Prestige Brands Holdings, Inc. Reports Second Quarter Fiscal 2017 Results

Prestige Brands Holdings, Inc. (NYSE-PBH) today announced results for the second quarter of fiscal year 2017, which ended September 30, 2016.

"We are pleased with the results of the second fiscal quarter, which reflect record quarterly sales, continued strong adjusted earnings per share, free cash flow growth and debt repayment of more than $100 million during the quarter," said Ron Lombardi, CEO. "We continue to gain market share across our invest for growth portfolio and continue to expect consumption to be in line with our organic growth targets for the year," he said.

Second Fiscal Quarter and First Half of Fiscal 2017 Ended September 30, 2016

Reported revenues for the second quarter of fiscal 2017 were $215.1 million, an increase of 4.4% over the prior year comparable quarter's revenues of $206.1 million. Reported revenues for the six month period ended September 30, 2016 totaled $424.6 million, an increase of 6.6% over the prior year comparable six month period's revenues of $398.2 million. These results reflect consumption increases across the Company's invest for growth portfolio and the addition of the DenTek business.

Reported net income for the second quarter of fiscal 2017 totaled $32.2 million, an increase of 1.2% over the prior year comparable quarter's net income of $31.8 million. Earnings per share were $0.60 for both the second quarter of fiscal 2017 and the prior year comparable period. Non-GAAP adjusted net income for the second quarter of fiscal 2017 was $33.8 million, an increase of 6.2% over the prior year period of $31.8 million. Non-GAAP adjusted earnings per share were $0.63 per share for the second quarter of fiscal 2017, compared to $0.60 per share in the prior year comparable period. Adjustments to net income in the second fiscal quarter of 2017 included accelerated amortization of debt origination costs, integration costs associated with the DenTek acquisition and the related income tax effects of the adjustments.

Reported net income for the first six months of fiscal 2017 totaled $26.7 million compared with the prior year comparable period's net income of $58.0 million. Reported earnings per share for the first six month period of fiscal 2017 were $0.50, compared to the prior year comparable period's reported earnings per share of $1.09 per share. Non-GAAP adjusted net income increased 10.1% for the first six month period of fiscal 2017 to $65.2 million, or $1.22 per share, compared to $59.2 million, or $1.12 per share, during the prior year comparable period. Adjustments to net income in the first six months of fiscal year 2017 included accelerated amortization of debt origination costs, integration costs associated with the DenTek acquisition, a net non-cash charge related to the divestiture of certain non-core brands and related income tax effects of the adjustments. Adjustments to net income in the first six months of fiscal year 2016 included costs associated with the CEO transition and loss on extinguishment of debt.

Free Cash Flow & Balance Sheet

The Company's reported net cash provided by operating activities for the second fiscal quarter increased 5.2% to $49.5 million, while non-GAAP adjusted free cash flow for the second fiscal quarter increased 6.9% to $49.4 million compared to the prior year comparable quarter.

For the first six months of fiscal 2017, net cash provided by operating activities increased 10.7% to $100.3 million, while non-GAAP adjusted free cash flow increased 12.0% to $99.6 million compared to the prior year's period.

The Company's net debt at September 30, 2016 decreased to approximately $1.5 billion, reflecting debt repayments of $100.5 million during the second fiscal quarter of 2017 and $150.5 million fiscal year to date. Proceeds from the divestiture of certain non-core brands are included in debt repayments in the fiscal second quarter of 2017. At September 30, 2016, the Company's covenant-defined leverage ratio was approximately 4.5.

Segment Review

Reported revenues for the North American OTC Healthcare segment were $172.4 million for the second quarter of fiscal 2017, 4.3% higher than the prior year comparable quarter's revenues of $165.4 million. For the first six months of the current fiscal year, reported revenues for the North American OTC segment were $344.5 million, an increase of 7.1% compared to $321.8 million in the prior year comparable period.

