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Dynamic quotes 
OFFON

PRESTIGE CONSUMER HEALTHCARE INC.

(PBH)
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PRESTIGE CONSUMER HEALTHCARE INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

11/04/2021 | 05:42am EST
The following discussion of our financial condition and results of operations
should be read together with the Condensed Consolidated Financial Statements and
the related notes included in this Quarterly Report on Form 10-Q, as well as our
Annual Report on Form 10-K for the fiscal year ended March 31, 2021. This
discussion and analysis may contain forward-looking statements that involve
certain risks, assumptions and uncertainties. Future results could differ
materially from the discussion that follows for many reasons, including the
factors described in Part I, Item 1A. "Risk Factors" in our Annual Report on
Form 10-K for the fiscal year ended March 31, 2021 and in future reports filed
with the U.S. Securities and Exchange Commission ("SEC").

See also "Cautionary Statement Regarding Forward-Looking Statements" on page 35 of this Quarterly Report on Form 10-Q.



Unless otherwise indicated by the context, all references in this Quarterly
Report on Form 10-Q to "we," "us," "our," the "Company" or "Prestige" refer to
Prestige Consumer Healthcare Inc. and our subsidiaries. Similarly, reference to
a year (e.g., 2022) refers to our fiscal year ended March 31 of that year.

General

We are engaged in the development, manufacturing, marketing, sales and
distribution of well-recognized, brand name, 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. We use the strength of our
brands, our established retail distribution network, a low-cost operating model
and our experienced management team to our competitive advantage.

We have grown our brand portfolio both organically and through acquisitions. We
develop our existing brands by investing in new product lines, brand extensions
and strong advertising support. Acquisitions of OTC brands have also been an
important part of our growth strategy. We have acquired strong and
well-recognized brands from consumer products and pharmaceutical companies, as
well as private equity firms. While many of these brands have long histories of
brand development and investment, we believe that, at the time we acquired them,
most were considered "non-core" by their previous owners. As a result, these
acquired brands did not benefit from adequate management focus and marketing
support during the period prior to their acquisition, which created
opportunities for us to reinvigorate these brands and improve their performance
post-acquisition. After adding a core brand to our portfolio, we seek to
increase its sales, market share and distribution in both existing and new
channels through our established retail distribution network.  We pursue this
growth through increased spending on advertising and marketing support, new
sales and marketing strategies, improved packaging and formulations, and
innovative development of brand extensions.

Acquisitions


Acquisition of 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 OTC Healthcare segment. The
purchase price was funded by a combination of available cash on hand, additional
borrowings under our asset-based revolving credit facility entered into on
January 31, 2011, 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").

The acquisition was accounted for as a business combination. During the three
months ended September 30, 2021, we incurred acquisition-related costs of
$5.1 million which are included in General and administrative expense. In
connection with the acquisition, we also entered into a supply arrangement with
Akorn for a term of three years with optional renewals at prevailing market
rates.

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

                                      -25-
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(In thousands)
                                                      July 1, 2021

Inventories                                          $       6,432

Goodwill                                                     1,758
Intangible assets                                          228,970

Total assets acquired                                        237,160

Accounts payable                                               591
Reserves for sales allowances and cash discounts             2,227
Other accrued liabilities                                    5,428

Total liabilities assumed                                    8,246
Total purchase price                                 $     228,914



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

We recorded goodwill of $1.8 million based on the amount by which the purchase price exceeded the preliminary estimate of the fair value of the net assets acquired.


Economic Environment Since the Coronavirus Outbreak
In March 2020, the World Health Organization ("WHO") declared a global pandemic
due to a new strain of coronavirus ("COVID-19"). The pandemic has caused
significant volatility in the United States and global economies. We expect
economic conditions will continue to be highly volatile and uncertain and could
affect demand for our products and put pressure on prices. We experienced a
temporary but significant decline in consumer consumption of our brands in the
first quarter of fiscal 2021, followed by more stable consumption and customer
orders over the remainder of the year. Generally, throughout the pandemic some
categories were positively impacted (for instance, Women's Health, Oral Care and
Dermatological) and some categories negatively impacted (for instance, Cough &
Cold and Gastrointestinal). The positively impacted categories benefited from
the consumer shift to over-the-counter healthcare products as consumers
increased their focus on hygiene and self-care at home related to COVID-19. The
declining categories were impacted by reduced incidence levels and usage rates
due to shelter-at-home restrictions and limited travel-related activity. In the
first half of fiscal 2022, we experienced solid consumer consumption and share
gains across most of our brand portfolio. Our business also benefited from a
significant increase in demand in certain travel-related categories and channels
and, to a lesser extent, the Cough & Cold category, previously impacted by the
COVID-19 virus.

