Good day, ladies and gentlemen, and welcome to the Q3 2013 Prestige Brands Holdings, Inc. Earnings Conference Call. My name is Darita, and I'll be your operator for today. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. I would like to turn the call over to Mr. Dean Siegal, the Director of Investor Relations. Please proceed, sir.

Good morning, and thanks for joining us this morning. As a reminder, there is a slide presentation which accompanies this call. It can be accessed by visiting prestigebrands.com, clicking on Investor Relations on the left, then on Webcasts & Presentations on the right. Today's presentation will be right at the top, #1. I'm required to remind you at this time that during this call, statements may be made by management of their beliefs and expectations as to the company's future operating results. Statements of management's expectations of what might occur with respect to future operating results are what is known as forward-looking statements. All forward-looking statements involve risks and uncertainties which, in many cases, are beyond the control of the company and may cause actual results to differ materially from management's expectations. You are cautioned not to place undue reliance on these forward-looking statements, which speak only of this date, of this conference call. A complete Safe Harbor disclosure appears on Page 2 of the presentation accompanying this call. Additional information concerning the factors that might cause actual results to differ materially from management's expectations is contained in the company's annual and quarterly reports, which is filed with the U.S. Securities and Exchange Commission. Before I introduce Matt Mannelly, our CEO; and Ron Lombardi, our CFO, I'd like to remind you that today, at be at about 5:15, between 5:15 and 5:45, if you watch CNBC, the program called Fast Money, you'll see our CEO, Matt Mannelly interviewed on our quarter. Now, I'd like to turn the call over to Matt and Ron Lombardi.

Good morning. Thank you, Dean, and thank you, everyone, for joining us this morning. We appreciate your time. Ron Lombardi, our CFO, is with me, and the agenda is on Page 3 of the presentation that Dean referenced earlier. I will start out and give some comments in terms of overall performance highlights. Ron will then take you through the financials. And then I will close it with some more closing comments, and we'll open it up for some Q&A from there. So with that, if you would turn to Slide 4. I believe you've seen this before, but just really to start out every presentation, we talk a little bit about our strategy and the key drivers for the company and how we create and deliver value today in moving forward for our shareholders. And for us, the strategies remain the same. The initiatives under the strategies may change, but the strategies remain the same over a long period of time. And our strategies have been, and will continue to be, to drive our core OTC growth, to leverage our financial profile, which Ron is going to talk to you a little bit about today, which really, we had an exceptional quarter as it relates to that, and to continue our aggressive and disciplined approach to M&A, and with that focus being exclusive in the OTC market. So with that, if you will turn to Slide 5, I'll talk a little bit about the highlights of the quarter, and I'd say, for starters, we're quite pleased and we feel we had an excellent financial performance for the quarter. Among the key measures include the fact that our third quarter revenue of $160 million is up over 50% from prior year. I think -- also, our adjusted earnings per share,…

Thanks, Matt, and good morning, everyone. Our financial overview of the third quarter results appears on Slide 15. As a reminder, unless otherwise noted, the financial information we're discussing today excludes certain TSA, integration and other costs. Our reconciliation between reported results and the adjusted results can be found in schedules included in today's earnings release. We're extremely pleased with our excellent financial performance in the quarter. That includes strong gains in sales, earnings and cash flow. Our solid revenue and earnings growth continue to be driven by strong growth and share gains in our core OTC brands, solid performance from the GSK brands and strong growth in EBITDA and EPS that is consistent with revenue gains. We also realized a record cash flow from operations during the quarter, which allowed us to significantly de-lever and reduce debt by over $80 million during the quarter. I'll give you more detail on each of these in the next few slides. Turning to Slide 16, we have our Q3 results. Our excellent Q3 results continue to reflect a transformed financial profile. Our year-to-date sales are at a run rate in excess of $600 million annually, our gross margin has increased approximately 5 points over the prior year and our A&P investment level is almost 15% of sales. For the third quarter, our net revenues increased approximately 51% over the prior year to just over $160 million during the quarter. We continue to realize strong growth and share gains in our legacy core OTC brands, with sales growth of almost 5% during the combined Q2, Q3 period. Cough/cold shipments seasoned today are off to a strong start, up 3% over the prior year for the combined Q2-Q3 period. As Matt discussed on Slide 6, we saw a shift in cough/cold timing into Q2…

