UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended December 31, 2014

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 BRANDS HOLDINGS, 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)

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 x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).

Yes x      No o

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

Large accelerated filer x		Accelerated filer o
Non-accelerated filer o	(Do not check if a smaller reporting company)	Smaller reporting company o

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

Yes o No x

As of January 30, 2015, there were 52,273,201 shares of common stock outstanding.

Prestige Brands Holdings, Inc.

Form 10-Q

Index

PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Statements of Income and Comprehensive Income for the three and nine months ended December 31, 2014 and 2013 (unaudited)	2
	Consolidated Balance Sheets as of December 31, 2014 (unaudited) and March 31, 2014	3
	Consolidated Statements of Cash Flows for the nine months ended December 31, 2014 and 2013 (unaudited)	4
	Notes to Consolidated Financial Statements (unaudited)	5
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	39
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	65
Item 4.	Controls and Procedures	65
PART II.	OTHER INFORMATION
Item 1A.	Risk Factors	65
Item 6.	Exhibits	71
	Signatures	72

Trademarks and Trade Names

Trademarks and trade names used in this Quarterly Report on Form 10-Q are the property of Prestige Brands Holdings, 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.

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PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Prestige Brands Holdings, Inc.

Consolidated Statements of Income and Comprehensive Income

(Unaudited)

	Three Months Ended December 31,						Nine Months Ended December 31,
(In thousands, except per share data)	2014			2013			2014			2013
Revenues
Net sales	$	196,435		$	143,713		$	520,981		$	450,862
Other revenues	1,171			1,158			3,596			3,466
Total revenues	197,606			144,871			524,577			454,328
Cost of Sales
Cost of sales (exclusive of depreciation shown below)	85,861			64,403			228,424			197,614
Gross profit	111,745			80,468			296,153			256,714
Operating Expenses
Advertising and promotion	30,144			24,229			74,284			67,457
General and administrative	19,454			12,137			63,588			35,390
Depreciation and amortization	5,154			3,644			11,967			10,206
Total operating expenses	54,752			40,010			149,839			113,053
Operating income	56,993			40,458			146,314			143,661
Other (income) expense
Interest income	(20		)	(16		)	(67		)	(44		)
Interest expense	24,612			21,276			57,505			53,648
Gain on sale of asset	(1,133		)	—			(1,133		)	—
Loss on extinguishment of debt	—			15,012			—			15,012
Total other expense	23,459			36,272			56,305			68,616
Income before income taxes	33,534			4,186			90,009			75,045
Provision for income taxes	12,241			1,056			35,521			18,431
Net income	$	21,293		$	3,130		$	54,488		$	56,614
Earnings per share:
Basic	$	0.41		$	0.06		$	1.05		$	1.10
Diluted	$	0.40		$	0.06		$	1.04		$	1.08
Weighted average shares outstanding:
Basic	52,278			51,806			52,110			51,498
Diluted	52,730			52,445			52,622			52,236
Comprehensive income, net of tax:
Currency translation adjustments	(8,779		)	(2,694		)	(16,883		)	(1,571		)
Total other comprehensive loss	(8,779		)	(2,694		)	(16,883		)	(1,571		)
Comprehensive income	$	12,514		$	436		$	37,605		$	55,043

See accompanying notes.

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Prestige Brands Holdings, Inc.

Consolidated Balance Sheets

(Unaudited)

(In thousands)	December 31, 2014			March 31, 2014
Assets
Current assets
Cash and cash equivalents	$	21,951		$	28,331
Accounts receivable, net	87,692			65,050
Inventories	75,240			65,586
Deferred income tax assets	8,346			6,544
Prepaid expenses and other current assets	7,533			11,674
Total current assets	200,762			177,185
Property and equipment, net	13,089			9,597
Goodwill	291,892			190,911
Intangible assets, net	2,144,084			1,394,817
Other long-term assets	30,769			23,153
Total Assets	$	2,680,596		$	1,795,663
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable	$	38,567		$	48,286
Accrued interest payable	11,792			9,626
Other accrued liabilities	40,675			26,446
Total current liabilities	91,034			84,358
Long-term debt
Principal amount	1,643,600			937,500
Less unamortized discount	(5,639		)	(3,086		)
Long-term debt, net of unamortized discount	1,637,961			934,414
Deferred income tax liabilities	342,385			213,204
Other long-term liabilities	279			327
Total Liabilities	2,071,659			1,232,303
Commitments and Contingencies — Note 16
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 - 52,508 shares at December 31, 2014 and 52,021 shares at March 31, 2014	525			520
Additional paid-in capital	423,985			414,387
Treasury stock, at cost - 255 shares at December 31, 2014 and 206 shares at March 31, 2014	(3,062		)	(1,431		)
Accumulated other comprehensive (loss) income, net of tax	(16,144		)	739
Retained earnings	203,633			149,145
Total Stockholders' Equity	608,937			563,360
Total Liabilities and Stockholders' Equity	$	2,680,596		$	1,795,663

 See accompanying notes.

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Prestige Brands Holdings, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

	Nine Months Ended December 31,
(In thousands)	2014			2013
Operating Activities
Net income	$	54,488		$	56,614
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	11,967			10,209
Gain on sale of asset	(1,133		)	—
Deferred income taxes	19,517			10,261
Amortization of deferred financing costs	4,568			6,023
Stock-based compensation costs	4,919			3,763
Loss on extinguishment of debt	—			15,012
Premium payment on 2010 Senior Notes	—			(12,768		)
Amortization of debt discount	1,336			3,115
Lease termination costs	1,125			—
Loss (gain) on sale or disposal of equipment	321			(3		)
Changes in operating assets and liabilities, net of effects from acquisitions
Accounts receivable	2,113			8,495
Inventories	14,478			(2,262		)
Prepaid expenses and other current assets	7,598			(2,783		)
Accounts payable	(25,452		)	(1,285		)
Accrued liabilities	8,297			(13,531		)
Net cash provided by operating activities	104,142			80,860
Investing Activities
Purchases of property and equipment	(3,700		)	(2,658		)
Proceeds from the sale of property and equipment	—			3
Proceeds from sale of business	18,500			—
Proceeds from sale of asset	10,000			—
Acquisition of Insight Pharmaceuticals, less cash acquired	(749,666		)	—
Acquisition of the Hydralyte brand	(77,991		)	—
Acquisition of Care Pharmaceuticals, less cash acquired	—			(55,215		)
Net cash used in investing activities	(802,857		)	(57,870		)
Financing Activities
Proceeds from the issuance of 2013 Senior Notes	—			400,000
Repayment of 2010 Senior Notes	—			(201,710		)
Term loan borrowings	720,000			—
Term loan repayments	(80,000		)	(147,500		)
Borrowings under revolving credit agreement	124,600			50,000
Repayments under revolving credit agreement	(58,500		)	(45,500		)
Payment of deferred financing costs	(16,072		)	(6,933		)
Proceeds from exercise of stock options	3,654			5,738
Proceeds from restricted stock exercises	57			—
Excess tax benefits from share-based awards	1,030			1,725
Fair value of shares surrendered as payment of tax withholding	(1,688		)	(278		)
Net cash provided by financing activities	693,081			55,542
Effects of exchange rate changes on cash and cash equivalents	(746		)	151
(Decrease) increase in cash and cash equivalents	(6,380		)	78,683
Cash and cash equivalents - beginning of period	28,331			15,670
Cash and cash equivalents - end of period	$	21,951		$	94,353
Interest paid	$	49,435		$	47,586
Income taxes paid	$	7,135		$	9,761

See accompanying notes.

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Prestige Brands Holdings, Inc.

Notes to Consolidated Financial Statements (unaudited)

1. Business and Basis of Presentation

Nature of Business

Prestige Brands Holdings, Inc. (referred to herein as the “Company” or “we”, which reference shall, unless the context requires otherwise, be deemed to refer to Prestige Brands Holdings, Inc. and all of its direct and indirect 100% owned subsidiaries on a consolidated basis) is engaged in the marketing, sales and distribution of over-the-counter (“OTC”) healthcare and household cleaning products to mass merchandisers, drug stores, supermarkets, and club, convenience, and dollar stores in North America (the United States and Canada), and in Australia and certain other international markets.  Prestige Brands Holdings, 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 9 to these Consolidated Financial Statements.

Basis of Presentation

The unaudited 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 the Consolidated Financial Statements.  In the opinion of management, the 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 31^st of each year. References in these Consolidated Financial Statements or related notes to a year (e.g., “2015”) mean our fiscal year ending or ended on March 31^st of that year. Operating results for the three and nine months ended December 31, 2014 are not necessarily indicative of results that may be expected for the fiscal year ending March 31, 2015.  These unaudited 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, 2014.

Revision

We revised the classification of certain promotional expenses that were incurred in the prior year to correctly present the amounts as a reduction to net sales. The amounts were not material to any of the periods presented.

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 materially from these estimates.  As discussed below, 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 the recognition of income taxes using an estimated annual effective tax rate.

