Prestige sumer Healthcare (PBH) - 2024 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements This section presents the unaudited condensed consolidated financial statements, including income, balance sheets, and cash flows, with detailed notes on accounting policies and financial data Condensed Consolidated Statements of Income and Comprehensive Income Total revenues slightly decreased to $286.3 million for the three months, while net income increased to $53.6 million Condensed Consolidated Statements of Income and Comprehensive Income (in thousands, except EPS) | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Six Months Ended Sep 30, 2023 | Six Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $286,316 | $289,273 | $565,625 | $566,332 | | Gross Profit | $160,020 | $161,009 | $314,693 | $321,128 | | Operating Income | $88,250 | $84,384 | $173,444 | $171,398 | | Net Income | $53,559 | $51,023 | $106,835 | $106,295 | | Diluted EPS | $1.07 | $1.02 | $2.13 | $2.11 | Condensed Consolidated Balance Sheets Total assets slightly decreased to $3.33 billion, primarily due to a reduction in long-term debt to $1.26 billion Condensed Consolidated Balance Sheets (in thousands) | Balance Sheet Item | September 30, 2023 | March 31, 2023 | | :--- | :--- | :--- | | Total Assets | $3,332,874 | $3,353,729 | | Cash and cash equivalents | $60,067 | $58,489 | | Goodwill | $526,860 | $527,553 | | Intangible assets, net | $2,328,250 | $2,341,893 | | Total Liabilities | $1,796,915 | $1,906,645 | | Long-term debt, net | $1,262,972 | $1,345,788 | | Total Stockholders' Equity | $1,535,959 | $1,447,084 | Condensed Consolidated Statements of Cash Flows Net cash from operations decreased to $110.5 million, while financing activities used $107.7 million for debt repayment and stock repurchases Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Six Months Ended Sep 30, 2023 | Six Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $110,547 | $115,787 | | Net cash provided by (used in) investing activities | $(611) | $(3,423) | | Net cash used in financing activities | $(107,728) | $(95,330) | | Increase (decrease) in cash and cash equivalents | $1,578 | $15,257 | - Key financing activities for the six months ended September 30, 2023 included $85.0 million in term loan repayments and $25.0 million for the repurchase of common stock[22] Notes to Condensed Consolidated Financial Statements Notes detail accounting policies, debt rate transition, stable goodwill, segment revenues, and significant customer concentration with Walmart and Amazon - The company's debt facilities transitioned their reference rate from LIBOR to the Secured Overnight Financing Rate (SOFR) effective July 1, 2023[31][45] - As of September 30, 2023, the company determined no events occurred that would indicate potential impairment of its $526.9 million in goodwill or $2.3 billion in intangible assets[35][38] - For the six months ended September 30, 2023, Walmart accounted for approximately 20.0% of gross revenues and Amazon accounted for 10.3%[68] Segment Revenues (Six Months Ended Sep 30, 2023, in thousands) | Segment Revenues | Revenue (in thousands) | | :--- | :--- | | North American OTC Healthcare | $490,566 | | International OTC Healthcare | $75,059 | | Total Consolidated | $565,625 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, noting slight revenue decreases, segment variations, gross profit margin changes, and cash flow utilization for debt reduction Results of Operations (Three Months Ended Sep 30, 2023 vs 2022) Total revenues decreased 1.0% to $286.3 million, with North American OTC down 3.0% and International OTC up 12.6% Segment Revenue (Three Months Ended Sep 30, in thousands) | Segment Revenue | 2023 (in thousands) | 2022 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | North American OTC Healthcare | $244,423 | $252,054 | (3.0)% | | International OTC Healthcare | $41,893 | $37,219 | 12.6% | | Total Consolidated | $286,316 | $289,273 | (1.0)% | - The North American revenue decline was primarily due to lower sales in Women's Health, Analgesics, and Gastrointestinal categories[88][89] - The International revenue increase was driven by growth in Eye & Ear Care (+50.5%) and Women's Health (+49.0%)[88][90] - Consolidated contribution margin increased by 2.3% to $119.9 million, with the margin rate improving to 41.9% from 40.5% year-over-year, mainly due to reduced advertising and marketing spend in North America[96][97] Results of Operations (Six Months Ended Sep 30, 2023 vs 2022) Total revenues for the six-month period were nearly flat at $565.6 million, with North American OTC down 0.8% and International OTC up 4.6% Segment Revenue (Six Months Ended Sep 30, in thousands) | Segment Revenue | 2023 (in thousands) | 2022 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | North American OTC Healthcare | $490,566 | $494,572 | (0.8)% | | International OTC Healthcare | $75,059 | $71,760 | 4.6% | | Total Consolidated | $565,625 | $566,332 | (0.1)% | - Gross profit margin for the six-month period decreased from 56.7% to 55.6% year-over-year, primarily due to increased supply chain costs and product mix, partly offset by pricing actions[108] - Net interest expense increased to $35.3 million from $32.3 million, as the average cost of borrowing rose to 5.4% from 4.3%, despite a decrease in average indebtedness[117] Liquidity and Capital Resources Operating cash flow was $110.5 million, with $60.1 million cash and $171.2 million available credit, and total debt reduced to $1.3 billion - Net cash from operations was $110.5 million for the six months ended September 30, 2023, a decrease of $5.2 million from the prior year, primarily due to increased working capital[120][121] - As of September 30, 2023, total outstanding indebtedness was $1.3 billion, and the company had a borrowing capacity of $171.2 million on its revolving credit facility[124] - The company is in compliance with its debt covenants, which include a leverage ratio of less than 6.50 to 1.0 and an interest coverage ratio greater than 2.25 to 1.0[129][130] Quantitative and Qualitative Disclosures About Market Risk The company faces market risks from interest rate fluctuations on $275 million variable debt and foreign currency exposure, impacting pre-tax earnings - The company has $275.0 million of variable-rate debt; a 1.0% increase in interest rates would reduce pre-tax earnings by approximately $1.6 million over a six-month period[138][139] - A hypothetical 10.0% adverse change in foreign currency exchange rates would impact pre-tax income by approximately $4.1 million for the six months ended September 30, 2023[141] Controls and Procedures Management concluded disclosure controls and procedures were effective as of September 30, 2023, with no material changes to internal controls - The Chief Executive Officer and Chief Financial Officer concluded that as of September 30, 2023, the Company's disclosure controls and procedures were effective[142] - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[143] PART II. OTHER INFORMATION Risk Factors No material changes to risk factors previously disclosed in the Annual Report on Form 10-K for the fiscal year ended March 31, 2023 - 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, 2023[144] Other Information A company officer adopted a Rule 10b5-1 trading plan on September 15, 2023, to sell up to 15,871 shares - On September 15, 2023, Mary Beth Fritz, Senior Vice President, Quality & Regulatory Affairs, adopted a Rule 10b5-1 trading plan to sell a total of 15,871 ordinary shares; the plan expires on September 27, 2024[148] Exhibits This section lists exhibits filed with the Form 10-Q, including officer certifications and Inline XBRL documents - The report includes standard exhibits such as officer certifications (31.1, 31.2, 32.1, 32.2) and XBRL data files (101 series)[150]