Prestige Brands Holdings, Inc. Reports Fiscal 2016 Fourth Quarter and Full Year Results; Company Exceeds Fourth Quarter and Full Year Outlook

Fourth Quarter Revenues Up 9.4%: Full Year Revenues Up 12.8%

Adjusted Free Cash Flow Increased 12.0% to $183.4 Million in FY2016

TARRYTOWN, N.Y.--()--Prestige Brands Holdings, Inc. (NYSE:PBH) today reported financial results for its fourth quarter and fiscal year ended March 31, 2016.

Key fourth quarter and fiscal year highlights include:

  • Reported revenue increased 9.4% to $207.9 million and 12.8% to $806.2 million in Q4 and FY2016, respectively.
  • Organic sales grew 5.0% in Q4 and 2.8% in FY2016, on a constant currency basis.
  • Adjusted net income increased 12.7% to $27.9 million, or $0.52 per diluted share, in Q4.
  • FY16 adjusted net income increased 17.8% to $115.5 million, or $2.17 per diluted share.
  • Adjusted free cash flow increased 12.0% to $183.4 million in FY2016.

Fiscal Fourth Quarter Ended March 31, 2016

Reported revenues in the fiscal fourth quarter of 2016 increased 9.4% to $207.9 million, compared to $190.0 million in the fiscal fourth quarter of 2015. Organic sales growth for the fourth quarter was 3.7%, or 5.0% on a constant currency basis. Revenues for the quarter were driven by continued strong consumption levels across the Company’s core over-the-counter healthcare (OTC) and international brands, and incremental revenue from the DenTek® acquisition.

Reported net income totaled $13.9 million, or $0.26 per diluted share, compared to $23.8 million, or $0.45 per diluted share, in the fourth quarter of fiscal year 2015. Adjusted net income increased 12.7% to $27.9 million, or $0.52 per diluted share, compared to $24.8 million, or $0.47 per diluted share, in the fourth quarter of fiscal year 2015. Adjustments to net income in the fourth quarter of fiscal 2016 consisted of items related to the acquisition of DenTek and the refinancing of the 2012 Senior Notes. Adjustments to net income in the prior year comparable quarter were related to the Insight and Hydralyte acquisitions.

Fiscal Year Ended March 31, 2016

Reported revenues for the fiscal year ended March 31, 2016 totaled $806.2 million, an increase of 12.8%, compared to revenues of $714.6 million for the fiscal year ended March 31, 2015. Organic revenues for the fiscal year ended March 31, 2016 increased 2.8% on a constant currency basis. Foreign currency fluctuations negatively impacted reported revenues for the fiscal year by $13.9 million.

Reported net income for fiscal year 2016 totaled $99.9 million, or $1.88 per diluted share, compared to $78.3 million, or $1.49 per diluted share, for fiscal year 2015. Adjusted net income for fiscal year 2016 totaled $115.5 million, or $2.17 per diluted share, an increase of 17.8% compared to adjusted net income of $98.0 million, or $1.86 per diluted share, for fiscal 2015. Adjustments to net income in fiscal 2016 consisted of items related to the acquisition of DenTek, CEO transition costs and the refinancing of the 2012 Senior Notes. Adjustments to net income in the prior year were related to the acquisitions of Insight and Hydralyte.

Adjusted Free Cash Flow and Balance Sheet

Adjusted free cash flow totaled $48.7 million for the fourth quarter of fiscal 2016, compared to fourth quarter fiscal 2015 results of $50.1 million. For fiscal year 2016, adjusted free cash flow increased 12.0% to $183.4 million compared to adjusted free cash flow of $163.7 million for fiscal year 2015. The Company’s consistent and industry-leading free cash flow resulted in a bank-defined net debt to EBITDA ratio of ~5.0 at the end of fiscal year 2016.

Segment Review

North American OTC Healthcare: Reported revenues totaled $171.1 million for the fourth quarter of 2016, a 9.2% increase over fourth quarter 2015 revenues of $156.6 million. For fiscal year 2016, reported revenues totaled $657.9 million, compared to $566.9 million for fiscal year 2015, an increase of 16.0%. Results for both periods were favorably impacted by increased consumption among core OTC brands as well as revenues from DenTek for two months.

International OTC Healthcare: Reported revenues totaled $14.4 million for the fourth quarter of fiscal 2016, a 14.7% increase over fourth quarter fiscal year 2015 revenues of $12.6 million. Revenues increased 24.7%, excluding $1.0 million of foreign currency impact. For fiscal year 2016, reported revenues totaled $57.7 million compared to $57.8 million for fiscal year 2015. Revenues increased 16.2%, excluding $8.1 million of foreign currency impact. The strong performance of the Care Pharma portfolio in Australia favorably impacted reported revenues for fiscal year 2016. The results also include revenues from two months of ownership of DenTek in the United Kingdom and Germany.

