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, 2022

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 29, 2022, there were 49,762,633 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, 2022 and 2021 (unaudited)	2
	Condensed Consolidated Balance Sheets as of June 30, 2022 and March 31, 2022 (unaudited)	3
	Condensed Consolidated Statements of Changes in Stockholders' Equity for the three months ended June 30, 2022 and 2021 (unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the three months ended June 30, 2022 and 2021 (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.	Issuer Purchases of Equity Securities	31
Item 5.	Other Information	31
Item 6.	Exhibits	33
	Signatures	34

TRADEMARKS AND TRADENAMES

Trademarks and tradenames 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 tradenames 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 June 30,
(In thousands, except per share data)	2022		2021
Revenues
Net sales	$	277,024	$	269,172
Other revenues	35		9
Total revenues	277,059		269,181
Cost of Sales
Cost of sales excluding depreciation	114,996		108,335
Cost of sales depreciation	1,944		1,834
Cost of sales	116,940		110,169
Gross profit	160,119		159,012
Operating Expenses
Advertising and marketing	39,951		39,439
General and administrative	26,714		22,471
Depreciation and amortization	6,440		5,760
Total operating expenses	73,105		67,670
Operating income	87,014		91,342
Other expense (income)
Interest expense, net	15,292		15,077
Other expense (income), net	825		(105)
Total other expense, net	16,117		14,972
Income before income taxes	70,897		76,370
Provision for income taxes	15,625		18,615
Net income	$	55,272	$	57,755
Earnings per share:
Basic	$	1.10	$	1.15
Diluted	$	1.09	$	1.14
Weighted average shares outstanding:
Basic	50,264		50,139
Diluted	50,730		50,671
Comprehensive income, net of tax:
Currency translation adjustments	(9,519)		(1,492)
Unrealized gain on interest rate swaps	—		520
Net loss on termination of pension plan	(790)		—
Total other comprehensive loss	(10,309)		(972)
Comprehensive income	$	44,963	$	56,783

See accompanying notes.

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Prestige Consumer Healthcare Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands)	June 30, 2022		March 31, 2022
Assets
Current assets
Cash and cash equivalents	$	35,869	$	27,185
Accounts receivable, net of allowance of $18,335 and $19,720, respectively	145,451		139,330
Inventories	133,768		120,342
Prepaid expenses and other current assets	9,527		6,410
Total current assets	324,615		293,267
Property, plant and equipment, net	70,393		71,300
Operating lease right-of-use assets	18,885		20,372
Finance lease right-of-use assets, net	6,193		6,858
Goodwill	576,794		578,976
Intangible assets, net	2,682,611		2,696,635
Other long-term assets	2,743		3,273
Total Assets	$	3,682,234	$	3,670,681
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable	58,110		55,760
Accrued interest payable	15,182		4,437
Operating lease liabilities, current portion	6,548		6,360
Finance lease liabilities, current portion	2,772		2,752
Other accrued liabilities	72,737		74,113
Total current liabilities	155,349		143,422
Long-term debt, net	1,472,427		1,476,658
Deferred income tax liabilities	442,537		444,917
Long-term operating lease liabilities, net of current portion	14,460		16,088
Long-term finance lease liabilities, net of current portion	3,800		4,501
Other long-term liabilities	8,918		7,484
Total Liabilities	2,097,491		2,093,070
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 - 54,690 shares at June 30, 2022 and 54,430 shares at March 31, 2022	547		544
Additional paid-in capital	520,926		515,583
Treasury stock, at cost - 4,928 shares at June 30, 2022 and 4,151 shares at March 31, 2022	(176,825)		(133,648)
Accumulated other comprehensive loss, net of tax	(29,341)		(19,032)
Retained earnings	1,269,436		1,214,164
Total Stockholders' Equity	1,584,743		1,577,611
Total Liabilities and Stockholders' Equity	$	3,682,234	$	3,670,681

 See accompanying notes.

