Attached files
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| 8-K - 8-K - Prestige Consumer Healthcare Inc. | a8-kpressreleaseseptember2.htm |
| EX-99.2 - PRESENTATION - Prestige Consumer Healthcare Inc. | prestigebrandsincreviewo.htm |
Exhibit 99.1
Prestige Brands Holdings, Inc. Reports Second Quarter Revenue Up 8.6%; Integration of Insight Pharmaceuticals Acquisition On Track
Outlook for Full Fiscal Year ’15 Reconfirmed
Tarrytown, NY-(Business Wire)-November 6, 2014--Prestige Brands Holdings, Inc. (NYSE-PBH) today announced results for the second quarter and first six months of fiscal year 2015, which ended on September 30, 2014.
These results include reported second fiscal quarter revenues of $181.3 million, an increase of 8.6% over the prior year comparable period’s revenues of $166.9 million. Reported revenues for the six month period ended September 30, 2014 totaled $327.0 million, an increase of approximately 5.7% over the prior year comparable six month period’s revenues of $309.5 million. These results reflect continued strengthening in consumption levels of core over-the-counter healthcare brands, as well as the acquisitions of Insight Pharmaceuticals (Insight) and Hydralyte.
Reported income for the second fiscal quarter of $16.5 million, or $0.31 per diluted share, was 49.7% lower than the prior year comparable quarter’s results of $32.8 million or $0.63 per diluted share, primarily as a result of acquisition-related items in the second quarter.
Adjusted earnings per share for the second fiscal quarter increased 6.4% to $0.50 compared to the second quarter of the prior year’s adjusted earnings per share of $0.47. The current quarter’s adjusted earnings per share excludes acquisition and transition items related to the acquisitions of Insight and Hydralyte. The second quarter of the prior year’s adjusted earnings per share excluded items related to the acquisition of Care Pharmaceuticals (Care) and the impact of favorable changes in tax laws. The impact of the Insight acquisition on adjusted earnings per share was $0.00 for the less than one month of Insight operations included in the second fiscal quarter results.
Reported income for the first six months of fiscal 2015 was $33.2 million, or $0.63 per diluted share compared with the prior year’s comparable six month period results of $53.5 million or $1.03 per diluted share. Adjusted earnings per share for the first half of fiscal 2015 were $0.91 compared to adjusted earnings per share of $0.88 in the prior year comparable period. Adjusted earnings per share for both the fiscal 2015 six month period and the fiscal 2014 comparable period exclude the items referenced above.
Segments
Reported revenues for the North American OTC Healthcare segment were $137.6 million for the second fiscal quarter of 2015, 4.0% higher than the prior year comparable period’s revenues of $132.3 million. For the first six months of the current fiscal year, reported revenues for the North American OTC Healthcare segment were $248.0 million, a decrease of 1.3% over the prior year comparable period’s results of $251.4 million. The second fiscal quarter was impacted by the Insight acquisition as well as increased consumption among certain key core OTC brands.
Reported revenues for the International OTC Healthcare segment were $17.4 million for the second fiscal quarter of 2015, an increase of 92.0% over the prior year comparable period’s results of $9.0 million. For the first six months of the current fiscal year, reported revenues for the International OTC Healthcare segment were $31.1 million, an increase of 150.0% over the prior year comparable period’s results of $12.4 million. Both the second fiscal quarter and the six month period were impacted by revenues from the strong performance of the Care portfolio in Australia and the recent acquisition of Hydralyte.
Reported revenues for the Household Cleaning segment were $26.3 million in the second fiscal quarter of 2015, an increase of 2.7% over the prior year's second quarter results of $25.7 million. For the six month period of 2015, reported revenues for this segment were $47.9 million compared to $45.7 million in the prior year comparable period, an increase of 4.9%.
Commentary & Outlook
According to Matthew M. Mannelly, President and CEO, “We are very pleased with our second quarter and six month performance in a challenging retail operating environment. Our results for the second fiscal quarter and the first half of the fiscal year reflect strengthening consumption trends among our core OTC brands, as well as the recent acquisition of Insight and the integration of Hydralyte into the Care portfolio in Australia.”
“We closed on the acquisition of Insight in September and we are on track to meet our schedule to integrate those brands into our portfolio by the end of the fiscal year,” he said. “Brand-building investments in marketing and advertising are now in development for these newly acquired brands.”
Mr. Mannelly continued, “Following the favorable results of the fiscal year-to-date, we are reconfirming the previously provided outlook for the full fiscal year of adjusted earnings per share in the range of $1.75
to $1.85 and revenue growth of 15-18%. We recognize, however, the challenging retail environment. The Company’s financial profile remains solid and is expected to generate substantial free cash flow of approximately $150 million in fiscal 2015. These funds will be used for rapid deleveraging and building meaningful M & A capacity as we pay close attention to the opportunities arising within our industry,” he said.
