UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)                                     

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

For the quarterly period ended June 30, 2019

OR

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

For the transition period from ____ to _____

Commission File Number: 001-32433

PRESTIGE CONSUMER HEALTHCARE INC.

(Exact Name of Registrant as Specified in Its Charter)

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

660 White Plains Road

Tarrytown, New York 10591

(Address of Principal Executive Offices) (Zip Code)

(914) 524-6800

(Registrant's Telephone Number, Including Area Code)

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

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

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

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

Yes ☒      No ☐

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

Large Accelerated Filer	☒	Accelerated Filer	☐
Non-Accelerated Filer	☐	Smaller Reporting Company	☐
		Emerging Growth Company	☐

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

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

Yes ☐ No ☒

As of July 26, 2019, there were 50,241,294 shares of common stock outstanding.

Prestige Consumer Healthcare Inc.

Form 10-Q

Index

PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Statements of Income and Comprehensive Income for the three months ended June 30, 2019 and 2018 (unaudited)	2
	Condensed Consolidated Balance Sheets as of June 30, 2019 (unaudited) and March 31, 2019	3
	Condensed Consolidated Statements of Changes in Stockholders' Equity for the three months ended June 30, 2019 and 2018 (unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the three months ended June 30, 2019 and 2018 (unaudited)	5
	Notes to Condensed Consolidated Financial Statements (unaudited)	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30
Item 4.	Controls and Procedures	30
PART II.	OTHER INFORMATION
Item 1A.	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 5.	Other Information	31
Item 6.	Exhibits	32
	Signatures	33

Trademarks and Trade Names

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

- 1-

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Prestige Consumer Healthcare Inc.

Condensed Consolidated Statements of Income and Comprehensive Income

(Unaudited)

	Three Months Ended June 30,
(In thousands, except per share data)	2019			2018
Revenues
Net sales	$	232,133		$	253,954
Other revenues	21			26
Total revenues	232,154			253,980
Cost of Sales
Cost of sales excluding depreciation	97,100			112,069
Cost of sales depreciation	987			1,288
Cost of sales	98,087			113,357
Gross profit	134,067			140,623
Operating Expenses
Advertising and promotion	34,801			37,111
General and administrative	21,706			23,941
Depreciation and amortization	6,074			7,084
Total operating expenses	62,581			68,136
Operating income	71,486			72,487
Other (income) expense
Interest income	(43		)	(100		)
Interest expense	25,063			26,040
Other expense, net	416			87
Total other expense	25,436			26,027
Income before income taxes	46,050			46,460
Provision for income taxes	12,125			11,994
Net income	$	33,925		$	34,466
Earnings per share:
Basic	$	0.66		$	0.65
Diluted	$	0.65		$	0.65
Weighted average shares outstanding:
Basic	51,697			52,640
Diluted	52,047			52,942
Comprehensive income, net of tax:
Currency translation adjustments	(224		)	(2,974		)
Total other comprehensive loss	(224		)	(2,974		)
Comprehensive income	$	33,701		$	31,492

See accompanying notes.

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Prestige Consumer Healthcare Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands)	June 30, 2019			March 31, 2019
Assets
Current assets
Cash and cash equivalents	$	29,042		$	27,530
Accounts receivable, net of allowance of $12,059 and $12,965, respectively	142,927			148,787
Inventories	129,388			119,880
Prepaid expenses and other current assets	9,164			4,741
Total current assets	310,521			300,938
Property, plant and equipment, net	51,387			51,176
Operating lease right-of-use asset	16,097			—
Goodwill	578,309			578,583
Intangible assets, net	2,501,358			2,507,210
Other long-term assets	3,038			3,129
Total Assets	$	3,460,710		$	3,441,036
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable	$	62,109		$	56,560
Accrued interest payable	13,937			9,756
Operating lease liabilities, current portion	5,099			—
Other accrued liabilities	62,346			60,663
Total current liabilities	143,491			126,979
Long-term debt, net	1,779,380			1,798,598
Deferred income tax liabilities	403,750			399,575
Long-term operating lease liability, net of current portion	12,526			—
Other long-term liabilities	19,940			20,053
Total Liabilities	2,359,087			2,345,205
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 - 53,741 shares at June 30, 2019 and 53,670 shares at March 31, 2019	537			536
Additional paid-in capital	480,805			479,150
Treasury stock, at cost - 2,848 shares at June 30, 2019 and 1,871 shares at March 31, 2019	(89,493		)	(59,928		)
Accumulated other comprehensive loss, net of tax	(25,971		)	(25,747		)
Retained earnings	735,745			701,820
Total Stockholders' Equity	1,101,623			1,095,831
Total Liabilities and Stockholders' Equity	$	3,460,710		$	3,441,036

 See accompanying notes.