Reported revenues for the International OTC Healthcare segment for the second quarter of fiscal 2017 were $18.8 million, 17.8% higher than the $16.0 million reported in the prior year comparable period. For the first six months of the current fiscal year, reported revenues for the International OTC Healthcare segment were $34.6 million, an increase of 17.6% over the prior year comparable period's revenues of $29.4 million. Revenues for both the North American OTC Healthcare segment and the International OTC Healthcare segment were impacted by favorable consumption levels as well as revenues from DenTek.

Reported revenues for the Household Cleaning segment were $23.8 million for the second quarter of fiscal 2017, a decrease of 3.6% over the prior year comparable quarter's revenues of $24.7 million. For the first six months of the current fiscal year, reported revenues for the Household Cleaning segment were $45.5 million, a decrease of 3.1% over the prior year comparable six month period's revenues of $47.0 million.

Commentary and Outlook

"The strength of our diverse domestic and international product portfolio combined with continued consumption growth are offsetting retailer headwinds in the U.S., enabling us to reiterate our full year fiscal guidance and positioning us for another year of solid top and bottom line results," Mr. Lombardi said. "We expect full year revenue growth of 4.5-6%, and anticipate adjusted EPS in the range of $2.30-$2.36 and free cash flow of $185 million or more," he said.

Q2 Conference Call & Accompanying Slide Presentation

The Company will host a conference call to review its first quarter results on November 3, 2016 at 8:30 am EDT. The toll-free dial-in numbers are 844-233-9440 within North America and 574-990-1016 outside of North America. The conference ID is 94506453. 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 94506453.

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 healthcare 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, DenTek® and The Doctor's® NightGuard® oral care products, 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," 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 Company's expectations regarding future operating results including revenues, adjusted earnings per share and adjusted free cash flow, and the Company's ability to gain market share and meet organic growth targets. 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, Quarterly Report on Form 10-Q for the quarter ended June 30, 2016, and other periodic reports filed with the Securities and Exchange Commission.
     

Prestige Brands Holdings, Inc.

Consolidated Statements of Income and Comprehensive Income

(Unaudited)
 
Three Months Ended September 30, Six Months Ended September 30,

(In thousands, except per share data)
2016   2015 2016   2015
Revenues
Net sales $ 215,017 $ 205,262 $ 423,787 $ 396,549
Other revenues 35   803   840   1,648  
Total revenues 215,052 206,065 424,627 398,197
 
Cost of Sales
Cost of sales (exclusive of depreciation shown below) 91,087   86,125   179,071   166,021  
Gross profit 123,965   119,940   245,556   232,176  
 
Operating Expenses
Advertising and promotion 28,592 27,893 56,227 54,315
General and administrative 18,795 16,462 38,252 34,051
Depreciation and amortization 6,016 5,687 12,848 11,407
(Gain) loss on sales of assets (496 )   54,957    
Total operating expenses 52,907   50,042   162,284   99,773  
Operating income 71,058   69,898   83,272   132,403  
 
Other (income) expense
Interest income (46 ) (33 ) (103 ) (60 )
Interest expense 20,876 20,700 42,060 42,611
Loss on extinguishment of debt       451  
Total other expense 20,830   20,667   41,957   43,002  
Income before income taxes 50,228 49,231 41,315 89,401
Provision for income taxes 18,033   17,428   14,651   31,425  
Net income $ 32,195   $ 31,803   $ 26,664   $ 57,976  
 
Earnings per share:
Basic $ 0.61   $ 0.60   $ 0.50   $ 1.10  
Diluted $ 0.60   $ 0.60   $ 0.50   $ 1.09  
 
Weighted average shares outstanding:
Basic 52,993   52,803   52,941   52,676  
Diluted 53,345   53,151   53,329   53,055  
 
Comprehensive income, net of tax:
Currency translation adjustments 2,703   (11,079 ) (3,121 ) (11,484 )
Total other comprehensive (loss) income 2,703   (11,079 ) (3,121 ) (11,484 )
Comprehensive income $ 34,898   $ 20,724   $ 23,543   $ 46,492  
 
 

Prestige Brands Holdings, Inc.

