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 December 31, 2021

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 January 28, 2022, there were 50,199,253 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 nine months ended December 31, 2021 and 2020 (unaudited)	2
	Condensed Consolidated Balance Sheets as of December 31, 2021 and March 31, 2021 (unaudited)	3
	Condensed Consolidated Statements of Changes in Stockholders' Equity for the three and nine months ended December 31, 2021 and 2020 (unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the nine months ended December 31, 2021 and 2020 (unaudited)	6
	Notes to Condensed Consolidated Financial Statements (unaudited)	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	25
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 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 December 31,				Nine Months Ended December 31,
(In thousands, except per share data)	2021		2020		2021		2020
Revenues
Net sales	$	274,454	$	238,779	$	819,843	$	705,572
Other revenues	16		9		33		32
Total revenues	274,470		238,788		819,876		705,604
Cost of Sales
Cost of sales excluding depreciation	117,604		98,260		342,661		290,623
Cost of sales depreciation	1,806		1,641		5,431		4,565
Cost of sales	119,410		99,901		348,092		295,188
Gross profit	155,060		138,887		471,784		410,416
Operating Expenses
Advertising and marketing	40,239		38,081		120,408		104,172
General and administrative	25,983		21,395		80,706		61,717
Depreciation and amortization	6,244		5,968		18,176		18,062
Total operating expenses	72,466		65,444		219,290		183,951
Operating income	82,594		73,443		252,494		226,465
Other expense (income)
Interest expense, net	16,924		20,138		48,314		63,345
Loss on extinguishment of debt	—		—		2,122		—
Other expense (income), net	177		(371)		565		(620)
Total other expense, net	17,101		19,767		51,001		62,725
Income before income taxes	65,493		53,676		201,493		163,740
Provision for income taxes	15,278		12,803		48,198		34,572
Net income	$	50,215	$	40,873	$	153,295	$	129,168
Earnings per share:
Basic	$	1.00	$	0.81	$	3.05	$	2.57
Diluted	$	0.99	$	0.81	$	3.02	$	2.55
Weighted average shares outstanding:
Basic	50,303		50,212		50,225		50,268
Diluted	50,935		50,561		50,799		50,635
Comprehensive income, net of tax:
Currency translation adjustments	652		8,184		(5,037)		22,439
Unrealized gain on interest rate swaps	561		1,053		1,631		2,347
Unrecognized net gain on pension plans	—		2,334		—		2,334
Net gain on pension distribution reclassified to net income	—		(190)		—		(190)
Total other comprehensive (loss) income	1,213		11,381		(3,406)		26,930
Comprehensive income	$	51,428	$	52,254	$	149,889	$	156,098

See accompanying notes.

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Prestige Consumer Healthcare Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands)	December 31, 2021		March 31, 2021
Assets
Current assets
Cash and cash equivalents	$	21,018	$	32,302
Accounts receivable, net of allowance of $20,272 and $16,457, respectively	134,263		114,671
Inventories	106,273		114,959
Prepaid expenses and other current assets	13,712		7,903
Total current assets	275,266		269,835
Property, plant and equipment, net	69,808		70,059
Operating lease right-of-use assets	21,836		23,722
Finance lease right-of-use assets, net	7,060		8,986
Goodwill	578,932		578,079
Intangible assets, net	2,703,616		2,475,729
Other long-term assets	2,890		2,863
Total Assets	$	3,659,408	$	3,429,273
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable	40,103		45,978
Accrued interest payable	15,116		6,312
Operating lease liabilities, current portion	6,273		5,858
Finance lease liabilities, current portion	2,646		2,588
Other accrued liabilities	70,989		61,402
Total current liabilities	135,127		122,138
Long-term debt, net	1,530,297		1,479,653
Deferred income tax liabilities	444,774		434,050
Long-term operating lease liabilities, net of current portion	17,632		19,706
Long-term finance lease liabilities, net of current portion	4,825		6,816
Other long-term liabilities	8,433		8,612
Total Liabilities	2,141,088		2,070,975
Commitments and Contingencies — Note 17
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 - 54,350 shares at December 31, 2021 and 53,999 shares at March 31, 2021	543		540
Additional paid-in capital	512,554		499,508
Treasury stock, at cost - 4,151 shares at December 31, 2021 and 4,088 shares at March 31, 2021	(133,648)		(130,732)
Accumulated other comprehensive loss, net of tax	(23,207)		(19,801)
Retained earnings	1,162,078		1,008,783
Total Stockholders' Equity	1,518,320		1,358,298
Total Liabilities and Stockholders' Equity	$	3,659,408	$	3,429,273

 See accompanying notes.

