Prestige Consumer Healthcare - 10-Q quarterly report FY2024 Q1

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023


OR


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the transition period from ____ to _____

Commission File Number: 001-32433

PRESTIGE CONSUMER HEALTHCARE INC.

(Exact Name of Registrant as Specified in Its Charter)


Delaware						20-1297589
(State or Other Jurisdiction of Incorporation or Organization)						(I.R.S. Employer Identification No.)

660 White Plains Road

Tarrytown, New York 10591

(Address of Principal Executive Offices) (Zip Code)

(914) 524-6800


(Registrant's Telephone Number, Including Area Code)

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)


Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.01 per share	PBH	New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

☒

Accelerated Filer

☐

Non-Accelerated Filer

☐

Smaller Reporting Company

☐

Emerging Growth Company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

As of July 28, 2023, there were 49,539,405 shares of common stock outstanding.

Prestige Consumer Healthcare Inc.

Form 10-Q

Index


PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements
	Condensed Consolidated Statements of Income and Comprehensive Income for the three months ended June 30, 2023 and 2022 (unaudited)	2
	Condensed Consolidated Balance Sheets as of June 30, 2023 and March 31, 2023 (unaudited)	3
	Condensed Consolidated Statements of Changes in Stockholders' Equity for the three months ended June 30, 2023 and 2022 (unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the three months ended June 30, 2023 and 2022 (unaudited)	5
	Notes to Condensed Consolidated Financial Statements (unaudited)	6

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	19

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27

Item 4.	Controls and Procedures	27

PART II.	OTHER INFORMATION

Item 1A.	Risk Factors	27

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28

Item 5.	Other Information	28

Item 6.	Exhibits	30

	Signatures	31

TRADEMARKS AND TRADE NAMES

Trademarks and trade names used in this Quarterly Report on Form 10-Q are the property of Prestige Consumer Healthcare Inc. or its subsidiaries, as the case may be. We have italicized our trademarks or trade names when they appear in this Quarterly Report on Form 10-Q.

-1-

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Prestige Consumer Healthcare Inc.

Condensed Consolidated Statements of Income and Comprehensive Income

(Unaudited)


	Three Months Ended June 30,
(In thousands, except per share data)		2023		2022
Revenues
Net sales		$	279,299	$	277,024
Other revenues		10		35
Total revenues		279,309		277,059

Cost of Sales
Cost of sales excluding depreciation		122,654		114,996
Cost of sales depreciation		1,982		1,944
Cost of sales		124,636		116,940
Gross profit		154,673		160,119

Operating Expenses
Advertising and marketing		36,231		39,951
General and administrative		27,687		26,714
Depreciation and amortization		5,561		6,440


Total operating expenses		69,479		73,105
Operating income		85,194		87,014

Other expense


Interest expense, net		17,719		15,292

Other (income) expense, net		(1,238)		825
Total other expense, net		16,481		16,117
Income before income taxes		68,713		70,897
Provision for income taxes		15,437		15,625




Net income		$	53,276	$	55,272

Earnings per share:
Basic		$	1.07	$	1.10
Diluted		$	1.06	$	1.09

Weighted average shares outstanding:
Basic		49,767		50,264
Diluted		50,196		50,730

Comprehensive income, net of tax:
Currency translation adjustments		(646)		(9,519)

Net loss on termination of pension plan		—		(790)

Total other comprehensive loss		(646)		(10,309)
Comprehensive income		$	52,630	$	44,963

See accompanying notes.

-2-

Prestige Consumer Healthcare Inc.

Condensed Consolidated Balance Sheets

(Unaudited)


(In thousands)	June 30, 2023		March 31, 2023

Assets
Current assets
Cash and cash equivalents	$	54,580	$	58,489
Accounts receivable, net of allowance of $24,928 and $20,205, respectively	157,950		167,016
Inventories	169,849		162,121

Prepaid expenses and other current assets	9,379		4,117

Total current assets	391,758		391,743

Property, plant and equipment, net	69,979		70,412
Operating lease right-of-use assets	13,443		14,923
Finance lease right-of-use assets, net	3,535		4,200
Goodwill	527,458		527,553
Intangible assets, net	2,336,137		2,341,893
Other long-term assets	3,267		3,005

Total Assets	$	3,345,577	$	3,353,729

Liabilities and Stockholders' Equity
Current liabilities

Accounts payable	57,861		62,743
Accrued interest payable	15,188		15,688
Operating lease liabilities, current portion	6,600		6,926
Finance lease liabilities, current portion	2,855		2,834
Other accrued liabilities	64,767		72,524

Total current liabilities	147,271		160,715




Long-term debt, net	1,316,711		1,345,788

Deferred income tax liabilities	383,955		380,434
Long-term operating lease liabilities, net of current portion	8,217		9,876
Long-term finance lease liabilities, net of current portion	945		1,667
Other long-term liabilities	8,183		8,165
Total Liabilities	1,865,282		1,906,645

Commitments and Contingencies — Note 14

Stockholders' Equity
Preferred stock - $0.01 par value
Authorized - 5,000 shares
Issued and outstanding - None	—		—
Common stock - $0.01 par value
Authorized - 250,000 shares
Issued - 55,220 shares at June 30, 2023 and 54,857 shares at March 31, 2023	552		548
Additional paid-in capital	546,526		535,356
Treasury stock, at cost - 5,680 shares at June 30, 2023 and 5,165 shares at March 31, 2023	(219,707)		(189,114)
Accumulated other comprehensive loss, net of tax	(32,210)		(31,564)
Retained earnings	1,185,134		1,131,858
Total Stockholders' Equity	1,480,295		1,447,084
Total Liabilities and Stockholders' Equity	$	3,345,577	$	3,353,729

See accompanying notes.

-3-

Prestige Consumer Healthcare Inc.

Condensed Consolidated Statements of Changes in Stockholders' Equity

(Unaudited)


	Three Months Ended June 30, 2023
	Common Stock			Additional Paid-in Capital		Treasury Stock			Accumulated Other Comprehensive (Loss)		Retained Earnings		Totals
(In thousands)	Shares	Par Value				Shares	Amount
Balances at March 31, 2023	54,857	$	548	$	535,356	5,165	$	(189,114)	$	(31,564)	$	1,131,858	$	1,447,084

Stock-based compensation	—	—		4,146		—	—		—		—		4,146
Exercise of stock options	173	2		7,026		—	—		—		—		7,028

Issuance of shares related to restricted stock	190	2		(2)		—	—		—		—		—
Treasury share repurchases	—	—		—		515	(30,593)		—		—		(30,593)




Net income	—	—		—		—	—		—		53,276		53,276


Comprehensive loss	—	—		—		—	—		(646)		—		(646)

Balances at June 30, 2023	55,220	$	552	$	546,526	5,680	$	(219,707)	$	(32,210)	$	1,185,134	$	1,480,295


	Three Months Ended June 30, 2022
	Common Stock			Additional Paid-in Capital		Treasury Stock			Accumulated Other Comprehensive (Loss)		Retained Earnings		Totals
(In thousands)	Shares	Par Value				Shares	Amount
Balances at March 31, 2022	54,430	$	544	$	515,583	4,151	$	(133,648)	$	(19,032)	$	1,214,164	$	1,577,611


Stock-based compensation	—	—		3,857		—	—		—		—		3,857
Exercise of stock options	39	1		1,488		—	—		—		—		1,489

Issuance of shares related to restricted stock	221	2		(2)		—	—		—		—		—
Treasury share repurchases	—	—		—		777	(43,177)		—		—		(43,177)


Net income	—	—		—		—	—		—		55,272		55,272


Comprehensive loss	—	—		—		—	—		(10,309)		—		(10,309)

Balances at June 30, 2022	54,690	$	547	$	520,926	4,928	$	(176,825)	$	(29,341)	$	1,269,436	$	1,584,743

See accompanying notes.

