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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-Q)

11/05/2020 | 06:17am 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, 2020. 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, 2020 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., 2021) 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.

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. The
COVID-19 pandemic and the corresponding government responses have led to
increased unemployment and economic uncertainty, which could lead to a further
reduction in consumer spending. Economic conditions are, and we expect that they
will continue to be, highly volatile and uncertain. Recessionary conditions
could reduce demand for our products and put downward pressure on prices. If the
outbreak continues to spread or if we continue to experience a period of
recession or enter a 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 shelter-at-home restrictions as we
believe consumers stocked up as a result of COVID-19, followed by a temporary
but significant decline in consumption in the first quarter and have since seen
more stable consumer consumption and customer orders in recent weeks. Sales
varied throughout the year with some categories 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 they looked to avoid doctor visits and
increased 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 to COVID-19.
Early in our first quarter of fiscal 2021, it had been reported to us that there
had been an increase in absenteeism at our distribution center and with some of
our suppliers; however, we have not experienced a material disruption to our
overall supply chain to date. We also continue 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. To date
the pandemic has not had a material negative impact on our operations, 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
                                      -24-
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operating cash flows to meet our short-term liquidity needs. These circumstances
could change in this dynamic, unprecedented environment. The extent to which
COVID-19 impacts 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. We do not yet know the full extent
of its 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 Regulations
On December 22, 2017, the Tax Cuts and Jobs Act was signed into law. The Tax
Cuts and Jobs Act, among other things, reduced the U.S. federal corporate tax
rate from 35% to 21% and imposed a new minimum tax on Global Intangible
Low-Taxed Income ("GILTI") earned by foreign subsidiaries. On July 20, 2020,
final regulations were issued for GILTI which include a high-tax exception for
income earned by foreign subsidiaries if the foreign tax rate is in excess of
90% of the U.S. tax rate of 21%. We calculated the potential impact of these
final regulations and accounted for those impacts in the quarterly provision for
the period ended September 30, 2020.
                                      -25-
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Results of Operations

Three Months Ended September 30, 2020 compared to the Three Months Ended September 30, 2019

Total Segment Revenues

The following table represents total revenue by segment, including product groups, for the three months ended September 30, 2020 and 2019.

Three Months Ended September 30,

                                                                                                                            Increase (Decrease)
(In thousands)                          2020                   %                 2019                 %                 Amount                  %
North American OTC Healthcare
Analgesics                        $      30,623                12.9          $  28,831                12.1          $      1,792                 6.2
Cough & Cold                             14,796                 6.2             20,506                 8.6                (5,710)              (27.8)
Women's Health                           61,492                25.9             59,678                25.3                 1,814                 3.0
Gastrointestinal                         31,718                13.4             32,214                13.5                  (496)               (1.5)
Eye & Ear Care                           26,767                11.3             22,286                 9.4                 4,481                20.1
Dermatologicals                          27,875                11.7             28,039                11.8                  (164)               (0.6)
Oral Care                                21,944                 9.2             21,063                 8.8                   881                 4.2
Other OTC                                 1,360                 0.6              1,261                 0.5                    99                 7.9
Total North American OTC
Healthcare                              216,575                91.2            213,878                90.0                 2,697                 1.3

International OTC Healthcare
Analgesics                                  267                 0.1                243                 0.1                    24                 9.9
Cough & Cold                              3,086                 1.3              5,814                 2.4                (2,728)              (46.9)
Women's Health                            4,106                 1.7              2,905                 1.2                 1,201                41.3
Gastrointestinal                          6,379                 2.7              9,028                 3.8                (2,649)              (29.3)
Eye & Ear Care                            3,037                 1.3              3,185                 1.3                  (148)               (4.6)
Dermatologicals                             836                 0.4                576                 0.2                   260                45.1
Oral Care                                 3,134                 1.3              2,439                 1.0                   695                28.5
Other OTC                                     2                   -                  1                   -                     1               100.0
Total International OTC
Healthcare                               20,847                 8.8             24,191                10.0                (3,344)              (13.8)

Total Consolidated                $     237,422               100.0          $ 238,069               100.0          $       (647)               (0.3)



Total segment revenues for the three months ended September 30, 2020 were $237.4
million, a decrease of $0.6 million, or 0.3%, versus the three months ended
September 30, 2019. The $0.6 million decrease was related to the decrease in our
International OTC Healthcare segment, partly offset by an increase in our North
American OTC Healthcare segment.