We have continued to see changes in the purchasing patterns of our consumers,
including the frequency of visits by consumers to retailers and a shift in many
markets to purchasing our products online. Although we have not experienced a
material disruption to our overall supply chain to date, we may experience
delays and backorders for certain ingredients and products, difficulty
scheduling shipping for our products, as well as price increases from certain of
our suppliers for both shipping and product costs. In addition, labor shortages
have begun to impact our manufacturing operations and may impact our ability to
supply certain products to our customers. To date, the pandemic has not had a
material negative impact on our operations, supply chain, overall demand for
most of our products or resulting aggregate sales and earnings, and, as such, it
has also not negatively impacted our liquidity position. We continue to generate
operating cash flows to meet our short-term liquidity needs. These circumstances
could change, however, in this dynamic, unprecedented environment. If the
outbreak continues to spread or labor shortage issues otherwise worsen, it may
materially affect our operations and those of third parties on which we rely,
including causing disruptions in the supply and distribution of our products. We
may need to limit operations and may experience material limitations in employee
and other labor resources. The extent to which COVID-19 and related economic
conditions impact our results and liquidity will depend on future developments,
which are highly uncertain and cannot be predicted, including new information
which may emerge concerning the severity of COVID-19, and the actions to contain
COVID-19 or treat its impact, among others. These effects could have a material,
adverse impact on our business, liquidity, capital resources, and results of
operations and those of the third parties on which we rely.
                                      -26-
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Results of Operations

Three Months Ended September 30, 2021 compared to Three Months Ended September 30, 2020


Total Segment Revenues

The following table represents total revenue by segment, including product groups, for the three months ended September 30, 2021 and 2020.

Three Months Ended September 30,

                                                                                                                                Increase (Decrease)
(In thousands)                            2021                     %                 2020                 %                 Amount                  %
North American OTC Healthcare
Analgesics                        $     29,943                     10.8          $  30,623                12.9          $       (680)               (2.2)
Cough & Cold                            23,022                      8.3             14,796                 6.2                 8,226                55.6
Women's Health                          65,020                     23.6             61,492                25.9                 3,528                 5.7
Gastrointestinal                        37,964                     13.7             31,718                13.4                 6,246                19.7
Eye & Ear Care                          37,818                     13.7             26,767                11.3                11,051                41.3
Dermatologicals                         32,365                     11.7             27,875                11.7                 4,490                16.1
Oral Care                               22,893                      8.3             21,944                 9.2                   949                 4.3
Other OTC                                2,703                      1.0              1,360                 0.6                 1,343                98.8
Total North American OTC
Healthcare                             251,728                     91.1            216,575                91.2                35,153                16.2

International OTC Healthcare
Analgesics                                 396                      0.1                267                 0.1                   129                48.3
Cough & Cold                             5,006                      1.9              3,086                 1.3                 1,920                62.2
Women's Health                           3,345                      1.2              4,106                 1.7                  (761)              (18.5)
Gastrointestinal                         8,641                      3.1              6,379                 2.7                 2,262                35.5
Eye & Ear Care                           2,988                      1.1              3,037                 1.3                   (49)               (1.6)
Dermatologicals                            839                      0.3                836                 0.4                     3                 0.4
Oral Care                                3,278                      1.2              3,134                 1.3                   144                 4.6
Other OTC                                    4                        -                  2                   -                     2               100.0
Total International OTC
Healthcare                              24,497                      8.9             20,847                 8.8                 3,650                17.5

Total Consolidated                $    276,225                    100.0          $ 237,422               100.0          $     38,803                16.3


Total revenues for the three months ended September 30, 2021 were $276.2 million, an increase of $38.8 million, or 16.3%, versus the three months ended September 30, 2020.


