Prestige Consumer Healthcare Inc

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 end customers, 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, changes in 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 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. 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.

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 and we expect further shortages may have a negative impact on our sales. 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

Numerous countries have agreed to a statement in support of the Organization for Economic Cooperation and Development ("OECD") model rules that propose a global minimum tax rate of 15%. Certain countries have enacted legislation incorporating the agreed upon global minimum tax effective in 2024. This legislation has not and is not expected to have a material impact on our Consolidated Financial Statements. As legislation becomes effective in more countries in which we do business, our taxes could increase and negatively impact our provision for income taxes. We will continue to monitor pending legislation and implementation by countries and evaluate the potential impact on our business in future periods.

Current wording

Numerous countries have agreed to a statement in support of the Organization for Economic Cooperation and Development ("OECD") model rules that propose a global minimum tax rate of 15%. Certain countries have enacted legislation incorporating the agreed upon global minimum tax effective in 2024. This legislation has not and is not expected to have a material impact on our Consolidated Financial Statements. As legislation becomes effective in more countries in which we do business, our taxes could increase and negatively impact our provision for income taxes. We continue to monitor pending legislation and implementation by countries and to evaluate the potential impact on our business in future periods.

Previous 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.

Current wording

Total revenues for the three months ended September 30, 2024 were $283.8 million, a decrease of $2.5 million, or 0.9%, versus the three months ended September 30, 2023.

Previous 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.

Current wording

Revenues for the North American OTC Healthcare segment decreased $4.6 million, or 1.9%, during the three months ended September 30, 2024 versus the three months ended September 30, 2023. The $4.6 million decrease was primarily attributable to a decrease in sales in the Eye & Ear Care, Cough & Cold, and Analgesics categories, partly offset by an increase in sales in the Gastrointestinal category.

Previous 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.

Current wording

Gross profit for the three months ended September 30, 2024 decreased $2.6 million, or 1.6%, when compared with the three months ended September 30, 2023. As a percentage of total revenues, gross profit decreased to 55.5% during the three months ended September 30, 2024 from 55.9% during the three months ended September 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 $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.

Current wording

Gross profit for the North American OTC Healthcare segment decreased $4.9 million, or 3.6%, during the three months ended September 30, 2024 versus the three months ended September 30, 2023. As a percentage of North American OTC Healthcare revenues, gross profit decreased to 55.1% during the three months ended September 30, 2024 from 56.0% during the three months ended September 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 International OTC Healthcare segment decreased $0.1 million, or 0.9%, during the three months ended June 30, 2024 versus the three months ended June 30, 2023. As a percentage of International OTC Healthcare revenues, contribution margin decreased to 39.2% during the three months ended June 30, 2024 from 41.5% during the three months ended June 30, 2023. The contribution margin decrease as a percentage of revenues was primarily due to the decrease in revenue and the increase in advertising and marketing spend during the quarter.

Current wording

Contribution margin for the International OTC Healthcare segment increased $0.5 million, or 2.6%, during the three months ended September 30, 2024 versus the three months ended September 30, 2023. As a percentage of International OTC Healthcare revenues, contribution margin decreased to 42.8% during the three months ended September 30, 2024 from 43.8% during the three months ended September 30, 2023. The contribution margin decrease as a percentage of revenues was primarily due to an increase in advertising and marketing spend during the quarter.

Previous wording

Depreciation and amortization expenses were $5.7 million for the three months ended June 30, 2024 and $5.6 million for the three months ended June 30, 2023.

Current wording

Depreciation and amortization expenses were $5.6 million for the three months ended September 30, 2024 and $5.7 million for the three months ended September 30, 2023.

Previous 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.

Current wording

Interest expense, net was $12.3 million during the three months ended September 30, 2024 versus $17.6 million during the three months ended September 30, 2023. The average indebtedness decreased to $1.1 billion during the three months ended September 30, 2024 from $1.3 billion during the three months ended September 30, 2023. The average cost of borrowing decreased to 4.7% for the three months ended September 30, 2024 from 5.5% for the three months ended September 30, 2023.

Previous 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.

Current wording

Revenues for the International OTC Healthcare segment increased $3.7 million, or 5.0%, during the six months ended September 30, 2024 versus the six months ended September 30, 2023. The $3.7 million increase was mainly attributable to an increase in sales in the Gastrointestinal category, partly offset by a decrease in sales in the Women's Health and Cough & Cold categories.

Previous 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.

Current wording

Contribution margin for the North American OTC Healthcare segment for the six months ended September 30, 2024 decreased $16.1 million, or 7.8%, when compared with the six months ended September 30, 2023. As a percentage of North American OTC Healthcare revenues, contribution margin decreased to 40.3% during the six months ended September 30, 2024 from 42.0% during the six months ended September 30, 2023, primarily due to the decrease in gross profit margin noted above.

Previous 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.

Current wording

General and administrative expenses were $55.0 million for the six months ended September 30, 2024 and $53.7 million for the six months ended September 30, 2023. General and administrative expenses increased $1.3 million due to an increase in professional fees.

Previous 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.

Current wording

The provision for income taxes during the six months ended September 30, 2024 was $26.6 million versus $32.3 million during the six months ended September 30, 2023. The effective tax rate during the six months ended September 30, 2024 was 20.5% versus 23.2% during the six months ended September 30, 2023. The decrease in the effective tax rate for the six months ended September 30, 2024 compared to the six months ended September 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 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:

Current wording

As of September 30, 2024, we had cash and cash equivalents of $51.5 million, an increase of $5.1 million from March 31, 2024. The following table summarizes the change:

Previous 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.

Current wording

Net cash provided by operating activities was $124.6 million for the six months ended September 30, 2024, compared to $110.5 million for the six months ended September 30, 2023. The $14.0 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 investing activities was $2.1 million for the three months ended June 30, 2024, compared to net cash provided by investing activities of $2.3 million for the three months ended June 30, 2023. The increase in cash used for investing activities of $4.5 million was primarily attributable to changes in a short term loan receivable.

Current wording

Net cash used in investing activities was $4.2 million for the six months ended September 30, 2024, compared to $0.6 million for the six months ended September 30, 2023. The increase in cash used for investing activities of $3.5 million was primarily attributable to changes in a short term loan receivable, partly offset by a decrease in capital expenditures.

Previous 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.

Current wording

Net cash used in financing activities was $116.7 million for the six months ended September 30, 2024, compared to $107.7 million for the six months ended September 30, 2023. The $9.0 million increase was primarily due to an increase in the purchase of shares of our common stock of $12.8 million and a decrease in the proceeds from the exercise of stock options of $5.6 million, partly offset by a decrease in term loan repayments of $10.0 million.

Previous 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.

Current wording

•$60.0 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 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.

Current wording

As of September 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 $173.9 million.

Previous 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

Current wording

At September 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.

Previous wording

-24- 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

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.

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, 2024. There were no material changes to our critical accounting policies during the three months ended June 30, 2024.

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 six months ended September 30, 2024.

Previous wording

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

Current wording

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