North American OTC Healthcare Segment
Revenues for the North American OTC Healthcare segment increased $2.7 million,
or 1.3%, during the three months ended September 30, 2020 versus the three
months ended September 30, 2019. The three months ended September 30, 2020 were
positively impacted by the Eye & Ear Care, Women's Health, Analgesics, and Oral
Care categories, but were partly offset by lower Cough & Cold, Gastrointestinal
and Dermatologicals revenues. The positively impacted categories benefited from
the consumer shift to over-the-counter healthcare products as they looked to
avoid doctor visits and increased 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
to COVID-19.

International OTC Healthcare Segment
Revenues for the International OTC Healthcare segment decreased $3.3 million, or
13.8%, during the three months ended September 30, 2020 versus the three months
ended September 30, 2019. The $3.3 million decrease was attributable to
decreased sales in our Australian subsidiary primarily related to the reduction
in sales of Hydralyte due to both lower general
                                      -26-
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consumer illnesses and activities such as athletics resulting from the various social distancing measures brought on by COVID-19.


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                                2020                  %                 2019                %                 Amount                  %
North American OTC Healthcare         $     125,506               58.0          $ 120,947               56.5          $      4,559                 3.8
International OTC Healthcare                 12,155               58.3             15,804               65.3                (3,649)              (23.1)

                                      $     137,661               58.0          $ 136,751               57.4          $        910                 0.7



Gross profit for the three months ended September 30, 2020 was relatively flat,
increasing $0.9 million, or 0.7%, when compared with the three months ended
September 30, 2019. The increase in gross profit was due to the increase in the
North American OTC Healthcare segment. As a percentage of total revenues, gross
profit increased to 58.0% during the three months ended September 30, 2020, from
57.4% during the three months ended September 30, 2019. The increase in gross
profit as a percentage of revenues was primarily a result of the fourth quarter
2020 completion of transitional costs associated with a new warehouse and
distribution center.
North American OTC Healthcare Segment
Gross profit for the North American OTC Healthcare segment increased $4.6
million, or 3.8%, during the three months ended September 30, 2020 versus the
three months ended September 30, 2019. As a percentage of North American OTC
Healthcare revenues, gross profit increased to 58.0% during the three months
ended September 30, 2020 from 56.5% during the three months ended September 30,
2019, primarily due to the fourth quarter 2020 completion of transitional costs
associated with a new warehouse and distribution center and improved logistics
costs resulting from our warehouse transition.

International OTC Healthcare Segment
Gross profit for the International OTC Healthcare segment decreased $3.6
million, or 23.1%, during the three months ended September 30, 2020 versus the
three months ended September 30, 2019. As a percentage of International OTC
Healthcare revenues, gross profit decreased to 58.3% during the three months
ended September 30, 2020 from 65.3% during the three months ended September 30,
2019, 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                       2020                  %                2019                %                 Amount                  %
North American OTC Healthcare        $     91,492               42.2          $ 86,352               40.4          $      5,140                 6.0
International OTC Healthcare                7,828               37.5            11,732               48.5                (3,904)              (33.3)

                                     $     99,320               41.8          $ 98,084               41.2          $      1,236                 1.3



North American OTC Healthcare Segment
Contribution margin for the North American OTC Healthcare segment increased $5.1
million, or 6.0%, during the three months ended September 30, 2020 versus the
three months ended September 30, 2019. As a percentage of North American OTC
Healthcare revenues, contribution margin increased to 42.2% during the three
months ended September 30, 2020 from 40.4% during the three months ended
September 30, 2019. The contribution margin increase as a percentage of revenues
was primarily due to the increase in gross profit noted above.

                                      -27-
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International OTC Healthcare Segment
Contribution margin for the International OTC Healthcare segment decreased $3.9
million, or 33.3%, during the three months ended September 30, 2020 versus the
three months ended September 30, 2019. As a percentage of International OTC
Healthcare revenues, contribution margin decreased to 37.5% during the three
months ended September 30, 2020 from 48.5% during the three months ended
September 30, 2019. The contribution margin decrease as a percentage of revenues
was primarily due to the decrease in gross profit noted above.
General and Administrative
General and administrative expenses were $20.4 million for the three months
ended September 30, 2020 versus $22.5 million for the three months ended
September 30, 2019. The decrease in general and administrative expenses was
primarily due to a decrease in compensation costs resulting from attrition as
well as reduced travel costs relating to COVID-19.

Depreciation and Amortization
Depreciation and amortization expenses were $6.0 million for the three months
ended September 30, 2020 and $6.2 million for the three months ended September
30, 2019. The decrease in depreciation and amortization was primarily due to
certain assets being fully depreciated in the first quarter of fiscal 2021.