Free Cash Flow and Debt Reduction
The Company's Non-GAAP Adjusted free cash flow for the second fiscal quarter was $36.5 million, an increase over the prior year comparable period’s Non-GAAP Adjusted free cash flow of $31.8 million. For the six months ended September 30, 2014, Non-GAAP Adjusted free cash flow was $68.1 million compared to the prior year six months Non-GAAP Adjusted free cash flow of $53.3 million.
At September 30, 2014, the Company’s net debt was $1.7 billion and its covenant-defined leverage ratio was approximately 5.6, reflecting the acquisition of Insight on September 3, 2014. The Company’s history of strong FCF and consistent debt repayment allows rapid de-leveraging and building M&A capacity going forward.
Q2 Conference Call, Accompanying Slide Presentation & Replay
The Company will host a conference call to review its second quarter results on November 6, 2013 at 8:30 am EDT. The toll-free dial-in numbers are 877-280-4954 within North America and 857-244-7311 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 87362413.
Non-GAAP Financial Information
In addition to financial results reported in accordance with generally accepted accounting principles (GAAP), we have provided certain non-GAAP financial information in this release to aid investors in understanding the Company's performance. Each non-GAAP financial measure is defined and reconciled
to its most closely related GAAP financial measure in the “About Non-GAAP Financial Measures” section at the end of this earnings release.
About Prestige Brands Holdings, Inc.
The Company markets and distributes brand name over-the-counter and household cleaning products throughout the U.S. and Canada, and in certain international markets. Core brands include Monistat® yeast infection treatment, Nix® lice treatment, Chloraseptic® sore throat treatments, Clear Eyes® eye care products, Compound W® wart treatments, The Doctor's® NightGuard® dental protector, the Little Remedies® and PediaCare® lines of pediatric over-the-counter products, Efferdent® denture care products, Luden's® throat drops, Dramamine® motion sickness treatment, BC® and Goody's® pain relievers, Beano® gas prevention, Debrox® earwax remover, and Gaviscon® antacid in Canada. Visit the Company's website at www.prestigebrands.com.
Note Regarding Forward-Looking Statements
This news release contains "forward-looking statements" within the meaning of the federal securities laws that are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. "Forward-looking statements" generally can be identified by the use of forward-looking terminology such as "outlook," "may," "will," "would," "expect," “intend,” “estimate,” “anticipate,” “believe,” or "continue" (or the negative or other derivatives of each of these terms) or similar terminology. The "forward-looking statements" include, without limitation, statements regarding the integration of the Insight brands into our portfolio, growth in consumption of core OTC healthcare brands, brand-building investments, our expected future operating results including adjusted earnings per share, revenue growth and generation of free cash flow, and our expected use of free cash flow for rapid deleveraging and building M&A capacity. These statements are based on management's estimates and assumptions with respect to future events and financial performance and are believed to be reasonable, though are inherently uncertain and difficult to predict. Actual results could differ materially from those expected as a result of a variety of factors, including the impact of our advertising and promotional initiatives, competition in our industry, and the success of our brand-building investments and integration of newly acquired products. A discussion of other factors that could cause results to vary is included in the Company's Annual Report on Form 10-K for the year ended March 31, 2014, Quarterly Report on Form 10-Q for the quarter ended June 30, 2014, and other periodic reports filed with the Securities and Exchange Commission.
