Irinquiries@prestigebrands.com
Prestige Consumer Healthcare Inc.
660 White Plains Road – Ste 250
Tarrytown, NY 10591
Telephone: 914-524-6819
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 6, 2015
PRESTIGE BRANDS HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware | 001-32433 | 20-1297589 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||
660 White Plains Road, Tarrytown, New York 10591
(Address of principal executive offices) (Zip Code)
(914) 524-6800
(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition.
On August 6, 2015, Prestige Brands Holdings, Inc. (the “Company”) announced financial results for the fiscal quarter ended June 30, 2015. A copy of the press release announcing the Company's earnings results for the fiscal quarter ended June 30, 2015 is attached hereto as Exhibit 99.1 and incorporated herein by reference.
Item 7.01 Regulation FD Disclosure.
The information set forth in Item 2.02 above is incorporated by reference as if fully set forth herein.
On August 6, 2015, representatives of the Company began making presentations to investors regarding the Company's financial results for the quarter ended June 30, 2015 using slides attached to this Current Report on Form 8-K as Exhibit 99.2 (the “Investor Presentation”) and incorporated herein by reference. The Company expects to use the Investor Presentation, in whole or in part, and possibly with modifications, in connection with presentations to investors, analysts and others during the fiscal year ended March 31, 2016.
By filing this Current Report on Form 8-K and furnishing the information contained herein, the Company makes no admission as to the materiality of any information in this report that is required to be disclosed solely by reason of Regulation FD.
The information contained in the Investor Presentation is summary information that is intended to be considered in the context of the Company's Securities and Exchange Commission (“SEC”) filings and other public announcements that the Company may make, by press release or otherwise, from time to time. The Company undertakes no duty or obligation to publicly update or revise the information contained in this report, although it may do so from time to time as its management believes is warranted. Any such updating may be made through the filing of other reports or documents with the SEC, through press releases or through other public disclosure.
The information presented in Items 2.02 and 7.01 of this Current Report on Form 8-K and Exhibits 99.1 and 99.2 shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, unless the Company specifically states that the information is to be considered “filed” under the Exchange Act or specifically incorporates it by reference into a filing under the Securities Act of 1933, as amended, or the Exchange Act.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
See Exhibit Index immediately following the signature page.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: August 6, 2015 | PRESTIGE BRANDS HOLDINGS, INC. | ||
By: | /s/ RONALD M. LOMBARDI | ||
Ronald M. Lombardi | |||
President, Chief Executive Officer and Chief Financial Officer | |||
(Principal Executive Officer, Principal Financial Officer and Duly Authorized Officer) | |||
EXHIBIT INDEX
Exhibit | Description | |
99.1 | Press Release dated August 6, 2015 announcing the Company's financial results for the fiscal quarter ended June 30, 2015 (furnished only). | |
99.2 | Investor Presentation in use beginning August 6, 2015 (furnished only). | |
Exhibit 99.1
Prestige Brands Holdings, Inc. Reports Record First Quarter Fiscal 2016 Revenues Up 31.9% to $192.1 Million & Free Cash Flow Up 46.5% to $42.7 Million
Outlook Reaffirmed for Fiscal Year 2016
Tarrytown, NY-(Business Wire)--August 6, 2015--Prestige Brands Holdings, Inc. (NYSE-PBH) today announced results for the first quarter of fiscal year 2016, which ended June 30, 2015, and reconfirmed the outlook for the fiscal year previously provided for revenues, adjusted earnings per share, and free cash flow.
Key first quarter highlights include:
>Revenues increased 31.9% to a record $192.1 million
>Free cash flow increased 46.5% to $42.7 million
>Organic sales growth of 3.7%, excluding the impact of foreign currency fluctuations.
>Adjusted earnings per share increased 26.8% to $0.52
First Fiscal Quarter Ended June 30, 2015
Revenues for the first quarter of fiscal 2016 were $192.1 million, an increase of 31.9% over the prior year comparable quarter’s revenues of $145.7 million. These results reflect strong consumption levels across the Company’s core over-the-counter healthcare brands (OTC), our growing international business, as well as the acquisitions of Insight Pharmaceuticals (Insight) and Hydralyte. Organic sales growth for the quarter was 3.7%, excluding the impact of foreign currency fluctuations.
Reported net income for the first quarter of fiscal 2016 totaled $26.2 million, or $0.49 per diluted share, an increase of 56.4% over the prior year comparable quarter’s results of $16.7 million, or $0.32 per diluted share. Adjusted net income for the first quarter of fiscal 2016 was $27.4 million, or $0.52 per diluted share, an increase of 27.4% over the prior year comparable period's adjusted net income of $21.5 million, or $0.41 per diluted share.
