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What changed in Prestige Consumer Healthcare Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Prestige Consumer Healthcare Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+289 added−319 removedSource: 10-K (2023-05-05) vs 10-K (2022-05-06)

Top changes in Prestige Consumer Healthcare Inc.'s 2023 10-K

289 paragraphs added · 319 removed · 247 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

60 edited+8 added−11 removed70 unchanged
Biggest changeAdvertising, marketing, merchandising and packaging, the timing of new product introductions, and line extensions also have a significant impact on customers’ buying decisions and, as a result, on our sales. The structure and quality of our sales force, as well as sell-through of our products, affect in-store and online positioning, wall display space and inventory levels for retail sale.
Biggest changeThe structure and quality of our sales force, as well as sell-through of our products, affect in-store and online positioning, wall display space and inventory levels for retail sale. Our markets are also highly sensitive to the introduction of new products, which may rapidly capture a significant share of the market.
In 2022, we acquired the consumer health business assets from Akorn Operating Company LLC. While we believe that there will continue to be a pipeline of acquisition candidates for us to investigate, strategic fit, availability of capital and relative cost are of the utmost importance in our decision to pursue such opportunities.
In 2022, we acquired the consumer health business assets from Akorn Operating Company LLC. While we believe that there will continue to be a pipeline of acquisition candidates for us to investigate, the strategic fit, availability of capital and relative cost are of the utmost importance in our decision to pursue such opportunities.
Other Regulations We are also subject to a variety of other regulations in various foreign markets, including regulations pertaining to import/export, antitrust and pharmacovigilance issues. To the extent we decide to commence or expand operations in additional 9 countries, we may be required to obtain an approval, license or certification from the country’s ministry of health or comparable agency.
Other Regulations We are also subject to a variety of other regulations in various foreign markets, including regulations pertaining to import/export, antitrust and pharmacovigilance issues. To the extent we decide to commence or expand operations in additional countries, we may be required to obtain an approval, license or certification from the country’s ministry of health or comparable 9 agency.
We endeavor to facilitate the acquisition of diverse attitudes, skills and talents particularly for future leadership roles through hiring, workplace practices and employee 10 development. We strive to create and sustain an environment where all employees are heard and inspired to achieve their full potential. We continually review our Company employee demographics to help us adhere to these principles.
We endeavor to facilitate the acquisition of diverse attitudes, skills and talents particularly for future leadership roles through hiring, workplace practices and employee development. We strive to create and sustain an environment where all employees are heard and inspired to achieve their full potential. We continually review our Company employee demographics to help us adhere to these principles.
Information on our Internet website does not constitute a part of this Annual Report on Form 10-K and is not incorporated herein by reference, including any general statement incorporating by reference this Annual Report on Form 10-K into any filing under the Securities Act of 1933, as amended (the “Securities Act”), or under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Information on our Internet website does not constitute a part of this Annual Report on Form 10-K and is not incorporated herein by reference, including through any general statement incorporating by reference this Annual Report on Form 10-K into any filing under the Securities Act of 1933, as amended (the “Securities Act”), or under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Additional or shifting governmental regulation has and in the future could require reformulation of certain products to meet new standards, recalls or discontinuance of certain products not able to be reformulated, additional record-keeping requirements, increased documentation of the properties of certain products, additional or different labeling, additional scientific substantiation, expanded adverse event reporting or other new requirements.
Additional or shifting governmental regulation has and in the future could also require reformulation of certain products to meet new standards, recalls or discontinuance of certain products not able to be reformulated, additional record-keeping requirements, increased documentation of the properties of certain products, additional or different labeling, additional scientific substantiation, expanded adverse event reporting or other new requirements.
Health and Safety We are committed to providing a safe work environment for our employees and require employees to share this concern by abiding to rigorous safety measures. To enable this and assure that the message of health, safety and well-being are part of our work culture, we conduct regular training programs at our production facility.
Health and Safety We are committed to providing a safe work environment for our employees and require employees to share this concern by abiding to rigorous safety measures. To enable this and assure that the message of health, safety and well-being are part of our 11 work culture, we conduct regular training programs at our production facility.
Major Brands Product Group Market Position (1) Market Segment (2) Brand Information North American OTC Healthcare: (3) BC and Goody's Analgesics #1 Analgesic Powders Developed over 90 years ago, BC and Goody’s provide fast pain relief at the speed of powder Boudreaux's Butt Paste Dermatologicals #3 Baby Ointments Products include various diaper rash treatments and skin protectants manufactured with high-quality ingredients Chloraseptic Cough & Cold #1 Sore Throat Liquids and Lozenges (Medicated) Products include sprays and lozenges to relieve sore throats and mouth pain Clear Eyes Eye & Ear Care #1 Redness Relief Effective line of eye care products that provide soothing comfort, including relief from redness and itchiness Compound W Dermatologicals #1 Wart Removal Provides safe and effective at-home removal of common and plantar warts Debrox Eye & Ear Care #1 Ear Wax Removal Provides a safe and gentle way to remove excess ear wax or water from ear canal DenTek Oral Care #3 PEG Oral Care Products include dental guards, floss picks, interdental brushes, dental repair and kits, and tongue cleaners Dramamine Gastrointestinal #1 Motion Sickness Relief Includes non-drowsy, kids', original and nausea-free formulas Fleet Gastrointestinal #1 Adult Enemas and Suppositories Founded in 1869, products include enemas and other laxative products Gaviscon Gastrointestinal #1 Upset Stomach Remedies Creates a protective foam barrier to help block stomach acid from splashing up into the esophagus Luden's Cough & Cold #3 Cough Drops (Non-Medicated) Cough drop brand that is over 130 years old and includes a variety of flavors Monistat Women's Health #1 Vaginal Anti-Fungal Provides fast relief for yeast infections and is available in several different doses Nix Dermatologicals #1 Lice and Parasite Treatments Effective and safe lice and super lice treatments Summer's Eve Women's Health #1 Feminine Hygiene Offers a variety of feminine care products including washes, cloths, and sprays TheraTears Eye & Ear Care #3 Dry Eye Relief Doctor created and recommended therapy for relief of dry eyes International OTC Healthcare: Fess Cough & Cold #1 Nasal Saline Sprays and Washes Helps relieve nasal and sinus congestion due to allergy, hay fever, colds and flu Hydralyte Gastrointestinal #1 Oral Rehydration Relieves symptoms of dehydration and helps replace water and electrolytes lost due to vomiting, diarrhea, heavy sweating, vigorous exercise and occasional hangovers (1) We have prepared the information included in this Annual Report on Form 10-K with regard to the market position for our brands based in part on data generated by Information Resources, Inc.
Major Brands Product Group Market Position (1) Market Segment (2) Brand Information North American OTC Healthcare: (3) BC and Goody's Analgesics #1 Analgesic Powders Founded over 90 years ago, the BC and Goody's brands feature over-the-counter, fast-acting pain relief powder Boudreaux's Butt Paste Dermatologicals #3 Baby Ointments Products include various diaper rash treatments and skin protectants manufactured with high-quality ingredients Chloraseptic Cough & Cold #1 Sore Throat Liquids and Lozenges (Medicated) Products include sprays and lozenges to relieve sore throats and mouth pain Clear Eyes Eye & Ear Care #2 Redness Relief Effective line of eye care products that provide soothing comfort, including relief from redness and itchiness Compound W Dermatologicals #1 Wart Removal Provides safe and effective at-home removal of common and plantar warts Debrox Eye & Ear Care #1 Ear Wax Removal Provides a safe and gentle way to remove excess ear wax or water from ear canal DenTek Oral Care #3 PEG Oral Care Products include dental guards, floss picks, interdental brushes, dental repair and kits, and tongue cleaners Dramamine Gastrointestinal #1 Motion Sickness Relief Includes non-drowsy, kids', original and nausea-free formulas Fleet Gastrointestinal #1 Adult Enemas and Suppositories Founded in 1869, products include enemas and other laxative products Gaviscon Gastrointestinal #2 Upset Stomach Remedies Creates a protective foam barrier to help block stomach acid from splashing up into the esophagus Luden's Cough & Cold #3 Cough Drops (Non-Medicated) Cough drop brand that is over 130 years old and includes a variety of flavors Monistat Women's Health #1 Vaginal Anti-Fungal Provides fast relief for yeast infections and is available in several different doses Nix Dermatologicals #1 Lice and Parasite Treatments Effective and safe lice and super lice treatments Summer's Eve Women's Health #1 Feminine Hygiene Offers a variety of feminine care products including washes, cloths, and sprays TheraTears Eye & Ear Care #3 Dry Eye Relief Doctor created and recommended brand for dry eye relief International OTC Healthcare: Fess Cough & Cold #1 Nasal Saline Sprays and Washes Helps relieve nasal and sinus congestion due to allergy, hay fever, colds and flu Hydralyte Gastrointestinal #1 Oral Rehydration Relieves symptoms of dehydration and helps replace water and electrolytes lost due to vomiting, diarrhea, heavy sweating, vigorous exercise and occasional hangovers (1) We have prepared the information included in this Annual Report on Form 10-K with regard to the market position for our brands based in part on data generated by Information Resources, Inc.
We expect that for future periods, our top ten customers, including Walmart, will in the aggregate continue to account for a large portion of our sales. Outsourcing and Manufacturing In order to maximize our competitiveness and efficiently allocate our resources, third-party manufacturers fulfill most of our manufacturing needs.
We expect that for future periods, our top ten customers, including Walmart, will in the aggregate continue to account for a large portion of our sales. 6 Outsourcing and Manufacturing In order to maximize our competitiveness and efficiently allocate our resources, third-party manufacturers fulfill most of our manufacturing needs.
With regard to our products both manufactured under long-term agreements and purchase orders, in periods of high inflation we have experienced and may continue to experience frequent increases in prices of products due to availability and fluctuations in input costs such as raw material, packaging components and labor costs.
With regard to our products both manufactured under long-term agreements and purchase orders, in periods of high inflation we have experienced and may continue to experience frequent increases in prices of products due to fluctuations in input costs such as raw material, packaging components and labor costs.
Although we have not experienced a material disruption to our overall supply chain to date, we have and may continue to experience delays and backorders for certain ingredients and products, difficulty scheduling shipping for our products, as well as price increases from many of our suppliers for both shipping and product costs.
Although we have not experienced a material disruption to our overall supply chain to date, we have and may continue to experience shortages, delays and backorders for certain ingredients and products, difficulty scheduling shipping for our products, as well as price increases from many of our suppliers for both shipping and product costs.
OTC drug products are New Drug Application (“NDA”) or Abbreviated New Drug Application (“ANDA”) products and are manufactured and labeled in accordance with an FDA-approved submission. These products are subject to 8 reporting requirements as set forth in FDA regulations.
OTC drug products are New Drug Application (“NDA”) or Abbreviated New Drug Application (“ANDA”) products and are manufactured and labeled in accordance with an FDA-approved submission. These products are subject to reporting requirements as set forth in FDA regulations.
Some of the ways we encourage this is by: • Recruiting : With employees across the U.S. and the world, we understand the importance of hiring and advancement practices that ensure diversity and equality at all levels of the organization as well as talent development. • Monitoring: We have a strict Code of Conduct and Ethics that fosters a work environment that is free from intimidation, harassment and violence.
Some of the ways we encourage this is by: • Recruiting : With employees across the U.S. and the world, we understand the importance of hiring and advancement practices that seek diversity and equality at all levels of the organization as well as talent development. • Monitoring: We have a strict Code of Conduct and Ethics that fosters a work environment that is free from intimidation, harassment and violence.
Our operations are subject to federal, state, local and foreign laws, rules and regulations relating to environmental concerns, including air emissions, wastewater discharges, solid and hazardous waste management activities, and the safety of our employees. We endeavor to take actions necessary to comply with such regulations, including periodic environmental and health and safety audits of our facilities.
Our operations are subject to U.S. federal, state, local and foreign laws, rules and regulations relating to environmental concerns, including air emissions, wastewater discharges, solid and hazardous waste management activities, and the safety of our employees. We endeavor to take actions necessary to comply with such regulations, including periodic environmental and health and safety audits of our facilities.
By empowering our employees to develop and enhance their skills through enterprise-wide tools, videos and coursework that focus on continuous learning and professional and personal development, we help all of our employees reach their full potential, which in turn helps our organization succeed.
By empowering our employees to develop and enhance their skills through enterprise-wide tools, videos and coursework that focus on continuous learning and professional and personal development, we encourage all of our employees to reach their full potential, which in turn helps our organization succeed.
The audits, conducted by independent firms with expertise in environmental, health and safety compliance, include site visits as well as a review of documentary information, to determine compliance with such federal, state, local and foreign laws, rules and regulations.
The audits, conducted by independent firms with expertise in environmental, health and safety compliance, include site visits as well as a review of documentary information, to determine compliance with such U.S. federal, state, local and foreign laws, rules and regulations.
Recognizing that financial resources are limited, we allocate our resources to focus on our core brands with the most impactful, consumer-relevant initiatives that we believe have the greatest opportunities for growth and financial success. Customers Our senior management team and dedicated sales force strive to maintain long-standing relationships with our top 25 domestic customers.
Recognizing that financial resources are limited, we allocate our resources to focus on our core brands with the most impactful, consumer-relevant initiatives that we believe have the greatest opportunities for growth and financial success. Customers Our senior management team and dedicated sales force strive to maintain long-standing relationships with our top 25 U.S. customers.
Our business, business model, competitive strengths and growth strategy face various risks that are described in "Risk Factors" in Part I, Item 1A of this Annual Report on Form 10-K. 2 The following summarizes the percent of our net revenues by segment: March 31, (In thousands) 2022 2021 2020 Segment: North American OTC Healthcare 89.1 % 90.0 % 89.2 % International OTC Healthcare 10.9 10.0 10.8 Total 100.0 % 100.0 % 100.0 % For additional information concerning our business segments, please refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 19 to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K. 3 Major Brands and Market Position Our major brands, set forth in the table below, have strong levels of consumer awareness and retail distribution across all major channels.
Our business, business model, competitive strengths and growth strategy face various risks that are described in "Risk Factors" in Part I, Item 1A of this Annual Report on Form 10-K. 2 The following summarizes the percent of our net revenues by segment: March 31, (In thousands) 2023 2022 2021 Segment: North American OTC Healthcare 86.3 % 89.1 % 90.0 % International OTC Healthcare 13.7 10.9 10.0 Total 100.0 % 100.0 % 100.0 % For additional information concerning our business segments, please refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 20 to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K. 3 Major Brands and Market Position Our major brands, set forth in the table below, have strong levels of consumer awareness and retail distribution across all major channels.
Our products are sold through multiple channels, including mass merchandisers, drug, food, dollar, convenience, club and e-commerce stores, which reduces our exposure to any single distribution channel. 4 Market Position During 2022, approximately 67.5% of our total revenues were from major brands with a number one market position, compared with approximately 69.2% and 69.4% of total revenues during 2021 and 2020, respectively.
Our products are sold through multiple channels, including mass merchandisers, drug, food, dollar, convenience, club and e-commerce stores, which reduces our exposure to any single distribution channel. 4 Market Position During 2023, approximately 58.1% of our total revenues were from major brands with a number one market position, compared with approximately 67.5% and 69.2% of total revenues during 2022 and 2021, respectively.