- 3-

Prestige Consumer Healthcare Inc.

Condensed Consolidated Statements of Changes in Stockholders' Equity

(Unaudited)

	Three Months Ended June 30, 2019
	Common Stock			Additional Paid-in Capital			Treasury Stock				Accumulated Other Comprehensive Loss			Retained Earnings		Totals
(In thousands)	Shares	Par Value					Shares	Amount
Balances at March 31, 2019	53,670	$	536	$	479,150		1,871	$	(59,928	)	$	(25,747	)	$	701,820	$	1,095,831
Stock-based compensation	—	—		1,381			—	—			—			—		1,381
Exercise of stock options	9	—		275			—	—			—			—		275
Issuance of shares related to restricted stock	62	1		(1		)	—	—			—			—		—
Treasury share repurchases	—	—		—			977	(29,565		)	—			—		(29,565		)
Net income	—	—		—			—	—			—			33,925		33,925
Comprehensive (loss) income	—	—		—			—	—			(224		)	—		(224		)
Balances at June 30, 2019	53,741	$	537	$	480,805		2,848	$	(89,493	)	$	(25,971	)	$	735,745	$	1,101,623

	Three Months Ended June 30, 2018
	Common Stock			Additional Paid-in Capital			Treasury Stock				Accumulated Other Comprehensive Loss			Retained Earnings		Totals
(In thousands)	Shares	Par Value					Shares	Amount
Balances at March 31, 2018	53,396	$	534	$	468,783		353	$	(7,669	)	$	(19,315	)	$	736,277	$	1,178,610
Adoption of new accounting pronouncement	—	—		—			—	—			—			1,343		1,343
Stock-based compensation	—	—		1,657			—	—			—			—		1,657
Exercise of stock options	33	—		880			—	—			—			—		880
Issuance of shares related to restricted stock	174	2		(2		)	—	—			—			—		—
Treasury share repurchases	—	—		—			1,518	(52,259		)	—			—		(52,259		)
Net income	—	—		—			—	—			—			34,466		34,466
Comprehensive (loss) income	—	—		—			—	—			(2,974		)	—		(2,974		)
Balances at June 30, 2018	53,603	$	536	$	471,318		1,871	$	(59,928	)	$	(22,289	)	$	772,086	$	1,161,723

See accompanying notes.

- 4-

Prestige Consumer Healthcare Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Three Months Ended June 30,
(In thousands)	2019			2018
Operating Activities
Net income	$	33,925		$	34,466
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	7,061			8,372
Loss on disposal of property and equipment	20			1
Deferred income taxes	4,206			6,755
Amortization of debt origination costs	851			920
Stock-based compensation costs	1,381			1,657
Non-cash operating lease cost	1,338			—
Changes in operating assets and liabilities:
Accounts receivable	5,808			(4,357		)
Inventories	(8,939		)	(9,303		)
Prepaid expenses and other current assets	(4,335		)	623
Accounts payable	5,306			16,479
Accrued liabilities	7,616			347
Operating lease liabilities	(1,368		)	—
Other	(93		)	(108		)
Net cash provided by operating activities	52,777			55,852
Investing Activities
Purchases of property, plant and equipment	(1,956		)	(2,469		)
Net cash used in investing activities	(1,956		)	(2,469		)
Financing Activities
Borrowings under revolving credit agreement	15,000			20,000
Repayments under revolving credit agreement	(35,000		)	(20,000		)
Proceeds from exercise of stock options	275			880
Fair value of shares surrendered as payment of tax withholding	(799		)	(2,281		)
Repurchase of common stock	(28,766		)	(49,978		)
Net cash used in financing activities	(49,290		)	(51,379		)
Effects of exchange rate changes on cash and cash equivalents	(19		)	(283		)
Increase in cash and cash equivalents	1,512			1,721
Cash and cash equivalents - beginning of period	27,530			32,548
Cash and cash equivalents - end of period	$	29,042		$	34,269
Interest paid	$	19,966		$	20,907
Income taxes paid	$	1,807		$	334

See accompanying notes.

