IRVINGTON, N.Y.--(BUSINESS WIRE)--Prestige Brands Holdings, Inc. (NYSE: PBH) today announced results for the fiscal 2012 third quarter ended December 31, 2011, including net revenues of $106.3 million, an increase of 17.3% over the prior year's comparable quarter of $90.6 million. Net revenues for the nine month period of fiscal 2012 were $307.1 million, an increase of 27.9% over the prior year's comparable period of $240.1 million. This growth is largely driven by the fiscal 2011 acquisitions of Blacksmith Brands and Dramamine®, and the growth of the Company's legacy core Over-The-Counter (OTC) products. Net revenues for the Company's legacy core OTC brands were 3.2% and 5.7% higher than the prior year’s comparable quarter and nine month periods, respectively, representing the sixth consecutive quarter of organic growth, excluding acquisitions.
Operating income for the third quarter of fiscal 2012 was $23.6 million, 81.4% higher than the prior year's comparable quarter of $13.0 million. Operating income for the first nine months of fiscal 2012 was $80.3 million, 39.5% higher than the prior year's comparable period of $57.5 million. These increases include the impact of the acquisitions completed in fiscal 2011, as well as expenses related to the acquisition of the brands from GSK.
Income from continuing operations for the third quarter of fiscal 2012 was $9.5 million, compared to $2.1 million in the prior year's comparable quarter. The current and prior year's fiscal third quarters were impacted by acquisition-related costs of $3.0 million and $8.2 million, respectively, net of tax of $1.9 million and $3.1 million, respectively. Excluding the impact of these charges, income from continuing operations for the third quarter of fiscal 2012 would have been $12.5 million, 21.5% higher than the prior year's comparable quarter of $10.3 million. Income from continuing operations for the first nine months of fiscal 2012 was $37.2 million, 63.5% higher than the prior year's comparable period of $22.8 million.
The current fiscal nine month period included the net impact of the $3.0 million of GSK acquisition-related costs, which was largely offset by a net gain associated with a legal settlement, and other net costs totaling approximately $2.9 million. The prior year's fiscal nine month period included the net impact of the $8.2 million Blacksmith acquisition-related costs. Excluding the impact of these charges, income from continuing operations for the first nine months of fiscal 2012 would have been $37.3 million, 20.7% higher than the prior year's comparable quarter of $30.9 million.
Reported net income for the third quarter of fiscal 2012 was $9.5 million, or $0.19 per diluted share, 336.6% higher than the prior year's comparable quarter of $2.2 million, or $0.04 per diluted share. Excluding the costs mentioned above in each of the respective periods, net income for the current third fiscal quarter would have been $12.5 million, or EPS of $0.25, compared to $10.3 million in the prior year's comparable quarter, or EPS of $0.21.
Reported net income for the first nine months of fiscal 2012 was $37.2 million, or 63.2% higher than the prior year's comparable period of $22.8 million. Excluding the amounts mentioned above in each of the respective periods, net income would have been $37.3 million for the first nine months of fiscal 2012, compared to $30.9 million in the prior fiscal year period. Excluding the costs referenced above, earnings per diluted share would have been $0.74 for the first nine months of fiscal 2012 compared to $0.62 in the prior year's nine month period, an increase of 19.4%.
Subsequent To The Close of the Quarter
On January 31, 2012, the Company completed the acquisition of fifteen of the seventeen OTC brands it agreed to purchase from GlaxoSmithKline(GSK), previously announced on December 20, 2011. The acquisition of the remaining two brands from GSK is expected to be completed during the first half of the year. The purchase price for the acquisition (inclusive of inventory) was $615 million, subject to a customary post-closing inventory adjustment. On January 31, 2012, to fund the acquisition, the Company completed the financing of additional bond and bank debt of $250 million and $660 million, respectively, the repayment of existing senior secured credit facilities and the payment of related transaction expenses. The acquisition of the GSK brands is the largest in the Company's history and a major step toward its commitment to its long-term OTC strategy.
