Prestige Brands Holdings, Inc. Reports Second Quarter Revenue Up 8.6%; Integration of Insight Pharmaceuticals Acquisition On Track

Outlook for Full Fiscal Year ’15 Reconfirmed

TARRYTOWN, N.Y.--()--Prestige Brands Holdings, Inc. (NYSE:PBH) today announced results for the second quarter and first six months of fiscal year 2015, which ended on September 30, 2014.

These results include reported second fiscal quarter revenues of $181.3 million, an increase of 8.6% over the prior year comparable period’s revenues of $166.9 million. Reported revenues for the six month period ended September 30, 2014 totaled $327.0 million, an increase of approximately 5.7% over the prior year comparable six month period’s revenues of $309.5 million. These results reflect continued strengthening in consumption levels of core over-the-counter healthcare brands, as well as the acquisitions of Insight Pharmaceuticals (Insight) and Hydralyte.

Reported income for the second fiscal quarter of $16.5 million, or $0.31 per diluted share, was 49.7% lower than the prior year comparable quarter’s results of $32.8 million or $0.63 per diluted share, primarily as a result of acquisition-related items in the second quarter.

Adjusted earnings per share for the second fiscal quarter increased 6.4% to $0.50 compared to the second quarter of the prior year’s adjusted earnings per share of $0.47. The current quarter’s adjusted earnings per share excludes acquisition and transition items related to the acquisitions of Insight and Hydralyte. The second quarter of the prior year’s adjusted earnings per share excluded items related to the acquisition of Care Pharmaceuticals (Care) and the impact of favorable changes in tax laws. The impact of the Insight acquisition on adjusted earnings per share was $0.00 for the less than one month of Insight operations included in the second fiscal quarter results.

Reported income for the first six months of fiscal 2015 was $33.2 million, or $0.63 per diluted share compared with the prior year’s comparable six month period results of $53.5 million or $1.03 per diluted share. Adjusted earnings per share for the first half of fiscal 2015 were $0.91 compared to adjusted earnings per share of $0.88 in the prior year comparable period. Adjusted earnings per share for both the fiscal 2015 six month period and the fiscal 2014 comparable period exclude the items referenced above.

Segments

Reported revenues for the North American OTC Healthcare segment were $137.6 million for the second fiscal quarter of 2015, 4.0% higher than the prior year comparable period’s revenues of $132.3 million. For the first six months of the current fiscal year, reported revenues for the North American OTC Healthcare segment were $248.0 million, a decrease of 1.3% over the prior year comparable period’s results of $251.4 million. The second fiscal quarter was impacted by the Insight acquisition as well as increased consumption among certain key core OTC brands.

Reported revenues for the International OTC Healthcare segment were $17.4 million for the second fiscal quarter of 2015, an increase of 92.0% over the prior year comparable period’s results of $9.0 million. For the first six months of the current fiscal year, reported revenues for the International OTC Healthcare segment were $31.1 million, an increase of 150.0% over the prior year comparable period’s results of $12.4 million. Both the second fiscal quarter and the six month period were impacted by revenues from the strong performance of the Care portfolio in Australia and the recent acquisition of Hydralyte.

Reported revenues for the Household Cleaning segment were $26.3 million in the second fiscal quarter of 2015, an increase of 2.7% over the prior year's second quarter results of $25.7 million. For the six month period of 2015, reported revenues for this segment were $47.9 million compared to $45.7 million in the prior year comparable period, an increase of 4.9%.

Commentary & Outlook

According to Matthew M. Mannelly, President and CEO, “We are very pleased with our second quarter and six month performance in a challenging retail operating environment. Our results for the second fiscal quarter and the first half of the fiscal year reflect strengthening consumption trends among our core OTC brands, as well as the recent acquisition of Insight and the integration of Hydralyte into the Care portfolio in Australia.”

“We closed on the acquisition of Insight in September and we are on track to meet our schedule to integrate those brands into our portfolio by the end of the fiscal year,” he said. “Brand-building investments in marketing and advertising are now in development for these newly acquired brands.”