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Prestige Consumer Healthcare Inc.

Condensed Consolidated Statements of Changes in Stockholders' Equity

(Unaudited)

	Three Months Ended December 31, 2021
	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 September 30, 2021	54,247	$	542	$	507,310	4,151	$	(133,648)	$	(24,420)	$	1,111,863	$	1,461,647
Stock-based compensation	—	—		2,234		—	—		—		—		2,234
Exercise of stock options	103	1		3,010		—	—		—		—		3,011
Net income	—	—		—		—	—		—		50,215		50,215
Comprehensive income	—	—		—		—	—		1,213		—		1,213
Balances at December 31, 2021	54,350	$	543	$	512,554	4,151	$	(133,648)	$	(23,207)	$	1,162,078	$	1,518,320

	Three Months Ended December 31, 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 September 30, 2020	53,941	$	539	$	493,756	3,779	$	(119,862)	$	(28,612)	$	932,396	$	1,278,217
Stock-based compensation	—	—		1,588		—	—		—		—		1,588
Exercise of stock options	4	—		39		—	—		—		—		39
Treasury share repurchases	—	—		—		254	(8,877)		—		—		(8,877)
Net income	—	—		—		—	—		—		40,873		40,873
Comprehensive income	—	—		—		—	—		11,381		—		11,381
Balances at December 31, 2020	53,945	$	539	$	495,383	4,033	$	(128,739)	$	(17,231)	$	973,269	$	1,323,221

	Nine Months Ended December 31, 2021
	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, 2021	53,999	$	540	$	499,508	4,088	$	(130,732)	$	(19,801)	$	1,008,783	$	1,358,298
Stock-based compensation	—	—		7,331		—	—		—		—		7,331
Exercise of stock options	191	1		5,717		—	—		—		—		5,718
Issuance of shares related to restricted stock	160	2		(2)		—	—		—		—		—
Treasury share repurchases	—	—		—		63	(2,916)		—		—		(2,916)
Net income	—	—		—		—	—		—		153,295		153,295
Comprehensive loss	—	—		—		—	—		(3,406)		—		(3,406)
Balances at December 31, 2021	54,350	$	543	$	512,554	4,151	$	(133,648)	$	(23,207)	$	1,162,078	$	1,518,320

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	Nine Months Ended December 31, 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	—	—		5,944		—	—		—		—		5,944
Exercise of stock options	66	—		1,324		—	—		—		—		1,324
Issuance of shares related to restricted stock	74	1		(1)		—	—		—		—		—
Treasury share repurchases	—	—		—		314	(11,116)		—		—		(11,116)
Net income	—	—		—		—	—		—		129,168		129,168
Comprehensive income	—	—		—		—	—		26,930		—		26,930
Balances at December 31, 2020	53,945	$	539	$	495,383	4,033	$	(128,739)	$	(17,231)	$	973,269	$	1,323,221

See accompanying notes.

