Edgewell Personal Care Co (EPC) 2003 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the fourth-quarter 2003 Playtex Products, Inc. earning conference call. My name is Carol, and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of this conference. (OPERATOR INSTRUCTIONS). As a reminder, ladies and gentlemen, this conference is being recorded for replay purposes.

I would now like to turn the presentation over to your host for today's call, Ms. Laura Kiernan, Director of Investor Relations. Ma'am, please proceed.

Good morning, everyone, and thank you for joining us today. With me is Mike Gallagher, our CEO, and Glenn Forbes, our CFO.

I'd like to remind everyone of the cautionary language about forward-looking statements contained in our press release. The same language applies to any comments made by management during today's call. We encourage you to read the Company's SEC filings and last night's press release, which discuss the full factors that could cause actual results to differ from those made in any forward-looking statements.

A replay of this call will be available beginning this afternoon, and will run through the end of the day on the 12th. The dial-in number is a 888-286-8010, and the pass code is 93944701. To access the webcast replay of this call, go to our investor relations website at PlaytexProductsInc.com.

Now, I'll hand it over to Mike for his comments.

Thanks, Laura. Today, we will cover a summary of 2003 results and key segment highlights. Glenn will comment on the financials, our 2004 guidance, and he will detail the recently announced refinancing. We will then take your questions, and I'll finish with a summary comment.

Well, 2003 was a year we are happy to have behind us. It was an extremely challenging and difficult year for Playtex. We faced a combination of unusual events which we worked our way through. We were significantly impacted by the competition in tampons. The sun certainly didn't shine on the East Coast. It was one of the most damp, wet summers within recorded history. The economy certainly had not been buoyant for most consumer product categories. So overall, our sales were down 8.5 percent for the year, and our profits were off significantly.

However, the year 2003 was marked by the following accomplishments. We defended our core plastic tampons franchise for the long term. We introduced a broad array of new products into the marketplace across our portfolio that will work for us in 2004 and beyond. We took actions to enhance our effectiveness and reduce our cost structure going forward, and we did make significant progress in our Sun Care returns initiative.

Turning to Feminine Care, here we successfully defended our Gentle Glide franchise, in the face of a significant competitive launch, with unprecedented advertising and promotional spending directly targeting our user base.

With defensive programs initiated in 2002 and continued in 2003, along with getting product improvements into the marketplace, our market share has stabilized at approximately 26 percent overall, and about 25 percent for our plastic applicator tampon. And we plan to gain share as we go forward. Our fourth-quarter net sales were down 6 percent, due to lower consumption, but our plastic applicator shipments were flat quarter to quarter. Our quarterly trends on plastic have been solidifying, and in January, we launched a truly innovative new flushable tampon, Beyond. We developed Beyond over the past four years, fully developing and testing the concept with consumers. Based on exceptional research results and overwhelming reception by retailers, we expect Beyond will help grow market share and grow our tampon franchise in 2004. Beyond features a comfortable, natural taper contoured tip, a flushable, colorful applicator and the incredible comfort Playtex is known for. The tampon will be targeted toward women that want the convenience of a flushable product but are dissatisfied with the comfort of their current tampon and also infrequent users of tampon. The flushable applicator segment remains a significant portion of the market, with 44 percent of sticks purchased in this segment. We're planning significant support behind Beyond, with initial advertising and promotional support beginning by approximately mid-March.

Turning to Infant Care, for the full year, our net sales were down 5 percent. Excluding the baby wipe business, our sales were down 2 percent. Higher sales in infant feeding and Wet Ones were offset by lower sales of Diaper Genie and Baby Magic. Our market share and sales trends for most of our Infant Care businesses are stable to improving. Our infant feeding is relatively flat, at 34.2 for '03 versus 34.5 for '02, wet Ones share is up significantly, at a 68 share versus 63 a year ago, and Diaper Genie shares were basically flat, in the 93 percent range.

We have faced extraordinary competition over the past couple of years in Infant Care. We have methodically fought each battle and made each of our key segments stronger through innovation, modernization and repositioning. We have emerged from this period with a very healthy portfolio, and we continue to rejuvenate and reposition our Infant Care franchise.