Cash and Cash Equivalents

We consider all short-term deposits and investments with original maturities of three months or less to be cash equivalents.  Substantially all of our cash is held by a large regional bank with headquarters in California.  We do not believe that, as a result of this concentration, we are subject to any unusual financial risk beyond the normal risk associated with commercial banking relationships. The Federal Deposit Insurance Corporation (“FDIC”) and Securities Investor Protection Corporation (“SIPC”) insure these balances up to $250,000 and $500,000, with a $250,000 limit for cash, respectively. Substantially all of the Company's cash balances at December 31, 2014 are uninsured.

Accounts Receivable

We extend non-interest-bearing trade credit to our customers in the ordinary course of business.  We maintain an allowance for doubtful accounts receivable based upon historical collection experience and expected collectability of the accounts receivable.  In an effort to reduce credit risk, we (i) have established credit limits for all of our customer relationships, (ii) perform ongoing credit evaluations of customers' financial condition, (iii) monitor the payment history and aging of customers' receivables, and (iv) monitor open orders against an individual customer's outstanding receivable balance.

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Inventories

Inventories are stated at the lower of cost or market value, with cost determined by using the first-in, first-out method.  We reduce inventories for diminution of value resulting from product obsolescence, damage or other issues affecting marketability, equal to the difference between the cost of the inventory and its estimated market value.  Factors utilized in the determination of estimated market value include: (i) current sales data and historical return rates, (ii) estimates of future demand, (iii) competitive pricing pressures, (iv) new product introductions, (v) product expiration dates, and (vi) component and packaging obsolescence.

Property and Equipment

Property and equipment are stated at cost and are depreciated using the straight-line method based on the following estimated useful lives:

	Years
Machinery	5
Computer equipment and software	3
Furniture and fixtures	7
Leasehold improvements	*

* Leasehold improvements are amortized over the lesser of the term of the lease or the estimated useful life of the related asset.

Expenditures for maintenance and repairs are charged to expense as incurred.  When an asset is sold or otherwise disposed of, we remove the cost and associated accumulated depreciation from the respective accounts and recognize the resulting gain or loss in the Consolidated Statements of Income and Comprehensive Income.

Property and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.  An impairment loss is recognized if the carrying amount of the asset exceeds its fair value.

Goodwill

The excess of the purchase price over the fair market value of assets acquired and liabilities assumed in purchase business combinations is classified as goodwill.  Goodwill is not amortized, although the carrying value is tested for impairment at least annually in the fourth fiscal quarter of each year, or more frequently if events or changes in circumstances indicate that the asset may be impaired.  Goodwill is tested for impairment at the reporting unit “brand” level, which is one level below the operating segment level.

Intangible Assets

Intangible assets, which are comprised primarily of trademarks, are stated at cost less accumulated amortization.  For intangible assets with finite lives, amortization is computed using the straight-line method over estimated useful lives ranging from 3 to 30 years and these assets are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts exceed their fair values and may not be recoverable.  An impairment loss is recognized if the carrying amount of the asset exceeds its fair value. Indefinite-lived intangible assets are tested for impairment at least annually in the fourth fiscal quarter of each year, or more frequently if events or changes in circumstances indicate that the asset may be impaired.  If the carrying amount of the asset exceeds its fair value, an impairment loss is recognized.

Deferred Financing Costs

We have incurred debt origination costs in connection with the issuance of long-term debt.  These costs are capitalized as deferred financing costs and amortized using the effective interest method over the term of the related debt.

Revenue Recognition

Revenues are recognized when the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the selling price is fixed or determinable, (iii) the product has been shipped and the customer takes ownership and assumes the risk of loss, and (iv) collection of the resulting receivable is reasonably assured.  We have determined that these criteria are met and the transfer of the risk of loss generally occurs when the product is received by the customer, and, accordingly, we recognize revenue at that time.  Provisions are made for estimated discounts related to customer payment terms and estimated product returns at the time of sale based on our historical experience.

As is customary in the consumer products industry, we participate in the promotional programs of our customers to enhance the sale of our products.  The cost of these promotional programs varies based on the actual number of units sold during a finite period of time.  These promotional programs consist of direct-to-consumer incentives, such as coupons and temporary price reductions,

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as well as incentives to our customers, such as allowances for new distribution, including slotting fees, and cooperative advertising.  Estimates of the costs of these promotional programs are based on (i) historical sales experience, (ii) the current promotional offering, (iii) forecasted data, (iv) current market conditions, and (v) communication with customer purchasing/marketing personnel. We recognize the cost of such sales incentives by recording an estimate of such cost as a reduction of revenue, at the later of (a) the date the related revenue is recognized, or (b) the date when a particular sales incentive is offered.  At the completion of a promotional program, the estimated amounts are adjusted to actual results.

Due to the nature of the consumer products industry, we are required to estimate future product returns.  Accordingly, we record an estimate of product returns concurrent with recording sales, which is made after analyzing (i) historical return rates, (ii) current economic trends, (iii) changes in customer demand, (iv) product acceptance, (v) seasonality of our product offerings, and (vi) the impact of changes in product formulation, packaging and advertising.

Cost of Sales

Cost of sales includes product costs, warehousing costs, inbound and outbound shipping costs, and handling and storage costs.  Shipping, warehousing and handling costs were $9.2 million and $26.3 million for the three and nine months ended December 30, 2014, respectively, and $7.6 million and $23.3 million for the three and nine months ended December 31, 2013, respectively.

Advertising and Promotion Costs

Advertising and promotion costs are expensed as incurred.  Allowances for new distribution costs associated with products, including slotting fees, are recognized as a reduction of sales.  Under these new distribution arrangements, the retailers allow our products to be placed on the stores' shelves in exchange for such fees.

Stock-based Compensation

We recognize stock-based compensation by measuring the cost of services to be rendered based on the grant-date fair value of the equity award.  Compensation expense is recognized over the period a grantee is required to provide service in exchange for the award, generally referred to as the requisite service period.

Income Taxes

Deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.  A valuation allowance is established when necessary to reduce deferred tax assets to the amounts expected to be realized.

The Income Taxes topic of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) prescribes a recognition threshold and measurement attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.  The guidance only allows the recognition of those tax benefits that have a greater than 50% likelihood of being sustained upon examination by the various taxing authorities. As a result, we have applied such guidance in determining our uncertainties.

We are subject to taxation in the United States and various state and foreign jurisdictions.  

We classify penalties and interest related to unrecognized tax benefits as income tax expense in the Consolidated Statements of Income and Comprehensive Income.

Earnings Per Share

Basic earnings per share is calculated based on income available to common stockholders and the weighted-average number of shares outstanding during the reporting period.  Diluted earnings per share is calculated based on income available to common stockholders and the weighted-average number of common and potential common shares outstanding during the reporting period.  Potential common shares, composed of the incremental common shares issuable upon the exercise of outstanding stock options, stock appreciation rights and unvested restricted shares, are included in the earnings per share calculation to the extent that they are dilutive.

Recently Issued Accounting Standards

In January 2015, the FASB issued Accounting Standards Update ("ASU") 2015-01. The amendments in this update eliminate the concept of extraordinary items in Subtopic 225-20, which required entities to consider whether an underlying event or transaction is extraordinary. However, the amendments retain the presentation and disclosure guidance for items that are unusual in nature or occur infrequently. The amendments in this update are effective for fiscal years, and interim periods within those years, beginning after December 15, 2015. The adoption of ASU 2015-01 is not expected to have a material impact on our Consolidated Financial Statements.

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In November 2014, the FASB issued ASU 2014-17, Pushdown Accounting, which clarifies whether and at what threshold an acquired entity that is a business or nonprofit activity can apply pushdown accounting in its separate financial statements. This ASU provides companies with the option to apply pushdown accounting in its separate financial statements upon occurrence of an event in which an acquirer obtains control of the acquired entity. The election to apply pushdown accounting can be made either in the period in which the change of control occurred, or in a subsequent period. The amendments in this update were effective November 18, 2014. The adoption of ASU 2014-17 did not have a material impact on our Consolidated Financial Statements.

In November 2014, the FASB issued ASU 2014-16, Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share is More Akin to Debt or to Equity. The amendments in this update clarify how current GAAP should be interpreted in evaluating economic characteristics and risks and ultimately determining whether the host contract in a hybrid financial instrument that is issued in the form of a share is more akin to debt or to equity. The effects of initially adopting the amendments in this update should be applied on a modified retrospective basis to existing hybrid financial instruments issued in the form of a share as of the beginning of the fiscal year for which the amendments are effective. The amendments in this update are effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. The adoption of ASU 2014-16 is not expected to have a material impact on our Consolidated Financial Statements.

In August 2014, the FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. This amendment states that in connection with preparing financial statements for each annual and interim reporting period, an entity's management should evaluate whether there are conditions or events that raise substantial doubt about the entity's ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued, when applicable). The amendments in this update are effective for the annual reporting period beginning after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The adoption of ASU 2014-15 is not expected to have a material impact on our Consolidated Financial Statements.

