Prestige Brands Holdings, Inc. Reports First Quarter Fiscal 2017

Revenues Up 9.1% to $209.6 Million

TARRYTOWN, N.Y.–(BUSINESS WIRE)–Prestige Brands Holdings, Inc. (NYSE:PBH) today announced results for
the first quarter of fiscal year 2017, which ended June 30, 2016.

Key first fiscal quarter highlights include:

  • Reported revenues increased 9.1% to $209.6 million;
  • Net cash provided by operating activities totaled $50.8 million;
  • Integration of DenTek® acquisition is complete; focus on
    brand-building continues;
  • Entered into an agreement to divest three non-core brands for $40.0
    million plus inventory and completed the transaction on July 7, 2016.

“We are very pleased with the Company’s first quarter financial
results,” said Ron Lombardi, President and CEO. “With this quarter’s
strong momentum across many of our key North American and International
brands and the addition of revenues from DenTek, we believe we are
well-positioned to meet our objectives for the full fiscal year.”

Mr. Lombardi continued, “We are also pleased with the progress made in
strategic portfolio management on two fronts. First, we completed the
integration of the DenTek acquisition into our business. Second, we
completed a transaction in early July to divest three non-core brands
for approximately $40 million in cash. These strategic moves enabled us
to continue driving our portfolio mix toward our stated long-term
objective of 85% in invest for growth brands and 15% in manage for cash
brands.”

First Fiscal Quarter Ended June 30, 2016

Reported revenues for the first quarter of fiscal 2017 were $209.6
million, an increase of 9.1% over the prior year comparable quarter’s
revenues of $192.1 million. These results reflect strong consumption
levels across the Company’s invest for growth brands, which include core
over-the-counter (OTC) healthcare brands and our international business,
as well as revenues from a full quarter of ownership of DenTek.

Reported net loss for the first quarter of fiscal 2017 totaled $5.5
million, or $0.10 per share. This included a non-cash after tax charge
of $35.5 million (net of a tax benefit of $19.9 million) related to the
divestiture of three non-core brands. Adjusted net income for the first
quarter of fiscal 2017 was $31.4 million, or $0.59 per share, an
increase of 14.7% over the prior year comparable period’s adjusted net
income of $27.4 million, or $0.52 per diluted share.

Free Cash Flow & Balance Sheet

The Company’s Net cash provided by operating activities was $50.8
million, while the Non-GAAP Adjusted Free Cash Flow for the first
quarter ended June 30, 2016 was $50.2 million compared to the prior year
comparable quarter’s Net cash provided by operating activities of $43.5
million and Non-GAAP Adjusted Free Cash Flow of $42.7 million, an
increase of 16.6% and 17.4%, respectively.

The Company’s net debt at June 30, 2016 was $1.6 billion, reflecting
debt repayments of $50.0 million during the first fiscal quarter.
Proceeds from the divestiture of three non-core brands in July 2016 will
be applied to debt repayments in the fiscal second quarter. At June 30,
2016, the Company’s covenant-defined leverage ratio was approximately
4.8.

Segment Review

Reported revenues for the North American OTC Healthcare segment were
$172.1 million for the first quarter of fiscal 2017, 10.6% higher than
the prior year comparable quarter’s revenues of $155.6 million. Reported
revenues for the International OTC Healthcare segment for the first
quarter of fiscal 2017 were $15.8 million, 11.0% higher than the $14.2
million reported in the prior year comparable period. Revenues for both
the North American OTC Healthcare segment and the International OTC
Healthcare segment were impacted by increased consumption levels as well
as revenues from DenTek for three months. Reported revenues for the
Household Cleaning segment were $21.7 million for the first quarter of
fiscal 2017, a decrease of 2.6% over the prior year comparable quarter’s
revenues of $22.3 million.

Outlook

Mr. Lombardi said, “To reflect the divestiture of the three non-core
brands, we are updating the previously provided outlook for revenues for
fiscal 2017, and reconfirming the previously provided estimates for
adjusted earnings per share and adjusted free cash flow. We are reducing
our revenue outlook by $17.0 million to reflect the impact of the sale
of the three brands. Our outlook for revenue growth is now in the range
of 4.0% to 6.0% for the fiscal year, including the impact of currency
fluctuations. We do not anticipate any impact from the sale on our
previously provided outlook for adjusted earnings per share for the
fiscal year, which continues to be in the range of $2.30 to $2.36. Our
previously provided outlook for adjusted free cash flow of $185 million
also remains unchanged,” Mr. Lombardi said.