Consolidated Balance Sheets

(Unaudited)
 

(In thousands)
September 30, March 31,

Assets
2016 2016
Current assets
Cash and cash equivalents $ 30,458 $ 27,230
Accounts receivable, net 92,869 95,247
Inventories 97,959 91,263
Deferred income tax assets 10,646 10,108
Prepaid expenses and other current assets 11,341 25,165
Assets held for sale 36,400    
Total current assets 279,673 249,013
 
Property and equipment, net 13,732 15,540
Goodwill 351,662 360,191
Intangible assets, net 2,181,128 2,322,723
Other long-term assets 4,783   1,324  
Total Assets $ 2,830,978   $ 2,948,791  
 
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $ 39,041 $ 38,296
Accrued interest payable 8,264 8,664
Other accrued liabilities 67,006   59,724  
Total current liabilities 114,311   106,684  
 
Long-term debt
Principal amount 1,502,000 1,652,500
Less unamortized debt costs (22,337 ) (27,191 )
Long-term debt, net 1,479,663   1,625,309  
 
Deferred income tax liabilities 459,527 469,622
Other long-term liabilities 2,837   2,840  
Total Liabilities 2,056,338   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 - 53,265 shares at September 30, 2016 and 53,066 shares at March 31, 2016 532 530
Additional paid-in capital 453,336 445,182
Treasury stock, at cost - 331 shares at September 30, 2016 and 306 shares at March 31, 2016 (6,558 ) (5,163 )
Accumulated other comprehensive loss, net of tax (26,646 ) (23,525 )
Retained earnings 353,976   327,312  
Total Stockholders' Equity 774,640   744,336  
Total Liabilities and Stockholders' Equity $ 2,830,978   $ 2,948,791  
 

Prestige Brands Holdings, Inc.

Consolidated Statements of Cash Flows

(Unaudited)
 
Six Months Ended September 30,

(In thousands)
2016   2015
Operating Activities
Net income $ 26,664 $ 57,976
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 12,848 11,407
Loss (gain) on sales of intangible assets and property and equipment 55,112 (36 )
Deferred income taxes (10,602 ) 21,985
Amortization of debt origination costs 5,097 4,055
Stock-based compensation costs 3,933 5,034
Loss on extinguishment of debt 451
Changes in operating assets and liabilities, net of effects from acquisitions
Accounts receivable 356 (3,918 )
Inventories (10,663 ) (3,838 )
Prepaid expenses and other current assets 10,112 3,436
Accounts payable 820 (4,519 )
Accrued liabilities 6,605   (1,443 )
Net cash provided by operating activities 100,282   90,590  
 
Investing Activities
Purchases of property and equipment (1,404 ) (1,683 )
Proceeds from sales of intangible assets 52,353
Proceeds from the sale of property and equipment 75   344  
Net cash provided by (used in) investing activities 51,024   (1,339 )
 
Financing Activities
Term loan repayments (130,500 ) (50,000 )
Borrowings under revolving credit agreement 20,000 15,000
Repayments under revolving credit agreement (40,000 ) (55,000 )
Payments of debt origination costs (9 ) (4,211 )
Proceeds from exercise of stock options 3,423 6,398
Proceeds from restricted stock exercises 544
Excess tax benefits from share-based awards 800 1,850
Fair value of shares surrendered as payment of tax withholding (1,395 ) (2,187 )
Net cash used in financing activities (147,681 ) (87,606 )
 
Effects of exchange rate changes on cash and cash equivalents (397 ) (811 )
Increase in cash and cash equivalents 3,228 834
Cash and cash equivalents - beginning of period 27,230   21,318  
Cash and cash equivalents - end of period $ 30,458   $ 22,152  
 
Interest paid $ 37,259   $ 40,550  
Income taxes paid $ 6,743   $ 3,707  
   

Prestige Brands Holdings, Inc.

