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, 2023

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 27, 2023, there were 49,618,585 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, 2023 and 2022 (unaudited)	2
	Condensed Consolidated Balance Sheets as of September 30, 2023 and March 31, 2023 (unaudited)	3
	Condensed Consolidated Statements of Changes in Stockholders' Equity for the three and six months ended September 30, 2023 and 2022 (unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the three and six months ended September 30, 2023 and 2022 (unaudited)	6
	Notes to Condensed Consolidated Financial Statements (unaudited)	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32
Item 4.	Controls and Procedures	32
PART II.	OTHER INFORMATION
Item 1A.	Risk Factors	32
Item 5.	Other Information	33
Item 6.	Exhibits	34
	Signatures	35

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 September 30,				Six Months Ended September 30,
(In thousands, except per share data)	2023		2022		2023		2022
Revenues
Net sales	$	286,307	$	289,264	$	565,606	$	566,288
Other revenues	9		9		19		44
Total revenues	286,316		289,273		565,625		566,332
Cost of Sales
Cost of sales excluding depreciation	124,324		126,384		246,978		241,380
Cost of sales depreciation	1,972		1,880		3,954		3,824
Cost of sales	126,296		128,264		250,932		245,204
Gross profit	160,020		161,009		314,693		321,128
Operating Expenses
Advertising and marketing	40,102		43,819		76,333		83,770
General and administrative	25,997		26,438		53,684		53,152
Depreciation and amortization	5,671		6,368		11,232		12,808
Total operating expenses	71,770		76,625		141,249		149,730
Operating income	88,250		84,384		173,444		171,398
Other expense
Interest expense, net	17,606		16,979		35,325		32,271
Other (income) expense, net	229		812		(1,009)		1,637
Total other expense, net	17,835		17,791		34,316		33,908
Income before income taxes	70,415		66,593		139,128		137,490
Provision for income taxes	16,856		15,570		32,293		31,195
Net income	$	53,559	$	51,023	$	106,835	$	106,295
Earnings per share:
Basic	$	1.08	$	1.02	$	2.15	$	2.12
Diluted	$	1.07	$	1.02	$	2.13	$	2.11
Weighted average shares outstanding:
Basic	49,687		49,804		49,727		50,033
Diluted	50,081		50,265		50,138		50,496
Comprehensive income, net of tax:
Currency translation adjustments	(3,784)		(7,118)		(4,430)		(16,637)
Net loss on termination of pension plan	—		—		—		(790)
Total other comprehensive loss	(3,784)		(7,118)		(4,430)		(17,427)
Comprehensive income	$	49,775	$	43,905	$	102,405	$	88,868

See accompanying notes.

-2-

Prestige Consumer Healthcare Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands)	September 30, 2023		March 31, 2023
Assets
Current assets
Cash and cash equivalents	$	60,067	$	58,489
Accounts receivable, net of allowance of $21,994 and $20,205, respectively	158,456		167,016
Inventories	161,283		162,121
Prepaid expenses and other current assets	8,392		4,117
Total current assets	388,198		391,743
Property, plant and equipment, net	70,700		70,412
Operating lease right-of-use assets	12,134		14,923
Finance lease right-of-use assets, net	2,870		4,200
Goodwill	526,860		527,553
Intangible assets, net	2,328,250		2,341,893
Other long-term assets	3,862		3,005
Total Assets	$	3,332,874	$	3,353,729
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable	44,381		62,743
Accrued interest payable	15,635		15,688
Operating lease liabilities, current portion	6,732		6,926
Finance lease liabilities, current portion	2,876		2,834
Other accrued liabilities	60,080		72,524
Total current liabilities	129,704		160,715
Long-term debt, net	1,262,972		1,345,788
Deferred income tax liabilities	388,481		380,434
Long-term operating lease liabilities, net of current portion	6,644		9,876
Long-term finance lease liabilities, net of current portion	218		1,667
Other long-term liabilities	8,896		8,165
Total Liabilities	1,796,915		1,906,645
Commitments and Contingencies — Note 14
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 - 55,291 shares at September 30, 2023 and 54,857 shares at March 31, 2023	552		548
Additional paid-in capital	552,369		535,356
Treasury stock, at cost - 5,680 shares at September 30, 2023 and 5,165 shares at March 31, 2023	(219,661)		(189,114)
Accumulated other comprehensive loss, net of tax	(35,994)		(31,564)
Retained earnings	1,238,693		1,131,858
Total Stockholders' Equity	1,535,959		1,447,084
Total Liabilities and Stockholders' Equity	$	3,332,874	$	3,353,729

 See accompanying notes.