Thank you, Ron. I'll just -- a couple of comments that I'll make and then we'll open it up for some Q&A. If you turn to Slide 21. Again, I think you've seen this slide before, it highlights a couple of things today that I think are particularly relevant. On the financial profile, hopefully in the results, what Ron had to say, you can see that the financial profile of the company is exceptional and has never been stronger. And when we look at our cash flow generation and what it allows us to do in terms of paying down debt, it's really exceptional, and this was a tremendous quarter for us. And you also heard from Ron at the very end, the fact that we're going out today and we'll be refinancing and we'll be strengthening that financial profile even more. The second thing I would just reiterate as I have in the past is, I think we have the right strategies, but you can have great strategies, but you've got to have great people. And for us, we're a company of 125 employees and it's the 125 people in this company that make it happen and the passion that they have for the business is why we had continued success. So with that, Page 22 -- Slide 22, I think this has been a topic that's been discussed recently, so I thought we'd include it since everyone seems to be talking about it. But recent seasonal flu incident levels. As a result of the flu incident levels, I think we're cautiously optimistic for the remainder of our fiscal year. I would point out a couple of things. If you look at this chart, the blue line is this year, 2012 and '13. And if you look at this…

[Operator Instructions] Your first question comes from the line of Joe Altobello from Oppenheimer. Joseph Altobello - Oppenheimer & Co. Inc., Research Division: Just a couple of quick ones. I guess, first, let me start out with a housekeeping item. You mentioned that the refi you expect to be about $0.01 accretive for the 45 days between mid-February and end of March. So back in the envelope, you're looking at about $0.08 of annualized accretion from that. Is that correct?

No, Joe. I think the way to look at it is we have approximately $475 million out on our term loan, and we've seen similar repricing in the marketplace with 1 to 1.25 point savings. So we would expect, using 1%, to save between $2.5 million and $3 million of cash in higher net income next year.

Because we're paying down debt, we're going to have less debt that we'll be capturing that against.

Right. It's not on the full debt levels, just on the term loan. Joseph Altobello - Oppenheimer & Co. Inc., Research Division: Okay, okay, understood. Secondly, in terms of next year, the acquired GSK brands you mentioned did very well in the quarter. And starting with next year, they will be or a lot of them will be in your sort of core OTC base, and you guys talked about organic growth. So could you give us a sense for the type of organic growth you're seeing from those brands? And then maybe what you would expect from those acquired GSK brand next year, given you'll have a full year of the innovation and marketing programs you guys are talking about.

Joe, I think the numbers we're seeing from the GSK brands on a pro forma basis year-over-year, even though we haven't owned them for a full year yet, are very similar to our other core OTC brands. And as it relates to '14, as I've said previously, we've done a lot of the internal homework in '13 for some of those brands, because remember, it's a marathon, not a sprint. We're learning about the brands and the consumers. We're doing a lot of quantitative and qualitative consumer research. We have significant A&P dollars that we intend to put behind some of those key GSK brands, including BC and Goody's, 2 in particular, that we'll talk more about in future quarters, and we would expect continued robust growth of those core brands, similar to what we're experiencing right now, which is similar to our other core OTC brands.

Your next question comes from John San Marco from Janney Capital Markets.

My question is on gross margin, down 160 bps sequentially quarter-over-quarter. That surprised me a little. And on the press release, I guess you attribute it to promotional and merchandising levels. I guess, one, did it surprise you at all? And two, when do you expect those promotional levels to win?

John, Ron Lombardi here. John, we have some seasonality in our gross margins, both from cough/cold mix, which tends to have a slightly lower gross margin than our average, as well as timing of promotional and merchandising events. So the third quarter was in line with what we anticipated and expected for the quarter.

John, I'll also add that, yes, we've talked about this. Our gross margin has increased over 500 bps this year or almost 500 bps. First half, it was about 57. For the year, were going to come in at a 56-plus gross margin, which we're quite pleased with. And we had said, and we still support the fact that long-term, we expect to get to a 57 gross margin on an ongoing basis. And so we're tracking right on, if not slightly ahead of, where we thought we would be from a gross margin standpoint 9 to 12 months ago.

Okay. That's helpful. And then focusing on cough/cold, I was a little surprised it was up 3% for this season given the consumption growth, and also thank you for the incident data that you guys shared at the end of the presentation. I guess, do you foresee shipments catching up to consumption as the flu season ends? Is there's some catch-up shipping to do and do you think you'll do that this cough/cold season or next cough/cold season?

Well, John, having been in this type of business before, whether it's cough/cold or the Gatorade business, which I was in years ago, when you're dependent on something like this. It's interesting, the reason we put the incident level out there was it's not like cough/cold has been -- influenza had been rampant the entire season. It's really mid- to late-December through January that it has picked up. So you're seeing that at retail mid- to late December through January. So if you -- you would have to be somewhat optimistic that with that pickup in terms of consumer pull in mid- to late December into January, that you would be hopeful that reorders would be coming in the fourth quarter, yes.