Q1 Conference Call & Accompanying Slide Presentation

The Company will host a conference call to review its first quarter
results on August 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 conference ID is 43058034. The Company will provide a live
Internet webcast, a slide presentation to accompany the call, as well as
an archived replay, all of which can be accessed from the Investor
Relations page of the Company’s website at http://prestigebrands.com.
The slide presentation can be accessed just before the call from the
Investor Relations page of the website by clicking on Webcasts and
Presentations. Telephonic replays will be available for two weeks
following the completion of the call and can be accessed at 855-859-2056
within North America and at 404-537-3406 from outside North America. The
conference ID is 43058034.

Non-GAAP Financial Information

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

About Prestige Brands Holdings, Inc.

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

Note Regarding Forward-Looking Statements

This news release contains “forward-looking statements” within the
meaning of the federal securities laws that are intended to qualify for
the Safe Harbor from liability established by the Private Securities
Litigation Reform Act of 1995. “Forward-looking statements” generally
can be identified by the use of forward-looking terminology such as
“assumptions,” “target,” “guidance,” “strategy,” “outlook,” “plans,”
“projection,” “may,” “will,” “would,” “expect,” “intend,” “estimate,”
“anticipate,” “believe”, “potential,” orcontinue”
(or the negative or other derivatives of each of these terms) or similar
terminology. Theforward-looking statements” include,
without limitation, statements regarding the Company’s
expectations regarding future operating results including
revenues, adjusted earnings per share and adjusted free cash flow, and
the Company’s portfolio mix. These statements are based on management’s
estimates and assumptions with respect to future events and financial
performance and are believed to be reasonable, though are inherently
uncertain and difficult to predict. Actual results could differ
materially from those expected as a result of a variety of factors,
including the impact of our advertising and promotional initiatives, the
severity of the cold and flu season, general economic and business
conditions, fluctuating foreign exchange rates, consumer trends,
competition in our industry, the ability of our third party
manufacturers and suppliers to meet demand for our products, and
introductions of new products. A discussion of other factors that could
cause results to vary is included in the Company’s Annual Report on Form
10-K for the year ended March 31, 2016 and other periodic reports filed
with the Securities and Exchange Commission.

 
Prestige Brands Holdings, Inc.
Consolidated Statements of Operations and Comprehensive Income

(Unaudited)

 
        Three Months Ended June 30,

(In thousands, except per share data)

2016       2015
Revenues
Net sales $       208,770 $       191,287
Other revenues 805   845  
Total revenues 209,575 192,132
 
Cost of Sales
Cost of sales (exclusive of depreciation shown below) 87,984   79,896  
Gross profit 121,591   112,236  
 
Operating Expenses
Advertising and promotion 27,635 26,422
General and administrative 19,457 17,589
Depreciation and amortization 6,832 5,720
Loss on sale of assets 55,453    
Total operating expenses 109,377   49,731  
Operating income 12,214   62,505  
 
Other (income) expense
Interest income (57 ) (27 )
Interest expense 21,184 21,911
Loss on extinguishment of debt   451  
Total other expense 21,127   22,335  
(Loss) income before income taxes (8,913 ) 40,170
(Benefit) provision for income taxes (3,382 ) 13,997  
Net (loss) income $       (5,531 ) $       26,173  
 
(Loss) earnings per share:
Basic $       (0.10 ) $       0.50  
Diluted $       (0.10 ) $       0.49  
 
Weighted average shares outstanding:
Basic 52,881   52,548  
Diluted 52,881   52,958  
 
Comprehensive (loss) income, net of tax:
Currency translation adjustments (5,824 ) (405 )
Total other comprehensive loss (5,824 ) (405 )
Comprehensive (loss) income $       (11,355 ) $       25,768  
 
 
Prestige Brands Holdings, Inc.
Consolidated Balance Sheets

(Unaudited)

 

(In thousands)

Assets

        June 30,
2016
      March 31,
2016
Current assets
Cash and cash equivalents $       28,877 $       27,230
Accounts receivable, net 88,437 95,247
Inventories 92,867 91,263
Deferred income tax assets 10,702 10,108
Prepaid expenses and other current assets 18,730 25,165
Assets held for sale 41,745    
Total current assets 281,358 249,013
 
