Attached files
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| 8-K - 8-K - Prestige Consumer Healthcare Inc. | a8-kpressreleasedecember20.htm |
| EX-99.2 - PRESENTATION - Prestige Consumer Healthcare Inc. | exibit992prestigebrandsi.htm |
Exhibit 99.1
Prestige Brands Holdings, Inc. Reports Fiscal 2016 Third Quarter and Year-to-Date Results
Closing of DenTek Acquisition Expected in Early February with FTC Review Now Completed
Company Reiterates Fiscal 2016 Revenue, Adjusted Free Cash Flow and Adjusted EPS Guidance
Tarrytown, NY-(Business Wire)-February 4, 2016--Prestige Brands Holdings, Inc. (NYSE: PBH) today announced results for the fiscal third quarter and nine month period ended December 31, 2015.
Key fiscal third quarter and nine month highlights include:
• | Q3 revenues increased 3.2% on a constant currency basis to $200.2 million. Nine month reported revenues increased 14.1% to $598.4 million. |
• | Q3 Free Cash Flow of $45.0 million; Nine Month Adjusted Free Cash Flow of $134.7 million, an increase of 18.5%. |
• | Q3 Adjusted Net Income increased 11.6% to $28.4 million, or $0.53 per diluted share. Nine month Adjusted Net Income increased 19.5% to $87.5 million, or $1.65 per diluted share. |
Fiscal Third Quarter Ended December 31, 2015
Reported revenues in the third quarter of fiscal year 2016 increased 1.3% to $200.2 million, compared to $197.6 million in the third quarter of fiscal year 2015. Revenues increased 3.2% excluding the impact of foreign currency fluctuations, driven by continued strong consumption levels across the Company’s core over-the-counter (OTC) healthcare brands. Foreign currency fluctuations negatively impacted reported revenues for the fiscal third quarter by $3.6 million.
Reported net income for the third quarter of fiscal 2016 totaled $28.0 million, or $0.53 per diluted share, compared to $21.3 million, or $0.40 per diluted share, in the third quarter of fiscal year 2015. Adjusted net income increased 11.6% to $28.4 million, or $0.53 per diluted share, compared to $25.4 million, or $0.48
per diluted share, in the third quarter of fiscal year 2015. Adjustments to net income in the third quarters of fiscal 2016 and fiscal 2015 consisted primarily of acquisition-related items.
Nine Months Ended December 31, 2015
Reported revenues for the nine months ended December 31, 2015 totaled $598.4 million, an increase of 14.1% compared to $524.6 million for the nine months ended December 31, 2014. Organic revenue for the nine months ended December 31, 2015 increased 2.1% excluding the impact of foreign currency fluctuations. Foreign currency fluctuations negatively impacted reported revenues for the fiscal nine months ended December 31, 2015 by $11.6 million.
Reported net income for the nine months ended December 31, 2015 totaled $86.0 million, or $1.62 per diluted share, compared to $54.5 million, or $1.04 per diluted share, for the nine months ended December 31, 2014. Adjusted net income for the nine months ended December 31, 2015 increased 19.5% to $87.5 million, or $1.65 per diluted share, compared to adjusted net income of $73.3 million, or $1.39 per diluted share, for the nine months ended December 31, 2014. Adjustments to net income for the nine month period ended December 31, 2015 were primarily related to the planned acquisition of DenTek and our CEO transition; adjustments to net income in the prior year comparable period were primarily related to the Insight and Hydralyte acquisitions.
Adjusted Free Cash Flow and Balance Sheet
Free Cash Flow totaled $45.0 million for the third quarter of fiscal 2016. For the nine months ended December 31, 2015, Adjusted Free Cash Flow was $134.7 million, compared to $113.6 million for the nine months ended December 31, 2014, an increase of 18.5%.
Adjusted EBITDA for the nine month period ended December 31, 2015 was $214.9 million, a 17.2% increase over the prior year nine month period’s Adjusted EBITDA of $183.4 million. The Company
repaid $26.1 million of debt during the third fiscal quarter of 2016 and had a bank-defined net debt to EBITDA leverage ratio of 4.8. The Company had cash of $49.0 million as of December 31, 2015 in anticipation of funding the DenTek acquisition.
Segment Review
North American OTC Healthcare. Reported revenues were $165.1 million for the third fiscal quarter of 2016, a 2.6% increase over third quarter 2015 revenues of $160.8 million. For the nine month period ended December 31, 2015, reported revenues totaled $486.8 million, compared to $410.2 million for the nine months ended December 31, 2014, an increase of 18.7%. Results for the third quarter were favorably impacted by increased consumption trends among core OTC brands. The nine month period also benefited from the Insight acquisition.
International OTC Healthcare. Reported revenues totaled $13.8 million for the third fiscal quarter of 2016, a decrease of 11.2% over third quarter 2015 revenues of $15.6 million, or, on a constant currency basis, which excludes $2.4 million of foreign currency impact, an increase of 4.7%. For the nine months ended December 31, 2015, reported revenues totaled $43.3 million, compared to $45.2 million for the nine months ended December 31, 2014, a decrease of 4.3%, or, on a constant currency basis, which excludes $7.1 million of foreign currency impact, an increase of 13.6%.