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Prestige Consumer Healthcare Inc.

Condensed Consolidated Statements of Changes in Stockholders' Equity

(Unaudited)

	Three Months Ended June 30, 2022
	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, 2022	54,430	$	544	$	515,583	4,151	$	(133,648)	$	(19,032)	$	1,214,164	$	1,577,611
Stock-based compensation	—	—		3,857		—	—		—		—		3,857
Exercise of stock options	39	1		1,488		—	—		—		—		1,489
Issuance of shares related to restricted stock	221	2		(2)		—	—		—		—		—
Treasury share repurchases	—	—		—		777	(43,177)		—		—		(43,177)
Net income	—	—		—		—	—		—		55,272		55,272
Comprehensive loss	—	—		—		—	—		(10,309)		—		(10,309)
Balances at June 30, 2022	54,690	$	547	$	520,926	4,928	$	(176,825)	$	(29,341)	$	1,269,436	$	1,584,743

	Three Months Ended June 30, 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	—	—		1,878		—	—		—		—		1,878
Exercise of stock options	68	—		2,204		—	—		—		—		2,204
Issuance of shares related to restricted stock	144	2		(2)		—	—		—		—		—
Treasury share repurchases	—	—		—		63	(2,916)		—		—		(2,916)
Net income	—	—		—		—	—		—		57,755		57,755
Comprehensive loss	—	—		—		—	—		(972)		—		(972)
Balances at June 30, 2021	54,211	$	542	$	503,588	4,151	$	(133,648)	$	(20,773)	$	1,066,538	$	1,416,247

See accompanying notes.

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Prestige Consumer Healthcare Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Three Months Ended June 30,
(In thousands)	2022		2021
Operating Activities
Net income	$	55,272	$	57,755
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	8,384		7,594
Loss on disposal of property and equipment	13		26
Deferred income taxes	1,213		5,876
Amortization of debt origination costs	828		759
Stock-based compensation costs	3,857		1,878
Non-cash operating lease cost	1,493		1,691
Other	446		—
Changes in operating assets and liabilities, net of effects from acquisition:
Accounts receivable	(7,079)		(15,879)
Inventories	(14,415)		9,384
Prepaid expenses and other current assets	(3,227)		(1,049)
Accounts payable	2,542		(15,551)
Accrued liabilities	10,524		18,439
Operating lease liabilities	(1,602)		(1,578)
Other	(2)		(40)
Net cash provided by operating activities	58,247		69,305
Investing Activities
Purchases of property, plant and equipment	(1,047)		(1,500)
Other	—		177
Net cash used in investing activities	(1,047)		(1,323)
Financing Activities
Term loan repayments	(15,000)		(20,000)
Borrowings under revolving credit agreement	20,000		85,000
Repayments under revolving credit agreement	(10,000)		—
Payments of finance leases	(686)		(638)
Proceeds from exercise of stock options	1,489		2,204
Fair value of shares surrendered as payment of tax withholding	(5,450)		(2,916)
Repurchase of common stock	(37,727)		—
Net cash (used in) provided by financing activities	(47,374)		63,650
Effects of exchange rate changes on cash and cash equivalents	(1,142)		(310)
Increase in cash and cash equivalents	8,684		131,322
Cash and cash equivalents - beginning of period	27,185		32,302
Cash and cash equivalents - end of period	$	35,869	$	163,624
Interest paid	$	3,562	$	3,389
Income taxes paid	$	1,799	$	2,388

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

The COVID-19 pandemic has caused significant volatility in the United States and global economies. In addition, the Russian invasion of Ukraine, global supply chain constraints and high inflationary environment have led to further economic uncertainty. We expect economic conditions will continue to be highly volatile and uncertain and could affect demand for our products and put pressure on prices and supply. In fiscal 2022, we experienced solid consumer consumption and share gains across most of our brand portfolio. We have continued to see changes in the purchasing patterns of our consumers, including a reduction in the frequency of visits to retailers and a shift in many markets to purchasing our products online.

