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News Release

Prestige Brands Holdings, Inc. Reports Third Quarter Fiscal 2017 Results
  • Q3 Revenues Up 8.3% to $216.8 Million; First Nine Month Revenues Up 7.2%
  • Q3 GAAP Diluted EPS Increased Approximately 11% to $0.59; Non-GAAP Adjusted EPS Increased Approximately 15% to $0.61
  • Reduced Debt by $65 Million and Increased Cash Approximately $33 Million in Q3; Cumulative First Nine Month Debt Reduction of $215.5 Million
  • Previously Announced Fleet Transaction Successfully Closed on January 26th
  • Reaffirms Full Year FY’17 Outlook, Excluding Fleet

TARRYTOWN, N.Y.--(BUSINESS WIRE)--Feb. 2, 2017-- Prestige Brands Holdings, Inc. (NYSE:PBH) today announced results for the third quarter of fiscal year 2017, which ended December 31, 2016.

“We are very pleased with our overall results of the third fiscal quarter, which include strong revenue, strong earnings per share and free cash flow,” said Ron Lombardi, CEO.

“Third quarter fiscal 2017 was eventful for the Company, as we divested multiple non-core brands and announced the acquisition of C.B. Fleet Company.” Mr. Lombardi continued, “These strategic moves completed over the last 12 months shift our portfolio favorably toward our stated long-term organic sales growth objectives.”

Third Quarter Fiscal 2017 Results Ended December 31, 2016

Reported revenues for the third quarter of fiscal 2017 were $216.8 million, an increase of 8.3% over the prior year comparable quarter’s revenues of $200.2 million. These results reflect consumption increases across the Company’s invest for growth portfolio and the addition of the DenTek business, partially offset by the divestitures of New Skin®, PediaCare® and Fiber Choice®. Excluding these acquisitions and divestitures, third quarter fiscal 2017 non-GAAP organic revenue growth, on a constant currency basis, increased 2.8% versus the prior year comparable quarter.

Reported net income for the third quarter of fiscal 2017 totaled $31.6 million, an increase of 13.0% over the prior year comparable quarter’s net income of $28.0 million. Diluted earnings per share of $0.59 for the third quarter of fiscal 2017 compared to $0.53 in the prior year comparable period. Non-GAAP adjusted net income for the third quarter of fiscal 2017 was $32.6 million, an increase of 14.9% over the prior year period’s adjusted net income of $28.4 million. Non-GAAP adjusted earnings per share were $0.61 per share for the third quarter of fiscal 2017, compared to $0.53 per share in the prior year comparable period. Adjustments to net income in the third fiscal quarter of 2017 included integration, transition, and other costs associated with the acquisition and divestitures, a net gain related to the divestiture of certain non-core brands, and the related income tax effects of the adjustments. Adjustments to net income in the third fiscal quarter of 2016 included integration, transition, and other costs associated with acquisitions and divestitures.

Nine Months Ended Results December 31, 2016

Reported revenues for the nine month period ended December 31, 2016 totaled $641.4 million, an increase of 7.2% over the prior year comparable nine month period’s revenues of $598.4 million. On a non-GAAP organic basis, excluding foreign currency fluctuations, acquisitions, and divestitures, revenues increased 1.0% versus the prior year comparable period.

Reported net income for the first nine months of fiscal 2017 totaled $58.3 million compared with the prior year comparable period’s net income of $86.0 million. Reported diluted earnings per share for the first nine month period of fiscal 2017 were $1.09, compared to the prior year comparable period’s reported diluted earnings per share of $1.62 per share. Non-GAAP adjusted net income for the first nine month period of fiscal 2017 totaled $97.8 million, or $1.83 per share, compared to $87.5 million, or $1.65 per share, during the prior year comparable period. Adjustments to net income in the first nine months of fiscal year 2017 included accelerated amortization of debt origination costs, integration, transition, and other costs associated with the acquisitions and divestitures, a net charge related to the divestiture of certain non-core brands, and related income tax effects of the adjustments. Adjustments to net income in the first nine months of fiscal year 2016 included costs associated with the CEO transition, integration, transition, and other costs associated with acquisitions and divestitures, and loss on extinguishment of debt.

