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Prestige Brands Holdings, Inc. (PBH)
F1Q09 Earnings Call
August 7, 2008 8:30 am ET
Dean Siegel - Director of Investor Relations
Mark Pettie - Chairman, Chief Executive Officer
Peter J. Anderson - Chief Financial Officer
Charles N. Jolly - General Counsel, Secretary
William Chappell - SunTrust Robinson Humphrey
Joseph Altobello - Oppenheimer & Co.
Analyst for Reza Vahabzdeh - Lehman Brothers
Olivia Tong - Merrill Lynch
Mimi Noel - Sidoti & Company
Jon Anderson - William Blair & Company, LLC
Previous Statements by PBH
» Prestige Brands Holdings Inc. F3Q09 (Qtr End 12/28/08) Earnings Call Transcript
» Prestige Brands Holdings Inc. F2Q09 (Qtr End 9/30/08) Earnings Call Transcript
» Prestige Brand Holdings, Inc. F4Q08 (Qtr End 3/31/08) Earnings Call Transcript
Welcome to Prestige Brands’ fiscal 2009 first 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 are 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 are filed with the US Securities and Exchange Commission.
Now I would like to introduce Mark Pettie, Chairman and CEO.
In addition to Dean, with me is Pete Anderson, Prestige’s Chief Financial Officer, and also joining us is Chuck Jolly, our General Counsel. I’ll begin today’s call with an overview of our first quarter results including specifics on our work care business. Pete will then review the full financials for the quarter in more detail. I’ll follow that with highlights of our segment performance, our progress against the four strategic growth thrusts guiding our efforts, and our outlook for the balance of this fiscal year. We’ll then open the call for questions.
So let’s get started with our reported total revenues for the first quarter which were $73.5 million, a 6.5% decrease from last year. As indicated in our press release this decline is attributable in large part to unsettled pricing dynamics in the cryogenic segment of the work care category which led to a 44% decline in our work care revenues. As I discussed on last quarter’s call, in March and April we significantly reduced list pricing on Wartner and Compound W Freeze Off respectively in response to actions taken by our major branded competitor. At the same time we reduced the number of applications in our Freeze Off product, also in response to a similar move by the same competitor. While the new pricing for Wartner was reflected in a timely fashion at many retailers, Freeze Off did not fully achieve reduced retails across our major customers until late July. Consequently price gaps versus our largest competitor were wider than expected throughout Q1 negatively affecting unit sales of our cryogenic products and to a lesser extent our Compound W salicylic acid products. Effective with the end of July our new prices are in place with all our major customers and we are beginning to see improved Freeze Off unit sales trends.
The second factor affecting work care in Q1 was a change in the balance of competitive marketing spending compared to recent history. In addition to reducing the cryogenic prices during the quarter our largest competitor increased their work care spending against both advertising and in-store promotion versus last year. Conversely since we were still in transition to our new retail price structure during Q1, we elected to reduce our spending versus prior year until that transition was complete. While I won’t predict what competition will be doing with their spending in Q2, I can tell you we will be restoring support behind our proven advertising company and strong brand equities now that our retail pricing is in line. This will be very important as we move through the second half of the traditional six-month April to September work care season as work care consumption during this period historically skews to the latter three months. So while we expect work care revenues will continue to be down versus a year ago due to the significant cryogenic segment price declines, we do project improved performance relative to Q1 as we move ahead.
Returning to our overall corporate performance, reported net income for the quarter of $7.8 million was $500,000 or 6.6% below last year’s reported net income of $8.3 million. Similar to the revenue story for this quarter, the decrease in net income compared to prior year was strongly influenced by the pricing dynamics in the cryogenic work care segment.
Finally, we generated $15.3 million of free cash in the quarter. Our continued strong cash generation helped us pay down an additional $15 million on our term loan reducing total debt to $396.2 million at June 30.
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.
Peter J. Anderson
As Mark mentioned net revenues for the quarter of $73.5 million were 6.5% less than prior year net revenues. Our operating income of $21.2 million was $1.9 million or 8.2% below last year’s operating income of $23.1 million and net income of $7.8 million was $500,000 or 6.6% below last year’s net income of $8.3 million.