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-kpressreleaseseptember2.htm |
Exhibit 99.1
Prestige Brands Holdings, Inc. Reports Second Quarter Fiscal 2017 Results
▪ | Q2 Revenues Up 4.4% to $215.1 Million; First Half Year Revenues Up 6.6% |
▪ | Q2 EPS of $0.60; Non-GAAP Adjusted EPS Increased 5.0% to $0.63 |
▪ | Q2 Net Cash Provided by Operating Activities Up 5.2% to $49.5 Million |
▪ | Debt Reduced by $100.5 Million in Q2 |
▪ | Outlook Reaffirmed for Full Year FY’17 Revenue, Non-GAAP Adjusted EPS & Non-GAAP Adjusted Free Cash Flow |
Tarrytown, NY-(Business Wire)-November 3, 2016--Prestige Brands Holdings, Inc. (NYSE-PBH) today announced results for the second quarter of fiscal year 2017, which ended September 30, 2016.
“We are pleased with the results of the second fiscal quarter, which reflect record quarterly sales, continued strong adjusted earnings per share, free cash flow growth and debt repayment of more than $100 million during the quarter,” said Ron Lombardi, CEO. “We continue to gain market share across our invest for growth portfolio and continue to expect consumption to be in line with our organic growth targets for the year,” he said.
Second Fiscal Quarter and First Half of Fiscal 2017 Ended September 30, 2016
Reported revenues for the second quarter of fiscal 2017 were $215.1 million, an increase of 4.4% over the prior year comparable quarter’s revenues of $206.1 million. Reported revenues for the six month period ended September 30, 2016 totaled $424.6 million, an increase of 6.6% over the prior year comparable six month period’s revenues of $398.2 million. These results reflect consumption increases across the Company’s invest for growth portfolio and the addition of the DenTek business.
Reported net income for the second quarter of fiscal 2017 totaled $32.2 million, an increase of 1.2% over the prior year comparable quarter’s net income of $31.8 million. Earnings per share were $0.60 for both the second quarter of fiscal 2017 and the prior year comparable period. Non-GAAP adjusted net income for the second quarter of fiscal 2017 was $33.8 million, an increase of 6.2% over the prior year period of $31.8 million. Non-GAAP adjusted earnings per share were $0.63 per share for the second quarter of fiscal 2017, compared to $0.60 per share in the prior year comparable period. Adjustments to net income in the second fiscal quarter of 2017 included accelerated amortization of debt origination costs, integration costs associated with the DenTek acquisition and the related income tax effects of the adjustments.
Reported net income for the first six months of fiscal 2017 totaled $26.7 million compared with the prior year comparable period’s net income of $58.0 million. Reported earnings per share for the first six month period of fiscal 2017 were $0.50, compared to the prior year comparable period’s reported earnings per share of $1.09 per share. Non-GAAP adjusted net income increased 10.1% for the first six month period of fiscal 2017 to $65.2 million, or $1.22 per share, compared to $59.2 million, or $1.12 per share, during the prior year comparable period. Adjustments to net income in the first six months of fiscal year 2017 included accelerated amortization of debt origination costs, integration costs associated with the DenTek acquisition, a net non-cash charge related to the divestiture of certain non-core brands and related income tax effects of the adjustments. Adjustments to net income in the first six months of fiscal year 2016 included costs associated with the CEO transition and loss on extinguishment of debt.
Free Cash Flow & Balance Sheet
The Company's reported net cash provided by operating activities for the second fiscal quarter increased 5.2% to $49.5 million, while non-GAAP adjusted free cash flow for the second fiscal quarter increased 6.9% to $49.4 million compared to the prior year comparable quarter.
For the first six months of fiscal 2017, net cash provided by operating activities increased 10.7% to $100.3 million, while non-GAAP adjusted free cash flow increased 12.0% to $99.6 million compared to the prior year's period.
The Company's net debt at September 30, 2016 decreased to approximately $1.5 billion, reflecting debt repayments of $100.5 million during the second fiscal quarter of 2017 and $150.5 million fiscal year to date. Proceeds from the divestiture of certain non-core brands are included in debt repayments in the fiscal second quarter of 2017. At September 30, 2016, the Company's covenant-defined leverage ratio was approximately 4.5.
Segment Review
Reported revenues for the North American OTC Healthcare segment were $172.4 million for the second quarter of fiscal 2017, 4.3% higher than the prior year comparable quarter's revenues of $165.4 million. For the first six months of the current fiscal year, reported revenues for the North American OTC segment were $344.5 million, an increase of 7.1% compared to $321.8 million in the prior year comparable period.
Reported revenues for the International OTC Healthcare segment for the second quarter of fiscal 2017 were $18.8 million, 17.8% higher than the $16.0 million reported in the prior year comparable period. For the first six months of the current fiscal year, reported revenues for the International OTC Healthcare segment were $34.6 million, an increase of 17.6% over the prior year comparable period’s revenues of $29.4 million. Revenues for both the North American OTC Healthcare segment and the International OTC Healthcare segment were impacted by favorable consumption levels as well as revenues from DenTek.