Household Cleaning: Reported revenues totaled $22.4 million for the fourth quarter of fiscal 2016, compared with fourth quarter fiscal 2015 revenues of $20.8 million, an increase of 7.5%. Reported revenues for fiscal year 2016 totaled $90.7 million, a 0.8% increase over fiscal year 2015 revenues of $89.9 million.

Commentary and Outlook for FY2017

“Our strong overall performance in the fourth quarter enabled us to exceed our previous outlook for the quarter and full fiscal year,” said Ron Lombardi, President and CEO. “The solid results, which include an organic growth rate of 2.8% for the full fiscal year on a constant currency basis, reflect continued successful execution of our brand-building strategy and positive consumption trends across our core OTC and international brands. Based on our strong finish to fiscal 2016, we believe we are well-positioned for another strong year in fiscal 2017.”

“We completed the acquisition of DenTek in February 2016, our seventh acquisition in the past six years,” Mr. Lombardi said. “The DenTek integration is proceeding on schedule, and we are excited by the growth opportunities of this leading oral care brand.”

Mr. Lombardi continued, “In fiscal 2017, we expect continued organic growth in our existing business and incremental revenues from the acquisition of DenTek. We anticipate full fiscal year 2017 revenue growth in the range of 6.0%-8.0% including the impact of foreign exchange, adjusted earnings per share in the range of $2.30-$2.36 following top line growth, and adjusted non-GAAP projected free cash flow of $185 million or more. As has been our practice, we expect to continue to use our industry-leading free cash flow to pay down debt and build M&A capacity.”

Q4 and Fiscal Year Conference Call, Accompanying Slide Presentation and Replay

The Company will host a conference call to review its fourth quarter and full year results on May 12, 2016 at 8:30 am EDT. The toll-free dial-in numbers are 877-784-9650 within North America and 530-379-4717 outside of North America. The conference ID number is 88898382. The Company will provide a live Internet webcast, a slide presentation to accompany the call, as well as an archived replay, all of which can be accessed from the Investor Relations page of the Company's website at http://prestigebrands.com. The slide presentation can be accessed just before the call from the Investor Relations page of the website by clicking on Webcasts and Presentations. Telephonic replays will be available for two weeks following the completion of the call and can be accessed at 855-859-2056 within North America and at 404-537-3406 from outside North America. The conference ID is 88898382.

Investor Day Scheduled for May 25, 2016

In addition, the Company will host an investor day on Wednesday, May 25th beginning at 9 am EDT in New York City. The CEO, Ron Lombardi, and other members of senior management will present an update on the Company’s strategy for long-term growth. The Company will provide a live internet webcast, which can be accessed from the Investor Relations page of http://prestigebrands.com. Choose the “Click Here for Webcast” hyperlink and register for access. A replay of the full event will be available through the same URL four to eight hours after the event. Visit the News and Events section of the Company’s website at http://prestigebrands.com for details.

Non-GAAP Financial Information

In addition to financial results reported in accordance with generally accepted accounting principles (GAAP), we have provided certain non-GAAP financial information in this release to aid investors in understanding the Company's performance. Each non-GAAP financial measure is defined and reconciled to its most closely related GAAP financial measure in the “About Non-GAAP Financial Measures” section at the end of this earnings release.

About Prestige Brands Holdings, Inc.

The Company markets and distributes brand name over-the-counter and household cleaning products throughout the U.S. and Canada, Australia, and in certain other international markets. The Company’s brands include Monistat® women’s health products, BC® and Goody’s® pain relievers, Clear Eyes® eye care products, DenTek® specialty oral care products, Dramamine® motion sickness treatments, Chloraseptic® sore throat treatments, Compound W® wart treatments, Little Remedies® pediatric over-the-counter products, The Doctor's® NightGuard® dental protector, Efferdent® denture care products, Luden's® throat drops, Beano® gas prevention, Debrox® earwax remover, Gaviscon® antacid in Canada, and Hydralyte® rehydration products and the Fess® line of nasal and sinus care products in Australia. Visit the Company's website at www.prestigebrands.com.

Note Regarding Forward-Looking Statements

This news release contains "forward-looking statements" within the meaning of the federal securities laws that are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. "Forward-looking statements" generally can be identified by the use of forward-looking terminology such as "outlook," "may," "will," "would," "expect," “intend,” “estimate,” “anticipate,” “believe,” or "continue" (or the negative or other derivatives of each of these terms) or similar terminology. The "forward-looking statements" include, without limitation, statements regarding our expected future operating results, including revenue growth, the impact of foreign exchange rates, adjusted EPS, and adjusted non-GAAP projected free cash flow; our expected use of free cash flow for deleveraging and building M&A capacity; the integration of the DenTek acquisition and incremental revenues from it; and our anticipated organic growth in the legacy business. These statements are based on management's estimates and assumptions with respect to future events and financial performance and are believed to be reasonable, though are inherently uncertain and difficult to predict. Actual results could differ materially from those expected as a result of a variety of factors, including the impact of our advertising and promotional initiatives, general economic and business conditions, regulatory matters, competition in our industry, supplier issues, the success of our brand-building investments and integration of newly acquired brands. A discussion of other factors that could cause results to vary is included in the Company's Annual Report on Form 10-K for the year ended March 31, 2015, Quarterly Report on Form 10-Q for the quarter ended December 31, 2015, and other periodic reports filed with the Securities and Exchange Commission.