Free Cash Flow & Balance Sheet

The Company's reported net cash provided by operating activities for the third fiscal quarter decreased 12.6% to $40.1 million due principally to the approximately $8.6 million payment of taxes related to the sale of non-core brands. Non-GAAP adjusted free cash flow for the third fiscal quarter increased 8.3% to $49.6 million compared to the prior year comparable quarter.

For the first nine months of fiscal 2017, net cash provided by operating activities increased 2.9% to $140.3 million, while non-GAAP adjusted free cash flow increased 10.7% to $149.1 million compared to the prior year's period.

The Company's net debt, as defined by principal amount debt less cash and cash equivalents, decreased by $97.8 million during the third fiscal quarter of 2017 to approximately $1.4 billion at December 31, 2016, reflecting total debt repayments and accumulation of cash for the first nine months of fiscal 2017. Proceeds from the divestiture of certain non-core brands are included in fiscal third quarter of 2017 debt repayments. At December 31, 2016, the Company's covenant-defined leverage ratio improved to approximately 4.3x.

Segment Review

Reported revenues for the North American OTC Healthcare segment were $177.3 million for the third quarter of fiscal 2017, 7.4% higher than the prior year comparable quarter's revenues of $165.1 million. For the first nine months of the current fiscal year, reported revenues for the North American OTC Healthcare segment were $521.8 million, an increase of 7.2% compared to $486.9 million in the prior year comparable period.

Reported revenues for the International OTC Healthcare segment for the third quarter of fiscal 2017 were $18.5 million, 33.6% higher than the $13.8 million reported in the prior year comparable period. For the first nine months of the current fiscal year, reported revenues for the International OTC Healthcare segment were $53.1 million, an increase of 22.7% over the prior year comparable period’s revenues of $43.3 million. Revenues for both the North American OTC Healthcare segment and the International OTC Healthcare segment were impacted by solid consumption levels as well as revenues from DenTek.

Reported revenues for the Household Cleaning segment were $21.0 million for the third quarter of fiscal 2017, a decrease of 1.4% over the prior year comparable quarter's revenues of $21.3 million. Excluding prior year revenues associated with royalty income subsequently divested, Household Cleaning segment revenues increased slightly. For the first nine months of the current fiscal year, reported revenues for the Household Cleaning segment were $66.5 million, a decrease of 2.6% over the prior year comparable nine month period’s revenues of $68.3 million.

Fiscal 2017 Full-Year Outlook and Additional Commentary

   

Fiscal 2017 Full-Year
Outlook
(excludes Fleet)

Revenue Growth 4.5-6.0%

Adjusted EPS*

$2.32-2.36
Adjusted Free Cash Flow* $190 mm or more
 

*See the “About Non-GAAP Financial Measures” of this report for further presentation information.

Ron Lombardi, CEO of Prestige Brands, stated “We were pleased with fiscal third quarter sales results, which experienced purchase patterns from our largest customers that aligned more closely with consumption trends versus fiscal 2Q. Our year-to-date organic growth rate of 1.0% speaks to the strength and diversity of our evolving domestic and international product portfolio and our long-term brand building initiatives. Looking ahead, we expect our positive fiscal 3Q momentum to continue and anticipate full-year adjusted EPS guidance to come in at the high end of our guided range, despite the divestiture of multiple non-core brands during fiscal 2017.”

Mr. Lombardi continued, “Furthermore, we are excited about the recent closure of the C.B. Fleet acquisition and look forward to executing on our core competencies of acquiring, integrating and growing businesses through investment in brand-building and innovation. This transaction marks our eighth acquisition in approximately six years, continuing our proven strategy to grow our portfolio and increase shareholder value. Over time, we expect Fleet to contribute towards our long-term growth targets, as it fits into our well-established brand building platform,” he said.

Q3 Conference Call & Accompanying Slide Presentation

The Company will host a conference call to review its third quarter results on February 2, 2017 at 8:30 am EST. The toll-free dial-in numbers are 844-233-9440 within North America and 574-990-1016 outside of North America. The conference ID is 49320260. 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 49320260.