-3-

Prestige Consumer Healthcare Inc.

Condensed Consolidated Statements of Changes in Stockholders' Equity

(Unaudited)

	Three Months Ended September 30, 2023
	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, 2023	55,220	$	552	$	546,526	5,680	$	(219,707)	$	(32,210)	$	1,185,134	$	1,480,295
Stock-based compensation	—	—		3,688		—	—		—		—		3,688
Exercise of stock options	58	—		2,155		—	—		—		—		2,155
Issuance of shares related to restricted stock	13	—		—		—	—		—		—		—
Treasury share repurchases	—	—		—		—	46		—		—		46
Net income	—	—		—		—	—		—		53,559		53,559
Comprehensive loss	—	—		—		—	—		(3,784)		—		(3,784)
Balances at September 30, 2023	55,291	$	552	$	552,369	5,680	$	(219,661)	$	(35,994)	$	1,238,693	$	1,535,959

	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

-4-

	Six Months Ended September 30, 2023
	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, 2023	54,857	$	548	$	535,356	5,165	$	(189,114)	$	(31,564)	$	1,131,858	$	1,447,084
Stock-based compensation	—	—		7,834		—	—		—		—		7,834
Exercise of stock options	231	2		9,181		—	—		—		—		9,183
Issuance of shares related to restricted stock	203	2		(2)		—	—		—		—		—
Treasury share repurchases	—	—		—		515	(30,547)		—		—		(30,547)
Net income	—	—		—		—	—		—		106,835		106,835
Comprehensive loss	—	—		—		—	—		(4,430)		—		(4,430)
Balances at September 30, 2023	55,291	$	552	$	552,369	5,680	$	(219,661)	$	(35,994)	$	1,238,693	$	1,535,959

	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

See accompanying notes.

-5-

Prestige Consumer Healthcare Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Six Months Ended September 30,
(In thousands)	2023		2022
Operating Activities
Net income	$	106,835	$	106,295
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	15,186		16,632
Loss on disposal of property and equipment	191		94
Deferred income taxes	9,721		4,211
Amortization of debt origination costs	2,302		1,798
Stock-based compensation costs	7,834		7,323
Non-cash operating lease cost	2,816		2,984
Other	—		447
Changes in operating assets and liabilities:
Accounts receivable	4,415		(8,276)
Inventories	223		(21,810)
Prepaid expenses and other current assets	(3,814)		(1,501)
Accounts payable	(18,820)		1,016
Accrued liabilities	(11,764)		9,788
Operating lease liabilities	(3,493)		(3,201)
Other	(1,085)		(13)
Net cash provided by operating activities	110,547		115,787
Investing Activities
Purchases of property, plant and equipment	(4,411)		(3,423)
Other	3,800		—
Net cash provided by (used in) investing activities	(611)		(3,423)
Financing Activities
Term loan repayments	(85,000)		(40,000)
Borrowings under revolving credit agreement	—		20,000
Repayments under revolving credit agreement	—		(20,000)
Payments of finance leases	(1,403)		(1,369)
Proceeds from exercise of stock options	9,183		1,489
Fair value of shares surrendered as payment of tax withholding	(5,508)		(5,450)
Repurchase of common stock	(25,000)		(50,000)
Net cash used in financing activities	(107,728)		(95,330)
Effects of exchange rate changes on cash and cash equivalents	(630)		(1,777)
Increase (decrease) in cash and cash equivalents	1,578		15,257
Cash and cash equivalents - beginning of period	58,489		27,185
Cash and cash equivalents - end of period	$	60,067	$	42,442
Interest paid	$	33,706	$	19,016
Income taxes paid	$	25,118	$	15,689

                                                                                                

See accompanying notes.