We have adopted a Code of Conduct and Ethics Policy, Code of Ethics for Senior Financial Employees, Policy and Procedures for Complaints Regarding Accounting, Internal Controls and Auditing Matters, Corporate Governance Guidelines, Audit Committee Pre-Approval Policy, and Charters for our Audit, Compensation and Nominating and Corporate Governance Committees, as well as a Related Persons Transaction Policy and Stock Ownership Guidelines.
We have adopted a Code of Conduct and Ethics Policy, Code of Ethics for Senior Financial Employees, Policy and Procedures for Complaints Regarding Accounting, Internal Controls and Auditing Matters, Corporate Governance Guidelines, and Charters for our Audit, Compensation and Nominating and Corporate Governance Committees, as well as a Related Persons Transaction Policy and Stock Ownership Guidelines.
We also contract with third-party sales management enterprises that interface directly with many of our remaining customers and report directly to members of our sales management team. In an effort to ensure continued sales growth, we continue to focus on expanding our reliance on direct sales while reducing our reliance on brokers for our non-top 25 customers.
We also contract with third-party sales management enterprises that interface directly with many of our remaining customers and report directly to members of our sales management team. In an effort to ensure continued sales growth, we continue to focus on expanding our reliance on direct sales while reducing our reliance on brokers.
This approach results in minimal capital expenditures and maximizes our cash flow, which allows us to reinvest to support our marketing initiatives, fund brand acquisitions or repay outstanding indebtedness. At March 31, 2022, we had relationships with 128 third-party manufacturers.
This approach results in minimal capital expenditures and maximizes our cash flow, which allows us to reinvest to support our marketing initiatives, fund brand acquisitions or repay outstanding indebtedness. At March 31, 2023, we had relationships with 135 third-party manufacturers.
Raising a concern honestly or participating in an investigation cannot be the basis for any adverse employment action, including termination, suspension, loss of benefits, threats, harassment or discrimination. Our Employees As of March 31, 2022, we had approximately 535 global employees.
Raising a concern honestly or participating in an investigation cannot be the basis for any adverse employment action, including termination, suspension, loss of benefits, threats, harassment or discrimination. Our Employees As of March 31, 2023, we had approximately 560 global employees.
In an effort to ensure continued sales growth, we continue to focus on expanding our reliance on direct sales while reducing our reliance on brokers for our customers, other than our top 25 customers. Pursuing Strategic Acquisitions Acquisitions are a part of our overall strategy for growing revenue. We have a history of growth through acquisitions.
In an effort to ensure continued sales growth, we continue to focus on expanding our reliance on direct sales while reducing our reliance on brokers for our customers. Pursuing Strategic Acquisitions Acquisitions are a part of our overall strategy for growing revenue. We have a history of growth through acquisitions.
We believe that our emphasis on strong customer relationships, speed and flexibility and leading sales technology capabilities, combined with consistent marketing support programs and ongoing product innovation, will continue to maximize our competitiveness in the increasingly complex retail environment. 6 During 2022, 2021, and 2020, Walmart accounted for approximately 20.5%, 21.6%, and 23.1%, respectively, of our gross revenues.
We believe that our emphasis on strong customer relationships, speed and flexibility and leading sales technology capabilities, combined with consistent marketing support programs and ongoing product innovation, will continue to maximize our competitiveness in the increasingly complex retail environment. During 2023, 2022, and 2021, Walmart accounted for approximately 19.7%, 20.5%, and 21.6%, respectively, of our gross revenues.
In March 2020, we implemented protocols in response to the COVID-19 pandemic across all locations, in an effort to ensure both the safety of our employees and compliance with federal and local requirements and guidelines. These protocols continued through fiscal 2022.
In March 2020, we implemented protocols in response to the COVID-19 pandemic across all locations, in an effort to ensure both the safety of our employees and compliance with federal and local requirements and guidelines. These protocols and monitoring measures to ensure safety continued through fiscal 2023.
We believe our business model allows us to integrate acquisitions in an efficient manner, while also providing opportunities to realize significant cost savings. Growing Our International Business International sales beyond the borders of North America represented 10.9%, 10.0% and 10.8% of total revenues in 2022, 2021, and 2020, respectively.
We believe our business model allows us to integrate acquisitions in an efficient manner, while also providing opportunities to realize significant cost savings. Growing Our International Business International sales beyond the borders of North America represented 13.7%, 10.9% and 10.0% of total revenues in 2023, 2022, and 2021, respectively.
Moving forward, OTC drug products will fall under the requirements of The Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") signed into law on March 27, 2020, which includes the Over-the-Counter Monograph Safety, Innovation, and Reform Act. These new requirements are expected to be delineated by the FDA in 2023/2024. Certain of our U.S.
Moving forward, OTC drug products will fall under the requirements 8 of The Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") signed into law on March 27, 2020, which includes the Over-the-Counter Monograph Safety, Innovation, and Reform Act. These new requirements are expected to be delineated by the FDA in the next few years. Certain of our U.S.
Reference to a year (e.g., “2022”) refers to our fiscal year ended March 31 of that year.
Reference to a year (e.g., “2023”) refers to our fiscal year ended March 31 of that year.
The following table sets forth the percentage of gross sales for our domestic customers across our six major distribution channels during each of the past three years ended March 31: Percentage of Gross Sales (1) Channel of Distribution 2022 2021 2020 Mass 34.3 34.5 36.5 Drug 25.4 22.4 25.6 Food 13.9 15.0 15.4 Dollar 6.3 7.7 6.6 Convenience 3.5 3.2 3.9 Club 1.6 1.8 1.4 Other (2) 15.0 15.4 10.6 (1) Includes estimates for some of our wholesale customers that service more than one distribution channel.
The following table sets forth the percentage of gross sales for our U.S. customers across our six major distribution channels during each of the past three years ended March 31: Percentage of Gross Sales (1) Channel of Distribution 2023 2022 2021 Mass 33.6 34.3 34.5 Drug 25.6 25.4 22.4 Food 14.3 13.9 15.0 Dollar 6.5 6.3 7.7 Convenience 3.4 3.5 3.2 Club 1.3 1.6 1.8 Other (2) 15.3 15.0 15.4 (1) Includes estimates for some of our wholesale customers that service more than one distribution channel.
(“IRI”), for the 52-week period ended March 20, 2022. International information was derived from several sources. Fess and Hydralyte data are for the Australian market.
(“IRI”), for the 52-week period ended March 26, 2023. International information was derived from several sources. Fess and Hydralyte data are for the Australian market.
These brands accounted for approximately 81.4%, 80.3%, and 80.5% of our total revenues for 2022, 2021, and 2020, respectively.
These brands accounted for approximately 81.9%, 81.4%, and 80.3% of our total revenues for 2023, 2022, and 2021, respectively.
In 2022, these brands included BC and Goody's, Chloraseptic , Clear Eyes , Compound W , Debrox, Dramamine, Fess, Fleet, Gaviscon, Hydralyte, Monistat, Nix, and Summer's Eve .
In 2023, these brands included BC and Goody's, Chloraseptic , Compound W , Debrox, Dramamine, Fess, Fleet, Hydralyte, Monistat, Nix, and Summer's Eve .
The extent to which these conditions impact our results and liquidity will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity and duration of any further COVID-19 outbreak and recovery period and further global instability.
The extent to which these conditions impact our results and liquidity will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity and duration of any further COVID-19 outbreaks, global supply chain constraints, the high inflationary environment and further global instability.
Of those, we had long-term contracts with 23 manufacturers that produced items that accounted for approximately 69.0% of our gross sales for 2022, compared to 19 manufacturers with long-term contracts that accounted for approximately 70.5% of our gross sales in 2021.
Of those, we had long-term contracts with 25 manufacturers that produced items that accounted for approximately 69.8% of our gross sales for 2023, compared to 23 manufacturers with long-term contracts that accounted for approximately 69.0% of our gross sales in 2022.
Our EPA registered products are also subject to state regulations and the rules and regulations of the various jurisdictions where these products are sold. Our Canadian and international business is also subject to product regulations by local regulatory authorities in the various countries where these businesses operate, including regulations regarding manufacturing, labeling, marketing, distribution, sale and storage.
Our Canadian and international business is also subject to product regulations by local regulatory authorities in the various countries where these businesses operate, including regulations regarding manufacturing, labeling, marketing, distribution, sale and storage.
We have continued to see changes in the purchasing patterns of our consumers, including the frequency of visits by consumers to retailers and a shift in many markets to purchasing our products online. Both the COVID-19 pandemic and the geopolitical environment have also impacted the supply of labor and raw materials and exacerbated rising costs.
We have continued to see changes in the purchasing patterns of our consumers, including a reduction in the frequency of visits to retailers and a shift in many markets to purchasing our products online. The volatile environment has impacted the supply of labor and raw materials and exacerbated rising input costs.
To date, the pandemic and other global conditions have not had a material negative impact on our operations, supply chain, overall costs or demand for most of our products or resulting aggregate sales and earnings, and, as such, it has also not negatively impacted our liquidity position. We continue to generate operating cash flows to meet our short-term liquidity needs.
To date, the COVID-19 pandemic and other global conditions have not had a material negative impact on our operations, supply chain, overall costs or demand for most of our products or resulting aggregate sales and earnings, and, as such, it has also not materially negatively 10 impacted our liquidity position.
Approximately 90% of our workforce operates in the United States, 9% in Australia and Asia and 1% in Europe. 60% of our employees are salaried and 40% are paid hourly wages, mostly in production. We employ only a few part time employees. Our workforce is 52% female and 48% male.
Approximately 88% of our workforce operates in the United States, 11% in Australia and Asia and 1% in Europe. 71% of our employees are salaried and 29% are paid hourly wages, mostly in production. We employ only a few part time employees. Our workforce is 50% female and 50% male.
These circumstances could change, however, in this dynamic, unprecedented environment. If the COVID-19 outbreak worsens or geopolitical conditions cause further disruption in the global supply chain, the availability of labor or otherwise increase costs, it may materially affect our operations and those of third parties on which we rely, including causing disruptions in the supply and distribution of our products.
If conditions cause further disruption in the global supply chain, the availability of labor and materials or otherwise increase costs, it may materially affect our operations and those of third parties on which we rely, including causing disruptions in the supply and distribution of our products.
Any requests for these documents from us should be made in writing to: 12 Prestige Consumer Healthcare Inc. 660 White Plains Road Tarrytown, New York 10591 Attention: Secretary We intend to disclose future amendments to these documents, policies and guidelines and any waivers of these documents, policies and guidelines, on our Internet website and/or through the filing of a Current Report on Form 8-K with the SEC, to the extent required under the Exchange Act. 13
Any requests for these documents from us should be made in writing to: Prestige Consumer Healthcare Inc. 660 White Plains Road Tarrytown, New York 10591 Attention: Corporate Secretary We also make copies of the following policies available on our Internet site at https://ir.prestigebrands.com/corporate-governance/documents: • Corporate Governance Guidelines • Supplier Code of Conduct • Related Persons Transaction Policy • Code of Conduct • Code of Ethics for Senior Financial Employees We intend to disclose future amendments to these documents, policies and guidelines and any waivers of these documents, policies and guidelines, on our Internet website and/or through the filing of a Current Report on Form 8-K with the SEC, to the extent required under the Exchange Act. 12
We seek out opportunities to be active members of our communities to enhance the lives of our neighbors and consumers. We encourage employees to become involved in their respective communities, and we enable office locations the freedom to develop programs that are appropriate to their community needs.
We encourage employees to become involved in their respective communities, and we enable office locations the freedom to develop programs that are appropriate to their community needs.
Warehousing and Distribution We manage product distribution in the continental United States through one facility, which is owned and operated by GEODIS Logistics LLC ("GEODIS"), a third-party provider. We entered into an agreement with GEODIS in May 2019 and transitioned to this facility from our previous provider during fiscal 2020.
Warehousing and Distribution We manage product distribution in the continental United States through one facility, which is owned and operated by GEODIS Logistics LLC ("GEODIS"), a third-party provider since fiscal 2020.
In addition, the Russian invasion of Ukraine has led to further economic uncertainty. We expect economic conditions will continue to be highly volatile and uncertain and could affect demand for our products and put pressure on prices.
We expect economic conditions will continue to be highly volatile and uncertain, put pressure on prices and supply, and could affect demand for our products.
We seek to comply with all federal, state and/or local occupational safety and health standards and report our safety records in accordance with the Occupational Safety and Health Administration ("OSHA").
We seek to comply with all U.S. federal, state and/or local occupational safety and health standards and report our safety records in accordance with the Occupational Safety and Health Administration ("OSHA"). We also seek to comply with the applicable safety and health standards in all other countries in which we have employees, including Australia, United Kingdom and Singapore.
Efficient Operating Model To gain operating efficiencies, we oversee the production planning and quality control aspects of the manufacturing, warehousing and distribution of our products, while we primarily outsource the operating elements of these functions to well-established third-party providers.
We seek to expand the number of brands sold through our existing international distribution network and continue to identify additional distribution partners for further expansion of our brands into other international markets. 5 Efficient Operating Model To gain operating efficiencies, we oversee the production planning and quality control aspects of the manufacturing, warehousing and distribution of our products, while we primarily outsource the operating elements of these functions to well-established third-party providers.
We have designed and developed both products and packaging for specific international markets and expect that our international revenues as a proportion of our total revenues will continue to grow over the long-term. 5 A number of our brands have previously been sold internationally, and we seek to expand the number of brands sold through our existing international distribution network and continue to identify additional distribution partners for further expansion of our brands into other international markets.
We have designed and developed both products and packaging for specific international markets and expect that our international revenues as a proportion of our total revenues will continue to grow over the long-term.
For example, our corporate headquarters office location traditionally has an annual “Day of Giving” where employees spend a day every December giving back to the nearby communities, while other office locations support their communities through various volunteerism events.
For example, our corporate headquarters office location traditionally has an annual “Day of Giving” where employees spend a day giving back to the nearby communities, while other office locations support their communities through various volunteerism events. Further information surrounding our Company’s human capital development and sustainability efforts are available on our Company’s website at https://www.prestigebrands.com/about-us/corporate-responsibility.
The markets in which we sell our products, however, are highly competitive and include numerous national and global manufacturers, distributors, marketers and retailers. As a result, any one or more of our brands could suffer a decline in market position or sales.
The markets in which we sell our products, however, are highly competitive and include numerous national and global manufacturers, distributors, marketers and retailers.
We take pride in the wide range of backgrounds, races, nationalities, personalities, ideas, and talents that make up our organization.
We also reward employees who take ownership and embody our principle of Leadership with projects that positively impact our business, community and stakeholders. We take pride in the wide range of backgrounds, races, nationalities, personalities, ideas, and talents that make up our organization.
Those changes have and will continue to require capital investments in facilities and equipment to meet the requirements, as well as additional product development, material and production costs which may impact our earnings, financial condition and ability to compete. Intellectual Property We own a number of trademark registrations and applications in the United States, Canada and other foreign countries.
Those changes have and will continue to require capital investments in facilities and equipment to meet the requirements, as well as additional product development, material and production costs which may impact our earnings, financial condition and ability to compete. If we fail to comply with these regulations, we could be subject to enforcement actions and the imposition of penalties.
As an example of this philosophy, in 2022 we launched a number of new products, including D enTek Fresh Protect Dental Guards, Dramamine Nausea Ginger Chews, BC Max Strength Lemonade-flavored powder, Summer’s Eve Spa Luxurious Wash and Clear Eyes Sensitive .
In 2022, we launched DenTek Fresh Protect Dental Guards, Dramamine Nausea Ginger Chews, BC Max Strength Lemonade-flavored powder, Summer’s Eve Spa Luxurious Wash and Clear Eyes Sensitive. While there is always a risk that sales of existing products may be reduced by new product introductions, our goal is to grow the overall sales of our brands.