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® and Summer’s Eve® 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 "assumptions," "target," "guidance," “strategy,” "outlook," "plans," "objective," "projection," "may," "will," "would," "expect," "intend," "estimate," "anticipate," "believe”, "potential," 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 the Company's expectations regarding future operating results including revenues, adjusted earnings per share and adjusted free cash flow, the Company’s ability to meet organic growth targets and increase shareholder value, and the success of the Company’s acquisition of Fleet. 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 the Company’s advertising and promotional and new product development initiatives, customer inventory management initiatives, the failure to successfully integrate the Fleet brands, general economic and business conditions, fluctuating foreign exchange rates, consumer trends, competitive pressures, and the ability of the Company’s third party manufacturers and suppliers to meet demand for its 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, 2016, Quarterly Report on Form 10-Q for the quarter ended September 30, 2016, 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)

2016     2015 2016     2015
Revenues
Net sales $ 216,732 $ 199,485 $ 640,519 $ 596,034
Other revenues 31   710   871   2,358  
Total revenues 216,763 200,195 641,390 598,392
 
Cost of Sales
Cost of sales (exclusive of depreciation shown below) 92,216   83,411   271,287   249,432  
Gross profit 124,547   116,784   370,103   348,960  
 
Operating Expenses
Advertising and promotion 30,682 29,935 86,909 84,250
General and administrative 22,131 18,135 60,383 52,186
Depreciation and amortization 5,852 6,071 18,700 17,478
(Gain) loss on divestitures (3,405 )   51,552    
Total operating expenses 55,260   54,141   217,544   153,914  
Operating income 69,287   62,643   152,559   195,046  
 
Other (income) expense
Interest income (46 ) (31 ) (149 ) (91 )
Interest expense 18,600 19,493 60,660 62,104
Loss on extinguishment of debt       451  
Total other expense 18,554   19,462   60,511   62,464  
Income before income taxes 50,733 43,181 92,048 132,582
Provision for income taxes 19,092   15,186   33,743   46,611  
Net income $ 31,641   $ 27,995   $ 58,305   $ 85,971  
 
Earnings per share:
Basic $ 0.60   $ 0.53   $ 1.10   $ 1.63  
Diluted $ 0.59   $ 0.53   $ 1.09   $ 1.62  
 
Weighted average shares outstanding:
Basic 52,999   52,824   52,960   52,727  
Diluted 53,359   53,203   53,339   53,106  
 
Comprehensive income, net of tax:
Currency translation adjustments (8,736 ) 4,922   (11,857 ) (6,562 )
Total other comprehensive (loss) income (8,736 ) 4,922   (11,857 ) (6,562 )
Comprehensive income $ 22,905   $ 32,917   $ 46,448   $ 79,409  
 
 
Prestige Brands Holdings, Inc.
Consolidated Balance Sheets

(Unaudited)

 

(In thousands)

   

December 31,

    March 31,

Assets

2016 2016
Current assets
Cash and cash equivalents $ 63,289 $ 27,230
Accounts receivable, net 104,388 95,247
Inventories 100,926 91,263
Deferred income tax assets 12,602 10,108
Prepaid expenses and other current assets 10,005   25,165  
Total current assets 291,210 249,013
 
Property and equipment, net 12,865 15,540
Goodwill 345,485 360,191
Intangible assets, net 2,156,378 2,322,723
Other long-term assets 4,914   1,324  
Total Assets $ 2,810,852   $ 2,948,791  
 
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $ 45,250 $ 38,296
Accrued interest payable 8,399 8,664
Other accrued liabilities 78,675   59,724  
Total current liabilities 132,324   106,684  
 
Long-term debt
Principal amount 1,437,000 1,652,500
Less unamortized debt costs (21,421 ) (27,191 )
Long-term debt, net 1,415,579   1,625,309  
 
Deferred income tax liabilities 459,780 469,622
Other long-term liabilities 3,312   2,840  
Total Liabilities 2,010,995   2,204,455  
 
 
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 - 53,269 shares at December 31, 2016 and 53,066 shares at March 31, 2016 532 530
Additional paid-in capital 455,684 445,182
Treasury stock, at cost - 332 shares at December 31, 2016 and 306 shares at March 31, 2016 (6,594 ) (5,163 )
Accumulated other comprehensive loss, net of tax (35,382 ) (23,525 )
Retained earnings 385,617   327,312  
Total Stockholders' Equity 799,857   744,336  
Total Liabilities and Stockholders' Equity $ 2,810,852   $ 2,948,791  
 