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) | 2014 | 2013 | 2014 | 2013 | |||||||||||
Revenues | |||||||||||||||
Net sales | $ | 180,005 | $ | 165,507 | $ | 324,546 | $ | 307,149 | |||||||
Other revenues | 1,264 | 1,438 | 2,425 | 2,308 | |||||||||||
Total revenues | 181,269 | 166,945 | 326,971 | 309,457 | |||||||||||
Cost of Sales | |||||||||||||||
Cost of sales (exclusive of depreciation shown below) | 78,727 | 73,723 | 142,563 | 133,211 | |||||||||||
Gross profit | 102,542 | 93,222 | 184,408 | 176,246 | |||||||||||
Operating Expenses | |||||||||||||||
Advertising and promotion | 25,044 | 24,547 | 44,140 | 43,228 | |||||||||||
General and administrative | 27,128 | 11,619 | 44,134 | 23,253 | |||||||||||
Depreciation and amortization | 3,852 | 3,294 | 6,813 | 6,562 | |||||||||||
Total operating expenses | 56,024 | 39,460 | 95,087 | 73,043 | |||||||||||
Operating income | 46,518 | 53,762 | 89,321 | 103,203 | |||||||||||
Other (income) expense | |||||||||||||||
Interest income | (15 | ) | (25 | ) | (47 | ) | (28 | ) | |||||||
Interest expense | 18,208 | 16,464 | 32,893 | 32,372 | |||||||||||
Total other expense | 18,193 | 16,439 | 32,846 | 32,344 | |||||||||||
Income before income taxes | 28,325 | 37,323 | 56,475 | 70,859 | |||||||||||
Provision for income taxes | 11,862 | 4,531 | 23,280 | 17,375 | |||||||||||
Net income | $ | 16,463 | $ | 32,792 | $ | 33,195 | $ | 53,484 | |||||||
Earnings per share: | |||||||||||||||
Basic | $ | 0.32 | $ | 0.64 | $ | 0.64 | $ | 1.04 | |||||||
Diluted | $ | 0.31 | $ | 0.63 | $ | 0.63 | $ | 1.03 | |||||||
Weighted average shares outstanding: | |||||||||||||||
Basic | 52,088 | 51,463 | 52,023 | 51,343 | |||||||||||
Diluted | 52,594 | 52,219 | 52,564 | 52,130 | |||||||||||
Comprehensive income, net of tax: | |||||||||||||||
Currency translation adjustments | (10,830 | ) | 1,122 | (8,104 | ) | 1,123 | |||||||||
Total other comprehensive (loss) income | (10,830 | ) | 1,122 | (8,104 | ) | 1,123 | |||||||||
Comprehensive income | $ | 5,633 | $ | 33,914 | $ | 25,091 | $ | 54,607 | |||||||
Prestige Brands Holdings, Inc.
Consolidated Balance Sheets
(Unaudited)
(In thousands) Assets | September 30, 2014 | March 31, 2014 | |||||
Current assets | |||||||
Cash and cash equivalents | $ | 21,748 | $ | 28,331 | |||
Accounts receivable, net | 98,644 | 65,050 | |||||
Inventories | 82,875 | 65,586 | |||||
Deferred income tax assets | 9,171 | 6,544 | |||||
Prepaid expenses and other current assets | 9,935 | 11,674 | |||||
Total current assets | 222,373 | 177,185 | |||||
Property and equipment, net | 12,420 | 9,597 | |||||
Goodwill | 293,993 | 190,911 | |||||
Intangible assets, net | 2,163,947 | 1,394,817 | |||||
Other long-term assets | 32,937 | 23,153 | |||||
Total Assets | $ | 2,725,670 | $ | 1,795,663 | |||
Liabilities and Stockholders' Equity | |||||||
Current liabilities | |||||||
Current portion of long term debt | $ | 7,200 | $ | — | |||
Accounts payable | 58,538 | 48,286 | |||||
Accrued interest payable | 12,086 | 9,626 | |||||
Other accrued liabilities | 34,086 | 26,446 | |||||
Total current liabilities | 111,910 | 84,358 | |||||
Long-term debt | |||||||
Principal amount | 1,691,400 | 937,500 | |||||
Less unamortized discount | (6,289 | ) | (3,086 | ) | |||
Long-term debt, net of unamortized discount | 1,685,111 | 934,414 | |||||
Deferred income tax liabilities | 334,297 | 213,204 | |||||
Other long-term liabilities | 313 | 327 | |||||
Total Liabilities | 2,131,631 | 1,232,303 | |||||
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 - 52,426 shares at September 30, 2014 and 52,021 shares at March 31, 2014 | 524 | 520 | |||||
Additional paid-in capital | 421,574 | 414,387 | |||||
Treasury stock, at cost - 254 shares at September 30, 2014 and 206 shares at March 31, 2014 | (3,034 | ) | (1,431 | ) | |||
Accumulated other comprehensive (loss) income, net of tax | (7,365 | ) | 739 | ||||
Retained earnings | 182,340 | 149,145 | |||||
Total Stockholders' Equity | 594,039 | 563,360 | |||||
Total Liabilities and Stockholders' Equity | $ | 2,725,670 | $ | 1,795,663 | |||
Prestige Brands Holdings, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended September 30, | |||||||
(In thousands) | 2014 | 2013 | |||||
Operating Activities | |||||||
Net income | $ | 33,195 | $ | 53,484 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 6,815 | 6,562 | |||||
