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Prestige Consumer Healthcare Inc. Reports Record Results for Fiscal 2022

May 5, 2022 4:30 PM

TARRYTOWN, N.Y., May 05, 2022 (GLOBE NEWSWIRE) -- Prestige Consumer Healthcare Inc. (NYSE: PBH) today reported financial results for its fourth quarter and fiscal year ended March 31, 2022.

“We are very pleased with our record fiscal 2022 that included double-digit revenue, earnings, and cash flow growth. This performance is the result of our proven business strategy and benefits of our leading portfolio of brands, which enabled us to continue delivering these outstanding results in a dynamic operating environment. The results are a continuation of our long history of delivering value for our stakeholders through successful execution of our business strategy. We look forward to discussing this history of success and what gives us confidence in future growth during tomorrow’s earnings call,” said Ron Lombardi, Chief Executive Officer of Prestige Consumer Healthcare.

Fourth Fiscal Quarter Ended March 31, 2022

Reported revenues in the fourth quarter of fiscal 2022 of $266.9 million increased 12.3% versus $237.8 million in the fourth quarter of fiscal 2021. Revenues increased 5.9% excluding the impact of foreign currency and a $16.3 million contribution from the acquisition of Akorn. The revenue performance for the quarter was driven by continued strong performance across many of the Company’s key brands including improved demand for certain brands, categories and channels that had been impacted by the COVID-19 virus in the prior year fourth quarter such as higher demand for cough & cold products.

Reported net income for the fourth quarter of fiscal 2022 totaled $52.1 million, compared to the prior year quarter’s net income of $35.5 million. Diluted earnings per share of $1.02 for the fourth quarter of fiscal 2022 compared to $0.70 in the prior year comparable period. On a non-GAAP basis, excluding discrete tax items, adjusted net income and adjusted diluted earnings per share in fiscal 2022 of $46.3 million and $0.91 per share, respectively, compared to $39.9 million and $0.79 per share, respectively, in the prior year comparable period.

The adjustment of net income in the fourth quarter fiscal 2022 reflects a tax rate adjustment to account for a discrete benefit associated with a change in the Company’s deferred state tax liabilities. The adjustment of net income in the fourth quarter fiscal 2021 includes a loss on extinguishment of debt and the related income tax effects.

Fiscal Year Ended March 31, 2022

Reported revenues for the fiscal year 2022 totaled $1,086.8 million, an increase of 15.2%, compared to revenues of $943.4 million for the fiscal year 2021. Revenues increased 10.1% excluding the impact of foreign currency and a $42.2 million contribution from the acquisition of Akorn. The revenue performance for the fiscal year 2022 was driven by consumption growth across the majority of the Company’s portfolio as well as improved demand for certain brands, categories and channels that had been impacted by the COVID-19 virus in the prior fiscal year.

Reported net income for fiscal 2022 totaled $205.4 million versus the prior year comparable period net income of $164.7 million. Diluted earnings per share were $4.04 for fiscal 2022 compared to $3.25 per share in the prior fiscal year. On a non-GAAP basis, adjusted net income and adjusted diluted earnings per share for fiscal 2022 were $206.3 million and $4.06, respectively, compared to $164.0 million and $3.24 per share, respectively, in the prior fiscal year.

Adjustments to net income in fiscal 2022 included integration, transition, purchase accounting, legal and various other costs associated with the Akorn acquisition as well as a loss on extinguishment of debt and the related income tax effects of the adjustments and a normalized tax rate adjustment to account for discrete items. The adjustments of net income in fiscal 2021 related to a loss on extinguishment of debt as well as the final regulations issued during the period for certain tax elements imposed under the domestic Tax Cuts and Jobs Act, which resulted in a one-time discrete benefit associated with the utilization of foreign tax credits.

