Attached files
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| EX-99.2 - EXHIBIT 99.2 - Prestige Consumer Healthcare Inc. | exhibit992prestigebrands.htm |
| 8-K - 8-K - Prestige Consumer Healthcare Inc. | a8-kpressreleaseq42015.htm |
Exhibit 99.1
Prestige Brands Holdings, Inc. Reports Record Fiscal 2015 Fourth Quarter and Full Year Results
Fourth Quarter Revenues Up 32.9%: Full Year Earnings Up 19.6%
Tarrytown, NY-(Business Wire)-May 14, 2015--Prestige Brands Holdings, Inc. (NYSE: PBH) today reported strong financial results for its fourth quarter and fiscal year ended March 31, 2015.
Key fourth quarter and fiscal year highlights include:
• | Revenue increased 32.9% to a record $190.0 million and 19.6% to a record $714.6 million in Q4 and FY2015, respectively |
• | Organic sales growth of 2.4% in Q4, excluding the impact of foreign exchange |
• | Adjusted free cash flow increased 45.0% in Q4 to $50.1 million |
• | Adjusted net income increased 33.1% to $24.8 million, or $0.47 per diluted share in Q4; FY15 adjusted net income increased 22.7% to $98.0 million, or $1.86 per diluted share. |
“We are extremely pleased with our fourth quarter and full fiscal year results,” said Matthew M. Mannelly, President and CEO. “Our excellent fourth quarter results reflect continued strengthening of consumption trends across our core OTC and international brands resulting in record adjusted free cash flow of over $50 million during the quarter. Fiscal year 2015 was Prestige Brands’ greatest year to date,” he said. “This strong momentum positions the Company well as we enter fiscal 2016.”
Fourth Fiscal Quarter Ended March 31, 2015
Revenues in the fourth fiscal quarter increased 32.9% to a record $190.0 million, compared to $143.1 million in the fourth quarter of 2014. Organic sales growth for the quarter was 2.4% excluding the impact of foreign exchange, or 1.1% including the impact of foreign exchange. Reported net income totaled $23.8 million, or $0.45 per diluted share, compared to $16.0 million, or $0.30 per diluted share, in the fourth quarter of fiscal year 2014. Reported earnings per share increased 50.0% to $0.45 compared to $0.30 in the prior year comparable period. Adjusted net income increased 33.1% to $24.8 million, or $0.47 per diluted share, compared to $18.6 million, or $0.35 per diluted share, in the fourth quarter of fiscal year 2014. Adjustments to net income in the fourth quarter of fiscal 2015 consist of items related to the acquisitions of Insight and Hydralyte.
Fiscal Year Ended March 31, 2015
Revenues for the fiscal year ended March 31, 2015 totaled a record $714.6 million, an increase of 19.6%, compared to revenues of $597.4 million for the fiscal year ended March 31, 2014. Reported net income for fiscal year 2015 totaled $78.3 million, or $1.49 per diluted share, compared to $72.6 million, or $1.39 per diluted share, for fiscal year 2014. Adjusted net income for fiscal year 2015 totaled $98.0 million, or $1.86 per diluted share, compared to adjusted net income of $79.9 million, or $1.53 per diluted share, for fiscal 2014. Adjustments to net income in fiscal 2015 consist of items related to the Insight and Hydralyte acquisitions.
Segment Review
North American OTC Healthcare: Revenues totaled $156.2 million for the fourth quarter of 2015, a 39.2% increase over fourth quarter 2014 revenues of $112.2 million. For fiscal 2015, revenues totaled $563.5 million, compared to $479.7 million for fiscal 2014, an increase of 17.5%. Results for both periods were favorably impacted by increased consumption among core OTC brands as well as the Insight and Hydralyte acquisitions.
International OTC Healthcare: Revenues totaled $13.0 million for the fourth quarter of 2015, a 40.6% increase over fourth quarter 2014 revenues of $9.3 million. For fiscal 2015, revenue totaled $61.2 million compared to $29.9 million for fiscal 2014, an increase of 104.5%. The strong performance of the Care portfolio in Australia and the acquisition of Hydralyte impacted revenues for both periods.
Household Cleaning: Revenues totaled $20.8 million for the fourth quarter of 2015, compared with fourth quarter 2014 revenues of $21.6 million. Revenues for fiscal year 2015 totaled $89.9 million, a 2.5% increase over fiscal year 2014 revenue of $87.8 million.
Balance Sheet and Adjusted Free Cash Flow
Adjusted free cash flow totaled $50.1 million for the fourth quarter of 2015, an increase of 45.0% over fourth quarter 2014 results of $34.5 million. For fiscal 2015, adjusted free cash flow was $163.7 million compared to adjusted free cash flow of $129.5 million for fiscal 2014, an increase of 26.4% The Company repaid $50.0 million of debt during the fourth quarter of fiscal 2015 and had a bank-defined net debt to EBITDA ratio of approximately 5.2. This is more than a half point reduction in debt since the closing of the Insight acquisition in September 2014.
