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 September 30, 2020

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 October 30, 2020, there were 50,103,802 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 and six months ended September 30, 2020 and 2019 (unaudited)	2
	Condensed Consolidated Balance Sheets as of September 30, 2020 and March 31, 2020 (unaudited)	3
	Condensed Consolidated Statements of Changes in Stockholders' Equity for the three and six months ended September 30, 2020 and 2019 (unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the six months ended September 30, 2020 and 2019 (unaudited)	6
	Notes to Condensed Consolidated Financial Statements (unaudited)	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4.	Controls and Procedures	37
PART II.	OTHER INFORMATION
Item 1A.	Risk Factors	38
Item 2.	Issuer Purchases of Equity Securities	38
Item 6.	Exhibits	39
	Signatures	40

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.

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PART I.    FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

Prestige Consumer Healthcare Inc.

Condensed Consolidated Statements of Income and Comprehensive Income

(Unaudited)

	Three Months Ended September 30,				Six Months Ended September 30,
(In thousands, except per share data)	2020		2019		2020		2019
Revenues
Net sales	$	237,409	$	238,051	$	466,793	$	470,184
Other revenues	13		18		23		39
Total revenues	237,422		238,069		466,816		470,223
Cost of Sales
Cost of sales excluding depreciation	98,239		100,318		192,363		197,418
Cost of sales depreciation	1,522		1,000		2,924		1,987
Cost of sales	99,761		101,318		195,287		199,405
Gross profit	137,661		136,751		271,529		270,818
Operating Expenses
Advertising and marketing	38,341		38,667		66,091		73,468
General and administrative	20,388		22,514		40,322		44,220
Depreciation and amortization	6,029		6,222		12,094		12,296
Total operating expenses	64,758		67,403		118,507		129,984
Operating income	72,903		69,348		153,022		140,834
Other (income) expense
Interest expense, net	21,266		24,477		43,207		49,497
Other (income) expense, net	(259)		859		(249)		1,275
Total other expense	21,007		25,336		42,958		50,772
Income before income taxes	51,896		44,012		110,064		90,062
Provision for income taxes	7,307		10,760		21,769		22,885
Net income	$	44,589	$	33,252	$	88,295	$	67,177
Earnings per share:
Basic	$	0.89	$	0.66	$	1.76	$	1.32
Diluted	$	0.88	$	0.65	$	1.74	$	1.31
Weighted average shares outstanding:
Basic	50,330		50,455		50,297		51,073
Diluted	50,661		50,811		50,672		51,426
Comprehensive income, net of tax:
Currency translation adjustments	3,665		(3,584)		14,255		(3,808)
Unrealized gain on interest rate swaps	985		—		1,294		—
Total other comprehensive income (loss)	4,650		(3,584)		15,549		(3,808)
Comprehensive income	$	49,239	$	29,668	$	103,844	$	63,369

See accompanying notes.

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Prestige Consumer Healthcare Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands)	September 30, 2020		March 31, 2020
Assets
Current assets
Cash and cash equivalents	$	26,603	$	94,760
Accounts receivable, net of allowance of $18,450 and $20,194, respectively	122,207		150,517
Inventories	114,026		116,026
Prepaid expenses and other current assets	7,017		4,351
Total current assets	269,853		365,654
Property, plant and equipment, net	65,161		55,988
Operating lease right-of-use assets	26,211		28,888
Finance lease right-of-use assets, net	10,897		5,842
Goodwill	577,919		575,179
Intangible assets, net	2,481,236		2,479,391
Other long-term assets	3,029		2,963
Total Assets	$	3,434,306	$	3,513,905
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable	$	55,423	$	62,375
Accrued interest payable	7,515		9,911
Operating lease liabilities, current portion	5,411		5,612
Finance lease liabilities, current portion	2,648		1,220
Other accrued liabilities	65,123		70,763
Total current liabilities	136,120		149,881
Long-term debt, net	1,548,100		1,730,300
Deferred income tax liabilities	416,383		407,812
Long-term operating lease liabilities, net of current portion	22,450		24,877
Long-term finance lease liabilities, net of current portion	8,428		4,626
Other long-term liabilities	24,608		25,438
Total Liabilities	2,156,089		2,342,934
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 - 53,941 shares at September 30, 2020 and 53,805 shares at March 31, 2020	539		538
Additional paid-in capital	493,756		488,116
Treasury stock, at cost - 3,779 shares at September 30, 2020 and 3,719 shares at March 31, 2020	(119,862)		(117,623)
Accumulated other comprehensive loss, net of tax	(28,612)		(44,161)
Retained earnings	932,396		844,101
Total Stockholders' Equity	1,278,217		1,170,971
Total Liabilities and Stockholders' Equity	$	3,434,306	$	3,513,905

 See accompanying notes.