Commentary and Outlook
Matthew M. Mannelly, CEO, commented, “We are pleased with our third quarter results, which reflect the successful execution of our stated strategy of core OTC growth combined with value-added acquisitions. We registered strong growth from our nine core OTC brands, resulting in solid market share gains across these categories. Both the Little Remedies® brand and the PediaCare® brand, which we acquired last year, experienced impressive revenue and share gains for both the quarter and the nine month year over year periods, despite a very soft cough/cold season. In addition, our diversified portfolio of OTC brands and platforms helped offset the headwinds of a tough cough/cold season," he said.
“Our disciplined approach to creating shareholder value continues to strategically transform the Company. The purchase of the seventeen well-known consumer brands from GSK represents the largest acquisition in our history. The brands are an excellent strategic and operational fit for Prestige, adding two new platforms and four new core brands to our business. They are well-aligned with our operating model, requiring limited incremental overhead, and are highly cash generative. We are confident we can rapidly transition these brands into our portfolio based on our track record of successful integration of previous acquisitions. Prestige's industry-leading Free Cash Flow will help us rapidly delever," he said.
"Our outlook for Q4 is one of cautious optimism given the challenging economic and retail environment, as well as the overall incident level of the cough/cold season to date. The GSK acquisition is expected to add approximately $30 million to our fourth quarter revenue and be neutral to EPS, excluding transaction-related and integration costs," he said.
Results by Segment
OTC Healthcare
Net revenues for the OTC Healthcare segment in the third quarter of fiscal 2012 were $84.9 million, or 25.9% higher than the prior year third quarter of $67.5 million. The revenue increase in the OTC Healthcare segment was led by strong sales of Little Remedies®, and The Doctor's®. In the third quarter of fiscal 2012, the five legacy core OTC brands increased 3.2% compared to the same period in the prior year and represents the sixth consecutive quarter of organic revenue increases for the Company's five legacy core OTC brands.
Net revenues for the OTC Healthcare segment in the nine month period of fiscal 2012 were $235.3 million, or 44.3% higher than the prior year's comparable period of $163.0 million. The increase in revenues is primarily due to revenues from the acquired Blacksmith brands and Dramamine®, and also to higher revenues from our five legacy core OTC brands, which benefited from increased advertising and promotional expenditures.
Household Cleaning
Net revenues for the Household Cleaning segment were $21.3 million for the third quarter of fiscal 2012, 7.8% lower than the prior year's comparable quarter of $23.1 million. Net revenues for the Household Cleaning segment were $71.8 million for the first nine months of fiscal 2012, 6.9% lower than the prior year's comparable nine month period of $77.1 million. This segment continues to be impacted by a difficult retail environment for household cleaning products. For both the third fiscal quarter and the nine month periods, lower sales of Comet® cleanser were partially offset by increased demand for Spic and Span®.
Free Cash Flow and Debt
Free Cash Flow is a "non-GAAP financial measure" and is presented here because management believes it is a commonly used measure of liquidity, indicative of cash available for debt repayment and acquisitions. Non-GAAP Free Cash Flow is defined and reconciled to GAAP Net Cash Provided by Operating Activities in the section entitled, “About Non-GAAP Financial Measures” below. The Company's Free Cash Flow for the third fiscal quarter ended December 31, 2011 was $14.5 million, a decrease of $4.2 million over the prior year's comparable quarter Free Cash Flow of $18.7 million. The Company's Free Cash Flow for the nine month period of fiscal 2012 was $47.6 million, a decrease of $13.6 million over the prior year comparable nine month period's Free Cash Flow of $61.2 million. The decrease in Free Cash Flow is primarily due to higher working capital usage, largely offset by the increased company performance primarily resulting from the acquisitions of Blacksmith Brands and Dramamine® as well as the growth of the legacy core OTC brands.
Total indebtedness at December 31, 2011 was $434.0 million, reflecting debt repayments of $58.0 million in the nine month period of the current fiscal year. At December 31, 2011, we had $40.0 million available for borrowing under our revolving credit facility and $4.4 million of cash on hand.
Conference Call and Accompanying Slide Presentation
The Company will host a conference call to review its third quarter results on February 9, 2012 at 8:30 am EST. The toll-free dial-in numbers are 866-700-7477 within North America and 617-213-8840 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 Company's Investor Relations page of 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 71452751.
About Prestige Brands Holdings, Inc.