Free Cash Flow and Balance Sheet

The Company's net cash provided by operating activities for fourth quarter fiscal 2022 was $63.1 million, compared to $59.1 million during the prior year comparable period. Non-GAAP free cash flow in the fourth quarter of fiscal 2022 was $60.0 million compared to $54.2 million in the prior year fourth quarter. The Company's net cash provided by operating activities for fiscal 2022 was $259.9 million, compared to $235.6 million during the prior year comparable period. Non-GAAP adjusted free cash flow for fiscal 2022 was $253.7 million compared to $213.4 million in the prior fiscal year.

The Company's net debt position as of March 31, 2022 was approximately $1.5 billion, resulting in a covenant-defined leverage ratio of 3.8x.

Share Repurchase Program AuthorizationOn May 3, 2022 the Company’s Board of Directors authorized the repurchase of up to $50.0 million of the Company’s issued and outstanding common stock. Under the authorization, the Company may purchase common stock through May, 2023 utilizing open market transactions, transactions structured through investment banking institutions, in privately-negotiated transactions, by direct purchases of common stock or a combination of the foregoing in compliance with the applicable rules and regulations of the Securities and Exchange Commission. The timing of the purchases and the amount of stock repurchased is subject to the Company's discretion and will depend on market and business conditions, applicable legal and credit requirements and other corporate considerations including the Company’s historical strategy of pursuing accretive acquisitions and deleveraging.

Segment Review

North American OTC Healthcare: Segment revenues of $232.9 million for the fourth quarter of fiscal 2022 increased 10.1% versus the prior year comparable quarter's segment revenues of $211.5 million. The fourth quarter fiscal 2022 revenue performance was driven by strong performance across a majority of the Company’s key brands versus their respective categories and increased demand in certain COVID-19 impacted categories such as cough & cold and motion sickness categories. The fourth quarter fiscal 2022 revenue performance also included an approximate $16 million contribution from the acquisition of Akorn.

For the fiscal year 2022, reported revenues for the North American OTC segment were $967.9 million, an increase of 14.0% compared to $849.3 million in the prior fiscal year, driven by similar factors attributable to the fourth quarter performance including an approximate $42 million contribution from the acquisition of Akorn.

International OTC Healthcare: Record segment fiscal fourth quarter 2022 revenues of $34.0 million increased 29.4% from $26.3 million reported in the prior year comparable period. The revenue increase versus the prior year related primarily to an increase in consumer activity in Australia, which drove a sharp rise in demand for Hydralyte and other COVID-19 impacted brands.

For the fiscal year 2022, reported revenues for the International OTC Healthcare segment were $118.9 million, an increase of 26.5% over the prior fiscal year revenues of $94.0 million. The increase was driven by similar factors attributable to the fourth quarter performance, along with a foreign currency benefit of $1.8 million.

Commentary and Outlook for Fiscal 2023

Ron Lombardi, Chief Executive Officer, stated, “During fiscal 2022 we generated record earnings and free cash flow even with a backdrop of resurgences of COVID-19 variants, supply chain challenges, and inflation. Furthermore, consistent with our long-term strategy, we deployed capital strategically by acquiring the TheraTears brand to add to our leading eye care portfolio, while still reducing net leverage. This record performance demonstrates once again that our business strategy and diversified portfolio of consumer healthcare brands gives us the ability to generate outstanding value across economic environments.”

“Building on the solid fiscal 2022 performance, we anticipate continued fiscal 2023 growth off the record year. We expect organic sales growth to track in-line with our long-term expectation of 2% to 3% driven by our time-tested brand-building attributes and pricing actions. We currently anticipate a manageable inflationary and supply chain environment thanks to our leading portfolio and largely domestic-based asset-light model, with the result being operating profits growing at or slightly above our rate of sales. This strong financial outlook will continue to support our long-term strategy of continued debt reduction and other strategic uses of capital to drive long-term shareholder value,” Mr. Lombardi concluded.

Initial Fiscal 2023 Outlook
Revenue$1,120 to 1,130 million
Organic Revenue Growth2% to 3%
Diluted E.P.S.$4.18 to $4.23
Free Cash Flow$260 million or more

Fiscal Fourth Quarter and Full Year 2022 Conference Call, Accompanying Slide Presentation and Replay

The Company will host a conference call to review its fourth quarter and full-year results tomorrow, May 6, 2022 at 8:30 a.m. ET. The toll-free dial-in numbers are 844-233-9440 for the U.S. & Canada and 574-990-1016 internationally. The conference ID number is 3389356. 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 approximately 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 3389356.