North American OTC Healthcare Segment
Revenues for the North American OTC Healthcare segment increased $35.2 million,
or 16.2%, during the three months ended September 30, 2021 versus the three
months ended September 30, 2020. The three months ended September 30, 2021 were
primarily positively impacted by the Eye & Ear Care, Cough and Cold, and
Gastrointestinal categories and certain other categories. The increase in the
Eye & Ear Care category was mainly attributable to the addition of the
TheraTears brand, acquired in conjunction with the Akorn acquisition. Certain
categories and channels benefited from increased consumer travel as a result of
easing COVID-19 restrictions which were negatively impacted in the prior year.

International OTC Healthcare Segment
Revenues for the International OTC Healthcare segment increased $3.7 million, or
17.5%, during the three months ended September 30, 2021 versus the three months
ended September 30, 2020. The $3.7 million increase was attributable to
increased sales in our Australian subsidiary primarily related to an increase in
sales of Hydralyte as a result of easing COVID-19 restrictions.

                                      -27-
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Gross Profit
The following table presents our gross profit and gross profit as a percentage
of total segment revenues, by segment for each of the periods presented.

                                                                                 Three Months Ended September 30,
(In thousands)                                                                                                                   Increase (Decrease)
Gross Profit                                  2021                    %                 2020                %                 Amount                 %
North American OTC Healthcare         $    143,105                    56.8          $ 125,506               58.0          $     17,599               14.0
International OTC Healthcare                14,607                    59.6             12,155               58.3                 2,452               20.2

                                      $    157,712                    57.1          $ 137,661               58.0          $     20,051               14.6



Gross profit for the three months ended September 30, 2021 increased $20.1
million, or 14.6%, when compared with the three months ended September 30,
2020. As a percentage of total revenues, gross profit decreased to 57.1% during
the three months ended September 30, 2021, from 58.0% during the three months
ended September 30, 2020. The decrease in gross profit as a percentage of
revenues was primarily a result of increased supply chain costs and charges
related to the inventory valuation of the acquired Akorn brands in fiscal 2022
of $1.6 million.

North American OTC Healthcare Segment
Gross profit for the North American OTC Healthcare segment increased $17.6
million, or 14.0%, during the three months ended September 30, 2021 versus the
three months ended September 30, 2020. As a percentage of North American OTC
Healthcare revenues, gross profit decreased to 56.8% during the three months
ended September 30, 2021 from 58.0% during the three months ended September 30,
2020, primarily due to increased supply chain costs and charges related to the
inventory valuation of the acquired Akorn brands in fiscal 2022 of $1.6 million.

International OTC Healthcare Segment
Gross profit for the International OTC Healthcare segment increased $2.5
million, or 20.2%, during the three months ended September 30, 2021, versus the
three months ended September 30, 2020. As a percentage of International OTC
Healthcare revenues, gross profit increased to 59.6% during the three months
ended September 30, 2021 from 58.3% during the three months ended September 30,
2020, primarily due to product mix.

Contribution Margin
Contribution margin is our segment measure of profitability. It is defined as
gross profit less advertising and marketing expenses.

The following table presents our contribution margin and contribution margin as a percentage of total segment revenues, by segment for each of the periods presented.


                                                                             Three Months Ended September 30,
(In thousands)                                                                                                             Increase (Decrease)
Contribution Margin                        2021                  %                2020                %                 Amount                 %
North American OTC Healthcare        $     106,612               42.4          $ 91,492               42.2          $     15,120               16.5
International OTC Healthcare                10,370               42.3             7,828               37.5                 2,542               32.5

                                     $     116,982               42.4          $ 99,320               41.8          $     17,662               17.8



North American OTC Healthcare Segment
Contribution margin for the North American OTC Healthcare segment increased
$15.1 million, or 16.5%, during the three months ended September 30, 2021 versus
the three months ended September 30, 2020. As a percentage of North American OTC
Healthcare revenues, contribution margin increased to 42.4% during the three
months ended September 30, 2021 from 42.2% during the three months ended
September 30, 2020. The contribution margin increase as a percentage of revenues
was primarily due to a decrease in the second quarter of fiscal 2022 in
advertising and marketing spend as a percentage of revenues, reflecting spend
efficiencies and reductions across brands/categories driven by consumer
behavior, partly offset by the decrease in gross profit noted above.

