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Prestige Brands Holdings, Inc. Reports Fiscal Third Quarter & Nine Month Results; Results Impacted by Retailer Inventory Reductions, Return of Competing Products & Soft Cough/Cold Season

TARRYTOWN, N.Y.--(BUSINESS WIRE)--Feb. 6, 2014-- Prestige Brands Holdings, Inc. (NYSE:PBH) today announced results for the third quarter and nine month periods of fiscal year 2014, which ended on December 31, 2013.

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. This includes free cash flow, a non-GAAP financial measure indicative of cash available for debt repayment and acquisitions. 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.

The results include reported third fiscal quarter revenues of $146.2 million, a decrease of 8.7% over the prior year comparable period’s revenues of $160.2 million. Reported revenues for the nine month period totaled $457.6 million, a decrease of 2.5% over the prior year nine month period’s revenues of $469.1 million. The Company previously indicated that fiscal 2014 would be a transitional year; however, results for the third quarter were impacted by a combination of three factors: retailer inventory reductions as a result of soft foot traffic, the return of several competing brands to the marketplace, and a weak cough/cold season.

Reported net income for the third fiscal quarter was $3.1 million, or $0.06 per diluted share, 74.5% lower than the prior year comparable quarter’s net income of $12.3 million, or $0.24 per diluted share. Adjusted earnings per share for the quarter were $0.30 compared to the prior year’s adjusted earnings per share of $0.37, a decrease of 18.9%. The current quarter’s adjusted earnings per share excludes items related to the Company’s recent bond offering. The prior year quarter’s adjusted earnings per share excludes items related to the integration of the GSK brands and accelerated amortization of finance costs.

Reported net income for the first nine months of fiscal 2014 was $56.6 million, or $1.08 per diluted share, 22.7% higher than the prior year’s comparable period net income of $46.2 million, or $0.90 per diluted share. Adjusted earnings per share for the nine month period of fiscal 2014 were $1.17, compared to adjusted earnings per share of $1.14 in the prior year’s comparable period, excluding items detailed in the schedules attached.

Reported revenues for the Over-The-Counter Healthcare segment (OTC) were $125.6 million for the third fiscal quarter, 9.6% lower than the prior year comparable period’s revenues of $139.0 million. For the nine month period of the current fiscal year, reported revenues for the OTC segment were $391.1 million, a decrease of 3.0% over the prior year comparable period’s revenues of $403.2 million. Reported revenues for the Household Cleaning segment were $20.6 million in the third fiscal quarter, a decrease of 2.8% over the prior year's third quarter results of $21.2 million. For the nine month period, reported revenues for this segment were slightly higher at $66.5 million compared to $65.9 million in the prior year’s comparable period.

Free Cash Flow and Debt

The Company's free cash flow (“FCF”) for the third fiscal quarter was $41.2 million, an increase of 11.8% over the prior year comparable period’s FCF of $36.8 million. For the nine month period, FCF was $94.5 million, an increase of approximately 2.8% over the prior year comparable period's FCF of $92.0 million. The increase in FCF for both the three month and nine month periods is a result of a reduction in fixed asset additions. On a per share basis, FCF for the three months ended December 31, 2013 translates to $0.78, compared to $0.72 in the prior year. For the nine month period, FCF per share translates to $1.81, compared to $1.79 for the nine month period ended December 31, 2012. This non-GAAP financial measure excludes items related to the December 2013 debt refinancing of approximately $16.3 million, as detailed in the schedules attached.

At December 31, 2013, the Company’s net debt was approximately $938.9 million and its covenant-defined leverage ratio was approximately 4.30.

Commentary & Outlook

According to Matthew M. Mannelly, President and CEO, “Recognizing the current environment, we continue to be focused on our long-term, three-prong value creation strategy which has been key to our success over the last five years. We are committed to innovating and driving growth in our core OTC brands, delivering strong and consistent free cash flow and aggressively pursuing M&A in the OTC space in a disciplined way. Our strong free cash flow of $41.2 million in the third quarter continues to provide flexibility for investing in brands for the long term,” he said.