In June 2014, the FASB issued ASU 2014-12, Accounting for Share-Based Payments When the Terms of an Award Provide that a Performance Target Could Be Achieved after the Requisite Service Period, which requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. As such, the new guidance does not allow for a performance target that affects vesting to be reflected in estimating the fair value of the award at the grant date. The amendments to this update are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2015. Early adoption is permitted. Entities may apply the amendments in this update either prospectively to all awards granted or modified after the effective date or retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. We currently do not have any outstanding share-based payments with a performance target. The adoption of ASU 2014-12 is not expected to have a material impact on our Consolidated Financial Statements.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers - Topic 606, which supersedes the revenue recognition requirements in FASB ASC 605. The new guidance primarily states that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. The amendments in this update are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. We are evaluating the impact of adopting this prospective guidance on our consolidated results of operations and financial condition.

In April 2014, the FASB issued ASU 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. Under the new guidance, only disposals representing a strategic shift in operations should be presented as discontinued operations. Those strategic shifts should have a major effect on the organization’s operations and financial results. Examples include a disposal of a major geographic area, a major line of business, or a major equity method investment. In addition, the new guidance requires expanded disclosures about discontinued operations that will provide financial statement users with more information about the assets, liabilities, income, and expenses of discontinued operations. Early adoption is permitted, but only for disposals (or classifications as held for sale) that have not been reported in financial statements previously issued or available for issuance. The amendments in this update must be applied prospectively to all disposals (or classifications as held for sale) of components of an entity that occur within annual periods beginning on or after December 15, 2014, and interim periods within those years. The adoption of ASU 2014-08 is not expected to have a material impact on our Consolidated Financial Statements.

Management has reviewed and continues to monitor the actions of the various financial and regulatory reporting agencies and is currently not aware of any other pronouncement that could have a material impact on our consolidated financial position, results of operations or cash flows.

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2. Acquisitions

Acquisition of Insight Pharmaceuticals

On September 3, 2014, the Company completed its previously announced acquisition of Insight Pharmaceuticals Corporation ("Insight"), a marketer and distributor of feminine care and other OTC healthcare products, for $753.2 million in cash. The closing followed the Federal Trade Commission’s (“FTC”) approval of the acquisition and was finalized pursuant to the terms of the purchase agreement announced on April 25, 2014. Pursuant to the Insight purchase agreement, the Company acquired 27 OTC brands sold in North America (including related trademarks, contracts and inventory), which extends the Company's portfolio of OTC brands to include a leading feminine care platform in the United States and Canada anchored by Monistat, the leading brand in OTC yeast infection treatment. The acquisition also adds brands to the Company's cough/cold, pain relief, ear care and dermatological platforms. In connection with the FTC's approval of the Insight acquisition, we sold one of the competing brands that we acquired from Insight on the same day as the Insight closing. Insight is primarily included in our North America OTC Healthcare segment.

The Insight acquisition was accounted for in accordance with the Business Combinations topic of the FASB ASC 805, which requires that the total cost of an acquisition be allocated to the tangible and intangible assets acquired and liabilities assumed based upon their respective fair values at the date of acquisition.

We prepared an analysis of the fair values of the assets acquired and liabilities assumed as of the date of acquisition. The following table summarizes our preliminary allocation of the assets acquired and liabilities assumed as of the September 3, 2014 acquisition date.

(In thousands)	September 3, 2014
Cash acquired	$	3,507
Accounts receivable	25,784
Inventories	23,559
Deferred income tax assets - current	860
Prepaids and other current assets	1,407
Property, plant and equipment	2,308
Goodwill	103,255
Intangible assets	724,374
Total assets acquired	885,054
Accounts payable	16,079
Accrued expenses	8,003
Deferred income tax liabilities - long term	107,799
Total liabilities assumed	131,881
Total purchase price	$	753,173

Based on this analysis, we allocated $599.6 million to non-amortizable intangible assets and $124.8 million to amortizable intangible assets. We are amortizing the purchased amortizable intangible assets on a straight-line basis over an estimated weighted average useful life of 16.2 years. The weighted average remaining life for amortizable intangible assets at December 31, 2014 was 15.9 years.

We also recorded goodwill of $103.3 million based on the amount by which the purchase price exceeded the fair value of the net assets acquired. The full amount of goodwill is not deductible for income tax purposes.

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The operating results of Insight have been included in our Consolidated Financial Statements beginning September 3, 2014. Revenues of the acquired Insight operations for the three and nine months ended December 31, 2014 were $43.4 million and $56.1 million, respectively. Net income for the three and nine months ended December 31, 2014 was $3.6 million and $1.6 million, respectively. On September 3, 2014, we sold one of the brands we acquired from the Insight acquisition for $18.5 million, for which we had allocated $17.7 million, $0.6 million and $0.2 million to intangible assets, inventory and property, plant and equipment, respectively.

The following table provides our unaudited pro forma revenues, net income and net income per basic and diluted common share had the results of Insight's operations been included in our operations commencing on April 1, 2013, based upon available information related to Insight's operations. This pro forma information is not necessarily indicative either of the combined results of operations that actually would have been realized by us had the Insight acquisition been consummated at the beginning of the period for which the pro forma information is presented, or of future results.

(In thousands, except per share data)	Nine Months Ended December 31, 2014
Revenues	$	593,171
Net income	$	62,688
Earnings per share:
Basic	$	1.20
Diluted	$	1.19

(In thousands, except per share data)	Nine Months Ended December 31, 2013
Revenues	$	579,762
Net income	$	57,537
Earnings per share:
Basic	$	1.12
Diluted	$	1.10

Acquisition of the Hydralyte brand

On April 30, 2014, we completed the acquisition of the Hydralyte brand in Australia and New Zealand from The Hydration Pharmaceuticals Trust of Victoria, Australia, which was funded through a combination of cash on hand and our existing senior secured credit facility.

Hydralyte is the leading OTC brand in oral rehydration in Australia and is marketed and sold through our Care Pharmaceuticals Pty Ltd. subsidiary ("Care Pharma"). Hydralyte is available in pharmacies in multiple forms and is indicated for oral rehydration following diarrhea, vomiting, fever, heat and other ailments. Hydralyte is included in our International OTC Healthcare segment.

The Hydralyte acquisition was accounted for in accordance with the Business Combinations topic of the FASB ASC 805, which requires that the total cost of an acquisition be allocated to the tangible and intangible assets acquired and liabilities assumed based upon their respective fair values at the date of acquisition.

We prepared an analysis of the fair values of the assets acquired and liabilities assumed as of the date of acquisition. The following table summarizes our allocation of the assets acquired and liabilities assumed as of the April 30, 2014 acquisition date.

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(In thousands)	April 30, 2014
Inventories	$	1,970
Property, plant and equipment, net	1,267
Goodwill	1,224
Intangible assets, net	73,580
Total assets acquired	78,041
Accrued expenses	38
Other long term liabilities	12
Total liabilities assumed	50
Net assets acquired	$	77,991

Based on this analysis, we allocated $73.6 million to non-amortizable intangible assets and no allocation was made to amortizable intangible assets.

We also recorded goodwill of $1.2 million based on the amount by which the purchase price exceeded the fair value of the net assets acquired. The full amount of goodwill is not deductible for income tax purposes.

The pro forma effect of this acquisition on revenues and earnings was not material.

Acquisition of Care Pharmaceuticals Pty Ltd.

On July 1, 2013, we completed the acquisition of Care Pharma, which was funded through a combination of our existing senior secured credit facility and cash on hand.

The Care Pharma brands include the Fess line of cold/allergy and saline nasal health products, which is the leading saline spray for both adults and children in Australia. Other key brands include Painstop analgesic, Rectogesic for rectal discomfort, and the Fab line of nutritional supplements. Care Pharma also includes a line of brands for children including Little Allergies, Little Eyes,and Little Coughs. The brands acquired are complementary to our OTC Healthcare portfolio and are included in our International OTC Healthcare segment.

The Care Pharma acquisition was accounted for in accordance with the Business Combinations topic of the FASB ASC 805, which requires that the total cost of an acquisition be allocated to the tangible and intangible assets acquired and liabilities assumed based upon their respective fair values at the date of acquisition.

We prepared an analysis of the fair values of the assets acquired and liabilities assumed as of the date of acquisition. The following table summarizes our allocation of the assets acquired and liabilities assumed as of the July 1, 2013 acquisition date.

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(In thousands)	July 1, 2013
Cash acquired	$	1,546
Accounts receivable	1,658
Inventories	2,465
Deferred income taxes	283
Prepaids and other current assets	647
Property, plant and equipment	163
Goodwill	23,122
Intangible assets	31,502
Total assets acquired	61,386
Accounts payable	1,537
Accrued expenses	2,788
Other long term liabilities	300
Total liabilities assumed	4,625
Net assets acquired	$	56,761

Based on this analysis, we allocated $29.8 million to non-amortizable intangible assets and $1.7 million to amortizable intangible assets. We are amortizing the purchased amortizable intangible assets on a straight-line basis over an estimated weighted average useful life of 15.1 years. The weighted average remaining life for amortizable intangible assets at December 31, 2014 was 12.3 years.

