AZUSA, Calif., May 8 /PRNewswire-FirstCall/ -- Physicians Formula
Holdings, Inc. (NASDAQ:FACE) ("Physicians Formula" or the
"Company") today announced financial results for the first quarter
ended March 31, 2007. First Quarter 2007 Compared to First Quarter
2006: * Net sales increased 29% to $35.7 million from $27.7
million. * Net income per diluted common share was $0.30, and
includes $0.03 per share of non-cash compensation expense after tax
and $0.01 per share of secondary offering costs after tax.
Excluding these items, adjusted net income per diluted common share
would have been $0.34 for the first quarter of 2007. "We are very
pleased with our results for the first quarter. The stronger than
expected sales and earnings are a direct result of a successful
sell-in period for existing and new product offerings, particularly
in our Mineral Wear(R) line," stated Ingrid Jackel, Chief Executive
Officer of Physicians Formula. "We achieved 26% growth in retail
sales in the Face category and 11% growth in retail sales in the
Eye category for the 52 weeks ended March 24, 2007, as reported by
ACNielsen." Ms. Jackel continued, "The increase in our overall
market share of retail sales to 7.3% of the masstige market is an
indication that our problem-solution based products are providing
our customers with solutions to specific needs that many women of
all ages and ethnicities have." "Our improved net income during the
quarter reflects strong net sales growth, a 120 basis point
increase in gross margins due primarily to improved inventory
management, and reduced interest expense resulting from the debt
refinancing we undertook in connection with our initial public
offering in November 2006," commented Joseph Jaeger, Chief
Financial Officer. Secondary Equity Offering On April 25, 2007, the
Company completed a secondary offering of 5,049,650 shares of its
common stock by certain selling stockholders. The Company did not
receive any proceeds from the sale of the shares but agreed to pay
the expenses of the offering, which resulted in a $0.01 per share
impact on net income per diluted common share for the first quarter
of 2007 and is expected to result in a cumulative $0.04 per share
impact on net income per diluted common share for 2007. Outlook The
Company currently anticipates net sales for the second quarter of
2007 will be in the range of approximately $24.5 million to $25.5
million, an increase of approximately 6% to 10% over the same
period a year ago. Net loss per diluted common share for the second
quarter of 2007 is expected to be in the range of $(0.04) to
$(0.01) on approximately 14.5 million diluted common shares. The
net loss per diluted common share outlook includes an estimated
non-cash charge for stock-based compensation after tax of
approximately $0.02 per share, as well as one-time secondary equity
offering costs after tax of approximately $0.04 per share.
Excluding these items, the estimated adjusted net income per
diluted common share outlook would be in the range of $0.02 to
$0.05 per share for the second quarter of 2007. The Company is
maintaining its net sales estimate and net income per diluted
common share estimate (reduced by $0.05 per share to reflect the
expenses of the secondary equity offering paid by the Company) for
the fiscal year ending December 31, 2007. Net sales are expected to
be in the range of approximately $113 million to $116 million, an
increase of approximately 19% to 22% over the same period a year
ago. Net income per diluted common share for 2007 is expected to be
in the range of $0.67 to $0.72 on approximately 14.5 million
diluted common shares. The net income per diluted common share
outlook includes an estimated non-cash charge for stock-based
compensation after tax of approximately $0.10 per diluted common
share, as well as the one- time secondary equity offering costs
after tax of approximately $0.05 per diluted common share.
