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, 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 January 27, 2023, there were 49,687,668 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, 2022 and 2021 (unaudited)	2
	Condensed Consolidated Balance Sheets as of December 31, 2022 and March 31, 2022 (unaudited)	3
	Condensed Consolidated Statements of Changes in Stockholders' Equity for the three and nine months ended December 31, 2022 and 2021 (unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the nine months ended December 31, 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	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36
Item 4.	Controls and Procedures	36
PART II.	OTHER INFORMATION
Item 1A.	Risk Factors	36
Item 2.	Issuer Purchases of Equity Securities	37
Item 6.	Exhibits	38
	Signatures	39

TRADEMARKS AND TRADE NAMES

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

-1-

PART I.    FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

Prestige Consumer Healthcare Inc.

Condensed Consolidated Statements of Income and Comprehensive Income

(Unaudited)

	Three Months Ended December 31,				Nine Months Ended December 31,
(In thousands, except per share data)	2022		2021		2022		2021
Revenues
Net sales	$	275,495	$	274,454	$	841,783	$	819,843
Other revenues	29		16		73		33
Total revenues	275,524		274,470		841,856		819,876
Cost of Sales
Cost of sales excluding depreciation	123,251		117,604		364,631		342,661
Cost of sales depreciation	1,871		1,806		5,695		5,431
Cost of sales	125,122		119,410		370,326		348,092
Gross profit	150,402		155,060		471,530		471,784
Operating Expenses
Advertising and marketing	30,423		40,239		114,193		120,408
General and administrative	26,536		25,983		79,688		80,706
Depreciation and amortization	6,259		6,244		19,067		18,176
Total operating expenses	63,218		72,466		212,948		219,290
Operating income	87,184		82,594		258,582		252,494
Other expense
Interest expense, net	17,917		16,924		50,188		48,314
Loss on extinguishment of debt	—		—		—		2,122
Other expense, net	1,150		177		2,787		565
Total other expense, net	19,067		17,101		52,975		51,001
Income before income taxes	68,117		65,493		205,607		201,493
Provision for income taxes	16,166		15,278		47,361		48,198
Net income	$	51,951	$	50,215	$	158,246	$	153,295
Earnings per share:
Basic	$	1.05	$	1.00	$	3.17	$	3.05
Diluted	$	1.04	$	0.99	$	3.14	$	3.02
Weighted average shares outstanding:
Basic	49,693		50,303		49,919		50,225
Diluted	50,186		50,935		50,392		50,799
Comprehensive income, net of tax:
Currency translation adjustments	6,970		652		(9,667)		(5,037)
Unrealized gain on interest rate swaps	—		561		—		1,631
Net loss on termination of pension plan	—		—		(790)		—
Total other comprehensive income (loss)	6,970		1,213		(10,457)		(3,406)
Comprehensive income	$	58,921	$	51,428	$	147,789	$	149,889

See accompanying notes.

-2-

Prestige Consumer Healthcare Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands)	December 31, 2022		March 31, 2022
Assets
Current assets
Cash and cash equivalents	$	86,358	$	27,185
Accounts receivable, net of allowance of $21,370 and $19,720, respectively	157,081		139,330
Inventories	158,522		120,342
Prepaid expenses and other current assets	6,886		6,410
Total current assets	408,847		293,267
Property, plant and equipment, net	69,569		71,300
Operating lease right-of-use assets	16,410		20,372
Finance lease right-of-use assets, net	4,864		6,858
Goodwill	576,602		578,976
Intangible assets, net	2,670,328		2,696,635
Other long-term assets	3,154		3,273
Total Assets	$	3,749,774	$	3,670,681
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable	64,254		55,760
Accrued interest payable	15,267		4,437
Operating lease liabilities, current portion	6,858		6,360
Finance lease liabilities, current portion	2,814		2,752
Other accrued liabilities	70,983		74,113
Total current liabilities	160,176		143,422
Long-term debt, net	1,424,095		1,476,658
Deferred income tax liabilities	455,826		444,917
Long-term operating lease liabilities, net of current portion	11,559		16,088
Long-term finance lease liabilities, net of current portion	2,383		4,501
Other long-term liabilities	8,872		7,484
Total Liabilities	2,062,911		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 - 54,852 shares at December 31, 2022 and 54,430 shares at March 31, 2022	548		544
Additional paid-in capital	532,508		515,583
Treasury stock, at cost - 5,165 shares at December 31, 2022 and 4,151 shares at March 31, 2022	(189,114)		(133,648)
Accumulated other comprehensive loss, net of tax	(29,489)		(19,032)
Retained earnings	1,372,410		1,214,164
Total Stockholders' Equity	1,686,863		1,577,611
Total Liabilities and Stockholders' Equity	$	3,749,774	$	3,670,681

 See accompanying notes.

