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Prestige Consumer Healthcare Inc. Reports Fiscal 2020 Third Quarter and Year-to-Date Results

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In this article:
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  • Revenue $241.6 Million in Q3 Fiscal 2020; Organic Revenue up 0.5% versus Prior Year Q3

  • GAAP Diluted EPS of $0.75 in Q3 Fiscal 2020; Adjusted EPS of $0.81, Up 11% Versus Prior Year Q3

  • Year-to-date Cash Flow From Operations of $161.0 Million; Non-GAAP Free Cash Flow of $154.3 Million

  • Raising FY’20 EPS Outlook to $2.85 to $2.87 From $2.76 to $2.83 Previously

TARRYTOWN, N.Y., Feb. 06, 2020 (GLOBE NEWSWIRE) -- Prestige Consumer Healthcare Inc. (PBH) today reported financial results for its third quarter and year-to-date fiscal 2020 ended December 31, 2019.

“Our third quarter and year to-date results reflect the benefits of our effective and proven three-pillar strategy. Positive organic top-line trends benefitted from continued strong consumption across our portfolio. We continue to generate strong cash flows and a consistent EBITDA margin profile, which allowed us to further reduce debt in Q3 and opportunistically repurchase shares year-to-date. Execution of our brand-building playbook combined with our disciplined and opportunistic capital deployment strategy are enabling us to raise our EPS outlook for full-year fiscal 2020,” said Ron Lombardi, Chief Executive Officer of Prestige Consumer Healthcare.

Third Fiscal Quarter Ended December 31, 2019

Reported revenues in the third quarter of fiscal 2020 were $241.6 million compared to $241.4 million in the third quarter of fiscal 2019. Revenues were up 0.5% on an organic basis, which excludes the effect of foreign currency. The revenue performance for the quarter was driven by a strong international segment performance as well as consumption gains in the Company’s core brand portfolio domestically, partially offset by continued retailer inventory reductions.

Reported gross profit margin in the third quarter fiscal 2020 was 56.9% compared to 57.7% in the prior year comparable period. Excluding transition costs associated with a new logistics provider and location, adjusted gross profit margin was 58.0% in third quarter fiscal 2020, a slight increase versus the prior year third quarter.

Reported net income for the third quarter of fiscal 2020 totaled $38.1 million, and $41.2 million in net income on a non-GAAP adjusted basis, versus the prior year comparable period net income of $38.2 million. Diluted earnings per share were $0.75 for the third quarter fiscal 2020, and $0.81 after one-time adjustments, compared to $0.73 per share in the prior year comparable period.

Adjustments to net income in the third quarter of fiscal 2020 included costs associated with a new logistics provider and location as well as a loss on extinguishment of debt, and the related income tax effects of each adjustment.

First Nine Months of Fiscal 2020 Ended December 31, 2019

Reported revenues for the first nine months of fiscal 2020 were $711.8 million compared to $734.8 million in the first nine months of fiscal 2019. Revenues were up slightly on an organic basis, which excludes the effect of foreign currency and the divestiture of the non-core Household Cleaning segment in the prior year. The revenue performance for the first nine months of fiscal 2020 was driven by strong international segment growth as well as consumption gains in the Company’s core brand portfolio domestically, partially offset by retailer inventory reductions.

Reported gross profit margin in the first nine months of fiscal 2020 was 57.4%, or 57.9% after excluding the one-time effects of the company’s transition to a new logistics provider and location, and compared to 56.8% for the first nine months of fiscal 2019.

Reported net income for the first nine months of fiscal 2020 totaled $105.2 million versus the prior year comparable period net income of $103.5 million. Diluted earnings per share were $2.05 for the first nine months of fiscal 2020, compared to $1.97 per share in the prior year comparable period. Non-GAAP adjusted net income for the first nine months of fiscal 2020 was $109.5 million, versus the prior year comparable period’s adjusted net income of $108.2 million. Non-GAAP adjusted earnings per share were $2.14 per share for the first nine months of fiscal 2020, compared to $2.06 per share in the first nine months of fiscal 2019.

Adjustments to net income in the first nine months of fiscal 2020 included costs associated with a new logistics provider and location as well as a loss on extinguishment of debt, and the related income tax effects of the adjustments. Adjustments to net income in the first nine months of fiscal 2019 included legal and various other costs and a gain associated with the Household Cleaning segment divestiture and the related income tax, as well as accelerated amortization of debt origination costs.