       

Prestige Brands Holdings, Inc.

Consolidated Statements of Income and Comprehensive Income

(Unaudited)

 

Three Months Ended
March 31,

Year Ended

March 31,

(In thousands, except per share data) 2016   2015 2016   2015
Revenues
Net sales $   207,054 $   189,089 $   803,088 $   710,070
Other revenues 801   957   3,159   4,553  

Total revenues

207,855 190,046 806,247 714,623
 
Cost of Sales
Cost of sales (exclusive of depreciation shown below) 89,604   79,976   339,036   308,400  
Gross profit 118,251   110,070   467,211   406,223  
 
Operating Expenses
Advertising and promotion 26,552 25,367 110,802 99,651
General and administrative 20,232 17,685 72,418 81,273
Depreciation and amortization 6,198   5,773   23,676   17,740  
Total operating expenses 52,982   48,825   206,896   198,664  
Operating income 65,269   61,245   260,315   207,559  
 
Other (income) expense
Interest income (71 ) (25 ) (162 ) (92 )
Interest expense 23,218 23,821 85,322 81,326
Gain on sale of asset (1,133 )
Loss on extinguishment of debt 17,519     17,970    
Total other expense 40,666   23,796   103,130   80,101  
Income before income taxes 24,603 37,449 157,185 127,458
Provision for income taxes 10,667   13,677   57,278   49,198  
Net income $   13,936   $   23,772   $   99,907   $   78,260  
 
Earnings per share:
Basic $   0.26   $   0.45   $   1.89   $   1.50  
Diluted $   0.26   $   0.45   $   1.88   $   1.49  
 
Weighted average shares outstanding:
Basic 52,833   52,356   52,754   52,170  
Diluted 53,252   52,821   53,143   52,670  
 
Comprehensive income, net of tax:
Currency translation adjustments 6,449   (7,268 ) (113 ) (24,151 )
Total other comprehensive income (loss) 6,449   (7,268 ) (113 ) (24,151 )
Comprehensive income $   20,385   $   16,504   $   99,794   $   54,109  
 
   

Prestige Brands Holdings, Inc.

Consolidated Balance Sheets

(Unaudited)

 

(In thousands)

March 31,
Assets 2016   2015
Current assets
Cash and cash equivalents $   27,230 $   21,318
Accounts receivable, net 95,247 87,858
Inventories 91,263 74,000
Deferred income tax assets 10,108 8,097
Prepaid expenses and other current assets 25,165   10,434  
Total current assets 249,013 201,707
 
Property and equipment, net 15,540 13,744
Goodwill 360,191 290,651
Intangible assets, net 2,322,723 2,134,700
Other long-term assets 1,324   1,165  
Total Assets $   2,948,791   $   2,641,967  
 
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $ 38,296 $ 46,115
Accrued interest payable 8,664 11,974
Other accrued liabilities 59,724   40,948  
Total current liabilities 106,684   99,037  
 
Long-term debt
Principal amount 1,652,500 1,593,600
Less unamortized debt costs (27,191 ) (32,327 )
Long-term debt, net 1,625,309   1,561,273  
 
Deferred income tax liabilities 469,622 351,569
Other long-term liabilities 2,840   2,464  
Total Liabilities 2,204,455   2,014,343  
 
Stockholders' Equity
Preferred stock - $0.01 par value
Authorized - 5,000 shares
Issued and outstanding - None
Common stock - $0.01 par value
Authorized - 250,000 shares
Issued – 53,066 shares at March 31, 2016 and 52,562 shares at March 31, 2015 530 525
Additional paid-in capital 445,182 426,584
Treasury stock, at cost – 306 shares at March 31, 2016 and 266 at March 31, 2015 (5,163 ) (3,478 )
Accumulated other comprehensive income (loss), net of tax (23,525 ) (23,412 )
Retained earnings 327,312   227,405  
Total Stockholders' Equity 744,336   627,624  
 
Total Liabilities and Stockholders' Equity $   2,948,791   $   2,641,967  
 
   

Prestige Brands Holdings, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

 
Year Ended March 31,

(In thousands)

