Prestige Consumer Healthcare Inc

Previous wording

We are engaged in the development, manufacturing, marketing, sales and distribution of well-recognized, brand name, over-the-counter ("OTC") healthcare products to mass merchandisers, drug, food, dollar, convenience, and club stores and e-commerce channels in North America (the United States and Canada) and in Australia and certain other international markets. We use the strength of our brands, our established retail distribution network, a low-cost operating model and our experienced management team to our competitive advantage.

Current wording

We are engaged in the development, manufacturing, marketing, sales and distribution of well-recognized, brand name, over-the-counter ("OTC") health and personal care products to mass merchandisers, drug, food, dollar, convenience, and club stores and e-commerce channels in North America (the United States and Canada) and in Australia and certain other international markets. We use the strength of our brands, our established retail distribution network, a low-cost operating model and our experienced management team to our competitive advantage.

Previous wording

We have grown our brand portfolio both organically and through acquisitions. We develop our existing brands by investing in new product lines, brand extensions and strong advertising support. Acquisitions of OTC brands have also been an important part of our growth strategy. We have acquired well-recognized brands from consumer products and pharmaceutical companies and private equity firms. While many of these brands have long histories of brand development and investment, we believe that, at the time we acquired them, most were considered “non-core” by their previous owners. As a result, these acquired brands did not benefit from adequate management focus and marketing support during the period prior to their acquisition, which created opportunities for us to reinvigorate these brands and improve their performance post-acquisition. After adding a core brand to our portfolio, we seek to increase its sales, market share and distribution in both existing and new channels through our established retail distribution network. We pursue this growth through increased spending on advertising and marketing support, new sales and marketing strategies, improved packaging and formulations, and innovative development of brand extensions.

Current wording

We have grown our brand portfolio both organically and through acquisitions. We develop our existing brands by investing in new product lines, brand extensions and strong advertising support. Acquisitions of consumer health and personal care brands have also been an important part of our growth strategy. We have acquired well-recognized brands from consumer products and pharmaceutical companies and private equity firms. While many of these brands have long histories of brand development and investment, we believe that, at the time we acquired them, most were considered “non-core” by their previous owners. As a result, these acquired brands did not benefit from adequate management focus and marketing support during the period prior to their acquisition, which created opportunities for us to reinvigorate these brands and improve their performance post-acquisition. After adding a core brand to our portfolio, we seek to increase its sales, market share and distribution in both existing and new channels through our established retail distribution network. We pursue this growth through increased spending on advertising and marketing support, new sales and marketing strategies, improved packaging and formulations, and innovative development of brand extensions.

Previous wording

There has been economic uncertainty in the United States and globally due to several factors, including global supply chain constraints, rising interest rates, a high inflationary environment and geopolitical events. We expect economic conditions will continue to be highly volatile and uncertain, put pressure on prices and supply, and could affect demand for our products. We have continued to see changes in the purchasing patterns of our consumers, including a reduction in the frequency of visits to retailers and a shift in many markets to purchasing our products online.

Current wording

There has been economic uncertainty in the United States and globally due to several factors, including global supply chain constraints, rising interest rates, a high inflationary environment and geopolitical events. We expect economic conditions will continue to be highly volatile and uncertain, put pressure on prices and supply, and could affect demand for our products. We have continued to see changes in the purchasing patterns of our end customers, including a reduction in the frequency of visits to retailers and a shift in many markets to purchasing our products online.

Previous wording

The volatile environment has impacted the supply of labor and raw materials and exacerbated rising input costs. Although we have not experienced a material disruption to our overall supply chain to date, we have and may continue to experience shortages, delays and backorders for certain ingredients and products, difficulty scheduling shipping for our products, as well as price increases from many of our suppliers for both shipping and product costs. In addition, labor shortages have impacted our manufacturing operations and may impact our ability to supply certain products to our customers. To date, these global conditions have not had a material negative impact on our operations, supply chain, overall costs or demand for most of our products or resulting aggregate sales and earnings, and, as such, it has also not materially negatively impacted our liquidity position. We continue to generate operating cash flows to meet our short-term liquidity needs. These circumstances could change, however, in this dynamic environment. If conditions cause further disruption in the global supply chain, the availability of labor and materials or otherwise further increase costs, it may materially affect our operations and those of third parties on which we rely, including causing material disruptions in the supply and distribution of our products. The extent to which these conditions impact our results and liquidity will depend on future developments, which are highly uncertain and cannot be predicted, including global supply chain constraints, inflation, global conflicts and instability, and the potential for further outbreaks of severe illnesses. These effects could have a material adverse impact on our business, liquidity, capital resources, and results of operations and those of the third parties on which we rely.