Commentary and Outlook for FY2016
“Significant value creation initiatives are well underway for fiscal 2016,” Mr. Mannelly said. “Key among them is the stabilization and growth of Monistat and building our women’s health platform. We are investing in educating the healthcare professional about Monistat and, at the same time, creating new, more effective advertising to reach targeted consumers. Our core OTC and international portfolio continues to be the focus of our brand-building efforts and we will invest substantially in new product development within those platforms.”
Mr. Mannelly continued, “The progress we have made in building a diversified portfolio, strengthening consumption trends among our core OTC brands and expanding our international footprint in 2015 has us very well positioned as we enter fiscal 2016. I am proud of these accomplishments by the Prestige team, and I am confident in the Company’s future under the leadership of Ron Lombardi.”
“We are providing an outlook for fiscal year 2016, which we believe will be driven by organic growth in our legacy business and recent acquisitions,” Mr. Mannelly continued. “For fiscal year 2016, we anticipate revenue growth in the range of 10-12% including the impact of foreign exchange, adjusted earnings per share in the range of $2.05-$2.10, and adjusted free cash flow of approximately $175 million. We expect to continue to use our free cash flow to build M&A capacity and pay down debt. Our management team is focused on the three-prong strategy that continues to drive value for our shareholders: investing in core OTC brands and international, managing our industry-leading free cash flow, and executing strategic and disciplined M&A.”
Q4 and Fiscal Year Conference Call, Accompanying Slide Presentation and Replay
The Company will host a conference call to review its fourth quarter and full year results on May 14, 2015 at 8:30 am EDT. The toll-free dial-in numbers are 877-474-9503 within North America and 857-244-7556 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 69872014.
Non-GAAP Financial Information
In addition to financial results reported in accordance with generally accepted accounting principles (GAAP), we have provided certain non-GAAP financial information in this release to aid investors in understanding the Company's performance. Each non-GAAP financial measure is defined and reconciled to its most closely related GAAP financial measure in the “About Non-GAAP Financial Measures” section at the end of this earnings release.
About Prestige Brands Holdings, Inc.
The Company markets and distributes brand name over-the-counter and household cleaning products throughout the U.S. and Canada, Australia, and in certain other international markets. Core brands include Monistat® women’s health products, Nix® lice treatment, Chloraseptic® sore throat treatments, Clear Eyes® eye care products, Compound W® wart treatments, The Doctor's® NightGuard® dental protector, 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 our positioning in fiscal 2016, our creation of shareholder value, investments in advertising, promotion and product development, brand growth, our expected future operating results, including revenue growth, adjusted EPS, adjusted free cash flow, and our expected use of free cash flow for rapid deleveraging and building M&A capacity, and our execution of M&A. These statements are based on management's estimates and assumptions with respect to future events and financial performance and are believed to be reasonable, though are inherently uncertain and difficult to predict. Actual results could differ materially from those expected as a result of a variety of factors, including fluctuating exchange rates, the ability to identify and consummate acquisitions at attractive valuations, the impact of our advertising and promotional initiatives, competition in our industry, supplier issues, and the success of our brand-building investments. 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 December 31, 2014, and other periodic reports filed with the Securities and Exchange Commission.
Contact: Dean Siegal
Prestige Brands Holdings, Inc.
914-524-6819
ICR
Kristen Nungesser
(646)277-1261
John Mills
(646)277-1254
Prestige Brands Holdings, Inc.
Consolidated Statements of Income and Comprehensive Income
(Unaudited)
Three Months Ended March 31, | Year Ended March 31, | |||||||||||||||
(In thousands, except per share data) | 2015 | 2014 | 2015 | 2014 | ||||||||||||
Revenues | ||||||||||||||||
Net sales | $ | 189,089 | $ | 141,592 | $ | 710,070 | $ | 592,454 | ||||||||