Mr. Mannelly continued, “Moving forward, we will leverage the strength of our business model which revolves around strong and consistent free cash flow. We continue to expect free cash flow of approximately $125 million for the fiscal year ending March 31, 2014. Regarding earnings per share, given the three factors that impacted this quarter and their potential impact on full year results, the Company now expects earnings per share for fiscal 2014 to be in the range of $1.48 to $1.52,” he said.

Q3 Conference Call & Accompanying Slide Presentation

The Company will host a conference call to review its third quarter results on February 6, 2014 at 8:30 am EDT. The toll-free dial-in numbers are 877-546-5021 within North America and 857-244-7553 outside of North America. The conference pass code is "prestige". 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 888-286-8010 within North America and at 617-801-6888 from outside North America. The pass code is 14345309.

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, and in certain international markets. Core brands include Chloraseptic® sore throat treatments, Clear Eyes® eye care products, Compound W® wart treatments, The Doctor's® NightGuard® dental protector, the Little Remedies® and PediaCare® lines of pediatric over-the-counter products, Efferdent® denture care products, Luden's® throat drops, Dramamine® motion sickness treatment, BC® and Goody's® pain relievers, Beano® gas prevention, Debrox® earwax remover, and Gaviscon® antacid in Canada. 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 "will," "expect," 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 earnings per share and free cash flow, our strategy and focus, our intention to invest in our core brands, development of innovative products, and aggressive and disciplined M&A. 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, competition in our industry, the strength of the cough/cold season, and the success of our new product introductions and integration of newly acquired products. 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, 2013, Quarterly Report on Form 10-Q for the quarter ended December 31, 2013, 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
December 31,

Nine Months Ended
December 31,

(In thousands, except per share data)

2013     2012 2013     2012
Revenues
Net sales $ 145,054 $ 159,492 $ 454,159 $ 466,735
Other revenues 1,158   740   3,466   2,349  
Total revenues 146,212 160,232 457,625 469,084
 
Cost of Sales
Cost of sales (exclusive of depreciation shown below) 64,403   75,235   197,614   209,938  
Gross profit 81,809   84,997   260,011   259,146  
 
Operating Expenses
Advertising and promotion 25,570 23,538 70,754 67,371
General and administrative 12,137 11,378 35,390 40,114
Depreciation and amortization 3,644   3,359   10,206   9,950  
Total operating expenses 41,351   38,275   116,350   117,435  
Operating income 40,458   46,722   143,661   141,711  
 
Other (income) expense
Interest income (16 ) (4 ) (44 ) (9 )
Interest expense 21,276 26,665 53,648 66,178
Loss on extinguishment of debt 15,012     15,012    
Total other expense 36,272   26,661   68,616   66,169  
 
Income before income taxes 4,186 20,061 75,045 75,542
Provision for income taxes 1,056   7,804   18,431   29,386  
Net income $ 3,130   $ 12,257   $ 56,614   $ 46,156  
 
Earnings per share:
Basic $ 0.06   $ 0.24   $ 1.10   $ 0.91  
Diluted $ 0.06   $ 0.24   $ 1.08   $ 0.90  
 
 
Weighted average shares outstanding:
Basic 51,806   50,686   51,498   50,465  
Diluted 52,445   51,523   52,236   51,285  
 
Comprehensive (loss) income, net of tax:
Currency translation adjustments (2,694 ) (1 ) (1,571 ) 23  
Total other comprehensive (loss) income (2,694 ) (1 ) (1,571 ) 23  
Comprehensive income $ 436   $ 12,256   $ 55,043   $ 46,179  
 
 

Prestige Brands Holdings, Inc.

Consolidated Balance Sheets

(Unaudited)

       

(In thousands)
Assets

December 31,
2013

March 31,
2013

Current assets
Cash and cash equivalents $ 94,353 $ 15,670
Accounts receivable, net 66,188 73,053
Inventories 64,798 60,201
Deferred income tax assets 6,836 6,349
Prepaid expenses and other current assets 12,326   8,900  
Total current assets 244,501 164,173
 
Property and equipment, net 10,528 9,896
Goodwill 189,955 167,546
Intangible assets, net 1,395,755 1,373,240
Other long-term assets 24,107   24,944  
Total Assets $ 1,864,846   $ 1,739,799  
 
Liabilities and Stockholders' Equity
Current liabilities
Current portion of long-term debt $ 48,290 $
Accounts payable 51,547 51,376
Accrued interest payable 10,781 13,894
Other accrued liabilities 23,445   31,398  
Total current liabilities 134,063   96,668  
 