Household Cleaning. Reported revenues totaled $21.3 million for the third fiscal quarter of 2016, a 0.4% increase over third quarter 2015 revenues of $21.2 million. Reported revenues for the nine months ended December 31, 2015 totaled $68.3 million, compared to $69.1 million for the nine months ended December 31, 2014, a decrease of 1.2%.
Commentary & Outlook
“We are extremely pleased with our solid third quarter and year-to-date results, which reflect continued consumption-driven performance trends among our core OTC brands,” said Ron Lombardi, President and CEO. “Our core OTC and International brands grew 5.7% during the fiscal third quarter, excluding the effects of foreign currency fluctuations. These results reflect our continued investment in brand-building and are highlighted by solid performance across the portfolio,” he said.
“With the Federal Trade Commission (FTC) having completed its review of the DenTek acquisition, we now expect to close on this transaction in early February. We expect the integration of DenTek into our portfolio will be smooth and efficient, benefitting from our core competencies of acquiring, integrating and growing businesses through investment in brand-building and innovation. DenTek is an excellent strategic fit with our acquisition criteria and shares our outsourced business model. The product line will strengthen our existing oral care platform and benefit from our proven brand-building ability over the long-term. This transaction will mark our seventh acquisition in the past six years, continuing our proven strategy to grow our portfolio and increase shareholder value.”
Mr. Lombardi continued, “For the fiscal year ending March 31, 2016, we are reconfirming our previously provided outlook, which recognizes the impact of foreign currency fluctuations, and excludes any potential sales, earnings or acquisition and integration costs from DenTek in the fourth fiscal quarter ending March 31, 2016. For the second half of the fiscal year, we continue to expect revenue growth between +0.5% and +1.5%, full year revenue growth of +10% to +11% and adjusted free cash flow of $175 million or more. We continue to anticipate fiscal 2016 adjusted earnings per share to be at the high end of our previously provided range of $2.05-$2.10, or slightly above,” he said.
Q3 Conference Call, Accompanying Slide Presentation & Replay
The Company will host a conference call to review its third quarter results on February 4, 2016 at 8:30 am EDT. The toll-free dial-in numbers are 877-784-9650 within North America and 530-379-4717 outside of North America. 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.
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 of our 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 international markets. Core brands include Monistat® women’s health products, Nix® lice treatment, Chloraseptic® sore throat treatments, Clear Eyes® eye care products, Compound W® wart treatments, The Doctor's® NightGuard® dental protector, Little Remedies® pediatric 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, our expectations regarding the closing of the DenTek acquisition and the integration of DenTek into our product portfolio, the expected impact of the acquisition on our oral care platform, and our expected future operating results, including revenue growth, adjusted EPS, and anticipated adjusted free cash flow. 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, supplier issues, unexpected costs, the integration of the DenTek acquisition, 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, 2015, Quarterly Report on Form 10-Q for the quarter ended September 30, 2015, 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 December 31, | Nine Months Ended December 31, | ||||||||||||||
(In thousands, except per share data) | 2015 | 2014 | 2015 | 2014 | |||||||||||
Revenues | |||||||||||||||
Net sales | $ | 199,485 | $ | 196,435 | $ | 596,034 | $ | 520,981 | |||||||
Other revenues | 710 | 1,171 | 2,358 | 3,596 | |||||||||||
Total revenues | 200,195 | 197,606 | 598,392 | 524,577 | |||||||||||
Cost of Sales | |||||||||||||||
Cost of sales (exclusive of depreciation shown below) | 83,411 | 85,861 | 249,432 | 228,424 | |||||||||||
Gross profit | 116,784 | 111,745 | 348,960 | 296,153 | |||||||||||
Operating Expenses | |||||||||||||||
Advertising and promotion | 29,935 | 30,144 | 84,250 | 74,284 | |||||||||||
General and administrative | 18,135 | 19,454 | 52,186 | 63,588 | |||||||||||
Depreciation and amortization | 6,071 | 5,154 | 17,478 | 11,967 | |||||||||||
Total operating expenses | 54,141 | 54,752 | 153,914 | 149,839 | |||||||||||
Operating income | 62,643 | 56,993 | 195,046 | 146,314 | |||||||||||
Other (income) expense | |||||||||||||||
Interest income | (31 | ) | (20 | ) | (91 | ) | (67 | ) | |||||||
Interest expense | 19,493 | 24,612 | 62,104 | 57,505 | |||||||||||
Gain on sale of asset | — | (1,133 | ) | — | (1,133 | ) | |||||||||
Loss on extinguishment of debt | — | — | 451 | — | |||||||||||
Total other expense | 19,462 | 23,459 | 62,464 | 56,305 | |||||||||||
Income before income taxes | 43,181 | 33,534 | 132,582 | 90,009 | |||||||||||
Provision for income taxes | 15,186 | 12,241 | 46,611 | 35,521 | |||||||||||
Net income | $ | 27,995 | $ | 21,293 | $ | 85,971 | $ | 54,488 | |||||||
Earnings per share: | |||||||||||||||
Basic | $ | 0.53 | $ | 0.41 | $ | 1.63 | $ | 1.05 | |||||||
Diluted | $ | 0.53 | $ | 0.40 | $ | 1.62 | $ | 1.04 | |||||||
Weighted average shares outstanding: | |||||||||||||||
Basic | 52,824 | 52,278 | 52,727 | 52,110 | |||||||||||
Diluted | 53,203 | 52,730 | 53,106 | 52,622 | |||||||||||
Comprehensive income, net of tax: | |||||||||||||||
Currency translation adjustments | 4,922 | (8,779 | ) | (6,562 | ) | (16,883 | ) | ||||||||
Total other comprehensive loss | 4,922 | (8,779 | ) | (6,562 | ) | (16,883 | ) | ||||||||
Comprehensive income | $ | 32,917 | $ | 12,514 | $ | 79,409 | $ | 37,605 | |||||||
Prestige Brands Holdings, Inc.