-3-

Prestige Consumer Healthcare Inc.

Condensed Consolidated Statements of Changes in Stockholders' Equity

(Unaudited)

	Three Months Ended September 30, 2020
	Common Stock			Additional Paid-in Capital		Treasury Stock			Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Totals
(In thousands)	Shares	Par Value				Shares	Amount
Balances at June 30, 2020	53,939	$	539	$	490,795	3,750	$	(118,865)	$	(33,262)	$	887,807	$	1,227,014
Stock-based compensation	—	—		2,892		—	—		—		—		2,892
Exercise of stock options	2	—		69		—	—		—		—		69
Treasury share repurchases	—	—		—		29	(997)		—		—		(997)
Net income	—	—		—		—	—		—		44,589		44,589
Comprehensive income	—	—		—		—	—		4,650		—		4,650
Balances at September 30, 2020	53,941	$	539	$	493,756	3,779	$	(119,862)	$	(28,612)	$	932,396	$	1,278,217

	Three Months Ended September 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 June 30, 2019	53,741	$	537	$	480,805	2,848	$	(89,493)	$	(25,971)	$	735,745	$	1,101,623
Stock-based compensation	—	—		2,521		—	—		—		—		2,521
Exercise of stock options	9	—		269		—	—		—		—		269
Issuance of shares related to restricted stock	5	—		—		—	—		—		—		—
Treasury share repurchases	—	—		—		675	(21,291)		—		—		(21,291)
Net income	—	—		—		—	—		—		33,252		33,252
Comprehensive loss	—	—		—		—	—		(3,584)		—		(3,584)
Balances at September 30, 2019	53,755	$	537	$	483,595	3,523	$	(110,784)	$	(29,555)	$	768,997	$	1,112,790

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	Six Months Ended September 30, 2020
	Common Stock			Additional Paid-in Capital		Treasury Stock			Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Totals
(In thousands)	Shares	Par Value				Shares	Amount
Balances at March 31, 2020	53,805	$	538	$	488,116	3,719	$	(117,623)	$	(44,161)	$	844,101	$	1,170,971
Stock-based compensation	—	—		4,356		—	—		—		—		4,356
Exercise of stock options	62	—		1,285		—	—		—		—		1,285
Issuance of shares related to restricted stock	74	1		(1)		—	—		—		—		—
Treasury share repurchases	—	—		—		60	(2,239)		—		—		(2,239)
Net income	—	—		—		—	—		—		88,295		88,295
Comprehensive income	—	—		—		—	—		15,549		—		15,549
Balances at September 30, 2020	53,941	$	539	$	493,756	3,779	$	(119,862)	$	(28,612)	$	932,396	$	1,278,217

	Six Months Ended September 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	—	—		3,902		—	—		—		—		3,902
Exercise of stock options	18	—		544		—	—		—		—		544
Issuance of shares related to restricted stock	67	1		(1)		—	—		—		—		—
Treasury share repurchases	—	—		—		1,652	(50,856)		—		—		(50,856)
Net income	—	—		—		—	—		—		67,177		67,177
Comprehensive loss	—	—		—		—	—		(3,808)		—		(3,808)
Balances at September 30, 2019	53,755	$	537	$	483,595	3,523	$	(110,784)	$	(29,555)	$	768,997	$	1,112,790

See accompanying notes.

-5-

Prestige Consumer Healthcare Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Six Months Ended September 30,
(In thousands)	2020		2019
Operating Activities
Net income	$	88,295	$	67,177
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	15,018		14,283
Loss on disposal of property and equipment	131		19
Deferred income taxes	3,656		5,827
Amortization of debt origination costs	2,918		1,711
Stock-based compensation costs	4,356		3,902
Non-cash operating lease cost	3,587		3,154
Interest expense relating to finance lease liability	109		—
Changes in operating assets and liabilities:
Accounts receivable	29,358		5,982
Inventories	3,213		(6,400)
Prepaid expenses and other current assets	(2,476)		(3,128)
Accounts payable	(9,183)		8,465
Accrued liabilities	(8,125)		6,616
Operating lease liabilities	(3,446)		(3,398)
Other	(118)		(1,210)
Net cash provided by operating activities	127,293		103,000
Investing Activities
Purchases of property, plant and equipment	(11,619)		(5,822)
Net cash used in investing activities	(11,619)		(5,822)
Financing Activities
Term loan repayments	(130,000)		—
Borrowings under revolving credit agreement	—		30,000
Repayments under revolving credit agreement	(55,000)		(76,000)
Payments of finance leases	(712)		—
Proceeds from exercise of stock options	1,285		544
Fair value of shares surrendered as payment of tax withholding	(1,242)		(880)
Repurchase of common stock	(997)		(49,976)
Net cash used in financing activities	(186,666)		(96,312)
Effects of exchange rate changes on cash and cash equivalents	2,835		(491)
(Decrease) increase in cash and cash equivalents	(68,157)		375
Cash and cash equivalents - beginning of period	94,760		27,530
Cash and cash equivalents - end of period	$	26,603	$	27,905
Interest paid	$	42,423	$	48,033
Income taxes paid	$	18,818	$	14,655