We launched several new products in January, new products that better align us with the needs of breast-feeding mothers, as well as to improve our cup and toiletry lines. We have launched the Ventaire natural shaped bottle, and added the NaturaLatch nipple for our disposables. These two systems will help augment breast-feeding, so that a breast-feeding mother can continue to breast-feed much longer, and have augmentation systems of feeding that she can be comfortable will not create nipple rejection by her infant. We've also added a one-step breastmilk storage kit to aid that mother in a more convenient system, and also to enhance the use of our disposable system. We've increased our Sipster cup line, with a sparkling Sipster, which is a modern-looking cup that has clear plastic both on the cup and on the top. It is unique in the marketplace, and one that we think most mothers looking for a modern cup will be seeking. And we've expanded our calming milk portion of the Baby Magic line by entering the shampoo section with our calming milk shampoo. We're seeing positive trends as we enter 2004, and we look forward to a great year in Infant Care.

Sun Care -- I have already mentioned the effect that the poor summer had on our business. The category was off 5 percent, and it certainly impeded our ability to grow our sales. Despite that, we had a solid season, and our market share was essentially flat year to year, at the 21.4 percent level. Our fourth-quarter shipments were down, as opening season orders were pushed forward to the first quarter of 2004 to better align with consumer patterns. In our overall year, shipments were just down 2 percent, new (ph) category trend and the timing of the fourth-quarter volume. We are very pleased that this business was off only 2 percent when the U.S. category was off 5 percent. This is testimony to the good success that we've had with our returns initiative, where we have significantly reduced costs associated with returns and, more importantly, were able to minimize the amount of returns that occurred during a year that could have been a disaster. We expect to see even more positive impact of savings associated with this initiative in 2004.

We've also introduced new products in the 2004 season that have been well-received by the retailers. Our new surf product is the best product for water protecting for people who are going in and out of the water constantly. Our Suntanicals line has been expanded to include a 30 SPF and and after-sun lotion, and we have revamped the packaging of some of our line in order to better communicate the benefits of our product. We look forward to a normalized weather pattern this year, and continued category growth and Banana Boat share increases.

In addition to our ongoing focus on cost containment, we initiated a detailed review to evaluate many of our processes to look for ways to enhance effectiveness and generate cost savings over time. Key areas that will benefit are our manufacturing processes in our Dover and Sydney facilities and our supply chain process. We expect savings to approximate $12 to $14 million when fully implemented in 2005. Partial-year savings in 2004 are expected to be between 6 and 7 million prior to implementation costs. The implementation costs will be about 4.6 million in the fourth quarter of 2003, and approximately $4 million in 2004. In addition, we anticipate that we will be able to reduce inventories by approximately $9 million over the next two years, as part of the supply chain evaluation.

We announced a major refinancing on January 30th that will enhance our flexibility over the long term. Glenn will cover the specifics of this in his comments. Now, I will turn this over to Glenn.

Thanks, Mike. Good morning, everybody. Just a couple of brief comments recapping 2003 outcome. Net sales were down 8.5 percent, as covered in Mike's commentary about the various business segments. Our gross margin was down; it was impacted by lower volume, as well as unfavorable product mix during the year. Our EBITDA, technically and officially, which is a very specific definition, was about 98.9 for the year. That included $2 million of what we call other expenses, which is essentially discounting and financing costs associated with the off-balance-sheet receivable facility; $2.3 million in costs related to the review of strategic alternatives; and $4.6 million associated with our restructuring program, of which 3.7 is isolated as a restructuring cost and 0.7 is other related costs that are in the SG&A line in the P&L.

Our working capital trends for the year were positive. Receivables -- we reduced DSO from fourth quarter to fourth quarter from 72 a year ago to 68 this year, and we reduced our inventory weeks of supply modestly, from 14.0 to 13.7. Our total debt at the end of the year was $793.3 million. We had no revolver drawings at the end of the year. Importantly, we paid down $34.5 million of debt during the year, and we also lowered our accounts receivable facility, in part due to the reduction in DSO by $18 million.

The key highlights of the refinancing that we have recently undertaken -- we issued $460 million in senior secured notes, entered into a $150 million asset-backed credit facility. We will use these proceeds to pay off the existing credit agreement, as well as terminate the accounts receivable facility. This refinancing significantly enhances our long-term flexibility to operate the business. It eliminates maintenance covenants, as well as near-term amortization requirements. It locks in interest rates and takes advantage of a very favorable high-yield market at the time. We also negotiated favorable terms over time, to allow us additional flexibility in the event of change of control, sale of assets, equity and the like. It also will grow; because it's asset-based, the working capital needs will expand over time as the business grows.

For 2004 guidance, net sales for the year, we expect to be up 4 to 5 percent. I believe we previously said 3 to 4 percent, but we have the same numbers working off of a slightly lower base in 2003. Within the segments, we expect Feminine Care to be at the upper end, or slightly above that range. We expect Infant Care to be at the lower end of that range. Sun Care should be well above the range, assuming that we have a normalized weather pattern for the year. Our Household/Personal Grooming trends should be down modestly in the absolute versus 2003.

