The problem-solution cosmetics firm Physicians Formula Holdings Inc. posted a third-quarter net loss of $302,000, or 2 cents a diluted share, compared with a net profit of $1.69 million, or 12 cents a share, in the year-earlier period.
This story first appeared in the November 6, 2009 issue of WWD. Subscribe Today.
Sales during the three-month period ended Sept. 30 declined 30 percent to $14.2 million from $20.3 million in the year-ago period. The company attributed the sales decline primarily to the loss of a major retail customer, as well as a planned pullback in promotional launches and lower Canadian sales relative to last year’s distribution gains in the country.
Physicians Formula did not name which retailer it lost, but WWD previously reported Walgreens stopped placing orders with the beauty firm as part of a storewide stockkeeping rationalization effort. Physicians Formula is scouting more outlets for growth. Chairman and chief executive officer Ingrid Jackel told WWD the firm is working with a prestige retailer in Europe to develop a 100-item line, slated to launch in the second half of 2010. The company, which is sold in 2,000 grocery stores, also sees potential to expand distribution to 10,000 to 12,000 food doors over the next three years, said president and director Jeff Rogers.
For the nine-month period ended Sept. 30, the firm reported a net loss of $1.4 million, or 10 cents a diluted share, compared with a net profit of $4.7 million, or 32 cents, in the year-ago period, on sales that declined 35.3 percent to $55.5 million. The company said it plans to “cleaning house” with a stockkeeping unit rationalization plan to weed out slow-turning items in its portfolio and focus investment behind active sku’s. “We plan to enter the year with a healthy financial position and we felt that there was no need to continue producing products that were at the end of their life cycle,” said Jackel.
The company said Thursday it reached an agreement to refinance its line of credit borrowings with Union Bank and its bridge loan financing with Mill Road Capital, which the company expected to close today.
As part of the refinancing, the company will enter into a senior secured asset-based loan with Wells Fargo Business Credit that will provide borrowings of up to $25 million, subject to a borrowing based formula, and an $8 million senior subordinated loan with Mill Road Capital, the company’s largest shareholder.
As of Sept. 30, the company’s total net debt was $12.1 million, which was comprised of $9.3 million of line credit borrowings and $4.2 million of bridge financing, net of $1.4 million of cash and cash equivalents.