Deferred income taxes | 11,496 | 4,355 | |||||
Amortization of deferred financing costs | 2,398 | 1,975 | |||||
Stock-based compensation costs | 3,403 | 2,487 | |||||
Amortization of debt discount | 687 | 798 | |||||
(Gain) on sale or disposal of equipment | 56 | (3 | ) | ||||
Changes in operating assets and liabilities, net of effects from acquisitions | |||||||
Accounts receivable | (8,363 | ) | (5,712 | ) | |||
Inventories | 7,264 | 821 | |||||
Prepaid expenses and other current assets | 3,114 | 2,619 | |||||
Accounts payable | (5,647 | ) | (1,125 | ) | |||
Accrued liabilities | 2,640 | (10,663 | ) | ||||
Net cash provided by operating activities | 57,058 | 55,598 | |||||
Investing Activities | |||||||
Purchases of property and equipment | (1,380 | ) | (2,319 | ) | |||
Proceeds from the sale of property and equipment | — | 3 | |||||
Proceeds from sale of business | 18,500 | — | |||||
Acquisition of Insight Pharmaceuticals, less cash acquired | (749,666 | ) | — | ||||
Acquisition of the Hydralyte brand | (77,991 | ) | — | ||||
Acquisition of Care Pharmaceuticals, less cash acquired | — | (55,215 | ) | ||||
Net cash used in investing activities | (810,537 | ) | (57,531 | ) | |||
Financing Activities | |||||||
Term loan borrowings | 720,000 | — | |||||
Term loan repayments | (25,000 | ) | (7,500 | ) | |||
Repayments under revolving credit agreement | (58,500 | ) | (35,500 | ) | |||
Borrowings under revolving credit agreement | 124,600 | 50,000 | |||||
Payment of deferred financing costs | (16,072 | ) | (275 | ) | |||
Proceeds from exercise of stock options | 2,757 | 5,143 | |||||
Proceeds from restricted stock exercises | 57 | — | |||||
Excess tax benefits from share-based awards | 1,030 | 1,350 | |||||
Fair value of shares surrendered as payment of tax withholding | (1,660 | ) | (278 | ) | |||
Net cash provided by financing activities | 747,212 | 12,940 | |||||
Effects of exchange rate changes on cash and cash equivalents | (316 | ) | 156 | ||||
(Decrease) Increase in cash and cash equivalents | (6,583 | ) | 11,163 | ||||
Cash and cash equivalents - beginning of period | 28,331 | 15,670 | |||||
Cash and cash equivalents - end of period | $ | 21,748 | $ | 26,833 | |||
Interest paid | $ | 27,349 | $ | 29,516 | |||
Income taxes paid | $ | 4,716 | $ | 8,468 | |||
Prestige Brands Holdings, Inc.
Consolidated Statements of Income
Business Segments
(Unaudited)
Three Months Ended September 30, 2014 | |||||||||||||||
(In thousands) | North American OTC Healthcare | International OTC Healthcare | Household Cleaning | Consolidated | |||||||||||
Gross segment revenues | $ | 138,138 | $ | 17,331 | $ | 25,246 | $ | 180,715 | |||||||
Elimination of intersegment revenues | (710 | ) | — | — | (710 | ) | |||||||||
Third-party segment revenues | 137,428 | 17,331 | 25,246 | 180,005 | |||||||||||
Other revenues | 150 | 23 | 1,091 | 1,264 | |||||||||||
Total segment revenues | 137,578 | 17,354 | 26,337 | 181,269 | |||||||||||
Cost of sales | 52,185 | 6,595 | 19,947 | 78,727 | |||||||||||
Gross profit | 85,393 | 10,759 | 6,390 | 102,542 | |||||||||||
Advertising and promotion | 21,442 | 3,035 | 567 | 25,044 | |||||||||||
Contribution margin | $ | 63,951 | $ | 7,724 | $ | 5,823 | 77,498 | ||||||||
Other operating expenses | 30,980 | ||||||||||||||
Operating income | 46,518 | ||||||||||||||
Other expense | 18,193 | ||||||||||||||
Income before income taxes | 28,325 | ||||||||||||||
Provision for income taxes | 11,862 | ||||||||||||||
Net income | $ | 16,463 | |||||||||||||
Six Months Ended September 30, 2014 | |||||||||||||||
(In thousands) | North American OTC Healthcare | International OTC Healthcare | Household Cleaning | Consolidated | |||||||||||
Gross segment revenues | $ | 249,112 | $ | 31,022 | $ | 45,839 | $ | 325,973 | |||||||
Elimination of intersegment revenues | (1,427 | ) | — | — | (1,427 | ) | |||||||||
Third-party segment revenues | 247,685 | 31,022 | 45,839 | 324,546 | |||||||||||
Other revenues | 327 | 58 | 2,040 | 2,425 | |||||||||||
Total segment revenues | 248,012 | 31,080 | 47,879 | 326,971 | |||||||||||
Cost of sales | 94,526 | 11,679 | 36,358 | 142,563 | |||||||||||
Gross profit | 153,486 | 19,401 | 11,521 | 184,408 | |||||||||||
Advertising and promotion | 37,794 | 5,375 | 971 | 44,140 | |||||||||||