Other revenues | 957 | 1,461 | 4,553 | 4,927 | ||||||||||||
Total revenues | 190,046 | 143,053 | 714,623 | 597,381 | ||||||||||||
Cost of Sales | ||||||||||||||||
Cost of sales (exclusive of depreciation shown below) | 79,976 | 64,216 | 308,400 | 261,830 | ||||||||||||
Gross profit | 110,070 | 78,837 | 406,223 | 335,551 | ||||||||||||
Operating Expenses | ||||||||||||||||
Advertising and promotion | 25,367 | 17,511 | 99,651 | 84,968 | ||||||||||||
General and administrative | 17,685 | 13,091 | 81,273 | 48,481 | ||||||||||||
Depreciation and amortization | 5,773 | 3,280 | 17,740 | 13,486 | ||||||||||||
Total operating expenses | 48,825 | 33,882 | 198,664 | 146,935 | ||||||||||||
Operating income | 61,245 | 44,955 | 207,559 | 188,616 | ||||||||||||
Other (income) expense | ||||||||||||||||
Interest income | (25 | ) | (16 | ) | (92 | ) | (60 | ) | ||||||||
Interest expense | 23,821 | 14,994 | 81,326 | 68,642 | ||||||||||||
Gain on sale of asset | — | — | (1,133 | ) | — | |||||||||||
Loss on extinguishment of debt | — | 3,274 | — | 18,286 | ||||||||||||
Total other expense | 23,796 | 18,252 | 80,101 | 86,868 | ||||||||||||
Income before income taxes | 37,449 | 26,703 | 127,458 | 101,748 | ||||||||||||
Provision for income taxes | 13,677 | 10,702 | 49,198 | 29,133 | ||||||||||||
Net income | $ | 23,772 | $ | 16,001 | $ | 78,260 | $ | 72,615 | ||||||||
Earnings per share: | ||||||||||||||||
Basic | $ | 0.45 | $ | 0.31 | $ | 1.50 | $ | 1.41 | ||||||||
Diluted | $ | 0.45 | $ | 0.30 | $ | 1.49 | $ | 1.39 | ||||||||
Weighted average shares outstanding: | ||||||||||||||||
Basic | 52,356 | 51,893 | 52,170 | 51,641 | ||||||||||||
Diluted | 52,821 | 52,513 | 52,670 | 52,349 | ||||||||||||
Comprehensive income, net of tax: | ||||||||||||||||
Currency translation adjustments | (7,268 | ) | 2,414 | (24,151 | ) | 843 | ||||||||||
Total other comprehensive income (loss) | (7,268 | ) | 2,414 | (24,151 | ) | 843 | ||||||||||
Comprehensive income | $ | 16,504 | $ | 18,415 | $ | 54,109 | $ | 73,458 | ||||||||
Prestige Brands Holdings, Inc.
Consolidated Balance Sheets
(Unaudited)
(In thousands) Assets | March 31, 2015 | March 31, 2014 | |||||
Current assets | |||||||
Cash and cash equivalents | $ | 21,318 | $ | 28,331 | |||
Accounts receivable, net | 87,858 | 65,050 | |||||
Inventories | 74,000 | 65,586 | |||||
Deferred income tax assets | 8,097 | 6,544 | |||||
Prepaid expenses and other current assets | 10,434 | 11,674 | |||||
Total current assets | 201,707 | 177,185 | |||||
Property and equipment, net | 13,744 | 9,597 | |||||
Goodwill | 290,651 | 190,911 | |||||
Intangible assets, net | 2,134,700 | 1,394,817 | |||||
Other long-term assets | 28,603 | 23,153 | |||||
Total Assets | $ | 2,669,405 | $ | 1,795,663 | |||
Liabilities and Stockholders' Equity | |||||||
Current liabilities | |||||||
Accounts payable | $ | 46,115 | $ | 48,286 | |||
Accrued interest payable | 11,974 | 9,626 | |||||
Other accrued liabilities | 40,948 | 26,446 | |||||
Total current liabilities | 99,037 | 84,358 | |||||
Long-term debt | |||||||
Principal amount | 1,593,600 | 937,500 | |||||
Less unamortized discount | (4,889 | ) | (3,086 | ) | |||
Long-term debt, net of unamortized discount | 1,588,711 | 934,414 | |||||
Deferred income tax liabilities | 351,569 | 213,204 | |||||
Other long-term liabilities | 2,464 | 327 | |||||
Total Liabilities | 2,041,781 | 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 – 52,562 shares and 52,021 shares at March 31, 2015 and 2014, respectively | 525 | 520 | |||||
Additional paid-in capital | 426,584 | 414,387 | |||||
Treasury stock, at cost – 266 shares at March 31, 2015 and 206 at March 31, 2014 | (3,478 | ) | (1,431 | ) | |||
Accumulated other comprehensive income (loss), net of tax | (23,412 | ) | 739 | ||||
Retained earnings | 227,405 | 149,145 | |||||
Total Stockholders' Equity | 627,624 | 563,360 | |||||
Total Liabilities and Stockholders' Equity | $ | 2,669,405 | $ | 1,795,663 | |||
Prestige Brands Holdings, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
Year Ended March 31, | |||||||
(In thousands) | 2015 | 2014 | |||||
Operating Activities | |||||||
Net income | $ | 78,260 | $ | 72,615 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 17,740 | 13,486 | |||||
Gain on sale of asset | (1,133 | ) | — | ||||
Deferred income taxes | 28,922 | 19,012 | |||||
Long term income taxes payable | 2,294 | — | |||||
Amortization of deferred financing costs | 6,735 | 7,102 | |||||
Stock-based compensation costs | 6,918 | 5,146 | |||||
Loss on extinguishment of debt | — | 18,286 | |||||
