Document
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): November 3, 2016
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 November 3, 2016, Prestige Brands Holdings, Inc. (the “Company”) announced financial results for the fiscal quarter ended September 30, 2016. A copy of the press release announcing the Company's earnings results for the fiscal quarter ended September 30, 2016 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 November 3, 2016, representatives of the Company began making presentations to investors regarding the Company's financial results for the quarter ended September 30, 2016 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, 2017.
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.
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| | | |
Dated: November 3, 2016 | PRESTIGE BRANDS HOLDINGS, INC. | |
| | | |
| By: | /s/ Christine Sacco | |
| | Christine Sacco | |
| | Chief Financial Officer | |
| | | |
| | | |
EXHIBIT INDEX
|
| | |
Exhibit | | Description |
| | |
99.1 | | Press Release dated November 3, 2016 announcing the Company's financial results for the fiscal quarter ended September 30, 2016 (furnished only). |
99.2 | | Investor Presentation in use beginning November 3, 2016 (furnished only). |
Exhibit
Exhibit 99.1
Prestige Brands Holdings, Inc. Reports Second Quarter Fiscal 2017 Results
| |
▪ | Q2 Revenues Up 4.4% to $215.1 Million; First Half Year Revenues Up 6.6% |
| |
▪ | Q2 EPS of $0.60; Non-GAAP Adjusted EPS Increased 5.0% to $0.63 |
| |
▪ | Q2 Net Cash Provided by Operating Activities Up 5.2% to $49.5 Million |
| |
▪ | Debt Reduced by $100.5 Million in Q2 |
| |
▪ | Outlook Reaffirmed for Full Year FY’17 Revenue, Non-GAAP Adjusted EPS & Non-GAAP Adjusted Free Cash Flow |
Tarrytown, NY-(Business Wire)-November 3, 2016--Prestige Brands Holdings, Inc. (NYSE-PBH) today announced results for the second quarter of fiscal year 2017, which ended September 30, 2016.
“We are pleased with the results of the second fiscal quarter, which reflect record quarterly sales, continued strong adjusted earnings per share, free cash flow growth and debt repayment of more than $100 million during the quarter,” said Ron Lombardi, CEO. “We continue to gain market share across our invest for growth portfolio and continue to expect consumption to be in line with our organic growth targets for the year,” he said.
Second Fiscal Quarter and First Half of Fiscal 2017 Ended September 30, 2016
Reported revenues for the second quarter of fiscal 2017 were $215.1 million, an increase of 4.4% over the prior year comparable quarter’s revenues of $206.1 million. Reported revenues for the six month period ended September 30, 2016 totaled $424.6 million, an increase of 6.6% over the prior year comparable six month period’s revenues of $398.2 million. These results reflect consumption increases across the Company’s invest for growth portfolio and the addition of the DenTek business.
Reported net income for the second quarter of fiscal 2017 totaled $32.2 million, an increase of 1.2% over the prior year comparable quarter’s net income of $31.8 million. Earnings per share were $0.60 for both the second quarter of fiscal 2017 and the prior year comparable period. Non-GAAP adjusted net income for the second quarter of fiscal 2017 was $33.8 million, an increase of 6.2% over the prior year period of $31.8 million. Non-GAAP adjusted earnings per share were $0.63 per share for the second quarter of fiscal 2017, compared to $0.60 per share in the prior year comparable period. Adjustments to net income in the second fiscal quarter of 2017 included accelerated amortization of debt origination costs, integration costs associated with the DenTek acquisition and the related income tax effects of the adjustments.
Reported net income for the first six months of fiscal 2017 totaled $26.7 million compared with the prior year comparable period’s net income of $58.0 million. Reported earnings per share for the first six month period of fiscal 2017 were $0.50, compared to the prior year comparable period’s reported earnings per share of $1.09 per share. Non-GAAP adjusted net income increased 10.1% for the first six month period of fiscal 2017 to $65.2 million, or $1.22 per share, compared to $59.2 million, or $1.12 per share, during the prior year comparable period. Adjustments to net income in the first six months of fiscal year 2017 included accelerated amortization of debt origination costs, integration costs associated with the DenTek acquisition, a net non-cash 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 six months of fiscal year 2016 included costs associated with the CEO transition and loss on extinguishment of debt.
Free Cash Flow & Balance Sheet
The Company's reported net cash provided by operating activities for the second fiscal quarter increased 5.2% to $49.5 million, while non-GAAP adjusted free cash flow for the second fiscal quarter increased 6.9% to $49.4 million compared to the prior year comparable quarter.
For the first six months of fiscal 2017, net cash provided by operating activities increased 10.7% to $100.3 million, while non-GAAP adjusted free cash flow increased 12.0% to $99.6 million compared to the prior year's period.
The Company's net debt at September 30, 2016 decreased to approximately $1.5 billion, reflecting debt repayments of $100.5 million during the second fiscal quarter of 2017 and $150.5 million fiscal year to date. Proceeds from the divestiture of certain non-core brands are included in debt repayments in the fiscal second quarter of 2017. At September 30, 2016, the Company's covenant-defined leverage ratio was approximately 4.5.
Segment Review
Reported revenues for the North American OTC Healthcare segment were $172.4 million for the second quarter of fiscal 2017, 4.3% higher than the prior year comparable quarter's revenues of $165.4 million. For the first six months of the current fiscal year, reported revenues for the North American OTC segment were $344.5 million, an increase of 7.1% compared to $321.8 million in the prior year comparable period.
Reported revenues for the International OTC Healthcare segment for the second quarter of fiscal 2017 were $18.8 million, 17.8% higher than the $16.0 million reported in the prior year comparable period. For the first six months of the current fiscal year, reported revenues for the International OTC Healthcare segment were $34.6 million, an increase of 17.6% over the prior year comparable period’s revenues of $29.4 million. Revenues for both the North American OTC Healthcare segment and the International OTC Healthcare segment were impacted by favorable consumption levels as well as revenues from DenTek.
Reported revenues for the Household Cleaning segment were $23.8 million for the second quarter of fiscal 2017, a decrease of 3.6% over the prior year comparable quarter's revenues of $24.7 million. For the first six months of the current fiscal year, reported revenues for the Household Cleaning segment were
$45.5 million, a decrease of 3.1% over the prior year comparable six month period’s revenues of $47.0 million.