Contribution margin | $ | 115,692 | $ | 14,026 | $ | 10,550 | 140,268 | ||||||||
Other operating expenses | 50,947 | ||||||||||||||
Operating income | 89,321 | ||||||||||||||
Other expense | 32,846 | ||||||||||||||
Income before income taxes | 56,475 | ||||||||||||||
Provision for income taxes | 23,280 | ||||||||||||||
Net income | $ | 33,195 | |||||||||||||
Three Months Ended September 30, 2013 | |||||||||||||||
(In thousands) | North American OTC Healthcare | International OTC Healthcare | Household Cleaning | Consolidated | |||||||||||
Gross segment revenues | $ | 132,944 | $ | 9,008 | $ | 24,374 | $ | 166,326 | |||||||
Elimination of intersegment revenues | (819 | ) | — | — | (819 | ) | |||||||||
Third-party segment revenues | 132,125 | 9,008 | 24,374 | 165,507 | |||||||||||
Other revenues | 150 | 7 | 1,281 | 1,438 | |||||||||||
Total segment revenues | 132,275 | 9,015 | 25,655 | 166,945 | |||||||||||
Cost of sales | 50,987 | 4,338 | 18,398 | 73,723 | |||||||||||
Gross profit | 81,288 | 4,677 | 7,257 | 93,222 | |||||||||||
Advertising and promotion | 22,547 | 1,446 | 554 | 24,547 | |||||||||||
Contribution margin | $ | 58,741 | $ | 3,231 | $ | 6,703 | 68,675 | ||||||||
Other operating expenses | 14,913 | ||||||||||||||
Operating income | 53,762 | ||||||||||||||
Other expense | 16,439 | ||||||||||||||
Income before income taxes | 37,323 | ||||||||||||||
Provision for income taxes | 4,531 | ||||||||||||||
Net income | $ | 32,792 | |||||||||||||
Six Months Ended September 30, 2013 | |||||||||||||||
(In thousands) | North American OTC Healthcare | International OTC Healthcare | Household Cleaning | Consolidated | |||||||||||
Gross segment revenues | $ | 251,880 | $ | 12,422 | $ | 43,666 | $ | 307,968 | |||||||
Elimination of intersegment revenues | (819 | ) | — | — | (819 | ) | |||||||||
Third-party segment revenues | 251,061 | 12,422 | 43,666 | 307,149 | |||||||||||
Other revenues | 300 | 14 | 1,994 | 2,308 | |||||||||||
Total segment revenues | 251,361 | 12,436 | 45,660 | 309,457 | |||||||||||
Cost of sales | 94,533 | 5,803 | 32,875 | 133,211 | |||||||||||
Gross profit | 156,828 | 6,633 | 12,785 | 176,246 | |||||||||||
Advertising and promotion | 40,097 | 1,710 | 1,421 | 43,228 | |||||||||||
Contribution margin | $ | 116,731 | $ | 4,923 | $ | 11,364 | 133,018 | ||||||||
Other operating expenses | 29,815 | ||||||||||||||
Operating income | 103,203 | ||||||||||||||
Other expense | 32,344 | ||||||||||||||
Income before income taxes | 70,859 | ||||||||||||||
Provision for income taxes | 17,375 | ||||||||||||||
Net income | $ | 53,484 | |||||||||||||
About Non-GAAP Financial Measures
We define Non-GAAP Total Revenues excluding acquisitions and divestitures as Total Revenues excluding revenues associated with products acquired or divested in the periods presented. We define Non-GAAP EBITDA as earnings before interest expense (income), income taxes, depreciation and amortization and Non-GAAP Adjusted EBITDA as earnings before interest expense (income), income taxes, depreciation and amortization, certain other legal and professional fees, and other acquisition-related costs. 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 Operating Income as Operating Income minus certain other legal and professional fees, acquisition and other integration costs. We define Non-GAAP Adjusted Net Income as Net Income before inventory step-up charges, certain other legal and professional fees, other acquisition and integration-related costs, 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. We define Non-GAAP Adjusted Free Cash Flow as net cash provided by operating activities less purchases of property and equipment plus payments associated with acquisitions for integration, transition and other payments associated with acquisitions. We define Non-GAAP Contribution Margin as Gross Profit less advertising and promotional expenses. Non-GAAP Total Revenues excluding acquisitions and divestitures, Non-GAAP EBITDA, Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted Gross Margin, Non-GAAP Adjusted Gross Margin Percentage, Non-GAAP Adjusted Operating Income, Non-GAAP Adjusted Net Income, Non-GAAP Adjusted EPS, Non-GAAP Free Cash Flow, Non-GAAP Adjusted Free Cash Flow, and Non-GAAP Contribution Margin may not be comparable to similarly titled measures reported by other companies.