 
Prestige Brands Holdings, Inc.
Consolidated Statements of Cash Flows

(Unaudited)

 
    Nine Months Ended December 31,

(In thousands)

2016     2015
Operating Activities
Net income $ 58,305 $ 85,971
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 18,700 17,478
Loss on divestitures and sales of property and equipment 51,807
Deferred income taxes (12,530 ) 31,591
Amortization of debt origination costs 6,129 5,433
Stock-based compensation costs 6,260 7,098
Loss on extinguishment of debt 451
Gain on sale or disposal of property and equipment (36 )
Changes in operating assets and liabilities, net of effects from acquisitions:
Accounts receivable (12,374 ) 2,453
Inventories (16,589 ) (7,114 )
Prepaid expenses and other current assets 11,149 5,472
Accounts payable 7,168 (17,553 )
Accrued liabilities 22,323   5,207  
Net cash provided by operating activities 140,348   136,451  
 
Investing Activities
Purchases of property and equipment (1,935 ) (2,540 )
Proceeds from divestitures 110,717
Proceeds from the sales of property and equipment 85 344
Proceeds from Insight Pharmaceuticals working capital arbitration settlement 7,237
Proceeds from DenTek working capital arbitration settlement 1,419    
Net cash provided by investing activities 110,286   5,041  
 
Financing Activities
Term loan repayments (130,500 ) (50,000 )
Borrowings under revolving credit agreement 20,000 15,000
Repayments under revolving credit agreement (105,000 ) (81,100 )
Payments of debt origination costs (9 ) (4,211 )
Proceeds from exercise of stock options 3,444 6,600
Proceeds from restricted stock exercises 544
Excess tax benefits from share-based awards 800 1,850
Fair value of shares surrendered as payment of tax withholding (1,431 ) (2,187 )
Net cash used in financing activities (212,696 ) (113,504 )
 
Effects of exchange rate changes on cash and cash equivalents (1,879 ) (333 )
Increase in cash and cash equivalents 36,059 27,655
Cash and cash equivalents - beginning of period 27,230   21,318  
Cash and cash equivalents - end of period $ 63,289   $ 48,973  
 
Interest paid $ 54,615   $ 58,867  
Income taxes paid $ 25,127   $ 9,014  
 
 
Prestige Brands Holdings, Inc.
Consolidated Statements of Income
Business Segments

(Unaudited)

 
    Three Months Ended December 31, 2016
(In thousands)

North American
OTC Healthcare

   

International
OTC Healthcare

   

Household
Cleaning

    Consolidated
Gross segment revenues $ 178,097 $ 18,459 $ 21,000 $ 217,556
Elimination of intersegment revenues (824 )     (824 )
Third-party segment revenues 177,273 18,459 21,000 216,732
Other revenues     31   31  
Total segment revenues 177,273 18,459 21,031 216,763
Cost of sales 68,378   7,678   16,160   92,216  
Gross profit 108,895 10,781 4,871 124,547
Advertising and promotion 26,800   3,502   380   30,682  
Contribution margin $ 82,095   $ 7,279   $ 4,491   93,865
Other operating expenses* 24,578  
Operating income 69,287
Other expense 18,554  
Income before income taxes 50,733
Provision for income taxes 19,092  
Net income $ 31,641  

*Other operating expenses for the three months ended December 31, 2016 includes a pre-tax net gain on divestitures of $3.4 million related primarily to e.p.t and Dermoplast. The assets and corresponding contribution margin associated with the pre-tax net gain on these divestitures are included within the North American OTC Healthcare segment.

 
   
Nine Months Ended December 31, 2016

(In thousands)

North American
OTC Healthcare

   

International
OTC Healthcare

   

Household
Cleaning

    Consolidated
Gross segment revenues $ 523,988 $ 53,061 $ 65,658 $ 642,707
Elimination of intersegment revenues (2,188 )     (2,188 )
Third-party segment revenues 521,800 53,061 65,658 640,519
Other revenues   6   865   871  
Total segment revenues 521,800 53,067 66,523 641,390
Cost of sales 198,014   21,722   51,551   271,287  
Gross profit 323,786 31,345 14,972 370,103
Advertising and promotion 76,651   8,870   1,388   86,909  
Contribution margin $ 247,135   $ 22,475   $ 13,584   283,194
Other operating expenses* 130,635  
Operating income 152,559
Other expense 60,511  
Income before income taxes 92,048
Provision for income taxes 33,743  
Net income $ 58,305  