International OTC Healthcare Segment
Contribution margin for the International OTC Healthcare segment increased $2.5
million, or 32.5%, during the three months ended September 30, 2021 versus the
three months ended September 30, 2020. As a percentage of International OTC
                                      -28-
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Healthcare revenues, contribution margin increased to 42.3% during the three
months ended September 30, 2021 from 37.5% during the three months ended
September 30, 2020. The contribution margin increase as a percentage of revenues
was primarily due to the increase in gross profit noted above as well as a
decrease in the second quarter of fiscal 2022 advertising and marketing spend as
a percentage of revenues.
General and Administrative
General and administrative expenses were $32.3 million for the three months
ended September 30, 2021 and $20.4 million for the three months ended September
30, 2020. The increase in general and administrative expenses was primarily due
to costs related to the acquisition of Akorn of $5.1 million as well as an
increase in compensation costs and professional fees.

Depreciation and Amortization
Depreciation and amortization expenses were $6.2 million for the three months
ended September 30, 2021 and $6.0 million for the three months ended September
30, 2020. The increase in depreciation and amortization expenses was
attributable to an increase in amortization expense due to the addition of
brands purchased in conjunction with the Akorn acquisition, partly offset by
certain assets being fully depreciated subsequent to the second quarter of
fiscal 2021.

Interest Expense, Net
Interest expense, net was $16.3 million during the three months ended September
30, 2021, versus $21.3 million during the three months ended September 30, 2020.
The average indebtedness was $1.6 billion during the three months ended
September 30, 2021 and 2020. The average cost of borrowing decreased to 3.9% for
the three months ended September 30, 2021 from 5.2% for the three months ended
September 30, 2020.

Loss on Extinguishment of Debt
During the three months ended September 30, 2021, we recorded a loss on
extinguishment of debt of $2.1 million related to the amendment of our 2012 Term
Loan on July 1, 2021.

Income Taxes
The provision for income taxes during the three months ended September 30, 2021
was $14.3 million versus $7.3 million during the three months ended September
30, 2020. The effective tax rate during the three months ended September 30,
2021 was 24.0% versus 14.1% during the three months ended September 30, 2020.
The lower effective tax rate in the three months ended September 30, 2020 was
primarily due to the final Global Intangible Low-Taxed Income ("GILTI")
regulations issued in July 2020, which resulted in the release of the valuation
allowance on foreign tax credit carryforwards.


                                      -29-
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Results of Operations

Six Months Ended September 30, 2021 compared to the Six Months Ended September 30, 2020


Total Segment Revenues

The following table represents total revenue by segment, including product groups, for the six months ended September 30, 2021 and 2020.

Six Months Ended September 30,

                                                                                                                             Increase (Decrease)
(In thousands)                           2021                    %                 2020                 %                 Amount                 %
North American OTC Healthcare
Analgesics                        $     62,764                   11.5          $  58,490                12.5          $      4,274                7.3
Cough & Cold                            37,067                    6.8             28,234                 6.0                 8,833               31.3
Women's Health                         128,268                   23.6            126,902                27.3                 1,366                1.1
Gastrointestinal                        80,330                   14.7             61,768                13.2                18,562               30.1
Eye & Ear Care                          73,805                   13.5             49,619                10.6                24,186               48.7
Dermatologicals                         63,515                   11.7             55,495                11.9                 8,020               14.5
Oral Care                               43,860                    8.0             44,110                 9.4                  (250)              (0.6)
Other OTC                                4,512                    0.8              2,615                 0.6                 1,897               72.5
Total North American OTC
Healthcare                             494,121                   90.6            427,233                91.5                66,888               15.7

International OTC Healthcare
Analgesics                                 802                    0.1                541                 0.1                   261               48.2
Cough & Cold                             9,853                    1.8              6,988                 1.5                 2,865               41.0
Women's Health                           7,289                    1.4              6,537                 1.4                   752               11.5
Gastrointestinal                        18,845                    3.5             12,084                 2.6                 6,761               56.0
Eye & Ear Care                           6,446                    1.2              5,582                 1.2                   864               15.5
Dermatologicals                          1,778                    0.3              1,535                 0.3                   243               15.8
Oral Care                                6,267                    1.1              6,313                 1.4                   (46)              (0.7)
Other OTC                                    5                      -                  3                   -                     2               66.7
Total International OTC
Healthcare                              51,285                    9.4             39,583                 8.5                11,702               29.6

Total Consolidated                $    545,406                  100.0          $ 466,816               100.0          $     78,590               16.8



Total revenues for the six months ended September 30, 2021 were $545.4 million,
an increase of $78.6 million, or 16.8%, versus the six months ended September
30, 2020.