The Company markets and distributes brand name over-the-counter and household cleaning products throughout the U.S., Canada, and certain international markets. Core brands now include 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® analgesics, Gaviscon® antacid and Beano® gas treatment.
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," "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. Forward-looking statements in this news release include, without limitation, statements regarding the impact of the acquired GSK brands on our operating results and financial condition, our ability to integrate and develop the brands that we acquired during fiscal year 2011 and 2012, A&P spending, and our outlook and plans for the markets in which we compete, including the severity of the cough/cold season. These statements are based on management's estimates and assumptions with respect to future events and financial performance and are believed to be reasonable, although they are inherently uncertain and difficult to predict. Actual results could differ materially from those expected as a result of a variety of factors. A discussion of factors that could cause results to vary is included in the Company's Annual Report on Form 10-K and other periodic reports filed with the Securities and Exchange Commission.
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Prestige Brands Holdings, Inc. Consolidated Statements of Operations (Unaudited) |
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Three Months Ended |
Nine Months Ended |
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| (In thousands, except per share data) | 2011 | 2010 | 2011 | 2010 | ||||||||||||
| Revenues | ||||||||||||||||
| Net sales | $ | 105,799 | $ | 90,077 | $ | 304,678 | $ | 238,086 | ||||||||
| Other revenues | 451 | 531 | 2,411 | 2,061 | ||||||||||||
| Total revenues | 106,250 | 90,608 | 307,089 | 240,147 | ||||||||||||
| Cost of Sales | ||||||||||||||||
| Cost of sales (exclusive of | ||||||||||||||||
| depreciation shown below) | 51,128 | 46,596 | 148,193 | 115,574 | ||||||||||||
| Gross profit | 55,122 | 44,012 | 158,896 | 124,573 | ||||||||||||
| Operating Expenses | ||||||||||||||||
| Advertising and promotion | 15,274 | 13,049 | 38,580 | 28,775 | ||||||||||||
| General and administrative | 13,655 | 15,426 | 32,366 | 30,941 | ||||||||||||
| Depreciation and amortization | 2,563 | 2,513 | 7,683 | 7,336 | ||||||||||||
| Total operating expenses | 31,492 | 30,988 | 78,629 | 67,052 | ||||||||||||
| Operating income | 23,630 | 13,024 | 80,267 | 57,521 | ||||||||||||
| Other (income) expense | ||||||||||||||||
| Interest income | (1 | ) | — | (4 | ) | — | ||||||||||
| Interest expense | 8,117 | 7,674 | 24,977 | 18,508 | ||||||||||||
| Gain on settlement | — | — | (5,063 | ) | — | |||||||||||
| Loss on extinguishment of debt | — | — | — | 300 | ||||||||||||
| Total other expense | 8,116 | 7,674 | 19,910 | 18,808 | ||||||||||||
| Income from continuing | ||||||||||||||||
| operations before income taxes | 15,514 | 5,350 | 60,357 | 38,713 | ||||||||||||
| Provision for income taxes | 6,004 | 3,204 | 23,130 | 15,948 | ||||||||||||
| Income from continuing operations | 9,510 | 2,146 | 37,227 | 22,765 | ||||||||||||
| Discontinued Operations | ||||||||||||||||
| Income from discontinued | ||||||||||||||||
| operations, net of income tax | — | 32 | — | 591 | ||||||||||||
| Loss on sale of discontinued | ||||||||||||||||
| operations, net of income tax | — | — | — | (550 | ) | |||||||||||
| Net income | $ | 9,510 | $ | 2,178 | $ | 37,227 | $ | 22,806 | ||||||||
| Basic earnings per share: | ||||||||||||||||
| Income from continuing operations | $ | 0.19 | $ | 0.04 | $ | 0.74 | $ | 0.46 | ||||||||
| Income from discontinued | ||||||||||||||||