We are presenting Non-GAAP Total Revenues excluding acquisitions and divestitures, Non-GAAP EBITDA, Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted Gross Margin, Non-GAAP Adjusted Gross Margin Percentage, Non-GAAP Adjusted Operating Income, Non-GAAP Adjusted Net Income, Non-GAAP Adjusted EPS, Non-GAAP Free Cash Flow, Non-GAAP Adjusted Free Cash Flow, and Non-GAAP Contribution Margin because they provide additional ways to view our operations, when considered with both our GAAP results and the reconciliation to net income and net cash provided by operating activities, respectively, which we believe provide a more complete understanding of our business than could be obtained absent this disclosure. Each of Non-GAAP Total Revenues excluding acquisitions and divestitures, Non-GAAP EBITDA, Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted Gross Margin, Non-GAAP Adjusted Gross Margin Percentage, Non-GAAP Adjusted Operating Income, Non-GAAP Adjusted Net Income, Non-GAAP Adjusted EPS, Non-GAAP Free Cash Flow, Non-GAAP Adjusted Free Cash Flow, and Non-GAAP Contribution Margin 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 Total Revenues excluding acquisitions and divestitures, Non-GAAP EBITDA, Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted Gross Margin, Non-GAAP Adjusted Gross Margin Percentage, Non-GAAP Adjusted Operating Income, Non-GAAP Adjusted Net Income, Non-GAAP Adjusted EPS, Non-GAAP Free Cash Flow, Non-GAAP Adjusted Free Cash Flow, and Non-GAAP Contribution Margin 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 Total Revenues excluding acquisitions and divestitures, Non-GAAP EBITDA, Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted Gross Margin, Non-GAAP Adjusted
Gross Margin Percentage, Non-GAAP Adjusted Operating Income, Non-GAAP Adjusted Net Income, Non-GAAP Adjusted EPS, Non-GAAP Free Cash Flow, Non-GAAP Adjusted Free Cash Flow, and Non-GAAP Contribution Margin have limitations, and you should not consider these measures in isolation from or as an alternative to GAAP measures such as Operating income, Net income, and Net cash flow provided by operating activities, or cash flow statement data prepared in accordance with GAAP, or as a measure of profitability or liquidity.
The following tables set forth the reconciliation of Non-GAAP Total Revenues excluding acquisitions and divestitures, Non-GAAP EBITDA, Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted Gross Margin, Non-GAAP Adjusted Gross Margin Percentage, Non-GAAP Adjusted Operating Income, Non-GAAP Adjusted Net Income, Non-GAAP Adjusted EPS, Non-GAAP Free Cash Flow, Non-GAAP Adjusted Free Cash Flow, all of which are non-GAAP financial measures, to GAAP Gross Profit, GAAP Operating Income, GAAP Net Income, GAAP Diluted EPS and GAAP Net cash provided by operating activities, our most directly comparable financial measures presented in accordance with GAAP. Non-GAAP Contribution Margin is reconciled in the Business Segments table immediately preceding this "About Non-GAAP Financial Measures" section.