Current wording

The volatile environment has impacted the supply of labor and raw materials and exacerbated rising input costs. We have and may continue to experience shortages, delays and backorders for certain ingredients and products, difficulty scheduling shipping for our products, as well as price increases from many of our suppliers for both shipping and product costs. Certain of our third-party manufacturers are currently having, and have had in the past, difficulty meeting demand, which is and has caused shortages of our products, particularly eye care products. These shortages negatively impacted our results of operations in 2024, and we expect further shortages may have a negative impact on our sales. In addition, labor shortages have impacted our manufacturing operations and could impact our ability to supply certain products to our customers. If conditions cause further disruption in the global supply chain, the availability of labor and materials or otherwise further increase costs, it may materially affect our operations and those of third parties on which we rely, including causing material disruptions in the supply and distribution of our products. The extent to which these conditions impact our results and liquidity will depend on future developments, which are highly uncertain and cannot be predicted, including global supply chain constraints, inflation, global conflicts and instability, and the potential for further outbreaks of severe illnesses. These effects could have a material adverse impact on our business, liquidity, capital resources, and results of operations and those of the third parties on which we rely.

Previous wording

Total revenues for the three months ended December 31, 2023 were $282.7 million, an increase of $7.2 million, or 2.6%, versus the three months ended December 31, 2022.

Current wording

Total revenues for the three months ended June 30, 2024 were $267.1 million, a decrease of $12.2 million, or 4.4%, versus the three months ended June 30, 2023.

Previous wording

Revenues for the North American OTC Healthcare segment decreased $0.3 million, or 0.1%, during the three months ended December 31, 2023 versus the three months ended December 31, 2022. The $0.3 million decrease was primarily attributable to a decline in sales in the Cough & Cold and Oral Care categories, partly offset by an increase in sales in the Eye & Ear Care category.

Current wording

Revenues for the North American OTC Healthcare segment decreased $13.8 million, or 5.6%, during the three months ended June 30, 2024 versus the three months ended June 30, 2023. The $13.8 million decrease was primarily attributable to a decrease in sales in the Cough & Cold and Women's Health categories, partly offset by an increase in sales in the Eye & Ear Care category.

Previous wording

Revenues for the International OTC Healthcare segment increased $10.8 million, or 9.8%, during the nine months ended December 31, 2023 versus the nine months ended December 31, 2022. The $10.8 million increase was mainly attributable to an increase in sales in the Women's Health, Eye & Ear Care and Analgesics categories.

Current wording

Revenues for the International OTC Healthcare segment increased $1.7 million, or 5.0%, during the three months ended June 30, 2024 versus the three months ended June 30, 2023. The $1.7 million increase was mainly attributable to an increase in sales in the Gastrointestinal and Eye & Ear Care categories, partly offset by a decrease in sales in the Women's Health category.

Previous wording

Gross profit for the three months ended December 31, 2023 increased $7.5 million, or 5.0%, when compared with the three months ended December 31, 2022. As a percentage of total revenues, gross profit increased to 55.9% during the three months ended December 31, 2023, from 54.6% during the three months ended December 31, 2022, primarily due to reduced logistics costs in our North American OTC Healthcare segment.

Current wording

Gross profit for the three months ended June 30, 2024 decreased $8.7 million, or 5.6%, when compared with the three months ended June 30, 2023. As a percentage of total revenues, gross profit decreased to 54.7% during the three months ended June 30, 2024, from 55.4% during the three months ended June 30, 2023, primarily due to the decrease in revenue and increased supply chain costs.

Previous wording

Gross profit for the North American OTC Healthcare segment decreased $0.9 million, or 0.2%, during the nine months ended December 31, 2023 versus the nine months ended December 31, 2022. As a percentage of North American OTC Healthcare revenues, gross profit increased to 55.5% during the nine months ended December 31, 2023 from 55.3% during the nine months ended December 31, 2022, primarily due to product mix and pricing actions, partly offset by increased supply chain costs.