Long-term debt
Principal amount 985,000 978,000
Less unamortized discount (3,489 ) (7,100 )
Long-term debt, net of unamortized discount 981,511   970,900  
 
Deferred income tax liabilities 205,036 194,288
Other long-term liabilities 302    
Total Liabilities 1,320,912   1,261,856  
 
 
Stockholders' Equity
Preferred stock - $0.01 par value
Authorized - 5,000 shares
Issued and outstanding - None
Preferred share rights 283 283
Common stock - $0.01 par value
Authorized - 250,000 shares
Issued - 51,961 shares at December 31, 2013 and 51,311 shares at March 31, 2013 520 513
Additional paid-in capital 412,910 401,691
Treasury stock, at cost - 194 shares at December 31, 2013 and 181 shares March 31, 2013 (965 ) (687 )
Accumulated other comprehensive loss, net of tax (1,675 ) (104 )
Retained earnings 132,861   76,247  
Total Stockholders' Equity 543,934   477,943  
Total Liabilities and Stockholders' Equity $ 1,864,846   $ 1,739,799  
 
 

Prestige Brands Holdings, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

   
Nine Months Ended December 31,

(In thousands)

2013     2012
Operating Activities
Net income $ 56,614 $ 46,156
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 10,209 9,950
Deferred income taxes 10,261 15,979
Amortization of deferred financing costs 6,023 8,220
Stock-based compensation costs 3,763 2,965
Loss on extinguishment of debt 15,012
Premium payment on 2010 Senior Notes (12,768 )
Amortization of debt discount 3,115 3,892
Lease termination costs 975
(Gain) loss on sale or disposal of equipment (3 ) 51
Changes in operating assets and liabilities, net of effects of acquisitions
Accounts receivable 8,495 (13,518 )
Inventories (2,262 ) (3,351 )
Prepaid expenses and other current assets (2,783 ) 5,801
Accounts payable (1,285 ) 14,125
Accrued liabilities (13,531 ) 9,631  
Net cash provided by operating activities 80,860   100,876  
 
Investing Activities
Purchases of property and equipment (2,658 ) (8,922 )
Proceeds from sale of property and equipment 3 15
Proceeds from the sale of the Phazyme brand 21,700
Acquisition of brands from GSK purchase price adjustments (226 )
Acquisition of Care Pharmaceuticals, less cash acquired (55,215 )  
Net cash (used in) provided by investing activities (57,870 ) 12,567  
 
Financing Activities
Proceeds from issuance of 2013 Senior Notes 400,000
Repayment of 2010 Senior Notes (201,710 )
Repayments of long-term debt (147,500 ) (167,500 )
Repayments under revolving credit agreement (45,500 ) (8,000 )
Borrowings under revolving credit agreement 50,000 48,000
Payment of deferred financing costs (6,933 )
Proceeds from exercise of stock options 5,738 5,460
Excess tax benefits from share-based awards 1,725
Fair value of shares surrendered as payment of tax withholding (278 )  
Net cash provided by (used in) financing activities 55,542   (122,040 )
 
Effects of exchange rate changes on cash and cash equivalents 151 13
Increase (decrease) in cash and cash equivalents 78,683 (8,584 )
Cash and cash equivalents - beginning of year 15,670   19,015  
Cash and cash equivalents - end of year $ 94,353   $ 10,431  
 
Interest paid $ 47,586   $ 54,149  
Income taxes paid $ 9,761   $ 7,183  
 
 

Prestige Brands Holdings, Inc.

Consolidated Statements of Income

Business Segments

(Unaudited)

 
    Three Months Ended December 31, 2013     Nine Months Ended December 31, 2013

(In thousands)

OTC
Healthcare

   

Household
Cleaning

    Consolidated

OTC
Healthcare

   