Mr. Mannelly continued, “Following the favorable results of the fiscal year-to-date, we are reconfirming the previously provided outlook for the full fiscal year of adjusted earnings per share in the range of $1.75 to $1.85 and revenue growth of 15-18%. We recognize, however, the challenging retail environment. The Company’s financial profile remains solid and is expected to generate substantial free cash flow of approximately $150 million in fiscal 2015. These funds will be used for rapid deleveraging and building meaningful M & A capacity as we pay close attention to the opportunities arising within our industry,” he said.

Free Cash Flow and Debt Reduction

The Company's Non-GAAP Adjusted free cash flow for the second fiscal quarter was $36.5 million, an increase over the prior year comparable period’s Non-GAAP Adjusted free cash flow of $31.8 million. For the six months ended September 30, 2014, Non-GAAP Adjusted free cash flow was $68.1 million compared to the prior year six months Non-GAAP Adjusted free cash flow of $53.3 million.

At September 30, 2014, the Company’s net debt was $1.7 billion and its covenant-defined leverage ratio was approximately 5.6, reflecting the acquisition of Insight on September 3, 2014. The Company’s history of strong FCF and consistent debt repayment allows rapid de-leveraging and building M&A capacity going forward.

Q2 Conference Call, Accompanying Slide Presentation & Replay

The Company will host a conference call to review its second quarter results on November 6, 2013 at 8:30 am EDT. The toll-free dial-in numbers are 877-280-4954 within North America and 857-244-7311 outside of North America. The conference pass code is "prestige". The Company will provide a live Internet webcast, a slide presentation to accompany the call, as well as an archived replay, all of which can be accessed from the Investor Relations page of the Company's website at http://prestigebrands.com. The slide presentation can be accessed just before the call from the Investor Relations page of the website by clicking on Webcasts and Presentations. Telephonic replays will be available for two weeks following the completion of the call and can be accessed at 888-286-8010 within North America and at 617-801-6888 from outside North America. The pass code is 87362413.

Non-GAAP Financial Information

In addition to financial results reported in accordance with generally accepted accounting principles (GAAP), we have provided certain non-GAAP financial information in this release to aid investors in understanding the Company's performance. Each non-GAAP financial measure is defined and reconciled to its most closely related GAAP financial measure in the “About Non-GAAP Financial Measures” section at the end of this earnings release.

About Prestige Brands Holdings, Inc.

The Company markets and distributes brand name over-the-counter and household cleaning products throughout the U.S. and Canada, and in certain international markets. Core brands include Monistat® yeast infection treatment, Nix® lice treatment, Chloraseptic® sore throat treatments, Clear Eyes® eye care products, Compound W® wart treatments, The Doctor's® NightGuard® dental protector, the Little Remedies® and PediaCare® lines of pediatric over-the-counter products, Efferdent® denture care products, Luden's® throat drops, Dramamine® motion sickness treatment, BC® and Goody's® pain relievers, Beano® gas prevention, Debrox® earwax remover, and Gaviscon® antacid in Canada. Visit the Company's website at www.prestigebrands.com.

Note Regarding Forward-Looking Statements

This news release contains "forward-looking statements" within the meaning of the federal securities laws that are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. "Forward-looking statements" generally can be identified by the use of forward-looking terminology such as "outlook," "may," "will," "would," "expect," “intend,” “estimate,” “anticipate,” “believe,” or "continue" (or the negative or other derivatives of each of these terms) or similar terminology. The "forward-looking statements" include, without limitation, statements regarding the integration of the Insight brands into our portfolio, growth in consumption of core OTC healthcare brands, brand-building investments, our expected future operating results including adjusted earnings per share, revenue growth and generation of free cash flow, and our expected use of free cash flow for rapid deleveraging and building M&A capacity. These statements are based on management's estimates and assumptions with respect to future events and financial performance and are believed to be reasonable, though are inherently uncertain and difficult to predict. Actual results could differ materially from those expected as a result of a variety of factors, including the impact of our advertising and promotional initiatives, competition in our industry, and the success of our brand-building investments and integration of newly acquired products. A discussion of other factors that could cause results to vary is included in the Company's Annual Report on Form 10-K for the year ended March 31, 2014, Quarterly Report on Form 10-Q for the quarter ended June 30, 2014, and other periodic reports filed with the Securities and Exchange Commission.