2016   2015
Operating Activities
Net income $   99,907 $   78,260
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization 23,676 17,740
Gain on sale of asset (1,133 )
Deferred income taxes 46,152 28,922
Long term income taxes payable (332 ) 2,294
Amortization of debt origination costs 8,994 8,821
Stock-based compensation costs 9,954 6,918
Loss on extinguishment of debt 17,970
Premium payment on 2012 Senior Notes (10,158 )
Lease termination costs 785
(Gain) loss on sale or disposal of property and equipment (35 ) 321
Changes in operating assets and liabilities, net of effects from acquisitions
Accounts receivable 1,824 1,608
Inventories (3,005 ) 15,360
Prepaid expenses and other current assets (7,921 ) 4,664
Accounts payable (11,348 ) (17,637 )
Accrued liabilities (1,328 ) 9,332  
Net cash provided by operating activities 174,350   156,255  
 
Investing Activities
Purchases of property and equipment (3,568 ) (6,101 )
Proceeds from the sale of property and equipment 344
Proceeds from sale of business 18,500
Proceeds from sale of asset 10,000
Proceeds from Insight Pharmaceuticals working capital arbitration settlement 7,237
Acquisition of DenTek, less cash acquired (226,984 )
Acquisition of Insight Pharmaceuticals, less cash acquired (749,666 )
Acquisition of the Hydralyte brand   (77,991 )
Net cash used in investing activities (222,971 ) (805,258 )
 
Financing Activities
Proceeds from issuance of 2016 Senior Notes 350,000
Repayment of 2012 Senior Notes (250,000 )
Borrowings under Bridge term loans 80,000
Repayments under Bridge term loans (80,000 )
Term loan borrowings 720,000
Term loan repayments (60,000 ) (130,000 )
Borrowings under revolving credit agreement 115,000 124,600
Repayments under revolving credit agreement (96,100 ) (58,500 )
Payments of debt origination costs (11,828 ) (16,072 )
Proceeds from exercise of stock options 6,689 3,954
Proceeds from restricted stock exercises 544 57
Excess tax benefits from share-based awards 1,960 1,330
Fair value of shares surrendered as payment of tax withholding (2,229 ) (2,104 )
Net cash provided by financing activities 54,036   643,265  
 
Effects of exchange rate changes on cash and cash equivalents 497 (1,275 )
Increase (decrease) in cash and cash equivalents 5,912 (7,013 )
Cash and cash equivalents - beginning of year 21,318   28,331  
Cash and cash equivalents - end of year $   27,230   $   21,318  
 
Interest paid $   79,132   $   70,155  
Income taxes paid $   15,352   $   11,939  
 
   

Prestige Brands Holdings, Inc.

Consolidated Statements of Income

Business Segments

(Unaudited)

 

Three Months Ended March 31, 2016

(In thousands)

North
American
OTC
Healthcare

 

International
OTC
Healthcare

 

Household

Cleaning

  Consolidated
Gross segment revenues $   171,294 $   14,416 $   21,577 $   207,287
Elimination of intersegment revenues (233 )     (233 )
Third-party segment revenues 171,061 14,416 21,577 207,054
Other revenues   2   799   801  
Total segment revenues 171,061 14,418 22,376 207,855
Cost of sales 69,873   3,195   16,536   89,604  
Gross profit 101,188 11,223 5,840 118,251
Advertising and promotion 23,286   2,776   490   26,552  
Contribution margin $   77,902   $   8,447   $   5,350   $   91,699  
Other operating expenses 26,430  
Operating income 65,269
Other expense 40,666  
Income before income taxes 24,603
Provision for income taxes 10,667  
Net income $   13,936  
 
   
Year Ended March 31, 2016

(In thousands)

North
American
OTC
Healthcare

 

International
OTC
Healthcare

 

Household
Cleaning

  Consolidated
Gross segment revenues* $   660,518 $   57,670 $   87,561 $   805,749
Elimination of intersegment revenues (2,661 )     (2,661 )
Third-party segment revenues 657,857 57,670 87,561 803,088
Other revenues* 14   43   3,102   3,159  
Total segment revenues 657,871 57,713 90,663 806,247
Cost of sales 252,152   19,542   67,342   339,036  
Gross profit 405,719 38,171 23,321 467,211
Advertising and promotion 97,393   11,114   2,295   110,802  
Contribution margin $   308,326   $   27,057   $   21,026   $   356,409  
Other operating expenses 96,094  
Operating income 260,315
Other expense 103,130  
Income before income taxes 157,185
Provision for income taxes 57,278  
Net income $   99,907  
 
   
Three Months Ended March 31, 2015

(In thousands)

North
American
OTC
Healthcare

 

International
OTC
Healthcare

 

