BUSINESS NEWS: Matrixx Initiatives, Inc. Reports Fiscal 2010 Third Quarter Sales

Matrixx Initiatives Inc. reports that the Company's third quarter revenue decreased 26% to $28.5 million compared to $38.7 million for the same quarter in the previous year. Net income was reported as $3.8 million for the third quarter, compared to a net income of $4.8 million for the same quarter in 2008. The Company reports that the decreased sales in the quarter are in part due to the loss of one of the Company's product lines, which was taken off the market in June 2009.

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Matrixx Initiatives, Inc. Reports Fiscal 2010 Third Quarter Sales of $28.5 Million and Net Income of $3.8 Million

SCOTTSDALE, Ariz., Jan 25, 2010 /PRNewswire via COMTEX News Network/ -- Matrixx Initiatives, Inc. (Nasdaq: MTXX), an over-the-counter healthcare company that develops and markets Zicam(R) products, today announced financial results for its fiscal third quarter and nine months ended December 31, 2009. Third quarter revenue decreased 26% to $28.5 million compared to $38.7 million for the comparable quarter in the prior year. The Company reported net income for the quarter of $3.8 million, or $0.41 per diluted share, compared to net income of $4.8 million, or $0.50 per diluted share, for the quarter ended December 31, 2008.

The decreased sales in the quarter ended December 31, 2009 versus the prior year is primarily attributable to the previously announced loss of nasal Cold Remedy products, which were withdrawn from the market in June 2009. Nasal Cold Remedy sales accounted for approximately 40% of net sales in the prior fiscal year. Partially offsetting the loss of nasal Cold Remedy sales was a 62% increase in oral Cold Remedy unit sales in the quarter ended December 31, 2009 over the quarter ended December 31, 2008.

For the nine months ended December 31, 2009, the Company reported net sales of $61.0 million and a net loss of $13.9 million, or $(1.51) per diluted share, which includes a $9.0 million charge for the recall of Cold Remedy Nasal Gel and Cold Remedy Swabs as well as charges of approximately $23.9 million for the impairment of goodwill and certain tangible and intangible assets recorded in the quarter ended June 30, 2009. This compares to net sales of $80.8 million and net income of $10.7 million, or $1.12 per diluted share, for the nine months ended December 31, 2008.

Bill Hemelt, President and Chief Executive Officer, said, "With the discontinuance of our nasal Cold Remedy products, we are pleased that our Zicam Cold Remedy oral delivery products are gaining market share. For the 12 weeks ended December 27, 2009, retail unit sales (three-outlet syndicated scanner data, not including Wal-Mart or club stores) of Zicam Cold Remedy oral delivery products increased approximately 16%, while the total cough/cold category increased approximately 5% compared to the prior year. We attribute the market share gains to increased in-store promotion, advertising, and conversion of consumers of nasal Cold Remedy products to our oral delivery forms. During the quarter ended December 31, 2009 retailers increased their inventory of cough/cold products, which we believe resulted in increased unit sales during the quarter."

Mr. Hemelt continued, "Average gross margin was 73% for the quarter ended December 31, 2009, compared to the 71% average gross margin realized in the quarter ended December 31, 2008. The higher gross margin was primarily due to the mix of products sold and cost reductions achieved on oral Cold Remedy products over the past year. Operating expense continued to be negatively impacted by high legal expense primarily associated with product liability, securities litigation, and FDA matters. Together, those amounted to approximately $1.8 million in legal expense in the third quarter of fiscal 2010. We anticipate legal expense will continue to average between $1.5 and $2.0 million per quarter. At December 31, 2009, the Company had $33.3 million in cash and certificates of deposit."

The incidence of colds historically increases in the January through March quarter and we anticipate spending approximately $10 million on marketing activities during the quarter ending March 31, 2010 to further support our oral Cold Remedy products. The Company is now executing operating plans that reflect fiscal 2010 revenue in the $68 million to $72 million range. Due to the high level of marketing support planned for the fourth quarter relative to anticipated sales, the Company expects to incur a sizable loss in that quarter.