Reported revenues for the Household Cleaning segment were $23.8 million for the second quarter of fiscal 2017, a decrease of 3.6% over the prior year comparable quarter's revenues of $24.7 million. For the first six months of the current fiscal year, reported revenues for the Household Cleaning segment were
$45.5 million, a decrease of 3.1% over the prior year comparable six month period’s revenues of $47.0 million.
Commentary and Outlook
“The strength of our diverse domestic and international product portfolio combined with continued consumption growth are offsetting retailer headwinds in the U.S., enabling us to reiterate our full year fiscal guidance and positioning us for another year of solid top and bottom line results,” Mr. Lombardi said. “We expect full year revenue growth of 4.5-6%, and anticipate adjusted EPS in the range of $2.30-$2.36 and free cash flow of $185 million or more,” he said.
Q2 Conference Call & Accompanying Slide Presentation
The Company will host a conference call to review its first quarter results on November 3, 2016 at 8:30 am EDT. The toll-free dial-in numbers are 844-233-9440 within North America and 574-990-1016 outside of North America. The conference ID is 94506453. The Company will provide a live Internet webcast, a slide presentation to accompany the call, as well as an archived replay, all of which can be accessed from the Investor Relations page of the Company's website at http://prestigebrands.com. The slide presentation can be accessed just before the call from the Investor Relations page of the website by clicking on Webcasts and Presentations. Telephonic replays will be available for two weeks following the completion of the call and can be accessed at 855-859-2056 within North America and at 404-537-3406 from outside North America. The conference ID is 94506453.
Non-GAAP Financial Information
In addition to financial results reported in accordance with generally accepted accounting principles (GAAP), we have provided certain non-GAAP financial information in this release to aid investors in understanding the Company's performance. Each non-GAAP financial measure is defined and reconciled
to its most closely related GAAP financial measure in the “About Non-GAAP Financial Measures” section at the end of this earnings release.
About Prestige Brands Holdings, Inc.
The Company markets and distributes brand name over-the-counter healthcare and household cleaning products throughout the U.S and Canada, Australia and in certain other international markets. The Company’s brands include Monistat® women’s health products, Nix® lice treatment, Chloraseptic® sore throat treatments, Clear Eyes® eye care products, Compound W® wart treatments, DenTek® and The Doctor's® NightGuard® oral care products, Little Remedies® pediatric products, Efferdent® denture care products, Luden's® throat drops, Dramamine® motion sickness treatment, BC® and Goody's® pain relievers, Beano® gas prevention, Debrox® earwax remover, and Gaviscon® antacid in Canada. Visit the Company's website at www.prestigebrands.com.
Note Regarding Forward-Looking Statements
This news release contains "forward-looking statements" within the meaning of the federal securities laws that are intended to qualify for the Safe Harbor from liability established by the Private Securities Litigation Reform Act of 1995. "Forward-looking statements" generally can be identified by the use of forward-looking terminology such as "assumptions," "target," "guidance," “strategy,” "outlook," "plans," "projection," "may," "will," "would," "expect," "intend," "estimate," "anticipate," "believe”, "potential," or "continue" (or the negative or other derivatives of each of these terms) or similar terminology. The "forward-looking statements" include, without limitation, statements regarding the Company's expectations regarding future operating results including revenues, adjusted earnings per share and adjusted free cash flow, and the Company’s ability to gain market share and meet organic growth targets. These statements are based on management's estimates and assumptions with respect to future events and financial performance and are believed to be reasonable, though are inherently uncertain and difficult to predict. Actual results could differ materially from those expected as a result of a variety of factors,
including the impact of our advertising and promotional initiatives, the severity of the cold and flu season, general economic and business conditions, fluctuating foreign exchange rates, consumer trends, competition in our industry, the ability of our third party manufacturers and suppliers to meet demand for our products, and introductions of new products. A discussion of other factors that could cause results to vary is included in the Company's Annual Report on Form 10-K for the year ended March 31, 2016, Quarterly Report on Form 10-Q for the quarter ended June 30, 2016, and other periodic reports filed with the Securities and Exchange Commission.
Company Contact: Dean Siegal
914-524-6819
Prestige Brands Holdings, Inc.