Got it. Do you have a view on what retailer inventories look like? Call it, relative to normal as of the end of the quarter?

Yes. As you can see in the beginning of the quarter, they were heavy because they also [indiscernible] at the end of Q2 in advance to cough/cold, but they since they've been working those down, so I think inventory late December was at normal levels and there was not any excess inventory out there at retail. Does that answer your question?

That's helpful. And then just with respect to the -- in this presentation, you put 11% consumption growth for cough/cold for the combined 2-quarter period. How would that compare to what your categories did, in cough/cold specifically?

It should be in there, John. We were at 11 -- for cough/cold, it showed that combined -- well, that's on Slide 6 that's showing that shipments combined were up 3.2% on cough/cold. On 7, it shows combined consumption. Ours was 10.9%. I'm sorry, what you're asking is the category, I believe.

Yes.

And the category, I would expect to be up -- actually I'll have to get you those numbers, but the category is up less than 10.9%. Significantly less, I can tell you that.

Okay. Great. That's what I was hoping to get to.

Your next question comes from Jon Andersen from William Blair. Jon Andersen - William Blair & Company L.L.C., Research Division: I just wanted to start with a little follow up, I guess, to Joe's question on the GSK brands. So those, it sounds like, are tracking in line with the other core OTC brand growth, which is quite strong. But with more A&P coming in 2014 behind those brands, would it be fair to assume perhaps we could see an acceleration in the organic growth rate, that part of the portfolio?

Well, I think, John, as we've said in the past, our strategy is to build the core brands long-term. So what we've done, whether it's with the Blacksmith Brands that we bought a couple of years ago or Dramamine that we bought a year ago, the first year or 2, when we first by the brands, we do all the required [ph] research, understand the consumer, our positioning, what's relevant, what's compelling. It takes several months to do that, then we'd turn on the support, and when you turn on the support, you expect some growth, but it's not like it's turning on a light switch and it all comes in right away. So we expect solid growth on those brands with the increased investment in '14. What we're really doing is to build the base for '15 and '16. Does that answer your question? Jon Andersen - William Blair & Company L.L.C., Research Division: Yes, it does. That's helpful. I had a question on advertising and promotion. It looks like -- obviously on an absolute basis the change in advertising and promotion spending was significant. When I kind of back out the brand contribution from GSK and the gross profit contribution from GSK, it looks like the advertising and promotion spending was maybe down year-over-year on the base business, on an absolute basis. I was wondering if I was thinking about that right, and if that just reflects maybe some de-emphasis of the household portion of the business?

John, our A&P on our legacy business was actually year-over-year up slightly, all right? So I know it's hard with all the numbers, but on our base business, we continue to invest, and our A&P spending was actually up slightly over prior year. Jon Andersen - William Blair & Company L.L.C., Research Division: Okay, that's helpful. In terms of gross margins, Matt, did I hear you say that you kind of have a -- your long-term target for gross margins is 57%?

Well, we had said that in the past, John. If you remember, this did come up a few calls ago when we bought GSK that we said that our long-term goal was to get to 57%. And then, pre-cough/cold season, we hit it right out of the gate with some brands, but we are going to end the year, like I said, at 56% plus, which is up from 51% a year ago. And so we are moving towards gross margin expansion and we would expect over '14 and '15 that we would be heading towards 57%. Jon Andersen - William Blair & Company L.L.C., Research Division: Okay. That's helpful. How about operating margin? Have you talked about an objective longer term or within than same time frame for operating margins within the business?

John, we haven't talked and given any guidance on that, specifically. I think what we have said is we're in the brand-building business, we want to set the right foundation now and in '14 with these acquired brands for the long-term. So it's about doing the right thing for the long-term and not trying to squeeze the most operating margin in the short-term. Does that help you? Jon Andersen - William Blair & Company L.L.C., Research Division: Yes, that make sense. Just a last question. On the refi, and maybe for Ron, how much will that refinancing help in 2014 just as we think about our estimates? That will be helpful.

Yes, as I mentioned earlier, we would anticipate saving $2.5 million in cash and improved net income next year.

Your next question comes from Carla Casella from JPMorgan. Carla Casella - JP Morgan Chase & Co, Research Division: I was wondering if you could give us any color on performance in math versus drug versus supermarket? And are there any particular channel where you're doing better or worse with new products or where you have more opportunities?