Current wording

Gross profit for the North American OTC Healthcare segment decreased $9.3 million, or 6.8%, during the three months ended June 30, 2024 versus the three months ended June 30, 2023. As a percentage of North American OTC Healthcare revenues, gross profit decreased to 54.6% during the three months ended June 30, 2024 from 55.3% during the three months ended June 30, 2023, primarily due to the decrease in revenue and increased supply chain costs, partly offset by pricing actions.

Previous wording

Contribution margin for the North American OTC Healthcare segment for the nine months ended December 31, 2023 decreased $2.1 million, or 0.7%, when compared with the nine months ended December 31, 2022. As a percentage of North American OTC Healthcare revenues, contribution margin decreased slightly to 41.6% during the nine months ended December 31, 2023 from 41.7% during the nine months ended December 31, 2022, primarily due to a slight increase in advertising and marketing spend in the nine months ended December 31, 2023.

Current wording

Contribution margin for the North American OTC Healthcare segment for the three months ended June 30, 2024 decreased $11.7 million, or 11.1%, when compared with the three months ended June 30, 2023. As a percentage of North American OTC Healthcare revenues, contribution margin decreased to 40.0% during the three months ended June 30, 2024 from 42.5% during the three months ended June 30, 2023, primarily due to the decrease in gross profit margin noted above and an increase in advertising and marketing spend during the quarter.

Previous wording

General and administrative expenses were $26.0 million for the three months ended December 31, 2023 and $26.5 million for the three months ended December 31, 2022.

Current wording

General and administrative expenses were $28.9 million for the three months ended June 30, 2024 and $27.7 million for the three months ended June 30, 2023. The increase in general and administrative expenses was primarily due to an increase in professional fees and compensation costs.

Previous wording

Interest expense, net was $16.6 million during the three months ended December 31, 2023 versus $17.9 million during the three months ended December 31, 2022. The average indebtedness decreased to $1.3 billion during the three months ended December 31, 2023 from $1.4 billion during the three months ended December 31, 2022. The average cost of borrowing increased to 5.4% for the three months ended December 31, 2023 from 5.0% for the three months ended December 31, 2022.

Current wording

Interest expense, net was $13.1 million during the three months ended June 30, 2024 versus $17.7 million during the three months ended June 30, 2023. The average indebtedness decreased to $1.1 billion during the three months ended June 30, 2024 from $1.4 billion during the three months ended June 30, 2023. The average cost of borrowing decreased to 4.8% for the three months ended June 30, 2024 compared to 5.3% for the three months ended June 30, 2023.

Previous wording

The provision for income taxes during the three months ended December 31, 2023 was $16.5 million versus $16.2 million during the three months ended December 31, 2022. The effective tax rate during the three months ended December 31, 2023 was 23.8% versus 23.7% during the three months ended December 31, 2022. The increase in the effective tax rate for the three months ended December 31, 2023 was due to the impact of discrete items primarily pertaining to stock-based compensation.

Current wording

The provision for income taxes during the three months ended June 30, 2024 was $9.3 million versus $15.4 million during the three months ended June 30, 2023. The effective tax rate during the three months ended June 30, 2024 was 16.0% versus 22.5% during the three months ended June 30, 2023. The decrease in the effective tax rate for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 was due to discrete items primarily pertaining to the release of a reserve for uncertain tax positions due to the statute of limitations expiring.

Previous wording

As of December 31, 2023, we had cash and cash equivalents of $63.6 million, an increase of $5.1 million from March 31, 2023. The following table summarizes the change:

Current wording

As of June 30, 2024, we had cash and cash equivalents of $34.3 million, a decrease of $12.2 million from March 31, 2024. The following table summarizes the change:

Previous wording

Net cash provided by operating activities was $182.0 million for the nine months ended December 31, 2023, compared to $170.7 million for the nine months ended December 31, 2022. The $11.3 million increase was primarily due to decreased working capital.

Current wording

Net cash provided by operating activities was $54.8 million for the three months ended June 30, 2024, compared to $48.1 million for the three months ended June 30, 2023. The $6.7 million increase was due to decreased working capital, partly offset by a decrease in net income before non-cash items.

Previous wording

Net cash used in financing activities was $172.6 million for the nine months ended December 31, 2023, compared to $105.4 million for the nine months ended December 31, 2022. The $67.2 million increase was primarily due to net repayments of $95.0 million compared to the prior year nine month period, partly offset by a decrease in the repurchase of shares of our common stock in conjunction with our share repurchase program of $25.0 million in the nine months ended December 31, 2023.