Commentary and Outlook
“The strength of our diverse domestic and international product portfolio combined with continued consumption growth are offsetting retailer headwinds in the U.S., enabling us to reiterate our full year fiscal guidance and positioning us for another year of solid top and bottom line results,” Mr. Lombardi said. “We expect full year revenue growth of 4.5-6%, and anticipate adjusted EPS in the range of $2.30-$2.36 and free cash flow of $185 million or more,” he said.
Q2 Conference Call & Accompanying Slide Presentation
The Company will host a conference call to review its first quarter results on November 3, 2016 at 8:30 am EDT. 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 94506453. 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 94506453.
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 and Canada, Australia and in certain other international markets. The Company’s brands include Monistat® women’s health products, Nix® lice treatment, Chloraseptic® sore throat treatments, Clear Eyes® eye care products, Compound W® wart treatments, DenTek® and The Doctor's® NightGuard® oral care products, 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 adjusted free cash flow, and the Company’s ability to gain market share and meet organic growth targets. 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, 2016, Quarterly Report on Form 10-Q for the quarter ended June 30, 2016, and other periodic reports filed with the Securities and Exchange Commission.
Company Contact: Dean Siegal
914-524-6819
Prestige Brands Holdings, Inc.
Consolidated Statements of Income and Comprehensive Income
(Unaudited)
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Six Months Ended September 30, |
(In thousands, except per share data) | 2016 | | 2015 | | 2016 | | 2015 |
Revenues | | | | | | | |
Net sales | $ | 215,017 |
| | $ | 205,262 |
| | $ | 423,787 |
| | $ | 396,549 |
|
Other revenues | 35 |
| | 803 |
| | 840 |
| | 1,648 |
|
Total revenues | 215,052 |
| | 206,065 |
| | 424,627 |
| | 398,197 |
|
| | | | | | | |
Cost of Sales | |
| | |
| | | | |
Cost of sales (exclusive of depreciation shown below) | 91,087 |
| | 86,125 |
| | 179,071 |
| | 166,021 |
|
Gross profit | 123,965 |
| | 119,940 |
| | 245,556 |
| | 232,176 |
|
| | | | | | | |
Operating Expenses | |
| | |
| | | | |
Advertising and promotion | 28,592 |
| | 27,893 |
| | 56,227 |
| | 54,315 |
|
General and administrative | 18,795 |
| | 16,462 |
| | 38,252 |
| | 34,051 |
|
Depreciation and amortization | 6,016 |
| | 5,687 |
| | 12,848 |
| | 11,407 |
|
(Gain) loss on sales of assets | (496 | ) | | — |
| | 54,957 |
| | — |
|
Total operating expenses | 52,907 |
| | 50,042 |
| | 162,284 |
| | 99,773 |
|
Operating income | 71,058 |
| | 69,898 |
| | 83,272 |
| | 132,403 |
|
| | | | | | | |
Other (income) expense | |
| | |
| | | | |
Interest income | (46 | ) | | (33 | ) | | (103 | ) | | (60 | ) |
Interest expense | 20,876 |
| | 20,700 |
| | 42,060 |
| | 42,611 |
|
Loss on extinguishment of debt | — |
| | — |
| | — |
| | 451 |
|
Total other expense | 20,830 |
| | 20,667 |
| | 41,957 |
| | 43,002 |
|
Income before income taxes | 50,228 |
| | 49,231 |
| | 41,315 |
| | 89,401 |
|
Provision for income taxes | 18,033 |
| | 17,428 |
| | 14,651 |
| | 31,425 |
|
Net income | $ | 32,195 |
| | $ | 31,803 |
| | $ | 26,664 |
| | $ | 57,976 |
|
| | | | | | | |
Earnings per share: | |
| | |
| | | | |
Basic | $ | 0.61 |
| | $ | 0.60 |
| | $ | 0.50 |
| | $ | 1.10 |
|
Diluted | $ | 0.60 |
| | $ | 0.60 |
| | $ | 0.50 |
| | $ | 1.09 |
|
| | | | | | | |
Weighted average shares outstanding: | |
| | |
| | | | |
Basic | 52,993 |
| | 52,803 |
| | 52,941 |
| | 52,676 |
|
Diluted | 53,345 |
| | 53,151 |
| | 53,329 |
| | 53,055 |
|
| | | | | | | |
Comprehensive income, net of tax: | | | | | | | |
Currency translation adjustments | 2,703 |
| | (11,079 | ) | | (3,121 | ) | | (11,484 | ) |
Total other comprehensive (loss) income | 2,703 |
| | (11,079 | ) | | (3,121 | ) | | (11,484 | ) |
Comprehensive income | $ | 34,898 |
| | $ | 20,724 |
| | $ | 23,543 |
| | $ | 46,492 |
|
Prestige Brands Holdings, Inc.
