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, 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 October 28, 2022, there were 49,525,952 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, 2022 and 2021 (unaudited)	2
	Condensed Consolidated Balance Sheets as of September 30, 2022 and March 31, 2022 (unaudited)	3
	Condensed Consolidated Statements of Changes in Stockholders' Equity for the three and six months ended September 30, 2022 and 2021 (unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the six months ended September 30, 2022 and 2021 (unaudited)	6
	Notes to Condensed Consolidated Financial Statements (unaudited)	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4.	Controls and Procedures	35
PART II.	OTHER INFORMATION
Item 1A.	Risk Factors	35
Item 2.	Issuer Purchases of Equity Securities	36
Item 6.	Exhibits	37
	Signatures	38

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)	2022		2021		2022		2021
Revenues
Net sales	$	289,264	$	276,217	$	566,288	$	545,389
Other revenues	9		8		44		17
Total revenues	289,273		276,225		566,332		545,406
Cost of Sales
Cost of sales excluding depreciation	126,384		116,722		241,380		225,057
Cost of sales depreciation	1,880		1,791		3,824		3,625
Cost of sales	128,264		118,513		245,204		228,682
Gross profit	161,009		157,712		321,128		316,724
Operating Expenses
Advertising and marketing	43,819		40,730		83,770		80,169
General and administrative	26,438		32,252		53,152		54,723
Depreciation and amortization	6,368		6,172		12,808		11,932
Total operating expenses	76,625		79,154		149,730		146,824
Operating income	84,384		78,558		171,398		169,900
Other expense
Interest expense, net	16,979		16,313		32,271		31,390
Loss on extinguishment of debt	—		2,122		—		2,122
Other expense, net	812		493		1,637		388
Total other expense, net	17,791		18,928		33,908		33,900
Income before income taxes	66,593		59,630		137,490		136,000
Provision for income taxes	15,570		14,305		31,195		32,920
Net income	$	51,023	$	45,325	$	106,295	$	103,080
Earnings per share:
Basic	$	1.02	$	0.90	$	2.12	$	2.05
Diluted	$	1.02	$	0.89	$	2.11	$	2.03
Weighted average shares outstanding:
Basic	49,804		50,232		50,033		50,186
Diluted	50,265		50,791		50,496		50,731
Comprehensive income, net of tax:
Currency translation adjustments	(7,118)		(4,197)		(16,637)		(5,689)
Unrealized gain on interest rate swaps	—		550		—		1,070
Net loss on termination of pension plan	—		—		(790)		—
Total other comprehensive loss	(7,118)		(3,647)		(17,427)		(4,619)
Comprehensive income	$	43,905	$	41,678	$	88,868	$	98,461

See accompanying notes.

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Prestige Consumer Healthcare Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands)	September 30, 2022		March 31, 2022
Assets
Current assets
Cash and cash equivalents	$	42,442	$	27,185
Accounts receivable, net of allowance of $20,673 and $19,720, respectively	145,992		139,330
Inventories	140,505		120,342
Prepaid expenses and other current assets	7,714		6,410
Total current assets	336,653		293,267
Property, plant and equipment, net	69,947		71,300
Operating lease right-of-use assets	17,300		20,372
Finance lease right-of-use assets, net	5,529		6,858
Goodwill	575,566		578,976
Intangible assets, net	2,670,942		2,696,635
Other long-term assets	2,577		3,273
Total Assets	$	3,678,514	$	3,670,681
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable	56,196		55,760
Accrued interest payable	15,688		4,437
Operating lease liabilities, current portion	6,647		6,360
Finance lease liabilities, current portion	2,793		2,752
Other accrued liabilities	70,984		74,113
Total current liabilities	152,308		143,422
Long-term debt, net	1,438,338		1,476,658
Deferred income tax liabilities	443,271		444,917
Long-term operating lease liabilities, net of current portion	12,785		16,088
Long-term finance lease liabilities, net of current portion	3,094		4,501
Other long-term liabilities	8,877		7,484
Total Liabilities	2,058,673		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 September 30, 2022 and 54,430 shares at March 31, 2022	547		544
Additional paid-in capital	524,392		515,583
Treasury stock, at cost - 5,164 shares at September 30, 2022 and 4,151 shares at March 31, 2022	(189,098)		(133,648)
Accumulated other comprehensive loss, net of tax	(36,459)		(19,032)
Retained earnings	1,320,459		1,214,164
Total Stockholders' Equity	1,619,841		1,577,611
Total Liabilities and Stockholders' Equity	$	3,678,514	$	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 September 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 June 30, 2022	54,690	$	547	$	520,926	4,928	$	(176,825)	$	(29,341)	$	1,269,436	$	1,584,743
Stock-based compensation	—	—		3,466		—	—		—		—		3,466
Treasury share repurchases	—	—		—		236	(12,273)		—		—		(12,273)
Net income	—	—		—		—	—		—		51,023		51,023
Comprehensive loss	—	—		—		—	—		(7,118)		—		(7,118)
Balances at September 30, 2022	54,690	$	547	$	524,392	5,164	$	(189,098)	$	(36,459)	$	1,320,459	$	1,619,841