- 5-

Prestige Consumer Healthcare Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

1.    Business and Basis of Presentation

Nature of Business

Prestige Consumer Healthcare Inc. (referred to herein as the “Company” or “we,” which reference shall, unless the context requires otherwise, be deemed to refer to Prestige Consumer Healthcare Inc. and all of its direct and indirect 100% owned subsidiaries on a consolidated basis) is engaged in the development, manufacturing, marketing, sales and distribution of over-the-counter (“OTC”) healthcare and household cleaning products (prior to the sale of our Household Cleaning segment, as discussed in Note 2) to mass merchandisers and drug, food, dollar, convenience and club stores and e-commerce channels in North America (the United States and Canada), and in Australia and certain other international markets.  Prestige Consumer Healthcare Inc. is a holding company with no operations and is also the parent guarantor of the senior credit facility and the senior notes described in Note 8.

Basis of Presentation

The unaudited Condensed Consolidated Financial Statements presented herein have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial reporting and the instructions to Form 10-Q and Article 10 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.  All significant intercompany transactions and balances have been eliminated in consolidation.  In the opinion of management, these Condensed Consolidated Financial Statements include all adjustments, consisting of normal recurring adjustments, that are considered necessary for a fair statement of our consolidated financial position, results of operations and cash flows for the interim periods presented.  Our fiscal year ends on March 31^st of each year. References in these Condensed Consolidated Financial Statements or related notes to a year (e.g., 2020) mean our fiscal year ending or ended on March 31^st of that year. Operating results for the three months ended June 30, 2019 are not necessarily indicative of results that may be expected for the fiscal year ending March 31, 2020.  These unaudited Condensed Consolidated Financial Statements and related notes should be read in conjunction with our audited Consolidated Financial Statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2019.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period.  Although these estimates are based on our knowledge of current events and actions that we may undertake in the future, actual results could differ from those estimates. Our most significant estimates include those made in connection with the valuation of intangible assets, stock-based compensation, fair value of debt, sales returns and allowances, trade promotional allowances, inventory obsolescence, and accounting for income taxes and related uncertain tax positions.  

Recently Adopted Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This update amends a number of aspects of lease accounting, including requiring lessees to recognize all leases with a term greater than one year as a right-of-use ("ROU") asset and corresponding lease liability, measured at the present value of the lease payments. On April 1, 2019, we adopted Topic 842 using the modified retrospective approach. Results for the three months ended June 30, 2019 are presented under Topic 842. No prior period amounts were adjusted and the prior period continues to be reported in accordance with previous lease guidance, ASC Topic 840, Leases.

The new standard provides a number of optional practical expedients in transition. We elected the package of transition provisions available for expired or existing contracts, which allowed us to carryforward our historical assessments of (1) whether contracts are or contain leases, (2) lease classification and (3) initial direct costs.

The effects of this recently adopted accounting pronouncement to our Consolidated Balance Sheet as of April 1, 2019 are as follows:

- 6-

(In thousands)	March 31, 2019			New Lease Standard Adjustment			April 1, 2019
Assets:
Operating lease ROU assets	$	—		$	17,435		$	17,435
Liabilities:
Operating lease liabilities, current portion	$	—		$	(5,697	)	$	(5,697	)
Long-term operating lease liabilities, net of current portion	$	—		$	(13,296	)	$	(13,296	)
Other accrued liabilities (1)	$	(60,663	)	$	1,558		$	(59,105	)

(1) Relates to deferred rent and exit costs associated with existing leases.

Adoption of this accounting pronouncement had no impact on our other financial statements.

See Note 6 for our lease accounting policy.

Recently Issued Accounting Pronouncements

In August 2018, the FASB issued ASU 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Topic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans. The amendments in this update modify the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans by eliminating certain required disclosures and incorporating others. The amendments are effective for public companies for fiscal years ending after December 15, 2020. We do not expect the adoption of this standard to have a material impact on our Consolidated Financial Statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. The amendments in this update modify the disclosure requirements in Topic 820, with a particular focus on Level 3 investments, by eliminating certain required disclosures and incorporating others. The amendments are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. We do not expect the adoption of this standard to have a material impact on our Consolidated Financial Statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments. The amendments in this update provide financial statement users with more useful information about expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. In April 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. These amendments clarify and improve areas of guidance related to recently issued standards on the topics of credit losses, hedging and recognition and measurements. In May 2019, the FASB issued ASU 2019-05, Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief, which provides entities that have certain instruments an option to irrevocably elect the fair value option in Subtopic 825-10. The amendments in these updates are effective for us for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. We are currently evaluating the impact of adopting this guidance on our Consolidated Financial Statements.