Consolidated Balance Sheets
(Unaudited)
|
| | | | | | | |
(In thousands) Assets | September 30, 2016 | | March 31, 2016 |
Current assets | | | |
Cash and cash equivalents | $ | 30,458 |
| | $ | 27,230 |
|
Accounts receivable, net | 92,869 |
| | 95,247 |
|
Inventories | 97,959 |
| | 91,263 |
|
Deferred income tax assets | 10,646 |
| | 10,108 |
|
Prepaid expenses and other current assets | 11,341 |
| | 25,165 |
|
Assets held for sale | 36,400 |
| | — |
|
Total current assets | 279,673 |
| | 249,013 |
|
| | | |
Property and equipment, net | 13,732 |
| | 15,540 |
|
Goodwill | 351,662 |
| | 360,191 |
|
Intangible assets, net | 2,181,128 |
| | 2,322,723 |
|
Other long-term assets | 4,783 |
| | 1,324 |
|
Total Assets | $ | 2,830,978 |
| | $ | 2,948,791 |
|
| | | |
Liabilities and Stockholders' Equity | |
| | |
|
Current liabilities | |
| | |
|
Accounts payable | $ | 39,041 |
| | $ | 38,296 |
|
Accrued interest payable | 8,264 |
| | 8,664 |
|
Other accrued liabilities | 67,006 |
| | 59,724 |
|
Total current liabilities | 114,311 |
| | 106,684 |
|
| | | |
Long-term debt | | | |
Principal amount | 1,502,000 |
| | 1,652,500 |
|
Less unamortized debt costs | (22,337 | ) | | (27,191 | ) |
Long-term debt, net | 1,479,663 |
| | 1,625,309 |
|
| | | |
Deferred income tax liabilities | 459,527 |
| | 469,622 |
|
Other long-term liabilities | 2,837 |
| | 2,840 |
|
Total Liabilities | 2,056,338 |
| | 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 - 53,265 shares at September 30, 2016 and 53,066 shares at March 31, 2016 | 532 |
| | 530 |
|
Additional paid-in capital | 453,336 |
| | 445,182 |
|
Treasury stock, at cost - 331 shares at September 30, 2016 and 306 shares at March 31, 2016 | (6,558 | ) | | (5,163 | ) |
Accumulated other comprehensive loss, net of tax | (26,646 | ) | | (23,525 | ) |
Retained earnings | 353,976 |
| | 327,312 |
|
Total Stockholders' Equity | 774,640 |
| | 744,336 |
|
Total Liabilities and Stockholders' Equity | $ | 2,830,978 |
| | $ | 2,948,791 |
|
Prestige Brands Holdings, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
|
| | | | | | | |
| Six Months Ended September 30, |
(In thousands) | 2016 | | 2015 |
Operating Activities | | | |
Net income | $ | 26,664 |
| | $ | 57,976 |
|
Adjustments to reconcile net income to net cash provided by operating activities: | | | |
Depreciation and amortization | 12,848 |
| | 11,407 |
|
Loss (gain) on sales of intangible assets and property and equipment | 55,112 |
| | (36 | ) |
Deferred income taxes | (10,602 | ) | | 21,985 |
|
Amortization of debt origination costs | 5,097 |
| | 4,055 |
|
Stock-based compensation costs | 3,933 |
| | 5,034 |
|
Loss on extinguishment of debt | — |
| | 451 |
|
Changes in operating assets and liabilities, net of effects from acquisitions | | | |
Accounts receivable | 356 |
| | (3,918 | ) |
Inventories | (10,663 | ) | | (3,838 | ) |
Prepaid expenses and other current assets | 10,112 |
| | 3,436 |
|
Accounts payable | 820 |
| | (4,519 | ) |
Accrued liabilities | 6,605 |
| | (1,443 | ) |
Net cash provided by operating activities | 100,282 |
| | 90,590 |
|
| | | |
Investing Activities | |
| | |
|
Purchases of property and equipment | (1,404 | ) | | (1,683 | ) |
Proceeds from sales of intangible assets | 52,353 |
| | — |
|
Proceeds from the sale of property and equipment | 75 |
| | 344 |
|
Net cash provided by (used in) investing activities | 51,024 |
| | (1,339 | ) |
| | | |
Financing Activities | |
| | |
|
Term loan repayments | (130,500 | ) | | (50,000 | ) |
Borrowings under revolving credit agreement | 20,000 |
| | 15,000 |
|
Repayments under revolving credit agreement | (40,000 | ) | | (55,000 | ) |
Payments of debt origination costs | (9 | ) | | (4,211 | ) |
Proceeds from exercise of stock options | 3,423 |
| | 6,398 |
|
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 | (1,395 | ) | | (2,187 | ) |
Net cash used in financing activities | (147,681 | ) | | (87,606 | ) |
| | | |
Effects of exchange rate changes on cash and cash equivalents | (397 | ) | | (811 | ) |
Increase in cash and cash equivalents | 3,228 |
| | 834 |
|
Cash and cash equivalents - beginning of period | 27,230 |
| | 21,318 |
|
Cash and cash equivalents - end of period | $ | 30,458 |
| | $ | 22,152 |
|
| | | |
Interest paid | $ | 37,259 |
| | $ | 40,550 |
|
Income taxes paid | $ | 6,743 |
| | $ | 3,707 |
|
Prestige Brands Holdings, Inc.
Consolidated Statements of Income
Business Segments
(Unaudited)
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, 2016 |
(In thousands) | North American OTC Healthcare | | International OTC Healthcare | | Household Cleaning | | Consolidated |
Gross segment revenues | $ | 172,590 |
| | $ | 18,802 |
| | $ | 23,768 |
| | $ | 215,160 |
|
Elimination of intersegment revenues | (143 | ) | | — |
| | — |
| | (143 | ) |
Third-party segment revenues | 172,447 |
| | 18,802 |
| | 23,768 |
| | 215,017 |
|
Other revenues | — |
| | 2 |
| | 33 |
| | 35 |
|
Total segment revenues | 172,447 |
| | 18,804 |
| | 23,801 |
| | 215,052 |
|
Cost of sales | 65,402 |
| | 7,096 |
| | 18,589 |
| | 91,087 |
|
Gross profit | 107,045 |
| | 11,708 |
| | 5,212 |
| | 123,965 |
|
Advertising and promotion | 24,811 |
| | 3,244 |
| | 537 |
| | 28,592 |
|
Contribution margin | $ | 82,234 |
| | $ | 8,464 |
| | $ | 4,675 |
| | 95,373 |
|
Other operating expenses* | |
| | | | |
| | 24,315 |
|
Operating income | |
| | | | |
| | 71,058 |
|
Other expense | |
| | | | |
| | 20,830 |
|
Income before income taxes | | | | | | | 50,228 |
|
Provision for income taxes | |
| | | | |
| | 18,033 |
|
Net income | | | | | | | $ | 32,195 |
|
*Other operating expenses for the three months ended September 30, 2016 includes a pre-tax loss on sale of assets of $0.7 million related to Pediacare, New Skin, and Fiber Choice and a pre-tax gain on sale of assets of $1.2 million associated with the sale of license rights in certain geographic areas pertaining to Comet. The assets and corresponding contribution margin associated with the pre-tax loss on sale of assets related to Pediacare, New Skin, and Fiber Choice 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.