These effects could have a material adverse impact on our business, liquidity, capital resources, and results of operations and those of the third parties on which we rely. Available Information Our Internet address is www.prestigeconsumerhealthcare.com.
These effects could have a material adverse impact on our business, liquidity, capital resources, and results of operations and those of the third parties on which we rely. Human Capital Management Our Culture & Diversity Our mission is to deliver high-quality consumer health and personal care products that improve and enrich the lives of our consumers.
Our failure to comply with these regulations can also result in a product being removed from sale in a particular market, either temporarily or permanently. In addition, we are subject to FTC and state regulations, as well as foreign regulations, relating to our product claims and advertising.
Government regulations in both our U.S. and international markets can delay or prevent the introduction of some of our products. Our failure to comply with these regulations can also result in a product being removed from sale in a particular market, either temporarily or permanently.
Our business also benefited from a significant increase in demand in travel-related categories and channels as well as the Cough & Cold category, previously impacted by the COVID-19 virus.
In fiscal 2022 and 2023, we experienced solid sales and consumption, with fiscal 2022 benefiting from a significant increase in demand in travel-related categories and channels as well as the Cough & Cold category, previously impacted by COVID-19, however, that may not be sustained at the same levels in the uncertain economic environment.
Human Capital Management Our Culture & Diversity Our mission is to deliver high-quality consumer health and personal care products that improve and enrich the lives of our consumers. Our Company culture is founded on the principles of Leadership, Trust, Change and Execution. Of those principles, Trust is among the most important.
Our Company culture is founded on the principles of Leadership, Trust, Change and Execution. Of those principles, Trust is among the most important. Trust in the safety and performance of our products, the integrity of our manufacturing and marketing processes, the character of our people, and the benefit to our consumers and society.
Seasonality The first quarter of our fiscal year generally is the least profitable quarter due to the increased advertising and marketing spending to support those brands with a summer selling season, such as Clear Eyes products and Compound W, and generally the lowest level of sales attributable to multiple factors.
Seasonality Our business is generally not seasonal due to our well-diversified portfolio of brands. Advertising and marketing spending to support brands can be high during a specific season, such as summer selling for Clear Eyes and Compound W and the early winter to influence sales of Chloraseptic , Little Remedies , and Luden’s .
If we fail to comply with these regulations, we could be subject to enforcement actions and the imposition of penalties. Impact of Regulations Compliance with these various regulations has an impact on capital expenditures, earnings and our competitive position.
We must also comply with product labeling and packaging regulations that may vary from country to country. In addition, we are subject to FTC and state regulations, as well as foreign regulations, relating to our product claims and advertising. Impact of Regulations Compliance with these various regulations has an impact on capital expenditures, earnings and our competitive position.
These measures have allowed employees the flexibility to attend to other unique personal and family needs brought on by the pandemic. Our Community We are a responsible corporate citizen and we resolve to live by our principles as we continue to grow our global business.
Our Community We seek to be a responsible corporate citizen and we resolve to live by our principles as we continue to grow our global business. We seek out opportunities to be active members of our communities to enhance the lives of our neighbors and consumers.
Our principal competitors include AbbVie, Alcon, Bausch Health Companies Inc., Bayer, Combe, GlaxoSmithKline, Johnson & Johnson, Mondelez International, Reckitt Benckiser, Sanofi, Sunstar Group, The Honey Pot Company, and The Procter & Gamble Company. We compete on the basis of numerous factors, including brand recognition, product quality, performance, value to customers, price, and product availability at the retail and e-commerce level.
Our branded competitors include, among others, AbbVie Inc., Alcon, Bausch + Lomb, Bayer AG, Combe, Haleon plc, Johnson & Johnson, Mondelez International, Reckitt Benckiser Group plc, Sanofi, Scholl's Wellness Company, Sunstar Group, The Honey Pot Company, and The Procter & Gamble Company.
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In 2021, we launched Summer's Eve Active Chafe Gel and Sprays, Monistat Feminine Cleanser, and Compound W Gel Plus ConSeal Patches . While there is always a risk that sales of existing products may be reduced by new product introductions, our goal is to grow the overall sales of our brands.
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As an example of this philosophy, in 2023 we launched a number of new products, including Summer’s Eve Spa Renewing Wash, Compound W Total Care, Nix Lice Prevention Spray, Tagamet Cool Mint, and Fleet Fresh & Clean Enemas .
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Our markets are also highly sensitive to the introduction of new products, which may rapidly capture a significant share of the market.
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We compete on the basis of numerous factors, including brand recognition, product quality, performance, value to customers, price, and product availability at the retail and e-commerce level. Advertising, marketing, merchandising and packaging, the timing of new product introductions, and line extensions also have a significant impact on customers’ buying decisions and, as a result, on our sales.
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We must also comply with product labeling and packaging regulations that may vary from country to country. Government regulations in both our domestic and international markets can delay or prevent the introduction, or require the reformulation or withdrawal, of some of our products.
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Our EPA registered products are also subject to state regulations and the rules and regulations of the various jurisdictions where these products are sold. Nix Prevention Daily Leave-in Spray is considered a minimum risk pesticide that is exempt from EPA registration, and it is only required to be registered with the states and Washington D.C.
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The effectiveness of advertising and marketing campaigns in the third quarter influences sales of products such as Chloraseptic, Little Remedies, and Luden's during the fourth quarter cough and cold winter months. Additionally, the fourth quarter typically has the lowest level of advertising and marketing spending as a percent of revenue.
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Intellectual Property We own a number of trademark registrations and applications in the United States, Canada and other foreign countries.
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Trust in the safety and performance of our products, the integrity of our manufacturing and marketing processes, the character of our people, and the benefit to our consumers and society. We also reward employees who take ownership and embody our principle of Leadership with projects that positively impact our business, community and stakeholders.
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Given our agility in advertising and marketing support and product diversity, the quarterly timing of this advertising and marketing support and impact to earnings is difficult to predict.
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During the pandemic, our dedicated production employees at our manufacturing facility in Lynchburg, VA continued to operate three shifts a day with enhanced safety and health measures in place to protect their well-being. Our office-based employees were initially transitioned to a remote workforce but later returned to the office with appropriate safeguards to protect their health and well-being.
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Economic Environment There has been economic uncertainty in the United States and globally due to several factors, including global supply chain constraints, rising interest rates, a high inflationary environment, geopolitical events and the effects from the COVID-19 pandemic.
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With the pandemic and employees working remotely, our charitable efforts this year focused on feeding those in need in the communities where employees live and a Company contribution to Feeding Westchester, a nonprofit hunger relief network of food banks across the County of Westchester, NY.
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We continue to generate operating cash flows to meet our short-term liquidity needs. These circumstances could change, however, in this dynamic, unprecedented environment.
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Further information surrounding our Company’s human capital development and sustainability efforts are available on our Company’s website at https://www.prestigebrands.com/about-us/corporate-responsibility. 11 Economic Environment In March 2020, the World Health Organization ("WHO") declared a global pandemic due to a new strain of coronavirus ("COVID-19"). The pandemic has caused significant volatility in the United States and global economies.
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The SEC also maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov.
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We experienced a temporary but significant decline in consumer consumption of our brands in the first quarter of fiscal 2021, followed by more stable consumption and customer orders over the remainder of the year.
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Generally, throughout the pandemic, some categories were positively impacted (for instance, Women’s Health, Oral Care and Dermatological) and some categories negatively impacted (for instance, Cough & Cold and Gastrointestinal). The positively impacted categories benefited from the consumer shift to over-the-counter healthcare products, as consumers increased their focus on hygiene and self-care at home related to COVID-19.
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The declining categories were impacted by reduced incidence levels and usage rates due to shelter-at-home restrictions and limited travel-related activity. In fiscal 2022, we experienced solid consumer consumption and share gains across most of our brand portfolio.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWhile we strive to minimize the environmental impact of our global operations, we may experience reduced demand for our products and loss of customers if we do not meet their ESG expectations, which could result in a material adverse effect on our financial condition and results of operations. 20 Risks Related to Intellectual Property and Data Privacy and Security If we are unable to protect our intellectual property rights, our ability to compete effectively in the market for our products could be negatively impacted.
Biggest changeWhile we seek to maintain sustainable operations that are both financially and operationally beneficial to our business, and contribute to the health and wellness of the communities in which we operate, we may experience reduced demand for our products and loss of customers if we do not meet their ESG expectations, which could result in a material adverse effect on our financial condition and results of operations.
Volatility and increases in commodity raw material (e.g. resins), packaging component prices, and labor, energy, and transportation costs and other input costs, including as a result of supply chain issues or shortages, could significantly affect our profit margin and could have a significant impact on our financial condition and results of operations if our raw material suppliers, third-party manufacturers, logistics providers or distributors pass along those costs to us.
Volatility and increases in commodity raw material (e.g. resins) and packaging component prices, labor, energy, and transportation costs, and other input costs, including as a result of supply chain issues or shortages, could significantly affect our profit margin and could have a significant impact on our financial condition and results of operations if our raw material suppliers, third-party manufacturers, logistics providers or distributors pass along those costs to us.
Advertising, marketing, merchandising and packaging and the timing of new product introductions and line extensions also have a significant impact on consumer buying decisions and, as a result, on our sales. Our markets are highly sensitive to the introduction of new products, which may rapidly capture a significant share of the market.
Advertising, marketing, merchandising and packaging and the timing of new product introductions and line extensions also have a significant impact on consumer buying decisions and, as a result, on our market share and our sales. Our markets are highly sensitive to the introduction of new products, which may rapidly capture a significant share of the market.
In addition, a serious disruption caused by performance or contractual issues with a third-party distribution manager, or labor shortages or contagious disease outbreaks or other public health emergencies at our distribution center or manufacturing facility could also materially impact our product distribution.
In addition, a serious disruption caused by performance or contractual issues with our third-party distribution manager, or labor shortages or contagious disease outbreaks or other public health emergencies at our distribution center or manufacturing facility could also materially impact our product distribution.
While the COVID-19 pandemic has not negatively impacted our results of operations to date, the extent to which it, and any related global economic downturn, could affect our business, results of operations and financial condition in future quarters will depend on developments that are highly uncertain and cannot be predicted, including the severity and duration of any further outbreak and recovery period, the availability, acceptance and efficacy of vaccines, future actions taken by governmental authorities and other third parties in response to the pandemic, and the impact on our customers, employees and suppliers, distributors and other service providers.
While the COVID-19 pandemic has not negatively impacted our results of operations to date, the extent to which it, and the related global economic downturn, could affect our business, results of operations and financial condition in future quarters will depend on developments that are highly uncertain and cannot be predicted, including the severity and duration of any further outbreak and recovery period, the availability, acceptance and efficacy of vaccines, future actions taken by governmental authorities and other third parties in response to the pandemic, and the impact on our customers, employees and suppliers, distributors and other service providers.
Significant judgment is required to determine the recognition and measurement of the attributes prescribed in Financial Accounting Standards Board (the "FASB") Accounting Standards Codification ("ASC") 740. As a multinational corporation, we conduct our business in several countries and are subject to taxation in many jurisdictions.
Significant judgment is required to determine the recognition and measurement of the attributes prescribed in Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 740. As a multinational corporation, we conduct our business in several countries and are subject to taxation in many jurisdictions.
Risks of doing business internationally include, but are not limited to: • Political instability or declining economic conditions in the countries or regions where we operate or rely on third-party manufacturers or suppliers that adversely affect sales of our products or our ability to obtain adequate supply of our products; • Currency controls that restrict or prohibit the payment of funds or the repatriation of earnings to the United States; • Fluctuating foreign exchange rates that result in unfavorable increases in the price of our products or cause increases in the cost of certain products purchased from our foreign third-party manufacturers; • Compliance with laws and regulations concerning ethical business practices; • Trade restrictions and exchange controls; • Difficulties in staffing and managing international operations; • Difficulty protecting our intellectual property rights in these markets; and • Increased costs of compliance with general business and tax regulations in these countries or regions.
Risks of doing business internationally include, but are not limited to: • Political instability or declining economic conditions in the countries or regions where we operate or rely on third-party manufacturers or suppliers, which adversely affect sales of our products or our ability to obtain adequate supply of our products; • Currency controls that restrict or prohibit the payment of funds or the repatriation of earnings to the United States; • Fluctuating foreign exchange rates that result in unfavorable increases in the price of our products or cause increases in the cost of certain products purchased from our foreign third-party manufacturers; • Compliance with laws and regulations concerning ethical business practices; • Trade restrictions and exchange controls; • Difficulties in staffing and managing international operations; • Difficulty protecting our intellectual property rights in these markets; and • Increased costs of compliance with general business and tax regulations in these countries or regions.
However, sustained or significant future declines in revenue, profitability, lost distribution, other adverse changes in expected operating 21 results, and/or unfavorable changes in economic factors used to estimate fair value of certain brands including the discount rate could indicate that the fair value no longer exceeds the carrying value, in which case a non-cash impairment charge may be recorded in future periods.
However, sustained or significant future declines in revenue, profitability, lost distribution, other adverse changes in expected operating results, and/or unfavorable changes in economic factors used to estimate fair value of certain brands (including the discount rate) could indicate that the fair value no longer exceeds the carrying value, in which case a non-cash impairment charge may be recorded in future periods.
ITEM 1A. RISK FACTORS Risks Related to our Business and Industry Price increases for raw materials, labor, energy, transportation costs and other manufacturer, logistics provider or distributor demands could continue to have an adverse impact on our margins. The costs to manufacture and distribute our products are subject to fluctuation based on a variety of factors.
ITEM 1A. RISK FACTORS Risks Related to our Business and Industry Price increases for raw materials, packaging, labor, energy and transportation costs, and other manufacturer, logistics provider or distributor demands could continue to have an adverse impact on our margins. The costs to manufacture and distribute our products are subject to fluctuation based on a variety of factors.
We own or license the material trademarks, tradenames and patents used in connection with the packaging, marketing and sale of our products. These rights prevent our competitors or new entrants to the market from using our valuable brand names and technologies. Therefore, trademark, tradename and patent protection is critical to our business.
We own or license the material trademarks, tradenames and patents used in connection with the manufacturing, packaging, marketing and sale of our products. These rights prevent our competitors or new entrants to the market from using our valuable brand names and technologies. Therefore, trademark, tradename and patent protection is critical to our business.
The formulation, manufacturing, packaging, labeling, distribution, importation, marketing, sale and storage of our products are subject to extensive regulation by various U.S. federal agencies, including the FDA, FTC and CPSC, the EPA, and by various agencies of the states, localities and foreign countries in which our products are manufactured, distributed, stored and sold.
In particular, the formulation, manufacturing, packaging, labeling, distribution, importation, marketing, sale and storage of our products are subject to extensive regulation by various U.S. federal agencies, including the FDA, FTC and CPSC, the EPA, and by various agencies of the states, localities and foreign countries in which our products are manufactured, distributed, stored and sold.
If we are unable to maintain these manufacturing relationships or are unable to successfully transfer manufacturing to another third-party or our own manufacturing facility we may be unable to meet customer demand, and our business, sales and profitability could suffer as a result. Many of our products are produced by a limited number of third-party manufacturers.
If we are unable to maintain these manufacturing relationships or are unable to successfully transfer manufacturing to another third-party or our own manufacturing facility, we may be unable to meet customer demand, and our business and sales could suffer as a result. Many of our products are produced by a limited number of third-party manufacturers.