-6-

Prestige Consumer Healthcare Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

1.    Business and Basis of Presentation

Nature of Business

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

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 and geopolitical events. 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. 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, these 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 materially 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 environment. If conditions cause further disruption in the global supply chain, the availability of labor and materials or otherwise further increase costs, it may materially affect our operations and those of third parties on which we rely, including causing material 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 global supply chain constraints, the high inflationary environment, global instability and the potential for further outbreaks of severe illnesses. 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., 2024) mean our fiscal year ending or ended on March 31st of that year. Operating results for the six months ended September 30, 2023 are not necessarily indicative of results that may be expected for the fiscal year ending March 31, 2024.  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, 2023.

-7-

Use of Estimates

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

Recently Adopted Accounting Pronouncements

In October 2021, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("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. We adopted this standard effective April 1, 2023. The impact of the 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"). In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848, which extends the period of time preparers can utilize the reference rate reform relief guidance in 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. On April 4, 2023, we entered into Amendment No. 8 ("ABL Amendment No. 8") to the Company's asset-based revolving credit facility originally entered into on January 31, 2012 (the "2012 ABL Revolver"). ABL Amendment No. 8 provides for the replacement of LIBOR with Secured Overnight Financing Rate ("SOFR") as our reference rate. On June 12, 2023, we entered into Amendment No. 7 ("Term Loan Amendment No. 7") to the Company’s term loan originally entered into on January 31, 2012 (the “2012 Term Loan”), effective July 1, 2023. Term Loan Amendment No. 7 provides for the replacement of LIBOR with SOFR as our reference rate. Effective July 1, 2023, we have transitioned all discontinued reference rates to SOFR. The adoption of the standard did not have a material impact on our Consolidated Financial Statements.

There were no other accounting pronouncements issued but not yet adopted by us that are expected to have a material impact on our Consolidated Financial Statements.

2.     Inventories

Inventories consist of the following:

(In thousands)	September 30, 2023		March 31, 2023
Components of Inventories
Packaging and raw materials	$	22,742	$	20,634
Work in process	233		220
Finished goods	138,308		141,267
Inventories	$	161,283	$	162,121

Inventories are carried and depicted above at the lower of cost or net realizable value, which includes a reduction in inventory values of $6.0 million at September 30, 2023 and $5.8 million at March 31, 2023 related to obsolete and slow-moving inventory.

-8-

3.    Goodwill

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

(In thousands)		North American OTC Healthcare		International OTC Healthcare		Consolidated
Balance - March 31, 2023
	Goodwill	$	711,452	$	30,204	$	741,656
	Accumulated impairment loss	(212,516)		(1,587)		(214,103)
Balance - March 31, 2023		498,936		28,617		527,553
	Effects of foreign currency exchange rates	—		(693)		(693)
Balance - September 30, 2023
	Goodwill	711,452		29,511		740,963
	Accumulated impairment loss	(212,516)		(1,587)		(214,103)
Balance - September 30, 2023		$	498,936	$	27,924	$	526,860

The date of our annual impairment review was February 28, 2023, and we recorded impairment charges to goodwill of $48.8 million in our March 31, 2023 financial statements. 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, 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. If these assumptions are adversely affected, we may be required to record impairment charges in the future. As of September 30, 2023, we determined no events have occurred that would indicate potential impairment of goodwill.

4.    Intangible Assets, net

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

(In thousands)	Indefinite- Lived Trademarks		Finite-Lived Trademarks and Customer Relationships		Totals
Gross Carrying Amounts
Balance — March 31, 2023	$	2,168,902	$	411,118	$	2,580,020
Effects of foreign currency exchange rates	(3,082)		(785)		(3,867)
Balance — September 30, 2023	$	2,165,820	$	410,333	$	2,576,153
Accumulated Amortization
Balance — March 31, 2023	$	—	$	238,127	$	238,127
Additions	—		9,900		9,900
Effects of foreign currency exchange rates	—		(124)		(124)
Balance — September 30, 2023	$	—	$	247,903	$	247,903
Intangible assets, net - September 30, 2023	$	2,165,820	$	162,430	$	2,328,250

Amortization expense was $4.9 million and $9.9 million for the three and six months ended September 30, 2023, respectively, and $5.6 million and $11.3 million for the three and six months ended September 30, 2022, respectively.  