Carla, I'd say that performance, it ebbs and flows across the channel. So as we know, in this economy, the last 24 to 36 months in particular, the dollar channel has been particularly strong. And as you know, prior to the last few quarters, Walmart probably was not performing at the rate it would like, but has since picked up consistently in the last 3 quarters. And math is now doing quite well, and the drug channel, which had been doing exceptionally well, has maybe slowed a little bit, all right? So that's a little bit of what's going on in terms of each of the key channels. And I think our performance, what we'd like is we've got a diversified portfolio and we've got a diversified channel mix that allows us to smooth out across a number of channels to see -- to manage the portfolio, and it works quite well for us. So we're pursuing opportunities in all those channels, and the growth in general right now is steady, if not spectacular. Carla Casella - JP Morgan Chase & Co, Research Division: And then how much -- what's your exposure to dollar stores?

I'm sorry, say it again, please, Carla. Carla Casella - JP Morgan Chase & Co, Research Division: What's your exposure to dollar stores? Is that a significant part of sales yet?

Dollar stores represent about 11% of our revenue, I believe. 10% to 11%.

Your next question comes from Karru Martinson from Deutsche Bank.

When you look at the kind of the market share gains that you're getting here, who do you feel that this market share is coming from? I mean, is it more coming from the private label? Is it coming from the remaining bigger players in the market? Or is it really just expanding the category itself in terms of shelf?

Well, I think it's primarily coming from -- it's really primarily coming from the competition, and that competition could be large pharma companies, it could be small independent companies. I think it's coming from those people more than it's coming from private label. Although, as we've said in the past, private label is like a pendulum that'll gain momentum, then it loses momentum. And I think it has significant momentum 12 to 24 months ago, and that has not slowed. But I think it's primarily coming from those other branded competitors, is where we're gaining share.

Okay. And in terms of shelf space, there's been kind of an ebb and flow in the drugstore channel to add and take away shelf. I mean, what's kind of the current dynamic there?

Well I think the current dynamic is, from a branded standpoint, I think if you step back, all the retailers, their #1 priority is foot traffic first, and basket size. But if you don't get foot traffic, you can't grow retail. And I think what the retailers appreciate is branded -- strong branded products like ours that bring significant consumer advertising and spending, marketing spend, which as you know our marketing spend 3 years ago were 10% of sales, and today it's approaching 15%. So in a rather lackluster economy, we've increased our market spend rate by 50%. Retailers appreciate that because that drives foot traffic into their doors. And so I think that's why they appreciate branded, and our branded products.

Okay. And given the strong growth that you've been experiencing, do you foresee a need to add G&A to kind of continue that? Or do you feel that the operation you have here is -- continues to be scalable?

Well, I think, 2 things. Number one, we've proven, when you look at our G&A numbers with the acquisitions, that we get significant synergies, and our acquisitions provide us great opportunities on that front. I think the G&A that we need to add with future acquisitions is more about what do we need to be great in the future, not what do we need for today. So we're constantly thinking in terms of what is it we need to do to be successful and to be a billion-dollar-plus company? What do we need to be successful in 3 to 5 years and what are the resources we should start planning today to do that? So that's where I think we need to add, from a G&A standpoint, not to support the existing portfolio.

Okay. And I guess in that vein, you guys talked about an active pipeline of M&A. I mean, what are you seeing in terms of kind of just the size of opportunities out there? Are we talking about one-off bolt-ons? Or larger, more transformative acquisitions?

Well, I think you can see in the marketplace there has been significant M&A activity in the last quarter again. So I think there continues to be opportunities out there and we continue to be a player in that market.

Your next question comes from Frank Camma from Sidoti. Frank A. Camma - Sidoti & Company, LLC: Most of my questions were answered, but I did have 2 quick ones, if I could. The first is just could you remind us, and I think you gave a little detail on this on your view on the A&P spend for the rest of the year? I think historically your 2 largest quarters are your second and third largest quarter, if I have that right, and then it kind of backs off in the fourth quarter. Would that be consistent this year?

I think our A&P spend typically in the third and fourth quarter is up, and we would expect that again this year.

Right, right. And this year, with a full quarter of GSK in the numbers, in the fourth quarter we'll have a little bit of a different trend than prior years without the impact of the acquisitions. Frank A. Camma - Sidoti & Company, LLC: Okay, great. So I had that -- okay. And the second question is, I know you don't really focus on it much anymore, but the household cleaning revenues were flat, which is obviously a pretty marked improvement. Could you just go into why that would be?