We also recorded goodwill of $23.1 million based on the amount by which the purchase price exceeded the fair value of the net assets acquired. The full amount of goodwill is deductible for income tax purposes.

The pro forma effect of this acquisition on revenues and earnings was not material.

3. Accounts Receivable

Accounts receivable consist of the following:

(In thousands)	December 31, 2014			March 31, 2014
Components of Accounts Receivable
Trade accounts receivable	$	95,596		$	73,632
Other receivables	2,998			1,360
	98,594			74,992
Less allowances for discounts, returns and uncollectible accounts	(10,902		)	(9,942		)
Accounts receivable, net	$	87,692		$	65,050

4. Inventories

Inventories consist of the following:

(In thousands)	December 31, 2014		March 31, 2014
Components of Inventories
Packaging and raw materials	$	6,909	$	3,099
Finished goods	68,331		62,487
Inventories	$	75,240	$	65,586

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Inventories are carried at the lower of cost or market, which includes a reduction in inventory values of $4.4 million and $1.1 million at December 31, 2014 and March 31, 2014, respectively, related to obsolete and slow-moving inventory. Following the acquisition of the Hydralyte brand on April 30, 2014, we manufacture certain Hydralyte products in Australia.

5. Property and Equipment

Property and equipment consist of the following:

(In thousands)	December 31, 2014			March 31, 2014
Components of Property and Equipment
Machinery	$	4,313		$	1,927
Computer equipment and software	9,950			8,923
Furniture and fixtures	2,427			1,858
Leasehold improvements	6,705			4,734
	23,395			17,442
Accumulated depreciation	(10,306		)	(7,845		)
Property and equipment, net	$	13,089		$	9,597

We recorded depreciation expense of $1.0 million and $1.1 million for the three months ended December 31, 2014 and December 31, 2013, respectively, and $2.6 million and $2.2 million for the nine months ended December 31, 2014 and December 31, 2013, respectively.

6. Goodwill

As described in Note 18 to these Consolidated Financial Statements, we have realigned our reportable segments effective April 1, 2014 with how we currently operate, review and evaluate the results of our business. A reconciliation of the activity affecting goodwill by reportable segment is as follows:

(In thousands)	North American OTC Healthcare		International OTC Healthcare			Household Cleaning			Consolidated
Balance — March 31, 2014	$	160,157	$	23,365		$	7,389		$	190,911
Additions	103,254		1,224			—			104,478
Reductions	—		—			(589		)	(589		)
Effects of foreign currency exchange rates	—		(2,908		)	—			(2,908		)
Balance — December 31, 2014	$	263,411	$	21,681		$	6,800		$	291,892

As discussed in Note 2, we completed two acquisitions during the nine months ended December 31, 2014. On September 3, 2014, we completed the acquisition of Insight and recorded goodwill of $103.3 million reflecting the amount by which the purchase price exceeded the preliminary estimate of fair value of net assets acquired. Additionally, on April 30, 2014, we completed the acquisition of the Hydralyte brand and recorded goodwill of $1.2 million reflecting the amount by which the purchase price exceeded the preliminary estimate of fair value of the net assets acquired.

As further discussed in Note 7, in December 2014, we completed a transaction to sell rights to use of the Comet brand in certain Eastern European countries to a third-party licensee. As a result, we recorded a gain on sale of $1.3 million and reduced the carrying value of our intangible assets and goodwill.

Under accounting guidelines, goodwill is 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 reporting unit below the carrying amount.

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.

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At March 31, 2014, during our annual test for goodwill impairment, there were no indicators of impairment under the analysis. Accordingly, no impairment charge was recorded in fiscal 2014. As of December 31, 2014, there have been no triggering events that would indicate potential impairment of goodwill.

The discounted cash flow methodology is a widely-accepted valuation technique to estimate fair value that is utilized by market participants in the transaction evaluation process and has been applied consistently. We also considered our market capitalization at March 31, 2014, 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. Consequently, changing rates of interest and inflation, declining sales or margins, increases in competition, changing consumer preferences, technical advances, or reductions in advertising and promotion may require an impairment charge to be recorded in the future.

7. Intangible Assets

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

(In thousands)	Indefinite Lived Trademarks			Finite Lived Trademarks			Totals
Gross Carrying Amounts
Balance — March 31, 2014	$	1,273,878		$	204,740		$	1,478,618
Additions	673,180			124,774			797,954
Reductions	(9,548		)	(17,674		)	(27,222		)
Effects of foreign currency exchange rates	(12,371		)	(197		)	(12,568		)
Balance — December 31, 2014	1,925,139			311,643			2,236,782
Accumulated Amortization
Balance — March 31, 2014	—			83,801			83,801
Additions	—			8,915			8,915
Effects of foreign currency exchange rates	—			(18		)	(18		)
Balance — December 31, 2014	—			92,698			92,698
Intangible assets, net - December 31, 2014	$	1,925,139		$	218,945		$	2,144,084
Intangible Assets, net by Reportable Segment:
North American OTC Healthcare	$	1,723,498		$	192,756		$	1,916,254
International OTC Healthcare	91,369			1,330			92,699
Household Cleaning	110,272			24,859			135,131
Intangible assets, net - December 31, 2014	$	1,925,139		$	218,945		$	2,144,084

As discussed in Note 2, we completed two acquisitions during the nine months ended December 31, 2014. On September 3, 2014, we completed the acquisition of Insight and allocated $724.4 million to intangible assets based on our preliminary analysis. Additionally, on April 30, 2014, we completed the acquisition of the Hydralyte brand and allocated $73.6 million to intangible assets based on our preliminary analysis. Furthermore, on September 3, 2014 we sold one of the brands that we acquired from Insight, for which we allocated $17.7 million to the intangible assets.

Sale of asset

Historically, we received royalty income from the licensing of the name of certain of our brands in geographic areas or markets in which we do not directly compete. We have had a royalty agreement for our Comet brand for several years, which included an option on behalf of the licensee to purchase the rights in certain geographic areas and markets in perpetuity. In December 2014, we amended the agreement to allow the licensee to buy out a portion of the agreement early, but retaining the remaining stream of royalty payments. In December, in connection with this amendment, we sold rights to use of the Comet brand in certain Eastern European countries to a third-party licensee and received $10.0 million as a partial early buyout. As a result, we recorded a gain on sale of $1.3 million, and reduced the carrying value of our intangible assets and goodwill. The licensee will continue to make quarterly payments at least through June 30, 2016 of approximately $1.0 million. The licensee has the option to purchase the remaining territories and markets, as defined in the agreement, at any time after July 1, 2016.

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

On an annual basis during the fourth fiscal quarter, or more frequently if conditions indicate that the carrying value of the asset may not be recovered, management performs a review of both the values and, if applicable, useful lives assigned to intangible assets and tests for impairment.

In a manner similar to goodwill, we completed our annual test for impairment of our indefinite-lived intangible assets during the fourth quarter of fiscal 2014.  

We have experienced declines in revenues and profitability of certain brands in the North American OTC Healthcare segment during the three and nine months ended December 31 2014, compared to the same periods during the prior year. Sustained or significant future declines in revenue, profitability, other adverse changes in expected operating results, and/or unfavorable changes in other economic factors used to estimate fair values of certain brands could indicate that fair value no longer exceeds the carrying value, in which case a non-cash impairment charge may be recorded in future periods. In particular, we continue to experience increasing competitive pressures for certain brands within our pediatric cough and cold and gastrointestinal product groups. Specifically in the cough and cold product group, we expected revenues to decline with the return to the market of competing products. However, such declines have been steeper than expected. Current quarter and year-to-date revenues from our Pediacare brand have declined significantly as compared to the corresponding periods in the prior year, due primarily to competition in the category, including new product introductions and lost distribution. As a result, we have increased our promotional spending in the short term, which resulted in lower revenues and profitability. Based on these factors, we considered whether these conditions would indicate that the fair value of the reporting unit would no longer exceed the carrying value, and accordingly, we performed an interim impairment analysis.

Based on completion of step 1 of the impairment analysis for goodwill and indefinite-lived intangible assets, the fair value of the Pediacare reporting unit and trademarks, exceed their book value and therefore, we concluded that no impairment existed as of December 31, 2014 and that step 2 of the impairment test was not required. The carrying value for the Pediacare reporting unit at December 31, 2014 is approximately $45.8 million. See Item 2, Critical Accounting Policies for a further discussion on the assumptions used in our impairment analysis.

Additionally, for all indefinite-lived intangible assets, an evaluation of the facts and circumstances as of December 31, 2014 continues to support an indefinite useful life for such assets. Therefore, no impairment charge was recorded for the nine months ended December 31, 2014, as facts and circumstances indicated that the fair values of the intangible assets for our brands exceeded their carrying values.