North American OTC Healthcare Segment
Revenues for the North American OTC Healthcare segment increased $66.9 million,
or 15.7%, during the six months ended September 30, 2021 versus the six months
ended September 30, 2020. The six months ended September 30, 2021 were primarily
positively impacted by the Eye & Ear Care, Gastrointestinal and Cough & Cold
categories and certain other categories. The positively impacted categories
benefited from increased consumer travel as a result of easing COVID-19
restrictions as well as the newly acquired TheraTears brand (included in the Eye
& Ear Care category) as part of the Akorn acquisition.

International OTC Healthcare Segment
Revenues for the International OTC Healthcare segment increased $11.7 million,
or 29.6%, during the six months ended September 30, 2021 versus the six months
ended September 30, 2020. The $11.7 million increase was attributable to
increased sales in our Australian subsidiary primarily related to an increase in
sales of Hydralyte as a result of easing COVID-19 restrictions.

                                      -30-
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Gross Profit
The following table presents our gross profit and gross profit as a percentage
of total segment revenues, by segment for each of the periods presented.
                                                                                 Six Months Ended September 30,
(In thousands)                                                                                                                 Increase (Decrease)
Gross Profit                                 2021                   %                 2020                %                 Amount                 %
North American OTC Healthcare         $    286,094                  57.9          $ 248,337               58.1          $     37,757               15.2
International OTC Healthcare                30,630                  59.7             23,192               58.6                 7,438               32.1

                                      $    316,724                  58.1          $ 271,529               58.2          $     45,195               16.6



Gross profit for the six months ended September 30, 2021 increased $45.2
million, or 16.6%, when compared with the six months ended September 30,
2020. As a percentage of total revenues, gross profit decreased to 58.1% during
the six months ended September 30, 2021, from 58.2% during the six months ended
September 30, 2020, primarily due to charges related to the inventory valuation
of the acquired Akorn brands in fiscal 2022 of $1.6 million.

North American OTC Healthcare Segment
Gross profit for the North American OTC Healthcare segment increased $37.8
million, or 15.2%, during the six months ended September 30, 2021 versus the six
months ended September 30, 2020. As a percentage of North American OTC
Healthcare revenues, gross profit decreased to 57.9% during the six months ended
September 30, 2021 from 58.1% during the six months ended September 30, 2020
primarily due to charges related to the inventory valuation of the acquired
Akorn brands in fiscal 2022 of $1.6 million.


International OTC Healthcare Segment
Gross profit for the International OTC Healthcare segment increased $7.4
million, or 32.1%, during the six months ended September 30, 2021 versus the six
months ended September 30, 2020. As a percentage of International OTC Healthcare
revenues, gross profit increased to 59.7% during the six months ended September
30, 2021 from 58.6% during the six months ended September 30, 2020, primarily
due to product mix.

Contribution Margin
Contribution margin is our segment measure of profitability. It is defined as
gross profit less advertising and marketing expenses.

The following table presents our contribution margin and contribution margin as a percentage of total segment revenues, by segment for each of the periods presented.

                                                                                Six Months Ended September 30,
(In thousands)                                                                                                                Increase (Decrease)
Contribution Margin                         2021                   %                 2020                %                 Amount                 %
North American OTC Healthcare        $    214,371                  43.4          $ 189,643               44.4          $     24,728               13.0
International OTC Healthcare               22,184                  43.3             15,795               39.9                 6,389               40.4

                                     $    236,555                  43.4          $ 205,438               44.0          $     31,117               15.1



North American OTC Healthcare Segment
Contribution margin for the North American OTC Healthcare segment increased
$24.7 million, or 13.0%, during the six months ended September 30, 2021 versus
the six months ended September 30, 2020. As a percentage of North American OTC
Healthcare revenues, contribution margin decreased to 43.4% during the six
months ended September 30, 2021 from 44.4% during the six months ended September
30, 2020. The contribution margin decrease as a percentage of revenues was
primarily due to an increase in advertising and marketing expenses as well as
the decrease in gross profit margin noted above.

International OTC Healthcare Segment
Contribution margin for the International OTC Healthcare segment increased $6.4
million, or 40.4%, during the six months ended September 30, 2021 versus the six
months ended September 30, 2020. As a percentage of International OTC Healthcare
revenues, contribution margin increased to 43.3% during the six months ended
September 30, 2021 from 39.9% during the six months ended September 30, 2020.
The contribution margin increase as a percentage of revenues was primarily due
to the increase in gross profit noted above as well as a decrease in advertising
and marketing expenses as a percentage of revenues.

