{"url_path":"/sec/pbh/10-k/2026/item-7","section_key":"item-7","section_title":"Item 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS","topic":"sec","document":{"doc_type":"10-K","doc_date":"2026-05-14","source_url":"https://www.sec.gov/Archives/edgar/data/1295947/0001295947-26-000016-index.html","accession_number":"0001295947-26-000016","cik":"0001295947","ticker":"PBH","issuer_name":"Prestige Consumer Healthcare Inc.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1295947/0001295947-26-000016-index.html","primary_entity_key":"0001295947","primary_entity_name":"Prestige Consumer Healthcare Inc."},"word_count":6796,"has_tables":true,"body_markdown":"ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS\n\nThe following discussion of our financial condition and results of operations should be read together with the Consolidated Financial Statements and related notes included elsewhere in this Annual Report on Form 10-K. This discussion and analysis may contain forward-looking statements that involve certain risks, assumptions and uncertainties that could cause actual results to differ materially from those implied or described by the forward-looking statements. Future results could differ materially from the discussion that follows for many reasons, including the factors described in Part I, Item 1A. “Risk Factors” in this Annual Report on Form 10-K, as well as those described in future reports filed with the SEC.\n\nGeneral\n\nWe are engaged in the development, manufacturing, marketing, sales and distribution of well-recognized, brand name OTC health and personal care products to mass merchandisers, drug/drug wholesale, food, dollar, convenience and club stores and e-commerce channels in North America (the United States and Canada) and in Australia and certain other international markets.  We use the strength of our brands, our established retail distribution network, a low-cost operating model and our experienced management team to create our competitive advantage.\n\nWe have grown our product portfolio both organically and through acquisitions. We develop our existing brands by investing in new product lines, brand extensions and strong advertising support. Acquisitions of consumer health and personal care brands have also been an important part of our growth strategy. We have acquired well-recognized brands from consumer products and pharmaceutical companies and private equity firms. While certain of these brands have long histories of brand development and investment, we believe that, at the time we acquired them, many were considered “non-strategic” by their previous owners. As a result, these acquired brands did not benefit from adequate management focus and marketing support during the period prior to their acquisition, which created opportunities for us to reinvigorate these brands and improve their performance post-acquisition. After adding a brand to our portfolio, we seek to increase its sales, market share and distribution in both existing and new channels through our established retail distribution network. We pursue this growth through increased spending on advertising and marketing support, new sales and marketing strategies, improved packaging and formulations and innovative development of brand extensions.\n\nAcquisitions\n\nAcquisition of Pillar5\n\nOn December 18, 2025, we completed the acquisition of Pillar5, which was funded through a combination of cash on hand and our existing asset-based revolving credit facility.\n\nBased in Arnprior Ontario, Canada, Pillar5 is a leading sterile ophthalmic manufacturer and one of our current Clear Eyes suppliers.\n\nThe pro-forma effect of this acquisition on revenues and earnings was not material.\n\nThe details of this acquisition are included in the notes to the Consolidated Financial Statements in Part II, Item 8, Note 2 of this Annual Report on Form 10-K.\n\nPending Acquisition of Foundation Consumer Brands Product Portfolio\n\nOn March 19, 2026, we entered into a definitive agreement to acquire certain assets and assume certain liabilities primarily related to a portfolio of over-the-counter consumer health products, including Breathe Right® and certain other brands from Foundation Consumer Brands, LLC. We anticipate the transaction to close in the first half of fiscal 2027.\n\nEconomic Environment\n\nThere has been economic uncertainty in the United States and globally due to several factors, including evolving fiscal policy, global supply chain constraints, changes in interest rates, a high inflationary environment, geopolitical events, including conflicts in the Middle East, and evolving U.S. and international trade restrictions and tariffs. We expect economic conditions will continue to be highly volatile and uncertain, put pressure on prices and supply, and could affect demand for our products. We have continued to see changes in the purchasing patterns of our consumers, including a shift in many markets to purchasing our products online, and have and may continue to see changes in retailer purchasing patterns due to these consumer patterns and the volatile economic environment.\n\n34\n\nThe volatile environment has impacted the supply of labor and raw materials and exacerbated rising input costs. 