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

Tarrytown, New York, UNITED STATES


  • 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. (NYSE: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, respectively144,502    148,787   
Inventories121,363    119,880   
Prepaid expenses and other current assets5,913    4,741   
Total current assets300,369    300,938   
    
Property, plant and equipment, net53,233    51,176   
Operating lease right-of-use asset31,342    —   
Finance lease right-of-use assets, net5,895    —   
Goodwill577,635    578,583   
Intangible assets, net2,491,539    2,507,210   
Other long-term assets4,189    3,129   
Total Assets$3,464,202    $3,441,036   
    
Liabilities and Stockholders' Equity   
Current liabilities   
Accounts payable$50,408    $56,560   
Accrued interest payable14,482    9,756   
Operating lease liabilities, current portion6,377    —   
Finance lease liabilities, current portion1,159    —   
Other accrued liabilities76,610    60,663   
Total current liabilities149,036    126,979   
    
Long-term debt, net1,701,313    1,798,598   
Deferred income tax liabilities407,776    399,575   
Long-term operating lease liabilities, net of current portion26,200    —   
Long-term finance lease liabilities, net of current portion4,725    —   
Other long-term liabilities18,658    20,053   
Total Liabilities2,307,708    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, 2019537    536   
Additional paid-in capital485,838    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 earnings807,055    701,820   
Total Stockholders' Equity1,156,494    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 amortization21,664    24,253   
Gain on divestiture—    (1,284) 
Loss on disposal of property and equipment184    197   
Deferred income taxes7,383    3,309   
Amortization of debt origination costs2,766    4,543   
Stock-based compensation costs5,682    6,160   
Loss on extinguishment of debt2,155    —   
Non-cash operating lease cost6,117    —   
Interest expense relating to ROU assets34    —   
Other—    247   
Changes in operating assets and liabilities:   
Accounts receivable4,624    5,398   
Inventories(817)  (11,081) 
Prepaid expenses and other current assets(879)  4,073   
Accounts payable(6,091)  (12,787) 
Accrued liabilities20,724    13,260   
Operating lease liabilities(6,430)  —   
Other(1,353)  (1,325) 
Net cash provided by operating activities160,998    138,437   
    
Investing Activities   
Purchases of property, plant and equipment(9,055)  (7,139) 
Escrow receipt750    —   
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 Notes400,000    —   
Repayment of 5.375% Senior Notes(400,000)  —   
Term loan repayments(21,000)  (155,000) 
Borrowings under revolving credit agreement45,000    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 options1,007    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 equivalents356    (758) 
Increase in cash and cash equivalents1,061    (7,876) 
Cash and cash equivalents - beginning of period27,530    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 sales93,937   10,120   —   104,057  
Gross profit120,955   16,540   —   137,495  
Advertising and promotion29,025   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 sales275,679   27,783   —   303,462  
Gross profit363,875   44,438   —   408,313  
Advertising and promotion94,634   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 sales91,594   10,585   —   102,179  
Gross profit125,182   14,053   —   139,235  
Advertising and promotion30,316   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 sales272,754   28,079   16,588   317,421  
Gross profit374,747   39,360   3,223   417,330  
Advertising and promotion96,899   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 Growth0.1 %   (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 Growth0.5 %   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 Revenue56.9 % 57.7 % 57.4 % 56.8 %
Adjustments:       
Transition and other costs associated with new warehouse and divestiture (1)2,555   —   3,962   170  
Total adjustments2,555   —   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 Revenues58.0 % 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 Revenue8.8 % 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 Revenues8.8 % 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, net24,275   26,327   73,772   79,337   
Provision for income taxes12,496   12,829   35,381   37,501   
Depreciation and amortization7,381   7,887   21,664   24,253   
Non-GAAP EBITDA82,210   85,210   236,052   244,565   
Non-GAAP EBITDA Margin34.0 % 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 debt2,155   —   2,155   —   
Gain on divestiture—   —   —   (1,284) 
Total adjustments4,710   —   6,117   3,158   
Non-GAAP Adjusted EBITDA$86,920   $85,210   $242,169   $247,723   
Non-GAAP Adjusted EBITDA Margin36.0 % 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,
 20192019
Adjusted
EPS
 20182018
Adjusted
EPS
 20192019
Adjusted
EPS
 20182018
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 debt2,155   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 adjustments3,169   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 Flows17,089    14,371    45,985    37,425   
Changes in operating assets and liabilities as shown in the Statement of Cash Flows2,851    (9,208)  9,778    (2,462) 
Total adjustments19,940    5,163    55,763    34,963   
GAAP Net cash provided by operating activities57,998    43,330    160,998    138,437   
Purchases of property and equipment(3,233)  (2,065)  (9,055)  (7,139) 
Non-GAAP Free Cash Flow54,765    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 debt0.03   0.03  
Total Adjustments0.18   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 Flow190   
Payments associated with integration of new logistics provider10   
Projected Non-GAAP Adjusted Free Cash Flow$200   

        

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