Within the quarters, I think that 4 to 5 percent is a pretty good operating model across the quarters. We would expect Infant Care growth to be relatively modest in the first half of the year, as some of these new products, particularly the latch-on nipple and the natural shape, tend to build momentum over time. So we do expect an improving trend over the course of the year. Feminine Care should be above the range in the first and second quarter, as we are doing pipeline and also comparing against year ago, when we had inventory reductions. And Sun Care will be up modestly in the first quarter and very strongly in the second quarter. We continue to move shipments closer to the timing of the consumption pattern, and that would portray a very strong second quarter.

Gross margin -- we're anticipating about a 100 basis point improvement over the course of the year, resulting from the higher volume, as well as from the initial impact from our cost savings programs. Within SG&A, we would expect it to be roughly the same percentage of sales over the course of the year, as a result of stronger support behind tampons, the launch of Beyond and Gentle Glide, as well as the control of our SG&A expenses, which again ties into our cost savings initiatives. Earnings per share for the year are targeted to be between 27 and 30 cents, and relative to the quarterly expectations, I think the best way to look at it is to work off of last year's actuals. We have a couple of unusual items in the first quarter. We will have a 7 cent negative non-cash charge, related to the write-off of deferred financing from the old financing, and in the fourth quarter, we would not expect a reoccurrence of the restructuring and related cost and strategic alternative cost of 7 cents in the fourth quarter. So you can deduct 7 in the first, add 7 in the fourth, and we would expect, from an operating point of view, the earnings to be improved on a quarterly basis by about 2 to 3 cents per quarter. And we would expect the higher interest resulting from the refinancing to be down by about 3 to 4 cents per quarter. If you apply that methodology, I think you'll end up with something roughly between 10 and 11 cents in the first quarter, 6 to 7 second, 4 to 5 in the third and 6 to 7 in the fourth, resulting in a 27 to 30 outlook for the year.

Our tax rate will be consistent with our recent history, which is 36.5 percent. Relative to cash flow, again, we would expect to generate cash flow from operations to reduce debt in the $30 to $35 million range, and that is prior to the refinancing fees of 10 and bringing the accounts receivable facility back on balance sheet of about 21. So our net debt position will change in roughly the 5 plus range for the year. But importantly, the operation will still continue to generate strong cash flow, as it has historically. Interest, which is mostly fixed in rate now, should approximate about $71 million for the year. And capital expenditures would be in the 17 to 18 range, consistent with the current year.

Operator, could you please begin the Q&A?

(OPERATOR INSTRUCTIONS). Reza Vahabzadeh, Lehman Brothers.

You did not do over the Household and Grooming segment. Even though it's a small business, I wanted to get your view on that business for 2004.

Sure. Do you want to talk about that segment?

Yes. Just briefly, we expect the business to be modestly below a year ago. We continue to have very strong positions in terms of share and business strength, number one or number in those categories. We have continued to good growth behind the Woolite segment, but the numbers have been down primarily because of the change in category trends. The household gloves has been affected over the last couple of years by a shift from the permanent, long-lasting gloves to more disposable, throwaway kind of gloves. So that has depressed the category there. And home permanents, which is Ogilvie, another of our larger segments, has been declining for quite some time now. So we continue to have viable, strong, strong positions in those segments, and continue to do everything we can to try to spur some growth within the categories while we build from there.

Now, on the free cash flow front, you mentioned that you expect to do about $35 million before the financing costs. What do you expect to use that free cash flow, say, in 2004 or 2005, now that your capital structure is basically entirely noncallable, for the most part?

Well, we will obviously start chipping away at the revolver and the term loan in the short term, which would be the largest area of opportunity for us in 2004. And then, after that, we have certain flexibility to start to retire some of the bonds over time.

I see. On the tampons business, what are your expectations for promotional intensity in 2004 versus 2003, for the whole category as a whole?

Our expectations are that it will be a competitive category, but not as competitive promotionally as it was in 2003 or the end of 2002. We do not plan to promote aggressively in our own tampon business, particularly against the Gentle Glide business. We have already moved away from heavy, intensive promotional activity that ran for a year and a half from the middle of 2002 through the third quarter of 2003. We actually came off of that in the fourth quarter of 2003, and plan to continue basically a normalized promotion program against Gentle Glide.

At this time last year, you experienced a destocking by retailers for much of the first half of 2003. How would you gauge retailer inventory levels at this point in time?