|
| | | | | | | | | | | | | | | |
| Six Months Ended September 30, 2016 |
(In thousands) | North American OTC Healthcare | | International OTC Healthcare | | Household Cleaning | | Consolidated |
Gross segment revenues | $ | 345,891 |
| | $ | 34,602 |
| | $ | 44,658 |
| | $ | 425,151 |
|
Elimination of intersegment revenues | (1,364 | ) | | — |
| | — |
| | (1,364 | ) |
Third-party segment revenues | 344,527 |
| | 34,602 |
| | 44,658 |
| | 423,787 |
|
Other revenues | — |
| | 6 |
| | 834 |
| | 840 |
|
Total segment revenues | 344,527 |
| | 34,608 |
| | 45,492 |
| | 424,627 |
|
Cost of sales | 129,636 |
| | 14,044 |
| | 35,391 |
| | 179,071 |
|
Gross profit | 214,891 |
| | 20,564 |
| | 10,101 |
| | 245,556 |
|
Advertising and promotion | 49,851 |
| | 5,368 |
| | 1,008 |
| | 56,227 |
|
Contribution margin | $ | 165,040 |
| | $ | 15,196 |
| | $ | 9,093 |
| | 189,329 |
|
Other operating expenses* | |
| | | | |
| | 106,057 |
|
Operating income | |
| | | | |
| | 83,272 |
|
Other expense | |
| | | | |
| | 41,957 |
|
Income before income taxes | | | | | | | 41,315 |
|
Provision for income taxes | |
| | | | |
| | 14,651 |
|
Net income | | | | | | | $ | 26,664 |
|
*Other operating expenses for the six months ended September 30, 2016 includes a pre-tax loss on sale of assets of $56.2 million related to Pediacare, New Skin, and Fiber Choice and a pre-tax gain on sale of assets of $1.2 million associated with the sale of license rights in certain geographic areas pertaining to Comet. The assets and corresponding contribution margin associated with the pre-tax loss on sale of assets related to Pediacare, New Skin, and Fiber Choice 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 September 30, 2015 |
(In thousands) | North American OTC Healthcare | | International OTC Healthcare | | Household Cleaning | | Consolidated |
Gross segment revenues | $ | 166,886 |
| | $ | 15,954 |
| | $ | 23,894 |
| | $ | 206,734 |
|
Elimination of intersegment revenues | (1,472 | ) | | — |
| | — |
| | (1,472 | ) |
Third-party segment revenues | 165,414 |
| | 15,954 |
| | 23,894 |
| | 205,262 |
|
Other revenues** | — |
| | 6 |
| | 797 |
| | 803 |
|
Total segment revenues | 165,414 |
| | 15,960 |
| | 24,691 |
| | 206,065 |
|
Cost of sales** | 61,497 |
| | 6,094 |
| | 18,534 |
| | 86,125 |
|
Gross profit | 103,917 |
| | 9,866 |
| | 6,157 |
| | 119,940 |
|
Advertising and promotion | 24,440 |
| | 2,777 |
| | 676 |
| | 27,893 |
|
Contribution margin | $ | 79,477 |
| | $ | 7,089 |
| | $ | 5,481 |
| | 92,047 |
|
Other operating expenses | |
| | | | |
| | 22,149 |
|
Operating income | |
| | | | |
| | 69,898 |
|
Other expense | |
| | | | |
| | 20,667 |
|
Income before income taxes | | | | | | | 49,231 |
|
Provision for income taxes | |
| | | | |
| | 17,428 |
|
Net income | | | | | | | $ | 31,803 |
|
|
| | | | | | | | | | | | | | | |
| Six Months Ended September 30, 2015 |
(In thousands) | North American OTC Healthcare | | International OTC Healthcare | | Household Cleaning | | Consolidated |
Gross segment revenues | $ | 323,978 |
| | $ | 29,410 |
| | $ | 45,361 |
| | $ | 398,749 |
|
Elimination of intersegment revenues | (2,200 | ) | | — |
| | — |
| | (2,200 | ) |
Third-party segment revenues | 321,778 |
| | 29,410 |
| | 45,361 |
| | 396,549 |
|
Other revenues** | 15 |
| | 31 |
| | 1,602 |
| | 1,648 |
|
Total segment revenues | 321,793 |
| | 29,441 |
| | 46,963 |
| | 398,197 |
|
Cost of sales** | 119,624 |
| | 11,383 |
| | 35,014 |
| | 166,021 |
|
Gross profit | 202,169 |
| | 18,058 |
| | 11,949 |
| | 232,176 |
|
Advertising and promotion | 47,635 |
| | 5,500 |
| | 1,180 |
| | 54,315 |
|
Contribution margin | $ | 154,534 |
| | $ | 12,558 |
| | $ | 10,769 |
| | 177,861 |
|
Other operating expenses | |
| | | | |
| | 45,458 |
|
Operating income | |
| | | | |
| | 132,403 |
|
Other expense | |
| | | | |
| | 43,002 |
|
Income before income taxes | | | | | | | 89,401 |
|
Provision for income taxes | |
| | | | |
| | 31,425 |
|
Net income | | | | | | | $ | 57,976 |
|
**Certain immaterial amounts relating to other revenues and cost of sales for each of the three and six months ended September 30, 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 and the applicable tax impacts associated with these items 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. |
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 September 30, | | Six Months Ended September 30, |
| 2016 | | 2015 | | 2016 | | 2015 |
(In thousands) | | | | | | | |
GAAP Total Revenues | $ | 215,052 |
| | $ | 206,065 |
| | $ | 424,627 |
| | $ | 398,197 |
|
Revenue Growth | 4.4 | % | | | | 6.6 | % | | |
Adjustments: | | | | | | | |
DenTek revenues (1) | (17,214 | ) | | — |