Household

Cleaning

  Consolidated
Gross segment revenues* $   156,940 $   12,572 $   20,028 $   189,540
Elimination of intersegment revenues (451 )     (451 )
Third-party segment revenues 156,489 12,572 20,028 189,089
Other revenues 159   2   796   957  
Total segment revenues 156,648 12,574 20,824 190,046
Cost of sales 58,776   4,894   16,306   79,976  
Gross profit 97,872 7,680 4,518 110,070
Advertising and promotion 22,324   2,771   272   25,367  
Contribution margin $   75,548   $   4,909   $   4,246   $   84,703  
Other operating expenses 23,458  
Operating income 61,245
Other expense 23,796  
Income before income taxes 37,449
Provision for income taxes 13,677  
Net income $   23,772  
 
   
Year Ended March 31, 2015

(In thousands)

North
American
OTC
Healthcare

 

International
OTC
Healthcare

 

Household
Cleaning

  Consolidated
Gross segment revenues* $   569,643 $   57,729 $   86,085 $   713,457
Elimination of intersegment revenues (3,387 )     (3,387 )
Third-party segment revenues 566,256 57,729 86,085 710,070
Other revenues 637   64   3,852   4,553  
Total segment revenues 566,893 57,793 89,937 714,623
Cost of sales 216,781   22,820   68,799   308,400  
Gross profit 350,112 34,973 21,138 406,223
Advertising and promotion 86,897   10,922   1,832   99,651  
Contribution margin $   263,215   $   24,051   $   19,306   $   306,572  
Other operating expenses 99,013  
Operating income 207,559
Other expense 80,101  
Income before income taxes 127,458
Provision for income taxes 49,198  
Net income $   78,260  
 

*Certain immaterial amounts relating to intersegment revenues and other revenues were reclassified between the International OTC Healthcare segment and the North American OTC Healthcare segment. There were no changes to the consolidated financial statements for any periods presented.

About Non-GAAP Financial Measures

We define Non-GAAP Organic Revenues as Total Revenues excluding revenues associated with products acquired or divested in the periods presented. We define Non-GAAP Organic Revenues on a Constant Currency basis as Total Revenues excluding acquisitions and divestitures and the impact of current year foreign exchange rates on total revenues. We define Non-GAAP Total Revenues on a Constant Currency basis as Total Revenues excluding the impact of currency exchange rates on total revenues. We define Non-GAAP Adjusted EBITDA as earnings before interest expense (income), income taxes, depreciation and amortization, inventory step-up charges, certain other legal and professional fees, other acquisition-related costs, costs associated with our CEO transition, gain on sale of asset, and loss on extinguishment of debt. Non-GAAP Adjusted EBITDA Margin is calculated as Non-GAAP Adjusted EBITDA divided by GAAP Total Revenues. We define Non-GAAP Adjusted Gross Margin as Gross Profit before inventory step up charges, and certain other acquisition and integration-related costs. Non-GAAP Adjusted Gross Margin percentage is calculated based on Non-GAAP Adjusted Gross Margin divided by GAAP Total Revenues. We define Non-GAAP Adjusted General and Administrative expenses as General and Administrative expenses minus certain other legal and professional fees, acquisition and other integration costs, and costs associated with our CEO transition. Non-GAAP Adjusted General and Administrative expense percentage is calculated based on Non-GAAP Adjusted General and Administrative expense divided by GAAP Total Revenues. We define Non-GAAP Adjusted Net Income as Net Income before inventory step-up charges, certain other legal and professional fees, other acquisition and integration-related costs, costs associated with our CEO transition, accelerated amortization of debt origination costs, gain on sale of asset, loss on extinguishment of debt, and the applicable tax impacts associated with these items and other non-deductible items. Non-GAAP Adjusted EPS is calculated based on Non-GAAP Adjusted Net Income, divided by the weighted average number of common and potential common shares outstanding during the period. We define Non-GAAP Free Cash Flow as net cash provided by operating activities less cash paid for capital expenditures. We define Non-GAAP Adjusted Free Cash Flow as net cash provided by operating activities less purchases of property and equipment plus payments associated with a premium on extinguishment of the 2012 Senior Notes and acquisitions for integration, transition, and other payments associated with acquisitions. Non-GAAP Organic Revenues, Non-GAAP Organic Revenues on a Constant Currency basis, Non-GAAP Total Revenues on a Constant Currency basis, Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted EBITDA Margin, Non-GAAP Adjusted Gross Margin, Non-GAAP Adjusted Gross Margin percentage, Non-GAAP Adjusted General and Administrative Expense, Non-GAAP Adjusted General and Administrative Expense percentage, Non-GAAP Adjusted Net Income, Non-GAAP Adjusted EPS, Non-GAAP Free Cash Flow, and Non-GAAP Adjusted Free Cash Flow may not be comparable to similarly titled measures reported by other companies.