Excluding these items, the estimated adjusted net income per
diluted common share outlook would be in the range of $0.82 to
$0.87 per share for 2007. U.S. Market Share Data ($ Share) The
Company defines the masstige market as products sold in the mass
market channel under the following premium-priced brands:
Physicians Formula, Almay, L'Oreal, Max Factor, Neutrogena, Revlon
and Vital Radiance. The following table sets forth the approximate
market share, based on retail sales, of the Company's products in
total and for selected categories within the masstige market, as
the Company defines it, based on ACNielsen(1) data for the 52 weeks
ended March 24, 2007. 52 Weeks Ended March 24, 2007 Masstige %
Change ($ Share) vs. Prior Year ($ Share) Total Company 7.3% 22%
Face 13.3% 26% Eye 5.3% 11% (1) ACNielsen is an independent
research entity. ACNielsen data does not include Wal-Mart, which is
the Company's largest customer. Non-GAAP Financial Measures
Physicians Formula presents net income per diluted common share on
an adjusted basis to exclude the impact of non-cash charges
associated with stock-based compensation expense and certain
one-time charges incurred in connection with its secondary equity
offering. This presentation is not in accordance with generally
accepted accounting principles in the United States ("GAAP"). The
items that are excluded from adjusted net income per diluted common
share are: a non-cash charge for stock-based compensation and
one-time charges incurred in connection with the Company's
secondary equity offering. For purposes of adjusted net income per
diluted common share, the adjusted pre-tax result is adjusted for a
provision for income taxes at an assumed tax rate of 40%. The
Company presents adjusted net income per diluted common share
because the Company believes that adjusted net income per diluted
common share can facilitate a comparison of the Company's current
results with the Company's historical results and provide useful
information to investors on the Company's profitability without
regard to certain one-time items and certain non-cash items which
do not directly affect the Company's operating performance. The
Company also believes that it is useful to investors to provide
disclosure of the Company's results on the same basis as that used
by its management. Adjusted net income per diluted common share has
limitations as an analytical tool, and you should not consider it
in isolation, or as a substitute for, analysis of the Company's
results as reported under GAAP. Because of these limitations,
adjusted net income per diluted common share should not be
considered as a replacement for net income (loss) per diluted
common share on a GAAP basis. The Company compensates for these
limitations by relying primarily on its GAAP results and using
adjusted net income per diluted common share only supplementally. A
reconciliation of net income per diluted common share to adjusted
net income per diluted common share in accordance with GAAP is
presented below: Three Months Ended March 31, 2007 Net Income per
Diluted Common Share $0.30 Adjustments to Net Income per Diluted
Common Share: Secondary Offering Expense, net of tax effect 0.01
Stock-Based Compensation Expense, net of tax effect 0.03 Adjusted
Net Income per Diluted Common Share $0.34 Reconciliations of net
(loss) income per diluted common share outlook to adjusted net
income per diluted common share outlook in accordance with GAAP are
presented below: Outlook for Outlook for Three Months Ended Year
Ended June 30, 2007 December 31, 2007 Net (Loss) Income per Diluted
Common Share $(0.04) - (0.01) $0.67 - 0.72 Adjustments to Net
(Loss) Income per Diluted Common Share: Secondary Offering Expense,
net of tax effect 0.04 0.05 Stock-Based Compensation Expense, net
of tax effect 0.02 0.10 Adjusted Net Income per Diluted Common
Share $0.02 - 0.05 $0.82 - 0.87 Conference Call The conference call
is scheduled to begin at 2:00 pm Pacific Time on Tuesday, May 8,
2007. Participants may access the call by dialing 800-817-4887
(domestic) or 913-981-4913 (international). In addition, the call
will be webcast via the Company's Web site at
http://www.physiciansformula.com/, Investor Relations, where it
will also be archived. A telephone replay will be available through
Tuesday, May 22, 2007. To access the replay, please dial
888-203-1112 (domestic) or 719-457-0820 (international), passcode
5840657. About Physicians Formula Holdings, Inc. Physicians Formula
is one of the fastest growing cosmetics companies operating in the
mass market prestige, or "masstige", market. Under its Physicians
Formula brand name, created in 1937, the Company develops, markets
and distributes innovative, premium-priced products for the mass