2.    Divestitures

On July 2, 2018, we sold the Comet®, Spic and Span®, Chore Boy®, Chlorinol® and Cinch® brands, as well as associated inventory. These brands represented our Household Cleaning segment.

As a result of this transaction, we received proceeds of approximately $65.9 million and recorded a pre-tax gain on sale of $1.3 million. The net proceeds were used to repay debt. 

- 7-

3.     Inventories

Inventories consist of the following:

(In thousands)	June 30, 2019		March 31, 2019
Components of Inventories
Packaging and raw materials	$	14,367	$	17,082
Work in process	342		161
Finished goods	114,679		102,637
Inventories	$	129,388	$	119,880

Inventories are carried and depicted above at the lower of cost or net realizable value, which includes a reduction in inventory values of $5.6 million and $5.5 million at June 30, 2019 and March 31, 2019, respectively, related to obsolete and slow-moving inventory.

4.    Goodwill

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

(In thousands)		North American OTC Healthcare			International OTC Healthcare			Consolidated
Balance - March 31, 2019
	Goodwill	$	711,104		$	31,190		$	742,294
	Accumulated impairment loss	(163,711		)	—			(163,711		)
Balance - March 31, 2019		547,393			31,190			578,583
	2020 Reductions:
	Effects of foreign currency exchange rates	—			(274		)	(274		)
Balance - June 30, 2019
	Goodwill	711,104			30,916			742,020
	Accumulated impairment loss	(163,711		)	—			(163,711		)
Balance - June 30, 2019		$	547,393		$	30,916		$	578,309

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. The date of our annual impairment review was February 28, 2019, and we recorded impairment charges in our March 31, 2019 financial statements. We utilize the discounted cash flow method to estimate the fair value of our reporting units as part of the goodwill impairment test. We also considered our market capitalization at February 28, 2019, which was the date of our annual review, 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, increasing competition, changing consumer preferences, technical advances, or reductions in advertising and promotion may require an additional impairment charge to be recorded in the future. As of June 30, 2019, no events have occurred that would indicate further potential impairment of goodwill.

- 8-

5.    Intangible Assets, net

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

(In thousands)	Indefinite- Lived Trademarks			Finite-Lived Trademarks and Customer Relationships			Totals
Gross Carrying Amounts
Balance — March 31, 2019	$	2,273,191		$	390,283		$	2,663,474
Effects of foreign currency exchange rates	(897		)	(63		)	(960		)
Balance — June 30, 2019	2,272,294			390,220			2,662,514
Accumulated Amortization
Balance — March 31, 2019	—			156,264			156,264
Additions	—			4,906			4,906
Effects of foreign currency exchange rates	—			(14		)	(14		)
Balance — June 30, 2019	—			161,156			161,156
Intangible assets, net - June 30, 2019	$	2,272,294		$	229,064		$	2,501,358

Amortization expense was $4.9 million for the three months ended June 30, 2019, and $5.8 million for the three months ended June 30, 2018.  Based on our amortizable intangible assets as of June 30, 2019, amortization expense is expected to be approximately $14.7 million for the remainder of fiscal 2020, $19.6 million in each of fiscal 2021, 2022, 2023 and 2024 and $135.9 million thereafter.

Under accounting guidelines, indefinite-lived assets are not amortized, but must be tested for impairment annually, or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of the asset below the carrying amount. The date of our annual impairment review was February 28, 2019, and we recorded impairment charges in our March 31, 2019 financial statements. Additionally, at each reporting period, an evaluation must be made to determine whether events and circumstances continue to support an indefinite useful life.  Intangible assets with finite lives are amortized over their respective estimated useful lives and are also tested for impairment whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable and exceeds its fair value.

We utilize the excess earnings method to estimate the fair value of our individual indefinite-lived intangible assets.  The discount rate utilized in the analyses, as well as future cash flows, may be influenced by such factors as changes in interest rates and rates of inflation.  Additionally, should the related fair values of intangible assets be adversely affected as a result of declining sales or margins caused by competition, changing consumer preferences, technological advances or reductions in advertising and promotional expenses, we may be required to record additional impairment charges in the future.

