Prestige sumer Healthcare (PBH) - 2024 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements Presents unaudited condensed consolidated financial statements for Q2 2023, showing slight net income decrease and debt reduction Condensed Consolidated Statements of Income and Comprehensive Income Revenues slightly increased to $279.3M, but net income declined to $53.3M due to higher cost of sales | Financial Metric | Three Months Ended June 30, 2023 (in millions) | Three Months Ended June 30, 2022 (in millions) | | :--- | :--- | :--- | | Total Revenues | $279.3 | $277.1 | | Gross Profit | $154.7 | $160.1 | | Operating Income | $85.2 | $87.0 | | Net Income | $53.3 | $55.3 | | Diluted EPS | $1.06 | $1.09 | Condensed Consolidated Balance Sheets Total assets slightly decreased to $3.35B, long-term debt reduced to $1.32B, and equity rose to $1.48B | Balance Sheet Item | June 30, 2023 (in millions) | March 31, 2023 (in millions) | | :--- | :--- | :--- | | Total Current Assets | $391.8 | $391.7 | | Total Assets | $3,345.6 | $3,353.7 | | Long-term debt, net | $1,316.7 | $1,345.8 | | Total Liabilities | $1,865.3 | $1,906.6 | | Total Stockholders' Equity | $1,480.3 | $1,447.1 | Condensed Consolidated Statements of Cash Flows Operating cash flow decreased to $48.1M, with $54.2M used in financing for debt repayment and share repurchases | Cash Flow Activity | Three Months Ended June 30, 2023 (in millions) | Three Months Ended June 30, 2022 (in millions) | | :--- | :--- | :--- | | Net cash provided by operating activities | $48.1 | $58.2 | | Net cash provided by (used in) investing activities | $2.3 | $(1.0) | | Net cash used in financing activities | $(54.2) | $(47.4) | | Net change in cash and cash equivalents | $(3.9) | $8.7 | Notes to Condensed Consolidated Financial Statements Details accounting policies, segment performance, debt, and customer concentration, noting economic uncertainties and major customer revenue - The company faces economic uncertainty from supply chain constraints, rising interest rates, and inflation, which could affect product demand, prices, and supply. To date, these conditions have not had a material negative impact on operations or liquidity[23][24] - Significant revenue concentration exists with top customers. For the three months ended June 30, 2023, Walmart accounted for approximately 20.8% of gross revenues, and Amazon accounted for 11.0%[63] Segment Performance (Q1 FY2024) | Segment Performance (Q1 FY2024) | North American OTC | International OTC | Consolidated | | :--- | :--- | :--- | :--- | | Total Revenues | $246.1M | $33.2M | $279.3M | | Contribution Margin | $104.7M | $13.8M | $118.4M | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 FY2024 results, noting revenue growth, gross margin contraction, and liquidity for debt and share repurchases Results of Operations Total revenues increased 0.8% to $279.3M, but gross profit fell 3.4% to $154.7M due to higher supply chain costs Revenue by Segment (Q1 FY2024 vs Q1 FY2023) | Revenue by Segment (Q1 FY2024 vs Q1 FY2023) | 2023 | 2022 | % Change | | :--- | :--- | :--- | :--- | | North American OTC Healthcare | $246.1M | $242.5M | +1.5% | | International OTC Healthcare | $33.2M | $34.5M | -4.0% | | Total Consolidated | $279.3M | $277.1M | +0.8% | - Gross profit margin decreased to 55.4% from 57.8% in the prior year, primarily due to increased supply chain costs and unfavorable product mix[85] - Interest expense increased to $17.7 million from $15.3 million YoY, as the average cost of borrowing rose to 5.3% from 4.1%, despite a decrease in average indebtedness[94] Liquidity and Capital Resources Operating cash flow decreased to $48.1M, used for $30M debt repayment and $25M share repurchases, with $1.3B total debt Cash Flow Summary (Q1 FY2024 vs Q1 FY2023) | Cash Flow Summary (Q1 FY2024 vs Q1 FY2023) | 2023 | 2022 | | :--- | :--- | :--- | | Cash from Operating Activities | $48.1M | $58.2M | | Cash from Investing Activities | $2.3M | $(1.0)M | | Cash used in Financing Activities | $(54.2)M | $(47.4)M | | Net Change in Cash | $(3.9)M | $8.7M | - As of June 30, 2023, total outstanding indebtedness was $1.3 billion, consisting of senior notes and term loans. The company had no outstanding balance on its $174.9 million ABL Revolver[101][105] - The company was in compliance with all financial covenants, including leverage ratio, interest coverage ratio, and fixed charge ratio requirements[105][106][107] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company faces interest rate risk on $330M variable-rate debt and foreign currency risk on 10.6% of revenues - The company has $330.0 million of variable-rate debt. A hypothetical 1.0% increase in interest rates would adversely impact pre-tax earnings by approximately $0.9 million for the quarter[116][117] - Approximately 10.6% of gross revenues were denominated in foreign currencies. A hypothetical 10.0% adverse change in foreign currency exchange rates would impact pre-tax income by approximately $1.7 million for the quarter[118][119] Item 4. Controls and Procedures Management concluded disclosure controls were effective as of June 30, 2023, with no material changes to internal controls - Based on an evaluation as of June 30, 2023, the CEO and CFO concluded that the company's disclosure controls and procedures were effective[120] - No changes occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[121] PART II. OTHER INFORMATION Item 1A. Risk Factors No material changes to previously disclosed risk factors from the Annual Report on Form 10-K for FY2023 - The risk factors described in the Annual Report on Form 10-K for the year ended March 31, 2023, have not materially changed during the period covered by this quarterly report[122] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 515,432 shares, completing a $25M program and satisfying tax withholding obligations Share Repurchase Summary | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | May 2023 | 363,138 | $59.88 | | June 2023 | 152,294 | $57.54 | | Total | 515,432 | $59.19 | - The company completed its $25.0 million share repurchase program announced in May 2023 by repurchasing 426,479 shares[126] Item 5. Other Information Details 2023 Annual Meeting voting results, including director elections, auditor ratification, and executive compensation approval - At the Annual Meeting on August 1, 2023, all seven director nominees were elected to the Board[127] - Stockholders ratified the appointment of PricewaterhouseCoopers LLP as the independent registered public accounting firm for fiscal year 2024[128] - A non-binding resolution to approve named executive officer compensation was passed, and stockholders advised for future advisory votes on compensation to be held every one year[129][130] Item 6. Exhibits Lists all exhibits filed with Form 10-Q, including Term Loan Credit Agreement amendment and officer certifications - Key exhibits filed include Amendment No. 7 to the Term Loan Credit Agreement and officer certifications pursuant to SEC rules[132]