Matrixx Initiatives, Inc. Reports Fiscal 2011 Second Quarter Net Sales of $21.3 Million and Net Income of $5.3 Million, or $0.57 Per Share

SCOTTSDALE, Ariz., Oct. 25 /PRNewswire-FirstCall/ -- Matrixx Initiatives, Inc. (Nasdaq: MTXX), an over-the-counter healthcare company that develops and markets Zicam® products, today announced financial results for its fiscal second quarter and six months ended September 30, 2010.

For the second quarter ended September 30, 2010, the Company reported net sales of $21.3 million, or 17% below the $25.6 million in net sales for the comparable quarter last year. The Company reported net income for the quarter of $5.3 million, or $0.57 per diluted share, compared to net income of $5.1 million, or $0.55 per diluted share, for the quarter ended September 30, 2009, primarily due to reduced net legal expense and the absence of a charge related to the Company's exit from the Canadian market in the prior year. The lower level of sales versus the quarter ended September 30, 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 six months ended September 30, 2010, the Company reported net sales of $24.5 million, and net income of $2.9 million, or $0.31 per diluted share. This compares to net sales of $32.5 million, and a net loss of $(17.8) million, or $(1.93) per diluted share, for the six months ended September 30, 2009. Results for the six months ended September 30, 2009 included $2.0 million of sales of nasal Cold Remedy products, which were withdrawn from the market in June 2009 and charges of $32.9 million related to withdrawal of the products.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, "Sales in the fiscal second quarter were in line with the Company's plan. In the second quarter last year, retailers placed large pre-season orders in anticipation of increased levels of illness associated with H1N1. Those large pre-season buys reduced our sales in subsequent quarters. This year, the inventory level at retail going into the cold season is lower, and, as a result, we believe reorders during our fiscal third and fourth quarters will be higher. We expect our new advertising campaign, which will encompass television, print, and online media, will help increase consumer purchases of Zicam products. We believe our new creative will continue to differentiate our products from general symptom relief products and help increase consumer awareness. As part of these efforts, we recently launched a new web-based Zicam video featuring iconic television moms addressing cold myths. We encourage you to view this video at www.Zicam.com. Our new television advertising will begin airing in November at about the same time when illness levels grow."

As previously disclosed, the Company and its product liability insurer reached agreement that the insurer would transfer the full amount of a $5.0 million policy to the Company to offset legal expenses. The Company received the cash in August 2010. Results for the quarter ended September 30, 2010 include legal defense costs of $2.9 million, which were reduced by $1.9 million of the insurance reimbursement, resulting in net legal defense expense of $1.0 million, compared to legal defense expense of $2.4 million in the quarter ended September 30, 2009. For the six months ended September 30, 2010, legal defense costs were $4.8 million which were offset by $4.1 million of the insurance reimbursement. Legal expense for the six months ended September 30, 2009 was approximately $3.0 million. The Company expects the remaining $900,000 of insurance reimbursement will offset legal expense in the fiscal third quarter and does not expect to receive additional insurance reimbursements for legal expense. Operating expenses for the quarter declined from last year due to reduced net legal expense and a $1.6 million charge recorded in the quarter ended September 30, 2009, related to the Company's exit from the Canadian market.

For fiscal 2011, the Company anticipates revenue increasing 3% to 5% above the $67.3 million achieved in fiscal 2010. In addition, we anticipate increased marketing and legal expense will somewhat offset increased sales in the second half of the year and we expect to report net income for the full year between $2.0 and $3.0 million.

There will be a teleconference Tuesday, October 26, 2010 at 11:00 a.m. EDT to discuss fiscal 2011 second quarter financial results. To access the teleconference, please call (877) 718-5108 (domestic) or (719) 325-4921 (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 9008846 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.