We are presenting Non-GAAP Organic Revenues, Non-GAAP Organic Revenues on a Constant Currency basis, Non-GAAP Total Revenues on a Constant Currency basis, Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted EBITDA Margin, Non-GAAP Adjusted Gross Margin, Non-GAAP Adjusted Gross Margin percentage, Non-GAAP Adjusted General and Administrative Expense, Non-GAAP Adjusted General and Administrative Expense percentage, Non-GAAP Adjusted Net Income, Non-GAAP Adjusted EPS, Non-GAAP Free Cash Flow, and Non-GAAP Adjusted Free Cash Flow, because they provide additional ways to view our operation when considered with both our GAAP results and the reconciliation to net income and net cash provided by operating activities, respectively, which we believe provides a more complete understanding of our business than could be obtained absent this disclosure. Each of Non-GAAP Organic Revenues, Non-GAAP Organic Revenues on a Constant Currency basis, Non-GAAP Total Revenues on a Constant Currency basis, Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted EBITDA Margin, Non-GAAP Adjusted Gross Margin, Non-GAAP Adjusted Gross Margin percentage, Non-GAAP Adjusted General and Administrative Expense, Non-GAAP Adjusted General and Administrative Expense percentage, Non-GAAP Adjusted Net Income, Non-GAAP Adjusted EPS, Non-GAAP Free Cash Flow, and Non-GAAP Adjusted Free Cash Flow is presented solely as a supplemental disclosure because (i) we believe it is a useful tool for investors to assess the operating performance of the business without the effect of these items; (ii) we believe that investors will find this data useful in assessing shareholder value; and (iii) we use Non-GAAP Organic Revenues, Non-GAAP Organic Revenues on a Constant Currency basis, Non-GAAP Total Revenues on a Constant Currency basis, Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted EBITDA Margin, Non-GAAP Adjusted Gross Margin, Non-GAAP Adjusted Gross Margin percentage, Non-GAAP Adjusted General and Administrative Expense, Non-GAAP Adjusted General and Administrative Expense percentage, Non-GAAP Adjusted Net Income, Non-GAAP Adjusted EPS, Non-GAAP Free Cash Flow, and Non-GAAP Adjusted Free Cash Flow internally to evaluate the performance of our personnel and also as a benchmark to evaluate our operating performance or compare our performance to that of our competitors. The use of Non-GAAP Organic Revenues, Non-GAAP Organic Revenues on a Constant Currency basis, Non-GAAP Total Revenues on a Constant Currency basis, Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted EBITDA Margin, Non-GAAP Adjusted Gross Margin, Non-GAAP Adjusted Gross Margin percentage, Non-GAAP Adjusted General and Administrative Expense, Non-GAAP Adjusted General and Administrative Expense percentage, Non-GAAP Adjusted Net Income, Non-GAAP Adjusted EPS, Non-GAAP Free Cash Flow, and Non-GAAP Adjusted Free Cash Flow have limitations, and you should not consider these measures in isolation from or as an alternative to GAAP measures such as Total Revenues, General and Administrative expense, Operating income, Net income, and Net cash flow provided by operating activities, or cash flow statement data prepared in accordance with GAAP, or as a measure of profitability or liquidity.

The following tables set forth the reconciliation of Non-GAAP Organic Revenues, Non-GAAP Organic Revenues on a Constant Currency basis, Non-GAAP Total Revenues on a Constant Currency basis, Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted EBITDA Margin, Non-GAAP Adjusted Gross Margin, Non-GAAP Adjusted Gross Margin percentage, Non-GAAP Adjusted General and Administrative Expense, Non-GAAP Adjusted General and Administrative Expense percentage, Non-GAAP Adjusted Net Income, Non-GAAP Adjusted EPS, Non-GAAP Free Cash Flow, and Non-GAAP Adjusted Free Cash Flow, all of which are non-GAAP financial measures, to GAAP Gross Profit, GAAP General and Administrative expense, GAAP Net Income, GAAP Diluted EPS and GAAP Net cash provided by operating activities, our most directly comparable financial measures presented in accordance with GAAP.

Reconciliation of GAAP Total Revenues to Non-GAAP Organic Revenues and Non-GAAP Organic Revenues on a Constant Currency basis and related growth percentages:

       

Three Months Ended
March 31,

Year Ended

March 31,

2016   2015 2016   2015

(In thousands)

GAAP Total Revenues $   207,855   $   190,046   $   806,247   $   714,623  

Adjustments:

Hydralyte revenues (1) (1,217 )
Insight revenues (2) (73,630 )
DenTek revenues (3) (10,687 )   (10,687 )  
Total adjustments (10,687 )   (85,534 )  
Non-GAAP Organic Revenues 197,168   190,046   720,713   714,623  
Organic Revenue Growth (Decline) 3.7 %   0.9 %  
Impact of foreign currency exchange rates (4)   (2,257 )   (13,862 )
Non-GAAP Organic Revenues on a constant currency basis $   197,168   $   187,789   $   720,713   $   700,761  
Constant Currency Organic Revenue Growth 5.0 % 2.8 %
 