This increased focus on sustainability may result in new laws, regulations and requirements that could cause disruptions in or increased costs associated with developing, manufacturing and distributing our products.
This increased focus on sustainability may result in new laws, regulations and requirements that could cause disruptions in or increased costs associated with developing, manufacturing and distributing our 19 products.
To help guard against these possibilities, the Company provides employee security training and maintains a compliance program with updated security policies to help evaluate and address potential threats and attacks.
To help guard against these possibilities, the Company provides quarterly employee security training and maintains a compliance program with updated security policies to help evaluate and address potential threats and attacks.
Our capital structure and ability to engage in strategic transactions is limited in significant respects by the restrictive covenants in our senior credit facility and the indentures governing our senior notes. 23 Our senior credit facility and the indentures governing our senior notes impose restrictions that could impede our ability to enter into certain corporate transactions, as well as increase our vulnerability to adverse economic and industry conditions, by limiting our flexibility in planning for, and reacting to, changes in our business and industry.
Our capital structure and ability to engage in strategic transactions is limited in significant respects by the restrictive covenants in our senior credit facility and the indentures governing our senior notes. 22 Our senior credit facility and the indentures governing our senior notes impose restrictions that could impede our ability to enter into certain corporate transactions, as well as increase our vulnerability to adverse economic and industry conditions, by limiting our flexibility in planning for, and reacting to, changes in our business and industry.
In addition, several states have enacted data privacy laws applicable to entities serving or employing residents and other states are doing the same. We may not be able to comply with all of these evolving compliance and operational requirements and to do so may impose significant costs that are likely to increase over time.
In addition, several U.S. states have enacted data privacy laws applicable to entities serving or employing residents and other states are doing the same. We may not be able to comply with all of these evolving compliance and operational requirements and to do so may impose significant costs that are likely to increase over time.
If we are unable to increase the price for our products to our customers or continue to achieve cost savings in a rising cost environment, any such cost increases would likely reduce our gross margins and could have a material adverse effect on our financial condition and results of operations.
If we are unable to increase the price for our products to our customers or achieve cost savings in a rising cost environment, any such cost increases would likely further reduce our gross margins and could have a material adverse effect on our financial condition and results of operations.
We depend on third parties for intellectual property relating to some of the products we sell, and our inability to maintain or enter into future license agreements may result in our failure to meet customer demand, which would adversely affect our business and operating results.
We depend on third parties for intellectual property relating to some of the products we sell, and our inability to maintain or enter into future license agreements may result in our failure to meet customer demand, which would adversely affect our business, operating results and financial condition.
We do not believe that any of these attacks or events has had a material adverse impact on our business, but future attacks could result in a serious information security breach and have a material adverse impact on our business or results of operations.
We do not believe that any of these attacks or events has had a material adverse impact on our business, but future attacks could result in a serious information security breach and have a material adverse impact on our business, results of operations or financial condition.
New product innovations by our competitors, or our failure to develop new products, the failure of a new product launch by the Company, or the obsolescence of one or more of our products, could have a material adverse 14 effect on our business, financial condition and results of operations.
New product innovations by our competitors, or our failure to develop new products, the failure of a new product launch by the Company, or the obsolescence of one or more of our products, could have a 13 material adverse effect on our business, financial condition and results of operations.
Should the value of those assets or other assets become further impaired or our financial condition be materially adversely affected in any way, our tangible assets that could be sold to repay our liabilities would be reduced.
Should the value of those assets or other assets become further impaired or our financial condition be materially adversely affected in any way, our intangible assets that could be sold to repay our liabilities would be reduced.
Changes in our provision for income taxes or adverse outcomes resulting from examination of our income tax returns could adversely affect our results. 25 Our provision for income taxes is subject to volatility and could be adversely affected by several factors, some of which are outside of our control, including: • Changes in the income allocation methods for state taxes, and the determination of which states or countries have jurisdiction to tax our Company; • An increase in non-deductible expenses for tax purposes, including certain stock-based compensation, executive compensation and impairment of goodwill; • Transfer pricing adjustments; • Tax assessments resulting from tax audits or any related tax interest or penalties that could significantly affect our income tax provision for the period in which the settlement takes place; • Tax liabilities from acquired businesses; • Changes in accounting principles; and • Changes in tax laws or related interpretations, accounting standards, regulations, and interpretations in multiple tax jurisdictions in which we operate.
Our provision for income taxes is subject to volatility and could be adversely affected by several factors, some of which are outside of our control, including: • Changes in the income allocation methods for state taxes, and the determination of which states or countries have jurisdiction to tax our Company; • An increase in non-deductible expenses for tax purposes, including certain stock-based compensation, executive compensation and impairment of goodwill; • Transfer pricing adjustments; • Tax assessments resulting from tax audits or any related tax interest or penalties that could significantly affect our income tax provision for the period in which the settlement takes place; • Tax liabilities from acquired businesses; • Changes in accounting principles; and • Changes in tax laws or related interpretations, accounting standards, regulations, and interpretations in multiple tax jurisdictions in which we operate.
Volatility in or worsening of economic conditions from geopolitical conflicts, public health issues, and other factors beyond our control could reduce consumer spending, which could adversely impact demand for our products and our results of operations and financial condition. Our financial performance depends on the stability of conditions that impact consumer spending.
Volatility in or worsening of economic conditions from high inflation, economic policy, geopolitical conflicts, public health issues, and other factors beyond our control could reduce consumer spending, which could adversely impact demand for our products and our results of operations and financial condition. Our financial performance depends on the stability of conditions that impact consumer spending.
We have experienced adverse impacts from COVID-19, and we could experience adverse impacts from other pandemics, in a number of ways, including, but not limited to, the following: • supply chain delays or disruptions due to closed supplier facilities or distribution centers, reduced workforces, scarcity of raw materials and scrutiny or embargoing of goods produced in infected areas; • shutdown of our manufacturing facility due to illness or government order; • reduced consumer demand for certain of our products as a result of the economic downturn or restrictions on in-person purchases; • change in demand for or availability of our products as a result of retailers or distributors modifying their restocking, fulfillment, or shipping practices; 16 • decrease in our ability to develop innovative products due to reprioritization of suppliers and/or retailers; • increase in working capital needs and/or an increase in trade accounts receivable write-offs as a result of increased financial pressures on our suppliers or customers; • impairment in the carrying value of goodwill or intangible assets or a change in the useful life of definite-lived intangible assets from sustained changes in consumer purchasing behaviors, government restrictions, or financial results; • increase in raw material and other input costs resulting from market volatility; and • fluctuation in foreign currency exchange rates or interest rates resulting from market uncertainties.
We have experienced other adverse impacts from COVID-19, and we could experience adverse impacts from other pandemics, in a number of ways, including, but not limited to, the following: • supply chain delays or disruptions due to closed supplier facilities or distribution centers, reduced workforces, scarcity of raw materials and scrutiny or embargoing of goods produced in infected areas; • shutdown of our manufacturing facility due to illness or government order; 15 • reduced consumer demand for certain of our products as a result of the economic downturn, discontinuance of government stimulus and assistance programs or restrictions on in-person purchases; • change in demand for or availability of our products as a result of retailers or distributors modifying their restocking, fulfillment, or shipping practices; • decrease in our ability to develop innovative products due to reprioritization of suppliers and/or retailers; • increase in working capital needs and/or an increase in trade accounts receivable write-offs as a result of increased financial pressures on our suppliers or customers; • impairment in the carrying value of goodwill or intangible assets or a change in the useful life of finite-lived intangible assets from sustained changes in consumer purchasing behaviors, government restrictions, or financial results; • increase in raw material and other input costs resulting from labor shortages, supply chain disruptions, and market volatility; and • fluctuation in foreign currency exchange rates or interest rates resulting from market uncertainties.
The manufacturers we use have and may continue to increase the cost of many of the products we purchase, which could adversely affect our margins in the event we are unable to pass along these increased costs to our customers or identify and qualify new manufacturers.
The manufacturers we use have and may continue to increase the cost to us of many of the products we purchase, which has impacted and could continue to adversely affect our margins in the event we are unable to pass along these increased costs to our customers or identify and qualify new manufacturers.
Reductions in inventory by our customers, the loss of one or more of our top customers, including as a result of consolidation in the retail industry, or any significant decrease in sales to these customers based on changes in their strategies or policies such as a reduction in the number of brands they carry, the amount of shelf space or positioning they dedicate to store brand products, inventory management, or a significant decrease in our retail display space or online positioning or in any of these customers’ stores, could reduce our sales and have a material adverse effect on our financial condition and results of operations.
Reductions in inventory by our customers, the loss of one or more of our top customers, including as a result of consolidation in the retail industry, or any significant decrease in sales to these customers based on changes in their strategies or policies, such as a reduction in the number of brands they carry, the amount of shelf space or positioning they dedicate to store brand products or to our particular products, or a significant reduction in our online positioning, could reduce our sales and have a material adverse effect on our financial condition and results of operations.
In the event that our primary third-party manufacturers are unable or unwilling to ship products to us in a timely manner, we would have to rely on secondary manufacturing relationships or, to the extent unavailable, identify and qualify new manufacturing relationships.
In the event that our primary third-party manufacturers are unable or unwilling to ship products to us in a timely manner to address these shortages, we would have to rely on secondary manufacturing relationships or, to the extent unavailable, identify and qualify new manufacturing relationships.
Any disruption could result in increased costs, expense and/or shipping times, and could cause us to incur customer fees and penalties. We could also incur significantly higher costs and experience longer lead times should we be required to replace our distribution center, the third-party distribution managers or the manufacturing facility.
Any disruption could result in increased costs, expense and/or shipping times, and could harm our reputation and cause us to incur customer fees and penalties. We could also incur significantly higher costs and experience longer lead times should we be required to replace our distribution center, the third-party distribution manager or the manufacturing facility.
Other factors beyond our control could also adversely impact demand for our products, including rising interest rates, inflation from rising costs, unemployment, and the availability of consumer financing. Any reduction in consumer demand for our products could have a material adverse impact on our results of operations and financial condition.
Other factors beyond our control could also adversely impact demand for our products, including rising interest rates, inflation from rising costs, unemployment, bank failures, and the lack of consumer financing. Any reduction in consumer demand for our products could have a material adverse impact on our results of operations and financial condition.
Any increase in LIBOR or other interest rates, which have been rising in fiscal 2022 and are expected to continue to rise in fiscal 2023, will increase our cost of servicing our variable rate debt and further limit our ability to fund working capital, capital expenditures, and acquisitions.
Any increase in SOFR or other interest rates, which have been rising in fiscal 2023 and are expected to continue to rise in fiscal 2024, will increase our cost of servicing our variable rate debt and further limit our ability to fund working capital, capital expenditures, and acquisitions.
All acquisitions entail various risks such that after completing an acquisition, we may also experience: • Difficulties in integrating any acquired companies, suppliers, personnel and products into our existing business; • Difficulties in realizing the benefits of the acquired company or products, including expected returns, margins, synergies and profitability; • Higher costs of integration than we anticipated; • Exposure to unexpected liabilities of the acquired business; • Difficulties in retaining key employees of the acquired business who are necessary to operate the business; • Difficulties in maintaining uniform standards, controls, procedures and policies throughout our acquired companies; or • Adverse customer or stockholder reaction to the acquisition.
All acquisitions entail various risks such that after completing an acquisition, we may also experience: • Difficulties in integrating any acquired companies, suppliers, personnel and products into our existing business; • Difficulties in realizing the benefits of the acquired company or products, including expected returns, margins, synergies and profitability, which can also result in subsequent impairments to the book value of the acquired assets; • Higher costs of integration than we anticipated; • Exposure to unexpected liabilities of the acquired business; • Difficulties in retaining key employees of the acquired business who are necessary to operate the business; • Difficulties in maintaining uniform standards, controls, procedures and policies throughout our acquired companies; or • Adverse customer or stockholder reaction to the acquisition.
Disruption in our third-party distribution center or our Virginia manufacturing facility may prevent us from meeting customer demand, and our sales and profitability may suffer as a result.
Disruption in our third-party distribution center or our Virginia manufacturing facility may prevent us from meeting customer demand, and our sales and financial condition may suffer as a result.
Globally, numerous government orders and restrictions implemented to reduce the spread of COVID-19 required many businesses to temporarily close or limit operations and mandated that individuals substantially restrict daily activities, which adversely affected workforces, customers, and consumer sentiment, decreased consumer spending and increased unemployment.
Globally, numerous government orders and restrictions implemented to reduce the spread of COVID-19 required many businesses to temporarily close or limit operations and mandated that individuals substantially restrict daily activities, which adversely affected workforces, customers, and consumer sentiment, decreased consumer spending, and increased unemployment, leading to inflation and supply chain disruptions.
If the debt under the senior credit facility and indentures governing the senior notes had both been accelerated, the aggregate amount immediately due and payable as of March 31, 2022 would have been approximately $1.5 billion.
If the debt under the senior credit facility and indentures governing the senior notes had both been accelerated, the aggregate amount immediately due and payable as of March 31, 2023 would have been approximately $1.4 billion.
Certain product categories have been impacted by higher inflation due to, among other things, the continuing impacts of the COVID-19 pandemic, Russia’s invasion of Ukraine, civil unrest, and related labor shortages, global supply chain disruptions and the uncertain economic and geopolitical environment which has impacted our gross margin in 2022.
Certain product categories have been impacted by higher inflation due to, among other things, the continuing impacts of the COVID-19 pandemic, Russia’s invasion of Ukraine, labor shortages, global supply chain disruptions and the uncertain economic and geopolitical environment, which has negatively impacted our gross margin.
Beginning in early 2020, the COVID-19 pandemic caused significant volatility in the global economy and resulted in materially reduced economic activity.
Beginning in late fiscal 2020, the COVID-19 pandemic caused significant volatility in the global economy and resulted in materially reduced economic activity.
Risks Related to our Financing Our indebtedness could adversely affect our financial condition, and the significant amount of cash we need to service our debt would not be available to reinvest in our business. At March 31, 2022, our total indebtedness, including current maturities, was approximately $1.5 billion.
Risks Related to our Financing Our indebtedness could adversely affect our financial condition, and the significant amount of cash required to service our debt would not be available to reinvest in our business. At March 31, 2023, our total indebtedness, including current maturities, was approximately $1.4 billion.
Whether or not successful, product liability claims could result in negative publicity that could adversely affect the reputation of our brands and our business, sales and operating results. Additionally, we may be required to pay for losses or injuries purportedly caused by our products.
Whether or not successful, product liability claims could result in negative publicity that could adversely affect the reputation of our brands and our business, sales 16 and financial condition. Additionally, we may be required to pay for losses or injuries purportedly caused by our products, which could negatively impact our financial condition.
If this were to occur, we might not be able to develop or obtain replacement intellectual property in a timely or cost-effective manner. Additionally, any modified products may not be well-received by customers.
If either of these intellectual property losses were to occur, we might not be able to develop or obtain replacement intellectual property at all or in a timely or cost-effective manner. Additionally, any modified products may not be well-received by customers.
For example, the European Union’s General Data Protection Regulation (the “GDPR”), which greatly 22 increases the jurisdictional reach of European Union law and adds a broad array of requirements for handling personal data, including the public disclosure of significant data breaches, became effective in May 2018.
For example, the European Union’s General Data Protection Regulation (the “GDPR”), greatly increases the jurisdictional reach of European Union law and adds a broad array of requirements for handling personal data, including the public disclosure of significant data breaches.