We think we're at a point where we are shipping to consumption. You're absolutely right; for the first three quarters of 2003, we were eating up heavy inventory levels that had been built up as a result of very aggressive promotion activities. But at the fourth quarter, we were pretty much shipping to inventory into consumption levels, and we expect to ship to consumption levels pretty much as we go forward in 2004, which means that trade inventories are normalized, and relatively low.

Kathy Reed, Stanford Financial.

Good morning. Can you actually just quickly tell us the EPS progressions again for the quarterly results in '04? You just said them fast; I didn't get to write them down.

Sure. We said 10 to 11 first quarter.

Okay. And then, if you add the 7 cents back, you would be in the 17 to 18 --

No, no. That's baked into that number. Last year, we were at 19 cents, if you recall. Second quarter 6 to 7, third quarter 4 to 5 and fourth quarter 6 to 7.

So if you eliminated the 7 cents of debt extinguishment in the first quarter --

It would be 17 to 18.

I think that's what she asked.

Right, 17 to 18. Okay, great. Can you just give us an update on Beyond -- where we'll start seeing that in the IRI numbers, what price point it's priced at, what kind of response, shelf space, et cetera you are getting at retail?

We began selling Beyond into the trade in the fourth quarter. We were selling four SKUs. The trade response was phenomenal -- a lot of acceptances right across the buyer's desk, and pretty universal acceptance of all four SKUs. We begin shipping -- and our introductory shipping periods really run, ordinarily, around 90 days. We begin shipping January 15th, and it was pretty clear that pretty much all aspects of the trade wanted to be early shipped, which is not a pattern that we ordinarily see against our new products. We're actually starting to come to the shelf now. We're starting to see it in some of the large retailers, both food and mass. And the products will go into the planograms, in our opinion, in the appropriate places. This is a target that really is targeting consumers who have been using flushable applicator products, but realize that there are more comfortable products in the marketplace, and would like to find one that fits their needs. This product really does a great job of that. Our market research tests among cardboard applicator users against the leading cardboard applicator in the marketplace showed a significant preference for our product. We will be priced premium to cardboard applicators, and on a per-stick basis, very similar to the per-stick retail price of plastic applicator tampons. This product will retail, for an 18-count, at 4.49. Our 20-count Gentle Glide retails for 4.99. The major competitor and leader in cardboard applicators retails for approximately 3.49, and is commonly featured in retail at significantly lower prices.

This is a premium-quality product that provides the benefit of flushability and the comfort of plastic, but it goes beyond that, in that it offers something unique to the marketplace, in that it has a natural tapered tip, both for the tampon itself and for the applicator. And that has had a significant benefit to users in our consumer panels, who believe that what they get with it is very accurate placement all the time, something they don't seem to experience with competitive brands. So we are thrilled with the trade response to this product. We are very, very encouraged by extremely strong consumer research, and the movement to the marketplace has been something we have really never experienced historically. We have many majors in the trade who have made their commitment to support this brand almost on a year-long bases. So we are very excited about it. We do not plan to deep-cut feature, price-promote this product. This is a premium-quality product that will be sold on the basis of its benefits to the consumer marketplace, and to its uniqueness in the offering that it provides. We also believe it is a great opportunity for Beyond to expand the category, as a result of reaching out to occasional users of tampons who largely rely on pads but have not found a tampon that they can be loyal to. We think the benefits of Beyond will appeal to those women.

Great. And will that show up as a cardboard product in IRI data?

You know, I really don't know. We don't subscribe to IRI, and therefore we don't work with them on (multiple speakers).

Okay. Or Nielsen?

In Nielsen, it will show up as a product. It won't be classified as either cardboard -- it shouldn't be classified as either cardboard or plastic.

And also, I know you gave out Infant Care sales for the year, excluding the Baby Wipes business. Do you have it for the fourth quarter?

Yes. For the fourth quarter, it was down 3.8 percent, excluding wipes.

Down 3.8 percent?

Yes.

Also, on Sun Care, I guess in your January release, we noted that there was about a 3 million revenue shift from your fourth quarter into your first quarter. Will we see that same kind of trend occurring this year? Is that a trend -- I mean, I think you said also we will see shifting even from first quarter to second quarter, as retailers want to purchase more toward the actual prime time of usage for Sun Care. Are we going to have weird comps, I guess, in first quarter 2005, I guess, is the question.

We don't know the answer to that, Kathy. We are basically planning on a fourth quarter that will be relatively normal to the fourth quarter this year. There are some logistic issues related to Sun Care. Not all not all accounts are able to really push back dramatically their opening orders. And there are a lot of accounts that like to set up early, because they have a large skew toward sun season markets. So my guess is that you're best to plan on a normal fourth quarter, similar to what our fourth quarter was this year.