*Other operating expenses for the nine months ended December 31, 2016 includes a pre-tax net loss of $51.6 million related to divestitures. These divestitures include PediaCare, New Skin, Fiber Choice, e.p.t, Dermoplast and license rights in certain geographic areas pertaining to Comet. The assets and corresponding contribution margin associated with the pre-tax net loss on divestitures related to PediaCare, New Skin, Fiber Choice, e.p.t and Dermoplast are included within the North American OTC Healthcare segment, while the pre-tax gain on sale of license rights related to Comet are included in the Household Cleaning segment.

 
   
Three Months Ended December 31, 2015

(In thousands)

North American
OTC Healthcare

   

International
OTC Healthcare

   

Household
Cleaning

    Consolidated
Gross segment revenues** $ 165,287 $ 13,803 $ 20,623 $ 199,713
Elimination of intersegment revenues (228 )     (228 )
Third-party segment revenues 165,059 13,803 20,623 199,485
Other revenues**   9   701   710  
Total segment revenues 165,059 13,812 21,324 200,195
Cost of sales** 62,655   4,964   15,792   83,411  
Gross profit 102,404 8,848 5,532 116,784
Advertising and promotion 26,472   2,838   625   29,935  
Contribution margin $ 75,932   $ 6,010   $ 4,907   86,849
Other operating expenses 24,206  
Operating income 62,643
Other expense 19,462  
Income before income taxes 43,181
Provision for income taxes 15,186  
Net income $ 27,995  
 
 

Nine Months Ended December 31, 2015

(In thousands)

North American
OTC Healthcare

International
OTC Healthcare

Household
Cleaning

Consolidated
Gross segment revenues** $ 489,265 $ 43,213 $ 65,984 $ 598,462
Elimination of intersegment revenues (2,428 )     (2,428 )
Third-party segment revenues 486,837 43,213 65,984 596,034
Other revenues** 15   40   2,303   2,358  
Total segment revenues 486,852 43,253 68,287 598,392
Cost of sales** 182,279   16,347   50,806   249,432  
Gross profit 304,573 26,906 17,481 348,960
Advertising and promotion 74,107   8,338   1,805   84,250  
Contribution margin $ 230,466   $ 18,568   $ 15,676   264,710  
Other operating expenses 69,664  
Operating income 195,046
Other expense 62,464  
Income before income taxes 132,582
Provision for income taxes 46,611  
Net income $ 85,971  
 
**Certain immaterial amounts relating to gross segment revenues, other revenues and cost of sales for each of the three and nine months ended December 31, 2015 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 have pursued various strategic initiatives and completed a number of acquisitions in recent years that have resulted in revenues that would not have otherwise been recognized. The frequency and the amount of such revenues vary significantly based on the size, timing and complexity of the transaction. In addition to financial results reported in accordance with GAAP, we disclose certain Non-GAAP financial measures ("NGFMs"), including, but not limited to, Non-GAAP Organic Revenues, Non-GAAP Organic Revenues on a Constant Currency basis, Non-GAAP Adjusted General and Administrative expenses, Non-GAAP Adjusted General and Administrative expense percentage, Non-GAAP EBITDA, Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted EBITDA Margin, Non-GAAP Adjusted Net Income, Non-GAAP Adjusted EPS, Non-GAAP Free Cash Flow, and Non-GAAP Adjusted Free Cash Flow. We use these NGFMs internally, along with GAAP information, in evaluating our operating performance and in making financial and operational decisions. We believe that the presentation of these NGFMs provides investors with greater transparency, and provides a more complete understanding of our business than could be obtained absent these disclosures, because the supplemental data relating to our financial condition and results of operations provides additional ways to view our operation when considered with both our GAAP results and the reconciliations below. In addition, we believe that the presentation of each of these NGFMs is useful to investors for period-to-period comparisons of results in assessing shareholder value, and we use these NGFMs internally to evaluate the performance of our personnel and also to evaluate our operating performance and compare our performance to that of our competitors.

