EX-99.2 3 reviewofthirdquarterf14r.htm PRESENTATION reviewofthirdquarterf14r
P R E S T I G E B R A N D S T h i r d Q u a r t e r F ’ 1 4 R e s u l t s 1 Review of Third Quarter F’14 Results Matt Mannelly, CEO & President Ron Lombardi, CFO February 6, 2014 Exhibit 99.2


 
P R E S T I G E B R A N D S T h i r d Q u a r t e r F ’ 1 4 R e s u l t s 2 This presentation contains certain “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995, such as statements about the Company’s growth strategies, investments in marketing, advertising and promotion, competitive position and strategies, product development and acquisitions, product distribution strategies, leverage, capital expenditures, creation of shareholder value, successful integration of acquired brands, debt reduction, growth and future financial performance including free cash flow and E.P.S. Words such as "continue," "will," "believe," “intend,” “expect,” “anticipate,” “plan,” “potential,” “estimate,” “may,” “should,” “could,” “would,” and similar expressions identify forward-looking statements. Such forward-looking statements represent the Company’s expectations and beliefs and involve a number of known and unknown risks, uncertainties and other factors that may cause actual results to differ materially from those expressed or implied by such forward-looking statements. These factors include, among others, the failure to successfully integrate the Care Pharma business or other future acquisitions, the failure to successfully commercialize new and enhanced products, the Company’s inability to rapidly deleverage, the effectiveness of the Company’s advertising and promotions investments, the severity of the cold/cough season, the effectiveness of the Company’s marketing and distribution infrastructure, and other risks set forth in Part I, Item 1A. Risk Factors in the Company’s Annual Report on Form 10-K for the year ended March 31, 2013 and Part II, Item 1A in the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2013. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this presentation. Except to the extent required by applicable securities laws, the Company undertakes no obligation to update any forward-looking statement contained herein, whether as a result of new information, future events, or otherwise. Safe Harbor Disclosure


 
P R E S T I G E B R A N D S T h i r d Q u a r t e r F ’ 1 4 R e s u l t s 3 1. Perspective on Current Environment 2. Q3 FY2014: Performance Highlights 3. Q3 FY2014: Financial Overview 4. FY2014 Outlook and The Road Ahead Agenda for Today’s Discussion


 
P R E S T I G E B R A N D S T h i r d Q u a r t e r F ’ 1 4 R e s u l t s 4 Perspective on Current Environment


 
P R E S T I G E B R A N D S T h i r d Q u a r t e r F ’ 1 4 R e s u l t s 5 Current Environment  Anticipated near-term transitional marketplace…combination of factors resulted in significant impact − Soft retail foot traffic has led to significant retail inventory reductions − Returning competitive pediatric brands to the marketplace − Weak cough/cold season and competitive dynamics in the GI category Significant Impact 1 2 3


 
P R E S T I G E B R A N D S T h i r d Q u a r t e r F ’ 1 4 R e s u l t s 6 Three Primary Environmental Factors Are Impacting Current and Near-Term Performance Retailer Dynamics Pediatric Product Returns Cough/Cold & Other Category Dynamics(2) “We continue to see a cautious consumer. We did see some pullback in consumer spending that began in the spring time frame. It's manifesting itself in fewer trips. At the same time, we have seen the promotional environment intensify in both the drug and mass channels.” – Nov 2013 “The retail environment, both in- stores and online, remains competitive. At the same time, some customers feel uncertainty about the economy, government, job stability and their need to take care of their families through the holidays.” – Nov 2013 Notes: (1) Includes Animal Health. (2) Seasonal cough, cold, flu data levels from October 2012 through Calendar 2013. Q4 2013 U.S. OTC: +22% Q4 2013 Global Consumer Health: +10%(1) YTD Cough/Cold Season: (15%) 1 2 3


 
P R E S T I G E B R A N D S T h i r d Q u a r t e r F ’ 1 4 R e s u l t s 7 Q3 FY2014: Performance Highlights