Consolidated Balance Sheets
(Unaudited)
(In thousands) Assets | December 31, 2015 | March 31, 2015 | |||||
Current assets | |||||||
Cash and cash equivalents | $ | 48,973 | $ | 21,318 | |||
Accounts receivable, net | 85,085 | 87,858 | |||||
Inventories | 80,671 | 74,000 | |||||
Deferred income tax assets | 8,406 | 8,097 | |||||
Prepaid expenses and other current assets | 5,020 | 10,434 | |||||
Total current assets | 228,155 | 201,707 | |||||
Property and equipment, net | 12,302 | 13,744 | |||||
Goodwill | 282,679 | 290,651 | |||||
Intangible assets, net | 2,116,511 | 2,134,700 | |||||
Other long-term assets | 1,352 | 1,165 | |||||
Total Assets | $ | 2,640,999 | $ | 2,641,967 | |||
Liabilities and Stockholders' Equity | |||||||
Current liabilities | |||||||
Accounts payable | $ | 28,539 | $ | 46,115 | |||
Accrued interest payable | 9,359 | 11,974 | |||||
Other accrued liabilities | 48,823 | 40,948 | |||||
Total current liabilities | 86,721 | 99,037 | |||||
Long-term debt | |||||||
Principal amount | 1,477,500 | 1,593,600 | |||||
Less unamortized debt costs | (30,468 | ) | (32,327 | ) | |||
Long-term debt, net | 1,447,032 | 1,561,273 | |||||
Deferred income tax liabilities | 383,485 | 351,569 | |||||
Other long-term liabilities | 2,823 | 2,464 | |||||
Total Liabilities | 1,920,061 | 2,014,343 | |||||
Stockholders' Equity | |||||||
Preferred stock - $0.01 par value | |||||||
Authorized - 5,000 shares | |||||||
Issued and outstanding - None | — | — | |||||
Common stock - $0.01 par value | |||||||
Authorized - 250,000 shares | |||||||
Issued - 53,059 shares at December 31, 2015 and 52,562 shares at March 31, 2015 | 530 | 525 | |||||
Additional paid-in capital | 442,127 | 426,584 | |||||
Treasury stock, at cost - 306 shares at December 31, 2015 and 266 shares at March 31, 2015 | (5,121 | ) | (3,478 | ) | |||
Accumulated other comprehensive loss, net of tax | (29,974 | ) | (23,412 | ) | |||
Retained earnings | 313,376 | 227,405 | |||||
Total Stockholders' Equity | 720,938 | 627,624 | |||||
Total Liabilities and Stockholders' Equity | $ | 2,640,999 | $ | 2,641,967 | |||
Prestige Brands Holdings, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended December 31, | |||||||
(In thousands) | 2015 | 2014 | |||||
Operating Activities | |||||||
Net income | $ | 85,971 | $ | 54,488 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 17,478 | 11,967 | |||||
Gain on sale of asset | — | (1,133 | ) | ||||
Deferred income taxes | 31,591 | 19,517 | |||||
Amortization of debt origination costs | 5,433 | 5,904 | |||||
Stock-based compensation costs | 7,098 | 4,919 | |||||
Loss on extinguishment of debt | 451 | — | |||||
Lease termination costs | — | 1,125 | |||||
(Gain) loss on sale or disposal of property and equipment | (36 | ) | 321 | ||||
Changes in operating assets and liabilities, net of effects from acquisitions | |||||||
Accounts receivable | 2,453 | 2,113 | |||||
Inventories | (7,114 | ) | 14,478 | ||||
Prepaid expenses and other current assets | 5,472 | 7,598 | |||||
Accounts payable | (17,553 | ) | (25,452 | ) | |||
Accrued liabilities | 5,207 | 8,297 | |||||
Net cash provided by operating activities | 136,451 | 104,142 | |||||
Investing Activities | |||||||
Purchases of property and equipment | (2,540 | ) | (3,700 | ) | |||
Proceeds from the sale of property and equipment | 344 | — | |||||
Proceeds from sale of business | — | 18,500 | |||||
Proceeds from sale of asset | — | 10,000 | |||||
Proceeds from Insight Pharmaceuticals working capital arbitration settlement | 7,237 | — | |||||
Acquisition of Insight Pharmaceuticals, less cash acquired | — | (749,666 | ) | ||||
Acquisition of the Hydralyte brand | — | (77,991 | ) | ||||
Net cash provided by (used in) investing activities | 5,041 | (802,857 | ) | ||||
Financing Activities | |||||||
Term loan borrowings | — | 720,000 | |||||
Term loan repayments | (50,000 | ) | (80,000 | ) | |||
Borrowings under revolving credit agreement | 15,000 | 124,600 | |||||
Repayments under revolving credit agreement | (81,100 | ) | (58,500 | ) | |||
Payments of debt origination costs | (4,211 | ) | (16,072 | ) | |||