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Prestige Consumer Healthcare Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	Three Months Ended June 30,
(In thousands)	2023		2022
Operating Activities
Net income	$	53,276	$	55,272
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	7,543		8,384

Loss on disposal of property and equipment	—		13
Deferred income taxes	4,272		1,213
Amortization of debt origination costs	983		828

Stock-based compensation costs	4,146		3,857




Non-cash operating lease cost	1,244		1,493

Other	—		446
Changes in operating assets and liabilities:
Accounts receivable	5,632		(7,079)
Inventories	(7,711)		(14,415)
Prepaid expenses and other current assets	(5,181)		(3,227)
Accounts payable	(5,599)		2,542
Accrued liabilities	(8,519)		10,524
Operating lease liabilities	(1,745)		(1,602)

Other	(254)		(2)
Net cash provided by operating activities	48,087		58,247

Investing Activities
Purchases of property, plant and equipment	(1,477)		(1,047)





Other	3,800		—


Net cash provided by (used in) investing activities	2,323		(1,047)

Financing Activities



Term loan repayments	(30,000)		(15,000)

Borrowings under revolving credit agreement	—		20,000
Repayments under revolving credit agreement	—		(10,000)

Payments of finance leases	(699)		(686)
Proceeds from exercise of stock options	7,028		1,489


Fair value of shares surrendered as payment of tax withholding	(5,508)		(5,450)
Repurchase of common stock	(25,000)		(37,727)
Net cash used in financing activities	(54,179)		(47,374)

Effects of exchange rate changes on cash and cash equivalents	(140)		(1,142)
Increase (decrease) in cash and cash equivalents	(3,909)		8,684
Cash and cash equivalents - beginning of period	58,489		27,185
Cash and cash equivalents - end of period	$	54,580	$	35,869

Interest paid	$	17,582	$	3,562
Income taxes paid	$	11,964	$	1,799

See accompanying notes.

-5-

Prestige Consumer Healthcare Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

1. Business and Basis of Presentation

Nature of Business

Prestige Consumer Healthcare Inc. (referred to herein as the “Company” or “we,” which reference shall, unless the context requires otherwise, be deemed to refer to Prestige Consumer Healthcare Inc. and all of its direct and indirect 100% owned subsidiaries on a consolidated basis) is engaged in the development, manufacturing, marketing, sales and distribution of 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. Prestige Consumer Healthcare Inc. is a holding company with no operations and is also the parent guarantor of the senior credit facility and the senior notes described in Note 7 to these Condensed Consolidated Financial Statements.

Economic Environment

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.

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, unprecedented 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 new information which may emerge concerning global supply chain constraints, the high inflationary environment, global 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.

Basis of Presentation
The unaudited Condensed Consolidated Financial Statements presented herein have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial reporting and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. All significant intercompany transactions and balances have been eliminated in consolidation. In the opinion of management, these Condensed Consolidated Financial Statements include all adjustments, consisting of normal recurring adjustments, that are considered necessary for a fair statement of our consolidated financial position, results of operations and cash flows for the interim periods presented. Our fiscal year ends on March 31st of each year. References in these Condensed Consolidated Financial Statements or related notes to a year (e.g., 2024) mean our fiscal year ending or ended on March 31st of that year. Operating results for the three months ended June 30, 2023 are not necessarily indicative of results that may be expected for the fiscal year ending March 31, 2024. These unaudited Condensed Consolidated Financial Statements and related notes should be read in conjunction with our audited Consolidated Financial Statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2023.

Use of Estimates

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. Our most significant estimates include those made in connection with the valuation of intangible assets, stock-based compensation, fair value of debt, sales returns and allowances, trade promotional allowances, inventory obsolescence, and accounting for income taxes and related uncertain tax positions.

-6-

Recently Adopted Accounting Pronouncements

In October 2021, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. This ASU requires entities to apply Topic 606 to recognize and measure contract assets and liabilities in a business combination. This ASU is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. We adopted this standard effective April 1, 2023. The impact of the adoption of this new standard will depend on the magnitude of future acquisitions.

Recently Issued Accounting Pronouncements

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting and also issued subsequent amendments to the initial guidance (collectively, "Topic 848"). In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848, which extends the period of time preparers can utilize the reference rate reform relief guidance in Topic 848. Topic 848 provides optional guidance for contract modifications and certain hedging relationships associated with the transition from reference rates that are expected to be discontinued. On April 4, 2023, we entered into Amendment No. 8 ("ABL Amendment No. 8") to the 2012 ABL Revolver. ABL Amendment No. 8 provides for the replacement of LIBOR with Secured Overnight Financing Rate ("SOFR") as our reference rate. On June 12, 2023, we entered into Amendment No. 7 ("Term Loan Amendment No. 7") to the Company’s term loan originally entered into on January 31, 2012 (the “2012 Term Loan”), effective July 1, 2023. Term Loan Amendment No. 7 provides for the replacement of LIBOR with SOFR as our reference rate. Effective July 1, 2023, we have transitioned all discontinued reference rates to SOFR. The adoption of the standard did not have a material impact on our Consolidated Financial Statements.

2. Inventories

Inventories consist of the following:


(In thousands)	June 30, 2023		March 31, 2023
Components of Inventories
Packaging and raw materials	$	22,671	$	20,634
Work in process	291		220
Finished goods	146,887		141,267

Inventories	$	169,849	$	162,121

Inventories are carried and depicted above at the lower of cost or net realizable value, which includes a reduction in inventory values of $4.9 million at June 30, 2023 and $5.8 million at March 31, 2023 related to obsolete and slow-moving inventory.

3. Goodwill

A reconciliation of the activity affecting goodwill by operating segment is as follows:


(In thousands)		North American OTC Healthcare		International OTC Healthcare		Consolidated
Balance - March 31, 2023
	Goodwill	$	711,452	$	30,204	$	741,656
	Accumulated impairment loss	(212,516)		(1,587)		(214,103)
Balance - March 31, 2023		498,936		28,617		527,553


	Adjustment related to acquisition	—		—		—

	Effects of foreign currency exchange rates	—		(95)		(95)
Balance - June 30, 2023
	Goodwill	711,452		30,109		741,561
	Accumulated impairment loss	(212,516)		(1,587)		(214,103)
Balance - June 30, 2023		$	498,936	$	28,522	$	527,458

On an annual basis during the fourth quarter of each fiscal year, or more frequently if conditions indicate that the carrying value of the asset may not be recoverable, management performs a review of the values assigned to goodwill and tests for impairment. The date of our annual impairment review was February 28, 2023, and we recorded impairment charges to

-7-

goodwill of $48.8 million in our March 31, 2023 financial statements. We utilized the discounted cash flow method to estimate the fair value of our reporting units as part of the goodwill impairment test. We also considered our market capitalization at February 28, 2023 as compared to the aggregate fair values of our reporting units, to assess the reasonableness of our estimates pursuant to the discounted cash flow methodology. The estimates and assumptions made in assessing the fair value of our reporting units and the valuation of the underlying assets and liabilities are inherently subject to significant uncertainties related to future sales, gross margins, and advertising and marketing expenses, which can be impacted by increases in competition, changing consumer preferences, technical advances, supply chain constraints, labor shortages, and inflation. The discount rate assumption may be influenced by such factors as changes in interest rates and rates of inflation, which can have an impact on the determination of fair value. If these assumptions are adversely affected, we may be required to record impairment charges in the future. As of June 30, 2023, we determined no events have occurred that would indicate potential impairment of goodwill.