The volatile environment has impacted the supply of labor and raw materials and exacerbated rising input costs. Although we have not experienced a material disruption to our overall supply chain to date, we have and may continue to experience shortages, delays and backorders for certain ingredients and products, difficulty scheduling shipping for our products, as well as price increases from many of our suppliers for both shipping and product costs. In addition, labor shortages have impacted our manufacturing operations and may impact our ability to supply certain products to our customers. To date, the pandemic and other global conditions have not had a material negative impact on our operations, supply chain, overall costs or 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 conditions cause further disruption in the global supply chain, the availability of labor and materials or otherwise increase costs, 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. The extent to which these 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 and duration of any further COVID-19 outbreaks, global supply chain constraints, high inflationary environment and further global instability. 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., 2023) mean our fiscal year ending or ended on March 31st of that year. Operating results for the three months ended June 30, 2022 are not necessarily indicative of results that may be expected for the fiscal year ending March 31, 2023.  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, 2022.

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

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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

There have been no accounting pronouncements adopted in fiscal 2023.

Recently Issued Accounting Pronouncements

In March 2022, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. This ASU responds to feedback received by the FASB during the post-implementation review of ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments, which we adopted effective April 1, 2020. The amendments in this update, among other things, eliminate the troubled debt restructuring recognition and measurement guidance and, instead, require the entity to evaluate whether the modification represents a new loan or a continuation of an existing loan. This ASU is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The adoption of the standard is not expected to have a material effect on our Consolidated Financial Statements.

In March 2022, the FASB issued ASU 2022-01, Derivatives and Hedging (Topic 815): Fair Value Hedging - Portfolio Layer Method. The purpose of the ASU is to address questions raised on ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. This ASU expands the currently used single-layer method of hedge accounting to allow multiple layers of a single closed portfolio under the method. This ASU is effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. The impact of adoption of this new standard is not expected to have a material effect on our Consolidated Financial Statements.

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 impact of adoption 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 our asset-based revolving credit facility entered into January 31, 2012, as amended (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. In connection with the acquisition, we entered into a supply arrangement with Akorn for a term of three years with optional renewals at prevailing market rates.

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We finalized our analysis of the fair values of the assets acquired and liabilities assumed as of the date of acquisition. The following table summarizes our allocation of the assets acquired and liabilities assumed as of the July 1, 2021 acquisition date.

(In thousands)
	July 1, 2021
Inventories	$	6,455
Goodwill	1,098
Intangible assets	225,410
Total assets acquired	232,963
Accounts payable	428
Reserves for sales allowances	497
Other accrued liabilities	3,124
Total liabilities assumed	4,049
Total purchase price	$	228,914

Based on this analysis, we allocated $195.9 million to non-amortizable intangible assets and $29.5 million to amortizable intangible assets. The non-amortizable intangible assets are classified as trademarks and, of the amortizable intangible assets, $20.4 million are classified as customer relationships and $9.1 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 $1.1 million based on the amount by which the purchase price exceeded 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)	June 30, 2022		March 31, 2022
Components of Inventories
Packaging and raw materials	$	16,737	$	16,984
Work in process	476		338
Finished goods	116,555		103,020
Inventories	$	133,768	$	120,342

Inventories are carried and depicted above at the lower of cost or net realizable value, which includes a reduction in inventory values of $4.9 million at both June 30, 2022 and March 31, 2022 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, 2022
	Goodwill	$	712,002	$	32,272	$	744,274
	Accumulated impairment loss	(163,711)		(1,587)		(165,298)
Balance - March 31, 2022		548,291		30,685		578,976
	Adjustment related to acquisition	(550)		—		(550)
	Effects of foreign currency exchange rates	—		(1,632)		(1,632)
Balance - June 30, 2022
	Goodwill	711,452		30,640		742,092
	Accumulated impairment loss	(163,711)		(1,587)		(165,298)
Balance - June 30, 2022		$	547,741	$	29,053	$	576,794

As discussed in Note 2, on July 1, 2021, we completed the acquisition of certain assets from Akorn. In connection with this acquisition, we recorded goodwill of $1.1 million based on the amount by which the purchase price exceeded the 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. The date of our annual impairment review was February 28, 2022, and we recorded impairment charges of $0.3 million in our March 31, 2022 financial statements. We utilized 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, 2022 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 and inflation. 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 and inflation for the period ended June 30, 2022.