Proceeds from exercise of stock options | 6,600 | 3,654 | |||||
Proceeds from restricted stock exercises | 544 | 57 | |||||
Excess tax benefits from share-based awards | 1,850 | 1,030 | |||||
Fair value of shares surrendered as payment of tax withholding | (2,187 | ) | (1,688 | ) | |||
Net cash (used in) provided by financing activities | (113,504 | ) | 693,081 | ||||
Effects of exchange rate changes on cash and cash equivalents | (333 | ) | (746 | ) | |||
Increase (decrease) in cash and cash equivalents | 27,655 | (6,380 | ) | ||||
Cash and cash equivalents - beginning of period | 21,318 | 28,331 | |||||
Cash and cash equivalents - end of period | $ | 48,973 | $ | 21,951 | |||
Interest paid | $ | 58,867 | $ | 49,435 | |||
Income taxes paid | $ | 9,014 | $ | 7,135 | |||
Prestige Brands Holdings, Inc.
Consolidated Statements of Income
Business Segments
(Unaudited)
Three Months Ended December 31, 2015 | |||||||||||||||
(In thousands) | North American OTC Healthcare | International OTC Healthcare | Household Cleaning | Consolidated | |||||||||||
Gross segment revenues* | $ | 165,278 | $ | 13,812 | $ | 20,623 | $ | 199,713 | |||||||
Elimination of intersegment revenues | (228 | ) | — | — | (228 | ) | |||||||||
Third-party segment revenues | 165,050 | 13,812 | 20,623 | 199,485 | |||||||||||
Other revenues* | — | 9 | 701 | 710 | |||||||||||
Total segment revenues | 165,050 | 13,821 | 21,324 | 200,195 | |||||||||||
Cost of sales | 62,654 | 4,965 | 15,792 | 83,411 | |||||||||||
Gross profit | 102,396 | 8,856 | 5,532 | 116,784 | |||||||||||
Advertising and promotion | 26,472 | 2,838 | 625 | 29,935 | |||||||||||
Contribution margin | $ | 75,924 | $ | 6,018 | $ | 4,907 | 86,849 | ||||||||
Other operating expenses | 24,206 | ||||||||||||||
Operating income | 62,643 | ||||||||||||||
Other expense | 19,462 | ||||||||||||||
Income before income taxes | 43,181 | ||||||||||||||
Provision for income taxes | 15,186 | ||||||||||||||
Net income | $ | 27,995 | |||||||||||||
Nine Months Ended December 31, 2015 | |||||||||||||||
(In thousands) | North American OTC Healthcare | International OTC Healthcare | Household Cleaning | Consolidated | |||||||||||
Gross segment revenues* | $ | 489,224 | $ | 43,254 | $ | 65,984 | $ | 598,462 | |||||||
Elimination of intersegment revenues | (2,428 | ) | — | — | (2,428 | ) | |||||||||
Third-party segment revenues | 486,796 | 43,254 | 65,984 | 596,034 | |||||||||||
Other revenues* | 14 | 41 | 2,303 | 2,358 | |||||||||||
Total segment revenues | 486,810 | 43,295 | 68,287 | 598,392 | |||||||||||
Cost of sales | 182,279 | 16,347 | 50,806 | 249,432 | |||||||||||
Gross profit | 304,531 | 26,948 | 17,481 | 348,960 | |||||||||||
Advertising and promotion | 74,107 | 8,338 | 1,805 | 84,250 | |||||||||||
Contribution margin | $ | 230,424 | $ | 18,610 | $ | 15,676 | 264,710 | ||||||||
Other operating expenses | 69,664 | ||||||||||||||
Operating income | 195,046 | ||||||||||||||
Other expense | 62,464 | ||||||||||||||
Income before income taxes | 132,582 | ||||||||||||||
Provision for income taxes | 46,611 | ||||||||||||||
Net income | $ | 85,971 | |||||||||||||
Three Months Ended December 31, 2014 | |||||||||||||||
(In thousands) | North American OTC Healthcare | International OTC Healthcare | Household Cleaning | Consolidated | |||||||||||
Gross segment revenues* | $ | 162,163 | $ | 15,563 | $ | 20,218 | $ | 197,944 | |||||||
Elimination of intersegment revenues | (1,509 | ) | — | — | (1,509 | ) | |||||||||
Third-party segment revenues | 160,654 | 15,563 | 20,218 | 196,435 | |||||||||||
Other revenues | 151 | 4 | 1,016 | 1,171 | |||||||||||
Total segment revenues | 160,805 | 15,567 | 21,234 | 197,606 | |||||||||||
Cost of sales | 63,479 | 6,247 | 16,135 | 85,861 | |||||||||||
Gross profit | 97,326 | 9,320 | 5,099 | 111,745 | |||||||||||
Advertising and promotion | 26,779 | 2,776 | 589 | 30,144 | |||||||||||
Contribution margin | $ | 70,547 | $ | 6,544 | $ | 4,510 | 81,601 | ||||||||
Other operating expenses | 24,608 | ||||||||||||||
Operating income | 56,993 | ||||||||||||||