Reconciliation of GAAP Total Revenues to Non-GAAP Total Revenues excluding acquisitions and divestitures:
Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
(In thousands) | |||||||||||||||
GAAP Total Revenues | $ | 181,269 | $ | 166,945 | $ | 326,971 | $ | 309,457 | |||||||
Adjustments: | |||||||||||||||
Care Pharma and Hydralyte revenues (1) | (5,061 | ) | (5,429 | ) | (12,341 | ) | (5,429 | ) | |||||||
Insight revenues (2) | (12,659 | ) | — | (12,659 | ) | — | |||||||||
Total adjustments | (17,720 | ) | (5,429 | ) | (25,000 | ) | (5,429 | ) | |||||||
Non-GAAP Total Revenues excluding acquisitions and divestitures | $ | 163,549 | $ | 161,516 | $ | 301,971 | $ | 304,028 | |||||||
(1) Revenue adjustments relate to our International OTC Healthcare segment
(2) Revenue adjustments relate to our North American OTC Healthcare segment
Reconciliation of GAAP Gross Profit to Non-GAAP Adjusted Gross Margin and related Adjusted Gross Margin percentage:
Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
(In thousands) | |||||||||||||||
GAAP Total Revenues | $ | 181,269 | $ | 166,945 | $ | 326,971 | $ | 309,457 | |||||||
GAAP Gross Profit | $ | 102,542 | $ | 93,222 | $ | 184,408 | $ | 176,246 | |||||||
Adjustments: | |||||||||||||||
Inventory step-up charges and other costs associated with Care and Hydralyte acquisitions (1) | 116 | 577 | 246 | 577 | |||||||||||
Inventory step-up charges associated with Insight acquisition (2) | 653 | — | 653 | — | |||||||||||
Care acquisition related inventory costs (1) | — | 407 | — | 407 | |||||||||||
Total adjustments | 769 | 984 | 899 | 984 | |||||||||||
Non-GAAP Adjusted Gross Margin | $ | 103,311 | $ | 94,206 | $ | 185,307 | $ | 177,230 | |||||||
Non-GAAP Adjusted Gross Margin % | 57.0 | % | 56.4 | % | 56.7 | % | 57.3 | % | |||||||
(1) Inventory step-up charges and other costs relate to our International OTC Healthcare segment
(2) Inventory step-up charges relate to our North American OTC Healthcare segment
Reconciliation of GAAP Operating Income to Non-GAAP Adjusted Operating Income:
Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
(In thousands) | |||||||||||||||
GAAP Operating Income | $ | 46,518 | $ | 53,762 | $ | 89,321 | $ | 103,203 | |||||||
Adjustments: | |||||||||||||||
Inventory step-up charges and other costs associated with Care and Hydralyte acquisitions (1) | 116 | 577 | 246 | 577 | |||||||||||
Inventory step-up charges associated with Insight acquisition (2) | 653 | — | 653 | — | |||||||||||
Care acquisition related inventory costs (1) | — | 407 | — | 407 | |||||||||||
Legal and professional fees associated with acquisitions and divestitures (3) | 8,058 | 85 | 9,857 | 668 | |||||||||||
Stamp/Duty Tax on Australian acquisition (3) | — | — | 2,940 | — | |||||||||||
Integration, transition and other costs associated with acquisitions (3) | 4,021 | — | 4,432 | — | |||||||||||
Total adjustments | 12,848 | 1,069 | 18,128 | 1,652 | |||||||||||
Non-GAAP Adjusted Operating Income | $ | 59,366 | $ | 54,831 | $ | 107,449 | $ | 104,855 | |||||||
(1) Inventory step-up charges and other costs relate to our International OTC Healthcare segment
(2) Inventory step-up charges relate to our North American OTC Healthcare segment
(3) Adjustments relate to G&A expenses
Reconciliation of GAAP Net Income to EBITDA and Non-GAAP Adjusted EBITDA:
Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
(In thousands) | |||||||||||||||
GAAP Net Income | $ | 16,463 | $ | 32,792 | $ | 33,195 | $ | 53,484 | |||||||
Interest expense, net | 18,193 | 16,439 | 32,846 | 32,344 | |||||||||||
Provision for income taxes | 11,862 | 4,531 | 23,280 | 17,375 | |||||||||||
Depreciation and amortization | 3,852 | 3,294 | 6,813 | 6,562 | |||||||||||
Non-GAAP EBITDA: | 50,370 | 57,056 | 96,134 | 109,765 | |||||||||||
Adjustments: | |||||||||||||||
Inventory step-up charges and other costs associated with Care and Hydralyte acquisitions (1) | 116 | 577 | 246 | 577 | |||||||||||
Inventory step-up charges associated with Insight acquisition (2) | 653 | — | 653 | — | |||||||||||
Care acquisition related inventory costs (1) | — | 407 | — | 407 | |||||||||||
Legal and professional fees associated with acquisitions and divestitures (3) | 8,058 | 85 | 9,857 | 668 | |||||||||||
Stamp/Duty Tax on Australian acquisition (3) | — | — | 2,940 | — | |||||||||||
Integration, transition and other costs associated with acquisitions (3) | 4,021 | — | 4,432 | — | |||||||||||