Consolidated Statements of Income and Comprehensive Income
(Unaudited)
Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||||||
(In thousands, except per share data) | 2016 | 2015 | 2016 | 2015 | |||||||||||
Revenues | |||||||||||||||
Net sales | $ | 215,017 | $ | 205,262 | $ | 423,787 | $ | 396,549 | |||||||
Other revenues | 35 | 803 | 840 | 1,648 | |||||||||||
Total revenues | 215,052 | 206,065 | 424,627 | 398,197 | |||||||||||
Cost of Sales | |||||||||||||||
Cost of sales (exclusive of depreciation shown below) | 91,087 | 86,125 | 179,071 | 166,021 | |||||||||||
Gross profit | 123,965 | 119,940 | 245,556 | 232,176 | |||||||||||
Operating Expenses | |||||||||||||||
Advertising and promotion | 28,592 | 27,893 | 56,227 | 54,315 | |||||||||||
General and administrative | 18,795 | 16,462 | 38,252 | 34,051 | |||||||||||
Depreciation and amortization | 6,016 | 5,687 | 12,848 | 11,407 | |||||||||||
(Gain) loss on sales of assets | (496 | ) | — | 54,957 | — | ||||||||||
Total operating expenses | 52,907 | 50,042 | 162,284 | 99,773 | |||||||||||
Operating income | 71,058 | 69,898 | 83,272 | 132,403 | |||||||||||
Other (income) expense | |||||||||||||||
Interest income | (46 | ) | (33 | ) | (103 | ) | (60 | ) | |||||||
Interest expense | 20,876 | 20,700 | 42,060 | 42,611 | |||||||||||
Loss on extinguishment of debt | — | — | — | 451 | |||||||||||
Total other expense | 20,830 | 20,667 | 41,957 | 43,002 | |||||||||||
Income before income taxes | 50,228 | 49,231 | 41,315 | 89,401 | |||||||||||
Provision for income taxes | 18,033 | 17,428 | 14,651 | 31,425 | |||||||||||
Net income | $ | 32,195 | $ | 31,803 | $ | 26,664 | $ | 57,976 | |||||||
Earnings per share: | |||||||||||||||
Basic | $ | 0.61 | $ | 0.60 | $ | 0.50 | $ | 1.10 | |||||||
Diluted | $ | 0.60 | $ | 0.60 | $ | 0.50 | $ | 1.09 | |||||||
Weighted average shares outstanding: | |||||||||||||||
Basic | 52,993 | 52,803 | 52,941 | 52,676 | |||||||||||
Diluted | 53,345 | 53,151 | 53,329 | 53,055 | |||||||||||
Comprehensive income, net of tax: | |||||||||||||||
Currency translation adjustments | 2,703 | (11,079 | ) | (3,121 | ) | (11,484 | ) | ||||||||
Total other comprehensive (loss) income | 2,703 | (11,079 | ) | (3,121 | ) | (11,484 | ) | ||||||||
Comprehensive income | $ | 34,898 | $ | 20,724 | $ | 23,543 | $ | 46,492 | |||||||
Prestige Brands Holdings, Inc.
Consolidated Balance Sheets
(Unaudited)
(In thousands) Assets | September 30, 2016 | March 31, 2016 | |||||
Current assets | |||||||
Cash and cash equivalents | $ | 30,458 | $ | 27,230 | |||
Accounts receivable, net | 92,869 | 95,247 | |||||
Inventories | 97,959 | 91,263 | |||||
Deferred income tax assets | 10,646 | 10,108 | |||||
Prepaid expenses and other current assets | 11,341 | 25,165 | |||||
Assets held for sale | 36,400 | — | |||||
Total current assets | 279,673 | 249,013 | |||||
Property and equipment, net | 13,732 | 15,540 | |||||
Goodwill | 351,662 | 360,191 | |||||
Intangible assets, net | 2,181,128 | 2,322,723 | |||||
Other long-term assets | 4,783 | 1,324 | |||||
Total Assets | $ | 2,830,978 | $ | 2,948,791 | |||
Liabilities and Stockholders' Equity | |||||||
Current liabilities | |||||||
Accounts payable | $ | 39,041 | $ | 38,296 | |||
Accrued interest payable | 8,264 | 8,664 | |||||
Other accrued liabilities | 67,006 | 59,724 | |||||
Total current liabilities | 114,311 | 106,684 | |||||
Long-term debt | |||||||
Principal amount | 1,502,000 | 1,652,500 | |||||
Less unamortized debt costs | (22,337 | ) | (27,191 | ) | |||
Long-term debt, net | 1,479,663 | 1,625,309 | |||||
Deferred income tax liabilities | 459,527 | 469,622 | |||||
Other long-term liabilities | 2,837 | 2,840 | |||||
Total Liabilities | 2,056,338 | 2,204,455 | |||||
Stockholders' Equity | |||||||
Preferred stock - $0.01 par value | |||||||
Authorized - 5,000 shares | |||||||
Issued and outstanding - None | — | — | |||||
Common stock - $0.01 par value | |||||||
Authorized - 250,000 shares | |||||||
Issued - 53,265 shares at September 30, 2016 and 53,066 shares at March 31, 2016 | 532 | 530 | |||||
Additional paid-in capital | 453,336 | 445,182 | |||||
Treasury stock, at cost - 331 shares at September 30, 2016 and 306 shares at March 31, 2016 | (6,558 | ) | (5,163 | ) | |||
Accumulated other comprehensive loss, net of tax | (26,646 | ) | (23,525 | ) | |||
Retained earnings | 353,976 | 327,312 | |||||