So x the 3 million in revenue that shifted in the first quarter?

Yes.

And then, just lastly, on your 4 million of restructuring charges in 2004, do you have those broken out by quarter, when we can expect to see those hit?

Yes, Kathy. As we said, we'll be expecting a benefit of $6 to $7 million, offset by these costs, so a net of about 3 million. So I would expect that the costs and the savings would pretty much offset in the first half of the year, so you would really see no impact. And then we'd start to see about a -- maybe a $1 million benefit in the third quarter and a $2 million benefit in the fourth quarter. So the savings will build over the year, and the costs really, for the most part, will be incurred during the first three quarters.

Mark Kaufman (ph), Lazard Freres.

In your advertising for the Beyond rollout, what markets are you targeting? I guess, specifically age groups, also any particular channels that advertise that you're going to be more dependent on. And I guess, ultimately the question comes up, if the big issue is is the competitors' brand Pearl, on how they were capitalizing their business, but it looks to me that it wasn't a bad cannibalization, because they were getting people to move up in price as far as their product goes. And what type cannibalization are you guys anticipating with your existing products?

Well, we are not providing specific guidance on cannibalization rate. We are using the cannibalization rate that was indicated in our research. It's actually significantly lower than the cannibalization rate that Pearl had against the Tampax franchise, for a number of reasons. First of all, we are not providing a deodorized version of Beyond in the marketplace. Approximately two-thirds of our users are deodorant tampons users, and therefore very, very loyal to that business. We have a highly loyal user base in Gentle Glide, and deodorant tampon segment significantly more loyal.

We will be moving to place this product in the vicinity of the cardboard applicator products, because we believe that those are the users who are most interested in a product that is flushable and comfortable. And we'll be targeting our activity against the younger half of the tampon category and the occasional users of tampons have not really found a tampons to be loyal to. So our goal is essentially to keep cannibalization as low as possible. The research indicated a relatively acceptable level of cannibalization. We are taking steps to try to lower that even further. And we have a solid advertising and support base behind Beyond, and at the same time, we are continuing to support, at more normal levels, what we did prior to the defensive activity of Pearl, our Gentle Glide business. And that was sufficient to see us grow our share over time in the marketplace, and it's something that P&G didn't do; they cut significantly their support for their base tampon when they launched Pearl, in order to adjust for some of the very high levels of spending that they used behind Pearl.

So for all of those reasons, we think our cannibalization impact should be acceptable. We built it into our numbers for our plan for the year, and we are very encouraged about the potential that Beyond offers to the marketplace and to our franchise.

Can I shift over to Sun Care for a minute? What is the risk that basically the inventory is not at the retail level, but actually on the customers' medicine shelves, because they bought the product -- it seems like you didn't have that bad of a sell-through last year. I guess my question really --

Is there a big pantry?

Exactly.

I don't think so. (multiple speakers). I think we worked through that pretty much in 2003, as we worked through the trade inventories. I think we probably did a pretty good job of loading up consumers. But obviously, there is the potential for building a pantry. We don't have any way of reading that, but based on the trends in our business and the patterns of consumption, we don't think there's much of a pantry inventory out there that's abnormal to a normal condition.

George Chalhoub, Deutsche Bank.

Glenn, in getting a real (ph) EBITDA for the business -- and I know I'm pushing a little bit away from the technicalities of the requirements of how to define EBITDA. But if we make the add-backs to EBITDA that are truly one-time in nature, the yearly EBITDA for '03 is around 111.5. I think we have all of the specific add-backs for Q4 of '03. Now, for the purpose of being able to project on a quarterly basis in '04, I was wondering if you could give us these add-backs on a quarterly basis in the first nine months of '03, so that we have the right anchor to project out of, as we look into this year, if you don't mind breaking those down for us on a quarterly basis.

Sure. First quarter was 0.7, second quarter was 1.5, and the third quarter was 1.6.

And all of those, Glenn, are in the SG&A line?

That's correct.

My second question is on the market share for the Feminine Care. I think that the transition that we're going through right now, Mike -- and please correct me if I'm wrong -- but we are basically going through support for Gentle Glide for the plastic side of the business, and the changeover on the cardboard side of the business. It sounds to me, if you are launching your advertising campaign in March, I'm assuming that you expect to be close to fully rolled-out by late February/early March and then to launch the advertising campaign. Is this the right timeframe to look at the transition we're going through right now?