                                      -31-
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General and Administrative
General and administrative expenses were $54.7 million for the six months ended
September 30, 2021 and $40.3 million for the six months ended September 30,
2020. The increase in general and administrative expenses was primarily due to
costs related to the acquisition of Akorn of $5.1 million as well as an increase
in compensation costs and professional fees.

Depreciation and Amortization
Depreciation and amortization expenses were $11.9 million for the six months
ended September 30, 2021 and $12.1 million for the six months ended September
30, 2020. The decrease in depreciation and amortization expenses was due to
certain assets being fully depreciated subsequent to the second quarter of
fiscal 2021, partly offset by an increase in amortization expense due to the
addition of brands purchased in conjunction with the Akorn acquisition.

Interest Expense, Net
Interest expense, net was $31.4 million during the six months ended September
30, 2021 versus $43.2 million during the six months ended September 30, 2020.
The average indebtedness decreased to $1.6 billion during the six months ended
September 30, 2021 from $1.7 billion during the six months ended September 30,
2020. The average cost of borrowing decreased to 4.0% for the six months ended
September 30, 2021 from 5.1% for the six months ended September 30, 2020.

Loss on Extinguishment of Debt
During the six months ended September 30, 2021, we recorded a loss on
extinguishment of debt of $2.1 million related to the amendment of our 2012 Term
Loan on July 1, 2021.

Income Taxes
The provision for income taxes during the six months ended September 30, 2021
was $32.9 million versus $21.8 million during the six months ended September 30,
2020. The effective tax rate during the six months ended September 30, 2021 was
24.2% versus 19.8% during the six months ended September 30, 2020. The lower
effective tax rate in the six months ended September 30, 2020 was primarily due
to the final GILTI regulations issued in July 2020, which resulted in the
release of the valuation allowance on foreign tax credit carryforwards.
Liquidity and Capital Resources

Liquidity

Our primary source of cash comes from our cash flow from operations. In the
past, we have supplemented this source of cash with various debt facilities,
primarily in connection with acquisitions. We have financed our operations, and
expect to continue to finance our operations for the next twelve months and the
foreseeable future, with a combination of funds generated from operations and
borrowings.  Our principal uses of cash are for operating expenses, debt
service, share repurchases, capital expenditures, and acquisitions. Based on our
current levels of operations and anticipated growth, excluding acquisitions, we
believe that our cash generated from operations and our existing credit
facilities will be adequate to finance our working capital and capital
expenditures through the next twelve months. See "Coronavirus Outbreak" above.

As of September 30, 2021, we had cash and cash equivalents of $42.8 million, an
increase of $10.5 million from March 31, 2021. The following table summarizes
the change:
                                                                         Six Months Ended September 30,
(In thousands)                                                     2021                  2020             $ Change
Cash provided by (used in):
Operating Activities                                        $    130,499$ 127,293$   3,206
Investing Activities                                            (232,989)              (11,619)          (221,370)
Financing Activities                                             114,184              (186,666)           300,850
Effects of exchange rate changes on cash and cash
equivalents                                                       (1,178)                2,835             (4,013)
Net change in cash and cash equivalents                     $     10,516$ (68,157)$  78,673



Operating Activities
Net cash provided by operating activities was $130.5 million for the six months
ended September 30, 2021, compared to $127.3 million for the six months ended
September 30, 2020. The $3.2 million increase was due to an increase in net
income after non-cash items, partly offset by increased working capital.



                                      -32-
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Investing Activities
Net cash used in investing activities was $233.0 million for the six months
ended September 30, 2021, compared to $11.6 million for the six months ended
September 30, 2020. The increase was primarily due to the purchase of Akorn in
the current period of $228.9 million, partly offset by a decrease in capital
expenditures in the current period.

Financing Activities
Net cash provided by financing activities was $114.2 million for the six months
ended September 30, 2021, compared to net cash used of $186.7 million for the
six months ended September 30, 2020. This change was primarily due to the
proceeds from the refinancing of our 2012 Term Loan of $597.0 million (see
Capital Resources below) and increased borrowings of $85.0 million under our
2012 ABL Revolver, partly offset by increased repayments of $365.0 million on
our 2012 Term Loan and $10.0 million on our 2012 ABL Revolver, as well as the
payment of debt costs of $6.1 million in the current period related to the
refinancing of our 2012 Term Loan.