As of June 30, 2019, no events have occurred that would indicate further potential impairment of intangible assets.

6.    Leases

We lease real estate and equipment for use in our operations. These leases have lease terms of 1 to 10 years, some of which include options to terminate or extend leases for up to 1 to 6 years or on a month-to-month basis. The exercise of lease renewal options is at our sole discretion and our lease right-of-use assets and liabilities reflect only the options we are reasonably certain that we will exercise.

We determine if an arrangement is or contains a lease at inception by assessing whether the arrangement contains an identified asset and whether we have the right to control the identified asset. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Lease liabilities are recognized at the lease commencement date based on the present value of future lease payments over the lease term. ROU assets are based on the measurement of the lease liability and also include any lease payments made prior to or on lease commencement and exclude lease incentives and initial direct costs incurred, as applicable.

- 9-

Variable lease payments, which do not vary based on an index or rate, are excluded from the ROU asset and lease liability determination. Variable lease payments are typically usage-based and are recorded in the period in which the obligation for those payments is incurred. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

As the implicit rate in our leases is unknown, we used our incremental borrowing rate based on the information available at the date of adoption for existing leases and at the lease commencement date for new leases in determining the present value of future lease payments. We give consideration to our credit risk, term of the lease, total lease payments and adjust for the impacts of collateral, as necessary, when calculating our incremental borrowing rates. Rent expense for our operating leases is recognized on a straight-line basis over the lease term.

For the measurement and classification of our lease agreements, we group lease and non-lease components into a single lease component for all underlying asset classes. We have also elected to exclude any leases within our existing classes of assets with a term of twelve months or less.

The components of lease expense for the three months ended June 30, 2019 was as follows:

(In thousands)
Operating lease cost	$	1,216
Short term lease cost	23
Variable lease cost	16,599
Sublease income	(914		)
Total net lease cost	$	16,924

As of June 30, 2019, the maturities of operating lease liabilities were as follows:

(In thousands)
Year Ending March 31,
2020 (Remaining nine months ending March 31, 2020)	$	4,577
2021	3,450
2022	2,488
2023	1,794
2024	1,705
Thereafter	6,761
Total undiscounted lease payments	20,775
Less imputed interest	(3,150		)
Total present value of lease payments	$	17,625

As of June 30, 2019, the weighted average remaining lease term was 6.24 years and the weighted average discount rate used to determine the operating lease liability was 5.21%.

The following table summarizes future minimum lease payments for our operating leases as of March 31, 2019, before adoption of ASC 842:

(In thousands)	Facilities		Equipment		Total
Year Ending March 31,
2020	$	2,828	$	314	$	3,142
2021	2,633		248		2,881
2022	2,265		213		2,478
2023	1,684		105		1,789
2024	1,705		—		1,705
Thereafter	6,780		—		6,780
	$	17,895	$	880	$	18,775

- 10-

On May 13, 2019, we entered into a Master Logistics Services Agreement with GEODIS Logistics LLC (“GEODIS”), pursuant to which GEODIS will serve as a new third party logistics provider. The agreement will have an initial term of five years with an option to renew for an additional five year term. Under the Master Logistics Services Agreement, we have authorized GEODIS to lease a facility under a five year term.  The lease commenced in July 2019 and the lease and non-lease components will be recorded in our second quarter fiscal year 2020 financial statements.  The right-of-use asset and operating lease liability at lease commencement was approximately $20.5 million.

7.    Other Accrued Liabilities

Other accrued liabilities consist of the following:

(In thousands)	June 30, 2019		March 31, 2019
Accrued marketing costs	$	31,886	$	31,228
Accrued compensation costs	5,701		10,958
Accrued broker commissions	1,057		1,361
Income taxes payable	5,640		88
Accrued professional fees	2,284		2,441
Accrued production costs	9,252		6,788
Other accrued liabilities	6,526		7,799
	$	62,346	$	60,663

8.    Long-Term Debt

At June 30, 2019, we had $55.0 million outstanding on the asset-based revolving credit facility entered into January 31, 2012, as amended (the "2012 ABL Revolver") and an additional borrowing capacity of $102.7 million.