Free Cash Flow & Balance Sheet
The Company's free cash flow for the quarter ended June 30, 2015 was $42.7 million compared to the prior year comparable quarter’s free cash flow of $29.2 million, an increase of 46.5%. Adjusted EBITDA for the first quarter of fiscal 2016 was $69.6 million, an increase of 36.4% over the prior year comparable quarter’s adjusted EBITDA of $51.0 million.
The Company's net debt at June 30, 2015 was approximately $1.5 billion, reflecting net debt repayments of approximately $45.0 million during the first fiscal quarter. The Company also completed the previously announced refinancing of its term loan to more favorable rates during the first fiscal quarter. At June 30, 2015, the Company's covenant-defined leverage ratio was approximately 5.1.
Segment Review
Revenues for the North American OTC Healthcare segment were $155.7 million for the first quarter of fiscal 2016, 40.9% higher than the prior year comparable quarter's revenues of $110.4 million. Revenues for the International OTC Healthcare segment were $14.2 million, 3.5% higher than $13.7 million reported in the prior year's comparable period. Revenues for both the North American OTC Healthcare segment and the International OTC Healthcare segment were impacted by increased consumption levels and the acquisitions of Insight and Hydralyte. Revenues for the Household Cleaning segment were $22.3 million for the first quarter of fiscal 2016, an increase of 3.4% over the prior year comparable quarter's revenues of $21.5 million.
Commentary & Outlook
“We are very pleased with our first quarter results, highlighted by record revenues driven by strong organic growth of 3.7%, excluding the impact of foreign currency fluctuations, and solid performance of our Insight and Hydralyte acquisitions,” said Ron Lombardi, President and CEO.
“With first quarter results under our belt, strong consumption trends across many of our key brands, and a growing international business, we believe the Company is on track to achieve our previously provided outlook. For the full fiscal year 2016, we are reconfirming our revenue growth projection to be in the range of 10% to 12%, including the estimated impact of foreign currency fluctuations. We continue to anticipate revenue growth for the first half of the fiscal year of 20% to 23% and 1.5% to 2% for the second half as we annualize the Insight and Hydralyte acquisitions which closed during the first half of fiscal 2015,” he said.
“In addition, we continue to expect fiscal 2016 adjusted earnings per share in the range of $2.05-$2.10,” Mr. Lombardi stated. “Our industry-leading free cash flow is expected to be very strong for the fiscal year with free cash flow estimated to be $175 million or more, which will enable the Company to continue to rapidly de-lever, build M&A capacity, and to continue to invest in building our brands.”
Q1 Conference Call & Accompanying Slide Presentation
The Company will host a conference call to review its first quarter results on August 6, 2015 at 8:30 am EDT. The toll-free dial-in numbers are 877-703-6109 within North America and 857-244-7308 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 19469360.
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 healthcare and household cleaning products throughout the U.S., Canada, and Australia and in certain other international markets. Core brands include Monistat® women’s health products, Nix® lice treatment, Chloraseptic® sore throat treatments, Clear Eyes® eye care products, Compound W® wart treatments, The Doctor's® NightGuard® dental protector, Little Remedies® pediatric 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 "assumptions," "target," "guidance," “strategy,” "outlook," "plans," "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 free cash flow, the strength of consumption of the Company's products, the growth of the Company's international business and the Company's expectations of rapid de-levering, building M&A capacity and investing in brand building. 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, the severity of the cold and flu season, general economic and business conditions, fluctuating foreign exchange rates, consumer trends, competition in our industry, the ability of our third party manufacturers and suppliers to meet demand for our products, and introductions of new 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, 2015 and other periodic reports filed with the Securities and Exchange Commission.
Investor Contact: Dean Siegal
914-524-6819
Or
John Mills, ICR
646-277-1254
John.mills@icrinc.com
Prestige Brands Holdings, Inc.
