Prestige Brand Holdings, Inc. (PBH)

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Prestige Brands Holdings Inc. (PBH)

F2Q09 Earnings Call

November 6, 2008 8:30 am ET

Executives

Dean Siegal – Director of Investor Relations

Mark Pettie – Executive Chairman, Chief Executive Officer

Peter J. Anderson – Chief Financial Officer

Charles N. Jolly – General Counsel

Analysts

Bill Chappell – Suntrust Robinson Humphrey

Joe Altobello – Oppenheimer & Co.

Mimi Noel – Sidoti & Co.

Neely Tamminga – Piper Jaffray

Olivia Tong – Merrill Lynch

[Unidentified Analyst] – William Blair & Company LLC

[Reza] – Barclay Capital

Presentation

Operator

Good day ladies and gentlemen and welcome to the Prestige Brands Holdings second quarter conference call. My name is Madge and I will be your coordinator for today. (Operator Instructions) I would now like to turn the presentation over to your host for today’s call,

Mr. Dean Siegal, Director of Investor Relations. Please proceed.

Dean Siegal

Good morning. Welcome to Prestige Brands fiscal 2009 second quarter conference call. During this call statements may be made by management of their beliefs and expectations as to the company’s future operating results. Statements of management’s expectations of what might occur with respect to future operating results are what is known as forward-looking statements. All forward-looking statements involve risks and uncertainties which in many cases are beyond the control of the company and may cause actual results to differ materially from management’s expectations.

Additional information concerning the factors that might cause actual results to differ from management’s expectations is contained in the company’s annual and quarterly reports that it files with the Securities and Exchange Commission. Now I’d like to introduce Mark Pettie, Chairman and CEO.

Mark Pettie

Thank you Dean and a good morning to all of you joining us on the call. In addition to Dean with me is Pete Anderson, prestigious Chief Financial Officer and also joining us today is Chuck Jolly our General Counsel.

I will begin today’s call with a brief overview of our second quarter results. Pete will then review the full financials for the quarter in more detail. I’ll follow that with highlights of our segment performance and a brief update on our progress against the four strategic growth thrusts guiding our efforts this year. We’ll then open the call for questions.

So getting underway, our reported total revenues for the second quarter were $88.1 million, a 1% increase over last year. As indicated in our press release, this increase is in part attributable to the launch of our breakthrough innovation products in the allergy category, Chloraseptic Allergen Block and Little Remedies Little Allergies.

In addition we saw sales increases on several other brands, most notably Clear Eyes, Comet, and our base Little Remedies lines. Partially offsetting those sales increases were declines in Murine Ear and our two wart care brands, Compound W and Wartner. As you might remember from last quarter’s call, the cryogenic of the wart remover category took a rather steep price reduction as our fiscal year and the summer wart season began.

During our fiscal first quarter the Compound W Freeze Off business in particular was significantly depressed by the fact that our new, lower priced eight application products did not get into certain retailer’s sets until late in the quarter, with some of that transition carrying into Q2. On that call we projected that in the second quarter, wart care revenues would continue to be down versus year ago due to the significant cryogenic segment price declines but that we would see meaningfully improved performance relative to Q1. That has proven to be the case as the pricing came into line and we restored advertising support to Compound W.

Returning to our overall corporate performance, reported net income for the quarter of

$8.5 million or $0.17 per share was $1.7 million or 25% greater than last year’s reported net income of $6.8 million or $0.14 per share. The improvement in net income was primarily due to a significant reduction in interest expense resulting from the $51 million of debt paid down over the past 12 months combined with a reduction in interest rates.

Finally, we generated $18.2 million of free cash in the quarter an increase of 40% over the second quarter last year. Our continued strong cash generation helped us pay down $11 million on our outstanding term loan during the quarter, reducing total debt to $385.2 million at September 30.

So that’s the summary for the quarter and now I’d like to turn the call over to Pete who will provide additional commentary and financial detail. Pete.

Peter J. Anderson

Thank you Mark and good morning everyone. As Mark mentioned, net revenues for the second quarter of the $88.1 million were 1% above last year’s net revenues. Operating income for the quarter of $20.5 million was essentially even with last year’s operating income of $20.6 million and our net income of $8.5 million was $1.7 million or 25% greater than last year’s net income of $6.8 million.

The significant net income improvement on essentially flat operating income was due to a

$2.8 million reduction in interest expense in this year’s quarter due to the large pay down of debt over the past year, combined with significantly lower interest rates in the current year compared to last year. Since September 30, 2007 our senior secured term loan facility has been reduced by

$51.9 million to $259.2 million. The average interest rate on our senior secured term loan facility dropped from 7.74% for the quarter ended September 30, 2007 to 4.75% in the current year’s quarter.

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