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

(In thousands, except percentages)	June 30, 2019			March 31, 2019
2016 Senior Notes bearing interest at 6.375%, with interest payable on March 1 and September 1 of each year. The 2016 Senior Notes mature on March 1, 2024.	$	600,000		$	600,000
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 Term B-5 Loans bearing interest at the Borrower's option at either LIBOR plus a margin of 2.00%, with a LIBOR floor of 0.00%, or an alternate base rate plus a margin of 1.00%, with a floor of 1.00%, due on January 26, 2024.	738,000			738,000
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 26, 2022.	55,000			75,000
Long-term debt	1,793,000			1,813,000
Less: unamortized debt costs	(13,620		)	(14,402		)
Long-term debt, net	$	1,779,380		$	1,798,598

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As of June 30, 2019, aggregate future principal payments required in accordance with the terms of the 2012 Term B-5 Loans, 2012 ABL Revolver and the indentures governing the 6.375% senior unsecured notes due 2024 (the "2016 Senior Notes") and the 5.375% senior unsecured notes due 2021 (the "2013 Senior Notes") are as follows:

(In thousands)
Year Ending March 31,	Amount
2020 (remaining nine months ending March 31, 2020)	$	—
2021	—
2022	455,000
2023	—
2024	1,338,000
Thereafter	—
	$	1,793,000

9.    Fair Value Measurements

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

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

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

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

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

The market values have been determined based on market values for similar instruments adjusted for certain factors. As such, the 2016 Senior Notes, the 2013 Senior Notes, the 2012 Term B-5 Loans, and the 2012 ABL Revolver are measured in Level 2 of the above hierarchy. See summary below detailing the carrying amounts and estimated fair values of these borrowings at June 30, 2019 and March 31, 2019.

	June 30, 2019				March 31, 2019
(In thousands)	Carrying Value		Fair Value		Carrying Value		Fair Value
2016 Senior Notes	$	600,000	$	627,000	$	600,000	$	606,000
2013 Senior Notes	400,000		403,000		400,000		401,500
2012 Term B-5 Loans	738,000		733,388		738,000		728,775
2012 ABL Revolver	55,000		55,000		75,000		75,000

At June 30, 2019 and March 31, 2019, we did not have any assets or liabilities measured in Level 1 or 3.

10.    Stockholders' Equity

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

Each share of common stock has the right to one vote on all matters submitted to a vote of stockholders.  The holders of common stock are also entitled to receive dividends whenever funds are legally available and when declared by the Board of Directors,

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subject to prior rights of holders of all classes of outstanding stock having priority rights as to dividends.  No dividends have been declared or paid on our common stock through June 30, 2019.

During the three months ended June 30, 2019 and 2018, we repurchased 26,264 shares and 68,939 shares, respectively, of common stock from our employees pursuant to the provisions of various employee restricted stock awards. The repurchases for the three months ended June 30, 2019 and 2018 were at an average price of $30.44 and $33.09, respectively. All of the repurchased shares have been recorded as treasury stock.

During the three months ended June 30, 2019 and 2018, we also repurchased 949,825 shares and 1,449,750 shares, respectively, of our common stock in conjunction with our share repurchase program. The repurchases for the three months ended June 30, 2019 and 2018 were at an average price of $30.29 and $34.47, respectively and totaled $28.8 million and $50.0 million, respectively. All of the repurchased shares have been recorded as treasury stock.

11.    Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss consisted of the following at June 30, 2019 and March 31, 2019:

(In thousands)	June 30, 2019			March 31, 2019
Components of Accumulated Other Comprehensive Loss
Cumulative translation adjustment	$	(27,102	)	$	(26,878	)
Unrecognized net gain on pension plans	1,131			1,131
Accumulated other comprehensive loss, net of tax	$	(25,971	)	$	(25,747	)

As of June 30, 2019 and March 31, 2019, no amounts were reclassified from accumulated other comprehensive loss into earnings.

12.    Earnings Per Share

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

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

	Three Months Ended June 30,
(In thousands, except per share data)	2019		2018
Numerator
Net income	$	33,925	$	34,466
Denominator
Denominator for basic earnings per share — weighted average shares outstanding	51,697		52,640
Dilutive effect of nonvested restricted stock units and options issued to employees and directors	350		302
Denominator for diluted earnings per share	52,047		52,942
Earnings per Common Share:
Basic earnings per share	$	0.66	$	0.65
Diluted earnings per share	$	0.65	$	0.65

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For the three months ended June 30, 2019 and 2018, there were 1.0 million and 0.8 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.