 
Prestige Brands Holdings, Inc.
Consolidated Statements of Income and Comprehensive Income
(Unaudited)
             

Three Months Ended
September 30,

Six Months Ended
September 30,

(In thousands, except per share data)

2014       2013 2014       2013
Revenues
Net sales $   180,005 $   165,507 $   324,546 $   307,149
Other revenues 1,264   1,438   2,425   2,308  

Total revenues

181,269 166,945 326,971 309,457
 
Cost of Sales
Cost of sales (exclusive of depreciation shown below) 78,727   73,723   142,563   133,211  
Gross profit 102,542   93,222   184,408   176,246  
 
Operating Expenses
Advertising and promotion 25,044 24,547 44,140 43,228
General and administrative 27,128 11,619 44,134 23,253
Depreciation and amortization 3,852   3,294   6,813   6,562  
Total operating expenses 56,024   39,460   95,087   73,043  
Operating income 46,518   53,762   89,321   103,203  
 
Other (income) expense
Interest income (15 ) (25 ) (47 ) (28 )
Interest expense 18,208   16,464   32,893   32,372  
Total other expense 18,193   16,439   32,846   32,344  
Income before income taxes 28,325 37,323 56,475 70,859
Provision for income taxes 11,862   4,531   23,280   17,375  
Net income $   16,463   $   32,792   $   33,195   $   53,484  
 
Earnings per share:
Basic $   0.32   $   0.64   $   0.64   $   1.04  
Diluted $   0.31   $   0.63   $   0.63   $   1.03  
 
Weighted average shares outstanding:
Basic 52,088   51,463   52,023   51,343  
Diluted 52,594   52,219   52,564   52,130  
 
Comprehensive income, net of tax:
Currency translation adjustments (10,830 ) 1,122   (8,104 ) 1,123  
Total other comprehensive (loss) income (10,830 ) 1,122   (8,104 ) 1,123  
Comprehensive income $   5,633   $   33,914   $   25,091   $   54,607  
 
 
Prestige Brands Holdings, Inc.
Consolidated Balance Sheets
(Unaudited)
               

(In thousands)

September 30, March 31,

Assets

2014 2014
Current assets
Cash and cash equivalents $ 21,748 $ 28,331
Accounts receivable, net 98,644 65,050
Inventories 82,875 65,586
Deferred income tax assets 9,171 6,544
Prepaid expenses and other current assets 9,935   11,674  
Total current assets 222,373 177,185
 
Property and equipment, net 12,420 9,597
Goodwill 293,993 190,911
Intangible assets, net 2,163,947 1,394,817
Other long-term assets 32,937   23,153  
Total Assets $ 2,725,670   $ 1,795,663  
 
Liabilities and Stockholders' Equity
Current liabilities
Current portion of long term debt $ 7,200 $
Accounts payable 58,538 48,286
Accrued interest payable 12,086 9,626
Other accrued liabilities 34,086   26,446  
Total current liabilities 111,910   84,358  
 
Long-term debt
Principal amount 1,691,400 937,500
Less unamortized discount (6,289 ) (3,086 )
Long-term debt, net of unamortized discount 1,685,111   934,414  
 
Deferred income tax liabilities 334,297 213,204
Other long-term liabilities 313   327  
Total Liabilities 2,131,631   1,232,303  
 
 
Stockholders' Equity
Preferred stock - $0.01 par value
Authorized - 5,000 shares
Issued and outstanding - None
Common stock - $0.01 par value
Authorized - 250,000 shares
Issued - 52,426 shares at September 30, 2014 and 52,021 shares at March 31, 2014 524 520
Additional paid-in capital 421,574 414,387
Treasury stock, at cost - 254 shares at September 30, 2014 and 206 shares at March 31, 2014 (3,034 ) (1,431 )
Accumulated other comprehensive (loss) income, net of tax (7,365 ) 739
Retained earnings 182,340   149,145  
Total Stockholders' Equity 594,039   563,360  
Total Liabilities and Stockholders' Equity $ 2,725,670   $ 1,795,663  
 
