first nine months of fiscal 2012, compared to $30.9 million in the prior fiscal year period. Excluding the costs referenced above, earnings per diluted share would have been $0.74 for the first nine months of fiscal 2012 compared to $0.62 in the prior year's nine month period, an increase of 19.4%.
Subsequent To The Close of the Quarter
On January 31, 2012, the Company completed the acquisition of fifteen of the seventeen OTC brands it agreed to purchase from GlaxoSmithKline(GSK), previously announced on December 20, 2011. The acquisition of the remaining two brands from GSK is expected to be completed during the first half of the year. The purchase price for the acquisition (inclusive of inventory) was $615 million, subject to a customary post-closing inventory adjustment. On January 31, 2012, to fund the acquisition, the Company completed the financing of additional bond and bank debt of $250 million and $660 million, respectively, the repayment of existing senior secured credit facilities and the payment of related transaction expenses. The acquisition of the GSK brands is the largest in the Company's history and a major step toward its commitment to its long-term OTC strategy.
Commentary and Outlook
Matthew M. Mannelly, CEO, commented, "We are pleased with our third quarter results, which reflect the successful execution of our stated strategy of core OTC growth combined with value-added acquisitions. We registered strong growth from our nine core OTC brands, resulting in solid market share gains across these categories. Both the Little Remedies® brand and the PediaCare® brand, which we acquired last year, experienced impressive revenue and share gains for both the quarter and the nine month year over year periods, despite a very soft cough/cold season. In addition, our diversified portfolio of OTC brands and platforms helped offset the headwinds of a tough cough/cold season," he said.
"Our disciplined approach to creating shareholder value continues to strategically transform the Company. The purchase of the seventeen well-known consumer brands from GSK represents the largest acquisition in our history. The brands are an excellent strategic and operational fit for Prestige, adding two new platforms and four new core brands to our business. They are well-aligned with our operating model, requiring limited incremental overhead, and are highly cash generative. We are confident we can rapidly transition these brands into our portfolio based on our track record of successful integration of previous acquisitions. Prestige's industry-leading Free Cash Flow will help us rapidly delever," he said.
"Our outlook for Q4 is one of cautious optimism given the challenging economic and retail environment, as well as the overall incident level of the cough/cold season to date. The GSK acquisition is expected to add approximately $30 million to our fourth quarter revenue and be neutral to EPS, excluding transaction-related and integration costs," he said.
Results by Segment
OTC Healthcare
Net revenues for the OTC Healthcare segment in the third quarter of fiscal 2012 were $84.9 million, or 25.9% higher than the prior year third quarter of $67.5 million. The revenue increase in the OTC Healthcare segment was led by strong sales of Little Remedies®, and The Doctor's®. In the third quarter of fiscal 2012, the five legacy core OTC brands increased 3.2% compared to the same period in the prior year and represents the sixth consecutive quarter of organic revenue increases for the Company's five legacy core OTC brands.
Net revenues for the OTC Healthcare segment in the nine month period of fiscal 2012 were $235.3 million, or 44.3% higher than the prior year's comparable period of $163.0 million. The increase in revenues is primarily due to revenues from the acquired Blacksmith brands and Dramamine®, and also to higher revenues from our five legacy core OTC brands, which benefited from increased advertising and promotional expenditures.
Household Cleaning
Net revenues for the Household Cleaning segment were $21.3 million for the third quarter of fiscal 2012, 7.8% lower than the prior year's comparable quarter of $23.1 million. Net revenues for the Household Cleaning segment were $71.8 million for the first nine months of fiscal 2012, 6.9% lower than the prior year's comparable nine month period of $77.1 million. This segment continues to be impacted by a difficult retail environment for household cleaning products. For both the third fiscal quarter and the nine month periods, lower sales of Comet® cleanser were partially offset by increased demand for Spic and Span®.
Free Cash Flow and Debt
Free Cash Flow is a "non-GAAP financial measure" and is presented here because management believes it is a commonly used measure of liquidity, indicative of cash available for debt repayment and acquisitions. Non-GAAP Free Cash Flow is defined and reconciled to GAAP Net Cash Provided by Operating Activities in the section entitled, "About Non-GAAP Financial Measures" below. The Company's Free Cash Flow for the third fiscal quarter ended December 31, 2011 was $14.5 million, a decrease of $4.2 million over the prior year's comparable quarter Free Cash Flow of $18.7 million. The Company's Free Cash Flow for the nine month period of fiscal 2012 was $47.6 million, a decrease of $13.6 million over the prior year comparable nine month period's Free Cash Flow of $61.2 million. The decrease in Free Cash Flow is primarily due to higher working capital usage, largely offset by the increased company performance primarily resulting from the acquisitions of Blacksmith Brands and Dramamine® as well as the growth of the legacy core OTC brands.
Total indebtedness at December 31, 2011 was $434.0 million, reflecting debt repayments of $58.0 million in the nine month period of the current fiscal year. At December 31, 2011, we had $40.0 million available for borrowing under our revolving credit facility and $4.4 million of cash on hand.
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