Prestige Brands Holdings, Inc. (NYSE: PBH) today announced results for the fourth fiscal quarter and full year ended March 31, 2011.
Revenues for the fourth fiscal quarter were $96.4 million, $26.4 million or 37.8% above the prior year's quarter. Revenues of the acquired Blacksmith Brands and Dramamine® brand, completed November 1, 2010 and January 6, 2011, respectively, accounted for $23.6 million of the increase while organic revenues for the Company grew $2.8 million or 4.1% during the current quarter over the prior year comparable quarter. The Company's revenue from its organic five core OTC brands (Chloraseptic®, Clear Eyes®, Compound W®, Little Remedies® and The Doctor's® NightGuard®) increased 8.4% over the prior year comparable quarter.
Gross profit for the fourth fiscal quarter was $46.3 million, $11.3 million or 32.5% above the prior year comparable quarter of $35.0 million. Excluding charges associated with inventory valuation step-up adjustments of $3.7 million related to the Blacksmith Brands and Dramamine acquisitions, gross profit would have been $50.0 million in the current quarter. Gross margin was 48.1% in the current quarter, which was negatively impacted by 3.8 percentage points from the inventory step-up charges noted above. Excluding these charges, gross margin would have improved to 51.9% from 50.0% in the prior year comparable quarter, primarily as a result of a higher proportion of revenue generated from the Over-the-Counter Healthcare ("OTC") segment. During the quarter the Company continued to invest strongly behind Advertising and Promotion ("A&P") in support of its core brands within the OTC segment and the acquired brands. A&P for the quarter was $14.1 million, $7.6 million or 115.8% above the prior year comparable quarter of $6.5 million.
Operating income for the fourth fiscal quarter was $18.6 million or 5.4% higher than the prior year comparable quarter of $17.7 million. Operating income included $4.5 million of costs associated with the acquisitions of Blacksmith and Dramamine, including the inventory step-up charges noted above. Excluding these charges, operating income would have been $23.1 million for the quarter, $5.4 million or 31.0% above the prior year comparable quarter.
Income from continuing operations for the fourth fiscal quarter was $6.4 million and was negatively impacted by the above noted costs associated with the acquisitions of $2.4 million, net of related tax effects. Income from continuing operations for the fourth fiscal quarter of the prior year was $5.8 million and was negatively impacted by $1.3 million of a loss on the extinguishment of debt, net of related tax effects. Excluding these impacts, income from continuing operations would have been $8.8 million for the current year fourth fiscal quarter compared to $7.1 million for the prior year fourth fiscal quarter, an increase of 23.8%.
Diluted earnings per share from continuing operations was $0.13 for the fourth fiscal quarter, which included costs associated with the Blacksmith and Dramamine acquisitions, compared to $0.12 in the prior year comparable quarter, which included a loss on the extinguishment of debt. Excluding the impact of these charges in each quarter, diluted earnings per share from continuing operations in the fourth fiscal quarter would have been $0.18 compared to $0.14 in the prior year comparable quarter, an increase of 28.6%.
Commentary:
"Fiscal 2011 has been an extremely productive and transformative year for Prestige Brands," said Matthew M. Mannelly, President and CEO. "In particular, we are pleased that the Company delivered 4.1% organic revenue growth in the quarter, exclusive of acquisitions. Our strategy to build brands through increased, innovative and effective A&P support is delivering the expected results. In addition to revenue growth, this is evidenced through accelerating consumption growth trends. For the fourth quarter, consumption for the Company's brands grew 20.6%, up from 14.2% in the third quarter, 3.4% in the second quarter and a negative 6.4% in the first quarter. We have also completed the integration of the acquisitions of Blacksmith Brands and Dramamine and are now focused on developing the long-term potential for these exciting brands. Looking forward, we intend to continue to invest significantly in our core OTC brands to drive long-term sustainable growth and have clear goals to build on the success and momentum heading into fiscal 2012."
Results by Segment for the Fourth Fiscal Quarter
Revenues for the OTC Healthcare segment in the fourth fiscal quarter were $71.6 million, an increase of 66.5% over the prior year comparable quarter revenues of $43.0 million, primarily due to the addition of the acquired brands in the current year quarter. In addition, our five organic core OTC brands grew 8.4% compared to the prior year comparable quarter, led by increases in Little Remedies®, Chloraseptic®, Clear Eyes®, and Compound W®, slightly offset by a decline in The Doctor's®.
Revenues for the Household Cleaning segment for the fourth fiscal quarter were $24.8 million, an 8.1% decrease over the prior year comparable quarter revenues of $27.0 million. Comet®, Spic and Span® and Chore Boy® continued to face negative category consumption trends and competitive pressures at retail.
Fiscal Year 2011
Revenues for the fiscal year 2011 were $336.5 million, an increase of 15.0% over the prior year's revenues of $292.6 million. Revenues of the acquired Blacksmith Brands and Dramamine® brand, accounted for $38.8 million or 13.3% of the increase while organic revenues for the Company grew $5.1 million or 1.7% during the current year over the prior year.
Income from continuing operations for fiscal 2011 of $29.2 million was 9.0% lower than fiscal 2010 income from continuing operations of $32.1 million. Income from continuing operations for fiscal 2011 was negatively impacted by costs of $10.5 million associated with the above noted acquisitions and $0.2 million of a loss associated with the extinguishment of debt, net of related tax effects. Income from continuing operations for fiscal 2010 was negatively impacted by $1.3 million of a loss on the extinguishment of debt, net of related tax effects. Excluding these impacts, income from continuing operations would have been $39.9 million for the current fiscal year compared to $33.4 million for the prior fiscal year, an increase of 19.3%.
Diluted earnings per share from continuing operations for fiscal 2011 was $0.58, which included the costs associated with the Blacksmith and Dramamine acquisitions and the extinguishment of debt, compared to $0.64 in the prior fiscal year, which included a loss on the extinguishment of debt. Excluding the impact of these charges in each fiscal year, diluted earnings per share from continuing operations in fiscal 2011 would have been $0.79 compared to $0.67 in the prior fiscal year, an increase of 17.9%.
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. The company defines "free cash flow" as operating cash flow minus capital expenditures.
The Company's free cash flow for the fourth fiscal quarter ended March 31, 2011 was $24.8 million, an increase of 185.5% over the prior year comparable period's free cash flow of $8.7 million. For fiscal year 2011, free cash flow totaled $86.0 million, composed of operating cash flow of $86.7 million minus capital expenditures of $0.7 million. This compares to the prior year free cash flow of $58.7 million, composed of operating cash flow of $59.4 million minus capital expenditures of $0.7 million.
Total indebtedness at March 31, 2011 was $492.0 million, reflecting a recent pay down of $17.5 million. Cash on the balance sheet totaled $13.3 million at March 31, 2011.
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