Yes.

So the true marketshare gains that are anticipated should not become very evident before maybe at least March -- maybe February, some, but March is probably going to be more the true start of the Beyond, if you well, impact on market share.

That's true, George. It largely depends on how fast we move to full presence on the shelf, and when we turn on our advertising and promotional support, we will have, I believe, a fairly broad-based in-store display activity, which should all start to culminate within the month of March. And therefore, from there on out, we will start to see impact from a share standpoint.

And at this point in time, Mike, you are not seeing any competitive activity on the tampon side when it comes to cardboard from other people, be it potentially some reaction in terms of product production and/or maybe some tweaks in promotion to really try to have the momentum that you guys have?

Well, I think that what we're seeing is pretty aggressive price promotion for the cardboard portion of the market, which has not fared very well, as a result of the launch of Pearl, and probably our defensive efforts. And the usually heavy promotional activity that Kimberly-Clark puts behind their Kotex brand.

So what you have is us returning to a normal promotional plan behind Gentle Glide. Pearl does not seem to be aggressively promoting, but instead spending their money in advertising and targeted activities, very heavy promotion on the original Tampax product. But that's been consistent now for quite some time. It's almost the only reason for being of that product in the marketplace, and then price brands not doing all that well in the cardboard, which -- largely cardboard segment, and having a hard time getting any kind of private-label plastic going, because of the pricing of the Kotex products in the marketplace.

So, as we look at the landscape, it looks pretty much kind of business as usual, from a promotional standpoint. And we are not, certainly, planning to trigger any kind of promotion war behind the launch of Beyond. We're not looking to deeply cut the price in-store. We are certainly not planning to have significant promotional activity behind Gentle Glide. We think, from what we're going to see, is pretty much business as usual. I'm not so sure, frankly, that deep-cut promotional activity by the cardboard segment would have any impact on Beyond, because it's not propositioned on the basis of low price. It's propositioned on the basis of premium quality and offering benefits that just are not available by the competitive set.

So I think it's a difficult one to defend from that standpoint. But more importantly, we really hope that we can grow this category. We know that still 60 percent of feminine hygiene users are using pads, or 60 percent of the occasions pads (ph). But still, the largest percentage of users in this segment are dual users of pads and tampons. They could use a lot more tampons, but I really do believe they haven't found the one they want. I think Beyond represents that. It's a modern product, it's a colorful product, it's a great-fitting product. And in many ways, it's kind of what tampons have always wanted to be. So we think it's going to be very appealing to many users.

Mike, on the Sun Care side of the business, you guys continue to pick up market share. At least, the IRI data shows that. And what we have seen, though, the last kind of few reporting periods is Johnson & Johnson coming in and taking share away from Coppertone. They don't seem to be affecting you; you seem to be still trending up. But it seems like there is something going on between the other two, with J&J kind of pressuring Coppertone a little bit. What is going on in that category, and is this something we should look for, something changing drastically because of that dynamic going on?

No; that has actually been happening for quite a while, George. And what we're talking about here is off-season shares. And 80 percent of the category is consumed in five months during the summer. So when you're looking at winter shares, you are really looking at real tailings of the category. What happens is you've got a lot of non-sun protection or after-sun products being utilized, but largely pre-sun types of products. So you will see your sunless do much better. That is the heart of Neutrogena's line, the J&J brand. And therefore, they always gain share during that period of time, because there are more people getting ready for summer, people sunless products. Our line is a little bit immune to that, because we really have a true value offering in the sunless segment, where we have a superior product in the marketplace at a reasonable price. So we pretty much hang in there. But our share really gets going significantly and starts to beef up as we go into the protection part of the season, and then after-sun segment.

Esther Chung (ph), Banc of America Securities.

Hi, it's Ron Phillis. Glenn, I've known you for a real long time. And I get a question here every day, almost, that I'm not sure I can answer, so I'm hoping you can answer it for me, or for us. You speak very confidently, all of you, about your business going forward. And people wonder, in view of that confidence, why would a lack of maintenance covenants be a good thing? Or why would that be consistent with such confidence?

Ron, I'm glad you hear the confidence in our voice about the business, because we do feel good about it. We just believe that the lack of maintenance covenants and the package that we put in place is a much better long-term solution, that allows us to do what is right for the business over the long term.

What does that mean?

A perfect example would be what happened in the fourth quarter, where we were incurring costs associated with our restructuring, that are one-time in nature, that result in a significant benefit in the future.

Those are typically added back in standard credit agreements.

