Prestige sumer Healthcare (PBH) - 2022 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements and management's analysis of financial performance Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements, including income, balance sheet, and cash flow data, along with explanatory notes for key accounting policies and events Condensed Consolidated Statements of Income and Comprehensive Income This section details the company's revenues, gross profit, operating income, net income, and diluted EPS for the specified periods Consolidated Statement of Income Highlights (Unaudited) | Metric | Three Months Ended Sep 30, 2021 (In thousands) | Three Months Ended Sep 30, 2020 (In thousands) | Six Months Ended Sep 30, 2021 (In thousands) | Six Months Ended Sep 30, 2020 (In thousands) | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $276,225 | $237,422 | $545,406 | $466,816 | | Gross Profit | $157,712 | $137,661 | $316,724 | $271,529 | | Operating Income | $78,558 | $72,903 | $169,900 | $153,022 | | Net Income | $45,325 | $44,589 | $103,080 | $88,295 | | Diluted EPS | $0.89 | $0.88 | $2.03 | $1.74 | Condensed Consolidated Balance Sheets This section provides a snapshot of the company's assets, liabilities, and stockholders' equity at the end of the reporting periods Consolidated Balance Sheet Highlights (Unaudited) | Metric | September 30, 2021 (In thousands) | March 31, 2021 (In thousands) | | :--- | :--- | :--- | | Total Current Assets | $304,810 | $269,835 | | Goodwill | $578,797 | $578,079 | | Intangible Assets, net | $2,689,920 | $2,475,729 | | Total Assets | $3,675,818 | $3,429,273 | | Long-term Debt, net | $1,592,981 | $1,479,653 | | Total Liabilities | $2,214,171 | $2,070,975 | | Total Stockholders' Equity | $1,461,647 | $1,358,298 | Condensed Consolidated Statements of Cash Flows This section outlines the cash inflows and outflows from operating, investing, and financing activities for the reporting periods Consolidated Statement of Cash Flows Highlights (Unaudited) | Metric | Six Months Ended Sep 30, 2021 (In thousands) | Six Months Ended Sep 30, 2020 (In thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $130,499 | $127,293 | | Net cash used in investing activities | ($232,989) | ($11,619) | | Net cash provided by (used in) financing activities | $114,184 | ($186,666) | | Increase (decrease) in cash and cash equivalents | $10,516 | ($68,157) | - The significant increase in cash used in investing activities was driven by the $228.9 million acquisition of Akorn's consumer health business[23] Notes to Condensed Consolidated Financial Statements This section provides detailed explanations of significant accounting policies, recent acquisitions, debt refinancing, and other material financial events - The company completed the acquisition of consumer health business assets from Akorn on July 1, 2021, for a purchase price of $228.9 million in cash. This acquisition added the TheraTears brand and other over-the-counter consumer brands to the company's portfolio[33] - The COVID-19 pandemic has had a mixed impact, with some categories like Women's Health and Oral Care benefiting, while others like Cough & Cold were negatively impacted. However, the pandemic has not had a material negative impact on overall operations, sales, or liquidity to date[26][27] - As of September 30, 2021, total long-term debt stood at $1.62 billion. The company refinanced its term loan on July 1, 2021, to fund the Akorn acquisition and extend the maturity date to July 1, 2028[53][54] - The company has significant customer concentration risk, with Walmart accounting for approximately 22.7% and 21.2% of gross revenues for the three and six months ended September 30, 2021, respectively[86] Management's Discussion and Analysis of Financial Condition and Results of Operations Management analyzes the company's financial performance, liquidity, and capital resources, highlighting revenue growth, margin pressures, and the impact of the Akorn acquisition Results of Operations (Three Months Ended Sep 30, 2021 vs 2020) This section details the company's financial performance for the three months ended September 30, 2021, compared to the prior year, focusing on revenue and expense drivers - Total revenues increased by 16.3% to $276.2 million, driven by a 16.2% increase in the North American OTC segment and a 17.5% increase in the International OTC segment[112] - The North American revenue growth was primarily driven by the Eye & Ear Care category, which included the newly acquired TheraTears brand, and recovery in the Cough & Cold and Gastrointestinal categories as COVID-19 restrictions eased[113] - Gross profit margin decreased slightly from 58.0% to 57.1%, primarily due to increased supply chain costs and a $1.6 million charge related to the inventory valuation of the acquired Akorn brands[116] - General and administrative expenses increased from $20.4 million to $32.3 million, largely due to $5.1 million in costs related to the Akorn acquisition[124] Results of Operations (Six Months Ended Sep 30, 2021 vs 2020) This section analyzes the company's financial results for the six months ended September 30, 2021, compared to the prior year, focusing on revenue, gross profit, and net interest expense - Total revenues for the six-month period increased by 16.8% to $545.4 million. The North American segment grew 15.7%, and the International segment grew 29.6%[131] - Gross profit increased 16.6% to $316.7 million, with the gross margin remaining relatively stable at 58.1% compared to 58.2% in the prior year[135] - Net interest expense decreased to $31.4 million from $43.2 million, driven by a lower average cost of borrowing (4.0% vs. 5.1%) and slightly lower average indebtedness[144] Liquidity and Capital Resources This section evaluates the company's cash flow generation, capital allocation, debt structure, and compliance with financial covenants - Net cash provided by operating activities was strong at $130.5 million for the six months ended September 30, 2021[149] - The company used $228.9 million for the acquisition of Akorn, which was the primary driver of the $233.0 million in net cash used in investing activities[150] - On July 1, 2021, the company refinanced its term loan, creating a new class of Term B-5 Loans in an aggregate principal amount of $600.0 million to fund the Akorn acquisition and extend the maturity to 2028[153][154] - As of September 30, 2021, total outstanding indebtedness was $1.6 billion, and the company was in compliance with all debt covenants[152][157] Quantitative and Qualitative Disclosures About Market Risk This section details the company's exposure to market risks, including interest rate fluctuations on variable-rate debt and foreign currency exchange rate volatility - A hypothetical 1.0% increase in interest rates on the company's variable rate debt would adversely impact pre-tax earnings by approximately $1.1 million for the quarter[169] - Approximately 11.8% of gross revenues for the quarter were denominated in currencies other than the U.S. Dollar, primarily Canadian and Australian Dollars. A hypothetical 10% adverse change in exchange rates would impact pre-tax income by approximately $1.8 million for the quarter[170][171] Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that as of September 30, 2021, the company's disclosure controls and procedures were effective[172] - No changes occurred during the quarter ended September 30, 2021, that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[173] PART II. OTHER INFORMATION This section provides additional information, including updates on risk factors and a list of exhibits filed with the quarterly report Risk Factors This section confirms no material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for the fiscal year ended March 31, 2021 - The risk factors described in the company's Annual Report on Form 10-K for the year ended March 31, 2021, have not materially changed during the period covered by this quarterly report[174] Exhibits This section lists the exhibits filed with the Form 10-Q, including amendments to credit agreements and required officer certifications - Key exhibits filed include Amendment No. 6 to the Term Loan Credit Agreement and CEO/CFO certifications pursuant to the Securities Exchange Act of 1934[178]