Consolidated Statements of Income and Comprehensive Income
(Unaudited)
Three Months Ended June 30, | |||||||
(In thousands, except per share data) | 2015 | 2014 | |||||
Revenues | |||||||
Net sales | $ | 191,287 | $ | 144,541 | |||
Other revenues | 845 | 1,161 | |||||
Total revenues | 192,132 | 145,702 | |||||
Cost of Sales | |||||||
Cost of sales (exclusive of depreciation shown below) | 79,896 | 63,836 | |||||
Gross profit | 112,236 | 81,866 | |||||
Operating Expenses | |||||||
Advertising and promotion | 26,422 | 19,096 | |||||
General and administrative | 17,589 | 17,006 | |||||
Depreciation and amortization | 5,720 | 2,961 | |||||
Total operating expenses | 49,731 | 39,063 | |||||
Operating income | 62,505 | 42,803 | |||||
Other (income) expense | |||||||
Interest income | (27 | ) | (32 | ) | |||
Interest expense | 21,911 | 14,685 | |||||
Loss on extinguishment of debt | 451 | — | |||||
Total other expense | 22,335 | 14,653 | |||||
Income before income taxes | 40,170 | 28,150 | |||||
Provision for income taxes | 13,997 | 11,418 | |||||
Net income | $ | 26,173 | $ | 16,732 | |||
Earnings per share: | |||||||
Basic | $ | 0.50 | $ | 0.32 | |||
Diluted | $ | 0.49 | $ | 0.32 | |||
Weighted average shares outstanding: | |||||||
Basic | 52,548 | 51,956 | |||||
Diluted | 52,958 | 52,533 | |||||
Comprehensive income, net of tax: | |||||||
Currency translation adjustments | (405 | ) | 2,726 | ||||
Total other comprehensive income (loss) | (405 | ) | 2,726 | ||||
Comprehensive income | $ | 25,768 | $ | 19,458 | |||
Prestige Brands Holdings, Inc.
Consolidated Balance Sheets
(Unaudited)
(In thousands) Assets | June 30, 2015 | March 31, 2015 | |||||
Current assets | |||||||
Cash and cash equivalents | $ | 21,598 | $ | 21,318 | |||
Accounts receivable, net | 85,576 | 87,858 | |||||
Inventories | 74,077 | 74,000 | |||||
Deferred income tax assets | 7,918 | 8,097 | |||||
Prepaid expenses and other current assets | 11,890 | 10,434 | |||||
Total current assets | 201,059 | 201,707 | |||||
Property and equipment, net | 13,154 | 13,744 | |||||
Goodwill | 290,867 | 290,651 | |||||
Intangible assets, net | 2,129,860 | 2,134,700 | |||||
Other long-term assets | 1,562 | 1,165 | |||||
Total Assets | $ | 2,636,502 | $ | 2,641,967 | |||
Liabilities and Stockholders' Equity | |||||||
Current liabilities | |||||||
Current portion of long term debt | $ | 8,525 | $ | — | |||
Accounts payable | 47,170 | 46,115 | |||||
Accrued interest payable | 9,359 | 11,974 | |||||
Other accrued liabilities | 36,738 | 40,948 | |||||
Total current liabilities | 101,792 | 99,037 | |||||
Long-term debt | |||||||
Principal amount | 1,540,075 | 1,593,600 | |||||
Less unamortized debt costs | (33,534 | ) | (32,327 | ) | |||
Long-term debt, net | 1,506,541 | 1,561,273 | |||||
Deferred income tax liabilities | 362,928 | 351,569 | |||||
Other long-term liabilities | 2,517 | 2,464 | |||||
Total Liabilities | 1,973,778 | 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 - 53,032 shares at June 30, 2015 and 52,562 shares at March 31, 2015 | 530 | 525 | |||||
Additional paid-in capital | 437,554 | 426,584 | |||||
Treasury stock, at cost - 306 shares at June 30, 2015 and 266 shares at March 31, 2015 | (5,121 | ) | (3,478 | ) | |||
Accumulated other comprehensive loss, net of tax | (23,817 | ) | (23,412 | ) | |||
Retained earnings | 253,578 | 227,405 | |||||
Total Stockholders' Equity | 662,724 | 627,624 | |||||
Total Liabilities and Stockholders' Equity | $ | 2,636,502 | $ | 2,641,967 | |||
Prestige Brands Holdings, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended June 30, | |||||||
(In thousands) | 2015 | 2014 | |||||
Operating Activities | |||||||
Net income | $ | 26,173 | $ | 16,732 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 5,720 | 2,961 | |||||
Gain on sale of asset | (36 | ) | — | ||||
Deferred income taxes | 11,536 | 7,140 | |||||
Amortization of debt origination costs | 2,138 | 995 | |||||
Stock-based compensation costs | 3,047 | 1,858 | |||||
Loss on extinguishment of debt | 451 | — | |||||
Changes in operating assets and liabilities, net of effects from acquisitions | |||||||
Accounts receivable | 2,578 | 6,956 | |||||
Inventories | (211 | ) | 1,540 | ||||
Prepaid expenses and other current assets | (1,522 | ) | (2,203 | ) | |||
Accounts payable | 783 | (3,096 | ) | ||||
Accrued liabilities | (7,136 | ) | (3,212 | ) | |||
Net cash provided by operating activities | 43,521 | 29,671 | |||||
Investing Activities | |||||||
Purchases of property and equipment | (780 | ) | (496 | ) | |||
Proceeds from the sale of property and equipment | 344 | — | |||||
Acquisition of the Hydralyte brand | — | (77,991 | ) | ||||
Net cash used in investing activities | (436 | ) | (78,487 | ) | |||
Financing Activities | |||||||
Term loan repayments | (25,000 | ) | — | ||||
Borrowings under revolving credit agreement | 15,000 | 65,000 | |||||
Repayments under revolving credit agreement | (35,000 | ) | (30,000 | ) | |||
Payment of debt origination costs | (4,172 | ) | (74 | ) | |||
Proceeds from exercise of stock options | 6,328 | 1,294 | |||||
Proceeds from restricted stock exercises | 544 | 57 | |||||
Excess tax benefits from share-based awards | 1,600 | 950 | |||||
Fair value of shares surrendered as payment of tax withholding | (2,187 | ) | (1,171 | ) | |||
Net cash (used in) provided by financing activities | (42,887 | ) | 36,056 | ||||
Effects of exchange rate changes on cash and cash equivalents | 82 | 104 | |||||
Increase (decrease) in cash and cash equivalents | 280 | (12,656 | ) | ||||
Cash and cash equivalents - beginning of period | 21,318 | 28,331 | |||||
Cash and cash equivalents - end of period | $ | 21,598 | $ | 15,675 | |||
Interest paid | $ | 22,444 | $ | 13,867 | |||
Income taxes paid | $ | 1,914 | $ | 707 | |||
Prestige Brands Holdings, Inc.