As of June 30, 2022, 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, 2022	$	2,476,559	$	436,174	$	2,912,733
Additions	—		—		—
Effects of foreign currency exchange rates	(6,796)		(1,776)		(8,572)
Balance — June 30, 2022	2,469,763		434,398		2,904,161
Accumulated Amortization
Balance — March 31, 2022	—		216,098		216,098
Additions	—		5,635		5,635
Effects of foreign currency exchange rates	—		(183)		(183)
Balance — June 30, 2022	—		221,550		221,550
Intangible assets, net - June 30, 2022	$	2,469,763	$	212,848	$	2,682,611

On July 1, 2021, we completed the acquisition of certain assets from 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. In connection with these acquisitions, we allocated $225.4 million to intangible assets for Akorn and $18.1 million for Zaditen.

Amortization expense was $5.6 million for the three months ended June 30, 2022 and $4.9 million for the three months ended June 30, 2021.  

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
2023 (remaining nine months ended March 31, 2023)	$	16,865
2024	22,445
2025	20,392
2026	18,145
2027	16,504
Thereafter	118,497
	$	212,848

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, 2022, and we recorded impairment charges of $0.7 million in our March 31, 2022 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 or inflation, we may be required to record impairment charges in the future.

As of June 30, 2022, 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 months ended June 30, 2022 and 2021 were as follows:

	Three Months Ended June 30,
(In thousands)	2022		2021
Finance lease cost:
Amortization of right-of-use assets	$	665	$	642
Interest on lease liabilities	50		66
Operating lease cost	1,634		1,687
Short term lease cost	34		22
Variable lease cost	11,999		11,651
Total net lease cost	$	14,382	$	14,068

As of June 30, 2022, the maturities of lease liabilities were as follows:

(In thousands)
Year Ending March 31,	Operating Leases		Finance Lease		Total
2023 (Remaining nine months ending March 31, 2023)	$	5,382	$	2,191	$	7,573
2024	6,850		2,923		9,773
2025	4,586		1,509		6,095
2026	2,181		96		2,277
2027	1,883		80		1,963
Thereafter	1,682		—		1,682
Total undiscounted lease payments	22,564		6,799		29,363
Less amount of lease payments representing interest	(1,556)		(227)		(1,783)
Total present value of lease payments	$	21,008	$	6,572	$	27,580

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

		June 30, 2022
Weighted average remaining lease term (years)
	Operating leases	3.81
	Finance leases	2.40
Weighted average discount rate
	Operating leases	3.08	%
	Finance leases	2.95	%

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7.    Other Accrued Liabilities

Other accrued liabilities consist of the following:

(In thousands)	June 30, 2022		March 31, 2022
Accrued marketing costs	$	37,835	$	36,149
Accrued compensation costs	5,356		19,587
Accrued broker commissions	1,239		1,179
Income taxes payable	13,830		2,670
Accrued professional fees	3,965		4,150
Accrued production costs	3,225		3,686
Other accrued liabilities	7,287		6,692
	$	72,737	$	74,113

8.    Long-Term Debt

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

(In thousands, except percentages)	June 30, 2022		March 31, 2022
2021 Senior Notes bearing interest at 3.750%, with interest payable on April 1 and October 1 of each year. The 2021 Senior Notes mature on April 1, 2031.	$	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 0.50%, or an alternate base rate plus a margin of 1.00% per annum, due on July 1, 2028.	480,000		495,000
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.	10,000		—
Long-term debt	1,490,000		1,495,000
Less: unamortized debt costs	(17,573)		(18,342)
Long-term debt, net	$	1,472,427	$	1,476,658

At June 30, 2022, we had $10.0 million outstanding on the 2012 ABL Revolver, and a borrowing capacity of $137.5 million.