| | (33,841 | ) | | — |
|
Revenues associated with divested brands(2) | — |
| | (6,922 | ) | | — |
| | (6,922 | ) |
Total adjustments | (17,214 | ) | | (6,922 | ) | | (33,841 | ) | | (6,922 | ) |
Non-GAAP Organic Revenues | 197,838 |
| | 199,143 |
| | 390,786 |
| | 391,275 |
|
Organic Revenue Growth (Decline) | (0.7 | )% | | | | (0.1 | )% | | |
Impact of foreign currency exchange rates (3) | | | (76 | ) | | | | (905 | ) |
Non-GAAP Organic Revenues on a constant currency basis | $ | 197,838 |
| | $ | 199,067 |
| | $ | 390,786 |
| | $ | 390,370 |
|
Constant Currency Organic Revenue Growth | (0.6 | )% | | | | 0.1 | % | | |
(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 prior year for purposes of calculating Non-GAAP organic revenues. These revenue adjustments relate to our North American OTC Healthcare 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 September 30, | | Six Months Ended September 30, |
| 2016 | | 2015 | | 2016 | | 2015 |
(In thousands) | | | | | | | |
GAAP General and Administrative Expense | $ | 18,795 |
| | $ | 16,462 |
| | $ | 38,252 |
| | $ | 34,051 |
|
Adjustments: | | | | | | | |
Costs associated with CEO transition (1) | — |
| | — |
| | — |
| | 1,406 |
|
Legal and professional fees associated with acquisitions and divestitures (2) | 101 |
| | — |
| | 585 |
| | — |
|
Integration, transition and other costs associated with acquisitions and divestitures (2) | 1,420 |
| | — |
| | 3,061 |
| | — |
|
Total adjustments | 1,521 |
| | — |
| | 3,646 |
| | 1,406 |
|
Non-GAAP Adjusted General and Administrative Expense | $ | 17,274 |
| | $ | 16,462 |
| | $ | 34,606 |
| | $ | 32,645 |
|
Non-GAAP Adjusted General and Administrative Expense Percentage | 8.0 | % | | 8.0 | % | | 8.1 | % | | 8.2 | % |
(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 September 30, | | Six Months Ended September 30, |
| 2016 | | 2015 | | 2016 | | 2015 |
(In thousands) | | | | | | | |
GAAP Net Income | $ | 32,195 |
| | $ | 31,803 |
| | $ | 26,664 |
| | $ | 57,976 |
|
Interest expense, net | 20,830 |
| | 20,667 |
| | 41,957 |
| | 42,551 |
|
Provision for income taxes | 18,033 |
| | 17,428 |
| | 14,651 |
| | 31,425 |
|
Depreciation and amortization | 6,016 |
| | 5,687 |
| | 12,848 |
| | 11,407 |
|
Non-GAAP EBITDA: | 77,074 |
| | 75,585 |
| | 96,120 |
| | 143,359 |
|
Adjustments: | | | | | | | |
Costs associated with CEO transition (1) | — |
| | — |
| | — |
| | 1,406 |
|
Legal and professional fees associated with acquisitions and divestitures (2) | 101 |
| | — |
| | 585 |
| | — |
|
Integration, transition and other costs associated with acquisitions and divestitures (2) | 1,420 |
| | — |
| | 3,061 |
| | — |
|
Loss on extinguishment of debt | — |
| | — |
| | — |
| | 451 |
|
(Gain) loss on sale of assets | (496 | ) | | — |
| | 54,957 |
| | — |
|
Total adjustments | 1,025 |
| | — |
| | 58,603 |
| | 1,857 |
|
Non-GAAP Adjusted EBITDA | $ | 78,099 |
| | $ | 75,585 |
| | $ | 154,723 |
| | $ | 145,216 |
|
Non-GAAP Adjusted EBITDA Margin | 36.3 | % | | 36.7 | % | | 36.4 | % | | 36.5 | % |
(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 September 30, | | Six Months Ended September 30, |
| 2016 | 2016 Adjusted EPS | | 2015 | 2015 Adjusted EPS | | 2016 | 2016 Adjusted EPS | | 2015 | 2015 Adjusted EPS |
(In thousands) | | | | | | | | | | | |
GAAP Net Income | $ | 32,195 |
| $ | 0.60 |
| | $ | 31,803 |
| $ | 0.60 |
| | $ | 26,664 |
| $ | 0.50 |
| | $ | 57,976 |
| $ | 1.09 |
|
Adjustments: | | | | | | | | | | | |
Costs associated with CEO transition (1) | — |
| — |
| | — |
| — |
| | — |
| — |
| | 1,406 |
| 0.03 |
|
Legal and professional fees associated with acquisitions and divestitures (2) | 101 |
| — |
| | — |
| — |
| | 585 |
| 0.01 |
| | — |
| — |
|
Integration, transition and other costs associated with acquisitions and divestitures (2) | 1,420 |
| 0.03 |
| | — |
| — |
| | 3,061 |
| 0.06 |
| | — |
| — |
|
Accelerated amortization of debt origination costs due to sale of assets | 1,131 |
| 0.02 |
| | — |
| — |
| | 1,131 |
| 0.02 |
| | — |
| — |
|
Loss on extinguishment of debt | — |
| — |
| | — |
| — |
| | — |
| — |
| | 451 |
| 0.01 |
|
(Gain) loss on sale of assets | (496 | ) | (0.01 | ) | | — |
| — |
| | 54,957 |
| 1.03 |
| | — |
| — |
|
Tax impact of adjustments (3) | (566 | ) | (0.01 | ) | | — |
| — |
| | (21,224 | ) | (0.40 | ) | | (657 | ) | (0.01 | ) |
Total adjustments | 1,590 |
| 0.03 |
| | — |
| — |
| | 38,510 |
| 0.72 |
| | 1,200 |
| 0.03 |
|
Non-GAAP Adjusted Net Income and Adjusted EPS | $ | 33,785 |
| $ | 0.63 |
| | $ | 31,803 |
| $ | 0.60 |
| | $ | 65,174 |
| $ | 1.22 |
| | $ | 59,176 |
| $ | 1.12 |
|
(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.