Non-GAAP and Other Financial InformationIn 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 "guidance," "strategy," "outlook," "projection," “plan,” "may," "will," "would," "expect," "anticipate," "believe”, "confidence," 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 future operating results including revenues, organic growth, diluted earnings per share, and free cash flow, the impact of supply chain issues and inflation on the Company’s performance, the Company’s ability to execute on its brand-building and capital allocation strategy, and the timing and amount of and source of funds for the Company’s share repurchases. 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 business and economic conditions, including as a result of COVID-19 and geopolitical instability, consumer trends, the impact of the Company’s advertising and marketing and new product development initiatives, customer inventory management initiatives, fluctuating foreign exchange rates, competitive pressures, and the ability of the Company’s manufacturing operations and third party manufacturers and logistics providers and suppliers to meet demand for its products and to avoid inflationary cost increases and disruption as a result of labor shortages. 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, 2021 and other periodic reports filed with the Securities and Exchange Commission.

About Prestige Consumer Healthcare Inc.Prestige Consumer Healthcare is a leading consumer healthcare products company with sales 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® and TheraTears® 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.Consolidated Statement of Income and Comprehensive Income (Unaudited)

Three Months Ended March 31, Year Ended March 31,
(In thousands, except per share data) 2022 2021 2022 2021
Total Revenues 266,936 237,761 1,086,812 943,365
Cost of Sales
Cost of sales excluding depreciation 116,281 99,047 458,942 389,670
Cost of sales depreciation 1,793 1,658 7,224 6,223
Cost of sales 118,074 100,705 466,166 395,893
Gross profit 148,862 137,056 620,646 547,472
Operating Expenses
Advertising and marketing 36,935 36,417 157,343 140,589
General and administrative 27,810 23,823 108,516 85,540
Depreciation and amortization 6,692 5,879 24,868 23,941
Total operating expenses 71,437 66,119 290,727 250,070
Operating income 77,425 70,937 329,919 297,402
Other expense (income)
Interest expense, net 15,973 18,983 64,287 82,328
Loss on extinguishment of debt — 12,327 2,122 12,327
Other expense (income), net 487 (746) 1,052 (1,366)
Total other expense, net 16,460 30,564 67,461 93,289
Income before income taxes 60,965 40,373 262,458 204,113
Provision for income taxes 8,879 4,859 57,077 39,431
Net income $52,086 $35,514 $205,381 $164,682
Earnings per share:
Basic $1.03 $0.71 $4.09 $3.28
Diluted $1.02 $0.70 $4.04 $3.25
Weighted average shares outstanding:
Basic 50,363 50,031 50,259 50,210
Diluted 50,972 50,512 50,842 50,605
Comprehensive income, net of tax:
Currency translation adjustments 3,741 (2,106) (1,296) 20,333
Unrealized gain on interest rate swaps 188 698 1,819 3,045
Unrecognized net gain (loss) on pension plans 246 (1,162) 246 1,172
Net gain on pension distribution reclassified to net income — — — (190)
Total other comprehensive income (loss) 4,175 (2,570) 769 24,360
Comprehensive income $56,261 $32,944 $206,150 $189,042

Prestige Consumer Healthcare Inc.Consolidated Balance Sheet(Unaudited)