Finite-lived intangible assets are expected to be amortized over their estimated useful life, which ranges from a period of 10 to 25 years, and the estimated amortization expense for each of the five succeeding years and the periods thereafter is as follows (in thousands):

-9-

(In thousands)
Year Ending March 31,	Amount
2024 (remaining six months ended March 31, 2024)	$	9,866
2025	18,061
2026	16,110
2027	14,519
2028	12,183
Thereafter	91,691
	$	162,430

The date of our annual impairment review was February 28, 2023, and we recorded impairment charges to intangible assets of $321.4 million in our March 31, 2023 financial statements. The assumptions subject to significant uncertainties in the impairment analysis include the discount rate utilized in the analysis, 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. 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 supply chain constraints, labor shortages, or inflation, we may be required to record impairment charges in the future. As of September 30, 2023, no events have occurred that would indicate potential impairment of intangible assets.

5.    Leases

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

The components of lease expense for the three and six months ended September 30, 2023 and 2022 were as follows:

	Three Months Ended September 30,				Six Months Ended September 30,
(In thousands)	2023		2022		2023		2022
Finance lease cost:
Amortization of right-of-use assets	$	664	$	664	$	1,329	$	1,329
Interest on lease liabilities	24		45		54		95
Operating lease cost	1,624		1,617		3,248		3,251
Short term lease cost	34		51		67		85
Variable lease cost	16,941		17,016		33,397		29,015
Total net lease cost	$	19,287	$	19,393	$	38,095	$	33,775

As of September 30, 2023, the maturities of lease liabilities were as follows:

(In thousands)
Year Ending March 31,	Operating Leases		Finance Lease		Total
2024 (remaining six months ending March 31, 2024)	$	3,564	$	1,461	$	5,025
2025	4,810		1,509		6,319
2026	2,328		96		2,424
2027	1,913		80		1,993
2028	1,433		—		1,433
Thereafter	254		—		254
Total undiscounted lease payments	14,302		3,146		17,448
Less amount of lease payments representing interest	(926)		(52)		(978)
Total present value of lease payments	$	13,376	$	3,094	$	16,470

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

		September 30, 2023
Weighted average remaining lease term (years)
	Operating leases	3.02
	Finance leases	1.23
Weighted average discount rate
	Operating leases	3.62	%
	Finance leases	2.94	%

6.    Other Accrued Liabilities

Other accrued liabilities consist of the following:

(In thousands)	September 30, 2023		March 31, 2023
Accrued marketing costs	$	26,512	$	30,471
Accrued compensation costs	8,232		14,292
Accrued broker commissions	2,210		1,767
Income taxes payable	8,160		10,645
Accrued professional fees	4,323		4,254
Accrued production costs	6,003		5,700
Other accrued liabilities	4,640		5,395
	$	60,080	$	72,524

7.    Long-Term Debt

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

(In thousands, except percentages)	September 30, 2023		March 31, 2023
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 (at March 31, 2023) and SOFR plus a margin of 2.00% plus a credit spread adjustment (at September 30, 2023), due on July 1, 2028.	275,000		360,000
Long-term debt	1,275,000		1,360,000
Less: unamortized debt costs	(12,028)		(14,212)
Long-term debt, net	$	1,262,972	$	1,345,788

At September 30, 2023, we had no balance outstanding on the 2012 ABL Revolver and a borrowing capacity of $171.2 million.

On April 4, 2023, we entered into Amendment No. 8 to the 2012 ABL Revolver. ABL Amendment No. 8 provides for the replacement of LIBOR with SOFR as our reference rate.

On June 12, 2023, we entered into Term Loan Amendment No. 7 to the Company’s 2012 Term Loan, effective July 1, 2023. Term Loan Amendment No. 7 provides for the replacement of LIBOR with SOFR as our reference rate.

As of September 30, 2023, aggregate future principal payments required in accordance with the terms of the 2012 Term B-5 Loans under the 2012 Term Loan, the 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:

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(In thousands)
Year Ending March 31,	Amount
2024 (remaining six months ending March 31, 2024)	$	—
2025	—
2026	—
2027	—
2028	400,000
Thereafter	875,000
	$	1,275,000

8.    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.