4. Intangible Assets, net

A reconciliation of the activity affecting intangible assets, net is as follows:


(In thousands)	Indefinite- Lived Trademarks		Finite-Lived Trademarks and Customer Relationships		Totals
Gross Carrying Amounts
Balance — March 31, 2023	$	2,168,902	$	411,118	$	2,580,020




Effects of foreign currency exchange rates	(671)		(145)		(816)
Balance — June 30, 2023	$	2,168,231	$	410,973	$	2,579,204

Accumulated Amortization
Balance — March 31, 2023	$	—	$	238,127	$	238,127

Additions	—		4,953		4,953

Effects of foreign currency exchange rates	—		(13)		(13)
Balance — June 30, 2023	$	—	$	243,067	$	243,067

Intangible assets, net - June 30, 2023	$	2,168,231	$	167,906	$	2,336,137

Amortization expense was $5.0 million and $5.6 million for the three months ended June 30, 2023 and 2022, respectively.

Finite-lived intangible assets are expected to be amortized over their estimated useful life, which ranges from a period of 10 to 25 years, and the estimated amortization expense for each of the five succeeding years and the periods thereafter is as follows (in thousands):


(In thousands)
Year Ending March 31,	Amount
2024 (remaining nine months ended March 31, 2024)	$	15,433
2025	18,906
2026	16,956
2027	15,363
2028	13,017
Thereafter	88,231
	$	167,906

Under accounting guidelines, indefinite-lived assets are not amortized, but must be tested for impairment annually, or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of the asset below the carrying amount. The date of our annual impairment review was February 28, 2023, and we recorded impairment charges to intangible assets of $321.4 million in our March 31, 2023 financial statements. Additionally, at each reporting period, an evaluation must be made to determine whether events and circumstances continue to support an indefinite useful life. Intangible assets with finite lives are amortized over their respective estimated useful lives and are also tested for

-8-

impairment whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable and exceeds its fair value.

We utilize the excess earnings method to estimate the fair value of our individual indefinite-lived intangible assets. The assumptions subject to significant uncertainties in the analysis include the discount rate utilized in the analysis, as well as future sales, gross margins, and advertising and marketing expenses. The discount rate assumption may be influenced by such factors as changes in interest rates and rates of inflation, which can have an impact on the determination of fair value. Additionally, should the related fair values of intangible assets be adversely affected as a result of declining sales or margins caused by competition, changing consumer needs or preferences, technological advances, changes in advertising and marketing expenses, or the potential impacts of supply chain constraints, labor shortages, or inflation, we may be required to record impairment charges in the future. As of June 30, 2023, no events have occurred that would indicate potential impairment of intangible assets.

5. Leases

We lease real estate and equipment for use in our operations.

The components of lease expense for the three months ended June 30, 2023 and 2022 were as follows:


	Three Months Ended June 30,
(In thousands)		2023		2022
Finance lease cost:
Amortization of right-of-use assets		$	665	$	665
Interest on lease liabilities		30		50
Operating lease cost		1,624		1,634
Short term lease cost		33		34
Variable lease cost		16,456		11,999

Total net lease cost		$	18,808	$	14,382

As of June 30, 2023, the maturities of lease liabilities were as follows:


(In thousands)
Year Ending March 31,	Operating Leases		Finance Lease		Total
2024 (remaining nine months ending March 31, 2024)	$	5,265	$	2,191	$	7,456
2025	4,743		1,509		6,252
2026	2,260		96		2,356
2027	1,889		80		1,969
2028	1,436		—		1,436
Thereafter	264		—		264
Total undiscounted lease payments	15,857		3,876		19,733
Less amount of lease payments representing interest	(1,040)		(76)		(1,116)
Total present value of lease payments	$	14,817	$	3,800	$	18,617

The weighted average remaining lease term and weighted average discount rate were as follows:


		June 30, 2023
Weighted average remaining lease term (years)
	Operating leases	3.15
	Finance leases	1.45
Weighted average discount rate
	Operating leases	3.51	%
	Finance leases	2.95	%

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6. Other Accrued Liabilities

Other accrued liabilities consist of the following:


(In thousands)	June 30, 2023		March 31, 2023
Accrued marketing costs	$	33,143	$	30,471
Accrued compensation costs	5,807		14,292
Accrued broker commissions	1,958		1,767
Income taxes payable	9,764		10,645
Accrued professional fees	4,056		4,254

Accrued production costs	4,593		5,700



Other accrued liabilities	5,446		5,395
	$	64,767	$	72,524

7. Long-Term Debt

Long-term debt consists of the following, as of the dates indicated:


(In thousands, except percentages)	June 30, 2023		March 31, 2023

2021 Senior Notes bearing interest at 3.750%, with interest payable on April 1 and October 1 of each year. The 2021 Senior Notes mature on April 1, 2031.	$	600,000	$	600,000
2019 Senior Notes bearing interest at 5.125%, with interest payable on January 15 and July 15 of each year. The 2019 Senior Notes mature on January 15, 2028.	400,000		400,000

2012 Term B-5 Loans bearing interest at the Borrower's option at either LIBOR plus a margin of 2.00%, with a LIBOR floor of 0.50%, or an alternate base rate plus a margin of 1.00% per annum, due on July 1, 2028. *	330,000		360,000
2012 ABL Revolver bearing interest at the Borrower's option at either a base rate plus applicable margin or LIBOR (at March 31, 2023) and SOFR (at June 30, 2023) plus applicable margin. Any unpaid balance is due on December 11, 2024.	—		—


Long-term debt	1,330,000		1,360,000
Less: unamortized debt costs	(13,289)		(14,212)

Long-term debt, net	$	1,316,711	$	1,345,788

* On June 12, 2023, we entered into Term Loan Amendment No. 7 to the Company’s 2012 Term Loan, effective July 1, 2023. Term Loan Amendment No. 7 provides for the replacement of LIBOR with SOFR as our reference rate.

At June 30, 2023, we had no balance outstanding on the Company's asset-based revolving credit facility originally entered into on January 31, 2012 (the "2012 ABL Revolver") and a borrowing capacity of $174.9 million.

On April 4, 2023, we entered into Amendment No. 8 to the 2012 ABL Revolver. ABL Amendment No. 8 provides for the replacement of LIBOR with SOFR as our reference rate.

As of June 30, 2023, aggregate future principal payments required in accordance with the terms of the 2012 Term B-5 Loans under the 2012 Term Loan, the 2012 ABL Revolver and the indentures governing the senior unsecured notes due 2031 (the "2021 Senior Notes") and the senior unsecured notes due 2028 (the "2019 Senior Notes") are as follows:


(In thousands)
Year Ending March 31,	Amount
2024 (remaining nine months ending March 31, 2024)	$	—
2025	—
2026	—
2027	—
2028	400,000
Thereafter	930,000
	$	1,330,000

-10-

8. Fair Value Measurements

For certain of our financial instruments, including cash, accounts receivable, accounts payable and other current liabilities, the carrying amounts approximate their respective fair values due to the relatively short maturity of these amounts.

FASB Accounting Standards Codification ("ASC") 820, Fair Value Measurements, requires fair value to be determined based on the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market assuming an orderly transaction between market participants. ASC 820 established market (observable inputs) as the preferred source of fair value, to be followed by our assumptions of fair value based on hypothetical transactions (unobservable inputs) in the absence of observable market inputs. Based upon the above, the following fair value hierarchy was created:

Level 1 - Quoted market prices for identical instruments in active markets;

Level 2 - Quoted prices for similar instruments in active markets, as well as quoted prices for identical or similar instruments in markets that are not considered active; and

Level 3 - Unobservable inputs developed by us using estimates and assumptions reflective of those that would be utilized by a market participant.