-3-

Prestige Consumer Healthcare Inc.

Condensed Consolidated Statements of Changes in Stockholders' Equity

(Unaudited)

	Three Months Ended December 31, 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 September 30, 2022	54,690	$	547	$	524,392	5,164	$	(189,098)	$	(36,459)	$	1,320,459	$	1,619,841
Stock-based compensation	—	—		2,433		—	—		—		—		2,433
Exercise of stock options	161	1		5,683		—	—		—		—		5,684
Issuance of shares related to restricted stock	1	—		—		—	—		—		—		—
Treasury share repurchases	—	—		—		1	(16)		—		—		(16)
Net income	—	—		—		—	—		—		51,951		51,951
Comprehensive income	—	—		—		—	—		6,970		—		6,970
Balances at December 31, 2022	54,852	$	548	$	532,508	5,165	$	(189,114)	$	(29,489)	$	1,372,410	$	1,686,863

	Three 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 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

-4-

	Nine Months Ended December 31, 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	—	—		9,756		—	—		—		—		9,756
Exercise of stock options	200	2		7,171		—	—		—		—		7,173
Issuance of shares related to restricted stock	222	2		(2)		—	—		—		—		—
Treasury share repurchases	—	—		—		1,014	(55,466)		—		—		(55,466)
Net income	—	—		—		—	—		—		158,246		158,246
Comprehensive loss	—	—		—		—	—		(10,457)		—		(10,457)
Balances at December 31, 2022	54,852	$	548	$	532,508	5,165	$	(189,114)	$	(29,489)	$	1,372,410	$	1,686,863

	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

See accompanying notes.

-5-

Prestige Consumer Healthcare Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Nine Months Ended December 31,
(In thousands)	2022		2021
Operating Activities
Net income	$	158,246	$	153,295
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	24,762		23,607
Loss on disposal of property and equipment	171		79
Deferred income taxes	14,021		11,296
Amortization of debt origination costs	2,613		2,811
Stock-based compensation costs	9,756		7,331
Loss on extinguishment of debt	—		2,122
Non-cash operating lease cost	4,697		5,034
Other	447		—
Changes in operating assets and liabilities, net of effects from acquisition:
Accounts receivable	(17,078)		(21,848)
Inventories	(38,587)		14,650
Prepaid expenses and other current assets	(596)		(5,622)
Accounts payable	8,892		(6,079)
Accrued liabilities	8,345		15,053
Operating lease liabilities	(4,941)		(4,807)
Other	(19)		(126)
Net cash provided by operating activities	170,729		196,796
Investing Activities
Purchases of property, plant and equipment	(5,226)		(6,481)
Acquisition of Akorn	—		(246,914)
Other	—		177
Net cash used in investing activities	(5,226)		(253,218)
Financing Activities
Term loan repayments	(55,000)		(545,000)
Proceeds from refinancing of Term Loan	—		597,000
Borrowings under revolving credit agreement	20,000		85,000
Repayments under revolving credit agreement	(20,000)		(85,000)
Payments of debt costs	—		(6,111)
Payments of finance leases	(2,058)		(2,145)
Proceeds from exercise of stock options	7,173		5,718
Fair value of shares surrendered as payment of tax withholding	(5,466)		(2,916)
Repurchase of common stock	(50,000)		—
Net cash (used in) provided by financing activities	(105,351)		46,546
Effects of exchange rate changes on cash and cash equivalents	(979)		(1,408)
Increase (decrease) in cash and cash equivalents	59,173		(11,284)
Cash and cash equivalents - beginning of period	27,185		32,302
Cash and cash equivalents - end of period	$	86,358	$	21,018
Interest paid	$	36,716	$	36,279
Income taxes paid	$	27,632	$	42,977

See accompanying notes.

-6-

Prestige Consumer Healthcare Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

1.    Business and Basis of Presentation

Nature of Business

Prestige Consumer Healthcare Inc. (referred to herein as the “Company” or “we,” which reference shall, unless the context requires otherwise, be deemed to refer to Prestige Consumer Healthcare Inc. and all of its direct and indirect 100% owned subsidiaries on a consolidated basis) is engaged in the development, manufacturing, marketing, sales and distribution of over-the-counter (“OTC”) healthcare products to mass merchandisers, drug, food, dollar, convenience and club stores and e-commerce channels in North America (the United States and Canada) and in Australia and certain other international markets.  Prestige Consumer Healthcare Inc. is a holding company with no operations and is also the parent guarantor of the senior credit facility and the senior notes described in Note 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 nine months ended December 31, 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.