Property and equipment, net 15,080 15,540
Goodwill 356,525 360,191
Intangible assets, net 2,223,559 2,322,723
Other long-term assets 1,918   1,324  
Total Assets $       2,878,440   $       2,948,791  
 
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable $ 35,012 $ 38,296
Accrued interest payable 9,216 8,664
Other accrued liabilities 55,913   59,724  
Total current liabilities 100,141   106,684  
 
Long-term debt
Principal amount 1,602,500 1,652,500
Less unamortized debt costs (25,086 ) (27,191 )
Long-term debt, net 1,577,414   1,625,309  
 
Deferred income tax liabilities 460,557 469,622
Other long-term liabilities 2,847   2,840  
Total Liabilities 2,140,959   2,204,455  
 
 
Stockholders’ Equity
Preferred stock – $0.01 par value
Authorized – 5,000 shares
Issued and outstanding – None
Common stock – $0.01 par value
Authorized – 250,000 shares
Issued – 53,247 shares at June 30, 2016 and 53,066 shares at March
31, 2016
532 530
Additional paid-in capital 451,075 445,182
Treasury stock, at cost – 331 shares at June 30, 2016 and 306 shares
at March 31, 2016
(6,558 ) (5,163 )
Accumulated other comprehensive loss, net of tax (29,349 ) (23,525 )
Retained earnings 321,781   327,312  
Total Stockholders’ Equity 737,481   744,336  
Total Liabilities and Stockholders’ Equity $       2,878,440   $       2,948,791  
 
 
Prestige Brands Holdings, Inc.
Consolidated Statements of Cash Flows

(Unaudited)

 
        Three Months Ended June 30,
(In thousands) 2016       2015
Operating Activities
Net (loss) income $     (5,531 ) $       26,173
Adjustments to reconcile net (loss) income to net cash provided by
operating activities:
Depreciation and amortization 6,832 5,720
Loss (gain) on sale of assets 55,453 (36 )
Deferred income taxes (9,660 ) 11,536
Amortization of debt origination costs 2,231 2,138
Stock-based compensation costs 1,940 3,047
Loss on extinguishment of debt 451
Changes in operating assets and liabilities, net of effects from
acquisitions
Accounts receivable 5,151 2,578
Inventories (4,327 ) (211 )
Prepaid expenses and other current assets 5,697 (1,522 )
Accounts payable (3,401 ) 783
Accrued liabilities (3,634 ) (7,136 )
Net cash provided by operating activities 50,751   43,521  
 
Investing Activities
Purchases of property and equipment (895 ) (780 )
Proceeds from the sale of property and equipment   344  
Net cash used in investing activities (895 ) (436 )
 
Financing Activities
Term loan repayments (50,000 ) (25,000 )
Borrowings under revolving credit agreement 15,000
Repayments under revolving credit agreement (35,000 )
Payments of debt origination costs (9 ) (4,172 )
Proceeds from exercise of stock options 3,405 6,328
Proceeds from restricted stock exercises 544
Excess tax benefits from share-based awards 550 1,600
Fair value of shares surrendered as payment of tax withholding (1,395 ) (2,187 )
Net cash used in financing activities (47,449 ) (42,887 )
 
Effects of exchange rate changes on cash and cash equivalents (760 ) 82
Increase in cash and cash equivalents 1,647 280
Cash and cash equivalents – beginning of period 27,230   21,318  
Cash and cash equivalents – end of period $     28,877   $       21,598  
 
Interest paid $     18,337   $       22,444  
Income taxes paid $     1,357   $       1,914  
 
 
Prestige Brands Holdings, Inc.
Consolidated Statements of Operations
Business Segments

(Unaudited)

 
        Three Months Ended June 30, 2016

(In
thousands
)

North
American
OTC
Healthcare

     

International
OTC
Healthcare

     

Household
Cleaning

      Consolidated
Gross segment revenues $     173,301 $     15,800 $     20,890 $   209,991
Elimination of intersegment revenues (1,221 )     (1,221 )
Third-party segment revenues 172,080 15,800 20,890 208,770
Other revenues   4   801   805  
Total segment revenues 172,080 15,804 21,691 209,575
Cost of sales 65,718   5,464   16,802   87,984  
Gross profit 106,362 10,340 4,889 121,591
Advertising and promotion 25,040   2,124   471   27,635  
Contribution margin $     81,322   $     8,216   $     4,418   93,956
Other operating expenses* 81,742  
Operating income 12,214
Other expense 21,127  
Loss before income taxes (8,913 )
Benefit for income taxes (3,382 )
Net loss $   (5,531 )
 

*Other operating expenses includes a pre-tax loss on sale of assets of
$55.5 million recognized for assets held for sale related to Pediacare,
New Skin and Fiber Choice. These assets and corresponding
contribution margin are included within the North American OTC
Healthcare segment.