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Prestige Consumer Healthcare Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Nine Months Ended December 31,
(In thousands)	2021		2020
Operating Activities
Net income	$	153,295	$	129,168
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	23,607		22,627
Loss on disposal of property and equipment	79		210
Deferred income taxes	11,296		7,970
Amortization of debt origination costs	2,811		3,569
Stock-based compensation costs	7,331		5,944
Loss on extinguishment of debt	2,122		—
Non-cash operating lease cost	5,034		5,362
Other	—		937
Changes in operating assets and liabilities, net of effects from acquisition:
Accounts receivable	(21,848)		36,725
Inventories	14,650		1,269
Prepaid expenses and other current assets	(5,622)		(1,439)
Accounts payable	(6,079)		(35,789)
Accrued liabilities	15,053		8,236
Operating lease liabilities	(4,807)		(5,085)
Other	(126)		(3,184)
Net cash provided by operating activities	196,796		176,520
Investing Activities
Purchases of property, plant and equipment	(6,481)		(17,347)
Acquisitions	(246,914)		—
Other	177		—
Net cash used in investing activities	(253,218)		(17,347)
Financing Activities
Term loan repayments	(545,000)		(130,000)
Proceeds from refinancing of Term Loan	597,000		—
Borrowings under revolving credit agreement	85,000		15,000
Repayments under revolving credit agreement	(85,000)		(70,000)
Payments of debt costs	(6,111)		—
Payments of finance leases	(2,145)		(918)
Proceeds from exercise of stock options	5,718		1,324
Fair value of shares surrendered as payment of tax withholding	(2,916)		(1,242)
Repurchase of common stock	—		(9,874)
Net cash provided by (used in) financing activities	46,546		(195,710)
Effects of exchange rate changes on cash and cash equivalents	(1,408)		3,880
Decrease in cash and cash equivalents	(11,284)		(32,657)
Cash and cash equivalents - beginning of period	32,302		94,760
Cash and cash equivalents - end of period	$	21,018	$	62,103
Interest paid	$	36,279	$	46,927
Income taxes paid	$	42,977	$	29,677

See accompanying notes.

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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 8 to these Condensed Consolidated Financial Statements.

Economic Environment Since the Coronavirus Outbreak

In March 2020, the World Health Organization ("WHO") declared a global pandemic due to a new strain of coronavirus ("COVID-19"). The pandemic has caused significant volatility in the United States and global economies. We expect economic conditions will continue to be highly volatile and uncertain and could affect demand for our products and put pressure on prices. We experienced a temporary but significant decline in consumer consumption of our brands in the first quarter of fiscal 2021, followed by more stable consumption and customer orders over the remainder of the year. Generally throughout the pandemic, some categories were 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 consumers increased their 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 activity. In the first nine months of fiscal 2022, we experienced solid consumer consumption and share gains across most of our brand portfolio. Our business also benefited from a significant increase in demand in travel-related categories and channels as well as the Cough & Cold category, previously impacted by the COVID-19 virus.

We have continued 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. Although we have not experienced a material disruption to our overall supply chain to date, we have and may continue to experience delays and backorders for certain ingredients and products, difficulty scheduling shipping for our products, as well as price increases from certain of our suppliers for both shipping and product costs. In addition, labor shortages have begun to impact our manufacturing operations and may impact our ability to supply certain products to our customers. To date, the pandemic has not had a material negative impact on our operations, supply chain, 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, however, in this dynamic, unprecedented environment. If the outbreak continues to spread or labor shortage issues otherwise worsen, 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 and other labor resources. The extent to which COVID-19 and related economic conditions impact 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 variants, and the actions to contain COVID-19 or treat its impact, among others. These effects could have a material, adverse impact on our business, liquidity, capital resources, and results of operations and those of the third parties on which we rely.

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., 2022) mean our fiscal year ending or ended on March 31st of that year. Operating results for the nine months ended December 31, 2021 are not necessarily indicative of results that may be expected for the fiscal year ending March 31, 2022.  These unaudited Condensed Consolidated Financial Statements and related notes should be read in conjunction with our audited

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Consolidated Financial Statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2021.

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 December 2019, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("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 adopted this standard effective April 1, 2021, and the adoption of this standard did not have a material impact on our Consolidated Financial Statements.

Recently Issued Accounting Pronouncements

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. This ASU requires entities to apply Topic 606 to recognize and measure contract assets and liabilities in a business combination. This ASU is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The adoption impact of this new standard will depend on the magnitude of future acquisitions.