These NGFMs are not in accordance with GAAP, should not be considered as a measure of profitability or liquidity, and may not be directly comparable to similarly titled NGFMs reported by other companies. These NGFMs have limitations and they should not be considered in isolation from or as an alternative to their most closely related GAAP measures reconciled below. Investors should not rely on any single financial measure when evaluating our business. We recommend investors review the GAAP financial measures included in this earnings release. When viewed in conjunction with our GAAP results and the reconciliations below, we believe these NGFMs provide greater transparency and a more complete understanding of factors affecting our business than GAAP measures alone.

NGFMs Defined

We define our NGFMs presented herein as follows:

  • Non-GAAP Organic Revenues: GAAP Total Revenues excluding revenues associated with products acquired or divested in the periods presented.
  • Non-GAAP Organic Revenues on a Constant Currency basis: Non-GAAP Organic Revenues excluding the impact of current year foreign exchange rates on total revenues.
  • Non-GAAP Adjusted General and Administrative expenses: GAAP General and Administrative expenses minus certain other legal and professional fees, acquisition and other integration costs, divestiture costs, and costs associated with our CEO transition.
  • Non-GAAP Adjusted General and Administrative expense percentage: Calculated as Non-GAAP Adjusted General and Administrative expense divided by GAAP Total Revenues.
  • Non-GAAP EBITDA: GAAP Net Income less interest expense (income), income taxes, and depreciation and amortization.
  • Non-GAAP Adjusted EBITDA: Non-GAAP EBITDA less certain other legal and professional fees, other acquisition-related costs, divestiture costs, costs associated with our CEO transition, loss on extinguishment of debt, and gain/loss on sale of assets.
  • Non-GAAP Adjusted EBITDA Margin: Calculated as Non-GAAP Adjusted EBITDA divided by GAAP Total Revenues.
  • Non-GAAP Adjusted Net Income: GAAP Net Income before certain other legal and professional fees, other acquisition and integration-related costs, divestiture costs, costs associated with our CEO transition, accelerated amortization of debt origination costs due to sale of assets, loss on extinguishment of debt, gain/loss on sale of assets, applicable tax impacts associated with these items, income tax related to adjustments and other non-deductible items.
  • Non-GAAP Adjusted EPS: Calculated as Non-GAAP Adjusted Net Income, divided by the weighted average number of common and potential common shares outstanding during the period.
  • Non-GAAP Free Cash Flow: GAAP Net cash provided by operating activities less cash paid for capital expenditures.
  • Non-GAAP Adjusted Free Cash Flow: Non-GAAP Free Cash Flow plus cash payments made for integration, transition, and other costs associated with acquisitions and divestitures and additional income tax payments due to sales of intangible assets.

The following tables set forth the reconciliations of each of our NGFMs to their 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
December 31,

Nine Months Ended
December 31,

2016     2015 2016     2015

(In thousands)

GAAP Total Revenues $ 216,763   $ 200,195   $ 641,390   $ 598,392  
Revenue Growth 8.3 % 7.2 %

Adjustments:

DenTek revenues (1) (17,327 ) (51,168 )
Revenues associated with divested brands(2)   (6,636 )   (13,542 )
Total adjustments (17,327 ) (6,636 ) (51,168 ) (13,542 )
Non-GAAP Organic Revenues $ 199,436   $ 193,559   $ 590,222   $ 584,850  
Organic Revenue Growth (Decline) 3.0 % 0.9 %
Impact of foreign currency exchange rates (3)   384     (521 )
Non-GAAP Organic Revenues on a constant currency basis $ 199,436   $ 193,943   $ 590,222   $ 584,329  
Constant Currency Organic Revenue Growth 2.8 % 1.0 %
 
(1) DenTek revenues are excluded for purposes of calculating Non-GAAP organic revenues. These revenue adjustments relate to our North American and International OTC Healthcare segment.
(2) Revenues of our divested brands have been excluded from the current year and the prior year for purposes of calculating Non-GAAP organic revenues. These revenue adjustments relate to our North American OTC Healthcare segment and our North America Household Cleaning segment.
(3) Foreign currency exchange rate adjustments relate to all 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
December 31,

Nine Months Ended
December 31,

2016     2015 2016     2015

(In thousands)

GAAP General and Administrative Expense $ 22,131   $ 18,135   $ 60,383   $ 52,186  