Capital Resources

As of September 30, 2021, we had an aggregate of $1.6 billion of outstanding indebtedness, which consisted of the following:


•$400.0 million of 5.125% 2019 Senior Notes, which mature on January 15, 2028;
•$600.0 million of 3.750% 2021 Senior Notes, which mature on April 1, 2031;
•$600.0 million of borrowings under the 2012 Term B-5 Loans due July 1, 2028;
and
•$20.0 million of borrowings under the 2012 ABL Revolver due December 11, 2024.

As of September 30, 2021, we had $20.0 million outstanding on our 2012 ABL Revolver and a borrowing capacity of $104.6 million.


Term Loan Refinancing
On July 1, 2021, we entered into Amendment No. 6 ("Term Loan Amendment No. 6")
to the 2012 Term Loan. Term Loan Amendment No. 6 provides for (i) the
refinancing of our outstanding term loans and the creation of a new class of
Term B-5 Loans under the credit agreement governing the 2012 Term Loan in an
aggregate principal amount of $600.0 million, (ii) increased flexibility under
the credit agreement and (iii) an interest rate on the Term B-5 Loans that is
based, at the Borrower's option, on a LIBOR rate plus a margin of 2.00% per
annum, with a LIBOR floor of 0.50%, or an alternative base rate plus a margin of
1.00% per annum. In addition, Term Loan Amendment No. 6 provides for an
extension of the maturity date to July 1, 2028. Under Term Loan Amendment No. 6,
we are required to make quarterly payments each equal to 0.25% of the aggregate
principal amount.

The net proceeds from the Term B-5 Loans were used to refinance our outstanding
term loans and finance the acquisition of the Akorn Consumer Health business and
to pay fees and expenses incurred in connection with these transactions.

Maturities:

(In thousands)
Year Ending March 31,                                      Amount
2022 (remaining six months ending March 31, 2022)       $     3,000
2023                                                          6,000
2024                                                          6,000
2025                                                         26,000
2026                                                          6,000
Thereafter                                                1,573,000
                                                        $ 1,620,000



Covenants:
Our debt facilities contain various financial covenants, including provisions
that require us to maintain certain leverage, interest coverage and fixed charge
ratios.  The credit agreement governing the 2012 Term Loan and the 2012 ABL
Revolver and the indentures governing the 2021 Senior Notes and 2019 Senior
Notes contain provisions that accelerate our indebtedness on certain changes in
control and restrict us from undertaking specified corporate actions, including
asset dispositions, acquisitions, payments of dividends and other specified
payments, repurchasing our equity securities in the public markets, incurrence
of indebtedness, creation of liens, making loans and investments and
transactions with affiliates. Specifically, we must:
                                      -33-
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•Have a leverage ratio of less than 6.50 to 1.0 for the quarter ended
September 30, 2021 and thereafter (defined as, with certain adjustments, the
ratio of our consolidated total net debt as of the last day of the fiscal
quarter to our trailing twelve month consolidated net income before interest,
taxes, depreciation, amortization, non-cash charges and certain other items
("EBITDA"));

•Have an interest coverage ratio of greater than 2.25 to 1.0 for the quarter
ended September 30, 2021 and thereafter (defined as, with certain adjustments,
the ratio of our consolidated EBITDA to our trailing twelve month consolidated
cash interest expense); and

•Have a fixed charge ratio of greater than 1.0 to 1.0 for the quarter ended
September 30, 2021 (defined as, with certain adjustments, the ratio of our
consolidated EBITDA minus capital expenditures to our trailing twelve month
consolidated interest paid, taxes paid and other specified payments). Our fixed
charge requirement remains level throughout the term of the debt facilities.

At September 30, 2021, we were in compliance with the applicable financial and
restrictive covenants under the 2012 Term Loan and the 2012 ABL Revolver and the
indentures governing the 2021 Senior Notes and the 2019 Senior Notes.
Additionally, management anticipates that in the normal course of operations, we
will be in compliance with the financial and restrictive covenants during the
next twelve months.

Interest Rate Swaps: We have one interest rate swap to hedge a total of $200.0 million of our variable interest debt.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements or financing activities with special-purpose entities.