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 and our manufacturers are currently having, and have had in the past, difficulty meeting demand, which is and has caused shortages of some of our products, particularly eye care products. These shortages have negatively impacted our results of operations, and we expect further shortages will continue to have a negative impact on our sales. If conditions cause further disruption in the global supply chain, the availability of labor and materials or otherwise further increase costs, it may materially affect our operations and those of third parties on which we rely, including causing material disruptions in the supply and distribution of our products. The extent to which these conditions impact our results of operations and liquidity will depend on future developments, which are highly uncertain and cannot be predicted, including global supply chain constraints, inflation, tariffs, global conflicts and trade actions/disputes. 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.\n\nCritical Accounting Estimates\n\nOur significant accounting policies are described in the notes to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.  While all significant accounting policies are important to our Consolidated Financial Statements, certain of these policies may be viewed as being critical.  Such policies are those that are both most important to the portrayal of our financial condition and results of operations and require our most difficult, subjective and complex estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses or the related disclosure of contingent assets and liabilities.  These estimates are based on our historical experience and on various other assumptions that we believe to be reasonable under the circumstances.  Actual results may differ materially from these estimates. The following are our most critical accounting estimates:\n\nRevenue Recognition, Customer Programs and Variable Consideration\n\nRevenue is recognized when control of a promised good is transferred to a customer, in an amount that reflects the consideration that we expect to be entitled to receive in exchange for that good. This occurs either when finished goods are transferred to a common carrier for delivery to the customer or when product is picked up by the customer or the customer’s carrier.\n\nOnce a product has transferred to the common carrier or been picked up by the customer, the customer is able to direct the use of, and obtain substantially all of the remaining benefits from, the product. It is at this point that we have a right to payment and the customer has legal title.\n\nProvisions for certain rebates, customer promotional programs, product returns and discounts to customers are accounted for as variable consideration and recorded as a reduction in sales.\n\nWe 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.\n\nWe participate in the promotional programs of our customers to enhance the sale of our products. These promotional programs consist of direct-to-consumer incentives, such as coupons and temporary price reductions, as well as incentives to our customers, such as allowances for new distribution including slotting fees, and cooperative advertising. The costs of such activities are recorded as a reduction to revenue when the related sale takes place. Estimates of the costs of these promotional programs are derived using the most likely amount method, which incorporates (i) historical sales experience, (ii) the current promotional offering, (iii) forecasted data, (iv) current market conditions and (v) communication with customer purchasing/marketing personnel. At the completion of the promotional program, the estimated amounts are adjusted to actual results.\n\nGoodwill and Intangible Assets\n\nAt March 31, 2026 and 2025, goodwill and intangible assets were apportioned among similar product groups within our operating segments as follows:\n\n35\n\nMarch 31, 2026\n\n(In thousands)North American OTC\nHealthcareInternational OTC\nHealthcareConsolidated\n\nGoodwill$550,987 $30,122 $581,109 \n\nIntangible assets \n\nIndefinite-lived2,068,752 74,923 2,143,675 \n\nFinite-lived138,903 17,027 155,930 \n\nIntangible assets, net2,207,655 91,950 2,299,605 \n\nTotal$2,758,642 $122,072 $2,880,714 \n\nMarch 31, 2025\n\n(In thousands)North American OTC\nHealthcareInternational OTC\nHealthcareConsolidated\n\nGoodwill$498,936 $28,489 $527,425 \n\nIntangible assets \n\nIndefinite-lived2,068,752 68,234 2,136,986 \n\nFinite-lived141,234 17,130 158,364 \n\nIntangible assets, net2,209,986 85,364 2,295,350 \n\nTotal$2,708,922 $113,853 $2,822,775 \n\nAt March 31, 2026, the brands with the highest carrying value were Monistat, BC/Goody's, Summer's Eve, TheraTears and Fleet, comprising approximately 59% of our total intangible assets value.\n\nGoodwill 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.  When we acquire a brand, we are required to make judgments regarding the value assigned to the associated intangible assets, as well as their respective useful lives.  