Premium payment on 2010 Senior Notes | — | (15,527 | ) | ||||
Amortization of debt discount | 2,086 | 3,410 | |||||
Lease termination costs | 785 | — | |||||
Loss (gain) on sale or disposal of property and equipment | 321 | (3 | ) | ||||
Changes in operating assets and liabilities, net of effects of acquisitions | |||||||
Accounts receivable | 1,608 | 9,735 | |||||
Inventories | 15,360 | (2,850 | ) | ||||
Prepaid expenses and other current assets | 4,664 | (2,130 | ) | ||||
Accounts payable | (17,637 | ) | (4,641 | ) | |||
Accrued liabilities | 9,332 | (12,059 | ) | ||||
Net cash provided by operating activities | 156,255 | 111,582 | |||||
Investing Activities | |||||||
Purchases of property and equipment | (6,101 | ) | (2,764 | ) | |||
Proceeds from sale of property and equipment | — | 3 | |||||
Proceeds from sale of business | 18,500 | — | |||||
Proceeds from sale of asset | 10,000 | — | |||||
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 | (805,258 | ) | (57,976 | ) | |||
Financing Activities | |||||||
Proceeds from issuance of 2013 Senior Notes | — | 400,000 | |||||
Repayment of 2010 Senior Notes | — | (250,000 | ) | ||||
Term loan borrowings | 720,000 | — | |||||
Term loan repayments | (130,000 | ) | (157,500 | ) | |||
Borrowings under revolving credit agreement | 124,600 | 50,000 | |||||
Repayments under revolving credit agreement | (58,500 | ) | (83,000 | ) | |||
Payment of deferred financing costs | (16,072 | ) | (7,466 | ) | |||
Proceeds from exercise of stock options | 3,954 | 5,907 | |||||
Proceeds from restricted stock exercises | 57 | — | |||||
Excess tax benefits from share-based awards | 1,330 | 1,650 | |||||
Fair value of shares surrendered as payment of tax withholding | (2,104 | ) | (744 | ) | |||
Net cash provided by (used in) financing activities | 643,265 | (41,153 | ) | ||||
Effects of exchange rate changes on cash and cash equivalents | (1,275 | ) | 208 | ||||
Increase (decrease) in cash and cash equivalents | (7,013 | ) | 12,661 | ||||
Cash and cash equivalents - beginning of year | 28,331 | 15,670 | |||||
Cash and cash equivalents - end of year | $ | 21,318 | $ | 28,331 | |||
Interest paid | $ | 70,155 | $ | 62,357 | |||
Income taxes paid | $ | 11,939 | $ | 11,020 | |||
Prestige Brands Holdings, Inc.
Consolidated Statements of Income
Business Segments
(Unaudited)
Three Months Ended March 31, 2015 | |||||||||||||||
(In thousands) | North American OTC Healthcare | International OTC Healthcare | Household Cleaning | Consolidated | |||||||||||
Gross segment revenues | $ | 156,489 | $ | 13,023 | $ | 20,028 | $ | 189,540 | |||||||
Elimination of intersegment revenues | (451 | ) | — | — | (451 | ) | |||||||||
Third-party segment revenues | 156,038 | 13,023 | 20,028 | 189,089 | |||||||||||
Other revenues | 159 | 2 | 796 | 957 | |||||||||||
Total segment revenues | 156,197 | 13,025 | 20,824 | 190,046 | |||||||||||
Cost of sales | 58,776 | 4,894 | 16,306 | 79,976 | |||||||||||
Gross profit | 97,421 | 8,131 | 4,518 | 110,070 | |||||||||||
Advertising and promotion | 22,324 | 2,771 | 272 | 25,367 | |||||||||||
Contribution margin | $ | 75,097 | $ | 5,360 | $ | 4,246 | $ | 84,703 | |||||||
Other operating expenses | 23,458 | ||||||||||||||
Operating income | 61,245 | ||||||||||||||
Other expense | 23,796 | ||||||||||||||
Income before income taxes | 37,449 | ||||||||||||||
Provision for income taxes | 13,677 | ||||||||||||||
Net income | $ | 23,772 | |||||||||||||
Year Ended March 31, 2015 | |||||||||||||||
(In thousands) | North American OTC Healthcare | International OTC Healthcare | Household Cleaning | Consolidated | |||||||||||
Gross segment revenues | $ | 566,256 | $ | 61,116 | $ | 86,085 | $ | 713,457 | |||||||
Elimination of intersegment revenues | (3,387 | ) | — | — | (3,387 | ) | |||||||||
Third-party segment revenues | 562,869 | 61,116 | 86,085 | 710,070 | |||||||||||
Other revenues | 637 | 64 | 3,852 | 4,553 | |||||||||||
Total segment revenues | 563,506 | 61,180 | 89,937 | 714,623 | |||||||||||
Cost of sales | 216,781 | 22,820 | 68,799 | 308,400 | |||||||||||
Gross profit | 346,725 | 38,360 | 21,138 | 406,223 | |||||||||||
Advertising and promotion | 86,897 | 10,922 | 1,832 | 99,651 | |||||||||||
Contribution margin | $ | 259,828 | $ | 27,438 | $ | 19,306 | $ | 306,572 | |||||||
Other operating expenses | 99,013 | ||||||||||||||
Operating income | 207,559 | ||||||||||||||
Other expense | 80,101 | ||||||||||||||
Income before income taxes | 127,458 | ||||||||||||||
Provision for income taxes | 49,198 | ||||||||||||||
Net income | $ | 78,260 | |||||||||||||
Three Months Ended March 31, 2014 | |||||||||||||||
