# Prestige Consumer Healthcare Inc.: Form 10-Q for the period ended Dec 31, 2023

- Company: [Prestige Consumer Healthcare Inc.](/companies/pbh.md) (CIK 1295947)
- Form: 10-Q
- Filed: 2024-02-08
- Accepted by EDGAR: Feb 8, 2024, 06:10 ET
- Period: 2023-12-31
- Accession: 0001295947-24-000008
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1295947/000129594724000008/pbh-20231231.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1295947/000129594724000008/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-12-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-10-01 to 2023-12-31 | $282.7m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2023-04-01 to 2023-12-31 | $848.4m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2023-10-01 to 2023-12-31 | $124.8m | us-gaap:CostOfRevenue |
| Cost of revenue | 9 months, 2023-04-01 to 2023-12-31 | $375.7m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2023-10-01 to 2023-12-31 | $157.9m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2023-04-01 to 2023-12-31 | $472.6m | us-gaap:GrossProfit |
| Operating income | 3 months, 2023-10-01 to 2023-12-31 | $86.8m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-04-01 to 2023-12-31 | $260.3m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2023-10-01 to 2023-12-31 | $16.5m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2023-04-01 to 2023-12-31 | $48.8m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-10-01 to 2023-12-31 | $53.0m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-04-01 to 2023-12-31 | $159.9m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-10-01 to 2023-12-31 | $1.06 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2023-04-01 to 2023-12-31 | $3.19 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-10-01 to 2023-12-31 | $1.07 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-04-01 to 2023-12-31 | $3.21 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-10-01 to 2023-12-31 | 50,125,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-04-01 to 2023-12-31 | 50,134,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2023-04-01 to 2023-12-31 | $182.0m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2023-04-01 to 2023-12-31 | $6.4m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 9 months, 2023-04-01 to 2023-12-31 | $25.0m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2023-12-31 | $63.6m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-12-31 | $393.8m | us-gaap:AssetsCurrent |
| Total assets | at 2023-12-31 | $3.34bn | us-gaap:Assets |
| Current liabilities | at 2023-12-31 | $127.4m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-12-31 | $1.74bn | us-gaap:Liabilities |
| Long-term debt | at 2023-12-31 | $1.21bn | us-gaap:LongTermDebtNoncurrent |
| Shareholders' equity | at 2023-12-31 | $1.60bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 34,535 characters.

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 31 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

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 environment. If conditions cause further disruption in the global supply chain, the availability of labor and materials or otherwise further increase costs, it may materially affect our operations and those of third parties on which we rely, including causing material disruptions in the supply and distribution of our products. The extent to which these conditions impact our results and liquidity will depend on future developments, which are highly uncertain and cannot be predicted, including global supply chain constraints, inflation, global conflicts and instability, and the potential for further outbreaks of severe illnesses. These effects could have a material adverse impact on our business, liquidity, capital resources, and results of operations and those of the third parties on which we rely.

### Results of Operations

### Three Months Ended December 31, 2023 compared to the Three Months Ended December 31, 2022

### Total Segment Revenues

The following table represents total revenue by segment, including product groups, for the three months ended December 31, 2023 and 2022.

|  | Three Months Ended December 31, |  | Increase (Decrease) |
| --- | ---: | ---: | ---: |
| **(In thousands)** | **2023%** | **2022%** | **Amount%** |
| **North American OTC Healthcare** |  |  |  |
| Analgesics | $28,680 10.1 | $29,396 10.7 | $(716) (2.4) |
| Cough & Cold | 27,359 9.7 | 31,246 11.3 | (3,887) (12.4) |
| Women's Health | 53,076 18.9 | 53,918 19.5 | (842) (1.6) |
| Gastrointestinal | 38,919 13.7 | 38,194 13.9 | 725 1.9 |
| Eye & Ear Care | 38,503 13.6 | 32,653 11.9 | 5,850 17.9 |
| Dermatologicals | 26,603 9.4 | 27,223 9.9 | (620) (2.3) |
| Oral Care | 20,362 7.2 | 21,371 7.8 | (1,009) (4.7) |
| Other OTC | 3,063 1.1 | 2,883 1.0 | 180 6.2 |
| Total North American OTC Healthcare | 236,565 83.7 | 236,884 86.0 | (319) (0.1) |
| **International OTC Healthcare** |  |  |  |
| Analgesics | $1,586 0.6 | $648 0.2 | 938 144.8 |
| Cough & Cold | 5,814 2.1 | 6,336 2.3 | (522) (8.2) |
| Women's Health | 5,190 1.8 | 4,138 1.5 | 1,052 25.4 |
| Gastrointestinal | 22,707 8.0 | 18,555 6.6 | 4,152 22.4 |
| Eye & Ear Care | 6,569 2.3 | 5,229 2.0 | 1,340 25.6 |
| Dermatologicals | 1,165 0.4 | 978 0.4 | 187 19.1 |
| Oral Care | 3,100 1.1 | 2,738 1.0 | 362 13.2 |
| Other OTC | 45 — | 18 — | 27 150.0 |
| Total International OTC Healthcare | 46,176 16.3 | 38,640 14.0 | 7,536 19.5 |
| Total Consolidated | $282,741 100.0 | $275,524 100.0 | $7,217 2.6 |