Consolidated Statements of Income
Business Segments
(Unaudited)
Three Months Ended June 30, 2015 | |||||||||||||||
(In thousands) | North American OTC Healthcare | International OTC Healthcare | Household Cleaning | Consolidated | |||||||||||
Gross segment revenues | $ | 156,339 | $ | 14,209 | $ | 21,467 | $ | 192,015 | |||||||
Elimination of intersegment revenues | (728 | ) | — | — | (728 | ) | |||||||||
Third-party segment revenues | 155,611 | 14,209 | 21,467 | 191,287 | |||||||||||
Other revenues | 40 | — | 805 | 845 | |||||||||||
Total segment revenues | 155,651 | 14,209 | 22,272 | 192,132 | |||||||||||
Cost of sales | 58,126 | 5,290 | 16,480 | 79,896 | |||||||||||
Gross profit | 97,525 | 8,919 | 5,792 | 112,236 | |||||||||||
Advertising and promotion | 23,195 | 2,723 | 504 | 26,422 | |||||||||||
Contribution margin | $ | 74,330 | $ | 6,196 | $ | 5,288 | 85,814 | ||||||||
Other operating expenses | 23,309 | ||||||||||||||
Operating income | 62,505 | ||||||||||||||
Other expense | 22,335 | ||||||||||||||
Income before income taxes | 40,170 | ||||||||||||||
Provision for income taxes | 13,997 | ||||||||||||||
Net income | $ | 26,173 | |||||||||||||
Three Months Ended June 30, 2014 | |||||||||||||||
(In thousands) | North American OTC Healthcare | International OTC Healthcare | Household Cleaning | Consolidated | |||||||||||
Gross segment revenues | $ | 110,973 | $ | 13,692 | $ | 20,593 | $ | 145,258 | |||||||
Elimination of intersegment revenues | (717 | ) | — | — | (717 | ) | |||||||||
Third-party segment revenues | 110,256 | 13,692 | 20,593 | 144,541 | |||||||||||
Other revenues | 177 | 35 | 949 | 1,161 | |||||||||||
Total segment revenues | 110,433 | 13,727 | 21,542 | 145,702 | |||||||||||
Cost of sales | 42,340 | 5,078 | 16,418 | 63,836 | |||||||||||
Gross profit | 68,093 | 8,649 | 5,124 | 81,866 | |||||||||||
Advertising and promotion | 16,353 | 2,339 | 404 | 19,096 | |||||||||||
Contribution margin | $ | 51,740 | $ | 6,310 | $ | 4,720 | 62,770 | ||||||||
Other operating expenses | 19,967 | ||||||||||||||
Operating income | 42,803 | ||||||||||||||
Other expense | 14,653 | ||||||||||||||
Income before income taxes | 28,150 | ||||||||||||||
Provision for income taxes | 11,418 | ||||||||||||||
Net income | $ | 16,732 | |||||||||||||
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 Adjusted EBITDA as earnings before interest expense (income), income taxes, depreciation and amortization, certain other legal and professional fees, other acquisition-related costs, and costs associated with our CEO transition. 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, 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 Free Cash Flow as net cash provided by operating activities less cash paid for capital expenditures. Non-GAAP Organic Revenues, Non-GAAP Organic 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, and Non-GAAP 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 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, and Non-GAAP 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 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, and Non-GAAP 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 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, and Non-GAAP 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 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, and Non-GAAP 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 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, 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 June 30, | |||||||
2015 | 2014 | ||||||
(In thousands) | |||||||
GAAP Total Revenues | $ | 192,132 | $ | 145,702 | |||
Adjustments: | |||||||
Hydralyte revenues (1) | (1,217 | ) | — | ||||
Insight revenues (2) | (42,638 | ) | — | ||||
Total adjustments | (43,855 | ) | — | ||||
Non-GAAP Organic Revenues | 148,277 | 145,702 | |||||
Organic Revenue Growth (decline) | 1.8 | % | |||||
Impact of foreign currency exchange rates (3) | (2,689 | ) | |||||