The Company has also conducted regular security audits by an outside firm based on the National Institute of Standards and Technology ("NIST") standards to address any potential service interruptions or vulnerabilities. Further, the Company has implemented continuity and recovery plans in the event of a disruption.
The Company has also conducted regular security audits by an outside firm based on the National Institute of Standards and Technology ("NIST") standards to address any potential service interruptions or vulnerabilities. Management regularly reports to the Company’s Board on information security risks and audit results. Further, the Company has implemented continuity and recovery plans in the event of a disruption.
In the event that any such license or manufacturing agreement expires or is otherwise terminated, we will lose the right to use the intellectual property covered by such license or agreement and will have to develop or obtain rights to use other intellectual property.
In the event that any such license or manufacturing agreement expires or is otherwise terminated, we will lose the right to use the intellectual property covered by such license or agreement.
The introduction or expansion of store brand products that compete with our products at a lower price point could in the future impact our sales and results of operations.
The introduction or expansion of store brand products that compete with our products at a lower price point has recently and could continue to impact our sales and results of operations.
Of those, we had long-term contracts with 23 manufacturers that produced items that accounted for approximately 69.0% of our gross sales for 2022, compared to 19 manufacturers with long-term contracts that produced approximately 70.5% of gross sales in 2021.
Of those, we had long-term contracts with 25 manufacturers that produced items that accounted for approximately 69.8% of our gross sales for 2023, compared to 23 manufacturers with long-term contracts that produced approximately 69.0% of gross sales in 2022.
However, adverse publicity about ingredients used in our products may discourage consumers from buying our products containing those ingredients, which would have an adverse impact on our sales. From time to time we are subject to various product liability claims.
We believe our products are safe and effective when used in accordance with label directions. However, adverse publicity about ingredients used in our products may discourage consumers from buying our products containing those ingredients, which would have an adverse impact on our sales. From time to time we are subject to various product liability claims.
At March 31, 2022, we had $123.3 million of borrowing capacity available under our revolving credit facility to support our operating activities.
At March 31, 2023, we had $168.7 million of borrowing capacity available under our revolving credit facility to support our operating activities.
Future price adjustments by our competitors or our inability to react with price adjustments of our own could result in a loss of market share, which could have a material adverse effect on our financial condition and results of operations.
Future price adjustments by our competitors or our inability to react with price adjustments of our own could result in a loss of market share, which could have a material adverse effect on our financial condition and results of operations. We primarily depend on third-party manufacturers to produce the products we sell.
Any product recalls could have a material adverse effect on our business, financial condition and results of operations. 17 Although we have supply and manufacturing agreements with certain of our third-party manufacturers, which explicitly outline the allocation of product liability risk with respect to the products these manufacturers produce, some of our other products are manufactured on a purchase order basis.
Although we have supply and manufacturing agreements with certain of our third-party manufacturers, which explicitly outline the allocation of product liability risk with respect to the products these manufacturers produce, some of our other products are manufactured on a purchase order basis.
In general, the consequences of not securing adequate, high quality and timely supplies of merchandise would negatively impact inventory levels, which could damage our reputation and result in lost customers and sales, and could have a material adverse effect on our business, financial condition and results of operations. At March 31, 2022, we had relationships with 128 third-party manufacturers.
In general, the consequences of not securing adequate, high quality and timely supplies of merchandise would negatively impact inventory levels, which could damage our reputation, result in lost customers and sales, and could have a material adverse effect on our financial condition and results of operations.
At March 31, 2022, the book value of our current assets was $293.3 million. Although the book value of our total assets was $3,670.7 million, approximately $3,275.6 million was in the form of intangible assets, including goodwill of $579.0 million, a significant portion of which may not be available to satisfy our creditors in the event our debt is accelerated.
At March 31, 2023, the book value of our current assets was $391.7 million. Although the book value of our total assets was $3,353.7 million, approximately $2,869.4 million was in the form of intangible assets, including goodwill of $527.6 million, a significant portion of which may not be available to satisfy our creditors in the event our debt is accelerated.
Our operations are impacted by consumer spending levels, the availability of our products at retail stores or for online purchase, and our ability to manufacture and distribute products to our customers and consumers in an effective and efficient manner.
Our sales are impacted by consumer spending levels, the availability of our products at retail stores or for online purchase, and our ability to manufacture and distribute products to our customers and consumers in an effective and efficient manner. Our sales are also impacted by demand for our products depending on consumers’ activities, lifestyles and financial resources.
If a significant number of our smaller customers, or any of our significant customers, elect not to purchase products from us, our financial condition and results of operations could be materially adversely affected. We primarily depend on third-party manufacturers to produce the products we sell.
If a significant number of our smaller customers, or any of our significant customers, elect not to purchase products from us, our financial condition and results of operations could be materially adversely affected.
We depend on a limited number of customers with whom we have no long-term agreements for a large portion of our gross sales, and the loss of one or more of these customers or changes in their strategies and policies could reduce our gross sales and have a material adverse effect on our financial condition and results of operations.
We depend on a limited number of customers with whom we have no long-term agreements for a large portion of our gross sales, and the loss of one or more of these customers or changes in their strategies and policies could reduce our gross sales and have a material adverse effect on our financial condition and results of operations. 14 During 2023, Walmart, which accounted for approximately 19.7% of our gross sales, was our only customer that accounted for more than 10% of our gross revenues.
Treasury Repo Rates. The rate is different from LIBOR, in that it is a risk-free rate, is backward-looking instead of forward-looking, is a secured rate and currently is available primarily as an overnight rate rather than a 1-,3- or 6-month rate available for LIBOR.
Treasury Repo Rates. The rate is different from LIBOR, in that it is a risk-free rate, is backward-looking instead of forward-looking, is a secured rate and currently is available primarily as an overnight rate rather than a 1-,3- or 6-month rate available for LIBOR. On April 4, 2023, we amended our revolving credit facility to replace LIBOR with SOFR.
Our ability to retain our current manufacturing relationships and engage in and successfully transition to new relationships or to our own manufacturing facility is critical to our ability to deliver quality products to our customers in a timely manner. Without adequate supplies of quality merchandise, our sales would decrease materially and our business would suffer.
Our ability to retain our current manufacturing relationships and engage in and successfully transition to new relationships or to our own manufacturing facility is critical to our ability to deliver quality products to our customers in a timely manner.
For example, we believe that government stimulus payments during the COVID-19 pandemic may have helped improve sales, and any termination or reduction of further stimulus funds may result in reduced consumer spending, which could adversely impact our results of operations. Accordingly, the ultimate impact on our financial condition and results of operations cannot be determined at this time.
For example, we believe that government stimulus payments during the COVID-19 pandemic may have helped improve sales, and the termination and reduction of further stimulus funds in the high inflationary environment may result in reduced consumer spending, which could adversely impact our results of operations.
In addition, third parties may assert claims against our intellectual property rights, and we may not be able to successfully resolve those claims, which would cause us to lose the right to use the intellectual property subject to those claims. Such loss could have a material adverse effect on our financial condition and results of operations.
In addition, third parties may assert claims against our intellectual property rights, and we may not be able to successfully resolve those claims, which would cause us to lose the right to use the intellectual property subject to those claims.
Business - Major Brands” of this Annual Report on Form 10-K for information regarding market share. We compete for consumers’ attention based on a number of factors, including brand recognition, product quality, performance, value to consumers, price and product availability at the retail level.
We compete for consumers’ attention based on a number of factors, including brand recognition, product quality, performance, value to consumers, price, and product availability at the retail level.
In addition, identifying alternative manufacturers without adequate lead times may involve additional manufacturing expense, delay in production, or product disadvantage in the marketplace. In some instances, we may seek to transfer the manufacture of certain products to our own facilities, which may result in additional manufacturing expense, delay in production, additional regulatory requirements and other disruptions to our 15 business.
In some instances, we may seek to transfer the manufacture of certain products to our own facilities, which may result in additional manufacturing expense, delay in production, additional regulatory requirements and other disruptions to our business.
If new products and product line extensions do not gain widespread customer acceptance or are otherwise discontinued, the Company's financial performance could be impacted. The Company's future performance and growth depends on its ability to successfully develop and introduce new products and product line extensions. We cannot be certain that we will achieve our innovation goals.
The Company's future performance and growth depends on our ability to successfully develop and introduce new products and product line extensions. We cannot be certain that we will achieve our innovation goals.
The successful development and introduction of new products involves substantial research, development, marketing and promotional expenditures, which the Company may be unable to recover if the new products do not gain widespread market acceptance.
The successful development and introduction of new products involves substantial research, development, marketing and promotional expenditures, which the Company may be unable to recover if the new products do not gain widespread market acceptance. New product development and marketing efforts, including efforts to enter markets or product categories in which we have limited or no prior experience, have inherent risks.
Many of our customers have sought to obtain lower pricing, logistics or other changes to the customer-supplier relationship. If we are unable to effectively respond to the demands of our customers, these customers could reduce their purchases of our products and increase their purchases of products from competitors.
If we are unable to effectively respond to the demands of our customers, these customers could reduce their purchases of our products and increase their purchases of products from competitors.
As we conduct our operations, we move data across national borders, and consequently we are subject to a variety of continuously evolving and developing laws and regulations in the United States and abroad regarding privacy, data protection and data security.
We may also be required to expend significant capital and other resources to protect against or respond to or alleviate problems caused by a security breach. 21 As we conduct our operations, we move data across national borders, and consequently we are subject to a variety of continuously evolving and developing laws and regulations in the United States and abroad regarding privacy, data protection and data security.
If we fail to manage these risks effectively, we may not be able to continue our international operations, and our business and results of operations may be materially adversely affected.
If we fail to manage these risks effectively, we may not be able to continue our international operations, and our business and results of operations may be materially adversely affected. Regulatory matters governing our industry could have a significant negative effect on our sales and operating costs.
Such laws, regulations and other constraints exist at the federal, state and local levels in the United States and at analogous levels of government in foreign jurisdictions.
In both the United States and in our foreign markets, our operations are affected by extensive laws, governmental regulations, administrative determinations, court decisions and similar constraints. Such laws, regulations and other constraints exist at the federal, state and local levels in the United States and at analogous levels of government in foreign jurisdictions.
In addition, we could be required for a variety of reasons to initiate product recalls, which we have done on several occasions.
We could also be required for a variety of reasons to initiate product recalls, which we have done on several occasions. Any product recalls could have a material adverse effect on our business, financial condition and results of operations.
Product liability claims and product recalls and related negative publicity could adversely affect our sales and operating results. We are dependent on consumers’ perception of the safety and quality of our products. Negative consumer perception may arise from product liability claims and product recalls, regardless of whether such claims or recalls involve us or our products.
Our calculation of consumption levels may not accurately reflect actual retail consumption given limitations of tracked data. Product liability claims and product recalls and related negative publicity could adversely affect our sales and operating results. We are dependent on consumers’ perception of the safety and quality of our products.
These provisions would apply even if an acquisition or other significant corporate transaction was considered beneficial by some of our stockholders. If a change in control or change in management is delayed or prevented by these provisions, the market price of our outstanding securities could be adversely impacted.
These provisions would apply even if an acquisition or other significant corporate transaction was considered beneficial by some of our stockholders.
In some cases, we may have a number one market position but still have a relatively small share of the overall market. Alternatively, we may hold a number two market position but have a substantially smaller share of the market versus the number one competitor. See “Part I, Item 1.
Alternatively, we may hold a number two market position but have a substantially smaller share of the market versus the number one competitor. See “Part I, Item 1. Business - Major Brands” of this Annual Report on Form 10-K for information regarding market share.
In addition, our business is based primarily upon individual sales orders. We typically do not enter into long-term contracts with our customers. Accordingly, our customers could cease buying products or reduce the number of items they buy from us at any time and for any reason.
Accordingly, our customers could cease buying products or reduce the number of items they buy from us at any time and for any reason.
As a result, any acquisitions we pursue or complete could adversely impact our business, financial condition and results from operations. In addition, any acquisition could adversely affect our operating results as a result of higher interest costs from any acquisition-related debt and higher amortization expenses related to the acquired intangible assets.
As a result, any acquisitions we pursue or complete could adversely impact our business, financial condition and results from operations.
During 2022, Walmart, which accounted for approximately 20.5% of our gross sales, was our only customer that accounted for more than 10% of our gross revenues. We expect that for future periods, our top ten customers, including Walmart, will, in the aggregate, continue to account for a large and potentially increasing portion of our sales.
We expect that for future periods, our top ten customers, including Walmart, will, in the aggregate, continue to account for a large and potentially increasing portion of our sales. Many of our customers have sought to obtain lower pricing, logistics or other changes to the customer-supplier relationship.
The mere publication of information asserting concerns about the safety of our products or the ingredients used in our products could have a material adverse effect on our business and results of operations. We believe our products are safe and effective when used in accordance with label directions.
Negative consumer perception may arise from product liability claims and product recalls, regardless of whether such claims or recalls involve us or our products. The mere publication of information asserting concerns about the safety of our products or the ingredients used in our products could have a material adverse effect on our business and results of operations.
Our calculation of consumption levels may not accurately reflect actual retail consumption given limitations of tracked data. In addition, many retailers have implemented inventory management strategies that include reductions in the amount of inventory they carry and related reductions in retail space and may continue such efforts in the future.
In addition, many retailers have implemented inventory management strategies that include reductions in the amount of inventory they carry and related reductions in retail space and may continue such efforts in the future. In addition, our business is based primarily upon individual sales orders. We typically do not enter into long-term contracts with our customers.
As a result, any default by us under our credit agreement, indentures governing the senior notes or any other financing agreement could have a material adverse effect on our financial condition. 24 General Risk Factors Litigation may adversely affect our business, financial condition and results of operations.
In addition, the lenders may be able to terminate any commitments they had made to supply us with additional funding. As a result, any default by us 23 under our credit agreement, indentures governing the senior notes or any other financing agreement could have a material adverse effect on our financial condition.
For example, if the Company’s brand performance is weaker than projections used in valuation calculations, the value of such brands may become impaired. In the event that such analysis would result in the fair value being lower than the carrying value, we would be required to record an impairment charge.
In addition, unfavorable changes in economic factors used to estimate fair value of certain brands (including the discount rate) could indicate that the fair value no longer exceeds the carrying value. For example, if the Company’s brand performance is weaker than projections used in valuation calculations, the value of such brands may become impaired.
In the event that we decide to divest of a brand or product line, we may encounter difficulty finding, or be unable to find, a buyer on acceptable terms in a timely manner. 18 Additionally, the pursuit of acquisitions and divestitures could also divert management's attention from our business operations and result in a delay in our efforts to achieve our strategic objectives.
In addition, any acquisition could adversely affect our operating results as a result of higher interest costs from any acquisition-related debt and higher amortization expenses related to the acquired intangible assets. 17 In the event that we decide to divest of a brand or product line, we may encounter difficulty finding, or be unable to find, a buyer on acceptable terms in a timely manner.
Because of the unique manufacturing requirements of certain products, the Company may be unable to timely qualify new suppliers or at the quantities, quality and price levels needed. From time to time, certain of the Company's manufacturers have had difficulty meeting demand, which can and has caused shortages of our products.
Because of the unique manufacturing requirements of certain products, the Company may be unable to timely identify or qualify new suppliers or at the quantities, quality and price levels needed. In addition, identifying alternative manufacturers without adequate lead times may involve additional manufacturing expense, delay in production, or product disadvantage in the marketplace.