Free Cash Flow and Balance Sheet
The Company's net cash provided by operating activities for the third quarter fiscal 2020 increased to $58.0 million from $43.3 million during the same period a year earlier. Non-GAAP free cash flow for the third quarter fiscal 2020 was $56.3, million compared to $57.2 million in the prior year comparable period. For the first nine months of fiscal 2020 net cash provided by operating activities was $161.0 million compared to $138.4 million during the same period a year earlier. Non-GAAP free cash flow for the first nine months of fiscal 2020 was $154.3 million compared to $154.9 million in the prior year comparable period.

In fiscal 2020 year-to-date, the Company primarily used its cash flow to focus on debt reduction. The Company also fully executed an authorized $50 million share repurchase program during the first two fiscal quarters of 2020.

During the third quarter 2020 the Company completed a $400 million issuance of new senior notes which replaced the same amount of senior notes previously due in fiscal 2022. The new notes extend the maturity to fiscal 2028 at an approximate $1 million annual savings.

The Company's net debt position as of December 31, 2019 was approximately $1.7 billion, compared to approximately $1.8 billion at December 31, 2018. At the end of the third quarter fiscal 2020 the Company's covenant-defined leverage ratio was 4.9x.

Segment Review

North American OTC Healthcare: Segment revenues totaled $214.9 million for the third quarter of fiscal 2020, compared to the prior year comparable quarter's revenues of $216.8 million. The third quarter fiscal 2020 revenue performance was attributable to increased consumption for the Company’s core OTC brands which was more than offset by retailer inventory reductions.

For the first nine months of the current fiscal year, reported revenues for the North American OTC Healthcare segment were $639.6 million compared to $647.5 million in the prior year comparable period. The first nine months of fiscal year 2020 were favorably impacted by increased consumption for the Company’s brand portfolio, but more than offset by inventory reductions at certain key retailers.

International OTC Healthcare: Segment fiscal third quarter 2020 revenues totaled $26.7 million, an approximate 8% increase versus $24.6 million reported in the prior year comparable period. Revenues versus the prior year third quarter benefitted from consumption and shipment growth in Australia and Asia-Pacific, partially offset by unfavorable foreign currency of approximately $1 million.

For the first nine months of the current fiscal year, reported revenues for the International OTC Healthcare segment were $72.2 million versus the prior year’s comparable period’s revenues of $67.4 million, attributable to consumption and shipment growth in the Asia-Pacific region, including the Company’s brand portfolio in Australia and Southeast Asia. Growth was partially offset by unfavorable foreign currency exchange rates of approximately $3 million.

Household Cleaning: The Company sold its Household Cleaning segment on July 2, 2018 and used net proceeds from the divestiture to pay down debt. For the first quarter of fiscal 2019, the Household Cleaning segment generated $19.8 million in revenues, with no reported revenue in subsequent quarters.

Commentary and Outlook for Fiscal 2020

Ron Lombardi, CEO, stated, “We are pleased with our third quarter results on a number of fronts. First, we experienced a continuation of solid consumption trends driven by our brand-building investment strategy. Second, we are more than halfway through the transition to a new third-party logistics provider and location which is proceeding as planned. Finally, we continue to generate strong cash flows from our leading financial profile, which we used for debt reduction in Q3.”

Mr. Lombardi continued, “Our strong operating results and disciplined use of cash flow during the first nine months of the fiscal year has enabled us to raise our EPS outlook for full-year fiscal 2020. As we look ahead to fiscal 2021, we anticipate continuing to benefit from our diversified portfolio of leading brands which has us well positioned in a continued challenging retailer environment. We expect our robust financial profile, enhanced by our disciplined capital deployment strategy, to continue to create value for our stakeholders. These attributes and our year-to-date performance keep us well positioned to capitalize on our long-term growth prospects,” Mr. Lombardi concluded.

Fiscal 2020 Full-Year Outlook

Revenue

$947 to $957 million

Organic Growth Percentage*

Approximately Flat

Adjusted E.P.S.*

$2.85 to $2.87

Adjusted Free Cash Flow*

$200 million or more

* See the “About Non-GAAP Financial Measures” section of this report for further presentation information.