13.    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 grants of up to a maximum of 5.0 million shares of restricted stock, stock options, RSUs and other equity-based awards. In June 2014, the Board of Directors approved, and in July 2014, our stockholders ratified, an increase of an additional 1.8 million shares of our common stock for issuance under the Plan, an increase of the maximum number of shares subject to stock options that may be awarded to any one participant under the Plan during any fiscal 12-month period from 1.0 million to 2.5 million shares, and an extension of the term of the Plan by ten years, to February 2025.  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 months ended June 30, 2019 and 2018, pre-tax share-based compensation costs charged against income were $1.4 million and $1.7 million, respectively, and the related income tax recognized was a benefit of $0.2 million and a benefit of $0.2 million, respectively.

At June 30, 2019, there were $11.0 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 1.1 years.  The total fair value of options and RSUs vested during the three months ended June 30, 2019 and 2018 was $6.1 million and $10.7 million, respectively.  For the three months ended June 30, 2019 and 2018, we received cash from the exercise of stock options of $0.3 million and $0.9 million, respectively. For the three months ended June 30, 2019 and 2018, we realized $0.4 million and $1.2 million, respectively, in tax benefits from the tax deductions resulting from RSU issuances and stock option exercises. At June 30, 2019, there were 1.4 million shares available for issuance under the Plan.

On May 6, 2019, the Compensation and Talent Management Committee of our Board of Directors granted 98,644 performance stock units, 89,286 RSUs and stock options to acquire 281,487 shares of our common stock to certain executive officers and employees under the Plan. The stock options were granted at an exercise price of $30.56 per share, which was equal to the closing price for our common stock on the date of the grant.

On May 13, 2019, the Compensation and Talent Management Committee of our Board of Directors granted 7,287 RSUs and stock options to acquire 21,194 shares of our common stock to a recently hired executive officer under the Plan. The stock options were granted at an exercise price of $30.19 per share, which was equal to the closing price for our common stock on the date of the grant.

Restricted Stock Units

RSUs granted to employees under the Plan generally vest in three years, primarily upon the attainment of certain time vesting thresholds, and, in the case of performance share units, may also be contingent on the attainment of certain performance goals of the Company, including revenue and earnings before income taxes, depreciation and amortization targets.  The RSUs provide for accelerated vesting if there is a change of control, as defined in the Plan.  The RSUs granted to employees generally vest either ratably over three years or in their entirety on the three-year anniversary of the date of the grant. Upon vesting, the units will be settled in shares of our common stock. Termination of employment prior to vesting will result in forfeiture of the RSUs, unless otherwise accelerated by the Compensation and Talent Management Committee or, in the case of RSUs granted in May 2017, 2018 and 2019, subject to pro-rata vesting in the event of death, disability or retirement. The RSUs granted to directors prior to fiscal 2020 vest immediately upon grant, and will be settled by delivery to the director of one share of our common stock for each vested RSU promptly following the earliest of the (i) director's death, (ii) director's disability or (iii) six-month anniversary of the date on which the director's Board membership ceases for reasons other than death or disability. See Note 19 for a description of RSUs granted to directors in July 2019.

The fair value of the RSUs is determined using the closing price of our common stock on the date of the grant.

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A summary of the RSUs granted under the Plan is presented below:

RSUs	Shares (in thousands)		Weighted Average Grant-Date Fair Value
Three Months Ended June 30, 2018
Vested and nonvested at March 31, 2018	393.5		$	44.13
Granted	203.8		29.46
Vested and issued	(173.4	)	43.00
Forfeited	(31.1	)	48.32
Vested and nonvested at June 30, 2018	392.8		36.68
Vested at June 30, 2018	90.5		29.88
Three Months Ended June 30, 2019
Vested and nonvested at March 31, 2019	413.0		$	36.58
Granted	195.2		30.55
Vested and issued	(61.8	)	48.04
Forfeited	(25.2	)	36.85
Vested and nonvested at June 30, 2019	521.2		32.94
Vested at June 30, 2019	113.2		31.05

Options

The Plan provides that the exercise price of options granted shall be no less than the fair market value of our 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 three to five years.  The option awards provide for accelerated vesting in the event of a change in control, as defined in the Plan. Except in the case of death, disability or retirement, termination of employment prior to vesting will result in forfeiture of the nonvested stock options. Vested stock options will remain exercisable by the employee after termination of employment, subject to the terms 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 our historical experience, 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 options.  