Consolidated Statements of Income

Business Segments

(Unaudited)
 
Three Months Ended September 30, 2016

(In thousands)

North American OTC Healthcare
 

International OTC Healthcare
  Household

Cleaning
  Consolidated
Gross segment revenues $ 172,590 $ 18,802 $ 23,768 $ 215,160
Elimination of intersegment revenues (143 )     (143 )
Third-party segment revenues 172,447 18,802 23,768 215,017
Other revenues   2   33   35  
Total segment revenues 172,447 18,804 23,801 215,052
Cost of sales 65,402   7,096   18,589   91,087  
Gross profit 107,045 11,708 5,212 123,965
Advertising and promotion 24,811   3,244   537   28,592  
Contribution margin $ 82,234   $ 8,464   $ 4,675   95,373
Other operating expenses* 24,315  
Operating income 71,058
Other expense 20,830  
Income before income taxes 50,228
Provision for income taxes 18,033  
Net income $ 32,195  
 
*Other operating expenses for the three months ended September 30, 2016 includes a pre-tax loss on sale of assets of $0.7 million related to Pediacare, New Skin, and Fiber Choice and a pre-tax gain on sale of assets of $1.2 million associated with the sale of license rights in certain geographic areas pertaining to Comet. The assets and corresponding contribution margin associated with the pre-tax loss on sale of assets related to Pediacare, New Skin, and Fiber Choice are included within the North American OTC Healthcare segment, while the pre-tax gain on sale of license rights related to Comet are included in the Household Cleaning segment.
   
Six Months Ended September 30, 2016

(In thousands)

North American OTC Healthcare
 

International OTC Healthcare
  Household

Cleaning
  Consolidated
Gross segment revenues $ 345,891 $ 34,602 $ 44,658 $ 425,151
Elimination of intersegment revenues (1,364 )     (1,364 )
Third-party segment revenues 344,527 34,602 44,658 423,787
Other revenues   6   834   840  
Total segment revenues 344,527 34,608 45,492 424,627
Cost of sales 129,636   14,044   35,391   179,071  
Gross profit 214,891 20,564 10,101 245,556
Advertising and promotion 49,851   5,368   1,008   56,227  
Contribution margin $ 165,040   $ 15,196   $ 9,093   189,329
Other operating expenses* 106,057  
Operating income 83,272
Other expense 41,957  
Income before income taxes 41,315
Provision for income taxes 14,651  
Net income $ 26,664  
 
*Other operating expenses for the six months ended September 30, 2016 includes a pre-tax loss on sale of assets of $56.2 million related to Pediacare, New Skin, and Fiber Choice and a pre-tax gain on sale of assets of $1.2 million associated with the sale of license rights in certain geographic areas pertaining to Comet. The assets and corresponding contribution margin associated with the pre-tax loss on sale of assets related to Pediacare, New Skin, and Fiber Choice are included within the North American OTC Healthcare segment, while the pre-tax gain on sale of license rights related to Comet are included in the Household Cleaning segment.
   
Three Months Ended September 30, 2015

(In thousands)

North American OTC Healthcare
 

International OTC Healthcare
  Household Cleaning   Consolidated
Gross segment revenues $ 166,886 $ 15,954 $ 23,894 $ 206,734
Elimination of intersegment revenues (1,472 )     (1,472 )
Third-party segment revenues 165,414 15,954 23,894 205,262
Other revenues**   6   797   803  
Total segment revenues 165,414 15,960 24,691 206,065
Cost of sales** 61,497   6,094   18,534   86,125  
Gross profit 103,917 9,866 6,157 119,940
Advertising and promotion 24,440   2,777   676   27,893  
Contribution margin $ 79,477   $ 7,089   $ 5,481   92,047
Other operating expenses 22,149  
Operating income 69,898
Other expense 20,667  
Income before income taxes 49,231
Provision for income taxes 17,428  
Net income $ 31,803  
 