 
Prestige Brands Holdings, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
       
Six Months Ended September 30,

(In thousands)

2014         2013  
Operating Activities
Net income $   33,195 $   53,484
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 6,815 6,562
Deferred income taxes 11,496 4,355
Amortization of deferred financing costs 2,398 1,975
Stock-based compensation costs 3,403 2,487
Amortization of debt discount 687 798
(Gain) on sale or disposal of equipment 56 (3 )
Changes in operating assets and liabilities, net of effects from acquisitions
Accounts receivable (8,363 ) (5,712 )
Inventories 7,264 821
Prepaid expenses and other current assets 3,114 2,619
Accounts payable (5,647 ) (1,125 )
Accrued liabilities 2,640   (10,663 )
Net cash provided by operating activities 57,058   55,598  
 
Investing Activities
Purchases of property and equipment (1,380 ) (2,319 )
Proceeds from the sale of property and equipment 3
Proceeds from sale of business 18,500
Acquisition of Insight Pharmaceuticals, less cash acquired (749,666 )
Acquisition of the Hydralyte brand (77,991 )
Acquisition of Care Pharmaceuticals, less cash acquired   (55,215 )
Net cash used in investing activities (810,537 ) (57,531 )
 
Financing Activities

Term loan borrowings

720,000

Term loan repayments

(25,000 ) (7,500 )
Repayments under revolving credit agreement (58,500 ) (35,500 )
Borrowings under revolving credit agreement 124,600 50,000
Payment of deferred financing costs (16,072 ) (275 )
Proceeds from exercise of stock options 2,757 5,143
Proceeds from restricted stock exercises 57
Excess tax benefits from share-based awards 1,030 1,350
Fair value of shares surrendered as payment of tax withholding (1,660 ) (278 )
Net cash provided by financing activities 747,212   12,940  
 
Effects of exchange rate changes on cash and cash equivalents (316 ) 156
(Decrease) Increase in cash and cash equivalents (6,583 ) 11,163
Cash and cash equivalents - beginning of period 28,331   15,670  
Cash and cash equivalents - end of period $   21,748   $   26,833  
 
Interest paid $   27,349   $   29,516  
Income taxes paid $   4,716   $   8,468  
 
 
Prestige Brands Holdings, Inc.
Consolidated Statements of Income
Business Segments
(Unaudited)
 
        Three Months Ended September 30, 2014

(In thousands)

North
American
OTC
Healthcare

     

International
OTC
Healthcare

     

Household
Cleaning

      Consolidated
Gross segment revenues $   138,138 $   17,331 $   25,246 $   180,715
Elimination of intersegment revenues (710 )     (710 )
Third-party segment revenues 137,428 17,331 25,246 180,005
Other revenues 150   23   1,091   1,264  
Total segment revenues 137,578 17,354 26,337 181,269
Cost of sales 52,185   6,595   19,947   78,727  
Gross profit 85,393 10,759 6,390 102,542
Advertising and promotion 21,442   3,035   567   25,044  
Contribution margin $   63,951   $   7,724   $   5,823   77,498
Other operating expenses 30,980  
Operating income 46,518
Other expense 18,193  
Income before income taxes 28,325
Provision for income taxes 11,862  
Net income $   16,463  
 
         
Six Months Ended September 30, 2014

(In thousands)

North
American
OTC
Healthcare

     

International
OTC
Healthcare

     

Household
Cleaning

      Consolidated
Gross segment revenues $   249,112 $   31,022 $   45,839 $   325,973
Elimination of intersegment revenues (1,427 )     (1,427 )
Third-party segment revenues 247,685 31,022 45,839 324,546
Other revenues 327   58   2,040   2,425  
Total segment revenues 248,012 31,080 47,879 326,971
Cost of sales 94,526   11,679   36,358   142,563  
Gross profit 153,486 19,401 11,521 184,408
Advertising and promotion 37,794   5,375   971   44,140  
Contribution margin $   115,692   $   14,026   $   10,550   140,268
Other operating expenses 50,947  
Operating income 89,321
Other expense 32,846  
Income before income taxes 56,475
Provision for income taxes 23,280  
Net income $   33,195  
 
