Part I.
ITEM 1. BUSINESS
Note About Forward-Looking Statements
Certain statements in this report, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements may appear throughout this Annual Report on Form 10-K, including without limitation, in the following sections: “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “future,” “opportunity,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. A detailed discussion of risks and uncertainties that could cause actual results to differ materially from such forward-looking statements is included in the section entitled “Risk Factors” (in Part I, Item 1A of this Annual Report on Form 10-K). We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.
Overview
Unless otherwise indicated by the context, all references in this Annual Report on Form 10-K to “we”, “us”, “our”, “Company” or “Prestige” refer to Prestige Brands Holdings, Inc. and our subsidiaries. Similarly, reference to a year (e.g., “2012”) refers to our fiscal year ended March 31 of that year.
We sell well-recognized, brand name Over-the-Counter (“OTC”) Healthcare and Household Cleaning products largely in North America. We use the strength of our brands, our established retail distribution network, a low-cost operating model and our experienced management team to our competitive advantage in these categories. Our ultimate success is dependent on several factors, including our ability to:
2012 Acquisitions
In 2012, we acquired 17 brands, which we believe are key to our growth strategy in the OTC Healthcare category and complementary to our existing OTC Healthcare brands. On January 31, 2012, we completed the acquisition of 15 North American OTC Healthcare brands, including the related contracts, trademarks and inventory from GlaxoSmithKline plc (“GSK”) and its affiliates (the “GSK Brands I”) for $615.0 million in cash, subject to a post-closing inventory and apportionment adjustment. The GSK Brands I include BC®, Goody's® and Ecotrin® brands of pain relievers; Beano®, Gaviscon®, Phazyme®, Tagamet® and Fiber Choice® gastrointestinal brands; and the Sominex® sleep aid brand. On March 30, 2012, we completed the acquisition of the Debrox® and Gly-Oxide® brands in the United States from GSK (the “GSK Brands II”), including the related contracts, trademarks and inventory, for $45.0 million in cash, subject to a post-closing inventory adjustment.
2011 Acquisitions
In 2011, we acquired six brands, which we believe are also key to our growth strategy in the OTC Healthcare category and complementary to our existing OTC Healthcare brands. On November 1, 2010, we acquired 100% of the capital stock of Blacksmith
Brands Holdings, Inc. (“Blacksmith”), which owned five brands; Efferdent®, Effergrip®, PediaCare®, Luden's® and NasalCrom®. On January 6, 2011, we completed the acquisition of certain assets comprising the Dramamine® brand in the United States.
Major Brands
Our major brands, set forth in the table below, have strong levels of consumer awareness and retail distribution across all major channels. These brands accounted for approximately 92.0%, 93.0%, and 97.0% of our net revenues for 2012, 2011 and 2010, respectively.
Major Brands
Market
Position(1)
Market Segment(2)
Share(3)
(%)
ACV(4)
Over-the-Counter Healthcare:
Chloraseptic®
#1
Sore Throat Liquids/Lozenges
42.8
87.9
Clear Eyes®
#2
Eye Allergy/Redness Relief
17.2
88.1
Compound W®
Wart Removal
35.9
91.8
Dramamine®
Motion Sickness
37.4
94.4
Efferdent®
Denture Cleanser Tablets
30.3
93.9
Little Remedies®
#4
Pediatric Healthcare
5.2
85.0
Luden's®
#3
Cough Drops
6.7
96.8
PediaCare®
5.5
87.5
The Doctor’s® NightGuard®
Bruxism (Teeth Grinding)
29.6
31.2
The Doctor’s® Brushpicks®
Disposable Dental Picks
15.9
44.4
BC®/Goody's®
Analgesic Powders
98.3
61.5
Beano®
Gas Prevention
86.7
90.6
Debrox®
Ear Drops/Treatments
28.3
89.4
Gaviscon® (5)
Upset Stomach Remedies
15.8
95.0
Dermoplast®
Pain Relief Sprays
15.0
61.0
Murine®
Personal Ear Care/Ear Drops & Treatments
10.1
67.4
New-Skin®
Liquid Bandages
56.3
84.8
Wartner®
3.9
29.2
Household Cleaning:
Chore Boy®
Soap Free Metal Scrubbers
22.2
30.9
Comet®
Abrasive Tub and Tile Cleaner
32.8
98.8
Spic and Span®
#6
Dilutable All Purpose Cleaner
3.0
51.5