    Six Months Ended September 30, 2015

(In thousands)

North American OTC Healthcare
 

International OTC Healthcare
  Household Cleaning   Consolidated
Gross segment revenues $ 323,978 $ 29,410 $ 45,361 $ 398,749
Elimination of intersegment revenues (2,200 )     (2,200 )
Third-party segment revenues 321,778 29,410 45,361 396,549
Other revenues** 15   31   1,602   1,648  
Total segment revenues 321,793 29,441 46,963 398,197
Cost of sales** 119,624   11,383   35,014   166,021  
Gross profit 202,169 18,058 11,949 232,176
Advertising and promotion 47,635   5,500   1,180   54,315  
Contribution margin $ 154,534   $ 12,558   $ 10,769   177,861
Other operating expenses 45,458  
Operating income 132,403
Other expense 43,002  
Income before income taxes 89,401
Provision for income taxes 31,425  
Net income $ 57,976  
**Certain immaterial amounts relating to other revenues and cost of sales for each of the three and six months ended September 30, 2015 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 have pursued various strategic initiatives and completed a number of acquisitions in recent years that have resulted in revenues that would not have otherwise been recognized. The frequency and the amount of such revenues vary significantly based on the size, timing and complexity of the transaction. 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 Revenues on a Constant Currency basis, Non-GAAP Adjusted General and Administrative expenses, Non-GAAP Adjusted General and Administrative expense percentage, Non-GAAP EBITDA, Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted EBITDA Margin, Non-GAAP Adjusted Net Income, Non-GAAP Adjusted EPS, Non-GAAP Free Cash Flow, and Non-GAAP Adjusted Free Cash Flow. 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 products acquired or divested in the periods presented.
  • Non-GAAP Organic Revenues on a Constant Currency basis: Non-GAAP Organic Revenues excluding the impact of current year foreign exchange rates on total revenues.
  • Non-GAAP Adjusted General and Administrative expenses: GAAP 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: Calculated as Non-GAAP Adjusted General and Administrative expense divided by GAAP Total Revenues.
  • Non-GAAP EBITDA: GAAP Net Income less interest expense (income), income taxes, and depreciation and amortization.
  • Non-GAAP Adjusted EBITDA: Non-GAAP EBITDA less certain other legal and professional fees, other acquisition-related costs, divestiture costs, costs associated with our CEO transition, loss on extinguishment of debt, and gain/loss on sale of assets.
  • Non-GAAP Adjusted EBITDA Margin: Calculated as Non-GAAP Adjusted EBITDA divided by GAAP Total Revenues.
  • Non-GAAP Adjusted Net Income: GAAP 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 due to sale of assets, loss on extinguishment of debt, gain/loss on sale of assets and the applicable tax impacts associated with these items and other non-deductible items.
  • 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 integration, transition, and other costs associated with acquisitions and divestitures.

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 Non-GAAP Organic Revenues on a Constant Currency basis and related growth percentages:

    Three Months Ended

September 30,
  Six Months Ended

September 30,
2016   2015 2016   2015

(In thousands)
GAAP Total Revenues $ 215,052   $ 206,065   $ 424,627   $ 398,197  
Revenue Growth 4.4 % 6.6 %

Adjustments:
DenTek revenues (1) (17,214 ) (33,841 )
Revenues associated with divested brands (2)   (6,922 )   (6,922 )
Total adjustments (17,214 ) (6,922 ) (33,841 ) (6,922 )
Non-GAAP Organic Revenues 197,838   199,143   390,786   391,275  
Organic Revenue Growth (Decline) (0.7 )% (0.1 )%
Impact of foreign currency exchange rates (3)   (76 )   (905 )
Non-GAAP Organic Revenues on a constant currency basis $ 197,838   $ 199,067   $ 390,786   $ 390,370  
Constant Currency Organic Revenue Growth (0.6 )% 0.1 %
(1) DenTek revenues are excluded for purposes of calculating Non-GAAP organic revenues. These revenue adjustments relate to our North American and International OTC Healthcare segment.
(2) Revenues of our divested brands have been excluded from the prior year for purposes of calculating Non-GAAP organic revenues. These revenue adjustments relate to our North American OTC Healthcare segment.
(3) 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

