TMCnet News

Prestige Brands Holdings, Inc. Reports Fiscal 2016 Third Quarter and Year-to-Date Results
[February 04, 2016]

Prestige Brands Holdings, Inc. Reports Fiscal 2016 Third Quarter and Year-to-Date Results


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.



       

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 with 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  
 


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