Reconciliation of GAAP Net Income to Non-GAAP Free Cash Flow and Non-GAAP Adjusted Free Cash Flow:
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Six Months Ended September 30, |
| 2016 | | 2015 | | 2016 | | 2015 |
(In thousands) | | | | | | | |
GAAP Net Income | $ | 32,195 |
| | $ | 31,803 |
| | $ | 26,664 |
| | $ | 57,976 |
|
Adjustments: | | | | | | | |
Adjustments to reconcile net income to net cash provided by operating activities as shown in the Statement of Cash Flows | 9,592 |
| | 20,040 |
| | 66,388 |
| | 42,896 |
|
Changes in operating assets and liabilities, net of effects from acquisitions as shown in the Statement of Cash Flows | 7,744 |
| | (4,774 | ) | | 7,230 |
| | (10,282 | ) |
Total adjustments | 17,336 |
| | 15,266 |
| | 73,618 |
| | 32,614 |
|
GAAP Net cash provided by operating activities | 49,531 |
| | 47,069 |
| | 100,282 |
| | 90,590 |
|
Purchases of property and equipment | (509 | ) | | (903 | ) | | (1,404 | ) | | (1,683 | ) |
Non-GAAP Free Cash Flow | 49,022 |
| | 46,166 |
| | 98,878 |
| | 88,907 |
|
Integration, transition and other payments associated with acquisitions and divestitures(1) | 352 |
| | — |
| | 683 |
| | — |
|
Non-GAAP Adjusted Free Cash Flow | $ | 49,374 |
| | $ | 46,166 |
| | $ | 99,561 |
| | $ | 88,907 |
|
(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.
Outlook for Fiscal Year 2017:
Reconciliation of Projected GAAP EPS to Projected Non-GAAP Adjusted EPS:
|
| | | | | | | |
| 2017 Projected EPS |
| Low | | High |
Projected FY'17 GAAP EPS | $ | 1.55 |
| | $ | 1.61 |
|
Adjustments: | | | |
Costs associated with DenTek integration(1) | 0.08 |
| | 0.08 |
|
Loss on sale of assets | 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.
Reconciliation of Projected GAAP Net cash provided by operating activities to Projected Non-GAAP Adjusted Free Cash Flow:
|
| | | |
| 2017 Projected Free Cash Flow |
(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.
exhibit992prestigebrands
Exhibit 99.2
This presentation contains certain “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995, such
as statements regarding the Company’s expected financial performance, including revenue growth, adjusted EPS, and adjusted free cash flow,
expansion of market share for the Company’s Invest for Growth brands, the Company’s investment in digital, product development and
marketing initiatives, the Company’s focus on development of professional marketing, the Company’s ability to execute on the DenTek growth
strategy, and the Company’s ability to de-lever and increase M&A capacity. Words such as “trend,” “continue,” “will,” “expect,” “project,”
“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, general economic and business conditions, regulatory matters, competitive pressures, the impact of the
Company’s digital, product development and marketing initiatives, supplier issues, unexpected costs, 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, 2016 and in Part II, Item 1A. Risk Factors in the
Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2016. 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.
All adjusted GAAP numbers presented are footnoted and reconciled to their closest GAAP measurement in the attached reconciliation schedule
and in our earnings release in the “About Non-GAAP Financial Measures” section.
Agenda for Today's Discussion
I. Performance Highlights
II. Financial Oueruiew
Ill. FY 17 Outloo� and the Road Ahead
Second �u arter FY 17 Results 3
I. Performance Highlights
Dramamine· Co 41BM#@R+
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eyes®
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* Invest for Growth portfolio comprised of Core OTC brands and International; reported on a constant currency basis. Core OTC brands reflect: Monistat (after Q2 FY 16), BC/Goody’s, Clear Eyes, Dramamine, Debrox, Chloraseptic, Luden’s,
Little Remedies, Compound W, Nix (after Q2 FY 16), Beano, Efferdent and The Doctor’s IRI multi-outlet + C-Store retail dollar sales for relevant period. International includes Canadian consumption for leading retailers, and Australia/ROW
shipment data as a proxy for consumption.
Q2 Revenue of $215.1 million, up 4.4% versus PY Q2
— Organic growth of (0.6%)(1) on a constant currency basis as top 5 retailers reduced inventory levels in the quarter
— Revenue growth of +0.9%(1) for Invest for Growth* portfolio
— DenTek contributed $17.2 million of revenue during the quarter, continuing its strong growth
Q2 consumption growth for Invest for Growth* portfolio of 1.5% outpaced revenue growth
— Consumption growth in-line with category†
International revenue up 8.9% in Q2 with particular strength in Care Pharma
— Revenue in Australia up 8.0% in Q2, and up 6.2% in 1H FY 17
Gross Margin of 57.6% in line with Q1 and expectations
Adjusted EPS of $0.63(2), up 5.0% versus the PY Q2
Strong Adjusted Free Cash Flow of $49.4 million(2), above the PY Q2 of $46.2 million
— Leverage of 4.5x(3) compared to 5.0x at the beginning of FY 17
Focus on enhancing and executing marketing plans for DenTek
Successfully completed transition of three brands divested in July from Manage for Cash portfolio
— Accelerated de-leveraging in first half, building meaningful M&A capacity
Invest for Growth portfolio is comprised of Core OTC brands and International; reported on a constant currency basis. (See slide 5 for additional details.)
IRI MULO period ending 10-2-16.*†
Invest for Growth portfolio is comprised of Core OTC brands and International; reported on a costant currency basis. (See slide 5 for additional details.)*
Source: Data reflects retail dollar sales percentage growth versus prior period for consumption growth and organic revenue growth.
FY 15 and FY 16 data shown as previously presented for Core OTC.
Q1 and Q2 FY 17 data for Invest for Growth portfolio comprised of Core OTC brands and International. (See slide 5 for additional details.)
FY 15
4.1%
8.3%
3.3%
1.5%
3.5%
5.9%
4.4%
0.9%
FY 16
Q1
*
*
Q2
FY 17
1H: 2.4%
1H: 2.6%
Shipments to five largest mass and drug accounts have lagged
consumption over the last six quarters as retailers continue to
manage inventory levels
In Q2 FY 17 alone, consumption in these accounts outpaced
shipments by over $8.2 million
Adjusted for this difference, organic revenue growth for Q2 FY 17 on
a constant currency basis would have been +3.5%
Source: IRI MULO period ending 10-2-16.