As of June 30, 2022, 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 senior unsecured notes due 2031 (the "2021 Senior Notes") and the senior unsecured notes due 2028 (the "2019 Senior Notes") are as follows:

(In thousands)
Year Ending March 31,	Amount
2023 (remaining nine months ending March 31, 2023)	$	—
2024	—
2025	10,000
2026	—
2027	—
Thereafter	1,480,000
	$	1,490,000

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.

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FASB Accounting Standards Codification ("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 2021 Senior Notes, the 2019 Senior Notes, the 2012 Term B-5 Loans, and the 2012 ABL Revolver are measured in Level 2 of the above hierarchy. The summary below details the carrying amounts and estimated fair values of these instruments at June 30, 2022 and March 31, 2022.

	June 30, 2022				March 31, 2022
(In thousands)	Carrying Value		Fair Value		Carrying Value		Fair Value
2021 Senior Notes	$	600,000	$	484,500	$	600,000	$	534,000
2019 Senior Notes	400,000		372,000		400,000		397,000
2012 Term B-5 Loans	480,000		476,400		495,000		493,144
2012 ABL Revolver	10,000		10,000		—		—

At June 30, 2022 and March 31, 2022, we did not have any assets or liabilities measured in Level 1 or 3.

10.    Derivative Instruments

Changes in interest rates expose us to risks. To help us manage these risks, in January 2020 we entered into an interest rate swap to hedge a total of $200.0 million of our variable interest debt which settled on January 31, 2022. We do not use derivatives for trading purposes.

The following table summarizes our interest rate swaps, net of tax, for the periods shown:

		Three Months Ended June 30,
(In thousands)	Location	2022		2021
Gain Recognized in Other Comprehensive Loss (effective portion)	Other comprehensive income (loss)	$	—	$	520
Loss Reclassified from Accumulated Other Comprehensive Loss into Income	Interest expense	$	—	$	(718)

11.    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, 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, 2022.

During the three months ended June 30, 2022 and 2021, we repurchased shares of our common stock and recorded them as treasury stock. Our share repurchases consisted of the following:

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	Three Months Ended June 30,
	2022	2021
Shares repurchased pursuant to the provisions of the various employee restricted stock awards:
Number of shares	99,219	63,314
Average price per share	$54.94	$46.04
Total amount repurchased	$5.5 million	$2.9 million
Shares repurchased in conjunction with our share repurchase program:
Number of shares	677,555	—
Average price per share	$55.68	$	—
Total amount repurchased	$37.7 million	$	—

12.    Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss consisted of the following at June 30, 2022 and March 31, 2022:

(In thousands)	June 30, 2022		March 31, 2022
Components of Accumulated Other Comprehensive Loss
Cumulative translation adjustment	$	(29,723)	$	(20,204)
Unrecognized net gain on pension plans, net of tax of $(114) and $(350), respectively	382		1,172
Accumulated other comprehensive loss, net of tax	$	(29,341)	$	(19,032)

As of June 30, 2022 and March 31, 2022, no amounts were reclassified from accumulated other comprehensive loss into earnings.

13.    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, restricted stock units ("RSUs") and performance stock units ("PSUs"). Potential common shares, composed of the incremental common shares issuable upon the exercise of outstanding stock options and unvested 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.