         
Three Months Ended September 30, 2013

(In thousands)

North
American
OTC
Healthcare

     

International
OTC
Healthcare

     

Household
Cleaning

      Consolidated
Gross segment revenues $   132,944 $   9,008 $   24,374 $   166,326
Elimination of intersegment revenues (819 )     (819 )
Third-party segment revenues 132,125 9,008 24,374 165,507
Other revenues 150   7   1,281   1,438  
Total segment revenues 132,275 9,015 25,655 166,945
Cost of sales 50,987   4,338   18,398   73,723  
Gross profit 81,288 4,677 7,257 93,222
Advertising and promotion 22,547   1,446   554   24,547  
Contribution margin $   58,741   $   3,231   $   6,703   68,675
Other operating expenses 14,913  
Operating income 53,762
Other expense 16,439  
Income before income taxes 37,323
Provision for income taxes 4,531  
Net income $   32,792  
 
         
Six Months Ended September 30, 2013

(In thousands)

North
American
OTC
Healthcare

     

International
OTC
Healthcare

     

Household
Cleaning

      Consolidated
Gross segment revenues $   251,880 $   12,422 $   43,666 $   307,968
Elimination of intersegment revenues (819 )     (819 )
Third-party segment revenues 251,061 12,422 43,666 307,149
Other revenues 300   14   1,994   2,308  
Total segment revenues 251,361 12,436 45,660 309,457
Cost of sales 94,533   5,803   32,875   133,211  
Gross profit 156,828 6,633 12,785 176,246
Advertising and promotion 40,097   1,710   1,421   43,228  
Contribution margin $   116,731   $   4,923   $   11,364   133,018
Other operating expenses 29,815  
Operating income 103,203
Other expense 32,344  
Income before income taxes 70,859
Provision for income taxes 17,375  
Net income $   53,484  
 

About Non-GAAP Financial Measures

We define Non-GAAP Total Revenues excluding acquisitions and divestitures as Total Revenues excluding revenues associated with products acquired or divested in the periods presented. We define Non-GAAP EBITDA as earnings before interest expense (income), income taxes, depreciation and amortization and Non-GAAP Adjusted EBITDA as earnings before interest expense (income), income taxes, depreciation and amortization, certain other legal and professional fees, and other acquisition-related costs. We define Non-GAAP Adjusted Gross Margin as Gross Profit before inventory step up charges and certain other acquisition and integration-related costs. Non-GAAP Adjusted Gross Margin Percentage is calculated based on Non-GAAP Adjusted Gross Margin divided by GAAP Total Revenues. We define Non-GAAP Adjusted Operating Income as Operating Income minus certain other legal and professional fees, acquisition and other integration costs. We define Non-GAAP Adjusted Net Income as Net Income before inventory step-up charges, certain other legal and professional fees, other acquisition and integration-related costs, the applicable tax impacts associated with these items and the tax impacts of state tax rate adjustments and other non-deductible items. Non-GAAP Adjusted EPS is calculated based on Non-GAAP Adjusted Net Income, divided by the weighted average number of common and potential common shares outstanding during the period. We define Non-GAAP Free Cash Flow as Net Cash provided by operating activities less cash paid for capital expenditures. We define Non-GAAP Adjusted Free Cash Flow as net cash provided by operating activities less purchases of property and equipment plus payments associated with acquisitions for integration, transition and other payments associated with acquisitions. We define Non-GAAP Contribution Margin as Gross Profit less advertising and promotional expenses. Non-GAAP Total Revenues excluding acquisitions and divestitures, Non-GAAP EBITDA, Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted Gross Margin, Non-GAAP Adjusted Gross Margin Percentage, Non-GAAP Adjusted Operating Income, Non-GAAP Adjusted Net Income, Non-GAAP Adjusted EPS, Non-GAAP Free Cash Flow, Non-GAAP Adjusted Free Cash Flow, and Non-GAAP Contribution Margin may not be comparable to similarly titled measures reported by other companies.