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

### North American OTC Healthcare Segment

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

### International OTC Healthcare Segment

Revenues for the International OTC Healthcare segment increased $7.5 million, or 19.5%, during the three months ended December 31, 2023 versus the three months ended December 31, 2022. The $7.5 million increase was primarily attributable to an increase in sales in the Gastrointestinal, Eye & Ear Care and Women's Health categories.

### 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.

*(In thousands)*

|  | Three Months Ended December 31, |  | Increase (Decrease) |
| --- | ---: | ---: | ---: |
| **Gross Profit** | **2023%** | **2022%** | **Amount%** |
| North American OTC Healthcare | $130,475 55.2 | $126,330 53.3 | $4,145 3.3 |
| International OTC Healthcare | 27,463 59.5 | 24,072 62.3 | 3,391 14.1 |
|  | $157,938 55.9 | $150,402 54.6 | $7,536 5.0 |

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

### North American OTC Healthcare Segment

Gross profit for the North American OTC Healthcare segment increased $4.1 million, or 3.3%, during the three months ended December 31, 2023 versus the three months ended December 31, 2022. As a percentage of North American OTC Healthcare revenues, gross profit increased to 55.2% during the three months ended December 31, 2023 from 53.3% during the three months ended December 31, 2022, primarily due to reduced logistics costs.

### International OTC Healthcare Segment

Gross profit for the International OTC Healthcare segment increased $3.4 million, or 14.1%, during the three months ended December 31, 2023 versus the three months ended December 31, 2022. As a percentage of International OTC Healthcare revenues, gross profit decreased to 59.5% during the three months ended December 31, 2023 from 62.3% during the three months ended December 31, 2022, primarily due to increased supply chain costs and 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.

*(In thousands)*

|  | Three Months Ended December 31, |  | Increase (Decrease) |
| --- | ---: | ---: | ---: |
| **Contribution Margin** | **2023%** | **2022%** | **Amount%** |
| North American OTC Healthcare | $96,558 40.8 | $101,499 42.8 | $(4,941) (4.9) |
| International OTC Healthcare | 21,914 47.5 | 18,480 47.8 | 3,434 18.6 |
|  | $118,472 41.9 | $119,979 43.5 | $(1,507) (1.3) |

### North American OTC Healthcare Segment

Contribution margin for the North American OTC Healthcare segment decreased $4.9 million, or 4.9%, during the three months ended December 31, 2023 versus the three months ended December 31, 2022. As a percentage of North American OTC Healthcare revenues, contribution margin decreased to 40.8% during the three months ended December 31, 2023 from 42.8% during the three months ended December 31, 2022. The contribution margin decrease as a percentage of revenues was primarily due to an increase in advertising and marketing spend in the three months ended December 31, 2023, partly offset by the increase in gross profit margin noted above.

### International OTC Healthcare Segment

Contribution margin for the International OTC Healthcare segment increased $3.4 million, or 18.6%, during the three months ended December 31, 2023 versus the three months ended December 31, 2022. As a percentage of International OTC Healthcare revenues, contribution margin decreased to 47.5% during the three months ended December 31, 2023 from 47.8% during the three months ended December 31, 2022. The contribution margin decrease as a percentage of revenues was primarily due to the decrease in gross profit margin noted above.

### General and Administrative

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

### Depreciation and Amortization

Depreciation and amortization expenses decreased to $5.6 million for the three months ended December 31, 2023 from $6.3 million for the three months ended December 31, 2022. The decrease in depreciation and amortization expenses was primarily attributable to a decrease in amortization expense due to impairment charges taken on finite-lived brands in fiscal 2023.