market channel. Physicians Formula differentiates itself by
addressing skin imperfections through a problem-solving approach,
rather than focusing on changing fashion trends. Currently,
Physicians Formula products are sold in over 26,000 stores
throughout the U.S. including stores operated by Wal-Mart, Target,
CVS, Walgreens and Albertsons. Safe Harbor Statement This press
release contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. In some
cases, forward-looking statements can be identified by words such
as "anticipates," "estimates", "expects," "believes," "plans,"
"predicts," and similar terms. These forward-looking statements are
based on current expectations, estimates and projections about the
Company's business and its industry, based on management's beliefs
and assumptions. Forward-looking statements are not guarantees of
future performance and the Company's actual results may differ
significantly from the results discussed in the forward-looking
statements. Factors that might cause such differences include, but
are not limited to: the demand for the Company's products; the
Company's ability to expand its product offerings; the competitive
environment in the Company's business; the Company's operations and
ability to achieve cost savings; the effect of technological and
regulatory changes; the Company's cash needs and financial
performance; changes in general economic or market conditions; and
other factors discussed in the Company's filings with the
Securities and Exchange Commission (the "SEC"), including the Risk
Factors contained in the Company's Annual Report on Form 10-K for
the year ended December, 31, 2006, filed March 16, 2007, and
available at http://www.physiciansformula.com/ and the SEC's
website at http://www.sec.gov/. You are urged to consider these
factors carefully in evaluating the forward-looking statements in
this release and are cautioned not to place undue reliance on such
forward-looking statements, which are qualified in their entirety
by this cautionary statement. Unless otherwise required by law, the
Company expressly disclaims any obligation to update publicly any
forward-looking statements, whether as result of new information,
future events or otherwise. PHYSICIANS FORMULA HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited) (dollars in
thousands, except per share data) Three Months Ended March 31, 2007
2006 NET SALES $35,723 $27,689 COST OF SALES 15,102 12,039 GROSS
PROFIT 20,621 15,650 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
13,110 9,950 INCOME FROM OPERATIONS 7,511 5,700 INTEREST EXPENSE
404 1,771 OTHER INCOME (5) (22) INCOME BEFORE INCOME TAXES 7,112
3,951 PROVISION FOR INCOME TAXES 2,810 1,536 NET INCOME $4,302
$2,415 NET INCOME PER COMMON SHARE: Basic $0.31 $0.23 Diluted $0.30
$0.21 WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING: Basic 13,866,389
10,352,892 Diluted 14,537,147 11,531,629 PHYSICIANS FORMULA
HOLDINGS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(dollars in thousands, except share data) March 31, December 31,
2007 2006 ASSETS CURRENT ASSETS: Cash and cash equivalents $21 $26
Accounts receivable, net of allowance for bad debts of $364 and
$348 29,009 26,654 Inventories 21,197 23,472 Prepaid expenses and
other current assets 1,601 1,775 Deferred income taxes - net 5,958
5,139 Total current assets 57,786 57,066 PROPERTY AND EQUIPMENT -
Net 2,775 2,506 OTHER ASSETS - Net 1,093 968 INTANGIBLE ASSETS -
Net 55,870 56,311 GOODWILL 17,463 17,463 TOTAL $134,987 $134,314
LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts
payable $10,468 $12,670 Accrued expenses 1,513 1,915 Trade
allowances 3,791 3,479 Sales returns reserve 10,462 9,440 Income
taxes payable 3,656 378 Line of credit borrowings 2,262 7,522
Current portion of long-term debt 2,250 2,063 Total current
liabilities 34,402 37,467 DEFERRED COMPENSATION 753 721 DEFERRED
INCOME TAXES - Net 21,123 21,617 LONG-TERM DEBT 12,375 12,937
COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Series A
preferred stock, $.01 par value - 10,000,000 shares authorized, 0
and 0 shares issued and outstanding -- -- Common stock, $.01 par
value - 50,000,000 shares authorized, 13,927,055 and 13,843,056
shares issued and outstanding 139 138 Additional paid-in capital
57,506 57,047 Retained earnings 8,689 4,387 Total stockholders'
equity 66,334 61,572 TOTAL $134,987 $134,314 (FACE/F) Contact: John
Mills / Anne Rakunas Integrated Corporate Relations, Inc. (310)
954-1100 DATASOURCE: Physicians Formula Holdings, Inc. CONTACT:
John Mills or Anne Rakunas, both of Integrated Corporate Relations,
Inc., +1-310-954-1100, for Physicians Formula Holdings, Inc. Web
site: http://www.physiciansformula.com/
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