Total Stockholders' Equity | 774,640 | 744,336 | |||||
Total Liabilities and Stockholders' Equity | $ | 2,830,978 | $ | 2,948,791 | |||
Prestige Brands Holdings, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended September 30, | |||||||
(In thousands) | 2016 | 2015 | |||||
Operating Activities | |||||||
Net income | $ | 26,664 | $ | 57,976 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 12,848 | 11,407 | |||||
Loss (gain) on sales of intangible assets and property and equipment | 55,112 | (36 | ) | ||||
Deferred income taxes | (10,602 | ) | 21,985 | ||||
Amortization of debt origination costs | 5,097 | 4,055 | |||||
Stock-based compensation costs | 3,933 | 5,034 | |||||
Loss on extinguishment of debt | — | 451 | |||||
Changes in operating assets and liabilities, net of effects from acquisitions | |||||||
Accounts receivable | 356 | (3,918 | ) | ||||
Inventories | (10,663 | ) | (3,838 | ) | |||
Prepaid expenses and other current assets | 10,112 | 3,436 | |||||
Accounts payable | 820 | (4,519 | ) | ||||
Accrued liabilities | 6,605 | (1,443 | ) | ||||
Net cash provided by operating activities | 100,282 | 90,590 | |||||
Investing Activities | |||||||
Purchases of property and equipment | (1,404 | ) | (1,683 | ) | |||
Proceeds from sales of intangible assets | 52,353 | — | |||||
Proceeds from the sale of property and equipment | 75 | 344 | |||||
Net cash provided by (used in) investing activities | 51,024 | (1,339 | ) | ||||
Financing Activities | |||||||
Term loan repayments | (130,500 | ) | (50,000 | ) | |||
Borrowings under revolving credit agreement | 20,000 | 15,000 | |||||
Repayments under revolving credit agreement | (40,000 | ) | (55,000 | ) | |||
Payments of debt origination costs | (9 | ) | (4,211 | ) | |||
Proceeds from exercise of stock options | 3,423 | 6,398 | |||||
Proceeds from restricted stock exercises | — | 544 | |||||
Excess tax benefits from share-based awards | 800 | 1,850 | |||||
Fair value of shares surrendered as payment of tax withholding | (1,395 | ) | (2,187 | ) | |||
Net cash used in financing activities | (147,681 | ) | (87,606 | ) | |||
Effects of exchange rate changes on cash and cash equivalents | (397 | ) | (811 | ) | |||
Increase in cash and cash equivalents | 3,228 | 834 | |||||
Cash and cash equivalents - beginning of period | 27,230 | 21,318 | |||||
Cash and cash equivalents - end of period | $ | 30,458 | $ | 22,152 | |||
Interest paid | $ | 37,259 | $ | 40,550 | |||
Income taxes paid | $ | 6,743 | $ | 3,707 | |||
Prestige Brands Holdings, Inc.
Consolidated Statements of Income
Business Segments
(Unaudited)
Three Months Ended September 30, 2016 | |||||||||||||||
(In thousands) | North American OTC Healthcare | International OTC Healthcare | Household Cleaning | Consolidated | |||||||||||
Gross segment revenues | $ | 172,590 | $ | 18,802 | $ | 23,768 | $ | 215,160 | |||||||
Elimination of intersegment revenues | (143 | ) | — | — | (143 | ) | |||||||||
Third-party segment revenues | 172,447 | 18,802 | 23,768 | 215,017 | |||||||||||
Other revenues | — | 2 | 33 | 35 | |||||||||||
Total segment revenues | 172,447 | 18,804 | 23,801 | 215,052 | |||||||||||
Cost of sales | 65,402 | 7,096 | 18,589 | 91,087 | |||||||||||
Gross profit | 107,045 | 11,708 | 5,212 | 123,965 | |||||||||||
Advertising and promotion | 24,811 | 3,244 | 537 | 28,592 | |||||||||||
Contribution margin | $ | 82,234 | $ | 8,464 | $ | 4,675 | 95,373 | ||||||||
Other operating expenses* | 24,315 | ||||||||||||||
Operating income | 71,058 | ||||||||||||||
Other expense | 20,830 | ||||||||||||||
Income before income taxes | 50,228 | ||||||||||||||
Provision for income taxes | 18,033 | ||||||||||||||
Net income | $ | 32,195 | |||||||||||||
*Other operating expenses for the three months ended September 30, 2016 includes a pre-tax loss on sale of assets of $0.7 million related to Pediacare, New Skin, and Fiber Choice and a pre-tax gain on sale of assets of $1.2 million associated with the sale of license rights in certain geographic areas pertaining to Comet. The assets and corresponding contribution margin associated with the pre-tax loss on sale of assets related to Pediacare, New Skin, and Fiber Choice are included within the North American OTC Healthcare segment, while the pre-tax gain on sale of license rights related to Comet are included in the Household Cleaning segment.