Interest Expense
Interest expense was $21.3 million during the three months ended September 30,
2020, versus $24.5 million during the three months ended September 30, 2019. The
average indebtedness decreased to $1.6 billion during the three months ended
September 30, 2020 from $1.8 billion during the three months ended September 30,
2019. The average cost of borrowing decreased to 5.2% for the three months ended
September 30, 2020 from 5.4% for the three months ended September 30, 2019.

Income Taxes
The provision for income taxes during the three months ended September 30, 2020
was $7.3 million versus $10.8 million during the three months ended September
30, 2019. The effective tax rate during the three months ended September 30,
2020 was 14.1% versus 24.5% during the three months ended September 30, 2019.
The decrease in the effective tax rate for the three months ended September 30,
2020 was primarily due to the application of final tax regulations issued for
GILTI, and the discrete event pertaining to the release of the valuation
allowance on prior year foreign tax credits.


                                      -28-
--------------------------------------------------------------------------------

Results of Operations


Six Months Ended September 30, 2020 compared to the Six Months Ended September
30, 2019
Total Segment Revenues

The following table represents total revenue by segment, including product groups, for the six months ended September 30, 2020 and 2019.

Six Months Ended September 30,

                                                                                                                              Increase (Decrease)
(In thousands)                           2020                    %                 2019                 %                 Amount                  %
North American OTC Healthcare
Analgesics                        $     58,490                   12.5          $  57,366                12.2          $      1,124                 2.0
Cough & Cold                            28,234                    6.0             37,846                 8.0                (9,612)              (25.4)
Women's Health                         126,902                   27.3            119,256                25.5                 7,646                 6.4
Gastrointestinal                        61,768                   13.2             63,786                13.6                (2,018)               (3.2)
Eye & Ear Care                          49,619                   10.6             49,039                10.4                   580                 1.2
Dermatologicals                         55,495                   11.9             53,777                11.4                 1,718                 3.2
Oral Care                               44,110                    9.4             41,042                 8.7                 3,068                 7.5
Other OTC                                2,615                    0.6              2,550                 0.5                    65                 2.5
Total North American OTC
Healthcare                             427,233                   91.5            424,662                90.3                 2,571                 0.6

International OTC Healthcare
Analgesics                                 541                    0.1                473                 0.1                    68                14.4
Cough & Cold                             6,988                    1.5             11,196                 2.4                (4,208)              (37.6)
Women's Health                           6,537                    1.4              5,324                 1.1                 1,213                22.8
Gastrointestinal                        12,084                    2.6             16,013                 3.4                (3,929)              (24.5)
Eye & Ear Care                           5,582                    1.2              6,196                 1.3                  (614)               (9.9)
Dermatologicals                          1,535                    0.3              1,266                 0.3                   269                21.2
Oral Care                                6,313                    1.4              5,091                 1.1                 1,222                24.0
Other OTC                                    3                      -                  2                   -                     1                50.0
Total International OTC
Healthcare                              39,583                    8.5             45,561                 9.7                (5,978)              (13.1)

Total Consolidated                $    466,816                  100.0          $ 470,223               100.0          $     (3,407)               (0.7)



Total segment revenues for the six months ended September 30, 2020 were $466.8
million, a decrease of $3.4 million, or 0.7%, versus the six months ended
September 30, 2019. The $3.4 million decrease was related to the decrease in our
International OTC Healthcare segment.

North American OTC Healthcare Segment
Revenues for the North American OTC Healthcare segment increased $2.6 million,
or 0.6%, during the six months ended September 30, 2020 versus the six months
ended September 30, 2019. The six months ended September 30, 2020 were
positively impacted by the Women's Health, Oral Care, Dermatologicals,
Analgesics, and Eye & Ear Care categories, but were partly offset by lower Cough
& Cold and Gastrointestinal revenues. The positively impacted categories
benefited from the consumer shift to over-the-counter healthcare products as
they looked to avoid doctor visits and increased focus on hygiene and self-care
at home related to COVID-19. The categories with revenue decreases faced
declines in incidence levels and usage rates due to shelter-at-home restrictions
and limited travel related to COVID-19.