Well, perhaps they are, but in this case, it wasn't something that was defined in the credit agreement. And also, in addition to that, another thing that happened in the fourth quarter that would have given us a problem relative to covenants was the shifting of the Sun Care business, which we know is right for the business. It's the right thing to do, but in the short term, it squeezes you against your covenants, when you allow something like that, which is good to do and has to happen. So it's our judgment that we certainly have a great relationship with the banks. We could have, and would have, been able to amend our covenants and amend our package, probably at higher pricing, but we just felt that that would be more of a short-term fix, as opposed to doing something for the long term.

Let me add that, even though it's true that we will be increasing our interest level for the time being, as a result of this package, we have taken away any real anxiety and concern that people have regarding escalating interest rates that are bound to happen as we go forward. And if you can foresee a situation where it would not take very long for the interest rates -- would certainly have approached what we have basically locked in as we go forward. So from that standpoint, we think it has a dual benefit.

Ann Gillin, Lehman Brothers.

I wanted to go back through the first half and the second half, because when adjusting for all the items in the first half, it seems like you are forecasting kind of a flat first half year over year, and yet I guess we're going to get a step-up in promotion as Beyond comes out. The cost saves really don't kick in to offset that until second half, and while Sun Care does feel like you're getting a net benefit on the revenue line, you really won't know if there has been a full-year benefit until we get into kind of that all-important June-September period when retailers start paying you for that. So I just wondered if you had given any thought to giving yourselves a little more maneuvering room in the first half.

I'm not sure what you mean by maneuvering room, Ann. We do expect the revenues to grow in the 4 to 5 percent range. In our guidance, we have indicated that the operating earnings would increase by a couple of pennies each quarter, which will show progressive improvement over the prior-year trends. We certainly have included in our estimates, and have made the appropriate provisions for the launch costs of Beyond, which will be mostly seen in the second quarter and third quarter. So I think, in general, it's a pretty balanced view that hopefully will show steady improvement.

My question is more just that you have got a lot of first-half weighted costs, it seems, and second-half weighted benefits. And yet you seem to be sort of more of a flat projection for the first half. I'm missing what the driver is to kind of overcome those extra costs in the first half year over year.

The only extra cost that we will have will be, as I mentioned, I think, in answering one of Kathy's questions, was that the implementation costs of the restructuring will happen over the first three quarters. But we also will start phasing in cost savings, so that will be a net -- almost a wash for the first half of the year, and then we'll get benefit in the second half of the year. And certainly, the launch costs of Beyond typically are covered by the initial pipeline, et cetera. So there is revenue there to cover that.

But there's also higher interest cost year over year?

Yes, and we have taken that into account in the first half.

My second question is actually just going back to Beyond. I'm just trying to understand the consumer testing that you did, in terms of their acceptance of a higher price point. You seem to be targeting those that, I would guess, have a lower discretionary income, at the young user level, and would be having to compare this product to a market of competitors who have been very promotional, as you pointed out, Mike. So I'm just trying to understand where you saw the benefit of a higher price point in your testing.

First of all, there has been a historic migration away from low-priced cardboard applicator products to higher-priced plastic applicator products. That will continue, and it will continue, obviously, because consumers eventually see a benefit of the comfort or whatever the benefit that the individual plastic applicator may be providing over the cardboard applicators that they are using.

What we are basically doing is just intending to accelerate that conversion to premium-quality products that do take more money, but there's a great benefit that comes from it -- comfort of insertion, wearing comfort, and other comforts like precise placement. We're talking about, in essence, $1 more per period, as a result of converting. Many consumers have already indicated that they are willing to pay $1, $1.50, $1.30, by converting to Gentle Glide or, most recently, to Pearl. So we think what we are offering is a really solid proposition, because we are giving a benefit to those people that they can't get from the plastic applicator brands, and that is disposability. And clearly, these people have hung onto what they are doing, not just principally because it's a low-priced product, but because it is a disposable product. So Beyond kind of slips right in there between what the plastics represent and what the cardboards represent, because it kind of provides the benefit of both. We think, historically, women have been willing to pay more money for better products. And in this case, we have the better product that they will pay more for.

In the long run, it isn't a significant amount of money that we're talking about. We're talking about 4.49 for essentially protection for more than one period cycle. In the scheme of things, that's not a significant amount of money. Our research certainly indicated that the pricing is appropriate. In many ways, we think that what we have is really the best overall value for price in the marketplace, given the benefits that Beyond is offering.