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 September 30, 2023 and March 31, 2023.

	September 30, 2023		March 31, 2023
(In thousands)	Carrying Value	Fair Value	Carrying Value	Fair Value
2019 Senior Notes	400,000	373,000	400,000	383,500
2021 Senior Notes	600,000	482,250	600,000	510,750
2012 Term B-5 Loans	275,000	275,000	360,000	359,550

At September 30, 2023 and March 31, 2023, we did not have any assets or liabilities measured in Level 1 or 3.

9.    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 September 30, 2023.

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On May 2, 2023, the Company's Board of Directors authorized the repurchase of up to $25.0 million of the Company's issued and outstanding common stock through May 31, 2024, utilizing open market transactions, transactions structured through investment banking institutions, in privately-negotiated transactions, by direct purchases of common stock or a combination of the foregoing in compliance with the applicable rules and regulations of the Securities and Exchange Commission. We completed the repurchase in the first quarter of fiscal 2024.

During the three and six months ended September 30, 2023 and 2022, we repurchased shares of our common stock and recorded them as treasury stock. Our share repurchases consisted of the following:

	Three Months Ended September 30,				Six Months Ended September 30,
	2023		2022		2023	2022
Shares repurchased pursuant to the provisions of the various employee restricted stock awards:
Number of shares	—		—		88,953	99,219
Average price per share	$	—	$	—	$61.92	$54.94
Total amount repurchased	$	—	$	—	$5.5 million	$5.5 million
Shares repurchased in conjunction with our share repurchase program:
Number of shares	—		236,681		426,479	914,236
Average price per share	$	—	$	51.85	$58.62	$54.69
Total amount repurchased	$	—	$12.3 million		$25.0 million	$50.0 million

10.    Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss consisted of the following at September 30, 2023 and March 31, 2023:

(In thousands)	September 30, 2023		March 31, 2023
Components of Accumulated Other Comprehensive Loss
Cumulative translation adjustment	$	(36,710)	$	(32,280)
Unrecognized net gain on pension plans, net of tax of $(214) and $(214), respectively	716		716
Accumulated other comprehensive loss, net of tax	$	(35,994)	$	(31,564)

As of September 30, 2023 and March 31, 2023, no amounts were reclassified from accumulated other comprehensive loss into earnings.

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11.    Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share:

	Three Months Ended September 30,				Six Months Ended September 30,
(In thousands, except per share data)	2023		2022		2023		2022
Numerator
Net income	$	53,559	$	51,023	$	106,835	$	106,295
Denominator
Denominator for basic earnings per share — weighted average shares outstanding	49,687		49,804		49,727		50,033
Dilutive effect of unvested restricted stock units and options issued to employees and directors	394		461		411		463
Denominator for diluted earnings per share	50,081		50,265		50,138		50,496
Earnings per Common Share:
Basic earnings per share	$	1.08	$	1.02	$	2.15	$	2.12
Diluted earnings per share	$	1.07	$	1.02	$	2.13	$	2.11

For the three months ended September 30, 2023 and 2022, there were 0.3 million and 0.4 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. For the six months ended September 30, 2023 and 2022, there were 0.3 million and 0.4 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.

12.    Stock-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, restricted stock units ("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, among other changes.

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). Since the 2020 Plan became effective, all equity awards have been made from the 2020 Plan, and the Company will not grant any additional awards under the 2005 Plan.

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

	Three Months Ended September 30,				Six Months Ended September 30,
(In thousands)	2023		2022		2023		2022
Pre-tax stock-based compensation costs charged against income	$	3,688	$	3,466	$	7,834	$	7,323
Income tax benefit recognized on compensation costs	$	263	$	338	$	669	$	875
Total fair value of options and RSUs vested during the period	$	987	$	64	$	12,213	$	10,289
Cash received from the exercise of stock options	$	2,155	$	—	$	9,183	$	1,489
Tax benefits realized from tax deductions resulting from RSU issuances and stock option exercises	$	263	$	—	$	1,139	$	2,895

At September 30, 2023, there were $3.8 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 2.1 years. At September 30, 2023, there were $14.8 million of unrecognized compensation costs related to unvested RSUs and performance stock units ("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 1.9 years.

