Prestige Brands Holdings, Inc. Reports Fourth Quarter & Fiscal 2014 Results & Provides Outlook for Fiscal 2015

Prestige Brands Holdings, Inc. (NYSE:PBH) (“the Company”) today announced results for the fourth quarter and the fiscal year ended March 31, 2014.

Reported fiscal fourth quarter net revenues were $144.3 million, a decrease of 6.6% over the prior year comparable quarter's revenues of $154.5 million. Reported net revenues for the fiscal year ended March 31, 2014 were $601.9 million, a decrease of 3.5% over the prior fiscal year’s revenues of $623.6 million.

Reported net income for the fiscal fourth quarter was $16.0 million, or $0.30 per diluted share, a decrease of 17.3% over the prior year comparable period’s results of $19.3 million or $0.37 per diluted share. Adjusted earnings per share for the quarter were $0.35 compared to $0.36 for the fiscal fourth quarter of 2013. Adjusted earnings per share for the fiscal fourth quarters of both 2014 and 2013 exclude costs related to acquisitions and financing-related items. Adjusted earnings per share for the fourth quarter of fiscal 2013 also excludes the impact of tax rate adjustments.

Reported net income for fiscal 2014 was $72.6 million, or $1.39 per diluted share, 10.8% higher than the prior fiscal year’s results of $65.5 million or $1.27 per diluted share. Adjusted earnings per share for fiscal year 2014 were $1.53 compared to $1.50 for fiscal year 2013. Adjusted earnings per share for both the current and the prior fiscal years exclude costs related to acquisitions, financing, and other specified items.

Fiscal fourth quarter revenues for the Over-the-Counter Healthcare segment (OTC) were $122.7 million, 8.3% lower than the prior year's fourth quarter revenues of $133.8 million. For fiscal 2014, OTC segment revenues were $513.8 million, a decrease of 4.3% over the prior fiscal year results of $536.9 million. The decrease in revenues in the OTC segment for both the fourth quarter and full fiscal year was driven by lower cough/cold incidence levels, the impact of the return of competitive products to the marketplace, and changes in retailer inventory levels. Revenues for the Household Cleaning segment, which represents less than 15% of overall Company revenues, were $21.5 million for the fiscal fourth quarter, an increase of 3.9% over the prior year's fourth quarter results of $20.7 million. For fiscal 2014, the Household Cleaning segment revenues were $88.0 million, an increase of 1.5% over fiscal 2013 revenues of $86.7 million.

Commentary and Outlook for FY'15

“With fiscal year 2014 adjusted earnings per share of $1.53, we exceeded our most recent projected guidance range of $1.48 to $1.52,” said Matthew M. Mannelly, CEO. “Our three-prong strategy continued to drive shareholder value creation in fiscal 2014 through investments in brand-building, generating industry-leading free cash flow, and strategic M&A. In fiscal 2015, we remain focused on this strategy as we complete and integrate both the Hydralyte™ brand and Insight Pharmaceuticals acquisitions and begin our brand-building investments in earnest for the acquired brands. As we previously stated, on a pro forma basis, the two acquisitions would result in revenues and adjusted EBITDA for the Company of approximately $800 million and $300 million, respectively, with pro forma adjusted earnings per share in the range of $1.90 to $2.00. The acquisitions strengthen the Company, providing new OTC platforms in hydration and feminine care, expanding other platforms, while also growing our presence in Australasia,” he said.

“We anticipate revenue growth in the range of 15% to 18% for fiscal 2015 based on the closing of the Hydralyte transaction on April 30, 2014 and the anticipated closing of the Insight transaction at the end of the first half of the fiscal year, pending regulatory approval. This growth reflects the impact of investments in our core brands as well as the addition of the two acquisitions. We anticipate a revenue increase of approximately 30% in the second half of the year due to core brand growth and the timing of the closing of the Insight transaction. For the first half of fiscal 2015, revenues are expected to be flat year-over-year as we comp against strong performance in the prior year period and build our brands in the current challenging retail environment.”

Mr. Mannelly continued, “We project fiscal 2015 adjusted earnings per share of $1.75 to $1.85, based on our expected closing of the Insight transaction at the end of the first half of the fiscal year. As a result, our free cash flow generation is expected to be strong and total approximately $150 million for the fiscal year, which will allow the Company to rapidly de-lever and provide flexibility for investment in brand-building. As we begin the new fiscal year, we will continue to drive the long-term value creation strategy which has enabled our impressive growth over the last five years, bringing us closer to our stated goal of becoming a billion dollar OTC products company,” he said.