Critical Accounting Policies and 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.  A summary of our
critical accounting policies is presented in our Annual Report on Form 10-K for
the fiscal year ended March 31, 2021.  There were no material changes to our
critical accounting policies during the six months ended September 30, 2021.

Recent Accounting Pronouncements
A description of recently issued and recently adopted accounting pronouncements
is included in the notes to the unaudited Condensed Consolidated Financial
Statements in Part I, Item I, Note 1 of this Quarterly Report on Form 10-Q.

                                      -34-
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS


This Quarterly Report on Form 10-Q contains "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995 (the
"PSLRA"), including, without limitation, information within Management's
Discussion and Analysis of Financial Condition and Results of Operations. The
following cautionary statements are being made pursuant to the provisions of the
PSLRA and with the intention of obtaining the benefits of the "safe harbor"
provisions of the PSLRA.

Forward-looking statements speak only as of the date of this Quarterly Report on
Form 10-Q. Except as required under federal securities laws and the rules and
regulations of the SEC, we do not intend to update any forward-looking
statements to reflect events or circumstances arising after the date of this
Quarterly Report on Form 10-Q, whether as a result of new information, future
events or otherwise. As a result of these risks and uncertainties, readers are
cautioned not to place undue reliance on forward-looking statements included in
this Quarterly Report on Form 10-Q or that may be made elsewhere from time to
time by, or on behalf of, us. All forward-looking statements attributable to us
are expressly qualified by these cautionary statements.

These forward-looking statements generally can be identified by the use of words
or phrases such as "believe," "anticipate," "expect," "estimate," "project,"
"intend," "strategy," "goal," "future," "seek," "may," "should," "would,"
"will," or other similar words and phrases. Forward-looking statements are based
on current expectations and assumptions that are subject to a number of risks
and uncertainties that could cause actual results to differ materially from
those anticipated, including, without limitation:

•The impact of the COVID-19 pandemic or other disease outbreaks on global
economic conditions, consumer demand, retailer product availability, and
business operations including manufacturing, supply chain and distribution;
•The high level of competition in our industry and markets;
•Our inability to increase organic growth via new product introductions, line
extensions, increased spending on advertising and marketing support, and other
new sales and marketing strategies;
•Our dependence on a limited number of customers for a large portion of our
sales;
•Our inability to successfully identify, negotiate, complete and integrate
suitable acquisition candidates and to obtain necessary financing;
•Changes by retailers in inventory management practices, delivery requirements,
and demands for marketing and promotional spending in order to retain or
increase shelf space or online share;
•Our inability to grow our international sales;
•General economic conditions and incidence levels affecting sales of our
products and their respective markets;
•Financial factors, such as increases in interest rates and currency exchange
rate fluctuations;
•Changing consumer trends, additional store brand or branded competition,
accelerating shifts to online shopping or pricing pressures;
•Our dependence on third-party manufacturers to produce many of the products we
sell and our ability to transfer production to our own facilities or other
third-party suppliers;
•Our dependence on a third-party logistics provider to distribute our products
to customers;
•Price increases for raw materials, labor, energy and transportation costs, and
for other input costs;
•Disruptions in our distribution center or manufacturing facility;
•Shortages of supply of sourced goods;
•Potential changes in export/import and trade laws, regulations and policies
including any increased trade restrictions or tariffs;
•Acquisitions, dispositions or other strategic transactions diverting managerial
resources, and creating additional liabilities;
•Actions of government agencies in connection with our products, advertising or
regulatory matters governing our industry;
•Product liability claims, product recalls and related negative publicity;
•Our inability to protect our intellectual property rights;
•Our dependence on third parties for intellectual property relating to some of
the products we sell;
•Our inability to protect our information technology systems from threats or
disruptions;
•Our dependence on third-party information technology service providers and
their ability to protect against security threats and disruptions;
•Our assets being comprised virtually entirely of goodwill and intangibles and
possible changes in their value based on adverse operating results and/or
changes in the discount rate used to value our brands;
•Our dependence on key personnel;
•The costs associated with any claims in litigation or arbitration and any
adverse judgments rendered in such litigation or arbitration;
•Our level of indebtedness and possible inability to service our debt or to
obtain additional financing;
                                      -35-
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•The restrictions imposed by our financing agreements on our operations; and •Changes in federal, state and other geographic tax laws.

For more information, see Part I, Item 1A. "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended March 31, 2021.

                                      -36-

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