Six Months Ended September 30, 2016 | |||||||||||||||
(In thousands) | North American OTC Healthcare | International OTC Healthcare | Household Cleaning | Consolidated | |||||||||||
Gross segment revenues | $ | 345,891 | $ | 34,602 | $ | 44,658 | $ | 425,151 | |||||||
Elimination of intersegment revenues | (1,364 | ) | — | — | (1,364 | ) | |||||||||
Third-party segment revenues | 344,527 | 34,602 | 44,658 | 423,787 | |||||||||||
Other revenues | — | 6 | 834 | 840 | |||||||||||
Total segment revenues | 344,527 | 34,608 | 45,492 | 424,627 | |||||||||||
Cost of sales | 129,636 | 14,044 | 35,391 | 179,071 | |||||||||||
Gross profit | 214,891 | 20,564 | 10,101 | 245,556 | |||||||||||
Advertising and promotion | 49,851 | 5,368 | 1,008 | 56,227 | |||||||||||
Contribution margin | $ | 165,040 | $ | 15,196 | $ | 9,093 | 189,329 | ||||||||
Other operating expenses* | 106,057 | ||||||||||||||
Operating income | 83,272 | ||||||||||||||
Other expense | 41,957 | ||||||||||||||
Income before income taxes | 41,315 | ||||||||||||||
Provision for income taxes | 14,651 | ||||||||||||||
Net income | $ | 26,664 | |||||||||||||
*Other operating expenses for the six months ended September 30, 2016 includes a pre-tax loss on sale of assets of $56.2 million related to Pediacare, New Skin, and Fiber Choice and a pre-tax gain on sale of assets of $1.2 million associated with the sale of license rights in certain geographic areas pertaining to Comet. The assets and corresponding contribution margin associated with the pre-tax loss on sale of assets related to Pediacare, New Skin, and Fiber Choice are included within the North American OTC Healthcare segment, while the pre-tax gain on sale of license rights related to Comet are included in the Household Cleaning segment.
Three Months Ended September 30, 2015 | |||||||||||||||
(In thousands) | North American OTC Healthcare | International OTC Healthcare | Household Cleaning | Consolidated | |||||||||||
Gross segment revenues | $ | 166,886 | $ | 15,954 | $ | 23,894 | $ | 206,734 | |||||||
Elimination of intersegment revenues | (1,472 | ) | — | — | (1,472 | ) | |||||||||
Third-party segment revenues | 165,414 | 15,954 | 23,894 | 205,262 | |||||||||||
Other revenues** | — | 6 | 797 | 803 | |||||||||||
Total segment revenues | 165,414 | 15,960 | 24,691 | 206,065 | |||||||||||
Cost of sales** | 61,497 | 6,094 | 18,534 | 86,125 | |||||||||||
Gross profit | 103,917 | 9,866 | 6,157 | 119,940 | |||||||||||
Advertising and promotion | 24,440 | 2,777 | 676 | 27,893 | |||||||||||
Contribution margin | $ | 79,477 | $ | 7,089 | $ | 5,481 | 92,047 | ||||||||
Other operating expenses | 22,149 | ||||||||||||||
Operating income | 69,898 | ||||||||||||||
Other expense | 20,667 | ||||||||||||||
Income before income taxes | 49,231 | ||||||||||||||
Provision for income taxes | 17,428 | ||||||||||||||
Net income | $ | 31,803 | |||||||||||||
Six Months Ended September 30, 2015 | |||||||||||||||
(In thousands) | North American OTC Healthcare | International OTC Healthcare | Household Cleaning | Consolidated | |||||||||||
Gross segment revenues | $ | 323,978 | $ | 29,410 | $ | 45,361 | $ | 398,749 | |||||||
Elimination of intersegment revenues | (2,200 | ) | — | — | (2,200 | ) | |||||||||
Third-party segment revenues | 321,778 | 29,410 | 45,361 | 396,549 | |||||||||||
Other revenues** | 15 | 31 | 1,602 | 1,648 | |||||||||||
Total segment revenues | 321,793 | 29,441 | 46,963 | 398,197 | |||||||||||
Cost of sales** | 119,624 | 11,383 | 35,014 | 166,021 | |||||||||||
Gross profit | 202,169 | 18,058 | 11,949 | 232,176 | |||||||||||
Advertising and promotion | 47,635 | 5,500 | 1,180 | 54,315 | |||||||||||
Contribution margin | $ | 154,534 | $ | 12,558 | $ | 10,769 | 177,861 | ||||||||
Other operating expenses | 45,458 | ||||||||||||||
Operating income | 132,403 | ||||||||||||||
Other expense | 43,002 | ||||||||||||||
Income before income taxes | 89,401 | ||||||||||||||
Provision for income taxes | 31,425 | ||||||||||||||
Net income | $ | 57,976 | |||||||||||||
**Certain immaterial amounts relating to other revenues and cost of sales for each of the three and six months ended September 30, 2015 were reclassified between the International OTC Healthcare segment and the North American OTC Healthcare segment. There were no changes to the consolidated financial statements for any periods presented.