See accompanying notes.

-6-

Prestige Consumer Healthcare Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

1.    Business and Basis of Presentation

Nature of Business

Prestige Consumer Healthcare Inc. (referred to herein as the “Company” or “we,” which reference shall, unless the context requires otherwise, be deemed to refer to Prestige Consumer Healthcare Inc. and all of its direct and indirect 100% owned subsidiaries on a consolidated basis) is engaged in the development, manufacturing, marketing, sales and distribution of over-the-counter (“OTC”) healthcare products to mass merchandisers, drug, food, dollar, convenience and club stores and e-commerce channels in North America (the United States and Canada), and in Australia and certain other international markets.  Prestige Consumer Healthcare Inc. is a holding company with no operations and is also the parent guarantor of the senior credit facility and the senior notes described in Note 7 to these Condensed Consolidated Financial Statements.

Coronavirus Outbreak

In January 2020, the World Health Organization ("WHO") announced a global health crisis due to a new strain of coronavirus ("COVID-19"). In March 2020, the WHO classified the COVID-19 outbreak as a pandemic. This pandemic is affecting the United States and global economies, including causing significant volatility in the global economy and resulting in materially reduced economic activity. The COVID-19 pandemic and the corresponding government responses have led to increased unemployment and economic uncertainty, which could lead to a further reduction in consumer spending. Economic conditions are, and we expect that they will continue to be, highly volatile and uncertain. Recessionary conditions could reduce demand for our products and put downward pressure on prices. If the outbreak continues to spread or if we continue to experience a period of recession or enter a depression, it may materially affect our operations and those of third parties on which we rely, including causing disruptions in the supply and distribution of our products. We may need to limit operations and may experience material limitations in employee resources. We did see an increase in sales at the end of March 2020 related to shelter-at-home restrictions as we believe consumers stocked up as a result of COVID-19, followed by a temporary but significant decline in consumption in the first quarter and have since seen more stable consumer consumption and customer orders in recent weeks. Sales varied throughout the year with some categories positively impacted (for instance, Women’s Health, Oral Care and Dermatological) and some categories negatively impacted (for instance, Cough & Cold, and Gastrointestinal). The positively impacted categories benefited from the consumer shift to over-the-counter healthcare products as they looked to avoid doctor visits and increased focus on hygiene and self-care at home related to COVID-19. The declining categories were impacted by reduced incidence levels and usage rates due to shelter-at-home restrictions and limited travel related to COVID-19. Early in our first quarter of fiscal 2021, it had been reported to us that there had been an increase in absenteeism at our distribution center and with some of our suppliers; however, we have not experienced a material disruption to our overall supply chain to date. We also continue to see changes in the purchasing patterns of our consumers, including the frequency of visits by consumers to retailers and a shift in many markets to purchasing our products online. To date the pandemic has not had a material negative impact on our operations, overall demand for most of our products or resulting aggregate sales and earnings, and, as such, it has also not negatively impacted our liquidity position. We continue to generate operating cash flows to meet our short-term liquidity needs. These circumstances could change in this dynamic, unprecedented environment. The extent to which COVID-19 impacts our results and liquidity will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19, and the actions to contain COVID-19 or treat its impact, among others. We do not yet know the full extent of its impacts on our business or the global economy. However, these effects could have a material, adverse impact on our liquidity, capital resources, operations and business and those of the third parties on which we rely.