Household
Cleaning

    Consolidated
Net sales $ 125,448 $ 19,606 $ 145,054 $ 390,670 $ 63,489 $ 454,159
Other revenues 150   1,008   1,158   462   3,004   3,466
Total revenues 125,598 20,614 146,212 391,132 66,493 457,625
Cost of sales 49,042   15,361   64,403   149,378   48,236   197,614
Gross profit 76,556 5,253 81,809 241,754 18,257 260,011
Advertising and promotion 24,830   740   25,570   68,375   2,379   70,754
Contribution margin $ 51,726   $ 4,513   56,239 $ 173,379   $ 15,878   189,257
Other operating expenses 15,781   45,596
Operating income 40,458 143,661
Other expense 36,272   68,616
Income before income taxes 4,186 75,045
Provision for income taxes 1,056   18,431
Net income $ 3,130   $ 56,614
 
 
    Three Months Ended December 31, 2012     Nine Months Ended December 31, 2012

(In thousands)

OTC
Healthcare

   

Household
Cleaning

    Consolidated

OTC
Healthcare

   

Household
Cleaning

    Consolidated
Net sales $ 138,858 $ 20,634 $ 159,492 $ 402,633 $ 64,102 $ 466,735
Other revenues 175   565   740   520   1,829   2,349
Total revenues 139,033 21,199 160,232 403,153 65,931 469,084
Cost of sales 59,381   15,854   75,235   160,249   49,689   209,938
Gross profit 79,652 5,345 84,997 242,904 16,242 259,146
Advertising and promotion 22,410   1,128   23,538   62,309   5,062   67,371
Contribution margin $ 57,242   $ 4,217   61,459 $ 180,595   $ 11,180   191,775
Other operating expenses 14,737   50,064
Operating income 46,722 141,711
Other expense 26,661   66,169
Income before income taxes 20,061 75,542
Provision for income taxes 7,804   29,386
Net income $ 12,257   $ 46,156
 

About Non-GAAP Financial Measures

We define Non-GAAP Adjusted Total Revenues excluding additional transition sales costs associated with acquisitions. We define Non-GAAP Total Revenues excluding acquisitions and divestitures as Total Revenues excluding revenues associated with products acquired or divested in the periods presented. We define Non-GAAP Total Revenues excluding sales to mass channel customers Total Revenues excluding revenues for products sold to our mass channel customers. We define Non-GAAP EBITDA as earnings before interest expense (income), income taxes, depreciation and amortization, income or loss from discontinued operations or the sale thereof and Non-GAAP Adjusted EBITDA as earnings before interest expense (income), income taxes, depreciation and amortization, income or loss from discontinued operations and the sale thereof, gain on settlement, loss on extinguishment of debt, certain other legal and professional fees, and acquisition-related costs. . We define Non-GAAP Adjusted Gross Margin as Gross Profit before certain acquisition and integration-related costs. We define Non-GAAP Adjusted Operating Income as Operating Income minus certain other legal and professional fees, acquisition and other integration costs. We define Non-GAAP Adjusted Net Income as Net Income before gain on settlement, loss on extinguishment of debt, accelerated amortization of debt discount and debt issue costs, certain other legal and professional fees, acquisition and integration-related costs, income or loss from discontinued operations and sale thereof, the applicable tax impacts associated with these items and the tax impacts of state tax rate adjustments 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 Operating Cash Flow as net cash provided by operating activities less premium payments to extinguish debt and accelerated interest payments due to debt refinancing. We define Non-GAAP Free Cash Flow as Net Cash provided by operating activities less premium payments to extinguish debt, accelerated interest payments due to debt refinancing and cash paid for capital expenditures. Non-GAAP Free Cash Flow per Share is calculated based on Non-GAAP Free Cash Flow, divided by the weighted average number of common and potential common shares outstanding during the period. Non-GAAP EBITDA, Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted Operating Income, Non-GAAP Adjusted Net Income, Non-GAAP Adjusted EPS, Non-GAAP Operating Cash Flow, Non-GAAP Free Cash Flow and Non-GAAP Free Cash Flow per Share may not be comparable to similarly titled measures reported by other companies.

We are presenting Non-GAAP Adjusted Total Revenues, Non-GAAP Total Revenues excluding acquisitions and divestitures, Non-GAAP Total Revenues excluding sales to mass channel customers, Non-GAAP EBITDA, Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted Gross Margin, Non-GAAP Adjusted Operating Income, Non-GAAP Adjusted Net Income, Non-GAAP Adjusted EPS, Non-GAAP Operating Cash Flow, Non-GAAP Free Cash Flow and Non-GAAP Free Cash Flow per Share because they provide additional ways to view our operations, when considered with both our GAAP results and the reconciliation to net income and net cash provided by operating activities, respectively, which we believe provide a more complete understanding of our business than could be obtained absent this disclosure. Each of Non-GAAP Adjusted Total Revenues, Non-GAAP Total Revenues excluding acquisitions and divestitures, Non-GAAP Total Revenues excluding sales to mass channel customers, Non-GAAP EBITDA, Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted Gross Margin, Non-GAAP Adjusted Operating Income, Non-GAAP Adjusted Net Income, Non-GAAP Adjusted EPS, Non-GAAP Operating Cash Flow, Non-GAAP Free Cash Flow and Non-GAAP Free Cash Flow per Share 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 Adjusted Total Revenues, Non-GAAP Total Revenues excluding acquisitions and divestitures, Non-GAAP Total Revenues excluding sales to mass channel customers, Non-GAAP EBITDA, Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted Gross Margin, Non-GAAP Adjusted Operating Income, Non-GAAP Adjusted Net Income and Non-GAAP Adjusted EPS 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 Adjusted Total Revenues, Non-GAAP Total Revenues excluding acquisitions and divestitures, Non-GAAP Total Revenues excluding sales to mass channel customers, Non-GAAP EBITDA, Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted Gross Margin, Non-GAAP Adjusted Operating Income, Non-GAAP Adjusted Net Income, Non-GAAP Adjusted EPS, Non-GAAP Operating Cash Flow, Non-GAAP Free Cash Flow and Non-GAAP Free Cash Flow per Share has limitations, and you should not consider these measures in isolation from or as an alternative to GAAP measures such as 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 Adjusted Total Revenues, Non-GAAP Total Revenues excluding acquisitions and divestitures, Non-GAAP Total Revenues excluding sales to mass channel customers, Non-GAAP EBITDA, Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted Gross Margin, Non-GAAP Adjusted Operating Income, Non-GAAP Adjusted Net Income, Non-GAAP Adjusted EPS, Non-GAAP Operating Cash Flow, Non-GAAP Free Cash Flow and Non-GAAP Free Cash Flow per Share, all of which are non-GAAP financial measures, to GAAP Gross Profit, GAAP Operating Income, 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 Total Revenues excluding acquisitions and divestitures:

       

Three Months Ended
December 31,

Nine Months Ended
December 31,

2013     2012 2013     2012
(In thousands)
GAAP Total Revenues $ 146,212   $ 160,232   $ 457,625   $ 469,084  

Adjustments: (1)

Care revenues (5,069 ) (10,498 )
Phazyme revenues   (524 )   (3,568 )
Total adjustments (5,069 ) (524 ) (10,498 ) (3,568 )
Non-GAAP Total Revenues excluding acquisitions and divestitures $ 141,143   $ 159,708   $ 447,127   $ 465,516  
 

(1) Revenue adjustments relate to our OTC Healthcare segment

 
 

Reconciliation of GAAP Total Revenues to Non-GAAP Total Revenues excluding sales to mass channel customers:

 
   

Three Months Ended
June 30,

   

%
Change

   

Three Months Ended
September 30,

   

%
Change

2013     2012 2013     2012
(In thousands)
GAAP Total Revenues $ 142,971   $ 146,997   (2.7) $ 168,442   $ 161,855   4.1

Adjustments:

Sales to mass channel customers (38,081 ) (43,082 ) (43,430 ) (44,182 )
Total adjustments (38,081 ) (43,082 ) (43,430 ) (44,182 )
Non-GAAP Total Revenues excluding sales to mass channel customers $ 104,890   $ 103,915   0.9 $ 125,012   $ 117,673   6.2
 

Three Months Ended
December 31,

%
Change

Nine Months Ended
December 31,

%
Change

2013 2012 2013 2012
(In thousands)
GAAP Total Revenues $ 146,212   $ 160,232   (8.7) $ 457,625   $ 469,084   (2.4)

Adjustments:

Sales to mass channel customers (36,627 ) (44,678 ) (118,138 ) (131,942 )
Total adjustments (36,627 ) (44,678 ) (118,138 ) (131,942 )
Non-GAAP Total Revenues excluding sales to mass channel customers $ 109,586   $ 115,554   (5.2) $ 339,488   $ 337,142   0.7
 