The market values have been determined based on market values for similar instruments adjusted for certain factors. As such, the 2021 Senior Notes, the 2019 Senior Notes, the 2012 Term B-5 Loans, and the 2012 ABL Revolver are measured in Level 2 of the above hierarchy. The summary below details the carrying amounts and estimated fair values of these instruments at June 30, 2023 and March 31, 2023.


	June 30, 2023		March 31, 2023
(In thousands)	Carrying Value	Fair Value	Carrying Value	Fair Value
2019 Senior Notes	400,000	379,000	400,000	383,500
2021 Senior Notes	600,000	493,500	600,000	510,750


2012 Term B-5 Loans	330,000	329,175	360,000	359,550

At June 30, 2023 and March 31, 2023, we did not have any assets or liabilities measured in Level 1 or 3.

9. Stockholders' Equity

We are authorized to issue 250.0 million shares of common stock, $0.01 par value per share, and 5.0 million shares of preferred stock, $0.01 par value per share. The Board of Directors may direct the issuance of the undesignated preferred stock in one or more series and determine preferences, privileges and restrictions thereof.

Each share of common stock has the right to one vote on all matters submitted to a vote of stockholders. The holders of common stock are also entitled to receive dividends whenever funds are legally available and when declared by the Board of Directors, subject to prior rights of holders of all classes of outstanding stock having priority rights as to dividends. No dividends have been declared or paid on our common stock through June 30, 2023.

On May 2, 2023, the Company's Board of Directors authorized the repurchase of up to $25.0 million of the Company's issued and outstanding common stock through May 31, 2024 utilizing open market transactions, transactions structured through investment banking institutions, in privately-negotiated transactions, by direct purchases of common stock or a combination of the foregoing in compliance with the applicable rules and regulations of the Securities and Exchange Commission. We completed the repurchase in the first quarter of fiscal 2024.

During the three months ended June 30, 2023 and 2022, we repurchased shares of our common stock and recorded them as treasury stock. Our share repurchases consisted of the following:

-11-


	Three Months Ended June 30,
		2023	2022
Shares repurchased pursuant to the provisions of the various employee restricted stock awards:
Number of shares		88,953	99,219
Average price per share		$61.92	$54.94
Total amount repurchased		$5.5 million	$5.5 million

Shares repurchased in conjunction with our share repurchase program:
Number of shares		426,479	677,555
Average price per share		$58.62	$55.68
Total amount repurchased		$25.0 million	$37.7 million

10. Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss consisted of the following at June 30, 2023 and March 31, 2023:


(In thousands)	June 30, 2023		March 31, 2023
Components of Accumulated Other Comprehensive Loss
Cumulative translation adjustment	$	(32,926)	$	(32,280)

Unrecognized net gain on pension plans, net of tax of $(214) and $(214), respectively	716		716
Accumulated other comprehensive loss, net of tax	$	(32,210)	$	(31,564)

As of June 30, 2023 and March 31, 2023, no amounts were reclassified from accumulated other comprehensive loss into earnings.

11. Earnings Per Share

Basic earnings per share is computed based on income available to common stockholders and the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed based on income available to common stockholders and the weighted average number of shares of common stock outstanding plus the effect of potentially dilutive common shares outstanding during the period using the treasury stock method, which includes stock options, restricted stock units ("RSUs") and performance stock units ("PSUs"). Potential common shares, composed of the incremental common shares issuable upon the exercise of outstanding stock options and unvested RSUs, are included in the diluted earnings per share calculation to the extent that they are dilutive. In loss periods, the assumed exercise of in-the-money stock options and RSUs has an anti-dilutive effect, and therefore these instruments are excluded from the computation of diluted earnings per share.

-12-

The following table sets forth the computation of basic and diluted earnings per share:


	Three Months Ended June 30,
(In thousands, except per share data)		2023		2022
Numerator
Net income		$	53,276	$	55,272

Denominator
Denominator for basic earnings per share — weighted average shares outstanding		49,767		50,264
Dilutive effect of unvested restricted stock units and options issued to employees and directors		429		466
Denominator for diluted earnings per share		50,196		50,730

Earnings per Common Share:
Basic earnings per share		$	1.07	$	1.10

Diluted earnings per share		$	1.06	$	1.09

For both the three months ended June 30, 2023 and 2022, there were 0.4 million shares attributable to outstanding stock-based awards that were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive.

12. Stock-Based Compensation

In connection with our initial public offering, the Board of Directors adopted the 2005 Long-Term Equity Incentive Plan (the “2005 Plan”), which provided for grants of up to a maximum of 5.0 million shares of restricted stock, stock options, RSUs and other equity-based awards. In June 2014, the Board of Directors approved, and in July 2014, our stockholders ratified, an increase of an additional 1.8 million shares of our common stock for issuance under the 2005 Plan, among other changes.

On June 23, 2020, the Board of Directors adopted the Prestige Consumer Healthcare Inc. 2020 Long-Term Incentive Plan (the “2020 Plan”). The 2020 Plan became effective on August 4, 2020, upon the approval of the 2020 Plan by our stockholders. On June 23, 2020, a total of 2,827,210 shares were available for issuance under the 2020 Plan (comprised of 2,000,000 new shares plus 827,210 shares that were unissued under the 2005 Plan). All future equity awards will be made from the 2020 Plan, and the Company will not grant any additional awards under the 2005 Plan.

The following table provides information regarding our stock-based compensation:


	Three Months Ended June 30,
(In thousands)		2023		2022
Pre-tax stock-based compensation costs charged against income		$	4,146	$	3,857
Income tax benefit recognized on compensation costs		$	406	$	537
Total fair value of options and RSUs vested during the period		$	11,226	$	10,225
Cash received from the exercise of stock options		$	7,028	$	1,489
Tax benefits realized from tax deductions resulting from RSU issuances and stock option exercises		$	876	$	2,895

At June 30, 2023, there were $4.6 million of unrecognized compensation costs related to unvested stock options under the 2005 Plan and the 2020 Plan, excluding an estimate for forfeitures which may occur. We expect to recognize such costs over a weighted average period of 2.3 years. At June 30, 2023, there were $15.1 million of unrecognized compensation costs related to unvested RSUs and PSUs under the 2005 Plan and the 2020 Plan, excluding an estimate for forfeitures which may occur. We expect to recognize such costs over a weighted average period of 2.3 years.

At June 30, 2023, there were 1.9 million shares available for issuance under the 2020 Plan.