International OTC Healthcare Segment
Revenues for the International OTC Healthcare segment decreased $6.0 million, or
13.1%, during the six months ended September 30, 2020 versus the six months
ended September 30, 2019. The $6.0 million decrease was primarily attributable
to decreased sales in our Australian subsidiary, primarily related to the
reduction in sales of Hydralyte due to both lower general consumer illnesses and
activities such as athletics resulting from the various social distancing
measures brought on by COVID-19.
                                      -29-
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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                                 2020                    %                 2019                %                 Amount                  %
North American OTC Healthcare         $    248,337                   58.1          $ 242,920               57.2          $      5,417                 2.2
International OTC Healthcare                23,192                   58.6             27,898               61.2                (4,706)              (16.9)

                                      $    271,529                   58.2          $ 270,818               57.7          $        711                 0.3



Gross profit for the six months ended September 30, 2020 was relatively flat,
increasing $0.7 million, or 0.3%, when compared with the six months ended
September 30, 2019. The increase in gross profit was primarily due to the
increase in the North American OTC Healthcare segment. As a percentage of total
revenues, gross profit increased to 58.2% during the six months ended September
30, 2020, from 57.7% during the six months ended September 30, 2019. The
increase in gross profit as a percentage of revenues was primarily a result of
the fourth quarter 2020 completion of transitional costs associated with a new
warehouse and distribution center and improved logistics costs resulting from
our warehouse transition.
North American OTC Healthcare Segment
Gross profit for the North American OTC Healthcare segment increased $5.4
million, or 2.2%, during the six months ended September 30, 2020 versus the six
months ended September 30, 2019. As a percentage of North American OTC
Healthcare revenues, gross profit increased to 58.1% during the six months ended
September 30, 2020 from 57.2% during the six months ended September 30, 2019,
primarily due to the fourth quarter completion of transitional costs associated
with a new warehouse and distribution center and improved logistics costs
resulting from our warehouse transition.

International OTC Healthcare Segment
Gross profit for the International OTC Healthcare segment decreased $4.7
million, or 16.9%, during the six months ended September 30, 2020 versus the six
months ended September 30, 2019. As a percentage of International OTC Healthcare
revenues, gross profit decreased to 58.6% during the six months ended September
30, 2020 from 61.2% during the six months ended September 30, 2019, 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                         2020                   %                 2019                %                 Amount                  %
North American OTC Healthcare        $    189,643                  44.4          $ 177,311               41.8          $     12,332                 7.0
International OTC Healthcare               15,795                  39.9             20,039               44.0                (4,244)              (21.2)

                                     $    205,438                  44.0          $ 197,350               42.0          $      8,088                 4.1



North American OTC Healthcare Segment
Contribution margin for the North American OTC Healthcare segment increased
$12.3 million, or 7.0%, during the six months ended September 30, 2020 versus
the six months ended September 30, 2019. As a percentage of North American OTC
Healthcare revenues, contribution margin increased to 44.4% during the six
months ended September 30, 2020 from 41.8% during the six months ended September
30, 2019. 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 first quarter of 2021 in advertising and marketing reflecting spend
efficiencies and reductions across brands/categories driven by consumer
behavior.

International OTC Healthcare Segment
Contribution margin for the International OTC Healthcare segment decreased $4.2
million, or 21.2%, during the six months ended September 30, 2020 versus the six
months ended September 30, 2019. As a percentage of International OTC Healthcare
                                      -30-
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revenues, contribution margin decreased to 39.9% during the six months ended
September 30, 2020 from 44.0% during the six months ended September 30, 2019.
The contribution margin decrease as a percentage of revenues was primarily due
to the decrease in gross profit noted above.
General and Administrative
General and administrative expenses were $40.3 million for the six months ended
September 30, 2020 versus $44.2 million for the six months ended September 30,
2019. The decrease in general and administrative expenses was primarily due to a
decrease in compensation costs resulting from attrition as well as reduced
travel costs relating to COVID-19.

Depreciation and Amortization
Depreciation and amortization expenses were $12.1 million for the six months
ended September 30, 2020 and $12.3 for the six months ended September 30, 2019.
The decrease in depreciation and amortization expenses was primarily due to
certain assets being fully depreciated in the first quarter of fiscal 2021.

Interest Expense
Interest expense was $43.3 million during the six months ended September 30,
2020, versus $49.6 million during the six months ended September 30, 2019. The
average indebtedness decreased to $1.7 billion during the six months ended
September 30, 2020 from $1.8 billion during the six months ended September 30,
2019. The average cost of borrowing decreased to 5.1% for the six months ended
September 30, 2020 from 5.5% for the six months ended September 30, 2019.

Income Taxes
The provision for income taxes during the six months ended September 30, 2020
was $21.8 million versus $22.9 million during the six months ended September 30,
2019. The effective tax rate during the six months ended September 30, 2020 was
19.8% versus 25.4% during the six months ended September 30, 2019. The decrease
in the effective tax rate for the six months ended September 30, 2020 was
primarily due to the application of final tax regulations issued for GILTI, and
the discrete event pertaining to the release of the valuation allowance on prior
year foreign tax credits.