Basis of Presentation

The unaudited Condensed Consolidated Financial Statements presented herein have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial reporting and the instructions to Form 10-Q and Article 10 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.  All significant intercompany transactions and balances have been eliminated in consolidation.  In the opinion of management, these Condensed Consolidated Financial Statements include all adjustments, consisting of normal recurring adjustments, that are considered necessary for a fair statement of our consolidated financial position, results of operations and cash flows for the interim periods presented.  Our fiscal year ends on March 31st of each year. References in these Condensed Consolidated Financial Statements or related notes to a year (e.g., 2021) mean our fiscal year ending or ended on March 31st of that year. Operating results for the six months ended September 30, 2020 are not necessarily indicative of results that may be expected for the fiscal year ending March 31, 2021.  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, 2020.

-7-

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 August 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("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 adopted this standard effective April 1, 2020, and the adoption did not 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 (with subsequent targeted amendments). 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. The guidance requires entities to utilize an expected credit loss model for certain financial instruments, including most trade receivables, which replaces the incurred credit loss model previously used. Under this new model, we are required to recognize estimated credit losses expected to occur over time using a broad range of information including historical information, current conditions and reasonable and supportable forecasts. The amendments in these updates were effective for us in the first quarter of our fiscal year 2021. We adopted this standard effective April 1, 2020, and the adoption did not have a material impact on our Consolidated Financial Statements.

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 December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The amendments in this update eliminate the need for an organization to analyze whether certain exceptions apply for tax purposes. It also simplifies GAAP for certain taxes. The amendments in these updates are effective for us for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. We do not expect the adoption of this standard to have a material impact on our Consolidated Financial Statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in this update are elective and apply to all entities that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued. The amendments in this update provide temporary optional guidance to ease the potential burden in accounting for reference rate reform. An entity may elect to apply the amendments prospectively through December 31, 2022. We are currently evaluating the impact of adopting this guidance on our Consolidated Financial Statements.

-8-

2.     Inventories

Inventories consist of the following:

(In thousands)	September 30, 2020		March 31, 2020
Components of Inventories
Packaging and raw materials	$	9,107	$	9,803
Work in process	297		355
Finished goods	104,622		105,868
Inventories	$	114,026	$	116,026

Inventories are carried and depicted above at the lower of cost or net realizable value, which includes a reduction in inventory values of $5.5 million and $6.5 million at September 30, 2020 and March 31, 2020, respectively, related to obsolete and slow-moving inventory.

3.    Goodwill

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

(In thousands)		North American OTC Healthcare		International OTC Healthcare		Consolidated
Balance - March 31, 2020
	Goodwill	$	710,354	$	28,536	$	738,890
	Accumulated impairment loss	(163,711)		—		(163,711)
Balance - March 31, 2020		546,643		28,536		575,179
	Effects of foreign currency exchange rates	—		2,740		2,740
Balance - September 30, 2020
	Goodwill	710,354		31,276		741,630
	Accumulated impairment loss	(163,711)		—		(163,711)
Balance - September 30, 2020		$	546,643	$	31,276	$	577,919

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. On February 29, 2020, the date of our annual impairment review, there were no indicators of impairment as a result of the analysis and, accordingly, no impairment charge was taken on our March 31, 2020 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 29, 2020 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 marketing may require an impairment charge to be recorded in the future. We continuously monitor events which could trigger an interim impairment analysis, which included the impact of COVID-19 for the period ended September 30, 2020. As of September 30, 2020, we determined no events have occurred that would indicate potential impairment of goodwill. However, the continued duration and severity of COVID-19 may result in future impairment charges as the prolonged pandemic could have an impact on our results due to changes in consumer habits. This could result in changes to the assumptions utilized in the annual impairment analysis to determine the estimated fair value of our goodwill, including long-term growth rates and discount rates.

-9-

4.    Intangible Assets, net

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

(In thousands)	Indefinite- Lived Trademarks		Finite-Lived Trademarks and Customer Relationships		Totals
Gross Carrying Amounts
Balance — March 31, 2020	$	2,265,331	$	389,801	$	2,655,132
Effects of foreign currency exchange rates	11,352		489		11,841
Balance — September 30, 2020	2,276,683		390,290		2,666,973
Accumulated Amortization
Balance — March 31, 2020	—		175,741		175,741
Additions	—		9,817		9,817
Effects of foreign currency exchange rates	—		179		179
Balance — September 30, 2020	—		185,737		185,737
Intangible assets, net - September 30, 2020	$	2,276,683	$	204,553	$	2,481,236

Amortization expense was $4.9 million and $9.8 million for the three and six months ended September 30, 2020, respectively, and $4.9 million and $9.8 million for the three and six months ended September 30, 2019, respectively.  