At September 30, 2023, there were 1.9 million shares available for issuance under the 2020 Plan.

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
Six Months Ended September 30, 2022
Unvested at March 31, 2022	440.9	$	38.45
Granted	148.9	55.04
Incremental performance shares	42.4	—
Vested	(222.4)	32.05
Unvested at September 30, 2022	409.8	47.14
Vested at September 30, 2022	108.5	36.54
Six Months Ended September 30, 2023
Unvested at March 31, 2023	409.0	$	47.17
Granted	157.1	62.06
Incremental performance shares	41.4	—
Vested	(205.0)	43.17
Forfeited	(8.6)	53.72
Unvested at September 30, 2023	393.9	54.40
Vested at September 30, 2023	110.2	38.77

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Options

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

	Six Months Ended September 30,
	2023		2022
Expected volatility	30.2% - 31.6%		30.8% - 30.9%
Expected dividends	$	—	$	—
Expected term in years	6.0 to 7.0		6.0 to 7.0
Risk-free rate	3.6% to 4.1%		2.8% to 2.9%
Weighted average grant date fair value of options granted	$	23.79	$	20.10

A summary of option activity under the 2005 Plan and the 2020 Plan is as follows:

Options	Shares (in thousands)	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (in thousands)
Six Months Ended September 30, 2022
Outstanding at March 31, 2022	1,100.9	$	40.62
Granted	197.6	54.48
Exercised	(39.1)	38.04
Outstanding at September 30, 2022	1,259.4	42.88		6.6	$	10,963
Vested at September 30, 2022	830.8	40.04		5.4	$	9,403
Six Months Ended September 30, 2023
Outstanding at March 31, 2023	1,081.0	$	43.96
Granted	131.1	61.81
Exercised	(230.4)	39.85
Forfeited	(35.8)	54.81
Expired	(2.8)	54.47
Outstanding at September 30, 2023	943.1	47.00		6.3	$	10,166
Vested at September 30, 2023	644.7	43.19		5.2	$	9,025

The aggregate intrinsic value of options exercised during the six months ended September 30, 2023 was $4.7 million.

13.    Income Taxes

Income taxes are recorded in our quarterly financial statements based on our estimated annual effective income tax rate, subject to adjustments for discrete events, should they occur. The effective tax rates used in the calculation of income taxes were 23.9% and 23.4% for the three months ended September 30, 2023 and 2022, respectively. The effective tax rates used in the calculation of income taxes were 23.2% and 22.7% for the six months ended September 30, 2023 and 2022, respectively. The increase in the effective tax rate for the three and six months ended September 30, 2023, compared to the three and six months ended September 30, 2022, was due to discrete items primarily pertaining to state tax rate legislative changes and stock-based compensation.

14.    Commitments and Contingencies

We are involved from time to time in legal matters and other claims incidental to our business.  We review outstanding claims and proceedings internally and with external counsel as necessary to assess the probability and amount of a potential loss.  These assessments are re-evaluated at each reporting period and as new information becomes available to determine whether a reserve should be established or if any existing reserve should be adjusted.  The actual cost of resolving a claim or proceeding ultimately may be substantially different than the amount of the recorded reserve.  In addition, because it is not permissible under GAAP to establish a litigation reserve until the loss is both probable and estimable, in some cases there may

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be insufficient time to establish a reserve prior to the actual incurrence of the loss (upon verdict and judgment at trial, for example, or in the case of a quickly negotiated settlement).  We believe the reasonably possible losses from resolution of routine legal matters and other claims incidental to our business will not have a material effect on our financial statements.