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Restricted Stock Units

The fair value of the RSUs is determined using the closing price of our common stock on the date of the grant. A summary of the RSUs granted under the 2005 Plan and the 2020 Plan is presented below:


RSUs	Shares (in thousands)	Weighted Average Grant-Date Fair Value
Three Months Ended June 30, 2022
Unvested at March 31, 2022	440.9	$	38.45
Granted	134.0	54.47
Incremental performance shares	42.4	—
Vested	(222.4)	32.05

Unvested at June 30, 2022	394.9	46.65
Vested at June 30, 2022	108.5	36.54

Three Months Ended June 30, 2023
Unvested at March 31, 2023	409.0	$	47.17
Granted	142.8	61.73
Incremental performance shares	41.3	—
Vested	(189.3)	41.81
Forfeited	(4.2)	54.92
Unvested at June 30, 2023	399.6	54.18
Vested at June 30, 2023	108.5	36.54

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Options

The fair value of each option award is estimated on the date of grant using the Black-Scholes Option Pricing Model that uses the assumptions presented below:


	Three Months Ended June 30,
	2023		2022
Expected volatility	30.2% - 31.6%		30.8% - 30.9%
Expected dividends	$	—	$	—
Expected term in years	6.0 to 7.0		6.0 to 7.0
Risk-free rate	3.6%		2.8% to 2.9%
Weighted average grant date fair value of options granted	$	23.75	$	20.10

A summary of option activity under the 2005 Plan and the 2020 Plan is as follows:


Options	Shares (in thousands)	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (in thousands)
Three Months Ended June 30, 2022
Outstanding at March 31, 2022	1,100.9	$	40.62
Granted	197.6	54.48
Exercised	(39.1)	38.04


Outstanding at June 30, 2022	1,259.4	42.88		6.9	$	20,052
Vested at June 30, 2022	827.0	39.98		5.7	$	15,567

Three Months Ended June 30, 2023
Outstanding at March 31, 2023	1,081.0	$	43.96
Granted	128.1	61.73
Exercised	(172.9)	40.64
Forfeited	(19.3)	54.86
Expired	(1.7)	54.47
Outstanding at June 30, 2023	1,015.2	46.54		6.5	$	13,369
Vested at June 30, 2023	700.1	42.70		5.4	$	11,714

The aggregate intrinsic value of options exercised during the three months ended June 30, 2023 was $3.2 million.

13. Income Taxes

Income taxes are recorded in our quarterly financial statements based on our estimated annual effective income tax rate, subject to adjustments for discrete events, should they occur. The effective tax rates used in the calculation of income taxes were 22.5% and 22.0% for the three months ended June 30, 2023 and 2022, respectively. The increase in the effective tax rate for the three months ended June 30, 2023, compared to the three months ended June 30, 2022, was due to discrete items primarily pertaining to state tax rate legislative changes and stock-based compensation.

14. Commitments and Contingencies

We are involved from time to time in legal matters and other claims incidental to our business. We review outstanding claims and proceedings internally and with external counsel as necessary to assess the probability and amount of a potential loss. These assessments are re-evaluated at each reporting period and as new information becomes available to determine whether a reserve should be established or if any existing reserve should be adjusted. The actual cost of resolving a claim or proceeding ultimately may be substantially different than the amount of the recorded reserve. In addition, because it is not permissible under GAAP to establish a litigation reserve until the loss is both probable and estimable, in some cases there may be insufficient time to establish a reserve prior to the actual incurrence of the loss (upon verdict and judgment at trial, for example, or in the case of a quickly negotiated settlement). We believe the reasonably possible losses from resolution of

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routine legal matters and other claims incidental to our business, taking our reserves into account, will not have a material adverse effect on our business, financial condition, or results of operations.

15. Concentrations of Risk

Our revenues are concentrated in the area of OTC Healthcare. We sell our products to mass merchandisers, drug, food, dollar, convenience and club stores and e-commerce channels. During the three months ended June 30, 2023 and 2022, approximately 41.0% and 41.5%, respectively, of our gross revenues were derived from our five top selling brands. Walmart accounted for approximately 20.8% and 19.9%, respectively, of our gross revenues for the three months ended June 30, 2023 and 2022. An additional customer, Amazon, accounted for 11.0% of our gross revenues for the first quarter of the current fiscal year.

Our product distribution in the United States is managed by a third party through one primary distribution center in Clayton, Indiana. In addition, we operate one manufacturing facility for certain of our products located in Lynchburg, Virginia, which manufactures many of the Summer's Eve and Fleet products. A natural disaster, such as tornado, earthquake, flood, or fire, could damage our inventory and/or materially impair our ability to distribute our products to customers in a timely manner or at a reasonable cost. In addition, a serious disruption caused by performance or contractual issues with our third-party distribution manager or labor shortages or public health emergencies at our distribution center or manufacturing facility could materially impact our product distribution. Any disruption could result in increased costs, expense and/or shipping times, and could cause us to incur customer fees and penalties. We could also incur significantly higher costs and experience longer lead times if we need to replace our distribution center, the third-party distribution manager or the manufacturing facility. As a result, any serious disruption could have a material adverse effect on our business, financial condition and results of operations.

At June 30, 2023, we had relationships with 135 third-party manufacturers. Of those, we had long-term contracts with 27 manufacturers that produced items that accounted for approximately 74.8% of gross sales for the three months ended June 30, 2023. At June 30, 2022, we had relationships with 129 third-party manufacturers. Of those, we had long-term contracts with 25 manufacturers that produced items that accounted for approximately 71.0% of gross sales for the three months ended June 30, 2022. The fact that we do not have long-term contracts with certain manufacturers means that they could cease manufacturing our products at any time and for any reason or initiate arbitrary and costly price increases, which could have a material adverse effect on our business and results of operations. Although we are continually in the process of negotiating long-term contracts with certain key manufacturers, we may not be able to reach a timely agreement, which could have a material adverse effect on our business and results of operations.

16. Business Segments

Segment information has been prepared in accordance with the Segment Reporting topic of the FASB ASC 280. Our current reportable segments consist of (i) North American OTC Healthcare and (ii) International OTC Healthcare. We evaluate the performance of our operating segments and allocate resources to these segments based primarily on contribution margin, which we define as gross profit less advertising and marketing expenses.

The tables below summarize information about our reportable segments.


	Three Months Ended June 30, 2023
(In thousands)	North American OTC Healthcare		International OTC Healthcare		Consolidated
Total segment revenues*	$	246,143	$	33,166	$	279,309
Cost of sales	110,076		14,560		124,636
Gross profit	136,067		18,606		154,673
Advertising and marketing	31,401		4,830		36,231
Contribution margin	$	104,666	$	13,776	118,442
Other operating expenses					33,248
Operating income					$	85,194
* Intersegment revenues of $1.4 million were eliminated from the North American OTC Healthcare segment.

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	Three Months Ended June 30, 2022
(In thousands)	North American OTC Healthcare		International OTC Healthcare		Consolidated
Total segment revenues*	$	242,518	$	34,541	$	277,059
Cost of sales	102,921		14,019		116,940
Gross profit	139,597		20,522		160,119
Advertising and marketing	35,412		4,539		39,951
Contribution margin	$	104,185	$	15,983	120,168
Other operating expenses					33,154
Operating income					$	87,014
* Intersegment revenues of $0.5 million were eliminated from the North American OTC Healthcare segment.

The tables below summarize information about our segment revenues from similar product groups.


	Three Months Ended June 30, 2023
(In thousands)	North American OTC Healthcare		International OTC Healthcare		Consolidated
Analgesics	$	27,182	$	842	$	28,024
Cough & Cold	20,374		6,052		26,426
Women's Health	54,955		4,956		59,911
Gastrointestinal	44,681		12,910		57,591
Eye & Ear Care	39,471		4,021		43,492
Dermatologicals	34,678		1,338		36,016
Oral Care	21,726		3,022		24,748
Other OTC	3,076		25		3,101

Total segment revenues	$	246,143	$	33,166	$	279,309


	Three Months Ended June 30, 2022
(In thousands)	North American OTC Healthcare		International OTC Healthcare		Consolidated
Analgesics	$	27,797	$	453	$	28,250
Cough & Cold	21,592		6,271		27,863
Women's Health	61,184		4,867		66,051
Gastrointestinal	40,067		14,027		54,094
Eye & Ear Care	38,611		4,736		43,347
Dermatologicals	29,455		1,006		30,461
Oral Care	20,975		3,170		24,145
Other OTC	2,837		11		2,848

Total segment revenues	$	242,518	$	34,541	$	277,059

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17. Subsequent Event

Director Equity Grants

Pursuant to the 2020 Plan, each of the independent members of the Board of Directors received a grant of 2,295 RSUs on August 1, 2023. The RSUs fully vest one year after receipt of the award, subject to the continued service of the director on such vesting date, and will be settled by delivery to each director of one share of our common stock for each vested RSU either (a) at the election of the director prior to the grant date, immediately upon vesting, or (b) promptly following the earliest of (i) such director's death, (ii) such director's separation from service or (iii) a change in control of the Company.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operations should be read together with the Condensed Consolidated Financial Statements and the related notes included in this Quarterly Report on Form 10-Q, as well as our Annual Report on Form 10-K for the fiscal year ended March 31, 2023. This discussion and analysis may contain forward-looking statements that involve certain risks, assumptions and uncertainties. Future results could differ materially from the discussion that follows for many reasons, including the factors described in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended March 31, 2023 and in future reports filed with the U.S. Securities and Exchange Commission ("SEC").