Management considers many factors both prior to and after the acquisition of an intangible asset in determining the value, as well as the useful life, assigned to each intangible asset that we acquire or continue to own and promote.\n\nThe most significant factors are:\n\n•Brand History\n\nA brand that has been in existence for a long period of time (e.g., 25, 50 or 100 years) generally warrants a higher valuation and longer life (sometimes indefinite) than a brand that has been in existence for a very short period of time.  A brand that has been in existence for an extended period of time generally has been the subject of considerable investment by its previous owner(s) to support product innovation and advertising and marketing.\n\n•Market Position\n\nConsumer products that rank number one or two in their respective market generally have greater name recognition and are known as quality product offerings, which warrant a higher valuation and longer life than products that lag in the marketplace.\n\n•Recent and Projected Sales Growth\n\nRecent sales results present a snapshot as to how the brand has performed in the most recent time periods and represent another factor in the determination of brand value.  In addition, projected sales growth provides information about the\n\n36\n\nstrength and potential longevity of the brand.  A brand that has both strong current and projected sales generally warrants a higher valuation and a longer life than a brand that has weak or declining sales.  Similarly, consideration is given to the potential investment, in the form of advertising and marketing, required to reinvigorate a brand that has fallen from favor.\n\n•History of and Potential for Product Extensions\n\nConsideration is given to the product innovation that has occurred during the brand’s history and the potential for continued product innovation that will determine the brand’s future.  Brands that can be continually enhanced by new product offerings generally warrant a higher valuation and longer life than a brand that has always “followed the leader.”\n\nAfter consideration of the factors described above, as well as current economic conditions and changing consumer behavior, management prepares a determination of an intangible asset’s value and useful life based on its analysis.  Under accounting guidelines, goodwill is not amortized 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.  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.  Intangible assets with finite lives are amortized over their respective estimated useful lives and must also be tested for impairment whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable and exceeds its fair value.\n\nOn 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.\n\nWe report goodwill and indefinite-lived intangible assets in two reportable segments: North American OTC Healthcare and International OTC Healthcare. We identify our reporting units in accordance with the FASB ASC Subtopic 280. The carrying value and fair value for intangible assets and goodwill for a reporting unit are calculated based on key assumptions and valuation methodologies.  As a result, any material changes to these assumptions could require us to record additional impairment in the future.\n\nWe have experienced declines in revenues and profitability of certain brands in the North American OTC Healthcare segment, as discussed in \"Results of Operations\" below.  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.\n\nGoodwill\n\nGoodwill is tested for impairment annually and whenever events and circumstances indicate that impairment may have occurred. As of February 28, 2026 (our annual impairment review date), we had 13 reporting units with goodwill. As part of our annual test for impairment of goodwill, management estimates the discounted cash flows of each reporting unit to estimate their respective fair values. In addition, we considered our market capitalization at February 28, 2026, 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 performing the discounted cash flow analysis, management considers current information and assumptions regarding future sales, gross margins and advertising and marketing expenses; the discount rate utilized in the analysis, as well as future cash flows, may be influenced by such factors as changes in interest rates and rates of inflation. Future events, such as competition, changing consumer needs, technological advances and changes in advertising support for our trademarks and tradenames, could cause subsequent evaluations to utilize different assumptions. Additionally, should the related fair value of goodwill be adversely affected as a result of declining sales or margins caused by competition, changing consumer needs or preferences, technological advances or changes in advertising and marketing expenses, we may be required to record additional impairment charges in the future.\n\nAt February 29, 2024, February 28, 2025 and February 28, 2026, in conjunction with the annual tests for goodwill impairment, which coincided with our annual strategic planning process, the estimated fair value exceeded the carrying value for all reporting units and accordingly, no impairment charge was taken in either period.