Matrixx Initiatives, Inc. Reports Fiscal 2010 Fourth Quarter and Full-Year Results

SCOTTSDALE, Ariz., May 10 /PRNewswire-FirstCall/ -- Matrixx Initiatives, Inc. (Nasdaq: MTXX), an over-the-counter healthcare company that develops and markets Zicam® products that provide consumers with “better ways to get better®,” today announced financial results for its fourth quarter and fiscal year ended March 31, 2010.

Fiscal 2010 Financial Results

For the fiscal year ended March 31, 2010, net sales were approximately $67.3 million, compared to net sales of $111.6 million for the fiscal year ended March 31, 2009. The Company incurred a net loss of approximately $23.6 million, or $(2.56) per diluted share, compared to net income of approximately $13.9 million, or $1.46 per diluted share, for fiscal 2009. Sales and operating results were significantly impacted by the recall of our nasal Cold Remedy products in June of 2009 (nasal Cold Remedy products accounted for approximately 40%, or $42.5 million of fiscal 2009 sales). Partially offsetting the nasal Cold Remedy revenue loss was a 22% increase in sales of oral Cold Remedy products. Product liability and recall-related legal expense increased to $6.2 million in fiscal 2010, compared to $2.5 million in fiscal 2009. For fiscal 2010, the Company incurred a loss from operations of $38.3 million which includes recall-related charges and asset impairments of $33.1 million. Income from operations in fiscal 2009 was $22.3 million and included $2.0 million for recall-related charges. Excluding the recall-related charges and asset impairments described above, the fiscal 2010 loss from operations was $5.2 million as compared to income from operations of $24.3 million in fiscal 2009.

Fourth Quarter Financial Results

For the fourth quarter ended March 31, 2010, the Company reported net sales of $6.3 million, versus net sales of $30.8 million in the quarter ended March 31, 2009. The Company incurred a net loss of approximately $9.6 million, or $(1.04) per diluted share, compared to net income of approximately $3.1 million, or $0.33 per diluted share, in the prior year’s fourth quarter. Due to the publicity associated with H1N1 flu, retailers increased early season buys and carried elevated levels of inventory early in the cold season, which adversely impacted reorders in the fourth quarter of fiscal 2010. During the fourth quarter ended March 31, 2010, the Company recorded $10.9 million for marketing and advertising activities to continue to spur consumption during the end of the cold season.

Brand and Operating Highlights

Bill Hemelt, President and Chief Executive Operating Officer, said, “Fiscal 2010 was the single most challenging year for the Company. We navigated a recall of our two nasal Cold Remedy products and reset plans for our Zicam brand to achieve growth in the future. During the cold season we focused our advertising message to consumers around oral Cold Remedy products and realized growth in our oral Cold Remedy franchise. For the 52 weeks ended March 21, 2010, retail unit sales (three-outlet syndicated scanner data, not including Wal-Mart or club stores) of oral Zicam Cold Remedy products increased 12%, while the total cough/cold category unit sales were flat compared to the prior year. Despite facing increased store brand competition, we believe we can continue to grow our core Zicam business, which includes oral Cold Remedy and Allergy/Sinus products. In order to differentiate and promote the growth of our products, we will continue to refresh our consumer messaging and introduce new products.” Additional fiscal fourth quarter and full-year 2010 metrics and highlights include:

• Introduced two new and unique oral Cold Remedy products for the 2009/2010 cold season (Zicam Cold Remedy Zavors and Zicam Cold Remedy Liqui-Loz)
• Achieved average gross margin of 69% for fiscal 2010
• Ended the fiscal year with $30.2 million of cash and certificates of deposit
• Executed the new “Zicam = I Can” advertising program
• Invested 38% of sales in advertising and brand building activities to promote Zicam oral Cold Remedy products in light of the nasal products recall
• Our mix of core business net sales in fiscal 2010 was 66% oral Cold Remedy products and 26% allergy/sinus products, versus 33% and 20%, respectively, in fiscal 2009
• Oral Cold Remedy unit sales increased 28%

Mr. Hemelt continued, “In fiscal 2011, the Company will focus on growing sales in our core Cold Remedy and Allergy/Sinus franchise and offsetting declines in our non-core product classes. For fiscal 2011, the Company anticipates revenue increasing 3% to 5% above the $67.3 million achieved in fiscal 2010. We anticipate expense for litigation will be between $1.3 million and $1.8 million per quarter in fiscal 2011. In addition, we expect to be cash flow positive and report net income between $2.0 and $3.0 million.”

There will be a teleconference Tuesday, May 11, 2010 at 11:00 a.m. EDT to discuss fourth quarter and fiscal 2010 financial results. To access the teleconference, please call (877) 878-2689 (domestic) or (970) 315-0419 (international). To listen to the teleconference via the Internet, go to http://www.matrixxinc.com and click on Events & Presentations. A replay of the call will be available at (888) 203-1112 (domestic) or (719) 457-0820 (international), replay number 69901813 for 3 days following the call, and the web cast will be archived on the Company’s website, http://www.matrixxinc.com, for 30 days.