See also “Cautionary Statement Regarding Forward-Looking Statements” on page 25 of this Quarterly Report on Form 10-Q.

Unless otherwise indicated by the context, all references in this Quarterly Report on Form 10-Q to “we,” “us,” “our,” the “Company” or “Prestige” refer to Prestige Consumer Healthcare Inc. and our subsidiaries. Similarly, references to a year (e.g., 2024) refers to our fiscal year ended March 31 of that year.

General

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.

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.

Economic Environment

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Results of Operations

Three Months Ended June 30, 2023 compared to the Three Months Ended June 30, 2022

Total Segment Revenues

The following table represents total revenue by segment, including product groups, for the three months ended June 30, 2023 and 2022.


	Three Months Ended June 30,
							Increase (Decrease)
(In thousands)	2023		%	2022		%	Amount		%
North American OTC Healthcare
Analgesics	$	27,182	9.7	$	27,797	10.0	$	(615)	(2.2)
Cough & Cold	20,374		7.3	21,592		7.8	(1,218)		(5.6)
Women's Health	54,955		19.7	61,184		22.1	(6,229)		(10.2)
Gastrointestinal	44,681		16.0	40,067		14.5	4,614		11.5
Eye & Ear Care	39,471		14.1	38,611		13.9	860		2.2
Dermatologicals	34,678		12.4	29,455		10.6	5,223		17.7
Oral Care	21,726		7.8	20,975		7.6	751		3.6
Other OTC	3,076		1.1	2,837		1.0	239		8.4
Total North American OTC Healthcare	246,143		88.1	242,518		87.5	3,625		1.5

International OTC Healthcare
Analgesics	842		0.3	453		0.2	389		85.9
Cough & Cold	6,052		2.2	6,271		2.2	(219)		(3.5)
Women's Health	4,956		1.8	4,867		1.8	89		1.8
Gastrointestinal	12,910		4.6	14,027		5.1	(1,117)		(8.0)
Eye & Ear Care	4,021		1.4	4,736		1.7	(715)		(15.1)
Dermatologicals	1,338		0.5	1,006		0.4	332		33.0
Oral Care	3,022		1.1	3,170		1.1	(148)		(4.7)
Other OTC	25		—	11		—	14		127.3
Total International OTC Healthcare	33,166		11.9	34,541		12.5	(1,375)		(4.0)



Total Consolidated	$	279,309	100.0	$	277,059	100.0	$	2,250	0.8

Total revenues for the three months ended June 30, 2023 were $279.3 million, an increase of $2.3 million, or 0.8%, versus the three months ended June 30, 2022.

North American OTC Healthcare Segment

Revenues for the North American OTC Healthcare segment increased $3.6 million, or 1.5%, during the three months ended June 30, 2023 versus the three months ended June 30, 2022. The $3.6 million increase was primarily attributable to an increase in sales in the Dermatological and Gastrointestinal categories, partly offset by a decrease in sales in the Women's Health category.

International OTC Healthcare Segment

Revenues for the International OTC Healthcare segment decreased $1.4 million, or 4.0%, during the three months ended June 30, 2023 versus the three months ended June 30, 2022. The $1.4 million decrease was mainly attributable to a decrease in sales in the Gastrointestinal and Eye & Ear categories.

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Gross Profit

The following table presents our gross profit and gross profit as a percentage of total segment revenues, by segment for each of the periods presented.


	Three Months Ended June 30,
(In thousands)							Increase (Decrease)
Gross Profit	2023		%	2022		%	Amount		%
North American OTC Healthcare	$	136,067	55.3	$	139,597	57.6	$	(3,530)	(2.5)
International OTC Healthcare	18,606		56.1	20,522		59.4	(1,916)		(9.3)

	$	154,673	55.4	$	160,119	57.8	$	(5,446)	(3.4)

Gross profit for the three months ended June 30, 2023 decreased $5.4 million, or 3.4%, when compared with the three months ended June 30, 2022. As a percentage of total revenues, gross profit decreased to 55.4% during the three months ended June 30, 2023, from 57.8% during the three months ended June 30, 2022, primarily due to increased supply chain costs and product mix.

North American OTC Healthcare Segment

Gross profit for the North American OTC Healthcare segment decreased $3.5 million, or 2.5%, during the three months ended June 30, 2023 versus the three months ended June 30, 2022. As a percentage of North American OTC Healthcare revenues, gross profit decreased to 55.3% during the three months ended June 30, 2023 from 57.6% during the three months ended June 30, 2022, primarily due to increased supply chain costs and product mix, partly offset by pricing actions.

International OTC Healthcare Segment

Gross profit for the International OTC Healthcare segment decreased $1.9 million, or 9.3%, during the three months ended June 30, 2023 versus the three months ended June 30, 2022. As a percentage of International OTC Healthcare revenues, gross profit decreased to 56.1% during the three months ended June 30, 2023 from 59.4% during the three months ended June 30, 2022, primarily due to product mix.

Contribution Margin

Contribution margin is our segment measure of profitability. It is defined as gross profit less advertising and marketing expenses.

The following table presents our contribution margin and contribution margin as a percentage of total segment revenues, by segment for each of the periods presented.


	Three Months Ended June 30,
(In thousands)							Increase (Decrease)
Contribution Margin	2023		%	2022		%	Amount		%
North American OTC Healthcare	$	104,666	42.5	$	104,185	43.0	$	481	0.5
International OTC Healthcare	13,776		41.5	15,983		46.3	(2,207)		(13.8)

	$	118,442	42.4	$	120,168	43.4	$	(1,726)	(1.4)

North American OTC Healthcare Segment

Contribution margin for the North American OTC Healthcare segment for the three months ended June 30, 2023 was relatively flat, increasing $0.5 million, or 0.5%, when compared with the three months ended June 30, 2022. As a percentage of North American OTC Healthcare revenues, contribution margin decreased to 42.5% during the three months ended June 30, 2023 from 43.0% during the three months ended June 30, 2022.

International OTC Healthcare Segment

Contribution margin for the International OTC Healthcare segment decreased $2.2 million, or 13.8%, during the three months ended June 30, 2023 versus the three months ended June 30, 2022. As a percentage of International OTC Healthcare revenues, contribution margin decreased to 41.5% during the three months ended June 30, 2023 from 46.3% during the three months ended June 30, 2022. The contribution margin decrease as a percentage of revenues was primarily due to the decrease in gross profit margin noted above.

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General and Administrative

General and administrative expenses were $27.7 million for the three months ended June 30, 2023 and $26.7 million for the three months ended June 30, 2022. The increase in general and administrative expenses was primarily due to increases in compensation costs, partly offset by a decrease in professional fees in the three months ended June 30, 2023.