\n\n37\n\nOur analysis at February 28, 2026 determined that all reporting units had a fair value that exceeded their carrying value by at least 10%. We performed a sensitivity analysis on our weighted average cost of capital, and we determined that a 50-basis point increase in the weighted average cost of capital would not have resulted in any of our reporting units' fair value being less than their carrying value. Additionally, a 50-basis point decrease in the terminal growth rate used for each reporting unit would not have resulted in any of our reporting units' fair value being less than their carrying value.\n\nIndefinite-Lived Intangible Assets\n\nIndefinite-lived intangibles are tested for impairment annually and whenever events and circumstances indicate that impairment may have occurred. We utilize the excess earnings method to estimate the fair value of our individual indefinite-lived intangible assets. The discount rate utilized in the analysis, as well as future cash flows, may be influenced by such factors as changes in interest rates and rates of inflation.\n\nAt 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.\n\nManagement tests the indefinite-lived intangible assets for impairment by comparing the carrying value of the intangible asset to its estimated fair value.  Since quoted market prices are seldom available for trademarks and tradenames such as ours, we utilize present value techniques to estimate fair value.  Accordingly, management’s projections are utilized to assimilate all of the facts, circumstances and expectations related to the trademark or tradename and estimate the cash flows over its useful life.  In a manner similar to goodwill, future events, such as competition, technological advances and changes in advertising support for our trademarks and tradenames, could cause subsequent evaluations to utilize different assumptions.  Once that analysis is completed, a discount rate is applied to the cash flows to estimate fair value. In connection with this analysis, management:\n\n•Reviews period-to-period sales and profitability by brand;\n\n•Analyzes industry trends and projects brand growth rates;\n\n•Prepares annual sales forecasts;\n\n•Evaluates advertising effectiveness;\n\n•Analyzes gross margins;\n\n•Reviews contractual benefits or limitations;\n\n•Monitors competitors’ advertising spend and product innovation;\n\n•Prepares projections to measure brand viability over the estimated useful life of the intangible asset; and\n\n•Considers the regulatory environment, as well as industry litigation.\n\nAt February 29, 2024, in conjunction with the annual test for impairment of intangible assets, the estimated fair value exceeded the carrying value for all indefinite-lived intangible assets and accordingly, no impairment charge was taken.\n\nAs part of our annual impairment test conducted on February 28, 2025, we recognized impairment charges totaling $6.6 million. These charges pertain to non-strategic indefinite-lived intangible assets, reflecting a deliberate shift in sales toward other strategic brands within our portfolio. Of the $6.6 million impairment charge, $4.1 million was associated with our North American OTC Healthcare segment, while $2.4 million impacted our International OTC Healthcare segment.\n\nAt February 28, 2026, in conjunction with the annual test for impairment of intangible assets, the estimated fair value exceeded the carrying value for all indefinite-lived intangible assets and accordingly, no impairment charge was taken.\n\nOur analysis as of February 28, 2026 confirmed that all indefinite-lived intangible assets had a fair value exceeding their carrying value by at least 10%, with the exception of Monistat within our North American Women's Health reporting unit. 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 impairment charge of $16.6 million. 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.\n\nFinite-Lived Intangible Assets\n\nOn an annual basis, or when events or changes in circumstances indicate the carrying value of the assets may not be recoverable, management performs a review similar to indefinite-lived intangible assets to ascertain the impact of events and circumstances on the estimated useful lives and carrying values of our trademarks and tradenames.\n\n38\n\nIf the analysis warrants a change in the estimated useful life of the intangible asset, management will reduce the estimated useful life and amortize the carrying value prospectively over the shorter remaining useful life.  Management’s projections are utilized to assimilate all of the facts, circumstances and expectations related to the trademark or tradename and estimate the cash flows over its useful life.  Future events, such as competition, technological advances and changes in advertising support for our trademarks and tradenames, could cause subsequent evaluations to utilize different assumptions.  In the event that the long-term projections indicate that the carrying value is in excess of the undiscounted cash flows expected to result from the use of the intangible assets, management is required to record an impairment charge.   The impairment charge is measured as the excess of the carrying amount of the intangible asset over its fair value.