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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)	2022		2021
Numerator
Net income	$	55,272	$	57,755
Denominator
Denominator for basic earnings per share — weighted average shares outstanding	50,264		50,139
Dilutive effect of unvested restricted stock units and options issued to employees and directors	466		532
Denominator for diluted earnings per share	50,730		50,671
Earnings per Common Share:
Basic earnings per share	$	1.10	$	1.15
Diluted earnings per share	$	1.09	$	1.14

For the three months ended June 30, 2022 and 2021, there were 0.4 million and 0.5 million shares, respectively, attributable to outstanding stock-based awards that were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive.

14.    Share-Based Compensation

In connection with our initial public offering, the Board of Directors adopted the 2005 Long-Term Equity Incentive Plan (the “2005 Plan”), which provided 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 2005 Plan, an increase of the maximum number of shares subject to stock options that could be awarded to any one participant under the 2005 Plan during any fiscal 12-month period from 1.0 million to 2.5 million shares, and an extension of the term of the 2005 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, were eligible for grants under the 2005 Plan.

On June 23, 2020, the Board of Directors adopted the Prestige Consumer Healthcare Inc. 2020 Long-Term Incentive Plan (the “2020 Plan”). The 2020 Plan became effective on August 4, 2020, upon the approval of the 2020 Plan by our stockholders. On June 23, 2020, a total of 2,827,210 shares were available for issuance under the 2020 Plan (comprised of 2,000,000 new shares plus 827,210 shares that were unissued under the 2005 Plan). All future equity awards will be made from the 2020 Plan, and the Company will not grant any additional awards under the 2005 Plan.

The following table provides information regarding our stock-based compensation:

	Three Months Ended June 30,
(In thousands)	2022		2021
Pre-tax share-based compensation costs charged against income	$	3,857	$	1,878
Income tax benefit recognized on compensation costs	$	537	$	143
Total fair value of options and RSUs vested during the period	$	10,225	$	7,006
Cash received from the exercise of stock options	$	1,489	$	2,204
Tax benefits realized from tax deductions resulting from RSU issuances and stock option exercises	$	2,895	$	1,721

At June 30, 2022, there were $5.5 million of unrecognized compensation costs related to unvested stock options under the 2005 Plan and the 2020 Plan, excluding an estimate for forfeitures which may occur.  We expect to recognize such costs over a weighted average period of 2.4 years. At June 30, 2022, there were $13.2 million of unrecognized compensation costs related to unvested RSUs and PSUs under the 2005 Plan and the 2020 Plan, excluding an estimate for forfeitures which may occur.  We expect to recognize such costs over a weighted average period of 2.3 years.

At June 30, 2022, there were 2.2 million shares available for issuance under the 2020 Plan.

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On May 2, 2022, the Compensation and Talent Management Committee (the "Committee") of our Board of Directors granted 67,959 PSUs, 65,721 RSUs, and stock options to acquire 195,526 shares of our common stock under the 2020 Plan to certain executive officers and employees. The stock options were granted at an exercise price of $54.47 per share, which was equal to the closing price for our common stock on the date of the grant.

Restricted Stock Units

The fair value of the RSUs is determined using the closing price of our common stock on the date of the grant. A summary of the RSUs granted under the 2005 Plan and the 2020 Plan is presented below:

RSUs	Shares (in thousands)	Weighted Average Grant-Date Fair Value
Three Months Ended June 30, 2021
Unvested at March 31, 2021	457.0	$	33.52
Granted	152.1	44.33
Vested	(145.5)	30.63
Forfeited	(23.1)	30.17
Unvested at June 30, 2021	440.5	38.38
Vested at June 30, 2021	151.3	32.03
Three Months Ended June 30, 2022
Unvested at March 31, 2022	440.9	$	38.45
Granted	134.0	54.47
Incremental performance shares	42.4	—
Vested	(222.4)	32.05
Unvested at June 30, 2022	394.9	46.65
Vested at June 30, 2022	108.5	36.54

Options

The fair value of each award is estimated on the date of grant using the Black-Scholes Option Pricing Model that uses the assumptions presented below:

Three Months Ended June 30,
2022	2021