The weighted average remaining life for finite-lived intangible assets at December 31, 2014 was approximately 14.1 years and the amortization expense for the three and nine months ended December 31, 2014 was $3.9 million and $8.9 million, respectively. At December 31, 2014, finite-lived intangible assets are being amortized over a period of 3 to 30 years, and the associated amortization expense is expected to be as follows:

(In thousands)
Year Ending March 31,	Amount
2015 (Remaining three months ending March 31, 2015)	$	3,887
2016	15,547
2017	15,547
2018	15,547
2019	15,547
Thereafter	152,870
	$	218,945

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8. Other Accrued Liabilities

Other accrued liabilities consist of the following:

(In thousands)	December 31, 2014		March 31, 2014
Accrued marketing costs	$	19,413	$	11,812
Accrued compensation costs	6,455		6,232
Accrued broker commissions	1,484		1,019
Income taxes payable	2,163		1,854
Accrued professional fees	2,999		2,002
Deferred rent	1,060		1,258
Accrued production costs	4,390		1,506
Accrued lease termination costs	1,110		—
Other accrued liabilities	1,601		763
	$	40,675	$	26,446

9. Long-Term Debt

2012 Senior Notes:

On January 31, 2012, Prestige Brands, Inc. (the "Borrower") issued $250.0 million of senior unsecured notes at par value, with an interest rate of 8.125% and a maturity date of February 1, 2020 (the "2012 Senior Notes"). The Borrower may earlier redeem some or all of the 2012 Senior Notes at redemption prices set forth in the indenture governing the 2012 Senior Notes. The 2012 Senior Notes are guaranteed by Prestige Brands Holdings, Inc. and certain of its domestic 100% owned subsidiaries, other than the Borrower. Each of these guarantees is joint and several. There are no significant restrictions on the ability of any of the guarantors to obtain funds from their subsidiaries or to make payments to the Borrower or the Company. In connection with the 2012 Senior Notes offering, we incurred $12.6 million of costs, which were capitalized as deferred financing costs and are being amortized over the term of the 2012 Senior Notes.

2012 Term Loan and 2012 ABL Revolver:

On January 31, 2012, the Borrower also entered into a new senior secured credit facility, which consists of (i) a $660.0 million term loan facility (the “2012 Term Loan”) with a seven-year maturity and (ii) a $50.0 million asset-based revolving credit facility (the “2012 ABL Revolver”) with a five-year maturity. In subsequent years, we have utilized portions of our accordion feature to increase the amount of our borrowing capacity under the 2012 ABL Revolver by $85.0 million to $135.0 million and reduced our borrowing rate on the 2012 ABL Revolver by 0.25%. The 2012 Term Loan was issued with an original issue discount of 1.5% of the principal amount thereof, resulting in net proceeds to the Borrower of $650.1 million. In connection with these loan facilities, we incurred $20.6 million of costs, which were capitalized as deferred financing costs and are being amortized over the terms of the facilities. The 2012 Term Loan is unconditionally guaranteed by Prestige Brands Holdings, Inc. and certain of its domestic 100% owned subsidiaries, other than the Borrower. Each of these guarantees is joint and several. There are no significant restrictions on the ability of any of the guarantors to obtain funds from their subsidiaries or to make payments to the Borrower or the Company.

On February 21, 2013, the Borrower entered into Amendment No. 1 (the "Term Loan Amendment No. 1") to the 2012 Term Loan. Term Loan Amendment No. 1 provided for the refinancing of all of the Borrower's existing Term B Loans with new Term B-1 Loans (the "Term B-1 Loans"). The interest rate on the Term B-1 Loans under the Term Loan Amendment No. 1 was based, at the Borrower's option, on a LIBOR rate plus a margin of 2.75% per annum, with a LIBOR floor of 1.00%, or an alternate base rate, with a floor of 2.00%, plus a margin. The new Term B-1 Loans mature on the same date as the Term B Loans' original maturity date.  In addition, Term Loan Amendment No. 1 provided the Borrower with certain additional capacity to prepay subordinated debt, the 2012 Senior Notes and certain other unsecured indebtedness permitted to be incurred under the credit agreement governing the 2012 Term Loan and 2012 ABL Revolver. In connection with Term Loan Amendment No. 1, during the fourth quarter ended March 31, 2013, we recognized a $1.4 million loss on the extinguishment of debt.

On September 3, 2014, the Borrower entered into Amendment No. 2 ("Term Loan Amendment No. 2") to the 2012 Term Loan. Term Loan Amendment No. 2 provides for (i) the creation of a new class of Term B-2 Loans under the 2012 Term Loan (the "Term B-2 Loans") in an aggregate principal amount of $720.0 million, (ii) increased flexibility under the credit agreement governing the 2012 Term Loan and 2012 ABL Revolver, including additional investment, restricted payment and debt incurrence flexibility

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and financial maintenance covenant relief, and (iii) an interest rate on (x) the Term B-1 Loans that is based, at the Borrower’s option, on a LIBOR rate plus a margin of 3.125% per annum, with a LIBOR floor of 1.00%, or an alternate base rate, with a floor of 2.00%, plus a margin, and (y) the Term B-2 Loans that is based, at the Borrower’s option, on a LIBOR rate plus a margin of 3.50% per annum, with a LIBOR floor of 1.00%, or an alternate base rate, with a floor of 2.00%, plus a margin (with a margin step-down to 3.25% per annum, based upon achievement of a specified secured net leverage ratio).

The 2012 Term Loan, as amended, bears interest at a rate per annum equal to an applicable margin plus, at the Borrower's option, either (i) a base rate determined by reference to the highest of (a) the Federal Funds rate plus 0.50%, (b) the prime rate of Citibank, N.A., (c) the LIBOR rate determined by reference to the cost of funds for U.S. dollar deposits for an interest period of one month, adjusted for certain additional costs, plus 1.00% and (d) a floor of 2.00% or (ii) a LIBOR rate determined by reference to the costs of funds for U.S. dollar deposits for the interest period relevant to such borrowing, adjusted for certain additional costs, with a floor of 1.00%. For the nine months ended December 31, 2014, the average interest rate on the 2012 Term Loan was 5.2%.

Under the 2012 Term Loan, we were originally required to make quarterly payments each equal to 0.25% of the original principal amount of the 2012 Term Loan, with the balance expected to be due on the seventh anniversary of the closing date. However, since we have previously made significant optional payments that exceeded all of our required quarterly payments, we will not be required to make a payment until the maturity date of January 31, 2019.

On September 3, 2014, the Borrower entered into Amendment No. 3 (“ABL Amendment No. 3”) to the 2012 ABL Revolver. ABL Amendment No. 3 provided for (i) a $40.0 million increase in revolving commitments under the 2012 ABL Revolver and (ii) increased flexibility under the credit agreement governing the 2012 Term Loan and 2012 ABL Revolver, including additional investment, restricted payment and debt incurrence flexibility. Borrowings under the 2012 ABL Revolver, as amended, bear interest at a rate per annum equal to an applicable margin, plus, at the Borrower's option, either (i) a base rate determined by reference to the highest of (a) the Federal Funds rate plus 0.50%, (b) the prime rate of Citibank, N.A., (c) the LIBOR rate determined by reference to the cost of funds for U.S. dollar deposits for an interest period of one month, adjusted for certain additional costs, plus 1.00% or (ii) a LIBOR rate determined by reference to the costs of funds for U.S. dollar deposits for the interest period relevant to such borrowing, adjusted for certain additional costs. The initial applicable margin for borrowings under the 2012 ABL Revolver is 1.75% with respect to LIBOR borrowings and 0.75% with respect to base-rate borrowings. The applicable margin for borrowings under the 2012 ABL Revolver may be increased to 2.00% or 2.25% for LIBOR borrowings and 1.00% or 1.25% for base-rate borrowings, depending on average excess availability under the 2012 ABL Revolver during the prior fiscal quarter. In addition to paying interest on outstanding principal under the 2012 ABL Revolver, we are required to pay a commitment fee to the lenders under the 2012 ABL Revolver in respect of the unutilized commitments thereunder. The initial commitment fee rate is 0.50% per annum. The commitment fee rate will be reduced to 0.375% per annum at any time when the average daily unused commitments for the prior quarter is less than a percentage of total commitments by an amount set forth in the credit agreement covering the 2012 ABL Revolver. We may voluntarily repay outstanding loans under the 2012 ABL Revolver at any time without a premium or penalty. For the nine months ended December 31, 2014, the average interest rate on the amounts borrowed under the 2012 ABL Revolver was 3.1%.