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 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, 2020, we had cash and cash equivalents of $26.6 million, a
decrease of $68.2 million from March 31, 2020. The following table summarizes
the change:

                                                                        Six Months Ended September 30,
(In thousands)                                                    2020                 2019             $ Change
Cash provided by (used in):
Operating Activities                                        $   127,293$ 103,000$  24,293
Investing Activities                                            (11,619)              (5,822)            (5,797)
Financing Activities                                           (186,666)             (96,312)           (90,354)
Effects of exchange rate changes on cash and cash
equivalents                                                       2,835                 (491)             3,326
Net change in cash and cash equivalents                     $   (68,157)$     375$ (68,532)



Operating Activities
Net cash provided by operating activities was $127.3 million for the six months
ended September 30, 2020, compared to $103.0 million for the six months ended
September 30, 2019. The $24.3 million increase was due to an increase in net
income after non-cash items.

Investing Activities

                                      -31-
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Net cash used in investing activities was $11.6 million for the six months ended
September 30, 2020, compared to $5.8 million for the six months ended
September 30, 2019. The increase was due to an increase in capital expenditures
in the current period.

Financing Activities
Net cash used in financing activities was $186.7 million for the six months
ended September 30, 2020, compared to $96.3 million for the six months ended
September 30, 2019. The increase was primarily due to increased repayments of
debt of $109.0 million and decreased borrowings of $30.0 million in the current
period, partly offset by a decrease from the repurchase of common stock of $49.0
million compared to the prior period.

Capital Resources

As of September 30, 2020, 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 6.375% 2016 Senior Notes, which mature on March 1, 2024; and
•$560.0 million of borrowings under the 2012 Term B-5 Loans due January 26,
2024.

As of September 30, 2020, we had no balance outstanding on 2012 ABL Revolver and a borrowing capacity of $132.7 million.


During the years ended March 31, 2020 and 2019, under the 2012 Term Loan, we
made voluntary principal payments against outstanding indebtedness of $48.0
million and $200.0 million, respectively. During the six months ended September
30, 2020, we made voluntary principal payments against outstanding indebtedness
of $130.0 million 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
principal amount, which, as of September 30, 2020, was $560.0 million. Since we
have made optional payments this year and in prior years that exceed a
significant portion of our required quarterly payments, we will not be required
to make another payment on the 2012 Term Loan until maturity on January 26,
2024.

Maturities:

         (In thousands)
         Year Ending March 31,                                      Amount
         2021 (remaining six months ending March 31, 2021)       $         -
         2022                                                              -
         2023                                                              -
         2024                                                      1,160,000
         2025                                                              -
         Thereafter                                                  400,000
                                                                 $ 1,560,000



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 2016 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:

•Have a leverage ratio of less than 6.50 to 1.0 for the quarter ended
September 30, 2020 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, 2020 and thereafter (defined as, with certain adjustments,
the ratio of our consolidated EBITDA to our trailing twelve month consolidated
cash interest expense); and

                                      -32-
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•Have a fixed charge ratio of greater than 1.0 to 1.0 for the quarter ended
September 30, 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 debt facilities.

At September 30, 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 the
next twelve months.

Interest Rate Swaps:
We currently have two interest rate swaps to hedge a total of $400.0 million of
our variable interest debt. Of these, $200.0 million mature on January 31, 2021
and $200.0 million mature on January 31, 2022.

Off-Balance Sheet Arrangements

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



                                      -33-
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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, 2020.  There were no material changes to our
critical accounting policies during the six months ended September 30, 2020.

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-
--------------------------------------------------------------------------------

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;
•Our inability to invest successfully in research and development to develop new
products;
•Changes in inventory management practices by retailers;
•Our inability to grow our international sales;
•General economic conditions and incidence levels affecting sales of our
products and their respective markets;
•Economic factors, such as increases in interest rates and currency exchange
rate fluctuations;
•Changing consumer trends, additional store brand or branded competition or
other pricing pressures which may cause us to lower our prices;
•Our dependence on third party manufacturers to produce many of the products we
sell;
•Our dependence on third party logistics providers 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;
•Acquisitions, dispositions or other strategic transactions diverting managerial
resources, the incurrence of additional liabilities or problems associated with
integration of those businesses and facilities;
•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 internal information technology systems;
•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;
•Our inability to obtain additional financing;
•The restrictions imposed by our financing agreements on our operations; and
•Changes in federal, state and other geographic tax laws.
                                      -35-
--------------------------------------------------------------------------------

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, 2020.

                                      -36-

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