Well, I think, what we're seeing, Frank, is some of the things that we've done with household. We introduced kind of 2x a few quarters ago. We've seen success with that in the marketplace. And as a result that's helped from a revenue and a profitability standpoint, both us and the retailer. So it's been successful on a couple of different fronts. Frank A. Camma - Sidoti & Company, LLC: Do you think the category itself may actually be stabilizing? Or do you think it's really kind of the innovation that you put out there that's helping it?

I think it's the innovation. I don't -- I think that continues to be a value-driven category. And in the current economic scenario, I don't see that changing.

Your next question comes from Reza Vahabzadeh from Barclays.

On the consumption growth in OTC as well as the cough/cold products, obviously pretty healthy trends. Is it driven primarily by just higher cough/cold incidents? Or is there -- are you getting better velocity from existing shelf space, your shelf space? And is there some contribution from additional shelf space and distribution doors?

Yes. I think it's from -- some of it is from cough/cold incidents, but remember what I said. In the consumption numbers, those consumption numbers are through 12/31, all right? So that includes the last few weeks of December where you remember incidence levels really ticked up, but that's only in the last part of the quarter. So some of it is coming from consumption. I think the bulk of our gains are really coming from increased velocity in terms of better merchandising performance and also stronger consumer takeaway as a result of marketing spend that's effective in driving people to shelves.

Got it. And as far as the additional velocity and shelf space, how does that impact your numbers in calendar 2013? Is that going to be a carryover impact as you lap prior year numbers?

I'm not sure I understand the question. Can you repeat it or state it slightly differently so I can answer it for you?

Right. So obviously you're getting better velocity and it sounds like you're getting some additional shelf space. So does that present an easy year-over-year comparison for you as you lap prior year numbers in 2013?

No. I think quite the opposite to your point. If you look at Slide 9 in the presentation, that shows consumption, all right, over the last, I guess, 9 or 10 quarters there. When you look at how we've outperformed the category, every quarter it gets harder because we're lapping strong numbers. So that's really what makes of the performance, in my mind, one of the things that makes it exceptional right now, because we're lapping very strong numbers. So, candidly, we're just setting the bar higher for ourselves next year and it's going to be a tough comp that we're going to have to work hard to beat.

Right. And I'm not sure if you've talked about this already or not, but your competitor in cough/cold, are they back? Will they be back? Any color on that?

We don't have any concrete information, we just hear things just like other people do. And as a result, what we've tried to so is focus on our cough/cold brands, increasing our marketing support, improving our connection with the consumers and with the retailers, so when they do come back, we've got a very solid foundation.

Ladies and gentlemen, [Operator Instructions] Your next question comes from the line of Jon Andersen from William Blair. Jon Andersen - William Blair & Company L.L.C., Research Division: I was just wondering, is there any reason that free cash flow in fiscal '14 wouldn't be as strong as you're seeing in 2013?

We would expect fiscal '14 cash flow to be as strong as what we saw in '13. There isn't any onetime events in '13 excluding the sale of Phazyme that wouldn't reoccur in '14.

For a cash flow from operations.

Cash flow from operations.

So cash flow from operations we would expect to be as strong, right? Jon Andersen - William Blair & Company L.L.C., Research Division: Absolutely. And then just -- I know you probably don't want to talk specifically about '14, but just in light of the new guidance for 2013, at $1.45 to $1.48, the -- if you look at the benefit of the refi, the debt paydown that you can do over the next 12 months, and if you get a little bit of growth out of the base business, I mean it would, like -- a number next year would be closer to $1.65 on top of $1.48 this year. Is that a reasonable way to think about 2014 at this point?

Jon, I think we're getting a little ahead of ourselves, but 2 comments. I mean, you talked about the refi, right, and what that can bring to it. But the other thing that you didn't mention was a couple of things. Number one, a major competitor will be back in the marketplace, so that has implications, right? And the second thing that we've said in the past is '14 is going to be the year that we're really going to focus on investing in the businesses, especially those GSK businesses that we bought to set ourselves up for '15 and '16. So we're trying to do the right things for the long-term, and '14 will also be a year that we'll deal with a major competitor coming back, and so I think you got to take both those into consideration as well. Does that answer it? Jon Andersen - William Blair & Company L.L.C., Research Division: Yes, fair enough. That's helpful.

I would now like to turn the call over to Mr. Mannelly for closing remarks. Please go ahead.

Again, thank you very much to everyone for joining us this morning. We appreciate it. We look forward to seeing you at future conferences and speaking with you on the next quarterly call. Have a very good day.

Thank you. Ladies and gentlemen, thank you for your participation in today's conference call. This concludes your presentation. You may now disconnect and have a good day. Thank you.