### Interest Expense, Net

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

### Income Taxes

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

### Results of Operations

### Nine Months Ended December 31, 2023 compared to the Nine Months Ended December 31, 2022

### Total Segment Revenues

The following table represents total revenue by segment, including product groups, for the nine months ended December 31, 2023 and 2022.

|  | Nine Months Ended December 31, |  | Increase (Decrease) |
| --- | ---: | ---: | ---: |
| **(In thousands)** | **2023%** | **2022%** | **Amount%** |
| **North American OTC Healthcare** |  |  |  |
| Analgesics | $85,838 10.1 | $89,943 10.7 | $(4,105) (4.6) |
| Cough & Cold | 73,703 8.7 | 76,896 9.1 | (3,193) (4.2) |
| Women's Health | 163,031 19.3 | 174,481 20.7 | (11,450) (6.6) |
| Gastrointestinal | 122,303 14.4 | 119,533 14.2 | 2,770 2.3 |
| Eye & Ear Care | 117,719 13.9 | 109,225 13.0 | 8,494 7.8 |
| Dermatologicals | 94,299 11.1 | 89,550 10.6 | 4,749 5.3 |
| Oral Care | 61,400 7.2 | 63,597 7.6 | (2,197) (3.5) |
| Other OTC | 8,838 1.0 | 8,231 1.0 | 607 7.4 |
| Total North American OTC Healthcare | 727,131 85.7 | 731,456 86.9 | (4,325) (0.6) |
| **International OTC Healthcare** |  |  |  |
| Analgesics | $3,814 0.4 | $1,642 0.2 | 2,172 132.3 |
| Cough & Cold | 19,129 2.3 | 19,775 2.4 | (646) (3.3) |
| Women's Health | 17,218 2.0 | 13,750 1.6 | 3,468 25.2 |
| Gastrointestinal | 49,678 5.9 | 48,619 5.8 | 1,059 2.2 |
| Eye & Ear Care | 17,715 2.1 | 14,699 1.7 | 3,016 20.5 |
| Dermatologicals | 3,972 0.5 | 2,886 0.3 | 1,086 37.6 |
| Oral Care | 9,591 1.1 | 8,988 1.1 | 603 6.7 |
| Other OTC | 118 — | 41 — | 77 187.8 |
| Total International OTC Healthcare | 121,235 14.3 | 110,400 13.1 | 10,835 9.8 |
| Total Consolidated | $848,366 100.0 | $841,856 100.0 | $6,510 0.8 |

Total revenues for the nine months ended December 31, 2023 were $848.4 million, an increase of $6.5 million, or 0.8%, versus the nine months ended December 31, 2022.

### North American OTC Healthcare Segment

Revenues for the North American OTC Healthcare segment decreased $4.3 million, or 0.6%, during the nine months ended December 31, 2023 versus the nine months ended December 31, 2022. The $4.3 million decrease was primarily attributable to a decrease in sales in the Women's Health, Analgesics and Cough & Cold categories, partly offset by an increase in sales in the Eye & Ear Care, Dermatologicals, and Gastrointestinal categories.

### International OTC Healthcare Segment

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

### 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.

*(In thousands)*

|  | Nine Months Ended December 31, |  | Increase (Decrease) |
| --- | ---: | ---: | ---: |
| **Gross Profit** | **2023%** | **2022%** | **Amount%** |
| North American OTC Healthcare | $403,499 55.5 | $404,448 55.3 | $(949) (0.2) |
| International OTC Healthcare | 69,132 57.0 | 67,082 60.8 | 2,050 3.1 |
|  | $472,631 55.7 | $471,530 56.0 | $1,101 0.2 |

Gross profit for the nine months ended December 31, 2023 increased $1.1 million, or 0.2%, when compared with the nine months ended December 31, 2022. As a percentage of total revenues, gross profit decreased to 55.7% during the nine months ended December 31, 2023, from 56.0% during the nine months ended December 31, 2022, primarily due to increased supply chain costs and product mix, partly offset by pricing actions.

### North American OTC Healthcare Segment

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

### International OTC Healthcare Segment

Gross profit for the International OTC Healthcare segment increased $2.1 million, or 3.1%, during the nine months ended December 31, 2023 versus the nine months ended December 31, 2022. As a percentage of International OTC Healthcare revenues, gross profit decreased to 57.0% during the nine months ended December 31, 2023 from 60.8% during the nine months ended December 31, 2022, primarily due to increased supply chain costs and 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.

*(In thousands)*

|  | Nine Months Ended December 31, |  | Increase (Decrease) |
| --- | ---: | ---: | ---: |
| **Contribution Margin** | **2023%** | **2022%** | **Amount%** |
| North American OTC Healthcare | $302,792 41.6 | $304,889 41.7 | $(2,097) (0.7) |
| International OTC Healthcare | 54,040 44.6 | 52,448 47.5 | 1,592 3.0 |
|  | $356,832 42.1 | $357,337 42.4 | $(505) (0.1) |

### North American OTC Healthcare Segment

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

### International OTC Healthcare Segment

Contribution margin for the International OTC Healthcare segment increased $1.6 million, or 3.0%, during the nine months ended December 31, 2023 versus the nine months ended December 31, 2022. As a percentage of International OTC Healthcare revenues, contribution margin decreased to 44.6% during the nine months ended December 31, 2023 from 47.5% during the nine months ended December 31, 2022. The contribution margin decrease as a percentage of revenues was primarily due to the decrease in gross profit margin noted above.

