AZUSA, Calif., May 05, 2008 (BUSINESS WIRE) ----Physicians Formula Holdings, Inc. (NASDAQ: FACE) ("Physicians Formula" or the "Company") today announced financial results for the three months ended March 31, 2008.

Net sales for the first quarter of 2008 were $42.7 million, an increase of 19.6% from $35.7 million for the same period in 2007. Net income per diluted common share for the first quarter of 2008 was $0.34 on approximately 14.6 million diluted common shares and included a $0.02 per share non-cash charge for stock-based compensation, net of tax. For the first quarter of 2007, net income per diluted common share was $0.30, and included a $0.03 per share non-cash charge for stock-based compensation, net of tax, and $0.01 per share of secondary offering costs, net of tax.

"We are very pleased with our strong first quarter net sales, which reflect the demand by our retail partners for existing products as well as the new products that form the foundation of the Company's 2008 strategic initiatives. These include an extension of our successful Mineral Wear(R) line, a rejuvenation of our eye make-up category and the introduction of our new Organic wear(TM) line," stated Ingrid Jackel, Chairwoman and CEO of Physicians Formula. "Late in the quarter, we began our advertising, promotion and public relations activities to support our new products initiatives and we remain optimistic about their consumer appeal."

U.S. Market Share Data ($ Share)

Based on retail sales data provided by ACNielsen, our approximate share of the masstige market, as we define it, was 8.0% for the 52 weeks ended March 22, 2008, or a gain of 10% when compared to 7.3% for the same period in the prior year. We define the masstige market as products sold in the mass market channel under the following premium-priced brands: Physicians Formula, Almay, L'Oreal, Max Factor, Neutrogena, Revlon and Vital Radiance. ACNielsen is an independent research entity and its data does not include Wal-Mart and Canada.

Outlook

While the Company remains cautious because of the soft consumer environment, it is reiterating its full year 2008 outlook and continues to expect net sales of between $123 million and $125 million, representing an increase between 10% and 12% over 2007. In addition, the Company expects net income per diluted common share between $0.65 and $0.69, based on 14.9 million diluted common shares, representing an increase between 8% and 15% over 2007. Included in the 2008 net income per diluted common share estimate is an approximate $0.11 non-cash charge for stock-based compensation, net of tax.

The Company expects to substantially increase its investment spend behind the Organic wear(TM) launch during the second quarter. The Company also noted its business continues to be subject to seasonal variation with a strong "sell-in" period for its new products during the first and fourth quarters, as well as the focus on "sell-through" during the second and third quarters.

Conference Call

The conference call is scheduled to begin at 2:00 pm Pacific Time on Monday, May 5, 2008. Participants may access the call by dialing 800-762-8779 (domestic) or 480-248-5081 (international). In addition, the call will be webcast via the Company's Web site at www.physiciansformula.com, Investor Relations, where it will also be archived. A telephone replay will be available through Monday, May 19, 2008. To access the replay, please dial 800-406-7325 (domestic) or 303-590-3030 (international), passcode 3870668.

About Physicians Formula Holdings, Inc.

Physicians Formula is one of the fastest growing cosmetics companies 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 approximately 27,000 stores throughout the U.S. including stores operated by Wal-Mart, Target, CVS, Walgreens and Kroger.

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. 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 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; 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.

   PHYSICIANS FORMULA HOLDINGS, INC. CONSOLIDATED STATEMENTS OF INCOME (unaudited) (dollars in thousands, except share data)
   Three Months Ended March 31, ------------------------ 2008 2007 ----------- ----------- NET SALES $ 42,661 $ 35,723 COST OF
   SALES 18,946 15,102 ----------- ----------- GROSS PROFIT 23,715 20,621 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 14,876
   13,110 ----------- ----------- INCOME FROM OPERATIONS 8,839 7,511 INTEREST EXPENSE-NET 358 404 OTHER EXPENSE (INCOME) 87 (5)
   ----------- ----------- INCOME BEFORE INCOME TAXES 8,394 7,112 PROVISION FOR INCOME TAXES 3,375 2,810 ----------- -----------
   NET INCOME $ 5,019 $ 4,302 =========== =========== NET INCOME PER COMMON SHARE: Basic $ 0.36 $ 0.31 Diluted $ 0.34 $ 0.30
   WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING: Basic 14,095,834 13,866,389 Diluted 14,579,437 14,537,147 

 PHYSICIANS
   FORMULA HOLDINGS, INC. CONSOLIDATED BALANCE SHEETS (unaudited) (dollars in thousands, except share data) March 31, December
   31, 2008 2007 --------- ------------ ASSETS CURRENT ASSETS: Cash and cash equivalents $ 3 $ - Accounts receivable, net of
   allowance for bad debts of $454 and $436 36,311 33,421 Inventories 27,856 31,648 Prepaid expenses and other current assets
   1,834 1,781 Deferred income taxes 6,206 7,364 --------- ------------ Total current assets 72,210 74,214 PROPERTY AND EQUIPMENT--Net
   4,032 4,070 OTHER ASSETS--Net 1,136 1,174 INTANGIBLE ASSETS--Net 54,105 54,546 GOODWILL 17,463 17,463 --------- ------------
   TOTAL $ 148,946 $ 151,467 ========= ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable
   $ 9,176 $ 13,043 Accrued expenses 1,585 2,134 Trade allowances 7,041 5,001 Sales returns reserve 9,363 10,396 Income taxes
   payable 2,669 3,125 Line of credit borrowings 7,512 10,168 Current portion of long-term debt 2,625 3,000 --------- ------------
   Total current liabilities 39,971 46,867 --------- ------------ DEFERRED COMPENSATION 804 829 --------- ------------ DEFERRED
   INCOME TAXES 20,333 20,821 --------- ------------ LONG-TERM DEBT 9,750 10,500 --------- ------------ COMMITMENTS AND CONTINGENCIES
   STOCKHOLDERS' EQUITY: Series A preferred stock, $.01 par value-- 10,000,000 shares authorized, no shares issued and outstanding
   at March 31, 2008 and December 31, 2007 - - Common stock, $.01 par value--50,000,000 shares authorized, 14,096,227 and 14,095,727
   shares issued and outstanding at March 31, 2008 and December 31, 2007, respectively 141 141 Additional paid-in capital 59,792
   59,173 Retained earnings 18,155 13,136 --------- ------------ Total stockholders' equity 78,088 72,450 --------- ------------
   TOTAL $ 148,946 $ 151,467 ========= ============ 

(FACE/F)

SOURCE: Physicians Formula Holdings, Inc.

Integrated
   Corporate Relations, Inc. John Mills / Anne Rakunas 310-954-1100 

Copyright Business Wire 2008