September 30,
Six Months Ended September 30,
2016   2015 2016   2015

(In thousands)
GAAP General and Administrative Expense $ 18,795   $ 16,462   $ 38,252   $ 34,051  

Adjustments:
Costs associated with CEO transition (1) 1,406
Legal and professional fees associated with acquisitions and divestitures (2) 101 585
Integration, transition and other costs associated with acquisitions and divestitures (2) 1,420     3,061    
Total adjustments 1,521     3,646   1,406  
Non-GAAP Adjusted General and Administrative Expense $ 17,274   $ 16,462   $ 34,606   $ 32,645  
Non-GAAP Adjusted General and Administrative Expense Percentage 8.0 % 8.0 % 8.1 % 8.2 %
 
(1) Costs relate to search fees associated with CEO and CFO transition and certain accelerated stock compensation costs related to our former CEO.
(2) Acquisition related items represent costs related to integrating recently acquired businesses including (but not limited to), costs to exit or convert contractual obligations, severance, information system conversion and consulting costs; and certain costs related to the consummation of the acquisition process such as legal and other acquisition related professional fees.
 

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

September 30,
Six Months Ended September 30,
2016   2015 2016   2015

(In thousands)
GAAP Net Income $ 32,195 $ 31,803 $ 26,664 $ 57,976
Interest expense, net 20,830 20,667 41,957 42,551
Provision for income taxes 18,033 17,428 14,651 31,425
Depreciation and amortization 6,016   5,687   12,848   11,407  
Non-GAAP EBITDA: 77,074   75,585   96,120   143,359  

Adjustments:
Costs associated with CEO transition (1) 1,406
Legal and professional fees associated with acquisitions and divestitures (2) 101 585
Integration, transition and other costs associated with acquisitions and divestitures (2) 1,420 3,061
Loss on extinguishment of debt 451
(Gain) loss on sale of assets (496 )   54,957    
Total adjustments 1,025     58,603   1,857  
Non-GAAP Adjusted EBITDA $ 78,099   $ 75,585   $ 154,723   $ 145,216  
Non-GAAP Adjusted EBITDA Margin 36.3 % 36.7 % 36.4 % 36.5 %
 
(1) Costs relate to search fees associated with CEO and CFO transition and certain accelerated stock compensation costs related to our former CEO.
(2) Acquisition related items represent costs related to integrating recently acquired businesses including (but not limited to), costs to exit or convert contractual obligations, severance, information system conversion and consulting costs; and certain costs related to the consummation of the acquisition process such as legal and other acquisition related professional fees.
 

Reconciliation of GAAP Net Income to Non-GAAP Adjusted Net Income and related Adjusted Earnings Per Share:
   
Three Months Ended September 30, Six Months Ended September 30,
2016 2016 Adjusted EPS   2015 2015 Adjusted EPS 2016 2016 Adjusted EPS   2015 2015 Adjusted EPS

(In thousands)
GAAP Net Income $ 32,195   $ 0.60   $ 31,803   $ 0.60   $ 26,664   $ 0.50   $ 57,976   $ 1.09  