| operations and loss on sale of | ||||||||||||||||
| discontinued operations | — | — | — | — | ||||||||||||
| Net income | $ | 0.19 | $ | 0.04 | $ | 0.74 | $ | 0.46 | ||||||||
| Diluted earnings per share: | ||||||||||||||||
| Income from continuing operations | $ | 0.19 | $ | 0.04 | $ | 0.73 | $ | 0.45 | ||||||||
| Income from discontinued | ||||||||||||||||
| operations and loss on sale of | ||||||||||||||||
| discontinued operations | — | — | — | — | ||||||||||||
| Net income | $ | 0.19 | $ | 0.04 | $ | 0.73 | $ | 0.45 | ||||||||
| Weighted average shares outstanding: | ||||||||||||||||
| Basic | 50,307 | 50,085 | 50,256 | 50,059 | ||||||||||||
| Diluted | 50,684 | 50,533 | 50,667 | 50,260 | ||||||||||||
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Prestige Brands Holdings, Inc. Consolidated Balance Sheets (Unaudited) |
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| (In thousands) | December 31, | March 31, | ||||||
| Assets | 2011 | 2011 | ||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 4,439 | $ | 13,334 | ||||
| Accounts receivable, net | 50,163 | 44,393 | ||||||
| Inventories | 43,579 | 39,751 | ||||||
| Deferred income tax assets | 5,540 | 5,292 | ||||||
| Prepaid expenses and other current assets | 2,162 | 4,812 | ||||||
| Total current assets | 105,883 | 107,582 | ||||||
| Property and equipment, net | 1,238 | 1,444 | ||||||
| Goodwill | 153,696 | 154,896 | ||||||
| Intangible assets, net | 779,242 | 786,361 | ||||||
| Other long-term assets | 5,788 | 6,635 | ||||||
| Total Assets | $ | 1,045,847 | $ | 1,056,918 | ||||
| Liabilities and Stockholders' Equity | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | 23,977 | $ | 21,615 | ||||
| Accrued interest payable | 5,181 | 10,313 | ||||||
| Other accrued liabilities | 23,905 | 22,280 | ||||||
| Total current liabilities | 53,063 | 54,208 | ||||||
| Long-term debt | ||||||||
| Principal amount | 434,000 | 492,000 | ||||||
| Less unamortized discount | (4,368 | ) | (5,055 | ) | ||||
| Long-term debt, net of unamortized discount | 429,632 | 486,945 | ||||||
| Deferred income tax liabilities | 161,502 | 153,933 | ||||||
| Total Liabilities | 644,197 | 695,086 | ||||||
| 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 - 50,433 shares at December 31, 2011 and 50,276 shares at March 31, 2011 | 504 | 503 | ||||||
| Additional paid-in capital | 390,863 | 387,932 | ||||||
| Treasury stock, at cost - 181 shares at December 31, 2011 and 160 | ||||||||
| shares at March 31, 2011 | (687 | ) | (416 | ) | ||||
| Accumulated other comprehensive loss, net of tax | (70 | ) | — | |||||
| Retained earnings (accumulated deficit) | 11,040 | (26,187 | ) | |||||
| Total Stockholders' Equity | 401,650 | 361,832 | ||||||
| Total Liabilities and Stockholders' Equity | $ | 1,045,847 | $ | 1,056,918 | ||||
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Prestige Brands Holdings, Inc. Consolidated Statements of Cash Flows (Unaudited) |
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| Nine Months Ended December 31, | ||||||||
| (In thousands) | 2011 | 2010 | ||||||
| Operating Activities | ||||||||
| Net income | $ | 37,227 | $ | 22,806 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 7,683 | 7,565 | ||||||
| Loss on sale of discontinued operations | — | 890 | ||||||
| Deferred income taxes | 7,321 | 5,591 | ||||||
| Amortization of deferred financing costs | 847 | 767 | ||||||
| Stock-based compensation costs | 2,360 | 2,751 | ||||||
| Loss on extinguishment of debt | — | 300 | ||||||
| Amortization of debt discount | 687 | 480 | ||||||
| Loss on disposal of equipment | — | 131 | ||||||
| Changes in operating assets and liabilities | ||||||||
| Accounts receivable | (5,816 | ) | 7,330 | |||||
| Inventories | (3,850 | ) | 2,814 | |||||