        Three Months Ended June 30, 2015  

(In
thousands
)

North
American
OTC
Healthcare

     

International
OTC
Healthcare

     

Household
Cleaning

      Consolidated
Gross segment revenues $     156,339 $     14,209 $     21,467 $   192,015
Elimination of intersegment revenues (728 )     (728 )
Third-party segment revenues 155,611 14,209 21,467 191,287
Other revenues** 15   25   805   845  
Total segment revenues 155,626 14,234 22,272 192,132
Cost of sales** 58,503   4,913   16,480   79,896  
Gross profit 97,123 9,321 5,792 112,236
Advertising and promotion 23,195   2,723   504   26,422  
Contribution margin $     73,928   $     6,598   $     5,288   85,814
Other operating expenses 23,309  
Operating income 62,505
Other expense 22,335  
Income before income taxes 40,170
Provision for income taxes 13,997  
Net income $   26,173  

**Certain immaterial amounts relating to other revenues and cost of
sales 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 Adjusted EBITDA as earnings before interest expense (income),
income taxes, depreciation and amortization, certain other legal and
professional fees, other acquisition-related costs, divestiture costs,
costs associated with our CEO transition, loss on sale of assets, 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 General and Administrative expenses as
General and Administrative expenses minus certain other legal and
professional fees, acquisition and other integration costs, divestiture
costs, and costs associated with our CEO transition. Non-GAAP Adjusted
General and Administrative expense percentage 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 certain other legal and professional fees, other acquisition and
integration-related costs, divestiture costs, costs associated with our
CEO transition, accelerated amortization of debt origination costs, loss
on sale of assets, 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 integration, transition, and other payments associated
with acquisitions and divestitures. Non-GAAP Organic Revenues, Non-GAAP
Organic Revenues on a Constant Currency basis, Non-GAAP Adjusted EBITDA,
Non-GAAP Adjusted EBITDA Margin, 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 Adjusted EBITDA, Non-GAAP
Adjusted EBITDA Margin, 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 (loss) 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 Adjusted EBITDA, Non-GAAP Adjusted EBITDA Margin, 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 Adjusted EBITDA,
Non-GAAP Adjusted EBITDA Margin, 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 Adjusted EBITDA,
Non-GAAP Adjusted EBITDA Margin, 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 (loss) 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 Adjusted EBITDA, Non-GAAP Adjusted EBITDA Margin, 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, all of which are non-GAAP financial measures, to GAAP
Total Revenues, GAAP General and Administrative Expense, GAAP Net (Loss)
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 June 30,  
2016       2015
(In thousands)
GAAP Total Revenues $     209,575   $     192,132  

Adjustments:

DenTek revenues (1) (16,627 )  
Total adjustments (16,627 )  
Non-GAAP Organic Revenues 192,948   192,132  
Organic Revenue Growth (Decline) 0.4 %  
Impact of foreign currency exchange rates (2)   (829 )
Non-GAAP Organic Revenues on a constant currency basis $     192,948   $     191,303  
Constant Currency Organic Revenue Growth 0.9 %
(1)   Revenue adjustments relate to our North American and International
OTC Healthcare segment
(2) Foreign currency exchange rate adjustments relate to all segments
 

Reconciliation of GAAP General and Administrative Expense to Non-GAAP
Adjusted General and Administrative Expense and related Non-GAAP
Adjusted General and Administrative Expense percentage:

        Three Months Ended June 30,  
2016       2015

(In
thousands
)

GAAP General and Administrative Expense $     19,457   $     17,589  

Adjustments:

Costs associated with CEO transition 1,406
Legal and professional fees associated with acquisitions and
divestitures
484
Integration, transition and other costs associated with acquisitions
and divestitures
1,641    
Total adjustments 2,125   1,406  
Non-GAAP Adjusted General and Administrative Expense $     17,332   $     16,183  
Non-GAAP Adjusted General and Administrative Expense Percentage 8.3 % 8.4 %
 

Contacts

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

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