 
P R E S T I G E B R A N D S T h i r d Q u a r t e r F ’ 1 4 R e s u l t s 8 Third Quarter Performance Highlights  Q3 Performance Highlights − Strong Free Cash Flow of $41.2(1) million, up 11.8% versus the prior year − Q3 consolidated net revenue of $146.2 million was down 8.7% versus the prior year − Gross margin of 56.0% improved versus the prior year − A&P spending increased by 8.6% versus prior year to continue to support core OTC brands and new product development − Adjusted E.P.S.(2) of $0.30, down 18.9% versus the prior year corresponding quarter  Continue to stay the course of our long-term value creation model − Generated strong free cash flow, driving further deleveraging and increasing M&A capacity − Appropriate investment behind brand-building initiatives in support of launches in upcoming quarters − Completed integration of Care Pharma; performance exceeding expectations Notes: (1) This non-GAAP financial measure is reconciled to its most closely related GAAP financial measure in our earnings release in the “About Non-GAAP Financial Measures” section. Free cash flow is reconciled to reported Net Income on slide 22. (2) This non-GAAP financial measure is reconciled to its most closely related GAAP financial measure in our earnings release in the “About Non-GAAP Financial Measures” section. Adjusted E.P.S. is also reconciled to reported E.P.S. on slide 21.


 
P R E S T I G E B R A N D S T h i r d Q u a r t e r F ’ 1 4 R e s u l t s 9 Q3 Results Impacted by Combination of Events Sources of Y/Y Net Revenue Decline Retail Inventory Reductions Competitive Product Returns Other Cough/Cold & GI Category Dynamics  Greater than anticipated trade inventory reduction due to soft retail foot traffic − ~$10M  Return of recalled pediatric products  Slow start to the cough/cold season further impacted declines — YTD incidence levels down >15%  GI category competitive dynamics — Probiotic and private label


 
P R E S T I G E B R A N D S T h i r d Q u a r t e r F ’ 1 4 R e s u l t s 1 0 Impact of Retail Inventory Reductions Concentrated in the Mass Channel Consolidated Total Revenue Growth Note: Represents year-over-year Revenue growth. (1) These Non-GAAP financial measures are reconciled to their most closely related GAAP financial measures in our Earnings Release in the “About Non-GAAP Financial Measures” section. (1)


 
P R E S T I G E B R A N D S T h i r d Q u a r t e r F ’ 1 4 R e s u l t s 1 1 Core OTC Consumption Growth Outpacing Reported Revenue Growth Due to Retailer Dynamics Source: Latest 12-week IRI multi-outlet retail dollar sales growth for relevant quarter. Note: Data reflects retail dollar sales percentage growth versus prior period. (1) Excludes PediaCare, Little Remedies and Beano. Core OTC Consumption vs. Revenue Growth(1)


 
P R E S T I G E B R A N D S T h i r d Q u a r t e r F ’ 1 4 R e s u l t s 1 2 “It’s A Marathon Not A Sprint”, Maintain Emphasis on Appropriate Long-Term Brand Building Strategies Sustained Long-Term Growth & Share Gains Innovative New Products Increased Marketing Support and Effectiveness Increased Distribution The Prestige Formula


 
P R E S T I G E B R A N D S T h i r d Q u a r t e r F ’ 1 4 R e s u l t s 1 3 Transitional Market Remain Focused on Drivers of Growth Over Time Core OTC Consumption Growth Source: Latest 12-week IRI multi-outlet retail dollar sales growth for relevant quarter. Note: Data reflects retail dollar sales percentage growth versus prior period. (1) Blacksmith Bands added middle of Q3 ’11. (2) Dramamine added beginning in Q4 ’11. (3) Acquired GSK brands added in Q4 ’12. (4) Excludes PediaCare, Little Remedies and Beano. Excluding Competitive Returns / GI Category Dynamics(4) (3) (2) (1) FY’11 FY’12 FY’13 FY’14 Q2 Q3


 
P R E S T I G E B R A N D S T h i r d Q u a r t e r F ’ 1 4 R e s u l t s 1 4  Gain Professional Endorsement Introducing New Fresh Guard by Efferdent New Fresh Guard Addresses Unmet Consumer Needs  Kills 99.9% of odor causing bacteria  Specially formulated for removable dental appliances  Prevents mouth film build-up, reduces yellowing, and helps remove stains “For a deep clean, ideal for use at home” “Convenient for on- the-go cleaning” Layered Marketing Plan for a Successful Launch  Drive awareness to generate demand  Drive trial and purchase at shelf