(In thousands)March 31,
2022 2021
Assets
Current assets
Cash and cash equivalents$27,185 $32,302
Accounts receivable, net of allowance of $19,720 and $16,457, respectively 139,330 114,671
Inventories 120,342 114,959
Prepaid expenses and other current assets 6,410 7,903
Total current assets 293,267 269,835
Property, plant and equipment, net 71,300 70,059
Operating lease right-of-use assets 20,372 23,722
Finance lease right-of-use assets, net 6,858 8,986
Goodwill 578,976 578,079
Intangible assets, net 2,696,635 2,475,729
Other long-term assets 3,273 2,863
Total Assets$3,670,681 $3,429,273
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable$55,760 $45,978
Accrued interest payable 4,437 6,312
Operating lease liabilities, current portion 6,360 5,858
Finance lease liabilities, current portion 2,752 2,588
Other accrued liabilities 74,113 61,402
Total current liabilities 143,422 122,138
Long-term debt, net 1,476,658 1,479,653
Deferred income tax liabilities 444,917 434,050
Long-term operating lease liabilities, net of current portion 16,088 19,706
Long-term finance lease liabilities, net of current portion 4,501 6,816
Other long-term liabilities 7,484 8,612
Total Liabilities 2,093,070 2,070,975
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 – 54,430 shares at March 31, 2022 and 53,999 shares at March 31, 2021 544 540
Additional paid-in capital 515,583 499,508
Treasury stock, at cost – 4,151 shares at March 31, 2022 and 4,088 at March 31, 2021 (133,648) (130,732)
Accumulated other comprehensive loss, net of tax (19,032) (19,801)
Retained earnings 1,214,164 1,008,783
Total Stockholders' Equity 1,577,611 1,358,298
Total Liabilities and Stockholders' Equity$3,670,681 $3,429,273

Prestige Consumer Healthcare Inc.Consolidated Statement of Cash Flows(Unaudited)

Year Ended March 31,
(In thousands) 2022 2021
Operating Activities
Net income$205,381 $164,682
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 32,092 30,164
Loss on sale or disposal of property and equipment 271 220
Deferred income taxes 9,979 18,628
Amortization of debt origination costs 4,230 4,979
Stock-based compensation costs 9,039 8,543
Loss on extinguishment of debt 2,122 12,327
Non-cash operating lease cost 6,706 7,082
Impairment loss 1,057 2,434
Other (9) (7,854)
Changes in operating assets and liabilities:
Accounts receivable (24,654) 36,872
Inventories 663 2,972
Prepaid expenses and other current assets 1,448 (3,227)
Accounts payable 9,154 (17,342)
Accrued liabilities 9,616 (14,912)
Operating lease liabilities (6,448) (6,718)
Other (725) (3,243)
Net cash provided by operating activities 259,922 235,607
Investing Activities
Purchases of property, plant and equipment (9,642) (22,243)
Acquisitions (247,046) —
Other 177 —
Net cash used in investing activities (256,511) (22,243)
Financing Activities
Proceeds from issuance of senior notes — 600,000
Repayment of senior notes — (600,000)
Term Loan repayments (600,000) (195,000)
Proceeds from refinancing of Term Loan 597,000 —
Borrowings under revolving credit agreement 85,000 15,000
Repayments under revolving credit agreement (85,000) (70,000)
Payment of debt costs (6,111) (17,718)
Payments of finance leases (2,582) (1,443)
Proceeds from exercise of stock options 7,040 2,851
Fair value of shares surrendered as payment of tax withholding (2,916) (1,242)
Repurchase of common stock — (11,867)
Net cash provided by (used in) financing activities (7,569) (279,419)
Effects of exchange rate changes on cash and cash equivalents (959) 3,597
Decrease in cash and cash equivalents (5,117) (62,458)
Cash and cash equivalents - beginning of year 32,302 94,760
Cash and cash equivalents - end of year$27,185 $32,302
Interest paid$61,364 $80,290
Income taxes paid$46,568 $34,381

Prestige Consumer Healthcare Inc.Consolidated Statement of IncomeBusiness Segments(Unaudited)

Three Months Ended March 31, 2022
(In thousands)North American OTCHealthcare International OTCHealthcare Consolidated
Total segment revenues*$232,903 $34,033 $266,936
Cost of sales 104,345 13,729 118,074
Gross profit 128,558 20,304 148,862
Advertising and marketing 32,084 4,851 36,935
Contribution margin$96,474 $15,453 111,927
Other operating expenses 34,502
Operating income $77,425

*Intersegment revenues of $0.6 million were eliminated from the North American OTC Healthcare segment.