Non-GAAP Organic Revenues on a constant currency basis | $ | 148,277 | $ | 143,013 | |||
Constant Currency Organic Revenue Growth | 3.7 | % | |||||
(1) Revenue adjustments relate to our International OTC Healthcare segment
(2) Revenue adjustments relate to our North American OTC Healthcare segment
(3) 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 June 30, | |||||||
2015 | 2014 | ||||||
(In thousands) | |||||||
GAAP Total Revenues | $ | 192,132 | $ | 145,702 | |||
GAAP Gross Profit | $ | 112,236 | $ | 81,866 | |||
Adjustments: | |||||||
Inventory step-up charges and other costs associated with the Hydralyte acquisition (1) | — | 130 | |||||
Total adjustments | — | 130 | |||||
Non-GAAP Adjusted Gross Margin | $ | 112,236 | $ | 81,996 | |||
Non-GAAP Adjusted Gross Margin % | 58.4 | % | 56.3 | % | |||
(1) Inventory step-up charges and other costs relate to our International OTC Healthcare segment
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 June 30, | |||||||
2015 | 2014 | ||||||
(In thousands) | |||||||
GAAP General and Administrative Expense | $ | 17,589 | $ | 17,006 | |||
Adjustments: | |||||||
Costs associated with CEO transition | 1,406 | — | |||||
Legal and professional fees associated with acquisitions | — | 1,799 | |||||
Stamp/Duty Tax on Australian acquisition | — | 2,940 | |||||
Integration, transition and other costs associated with acquisitions | — | 411 | |||||
Total adjustments | 1,406 | 5,150 | |||||
Non-GAAP Adjusted General and Administrative Expense | $ | 16,183 | $ | 11,856 | |||
Non-GAAP Adjusted General and Administrative Expense Percentage | 8.4 | % | 8.1 | % | |||
Reconciliation of GAAP Net Income to Non-GAAP Adjusted EBITDA and related Non-GAAP Adjusted EBITDA Margin:
Three Months Ended June 30, | |||||||
2015 | 2014 | ||||||
(In thousands) | |||||||
GAAP Net Income | $ | 26,173 | $ | 16,732 | |||
Interest expense, net | 21,884 | 14,653 | |||||
Provision for income taxes | 13,997 | 11,418 | |||||
Depreciation and amortization | 5,720 | 2,961 | |||||
Non-GAAP EBITDA: | 67,774 | 45,764 | |||||
Adjustments: | |||||||
Costs associated with CEO transition | 1,406 | — | |||||
Inventory step-up charges and other costs associated with the Hydralyte acquisition (1) | — | 130 | |||||
Legal and professional fees associated with acquisitions (2) | — | 1,799 | |||||
Stamp/Duty Tax on Australian acquisition (2) | — | 2,940 | |||||
Integration, transition and other costs associated with acquisitions (2) | — | 411 | |||||
Loss on extinguishment of debt | 451 | — | |||||
Total adjustments | 1,857 | 5,280 | |||||
Non-GAAP Adjusted EBITDA | $ | 69,631 | $ | 51,044 | |||
Non-GAAP Adjusted EBITDA Margin | 36.2 | % | 35.0 | % | |||
(1) Inventory step-up charges and other costs relate to our International 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 June 30, | |||||||||||||
2015 | 2015 Adjusted EPS | 2014 | 2014 Adjusted EPS | ||||||||||
(In thousands) | |||||||||||||
GAAP Net Income | $ | 26,173 | $ | 0.49 | $ | 16,732 | $ | 0.32 | |||||
Adjustments: | |||||||||||||
Costs associated with CEO transition | 1,406 | 0.03 | — | — | |||||||||
Inventory step-up charges and other costs associated the Hydralyte acquisition (1) | — | — | 130 | — | |||||||||
Legal and professional fees associated with acquisitions (2) | — | — | 1,799 | 0.03 | |||||||||
Stamp/Duty Tax on Australian acquisition (2) | — | — | 2,940 | 0.06 | |||||||||
Integration, transition and other costs associated with acquisitions (2) | — | — | 411 | 0.01 | |||||||||
Loss on extinguishment of debt | 451 | 0.01 | — | — | |||||||||
Tax impact of adjustments | (657 | ) | (0.01 | ) | (528 | ) | (0.01 | ) | |||||
Total adjustments | 1,200 | 0.03 | 4,752 | 0.09 | |||||||||
Non-GAAP Adjusted Net Income and Adjusted EPS | $ | 27,373 | $ | 0.52 | $ | 21,484 | $ | 0.41 | |||||
(1) Inventory step-up charges and other costs relate to our International OTC Healthcare segment
(2) Adjustments relate to G&A expenses
Reconciliation of GAAP Net Income to Non-GAAP Free Cash Flow:
Three Months Ended June 30, | |||||||
2015 | 2014 | ||||||
(In thousands) | |||||||
GAAP Net Income | $ | 26,173 | $ | 16,732 | |||
Adjustments: | |||||||
Adjustments to reconcile net income to net cash provided by operating activities as shown in the Statement of Cash Flows | 22,856 | 12,954 | |||||
Changes in operating assets and liabilities, net of effects from acquisitions as shown in the Statement of Cash Flows | (5,508 | ) | (15 | ) | |||
Total adjustments | 17,348 | 12,939 | |||||
GAAP Net cash provided by operating activities | 43,521 | 29,671 | |||||
Purchases of property and equipment | (780 | ) | (496 | ) | |||
Non-GAAP Free Cash Flow | $ | 42,741 | $ | 29,175 | |||
Outlook for Fiscal Year 2016:
Reconciliation of Projected GAAP EPS to Projected Non-GAAP Adjusted EPS:
2016 Projected EPS | |||||||
Low | High | ||||||
Projected FY'16 GAAP EPS | $ | 2.00 | $ | 2.05 | |||
Adjustments: | |||||||
Costs associated with term loan refinancing and CEO transition | 0.05 | 0.05 | |||||
Total Adjustments | 0.05 | 0.05 | |||||
Projected Non-GAAP Adjusted EPS | $ | 2.05 | $ | 2.10 | |||
Reconciliation of Projected GAAP Net cash provided by operating activities to Projected Non-GAAP Free Cash Flow:
2016 Projected Free Cash Flow | |||
(In millions) | |||
Projected FY'16 GAAP Net cash provided by operating activities | $ | 181 | |
Additions to property and equipment for cash | (6 | ) | |
Projected Non-GAAP Free Cash Flow | $ | 175 | |
Review of First Quarter FY 16 Results August 6, 2015 Exhibit 99.2
F i r s t Q u a r t e r F Y 1 6 R e s u l t s 2 This presentation contains certain “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995, such as statements about the Company’s product expansion and development plans, investments in brand building and marketing, debt reduction and future financing capacity, consumption growth and market position of the Company’s brands, M&A strategy and market activity, future financial performance, and creation of shareholder value. Words such as “continue,” “target,” “will,” “expect,” “project,” “strategy”, “anticipate,” “likely,” “estimate,” “may,” “should,” “could,” “would,” and similar expressions identify forward-looking statements. Such forward-looking statements represent the Company’s expectations and beliefs and involve a number of known and unknown risks, uncertainties and other factors that may cause actual results to differ materially from those expressed or implied by such forward- looking statements. These factors include, among others, the inability to identify and consummate future acquisitions at attractive valuations, the failure to successfully commercialize new products, consumer trends, the severity of the cold and flu season, the inability of third party manufacturers and suppliers to meet demand, competitive pressures, the effectiveness of the Company’s brand building and marketing investments, fluctuating foreign exchange rates, and other risks set forth in Part I, Item 1A. Risk Factors in the Company’s Annual Report on Form 10-K for the year ended March 31, 2015. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date this presentation. Except to the extent required by applicable law, the Company undertakes no obligation to update any forward-looking statement contained in this presentation, whether as a result of new information, future events, or otherwise. Safe Harbor Disclosure
F i r s t Q u a r t e r F Y 1 6 R e s u l t s 3 Agenda for Today’s Discussion I. Performance Highlights II. Financial Overview III. FY 16 Outlook and the Road Ahead
F i r s t Q u a r t e r F Y 1 6 R e s u l t s 4