 
P R E S T I G E B R A N D S T h i r d Q u a r t e r F ’ 1 4 R e s u l t s 1 5 Continue to Invest Appropriately Behind Brand Building to Support Long-Term Growth (1) (1) Adjusted in FY’11 to reflect normalized level of A&P spending for PediaCare. A&P % of Net Revenue


 
P R E S T I G E B R A N D S T h i r d Q u a r t e r F ’ 1 4 R e s u l t s 1 6 Oh Canada! Growing Share & Expanding the Reach 10 Core Brands with Leading Positions Other(1) #2 #1 #1 #1 #1 #1 Supported by Focused Marketing for All Core OTC Brands Goal: Outperform category growth & introduce selected US products to Canadian market (1) Other includes: Kwellada-P, R&C, Nytol, New Skin, Luden’s, Murine, Wartner, Ezo, Freezone, Massengill, and Chore Boy


 
P R E S T I G E B R A N D S T h i r d Q u a r t e r F ’ 1 4 R e s u l t s 1 7 Q3 FY2014: Financial Overview


 
P R E S T I G E B R A N D S T h i r d Q u a r t e r F ’ 1 4 R e s u l t s 1 8 Summary Financial Performance Dollar values in millions, except per share data Notes: (1) These non-GAAP financial measures are reconciled to their most closely related GAAP financial measures in our earnings release in the “About Non-GAAP Financial Measures” section. (2) Free cash flow is a non-GAAP financial measure and is also reconciled to reported net income on slide 22. Q3 FY’14 Q3 FY’13 (8.7%) (18.1%) (18.9%) +11.8% (1) (1) Free Cash Flow(1,2) $0.37 $0.30


 
P R E S T I G E B R A N D S T h i r d Q u a r t e r F ’ 1 4 R e s u l t s 1 9 Q3 FY'14 Q3 FY'13 % Chg Net Revenue 146.2$ 160.2$ (8.7%) Adj. Gross Margin(1) 81.8 88.7 (7.8%) % Margin 56.0% 55.4% A&P 25.6 23.5 8.6% % Net Revenue 17.5% 14.7% G&A 12.1 11.4 6.7% % Net Revenue 8.3% 7.1% Adjusted EBITDA(1) 44.1$ 53.8$ (18.1%) % Margin 30.2% 33.6% D&A 3.6 3.4 8.5% % Net Revenue 2.5% 2.1% Adj. Operating Income(1) 40.5 50.4 (19.9%) % Net Revenue 27.7% 31.5% Adjusted Net Income(1) 15.6$ 19.3$ (19.0%) Adjusted Earnings Per Share(1) 0.30$ 0.37$ (18.9%) Earnings Per Share - As Reported 0.06$ 0.24$ (75.0%) Net Income - As Reported 3.1$ 12.3$ (74.5%)  Net Revenue declined $14.0 million, or 8.7%, due to retail inventory reductions, lowered cough / cold incidence levels, the return of competitive products (e.g. Children’s Tylenol and Children’s Motrin), and GI category dynamics (beano)  Gross margin increased 0.6 pts. to 56.0% of Net Revenue  A&P growth of 8.6% consistent with stated investment levels to drive core OTC growth  G&A as a percentage of Net Revenue increased 1.2 pts. to 8.3% as a result of lower sales  Adjusted Net Income declined 19.0%  Adjusted earnings per share decline of 18.9%  Reported EPS of $0.06 includes $0.25 of loss due to early extinguishment of debt Q3 Consolidated Financial Summary Dollar values in millions, except per share data Notes: (1) These Non-GAAP financial measures are reconciled to their most closely related GAAP financial measures in our Earnings Release in the “About Non-GAAP Financial Measures” section. Q3 FY’14 Comments