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. This ASU provides optional expedient and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. In response to the concerns about structural risks of interbank offered rates (“IBORs”) and, particularly, the risk of cessation of the London Interbank Offered Rate (“LIBOR”), regulators in several jurisdictions around the world have undertaken reference rate reform initiatives to identify alternative reference rates that are more observable or transaction based and less susceptible to manipulation. The ASU provides companies with optional guidance to ease the potential accounting burden associated with transitioning away from reference rates that are expected to be discontinued. In January 2021, the FASB issued ASU 2021-01, which adds implementation guidance to clarify certain optional expedients in Topic 848. The ASUs can be adopted no later than December 31, 2022, with early adoption permitted. The adoption of the standard is not expected to have a material effect on our Consolidated Financial Statements.

2.     Acquisition

Akorn

On July 1, 2021, we completed the acquisition of the consumer health business assets from Akorn Operating Company LLC ("Akorn") pursuant to an Asset Purchase Agreement, dated May 27, 2021 (the "Purchase Agreement"), for a purchase price of $228.9 million in cash, subject to certain closing adjustments specified in the Purchase Agreement. As a result of the purchase, we acquired TheraTears and certain other over-the-counter consumer brands. The financial results from this acquisition are included in our North American and International OTC Healthcare segments. The purchase price was funded by a combination of available cash on hand, additional borrowings under the 2012 ABL Revolver and the net proceeds from the refinancing of our term loan entered into on January 31, 2012 (the "2012 Term Loan") (see Note 8).

The acquisition was accounted for as a business combination. During the nine months ended December 31, 2021, we incurred acquisition-related costs of $5.1 million, which are included in General and administrative expense. In connection with the acquisition, we also entered into a supply arrangement with Akorn for a term of three years with optional renewals at prevailing market rates.

We prepared an analysis of the fair values of the assets acquired and liabilities assumed as of the date of acquisition. These purchase price allocations are preliminary as we are in the process of finalizing the valuation. The following table summarizes our preliminary allocation of the assets acquired and liabilities assumed as of the July 1, 2021 acquisition date.

-8-

(In thousands)
	July 1, 2021
Inventories	$	6,432
Goodwill	1,758
Intangible assets	228,970
Total assets acquired	237,160
Accounts payable	591
Reserves for sales allowances and cash discounts	2,227
Other accrued liabilities	5,428
Total liabilities assumed	8,246
Total purchase price	$	228,914

Based on this preliminary analysis, we allocated $204.1 million to non-amortizable intangible assets and $24.9 million to amortizable intangible assets. The non-amortizable intangible assets are classified as trademarks and, of the amortizable intangible assets, $19.6 million are classified as customer relationships and $5.3 million are classified as trademarks. We are amortizing the purchased amortizable intangible assets on a straight-line basis over an estimated weighted average useful life of 12.5 years (see Note 5).

We recorded goodwill of $1.8 million based on the amount by which the purchase price exceeded the preliminary estimate of the fair value of the net assets acquired (see Note 4). Goodwill is deductible and is being amortized for income tax purposes.

The financial impact of this acquisition was not material to our Consolidated Financial Statements, and, therefore, we have not presented pro forma results of operations for the acquisition.

3.     Inventories

Inventories consist of the following:

(In thousands)	December 31, 2021		March 31, 2021
Components of Inventories
Packaging and raw materials	$	10,999	$	8,463
Work in process	324		326
Finished goods	94,950		106,170
Inventories	$	106,273	$	114,959

Inventories are carried and depicted above at the lower of cost or net realizable value, which includes a reduction in inventory values of $4.6 million and $4.0 million at December 31, 2021 and March 31, 2021, respectively, related to obsolete and slow-moving inventory.

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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, 2021
	Goodwill	$	710,354	$	32,683	$	743,037
	Accumulated impairment loss	(163,711)		(1,247)		(164,958)
Balance - March 31, 2021		546,643		31,436		578,079
	2022 Additions	1,758		—		1,758
	Effects of foreign currency exchange rates	—		(905)		(905)
Balance - December 31, 2021
	Goodwill	712,112		31,778		743,890
	Accumulated impairment loss	(163,711)		(1,247)		(164,958)
Balance - December 31, 2021		$	548,401	$	30,531	$	578,932

As discussed in Note 2, on July 1, 2021, we completed the acquisition of Akorn. In connection with this acquisition, we recorded goodwill of $1.8 million based on the amount by which the purchase price exceeded the preliminary estimate of the fair value of the net assets acquired.