New product development and marketing efforts, including efforts to enter markets or product categories in which the Company has limited or no prior experience, have inherent risks. These risks include product development or launch delays, competitor actions, regulatory approval hurdles, and the failure of new products and line extensions to achieve anticipated levels of market acceptance.
These risks include product development or launch delays, competitor actions, regulatory approval hurdles, and the failure of new products and line extensions to achieve anticipated levels of market acceptance. A negative outcome in any of these risks could adversely impact our results of operations and financial condition. Regulatory Risks We face risks associated with doing business internationally .
A negative outcome in any of these risks could adversely impact our results of operations. Regulatory Risks We face risks associated with doing business internationally . Approximately 11% of our total revenues are attributable to our international business. We generally rely on brokers and distributors for the sale of our products in foreign countries.
Approximately 14% of our total 2023 revenues were attributable to our international business. We generally rely on brokers and distributors for the sale of our products in foreign countries. In addition, some of our third-party manufacturers are located outside the United States.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThis property serves as our primary warehouse. The lease expires on September 30, 2024. We own an office and manufacturing facility in Lynchburg, Virginia.
Biggest changeThis property serves as our primary warehouse. The lease expires on September 30, 2024. We own an office and manufacturing facility in Lynchburg, Virginia. 25 All of our properties are utilized by both our North American OTC Healthcare segment and our International OTC Healthcare segment.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS 26 We are involved from time to time in routine legal matters and other claims incidental to our business. We review outstanding claims and proceedings internally and with external counsel as necessary to assess probability and amount of potential loss.
Biggest changeITEM 3. LEGAL PROCEEDINGS We are involved from time to time in routine legal matters and other claims incidental to our business. We review outstanding claims and proceedings internally and with external counsel as necessary to assess probability and amount of potential loss.
We believe the resolution of routine matters and other incidental claims, taking our reserves into account, will not have a material adverse effect on our business, financial condition or results of operations. ITEM 4. MINE SAFETY DISCLOSURES None. 27 Part II
We believe the resolution of routine matters and other incidental claims, taking our reserves into account, will not have a material adverse effect on our business, financial condition or results of operations. ITEM 4. MINE SAFETY DISCLOSURES None. 26 Part II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

5 edited+1 added−1 removed4 unchanged
Biggest changeMarch 31, Company/Market/Peer Group 2017 2018 2019 2020 2021 2022 Prestige Consumer Healthcare Inc. $ 100.00 $ 60.69 $ 53.83 $ 66.02 $ 79.33 $ 95.28 Russell 2000 Index 100.00 111.79 114.09 86.72 168.96 159.19 S&P SmallCap 600 Index 100.00 112.68 114.44 84.81 165.66 167.70 New Peer Group Index (1) 100.00 95.99 99.61 80.94 126.60 122.54 Old Peer Group Index (2) 100.00 93.71 93.55 75.58 118.42 115.64 (1) The New Peer Group index is comprised of: (i) B&G Food Holdings Corp., (ii) Hain Celestial Group, Inc., (iii) Church & Dwight Co., Inc., (iv) Helen of Troy, Ltd., (v) Vista Outdoors, Inc., (vi) Tupperware Brands Corporation, (vii) Revlon, Inc., (viii) Jazz Pharmaceuticals PLC, (ix) Edgewell Personal Care Company, (x) Energizer Holdings, Inc., (xi) Calavo Growers, Inc., (xii) Primo Water Corporation, (xiii) Lannet Co., and (xiv) Usana Health Sciences, Inc.
Biggest changeMarch 31, Company/Market/Peer Group 2018 2019 2020 2021 2022 2023 Prestige Consumer Healthcare Inc. $ 100.00 $ 88.70 $ 108.77 $ 130.72 $ 156.99 $ 185.71 Russell 2000 Index 100.00 102.05 77.57 151.14 142.39 125.87 S&P SmallCap 600 Index 100.00 101.57 75.27 147.02 148.83 135.71 New Peer Group Index (1) 100.00 103.20 85.21 136.77 133.54 111.41 Old Peer Group Index (2) 100.00 103.77 84.32 131.89 127.66 107.30 (1) The New Peer Group index is comprised of: (i) B&G Food Holdings Corp., (ii) Hain Celestial Group, Inc., (iii) Church & Dwight Co., Inc., (iv) Helen of Troy, Ltd., (v) Vista Outdoors, Inc., (vi) Tupperware Brands Corporation, (vii) Pacira BioSciences, Inc., (viii) Jazz Pharmaceuticals PLC, (ix) Edgewell Personal Care Company, (x) Energizer Holdings, Inc., (xi) Calavo Growers, Inc., (xii) Primo Water Corporation, (xiii) Lannet Co., (xiv) Usana Health Sciences, Inc., and (xv) Corcept Therapeutics Incorporated.
The Company is included in each of the Standard & Poor's SmallCap 600 Index and the Russell 2000 Index. The Performance Graph assumes that the value of the investment in the Company’s common stock and each index was $100.00 on March 31, 2017.
The Company is included in each of the Standard & Poor's SmallCap 600 Index and the Russell 2000 Index. The Performance Graph assumes that the value of the investment in the Company’s common stock and each index was $100.00 on March 31, 2018.
(2) The Old Peer Group index is comprised of: (i) B&G Food Holdings Corp., (ii) Hain Celestial Group, Inc., (iii) Church & Dwight Co., Inc., (iv) Helen of Troy, Ltd., (v) Vista Outdoors, Inc., (vi) Tupperware Brands Corporation, (vii) Revlon, Inc., (viii) Jazz Pharmaceuticals PLC, (ix) Edgewell Personal Care Company, (x) Energizer Holdings, Inc., (xi) Calavo Growers, Inc., (xii) Primo Water Corporation, (xiii) Akorn, Inc., and (xiv) Amag Pharmaceuticals, Inc. 29 The Performance Graph shall not be deemed incorporated by reference by any general statement incorporating by reference this Annual Report on Form 10-K into any filing under the Securities Act or the Exchange Act, except to the extent that we specifically incorporate this information by reference, and shall not otherwise be deemed filed under such Acts. 30 ITEM 6.
(2) The Old Peer Group index is comprised of: (i) B&G Food Holdings Corp., (ii) Hain Celestial Group, Inc., (iii) Church & Dwight Co., Inc., (iv) Helen of Troy, Ltd., (v) Vista Outdoors, Inc., (vi) Tupperware Brands Corporation, (vii) Revlon, Inc., (viii) Jazz Pharmaceuticals PLC, (ix) Edgewell Personal Care Company, (x) Energizer Holdings, Inc., (xi) Calavo Growers, Inc., (xii) Primo Water Corporation, (xiii) Lannet Co., and (xiv) Usana Health Sciences, Inc. 28 The Performance Graph shall not be deemed incorporated by reference by any general statement incorporating by reference this Annual Report on Form 10-K into any filing under the Securities Act or the Exchange Act, except to the extent that we specifically incorporate this information by reference, and shall not otherwise be deemed filed under such Acts. 29 ITEM 6.
"Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters" of this Annual Report on Form 10-K is incorporated herein by reference. 28 PERFORMANCE GRAPH The following graph (“Performance Graph”) compares our cumulative total stockholder return since March 31, 2017, with the cumulative total stockholder return for the Russell 2000 Index, Standard & Poor's SmallCap 600 Index and our peer group index.
"Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters" of this Annual Report on Form 10-K is incorporated herein by reference. 27 PERFORMANCE GRAPH The following graph (“Performance Graph”) compares our cumulative total stockholder return since March 31, 2018, with the cumulative total stockholder return for the Russell 2000 Index, Standard & Poor's SmallCap 600 Index and our peer group index.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is listed on The New York Stock Exchange (“NYSE”) under the symbol “PBH.” Holders As of May 5, 2022, there were 17 holders of record of our common stock.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is listed on The New York Stock Exchange (“NYSE”) under the symbol “PBH.” Holders As of May 1, 2023, there were 16 holders of record of our common stock.
Removed
Two companies in the Old Peer Group, Akorn, Inc., and Amag Pharmaceuticals, Inc were replaced in the New Peer Group by Lannet Co. and Usana Health Sciences, Inc. as they ceased to be relevant peers due to bankruptcy and acquisition, respectively.
Added
Revlon, Inc., which was included in the Old Peer Group, was replaced in the New Peer Group as it ceased to be a relevant peer due to bankruptcy. Corcept Therapeutics Incorporated and Pacira BioSciences, Inc. were added as replacements based on their similar financial profiles.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeIncrease (Decrease) (In thousands) 2022 % 2021 % Amount % North American OTC Healthcare Analgesics $ 117,868 10.8 $ 117,775 12.5 $ 93 0.1 Cough & Cold 86,855 8.0 56,158 6.0 30,697 54.7 Women's Health 249,136 22.9 252,535 26.7 (3,399) (1.3) Gastrointestinal 152,191 14.0 124,755 13.2 27,436 22.0 Eye & Ear Care 149,454 13.9 99,774 10.6 49,680 49.8 Dermatologicals 117,173 10.8 103,998 11.0 13,175 12.7 Oral Care 85,239 7.8 88,903 9.4 (3,664) (4.1) Other OTC 9,965 0.9 5,421 0.6 4,544 83.8 Total North American OTC Healthcare 967,881 89.1 849,319 90.0 118,562 14.0 International OTC Healthcare Analgesics 1,455 0.1 1,367 0.1 88 6.4 Cough & Cold 20,225 1.9 14,483 1.5 5,742 39.6 Women's Health 15,373 1.4 15,562 1.7 (189) (1.2) Gastrointestinal 52,368 4.8 36,381 3.9 15,987 43.9 Eye & Ear Care 13,995 1.3 10,635 1.2 3,360 31.6 Dermatologicals 3,213 0.3 3,085 0.3 128 4.1 Oral Care 12,282 1.1 12,528 1.3 (246) (2.0) Other OTC 20 — 5 — 15 300.0 Total International OTC Healthcare 118,931 10.9 94,046 10.0 24,885 26.5 Total Consolidated $ 1,086,812 100.0 $ 943,365 100.0 $ 143,447 15.2 Total segment revenues for 2022 were $1,086.8 million, an increase of $143.4 million, or 15.2%, versus 2021.
Biggest changeIncrease (Decrease) (In thousands) 2023 % 2022 % Amount % North American OTC Healthcare Analgesics $ 116,582 10.3 $ 117,868 10.8 $ (1,286) (1.1) Cough & Cold 100,218 8.9 86,855 8.0 13,363 15.4 Women's Health 231,754 20.5 249,136 22.9 (17,382) (7.0) Gastrointestinal 156,957 13.9 152,191 14.0 4,766 3.1 Eye & Ear Care 151,879 13.5 149,454 13.9 2,425 1.6 Dermatologicals 119,822 10.6 117,173 10.8 2,649 2.3 Oral Care 85,542 7.6 85,239 7.8 303 0.4 Other OTC 11,020 1.0 9,965 0.9 1,055 10.6 Total North American OTC Healthcare 973,774 86.3 967,881 89.1 5,893 0.6 International OTC Healthcare Analgesics 2,680 0.2 1,455 0.1 1,225 84.2 Cough & Cold 26,770 2.4 20,225 1.9 6,545 32.4 Women's Health 19,597 1.7 15,373 1.4 4,224 27.5 Gastrointestinal 69,626 6.3 52,368 4.8 17,258 33.0 Eye & Ear Care 19,197 1.7 13,995 1.3 5,202 37.2 Dermatologicals 3,919 0.3 3,213 0.3 706 22.0 Oral Care 12,085 1.1 12,282 1.1 (197) (1.6) Other OTC 77 — 20 — 57 285.0 Total International OTC Healthcare 153,951 13.7 118,931 10.9 35,020 29.4 Total Consolidated $ 1,127,725 100.0 $ 1,086,812 100.0 $ 40,913 3.8 Total segment revenues for 2023 were $1,127.7 million, an increase of $40.9 million, or 3.8%, versus 2022.
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 other 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.
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 other reporting units' 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.
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.
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 to intangible assets and tests for impairment.
They are also subject to an annual impairment test or more 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.
They are also subject to an annual impairment test or more frequently if events or changes in circumstances indicate that the asset may be impaired. Additionally, at each reporting period 33 an evaluation must be made to determine whether events and circumstances continue to support an indefinite useful life.
Although we have not experienced a material disruption to our overall supply chain to date, we have and may continue to experience delays and backorders for certain ingredients and products, difficulty scheduling shipping for our products, as well as price increases from many of our suppliers for both shipping and product costs.
Although we have not experienced a material disruption to our overall supply chain to date, we have and may continue to experience shortages, delays and backorders for certain ingredients and products, difficulty scheduling shipping for our products, as well as price increases from many of our suppliers for both shipping and product costs.
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 other reporting units' implied fair value being less than their carrying value.
We performed a sensitivity analysis on our weighted average cost of capital, and we determined that a 50-basis point increase in the weighted average cost of capital would not have resulted in any of our other reporting units' fair value being less than their carrying value.
While management prepares various analyses to 37 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.
While management prepares various analyses to 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.
The $24.3 million increase in net cash provided by operating activities was due to an increase in net income after non-cash items, partly offset by increased working capital. 40 Investing Activities Net cash used in investing activities was $256.5 million for 2022 compared $22.2 million for 2021.
The $24.3 million increase in net cash provided by operating activities was due to an increase in net income after non-cash items, partly offset by increased working capital. Investing Activities Net cash used in investing activities was $256.5 million for 2022 compared $22.2 million for 2021.
At February 28, 2021, in conjunction with the annual test for impairment of intangible assets, there were no additional indicators of impairment of our finite-lived intangible assets and accordingly, no additional impairment charge was taken. At February 28, 2022, in conjunction with the annual test for impairment of intangible assets, an impairment charge of $0.7 million was recorded.
At February 28, 2021, in conjunction with the annual test for impairment of intangible assets, there were no additional indicators of impairment of our finite-lived intangible assets and accordingly, no additional impairment charge was taken. 35 At February 28, 2022, in conjunction with the annual test for impairment of intangible assets, an impairment charge of $0.7 million was recorded.
Additionally, the credit agreement governing the 2012 Term Loan and the 2012 ABL Revolver and the indentures governing the 2021 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 2021 Senior Notes and the 2019 Senior Notes.
Additionally, the credit agreement governing the 2012 Term Loan and the 2012 ABL Revolver and the indentures governing the 2021 Senior Notes and 41 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 2021 Senior Notes and the 2019 Senior Notes.
Specifically, we must: • Have a leverage ratio of less than 6.50 to 1.0 for the quarter ended March 31, 2022 and going forward (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, 2022 and going forward (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 (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).
Specifically, we must: • Have a leverage ratio of less than 6.50 to 1.0 for the quarter ended March 31, 2023 and going forward (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, 2023 and going forward (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 (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).
ABL Amendment No. 7 provides for (i) an extension of the maturity date of the 2012 ABL Revolver to December 11, 2024, which is five years from the effective date of the ABL Amendment No. 7, (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.
ABL Amendment No. 7 provided for (i) an extension of the maturity date of the 2012 ABL Revolver to December 11, 2024, which was five years from the effective date of ABL Amendment No. 7, (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.
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 that 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 record an estimate of future product returns, chargebacks and logistics deductions concurrent with recording sales, which is made using the most likely amount method that 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.
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.
Under accounting guidelines, goodwill is not amortized, and 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.
In addition, we considered our market capitalization at February 28, 2022, as compared to the aggregate fair values of our reporting units, to assess the reasonableness of our estimates pursuant to the discounted cash flow methodology. An impairment charge is then recognized for the amount by which the carrying amount exceeds the reporting unit's fair value.