\n\nAt February 29, 2024, in conjunction with the annual test for impairment of finite-lived intangible assets, there were no indicators of impairment under the analysis and accordingly, no impairment charge was taken.\n\nOur analysis at February 28, 2025 concluded that the fair value of several non-strategic finite-lived intangible assets did not exceed their carrying values, and as such, impairment charges of $5.9 million were recorded. These charges relate to non-strategic finite-lived intangible assets, driven by a deliberate shift in sales toward other strategic brands within our portfolio. The impairments were predominantly associated with our North American OTC Healthcare segment.\n\nAt February 28, 2026, in conjunction with the annual test for impairment of finite-lived intangible assets, there were no indicators of impairment under the analysis and accordingly, no impairment charge was taken.\n\nStock-Based Compensation\n\nThe Compensation and Equity topic of the FASB ASC 718 requires us to measure the cost of services to be rendered based on the grant-date fair value of the equity award.  For most of our awards, compensation expense is to be recognized over the period during which an employee is required to provide service in exchange for the award, generally referred to as the requisite service period. We also grant performance stock units, which are contingent on the attainment of certain goals of the Company.  Information utilized in the determination of fair value includes the following:\n\n•Type of instrument (i.e., restricted shares, stock options or performance shares);\n\n•Strike price of the instrument;\n\n•Market price of our common stock on the date of grant;\n\n•Discount rates;\n\n•Duration of the instrument; and\n\n•Volatility of our common stock in the public market.\n\nAdditionally, management must estimate the expected attrition rate of the recipients to enable it to estimate the amount of non-cash compensation expense to be recorded in our financial statements.  While management prepares various analyses to estimate the respective variables, a change in assumptions or market conditions, as well as changes in the anticipated or actual attrition rates, could have a significant impact on the future amounts recorded as non-cash compensation expense.  \n\nRecent Accounting Pronouncements\n\nA 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.\n\n39\n\nResults of Operations\n\n2026 compared to 2025\n\nTotal Segment Revenues\n\nThe following table represents total revenue by segment, including product groups, for each of the fiscal years ended March 31, 2026 and 2025.\n\nIncrease (Decrease)\n\n(In thousands)2026%2025%Amount%\n\nNorth American OTC Healthcare\n\nAnalgesics$108,300 9.9 $112,173 9.9 $(3,873)(3.5)\n\nCough & Cold76,878 7.1 82,533 7.3 (5,655)(6.9)\n\nWomen's Health205,053 18.8 216,335 18.9 (11,282)(5.2)\n\nGastrointestinal179,300 16.5 174,891 15.4 4,409 2.5 \n\nEye & Ear Care126,132 11.6 158,858 14.0 (32,726)(20.6)\n\nDermatologicals116,618 10.7 120,770 10.6 (4,152)(3.4)\n\nOral Care86,958 8.0 81,868 7.2 5,090 6.2 \n\nOther OTC14,337 1.3 12,582 1.1 1,755 13.9 \n\nTotal North American OTC Healthcare913,576 83.9 960,010 84.4 (46,434)(4.8)\n\nInternational OTC Healthcare\n\nAnalgesics5,636 0.5 5,524 0.5 112 2.0 \n\nCough & Cold25,031 2.3 23,681 2.1 1,350 5.7 \n\nWomen's Health22,712 2.1 20,496 1.8 2,216 10.8 \n\nGastrointestinal80,488 7.5 81,052 7.1 (564)(0.7)\n\nEye & Ear Care16,807 1.5 24,464 2.2 (7,657)(31.3)\n\nDermatologicals9,313 0.9 8,177 0.7 1,136 13.9 \n\nOral Care14,093 1.3 13,162 1.2 931 7.1 \n\nOther OTC1,049 —1,196 —(147)(12.3)\n\nTotal International OTC Healthcare175,129 16.1 177,752 15.6 (2,623)(1.5)\n\nTotal Consolidated$1,088,705 100.0 $1,137,762 100.0 $(49,057)(4.3)\n\nTotal segment revenues for 2026 were $1,088.7 million, a decrease of $49.1 million, or 4.3%, versus 2025.\n\nNorth American OTC Healthcare Segment\n\nRevenues for the North American OTC Healthcare segment decreased $46.4 million, or 4.8%, during 2026 versus 2025. The $46.4 million decrease was primarily attributable to a decrease in sales in the Eye & Ear Care category, due to a limited ability to supply demand for Clear Eyes.\n\nInternational OTC Healthcare Segment\n\nRevenues for the International OTC Healthcare segment decreased $2.6 million, or 1.5%, during 2026 versus 2025. The $2.6 million decrease was mainly attributable to a decrease in sales in the Eye & Ear Care category, partly offset by an increase in sales in the Women's Health and Cough & Cold categories.\n\n40\n\nGross Profit\n\nThe 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, 2026 and 2025.\n\n(In thousands)Increase (Decrease)\n\nGross Profit 2026%2025%Amount%\n\nNorth American OTC Healthcare $500,877 54.8 $531,139 55.3 $(30,262)(5.7)\n\nInternational OTC Healthcare 94,701 54.1 103,324 58.1 (8,623)(8.3)\n\n $595,578 54.7 $634,463 55.8 $(38,885)(6.1)\n\nGross profit for 2026 decreased $38.9 million, or 6.1%, versus 2025. As a percentage of total revenues, gross profit decreased to 54.7% in 2026 from 55.8% in 2025, primarily due to the decrease in revenue and costs related to the acquisition of our Canadian manufacturing facility.