F i r s t Q u a r t e r F Y 1 6 R e s u l t s 5 Solid Start to the Fiscal Year Q1 consolidated Revenue of $192.1 million, up 31.9% versus PY Q1 – Organic growth of +3.7%(1) on a constant currency basis, and +1.8% on a reported basis versus PY Q1 Total Core OTC consumption growth of 6.5% YoY – 82% of Core OTC portfolio with consumption growth – Consistent and innovative marketing support building long-term brand equity in core OTC brands Adjusted Gross Margin of 58.4%(2) versus 56.3% in the PY Q1, and up from 57.9% in Q4 Adjusted EPS of $0.52(2), up 26.8% versus the PY Q1 Strong Free Cash Flow of $42.7(2) million, up 46.5% versus the PY Q1 – Leverage of ~5.1x(3), down from 5.7x at the time of Insight acquisition On track to continue to deliver strong financial performance in FY2016 – Full year sales growth 1H +20% to +23%, 2H +1.5% to 2.0% – Adjusted E.P.S. $2.05 to $2.10(7) – Free Cash Flow ~$175MM(8) or more
F i r s t Q u a r t e r F Y 1 6 R e s u l t s 6 Continued Core OTC Consumption Growth and Sales Momentum Source: IRI multi-outlet + C-Store retail dollar sales growth for relevant period. Data reflects retail dollar sales percentage growth versus prior period. O rg a n ic Sa les G ro w th C o n s u m p ti o n G ro w th (0.8%) (1.1%) 10.7% 5.8% 5.7% Q1 Q2 Q3 Q4 Q1 0.5% 3.6% 5.6% 7.0% 6.5% FY 15 FY 16
F i r s t Q u a r t e r F Y 1 6 R e s u l t s 7 Q1 FY 16 Core OTC Growth Broad Based Led by Largest Brands % of Core OTC Portfolio with Consumption Growth in Q1 FY 16 82% 6.0% 13.3% 15.6% 16.2% 14.9% Q1 Q2 Q3 Q4 Q1 Growth of Largest Brands Accelerating 1.6% 2.5% 5.1% 4.6% 9.1% Q1 Q2 Q3 Q4 Q1 Y/Y Retail Sales % Growth Core OTC, includes Insight Pharmaceuticals. Source: IRI multi-outlet + C-Store, L-52 period ending June 14, 2015. % of Core OTC Retail Sales Represented by Growing Brands Recently Acquired 0.4% 3.6% 4.5% 5.3% 7.9% Q1 Q2 Q3 Q4 Q1 FY 15 FY 16
F i r s t Q u a r t e r F Y 1 6 R e s u l t s 8 New Goody’s Marketing Campaign Launched June 1st Featuring Dale Earnhardt, JR. Promotes New Products Race Sponsorship TV & Radio Social Media Introduced in July: 2 New Goody’s Line-Extending Innovations in Taste for Headache Sufferers & in Dosage Form for Pain Relief
F i r s t Q u a r t e r F Y 1 6 R e s u l t s 9 Clear Eyes Now #1 in Redness Relief Innovative Line Extensions Pocket Pal line creates distribution & revenue opportunities Full Range of SKUs Commands Shelf Presence Targeted Marketing Campaign Social Media & Digital Banner Ads TV, Radio & Print Advertising Vanessa Williams will continue this year as celebrity spokesperson across all media, reaching target market consumers with her message of trust for Clear Eyes
F i r s t Q u a r t e r F Y 1 6 R e s u l t s 10 Monistat: Building Brand Momentum Developing HCP Relationship Awareness Beyond HCP New TV & digital advertising campaigns target Hispanic markets and women 18-24 “Prescription strength cure without the prescription” Too Much Information “TMI” Women’s Health PR Program Reinforcing strategy, messaging and communication with Health Care Professionals Hispanic Pilot Program Delivers the Monistat Message: Retail Events Drug Chain Shelf Brochures Doctor’s Office Waiting Rooms Targeted Digital Channels
F i r s t Q u a r t e r F Y 1 6 R e s u l t s 11 Core OTC International Other OTC Household Contribution to Portfolio: # of Brands: Investment: Targeted Mix Over Time(4)(5): Q1 FY 16 % Organic Growth: (Constant Currency)(1) Invest for Growth Manage for Cash Flow Generation ~25% of Total Brands ~75% of Total Brands 63% 15% Investment in Core OTC and International Driving Organic Growth +6.5% (2.4%) +3.7%(1) Organic Growth High Maintain ~78% ~85% Current Target ~22% ~15% Current Target 11% 11%
F i r s t Q u a r t e r F Y 1 6 R e s u l t s 12
F i r s t Q u a r t e r F Y 1 6 R e s u l t s 13 Key Financial Results for First Quarter Performance Excellent overall financial performance in the quarter − Achieved organic growth of 3.7%(1) excluding the impact of foreign currency − Revenue of $192.1 million, an increase of 31.9% − Adjusted EPS of $0.52(2), up 26.8% − Free Cash Flow growth of 46.5% to $42.7 million(2) $145.7 $51.0 $29.2 $192.1 $69.6 $42.7 Total Revenue Adjusted EBITDA Adjusted EPS Free Cash Flow Q1 FY 16 Q1 FY 15 31.9% 36.4% 26.8% 46.5% $0.41 $0.52 (2) (2) (2) Dollar values in millions, except per share data.