(1)   Revenue adjustments relate to our International OTC Healthcare segment
(2) Revenue adjustments relate to our North American OTC Healthcare segment
(3) Revenue adjustments relate to our North American and International OTC Healthcare segment
(4) Foreign currency exchange rate adjustments relate to all segments
 

Reconciliation of GAAP Total Revenues to Non-GAAP Total Revenues on a Constant Currency basis and related growth percentages:

       

Three Months Ended
March 31,

Year Ended

March 31,

2016   2015 2016   2015

(In thousands)

GAAP Total Revenues $   207,855 $   190,046 $   806,247 $   714,623
Impact of foreign currency exchange rates (1)   (2,257 )   (13,862 )
Non-GAAP Total Revenues on a constant currency basis $   207,855   $   187,789   $   806,247   $   700,761  
Constant Currency Revenue Growth 10.7 % 15.1 %
 
(1)   Foreign currency exchange rate adjustments relate to all segments
 

Reconciliation of GAAP Gross Profit to Non-GAAP Adjusted Gross Margin and related Adjusted Gross Margin percentage:

       

Three Months Ended
March 31,

Year Ended
March 31,

2016   2015 2016   2015

(In thousands)

GAAP Total Revenues $   207,855   $   190,046   $   806,247   $   714,623  
 
GAAP Gross Profit $   118,251   $   110,070   $   467,211   $   406,223  

Adjustments:

Inventory step-up charges and other costs associated with the Hydralyte acquisition (1) 246
Inventory step-up charges associated with Insight acquisition (2) 1,979
Inventory step-up charges and other costs associated with the DenTek acquisition (3) 1,387     1,387    
Total adjustments 1,387     1,387   2,225  
Non-GAAP Adjusted Gross Margin $   119,638   $   110,070   $   468,598   $   408,448  
Non-GAAP Adjusted Gross Margin % 57.6 % 57.9 % 58.1 % 57.2 %
 
(1)   Inventory step-up charges and other costs relate to our International OTC Healthcare segment
(2) Inventory step-up charges relate to our North American OTC Healthcare segment
(3) Inventory step-up charges relate to our North American and International OTC Healthcare segments
 

Reconciliation of GAAP General and Administrative Expense to Non-GAAP Adjusted General and Administrative Expense and related Non-GAAP Adjusted General and Administrative Expense percentage:

       

Three Months Ended
March 31,

Year Ended
March 31,

2016   2015 2016   2015

(In thousands)

GAAP General and Administrative Expense $   20,232   $   17,685   $   72,418   $   81,273  

Adjustments:

Costs associated with CEO transition 1,406
Legal and professional fees associated with acquisitions 1,096 640 2,112 10,974
Stamp/Duty Tax on Australian acquisition 2,940
Integration, transition and other costs associated with acquisitions 289   920   289   10,533  
Total adjustments 1,385   1,560   3,807   24,447  
Non-GAAP Adjusted General and Administrative Expense $   18,847   $   16,125   $   68,611   $   56,826  
Non-GAAP Adjusted General and Administrative Expense Percentage 9.1 % 8.5 % 8.5 % 8.0 %
 

Reconciliation of GAAP Net Income to Non-GAAP Adjusted EBITDA and related Non-GAAP Adjusted EBITDA Margin:

       

Three Months Ended
March 31,

Year Ended
March 31,

2016   2015 2016   2015

(In thousands)

GAAP Net Income $   13,936 $   23,772 $   99,907 $   78,260
Interest expense, net 23,147 23,796 85,160 81,234
Provision for income taxes 10,667 13,677 57,278 49,198
Depreciation and amortization 6,198   5,773   23,676   17,740  
Non-GAAP EBITDA: 53,948   67,018   266,021   226,432  

Adjustments:

Inventory step-up charges and other costs associated with the Hydralyte acquisition (1) 246
Inventory step-up charges associated with Insight acquisition (2) 1,979
Inventory step-up charges and other costs associated with the DenTek acquisition (3) 1,387 1,387
Costs associated with CEO transition (4) 1,406
Legal and professional fees associated with acquisitions (4) 1,096 640 2,112 10,974
Stamp/Duty Tax on Australian acquisition (4) 2,940
Integration, transition and other costs associated with acquisitions (4) 289 920 289 10,533
Gain on sale of asset (1,133 )
Loss on extinguishment of debt 17,519     17,970    
Total adjustments 20,291   1,560   23,164   25,539  
Non-GAAP Adjusted EBITDA $   74,239   $   68,578   $   289,185   $   251,971  
Non-GAAP Adjusted EBITDA Margin 35.7 % 36.1 % 35.9 % 35.3 %
 