	Three Months Ended September 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 June 30, 2021	54,211	$	542	$	503,588	4,151	$	(133,648)	$	(20,773)	$	1,066,538	$	1,416,247
Stock-based compensation	—	—		3,219		—	—		—		—		3,219
Exercise of stock options	20	—		503		—	—		—		—		503
Issuance of shares related to restricted stock	16	—		—		—	—		—		—		—
Net income	—	—		—		—	—		—		45,325		45,325
Comprehensive loss	—	—		—		—	—		(3,647)		—		(3,647)
Balances at September 30, 2021	54,247	$	542	$	507,310	4,151	$	(133,648)	$	(24,420)	$	1,111,863	$	1,461,647

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	Six Months Ended September 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	—	—		7,323		—	—		—		—		7,323
Exercise of stock options	39	1		1,488		—	—		—		—		1,489
Issuance of shares related to restricted stock	221	2		(2)		—	—		—		—		—
Treasury share repurchases	—	—		—		1,013	(55,450)		—		—		(55,450)
Net income	—	—		—		—	—		—		106,295		106,295
Comprehensive loss	—	—		—		—	—		(17,427)		—		(17,427)
Balances at September 30, 2022	54,690	$	547	$	524,392	5,164	$	(189,098)	$	(36,459)	$	1,320,459	$	1,619,841

	Six Months Ended September 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	—	—		5,097		—	—		—		—		5,097
Exercise of stock options	88	—		2,707		—	—		—		—		2,707
Issuance of shares related to restricted stock	160	2		(2)		—	—		—		—		—
Treasury share repurchases	—	—		—		63	(2,916)		—		—		(2,916)
Net income	—	—		—		—	—		—		103,080		103,080
Comprehensive loss	—	—		—		—	—		(4,619)		—		(4,619)
Balances at September 30, 2021	54,247	$	542	$	507,310	4,151	$	(133,648)	$	(24,420)	$	1,111,863	$	1,461,647

See accompanying notes.

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Prestige Consumer Healthcare Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Six Months Ended September 30,
(In thousands)	2022		2021
Operating Activities
Net income	$	106,295	$	103,080
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	16,632		15,557
Loss on disposal of property and equipment	94		27
Deferred income taxes	4,211		7,639
Amortization of debt origination costs	1,798		1,435
Stock-based compensation costs	7,323		5,097
Loss on extinguishment of debt	—		2,122
Non-cash operating lease cost	2,984		3,351
Other	447		—
Changes in operating assets and liabilities, net of effects from acquisition:
Accounts receivable	(8,276)		(34,322)
Inventories	(21,810)		12,978
Prepaid expenses and other current assets	(1,501)		473
Accounts payable	1,016		(8,275)
Accrued liabilities	9,788		24,570
Operating lease liabilities	(3,201)		(3,150)
Other	(13)		(83)
Net cash provided by operating activities	115,787		130,499
Investing Activities
Purchases of property, plant and equipment	(3,423)		(4,252)
Acquisition of Akorn	—		(228,914)
Other	—		177
Net cash used in investing activities	(3,423)		(232,989)
Financing Activities
Term loan repayments	(40,000)		(495,000)
Proceeds from refinancing of Term Loan	—		597,000
Borrowings under revolving credit agreement	20,000		85,000
Repayments under revolving credit agreement	(20,000)		(65,000)
Payments of debt costs	—		(6,111)
Payments of finance leases	(1,369)		(1,496)
Proceeds from exercise of stock options	1,489		2,707
Fair value of shares surrendered as payment of tax withholding	(5,450)		(2,916)
Repurchase of common stock	(50,000)		—
Net cash (used in) provided by financing activities	(95,330)		114,184
Effects of exchange rate changes on cash and cash equivalents	(1,777)		(1,178)
Increase in cash and cash equivalents	15,257		10,516
Cash and cash equivalents - beginning of period	27,185		32,302
Cash and cash equivalents - end of period	$	42,442	$	42,818
Interest paid	$	19,016	$	18,481
Income taxes paid	$	15,689	$	21,141