Year Ended March 31, 2022
(In thousands)North American OTCHealthcare International OTCHealthcare Consolidated
Total segment revenues*$967,881 $118,931 $1,086,812
Cost of sales 419,162 47,004 466,166
Gross profit 548,719 71,927 620,646
Advertising and marketing 138,714 18,629 157,343
Contribution margin$410,005 $53,298 463,303
Other operating expenses 133,384
Operating income $329,919

*Intersegment revenues of $3.0 million were eliminated from the North American OTC Healthcare segment.

Three Months Ended March 31, 2021
(In thousands)North American OTCHealthcare International OTCHealthcare Consolidated
Total segment revenues*$211,468 $26,293 $237,761
Cost of sales 91,321 9,384 100,705
Gross profit 120,147 16,909 137,056
Advertising and marketing 31,304 5,113 36,417
Contribution margin$88,843 $11,796 100,639
Other operating expenses 29,702
Operating income $70,937

*Intersegment revenues of $0.8 million were eliminated from the North American OTC Healthcare segment.

Year Ended March 31, 2021
(In thousands)North American OTCHealthcare International OTCHealthcare Consolidated
Total segment revenues*$849,319 $94,046 $943,365
Cost of sales 359,100 36,793 395,893
Gross profit 490,219 57,253 547,472
Advertising and marketing 122,857 17,732 140,589
Contribution margin$367,362 $39,521 406,883
Other operating expenses 109,481
Operating income $297,402

* Intersegment revenues of $3.2 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 Change 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 Diluted 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:

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 Change percentage:

Three Months Ended March 31, Year Ended March 31,
2022 2021 2022 2021
(In thousands)
GAAP Total Revenues$266,936 $237,761 $1,086,812 $943,365
Revenue Change 12.3% 15.2%
Adjustments:
Revenues associated with acquisition (1) (16,334) — (42,420) —
Impact of foreign currency exchange rates — (1,065) — 4,822
Total adjustments (16,334) (1,065) (42,420) 4,822
Non-GAAP Organic Revenues$250,602 $236,696 $1,044,392 $948,187
Non-GAAP Organic Revenue Change 5.9% 10.1%

(1) Revenues of our Akorn acquisition are excluded for purposes of calculating Non-GAAP organic revenues.

Reconciliation of GAAP Gross Profit to Non-GAAP Adjusted Gross Margin and related Non-GAAP Adjusted Gross Margin percentage:

Three Months Ended March 31, Year Ended March 31,
2022 2021 2022 2021
(In thousands)
GAAP Total Revenues$266,936 $237,761 $1,086,812 $943,365
GAAP Gross Profit$148,862 $137,056 $620,646 $547,472
GAAP Gross Profit as a Percentage of GAAP Total Revenue 55.8% 57.6% 57.1% 58.0%
Adjustments:
Inventory step-up charges associated with acquisition(1) — — 1,567 —
Total adjustments — — 1,567 —
Non-GAAP Adjusted Gross Margin$148,862 $137,056 $622,213 $547,472
Non-GAAP Adjusted Gross Margin as a Percentage of GAAP Total Revenues 55.8% 57.6% 57.3% 58.0%

(1) Inventory step-up charges relate to our North American OTC Healthcare segment.

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 March 31, Year Ended March 31,
2022 2021 2022 2021
(In thousands)
GAAP General and Administrative Expense$27,810 $23,823 $108,516 $85,540
GAAP General and Administrative Expense as a Percentage of GAAP Total Revenue 10.4% 10.0% 10.0% 9.1%
Adjustments:
Costs associated with acquisition(1) — — 5,127 —
Total adjustments — — 5,127 —
Non-GAAP Adjusted General and Administrative Expense$27,810 $23,823 $103,389 $85,540
Non-GAAP Adjusted General and Administrative Expense as a Percentage of GAAP Total Revenues 10.4% 10.0% 9.5% 9.1%