\n\nNorth American OTC Healthcare Segment\n\nGross profit for the North American OTC Healthcare segment decreased $30.3 million, or 5.7%, during 2026 versus 2025.  As a percentage of North American OTC Healthcare revenues, gross profit decreased to 54.8% during 2026 from 55.3% during 2025, primarily due to the decrease in revenue and costs related to the acquisition of our Canadian manufacturing facility.\n\nInternational OTC Healthcare Segment\n\nGross profit for the International OTC Healthcare segment decreased $8.6 million, or 8.3%, during 2026 versus 2025. As a percentage of International OTC Healthcare revenues, gross profit decreased to 54.1% during 2026 from 58.1% during 2025, primarily due to increased inflation as well as channel and product mix.\n\nContribution Margin\n\nContribution margin is our segment measure of profitability. It is defined as gross profit less advertising and marketing expenses.\n\nThe 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, 2026 and 2025.\n\n(In thousands)Increase (Decrease)\n\nContribution Margin2026%2025%Amount%\n\nNorth American OTC Healthcare$380,030 41.6 $401,708 41.8 $(21,678)(5.4)\n\nInternational OTC Healthcare66,766 38.1 77,032 43.3 (10,266)(13.3)\n\n $446,796 41.0 $478,740 42.1 $(31,944)(6.7)\n\nNorth American OTC Healthcare Segment\n\nContribution margin for the North American OTC Healthcare segment decreased $21.7 million, or 5.4%, during 2026 versus 2025. As a percentage of North American OTC Healthcare revenues, contribution margin for the North American OTC Healthcare segment decreased to 41.6% during 2026 from 41.8% during 2025. The contribution margin decrease as a percentage of revenue was primarily due to the decrease in gross profit margin above, partly offset by a decrease in advertising and marketing spend.\n\nInternational OTC Healthcare Segment\n\nContribution margin for the International OTC Healthcare segment decreased $10.3 million, or 13.3%, during 2026 versus 2025. As a percentage of International OTC Healthcare revenues, contribution margin for the International OTC Healthcare segment decreased to 38.1% during 2026 from 43.3% during 2025. The contribution margin decrease as a percentage of revenues was primarily due to the decrease in gross profit margin noted above.\n\nGeneral and Administrative\n\nGeneral and administrative expenses were $116.4 million for 2026 versus $108.2 million for 2025. The increase in general and administrative expenses was primarily due to increases in compensation-related expenses, acquisition-related costs and an increase in our allowance for doubtful accounts pertaining to one specific customer.\n\n41\n\nDepreciation and Amortization\n\nDepreciation and amortization expense was $20.9 million for 2026 versus $21.3 million for 2025. The decrease in depreciation and amortization expenses was primarily related to a decrease in amortization expense due to impairment charges taken on certain finite-lived brands in fiscal 2025, as well as certain intangible assets being fully amortized during 2025.\n\nOther Expense, Net\n\nDuring fiscal 2026, we wrote off a supplier loan of $10.3 million, previously included in Accounts receivable, net.\n\nTradename Impairment\n\nIn 2025, our annual impairment test resulted in total impairment charges of $12.5 million. This included $6.6 million related to non-strategic indefinite-lived intangible assets and $5.9 million related to non-strategic finite-lived assets. The impairments primarily reflected the deliberate shift in sales toward other strategic brands within our portfolio. Of the total charges, $10.0 million pertains to our North American OTC Healthcare segment, while $2.5 million related to our International OTC Healthcare segment.\n\nInterest Expense, Net\n\nInterest expense, net was $42.3 million during 2026 versus $47.6 million during 2025.  The average cost of borrowing decreased to 4.5% for 2026 from 4.7% for 2025. The average indebtedness decreased to $1.0 billion during 2026 from $1.1 billion in 2025.\n\nIncome Taxes\n\nThe provision for income taxes during 2026 was $67.2 million versus $69.6 million in 2025.  The effective tax rate on income before income taxes was 26.1% during 2026 versus 24.5% during 2025. The increase in the effective tax rate in 2026 compared to 2025 was primarily due to the mix of earnings in the U.S. and foreign jurisdictions and establishing a taxable presence in a new state.\n\nResults of Operations\n\n2025 compared to 2024\n\nFor a discussion of fiscal 2025 compared to 2024, please refer to Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2025 Annual Report on Form 10-K, filed with the SEC on May 9, 2025.\n\nLiquidity and Capital Resources\n\nLiquidity\n\nOur primary source of cash comes from our cash flow from operations. In the past, we have supplemented this source of cash with various debt facilities, primarily in connection with acquisitions. We have financed our operations, and expect to continue to finance our operations over the next twelve months, with a combination of funds generated from operations and borrowings. In connection with the recently announced expected acquisition of a portfolio of brands, including Breathe Right®, we expect to fund the transaction through a combination of a new term loan facility and cash on hand. Our principal uses of cash are for operating expenses, debt service, capital expenditures, share repurchases and acquisitions. Based on our current levels of operations and anticipated growth, excluding acquisitions, we believe that our cash generated from operations and our existing credit facilities will be adequate to finance our working capital and capital expenditures through the next twelve months, although no assurance can be given in this regard. See \"Economic Environment\" above with respect to current uncertainties facing us from a liquidity perspective.