### General and Administrative

General and administrative expenses remained flat at $79.7 million for the nine months ended December 31, 2023 and nine months ended December 31, 2022.

### Depreciation and Amortization

Depreciation and amortization expenses were $16.9 million for the nine months ended December 31, 2023 and $19.1 million for the nine months ended December 31, 2022. The decrease in depreciation and amortization expenses was primarily attributable to a decrease in amortization expense due to impairment charges taken on finite-lived brands in fiscal 2023.

### Interest Expense, Net

Interest expense, net was $51.9 million during the nine months ended December 31, 2023 versus $50.2 million during the nine months ended December 31, 2022. The average indebtedness decreased to $1.3 billion during the nine months ended December 31, 2023 from $1.5 billion during the nine months ended December 31, 2022. The average cost of borrowing increased to 5.4% for the nine months ended December 31, 2023 compared to 4.5% for the nine months ended December 31, 2022.

### Income Taxes

The provision for income taxes during the nine months ended December 31, 2023 was $48.8 million versus $47.4 million during the nine months ended December 31, 2022. The effective tax rate during the nine months ended December 31, 2023 was 23.4% versus 23.0% during the nine months ended December 31, 2022. The increase in the effective tax rate for the nine months ended December 31, 2023 compared to the nine months ended December 31, 2022 was due to the impact of discrete items primarily pertaining to stock-based compensation and state tax rate legislative changes.

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

*(In thousands)*

| Cash provided by (used in): | Nine Months Ended December 31, 2023 | 2022 | $ Change |
| --- | ---: | ---: | ---: |
| Operating Activities | $182,019 | $170,729 | $11,290 |
| Investing Activities | (5,107) | (5,226) | 119 |
| Financing Activities | (172,571) | (105,351) | (67,220) |
| Effects of exchange rate changes on cash and cash equivalents | 785 | (979) | 1,764 |
| Net change in cash and cash equivalents | $5,126 | $59,173 | $(54,047) |

### Operating Activities

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

### Investing Activities

Net cash used in investing activities was $5.1 million for the nine months ended December 31, 2023, compared to $5.2 million for the nine months ended December 31, 2022.

### Financing Activities

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

### Capital Resources

As of December 31, 2023, we had an aggregate of $1.2 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
- $210.0 million of borrowings under the Term B-5 Loans under our term loan originally entered into on January 31, 2012 (the "2012 Term Loan”) due July 1, 2028.

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

On December 8, 2023, we entered into Amendment No. 9 ("ABL Amendment No. 9") to the 2012 ABL Revolver. ABL Amendment No. 9 provides for (i) an increase in the aggregate revolving commitment of the facility from $175.0 million to $200.0 million, (ii) an extension of the maturity date of the 2012 ABL Revolver to December 8, 2028, and (iii) increased flexibility under the credit agreement governing the 2012 ABL Revolver, including, but not limited to, increased flexibility related to restricted payments, debt incurrence and borrowing base calculations. There were no changes to interest terms as a result of this amendment.

Since we have made optional payments that exceed all of our required quarterly payments, we will not be required to make another payment on the 2012 Term Loan until maturity.

### Maturities:

*(In thousands)*

| Year Ending March 31, | Amount |
| --- | ---: |
| 2024 (remaining three months ending March 31, 2024) | $— |
| 2025 | — |
| 2026 | — |
| 2027 | — |
| 2028 | 400,000 |
| Thereafter | 810,000 |
|  | $1,210,000 |

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

### 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 nine months ended December 31, 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.

### 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 geopolitical events and severe illness 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;
- 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.

## Market risk

As filed, 1,804 characters.

### 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 December 31, 2023, approximately $210.0 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 and nine months ended December 31, 2023 of approximately $0.7 million and $2.3 million, respectively.

### Foreign Currency Exchange Rate Risk

During the three and nine months ended December 31, 2023, approximately 17.0% and 14.1%, respectively, of our gross revenues were denominated in currencies other than the U.S. Dollar. During the three and nine months ended December 31, 2022, approximately 14.9% and 13.8%, 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 and nine months ended December 31, 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 $2.7 million for the three months ended December 31, 2023 and approximately $6.8 million for the nine months ended December 31, 2023. It represented a less than 5.0% impact on pre-tax income of approximately $2.3 million for the three months ended December 31, 2022 and $7.1 million for the nine months ended December 31, 2022.

## Controls and procedures

As filed, 1,319 characters.

### 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 December 31, 2023. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 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 December 31, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 1,148 characters.

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.

Filed Feb 8, 2024.
Source: SEC EDGAR, the filing index for accession 0001295947-24-000008. Last ingested by Listed: Nov 5, 2026, 11:26 ET. No prices; not investment advice.