-7-

Use of Estimates

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

Recently Adopted Accounting Pronouncements

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 and also issued subsequent amendments to the initial guidance (collectively, "Topic 848"). Topic 848 provides optional guidance for contract modifications and certain hedging relationships associated with the transition from reference rates that are expected to be discontinued. We will adopt Topic 848 when relevant contracts are modified upon transition to alternate reference rates, but no later than December 31, 2024. 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.

-8-

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)	December 31, 2022		March 31, 2022
Components of Inventories
Packaging and raw materials	$	20,306	$	16,984
Work in process	453		338
Finished goods	137,763		103,020
Inventories	$	158,522	$	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 $4.5 million at December 31, 2022 and $4.9 million at March 31, 2022 related to obsolete and slow-moving inventory.

-9-

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	—		(1,824)		(1,824)
Balance - December 31, 2022
	Goodwill	711,452		30,448		741,900
	Accumulated impairment loss	(163,711)		(1,587)		(165,298)
Balance - December 31, 2022		$	547,741	$	28,861	$	576,602

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, supply chain constraints, labor shortages, 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. For example, the significant increase in interest rates over the last fiscal year, if sustained at year-end, will significantly impact the discount rate we use in our year-end analysis, impacting the final analysis of many of our brands. 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, supply chain constraints, labor shortages, and inflation for the period ended December 31, 2022.

As of December 31, 2022, we determined no events have occurred that would indicate potential impairment of goodwill.

-10-

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	(7,646)		(1,993)		(9,639)
Balance — December 31, 2022	2,468,913		434,181		2,903,094
Accumulated Amortization
Balance — March 31, 2022	—		216,098		216,098
Additions	—		16,865		16,865
Effects of foreign currency exchange rates	—		(197)		(197)
Balance — December 31, 2022	—		232,766		232,766
Intangible assets, net - December 31, 2022	$	2,468,913	$	201,415	$	2,670,328

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 $16.9 million for the three and nine months ended December 31, 2022, respectively, and $5.4 million and $15.6 million for the three and nine months ended December 31, 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 three months ended March 31, 2023)	$	5,619
2024	22,434
2025	20,382
2026	18,134
2027	16,493
Thereafter	118,353
	$	201,415

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.

-11-

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 in interest rates and rates of inflation, which can have an impact on the determination of fair value. For example, the significant increase in interest rates over the last fiscal year, if sustained at year-end, will significantly impact the discount rate we use in our year-end analysis, impacting the final analysis of many of our brands. 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, supply chain constraints, labor shortages, or inflation, we may be required to record impairment charges in the future.

As of December 31, 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 nine months ended December 31, 2022 and 2021 were as follows:

	Three Months Ended December 31,				Nine Months Ended December 31,
(In thousands)	2022		2021		2022		2021
Finance lease cost:
Amortization of right-of-use assets	$	665	$	642	$	1,994	$	1,926
Interest on lease liabilities	41		57		136		186
Operating lease cost	1,621		1,651		4,872		5,021
Short term lease cost	35		30		120		76
Variable lease cost	14,727		9,770		43,742		33,419
Total net lease cost	$	17,089	$	12,150	$	50,864	$	40,628

As of December 31, 2022, the maturities of lease liabilities were as follows:

(In thousands)
Year Ending March 31,	Operating Leases		Finance Lease		Total
2023 (Remaining three months ending March 31, 2023)	$	2,121	$	730	$	2,851
2024	7,017		2,923		9,940
2025	4,750		1,509		6,259
2026	2,264		96		2,360
2027	1,886		80		1,966
Thereafter	1,685		—		1,685
Total undiscounted lease payments	19,723		5,338		25,061
Less amount of lease payments representing interest	(1,306)		(141)		(1,447)
Total present value of lease payments	$	18,417	$	5,197	$	23,614

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

		December 31, 2022
Weighted average remaining lease term (years)
	Operating leases	3.43
	Finance leases	1.92
Weighted average discount rate
	Operating leases	3.29	%
	Finance leases	2.95	%

-12-

7.    Other Accrued Liabilities

Other accrued liabilities consist of the following:

(In thousands)	December 31, 2022		March 31, 2022
Accrued marketing costs	$	35,936	$	36,149
Accrued compensation costs	10,436		19,587
Accrued broker commissions	1,474		1,179
Income taxes payable	6,973		2,670
Accrued professional fees	4,179		4,150
Accrued production costs	5,435		3,686
Other accrued liabilities	6,550		6,692
	$	70,983	$	74,113

8.    Long-Term Debt

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

(In thousands, except percentages)	December 31, 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.