(In thousands) | North American OTC Healthcare | International OTC Healthcare | Household Cleaning | Consolidated | |||||||||||
Gross segment revenues | $ | 112,782 | $ | 9,236 | $ | 20,431 | $ | 142,449 | |||||||
Elimination of intersegment revenues | (857 | ) | — | — | (857 | ) | |||||||||
Third-party segment revenues | 111,925 | 9,236 | 20,431 | 141,592 | |||||||||||
Other revenues | 299 | 28 | 1,134 | 1,461 | |||||||||||
Total segment revenues | 112,224 | 9,264 | 21,565 | 143,053 | |||||||||||
Cost of sales | 44,377 | 3,699 | 16,140 | 64,216 | |||||||||||
Gross profit | 67,847 | 5,565 | 5,425 | 78,837 | |||||||||||
Advertising and promotion | 15,606 | 1,409 | 496 | 17,511 | |||||||||||
Contribution margin | $ | 52,241 | $ | 4,156 | $ | 4,929 | $ | 61,326 | |||||||
Other operating expenses | 16,371 | ||||||||||||||
Operating income | 44,955 | ||||||||||||||
Other expense | 18,252 | ||||||||||||||
Income before income taxes | 26,703 | ||||||||||||||
Provision for income taxes | 10,702 | ||||||||||||||
Net income | $ | 16,001 | |||||||||||||
Year Ended March 31, 2014 | |||||||||||||||
(In thousands) | North American OTC Healthcare | International OTC Healthcare | Household Cleaning | Consolidated | |||||||||||
Gross segment revenues | $ | 482,138 | $ | 29,872 | $ | 83,629 | $ | 595,639 | |||||||
Elimination of intersegment revenues | (3,185 | ) | — | — | (3,185 | ) | |||||||||
Third-party segment revenues | 478,953 | 29,872 | 83,629 | 592,454 | |||||||||||
Other revenues | 749 | 42 | 4,136 | 4,927 | |||||||||||
Total segment revenues | 479,702 | 29,914 | 87,765 | 597,381 | |||||||||||
Cost of sales | 184,796 | 12,646 | 64,388 | 261,830 | |||||||||||
Gross profit | 294,906 | 17,268 | 23,377 | 335,551 | |||||||||||
Advertising and promotion | 77,083 | 5,264 | 2,621 | 84,968 | |||||||||||
Contribution margin | $ | 217,823 | $ | 12,004 | $ | 20,756 | $ | 250,583 | |||||||
Other operating expenses | 61,967 | ||||||||||||||
Operating income | 188,616 | ||||||||||||||
Other expense | 86,868 | ||||||||||||||
Income before income taxes | 101,748 | ||||||||||||||
Provision for income taxes | 29,133 | ||||||||||||||
Net income | $ | 72,615 | |||||||||||||
About Non-GAAP Financial Measures
We define Non-GAAP Adjusted Total Revenues excluding acquisitions and divestitures and the impact of current year foreign exchange rates as Total Revenues excluding revenues associated with products acquired or divested in the periods presented and the impact of current year foreign exchange rates on total revenues. We define Non-GAAP Adjusted EBITDA as earnings before interest expense (income), income taxes, depreciation and amortization, certain other legal and professional fees, and other acquisition-related costs. Non-GAAP Adjusted EBITDA margin is calculated as Non-GAAP Adjusted EBITDA divided by GAAP Total Revenues. We define Non-GAAP Adjusted Gross Margin as Gross Profit before inventory step up charges and certain other acquisition and integration-related costs. Non-GAAP Adjusted Gross Margin percentage is calculated based on Non-GAAP Adjusted Gross Margin divided by GAAP Total Revenues. We define Non-GAAP Adjusted General and Administrative expenses as General and Administrative expenses minus certain other legal and professional fees, acquisition and other integration costs. Non-GAAP Adjusted General and Administrative expense percentage is calculated based on Non-GAAP Adjusted General and Administrative expense divided by GAAP Total Revenues. We define Non-GAAP Adjusted Net Income as Net Income before inventory step-up charges, certain other legal and professional fees, other acquisition and integration-related costs, 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 Adjusted Free Cash Flow as net cash provided by operating activities less premium payments to extinguish debt, accelerated interest payments due to debt refinancing and cash paid for capital expenditures, plus payments for integration, transition and other payments associated with acquisitions. Non-GAAP Adjusted Total Revenues excluding acquisitions and divestitures and the impact of current year foreign exchange rates, Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted EBITDA Margin, Non-GAAP Adjusted Gross Margin, Non-GAAP Adjusted Gross Margin percentage, Non-GAAP Adjusted General and Administrative Expense, Non-GAAP Adjusted General and Administrative Expense percentage, Non-GAAP Adjusted Net Income, Non-GAAP Adjusted EPS, and Non-GAAP Adjusted Free Cash Flow may not be comparable to similarly titled measures reported by other companies.