| Inventories held for sale | — | 1,114 | ||||||
| Prepaid expenses and other current assets | 2,650 | 3,166 | ||||||
| Accounts payable | 2,392 | (1,054 | ) | |||||
| Accrued liabilities | (3,508 | ) | 7,008 | |||||
| Net cash provided by operating activities | 47,993 | 61,659 | ||||||
| Investing Activities | ||||||||
| Purchases of equipment | (358 | ) | (405 | ) | ||||
| Proceeds from sale of discontinued operations | — | 4,122 | ||||||
| Acquisition of Blacksmith, net of cash acquired | — | (202,044 | ) | |||||
| Proceeds from escrow of Blacksmith acquisition | 1,200 | — | ||||||
| Net cash provided by (used in) investing activities | 842 | (198,327 | ) | |||||
| Financing Activities | ||||||||
| Proceeds from issuance of Senior Notes | — | 100,250 | ||||||
| Proceeds from issuance of Senior Term Loan | — | 112,936 | ||||||
| Payment of deferred financing costs | — | (648 | ) | |||||
| Repayment of long-term debt | (58,000 | ) | (33,587 | ) | ||||
| Proceeds from exercise of stock options | 572 | 150 | ||||||
| Shares surrendered as payment of tax withholding | (271 | ) | (264 | ) | ||||
| Net cash (used in) provided by financing activities | (57,699 | ) | 178,837 | |||||
| Effects of exchange rate changes on cash and cash equivalents | (31 | ) | — | |||||
| (Decrease) increase in cash and cash equivalents | (8,895 | ) | 42,169 | |||||
| Cash and cash equivalents - beginning of period | 13,334 | 41,097 | ||||||
| Cash and cash equivalents - end of period | $ | 4,439 | $ | 83,266 | ||||
| Interest paid | $ | 28,503 | $ | 13,354 | ||||
| Income taxes paid | $ | 12,699 | $ | 4,096 | ||||
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Prestige Brands Holdings, Inc. Consolidated Statements of Operations Business Segments (Unaudited) |
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| Three Months Ended December 31, 2011 | |||||||||||
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OTC
Healthcare |
Household
Cleaning |
Consolidated | |||||||||
| (In thousands) | |||||||||||
| Net sales | $ | 84,711 | $ | 21,088 | $ | 105,799 | |||||
| Other revenues | 195 | 256 | 451 | ||||||||
| Total revenues | 84,906 | 21,344 | 106,250 | ||||||||
| Cost of sales | 35,329 | 15,799 | 51,128 | ||||||||
| Gross profit | 49,577 | 5,545 | 55,122 | ||||||||
| Advertising and promotion | 14,170 | 1,104 | 15,274 | ||||||||
| Contribution margin | $ | 35,407 | $ | 4,441 | 39,848 | ||||||
| Other operating expenses | 16,218 | ||||||||||
| Operating income | 23,630 | ||||||||||
| Other expense | 8,116 | ||||||||||
| Provision for income taxes | 6,004 | ||||||||||
| Income from continuing operations | 9,510 | ||||||||||
| Income from discontinued operations, net of income tax | — | ||||||||||
| Loss on sale of discontinued operations, net of income tax | — | ||||||||||
| Net income | $ | 9,510 | |||||||||
| Three Months Ended December 31, 2010 | |||||||||||
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OTC
Healthcare |
Household
Cleaning |
Consolidated | |||||||||
| (In thousands) | |||||||||||
| Net sales | $ | 67,287 | $ | 22,790 | $ | 90,077 | |||||
| Other revenues | 173 | 358 | 531 | ||||||||
| Total revenues | 67,460 | 23,148 | 90,608 | ||||||||
| Cost of sales | 30,827 | 15,769 | 46,596 | ||||||||
| Gross profit | 36,633 | 7,379 | 44,012 | ||||||||
| Advertising and promotion | 11,842 | 1,207 | 13,049 | ||||||||
| Contribution margin | $ | 24,791 | $ | 6,172 | 30,963 | ||||||
| Other operating expenses | 17,939 | ||||||||||
| Operating income | 13,024 | ||||||||||
| Other expense | 7,674 | ||||||||||
| Provision for income taxes | 3,204 | ||||||||||
| Income from continuing operations | 2,146 | ||||||||||
| Income from discontinued operations, net of income tax | 32 | ||||||||||
