Prestige Brands Holdings, Inc. (NYSE: PBH) today announced results for the first fiscal quarter ended June 30, 2011, including revenues of $95.3 million, an increase of 33.8% over the prior year comparable period's results of $71.2 million. This growth is driven by the Company's core over-the-counter (OTC) brands as well as the fiscal 2011 acquisitions of Blacksmith Brands and Dramamine®.
Reported net income for the first fiscal quarter was $14.8 million, or $0.29 per diluted share, 53.7% higher than the prior year comparable period's net income of $9.6 million, or $0.19 per diluted share. The current year period includes a one-time net gain associated with a legal settlement and other one-time costs totaling approximately $2.9 million, or $0.06 per diluted share. The prior year period included income from discontinued operations and costs associated with the extinguishment of debt totaling approximately $0.2 million, or less than $0.01 per diluted share. Excluding these one-time amounts in each of the respective periods, earnings per diluted share would have been $0.23 for the first fiscal quarter of the current year compared to $0.19 in the prior year's first quarter, an increase of 21.1%.
Operating income for the first fiscal quarter was $27.2 million, 31.8% higher than the prior year comparable period's results of $20.7 million. The increase includes the impact in the current year period of the acquisitions completed in fiscal 2011.
Income from continuing operations for the first fiscal quarter was $14.8 million, 60.4% higher than the prior year comparable period's results of $9.2 million. The increase includes the impact of the acquisitions completed in fiscal 2011, and the one-time net gain mentioned above totaling approximately $2.9 million in the current fiscal year period. The prior fiscal year period included the impact of costs associated with the extinguishment of debt totaling approximately $0.2 million. Excluding the impact of these one-time amounts from each of the respective periods, income from continuing operations would have increased by approximately $2.5 million or 26.2%.
Diluted earnings per share from continuing operations was $0.29 for the first fiscal quarter, which included the one-time net gain mentioned above totaling approximately $2.9 million, or $0.06 per diluted share, compared to the $0.19 for the prior year first fiscal quarter, which included a loss on extinguishment of debt of $0.2 million, or less than $0.01 per diluted share.
Results by Segment
Revenues for the OTC Healthcare segment were $71.2 million, or 59.2% higher than the prior year first quarter results of $44.7 million. The revenue increase in the OTC Healthcare segment was driven by strong sales of PediaCare®, Luden's®, Little Remedies®, The Doctor's® and Compound W®. In the first fiscal quarter, the five legacy core OTC brands increased 10.7%, while the OTC Healthcare segment in total increased 4.5%, compared to the same period in the prior year. This excludes the impact of the acquisitions completed in fiscal 2011, and represents the fourth consecutive quarter of organic revenue increases for the Company's five legacy core OTC brands.
Revenues for the Household Cleaning segment were $24.1 million for the first fiscal quarter, 9.1% lower than the prior year comparable period revenues of $26.5 million. The overall retail market for household cleaning products continues to decline slightly across many categories. This decline has created a highly competitive and price sensitive retail environment.
Commentary
"Our solid performance this quarter reflects our continued focus on key strategic initiatives which position Prestige for long-term growth," said Matthew M. Mannelly, President and CEO. "Our fiscal 2011 acquisitions of Blacksmith Brands and Dramamine are now fully integrated into the OTC segment of our business, and we are investing in, and executing against, building the equity of these important brands. Our strategy of increasing our advertising and promotion investment against core OTC brands continues to yield results. Our core OTC brands clearly benefit from this as we recorded our fourth consecutive quarter of revenue increases and share gains, outpacing category growth in many of our OTC businesses."
"While most of our revenues are derived from the U.S., sales of our international business, which includes Canada, grew 23.4% in the first fiscal quarter," Mr. Mannelly said. "The sales increase was largely a result of our strategy of increased marketing and advertising investment, product innovation, and distribution gains for Compound W, Chloraseptic, and Sleep-Eze."
"We are pleased with the progress we are making and encouraged by consumer and retailer reaction to the innovation and increased marketing support we are bringing to our brands. We are confident in our strategies and the results they have delivered. Given the economic climate and challenging retail environment, we remain cautiously optimistic in our outlook for the remainder of the year. In addition, the cough/cold products category faces strong comparisons versus the prior year's high incident cough/cold level, and children's cold products will face increased competition at some point in the foreseeable future," he said.
Free Cash Flow and Debt Reduction
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 first fiscal quarter ended June 30, 2011 was $15.4 million, a decrease of $5.2 million over the prior year comparable period's free cash flow of $20.6 million. The decrease in free cash flow is primarily due to higher interest payments in connection with increased acquisition financing incurred in fiscal 2011 and higher incentive compensation payments in the current year period due to increased company performance in fiscal 2011.
Total indebtedness at June 30, 2011 was $469.0 million, reflecting recent debt repayments of $23.0 million. Cash on the balance sheet totaled $6.0 million at June 30, 2011.
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