\n\n Year Ended March 31,$ Change\n\n(In thousands)2026202520242026 vs. 20252025 vs. 2024\n\nNet cash provided by (used in):   \n\nOperating activities$257,627 $251,515 $248,926 $6,112 $2,589 \n\nInvesting activities(136,841)(17,452)(20,111)(119,389)2,659 \n\nFinancing activities(156,062)(182,075)(241,015)26,013 58,940 \n\nEffects of exchange rate changes on cash and cash equivalents1,260 (573)180 1,833 (753)\n\nNet change in cash and cash equivalents$(34,016)$51,415 $(12,020)$(85,431)$63,435 \n\n42\n\n2026 compared to 2025\n\nOperating Activities\n\nNet cash provided by operating activities was $257.6 million for 2026, compared to $251.5 million for 2025.  The $6.1 million increase in net cash provided by operating activities was due to the timing of working capital, partially offset by a decrease in net income before non-cash items.\n\nInvesting Activities\n\nNet cash used in investing activities was $136.8 million for 2026, compared to $17.5 million for 2025.  The increase of $119.4 million in net cash used in investing activities was primarily due to acquisitions during the current year.\n\nFinancing Activities\n\nNet cash used in financing activities was $156.1 million for 2026, compared to $182.1 million for 2025. The decrease of $26.0 million in net cash used in financing activities was primarily due to a decrease in net debt repayments of $138.0 million, partly offset by an increase in the repurchase of shares of our common stock in conjunction with our share repurchase program of $104.8 million and a decrease in proceeds from the exercise of stock options of $10.5 million.\n\n2025 compared to 2024\n\nOperating Activities\n\nNet cash provided by operating activities was $251.5 million for 2025, compared to $248.9 million for 2024.  The $2.6 million increase in net cash provided by operating activities was due to an increase in net income before non-cash items, partly offset by increased working capital.\n\nInvesting Activities\n\nNet cash used in investing activities was $17.5 million for 2025, compared to $20.1 million for 2024.  The decrease of $2.7 million in net cash used in investing activities was primarily due to a decrease in capital expenditures of $1.3 million and changes in a short-term loan receivable of $1.2 million.\n\nFinancing Activities\n\nNet cash used in financing activities was $182.1 million for 2025, compared to $241.0 million for 2024. The decrease of $58.9 million was primarily due to a decrease in debt repayments of $90.0 million, partly offset by an increase in the repurchase of shares of our common stock in conjunction with our share repurchase program of $26.5 million and a decrease in proceeds from the exercise of stock options of $3.3 million.\n\nCapital Resources\n\n2012 Term Loan and 2012 ABL Revolver:\n\nOn January 31, 2012, Prestige Brands, Inc. (the “Borrower\") entered into a senior secured credit facility, which originally consisted of (i) a $660.0 million term loan with a 7-year maturity (the \"2012 Term Loan\") and (ii) a $50.0 million asset-based revolving line of credit with a 5-year maturity (the \"2012 ABL Revolver\"). 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 $200.0 million, reduced our borrowing rate on the 2012 ABL Revolver and made several other changes to the 2012 ABL Revolver. We have also amended the 2012 Term Loan several times.\n\nOn June 12, 2023, we entered Amendment No. 7 to the 2012 Term Loan (\"Term Loan Amendment No. 7\"), effective July 1, 2023. Term Loan Amendment No. 7 provided for the replacement of LIBOR with SOFR as our reference rate for the 2012 Term Loan.\n\nOn April 4, 2023, we entered into Amendment No. 8 (\"ABL Amendment No. 8\") to the 2012 ABL Revolver. ABL Amendment No. 8 provides for the replacement of LIBOR with SOFR as our reference rate for the 2012 ABL Revolver.\n\nOn December 8, 2023, we entered into Amendment No. 9 (\"ABL Amendment No. 9\") to the 2012 ABL Revolver. ABL Amendment No. 9 provides for (i) an increase in the aggregate revolving commitment of the facility from $175.0 million to $200.0 million, (ii) an extension of the maturity date of the 2012 ABL Revolver to December 8, 2028 and (iii) increased flexibility under the credit agreement governing the 2012 ABL Revolver, including increased flexibility related to restricted payments, debt incurrence and borrowing base calculations. There were no changes to interest terms as a result of this amendment.\n\n43\n\n2019 Senior Notes:\n\nOn December 2, 2019, the Borrower issued $400.0 million aggregate principal amount of 5.125% senior notes due January 15, 2028 (the \"2019 Senior Notes\"), pursuant to an indenture dated December 2, 2019, among the Borrower, the guarantors party thereto (including the Company) and U.S. Bank National Association, as trustee. 