About Non-GAAP Financial Measures
We have pursued various strategic initiatives and completed a number of acquisitions in recent years that have resulted in revenues that would not have otherwise been recognized. The frequency and the amount of such revenues vary significantly based on the size, timing and complexity of the transaction. In addition to financial results reported in accordance with GAAP, we disclose certain Non-GAAP financial measures ("NGFMs"), including, but not limited to, Non-GAAP Organic Revenues, Non-GAAP Organic Revenues on a Constant Currency basis, Non-GAAP Adjusted General and Administrative expenses, Non-GAAP Adjusted General and Administrative expense percentage, Non-GAAP EBITDA, Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted EBITDA Margin, Non-GAAP Adjusted Net Income, Non-GAAP Adjusted EPS, Non-GAAP Free Cash Flow, and Non-GAAP Adjusted Free Cash Flow. We use these NGFMs internally, along with GAAP information, in evaluating our operating performance and in making financial and operational decisions. We believe that the presentation of these NGFMs provides investors with greater transparency, and provides a more complete understanding of our business than could be obtained absent these disclosures, because the supplemental data relating to our financial condition and results of operations provides additional ways to view our operation when considered with both our GAAP results and the reconciliations below. In addition, we believe that the presentation of each of these NGFMs is useful to investors for period-to-period comparisons of results in assessing shareholder value, and we use these NGFMs internally to evaluate the performance of our personnel and also to evaluate our operating performance and compare our performance to that of our competitors.
These NGFMs are not in accordance with GAAP, should not be considered as a measure of profitability or liquidity, and may not be directly comparable to similarly titled NGFMs reported by other companies. These NGFMs have limitations and they should not be considered in isolation from or as an alternative to their most closely related GAAP measures reconciled below. Investors should not rely on any single financial measure when evaluating our business. We recommend investors review the GAAP financial measures included in this earnings release. When viewed in conjunction with our GAAP results and the reconciliations below, we believe these NGFMs provide greater transparency and a more complete understanding of factors affecting our business than GAAP measures alone.
NGFMs Defined
We define our NGFMs presented herein as follows:
• | Non-GAAP Organic Revenues: GAAP Total Revenues excluding revenues associated with products acquired or divested in the periods presented. |
• | Non-GAAP Organic Revenues on a Constant Currency basis: Non-GAAP Organic Revenues excluding the impact of current year foreign exchange rates on total revenues. |
• | Non-GAAP Adjusted General and Administrative expenses: GAAP General and Administrative expenses minus certain other legal and professional fees, acquisition and other integration costs, divestiture costs, and costs associated with our CEO transition. |
• | Non-GAAP Adjusted General and Administrative expense percentage: Calculated as Non-GAAP Adjusted General and Administrative expense divided by GAAP Total Revenues. |
• | Non-GAAP EBITDA: GAAP Net Income less interest expense (income), income taxes, and depreciation and amortization. |
• | Non-GAAP Adjusted EBITDA: Non-GAAP EBITDA less certain other legal and professional fees, other acquisition-related costs, divestiture costs, costs associated with our CEO transition, loss on extinguishment of debt, and gain/loss on sale of assets. |
• | Non-GAAP Adjusted EBITDA Margin: Calculated as Non-GAAP Adjusted EBITDA divided by GAAP Total Revenues. |
• | Non-GAAP Adjusted Net Income: GAAP Net Income before certain other legal and professional fees, other acquisition and integration-related costs, divestiture costs, costs associated with our CEO transition, accelerated amortization of debt origination costs due to sale of assets, loss on extinguishment of debt, gain/loss on sale of assets and the applicable tax impacts associated with these items and other non-deductible items. |
• | Non-GAAP Adjusted EPS: Calculated as Non-GAAP Adjusted Net Income, divided by the weighted average number of common and potential common shares outstanding during the period. |
• | Non-GAAP Free Cash Flow: GAAP Net cash provided by operating activities less cash paid for capital expenditures. |
• | Non-GAAP Adjusted Free Cash Flow: Non-GAAP Free Cash Flow plus cash payments made for integration, transition, and other costs associated with acquisitions and divestitures. |
The following tables set forth the reconciliations of each of our NGFMs to their most directly comparable financial measures presented in accordance with GAAP.
Reconciliation of GAAP Total Revenues to Non-GAAP Organic Revenues and Non-GAAP Organic Revenues on a Constant Currency basis and related growth percentages:
Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
(In thousands) | |||||||||||||||
GAAP Total Revenues | $ | 215,052 | $ | 206,065 | $ | 424,627 | $ | 398,197 | |||||||
Revenue Growth | 4.4 | % | 6.6 | % | |||||||||||
Adjustments: | |||||||||||||||
DenTek revenues (1) | (17,214 | ) | — | (33,841 | ) | — | |||||||||
Revenues associated with divested brands(2) | — | (6,922 | ) | — | (6,922 | ) | |||||||||
Total adjustments | (17,214 | ) | (6,922 | ) | (33,841 | ) | (6,922 | ) | |||||||
Non-GAAP Organic Revenues | 197,838 | 199,143 | 390,786 | 391,275 | |||||||||||
Organic Revenue Growth (Decline) | (0.7 | )% | (0.1 | )% | |||||||||||
Impact of foreign currency exchange rates (3) | (76 | ) | (905 | ) | |||||||||||
Non-GAAP Organic Revenues on a constant currency basis | $ | 197,838 | $ | 199,067 | $ | 390,786 | $ | 390,370 | |||||||
Constant Currency Organic Revenue Growth | (0.6 | )% | 0.1 | % | |||||||||||
(1) DenTek revenues are excluded for purposes of calculating Non-GAAP organic revenues. These revenue adjustments relate to our North American and International OTC Healthcare segment.