We are presenting Non-GAAP Adjusted Total Revenues excluding acquisitions and divestitures and exchange rates, Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted EBITDA Margin, Non-GAAP Adjusted Gross Margin, Non-GAAP Adjusted Gross Margin percentage, Non-GAAP Adjusted General and Administrative Expense, Non-GAAP Adjusted General and Administrative Expense percentage, Non-GAAP Adjusted Net Income, Non-GAAP Adjusted EPS, and Non-GAAP Adjusted Free Cash Flow, because they provide additional ways to view our operation when considered with both our GAAP results and the reconciliation to net income and net cash provided by operating activities, respectively, which we believe provides a more complete understanding of our business than could be obtained absent this disclosure. Each of Non-GAAP Adjusted Total Revenues excluding acquisitions and divestitures and exchange rates, Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted EBITDA Margin, Non-GAAP Adjusted Gross Margin, Non-GAAP Adjusted Gross Margin percentage, Non-GAAP Adjusted General and Administrative Expense, Non-GAAP Adjusted General and Administrative Expense percentage, Non-GAAP Adjusted Net Income, Non-GAAP Adjusted EPS, and Non-GAAP Adjusted Free Cash Flow is presented solely as a supplemental disclosure because (i) we believe it is a useful tool for investors to assess the operating performance of the business without the effect of these items; (ii) we believe that investors will find this data useful in assessing shareholder value; and (iii) we use Non-GAAP Adjusted Total Revenues excluding acquisitions and divestitures and exchange rates, Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted EBITDA Margin, Non-GAAP Adjusted Gross Margin, Non-GAAP Adjusted Gross Margin percentage, Non-GAAP Adjusted General and Administrative Expense, Non-GAAP Adjusted General and Administrative Expense percentage, Non-GAAP Adjusted Net Income, Non-
GAAP Adjusted EPS, and Non-GAAP Adjusted Free Cash Flow internally to evaluate the performance of our personnel and also as a benchmark to evaluate our operating performance or compare our performance to that of our competitors. The use of Non-GAAP Adjusted Total Revenues excluding acquisitions and divestitures and exchange rates, Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted EBITDA Margin, Non-GAAP Adjusted Gross Margin, Non-GAAP Adjusted Gross Margin percentage, Non-GAAP Adjusted General and Administrative Expense, Non-GAAP Adjusted General and Administrative Expense percentage, Non-GAAP Adjusted Net Income, Non-GAAP Adjusted EPS, and Non-GAAP Adjusted Free Cash Flow have limitations, and you should not consider these measures in isolation from or as an alternative to GAAP measures such as General and Administrative expense, Operating income, Net income, and Net cash flow provided by operating activities, or cash flow statement data prepared in accordance with GAAP, or as a measure of profitability or liquidity.
The following tables set forth the reconciliation of Non-GAAP Adjusted Total Revenues excluding acquisitions and divestitures and exchange rates, Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted EBITDA Margin, Non-GAAP Adjusted Gross Margin, Non-GAAP Adjusted Gross Margin percentage, Non-GAAP Adjusted General and Administrative Expense, Non-GAAP Adjusted General and Administrative Expense percentage, Non-GAAP Adjusted Net Income, Non-GAAP Adjusted EPS, Non-GAAP Adjusted Free Cash Flow, all of which are non-GAAP financial measures, to GAAP Gross Profit, GAAP General and Administrative expense, GAAP Net Income, GAAP Diluted EPS and GAAP Net cash provided by operating activities, our most directly comparable financial measures presented in accordance with GAAP.