Finite-lived intangible assets are expected to be amortized over their estimated useful life, which ranges from a period of 10 to 30 years, and the estimated amortization expense for each of the five succeeding years and the periods thereafter is as follows (in thousands):

(In thousands)
Year Ending March 31,	Amount
2021 (remaining six months ended March 31, 2021)	9,823
2022	19,645
2023	19,645
2024	19,615
2025	17,570
Thereafter	118,255
	$	204,553

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. On February 29, 2020, the date of our annual impairment review, there were no indicators of impairment as a result of the analysis and, accordingly, no impairment charge was taken on our March 31, 2020 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 marketing expenses, we may be required to record impairment charges in the future.

We continuously monitor events which could trigger an interim impairment analysis, which included the impact of COVID-19 for the period ended September 30, 2020. As of September 30, 2020, we determined no events have occurred that would

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indicate potential impairment of intangible assets. However, the continued duration and severity of COVID-19 may result in future impairment charges as the prolonged pandemic could have an impact on our results due to changes in consumer habits. This could result in changes to the assumptions utilized in the annual impairment analysis to determine the estimated fair value of our intangible assets, including long-term growth rates and discount rates.

5.    Leases

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

The components of lease expense for the three and six months ended September 30, 2020 and 2019 were as follows:

	Three Months Ended September 30,			Six Months Ended September 30,
(In thousands)	2020		2019	2020		2019
Finance lease cost:
Amortization of right-of-use assets	$	443	—	$	768	$	—
Interest on lease liabilities	59		—	109		—
Operating lease cost	1,692		2,242	3,389		3,458
Short term lease cost	22		27	45		50
Variable lease cost	12,303		15,696	24,010		32,295
Sublease income	(55)		(860)	(109)		(1,774)
Total net lease cost	$	14,464	17,105	$	28,212	$	34,029

As of September 30, 2020, the maturities of lease liabilities were as follows:

(In thousands)
Year Ending March 31,	Operating Leases		Finance Lease		Total
2021 (Remaining six months ending March 31, 2021)	$	3,613	$	1,466	$	5,079
2022	6,521		2,932		9,453
2023	6,291		2,932		9,223
2024	6,303		2,932		9,235
2025	4,132		1,467		5,599
Thereafter	4,974		—		4,974
Total undiscounted lease payments	31,834		11,729		43,563
Less amount of lease payments representing interest	(3,973)		(653)		(4,626)
Total present value of lease payments	$	27,861	$	11,076	$	38,937

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

		September 30, 2020
Weighted average remaining lease term (years)
	Operating leases	5.08
	Finance leases	4.00
Weighted average discount rate
	Operating leases	5.28	%
	Finance leases	2.96	%

Under our Master Services Agreement with GEODIS Logistics LLC ("GEODIS"), GEODIS purchased certain assets for our use that went into service during the three months ended September 30, 2020. The right-of-use ("ROU") asset and lease liability at the commencement of this finance lease was $5.8 million.

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6.    Other Accrued Liabilities

Other accrued liabilities consist of the following:

(In thousands)	September 30, 2020		March 31, 2020
Accrued marketing costs	$	37,420	$	34,450
Accrued compensation costs	8,025		13,393
Accrued broker commissions	986		1,491
Income taxes payable	2,902		3,210
Accrued professional fees	3,700		4,183
Accrued production costs	3,187		5,628
Accrued sales tax	930		1,917
Other accrued liabilities	7,973		6,491
	$	65,123	$	70,763

7.    Long-Term Debt

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

(In thousands, except percentages)	September 30, 2020		March 31, 2020
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
2019 Senior Notes bearing interest at 5.125%, with interest payable on January 15 and July 15 of each year. The 2019 Senior Notes mature on January 15, 2028.	400,000		400,000
2012 Term B-5 Loans bearing interest at the Borrower's option at either LIBOR plus a margin of 2.00%, with a LIBOR floor of 0.00%, or an alternate base rate plus a margin of 1.00%, with a base rate floor of 1.00%, due on January 26, 2024.	560,000		690,000
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 December 11, 2024.	—		55,000
Long-term debt	1,560,000		1,745,000
Less: unamortized debt costs	(11,900)		(14,700)
Long-term debt, net	$	1,548,100	$	1,730,300

At September 30, 2020, we had no balance outstanding on the asset-based revolving credit facility entered into January 31, 2012, as amended (the "2012 ABL Revolver") and a borrowing capacity of $132.7 million.

Interest Rate Swaps:

We currently have two interest rate swaps to hedge a total of $400.0 million of our variable interest debt (see Note 9 for further details). </