(2) Revenues of our divested brands have been excluded from the prior year for purposes of calculating Non-GAAP organic revenues. These revenue adjustments relate to our North American OTC Healthcare segment.
(3) Foreign currency exchange rate adjustments relate to all segments.
Reconciliation of GAAP General and Administrative Expense to Non-GAAP Adjusted General and Administrative Expense and related Non-GAAP Adjusted General and Administrative Expense percentage:
Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
(In thousands) | |||||||||||||||
GAAP General and Administrative Expense | $ | 18,795 | $ | 16,462 | $ | 38,252 | $ | 34,051 | |||||||
Adjustments: | |||||||||||||||
Costs associated with CEO transition (1) | — | — | — | 1,406 | |||||||||||
Legal and professional fees associated with acquisitions and divestitures (2) | 101 | — | 585 | — | |||||||||||
Integration, transition and other costs associated with acquisitions and divestitures (2) | 1,420 | — | 3,061 | — | |||||||||||
Total adjustments | 1,521 | — | 3,646 | 1,406 | |||||||||||
Non-GAAP Adjusted General and Administrative Expense | $ | 17,274 | $ | 16,462 | $ | 34,606 | $ | 32,645 | |||||||
Non-GAAP Adjusted General and Administrative Expense Percentage | 8.0 | % | 8.0 | % | 8.1 | % | 8.2 | % | |||||||
(1) Costs relate to search fees associated with CEO and CFO transition and certain accelerated stock compensation costs related to our former CEO.
(2) Acquisition related items represent costs related to integrating recently acquired businesses including (but not limited to), costs to exit or convert contractual obligations, severance, information system conversion and consulting costs; and certain costs related to the consummation of the acquisition process such as legal and other acquisition related professional fees.
Reconciliation of GAAP Net Income to Non-GAAP EBITDA, Non-GAAP Adjusted EBITDA and related Non-GAAP Adjusted EBITDA Margin:
Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
(In thousands) | |||||||||||||||
GAAP Net Income | $ | 32,195 | $ | 31,803 | $ | 26,664 | $ | 57,976 | |||||||
Interest expense, net | 20,830 | 20,667 | 41,957 | 42,551 | |||||||||||
Provision for income taxes | 18,033 | 17,428 | 14,651 | 31,425 | |||||||||||
Depreciation and amortization | 6,016 | 5,687 | 12,848 | 11,407 | |||||||||||
Non-GAAP EBITDA: | 77,074 | 75,585 | 96,120 | 143,359 | |||||||||||
Adjustments: | |||||||||||||||
Costs associated with CEO transition (1) | — | — | — | 1,406 | |||||||||||
Legal and professional fees associated with acquisitions and divestitures (2) | 101 | — | 585 | — | |||||||||||
Integration, transition and other costs associated with acquisitions and divestitures (2) | 1,420 | — | 3,061 | — | |||||||||||
Loss on extinguishment of debt | — | — | — | 451 | |||||||||||
(Gain) loss on sale of assets | (496 | ) | — | 54,957 | — | ||||||||||
Total adjustments | 1,025 | — | 58,603 | 1,857 | |||||||||||
Non-GAAP Adjusted EBITDA | $ | 78,099 | $ | 75,585 | $ | 154,723 | $ | 145,216 | |||||||
Non-GAAP Adjusted EBITDA Margin | 36.3 | % | 36.7 | % | 36.4 | % | 36.5 | % | |||||||
(1) Costs relate to search fees associated with CEO and CFO transition and certain accelerated stock compensation costs related to our former CEO.
(2) Acquisition related items represent costs related to integrating recently acquired businesses including (but not limited to), costs to exit or convert contractual obligations, severance, information system conversion and consulting costs; and certain costs related to the consummation of the acquisition process such as legal and other acquisition related professional fees.