 
P R E S T I G E B R A N D S T h i r d Q u a r t e r F ’ 1 4 R e s u l t s 2 0  Adjusted Net Revenue declined 2.5% over the prior year  Adjusted gross margin expanded by 0.5 pts. to 57.0%  A&P spend increased by 1.1 pts. to 15.5% of Adjusted Net Revenue  Adjusted G&A as a percentage of Adjusted Net Revenue increased modestly to 7.6%  Adjusted Net Income growth of 4.8%  Adjusted earnings per share growth of 2.6% YTD Consolidated Financial Summary Dollar values in millions, except per share data Notes: (1) Reported net revenue for Q1 FY’13 was $147.0 million. Adjusted net revenue for Q1 FY’13 was $147.4 million and excludes transition related costs of ~$400k. (2) These Non-GAAP financial measures are reconciled to their most closely related GAAP financial measures in our Earnings Release in the “About Non-GAAP Financial Measures” section. YTD FY’14 YTD Comments FY'14 FY'13 % Chg Adjusted Net Revenue(1,2) 457.6$ 469.5$ (2.5%) Adj. Gross Margin(2) 261.0 265.2 (1.6%) % Revenue 57.0% 56.5% A&P 70.8 67.4 5.0% % Adj. Net Revenue 15.5% 14.4% Adj. G&A(2) 34.7 33.7 3.1% % Adj. Net Revenue 7.6% 7.2% Adjusted EBITDA(2) 155.5$ 164.2$ (5.3%) % Margin 34.0% 35.0% D&A 10.2 10.0 2.6% % Adj. Net Revenue 2.2% 2.1% Adj. Operating Income(2) 145.3 154.2 (5.8%) % Adj. Net Revenue 31.8% 32.9% Adjusted Net Income(2) 61.3$ 58.5$ 4.8% Adjusted Earnings Per Share(2) 1.17$ 1.14$ 2.6% Earnings Per Share - s Reported 1.08$ 0.90$ 20.0% Net Income - As Reported 56.6$ 46.2$ 22.7%


 
P R E S T I G E B R A N D S T h i r d Q u a r t e r F ’ 1 4 R e s u l t s 2 1 3 Months Ended 3 Months Ended 9 Months Ended 9 Months Ended Q3 FY'14 Q3 FY'13 Q3 FY'14 Q3 FY'13 Net Income EPS Net Income EPS Net Income EPS Net Income EPS As Reported 3.1$ 0.06$ 12.3$ 0.24$ 56.6$ 1.08$ 46.2$ 0.90$ Adjustments: Acquisition Costs Associated with Care - - - - 1.0 0.02 - - Legal & Professional Fees - - - - 0.7 0.01 0.6 0.01 Transition Costs Associated with GSK - - 3.8 0.07 - - 11.9 0.23 - - Accelerated Amortization of Debt Costs(2) 5.1 0.10 7.7 0.15 5.1 0.10 7.7 0.15 Loss on Extinguishment of Debt(3) 15.0 0.29 - - 15.0 0.29 - - Tax Impact of Adjustments (7.3) (0.14) (4.5) (0.09) (7.6) (0.15) (7.9) (0.15) Tax Impact of State Rate Adjustments (0.4) (0.01) - - (9.5) (0.18) Total Adjustments 12.5 0.24 7.0 0.13 4.7 0.09 12.3 0.24 Adjusted(1) 15.6$ 0.30$ 19.3$ 0.37$ 61.3$ 1.17$ 58.5$ 1.14$ Net Income and E.P.S. Reconciliation Dollar values in millions, except per share data (1) These Non-GAAP financial measures are reconciled to their reported GAAP amounts in our Earnings Release in the “About Non-GAAP Financial Measures” section. (2) Relates to incremental amortization of non-cash deferred debt issue costs and debt discount resulting from the accelerated paydown of our term loan. (3) Related to the portion of our refinancing completed in December 2013. Q3 YTD