 

Reconciliation of GAAP Total Revenues to Non-GAAP Adjusted Total Revenues and GAAP Gross Profit to Non-GAAP Adjusted Gross Margin:

 
   

Three Months Ended
December 31,

   

Nine Months Ended
December 31,

2013     2012 2013     2012
(In thousands)
GAAP Total Revenues $ 146,212   $ 160,232   $ 457,625   $ 469,084  

Adjustments: (1)

Additional sales costs associated with GSK       411  
Total adjustments       411  
Non-GAAP Adjusted Total Revenues $ 146,212   $ 160,232   $ 457,625   $ 469,495  
 
GAAP Gross Profit $ 81,809   $ 84,997   $ 260,011   $ 259,146  

Adjustments:

Additional sales costs associated with GSK 411
Inventory step-up charge associated with acquisitions 577 23
Care acquisition related inventory costs 407
Additional product testing costs associated with GSK 220
Additional supplier transaction costs associated with GSK   3,765     5,426  
Total adjustments   3,765   984   6,080  
Non-GAAP Adjusted Gross Margin $ 81,809   $ 88,762   $ 260,995   $ 265,226  
Non-GAAP Adjusted Gross Margin % 56.0 % 55.4 % 57.0 % 56.5 %
 

(1) Revenue adjustments relate to our OTC Healthcare segment

 
 

Reconciliation of GAAP Operating Income to Non-GAAP Adjusted Operating Income:

 
   

Three Months Ended
December 31,

   

Nine Months Ended
December 31,

2013     2012 2013     2012
(In thousands)
GAAP Operating Income $ 40,458   $ 46,722   $ 143,661   $ 141,711

Adjustments:

Additional sales costs associated with GSK (1) 411
Inventory step-up charge associated with acquisitions (1) 577 23
Care acquisition related inventory costs (1) 407
Additional product testing costs associated with GSK (1) 220
Additional supplier transition costs associated with GSK (1) 3,765 5,426
Legal and professional fees associated with acquisitions (2) 668 98
Unsolicited proposal costs (2) 534
Transition and integration costs associated with GSK (2)       5,811
Total adjustments   3,765   1,652   12,523
Non-GAAP Adjusted Operating Income $ 40,458   $ 50,487   $ 145,313   $ 154,234
 

(1) Adjustments relate to our OTC Healthcare segment

(2) Adjustments relate to G&A expenses

 
 

Reconciliation of GAAP Net Income to Non-GAAP Adjusted EBITDA:

 
   

Three Months Ended
December 31,

   

Nine Months Ended
December 31,

2013     2012 2013     2012
(In thousands)
GAAP Net Income $ 3,130 $ 12,257 $ 56,614 $ 46,156
Interest expense, net 21,260 26,661 53,604 66,169
Income tax provision 1,056 7,804 18,431 29,386
Depreciation and amortization 3,644   3,359   10,206   9,950
Non-GAAP EBITDA: 29,090   50,081   138,855   151,661

Adjustments:

Additional sales costs associated with GSK (1) 411
Inventory step-up charge associated with acquisitions (1) 577 23
Care acquisition related inventory costs (1) 407
Additional product testing costs associated with GSK (1) 220
Additional supplier transaction costs associated with GSK (1) 3,765 5,426
Legal and professional fees associated with acquisitions (2) 668 98
Unsolicited proposal costs (2) 534
Transition and integration costs associated with GSK(2) 5,811
Loss on extinguishment of debt 15,012     15,012  
Total adjustments 15,012   3,765   16,664   12,523
Non-GAAP Adjusted EBITDA $ 44,102   $ 53,846   $ 155,519   $ 164,184
 

(1) Adjustments relate to our OTC Healthcare segment

(2) 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 December 31,     Nine Months Ended December 31,
2013    

2013
Adjusted
EPS

    2012    

2012
Adjusted
EPS

2013    

2013
Adjusted
EPS

    2012    

2012
Adjusted
EPS

(In thousands)                
GAAP Net Income $ 3,130       $ 0.06   $ 12,257       $ 0.24   $ 56,614       $ 1.08   $ 46,156       $ 0.90  

Adjustments:

Additional sales costs associated with GSK (1) 411 0.01
Inventory step-up charge associated with acquisitions (1) 577 0.01 23
Care acquisition related inventory costs (1) 407 0.01
Additional product testing costs associated with GSK (1) 220
Additional supplier transition costs associated with GSK (1) 3,765 0.07 5,426 0.11
Legal and professional fees associated with acquisitions (2) 668 0.01 13,907 98
Unsolicited proposal costs (2) 534 0.01
Transition and integration costs associated with GSK (2) 5,811 0.11
Accelerated amortization of debt discount and debt issue costs 5,112 0.10 7,746 0.15 5,112 0.10 7,746 0.15
Loss on extinguishment of debt 15,012 0.29 15,012 0.29
Tax impact of adjustments (7,285 ) (0.14 ) (4,513 ) (0.09 ) (7,641 ) (0.15 ) (7,920 ) (0.15 )
Impact of state tax adjustments (380 )     (0.01 )         (9,465 )     (0.18 )        
Total adjustments 12,459       0.24   6,998       0.13   4,670       0.09   12,349       0.24  
Non-GAAP Adjusted Net Income and Adjusted EPS $ 15,589       $ 0.30   $ 19,255       $ 0.37   $ 61,284       $ 1.17   $ 58,505       $ 1.14  
 

(1) Adjustments relate to our OTC Healthcare segment

(2) Adjustments relate to G&A expenses

 
 

Reconciliation of GAAP Net Cash Provided by Operating Activities to Non-GAAP Free Cash Flow:

 
   

Three Months Ended
December 31,

   

Nine Months Ended
December 31,

2013     2012 2013     2012
(In thousands)
GAAP Net cash provided by operating activities $ 25,262 $ 40,502 $ 80,860 $ 100,876
Premium payment on 2010 Senior Notes 12,768 12,768
Accelerated interest payments due to debt refinancing 3,513     3,513    
Non-GAAP Operating Cash Flow 41,543   40,502   97,141   100,876  
Additions to property and equipment for cash (339 ) (3,656 ) (2,658 ) (8,922 )
Non-GAAP Free Cash Flow $ 41,204   $ 36,846   $ 94,483   $ 91,954  
 
Non-GAAP Free Cash Flow per Share $ 0.78   $ 0.72   $ 1.81   $ 1.79  
 
 

Reconciliation of GAAP Net Income and EPS to Non-GAAP Free Cash Flow and Non-GAAP Free Cash Flow per Share:

 
    Three Months Ended December 31,     Nine Months Ended December 31,
2013    

2013 Free
Cash
Flow per
Share

    2012    

2012 Free
Cash
Flow per
Share

2013    

2013 Free
Cash
Flow per
Share

    2012    

2012 Free
Cash
Flow per
Share

(In thousands)                
GAAP Net Income $ 3,130       $ 0.06   $ 12,257       $ 0.24   $ 56,614       $ 1.08   $ 46,156       $ 0.90  

Adjustments:

Adjustments to reconcile net income to net cash provided by operating activities as shown in the Statement of Cash Flows 19,438 0.37 17,179 0.33 35,612 0.68 42,032 0.82
Changes in operating assets and liabilities, net of effects from acquisitions as shown in the Statement of Cash Flows 2,694       0.05   11,066       0.22   (11,366 )     (0.22 ) 12,688       0.25  
Total adjustments 22,132       0.42   28,245       0.55   24,246       0.46   54,720       1.07  
GAAP Net cash provided by operating activities 25,262 0.48 40,502 0.79 80,860 1.54 100,876 1.97
Premium payment on 2010 Senior Notes 12,768 0.24 12,768 0.25
Accelerated interest payments due to debt refinancing 3,513       0.07           3,513       0.07          
Non-GAAP Operating Cash Flow 41,543 0.79 40,502 0.79 97,141 1.86 100,876 1.97
Additions to property and equipment for cash (339 )     (0.01 ) (3,656 )     (0.07 ) (2,658 )     (0.05 ) (8,922 )     (0.18 )
Non-GAAP Free Cash Flow $ 41,204       $ 0.78   $ 36,846       $ 0.72   $ 94,483       $ 1.81   $ 91,954       $ 1.79  
 

Source: Prestige Brands Holdings, Inc.

Prestige Brands Holdings, Inc.
Dean Siegal, 914-524-6819

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