We are presenting Non-GAAP Total Revenues excluding acquisitions and divestitures, Non-GAAP EBITDA, Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted Gross Margin, Non-GAAP Adjusted Gross Margin Percentage, Non-GAAP Adjusted Operating Income, Non-GAAP Adjusted Net Income, Non-GAAP Adjusted EPS, Non-GAAP Free Cash Flow, Non-GAAP Adjusted Free Cash Flow, and Non-GAAP Contribution Margin because they provide additional ways to view our operations, when considered with both our GAAP results and the reconciliation to net income and net cash provided by operating activities, respectively, which we believe provide a more complete understanding of our business than could be obtained absent this disclosure. Each of Non-GAAP Total Revenues excluding acquisitions and divestitures, Non-GAAP EBITDA, Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted Gross Margin, Non-GAAP Adjusted Gross Margin Percentage, Non-GAAP Adjusted Operating Income, Non-GAAP Adjusted Net Income, Non-GAAP Adjusted EPS, Non-GAAP Free Cash Flow, Non-GAAP Adjusted Free Cash Flow, and Non-GAAP Contribution Margin is presented solely as a supplemental disclosure because (i) we believe it is a useful tool for investors to assess the operating performance of the business without the effect of these items; (ii) we believe that investors will find this data useful in assessing shareholder value; and (iii) we use Non-GAAP Total Revenues excluding acquisitions and divestitures, Non-GAAP EBITDA, Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted Gross Margin, Non-GAAP Adjusted Gross Margin Percentage, Non-GAAP Adjusted Operating Income, Non-GAAP Adjusted Net Income, Non-GAAP Adjusted EPS, Non-GAAP Free Cash Flow, Non-GAAP Adjusted Free Cash Flow, and Non-GAAP Contribution Margin internally to evaluate the performance of our personnel and also as a benchmark to evaluate our operating performance or compare our performance to that of our competitors. The use of Non-GAAP Total Revenues excluding acquisitions and divestitures, Non-GAAP EBITDA, Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted Gross Margin, Non-GAAP Adjusted Gross Margin Percentage, Non-GAAP Adjusted Operating Income, Non-GAAP Adjusted Net Income, Non-GAAP Adjusted EPS, Non-GAAP Free Cash Flow, Non-GAAP Adjusted Free Cash Flow, and Non-GAAP Contribution Margin have limitations, and you should not consider these measures in isolation from or as an alternative to GAAP measures such as Operating income, Net income, and Net cash flow provided by operating activities, or cash flow statement data prepared in accordance with GAAP, or as a measure of profitability or liquidity.

The following tables set forth the reconciliation of Non-GAAP Total Revenues excluding acquisitions and divestitures, Non-GAAP EBITDA, Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted Gross Margin, Non-GAAP Adjusted Gross Margin Percentage, Non-GAAP Adjusted Operating Income, Non-GAAP Adjusted Net Income, Non-GAAP Adjusted EPS, Non-GAAP Free Cash Flow, Non-GAAP Adjusted Free Cash Flow, all of which are non-GAAP financial measures, to GAAP Gross Profit, GAAP Operating Income, GAAP Net Income, GAAP Diluted EPS and GAAP Net cash provided by operating activities, our most directly comparable financial measures presented in accordance with GAAP. Non-GAAP Contribution Margin is reconciled in the Business Segments table immediately preceding this "About Non-GAAP Financial Measures" section.

