ProPhase Labs Releases 3Q Results

DOYLESTOWN, Pa.ProPhase Labs Inc. (NASDAQ: PRPH) released its financial results for the third quarter (3Q10), ended Sept. 30. Net sales were up slightly, hitting $5.2 million for 3Q10 compared to $4.98 million in 3Q09. However, net income was slightly down for the period, coming in at $947,000 in the 2010 quarter versus $1.2 million in the 2009 period. And while sales were uprising 4.6 percent for 3Q10 compared to 3Q09gross margin was down, approximately 3.2 percent, which the company attributed to increased product promotion related to new product launches.

The financials for the nine months ended Sept. 30, 2010, were similarly down, with net sales of $8.3 million compared to net sales of $10.7 million for the nine months ended Sept. 30, 2009. ProPhase also posted a net loss for the first nine months of 2010, losing $2.4 million or ($0.17) per share; however, it was an improvement from a net loss of $5.6 million or ($0.43) per share for the nine months ended Sept. 30, 2009. The company attributed the comparative decline in net sales to skewed timing on retail customer purchases and stocking for the cold season. At the same time, sales and marketing expenses for the nine months ended Sept. 30, 2010, were only $2.4 million, compared to $3.4 million reported in the comparable 2009 period; ProPhase attributed the positive move to more cost effective marketing programs with improved timing.

"We are currently operating in a very difficult retail environment," said Ted Karkus, CEO, ProPhase. "Due to prevailing economic conditions, consumer preferences continue to trend toward lower-priced, private label brands in place of the national brands such as Cold-EEZE. Furthermore, as a result of the down trending and mild cough/cold seasons over the past several years, retailers have reduced shelf space for cough cold remedies in the current season. In turn, we are observing competitors who are aggressively discounting their prices. Finally, in the third quarter of 2010, we continued to feel the effects of the retail overstock created by H1N1 related sales in late 2009. These trends have all continued into the current quarter which has the net effect of pressuring sales and margins."