2013 Senior Notes:

On December 17, 2013, the Borrower issued $400.0 million of senior unsecured notes, with an interest rate of 5.375% and a maturity date of December 15, 2021 (the "2013 Senior Notes"). The Borrower may redeem some or all of the 2013 Senior Notes at redemption prices set forth in the indenture governing the 2013 Senior Notes. The 2013 Senior Notes are guaranteed by Prestige Brands Holdings, Inc. and certain of its 100% domestic owned subsidiaries, other than the Borrower. Each of these guarantees is joint and several. There are no significant restrictions on the ability of any of the guarantors to obtain funds from their subsidiaries or to make payments to the Borrower or the Company. In connection with the 2013 Senior Notes offering, we incurred $7.2 million of costs, which were capitalized as deferred financing costs and are being amortized over the term of the 2013 Senior Notes.

Redemptions and Restrictions:

At any time prior to February 1, 2016, we may redeem the 2012 Senior Notes in whole or in part at a redemption price equal to 100% of the principal amount of the notes redeemed, plus a "make-whole premium" calculated as set forth in the indenture governing the 2012 Senior Notes, together with accrued and unpaid interest, if any, to the date of redemption. On or after February 1, 2016, we may redeem the 2012 Senior Notes in whole or in part at redemption prices set forth in the indenture governing the 2012 Senior Notes. In addition, at any time prior to February 1, 2015, we may redeem up to 35% of the aggregate principal amount of the 2012 Senior Notes at a redemption price equal to 108.125% of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date, with the net cash proceeds of certain equity offerings, provided that certain conditions are met. Subject to certain limitations, in the event of a change of control, as defined in the indenture governing the 2012 Senior Notes, the Borrower will be required to make an offer to purchase the 2012 Senior Notes at a price equal to 101% of the aggregate principal amount of the 2012 Senior Notes repurchased, plus accrued and unpaid interest, if any, to the date of repurchase.

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At any time prior to December 15, 2016, we may redeem the 2013 Senior Notes in whole or in part at a redemption price equal to 100% of the principal amount of notes redeemed, plus an applicable "make-whole premium" calculated as set forth in the indenture governing the 2013 Senior Notes, together with accrued and unpaid interest, if any, to the date of redemption. On or after December 15, 2016, we may redeem some or all of the 2013 Senior Notes at redemption prices set forth in the indenture governing the 2013 Senior Notes. In addition, at any time prior to December 15, 2016, we may redeem up to 35% of the aggregate principal amount of the 2013 Senior Notes at a redemption price equal to 105.375% of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date, with the net cash proceeds of certain equity offerings, provided that certain conditions are met. Subject to certain limitations, in the event of a change of control, as defined in the indenture governing the 2013 Senior Notes, the Borrower will be required to make an offer to purchase the 2013 Senior Notes at a price equal to 101% of the aggregate principal amount of the 2013 Senior Notes repurchased, plus accrued and unpaid interest, if any, to the date of repurchase.

The indentures governing the 2012 Senior Notes and the 2013 Senior Notes contain provisions that restrict us from undertaking specified corporate actions, such as asset dispositions, acquisitions, dividend payments, repurchases of common shares outstanding, changes of control, incurrences of indebtedness, issuance of equity, creation of liens, making of loans and transactions with affiliates. Additionally, the credit agreement with respect to the 2012 Term Loan and the 2012 ABL Revolver and the indentures governing the 2012 Senior Notes and the 2013 Senior Notes contain cross-default provisions, whereby a default pursuant to the terms and conditions of certain indebtedness will cause a default on the remaining indebtedness under the credit agreement governing the 2012 Term Loan and the 2012 ABL Revolver and the indentures governing the 2012 Senior Notes and the 2013 Senior Notes. At December 31, 2014, we were in compliance with the covenants under our long-term indebtedness.

At December 31, 2014, we had an aggregate of $30.6 million of unamortized debt issuance costs and $5.6 million of unamortized debt discount, the total of which is comprised of $9.0 million related to the 2012 Senior Notes, $6.4 million related to the 2013 Senior Notes, $19.7 million related to the 2012 Term Loan, and $1.1 million related to the 2012 ABL Revolver.

During the nine months ended December 31, 2014, we borrowed a net amount of $66.1 million against the 2012 ABL Revolver.

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

(In thousands, except percentages)	December 31, 2014			March 31, 2014
2013 Senior Notes bearing interest at 5.375%, with interest payable on June 15 and December 15 of each year. The 2013 Senior Notes mature on December 15, 2021.	$	400,000		$	400,000
2012 Senior Notes bearing interest at 8.125%, with interest payable on February 1 and August 1 of each year. The 2012 Senior Notes mature on February 1, 2020.	250,000			250,000
2012 Term B-1 Loan bearing interest at the Borrower's option at either a base rate with a floor of 2.00% plus applicable margin or LIBOR with a floor of 1.00% plus applicable margin, due on January 31, 2019.	247,500			287,500
2012 Term B-2 Loan bearing interest at the Borrower's option at either a base rate with a floor of 2.00% plus applicable margin or LIBOR with a floor of 1.00% plus applicable margin, due on September 3, 2021.	680,000			—
2012 ABL Revolver bearing interest at the Borrower's option at either a base rate plus applicable margin or LIBOR plus applicable margin. Any unpaid balance is due on January 31, 2017.	66,100			—
	1,643,600			937,500
Current portion of long-term debt	—			—
	1,643,600			937,500
Less: unamortized discount	(5,639		)	(3,086		)
Long-term debt, net of unamortized discount	$	1,637,961		$	934,414

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As of December 31, 2014, aggregate future principal payments required in accordance with the terms of the 2012 Term Loan, 2012 ABL Revolver and the indentures governing the 2013 Senior Notes and the 2012 Senior Notes are as follows:

(In thousands)
Year Ending March 31,	Amount
2015 (remaining three months ending March 31, 2015)	$	—
2016	—
2017	66,100
2018	—
2019	247,500
Thereafter	1,330,000
	$	1,643,600

10. 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.

The Fair Value Measurements and Disclosures topic of the FASB ASC 820 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. The Fair Value Measurements and Disclosures topic established market (observable inputs) as the preferred source of fair value, to be followed by the Company's 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 the Company 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 Term B-1 Loans, Term B-2 Loans, the 2013 Senior Notes, the 2012 Senior Notes, and the 2012 ABL Revolver are measured in Level 2 of the above hierarchy. At December 31, 2014 and March 31, 2014, we did not have any assets or liabilities measured in Level 1 or 3. During any of the periods presented, there were no transfers of assets or liabilities between Levels 1, 2 and 3.

At December 31, 2014 and March 31, 2014, the carrying value of our 2013 Senior Notes was $400.0 million. The fair value of our 2013 Senior Notes was $391.5 million and $408.5 million at December 31, 2014 and March 31, 2014, respectively.

At December 31, 2014 and March 31, 2014, the carrying value of our 2012 Senior Notes was $250.0 million. The fair value of our 2012 Senior Notes was $264.1 million and $280.6 million at December 31, 2014 and March 31, 2014, respectively.

At December 31, 2014 and March 31, 2014, the carrying value of the Term B-1 Loans was $247.5 million and $287.5 million, respectively. The fair value of the Term B-1 Loans was $246.9 million and $288.9 million at December 31, 2014 and March 31, 2014, respectively.

At December 31, 2014 the carrying value of the Term B-2 Loans was $680.0 million. The fair value of the Term B-2 Loan was $680.0 million at December 31, 2014. Because the Term B-2 Loans was entered into on September 3, 2014, there were no outstanding loan balances as of March 31, 2014.

At December 31, 2014, the carrying value and fair value of the 2012 ABL Revolver was $66.1 million and $65.4 million, respectively. There were no outstanding borrowings under the 2012 ABL Revolver at March 31, 2014.

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11. Stockholders' Equity

The Company is 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 the Company's common stock through December 31, 2014.

During the three and nine months ended December 31, 2014, we repurchased 781 shares and 48,445 shares, respectively, of restricted common stock from our employees pursuant to the provisions of various employee restricted stock awards. During the three and nine months ended December 31, 2013, we repurchased 2,549 shares and 13,275 shares, respectively, of restricted common stock from our employees pursuant to the provisions of various employee restricted stock awards. The repurchases for the nine months ended December 31, 2014 and 2013 were at an average price of $33.66 and $27.81, respectively. All of the repurchased shares have been recorded as treasury stock.

12. Accumulated Other Comprehensive (Loss) Income

The table below presents accumulated other comprehensive (loss) income (“AOCI”), which affects equity and results from recognized transactions and other economic events, other than transactions with owners in their capacity as owners.

