Company Completes Refinancing of $8.9 Million of Subordinated Debt With a $4.0 Million Term Loan and $4.9 Million From Its Existing Line of Credit
At Current Market Rates, Interest Expense is Estimated to be Reduced by $1.5 Million for the First Twelve Months After Completion of the Refinancing
AZUSA, Calif., Nov. 15, 2011 (GLOBE NEWSWIRE) -- Physicians Formula Holdings, Inc. (Nasdaq:FACE) ("Physicians Formula" or the "Company") today announced it completed the previously announced refinancing of its subordinated debt held by Mill Road Capital ("Mill Road") on November 10, 2011.
The Company refinanced $8.9 million of subordinated debt principal, accrued paid-in-kind interest, accrued interest expense, and pre-payment penalties under the Mill Road subordinated debt with proceeds from its previously announced $4.0 million Term Note ("new Term Note") with Wells Fargo Business Credit ("Wells Fargo") and borrowings of $4.9 million under its existing line of credit with Wells Fargo.
This refinancing lowers the Company's interest expense and extends debt maturities. The Company noted that the primary, specific benefits of the refinancing to the Company are as follows:
- The effective, annualized borrowing rate on the new Term Note is LIBOR plus 3.5%, or approximately 3.9% using the 3-month LIBOR rate as of November 11, 2011. This is significantly lower than the cost of the Mill Road subordinated debt, which was 14.1% when including the impact of annually compounded paid-in-kind interest expense.
- The borrowing rate on the line of credit with Wells Fargo has been reduced from LIBOR plus 3.5% to LIBOR plus 2.75%.
- The maturity date on the line of credit with Wells Fargo has been extended by three years, from November 2012 to November 2015. The Term Note also expires in November 2015 versus the Mill Road subordinated debt's maturity of November 2014.
Given current rates and the borrowing costs noted above, the Company expects to save approximately $1.5 million in interest expense in the first twelve months following the refinancing, before the impact of one-time refinancing costs. This translates to approximately $0.06 of earnings per diluted common share, net of tax.
The Company incurred $1.3 million of one-time expenses associated with the refinancing on November 10, 2011. The Company noted that it expects another $0.1 million of refinancing-related legal fees in the coming months. In total, these one-time expenses are expected to be the equivalent of $(0.06) of earnings per diluted common share, net of tax, and will be reflected on the Company's fourth quarter 2011 profit and loss statement.
The Company noted in its third quarter 2011 earnings release that it had guided to the more favorable end of its $(0.04) to $(0.14) earnings per common share guidance range for the full year 2011, before the impact of these one-time costs.
Ingrid Jackel, Chairwoman and Chief Executive Officer, stated, "The completion of our refinancing is an important step in the improvement of Physicians Formula's cost of capital and financial flexibility, and will help ensure that we have the financial resources necessary to execute our growth strategies. The significant savings that will be generated, coupled with the success we have seen in our 2011 investment strategy, has set the foundation for both growth and profitability in 2012."
For full details of the refinancing transaction, as well as the cost savings benefits and one-time costs, please refer to the press release issued by the Company as well as the Company's Form 8-K filing from October 6, 2011.
About Physicians Formula Holdings, Inc.
Physicians Formula is an innovative cosmetics and skin care company operating in the mass market prestige, or "masstige", market. Under its Physicians Formula brand name, created in 1937, the Company develops, markets and distributes innovative, premium-priced products for the mass market channel. Physicians Formula differentiates itself by addressing skin imperfections through a problem-solving approach, rather than focusing on changing fashion trends. Currently, Physicians Formula products are sold in 25,700 stores including those operated by Wal-Mart, Target, CVS and Rite Aid.
Safe Harbor Statement
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In some cases, forward-looking statements can be identified by words such as "anticipates," "estimates," "expects," "believes," "plans," "predicts," and similar terms. In particular, this press release may include forward-looking statements about management's expectations regarding the Company's refinancing, strategy, liquidity, financial performance and outlook. These forward-looking statements are based on current expectations, estimates and projections about the Company's business and its industry, based on management's beliefs and assumptions. Forward-looking statements are not guarantees of future performance and the Company's actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to: the loss of any significant retailer customers; the demand for the Company's products; the Company's ability to expand its product offerings; the competitive environment in the Company's business; the Company's operations and ability to achieve cost savings; the effect of technological and regulatory changes; the Company's cash needs and financial performance; the Company's ability to comply with the financial covenants in its debt agreements; changes in general economic or market conditions; and other factors discussed in the Company's filings with the Securities and Exchange Commission (the "SEC"), including the Risk Factors contained in the Company's filings with the SEC, and available at www.physiciansformula.com and the SEC's website at www.sec.gov. You are urged to consider these factors carefully in evaluating the forward-looking statements in this release and are cautioned not to place undue reliance on such forward-looking statements, which are qualified in their entirety by this cautionary statement. Unless otherwise required by law, the Company expressly disclaims any obligation to update publicly any forward-looking statements, whether as result of new information, future events or otherwise.
(FACE/F)