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

There has been economic uncertainty in the United States and globally due to several factors including global supply chain constraints, rising interest rates, a high inflationary environment, geopolitical events and the effects from the COVID-19 pandemic. We expect economic conditions will continue to be highly volatile and uncertain, put pressure on prices and supply and could affect demand for our products. In fiscal 2022, we experienced solid consumer consumption and share gains across most of our brand portfolio, however, that may not be sustained at the same levels in the uncertain economic environment. 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, the 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 six months ended September 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 expedients 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)	September 30, 2022		March 31, 2022
Components of Inventories
Packaging and raw materials	$	18,733	$	16,984
Work in process	537		338
Finished goods	121,235		103,020
Inventories	$	140,505	$	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 $4.3 million at September 30, 2022 and $4.9 million at 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	—		(2,860)		(2,860)
Balance - September 30, 2022
	Goodwill	711,452		29,412		740,864
	Accumulated impairment loss	(163,711)		(1,587)		(165,298)
Balance - September 30, 2022		$	547,741	$	27,825	$	575,566

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 to goodwill 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 September 30, 2022.

As of September 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
Effects of foreign currency exchange rates	(11,701)		(3,081)		(14,782)
Balance — September 30, 2022	2,464,858		433,093		2,897,951
Accumulated Amortization
Balance — March 31, 2022	—		216,098		216,098
Additions	—		11,257		11,257
Effects of foreign currency exchange rates	—		(346)		(346)
Balance — September 30, 2022	—		227,009		227,009
Intangible assets, net - September 30, 2022	$	2,464,858	$	206,084	$	2,670,942

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 and $11.3 million for the three and six months ended September 30, 2022, respectively, and $5.3 million and $10.2 million for the three and six months ended September 30, 2021, 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
2023 (remaining six months ended March 31, 2023)	$	11,210
2024	22,381
2025	20,328
2026	18,081
2027	16,440
Thereafter	117,644
	$	206,084

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 to intangible assets 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 September 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 and six months ended September 30, 2022 and 2021 were as follows:

	Three Months Ended September 30,				Six Months Ended September 30,
(In thousands)	2022		2021		2022		2021
Finance lease cost:
Amortization of right-of-use assets	$	664	$	642	$	1,329	$	1,284
Interest on lease liabilities	45		63		95		129
Operating lease cost	1,617		1,683		3,251		3,370
Short term lease cost	51		24		85		46
Variable lease cost	17,016		11,998		29,015		23,649
Total net lease cost	$	19,393	$	14,410	$	33,775	$	28,478

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

(In thousands)
Year Ending March 31,	Operating Leases		Finance Lease		Total
2023 (Remaining six months ending March 31, 2023)	$	3,768	$	1,461	$	5,229
2024	6,820		2,922		9,742
2025	4,556		1,509		6,065
2026	2,157		96		2,253
2027	1,875		80		1,955
Thereafter	1,655		—		1,655
Total undiscounted lease payments	20,831		6,068		26,899
Less amount of lease payments representing interest	(1,399)		(181)		(1,580)
Total present value of lease payments	$	19,432	$	5,887	$	25,319

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

		September 30, 2022
Weighted average remaining lease term (years)
	Operating leases	3.61
	Finance leases	2.16
Weighted average discount rate
	Operating leases	3.14	%
	Finance leases	2.95	%

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7.    Other Accrued Liabilities

Other accrued liabilities consist of the following:

(In thousands)	September 30, 2022		March 31, 2022
Accrued marketing costs	$	33,684	$	36,149
Accrued compensation costs	7,218		19,587
Accrued broker commissions	2,078		1,179
Income taxes payable	12,455		2,670
Accrued professional fees	5,127		4,150
Accrued production costs	3,775		3,686
Other accrued liabilities	6,647		6,692
	$	70,984	$	74,113

8.    Long-Term Debt

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

(In thousands, except percentages)	September 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	$