In addition, we considered our market capitalization at February 28, 2023, 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.
Term Loan Amendment No. 6 provided for (i) the refinancing of our outstanding term loans and the creation of a new class of Term B-5 Loans under the credit agreement governing the 2012 Term Loan in an aggregate principal amount of $600.0 million, (ii) increased flexibility under the credit agreement governing the 2012 Term Loan and the 2012 ABL Revolver, and (iii) an interest rate on the Term B-5 Loans that is based, at the Borrower's option, on a LIBOR rate plus a margin of 2.00% per annum, with a LIBOR floor of 0.50%, or an alternative base rate plus a margin of 1.00% per annum.
Term Loan Amendment No. 6 provides for (i) the refinancing of our outstanding term loans and the creation of a new class of Term B-5 Loans in an aggregate principal amount of $600.0 million, (ii) increased flexibility under the credit agreement governing the 2012 Term Loan and the 2012 ABL Revolver, and (iii) an interest rate on the Term B-5 Loans that is based, at our option, on a LIBOR rate plus a margin of 2.00% per annum, with a LIBOR floor of 0.50%, or an alternative base rate plus a margin of 1.00% per annum.
In addition, Term Loan Amendment No. 6 provided for an extension of the maturity date of the 2012 Term Loan to July 1, 2028. In connection with this refinancing, we recorded a loss on extinguishment of debt of $2.1 million to write off a portion of new and old debt costs relating to this refinancing.
In addition, Term Loan Amendment No. 6 provides for an extension of the maturity date of the 2012 Term Loan to July 1, 2028. In connection with this refinancing, we recorded a loss on extinguishment of debt of $2.1 million to write off a portion of new and old debt costs relating to this refinancing.
Our fixed charge requirement remains level throughout the term of the agreement. At March 31, 2022, we were in compliance with the applicable financial and restrictive covenants under the credit agreement governing the 2012 Term Loan and the 2012 ABL Revolver and the indentures governing the 2021 Senior Notes and the 2019 Senior Notes.
Our fixed charge requirement remains level throughout the term of the agreement. At March 31, 2023, we were in compliance with the applicable financial and restrictive covenants under the credit agreement governing the 2012 Term Loan and the 2012 ABL Revolver and the indentures governing the 2021 Senior Notes and the 2019 Senior Notes.
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, 2022 remain constant into the future. This is an estimate, as actual rates will vary over time.
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, 2023 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 2022 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.
In addition, we assume that the average balance outstanding for the last month of fiscal 2023 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.
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.
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.
The increase was primarily due to acquisitions of $247.0 million in the current period, partly offset by a decrease in capital expenditures in the current period. Financing Activities Net cash used in financing activities was $7.6 million for 2022 compared to $279.4 million for 2021.
The increase was primarily due to acquisitions of $247.0 million in 2022, partly offset by a decrease in capital expenditures in 2022. Financing Activities Net cash used in financing activities was $7.6 million for 2022 compared to $279.4 million for 2021.
Additionally, management anticipates that in the normal course of operations, we will be in compliance with the financial and restrictive covenants during fiscal 2023. During the year ended March 31, 2022, we made a required repayment 44 of $1.5 million as well as voluntary principal payments of $103.5 million against the outstanding balance under our 2012 Term Loan.
Additionally, management anticipates that in the normal course of operations, we will be in compliance with the financial and restrictive covenants during fiscal 2024. During the year ended March 31, 2022, we made a required repayment of $1.5 million as well as voluntary principal payments of $103.5 million against the outstanding balance under our 2012 Term Loan.
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. See "Economic Environment Since the Coronavirus Outbreak" above.
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. See "Economic Environment" above.
As a result of the purchase, we acquired TheraTears and certain other over-the-counter consumer brands. The financial results from this acquisition are included in our North American and International OTC Healthcare segments.
As a result of the purchase, we acquired TheraTears and certain other OTC consumer brands. The financial results from this acquisition are included in our North American and International OTC Healthcare segments.
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.
While certain of these brands have long histories of brand development and investment, we believe that, at the time we acquired them, many were considered “non-core” by their previous owners.
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. 2021 Senior Notes: On March 1, 2021, we issued $600.0 million aggregate principal amount of 3.750% senior notes due April 1, 2031, (the "2021 Senior Notes") pursuant to an indenture dated March 1, 2021, among the Borrower, the guarantors party thereto (including the Company), and U.S.
We used the net proceeds from the 2019 Senior Notes, together with cash on hand, to redeem all $400.0 million of our then-outstanding senior notes issued on December 17, 2013 that were due in 2021, and to pay related fees and expenses. 2021 Senior Notes: On March 1, 2021, the Borrower issued $600.0 million aggregate principal amount of 3.750% senior notes due April 1, 2031 (the "2021 Senior Notes") pursuant to an indenture dated March 1, 2021, among the Borrower, the guarantors party thereto (including the Company), and U.S.
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.
As a result, any material changes to these assumptions could require us to record additional impairment in the future. We have experienced declines in revenues and profitability of certain brands in the North American OTC Healthcare segment, as discussed below.
Results of Operations 2021 compared to 2020 For a discussion of fiscal 2021 compared to 2020, please refer to our 2021 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 7, 2021.
Results of Operations 2022 compared to 2021 For a discussion of fiscal 2022 compared to 2021, please refer to Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of our 2022 Annual Report on Form 10-K , filed with the SEC on May 6, 2022.
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.
In performing this analysis, management considers current information and future events, such as competition, changing consumer needs, technological advances and changes in advertising support for our trademarks and tradenames, that could cause subsequent evaluations to utilize different assumptions.
We recorded goodwill of $1.6 million based on the amount by which the purchase price exceeded the preliminary estimate of the fair value of the net assets acquired. Goodwill is deductible and is being amortized for income tax purposes.
We recorded goodwill of $1.1 million based on the amount by which the purchase price exceeded the fair value of the net assets acquired. Goodwill is deductible and is being amortized for income tax purposes.
As of March 31, 2022, we had an aggregate of $1.5 billion of outstanding indebtedness, which consisted of the following: • $400.0 million of 5.125% 2019 Senior Notes due January 15, 2028; • $600.0 million of 3.750% 2021 Senior Notes due April 1, 2031; and • $495.0 million of borrowings under the Term B-5 Loans due July 1, 2028.
As of March 31, 2023, we had an aggregate of $1.4 billion of outstanding indebtedness, which consisted of the following: • $400.0 million of 5.125% 2019 Senior Notes due January 15, 2028; • $600.0 million of 3.750% 2021 Senior Notes due April 1, 2031; and • $360.0 million of borrowings under the Term B-5 Loans due July 1, 2028.
The purchase price was funded by a combination of available cash on hand, additional borrowings under the 2012 ABL Revolver and the net proceeds from the refinancing of our term loan originally entered into on January 31, 2012 (the "2012 Term Loan"). The acquisition was accounted for as a business combination.
The purchase price was funded by a combination of available cash on hand, additional borrowings under our asset-based revolving credit facility (the "2012 ABL Revolver") and the net proceeds from the refinancing of our term loan originally entered into on January 31, 2012 (the "2012 Term Loan"). The acquisition was accounted for as a business combination.
As of March 31, 2022, we had no balance outstanding on the 2012 ABL Revolver and a borrowing capacity of $123.3 million. 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.
As of March 31, 2023, we had no balance outstanding on the 2012 ABL Revolver and a borrowing capacity of $168.7 million. 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.
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. 35 Goodwill Goodwill is tested for impairment annually and whenever events and circumstances indicate that impairment may have occurred.
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.
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.
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 March 21, 2018, we entered into Amendment No. 5 (“Term Loan Amendment No. 5”) to the 2012 Term Loan.
The extent to which these conditions impact our results and liquidity will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity and duration of any further COVID-19 outbreak and recovery period and further global instability.
The extent to which these conditions impact our results and liquidity will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity and duration of any further COVID-19 outbreaks, global supply chain constraints, the high inflationary environment and further global instability.
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, 2022 and 2021.
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, 2023 and 2022.
The following table summarizes our preliminary allocation of the assets acquired and liabilities assumed as of the July 1, 2021 acquisition date. 31 (In thousands) July 1, 2021 Inventories 6,455 Goodwill 1,648 Intangible assets 225,410 Total assets acquired 233,513 Accounts payable 478 Reserves for sales allowances 747 Other accrued liabilities 3,374 Total liabilities assumed 4,599 Total purchase price $ 228,914 Based on this preliminary analysis, we allocated $195.9 million to non-amortizable intangible assets and $29.5 million to amortizable intangible assets.
The following table summarizes our allocation of the assets acquired and liabilities assumed as of the July 1, 2021 acquisition date. 30 (In thousands) July 1, 2021 Inventories $ 6,455 Goodwill 1,098 Intangible assets 225,410 Total assets acquired 232,963 Accounts payable 428 Reserves for sales allowances 497 Other accrued liabilities 3,124 Total liabilities assumed 4,049 Total purchase price $ 228,914 Based on this analysis, we allocated $195.9 million to non-amortizable intangible assets and $29.5 million to amortizable intangible assets.
As such, we recorded an impairment charge of $1.2 million. The decline in the fair value of Painstop was primarily related to a decline in expected future sales due to a regulatory change that now requires Painstop to be prescribed by physicians rather than sold over-the-counter direct to consumers.
The decline in the fair value of Painstop was primarily related to a decline in expected future sales due to a regulatory change that now requires Painstop to be prescribed by physicians rather than sold over-the-counter direct to consumers.
To date, the pandemic and other global conditions have not had a material negative impact on our operations, supply chain, overall costs or demand for most of our products or resulting aggregate sales and earnings, and, as such, it has also not negatively impacted our liquidity position. We continue to generate operating cash flows to meet our short-term liquidity needs.
To date, the COVID-19 pandemic and other global conditions have not had a material negative impact on our operations, supply chain, overall costs or demand for most of our products or resulting aggregate sales and earnings, and, as such, it has also not materially negatively impacted our liquidity position.
We have continued to see changes in the purchasing patterns of our consumers, including the frequency of visits by consumers to retailers and a shift in many markets to purchasing our products online. Both the COVID-19 pandemic and the geopolitical environment have also impacted the supply of labor and raw materials and exacerbated rising costs.
We have continued to see changes in the purchasing patterns of our consumers, including a reduction in the frequency of visits to retailers and a shift in many markets to purchasing our products online. The volatile environment has impacted the supply of labor and raw materials and exacerbated rising input costs.
Since we have made optional payments that exceed all of our required quarterly payments, we will not be required to make another payment on the 2012 Term Loan until maturity on July 1, 2028.
Since we have made optional payments that exceed all of our required quarterly payments, we will not be required to make another payment on the 2012 Term Loan until maturity on July 1, 2028. 40 On December 11, 2019, we entered into Amendment No. 7 ("ABL Amendment No. 7") to the 2012 ABL Revolver.
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. 36 At February 28, 2022, in conjunction with the annual test for impairment of intangible assets, there were no indicators of impairment of indefinite-lived intangible assets under the analysis and accordingly, no impairment charge was taken.
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.
These circumstances could change, however, in this dynamic, unprecedented environment. If the COVID-19 outbreak worsens or geopolitical conditions cause further disruption in the global supply chain, the availability of labor or otherwise increase costs, it may materially affect our operations and those of third parties on which we rely, including causing disruptions in the supply and distribution of our products.
If conditions cause further disruption in the global supply chain, the availability of labor and materials or otherwise increase costs, it may materially affect our operations and those of third parties on which we rely, including causing disruptions in the supply and distribution of our products.
As of February 28, 2022 (our annual impairment review date), we had 14 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.
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.
International OTC Healthcare Segment Contribution margin for the International OTC Healthcare segment increased $13.8 million, or 34.9%, during 2022 versus 2021. As a percentage of International OTC Healthcare revenues, contribution margin for the International OTC Healthcare segment increased to 44.8% during 2022 from 42.0% during 2021.
International OTC Healthcare Segment Contribution margin for the International OTC Healthcare segment increased $18.9 million, or 35.5%, during 2023 versus 2022. As a percentage of International OTC Healthcare revenues, contribution margin for the International OTC Healthcare segment increased to 46.9% during 2023 from 44.8% during 2022.
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.
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. The impairment charge is measured as the excess of the carrying amount of the intangible asset over its 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. During the third quarter of 2021, we determined that the fair value of one of our finite-lived intangible assets in our International OTC Healthcare segment, Painstop , did not exceed its carrying amount.
During the third quarter of 2021, we determined that the fair value of one of our finite-lived intangible assets in our International OTC Healthcare segment, Painstop , did not exceed its carrying amount. As such, we recorded an impairment charge of $1.2 million.
As a percentage of North American OTC Healthcare revenues, contribution margin for the North American OTC Healthcare segment decreased to 42.4% during 2022 from 43.3% during 2021. The contribution margin decrease as a percentage of revenues was primarily due to an increase in advertising and marketing expenses as well as the decrease in gross profit margin noted above.
As a percentage of North American OTC Healthcare revenues, contribution margin for the North American OTC Healthcare segment decreased to 41.9% during 2023 from 42.4% during 2022. The contribution margin decrease as a percentage of revenues was primarily due to the decrease in gross margin noted above, partly offset by a decrease in advertising and marketing spend in 2023.
In 2022, we had no net change in our long-term debt principal, as prepayments served to offset the borrowings to finance the Akorn acquisition and payments of debt costs of $6.1 million.
In 2022, we had no net change in our long-term debt principal, as prepayments served to offset the borrowings to finance the Akorn acquisition and payments of debt costs of $6.1 million. In 2021, we reduced our outstanding long-term debt by $250.0 million, paid debt costs of $17.7 million and repurchased common stock of $11.9 million.
These effects could have a material adverse impact on our business, liquidity, capital resources, and results of operations and those of the third parties on which we rely. 32 Tax Reform On December 22, 2017, the Tax Cuts and Jobs Act (the "TCJA") was signed into law.
These effects could have a material adverse impact on our business, liquidity, capital resources, and results of operations and those of the third parties on which we rely. Tax Reform On August 16, 2022, the Inflation Reduction Act (“IRA”) was signed into law in the United States.
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.
Term Loan Amendment No. 5 provided for the creation of Term B-5 Loans (the "Term B-5 Loans") by repricing the then-existing term loans to an interest rate that was 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%.
The $18.5 million increase in net cash provided by operating activities was due to an increase in net income after non-cash items, partly offset by increased working capital. Investing Activities Net cash used in investing activities was $22.2 million for 2021 compared $16.6 million for 2020. The increase was primarily due to an increase in capital expenditures in 2021.
The $30.2 million decrease in net cash provided by operating activities was due to increased working capital, partly offset by an increase in net income before non-cash items. Investing Activities Net cash used in investing activities was $11.6 million for 2023 compared $256.5 million for 2022.
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).
In subsequent years, we have utilized portions of our accordion feature to increase the amount of our borrowing capacity under the 2012 ABL Revolver to the current amount of $175.0 million and reduced our borrowing rate on the 2012 ABL Revolver. We have also amended the 2012 Term Loan several times.
Under Term Loan Amendment No. 6, we are required to make quarterly payments each equal to 0.25% of the aggregate principal amount of the 2012 Term Loan. For the year ended March 31, 2022, the average interest rate on the 2012 Term Loan was 3.6%.
Under Term Loan Amendment No. 6, we are required to make quarterly payments each equal to 0.25% of the aggregate principal amount of the 2012 Term Loan.