AOCI consisted of the following at December 31, 2014 and March 31, 2014:

	December 31,			March 31,
(In thousands)	2014			2014
Components of Accumulated Other Comprehensive (Loss) Income
Cumulative translation adjustment	$	(16,144	)	$	739
Total accumulated other comprehensive (loss) income, net of tax	$	(16,144	)	$	739

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13. Earnings Per Share

Basic earnings per share is computed based on the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per share is computed based on 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 awards, and restricted stock units. The following table sets forth the computation of basic and diluted earnings per share:

	Three Months Ended December 31,				Nine Months Ended December 31,
(In thousands, except per share data)	2014		2013		2014		2013
Numerator
Net income	$	21,293	$	3,130	$	54,488	$	56,614
Denominator
Denominator for basic earnings per share — weighted average shares outstanding	52,278		51,806		52,110		51,498
Dilutive effect of unvested restricted common stock (including restricted stock units) and options issued to employees and directors	452		639		512		738
Denominator for diluted earnings per share	52,730		52,445		52,622		52,236
Earnings per Common Share:
Basic net earnings per share	$	0.41	$	0.06	$	1.05	$	1.10
Diluted net earnings per share	$	0.40	$	0.06	$	1.04	$	1.08

For the three months ended December 31, 2014 and 2013, there were 0.3 million and 0.2 million shares, respectively, 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. For the nine months ended December 31, 2014 and 2013, there were 0.3 million and 0.2 million shares, respectively, 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.

14. Share-Based Compensation

In connection with our initial public offering, the Board of Directors adopted the 2005 Long-Term Equity Incentive Plan (the “Plan”), which provides for the grant of up to a maximum of 5.0 million shares of restricted stock, stock options, restricted stock units and other equity-based awards. On June 19, 2014, the Board of Directors amended the Plan to provide for the grant of an additional 1.8 million shares of the Company's stock, $0.01 par value, pursuant to the Plan, which amendment the Company's stockholders approved on August 5, 2014.  Directors, officers and other employees of the Company and its subsidiaries, as well as others performing services for the Company, are eligible for grants under the Plan.

During the three and nine months ended December 31, 2014, pre-tax share-based compensation costs charged against income were $1.5 million and $4.9 million, respectively, and the related income tax benefit recognized was $0.6 million and $1.8 million, respectively. During the three and nine months ended December 31, 2013, pre-tax share-based compensation costs charged against income were $1.3 million and $3.8 million, respectively, and the related income tax benefit recognized was $0.4 million and $1.1 million, respectively.

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Restricted Shares

Restricted shares granted to employees under the Plan generally vest in three to five years, primarily upon the attainment of certain time vesting thresholds, and may also be contingent on the attainment of certain performance goals by the Company, including revenue and earnings before income taxes, depreciation and amortization targets.  The restricted share awards provide for accelerated vesting if there is a change of control, as defined in the Plan.  The restricted stock units granted to employees generally vest in their entirety on the three-year anniversary of the date of the grant, unless specified differently on the date of grant. Termination of employment prior to vesting will result in forfeiture of the restricted stock units. The restricted stock units granted to directors will vest in their entirety one year after the date of grant so long as the membership on the Board of Directors continues through the vesting date, with the settlement in common stock to occur on the earliest of the director's death, disability or six month anniversary of the date on which the director's Board membership ceases for reasons other than death or disability. Upon vesting, the units will be settled in shares of our common stock.

On May 12, 2014, the Compensation Committee of our Board of Directors granted 96,638 restricted stock units to certain executive officers and employees under the Plan. Of those grants, 75,638 restricted stock units vest in their entirety on the three-year anniversary of the date of grant and 21,000 restricted stock units vest 33.3% per year over three years.

The fair value of the restricted stock units is determined using the closing price of our common stock on the day of grant. The weighted-average grant-date fair value of restricted stock units granted during the nine months ended December 31, 2014 and 2013 was $33.30 and $30.19, respectively.

A summary of the Company's restricted shares granted under the Plan is presented below:

Restricted Shares	Shares (in thousands)		Weighted- Average Grant-Date Fair Value
Nine months ended December 31, 2013
Vested and nonvested at March 31, 2013	421.3		$	11.01
Granted	126.6		30.19
Vested and issued	(59.7	)	8.42
Forfeited	(5.6	)	15.11
Vested and nonvested at December 31, 2013	482.6		16.32
Vested at December 31, 2013	83.1		9.63
Nine months ended December 31, 2014:
Vested and nonvested at March 31, 2014	437.5		$	16.76
Granted	104.4		33.30
Vested and issued	(122.8	)	13.62
Forfeited	(21.3	)	20.77
Vested and nonvested at December 31, 2014	397.8		21.86
Vested at December 31, 2014	76.6		11.62

Options

The Plan provides that the exercise price of options granted shall be no less than the fair market value of the Company's common stock on the date the options are granted.  Options granted have a term of no greater than ten years from the date of grant and vest in accordance with a schedule determined at the time the option is granted, generally over three to five years.  The option awards provide for accelerated vesting if there is a change in control, as defined in the Plan.

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 noted in the table below.  Expected volatilities are based on the historical volatility of our common stock and other factors, including the historical volatilities of comparable companies.  We use appropriate historical data, as well as current data, to estimate option exercise and employee termination behaviors.  Employees that are expected to exhibit similar exercise or termination behaviors are grouped together for the purposes of valuation.  The expected terms of the options granted are derived from management's estimates and consideration of information derived from the public filings of companies similar to us and represent the period of time that options granted are expected to be outstanding.  The risk-free rate represents the yield on U.S. Treasury bonds with a maturity equal to the expected term of the granted option.  On May 12, 2014, the Compensation Committee

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of our Board of Directors granted stock options to acquire 307,490 shares of our common stock to certain executive officers and employees under the Plan. The stock options will vest 33.3% per year over three years and are exercisable for up to ten years from the date of grant. These stock options were granted at an exercise price of $33.50 per share, which is equal to the closing price for our common stock on the date of the grant. Termination of employment prior to vesting will result in forfeiture of the unvested stock options. Vested stock options will remain exercisable by the employee after termination, subject to the terms of the Plan.

The weighted-average grant-date fair value of the options granted during the nine months ended December 31, 2014 and 2013 was $15.93 and $13.94, respectively.

	Nine Months Ended December 31,
	2014			2013
Expected volatility	47.3		%	48.0		%
Expected dividends	$	—		$	—
Expected term in years	6.0			6.0
Risk-free rate	2.2		%	1.3		%

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

Options	Shares (in thousands)		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value (in thousands)
Nine months ended December 31, 2013:
Outstanding at March 31, 2013	1,386.4		$	10.43
Granted	227.7		29.94
Exercised	(589.9	)	9.73
Forfeited or expired	(14.2	)	14.56
Outstanding at December 31, 2013	1,010.0		15.18		7.6	$	20,828
Exercisable at December 31, 2013	172.1		11.34		6.8	4,210
Nine months ended December 31, 2014:
Outstanding at March 31, 2014	994.9		$	15.24
Granted	307.5		33.50
Exercised	(363.4	)	10.05
Forfeited or expired	(47.5	)	25.76
Outstanding at December 31, 2014	891.5		23.09		7.9	$	10,368
Exercisable at December 31, 2014	335.1		15.01		6.7	6,604

The aggregate intrinsic value of options exercised in the nine months ended December 31, 2014 was $8.8 million.

At December 31, 2014, there were $5.9 million of unrecognized compensation costs related to nonvested share-based compensation arrangements under the Plan, based on management's estimate of the shares that will ultimately vest.  We expect to recognize such costs over a weighted-average period of 0.9 years.  The total fair value of options and restricted shares vested during the nine months ended December 31, 2014 and 2013 was $4.3 million and $3.2 million, respectively.  For the nine months ended December 31, 2014 and 2013, cash received from the exercise of stock options was $3.7 million and $5.7 million, respectively, and we realized $1.9 million and $1.7 million, respectively, in tax benefits from the tax deductions resulting from these option exercises. At December 31, 2014, there were 1.2 million shares available for issuance under the Plan.

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15. 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 36.5% and 25.2% for the three months ended December 31, 2014 and December 31, 2013, respectively. The effective tax rates used in the calculation of income taxes were 39.5% and 24.6% for the nine months ended December 31, 2014 and December 31, 2013, respectively. The increase in the effective tax rate for the three and nine months ended December 31, 2014 was primarily due to the impact of certain non-deductible items related to acquisitions, and a higher gain for tax purposes associated with the sale of the right of use of the Comet brand in the current period and a one-time benefit of $9.1 million due primarily to lower state income taxes enacted in the prior year period. This benefit was primarily related to a law change in the state where we have our major distribution center to tax earnings attributed to in-state revenues only.

At December 31, 2014, wholly-owned subsidiaries of the Company had net operating loss carryforwards of approximately $69.8 million, which may be used to offset future taxable income of the consolidated group and which begin to expire in 2020.  The net operating loss carryforwards are subject to an annual limitation as to usage of approximately $33.6 million pursuant to Internal Revenue Code Section 382. The Company expects to utilize all of the net operating loss carryforwards before they expire.

We had a net increase of $0.5 million in our uncertain tax liability during the nine months ended December 31, 2014. Therefore, the balance in our uncertain tax liability was $1.7 million at December 31, 2014 and $1.2 million at March 31, 2014. We recognize interest and penalties related to uncertain tax positions as a component of income tax expense.  We did not incur any material interest or penalties related to income taxes in any of the periods presented.