Reconciliation of GAAP Total Revenues to Non-GAAP Total Revenues excluding acquisitions and divestitures:

               

Three Months Ended
September 30,

Six Months Ended
September 30,

2014       2013 2014       2013
(In thousands)
GAAP Total Revenues $   181,269   $   166,945   $   326,971   $   309,457  
 

Adjustments:

Care Pharma and Hydralyte revenues (1) (5,061 ) (5,429 ) (12,341 ) (5,429 )
Insight revenues (2) (12,659 )   (12,659 )  
Total adjustments (17,720 ) (5,429 ) (25,000 ) (5,429 )
Non-GAAP Total Revenues excluding acquisitions and divestitures $   163,549   $   161,516   $   301,971   $   304,028  
       
(1) Revenue adjustments relate to our International OTC Healthcare segment
(2) Revenue adjustments relate to our North American OTC Healthcare segment
 

Reconciliation of GAAP Gross Profit to Non-GAAP Adjusted Gross Margin and related Adjusted Gross Margin percentage:

               

Three Months Ended
September 30,

Six Months Ended
September 30,

2014       2013 2014       2013
(In thousands)
GAAP Total Revenues $   181,269   $   166,945   $   326,971   $   309,457  
 
GAAP Gross Profit $   102,542   $   93,222   $   184,408   $   176,246  

Adjustments:

Inventory step-up charges and other costs associated with

Care and Hydralyte acquisitions (1)

116 577 246 577
Inventory step-up charges associated with Insight acquisition (2) 653 653
Care acquisition related inventory costs (1)   407     407  
Total adjustments 769   984   899   984  
Non-GAAP Adjusted Gross Margin $   103,311   $   94,206   $   185,307   $   177,230  
Non-GAAP Adjusted Gross Margin % 57.0 % 56.4 % 56.7 % 57.3 %
 
(1) Inventory step-up charges and other costs relate to our International OTC Healthcare segment
(2) Inventory step-up charges relate to our North American OTC Healthcare segment
 

Reconciliation of GAAP Operating Income to Non-GAAP Adjusted Operating Income:

               

Three Months Ended
September 30,

Six Months Ended
September 30,

2014       2013 2014       2013
(In thousands)
GAAP Operating Income $   46,518   $   53,762   $   89,321   $   103,203

Adjustments:

Inventory step-up charges and other costs associated with

Care and Hydralyte acquisitions (1)

116 577 246 577
Inventory step-up charges associated with Insight acquisition (2) 653 653
Care acquisition related inventory costs (1) 407 407

Legal and professional fees associated with acquisitions

and divestitures (3)

8,058 85 9,857 668
Stamp/Duty Tax on Australian acquisition (3) 2,940
Integration, transition and other costs associated with acquisitions (3) 4,021     4,432  
Total adjustments 12,848   1,069   18,128   1,652
Non-GAAP Adjusted Operating Income $   59,366   $   54,831   $   107,449   $   104,855
       
(1) Inventory step-up charges and other costs relate to our International OTC Healthcare segment
(2) Inventory step-up charges relate to our North American OTC Healthcare segment
(3) Adjustments relate to G&A expenses
 

Reconciliation of GAAP Net Income to EBITDA and Non-GAAP Adjusted EBITDA:

               

Three Months Ended
September 30,

Six Months Ended
September 30,

2014       2013 2014       2013
(In thousands)
GAAP Net Income $   16,463 $   32,792 $   33,195 $   53,484
Interest expense, net 18,193 16,439 32,846 32,344
Provision for income taxes 11,862 4,531 23,280 17,375
Depreciation and amortization 3,852   3,294   6,813   6,562
Non-GAAP EBITDA: 50,370   57,056   96,134   109,765

Adjustments:

Inventory step-up charges and other costs associated with

Care and Hydralyte acquisitions (1)

116 577 246 577
Inventory step-up charges associated with Insight acquisition (2) 653 653
Care acquisition related inventory costs (1) 407 407

Legal and professional fees associated with acquisitions

and divestitures (3)

8,058 85 9,857 668
Stamp/Duty Tax on Australian acquisition (3) 2,940
Integration, transition and other costs associated with acquisitions (3) 4,021     4,432  
Total adjustments 12,848   1,069   18,128   1,652
Non-GAAP Adjusted EBITDA $   63,218   $   58,125   $   114,262   $   111,417
 
(1) Inventory step-up charges and other costs relate to our International OTC Healthcare segment
(2) Inventory step-up charges relate to our North American OTC Healthcare segment
(3) Adjustments relate to G&A expenses
 

Reconciliation of GAAP Net Income to Non-GAAP Adjusted Net Income and related Adjusted Earnings Per Share:

             
Three Months Ended September 30, Six Months Ended September 30,
2014  

2014
Adjusted
EPS

    2013  

2013
Adjusted
EPS

2014  

2014
Adjusted
EPS

    2013  

2013
Adjusted
EPS

(In thousands)
GAAP Net Income $   16,463   $   0.31   $   32,792   $   0.63   $   33,195   $   0.63   $   53,484   $   1.03  

Adjustments:

Inventory step-up charges and other costs associated

with Care and Hydralyte acquisitions (1)

116 577 0.01 246 577 0.01
Inventory step-up charges associated with Insight acquisition (2) 653 0.01 653 0.01
Care acquisition related inventory costs (1) 407 0.01 407 0.01

Legal and professional fees associated with acquisitions

and divestitures (3)

8,058 0.15 85 9,857 0.19 668 0.01
Stamp/Duty Tax on Australian acquisition (3) 2,940 0.06

Integration, transition and other costs associated

with acquisitions (3)

4,021 0.09 4,432 0.09
Tax impact of adjustments (2,941 ) (0.06 ) (133 ) (0.01 ) (3,469 ) (0.07 ) (356 ) (0.01 )
Impact of state tax adjustments     (9,085 ) (0.17 )     (9,085 ) (0.17 )
Total adjustments 9,907   0.19   (8,149 ) (0.16 ) 14,659   0.28   (7,789 ) (0.15 )
Non-GAAP Adjusted Net Income and Adjusted EPS $   26,370   $   0.50   $   24,643   $   0.47   $   47,854   $   0.91   $   45,695   $   0.88  
               
(1) Inventory step-up charges and other costs relate to our International OTC Healthcare segment
(2) Inventory step-up charges relate to our North American OTC Healthcare segment
(3) Adjustments relate to G&A expenses
 

Reconciliation of GAAP Net Income to Non-GAAP Free Cash Flow and Adjusted Non-GAAP Free Cash Flow:

       

Three Months Ended
September 30,

     

Six Months Ended
September 30,

 
2014       2013 2014       2013
(In thousands)
GAAP Net Income $   16,463   $   32,792   $   33,195   $   53,484  

Adjustments:

Adjustments to reconcile net income to net cash

provided by operating activities as shown in the

Statement of Cash Flows

11,901 3,681 24,855 16,174

Changes in operating assets and liabilities, net

of effects from acquisitions as shown in the

Statement of Cash Flows

(977 ) (3,673 ) (992 ) (14,060 )
Total adjustments 10,924   8   23,863   2,114  
GAAP Net cash provided by operating activities 27,387   32,800   57,058   55,598  
Purchases of property and equipment (884 ) (955 ) (1,380 ) (2,319 )
Non-GAAP Free Cash Flow 26,503   31,845   55,678   53,279  

Integration, transition and other payments

associated with acquisitions

10,018     12,417    
Adjusted Non-GAAP Free Cash Flow $   36,521   $   31,845   $   68,095   $   53,279  
       

Outlook for Fiscal Year 2015:

Reconciliation of Projected GAAP EPS to Projected Non-GAAP Adjusted EPS:

           
2015 Projected EPS  
Low       High  
Projected FY'15 GAAP EPS $   1.28           $   1.38  

Adjustments:

       
Integration, transition and other costs associated with acquisitions 0.47           0.47  
Total Adjustments 0.47           0.47  
Projected Non-GAAP Adjusted EPS $   1.75           $   1.85  
   

Reconciliation of Projected GAAP Net cash provided by operating activities to Projected Non-GAAP Adjusted Free Cash Flow:

         

2015
Projected Free
Cash Flow

(In millions)
Projected FY'15 GAAP Net cash provided by operating activities $   136
Projected integration, transition and other costs associated with acquisitions 20
Additions to property and equipment for cash (6 )
Projected Non-GAAP Adjusted Free Cash Flow $   150  
 
 

Contacts

Prestige Brands Holdings, Inc.
Dean Siegal, 914-524-6819

Contacts

Prestige Brands Holdings, Inc.
Dean Siegal, 914-524-6819