We used the net proceeds from the 2021 Senior Notes to redeem all $600.0 million of our outstanding 2016 Senior Notes, which were due in 2024, and to pay related fees and expenses. 43 Redemptions and Restrictions: We have the option to redeem all or a portion of the 2019 Senior Notes at any time on or after January 15, 2023 at the redemption prices set forth in the indenture governing the 2019 Senior Notes, plus accrued and unpaid interest, if any.
Redemptions and Restrictions: We have the option to redeem all or a portion of the 2019 Senior Notes at any time on or after January 15, 2023 at the redemption prices set forth in the indenture governing the 2019 Senior Notes, plus accrued and unpaid interest, if any.
The contribution margin increase as a percentage of revenues was primarily due to decreased advertising and marketing expenses as a percentage of revenues in 2022. 39 General and Administrative General and administrative expenses were $108.5 million for 2022 versus $85.5 million for 2021.
The contribution margin increase as a percentage of revenues was primarily due to lower advertising and marketing spend as a percent of net sales. General and Administrative General and administrative expenses were $107.4 million for 2023 versus $107.5 million for 2022.
Year Ended March 31, $ Change (In thousands) 2022 2021 2020 2022 vs. 2021 2021 vs. 2020 Net cash provided by (used in): Operating activities $ 259,922 $ 235,607 $ 217,124 $ 24,315 $ 18,483 Investing activities (256,511) (22,243) (16,570) (234,268) (5,673) Financing activities (7,569) (279,419) (131,431) 271,850 (147,988) Effects of exchange rate changes on cash and cash equivalents (959) 3,597 (1,893) (4,556) 5,490 Net change in cash and cash equivalents $ (5,117) $ (62,458) $ 67,230 $ 57,341 $ (129,688) 2022 compared to 2021 Operating Activities Net cash provided by operating activities was $259.9 million for 2022 compared to $235.6 million for 2021.
Year Ended March 31, $ Change (In thousands) 2023 2022 2021 2023 vs. 2022 2021 vs. 2020 Net cash provided by (used in): Operating activities $ 229,716 $ 259,922 $ 235,607 $ (30,206) $ 24,315 Investing activities (11,584) (256,511) (22,243) 244,927 (234,268) Financing activities (185,846) (7,569) (279,419) (178,277) 271,850 Effects of exchange rate changes on cash and cash equivalents (982) (959) 3,597 (23) (4,556) Net change in cash and cash equivalents $ 31,304 $ (5,117) $ (62,458) $ 36,421 $ 57,341 39 2023 compared to 2022 Operating Activities Net cash provided by operating activities was $229.7 million for 2023 compared to $259.9 million for 2022.
The increase in depreciation and amortization expenses was attributable to an increase in amortization expense due to the addition of certain brands purchased in conjunction with the Akorn acquisition, partly offset by certain assets being fully depreciated during 2022. Interest Expense, Net Interest expense, net was $64.3 million during 2022 versus $82.3 million during 2021.
The increase in depreciation and amortization expenses was attributable to an increase in amortization expense due to the addition of certain brands 38 purchased in conjunction with our 2022 acquisitions, partly offset by lower depreciation expense due to certain assets being fully depreciated early in 2023.
Additionally, a 50 basis point decrease in the terminal growth rate used for each of our indefinite-lived intangible assets' would not have resulted in any of our indefinite-lived intangible assets' 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 intangible assets' would have resulted in an additional impairment of $23.3 million.
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.
While all significant accounting policies are important to our Consolidated Financial Statements, certain of these policies may be viewed as being critical.
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 intangible assets would not have resulted in any of our indefinite-lived intangible assets' fair value being less than their carrying value, with the exception of our TheraTears tradename.
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 all of our indefinite-lived intangible assets would have resulted in an additional impairment of $46.5 million.
("the Borrower") entered into a senior secured credit facility, which consists of (i) a $660.0 million term loan (the "2012 Term Loan") with an original 7-year maturity and (ii) a $50.0 million asset-based revolving credit facility (the "2012 ABL Revolver") with an original 5-year maturity.
Capital Resources 2012 Term Loan and 2012 ABL Revolver: On January 31, 2012, Prestige Brands, Inc. (the “Borrower") entered into a senior secured credit facility, which originally consisted of (i) the $660.0 million 2012 Term Loan with a 7-year maturity and (ii) the $50.0 million 2012 ABL Revolver with a 5-year maturity.
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.
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.
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.
Goodwill and intangible assets comprise the majority of 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.
Commitments As of March 31, 2022, 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 $ 1,495.0 $ — $ — $ — $ 1,495.0 Interest on long-term debt (1) 438.2 62.6 125.0 123.7 126.9 Purchase obligations: Inventory costs (2) 334.4 308.6 10.6 9.8 5.4 Other costs (3) 39.7 39.4 0.3 — — Operating leases 22.4 6.4 10.7 3.8 1.5 Finance leases 7.3 2.8 4.3 0.2 — Total contractual cash obligations (4) $ 2,337.0 $ 419.8 $ 150.9 $ 137.5 $ 1,628.8 (1) Represents the estimated interest obligations on the outstanding balances at March 31, 2022 of the 2021 Senior Notes, 2019 Senior Notes, Term B-5 Loans, and 2012 ABL Revolver, assuming scheduled principal payments (based on the terms of the loan agreements).
Since we have made optional payments that exceed all of our required quarterly payments, we will not be required to make another payment on the 2012 Term Loan until maturity on July 1, 2028. 42 Commitments As of March 31, 2023, 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 $ 1,360.0 $ — $ — $ 400.0 $ 960.0 Interest on long-term debt (1) 434.7 73.5 146.0 142.1 73.1 Purchase obligations: Inventory costs (2) 249.2 225.2 11.7 10.2 2.1 Other costs (3) 25.2 23.1 0.8 0.8 0.5 Operating leases 16.5 6.6 6.5 3.2 0.2 Finance leases 4.5 2.8 1.6 0.1 — Total contractual cash obligations (4) $ 2,090.1 $ 331.2 $ 166.6 $ 556.4 $ 1,035.9 (1) Represents the estimated interest obligations on the outstanding balances at March 31, 2023 of the 2021 Senior Notes, 2019 Senior Notes, Term B-5 Loans, and 2012 ABL Revolver, assuming scheduled principal payments (based on the terms of the loan agreements).
As a result of our analysis at February 28, 2022, all indefinite-lived intangible assets tested had a fair value that exceeded their carrying value by at least 10%, with the exception of our TheraTears tradename which had a fair value exceeding its carrying value by 7%.
Our analysis at February 28, 2023 determined that all other indefinite-lived intangible assets tested had a fair value that exceeded their carrying value by at least 10%, with the exception of Monistat within our North American Women’s Health reporting unit.
International OTC Healthcare Segment Revenues for the International OTC Healthcare segment increased $24.9 million, or 26.5%, during 2022 versus 2021.
International OTC Healthcare Segment Revenues for the International OTC Healthcare segment increased $35.0 million, or 29.4%, during 2023 versus 2022.
As a result of our analysis at February 28, 2022, all other reporting units tested had a fair value that exceeded their carrying value by at least 10%.
The impairment charges were primarily a result of increased discount rates due to current macroeconomic conditions. Our analysis at February 28, 2023 determined that all other reporting units had a fair value that exceeded their carrying value by at least 10%.
At March 31, 2022 and 2021, goodwill and intangible assets were apportioned among similar product groups within our operating segments as follows: March 31, 2022 (In thousands) North American OTC Healthcare International OTC Healthcare Consolidated Goodwill $ 548,291 $ 30,685 $ 578,976 Intangible assets Indefinite-lived 2,391,517 85,042 2,476,559 Finite-lived 198,353 21,723 220,076 Intangible assets, net 2,589,870 106,765 2,696,635 Total $ 3,138,161 $ 137,450 $ 3,275,611 March 31, 2021 (In thousands) North American OTC Healthcare International OTC Healthcare Consolidated Goodwill $ 546,643 $ 31,436 $ 578,079 Intangible assets Indefinite-lived 2,195,617 86,371 2,281,988 Finite-lived 190,462 3,279 193,741 Intangible assets, net 2,386,079 89,650 2,475,729 Total $ 2,932,722 $ 121,086 $ 3,053,808 At March 31, 2022, the brands with the highest carrying value were Monistat, Summer's Eve, BC/Goody's, TheraTears and DenTek , comprising 60.6% of our total intangible assets value. 34 Goodwill and intangible assets comprise the majority of all of our assets.
At March 31, 2023 and 2022, goodwill and intangible assets were apportioned among similar product groups within our operating segments as follows: March 31, 2023 (In thousands) North American OTC Healthcare International OTC Healthcare Consolidated Goodwill $ 498,936 $ 28,617 $ 527,553 Intangible assets Indefinite-lived 2,092,852 76,050 2,168,902 Finite-lived 154,552 18,439 172,991 Intangible assets, net 2,247,404 94,489 2,341,893 Total $ 2,746,340 $ 123,106 $ 2,869,446 32 March 31, 2022 (In thousands) North American OTC Healthcare International OTC Healthcare Consolidated Goodwill $ 548,291 $ 30,685 $ 578,976 Intangible assets Indefinite-lived 2,391,517 85,042 2,476,559 Finite-lived 198,353 21,723 220,076 Intangible assets, net 2,589,870 106,765 2,696,635 Total $ 3,138,161 $ 137,450 $ 3,275,611 At March 31, 2023, the brands with the highest carrying value were Monistat, BC/Goody's, Summer's Eve, TheraTears and Fleet , comprising 57.5% of our total intangible assets value.
The increase in general and administrative expenses was primarily due to increases in compensation costs and professional fees, as well as costs related to the acquisition of Akorn of $5.1 million. Depreciation and Amortization Depreciation and amortization expense was $24.9 million for 2022 versus $23.9 million for 2021.
The decrease in general and administrative expenses was primarily due to acquisition costs in the prior year associated with the Akorn acquisition, partly offset by increases in compensation costs in the current year. Depreciation and Amortization Depreciation and amortization expense was $25.1 million for 2023 versus $24.9 million for 2022.
The average indebtedness remained at $1.6 billion during 2021 and 2022. The average cost of borrowing decreased to 4.1% for 2022 from 5.1% for 2021. Loss on Extinguishment of Debt During 2022, we recorded a loss on extinguishment of debt of $2.1 million, related to the amendment of our 2012 Term Loan on July 1, 2021.
Loss on Extinguishment of Debt During 2022, we recorded a loss on extinguishment of debt of $2.1 million, related to the amendment of our 2012 Term Loan on July 1, 2021. Income Taxes The (benefit) provision for income taxes during 2023 was a benefit of $(11.6) million versus a provision of $57.1 million in 2022.
As a percentage of North American OTC Healthcare revenues, gross profit decreased to 56.7% during 2022 from 57.7% during 2021, primarily due to increased supply chain costs and charges related to the inventory valuation of the acquired Akorn brands in fiscal 2022 of $1.6 million.
As a percentage of total revenues, gross profit decreased to 55.4% in 2023 from 57.1% in 2022, primarily due to increased supply chain costs and product mix. North American OTC Healthcare Segment Gross profit for the North American OTC Healthcare segment decreased $16.8 million, or 3.1%, during 2023 versus 2022.
Accordingly, 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. 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.
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.
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.
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.
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.
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. 36 Results of Operations 2023 compared to 2022 Total Segment Revenues The following table represents total revenue by segment, including product groups, for each of the fiscal years ended March 31, 2023 and 2022.
We prepared an analysis of the fair values of the assets acquired and liabilities assumed as of the date of acquisition. These purchase price allocations are preliminary as we are in the process of finalizing the valuation.
We finalized our analysis of the fair values of the assets acquired and liabilities assumed as of the date of acquisition.
The $24.9 million increase was mainly attributable to increased sales in our Australian subsidiary, primarily related to an increase in 38 sales of Hydralyte (included in the Gastrointestinal category) as a result of easing COVID-19 restrictions, as well as an increase in consumer illnesses.
The $35.0 million increase was mainly attributable to increased sales in our Australian subsidiary, primarily related to an increase in sales of Hydralyte (included in the Gastrointestinal category) as a result of easing COVID-19 restrictions, as well as an overall increase in consumer illnesses which benefited most categories. 37 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, 2023 and 2022.
International OTC Healthcare Segment Gross profit for the International OTC Healthcare segment increased $14.7 million, or 25.6%, during 2022 versus 2021. As a percentage of International OTC Healthcare revenues, gross profit decreased to 60.5% during 2022 from 60.9% during 2021, primarily due to increased supply chain costs. Contribution Margin Contribution margin is our segment measure of profitability.
As a percentage of North American OTC Healthcare revenues, gross profit decreased to 54.6% during 2023 from 56.7% during 2022, primarily due to increased supply chain costs and product mix, partly offset by pricing actions. International OTC Healthcare Segment Gross profit for the International OTC Healthcare segment increased $21.4 million, or 29.8%, during 2023 versus 2022.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

4 edited+0 added−1 removed0 unchanged
Biggest changeAt March 31, 2022, approximately $495.0 million of our debt carries a variable rate of interest. 45 Holding other variables constant, including levels of indebtedness, a one percentage point increase in interest rates on our variable rate debt would have had an adverse impact on pre-tax loss and cash flows for the year ended March 31, 2022 of approximately $4.0 million.
Biggest changeHolding other variables constant, including levels of indebtedness, a one percentage point increase in interest rates on our variable rate debt would have had an adverse impact on pre-tax loss and cash flows for the year ended March 31, 2023 of approximately $4.6 million. 43 Foreign Currency Exchange Rate Risk During the years ended March 31, 2023 and 2022, approximately 13.9% and 13.2%, respectively, of our net revenues were denominated in currencies other than the U.S.
Holding all other variables constant, and assuming a hypothetical 10.0% adverse change in foreign currency exchange rates, this analysis resulted in a 2.6% impact on pre-tax income of approximately $6.8 million for the year ended March 31, 2022 and a 2.2% impact on pre-tax loss of approximately $4.4 million for the year ended March 31, 2021. 46
Holding all other variables constant, and assuming a hypothetical 10.0% adverse change in foreign currency exchange rates, this analysis resulted in a 10.6% impact on pre-tax loss of approximately $9.0 million for the year ended March 31, 2023 and a 2.6% impact on pre-tax income of approximately $6.8 million for the year ended March 31, 2022. 44
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rate Risk We are exposed to interest rate risk because our 2012 Term Loan and 2012 ABL Revolver are variable rate debt.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rate Risk We are exposed to interest rate risk because our 2012 Term Loan and 2012 ABL Revolver are variable rate debt. At March 31, 2023, approximately $360.0 million of our debt carries a variable rate of interest.
These transactions are primarily with respect to the Canadian and Australian Dollar. We performed a sensitivity analysis with respect to exchange rates for the year ended March 31, 2022 and 2021.
Dollar. As such, we are exposed to transactions that are sensitive to foreign currency exchange rates, including insignificant foreign currency forward exchange agreements. These transactions are primarily with respect to the Canadian and Australian Dollar. We performed a sensitivity analysis with respect to exchange rates for the year ended March 31, 2023 and 2022.
Removed
Foreign Currency Exchange Rate Risk During the years ended March 31, 2022 and 2021, approximately 13.2% and 12.0%, respectively, of our net revenues were denominated in currencies other than the U.S. Dollar. As such, we are exposed to transactions that are sensitive to foreign currency exchange rates, including insignificant foreign currency forward exchange agreements.

Other PBH 10-K year-over-year comparisons