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. 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, 2021, 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 related to future sales, gross margins, and advertising and marketing expenses, which can be impacted by increases in competition, changing consumer preferences, technical advances, or the potential impacts of COVID-19. The discount rate assumption may be influenced by such factors as changes in interest rates and rates of inflation, which can have an impact on the determination of fair value. If these assumptions are adversely affected, we may be required to record impairment charges in the future. We continuously monitor events that could trigger an interim impairment analysis, which included the impact of COVID-19 for the period ended December 31, 2021.

As of December 31, 2021, we determined no events have occurred that would indicate potential impairment of goodwill.

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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, 2021	$	2,281,988	$	389,347	$	2,671,335
Additions (a)	204,100		43,002		247,102
Effects of foreign currency exchange rates	(3,925)		264		(3,661)
Balance — December 31, 2021	2,482,163		432,613		2,914,776
Accumulated Amortization
Balance — March 31, 2021	—		195,606		195,606
Additions	—		15,628		15,628
Effects of foreign currency exchange rates	—		(74)		(74)
Balance — December 31, 2021	—		211,160		211,160
Intangible assets, net - December 31, 2021	$	2,482,163	$	221,453	$	2,703,616

(a) On July 1, 2021, we completed the acquisition of Akorn (see Note 2) and on December 15, 2021 our Australian subsidiary acquired the rights to the Zaditen brand in certain territories from Novartis Pharma AG for a purchase price of $18.0 million in cash. In connection with these acquisitions, we allocated $229.0 million to intangible assets based on our preliminary analysis for Akorn and $18.1 million for Zaditen.

Amortization expense was $5.4 million and $15.6 million for the three and nine months ended December 31, 2021, respectively, and $4.9 million and $14.7 million for the three and nine months ended December 31, 2020, 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
2022 (remaining three months ended March 31, 2022)	$	5,599
2023	22,365
2024	22,331
2025	20,239
2026	17,856
Thereafter	133,063
	$	221,453

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 28, 2021, the date of our annual impairment review, there were no indicators of impairment as a result of the analysis and, accordingly, no additional impairment charge was taken on our March 31, 2021 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 assumptions subject to significant uncertainties include the discount rate utilized in the analyses, as well as future sales, gross margins, and advertising and marketing expenses. The discount rate assumption may be influenced by such factors as changes

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in interest rates and rates of inflation, which can have an impact on the determination of fair value. 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 needs or preferences, technological advances, changes in advertising and marketing expenses, or the potential impacts of COVID-19, we may be required to record impairment charges in the future.

As of December 31, 2021, no events have occurred that would indicate potential impairment of intangible assets.

6.    Leases

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

The components of lease expense for the three and nine months ended December 31, 2021 and 2020 were as follows:

	Three Months Ended December 31,				Nine Months Ended December 31,
(In thousands)	2021		2020		2021		2020
Finance lease cost:
Amortization of right-of-use assets	$	642	$	629	$	1,926	$	1,397
Interest on lease liabilities	57		76		186		185
Operating lease cost	1,651		1,679		5,021		5,068
Short term lease cost	30		24		76		69
Variable lease cost	9,770		11,220		33,419		35,230
Sublease income	—		(54)		—		(163)
Total net lease cost	$	12,150	$	13,574	$	40,628	$	41,786

As of December 31, 2021, the maturities of lease liabilities were as follows:

(In thousands)
Year Ending March 31,	Operating Leases		Finance Lease		Total
2022 (Remaining three months ending March 31, 2022)	$	2,018	$	706	$	2,724
2023	6,547		2,826		9,373
2024	6,795		2,826		9,621
2025	4,614		1,413		6,027
2026	2,205		—		2,205
Thereafter	3,605		—		3,605
Total undiscounted lease payments	25,784		7,771		33,555
Less amount of lease payments representing interest	(