Total adjustments | 12,848 | 1,069 | 18,128 | 1,652 | |||||||||||
Non-GAAP Adjusted EBITDA | $ | 63,218 | $ | 58,125 | $ | 114,262 | $ | 111,417 | |||||||
(1) Inventory step-up charges and other costs relate to our International OTC Healthcare segment
(2) Inventory step-up charges relate to our North American OTC Healthcare segment
(3) 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 September 30, | Six Months Ended September 30, | ||||||||||||||||||||||||||
2014 | 2014 Adjusted EPS | 2013 | 2013 Adjusted EPS | 2014 | 2014 Adjusted EPS | 2013 | 2013 Adjusted EPS | ||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||||
GAAP Net Income | $ | 16,463 | $ | 0.31 | $ | 32,792 | $ | 0.63 | $ | 33,195 | $ | 0.63 | $ | 53,484 | $ | 1.03 | |||||||||||
Adjustments: | |||||||||||||||||||||||||||
Inventory step-up charges and other costs associated with Care and Hydralyte acquisitions (1) | 116 | — | 577 | 0.01 | 246 | — | 577 | 0.01 | |||||||||||||||||||
Inventory step-up charges associated with Insight acquisition (2) | 653 | 0.01 | — | — | 653 | 0.01 | — | — | |||||||||||||||||||
Care acquisition related inventory costs (1) | — | — | 407 | 0.01 | — | — | 407 | 0.01 | |||||||||||||||||||
Legal and professional fees associated with acquisitions and divestitures (3) | 8,058 | 0.15 | 85 | — | 9,857 | 0.19 | 668 | 0.01 | |||||||||||||||||||
Stamp/Duty Tax on Australian acquisition (3) | — | — | — | — | 2,940 | 0.06 | — | — | |||||||||||||||||||
Integration, transition and other costs associated with acquisitions (3) | 4,021 | 0.09 | — | — | 4,432 | 0.09 | — | — | |||||||||||||||||||
Tax impact of adjustments | (2,941 | ) | (0.06 | ) | (133 | ) | (0.01 | ) | (3,469 | ) | (0.07 | ) | (356 | ) | (0.01 | ) | |||||||||||
Impact of state tax adjustments | — | — | (9,085 | ) | (0.17 | ) | — | — | (9,085 | ) | (0.17 | ) | |||||||||||||||
Total adjustments | 9,907 | 0.19 | (8,149 | ) | (0.16 | ) | 14,659 | 0.28 | (7,789 | ) | (0.15 | ) | |||||||||||||||
Non-GAAP Adjusted Net Income and Adjusted EPS | $ | 26,370 | $ | 0.50 | $ | 24,643 | $ | 0.47 | $ | 47,854 | $ | 0.91 | $ | 45,695 | $ | 0.88 | |||||||||||
(1) Inventory step-up charges and other costs relate to our International OTC Healthcare segment
(2) Inventory step-up charges relate to our North American OTC Healthcare segment
(3) Adjustments relate to G&A expenses
Reconciliation of GAAP Net Income to Non-GAAP Free Cash Flow and Adjusted Non-GAAP Free Cash Flow:
Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
(In thousands) | |||||||||||||||
GAAP Net Income | $ | 16,463 | $ | 32,792 | $ | 33,195 | $ | 53,484 | |||||||
Adjustments: | |||||||||||||||
Adjustments to reconcile net income to net cash provided by operating activities as shown in the Statement of Cash Flows | 11,901 | 3,681 | 24,855 | 16,174 | |||||||||||
Changes in operating assets and liabilities, net of effects from acquisitions as shown in the Statement of Cash Flows | (977 | ) | (3,673 | ) | (992 | ) | (14,060 | ) | |||||||
Total adjustments | 10,924 | 8 | 23,863 | 2,114 | |||||||||||
GAAP Net cash provided by operating activities | 27,387 | 32,800 | 57,058 | 55,598 | |||||||||||
Purchases of property and equipment | (884 | ) | (955 | ) | (1,380 | ) | (2,319 | ) | |||||||
Non-GAAP Free Cash Flow | 26,503 | 31,845 | 55,678 | 53,279 | |||||||||||
Integration, transition and other payments associated with acquisitions | 10,018 | — | 12,417 | — | |||||||||||
Adjusted Non-GAAP Free Cash Flow | $ | 36,521 | $ | 31,845 | $ | 68,095 | $ | 53,279 | |||||||
Outlook for Fiscal Year 2015:
Reconciliation of Projected GAAP EPS to Projected Non-GAAP Adjusted EPS:
2015 Projected EPS | |||||||
Low | High | ||||||
Projected FY'15 GAAP EPS | $ | 1.28 | $ | 1.38 | |||
Adjustments: | |||||||
Integration, transition and other costs associated with acquisitions | 0.47 | 0.47 | |||||
Total Adjustments | 0.47 | 0.47 | |||||
Projected Non-GAAP Adjusted EPS | $ | 1.75 | $ | 1.85 | |||
Reconciliation of Projected GAAP Net cash provided by operating activities to Projected Non-GAAP Adjusted Free Cash Flow:
2015 Projected Free Cash Flow | |||
(In millions) | |||
Projected FY'15 GAAP Net cash provided by operating activities | $ | 136 | |
Projected integration, transition and other costs associated with acquisitions | 20 | ||
Additions to property and equipment for cash | (6 | ) | |
Projected Non-GAAP Adjusted Free Cash Flow | $ | 150 | |