The weighted average grant-date fair values of the options granted during the three months ended June 30, 2019 and 2018 were $10.83 and $10.22, respectively.

	Three Months Ended June 30,
	2019		2018
Expected volatility	30.9% - 31.3%		29.6		%
Expected dividends	$	—	$	—
Expected term in years	6.0 to 7.0		6.0
Risk-free rate	2.3% to 2.4%		2.9		%

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

Options	Shares (in thousands)		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (in thousands)
Three Months Ended June 30, 2018
Outstanding at March 31, 2018	873.2		$	41.79
Granted	294.5		29.46
Exercised	(32.8	)	26.81
Forfeited or expired	(72.7	)	45.00
Outstanding at June 30, 2018	1,062.2		38.61		7.6	$	6,573
Vested at June 30, 2018	599.8		37.99		6.2	$	4,054
Three Months Ended June 30, 2019
Outstanding at March 31, 2019	944.6		$	38.45
Granted	302.7		30.53
Exercised	(9.3	)	29.46
Forfeited or expired	(95.9	)	42.62
Outstanding at June 30, 2019	1,142.1		36.07		7.5	$	2,540
Vested at June 30, 2019	628.6		38.70		6.0	$	2,206

The aggregate intrinsic value of options exercised during the three months ended June 30, 2019 was less than $0.1 million.

14.    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 rates used in the calculation of income taxes were 26.3% and 25.8% for the three months ended June 30, 2019 and 2018, respectively. The increase in the effective tax rate for the three months ended June 30, 2019 versus the prior year period was primarily related to discrete items arising from stock compensation.

15.     Employee Retirement Plans

The primary components of Net Periodic Benefits consist of the following:

	Three Months Ended June 30,
(In thousands)	2019			2018
Interest cost	$	577		$	610
Expected return on assets	(721		)	(768		)
Net periodic benefit income	$	(144	)	$	(158	)

During the three months ended June 30, 2019, we contributed $0.1 million to our non-qualified defined benefit plan and made no contributions to the qualified defined benefit plan. During the remainder of fiscal 2020, we expect to contribute an additional $0.3 million to our non-qualified plan and make a $1.0 million contribution to the qualified plan.

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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 business, financial condition, or results of operations.

17.    Concentrations of Risk

Our revenues are concentrated in the area of OTC Healthcare. We sell our products to mass merchandisers and drug, food, dollar, convenience and club stores and e-commerce channels.  During the three months ended June 30, 2019 and 2018, approximately 44.1% and 42.6%, respectively, of our gross 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 24.2% and 24.6%, respectively, of our gross revenues for the three months ended June 30, 2019 and 2018, respectively. The gross revenues for Walmart are included in our North American OTC Healthcare segment and Household Cleaning segment (prior to the sale of our Household Cleaning segment on July 2, 2018).

Our product distribution in the United States is currently managed by a third party through one primary distribution center near St. Louis, Missouri, and we operate one manufacturing facility for certain of our products located in Lynchburg, Virginia. On May 13, 2019, we entered into an agreement with a second third party logistics provider for a warehouse, and we intend to transition to this facility, which will be managed by a new logistics provider. A serious disruption, caused by performance or contractual issues with a third party distribution manager or by earthquake, flood, or fire, could damage our inventory and/or materially impair our ability to distribute our products to customers in a timely manner or at a reasonable cost. Any disruption as a result of business integration, transition of our distribution center to the new third party manager or new location, or third party performance at our distribution centers could result in increased costs, expense and/or shipping times, and could cause us to incur customer fees and penalties. In addition, any serious disruption to our Lynchburg manufacturing facility could materially impair our ability to manufacture many of the products associated with our acquisition of C.B. Fleet Company, Inc. ("Fleet"), which would also limit our ability to provide those products to customers in a timely manner or at a reasonable cost.  We could also incur significantly higher costs and experience longer lead times if we need to replace our distribution centers, the third party distribution managers or the manufacturing facility.  As a result, any serious disruption could have a material adverse effect on our business, financial condition and results of operations.

At June 30, 2019, we had relationships with