Adjustments:
Costs associated with CEO transition (1) 1,406 0.03
Legal and professional fees associated with acquisitions and

divestitures (2)
101 585 0.01
Integration, transition and other costs associated with acquisitions and divestitures (2) 1,420 0.03 3,061 0.06
Accelerated amortization of debt origination costs due to sale of assets 1,131 0.02 1,131 0.02
Loss on extinguishment of debt 451 0.01
(Gain) loss on sale of assets (496 ) (0.01 ) 54,957 1.03
Tax impact of adjustments (3) (566 ) (0.01 )     (21,224 ) (0.40 ) (657 ) (0.01 )
Total adjustments 1,590   0.03       38,510   0.72   1,200   0.03  
Non-GAAP Adjusted Net Income

and Adjusted EPS
$ 33,785   $ 0.63   $ 31,803   $ 0.60   $ 65,174   $ 1.22   $ 59,176   $ 1.12  
 
(1) Costs relate to search fees associated with CEO and CFO transition and certain accelerated stock compensation costs related to our former CEO.
(2) Acquisition related items represent costs related to integrating recently acquired businesses including (but not limited to), costs to exit or convert contractual obligations, severance, information system conversion and consulting costs; and certain costs related to the consummation of the acquisition process such as legal and other acquisition 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.
 

Reconciliation of GAAP Net Income to Non-GAAP Free Cash Flow and Non-GAAP Adjusted Free Cash Flow:
    Three Months Ended

September 30,
  Six Months Ended September 30,
2016   2015 2016   2015

(In thousands)
GAAP Net Income $ 32,195   $ 31,803   $ 26,664   $ 57,976  

Adjustments:

Adjustments to reconcile net income to net cashprovided by operating activities as shown in theStatement of Cash Flows
9,592 20,040 66,388 42,896

Changes in operating assets and liabilities, net ofeffects from acquisitions as shown in theStatement of Cash Flows
7,744   (4,774 ) 7,230   (10,282 )
Total adjustments 17,336   15,266   73,618   32,614  
GAAP Net cash provided by operating activities 49,531 47,069 100,282 90,590
Purchases of property and equipment (509 ) (903 ) (1,404 ) (1,683 )
Non-GAAP Free Cash Flow 49,022 46,166 98,878 88,907

Integration, transition and other paymentsassociated with acquisitions and divestitures (1)
352         683    
Non-GAAP Adjusted Free Cash Flow $ 49,374   $ 46,166   $ 99,561   $ 88,907  
(1) Acquisition related items represent payments related to integrating recently acquired businesses including (but not limited to), costs to exit or convert contractual obligations, severance, information system conversion and consulting costs; and certain costs related to the consummation of the acquisition process such as legal and other acquisition related professional fees.
 

Outlook for Fiscal Year 2017 :

Reconciliation of Projected GAAP EPS to Projected Non-GAAP Adjusted EPS:
   
2017 Projected EPS
Low   High
Projected FY'17 GAAP EPS $ 1.55     $ 1.61

Adjustments:
 
Costs associated with DenTek integration (1) 0.08 0.08
Loss on sale of assets 0.67     0.67
Total Adjustments 0.75     0.75
Projected Non-GAAP Adjusted EPS $ 2.30     $ 2.36
(1) Acquisition related items represent costs related to integrating recently acquired businesses including (but not limited to), costs to exit or convert contractual obligations, severance, information system conversion and consulting costs; and certain costs related to the consummation of the acquisition process such as legal and other acquisition related professional fees.
 

Reconciliation of Projected GAAP Net cash provided by operating activities to Projected Non-GAAP Adjusted Free Cash Flow:
    2017 Projected Free Cash Flow

(In millions)
Projected FY'17 GAAP Net cash provided by operating activities $ 191
Additions to property and equipment for cash (4 )
Projected Non-GAAP Free Cash Flow 187
Payments associated with acquisitions (1) 3  
Projected Non-GAAP Adjusted Free Cash Flow $ 190  
(1) Acquisition related items represent costs related to integrating recently acquired businesses including (but not limited to), costs to exit or convert contractual obligations, severance, information system conversion and consulting costs; and certain costs related to the consummation of the acquisition process such as legal and other acquisition related professional fees.
 

View source version on businesswire.com: http://www.businesswire.com/news/home/20161103005486/en/

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