Fiscal Q3 2020 Conference Call, Accompanying Slide Presentation and Replay
The Company will host a conference call to review its second quarter results today, February 6, 2020 at 8:30 a.m. ET. The toll-free dial-in numbers are 844-233-9440 within North America and 574-990-1016 outside of North America. The conference ID number is 5006769. The Company provides 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 www.prestigeconsumerhealthcare.com. The slide presentation can be accessed from the Investor Relations page of the website by clicking on Webcasts and Presentations.

Telephonic replays will be available for one week 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 5006769.

Non-GAAP and Other 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.

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," "prospects," "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 expected consumption trends and market share for the Company’s products, costs and timing of the transition to a new logistics provider, the Company's expectations regarding future operating results including revenues, organic growth, earnings per share and free cash flow, the Company’s disciplined capital allocation, the Company’s ability to create value for its stakeholders and reduce debt and the Company’s ability to position itself for long-term growth. 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 the Company’s advertising and promotional and new product development initiatives, customer inventory management initiatives, general economic and business conditions, fluctuating foreign exchange rates, consumer trends, competitive pressures, the impact of the transition to a new third party logistics provider, and the ability of the Company’s third party manufacturers and logistics providers and suppliers to meet demand for its products and to reduce costs. 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, 2019 and other periodic reports filed with the Securities and Exchange Commission.

About Prestige Consumer Healthcare Inc.
Prestige Consumer Healthcare markets, sells, manufactures and distributes consumer healthcare products to retail outlets throughout the U.S. and Canada, Australia, and in certain other international markets. The Company’s diverse portfolio of brands include Monistat® and Summer’s Eve® women's health products, BC® and Goody's® pain relievers, Clear Eyes® eye care products, DenTek® specialty oral care products, Dramamine® motion sickness treatments, Fleet® enemas and glycerin suppositories, Chloraseptic® and Luden's® sore throat treatments and drops, Compound W® wart treatments, Little Remedies® pediatric over-the-counter products, Boudreaux’s Butt Paste® diaper rash ointments, Nix® lice treatment, Debrox® earwax remover, Gaviscon® antacid in Canada, and Hydralyte® rehydration products and the Fess® line of nasal and sinus care products in Australia. Visit the Company's website at www.prestigeconsumerhealthcare.com

Prestige Consumer Healthcare Inc.
Condensed Consolidated Statements of Income and Comprehensive Income
(Unaudited)

Three Months Ended
December 31,

Nine Months Ended December
31,

(In thousands, except per share data)

2019

2018

2019

2018

Total revenues

$

241,552

$

241,414

$

711,775

$

734,751

Cost of Sales

Cost of sales excluding depreciation

102,900

100,997

300,318

313,713

Cost of sales depreciation

1,157

1,182

3,144

3,708

Cost of sales

104,057

102,179

303,462

317,421

Gross profit

137,495

139,235

408,313

417,330

Operating Expenses

Advertising and promotion

33,559

34,504

107,027

108,657

General and administrative

21,308

20,485

65,528

68,460

Depreciation and amortization

6,224

6,705

18,520

20,545

Gain on divestiture

(1,284

)

Total operating expenses

61,091

61,694

191,075

196,378

Operating income

76,404

77,541

217,238

220,952

Other (income) expense

Interest income

(245

)

(39

)

(320

)

(172

)

Interest expense

24,520

26,366

74,092

79,509

Other (income) expense, net

(580

)

218

695

640

Loss on extinguishment of debt

2,155

2,155

Total other expense

25,850

26,545

76,622

79,977

Income before income taxes

50,554

50,996

140,616

140,975

Provision for income taxes

12,496

12,829

35,381

37,501

Net income

$

38,058

$

38,167

$

105,235

$

103,474

Earnings per share:

Basic

$

0.76

$

0.74

$

2.07

$

1.99

Diluted

$

0.75

$

0.73

$

2.05

$

1.97

Weighted average shares outstanding:

Basic

50,378

51,881

50,840

52,119

Diluted

50,831

52,202

51,226

52,431

Comprehensive income, net of tax:

Currency translation adjustments

3,497

(2,020

)

(311

)

(7,139

)

Total other comprehensive income (loss)

3,497

(2,020

)

(311

)

(7,139

)

Comprehensive income

$

41,555

$

36,147

$

104,924

$

96,335


Prestige Consumer Healthcare Inc.
Condensed Consolidated Balance Sheets
(Unaudited)

(In thousands)