Reconciliation of GAAP Net Income to Non-GAAP Adjusted Net Income and related Adjusted Earnings Per Share:
Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||||||||||||||||||
2016 | 2016 Adjusted EPS | 2015 | 2015 Adjusted EPS | 2016 | 2016 Adjusted EPS | 2015 | 2015 Adjusted EPS | ||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||||
GAAP Net Income | $ | 32,195 | $ | 0.60 | $ | 31,803 | $ | 0.60 | $ | 26,664 | $ | 0.50 | $ | 57,976 | $ | 1.09 | |||||||||||
Adjustments: | |||||||||||||||||||||||||||
Costs associated with CEO transition (1) | — | — | — | — | — | — | 1,406 | 0.03 | |||||||||||||||||||
Legal and professional fees associated with acquisitions and divestitures (2) | 101 | — | — | — | 585 | 0.01 | — | — | |||||||||||||||||||
Integration, transition and other costs associated with acquisitions and divestitures (2) | 1,420 | 0.03 | — | — | 3,061 | 0.06 | — | — | |||||||||||||||||||
Accelerated amortization of debt origination costs due to sale of assets | 1,131 | 0.02 | — | — | 1,131 | 0.02 | — | — | |||||||||||||||||||
Loss on extinguishment of debt | — | — | — | — | — | — | 451 | 0.01 | |||||||||||||||||||
(Gain) loss on sale of assets | (496 | ) | (0.01 | ) | — | — | 54,957 | 1.03 | — | — | |||||||||||||||||
Tax impact of adjustments (3) | (566 | ) | (0.01 | ) | — | — | (21,224 | ) | (0.40 | ) | (657 | ) | (0.01 | ) | |||||||||||||
Total adjustments | 1,590 | 0.03 | — | — | 38,510 | 0.72 | 1,200 | 0.03 | |||||||||||||||||||
Non-GAAP Adjusted Net Income and Adjusted EPS | $ | 33,785 | $ | 0.63 | $ | 31,803 | $ | 0.60 | $ | 65,174 | $ | 1.22 | $ | 59,176 | $ | 1.12 | |||||||||||
(1) Costs relate to search fees associated with CEO and CFO transition and certain accelerated stock compensation costs related to our former CEO.
(2) Acquisition related items represent costs related to integrating recently acquired businesses including (but not limited to), costs to exit or convert contractual obligations, severance, information system conversion and consulting costs; and certain costs related to the consummation of the acquisition process such as legal and other acquisition related professional fees.
(3) The income tax adjustments are determined using applicable rates in the taxing jurisdictions in which the above adjustments relate and includes both current and deferred income tax expense (benefit) based on the specific nature of the specific Non-GAAP performance measure.
Reconciliation of GAAP Net Income to Non-GAAP Free Cash Flow and Non-GAAP Adjusted Free Cash Flow:
Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
(In thousands) | |||||||||||||||
GAAP Net Income | $ | 32,195 | $ | 31,803 | $ | 26,664 | $ | 57,976 | |||||||
Adjustments: | |||||||||||||||
Adjustments to reconcile net income to net cash provided by operating activities as shown in the Statement of Cash Flows | 9,592 | 20,040 | 66,388 | 42,896 | |||||||||||
Changes in operating assets and liabilities, net of effects from acquisitions as shown in the Statement of Cash Flows | 7,744 | (4,774 | ) | 7,230 | (10,282 | ) | |||||||||
Total adjustments | 17,336 | 15,266 | 73,618 | 32,614 | |||||||||||
GAAP Net cash provided by operating activities | 49,531 | 47,069 | 100,282 | 90,590 | |||||||||||
Purchases of property and equipment | (509 | ) | (903 | ) | (1,404 | ) | (1,683 | ) | |||||||
Non-GAAP Free Cash Flow | 49,022 | 46,166 | 98,878 | 88,907 | |||||||||||
Integration, transition and other payments associated with acquisitions and divestitures(1) | 352 | — | 683 | — | |||||||||||
Non-GAAP Adjusted Free Cash Flow | $ | 49,374 | $ | 46,166 | $ | 99,561 | $ | 88,907 | |||||||
(1) Acquisition related items represent payments related to integrating recently acquired businesses including (but not limited to), costs to exit or convert contractual obligations, severance, information system conversion and consulting costs; and certain costs related to the consummation of the acquisition process such as legal and other acquisition related professional fees.
Outlook for Fiscal Year 2017:
Reconciliation of Projected GAAP EPS to Projected Non-GAAP Adjusted EPS:
2017 Projected EPS | |||||||
Low | High | ||||||
Projected FY'17 GAAP EPS | $ | 1.55 | $ | 1.61 | |||
Adjustments: | |||||||
Costs associated with DenTek integration(1) | 0.08 | 0.08 | |||||
Loss on sale of assets | 0.67 | 0.67 | |||||
Total Adjustments | 0.75 | 0.75 | |||||
Projected Non-GAAP Adjusted EPS | $ | 2.30 | $ | 2.36 | |||
(1) Acquisition related items represent costs related to integrating recently acquired businesses including (but not limited to), costs to exit or convert contractual obligations, severance, information system conversion and consulting costs; and certain costs related to the consummation of the acquisition process such as legal and other acquisition related professional fees.
Reconciliation of Projected GAAP Net cash provided by operating activities to Projected Non-GAAP Adjusted Free Cash Flow:
2017 Projected Free Cash Flow | |||
(In millions) | |||
Projected FY'17 GAAP Net cash provided by operating activities | $ | 191 | |
Additions to property and equipment for cash | (4 | ) | |
Projected Non-GAAP Free Cash Flow | 187 | ||
Payments associated with acquisitions(1) | 3 | ||
Projected Non-GAAP Adjusted Free Cash Flow | $ | 190 | |
(1) Acquisition related items represent costs related to integrating recently acquired businesses including (but not limited to), costs to exit or convert contractual obligations, severance, information system conversion and consulting costs; and certain costs related to the consummation of the acquisition process such as legal and other acquisition related professional fees.