Adjustments:

Costs associated with CEO transition (1) 1,406
Legal and professional fees associated with acquisitions and divestitures (2) 2,544 1,016 3,129 1,016
Integration, transition and other costs associated with acquisitions and divestitures (2) 638     3,699    
Total adjustments 3,182   1,016   6,828   2,422  
Non-GAAP Adjusted General and Administrative Expense $ 18,949   $ 17,119   $ 53,555   $ 49,764  
Non-GAAP Adjusted General and Administrative Expense Percentage 8.7 % 8.6 % 8.3 % 8.3 %
 
(1) Costs relate to search fees associated with CEO and CFO transition and certain accelerated stock compensation costs related to our former CEO.
(2) Acquisition related items represent costs related to integrating recently acquired businesses including (but not limited to), costs to exit or convert contractual obligations, severance, information system conversion and consulting costs; and certain costs related to the consummation of the acquisition process such as legal and other acquisition related professional fees.
 

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

       

Three Months Ended
December 31,

Nine Months Ended
December 31,

2016     2015 2016     2015

(In thousands)

GAAP Net Income $ 31,641 $ 27,995 $ 58,305 $ 85,971
Interest expense, net 18,554 19,462 60,511 62,013
Provision for income taxes 19,092 15,186 33,743 46,611
Depreciation and amortization 5,852   6,071   18,700   17,478  
Non-GAAP EBITDA: 75,139   68,714   171,259   212,073  

Adjustments:

Costs associated with CEO transition (1) 1,406
Legal and professional fees associated with acquisitions and divestitures (2) 2,544 1,016 3,129 1,016
Integration, transition and other costs associated with acquisitions and divestitures (2) 638 3,699
Loss on extinguishment of debt 451
(Gain) loss on divestitures (3,405 )   51,552    
Total adjustments (223 ) 1,016   58,380   2,873  
Non-GAAP Adjusted EBITDA $ 74,916   $ 69,730   $ 229,639   $ 214,946  
Non-GAAP Adjusted EBITDA Margin 34.6 % 34.8 % 35.8 % 35.9 %
 
(1) Costs relate to search fees associated with CEO and CFO transition and certain accelerated stock compensation costs related to our former CEO.
(2) Acquisition related items represent costs related to integrating recently acquired businesses including (but not limited to), costs to exit or convert contractual obligations, severance, information system conversion and consulting costs; and certain costs related to the consummation of the acquisition process such as legal and other acquisition related professional fees.
 

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,
2016  

2016
Adjusted
EPS

    2015  

2015
Adjusted
EPS

2016  

2016
Adjusted
EPS

    2015  

2015
Adjusted
EPS

(In thousands)

       
GAAP Net Income $ 31,641     $ 0.59   $ 27,995     $ 0.53   $ 58,305     $ 1.09   $ 85,971     $ 1.62  

Adjustments:

Costs associated with CEO transition (1) 1,406 0.03

Legal and professional fees associated with acquisitions and divestitures (2)

2,544 0.05 1,016 0.02 3,129 0.06 1,016 0.02

Integration, transition and other costs associated with acquisitions and divestitures (2)

638 0.01 3,699 0.07
Accelerated amortization of debt origination costs (5) 1,131 0.02
Loss on extinguishment of debt 451 0.01
(Gain) loss on divestitures (3,405 ) (0.06 ) 51,552 0.97
Tax impact of adjustments (3) 2,638 0.05 (657 ) (0.02 ) (18,586 ) (0.35 ) (1,314 ) (0.03 )
Income tax related to adjustments(4) (1,477 )   (0.03 )       (1,477 )   (0.03 )      
Total adjustments 938     0.02   359       39,448     0.74   1,559     0.03  

Non-GAAP Adjusted Net Income and Adjusted EPS

$ 32,579     $ 0.61   $ 28,354     $ 0.53   $ 97,753     $ 1.83   $ 87,530     $ 1.65  
 
(1) Costs relate to search fees associated with CEO and CFO transition and certain accelerated stock compensation costs related to our former CEO.
(2) Acquisition related items represent costs related to integrating recently acquired businesses including (but not limited to), costs to exit or convert contractual obligations, severance, information system conversion and consulting costs; and certain costs related to the consummation of the acquisition process such as legal and other acquisition related professional fees.
(3) The income tax adjustments are determined using applicable rates in the taxing jurisdictions in which the above adjustments relate and includes both current and deferred income tax expense (benefit) based on the specific nature of the specific Non-GAAP performance measure.
(4) Income tax adjustments relate primarily to the expiration of certain statute of limitations associated with certain tax reserves.
(5) Higher amortization of debt origination costs resulting from debt payments on our term loan from the proceeds from divestitures.
 