December 31,
2019

March 31,
2019

Assets

Current assets

Cash and cash equivalents

$

28,591

$

27,530

Accounts receivable, net of allowance of $21,475 and $12,965, respectively

144,502

148,787

Inventories

121,363

119,880

Prepaid expenses and other current assets

5,913

4,741

Total current assets

300,369

300,938

Property, plant and equipment, net

53,233

51,176

Operating lease right-of-use asset

31,342

Finance lease right-of-use assets, net

5,895

Goodwill

577,635

578,583

Intangible assets, net

2,491,539

2,507,210

Other long-term assets

4,189

3,129

Total Assets

$

3,464,202

$

3,441,036

Liabilities and Stockholders' Equity

Current liabilities

Accounts payable

$

50,408

$

56,560

Accrued interest payable

14,482

9,756

Operating lease liabilities, current portion

6,377

Finance lease liabilities, current portion

1,159

Other accrued liabilities

76,610

60,663

Total current liabilities

149,036

126,979

Long-term debt, net

1,701,313

1,798,598

Deferred income tax liabilities

407,776

399,575

Long-term operating lease liabilities, net of current portion

26,200

Long-term finance lease liabilities, net of current portion

4,725

Other long-term liabilities

18,658

20,053

Total Liabilities

2,307,708

2,345,205

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 - 53,779 shares at December 31, 2019 and 53,670 shares at March 31, 2019

537

536

Additional paid-in capital

485,838

479,150

Treasury stock, at cost - 3,525 shares at December 31, 2019 and 1,871 shares at March 31, 2019

(110,878

)

(59,928

)

Accumulated other comprehensive loss, net of tax

(26,058

)

(25,747

)

Retained earnings

807,055

701,820

Total Stockholders' Equity

1,156,494

1,095,831

Total Liabilities and Stockholders' Equity

$

3,464,202

$

3,441,036


Prestige Consumer Healthcare Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)

Nine Months Ended December 31,

(In thousands)

2019

2018

Operating Activities

Net income

$

105,235

$

103,474

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

21,664

24,253

Gain on divestiture

(1,284

)

Loss on disposal of property and equipment

184

197

Deferred income taxes

7,383

3,309

Amortization of debt origination costs

2,766

4,543

Stock-based compensation costs

5,682

6,160

Loss on extinguishment of debt

2,155

Non-cash operating lease cost

6,117

Interest expense relating to ROU assets

34

Other

247

Changes in operating assets and liabilities:

Accounts receivable

4,624

5,398

Inventories

(817

)

(11,081

)

Prepaid expenses and other current assets

(879

)

4,073

Accounts payable

(6,091

)

(12,787

)

Accrued liabilities

20,724

13,260

Operating lease liabilities

(6,430

)

Other

(1,353

)

(1,325

)

Net cash provided by operating activities

160,998

138,437

Investing Activities

Purchases of property, plant and equipment

(9,055

)

(7,139

)

Escrow receipt

750

Proceeds from divestiture

65,912

Net cash (used in) provided by investing activities

(8,305

)

58,773

Financing Activities

Proceeds from issuance of 5.125% Senior Notes

400,000

Repayment of 5.375% Senior Notes

(400,000

)

Term loan repayments

(21,000

)

(155,000

)

Borrowings under revolving credit agreement

45,000

45,000

Repayments under revolving credit agreement

(120,000

)

(45,000

)

Payment of debt costs

(5,793

)

Payments of finance leases

(252

)

Proceeds from exercise of stock options

1,007

2,931

Fair value of shares surrendered as payment of tax withholding

(974

)

(2,281

)

Repurchase of common stock

(49,976

)

(49,978

)

Net cash used in financing activities

(151,988

)

(204,328

)

Effects of exchange rate changes on cash and cash equivalents

356

(758

)

Increase in cash and cash equivalents

1,061

(7,876

)

Cash and cash equivalents - beginning of period

27,530

32,548

Cash and cash equivalents - end of period

$

28,591

$

24,672

Interest paid

$

66,305

$

69,955

Income taxes paid

$

21,212

$

24,404


Prestige Consumer Healthcare Inc.
Condensed Consolidated Statements of Income
Business Segments
(Unaudited)

Three Months Ended December 31, 2019

(In thousands)

North American
OTC Healthcare

International
OTC Healthcare

Household
Cleaning

Consolidated

Total segment revenues*

$

214,892

$

26,660

$

$

241,552

Cost of sales

93,937

10,120

104,057

Gross profit

120,955

16,540

137,495

Advertising and promotion

29,025

4,534

33,559

Contribution margin

$

91,930

$

12,006

$

103,936

Other operating expenses

27,532

Operating income

76,404

Other expense

25,850

Income before income taxes

50,554

Provision for income taxes

12,496

Net income

$

38,058

*Intersegment revenues of $0.6 million were eliminated from the North American OTC Healthcare segment.