Current wording

Net cash used in financing activities was $65.5 million for the three months ended June 30, 2024, compared to $54.2 million for the three months ended June 30, 2023. The $11.3 million increase was primarily due to an increase in term loan repayments of $5.0 million, a decrease in the proceeds from the exercise of stock options of $5.0 million and an increase in the purchase of shares of our common stock of $1.0 million.

Previous wording

As of December 31, 2023, we had an aggregate of $1.2 billion of outstanding indebtedness, which consisted of the following:

Current wording

As of June 30, 2024, we had an aggregate of $1.1 billion of outstanding indebtedness, which consisted of the following:

Previous wording

•$210.0 million of borrowings under the Term B-5 Loans under our term loan originally entered into on January 31, 2012 (the "2012 Term Loan”) due July 1, 2028.

Current wording

•$100.0 million of borrowings under the Term B-5 Loans under our term loan originally entered into on January 31, 2012 (the "2012 Term Loan”) due July 1, 2028.

Previous wording

As of December 31, 2023, we had no outstanding balance on our asset-based revolving credit facility originally entered into on January 31, 2012 (the "2012 ABL Revolver”) and a borrowing capacity of $168.9 million.

Current wording

As of June 30, 2024, we had no outstanding balance on our asset-based revolving credit facility originally entered into on January 31, 2012 (the "2012 ABL Revolver”) and a borrowing capacity of $183.6 million.

Previous wording

At December 31, 2023, we were in compliance with the applicable financial and restrictive covenants under the 2012 Term Loan and the 2012 ABL Revolver and the indentures governing the 2021 Senior Notes and the 2019 Senior Notes. Management anticipates that in the normal course of operations, we will be in compliance with the financial and restrictive covenants during the next twelve months.

Current wording

At June 30, 2024, we were in compliance with the applicable financial and restrictive covenants under the 2012 Term Loan and the 2012 ABL Revolver and the indentures governing the 2021 Senior Notes and the 2019 Senior Notes. Management

Previous wording

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on our knowledge of current events and actions that we may undertake in the future, actual results could differ from those estimates. A summary of our critical accounting policies is presented in our Annual Report on Form 10-K for the fiscal year ended March 31, 2023. There were no material changes to our critical accounting policies during the nine months ended December 31, 2023.

Current wording

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on our knowledge of current events and actions that we may undertake in the future, actual results could differ from those estimates. A summary of our critical accounting policies is presented in our Annual Report on Form 10-K for the fiscal year ended March 31, 2024. There were no material changes to our critical accounting policies during the three months ended June 30, 2024.

Previous wording

A description of recently issued and recently adopted accounting pronouncements is included in the notes to the unaudited Condensed Consolidated Financial Statements in Part I, Item I, Note 1 of this Quarterly Report on Form 10-Q.

Current wording

A description of recently issued accounting pronouncements is included in the notes to the unaudited Condensed Consolidated Financial Statements in Part I, Item I, Note 1 of this Quarterly Report on Form 10-Q.

Previous wording

Forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. Except as required under federal securities laws and the rules and regulations of the SEC, we do not intend to update any forward-looking statements to reflect events or circumstances arising after the date of this Quarterly Report on Form 10-Q, whether as a result of new information, future events or otherwise. As a result of these risks and uncertainties, readers are cautioned not to place undue reliance on forward-looking statements included in this Quarterly Report on Form 10-Q or that may be made elsewhere from time to time by, or on behalf of, us. All forward-looking statements attributable to us are expressly qualified by these cautionary statements.

Current wording

Forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. Except as required under federal securities laws and the rules and regulations of the SEC, we do not intend to update any forward-looking statements to reflect events or circumstances arising after the date of this Quarterly Report on Form 10-Q, whether as a result of new information, future events or otherwise. As a result of the risks and uncertainties described below, readers are cautioned not to place undue reliance on forward-looking statements included in this Quarterly Report on Form 10-Q or that may be made elsewhere from time to time by, or on behalf of, us. All forward-looking statements attributable to us are expressly qualified by these cautionary statements.

Previous wording

•Disruptions in our distribution center or manufacturing facility;

Current wording

•Disruptions in our distribution center or manufacturing facilities;

Previous wording

•Actions of government agencies in connection with our manufacturing plant, products, advertising or regulatory matters;

Current wording

•Actions of government agencies in connection with our manufacturing plants, products, advertising or regulatory matters;