Free Cash Flow and Debt Reduction

The Company's free cash flow for the fiscal year ended March 31, 2014 totaled $129.0 million, ahead of expectations, and an increase of 1.3% over the prior fiscal year free cash flow of $127.3 million. On a per share basis, free cash flow for the full fiscal year ended March 31, 2014 translates to $2.46 per share compared to $2.48 per share for the year ended March 31, 2013.

The Company's net debt at March 31, 2014 was $909.2 million, reflecting a reduction of a total of $47.1 million during the fiscal fourth quarter. At March 31, 2014, the Company's covenant-defined leverage ratio was approximately 4.25x, even with the prior year level.

Q4 & Fiscal Year-End Conference Call & Presentation

The Company will host a conference call to review its fourth quarter results on May 15, 2014 at 8:30 am EDT. The toll-free dial-in numbers are 800-322-2803 within North America and 617-614-4925 outside of North America. The conference pass code is "prestige". The Company will provide a live Internet webcast, a presentation to accompany the call, as well as an archived replay, all of which can be accessed from the Investors page of the Company's website at ir.prestigebrands.com. Telephonic replays will be available for two weeks following the completion of the call and can be accessed at 888-286-8010 within North America and at 617-801-6888 from outside North America. The pass code is 52987345.

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, and in certain international markets. Core brands include Chloraseptic® sore throat treatments, Clear Eyes® eye care products, Compound W® wart treatments, The Doctor's® NightGuard® dental protector, the Little Remedies® and PediaCare® lines of pediatric over-the-counter products, Efferdent® denture care products, Luden's® throat drops, Dramamine® motion sickness treatment, BC® and Goody's® pain relievers, Beano® gas prevention, Debrox® earwax remover, and Gaviscon® antacid in Canada. Visit the Company's website at www.prestigebrands.com.

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.

Non-GAAP Pro Forma Projected Full Fiscal Year 2015 Financial Measures

Pro forma adjusted EBITDA is a non-GAAP financial measure and is arrived at by taking pro forma net income of $89 million and adding back depreciation and amortization of $31 million, interest expense of $103 million, taxes of $52 million, and $25 million of transition, integration and other items to arrive at projected non-GAAP pro forma adjusted EBITDA of $300 million. Pro forma adjusted earnings per share is a non-GAAP financial measure arrived at by taking pro forma net income of $1.60 to $1.70 and adding back $0.30 of transition, integration and other items to arrive at $1.90 to $2.00 of adjusted earnings per share. This assumes ownership of both acquisitions for the full fiscal year.

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 “guidance," "outlook," "strategy," “goal,” "project," "will," "would," "expect," "anticipate," 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 our expected future operating results including revenues, adjusted earnings per share, and free cash flow, our strategy and focus, investments in brand-building, rapid deleveraging, the timing of the closing of the Insight transaction, the projected pro forma revenues, adjusted EBITDA and earnings per share, and the integration of the Hydralyte and Insight acquisitions. 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, competition in our industry, the success of our new product introductions and integration of newly acquired products, failure to satisfy the closing conditions for the Insight acquisition, general economic and business conditions, unexpected costs, and lower than expected revenues or cash flow from the Company’s acquisitions. 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, 2013, and other periodic reports filed with the Securities and Exchange Commission.

About Non-GAAP Financial Measures

We define Non-GAAP Total Revenues excluding acquisitions and divestitures as GAAP Total Revenues excluding revenues associated with products acquired or divested in the periods presented. We define Non-GAAP Adjusted Total Revenues as GAAP Total Revenues excluding additional transition sales costs associated with acquisitions. We define Non-GAAP Adjusted Gross Margin as Gross Profit before certain acquisition and integration-related costs. We define Non-GAAP Adjusted Operating Income as Operating Income minus certain other legal and professional fees, and other acquisition and integration related costs. We define Non-GAAP EBITDA as earnings before net interest expense (income), income taxes, and depreciation and amortization, and Non-GAAP Adjusted EBITDA as earnings before interest expense (income), income taxes, and depreciation and amortization, loss on extinguishment of debt, certain other legal and professional fees, and acquisition-related costs. We define Non-GAAP Adjusted Net Income as Net Income before, loss on extinguishment of debt, accelerated amortization of debt discount and debt issue costs, certain other legal and professional fees, acquisition and integration-related costs, the applicable tax impacts associated with these items and the tax impacts of state tax rate adjustments 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 Operating Cash Flow as net cash provided by operating activities less premium payments to extinguish debt and accelerated interest payments due to debt refinancing. We define Non-GAAP Free Cash Flow as Net Cash provided by operating activities less premium payments to extinguish debt, accelerated interest payments due to debt refinancing and cash paid for capital expenditures. Non-GAAP Free Cash Flow per Share is calculated based on Non-GAAP Free Cash Flow, divided by the weighted average number of common and potential common shares outstanding during the period. Non-GAAP Total Revenues excluding acquisitions and divestitures, Non-GAAP Adjusted Total Revenues, Non-GAAP Adjusted Gross Margin, Non-GAAP Adjusted Operating Income, Non-GAAP EBITDA, Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted Net Income, Non-GAAP Adjusted EPS, Non-GAAP Operating Cash Flow, Non-GAAP Free Cash Flow and Non-GAAP Free Cash Flow per Share may not be comparable to similarly titled measures reported by other companies.