Other expense | 23,459 | ||||||||||||||
Income before income taxes | 33,534 | ||||||||||||||
Provision for income taxes | 12,241 | ||||||||||||||
Net income | $ | 21,293 | |||||||||||||
Nine Months Ended December 31, 2014 | |||||||||||||||
(In thousands) | North American OTC Healthcare | International OTC Healthcare | Household Cleaning | Consolidated | |||||||||||
Gross segment revenues* | $ | 412,703 | $ | 45,157 | $ | 66,057 | $ | 523,917 | |||||||
Elimination of intersegment revenues | (2,936 | ) | — | — | (2,936 | ) | |||||||||
Third-party segment revenues | 409,767 | 45,157 | 66,057 | 520,981 | |||||||||||
Other revenues | 478 | 62 | 3,056 | 3,596 | |||||||||||
Total segment revenues | 410,245 | 45,219 | 69,113 | 524,577 | |||||||||||
Cost of sales | 158,005 | 17,926 | 52,493 | 228,424 | |||||||||||
Gross profit | 252,240 | 27,293 | 16,620 | 296,153 | |||||||||||
Advertising and promotion | 64,573 | 8,151 | 1,560 | 74,284 | |||||||||||
Contribution margin | $ | 187,667 | $ | 19,142 | $ | 15,060 | 221,869 | ||||||||
Other operating expenses | 75,555 | ||||||||||||||
Operating income | 146,314 | ||||||||||||||
Other expense | 56,305 | ||||||||||||||
Income before income taxes | 90,009 | ||||||||||||||
Provision for income taxes | 35,521 | ||||||||||||||
Net income | $ | 54,488 | |||||||||||||
* Certain immaterial amounts relating to intersegment revenues and other revenues 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 define Non-GAAP Organic Revenues as Total Revenues excluding revenues associated with products acquired or divested in the periods presented. We define Non-GAAP Organic Revenues on a Constant Currency basis as Total Revenues excluding acquisitions and divestitures and the impact of current year foreign exchange rates on total revenues. We define Non-GAAP Total Revenues on a Constant Currency basis as Total Revenues excluding the impact of currency exchange rates on total revenues. We define Non-GAAP Adjusted EBITDA as earnings before interest expense (income), income taxes, depreciation and amortization, inventory step-up charges, certain other legal and professional fees, other acquisition-related costs, costs associated with our CEO transition, gain on sale of asset, and loss on extinguishment of debt. Non-GAAP Adjusted EBITDA Margin is calculated as Non-GAAP Adjusted EBITDA divided by GAAP Total Revenues. We define Non-GAAP Adjusted Gross Margin as Gross Profit before inventory step up charges, and certain other acquisition and integration-related costs. Non-GAAP Adjusted Gross Margin percentage is calculated based on Non-GAAP Adjusted Gross Margin divided by GAAP Total Revenues. We define Non-GAAP Adjusted General and Administrative expenses as General and Administrative expenses minus certain other legal and professional fees, acquisition and other integration costs, and costs associated with our CEO transition. Non-GAAP Adjusted General and Administrative expense percentage is calculated based on Non-GAAP Adjusted General and Administrative expense divided by GAAP Total Revenues. We define Non-GAAP Adjusted Net Income as Net Income before inventory step-up charges, certain other legal and professional fees, other acquisition and integration-related costs, costs associated with our CEO transition, accelerated amortization of debt origination costs, gain on sale of asset, loss on extinguishment of debt, and the applicable tax impacts associated with these items 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. Non-GAAP Organic Revenues, Non-GAAP Organic Revenues on a Constant Currency basis, Non-GAAP Total Revenues on a Constant Currency basis, Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted EBITDA Margin, Non-GAAP Adjusted Gross Margin, Non-GAAP Adjusted Gross Margin percentage, Non-GAAP Adjusted General and Administrative Expense, Non-GAAP Adjusted General and Administrative Expense percentage, Non-GAAP Adjusted Net Income, Non-GAAP Adjusted EPS, Non-GAAP Free Cash Flow, and Non-GAAP Adjusted Free Cash Flow may not be comparable to similarly titled measures reported by other companies.
We are presenting Non-GAAP Organic Revenues, Non-GAAP Organic Revenues on a Constant Currency basis, Non-GAAP Total Revenues on a Constant Currency basis, Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted EBITDA Margin, Non-GAAP Adjusted Gross Margin, Non-GAAP Adjusted Gross Margin percentage, Non-GAAP Adjusted General and Administrative Expense, Non-GAAP Adjusted General and Administrative Expense percentage, Non-GAAP Adjusted Net Income, Non-GAAP Adjusted EPS, Non-GAAP Free Cash Flow, 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 Organic Revenues, Non-GAAP Organic Revenues on a Constant Currency basis, Non-GAAP Total Revenues on a Constant Currency basis, Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted EBITDA Margin, Non-GAAP Adjusted Gross Margin, Non-GAAP Adjusted Gross Margin percentage, Non-GAAP Adjusted General and Administrative Expense, Non-GAAP Adjusted General and Administrative Expense percentage, Non-GAAP Adjusted Net Income, Non-GAAP Adjusted EPS, Non-GAAP Free Cash Flow,
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 Organic Revenues, Non-GAAP Organic Revenues on a Constant Currency basis, Non-GAAP Total Revenues on a Constant Currency basis, Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted EBITDA Margin, Non-GAAP Adjusted Gross Margin, Non-GAAP Adjusted Gross Margin percentage, Non-GAAP Adjusted General and Administrative Expense, Non-GAAP Adjusted General and Administrative Expense percentage, Non-GAAP Adjusted Net Income, Non-GAAP Adjusted EPS, Non-GAAP Free Cash Flow, 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 Organic Revenues, Non-GAAP Organic Revenues on a Constant Currency basis, Non-GAAP Total Revenues on a Constant Currency basis, Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted EBITDA Margin, Non-GAAP Adjusted Gross Margin, Non-GAAP Adjusted Gross Margin percentage, Non-GAAP Adjusted General and Administrative Expense, Non-GAAP Adjusted General and Administrative Expense percentage, Non-GAAP Adjusted Net Income, Non-GAAP Adjusted EPS, Non-GAAP Free Cash Flow, 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 Total Revenues, General and Administrative expense, Operating income, Net income, and Net cash flow provided by operating activities, or cash flow statement data prepared in accordance with GAAP, or as a measure of profitability or liquidity.
The following tables set forth the reconciliation of Non-GAAP Organic Revenues, Non-GAAP Organic Revenues on a Constant Currency basis, Non-GAAP Total Revenues on a Constant Currency basis, Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted EBITDA Margin, Non-GAAP Adjusted Gross Margin, Non-GAAP Adjusted Gross Margin percentage, Non-GAAP Adjusted General and Administrative Expense, Non-GAAP Adjusted General and Administrative Expense percentage, Non-GAAP Adjusted Net Income, Non-GAAP Adjusted EPS, Non-GAAP Free Cash Flow, 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 Organic Revenues and Non-GAAP Organic Revenues on a Constant Currency basis and related growth percentages:
Three Months Ended December 31, | Nine Months Ended December 31, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
(In thousands) | |||||||||||||||
GAAP Total Revenues | $ | 200,195 | $ | 197,606 | $ | 598,392 | $ | 524,577 | |||||||
Adjustments: | |||||||||||||||
Hydralyte revenues (1) | — | — | (1,217 | ) | — | ||||||||||
Insight revenues (2) | — | — | (73,630 | ) | — | ||||||||||
Total adjustments | — | — | (74,847 | ) | — | ||||||||||
Non-GAAP Organic Revenues | 200,195 | 197,606 | 523,545 | 524,577 | |||||||||||
Organic Revenue Growth (Decline) | 1.3 | % | (0.2 | )% | |||||||||||
Impact of foreign currency exchange rates (3) | (3,614 | ) | (11,605 | ) | |||||||||||
Non-GAAP Organic Revenues on a constant currency basis | $ | 200,195 | $ | 193,992 | $ | 523,545 | $ | 512,972 | |||||||
Constant Currency Organic Revenue Growth | 3.2 | % | 2.1 | % | |||||||||||
(1) Revenue adjustments relate to our International OTC Healthcare segment
(2) Revenue adjustments relate to our North American OTC Healthcare segment
(3) Foreign currency exchange rate adjustments relate to all segments
Reconciliation of GAAP Total Revenues to Non-GAAP Total Revenues on a Constant Currency basis and related growth percentages:
Three Months Ended December 31, | Nine Months Ended December 31, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
(In thousands) | |||||||||||||||
GAAP Total Revenues | $ | 200,195 | $ | 197,606 | $ | 598,392 | $ | 524,577 | |||||||
Impact of foreign currency exchange rates (1) | (3,614 | ) | (11,605 | ) | |||||||||||
Non-GAAP Total Revenues on a constant currency basis | $ | 200,195 | $ | 193,992 | $ | 598,392 | $ | 512,972 | |||||||
Constant Currency Revenue Growth | 3.2 | % | 16.7 | % | |||||||||||
(1) Foreign currency exchange rate adjustments relate to all segments
Reconciliation of GAAP Gross Profit to Non-GAAP Adjusted Gross Margin and related Adjusted Gross Margin percentage:
Three Months Ended December 31, | Nine Months Ended December 31, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
(In thousands) | |||||||||||||||
GAAP Total Revenues | $ | 200,195 | $ | 197,606 | $ | 598,392 | $ | 524,577 | |||||||
GAAP Gross Profit | $ | 116,784 | $ | 111,745 | $ | 348,960 | $ | 296,153 | |||||||
Adjustments: | |||||||||||||||
Inventory step-up charges and other costs associated with the Hydralyte acquisition (1) | — | — | — | 246 | |||||||||||
Inventory step-up charges associated with Insight acquisition (2) | — | 1,326 | — | 1,979 | |||||||||||
Total adjustments | — | 1,326 | — | 2,225 | |||||||||||
Non-GAAP Adjusted Gross Margin | $ | 116,784 | $ | 113,071 | $ | 348,960 | $ | 298,378 | |||||||
Non-GAAP Adjusted Gross Margin % | 58.3 | % | 57.2 | % | 58.3 | % | 56.9 | % | |||||||
(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 related Non-GAAP Adjusted General and Administrative Expense percentage:
Three Months Ended December 31, | Nine Months Ended December 31, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
(In thousands) | |||||||||||||||
GAAP General and Administrative Expense | $ | 18,135 | $ | 19,454 | $ | 52,186 | $ | 63,588 | |||||||
Adjustments: | |||||||||||||||
Costs associated with CEO transition | — | — | 1,406 | — | |||||||||||
Legal and professional fees associated with acquisitions | 1,016 | 477 | 1,016 | 10,334 | |||||||||||
Stamp/Duty Tax on Australian acquisition | — | — | — | 2,940 | |||||||||||
Integration, transition and other costs associated with acquisitions | — | 5,181 | — | 9,613 | |||||||||||
Total adjustments | 1,016 | 5,658 | 2,422 | 22,887 | |||||||||||
Non-GAAP Adjusted General and Administrative Expense | $ | 17,119 | $ | 13,796 | $ | 49,764 | $ | 40,701 | |||||||
Non-GAAP Adjusted General and Administrative Expense Percentage | 8.6 | % | 7.0 | % | 8.3 | % | 7.8 | % | |||||||
Reconciliation of GAAP Net Income to Non-GAAP Adjusted EBITDA and related Non-GAAP Adjusted EBITDA Margin:
Three Months Ended December 31, | Nine Months Ended December 31, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
(In thousands) | |||||||||||||||
GAAP Net Income | $ | 27,995 | $ | 21,293 | $ | 85,971 | $ | 54,488 | |||||||
Interest expense, net | 19,462 | 24,592 | 62,013 | 57,438 | |||||||||||
Provision for income taxes | 15,186 | 12,241 | 46,611 | 35,521 | |||||||||||
Depreciation and amortization | 6,071 | 5,154 | 17,478 | 11,967 | |||||||||||
Non-GAAP EBITDA: | 68,714 | 63,280 | 212,073 | 159,414 | |||||||||||
Adjustments: | |||||||||||||||
Inventory step-up charges and other costs associated with the Hydralyte acquisition (1) | — | — | — | 246 | |||||||||||
Inventory step-up charges associated with Insight acquisition (2) | — | 1,326 | — | 1,979 | |||||||||||
Costs associated with CEO transition (3) | — | — | 1,406 | — | |||||||||||
Legal and professional fees associated with acquisitions (3) | 1,016 | 477 | 1,016 | 10,334 | |||||||||||
Stamp/Duty Tax on Australian acquisition (3) | — | — | — | 2,940 | |||||||||||
Integration, transition and other costs associated with acquisitions (3) | — | 5,181 | — | 9,613 | |||||||||||
Gain on sale of asset | — | (1,133 | ) | — | (1,133 | ) | |||||||||
Loss on extinguishment of debt | — | — | 451 | — | |||||||||||