Reconciliation of GAAP Total Revenues to Non-GAAP Adjusted Total Revenues excluding acquisitions and divestitures and exchange rates:
Three Months Ended March 31, | Year Ended March 31, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
(In thousands) | |||||||||||||||
GAAP Total Revenues | $ | 190,046 | $ | 143,053 | $ | 714,623 | $ | 597,381 | |||||||
Adjustments: | |||||||||||||||
Care Pharma and Hydralyte revenues (1) | (4,452 | ) | — | (23,043 | ) | — | |||||||||
Insight revenues (2) | (40,978 | ) | — | (97,068 | ) | — | |||||||||
Total adjustments | (45,430 | ) | — | (120,111 | ) | — | |||||||||
Non-GAAP Adjusted Total Revenues excluding acquisitions and divestitures | 144,616 | 143,053 | 594,512 | 597,381 | |||||||||||
Organic Revenue Growth (decline) | 1.1 | % | (0.5 | )% | |||||||||||
Impact of current year foreign exchange rates (3) | (1,805 | ) | (3,839 | ) | |||||||||||
Non-GAAP Adjusted Total Revenues excluding acquisitions and divestitures and impact of current year foreign exchange rates | $ | 144,616 | $ | 141,248 | $ | 594,512 | $ | 593,542 | |||||||
Constant Currency Organic Revenue Growth | 2.4 | % | 0.2 | % | |||||||||||
(1) Revenue adjustments relate to our International OTC Healthcare segment
(2) Revenue adjustments relate to our North American OTC Healthcare segment
(3) Foreign exchange rate adjustments relate to all segments
Reconciliation of GAAP Gross Profit to Non-GAAP Adjusted Gross Margin and related Adjusted Gross Margin percentage:
Three Months Ended March 31, | Year Ended March 31, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
(In thousands) | |||||||||||||||
GAAP Total Revenues | $ | 190,046 | $ | 143,053 | $ | 714,623 | $ | 597,381 | |||||||
GAAP Gross Profit | $ | 110,070 | $ | 78,837 | $ | 406,223 | $ | 335,551 | |||||||
Adjustments: | |||||||||||||||
Inventory step-up charges and other costs associated with Care and Hydralyte acquisitions (1) | — | — | 246 | 577 | |||||||||||
Inventory step-up charges associated with Insight acquisition (2) | — | — | 1,979 | — | |||||||||||
Care acquisition related inventory costs (1) | — | — | — | 407 | |||||||||||
Total adjustments | — | — | 2,225 | 984 | |||||||||||
Non-GAAP Adjusted Gross Margin | $ | 110,070 | $ | 78,837 | $ | 408,448 | $ | 336,535 | |||||||
Non-GAAP Adjusted Gross Margin % | 57.9 | % | 55.1 | % | 57.2 | % | 56.3 | % | |||||||
(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 General and Administrative Expense to Non-GAAP Adjusted General and Administrative Expense and Non-GAAP Adjusted General and Administrative Expense percentage:
Three Months Ended March 31, | Year Ended March 31, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
(In thousands) | |||||||||||||||
GAAP General and Administrative Expense | $ | 17,685 | $ | 13,091 | $ | 81,273 | $ | 48,481 | |||||||
Adjustments: | |||||||||||||||
Legal and professional fees associated with acquisitions and divestitures | 640 | 443 | 10,974 | 1,111 | |||||||||||
Stamp/Duty Tax on Australian acquisition | — | — | 2,940 | — | |||||||||||
Integration, transition and other costs associated with acquisitions | 920 | — | 10,533 | — | |||||||||||
Total adjustments | 1,560 | 443 | 24,447 | 1,111 | |||||||||||
Non-GAAP Adjusted General and Administrative Expense | $ | 16,125 | $ | 12,648 | $ | 56,826 | $ | 47,370 | |||||||
Non-GAAP Adjusted General and Administrative Expense Percentage | 8.5 | % | 8.8 | % | 8.0 | % | 7.9 | % | |||||||
Reconciliation of GAAP Net Income to Non-GAAP Adjusted EBITDA and Non-GAAP Adjusted EBITDA Margin:
Three Months Ended March 31, | Year Ended March 31, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
(In thousands) | |||||||||||||||
GAAP Net Income | $ | 23,772 | $ | 16,001 | $ | 78,260 | $ | 72,615 | |||||||
Interest expense, net | 23,796 | 14,978 | 81,234 | 68,582 | |||||||||||
Provision for income taxes | 13,677 | 10,702 | 49,198 | 29,133 | |||||||||||
Depreciation and amortization | 5,773 | 3,280 | 17,740 | 13,486 | |||||||||||
Non-GAAP EBITDA: | 67,018 | 44,961 | 226,432 | 183,816 | |||||||||||
Adjustments: | |||||||||||||||
Inventory step-up charges and other costs associated with Care and Hydralyte acquisitions (1) | — | — | 246 | 577 | |||||||||||
Inventory step-up charges associated with Insight acquisition (2) | — | — | 1,979 | — | |||||||||||
Care acquisition related inventory costs (1) | — | — | — | 407 | |||||||||||
Legal and professional fees associated with acquisitions and divestitures (3) | 640 | 443 | 10,974 | 1,111 | |||||||||||
Stamp/Duty Tax on Australian acquisition (3) | — | — | 2,940 | — | |||||||||||
Integration, transition and other costs associated with acquisitions (3) | 920 | — | 10,533 | — | |||||||||||