($2.8)
$1.0
($4.3)
$0.9 $0.9
($8.2)
Q1 Q2 Q3 Q4 Q1 Q2
FY 16 FY 17
Co
ns
um
ption
>
Sh
ipm
en
ts
Sh
ipm
en
ts
>
Co
ns
um
ptio
n
Expand Domestic And Int’l Distribution
Develop Alternate Channels and E-commerce
Increase Shelf Presence in UK and Germany
Use Digital To Drive Brand Awareness
Target High Value Consumers
Leverage Scale to Drive Efficiencies
Dental Professional Marketing
Secure the Hygienist Recommendation
Increase Sampling to Drive Trial
Grow The Category
New Category and Consumer Insights
Build Basket with Shopper Insights
Innovate With New Products
Pipeline to Deliver Top and Bottom Line Growth
Consumer Insight Innovation
Source: IRI MULO period ending 10-2-16.
Expanding Product Offerings: New Nix Ultra kills a resistant form of Lice called “Super Lice”
Innovative Marketing: Nix partnered with Google and IRI to develop the first ever Lice Tracker. Now
consumers and Healthcare Professionals can get real-time information on lice outbreaks
Digital Consumer Advertising: The first place consumers go to get information is on line. Nix’s new
advertising campaign will reach consumers with information where and when they need it
Strong Results: Latest 12 weeks consumption +53% and gained 7.1% ppts. market share
Dramamine·
II. Financial Oueruiew
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Solid overall financial performance in the quarter
− Revenue of $215.1 million, an increase of 4.4%
− Adjusted EPS of $0.63(2), up 5.0%
− Adjusted Free Cash Flow of $49.4 million(2), an increase of 6.9%
$215.1
$78.1
$49.4
$206.1
$75.6
$46.2
Total Revenue Adjusted EBITDA Adjusted EPS Adjusted Free Cash Flow
Q2 FY 17 Q2 FY 16
4.4%
3.3% 5.0% 6.9%
$0.63 $0.60
(2) (2) (2)
Dollar values in millions, except per share data.
Revenue growth of +4.4%
– Organic growth of (0.6%)
excluding the impact of Fx(1)
– DenTek contributed $17.2
million of revenue during
the quarter
Gross Margin of 57.6%
A&P 13.3% of Revenue, $0.7
million more than Q2 FY 16
Adjusted EBITDA Margin of
36.3%(2)
Adjusted Net Income +6.2%(2)
over Q2 FY 16, ahead of topline
growth
Dollar values in millions, except per share data.
(2)
(2)
(2)
(2)
Q2 FY 17 Q2 FY 16 % Chg Q2 FY 17 Q2 FY 16 % Chg
Total Revenue 215.1$ 206.1$ 4.4% 424.6$ 398.2$ 6.6%
Gross Margin 124.0 119.9 3.4% 245.6 232.2 5.8%
% Margin 57.6% 58.2% 57.8% 58.3%
A&P 28.6 27.9 2.5% 56.2 54.3 3.5%
% Total Revenue 13.3% 13.5% 13.2% 13.6%
Adjusted G&A 17.3 16.5 4.9% 34.6 32.6 6.0%
% Total Revenue 8.0% 8.0% 8.1% 8.2%
Adjusted EBITDA 78.1$ 75.6$ 3.3% 154.7$ 145.2$ 6.5%
% Margin 36.3% 36.7% 36.4% 36.5%
Adjusted Net Income 33.8$ 31.8$ 6.2% 65.2$ 59.2$ 10.1%
Adjusted Earnings Per Share 0.63$ 0.60$ 5.0% 1.22$ 1.12$ 8.9%
Net Debt at 9/30/16 of $1,472 million comprised of:
– Cash on hand of $30 million
– $752 million of term loan and revolver
– $750 million of bonds
Leverage ratio(3) of 4.5x
– Leverage below prior year level of 5.0x,
including acquisition of DenTek in Q4 FY 16
Dollar values in millions.
* 1H FY 17 increase in Other Non-Cash Operating Items reflects Q1 FY 17 after tax loss of approximately $35 million related to divestitures.
(4)
(2)
Three Months Ended Six Months Ended
Q2 FY 17 Q2 FY 16 Q2 FY 17 Q2 FY 16
Net Income - As Reported 32.2$ 31.8$ 26.7$ 58.0$
Depreciation & Amortization 6.0 5.7 12.8 11.4
Other Non-Cash Operating Items 3.6 14.4 53.5 31.5
Working Capital 7.7 (4.8) 7.2 (10.3)
Operating Cash Flow 49.5$ 47.1$ 100.3$ 90.6$
Additions to Proper y and Equipment (0.5) (0.9) (1.4) (1.7)
Payments Associ ted with M&A 0.4 - 0.7 -
Adjusted Free Cash Flow 49.4$ 46.2$ 99.6$ 88.9$
*
Ill. FY 17 Outlook and the Road Ahead
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Revenue growth of +4% to +6%
— 1H +5.0% to +7.0%
— 2H +2.5% to +4.5%
— Organic growth of +1.5% to +2.0%
Revenue growth of +4.5% to +6.0%
— 1H Actual +6.6%
— No change
— Continuing to expect organic growth of 1.5% to
2.0% in 2H
Adjusted EPS +6% to +9% ($2.30 to $2.36)(5) No change
Adjusted Free Cash Flow of $185 million(6) or more No change
Portfolio of recognizable brands in
attractive consumer health industry
Established expertise in brand-
building and product innovation
Demonstrated ability to gain market
share long-term
Target revenue contribution from
Core OTC and International brands
from ~80% to ~85%
Strong and consistent cash flow
driven by industry leading EBITDA
margins, capital-lite business model
& significant benefit of deferred taxes
Rapid deleveraging allows for
expanded acquisition capacity and
continued investment in brand
building
Non-core brands’ contribution to
cash flow
Debt repayment reduces cash
interest expense and adds to EPS
Demonstrated track record of 7
acquisitions during the past 6 years
Effective consolidation platform
positioned for consistent pipeline of
opportunities
Proven ability to source from varied
sellers
Fragmented industry and acquisition
activity creates a consistent pipeline
of opportunity
Care
Second Qu arter FY 17 Results �,.