(1)   Inventory step-up charges and other costs relate to our International OTC Healthcare segment
(2) Inventory step-up charges relate to our North American OTC Healthcare segment
(3) Inventory step-up charges relate to our North American and International OTC Healthcare segments
(4) Adjustments relate to G&A expenses
 

Reconciliation of GAAP Net Income to Non-GAAP Adjusted Net Income and related Adjusted Earnings Per Share:

       
Three Months Ended March 31, Year Ended March 31,
2016

2016
Adjusted
EPS

  2015

2015
Adjusted
EPS

2016

2016
Adjusted
EPS

  2015

2015
Adjusted
EPS

(In thousands)

GAAP Net Income $   13,936   $   0.26   $   23,772   $   0.45   $   99,907   $   1.88   $   78,260   $   1.49  

Adjustments:

Inventory step-up charges and other costs associated the Hydralyte acquisition (1) 246
Inventory step-up charges associated with Insight acquisition (2) 1,979 0.04
Inventory step-up charges and other costs associated with the DenTek acquisition (3) 1,387 0.03 1,387 0.03
Costs associated with CEO transition (4) 1,406 0.02
Legal and professional fees associated with acquisitions (4) 1,096 0.02 640 0.01 2,112 0.04 10,974 0.21
Stamp/Duty Tax on Australian acquisition(4) 2,940 0.05
Integration, transition and other costs associated with acquisitions (4) 289 0.01 920 0.02 289 0.01 10,533 0.20
Accelerated amortization of debt origination costs 218
Gain on sale of asset (1,133 ) (0.02 )
Loss on extinguishment of debt 17,519 0.33 17,970 0.34
Tax impact of adjustments (6,294 ) (0.13 ) (549 ) (0.01 ) (7,608 ) (0.15 ) (5,968 ) (0.11 )
Total adjustments 13,997   0.26   1,011   0.02   15,556   0.29   19,789   0.37  
Non-GAAP Adjusted Net Income and Adjusted EPS $   27,933   $   0.52   $   24,783   $   0.47   $   115,463   $   2.17   $   98,049   $   1.86  
               
(1)   Inventory step-up charges and other costs relate to our International OTC Healthcare segment
(2) Inventory step-up charges relate to our North American OTC Healthcare segment
(3) Inventory step-up charges relate to our North American and International OTC Healthcare segments
(4) Adjustments relate to G&A expenses
 

Reconciliation of GAAP Net Income to Non-GAAP Free Cash Flow and Non-GAAP Adjusted Free Cash Flow:

       

Three Months Ended
March 31,

Year Ended
March 31,
2016   2015 2016   2015

(In thousands)

GAAP Net Income $   13,936   $   23,772   $   99,907   $   78,260  

Adjustments:

Adjustments to reconcile net income to net cash provided by operating activities as shown in the Statement of Cash Flows

34,206 22,048 96,221 64,668

Changes in operating assets and liabilities, net of effects from acquisitions as shown in the Statement of Cash Flows

(10,243 ) 6,293   (21,778 ) 13,327  
Total adjustments 23,963   28,341   74,443   77,995  
GAAP Net cash provided by operating activities 37,899 52,113 174,350 156,255
Purchases of property and equipment (1,028 ) (2,401 ) (3,568 ) (6,101 )
Non-GAAP Free Cash Flow 36,871 49,712 170,782 150,154
Premium payment on extinguishment of 2012 Senior Notes 10,158 10,158
Integration, transition and other payments associated with acquisitions 1,665   362   2,461   13,563  
Adjusted Non-GAAP Free Cash Flow $   48,694   $   50,074   $   183,401   $   163,717  
       

Outlook for Fiscal Year 2017:

Reconciliation of Projected GAAP EPS to Projected Non-GAAP Adjusted EPS:

   
2017 Projected EPS
Low   High
Projected FY'17 GAAP EPS $   2.22     $   2.28
Adjustments:  
Costs associated with DenTek integration 0.08     0.08
Total adjustments 0.08     0.08
Projected Non-GAAP Adjusted EPS $   2.30     $   2.36
   

Reconciliation of Projected GAAP Net cash provided by operating activities to Projected Non-GAAP Free Cash Flow:

   

2017
Projected
Free Cash
Flow

(In millions)

Projected FY'17 GAAP Net cash provided by operating activities $   190
Additions to property and equipment for cash (8 )
Projected Non-GAAP Free Cash Flow 182
Payments associated with acquisitions 3  
Adjusted Non-GAAP Projected Free Cash Flow $   185  
 

Contacts

Prestige Brands Holdings, Inc.
Dean Siegal, 914-524-6819
or
John Mills, 646-277-1254

Release Summary

Fiscal 2016 Q4 and Year-End Results

Contacts

Prestige Brands Holdings, Inc.
Dean Siegal, 914-524-6819
or
John Mills, 646-277-1254