Total adjustments | 1,016 | 5,851 | 2,873 | 23,979 | |||||||||||
Non-GAAP Adjusted EBITDA | $ | 69,730 | $ | 69,131 | $ | 214,946 | $ | 183,393 | |||||||
Non-GAAP Adjusted EBITDA Margin | 34.8 | % | 35.0 | % | 35.9 | % | 35.0 | % | |||||||
(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 December 31, | Nine Months Ended December 31, | ||||||||||||||||||||||||||
2015 | 2015 Adjusted EPS | 2014 | 2014 Adjusted EPS | 2015 | 2015 Adjusted EPS | 2014 | 2014 Adjusted EPS | ||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||||
GAAP Net Income | $ | 27,995 | $ | 0.53 | $ | 21,293 | $ | 0.40 | $ | 85,971 | $ | 1.62 | $ | 54,488 | $ | 1.04 | |||||||||||
Adjustments: | |||||||||||||||||||||||||||
Inventory step-up charges and other costs associated the Hydralyte acquisition (1) | — | — | — | — | — | — | 246 | — | |||||||||||||||||||
Inventory step-up charges associated with Insight acquisition (2) | — | — | 1,326 | 0.03 | — | — | 1,979 | 0.04 | |||||||||||||||||||
Costs associated with CEO transition (3) | — | — | — | — | 1,406 | 0.03 | — | — | |||||||||||||||||||
Legal and professional fees associated with acquisitions (3) | 1,016 | 0.02 | 477 | 0.01 | 1,016 | 0.02 | 10,334 | 0.20 | |||||||||||||||||||
Stamp/Duty Tax on Australian acquisition (3) | — | — | — | — | — | — | 2,940 | 0.05 | |||||||||||||||||||
Integration, transition and other costs associated with acquisitions (3) | — | — | 5,181 | 0.10 | — | — | 9,613 | 0.18 | |||||||||||||||||||
Accelerated amortization of debt origination costs | — | — | 218 | — | — | — | 218 | — | |||||||||||||||||||
Gain on sale of asset | — | — | (1,133 | ) | (0.02 | ) | — | — | (1,133 | ) | (0.02 | ) | |||||||||||||||
Loss on extinguishment of debt | — | — | — | — | 451 | 0.01 | — | — | |||||||||||||||||||
Tax impact of adjustments | (657 | ) | (0.02 | ) | (1,950 | ) | (0.04 | ) | (1,314 | ) | (0.03 | ) | (5,419 | ) | (0.10 | ) | |||||||||||
Total adjustments | 359 | — | 4,119 | 0.08 | 1,559 | 0.03 | 18,778 | 0.35 | |||||||||||||||||||
Non-GAAP Adjusted Net Income and Adjusted EPS | $ | 28,354 | $ | 0.53 | $ | 25,412 | $ | 0.48 | $ | 87,530 | $ | 1.65 | $ | 73,266 | $ | 1.39 | |||||||||||
(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 Non-GAAP Adjusted Free Cash Flow:
Three Months Ended December 31, | Nine Months Ended December 31, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
(In thousands) | |||||||||||||||
GAAP Net Income | $ | 27,995 | $ | 21,293 | $ | 85,971 | $ | 54,488 | |||||||
Adjustments: | |||||||||||||||
Adjustments to reconcile net income to net cash provided by operating activities as shown in the Statement of Cash Flows | 19,119 | 17,765 | 62,015 | 42,620 | |||||||||||
Changes in operating assets and liabilities, net of effects from acquisitions as shown in the Statement of Cash Flows | (1,253 | ) | 8,026 | (11,535 | ) | 7,034 | |||||||||
Total adjustments | 17,866 | 25,791 | 50,480 | 49,654 | |||||||||||
GAAP Net cash provided by operating activities | 45,861 | 47,084 | 136,451 | 104,142 | |||||||||||
Purchases of property and equipment | (857 | ) | (2,320 | ) | (2,540 | ) | (3,700 | ) | |||||||
Non-GAAP Free Cash Flow | 45,004 | 44,764 | 133,911 | 100,442 | |||||||||||
Integration, transition and other payments associated with acquisitions | 796 | 784 | 796 | 13,201 | |||||||||||
Adjusted Non-GAAP Free Cash Flow | $ | 45,800 | $ | 45,548 | $ | 134,707 | $ | 113,643 | |||||||
Outlook for Fiscal Year 2016:
Reconciliation of Projected GAAP EPS to Projected Non-GAAP Adjusted EPS:
2016 Projected EPS | |||||||
Low | High | ||||||
Projected FY'16 GAAP EPS | $ | 2.00 | $ | 2.05 | |||
Adjustments: | |||||||
Costs associated with term loan refinancing and CEO transition | 0.05 | 0.05 | |||||
Total Adjustments | 0.05 | 0.05 | |||||
Projected Non-GAAP Adjusted EPS | $ | 2.05 | $ | 2.10 | |||
Reconciliation of Projected GAAP Net cash provided by operating activities to Projected Non-GAAP Free Cash Flow:
2016 Projected Free Cash Flow | |||
(In millions) | |||
Projected FY'16 GAAP Net cash provided by operating activities | $ | 181 | |
Additions to property and equipment for cash | (6 | ) | |
Projected Non-GAAP Free Cash Flow | $ | 175 | |