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MarketScreener Homepage  >  Equities  >  Nyse  >  Prestige Consumer Healthcare Inc.    PBH

PRESTIGE CONSUMER HEALTHCARE INC.

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

05/08/2020 | 04:34pm EST
The following discussion of our financial condition and results of operations
should be read together with the "Selected Financial Data" and the Consolidated
Financial Statements and related notes included elsewhere in this Annual Report
on Form 10-K. This discussion and analysis may contain forward-looking
statements that involve certain risks, assumptions and uncertainties that could
cause actual results to differ materially from those implied or described by the
forward-looking statements. 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 this Annual Report on Form 10-K, as well as
those described in future reports filed with the SEC.

General

We are engaged in the development, manufacturing, marketing, sales and
distribution of well-recognized, brand name OTC healthcare and, prior to the
sale of our Household Cleaning segment on July 2, 2018, household cleaning
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 create our competitive advantage.

We have grown our product 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 and
private equity firms. While certain 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 promotional support, new sales and
marketing strategies, improved packaging and formulations and innovative
development of brand extensions.

Coronavirus Outbreak
In January 2020, the World Health Organization ("WHO") announced a global health
crisis due to a new strain of coronavirus ("COVID-19"). In March 2020, the WHO
classified the COVID-19 outbreak as a pandemic. This pandemic is affecting the
United States and global economies, including causing significant volatility in
the global economy and resulting in materially reduced economic activity. If the
outbreak continues to spread or if we enter a period of recession or depression,
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 resources. We did see an increase in sales at the end of
March 2020 related to the United States shelter-in-place restrictions, followed
by a significant decrease in consumer consumption in the weeks that followed. It
has been reported to us that there has been an increase in absenteeism at our
distribution center and some of our suppliers, however, we have not experienced
a material disruption to our overall supply chain. The extent to which COVID-19
impacts our results 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. We do not yet know the full extent of impacts on
our business or the global economy. However, these effects could have a
material, adverse impact on our liquidity, capital resources, operations and
business and those of the third parties on which we rely.

Tax Reform
On December 22, 2017, the U.S. government enacted comprehensive tax legislation
commonly referred to as the Tax Cuts and Jobs Act ("Tax Act"). The Tax Act
represented significant U.S. federal tax reform legislation including a
permanent reduction to the U.S. federal corporate income tax rate. The permanent
reduction to the federal corporate income tax rate resulted in a one-time
benefit of $267.0 million related to the value of our deferred tax liabilities
and a benefit of $3.2 million related to the lower blended tax rate on our
earnings in the year ended March 31, 2018, resulting in a net benefit of $270.2
million. Additionally, the Tax Act subjects certain of our cumulative foreign
earnings and profits to U.S. income taxes through a deemed repatriation, which
resulted in a charge of $1.9 million in the year ended March 31, 2018.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act
("CARES Act") was enacted and signed into law in response to the COVID-19
pandemic. Certain provisions of the CARES Act impacted us and were reflected in
our 2020 income tax provision computations. The CARES Act contains modifications
on the limitation of business interest for tax years
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beginning in 2019 and 2020. The modifications to Section 163(j) increase the
allowable business interest deduction from 30% of adjusted taxable income to 50%
of adjusted taxable income. This modification increased our allowable interest
expense deduction and resulted in a lower taxable income for 2020. As a result
of the CARES Act, it is anticipated that we will fully utilize the interest
expense deduction on our 2020 tax return.

Acquisition and Divestiture
On July 2, 2018, we sold the Comet®, Spic and Span®, Chore Boy®, Chlorinol® and
Cinch® brands, as well as associated inventory. These brands represented our
Household Cleaning segment. As a result of this transaction, we recorded a
pre-tax gain on sale of $1.3 million.

On January 26, 2017, the Company completed the acquisition of Fleet pursuant to
a merger agreement, dated as of December 22, 2016, for $823.7 million. The
purchase price was funded by available cash on hand, additional borrowings under
our asset-based revolving credit facility (the "2012 ABL Revolver"), and a new
$740.0 million senior secured incremental term loan under our existing term loan
facility (the "2012 Term Loan"). As a result of the merger, we acquired women's
health, gastrointestinal and dermatological care OTC brands, including Summer's
Eve, Fleet, and Boudreaux's Butt Paste, as well as a "mix and fill"
manufacturing facility in Lynchburg, Virginia. The financial results from the
Fleet acquisition are included in the Company's North American and International
OTC Healthcare segments.

Critical Accounting Estimates


Our significant accounting policies are described in the notes to the
Consolidated Financial Statements included elsewhere in this Annual Report on
Form 10-K. While all significant accounting policies are important to our
Consolidated Financial Statements, certain of these policies may be viewed as
being critical. Such policies are those that are both most important to the
portrayal of our financial condition and results of operations and require our
most difficult, subjective and complex estimates and assumptions that affect the
reported amounts of assets, liabilities, revenues, expenses or the related
disclosure of contingent assets and liabilities. These estimates are based on
our historical experience and on various other assumptions that we believe to be
reasonable under the circumstances. Actual results may differ materially from
these estimates. The following are our most critical accounting estimates:

Revenue Recognition, Customer Programs and Variable Consideration
Revenue is recognized when control of a promised good is transferred to a
customer, in an amount that reflects the consideration that we expect to be
entitled to receive in exchange for that good. This occurs either when finished
goods are transferred to a common carrier for delivery to the customer or when
product is picked up by the customer or the customer's carrier.

Once a product has transferred to the common carrier or been picked up by the
customer, the customer is able to direct the use of, and obtain substantially
all of the remaining benefits from, the product. It is at this point that we
have a right to payment and the customer has legal title.

Provisions for certain rebates, customer promotional programs, product returns, and discounts to customers are accounted for as variable consideration and recorded as a reduction in sales.


We record an estimate of future product returns, chargebacks and logistic
deductions concurrent with recording sales, which is made using the most likely
amount method which incorporates (i) historical return rates, (ii) current
economic trends, (iii) changes in customer demand, (iv) product acceptance, (v)
seasonality of our product offerings, and (vi) the impact of changes in product
formulation, packaging and advertising.

We participate in the promotional programs of our customers to enhance the sale
of our products. These promotional programs consist of direct-to-consumer
incentives, such as coupons and temporary price reductions, as well as
incentives to our customers, such as allowances for new distribution, including
slotting fees, and cooperative advertising. The costs of such activities are
recorded as a reduction to revenue when the related sale takes place. Estimates
of the costs of these promotional programs are derived using the most likely
amount method, which incorporates (i) historical sales experience, (ii) the
current promotional offering, (iii) forecasted data, (iv) current market
conditions, and (v) communication with customer purchasing/marketing personnel.
At the completion of the promotional program, the estimated amounts are adjusted
to actual results.

Pension Obligations and Expense
Certain employees of our Lynchburg manufacturing facility are covered by defined
benefit pension plans. The Company's policy is to contribute at least the
minimum amount required under The Employee Retirement Income Security Act of
1974 ("ERISA"). The Company may elect to make additional contributions. Benefits
are based on years of service and levels of
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compensation. On December 16, 2014, the decision was made to freeze the benefits under the Company's U.S. qualified defined benefit pension plan with an effective date of March 1, 2015.


Our discount rate assumption for our defined benefit plans changed to a range of
3.37% to 3.55% at March 31, 2020 from a range of 3.80% to 3.99% at March 31,
2019. While we do not currently anticipate a change in our fiscal 2021
assumptions, as a sensitivity measure, a 0.25% decline or increase in our
qualified discount rate would increase or decrease our qualified pension expense
by less than $0.1 million. Similarly, a 0.25% decrease or increase in the
expected return on our pension plan assets would increase or decrease our
qualified pension expense by approximately $0.1 million.

The amounts that we recognize in our financial statements for pension benefit
obligations are determined by actuarial valuations. Inherent in these valuations
are certain assumptions, the more significant of which are: (i) the weighted
average used for discounting the liability, (ii) the weighted average expected
long-term rate of return on pension plan assets, (iii) the method used to
determine the market-related value of pension plan assets, and (iv) the
anticipated mortality rate tables. We believe the current assumptions used to
estimate plan obligations and pension expense are appropriate in the current
economic environment. However, as economic conditions change, we may change some
of our assumptions, which could have a material impact on our financial
condition and results of operations.
The funded status of our pension plans is dependent upon many factors, including
returns on invested assets and the level of certain market interest rates. We
review pension assumptions regularly and we may from time to time make voluntary
contributions to our pension plans that exceed the amounts required by statute.
During fiscal 2020, we made total contributions to our pension plans of
$1.4 million. We expect to make a contribution of $1.0 million to our qualified
defined benefit pension plan during fiscal 2021. Changes in interest rates and
the market value of the securities held by the plans could materially change,
positively or negatively, the funded status of the plans and affect the level of
pension expense and required contributions.

Goodwill and Intangible Assets
Goodwill and intangible assets amounted to $3,054.6 million and $3,085.8 million
at March 31, 2020 and 2019, respectively. At March 31, 2020 and 2019, goodwill
and intangible assets were apportioned among similar product groups within our
operating segments as follows:
                                           March 31, 2020
                           North American OTC      International OTC
(In thousands)                 Healthcare             Healthcare                Consolidated

Goodwill                  $         546,643       $         28,536             $   575,179

Intangible assets
Indefinite-lived                  2,195,617                 69,714               2,265,331
Finite-lived                        209,604                  4,456                 214,060
Intangible assets, net            2,405,221                 74,170               2,479,391
Total                     $       2,951,864$        102,706$ 3,054,570



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                                           March 31, 2019
                           North American OTC      International OTC
(In thousands)                 Healthcare             Healthcare                Consolidated

Goodwill                  $         547,393       $         31,190             $   578,583

Intangible assets
Indefinite-lived                  2,195,617                 77,574               2,273,191
Finite-lived                        228,743                  5,276                 234,019
Intangible assets, net            2,424,360                 82,850               2,507,210
Total                     $       2,971,753$        114,040$ 3,085,793

At March 31, 2020 the brands with the highest carrying value were Monistat, Summer's Eve, BC/Goody's, DenTek and Fleet, comprising 62.5% of our total intangible assets value.


Goodwill and intangible assets comprise substantially all of our
assets. Goodwill represents the excess of the purchase price over the fair value
of assets acquired and liabilities assumed in a business combination. Intangible
assets generally represent our tradenames, brand names and patents. When we
acquire a brand, we are required to make judgments regarding the value assigned
to the associated intangible assets, as well as their respective useful
lives. Management considers many factors both prior to and after the acquisition
of an intangible asset in determining the value, as well as the useful life,
assigned to each intangible asset that we acquire or continue to own and
promote.

The most significant factors are:


•Brand History
A brand that has been in existence for a long period of time (e.g., 25, 50 or
100 years) generally warrants a higher valuation and longer life (sometimes
indefinite) than a brand that has been in existence for a very short period of
time. A brand that has been in existence for an extended period of time
generally has been the subject of considerable investment by its previous
owner(s) to support product innovation and advertising and promotion.

•Market Position
Consumer products that rank number one or two in their respective market
generally have greater name recognition and are known as quality product
offerings, which warrant a higher valuation and longer life than products that
lag in the marketplace.

•Recent and Projected Sales Growth
Recent sales results present a snapshot as to how the brand has performed in the
most recent time periods and represent another factor in the determination of
brand value. In addition, projected sales growth provides information about the
strength and potential longevity of the brand. A brand that has both strong
current and projected sales generally warrants a higher valuation and a longer
life than a brand that has weak or declining sales. Similarly, consideration is
given to the potential investment, in the form of advertising and promotion,
required to reinvigorate a brand that has fallen from favor.

•History of and Potential for Product Extensions
Consideration is given to the product innovation that has occurred during the
brand's history and the potential for continued product innovation that will
determine the brand's future. Brands that can be continually enhanced by new
product offerings generally warrant a higher valuation and longer life than a
brand that has always "followed the leader".

After consideration of the factors described above, as well as current economic
conditions and changing consumer behavior, management prepares a determination
of an intangible asset's value and useful life based on its analysis. Under
accounting guidelines, goodwill is not amortized, but must be tested for
impairment annually, or more frequently if an event occurs or circumstances
change that would more likely than not reduce the fair value of the reporting
unit below the carrying amount. In a similar manner, indefinite-lived assets are
not amortized. They are also subject to an annual impairment test or more
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frequently if events or changes in circumstances indicate that the asset may be
impaired. Additionally, at each reporting period an evaluation must be made to
determine whether events and circumstances continue to support an indefinite
useful life. Intangible assets with finite lives are amortized over their
respective estimated useful lives and must also be tested for impairment
whenever events or changes in circumstances indicate that the carrying value of
the asset may not be recoverable and exceeds its fair value.

On an annual basis, during the fourth fiscal quarter, concurrent with our annual
strategic planning process, or more frequently if conditions indicate that the
carrying value of the asset may not be recovered, management performs a review
of both the values and, if applicable, useful lives assigned intangible assets
and tests for impairment.

We currently report goodwill and indefinite-lived intangible assets in two
reportable segments: North American OTC Healthcare and International OTC
Healthcare. We sold our Household Cleaning segment on July 2, 2018; see above
under "Acquisition and Divestiture" for further information. We identify our
reporting units in accordance with the FASB ASC Subtopic 280. The carrying value
and fair value for intangible assets and goodwill for a reporting unit are
calculated based on key assumptions and valuation methodologies previously
discussed. As a result, any material changes to these assumptions could require
us to record additional impairment in the future.

In the past, we have experienced declines in revenues and profitability of
certain brands in the North American OTC Healthcare segment. Sustained or
significant future declines in revenue, profitability, other adverse changes in
expected operating results, and/or unfavorable changes in other economic factors
used to estimate fair values of certain brands could indicate that fair value no
longer exceeds carrying value, in which case additional non-cash impairment
charges may be recorded in future periods.

Goodwill

Goodwill is tested for impairment annually and whenever events and circumstances
indicate that impairment may have occurred. As of February 29, 2020 (our annual
impairment review date) and March 31, 2020, we had 15 reporting units with
goodwill. As part of our annual test for impairment of goodwill, management
estimates the discounted cash flows of each reporting unit to estimate their
respective fair values. In performing this analysis, management considers
current information and future events, such as competition, technological
advances and changes in advertising support for our trademarks and tradenames
that could cause subsequent evaluations to utilize different assumptions.  The
discount rate utilized in the analysis, as well as future cash flows, may be
influenced by such factors as changes in interest rates and rates of inflation.
Additionally, should the related fair value of goodwill be adversely affected as
a result of declining sales or margins caused by competition, changing consumer
needs or preferences, technological advances or changes in advertising and
promotional expenses, we may be required to record additional impairment charges
in the future. In addition, we considered our market capitalization at February
29, 2020, as compared to the aggregate fair values of our reporting units, to
assess the reasonableness of our estimates pursuant to the discounted cash flow
methodology. An impairment charge is then recognized for the amount by which the
carrying amount exceeds the reporting unit's fair value.

At February 29, 2020, in conjunction with the annual test for goodwill impairment, there were no indicators of impairment under the analysis and accordingly, no impairment charge was taken.


As a result of our analysis at February 29, 2020, all reporting units tested had
a fair value that exceeded their carrying value by at least 10%. We performed a
sensitivity analysis on our weighted average cost of capital and determined that
a 50 basis point increase in the weighted average cost of capital would not have
resulted in any of our reporting unit's implied fair value being less than their
carrying value. Additionally, a 50 basis point decrease in the terminal growth
rate used for each reporting unit would also not have resulted in any of our
reporting units' implied fair value being less than their carrying value.

Indefinite-Lived Intangible Assets
Indefinite-lived intangibles are tested for impairment annually and whenever
events and circumstances indicate that impairment may have occurred. We utilize
the excess earnings method to estimate the fair value of our individual
indefinite-lived intangible assets. The discount rate utilized in the analysis,
as well as future cash flows, may be influenced by such factors as changes in
interest rates and rates of inflation.

At each reporting period, management analyzes current events and circumstances
to determine whether the indefinite life classification for a trademark or
tradename continues to be valid. If circumstances warrant a change to a finite
life, the carrying value of the intangible asset would then be amortized
prospectively over the estimated remaining useful life.

Management tests the indefinite-lived intangible assets for impairment by comparing the carrying value of the intangible asset to its estimated fair value. Since quoted market prices are seldom available for trademarks and tradenames such as ours, we utilize present value techniques to estimate fair value. Accordingly, management's projections are utilized to assimilate all of

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the facts, circumstances and expectations related to the trademark or tradename
and estimate the cash flows over its useful life. In a manner similar to
goodwill, future events, such as competition, technological advances and changes
in advertising support for our trademarks and tradenames, could cause subsequent
evaluations to utilize different assumptions.  Once that analysis is completed,
a discount rate is applied to the cash flows to estimate fair value. In
connection with this analysis, management:

•Reviews period-to-period sales and profitability by brand;
•Analyzes industry trends and projects brand growth rates;
•Prepares annual sales forecasts;
•Evaluates advertising effectiveness;
•Analyzes gross margins;
•Reviews contractual benefits or limitations;
•Monitors competitors' advertising spend and product innovation;
•Prepares projections to measure brand viability over the estimated useful life
of the intangible asset; and
•Considers the regulatory environment, as well as industry litigation.

At February 29, 2020, in conjunction with the annual test for impairment of intangible assets, there were no indicators of impairment under the analysis and accordingly, no impairment charge was taken.


We performed a sensitivity analysis of our weighted average cost of capital, and
we determined that a 50 basis point increase in the weighted average cost of
capital used to value the indefinite-lived intangibles would not have resulted
in any of our indefinite-lived intangible asset's fair value being less than
their carrying value. Additionally, a 50 basis point decrease in the terminal
growth rate used for each of our indefinite-lived intangibles would also not
have resulted in any of our indefinite-lived intangible asset's fair value being
less than their carrying value.

Finite-Lived Intangible Assets
On an annual basis or when events or changes in circumstances indicate the
carrying value of the assets may not be recoverable, management performs a
review similar to indefinite-lived intangible assets to ascertain the impact of
events and circumstances on the estimated useful lives and carrying values of
our trademarks and tradenames.

If the analysis warrants a change in the estimated useful life of the intangible
asset, management will reduce the estimated useful life and amortize the
carrying value prospectively over the shorter remaining useful
life. Management's projections are utilized to assimilate all of the facts,
circumstances and expectations related to the trademark or tradename and
estimate the cash flows over its useful life.  Future events, such as
competition, technological advances and changes in advertising support for our
trademarks and tradenames, could cause subsequent evaluations to utilize
different assumptions.  In the event that the long-term projections indicate
that the carrying value is in excess of the undiscounted cash flows expected to
result from the use of the intangible assets, management is required to record
an impairment charge. Once that analysis is completed, a discount rate is
applied to the cash flows to estimate fair value. The impairment charge is
measured as the excess of the carrying amount of the intangible asset over fair
value, as calculated using the excess earnings method.

At February 29, 2020, in conjunction with the annual test for impairment of
intangible assets, there were no indicators of impairment of our finite-lived
intangible assets under the analysis and accordingly, no impairment charge was
taken.

Stock-Based Compensation
The Compensation and Equity topic of the FASB ASC 718 requires us to measure the
cost of services to be rendered based on the grant-date fair value of the equity
award. For most of our awards, compensation expense is to be recognized over the
period during which an employee is required to provide service in exchange for
the award, generally referred to as the requisite service period. We also grant
performance stock units which are contingent on the attainment of certain goals
of the Company. Information utilized in the determination of fair value includes
the following:

•Type of instrument (i.e., restricted shares, stock options, warrants or
performance shares);
•Strike price of the instrument;
•Market price of our common stock on the date of grant;
•Discount rates;
•Duration of the instrument; and
•Volatility of our common stock in the public market.

Additionally, management must estimate the expected attrition rate of the
recipients to enable it to estimate the amount of non-cash compensation expense
to be recorded in our financial statements. While management prepares various
analyses to
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estimate the respective variables, a change in assumptions or market conditions,
as well as changes in the anticipated attrition rates, could have a significant
impact on the future amounts recorded as non-cash compensation expense.

Recent Accounting Pronouncements

A description of recently issued and adopted accounting pronouncements is included in the notes to the Consolidated Financial Statements in Item 8, Note 1 of this Annual Report.


Results of Operations

2020 compared to 2019

Total Segment Revenues The following table represents total revenue by segment, including product groups, for each of the fiscal years ended March 31, 2020 and 2019.

                                                                                               Increase (Decrease)
(In thousands)                                   2020          %         2019         %         Amount         %
North American OTC Healthcare
Analgesics                                   $  113,130      11.7    $ 113,563      11.6    $     (433)       (0.4)
Cough & Cold                                     87,601       9.1       83,168       8.5         4,433         5.3
Women's Health                                  239,330      24.9      244,927      25.1        (5,597)       (2.3)
Gastrointestinal                                130,088      13.5      125,416      12.9         4,672         3.7
Eye & Ear Care                                  100,245      10.4      101,128      10.4          (883)       (0.9)
Dermatologicals                                 100,591      10.4       95,801       9.8         4,790         5.0
Oral Care                                        83,323       8.7       92,964       9.5        (9,641)      (10.4)
Other OTC                                         5,060       0.5        5,479       0.6          (419)       (7.6)
Total North American OTC Healthcare             859,368      89.2      

862,446 88.4 (3,078) (0.4)


International OTC Healthcare
Analgesics                                          877       0.1          615       0.1           262        42.6
Cough & Cold                                     23,505       2.4       19,955       2.0         3,550        17.8
Women's Health                                   12,221       1.3       13,552       1.4        (1,331)       (9.8)
Gastrointestinal                                 42,820       4.5       35,046       3.6         7,774        22.2
Eye & Ear Care                                   11,911       1.2       11,709       1.2           202         1.7
Dermatologicals                                   2,421       0.3        2,171       0.2           250        11.5
Oral Care                                         9,882       1.0       10,468       1.1          (586)       (5.6)
Other OTC                                             5            -         4            -          1        25.0
Total International OTC Healthcare              103,642      10.8       

93,520 9.6 10,122 10.8


Total OTC Healthcare                            963,010     100.0      955,966      98.0         7,044         0.7

Household Cleaning                                    -         -       19,811       2.0       (19,811)     (100.0)
Total Consolidated                           $  963,010     100.0    $ 975,777     100.0    $  (12,767)       (1.3)


Total segment revenues for 2020 were $963.0 million, a decrease of $12.8 million, or 1.3%, versus 2019. The $12.8 million decrease was primarily related to the sale of our Household Cleaning segment on July 2, 2018.


North American OTC Healthcare Segment
Revenues for the North American OTC Healthcare segment decreased $3.1 million,
or 0.4%, during 2020 versus 2019. The $3.1 million decrease was primarily
attributable to inventory reductions at certain key retailers, partly offset by
increased consumption in part due to the immediate reaction to the COVID-19
demand which we do not expect to continue indefinitely.

International OTC Healthcare Segment

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Revenues for the International OTC Healthcare segment increased $10.1 million, or 10.8%, during 2020 versus 2019. The $10.1 million increase was primarily attributable to increased consumption and geographic expansion of product distribution, partly offset by the impact of unfavorable foreign currency exchange rates.


Household Cleaning Segment
Due to the sale of our Household Cleaning segment on July 2, 2018, there were no
related revenues in the year ended March 31, 2020.

Gross Profit
The following table represents our gross profit and gross profit as a percentage
of total segment revenues, by segment for each of the fiscal years ended
March 31, 2020 and 2019.

(In thousands)                                                                                    Increase (Decrease)
Gross Profit                                         2020         %         2019         %         Amount         %
North American OTC Healthcare                    $ 487,235      56.7    $ 497,913      57.7    $  (10,678)       (2.1)
International OTC Healthcare                        64,988      62.7       54,440      58.2        10,548        19.4
Household Cleaning                                       -         -        3,223      16.3        (3,223)     (100.0)
                                                 $ 552,223      57.3    $ 555,576      56.9    $   (3,353)       (0.6)



Gross profit for 2020 decreased $3.4 million, or 0.6%, versus 2019. The decrease
in gross profit was primarily due to decreases in gross profit within the North
American OTC Healthcare segment and the sale of our Household Cleaning segment.
 As a percentage of total revenues, gross profit increased to 57.3% in 2020 from
56.9% in 2019. The increase in gross profit as a percentage of revenues was
primarily a result of the divestiture of our Household Cleaning segment, which
had lower gross margins, and the increase in gross profit on our International
OTC Healthcare segment, which has higher gross margins, partly offset by certain
costs associated with a change in warehouse locations.

North American OTC Healthcare Segment
Gross profit for the North American OTC Healthcare segment decreased $10.7
million, or 2.1%, during 2020 versus 2019.  As a percentage of North American
OTC Healthcare revenues, gross profit decreased to 56.7% during 2020 from 57.7%
during 2019, primarily due to certain costs associated with a change in our
warehouse locations.

International OTC Healthcare Segment
Gross profit for the International OTC Healthcare segment increased $10.5
million, or 19.4%, during 2020 versus 2019. As a percentage of International OTC
Healthcare revenues, gross profit increased to 62.7% during 2020 from 58.2%
during 2019, primarily due to product mix.

Household Cleaning Segment
Due to the sale of our Household Cleaning segment on July 2, 2018, there were no
related gross profit in the year ended March 31, 2020.

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

The following table represents our contribution margin and contribution margin
as a percentage of total segment revenues, by segment for each of the fiscal
years ended March 31, 2020 and 2019.

(In thousands)                                                                                   Increase (Decrease)
Contribution Margin                                 2020         %         2019         %         Amount         %
North American OTC Healthcare                   $ 359,263      41.8    $ 371,539      43.1    $  (12,276)       (3.3)
International OTC Healthcare                       45,766      44.2       38,154      40.8         7,612        20.0
Household Cleaning                                      -         -        2,793      14.1        (2,793)     (100.0)
                                                $ 405,029      42.1    $ 412,486      42.3    $   (7,457)       (1.8)



                                       37
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North American OTC Healthcare Segment
Contribution margin for the North American OTC Healthcare segment decreased
$12.3 million, or 3.3%, during 2020 versus 2019. As a percentage of North
American OTC Healthcare revenues, contribution margin for the North American OTC
Healthcare segment decreased to 41.8% during 2020 from 43.1% during 2019. The
contribution margin decrease as a percentage of revenues was primarily due to
the gross profit decrease in the North American OTC Healthcare segment discussed
above.

International OTC Healthcare Segment
Contribution margin for the International OTC Healthcare segment increased $7.6
million, or 20.0%, during 2020 versus 2019. As a percentage of International OTC
Healthcare revenues, contribution margin for the International OTC Healthcare
segment increased to 44.2% during 2020 from 40.8% during 2019. The contribution
margin increase as a percentage of revenues was primarily due to the gross
profit increase as a percentage of revenues in the International OTC Healthcare
segment discussed above.

Household Cleaning Segment
Due to the sale of our Household Cleaning segment on July 2, 2018, there were no
related contribution margin in the year ended March 31, 2020.

General and Administrative
General and administrative expenses were $89.1 million for 2020 versus $89.8
million for 2019. The decrease in general and administrative expenses was
primarily due to divestiture costs in the prior period associated with the sale
of the Household Cleaning segment, partly offset by higher professional fees in
the current period.

Depreciation and Amortization
Depreciation and amortization expense was $24.8 million for 2020 versus $27.0
million for 2019. The decrease in depreciation and amortization expenses was
primarily due to the sale of our Household Cleaning segment on July 2, 2018, as
well as lower amortization expense resulting from prior year intangible asset
impairments, which were recorded in the fourth quarter of fiscal 2019.

Goodwill and Tradename Impairment
As a result of our impairment analysis at February 28, 2019, we recorded total
goodwill and intangible asset impairment charges in 2019 of $229.5 million.
Goodwill impairment represented $33.5 million related to our North American Oral
Care reporting unit. Intangible asset impairment represented $195.9 million and
was comprised of $155.0 million of indefinite-lived intangible assets (Fleet,
DenTek and Efferdent/Effergrip) and $41.0 million of various finite-lived
intangible assets. The impairment charges were the result of our reassessment of
the long-term sales projections based on our annual planning cycle, as well as
an overall increase in the discount rate used to value the brands. The assets
impaired are all part of our North American OTC Healthcare segment.

Interest Expense
Interest expense was $96.6 million during 2020 versus $105.3 million during
2019.  The average indebtedness decreased from $1.9 billion during 2019 to $1.8
billion during 2020. The average cost of borrowing remained constant at 5.4% for
2020 and 2019.

Loss on Extinguishment of Debt
During 2020, we recorded a loss on extinguishment of debt of $2.2 million to
write off the debt costs related to our 5.375% 2013 Senior Notes, which we
redeemed in December 2019.

Income Taxes
The provision/benefit for income taxes during 2020 was a provision of $48.9
million versus a benefit of $2.3 million in 2019. The effective tax rate on
income before income taxes was 25.6% during 2020 versus 5.9% during 2019. The
increase in the effective tax rate for 2020 compared to 2019 was primarily due
to impairment charges in 2019.

Results of Operations
2019 compared to 2018 For a discussion of fiscal 2019 compared to 2018, please
refer to our 2019 Annual Report on Form 10-K Part II, Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations, filed
with the SEC on May 13, 2019.
                                       38
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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 over the next twelve months, with a
combination of funds generated from operations and borrowings.  Our principal
uses of cash are for operating expenses, debt service, share repurchase, 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,
although no assurance can be given in this regard.

                                                               Year Ended March 31,                                                                 $ Change
(In thousands)                                      2020               2019               2018            2020 vs. 2019    2019 vs. 2018
Net cash provided by (used in):
Operating activities                            $ 217,124$ 189,284$ 210,110$      27,840$     (20,826)
Investing activities                              (16,570)            55,432            (11,562)               (72,002)          66,994
Financing activities                             (131,431)          (249,328)          (208,955)               117,897          (40,373)
Effects of exchange rate changes on cash and
cash equivalents                                   (1,893)              (406)             1,100                 (1,487)          (1,506)

Net change in cash and cash equivalents $ 67,230$ (5,018)$ (9,307)$ 72,248$ 4,289




2020 compared to 2019
Operating Activities
Net cash provided by operating activities was $217.1 million for 2020 compared
to $189.3 million for 2019. The $27.8 million increase in net cash provided by
operating activities was primarily due to an increase in net income after
non-cash items and decreased working capital.

Investing Activities
Net cash used in investing activities was $16.6 million for 2020 compared to net
cash provided by investing activities of $55.4 million for 2019. This change was
primarily due to proceeds of $65.9 million from the divestiture of our Household
Cleaning segment in the year ended March 31, 2019 and higher capital
expenditures in 2020.

Financing Activities
Net cash used in financing activities was $131.4 million for 2020 compared to
$249.3 million for 2019.  The decrease was primarily due to decreased repayments
of debt of $77.0 million in 2020 compared to 2019 and increased borrowings of
$55.0 million in 2020 on our revolving credit facility. We paid down more debt
in 2019 due to the proceeds received from the divestiture of our Household
Cleaning segment. This decrease in debt repayments was partly offset by the
payment of debt costs of $6.6 million and the higher repurchase of our shares in
conjunction with our share repurchase program of $6.7 million in 2020.

2019 compared to 2018
Operating Activities
Net cash provided by operating activities was $189.3 million for 2019 compared
to $210.1 million for 2018. The $20.8 million decrease in net cash provided by
operating activities was primarily due to the reduction in net income following
the sale of our Household Cleaning segment.

Investing Activities
Net cash provided by investing activities was $55.4 million for 2019 compared to
a use of net cash in investing activities of $11.6 million for 2018. This change
was primarily due to proceeds from the divestiture of our Household Cleaning
segment in the year ended March 31, 2019.

Financing Activities
Net cash used in financing activities was $249.3 million for 2019 compared to
$209.0 million for 2018.  This change was primarily due to the repurchase of
shares of our common stock in conjunction with our share repurchase program in
the year ended March 31, 2019.
                                       39
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Capital Resources


2012 Term Loan and 2012 ABL Revolver:
On January 31, 2012, Prestige Consumer Healthcare Inc. ("the Borrower") entered
into a senior secured credit facility, which consists of (i) a $660.0 million
2012 Term Loan with an original 7-year maturity and (ii) a $50.0 million
asset-based 2012 ABL Revolver with an original 5-year maturity. In subsequent
years, we have utilized portions of our accordion feature to increase the amount
of our borrowing capacity under the 2012 ABL Revolver by $85.0 million to $135.0
million and reduced our borrowing rate on the 2012 ABL Revolver by 0.25%
(discussed below). The 2012 Term Loan was issued with an original issue discount
of 1.5% of the principal amount thereof, resulting in net proceeds to the
Borrower of $650.1 million. The 2012 Term Loan is unconditionally guaranteed by
Prestige Consumer Healthcare Inc. and certain of its domestic 100% owned
subsidiaries, other than the Borrower. Each of these guarantees is joint and
several. There are no significant restrictions on the ability of any of the
guarantors to obtain funds from their subsidiaries or to make payments to the
Borrower or the Company.

On February 21, 2013, we entered into Amendment No. 1 ("Term Loan Amendment No.
1") to the 2012 Term Loan. Term Loan Amendment No. 1 provided for the
refinancing of all of the Borrower's existing Term B Loans with new Term B-1
Loans (the "Term B-1 Loans"). The interest rate on the Term B-1 Loans under Term
Loan Amendment No. 1 was based, at our option, on a LIBOR rate plus a margin of
2.75% per annum, with a LIBOR floor of 1.00%, or an alternate base rate, with a
floor of 2.00%, plus a margin. In addition, Term Loan Amendment No. 1 provided
the Borrower with certain additional capacity to prepay subordinated debt, the
2012 Senior Notes and certain other unsecured indebtedness permitted to be
incurred under the credit agreement governing the 2012 Term Loan and 2012 ABL
Revolver.

On September 3, 2014, we entered into Amendment No. 2 ("Term Loan Amendment No.
2") to the 2012 Term Loan. Term Loan Amendment No. 2 provided for (i) the
creation of a new class of Term B-2 Loans under the 2012 Term Loan (the "Term
B-2 Loans") in an aggregate principal amount of $720.0 million, (ii) increased
flexibility under the credit agreement governing the 2012 Term Loan and 2012 ABL
Revolver, including additional investment, restricted payment and debt
incurrence flexibility and financial maintenance covenant relief, and (iii) an
interest rate on (x) the Term B-1 Loans that was based, at our option, on a
LIBOR rate plus a margin of 3.125% per annum, with a LIBOR floor of 1.00%, or an
alternate base rate, with a floor of 2.00%, plus a margin, and (y) the Term B-2
Loans that was based, at our option, on a LIBOR rate plus a margin of 3.50% per
annum, with a LIBOR floor of 1.00%, or an alternate base rate, with a floor of
2.00%, plus a margin (with a margin step-down to 3.25% per annum, based upon
achievement of a specified secured net leverage ratio).

Also on September 3, 2014, we entered into Amendment No. 3 ("ABL Amendment No.
3") to the 2012 ABL Revolver. ABL Amendment No. 3 provided for (i) a $40.0
million increase in revolving commitments under the 2012 ABL Revolver and (ii)
increased flexibility under the credit agreement governing the 2012 Term Loan
and 2012 ABL Revolver, including additional investment, restricted payment and
debt incurrence flexibility. Borrowings under the 2012 ABL Revolver, as amended,
bore interest at a rate per annum equal to an applicable margin, plus, at our
option, either (i) a base rate determined by reference to the highest of (a) the
Federal Funds rate plus 0.50%, (b) the prime rate of Citibank, N.A., and (c) the
LIBOR rate determined by reference to the cost of funds for U.S. dollar deposits
for an interest period of one month, adjusted for certain additional costs, plus
1.00% or (ii) a LIBOR rate determined by reference to the costs of funds for
U.S. dollar deposits for the interest period relevant to such borrowing,
adjusted for certain additional costs. The applicable margin for borrowings
under the 2012 ABL Revolver could be increased to 2.00% or 2.25% for LIBOR
borrowings and 1.00% or 1.25% for base-rate borrowings, depending on average
excess availability under the 2012 ABL Revolver during the prior fiscal quarter.
In addition to paying interest on outstanding principal under the 2012 ABL
Revolver, we are required to pay a commitment fee to the lenders under the 2012
ABL Revolver in respect of the unutilized commitments thereunder. The initial
commitment fee rate is 0.50% per annum. The commitment fee rate will be reduced
to 0.375% per annum at any time when the average daily unused commitments for
the prior quarter is less than a percentage of total commitments by an amount
set forth in the credit agreement covering the 2012 ABL Revolver. We may
voluntarily repay outstanding loans under the 2012 ABL Revolver at any time
without a premium or penalty.
On May 8, 2015, we entered into Amendment No. 3 ("Term Loan Amendment No. 3") to
the 2012 Term Loan. Term Loan Amendment No. 3 provided for (i) the creation of a
new class of Term B-3 Loans under the 2012 Term Loan (the "Term B-3 Loans") in
an aggregate principal amount of $852.5 million, which combined the outstanding
balances of the Term B-1 Loans of $207.5 million and the Term B-2 Loans of
$645.0 million, and (ii) increased flexibility under the credit agreement
governing the 2012 Term Loan and 2012 ABL Revolver, including additional
investment, restricted payment, and debt incurrence flexibility and financial
maintenance covenant relief. The maturity date of the Term B-3 Loans remained
the same as the Term B-2 Loans' original maturity date of September 3, 2021.
                                       40
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On June 9, 2015, we entered into Amendment No. 4 ("ABL Amendment No. 4") to the
2012 ABL Revolver. ABL Amendment No. 4 provided for (i) a $35.0 million increase
in the accordion feature under the 2012 ABL Revolver and (ii) increased
flexibility under the credit agreement governing the 2012 Term Loan and the 2012
ABL Revolver, including additional investment, restricted payment, and debt
incurrence flexibility and financial maintenance covenant relief and (iii)
extended the maturity date of the 2012 ABL Revolver to June 9, 2020, which is
five years from the effective date of ABL Amendment No. 4.
In connection with the DenTek acquisition on February 5, 2016, we entered into
Amendment No. 5 ("ABL Amendment No. 5") to the 2012 ABL Revolver. ABL Amendment
No. 5 temporarily suspended certain financial and related reporting covenants in
the 2012 ABL Revolver until the earliest of (i) the date that was 60 calendar
days following February 4, 2016, (ii) the date upon which certain of DenTek's
assets were included in the Company's borrowing base under the 2012 ABL Revolver
and (iii) the date upon which the Company received net proceeds from an offering
of debt securities.

In connection with the Fleet acquisition, on January 26, 2017, we entered into
Amendment No. 4 ("Term Loan Amendment No. 4") to the 2012 Term Loan. Term Loan
Amendment No. 4 provided for (i) the refinancing of all of our outstanding term
loans and the creation of a new class of Term B-4 Loans under the 2012 Term Loan
(the "Term B-4 Loans") in an aggregate principal amount of $1,427.0 million and
(ii) increased flexibility under the credit agreement governing the 2012 Term
Loan and the 2012 ABL Revolver, including additional investment, restricted
payment, and debt incurrence flexibility and financial maintenance covenant
relief. The maturity date was extended to January 26, 2024. In addition,
Citibank, N.A. was succeeded by Barclays Bank PLC as administrative agent under
the 2012 Term Loan.

Also on January 26, 2017, we entered into Amendment No. 6 ("ABL Amendment No.
6") to the 2012 ABL Revolver. ABL Amendment No. 6 provides for (i) a $40.0
million increase in revolving commitments under the 2012 ABL Revolver, (ii) an
extension of the maturity date of revolving commitments to January 26, 2022, and
(iii) increased flexibility under the credit agreement governing the 2012 Term
Loan and the 2012 ABL Revolver, including additional investment, restricted
payment and debt incurrence flexibility consistent with Term Loan Amendment No.
4.

On March 21, 2018, we entered into Amendment No. 5 ("Term Loan Amendment No. 5")
to the 2012 Term Loan. Term Loan Amendment No. 5 ("Term B-5 Loans") provided for
the repricing of the Term B-4 Loans under the Credit Agreement to an interest
rate that is based, at our option, on a LIBOR rate plus a margin of 2.00% per
annum, with a LIBOR floor of 0.00%, or an alternative base rate plus a margin of
1.00% per annum with a floor of 1.00%.

On December 11, 2019, the Company and Prestige Brands, Inc. entered into
Amendment No. 7 ("ABL Amendment No. 7") to the 2012 ABL Revolver. ABL Amendment
No. 7 provides for (i) an extension of the maturity date of the revolving credit
facility to December 11, 2024, which is five years from the effective date of
the amendment, (ii) increased flexibility under the 2012 ABL Revolver, including
additional investment, restricted payment, and debt incurrence flexibility,
(iii) an initial applicable margin for borrowings under the 2012 ABL Revolver
that is 1.00% with respect to LIBOR borrowings and 0.0% with respect to
base-rate borrowings (which may be increased to 1.25% or 1.50% for LIBOR
borrowings and 0.25% or 0.50% for base-rate borrowings, depending on average
excess availability under the facility during the prior fiscal quarter) and (iv)
a commitment fee to the lenders under the 2012 ABL Revolver in respect of the
unutilized commitments thereunder of 0.25% per annum.

For the year ended March 31, 2020, the average interest rate on the 2012 Term
Loan was 4.6%. For the year ended March 31, 2020, the average interest rate on
the amounts borrowed under the 2012 ABL Revolver was 4.0%.

2013 Senior Notes:
On December 17, 2013, the Borrower issued $400.0 million of senior unsecured
notes, with an interest rate of 5.375% and a maturity date of December 15, 2021
(the "2013 Senior Notes"). These notes were redeemed on December 16, 2019 using
the funds from the issuance of our 2019 Senior Notes described below.

2016 Senior Notes:
On February 19, 2016, the Borrower completed the sale of $350.0 million
aggregate principal amount of 6.375% senior notes due March 1, 2024 (the
"Initial Notes"), pursuant to a purchase agreement, dated February 16, 2016,
among the Borrower, the guarantors party thereto (the "Guarantors") and the
initial purchasers party thereto. The 2016 Senior Notes are guaranteed by
Prestige Consumer Healthcare Inc. and certain of its domestic 100% owned
subsidiaries, other than the Borrower. Each of these guarantees is joint and
several. There are no significant restrictions on the ability of any of the
Guarantors to obtain funds from their subsidiaries or to make payments to the
Borrower or the Company.

                                       41
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The 2016 Senior Notes were issued pursuant to an indenture, dated February 19,
2016 (the "Indenture"). The Indenture provides, among other things, that
interest will be payable on the 2016 Senior Notes on March 1 and September 1 of
each year, beginning on September 1, 2016, until their maturity date of March 1,
2024. The 2016 Senior Notes are senior unsecured obligations of the Borrower.

On March 21, 2018, we completed the sale of $250.0 million aggregate principal
amount of 6.375% senior notes due 2024 (the "Additional Notes"), at an issue
price of 101.0%, pursuant to a purchase agreement, dated March 16, 2018, among
the Borrower, the guarantors party thereto and the initial purchasers party
thereto. The Additional Notes are senior unsecured obligations of the Borrower
and are guaranteed by each of Prestige Consumer Healthcare Inc.'s domestic
subsidiaries that guarantee the obligations under the 2012 Term Loan. We used
the proceeds from the issuance of the Additional Notes to repay a portion of our
outstanding obligations under the 2012 Term Loan and to pay related fees and
expenses. The Additional Notes will be treated as a single series with the
$350.0 million aggregate principle amount of Initial Notes (the Initial Notes
and, together with the Additional Notes, the "2016 Senior Notes").

2019 Senior Notes:
On December 2, 2019, the Borrower issued $400.0 million aggregate principal
amount of 5.125% senior notes (the "2019 Senior Notes") pursuant to an indenture
dated December 2, 2019, among Prestige Brands, Inc., the guarantors party
thereto (including the Company) and the U.S. Bank National Association, as a
trustee. The 2019 Senior Notes mature on January 15, 2028. We used the net
proceeds from the 2019 Senior Notes, together with cash on hand, to redeem all
$400.0 million of our outstanding 2013 Senior Notes, which were due in 2021, and
to pay related fees and expenses. In conjunction with the redemption of our 2013
Senior Notes, we wrote off related debt costs of $2.2 million.

Redemptions and Restrictions:
We have the option to redeem all or a portion of the 2016 Senior Notes at any
time on or after March 1, 2019 at the redemption prices set forth in the
Indenture, plus accrued and unpaid interest, if any. Subject to certain
limitations, in the event of a change of control (as defined in the Indenture),
the Borrower will be required to make an offer to purchase the 2016 Senior Notes
at a price equal to 101% of the aggregate principal amount of the notes
repurchased, plus accrued and unpaid interest, if any, to the date of
repurchase.

The indentures governing the 2016 Senior Notes and the 2019 Senior Notes contain
provisions that restrict us from undertaking specified corporate actions, such
as asset dispositions, acquisitions, dividend payments, repurchases of common
shares outstanding, changes of control, incurrences of indebtedness, issuance of
equity, creation of liens, making of loans and transactions with affiliates.
Additionally, the credit agreement governing the 2012 Term Loan and the 2012 ABL
Revolver and the indentures governing the 2016 Senior Notes and the 2019 Senior
Notes contain cross-default provisions, whereby a default pursuant to the terms
and conditions of certain indebtedness will cause a default on the remaining
indebtedness under the credit agreement governing the 2012 Term Loan and the
2012 ABL Revolver and the indentures governing the 2016 Senior Notes and the
2019 Senior Notes. At March 31, 2020, we were in compliance with the covenants
under our long-term indebtedness.

As of March 31, 2020, we had an aggregate of $1.7 billion of outstanding indebtedness, which consisted of the following:

•$400.0 million of 5.125% 2019 Senior Notes due 2028; •$600.0 million of 6.375% 2016 Senior Notes due 2024; •$690.0 million of borrowings under the Term B-5 Loans; and •$55.0 million of borrowings under the 2012 ABL Revolver.

As of March 31, 2020, we had $107.3 million of borrowing capacity under the 2012 ABL Revolver.


Interest Rate Swaps

In January 2020, we entered into two interest rate swaps to hedge a total of $400.0 million of our variable interest debt.

Debt 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 2016 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, payment 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:
                                       42
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•Have a leverage ratio of less than 6.50 to 1.0 for the quarter ended March 31,
2020 (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 March 31, 2020 (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
March 31, 2020 (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 agreement.

At March 31, 2020, 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 2016 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 2021.
During the years ended March 31, 2020 and 2019, we made voluntary principal
payments against outstanding indebtedness of $48.0 million and $200.0 million,
respectively, under the 2012 Term Loan. Under the Term Loan Amendment No. 5, we
are required to make quarterly payments each equal to 0.25% of the aggregate
amount of $690.0 million. Since we have previously made a significant optional
payment that exceeded a significant portion of our required quarterly payments,
we will not be required to make another payment until the fiscal year ending
March 31, 2024.

Commitments

As of March 31, 2020, we had ongoing commitments under various contractual and commercial obligations as follows:


                                                                            Payments Due by Period
(In millions)                                                     Less than          1 to 3            4 to 5           After 5
Contractual Obligations                          Total             1 Year            Years             Years             Years
Long-term debt                                $ 1,745.0          $      -   

$ - $ 1,345.0$ 400.0 Interest on long-term debt(1)

                     483.8              87.7            183.8              120.2             92.1
Purchase obligations:
Inventory costs(2)                                169.9             142.9             16.0                4.8              6.2
Other costs(3)                                     28.4              27.8              0.4                0.2                -
Operating leases(4)                                30.5               5.6             10.8                9.5              4.6
Finance leases                                      5.8               1.2              2.5                2.1                -

Total contractual cash obligations(5) $ 2,463.4$ 265.2

       $ 213.5$ 1,481.8$ 502.9





(1)Represents the estimated interest obligations on the outstanding balances at
March 31, 2020 of the 2019 Senior Notes, 2016 Senior Notes, Term B-5 Loans, and
2012 ABL Revolver, assuming scheduled principal payments (based on the terms of
the loan agreements). We estimate our future obligations for interest on our
variable rate debt by assuming the weighted average interest rates in effect on
each variable rate debt obligation at March 31, 2020 remain constant into the
future. This is an estimate, as actual rates will vary over time. In addition,
we assume that the average balance outstanding for the last month of fiscal 2020
remains the same for the remaining term of the agreement. The actual balance
outstanding may fluctuate significantly in future periods, depending on the
availability of cash flow from operations and future investing and financing
considerations. Estimated interest obligations would be different under
different assumptions regarding interest rates or timing of principal
payments.

(2)Purchase obligations for inventory costs are legally binding commitments for
projected inventory requirements to be utilized during the normal course of our
operations.

(3)Purchase obligations for other costs are legally binding commitments for
marketing, advertising and capital expenditures. Activity costs for molds and
equipment to be paid, based solely on a per unit basis without any deadlines for
final payment, have been excluded from the table because we are unable to
determine the time period over which such activity costs will be paid.

(4)We have excluded minimum sublease rentals of $0.2 million due in the future under non-cancellable subleases. Please refer to Note 8 to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.

                                       43
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(5)We have excluded obligations related to uncertain tax positions because we cannot reasonably estimate when they will occur.

Off-Balance Sheet Arrangements

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


Inflation

Inflationary factors such as increases in the costs of raw materials, packaging
materials, purchased product and overhead may adversely affect our operating
results and financial condition. Although we do not believe that inflation has
had a material impact on our financial condition or results of operations for
the three most recent fiscal years, we anticipate the COVID-19 pandemic may have
an inflationary impact on our costs and a high rate of inflation in the future
could have a material adverse effect on our financial condition or results of
operations. More volatility in crude oil prices may have an adverse impact on
transportation costs, as well as certain petroleum based raw materials and
packaging material. Although we make efforts to minimize the impact of
inflationary factors, including raising prices to our customers, a high rate of
pricing volatility associated with crude oil supplies or other raw materials
used in our products may have an adverse effect on our operating results.

                                       44

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