Nine Months Ended December 31, 2019

(In thousands)

North American
OTC Healthcare

International
OTC Healthcare

Household
Cleaning

Consolidated

Total segment revenues*

$

639,554

$

72,221

$

$

711,775

Cost of sales

275,679

27,783

303,462

Gross profit

363,875

44,438

408,313

Advertising and promotion

94,634

12,393

107,027

Contribution margin

$

269,241

$

32,045

$

301,286

Other operating expenses

84,048

Operating income

217,238

Other expense

76,622

Income before income taxes

140,616

Provision for income taxes

35,381

Net income

$

105,235

*Intersegment revenues of $2.1 million were eliminated from the North American OTC Healthcare segment.

Three Months Ended December 31, 2018

(In thousands)

North American
OTC Healthcare

International
OTC Healthcare

Household
Cleaning

Consolidated

Total segment revenues*

$

216,776

$

24,638

$

$

241,414

Cost of sales

91,594

10,585

102,179

Gross profit

125,182

14,053

139,235

Advertising and promotion

30,316

4,188

34,504

Contribution margin

$

94,866

$

9,865

$

104,731

Other operating expenses

27,190

Operating income

77,541

Other expense

26,545

Income before income taxes

50,996

Provision for income taxes

12,829

Net income

$

38,167

* Intersegment revenues of $1.3 million were eliminated from the North American OTC Healthcare segment.

Nine Months Ended December 31, 2018

(In thousands)

North American
OTC Healthcare

International
OTC Healthcare

Household
Cleaning

Consolidated

Total segment revenues*

$

647,501

$

67,439

$

19,811

$

734,751

Cost of sales

272,754

28,079

16,588

317,421

Gross profit

374,747

39,360

3,223

417,330

Advertising and promotion

96,899

11,328

430

108,657

Contribution margin

$

277,848

$

28,032

$

2,793

308,673

Other operating expenses

87,721

Operating income

220,952

Other expense

79,977

Income before income taxes

140,975

Provision for income taxes

37,501

Net income

$

103,474

* Intersegment revenues of $5.6 million were eliminated from the North American OTC Healthcare segment.

About Non-GAAP Financial Measures

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 Revenue Growth Percentage, 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 EBITDA, Non-GAAP EBITDA Margin, Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted EBITDA Margin, Non-GAAP Adjusted Net Income, Non-GAAP Adjusted EPS, Non-GAAP Free Cash Flow, Non-GAAP Adjusted Free Cash Flow and Net Debt. 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 divestiture, allocated cost that remain after divestiture and impact of foreign currency exchange rates in the periods presented.

  • Non-GAAP Organic Revenue Growth Percentage: Calculated as the change in Non-GAAP Organic Revenues from prior year divided by prior year Non-GAAP Organic Revenues.

  • Non-GAAP Adjusted Gross Margin: GAAP Gross Profit minus certain transition and other costs associated with new warehouse and divestiture.

  • Non-GAAP Adjusted Gross Margin Percentage: Calculated as Non-GAAP Adjusted Gross Margin divided by GAAP Total Revenues.

  • Non-GAAP Adjusted General and Administrative Expense: GAAP General and Administrative expenses minus certain transition and divestiture-related costs.

  • 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 (Loss) before net interest expense (income), income taxes provision (benefit), and depreciation and amortization.

  • Non-GAAP EBITDA Margin: Calculated as Non-GAAP EBITDA divided by GAAP Total Revenues.

  • Non-GAAP Adjusted EBITDA: Non-GAAP EBITDA before certain transition, other costs associated with new warehouse and divestiture, and loss on extinguishment of debt.

  • Non-GAAP Adjusted EBITDA Margin: Calculated as Non-GAAP Adjusted EBITDA divided by GAAP Total Revenues.