We are presenting Non-GAAP Total Revenues excluding acquisitions and divestitures, Non-GAAP Adjusted Total Revenues, Non-GAAP Adjusted Gross Margin, Non-GAAP Adjusted Operating Income, Non-GAAP EBITDA, Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted Net Income, Non-GAAP Adjusted EPS, Non-GAAP Operating Cash Flow, Non-GAAP Free Cash Flow and Non-GAAP Free Cash Flow per Share because they provide additional ways to view our operations, when considered with both our GAAP results and the reconciliation to net income and net cash provided by operating activities, respectively, which we believe provide a more complete understanding of our business than could be obtained absent this disclosure. Each of Non-GAAP Total Revenues excluding acquisitions and divestitures, Non-GAAP Adjusted Total Revenues, Non-GAAP Adjusted Gross Margin, Non-GAAP Adjusted Operating Income, Non-GAAP EBITDA, Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted Net Income, Non-GAAP Adjusted EPS, Non-GAAP Operating Cash Flow, Non-GAAP Free Cash Flow and Non-GAAP Free Cash Flow per Share 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 Total Revenues excluding acquisitions and divestitures, Non-GAAP Adjusted Total Revenues, Non-GAAP Adjusted Gross Margin, Non-GAAP Adjusted Operating Income, Non-GAAP EBITDA, Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted Net Income and Non-GAAP Adjusted EPS 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 Total Revenues excluding acquisitions and divestitures, Non-GAAP Adjusted Total Revenues, Non-GAAP Adjusted Gross Margin, Non-GAAP Adjusted Operating Income, Non-GAAP EBITDA, Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted Net Income, Non-GAAP Adjusted EPS, Non-GAAP Operating Cash Flow, Non-GAAP Free Cash Flow and Non-GAAP Free Cash Flow per Share has limitations, and you should not consider these measures in isolation from or as an alternative to GAAP measures such as Total Revenues, Gross Profit, Operating income, Net income, and Net cash flow provided by operating activities, or cash flow statement data prepared in accordance with GAAP, or as a measure of profitability or liquidity.

The following tables set forth the reconciliation of Non-GAAP Total Revenues excluding acquisitions and divestitures, Non-GAAP Adjusted Total Revenues, Non-GAAP Adjusted Gross Margin, Non-GAAP Adjusted Operating Income, Non-GAAP EBITDA, Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted Net Income, Non-GAAP Adjusted EPS, Non-GAAP Operating Cash Flow, Non-GAAP Free Cash Flow and Non-GAAP Free Cash Flow per Share, all of which are non-GAAP financial measures, to GAAP total Revenues, to GAAP Gross Profit, GAAP Operating Income, GAAP Net 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 Total Revenues excluding acquisitions and divestitures:

Reconciliation of GAAP Gross Margin to Non-GAAP Adjusted Total Revenues and GAAP Gross Profit to Non-GAAP Adjusted Gross Margin:

Reconciliation of GAAP Operating Income to Non-GAAP Adjusted Operating Income:

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

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

Reconciliation of GAAP Net Cash Provided by Operating Activities to Non-GAAP Operating Cash Flow, Non-GAAP Free Cash Flow and Non-GAAP Free Cash Flow per Share:

Reconciliation of GAAP Net Income and EPS to Non-GAAP Operating Cash Flow, Non-GAAP Free Cash Flow and Non-GAAP Free Cash Flow per Share:

Guidance for Fiscal Year 2015:

Reconciliation of Projected 2015 EPS:

Reconciliation of Projected 2015 Free Cash Flow: