SCOTTSDALE, Ariz., Jan. 20, 2011 /PRNewswire/ -- Matrixx Initiatives, Inc. (Nasdaq: MTXX), an over-the-counter healthcare company that develops and markets Zicam® products, today announced financial results for its fiscal third quarter and nine months ended December 31, 2010.
For the third quarter ended December 31, 2010, the Company reported net sales of $20.3 million, or 29% below the $28.5 million in net sales for the comparable quarter last year. The Company reported a net loss for the quarter ended December 31, 2010 of $11.3 million, or $(1.21) per diluted share, compared to net income of $3.8 million, or $0.41 per diluted share, for the quarter ended December 31, 2009. The net loss includes $15.0 million of net costs associated with the settlement of the personal injury product liability claims ($15.5 million for the settlement less the $523,000 previously reserved) , $2.2 million to reserve for costs associated with the potential settlement of the economic injury claims, and approximately $1.8 million for merger-related expenses. The lower level of sales versus the quarter ended December 31, 2009 is primarily attributable to last year's high pre-season inventory purchases by retailers due to publicity of the H1N1 flu outbreak.
For the nine months ended December 31, 2010, the Company reported net sales of $44.8 million, and a net loss of $8.4 million, or $(0.91) per diluted share. This compares to net sales of $61.0 million, and a net loss of $(13.9) million, or $(1.51) per diluted share, for the nine months ended December 31, 2009. Results for the nine months ended December 31, 2009 included $2.0 million of sales of nasal Cold Remedy products, which were withdrawn from the market in June 2009, and charges of $32.9 million related to withdrawal of the products.
Bill Hemelt, President and Chief Executive Officer, said, "We began to see increases in consumer purchases of our products during the last half of our fiscal third quarter as new advertising commenced and the incidence of illness surpassed last year's illness level. Retailers continued to trim their inventory levels in comparison to last year; however, we believe retailers' inventory of our products has reached a point where they will increase purchases to offset the increased consumer takeaway. For the four weeks ended December 26, 2010, retail unit sales (three-outlet syndicated scanner data, not including Wal-Mart or club stores) of Zicam Cold Remedy oral delivery products increased approximately 30%, while the total cough/cold category increased approximately 5% compared to the prior year. We attribute the market share gains to increased and improved advertising and other marketing activities. For the full fiscal year ending March 31, 2011, we anticipate revenue increasing 3% to 5% above the $67.3 million achieved in fiscal 2010."
As previously disclosed, on December 13, 2010, the Company executed a settlement agreement associated with the bulk of the personal injury product liability claims and lawsuits. The settlement calls for the Company to pay $15.5 million to the claimants. The Company paid the first installment of $11.5 million into an escrow account and that amount is recorded as restricted cash on the Company's balance sheet until certain terms of the settlement are met. The remaining $4.0 million will be paid out over the next 20 months.
Results for the quarter ended December 31, 2010 include legal defense costs of approximately $2.2 million, which was reduced by $942,000 of insurance reimbursement, resulting in net legal defense expense of $1.3 million, compared to expense of $1.8 million in the quarter ended December 31, 2009. For the nine months ended December 31, 2010, product liability and regulatory legal defense costs were $7.0 million which was offset by $5.0 million of insurance reimbursement (which exhausted the insurance policy), compared to $4.7 million in the nine months ended December 31, 2009.
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