  • Non-GAAP Adjusted Net Income: GAAP Net Income (Loss) before certain transition, other costs associated with new warehouse and divestiture, and loss on extinguishment of debt.

  • 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 transition and other costs associated with new warehouse and divestiture.

  • Net Debt: Calculated as total principal amount of debt outstanding ($1,717,000 at December 31, 2019) less cash and cash equivalents ($28,591 at December 31, 2019). Amounts in thousands.

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 related Non-GAAP Organic Revenue Growth percentage:

Three Months Ended
December 31,

Nine Months Ended
December 31,

2019

2018

2019

2018

(In thousands)

GAAP Total Revenues

$

241,552

$

241,414

$

711,775

$

734,751

Revenue Growth

0.1

%

(3.1

)

%

Adjustments:

Revenues associated with divestiture

(19,811

)

Allocated costs that remain after divestiture

(659

)

Impact of foreign currency exchange rates

(977

)

(3,534

)

Total adjustments

(977

)

(24,004

)

Non-GAAP Organic Revenues

$

241,552

$

240,437

$

711,775

$

710,747

Non-GAAP Organic Revenue Growth

0.5

%

0.1

%

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

Three Months Ended
December 31,

Nine Months Ended
December 31,

2019

2018

2019

2018

(In thousands)

GAAP Total Revenues

$

241,552

$

241,414

$

711,775

$

734,751

GAAP Gross Profit

$

137,495

$

139,235

$

408,313

$

417,330

GAAP Gross Profit as a Percentage of GAAP Total Revenue

56.9

%

57.7

%

57.4

%

56.8

%

Adjustments:

Transition and other costs associated with new warehouse and divestiture (1)

2,555

3,962

170

Total adjustments

2,555

3,962

170

Non-GAAP Adjusted Gross Margin

$

140,050

$

139,235

$

412,275

$

417,500

Non-GAAP Adjusted Gross Margin as a Percentage of GAAP Total Revenues

58.0

%

57.7

%

57.9

%

56.8

%

(1) Items related to new warehouse represent costs to transition to the new warehouse and duplicate costs incurred during the transition. Items related to divestiture represent costs related to divesting of assets sold.

Reconciliation of GAAP General and Administrative Expense and related GAAP General and Administrative Expense percentage 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,

2019

2018

2019

2018

(In thousands)

GAAP General and Administrative Expense

$

21,308

$

20,485

$

65,528

$

68,460

GAAP General and Administrative Expense as a Percentage of GAAP Total Revenue

8.8

%

8.5

%

9.2

%

9.3

%

Adjustments:

Transition and other costs associated with divestiture (1)

4,272

Total adjustments

4,272

Non-GAAP Adjusted General and Administrative Expense

$

21,308

$

20,485

$

65,528

$

64,188

Non-GAAP Adjusted General and Administrative Expense Percentage as a Percentage of GAAP Total Revenues

8.8

%

8.5

%

9.2

%

8.7

%

(1) Items related to divestiture represent costs related to divesting of assets sold, including (but not limited to) costs to exit or convert contractual obligations, severance and consulting costs; and certain costs related to the consummation of the divestiture process such as legal and other related professional fees.

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

Three Months Ended
December 31,

Nine Months Ended
December 31,

2019

2018

2019

2018

(In thousands)

GAAP Net Income

$

38,058

$

38,167

$

105,235

$

103,474

Interest expense, net

24,275

26,327

73,772

79,337

Provision for income taxes

12,496

12,829

35,381

37,501

Depreciation and amortization

7,381

7,887

21,664

24,253

Non-GAAP EBITDA

82,210

85,210

236,052

244,565

Non-GAAP EBITDA Margin

34.0

%

35.3

%

33.2

%

33.3

%

Adjustments:

Transition and other costs associated with new warehouse and divestiture in Cost of Goods Sold (1)

2,555

3,962

170

Transition and other costs associated with divestiture in General and Administrative Expense (2)

4,272

Loss on extinguishment of debt

2,155

2,155

Gain on divestiture

(1,284

)

Total adjustments

4,710

6,117

3,158

Non-GAAP Adjusted EBITDA

$

86,920

$

85,210

$

242,169

$

247,723

Non-GAAP Adjusted EBITDA Margin

36.0

%

35.3

%

34.0

%

33.7

%

(1) Items related to new warehouse represent costs to transition to the new warehouse and duplicate costs incurred during the transition. Items related to divestiture represent costs related to divesting of assets sold.
(2) Items related to divestiture represent costs related to divesting of assets sold, including (but not limited to) costs to exit or convert contractual obligations, severance and consulting costs; and certain costs related to the consummation of the divestiture process such as legal and other related professional fees.