15.    Concentrations of Risk

Our revenues are concentrated in the area of OTC Healthcare. We sell our products to mass merchandisers, drug, food, dollar, convenience and club stores and e-commerce channels. During the three and six months ended September 30, 2023, approximately 38.9% and 40.0%, respectively, of our gross revenues were derived from our five top selling brands. During the three and six months ended September 30, 2022, approximately 39.7% and 40.6%, respectively, of our gross revenues were derived from our five top selling brands. Walmart accounted for approximately 19.1% and 20.0%, respectively, of our gross revenues for the three and six months ended September 30, 2023. Walmart accounted for approximately 19.7% and 19.8%, respectively, of our gross revenues for the three and six months ended September 30, 2022. Amazon accounted for 10.3% of our gross revenues for the six months ended September 30, 2023. An additional customer, Walgreens, accounted for approximately 10.4% of our gross revenues for the three months ended September 30, 2022.

Our product distribution in the United States is managed by a third party through one primary distribution center in Clayton, Indiana. In addition, we operate one manufacturing facility for certain of our products located in Lynchburg, Virginia, which manufactures many of the Summer's Eve and Fleet products. A natural disaster, such as tornado, earthquake, flood, or fire, could damage our inventory and/or materially impair our ability to distribute our products to customers in a timely manner or at a reasonable cost. In addition, a serious disruption caused by performance or contractual issues with our third-party distribution manager or labor shortages or public health emergencies at our distribution center or manufacturing facility could materially impact our product distribution. Any disruption could result in increased costs, expense and/or shipping times, and could cause us to incur customer fees and penalties. We could also incur significantly higher costs and experience longer lead times if we need to replace our distribution center, the third-party distribution manager or the manufacturing facility.  As a result, any serious disruption could have a material adverse effect on our business, financial condition and results of operations.

At September 30, 2023, we had relationships with 128 third-party manufacturers.  Of those, we had long-term contracts with 28 manufacturers that produced items that accounted for approximately 74.6% of gross sales for the six months ended September 30, 2023. At September 30, 2022, we had relationships with 130 third-party manufacturers.  Of those, we had long-term contracts with 27 manufacturers that produced items that accounted for approximately 71.3% of gross sales for the six months ended September 30, 2022. The fact that we do not have long-term contracts with certain manufacturers means that they could cease manufacturing our products at any time and for any reason or initiate arbitrary and costly price increases, which could have a material adverse effect on our business and results of operations. Although we are continually in the process of negotiating long-term contracts with certain key manufacturers, we may not be able to reach a timely agreement, which could have a material adverse effect on our business and results of operations.

16.    Business Segments

Our current reportable segments consist of (i) North American OTC Healthcare and (ii) International OTC Healthcare. We evaluate the performance of our operating segments and allocate resources to these segments based primarily on contribution margin, which we define as gross profit less advertising and marketing expenses.

The tables below summarize information about our reportable segments.

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	Three Months Ended September 30, 2023
(In thousands)	North American OTC Healthcare		International OTC Healthcare		Consolidated
Total segment revenues*	$	244,423	$	41,893	$	286,316
Cost of sales	107,466		18,830		126,296
Gross profit	136,957		23,063		160,020
Advertising and marketing	35,389		4,713		40,102
Contribution margin	$	101,568	$	18,350	$	119,918
Other operating expenses					31,668
Operating income					$	88,250
* Intersegment revenues of $0.6 million were eliminated from the North American OTC Healthcare segment.

	Six Months Ended September 30, 2023
(In thousands)	North American OTC Healthcare		International OTC Healthcare		Consolidated
Total segment revenues*	$	490,566	$	75,059	$	565,625
Cost of sales	217,542		33,390		250,932
Gross profit	273,024		41,669		314,693
Advertising and marketing	66,790		9,543		76,333
Contribution margin	$	206,234	$	32,126	$	238,360
Other operating expenses					64,916
Operating income					$	173,444
* Intersegment revenues of $2.0 million were eliminated from the North American OTC Healthcare segment.

	Three Months Ended September 30, 2022
(In thousands)	North American OTC Healthcare		International OTC Healthcare		Consolidated
Total segment revenues*	$	252,054	$	37,219	$	289,273
Cost of sales	113,533		14,731		128,264
Gross profit	138,521		22,488		161,009
Advertising and marketing	39,316		4,503		43,819
Contribution margin	$	99,205	$	17,985	$	117,190
Other operating expenses					32,806
Operating income					$	84,384
* Intersegment revenues of $1.1 million were eliminated from the North American OTC Healthcare segment.