Prestige Consumer Healthcare Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended March 31, 2022. The filing is an annual report, not a standalone Q4 report; it does not provide a clear set of fourth-quarter-only results. Prestige sells branded OTC healthcare and personal-care products through North American and international channels.
Financial performance
| Metric | FY2022 | FY2021 |
|---|---|---|
| Total revenue | $1,086.8 million | $943.4 million |
| Gross profit / margin | $620.6 million / 57.1% | $547.5 million / 58.0% |
| Operating income | $329.9 million | $297.4 million |
| Net income | $205.4 million | $164.7 million |
| Diluted EPS | $4.04 | $3.25 |
| Operating cash flow | $259.9 million | $235.6 million |
| Cash and cash equivalents at year-end | $27.2 million | $32.3 million |
| Debt principal at year-end | $1,495.0 million | $1,495.0 million |
Revenue increased 15.2%, while gross margin fell 0.9 percentage points, mainly from higher supply-chain costs and $1.6 million of acquired-inventory step-up charges. Operating income rose 10.9%; net income rose 24.7%. Interest expense declined to $64.3 million from $82.3 million, and the effective tax rate increased to 21.7% from 19.3%.
North American OTC revenue rose 14.0% to $967.9 million; International OTC revenue rose 26.5% to $118.9 million. Eye & Ear Care, Cough & Cold, and Gastrointestinal were significant North American growth categories. Results included $42.2 million of North American revenue from the acquired TheraTears brand.
Liquidity, debt and capital allocation
- Current assets were $293.3 million and current liabilities were $143.4 million at March 31, 2022.
- Cash used in investing was $256.5 million, including $247.0 million of acquisition outflows. Cash used in financing was $7.6 million.
- The company had $123.3 million of available revolving-credit borrowing capacity and no revolver balance. It reported compliance with debt covenants and anticipated compliance in fiscal 2023.
- Debt comprised $600 million of 3.750% notes due 2031, $400 million of 5.125% notes due 2028, and $495 million of variable-rate term loans due 2028. The term loan was refinanced and extended in July 2021; the company made $103.5 million of voluntary and $1.5 million of required term-loan principal payments during the year.
- Management said operating cash and existing credit facilities were expected to fund working capital and capital expenditures for the next 12 months, excluding acquisitions. The company does not expect to pay common dividends.
Material changes, outlook and risks
- On July 1, 2021, Prestige acquired Akorn consumer-health assets, including TheraTears, for $228.9 million in cash. Purchase-price allocations were preliminary; acquisition-related costs were $5.1 million.
- Management reported solid consumer consumption and share gains across most brands, with stronger travel-related and Cough & Cold demand as restrictions eased. It also cited changing online purchasing patterns. No quantified FY2023 revenue or earnings guidance is provided in the filing.
- Inflation, labor shortages, shipping constraints and supplier price increases pressured margins; delays and backorders affected some products. Management said conditions had not materially harmed aggregate results or liquidity to date, but warned that further disruption could do so.
- Customer concentration remains notable: Walmart represented 20.5% of gross revenue and 22.1% of accounts receivable at year-end. The company generally has no long-term customer sales contracts.
- Prestige relied on 128 third-party manufacturers; 23 under long-term contracts produced items representing about 69% of gross sales. U.S. distribution is managed through one primary third-party warehouse, and the Lynchburg facility produces products representing about 13% of gross sales.
- Goodwill and intangible assets totaled $3.276 billion, the majority of total assets. FY2022 included impairment charges for Painstop goodwill and two discontinued non-core brands. TheraTears’ fair value exceeded carrying value by 7%; a 50-basis-point increase in the discount rate would imply a potential $4.3 million impairment for that tradename.
- Debt covenants restrict certain transactions and contain cross-default provisions. A 1-percentage-point increase in variable interest rates was estimated to raise annual pre-tax expense by approximately $4.0 million. The company also identified foreign-exchange, regulatory, product-liability, competition and cybersecurity risks.
Important facts for investors to verify
- How much of revenue growth reflects the Akorn acquisition versus organic sales, pricing and category recovery.
- Whether gross-margin pressure from inflation and supply-chain costs persists and can be offset by pricing or cost savings.
- TheraTears performance and the assumptions supporting its relatively limited impairment cushion; also confirm the final Akorn purchase-price allocation.
- Debt repayment capacity, variable-rate exposure, covenant headroom and the availability of revolving credit as interest rates change.
- Exposure to Walmart and other major customers, and the resilience of supply arrangements with manufacturers and the single primary U.S. distribution center.