(1) Costs related to the consummation of the acquisition process such as insurance costs, legal and other acquisition 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 March 31, Year Ended March 31,
2022 2021 2022 2021
(In thousands)
GAAP Net Income$52,086 $35,514 $205,381 $164,682
Interest expense, net 15,973 18,983 64,287 82,328
Provision for income taxes 8,879 4,859 57,077 39,431
Depreciation and amortization 8,485 7,537 32,092 30,164
Non-GAAP EBITDA 85,423 66,893 358,837 316,605
Non-GAAP EBITDA Margin 32.0% 28.1% 33.0% 33.6%
Adjustments:
Inventory step-up charges associated with acquisition in Cost of Sales(1) — — 1,567 —
Costs associated with acquisition in General and Administrative Expense(2) — — 5,127 —
Loss on extinguishment of debt — 12,327 2,122 12,327
Total adjustments — 12,327 8,816 12,327
Non-GAAP Adjusted EBITDA$85,423 $79,220 $367,653 $328,932
Non-GAAP Adjusted EBITDA Margin 32.0% 33.3% 33.8% 34.9%

(1) Inventory step-up charges relate to our North American OTC Healthcare segment. (2) Costs related to the consummation of the acquisition process such as insurance costs, legal and other acquisition related professional fees.

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

Three Months Ended March 31, Year Ended March 31,
2022 2022 Adjusted EPS 2021 2021 Adjusted EPS 2022 2022 Adjusted EPS 2021 2021 Adjusted EPS
(In thousands, except per share data)
GAAP Net Income and Diluted EPS$52,086 $1.02 $35,514 $0.70 $205,381 $4.04 $164,682 $3.25
Adjustments:
Inventory step-up charges and other costs associated with acquisition in Cost of Sales(1) — — — — 1,567 0.03 — —
Costs associated with acquisition in General and Administrative Expense(2) — — — — 5,127 0.10 — —
Loss on extinguishment of debt — — 12,327 0.24 2,122 0.04 12,327 0.24
Tax impact of adjustments(3) — — (2,986) (0.06) (2,134) (0.04) (2,986) (0.06)
Normalized tax rate adjustment(4) (5,753) (0.11) (4,919) (0.10) (5,753) (0.11) (10,025) (0.20)
Total adjustments (5,753) (0.11) 4,422 0.09 929 0.02 (684) (0.01)
Non-GAAP Adjusted Net Income and Adjusted EPS$46,333 $0.91 $39,936 $0.79 $206,310 $4.06 $163,998 $3.24

(1) Inventory step-up charges relate to our North American OTC Healthcare segment.(2) Costs related to the consummation of the acquisition process such as insurance costs, 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.(4) Income tax adjustment to adjust for discrete income tax items.Note: Amounts may not add due to rounding.

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

Three Months Ended March 31, Year Ended March 31,
2022 2021 2022 2021
(In thousands)
GAAP Net Income$52,086 $35,514 $205,381 $164,682
Adjustments:
Adjustments to reconcile net income to net cash provided by operating activities as shown in the Statement of Cash Flows 13,207 29,904 65,487 76,523
Changes in operating assets and liabilities as shown in the Statement of Cash Flows (2,167) (6,331) (10,946) (5,598)
Total adjustments 11,040 23,573 54,541 70,925
GAAP Net cash provided by operating activities 63,126 59,087 259,922 235,607
Purchases of property and equipment (3,161) (4,896) (9,642) (22,243)
Non-GAAP Free Cash Flow 59,965 54,191 250,280 213,364
Payments associated with acquisition (1) — — 3,465 —
Non-GAAP Adjusted Free Cash Flow$59,965 $54,191 $253,745 $213,364

(1) Payments related to the consummation of the acquisition process such as insurance costs, legal and other acquisition related professional fees.

Outlook for Fiscal Year 2023:

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

(In millions)
Projected FY'23 GAAP Net cash provided by operating activities$270
Additions to property and equipment for cash (10)
Projected Non-GAAP Free Cash Flow$260

Investor Relations ContactPhil Terpolilli, CFA, 914-524-6819[email protected]

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Source: Prestige Consumer Healthcare Inc.

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