Gain on sale of asset | — | — | (1,133 | ) | — | ||||||||||
Loss on extinguishment of debt | — | 3,274 | — | 18,286 | |||||||||||
Total adjustments | 1,560 | 3,717 | 25,539 | 20,381 | |||||||||||
Non-GAAP Adjusted EBITDA | $ | 68,578 | $ | 48,678 | $ | 251,971 | $ | 204,197 | |||||||
Non-GAAP Adjusted EBITDA Margin | 36.1 | % | 34.0 | % | 35.3 | % | 34.2 | % | |||||||
(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 March 31, | Year Ended March 31, | ||||||||||||||||||||||||||
2015 | 2015 Adjusted EPS | 2014 | 2014 Adjusted EPS | 2015 | 2015 Adjusted EPS | 2014 | 2014 Adjusted EPS | ||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||||
GAAP Net Income | $ | 23,772 | $ | 0.45 | $ | 16,001 | $ | 0.30 | $ | 78,260 | $ | 1.49 | $ | 72,615 | $ | 1.39 | |||||||||||
Adjustments: | |||||||||||||||||||||||||||
Inventory step-up charges and other costs associated with Care and Hydralyte acquisitions (1) | — | — | — | — | 246 | — | 577 | 0.01 | |||||||||||||||||||
Inventory step-up charges associated with Insight acquisition (2) | — | — | — | — | 1,979 | 0.04 | — | — | |||||||||||||||||||
Care acquisition related inventory costs (1) | — | — | — | — | — | — | 407 | 0.01 | |||||||||||||||||||
Legal and professional fees associated with acquisitions and divestitures (3) | 640 | 0.01 | 443 | 0.01 | 10,974 | 0.21 | 1,111 | 0.02 | |||||||||||||||||||
Stamp/Duty Tax on Australian acquisition (3) | — | — | — | — | 2,940 | 0.05 | — | — | |||||||||||||||||||
Integration, transition and other costs associated with acquisitions (3) | 920 | 0.02 | — | — | 10,533 | 0.20 | — | — | |||||||||||||||||||
Accelerated amortization of debt discount and debt issue costs | — | — | 365 | 0.01 | 218 | — | 5,477 | 0.10 | |||||||||||||||||||
Gain on sale of asset | — | — | — | — | (1,133 | ) | (0.02 | ) | — | — | |||||||||||||||||
Loss on extinguishment of debt | — | — | 3,274 | 0.06 | — | — | 18,286 | 0.35 | |||||||||||||||||||
Tax impact of adjustments | (549 | ) | (0.01 | ) | (1,459 | ) | (0.03 | ) | (5,968 | ) | (0.11 | ) | (9,100 | ) | (0.17 | ) | |||||||||||
Impact of state tax adjustments | — | — | — | — | — | — | (9,465 | ) | (0.18 | ) | |||||||||||||||||
Total adjustments | 1,011 | 0.02 | 2,623 | 0.05 | 19,789 | 0.37 | 7,293 | 0.14 | |||||||||||||||||||
Non-GAAP Adjusted Net Income and Adjusted EPS | $ | 24,783 | $ | 0.47 | $ | 18,624 | $ | 0.35 | $ | 98,049 | $ | 1.86 | $ | 79,908 | $ | 1.53 | |||||||||||
(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 Adjusted Non-GAAP Free Cash Flow:
Three Months Ended March 31, | Year Ended March 31, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
(In thousands) | |||||||||||||||
GAAP Net Income | $ | 23,772 | $ | 16,001 | $ | 78,260 | $ | 72,615 | |||||||
Adjustments: | |||||||||||||||
Adjustments to reconcile net income to net cash provided by operating activities as shown in the Statement of Cash Flows | 22,048 | 15,300 | 64,668 | 50,912 | |||||||||||
Changes in operating assets and liabilities, net of effects from acquisitions as shown in the Statement of Cash Flows | 6,293 | (579 | ) | 13,327 | (11,945 | ) | |||||||||
Total adjustments | 28,341 | 14,721 | 77,995 | 38,967 | |||||||||||
GAAP Net cash provided by operating activities | 52,113 | 30,722 | 156,255 | 111,582 | |||||||||||
Premium payment on 2010 Senior Notes | — | 2,759 | — | 15,527 | |||||||||||
Accelerated interest payments due to debt refinancing | — | 1,162 | — | 4,675 | |||||||||||
Purchases of property and equipment | (2,401 | ) | (106 | ) | (6,101 | ) | (2,764 | ) | |||||||
Non-GAAP Free Cash Flow | 49,712 | 34,537 | 150,154 | 129,020 | |||||||||||
Integration, transition and other payments associated with acquisitions | 362 | — | 13,563 | 512 | |||||||||||
Adjusted Non-GAAP Free Cash Flow | $ | 50,074 | $ | 34,537 | $ | 163,717 | $ | 129,532 | |||||||
Outlook for Fiscal Year 2016:
Reconciliation of Projected GAAP EPS to Projected Non-GAAP Adjusted EPS:
2016 Projected EPS | |||||||
Low | High | ||||||
Projected FY'16 GAAP EPS | $ | 2.00 | $ | 2.05 | |||
Adjustments: | |||||||
Costs associated with term loan refinancing and CEO retirement | 0.05 | 0.05 | |||||
Total Adjustments | 0.05 | 0.05 | |||||
Projected Non-GAAP Adjusted EPS | $ | 2.05 | $ | 2.10 | |||
Reconciliation of Projected GAAP Net cash provided by operating activities to Projected Non-GAAP Adjusted Free Cash Flow:
2016 Projected Free Cash Flow | |||
(In millions) | |||
Projected FY'16 GAAP Net cash provided by operating activities | $ | 181 | |
Additions to property and equipment for cash | (6 | ) | |
Projected Non-GAAP Adjusted Free Cash Flow | $ | 175 | |