(1) Organic 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 G&A, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, Adjusted EPS, Adjusted Free Cash Flow are
Non-GAAP financial measures and are reconciled to their most closely related GAAP financial measures in the attached
Reconciliation Schedules and in our earnings release in the “About Non-GAAP Financial Measures” section.
(3) Leverage ratio reflects net debt / covenant defined EBITDA.
(4) Operating cash flow is equal to GAAP net cash provided by operating activities.
(5) Adjusted EPS for FY 17 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 $1.55 to $1.61 plus
$0.08 of costs associated with DenTek integration plus $0.67 of costs associated with the loss on sale of assets, resulting in
$2.30 to $2.36.
(6) Adjusted Free Cash Flow for FY 17 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 $191 million less projected capital expenditures of $4 million
plus payments associated with acquisitions of $3 million.
Three Months Ended Sept. 30, Six Months Ended Sept. 30,
2016 2015 2016 2015
(In Thousands)
GAAP Total Revenues $ 215,052 $ 206,065 $ 424,627 $ 398,197
Adjustments:
DenTek revenues (17,214) - (33,841) -
Revenues associated with divested brands - (6,922) - (6,922)
Total adjustments (17,214) (6,922) (33,841) (6,922)
Non-GAAP Organic Revenues 197,838 199,143 390,786 391,275
Organic Revenue Growth (Decline) (0.7%) (0.1%)
Impact of foreign currency exchange rates (76) (905)
Non-GAAP Organic Revenues on a constant currency basis $ 197,838 $ 199,067 $ 390,786 $ 390,370
Constant Currency Organic Revenue Growth (0.6%) 0.1%
Three Months Ended Sept. 30, Six Months Ended Sept. 30,
2016 2015 2016 2015
(In Thousands)
GAAP General and Administrative Expense $ 18,795 $ 16,462 $ 38,252 $ 34,051
Adjustments:
Costs Associated with CEO transition - - - 1,406
Legal and professional fees associated with acquisitions and
divestitures 101 - 585 -
Integration, transition and other costs associated with
acquisitions and divestitures 1,420 - 3,061 -
Total adjustments 1,521 - 3,646 1,406
Non-GAAP Adjusted General and Administrative Expense $ 17,274 $ 16,462 $ 34,606 $ 32,645
Non-GAAP Adjusted General and Administrative Expense
Percentage 8.0% 8.0% 8.1% 8.2%
Three Months Ended Sept. 30, Six Months Ended Sept. 30,
2016 2015 2016 2015
(In Thousands)
GAAP Net (Loss) Income $ 32,195 $ 31,803 $ 26,664 $ 57,976
Interest expense, net 20,830 20,667 41,957 42,551
(Benefit) provision for income taxes 18,033 17,428 14,651 31,425
Depreciation and amortization 6,016 5,687 12,848 11,407
Non-GAAP EBITDA 77,074 75,585 96,120 143,359
Adjustments:
Costs associated with CEO transitions - - - 1,406
Legal and professional fees associated with acquisitions and
divestitures 101 - 585 -
Integration, transition and other costs associated with
acquisitions and divestitures 1,420 - 3,061 -
Loss on extinguishment of debt - - - 451
(Gain) loss on sale of assets (496) - 54,957 -
Total adjustments 1,025 - 58,603 1,857
Non-GAAP Adjusted EBITDA $ 78,099 $ 75,585 $ 154,723 $ 145,216
Non-GAAP Adjusted EBITDA Margin 36.3% 36.7% 36.4% 36.5%
Three Months Ended Sept. 30, Six Months Ended Sept. 30,
2016 2015 2016 2015
Net
Income EPS
Net
Income EPS
Net
Income EPS
Net
Income EPS
(In Thousands)
GAAP Net Income $ 32,195 $ 0.60 $ 31,803 $ 0.60 $ 26,664 $ 0.50 $ 57,976 $ 1.09
Adjustments:
Costs associated with CEO transition - - - - - - 1,406 0.03
Legal and professional fees associated with
acquisitions and divestitures 101 - - - 585 0.01 - -
Integration, transition and other costs associated
with acquisitions and divestitures 1,420 0.03 - - 3,061 0.06 -
Accelerated amortization of debt origination costs
due to sale of assets 1,131 0.02 - - 1,131 0.02 -
Loss on extinguishment of debt - - - - - - 451 0.01
(Gain) loss on sale of assets (496) (0.01) - - 54,957 1.03 - -
Tax impact of adjustments (566) (0.01) - - (21,224) (0.40) (657) (0.01)
Total Adjustments 1,590 0.03 - - 38,510 0.72 1,200 0.03
Non-GAAP Adjusted Net Income and Adjusted EPS $ 33,785 $ 0.63 $ 31,803 $ 0.60 $ 65,174 $ 1.22 $ 59,176 $ 1.12
Three Months Ended Sept. 30, Six Months Ended Sept. 30,
2016 2015 2016 2015
(In Thousands)
GAAP Net (Loss) Income $ 32,195 $ 31,803 $ 26,664 $ 57,976
Adjustments:
Adjustments to reconcile net (loss) income to net
cash provided by operating activities as shown in
the Statement of Cash Flows 9,592 20,040 66,388 42,896
Changes in operating assets and liabilities, net of
effects from acquisitions as shown in the
Statement of Cash Flows
7,744 (4,774) 7,230 (10,282)
Total Adjustments 17,336 15,266 73,618 32,614
GAAP Net cash provided by operating activities 49,531 47,069 100,282 90,590
Purchase of property and equipment (509) (903) (1,404) (1,683)
Non-GAAP Free Cash Flow 49,022 46,166 98,878 88,907
Integration, transition and other payments
associated with acquisitions and divestitures 352 - 683 -
Non-GAAP Adjusted Free Cash Flow $ 49,374 $ 46,166 $ 99,561 $ 88,907
2017 Projected EPS
Low High
Projected FY'17 GAAP EPS $ 1.55 $ 1.61
Adjustments:
Costs associated with DenTek integration 0.08 0.08
Loss on sale of assets 0.67 0.67
Total Adjustments 0.75 0.75
Projected Non-GAAP Adjusted EPS $ 2.30 $ 2.36
2017
Projected
Free Cash
Flow
(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 3
Adjusted Non-GAAP Projected Free Cash Flow 190