Depreciation and Amortization

Depreciation and amortization expenses were $5.6 million for the three months ended June 30, 2023 and $6.4 million for the three months ended June 30, 2022. The decrease in depreciation and amortization expenses was primarily attributable to a decrease in amortization expense due to impairment charges taken in fiscal 2023.

Interest Expense, Net

Interest expense, net was $17.7 million during the three months ended June 30, 2023 versus $15.3 million during the three months ended June 30, 2022. The average indebtedness decreased to $1.4 billion during the three months ended June 30, 2023 from $1.5 billion during the three months ended June 30, 2022. The average cost of borrowing increased to 5.3% for the three months ended June 30, 2023 compared to 4.1% for the three months ended June 30, 2022.

Income Taxes

The provision for income taxes during the three months ended June 30, 2023 was $15.4 million versus $15.6 million during the three months ended June 30, 2022. The effective tax rate during the three months ended June 30, 2023 was 22.5% versus 22.0% during the three months ended June 30, 2022. The increase in the effective tax rate for the three months ended June 30, 2023 compared to the three months ended June 30, 2022 was due to the impact of discrete items primarily pertaining to state tax rate legislative changes and stock-based compensation.

Liquidity and Capital Resources

Liquidity

Our primary source of cash comes from our cash flow from operations. In the past, we have supplemented this source of cash with various debt facilities, primarily in connection with acquisitions. We have financed our operations, and expect to continue to finance our operations for the next twelve months and the foreseeable future, with a combination of funds generated from operations and borrowings. Our principal uses of cash are for operating expenses, debt service, share repurchases, capital expenditures, and acquisitions. Based on our current levels of operations and anticipated growth, excluding acquisitions, we believe that our cash generated from operations and our existing credit facilities will be adequate to finance our working capital and capital expenditures through the next twelve months. See "Economic Environment" above.

As of June 30, 2023, we had cash and cash equivalents of $54.6 million, a decrease of $3.9 million from March 31, 2023. The following table summarizes the change:


	Three Months Ended June 30,
(In thousands)	2023		2022		$ Change
Cash provided by (used in):
Operating Activities	$	48,087	$	58,247	$	(10,160)
Investing Activities	2,323		(1,047)		3,370
Financing Activities	(54,179)		(47,374)		(6,805)
Effects of exchange rate changes on cash and cash equivalents	(140)		(1,142)		1,002
Net change in cash and cash equivalents	$	(3,909)	$	8,684	$	(12,593)

Operating Activities

Net cash provided by operating activities was $48.1 million for the three months ended June 30, 2023, compared to $58.2 million for the three months ended June 30, 2022. The $10.2 million decrease was primarily due to increased working capital.

Investing Activities

Net cash provided by investing activities was $2.3 million for the three months ended June 30, 2023, compared to net cash used in investing activities of $1.0 million for the three months ended June 30, 2022. The change was primarily due to proceeds we received from a short term loan repayment.

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Financing Activities

Net cash used in financing activities was $54.2 million for the three months ended June 30, 2023, compared to $47.4 million for the three months ended June 30, 2022. The $6.8 million increase was primarily due to lower net borrowings of $25.0 million compared to prior year, partly offset by a decrease in the repurchase of shares of our common stock in conjunction with our share repurchase program of $12.7 million and an increase in the proceeds from exercise of stock options of $5.5 million in the three months ended June 30, 2023.

Capital Resources

As of June 30, 2023, we had an aggregate of $1.3 billion of outstanding indebtedness, which consisted of the following:

•$400.0 million of 5.125% 2019 senior unsecured notes, which mature on January 15, 2028 (the "2019 Senior Notes");

•$600.0 million of 3.750% 2021 senior unsecured notes, which mature on April 1, 2031 (the "2021 Senior Notes"); and

•$330.0 million of borrowings under the Term B-5 Loans under the 2012 Term Loan due July 1, 2028.

As of June 30, 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 $174.9 million.

Since we have made optional payments that exceed all of our required quarterly payments, we will not be required to make another payment on our term loan originally entered into on January 31, 2012 (the "2012 Term Loan”) until maturity.

Maturities:


(In thousands)
Year Ending March 31,	Amount
2024 (remaining nine months ending March 31, 2024)	$	—
2025	—
2026	—
2027	—
2028	400,000
Thereafter	930,000
	$	1,330,000

Covenants:

Our debt facilities contain various financial covenants, including provisions that require us to maintain certain leverage, interest coverage and fixed charge ratios. The credit agreement governing the 2012 Term Loan and the 2012 ABL Revolver and the indentures governing the 2021 Senior Notes and 2019 Senior Notes contain provisions that accelerate our indebtedness on certain changes in control and restrict us from undertaking specified corporate actions, including asset dispositions, acquisitions, payments of dividends and other specified payments, repurchasing our equity securities in the public markets, incurrence of indebtedness, creation of liens, making loans and investments and transactions with affiliates. Specifically, we must:

•Have a leverage ratio of less than 6.50 to 1.0 for the quarter ended June 30, 2023 and thereafter (defined as, with certain adjustments, the ratio of our consolidated total net debt as of the last day of the fiscal quarter to our trailing twelve month consolidated net income before interest, taxes, depreciation, amortization, non-cash charges and certain other items (“EBITDA”));

•Have an interest coverage ratio of greater than 2.25 to 1.0 for the quarter ended June 30, 2023 and thereafter (defined as, with certain adjustments, the ratio of our consolidated EBITDA to our trailing twelve month consolidated cash interest expense); and

•Have a fixed charge ratio of greater than 1.0 to 1.0 for the quarter ended June 30, 2023 (defined as, with certain adjustments, the ratio of our consolidated EBITDA minus capital expenditures to our trailing twelve month consolidated interest paid, taxes paid and other specified payments). Our fixed charge requirement remains level throughout the term of the debt facilities.

At June 30, 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

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anticipates that in the normal course of operations, we will be in compliance with the financial and restrictive covenants during the next twelve months.

Critical Accounting Policies and Estimates

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 three months ended June 30, 2023.

Recent Accounting Pronouncements

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.

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “PSLRA”), including, without limitation, information within Management's Discussion and Analysis of Financial Condition and Results of Operations. The following cautionary statements are being made pursuant to the provisions of the PSLRA and with the intention of obtaining the benefits of the “safe harbor” provisions of the PSLRA.

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.

These forward-looking statements generally can be identified by the use of words or phrases such as “believe,” “anticipate,” “expect,” “estimate,” "plan," “project,” "intend," "strategy," "goal," "objective," "future," "seek," "may," "might," "should," "would," "will," "will be," or other similar words and phrases. Forward-looking statements are based on current expectations and assumptions that are subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated, including, without limitation:

•Price increases for raw materials, labor, energy and transportation costs, and for other input costs;

•Disruptions of supply of sourced goods or components;

•The impact of the COVID-19 pandemic or other disease outbreaks on global economic conditions, consumer demand, retailer product availability, and business operations including manufacturing, supply chain and distribution;

•The high level of competition in our industry and markets;

•The level of success of new product introductions, line extensions, increased spending on advertising and marketing support, and other new sales and marketing strategies;

•Our dependence on a limited number of customers for a large portion of our sales;

•Our inability to successfully identify, negotiate, complete and integrate suitable acquisition candidates and to obtain necessary financing;

•Changes by retailers in inventory management practices, delivery requirements, and demands for marketing and promotional spending in order to retain or increase shelf space or online share;

•Our inability to grow our international sales;

•General economic conditions and incidence levels affecting sales of our products and their respective markets;

•Financial factors, such as increases in interest rates and currency exchange rate fluctuations;