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

Three Months Ended December 31,

Nine Months Ended December 31,

2019

2019
Adjusted
EPS

2018

2018
Adjusted
EPS

2019

2019
Adjusted
EPS

2018

2018
Adjusted
EPS

(In thousands, except per share data)

GAAP Net Income

$

38,058

$

0.75

$

38,167

$

0.73

$

105,235

$

2.05

$

103,474

$

1.97

Adjustments:

Transition and other costs associated with new warehouse and divestiture in Cost of Goods Sold (1)

2,555

0.05

3,962

0.08

170

Transition and other costs associated with divestiture in General and Administrative Expense (2)

4,272

0.08

Loss on extinguishment of debt

2,155

0.04

2,155

0.04

Gain on divestiture

(1,284

)

(0.02

)

Accelerated amortization of debt origination costs

706

0.01

Tax impact of adjustments (3)

(1,196

)

(0.02

)

(1,554

)

(0.03

)

420

0.01

Normalized tax rate adjustment (4)

(345

)

(0.01

)

(335

)

(0.01

)

415

0.01

Total adjustments

3,169

0.06

4,228

0.08

4,699

0.09

Non-GAAP Adjusted Net Income
and Adjusted EPS

$

41,227

$

0.81

$

38,167

$

0.73

$

109,463

$

2.14

$

108,173

$

2.06

Note: Amounts may not add due to rounding.
(1) Items related to new warehouse represent costs to transition to the new warehouse and duplicate costs incurred during the transition. Items related to divestiture represent costs related to divesting of assets sold.
(2) Items related to divestiture represent costs related to divesting of assets sold, including (but not limited to) costs to exit or convert contractual obligations, severance and consulting costs; and certain costs related to the consummation of the divestiture process such as legal and other 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.
(4) Income tax adjustment to adjust for discrete income tax items.

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,

2019

2018

2019

2018

(In thousands)

GAAP Net Income

$

38,058

$

38,167

$

105,235

$

103,474

Adjustments:

Adjustments to reconcile net income to net cash provided by operating activities as shown in the Statement of Cash Flows

17,089

14,371

45,985

37,425

Changes in operating assets and liabilities as shown in the Statement of Cash Flows

2,851

(9,208

)

9,778

(2,462

)

Total adjustments

19,940

5,163

55,763

34,963

GAAP Net cash provided by operating activities

57,998

43,330

160,998

138,437

Purchases of property and equipment

(3,233

)

(2,065

)

(9,055

)

(7,139

)

Non-GAAP Free Cash Flow

54,765

41,265

151,943

131,298

Transition and other payments associated with new warehouse and divestiture (1)

1,517

3,284

2,327

10,902

Additional income tax payments associated with divestiture

12,656

12,656

Non-GAAP Adjusted Free Cash Flow

$

56,282

$

57,205

$

154,270

$

154,856

(1) Payments related to new warehouse represent costs to transition to the new warehouse and duplicate costs incurred during the transition. Payments related to divestiture represent costs related to divesting of assets sold, including (but not limited to) costs to exit or convert contractual obligations, severance and consulting costs; and certain costs related to the consummation of the divestiture process such as legal and other related professional fees.

Outlook for Fiscal Year 2020:

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

2020 Projected EPS

Low

High

Projected FY'20 GAAP EPS

$

2.67

$

2.69

Adjustments:

Integration of new logistics provider (1)

0.15

0.15

Loss on extinguishment of debt

0.03

0.03

Total Adjustments

0.18

0.18

Projected Non-GAAP Adjusted EPS

$

2.85

$

2.87

(1) Represents costs to integrate our new logistics provider into our operations.

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

2020
Projected
Free Cash
Flow

(In millions)

Projected FY'20 GAAP Net cash provided by operating activities

$

205

Additions to property and equipment for cash

(15

)

Projected Non-GAAP Free Cash Flow

190

Payments associated with integration of new logistics provider

10

Projected Non-GAAP Adjusted Free Cash Flow

$

200

Investor Relations Contact
Phil Terpolilli, CFA, 914-524-6819
irinquiries@prestigebrands.com