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

       

Three Months Ended
December 31,

Nine Months Ended
December 31,

2016     2015 2016     2015

(In thousands)

GAAP Net Income $ 31,641   $ 27,995   $ 58,305   $ 85,971  

Adjustments:

Adjustments to reconcile net income to net cash provided by operating activities as shown in the Statement of Cash Flows 3,978 19,119 70,366 62,015
Changes in operating assets and liabilities, net of effects from acquisitions as shown in the Statement of Cash Flows 4,447   (1,253 ) 11,677   (11,535 )
Total adjustments 8,425   17,866   82,043   50,480  
GAAP Net cash provided by operating activities 40,066 45,861 140,348 136,451
Purchases of property and equipment (531 ) (857 ) (1,935 ) (2,540 )
Non-GAAP Free Cash Flow 39,535 45,004 138,413 133,911
Integration, transition and other payments associated with acquisitions and divestitures(1) 1,461 796 2,144 796
Additional income tax payments associated with divestitures (2) 8,589     8,589    
 
Non-GAAP Adjusted Free Cash Flow $ 49,585   $ 45,800   $ 149,146   $ 134,707  
 
(1) Acquisition related items represent payments related to integrating recently acquired businesses including (but not limited to), costs to exit or convert contractual obligations, severance, information system conversion and consulting costs; and certain costs related to the consummation of the acquisition process such as legal and other acquisition related professional fees.
(2) Additional income tax payments resulting from the proceeds from divestitures.
 

Outlook for Fiscal Year 2017:

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

   
2017 Projected EPS (2)
Low   High
Projected FY'17 GAAP EPS $ 1.55     $ 1.61

Adjustments:

 
Costs associated with DenTek integration(1) 0.08 0.08
Loss on divestitures 0.67     0.67
Total Adjustments 0.75     0.75
Projected Non-GAAP Adjusted EPS $ 2.30     $ 2.36
 
(1) Acquisition related items represent costs related to integrating recently acquired businesses including (but not limited to), costs to exit or convert contractual obligations, severance, information system conversion and consulting costs; and certain costs related to the consummation of the acquisition process such as legal and other acquisition related professional fees. However, due to the timing of the recently acquired Fleet business, the amounts above exclude projections for that business.
(2) The above reconciliation of this forward-looking non-GAAP financial measure excludes the recently acquired Fleet business primarily due to the high variability and difficulty in making accurate forecasts and projections of some of the excluded information, together with some of the excluded information not being ascertainable or accessible, the Company is unable to quantify certain amounts that would be required to be included in the most directly comparable GAAP financial measure without unreasonable efforts.
 

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

   

2017
Projected
Free Cash
Flow (2)

(In millions)

Projected FY'17 GAAP Net cash provided by operating activities $ 191
Additions to property and equipment for cash (4 )
Projected Non-GAAP Free Cash Flow 187
Payments associated with acquisitions(1) 3  
Projected Non-GAAP Adjusted Free Cash Flow $ 190  
 
(1) Acquisition related items represent costs related to integrating recently acquired businesses including (but not limited to), costs to exit or convert contractual obligations, severance, information system conversion and consulting costs; and certain costs related to the consummation of the acquisition process such as legal and other acquisition related professional fees. However, due to the timing of the recently acquired Fleet business, the amounts above exclude projections for that business.
(2) The above reconciliation of this forward-looking non-GAAP financial measure excludes the recently acquired Fleet business primarily due to the high variability and difficulty in making accurate forecasts and projections of some of the excluded information, together with some of the excluded information not being ascertainable or accessible, the Company is unable to quantify certain amounts that would be required to be included in the most directly comparable GAAP financial measure without unreasonable efforts.
 

Source: Prestige Brands Holdings, Inc.

Prestige Brands Holdings, Inc.
Phil Terpolilli, 914-524-6819