Prestige sumer Healthcare (US:PBH)2021-08-05 10:17PART I. FINANCIAL INFORMATION Financial Statements Prestige Consumer Healthcare Inc. reported Q1 2022 revenues of $269.2 million (+17.3%) and net income of $57.8 million Condensed Consolidated Statements of Income and Comprehensive Income | Metric | Three Months Ended June 30, 2021 (in thousands) | Three Months Ended June 30, 2020 (in thousands) | | :--- | :--- | :--- | | Total Revenues | $269,181 | $229,394 | | Gross Profit | $159,012 | $133,868 | | Operating Income | $91,342 | $80,119 | | Net Income | $57,755 | $43,706 | | Diluted EPS | $1.14 | $0.86 | Condensed Consolidated Balance Sheets | Metric | June 30, 2021 (in thousands) | March 31, 2021 (in thousands) | | :--- | :--- | :--- | | Total Current Assets | $408,524 | $269,835 | | Total Assets | $3,559,114 | $3,429,273 | | Total Current Liabilities | $125,046 | $122,138 | | Long-term Debt, net | $1,545,352 | $1,479,653 | | Total Liabilities | $2,142,867 | $2,070,975 | | Total Stockholders' Equity | $1,416,247 | $1,358,298 | Condensed Consolidated Statements of Cash Flows | Cash Flow Activity | Three Months Ended June 30, 2021 (in thousands) | Three Months Ended June 30, 2020 (in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $69,305 | $75,154 | | Net cash used in investing activities | ($1,323) | ($2,553) | | Net cash provided by (used in) financing activities | $63,650 | ($111,362) | | Increase (decrease) in cash and cash equivalents | $131,322 | ($36,819) | | Cash and cash equivalents - end of period | $163,624 | $57,941 | Notes to Condensed Consolidated Financial Statements - The COVID-19 pandemic caused volatile demand, with categories like Women's Health and Oral Care benefiting, while Cough & Cold was negatively impacted, though Q1 fiscal 2022 saw significant increases in travel-related categories23 - As of June 30, 2021, the company had $1.56 billion in long-term debt, including senior notes and term loans, with $85.0 million outstanding on the ABL Revolver and a remaining borrowing capacity of $57.1 million42 - On July 1, 2021, the company acquired Akorn's Consumer Health business assets, including the TheraTears brand, for $230 million in cash, funded by cash on hand, revolver borrowings, and a term loan refinancing83 - On July 1, 2021, the company refinanced its term loan, creating a new class of Term B-5 Loans with an aggregate principal of $600 million and extending the maturity date to July 1, 202885 Management's Discussion and Analysis of Financial Condition and Results of Operations Q1 2022 revenues grew 17.3% to $269.2 million, driven by OTC segment growth from easing COVID-19 restrictions and improved gross profit margin Results of Operations Total Segment Revenues (Three Months Ended June 30, in thousands) | Segment | 2021 Revenue | 2020 Revenue | % Change | | :--- | :--- | :--- | :--- | | North American OTC Healthcare | $242,393 | $210,658 | 15.1% | | International OTC Healthcare | $26,788 | $18,736 | 43.0% | | Total Consolidated | $269,181 | $229,394 | 17.3% | - The North American OTC segment's revenue growth was primarily driven by the Eye & Ear Care (+57.5%) and Gastrointestinal (+41.0%) categories, benefiting from increased consumer travel as COVID-19 restrictions eased9697 - The International OTC segment's revenue growth was mainly attributable to increased sales of Hydralyte in Australia, also due to easing COVID-19 restrictions98 - Gross profit as a percentage of total revenues increased to 59.1% from 58.4% in the prior-year period, primarily due to a favorable product mix100 - Net interest expense decreased to $15.1 million from $21.9 million, driven by a reduction in average indebtedness (from $1.7 billion to $1.5 billion) and a lower average cost of borrowing (from 5.1% to 4.0%)109 Liquidity and Capital Resources Cash Flow Summary (Three Months Ended June 30, in thousands) | Activity | 2021 | 2020 | | :--- | :--- | :--- | | Operating Activities | $69,305 | $75,154 | | Investing Activities | ($1,323) | ($2,553) | | Financing Activities | $63,650 | ($111,362) | - Cash and cash equivalents increased by $131.3 million during the quarter to end at $163.6 million as of June 30, 2021112 - The company borrowed $85.0 million under its revolving credit agreement in June 2021 in anticipation of the acquisition of Akorn's Consumer Health business, which was completed on July 1, 2021115118 - As of June 30, 2021, the company had $1.6 billion of outstanding indebtedness and was in compliance with all debt covenants116124 Quantitative and Qualitative Disclosures About Market Risk The company is exposed to interest rate risk on $360.0 million variable-rate debt and foreign currency risk, with potential adverse impacts - The company is exposed to interest rate risk on approximately $360.0 million of its variable-rate debt, where a 1.0% increase in interest rates would have an estimated adverse impact of $0.7 million on pre-tax earnings for the quarter135136 - The company uses an interest rate swap to hedge $200.0 million of its variable-rate debt to manage risk135 - The company is exposed to foreign currency exchange rate risk, primarily from Canadian and Australian Dollars, where a hypothetical 10% adverse change in exchange rates would impact pre-tax income by approximately $1.6 million for the quarter137138 Controls and Procedures Management concluded disclosure controls and procedures were effective as of June 30, 2021, with no material changes to internal controls - As of June 30, 2021, the CEO and CFO concluded that the company's disclosure controls and procedures were effective139 - No material changes to the company's internal control over financial reporting occurred during the quarter ended June 30, 2021140 PART II. OTHER INFORMATION Risk Factors No material changes occurred to the risk factors previously disclosed in the Annual Report on Form 10-K for the fiscal year ended March 31, 2021 - There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended March 31, 2021142 Issuer Purchases of Equity Securities The company repurchased 63,314 shares at $46.04 per share to satisfy tax-withholding requirements for employee equity awards Issuer Purchases of Equity Securities (May 1 to May 31, 2021) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | May 1 to May 31, 2021 | 63,314 | $46.04 | - Share repurchases were conducted to satisfy tax-withholding requirements upon the vesting of shares under the 2005 Long-Term Equity Incentive Plan144 Other Information The 2021 Annual Meeting of Stockholders elected directors, ratified auditors, and approved executive compensation on a non-binding basis - The 2021 Annual Meeting of Stockholders was held on August 3, 2021145 - Stockholders voted on and approved three proposals: the election of seven directors, the ratification of PricewaterhouseCoopers LLP as the independent auditor, and a non-binding resolution on executive compensation145147148149 Exhibits Key exhibits filed include the Asset Purchase Agreement with Akorn Operating Company and Amendment No. 6 to the Term Loan Credit Agreement - Key exhibits filed include the Asset Purchase Agreement with Akorn Operating Company and Amendment No. 6 to the Term Loan Credit Agreement153