 
P R E S T I G E B R A N D S T h i r d Q u a r t e r F ’ 1 4 R e s u l t s 2 2 Q3 FY'14 Q3 FY'13 YTD FY'14 YTD FY'13 Net Income - As Reported 3.1$ 12.3$ 56.6$ 46.2$ Depreciation & Amortization 3.6 3.4 10.2 10.0 Other Non-Cash Operating Items 15.8 13.8 25.4 32.1 Working Capital 2.7 11.1 (11.4) 12.7 Premium Payment on Notes 12.8 - 12.8 - Accelerated Interest due to Refinancing 3.5 - 3.5 - Adjusted Operating Cash Flow(1) 41.5$ 40.5$ 97.1$ 100.9$ Additions to Property and Equipment (0.3) (3.7) (2.6) (8.9) Free Cash Flow 41.2$ 36.8$ 94.5$ 92.0$ Debt Profile & Financial Compliance:  Total Net Debt at 12/31/13 of $939 million comprised of: – Cash on hand of $94 million – $298 million of term loan – $698 million of bonds – $37 million of revolver  Leverage ratio(2) of 4.30x  Continue to expect full year cash flow of $125 million Strong Free Cash Flow Dollar values in millions Note: (1) Adjusted operating cash flow is a Non-GAAP financial measure and is reconciled to GAAP net cash provided by operating activities in our earnings release in the “About Non-GAAP Financial Measures” section. (2) Leverage ratio reflects net debt / covenant defined EBITDA. Cash Flow Comments


 
P R E S T I G E B R A N D S T h i r d Q u a r t e r F ’ 1 4 R e s u l t s 2 3 Prestige Continues to Have Leading Free Cash Flow Conversion Median: 107% Source: Capital IQ Notes: For the latest twelve month period. Free Cash Flow Conversion is a non GAAP financial measure and is defined as Non-GAAP Operating Cash Flow less Capital Expenditures over Adjusted Net Income. Operating Cash Flow and Adjusted Net Income are reconciled to their reported GAAP amounts in our earnings release in the “About Non-GAAP Financial Measures” section. (1) PBH free cash flow conversion is calculated using non GAAP free cash flow. This non GAAP financial measure is reconciled to net income on page 22. Free Cash Flow Conversion (1)


 
P R E S T I G E B R A N D S T h i r d Q u a r t e r F ’ 1 4 R e s u l t s 2 4 Leading Free Cash Flow Yield Supports Attractive Valuation Source: Capital IQ Note: For the latest twelve month period. Free Cash Flow Yield is a non GAAP financial measure and is defined as Cash Provided by Operating Activities divided by Market Capitalization. (1) PBH Free Cash Flow yield is calculated using non GAAP Free Cash Flow. This non GAAP financial measure is reconciled to net income on page 22. Free Cash Flow is reconciled to GAAP cash flow provided by operating activities in our earnings release in the “About Non-GAAP Financial Measures” section. Free Cash Flow Yield Median: 5% (1)


 
P R E S T I G E B R A N D S T h i r d Q u a r t e r F ’ 1 4 R e s u l t s 2 5 FY2014 Outlook and Road Ahead


 
P R E S T I G E B R A N D S T h i r d Q u a r t e r F ’ 1 4 R e s u l t s 2 6 Q4 Considerations: Remain Cautious  Potential for continued soft retail and foot traffic and retailer inventory reductions  Seasonal cough/cold incidences remain well below prior year  Expect returning competitive brands will settle over time  Appropriate investment in brand building behind core brands through A&P support and new product introductions FY 14 Full Year  Continue to expect $125 million of full year free cash flow(1)  In light of combination of three factors impacting short term, expect FY’2014 Adjusted E.P.S. of $1.48 to $1.52 Long-Term Outlook  Stay the strategic course: Invest in Core OTC growth; continue to deliver cash flow to de-lever, remain aggressive and disciplined in M&A market  Expect 10%+ long-term E.P.S growth Outlook for Q4 FY’2014 and Beyond (1) Free cash flow is a non-GAAP financial measure.


 
P R E S T I G E B R A N D S T h i r d Q u a r t e r F ’ 1 4 R e s u l t s 2 7 Our Corporate Mission To be the Best Mid-Sized, Public Company in the Consumer Health Care Market The following principles guide us in this endeavor:  deliver outstanding shareholder value through superior growth in sales, profits, and cash flow  create innovative products that exceed our consumers’ expectations  engage in true partnerships with our suppliers and customers  build a company culture founded on leadership, trust, change and execution


 
P R E S T I G E B R A N D S T h i r d Q u a r t e r F ’ 1 4 R e s u l t s 2 8