| Loss on sale of discontinued operations, net of income tax | — | ||||||||||
| Net income | $ | 2,178 | |||||||||
| Nine Months Ended December 31, 2011 | |||||||||||
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OTC
Healthcare |
Household
Cleaning |
Consolidated | |||||||||
| (In thousands) | |||||||||||
| Net sales | $ | 234,712 | $ | 69,966 | $ | 304,678 | |||||
| Other revenues | 552 | 1,859 | 2,411 | ||||||||
| Total revenues | 235,264 | 71,825 | 307,089 | ||||||||
| Cost of sales | 97,198 | 50,995 | 148,193 | ||||||||
| Gross profit | 138,066 | 20,830 | 158,896 | ||||||||
| Advertising and promotion | 34,746 | 3,834 | 38,580 | ||||||||
| Contribution margin | $ | 103,320 | $ | 16,996 | 120,316 | ||||||
| Other operating expenses | 40,049 | ||||||||||
| Operating income | 80,267 | ||||||||||
| Other expense | 19,910 | ||||||||||
| Provision for income taxes | 23,130 | ||||||||||
| Income from continuing operations | 37,227 | ||||||||||
| Income from discontinued operations, net of income tax | — | ||||||||||
| Loss on sale of discontinued operations, net of income tax | — | ||||||||||
| Net income | $ | 37,227 | |||||||||
| Nine Months Ended December 31, 2010 | ||||||||||||
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OTC
Healthcare |
Household
Cleaning |
Consolidated | ||||||||||
| (In thousands) | ||||||||||||
| Net sales | $ | 162,652 | $ | 75,434 | $ | 238,086 | ||||||
| Other revenues | 368 | 1,693 | 2,061 | |||||||||
| Total revenues | 163,020 | 77,127 | 240,147 | |||||||||
| Cost of sales | 64,477 | 51,097 | 115,574 | |||||||||
| Gross profit | 98,543 | 26,030 | 124,573 | |||||||||
| Advertising and promotion | 23,918 | 4,857 | 28,775 | |||||||||
| Contribution margin | $ | 74,625 | $ | 21,173 | 95,798 | |||||||
| Other operating expenses | 38,277 | |||||||||||
| Operating income | 57,521 | |||||||||||
| Other expense | 18,808 | |||||||||||
| Provision for income taxes | 15,948 | |||||||||||
| Income from continuing operations | 22,765 | |||||||||||
| Income from discontinued operations, net of income tax | 591 | |||||||||||
| Loss on sale of discontinued operations, net of income tax | (550 | ) | ||||||||||
| Net income | $ | 22,806 | ||||||||||
About Non-GAAP Financial Measures
We define Non-GAAP EBITDA as earnings before interest expense (income), income taxes, depreciation and amortization, income or loss from discontinued operations or the sale thereof and Non-GAAP Adjusted EBITDA as earnings before interest expense (income), income taxes, depreciation and amortization, income or loss from discontinued operations and the sale thereof, gain on settlement, certain other legal and professional fees and acquisition-related costs. We define Non-GAAP Adjusted Income from Continuing Operations as Income from Continuing Operations before incremental interest expense to finance future acquisitions, gain on settlement, certain other legal and professional fees, acquisition-related costs, the applicable tax impacts associated with these items and the tax impacts of state tax rate adjustments and other non-deductible items. We define Non-GAAP Adjusted Net Income as Net Income before gain on settlement, certain other legal and professional fees, acquisition-related costs, income or loss from discontinued operations and the sale thereof, loss on extinguishment of debt, the applicable tax impacts associated with these items and the tax impacts of state tax rate adjustments and other non-deductible items. We define Non-GAAP Free Cash Flow as net cash provided by operating activities less cash paid for capital expenditures. Non-GAAP EBITDA, Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted Net Income and Non-GAAP Free Cash Flow may not be comparable to similarly titled measures reported by other companies.
We are presenting Non-GAAP EBITDA, Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted Income from Continuing Operations, Non-GAAP Adjusted Net Income and Non-GAAP Free Cash Flow because they provide a 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 EBITDA, Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted Income from Continuing Operations, Non-GAAP Adjusted Net Income and Non-GAAP 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 our ability to pursue acquisitions or service or incur indebtedness; and (iii) we use Non-GAAP EBITDA/Non-GAAP Adjusted EBITDA and Non-GAAP Adjusted Net Income 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 EBITDA, Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted Income from Continuing Operations, Non-GAAP Adjusted Net Income and Non-GAAP Free Cash Flow has limitations and you should not consider these measures in isolation from or as an alternative to GAAP measures such as operating income, income from continuing operations, 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 EBITDA, Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted Income from Continuing Operations, Non-GAAP Adjusted Net Income and Non-GAAP Free Cash Flow, all of which are non-GAAP financial measures, to GAAP net income and GAAP net cash provided by operating activities, respectively, our most directly comparable financial measures presented in accordance with GAAP.
Reconciliation of GAAP Net Income to Non-GAAP Adjusted EBITDA:
| Three Months Ended December 31, | ||||||||||
| 2011 | 2010 | |||||||||
| (In thousands) | ||||||||||
| GAAP Net Income | $ | 9,510 | $ | 2,178 | ||||||
| Income from discontinued operations | — | (32 | ) | |||||||
| Interest Expense, net | 8,116 | 7,674 | ||||||||
| Income tax provision | 6,004 | 3,204 | ||||||||
| Depreciation and amortization | 2,563 | 2,513 | ||||||||
| Non-GAAP EBITDA: | 26,193 | 15,537 | ||||||||
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Adjustments: |
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| Inventory step-up charges associated with acquisitions | — | 3,544 | ||||||||
| Legal and professional fees associated with acquisitions | 4,890 | 6,927 | ||||||||
| Total adjustments | 4,890 | 10,471 | ||||||||
| Non-GAAP Adjusted EBITDA | $ | 31,083 | $ | 26,008 | ||||||
| Nine Months Ended December 31, | ||||||||||
| 2011 | 2010 | |||||||||
| (In thousands) | ||||||||||
| GAAP Net Income | $ | 37,227 | $ | 22,806 | ||||||
| Income from discontinued operations | — | (591 | ) | |||||||
| Loss on sale of discontinued operations | — | 550 | ||||||||
| Interest Expense, net | 24,973 | 18,508 | ||||||||
| Income tax provision | 23,130 | 15,948 | ||||||||
| Depreciation and amortization | 7,683 | 7,336 | ||||||||
| Non-GAAP EBITDA: | 93,013 | 64,557 | ||||||||
|
Adjustments: |
||||||||||
| Gain on settlement | (5,063 | ) | — | |||||||
| Inventory step-up charges associated with acquisitions | — | 3,544 | ||||||||
| Legal and professional fees associated with acquisitions | 5,665 | 6,927 | ||||||||
| Loss on extinguishment of debt | — | 300 | ||||||||
| Total adjustments | 602 | 10,771 | ||||||||
| Non-GAAP Adjusted EBITDA | $ | 93,615 | $ | 75,328 | ||||||
Reconciliation of GAAP Income from Continuing Operations to Non-GAAP Adjusted Income from Continuing Operations:
| Three Months Ended December 31, | ||||||||||
| 2011 | 2010 | |||||||||
| (In thousands) | ||||||||||
| GAAP Income from Continuing Operations | $ | 9,510 | $ | 2,146 | ||||||
|
Adjustments: |
||||||||||
| Incremental interest expense to finance Dramamine | — | 800 | ||||||||
| Inventory step-up charges associated with acquisitions | — | 3,544 | ||||||||
| Acquisition related costs | 4,890 | 6,927 | ||||||||
| Tax impact of adjustments | (1,892 | ) | (3,119 | ) | ||||||
| Total adjustments | 2,998 | 8,152 | ||||||||
| Non-GAAP Adjusted Income from Continuing Operations | $ | 12,508 | $ | 10,298 | ||||||
| Nine Months Ended December 31, | ||||||||||
| 2011 | 2010 | |||||||||
| (In thousands) | ||||||||||
| GAAP Income from Continuing Operations | $ | 37,227 | $ | 22,765 | ||||||
|
Adjustments: |
||||||||||
| Incremental interest expense to finance Dramamine | — | 800 | ||||||||
| Inventory step-up charges associated with acquisitions | — | 3,544 | ||||||||
| Gain on settlement | (5,063 | ) | — | |||||||
| Acquisition related costs | 5,665 | 6,927 | ||||||||
| Tax impact of adjustments | (275 | ) | (3,119 | ) | ||||||
| Tax impact of state rate adjustments and other non-deductible items | (237 | ) | — | |||||||
| Total adjustments | 90 | 8,152 | ||||||||
| Non-GAAP Adjusted Income from Continuing Operations | $ | 37,317 | $ | 30,917 | ||||||
Reconciliation of GAAP Net Income to Non-GAAP Adjusted Net Income and related Diluted Earnings Per Share:
| Three Months Ended December 31, | |||||||||||||||||
| 2011 |
2011 |
2010 |
2010 |
||||||||||||||
| (In thousands) | |||||||||||||||||
| GAAP Net Income | $ | 9,510 | $ | 0.19 | $ | 2,178 | $ | 0.04 | |||||||||
|
Adjustments: |
|||||||||||||||||
| Income from discontinued operations | — | — | (32 | ) | — | ||||||||||||
| Incremental interest expense to finance Dramamine | — | — | 800 | 0.02 | |||||||||||||
| Inventory step-up charge associated with acquisitions | — | — | 3,544 | 0.07 | |||||||||||||
| Legal and professional fees associated with acquisitions | 4,890 | 0.10 | 6,927 | 0.14 | |||||||||||||
| Tax impact of adjustments | (1,892 | ) | (0.04 | ) | (3,119 | ) | (0.06 | ) | |||||||||
| Total adjustments | 2,998 | 0.06 | 8,120 | 0.17 | |||||||||||||
| Non-GAAP Adjusted Net Income and Adjusted EPS | $ | 12,508 | $ | 0.25 | $ | 10,298 | $ | 0.21 | |||||||||
| Nine Months Ended December 31, | |||||||||||||||||
| 2011 |
2011 |
2010 |
2010 |
||||||||||||||
| (In thousands) | |||||||||||||||||
| GAAP Net Income | $ | 37,227 | $ | 0.73 | $ | 22,806 | $ | 0.45 | |||||||||
|
Adjustments: |
|||||||||||||||||
| Income from discontinued operations | — | — | (591 | ) | (0.01 | ) | |||||||||||
| Loss on sale of discontinued operations | — | — | 550 | 0.01 | |||||||||||||
| Gain on settlement | (5,063 | ) | (0.10 | ) | — | — | |||||||||||
| Incremental interest expense to finance Dramamine | — | — | 800 | 0.02 | |||||||||||||
| Inventory step-up charge associated with acquisitions | — | — | 3,544 | 0.07 | |||||||||||||
| Legal and professional fees associated with acquisitions | 5,665 | 0.11 | 6,927 | 0.14 | |||||||||||||
| Tax impact of adjustments | (275 | ) | — | (3,119 | ) | (0.06 | ) | ||||||||||
| Tax impact of state rate adjustments and other non-deductible items | (237 | ) | — | — | — | ||||||||||||
| Total adjustments | 90 | 0.01 | 8,111 | 0.17 | |||||||||||||
| Non-GAAP Adjusted Net Income and Adjusted EPS | $ | 37,317 | $ | 0.74 | $ | 30,917 | $ | 0.62 | |||||||||
Reconciliation of GAAP Net Cash Provided by Operating Activities to Non-GAAP Free Cash Flow:
| Three Months Ended December 31, | ||||||||||
| 2011 | 2010 | |||||||||
| (In thousands) | ||||||||||
| GAAP Net cash provided by operating activities | $ | 14,527 | $ | 18,842 | ||||||
| Additions to property and equipment for cash | (51 | ) | (151 | ) | ||||||
| Non-GAAP Free Cash Flow | $ | 14,476 | $ | 18,691 | ||||||
| Nine Months Ended December 31, | ||||||||||
| 2011 | 2010 | |||||||||
| (In thousands) | ||||||||||
| GAAP Net cash provided by operating activities | $ | 47,993 | $ | 61,659 | ||||||
| Additions to property and equipment for cash | (358 | ) | (405 | ) | ||||||
| Non-GAAP Free Cash Flow | $ | 47,635 | $ | 61,254 | ||||||