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

Lease Commitments

We have operating leases for office facilities and equipment in New York, Wyoming, and other locations, which expire at various dates through fiscal 2021. We required additional office space as a result of the closing of the acquisition of Insight. Therefore, in the first quarter of fiscal 2015, we amended our existing New York office lease to include an additional 15,470 square feet beginning October 2014 and extended the expiration of the combined lease through September 2020. These amounts have been included in the table below.

The following summarizes future minimum lease payments for our operating leases as of December 31, 2014:

(In thousands)
Year Ending March 31,	Facilities		Equipment		Total
2015 (Remaining three months ending March 31, 2015)	$	422	$	274	$	696
2016	1,612		311		1,923
2017	1,772		77		1,849
2018	1,856		—		1,856
2019	1,864		—		1,864
Thereafter	2,465		—		2,465
	$	9,991	$	662	$	10,653

Rent expense for the three months ended December 31, 2014 and 2013 was $0.4 million and $0.4 million, respectively, while rent expense for the nine months ended December 31, 2014 and 2013 was $1.2 million and $1.2 million, respectively.

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Purchase Commitments

Effective November 1, 2009, we entered into a ten year supply agreement for the exclusive manufacture of a portion of one of our Household Cleaning products.  Although we are committed under the supply agreement to pay the minimum amounts set forth in the table below, the total commitment is less than 10% of the estimated purchases that we expect to make during the course of the agreement.

(In thousands)
Year Ending March 31,	Amount
2015 (Remaining three months ending March 31, 2015)	273
2016	1,074
2017	1,044
2018	1,013
2019	982
Thereafter	560
	$	4,946

17. Concentrations of Risk

Our revenues are concentrated in the areas of OTC Healthcare and Household Cleaning products.  We sell our products to mass merchandisers, food and drug stores, and convenience, dollar and club stores.  During the three and nine months ended December 31, 2014, approximately 44.3% and 41.9%, respectively, of our total revenues were derived from our five top selling brands.  During the three and nine months ended December 31, 2013, approximately 41.1% and 41.7%, respectively, of our total revenues were derived from our five top selling brands. One customer, Walmart, accounted for more than 10% of our gross revenues for each of the periods presented. Walmart accounted for approximately 16.5% and 17.4%, respectively, of our gross revenues for the three and nine months ended December 31, 2014, and approximately 20.4% and 19.7%, respectively, of our gross revenues for the three and nine months ended December 31, 2013. At December 31, 2014, approximately 20.2% and 13.4% of accounts receivable were owed by Walmart and Walgreens, respectively.

We manage product distribution in the continental United States through a third-party distribution center in St. Louis, Missouri.  A serious disruption, such as a flood or fire, to the main distribution center could damage our inventories and could materially impair our ability to distribute our products to customers in a timely manner or at a reasonable cost.  We could incur significantly higher costs and experience longer lead times associated with the distribution of our products to our customers during the time that it takes us to reopen or replace our distribution center and inventory levels.  As a result, any such disruption could have a material adverse effect on our business, sales and profitability.

At December 31, 2014, we had relationships with 96 third-party manufacturers.  Of those, we had long-term contracts with 44 manufacturers that produced items that accounted for approximately 80.1% of gross sales for the nine months ended December 31, 2014. At December 31, 2013, we had relationships with 58 third-party manufacturers.  Of those, we had long-term contracts with 21 manufacturers that produced items that accounted for approximately 86.3% of gross sales for the nine months ended December 31, 2013. The fact that we do not have long-term contracts with certain manufacturers means 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, financial condition and results from operations.

18. Business Segments

Beginning April 1, 2014, we began managing and reporting certain of our businesses separately and have therefore realigned our reportable segments to align with how we manage and evaluate the results of our business. These reportable segments consist of (i) North American OTC Healthcare, (ii) International OTC Healthcare and (iii) Household Cleaning. The results of our previously reported OTC Healthcare segment is now separated into two reporting segments, the North American OTC Healthcare segment and the International OTC Healthcare segment, largely to reflect our international expansion due to recent acquisitions. Prior year amounts were reclassified to conform to the current reportable segments discussed above. Segment information has been prepared in accordance with the Segment Reporting topic of the FASB ASC 280. 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 promotional expenses.

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The tables below summarize information about our reportable segments.

	Three Months Ended December 31, 2014
(In thousands)	North American OTC Healthcare			International OTC Healthcare		Household Cleaning		Consolidated
Gross segment revenues	$	160,655		$	17,071	$	20,218	$	197,944
Elimination of intersegment revenues	(1,509		)	—		—		(1,509		)
Third-party segment revenues	159,146			17,071		20,218		196,435
Other revenues	151			4		1,016		1,171
Total segment revenues	159,297			17,075		21,234		197,606
Cost of sales	63,479			6,247		16,135		85,861
Gross profit	95,818			10,828		5,099		111,745
Advertising and promotion	26,779			2,776		589		30,144
Contribution margin	$	69,039		$	8,052	$	4,510	81,601
Other operating expenses								24,608
Operating income								56,993
Other expense								23,459
Income before income taxes								33,534
Provision for income taxes								12,241
Net income								$	21,293

	Nine Months Ended December 31, 2014
(In thousands)	North American OTC Healthcare			International OTC Healthcare		Household Cleaning		Consolidated
Gross segment revenues	$	409,767		$	48,093	$	66,057	$	523,917
Elimination of intersegment revenues	(2,936		)	—		—		(2,936		)
Third-party segment revenues	406,831			48,093		66,057		520,981
Other revenues	478			62		3,056		3,596
Total segment revenues	407,309			48,155		69,113		524,577
Cost of sales	158,005			17,926		52,493		228,424
Gross profit	249,304			30,229		16,620		296,153
Advertising and promotion	64,573			8,151		1,560		74,284
Contribution margin	$	184,731		$	22,078	$	15,060	221,869
Other operating expenses								75,555
Operating income								146,314
Other expense								56,305
Income before income taxes								90,009
Provision for income taxes								35,521
Net income								$	54,488

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	Three Months Ended December 31, 2013
(In thousands)	North American OTC Healthcare			International OTC Healthcare		Household Cleaning		Consolidated
Gross segment revenues	$	117,476		$	8,214	$	19,532	$	145,222
Elimination of intersegment revenues	(1,509		)	—		—		(1,509		)
Third-party segment revenues	115,967			8,214		19,532		143,713
Other revenues	150			—		1,008		1,158
Total segment revenues	116,117			8,214		20,540		144,871
Cost of sales	45,886			3,144		15,373		64,403
Gross profit	70,231			5,070		5,167		80,468
Advertising and promotion	21,380			2,145		704		24,229
Contribution margin	$	48,851		$	2,925	$	4,463	56,239
Other operating expenses								15,781
Operating income								40,458
Other expense								36,272
Income before income taxes								4,186
Provision for income taxes								1,056
Net income								$	3,130

	Nine Months Ended December 31, 2013
(In thousands)	North American OTC Healthcare			International OTC Healthcare		Household Cleaning		Consolidated
Gross segment revenues	$	369,356		$	20,636	$	63,198	$	453,190
Elimination of intersegment revenues	(2,328		)	—		—		(2,328		)
Third-party segment revenues	367,028			20,636		63,198		450,862
Other revenues	450			14		3,002		3,466
Total segment revenues	367,478			20,650		66,200		454,328
Cost of sales	140,419			8,947		48,248		197,614
Gross profit	227,059			11,703		17,952		256,714
Advertising and promotion	61,477			3,855		2,125		67,457
Contribution margin	$	165,582		$	7,848	$	15,827	189,257
Other operating expenses								45,596
Operating income								143,661
Other expense								68,616
Income before income taxes								75,045
Provision for income taxes								18,431
Net income								$	56,614

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

	Three Months Ended December 31, 2014
(In thousands)	North American OTC Healthcare		International OTC Healthcare		Household Cleaning		Consolidated
Analgesics	$	28,187	$	657	$	—	$	28,844
Cough & Cold	31,927		3,831		—		35,758
Women's Health	31,364		589		—		31,953
Gastrointestinal	17,365		6,668		—		24,033
Eye & Ear Care	19,020		4,577		—		23,597
Dermatologicals	17,663		570		—		18,233
Oral Care	12,300		172		—		12,472
Other OTC	1,471		11		—		1,482
Household Cleaning	—		—		21,234		21,234
Total segment revenues	$	159,297	$	17,075	$	21,234	$	197,606

	Nine Months Ended December 31, 2014
(In thousands)	North American OTC Healthcare		International OTC Healthcare			Household Cleaning		Consolidated
Analgesics	$	82,290	$	2,114		$	—	$	84,404
Cough & Cold	76,741		14,090			—		90,831
Women's Health	40,851		1,765			—		42,616
Gastrointestinal	58,899		14,764			—		73,663
Eye & Ear Care	61,150		13,247			—		74,397
Dermatologicals	47,383		1,799			—		49,182
Oral Care	35,421		361		</