•Changing consumer trends, additional store brand or branded competition, accelerating shifts to online shopping or pricing pressures;

•Our dependence on third-party manufacturers to produce many of the products we sell and our ability to transfer production to our own facilities or other third-party suppliers;

•Our dependence on third-party logistics providers to distribute our products to customers;

•Disruptions in our distribution center or manufacturing facility;

•Potential changes in export/import and trade laws, regulations and policies including any increased trade restrictions or tariffs;

•Acquisitions, dispositions or other strategic transactions diverting managerial resources and creating additional liabilities;

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

•Product liability claims, product recalls and related negative publicity;

•Our inability to protect our intellectual property rights;

•Our dependence on third parties for intellectual property relating to some of the products we sell;

•Our inability to protect our information technology systems from threats or disruptions;

•Our dependence on third-party information technology service providers and their ability to protect against security threats and disruptions;

•Our assets being comprised virtually entirely of goodwill and intangibles and possible changes in their value based on adverse operating results and/or changes in the discount rate used to value our brands;

•Our dependence on key personnel;

•The costs associated with any claims in litigation or arbitration and any adverse judgments rendered in such litigation or arbitration;

•Our level of indebtedness and possible inability to service our debt or to obtain additional financing;

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•The restrictions imposed by our financing agreements on our operations; and

•Changes in federal, state and other geographic tax laws.

For more information, see Part I, Item 1A. "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended March 31, 2023.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

We are exposed to changes in interest rates because our 2012 Term Loan and 2012 ABL Revolver are variable rate debt. At June 30, 2023, approximately $330.0 million of our debt carries a variable rate of interest.

Holding other variables constant, including levels of indebtedness, a 1.0% increase in interest rates on our variable rate debt would have an adverse impact on pre-tax earnings and cash flows for the three months ended June 30, 2023 of approximately $0.9 million, respectively.

Foreign Currency Exchange Rate Risk

During the three months ended June 30, 2023 and 2022, approximately 10.6% and 13.6%, respectively, of our gross revenues were denominated in currencies other than the U.S. Dollar. As such, we are exposed to transactions that are sensitive to foreign currency exchange rates. These transactions are primarily with respect to the Canadian and Australian Dollars.

We performed a sensitivity analysis with respect to exchange rates for the three months ended June 30, 2023 and 2022. Holding all other variables constant, and assuming a hypothetical 10.0% adverse change in foreign currency exchange rates, this analysis resulted in a less than 5.0% impact on pre-tax income of approximately $1.7 million for the three months ended June 30, 2023 and approximately $2.2 million for the three months ended June 30, 2022.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Company's management, with the participation of its Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company's disclosure controls and procedures, as defined in Rule 13a–15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”), as of June 30, 2023. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2023, the Company's disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in the reports the Company files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms and that such information is accumulated and communicated to the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the quarter ended June 30, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1A. RISK FACTORS

You should carefully consider the risk factors discussed in Part I, Item 1A. "Risk Factors" in our Annual Report on Form 10-K for the year ended March 31, 2023, which could materially affect our business, financial condition or results of operations. The risk factors described in our Annual Report on Form 10-K have not materially changed in the period covered by this Quarterly Report on Form 10-Q, but such risks are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and results of operations.

Our quarterly operating results and revenues may fluctuate as a result of any of these or other factors. Accordingly, results for any one quarter are not necessarily indicative of results to be expected for any other quarter or for any year, and revenues for any particular future period may decrease. In the future, operating results may fall below the expectations of securities analysts and investors. In that event, the market price of our outstanding securities could be adversely impacted.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

ISSUER PURCHASES OF EQUITY SECURITIES


Period	Total Number of Shares Purchased (a)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs
April 1 to April 30, 2023	—	$	—	—	$	—
May 1 to May 31, 2023	363,138	$	59.88	274,600	$	8,740,161
June 1 to June 30, 2023	152,294	$	57.54	151,879	$	—
Total	515,432	$	59.19	426,479

(a) The majority of these shares (426,479 shares) were made pursuant to our share repurchase program which was announced in May 2023 and permits the repurchase of up to $25.0 million of our common stock through May 2024. The remaining repurchases (88,953 shares) were made pursuant to our 2005 Long-Term Equity Incentive Plan and our 2020 Long-Term Incentive Plan, which allow for the indirect purchase of shares through a net-settlement feature upon the vesting of shares in order to satisfy minimum statutory tax-withholding requirements.

ITEM 5. OTHER INFORMATION

Submission of Matters to a Vote of Security Holders.

The 2023 Annual Meeting of Stockholders of the Company was held on August 1, 2023. The stockholders of the Company voted upon four proposals at the Annual Meeting, with the following results:

Item 1 – Election of seven directors nominated by the Board of Directors to serve until the 2024 Annual Meeting of Stockholders.


Director Nominee	For	Withheld	Broker Non-Votes
Ronald M. Lombardi	44,639,759	1,825,062	562,398
John E. Byom	45,457,473	1,007,348	562,398
Celeste A. Clark	45,565,993	898,828	562,398
James C. D'Arecca	45,729,012	735,809	562,398
Sheila A. Hopkins	46,328,635	136,186	562,398
Natale S. Ricciardi	42,688,666	3,776,155	562,398
Dawn M. Zier	46,181,193	283,628	562,398

Item 2 – Ratification of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the fiscal year ending March 31, 2024.


For	Against	Abstentions
45,545,567	1,456,464	25,188

Item 3 – Non-binding resolution to approve the compensation of the Company’s named executive officers as disclosed in the Company’s proxy statement.


For	Against	Abstentions	Broker Non-Votes
44,602,355	1,762,951	99,515	562,398

Item 4 - Advisory vote to determine the preferred frequency of the advisory vote on compensation of the Company's named executive officers.

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Every One Year	Every Two Years	Every Three Years	Abstentions	Broker Non-Votes
42,613,034	6,160	3,831,506	14,121	562,398

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ITEM 6. EXHIBITS



3.1						Amended and Restated Certificate of Incorporation of Prestige Consumer Healthcare Inc. (filed as Exhibit 3.1 to the Company's Form S-1/A filed with the SEC on February 8, 2005).*

3.1.1						Amendment to Amended and Restated Certificate of Incorporation of Prestige Consumer Healthcare Inc. (filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on August 2, 2018).*

3.2						Amended and Restated Bylaws of Prestige Consumer Healthcare Inc., as amended, effective October 29, 2018 (filed as Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q filed with the SEC on February 7, 2019).*

10.1						Amendment No. 7, dated as of June 12, 2023, to the Term Loan Credit Agreement, dated as of January 31, 2012, among the Company, Prestige Brands, Inc., the other guarantors from time to time party thereto and Barclays Bank PLC (as successor in interest to Citibank, N.A.), as administrative agent, and other agents named therein.

31.1						Certification of Principal Executive Officer of Prestige Consumer Healthcare Inc. pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.

31.2						Certification of Principal Financial Officer of Prestige Consumer Healthcare Inc. pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.

32.1						Certification of Principal Executive Officer of Prestige Consumer Healthcare Inc. pursuant to Rule 13a-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code.

32.2						Certification of Principal Financial Officer of Prestige Consumer Healthcare Inc. pursuant to Rule 13a-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code.

*						Incorporated herein by reference.

101.INS						Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH						Inline XBRL Taxonomy Extension Schema Document
101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document
104						Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

PRESTIGE CONSUMER HEALTHCARE INC.

Date:

August 3, 2023

By:

/s/ Christine Sacco

Christine Sacco

Chief Financial Officer

(Principal Financial Officer and Duly Authorized Officer)

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Prestige Consumer Healthcare - 10-Q quarterly report FY2024 Q1

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