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.\n\n2021 Senior Notes:\n\nOn 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. Bank National Association, as trustee. We used the net proceeds from the 2021 Senior Notes to redeem all $600.0 million of our then-outstanding 2016 senior notes issued on February 19, 2016 and March 21, 2018, which were due in 2024, and to pay related fees and expenses.\n\nInterest, Redemptions and Restrictions:\n\nDuring fiscal 2025, we repaid the balance of our 2012 Term Loan and terminated all related commitments. For the year ended March 31, 2025, during the period it was outstanding, the average interest rate on the 2012 Term Loan was 7.1%. For the year ended March 31, 2026, the average interest rate on amounts borrowed under the 2012 ABL Revolver was 3.9%. There were no borrowings under the 2012 ABL Revolver at any time during 2025.\n\nWe 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. Subject to certain limitations, in the event of a change of control (as defined in the indenture governing the 2019 Senior Notes), the Borrower will be required to make an offer to purchase the 2019 Senior Notes at a price equal to 101% of the aggregate principal amount of the notes repurchased, plus accrued and unpaid interest, if any, to the date of repurchase.\n\nWe have the option to redeem all or a portion of the 2021 Senior Notes at any time on or after April 1, 2026 at the redemption prices set forth in the indenture governing the 2021 Senior Notes, plus accrued and unpaid interest, if any. Subject to certain limitations, in the event of a change of control (as defined in the indenture governing the 2021 Senior Notes), the Borrower will be required to make an offer to purchase the 2021 Senior Notes at a price equal to 101% of the aggregate principal amount of the notes repurchased, plus accrued and unpaid interest, if any, to the date of repurchase.\n\nThe credit agreement governing the 2012 ABL Revolver and the indentures governing the 2021 Senior Notes and the 2019 Senior Notes contain provisions that restrict us from undertaking specified corporate actions, such as asset dispositions, acquisitions, dividend payments, repurchases of common shares outstanding, changes of control, incurrences of indebtedness, issuance of equity, creation of liens, making of loans and transactions with affiliates. Additionally, the credit agreement governing the 2012 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 ABL Revolver and the indentures governing the 2021 Senior Notes and the 2019 Senior Notes.\n\nAs of March 31, 2026, we had an aggregate of $1.0 billion of outstanding indebtedness, which consisted of the following:\n\n•$400.0 million of 5.125% 2019 Senior Notes due January 15, 2028; and\n\n•$600.0 million of 3.750% 2021 Senior Notes due April 1, 2031.\n\nAs of March 31, 2026, we had no balance outstanding on the 2012 ABL Revolver and a borrowing capacity of $182.9 million.\n\nDebt Covenants\n\nOur debt facilities contain various financial covenants, including provisions that require us to maintain certain fixed charge ratios.  Specifically, we must:\n\n•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 months consolidated interest paid, taxes paid and other specified payments). Our fixed charge requirement remains level throughout the term of the credit agreement.\n\n44\n\nAt March 31, 2026, we were in compliance with the applicable financial and restrictive covenants under the credit agreement governing the 2012 ABL Revolver and the indentures governing the 2021 Senior Notes and the 2019 Senior Notes. Additionally, management anticipates that in the normal course of operations, we will continue to be in compliance with the financial and restrictive covenants during fiscal 2027.\n\nCommitments\n\nOngoing commitments under various contractual and commercial obligations have not materially changed since our 2025 Annual Report on Form 10-K.\n\n \n\nWe do not have any off-balance sheet arrangements or financing activities with special-purpose entities.\n\nInflation\n\nInflationary factors such as increases in the costs of raw materials, packaging materials, purchased product, labor costs, transportation costs, tariffs and overhead may adversely affect our operating results and financial condition.  Although we do not believe that inflation has had a material impact on our financial condition or results of operations for the three most recent fiscal years, supply and labor disruptions may have an inflationary impact on our costs and a high rate of inflation in the future could have a material adverse effect on our financial condition and results of operations.  More volatility in crude oil prices may have an adverse impact on transportation costs, as well as certain petroleum based raw materials and packaging material.  Although we make efforts to minimize the impact of inflationary factors, including by raising prices to our customers, a high rate of pricing volatility associated with crude oil supplies or other raw materials used in our products may have an adverse effect on our operating results."}