F i r s t Q u a r t e r F Y 1 6 R e s u l t s 14 Jun '15 Jun '14 % Chg Total Revenue 192.1$ 145.7$ 31.9% Adj. Gross Margin 112.2 82.0 36.9% % Margin 58.4% 56.3% A&P 26.4 19.1 38.4% % Total Revenue 13.8% 13.1% Adj. G&A 16.2 11.9 36.5% % Total Revenue 8.4% 8.1% Adjusted EBITDA 69.6$ 51.0$ 36.4% % Margin 36.2% 35.0% Adjusted Net Income 27.4$ 21.5$ 27.4% Adjusted Earnings Per Share 0.52$ 0.41$ 26.8% FY 16 First Quarter Consolidated Financial Summary Q1 Revenue growth of +31.9%, or +34.3%(1) on a constant currency basis Q1 Adjusted Gross Margin of 58.4%(2), consistent with full year outlook of 58.0% Q1 A&P 13.8% of Total Revenue, an increase of 70bps versus PY Q1 Q1 Adjusted EBITDA Margin of 36.2%(2) Q1 Adjusted EPS of $0.52, up 26.8%(2) 3 Months Ended Dollar values in millions, except per share data. Refer to footnote 2 for all adjusted items.
F i r s t Q u a r t e r F Y 1 6 R e s u l t s 15 Q1 FY 16 Q1 FY 15 Net Income - As Reported 26.2$ 16.7$ Depreciation & Amortization 5.7 3.0 Other Non-Cash Operating Items 17.1 10.0 Working Capital (5.5) (0.0) Operating Cash Flow 43.5$ 29.7$ Additions to Property and Equipment (0.8) (0.5) Free Cash Flow 42.7$ 29.2$ Debt Profile & Financial Compliance: Net Debt at 6/30/15 of $1,527 million comprised of: – Cash on hand of $22 million – $899 million of term loan and revolver – $650 million of bonds Leverage ratio(3) of ~5.1x Recent term loan refinancing continues to support rapid deleveraging Exceptional Free Cash Flow Trends Cash Flow Comments (6) (2) Dollar values in millions.
F i r s t Q u a r t e r F Y 1 6 R e s u l t s 16
F i r s t Q u a r t e r F Y 1 6 R e s u l t s 17 Staying the Strategic Course to Continue Shareholder Value Creation − Strong momentum heading into Q2 − Consumption trends leading to market share gains − Retail environment continues to present headwinds − Revenue outlook +20% to +23% for 1H FY 16, Fx impact may be larger than anticipated − Continued focus on investment in brand building for FY 16 − Invest and innovate in Core OTC brands and international platform − Continue to build new product pipeline for the long term − Remain aggressive and disciplined − Rapidly de-levering and building meaningful M&A capacity − Continue to monitor major company divestiture announcements − Revenue growth of +10% to +12% (including $10MM negative Fx impact) 1H +20% to +23%, 2H +1.5% to +2.0% − Adjusted EPS +10% to +13% ($2.05 to $2.10)(7) − Free cash flow of $175MM(8) or more − Continued A&P investment in portfolio, Insight brands in particular Brand Building Confident in Full FY 16 Outlook M&A Strategy Strong Consumption Trends
F i r s t Q u a r t e r F Y 1 6 R e s u l t s 18 Q&A
F i r s t Q u a r t e r F Y 1 6 R e s u l t s 19 Appendix (1) Revenue Growth on a constant currency basis is a Non-GAAP financial measure and is reconciled to its most closely related GAAP financial measure in our earnings release in the “About Non-GAAP Financial Measures” section. (2) Adjusted Gross Margin, Adjusted G&A, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, Adjusted EPS and Free Cash Flow are Non-GAAP financial measures and are reconciled to their most closely related GAAP financial measures in our earnings release in the “About Non-GAAP Financial Measures” section. (3) Leverage ratio reflects net debt / covenant defined EBITDA. (4) Pro forma Net Sales for FY 15 as if Insight and Hydralyte were acquired on April 1, 2014. (5) Based on Company's organic long-term plan. Source: Company data. (6) Operating cash flow is equal to GAAP net cash provided by operating activities. (7) Adjusted EPS for FY 16 is a projected Non-GAAP financial measure, is reconciled to projected GAAP EPS in our earnings release in the “About Non-GAAP Financial Measures” section and is calculated based on projected GAAP EPS of $2.00 to $2.05 plus $0.05 of cost associated with term loan refinancing and CEO retirement totaling $2.05 to $2.10. (8) Free Cash Flow for FY 16 is a projected Non-GAAP financial measure, is reconciled to projected GAAP Net Cash Provided by Operating Activities in our earnings release in the “About Non-GAAP Financial Measures” section and is calculated based on projected Net Cash Provided by Operating Activities of $181 million less projected capital expenditures of $6 million.