Now also, obviously, we are not launching this behind the kind of dollars that P&G used to launch Pearl. We're not spending $80 million or whatever it was that they spent. And so our expectations are clearly not to achieve, not in year one, the $13 share level. We have a more appropriate goal for the monies that we're spending. We have a very solid advertising program that will reach our target audiences enough times in order for them to understand the message. We have a good trade-coordinated effort, and we have solid, targeted mechanisms in order to induce targeted users to try our product. And we will continue to work against the growth of this brand over time.

So what we are providing here, in my opinion, is a very, very solid alternative to low-priced tampons that do provide significant comfort benefits to consumers. At the same time, we are offering something even more unique, in that this naturally tapered tip -- there's nothing like it in the marketplace.

Just one more question, if I might, on Sun Care. I left kind of my '03 Playtex model under the impression that we were finished with the initiative, that really I know you took quite a hit for as you phased it into '03, in terms of trying to ship closer to consumption. Why is that perception changing now, and why is this carrying over into '04?

I'm not sure I understand. Why --

I think, Ann, I would say that the initiative, while we have made great strides and have had great results, due to a lot of hard work by a lot of our sales force and management team and working with accounts, it's not over. We will continue to evolve, and it involves -- we're continuing to work to get closer and closer to the consumption season. It helps the retailers by reducing their inventories earlier, and we continue to learn things. And each new season will bring more learning. So again, it's strictly a timing shift of moving the opening orders closer to the season. We said that we think that we would expect a relatively normal fourth quarter, but we don't know that. There may be additional accounts that come up with better coordinated logistics, with our help, and are able to push their business further. But the important thing is to measure the net take-away as to how much we ship in, and how much we ultimately consume, which will be driven by the category trends. And everything we can do to continue to reduce that, which we well, will help improve our cost structure and improves our relationship with the retailers. They've taken this with great open arms, relative to somebody that is trying to help drive the category in a better direction that's more efficient for both parties. So it continues to evolve.

And how have you set it up so that you're not going to run into out-of-stocks as this becomes closer and closer to consumption?

It's because we are basically managing every account on an individual basis, doing an analysis of where that account did a good job logistically, and where they may have opportunities for improvement, and then coming up with an individual solution that includes monitoring how big their opening order is, how it is disbursed by SKU, when they want it delivered, when they are going to set up, how they handle returns from a logistics standpoint, what condition the product comes back in, how much of their product is damaged beyond repair, what time they returned it, how much they charged for handling. And then we are improving upon that the following year, and then we will improve upon it the next year. So this is a major asset management -- our asset and their asset -- and with the goal of significantly reducing the overall returns level, which costs us just a ton of money.

Let me give you some perspective. Historically, when the category has been basically affected by normal weather patterns, and the category has grown; average compound growth of this category has been between 6 in 7 percent, I believe, the past five years, prior to this year. And we would push a significant amount of product into the trade to make sure that they had everything that they needed, and then we would take it all back at the end of the season. We have run between 27 and 29 percent returns of product that we shipped in. And that was considered to be a good level for a company in Sun Care, with other companies actually having worse levels. I fully believe that if we had operated in 2003 on a normal basis, and pushed in the product without regard to how much it was pushed in, we could have seen returns come back in the 30 to 32 percent range, easily, maybe higher. We actually believe we will be coming in somewhere in the vicinity of 24 to 25 percent. That is a big gap between what was likely to happen and what we made happen. When we have a normal season, that gap should even drop more, and as we get smarter about it, should drop even more. But obviously, we are not doing this as an end-all and be-all. Our goal is to grow our share to provide adequate support and merchandising to the trade so that they can grow their category. And it's not our goal to have any major out-of-stocks. And that is part of the overall program, to work with the trade in order to work logistically to make sure they have enough inventory, the right items, at the time that they need it throughout the season. And I don't think we suffered much from that this past season. I certainly didn't hear many reports of us having higher levels of out-of-stock than normal.

David Maura, First Albany Capital.

Glenn, just to try to simplify the EPS guidance and roll it back up, I am coming up with roughly $115 million in EBITDA. Does that sound like I'm using the right math?

Once again, David, I'm going to let you reverse engineer (inaudible). You are in the range of what everybody else has told me the reverse engineering gets.

Using $71 million in interest, 18 of CapEx, 11 million of tax, I'm coming up with $15 million absent working capital adjustments. You guys are saying you can get, I think, $9 million out of inventory; is that right?

Over a two-year period, yes.

What do you expect the net working capital change position to be in the business in 2004? Can it be a net source of cash?

It could be --

You're expecting some growth?

-- plus or minus 0 by a couple million.

So what are the other major uses? You mentioned an operating cash flow number of $30 million. I think maybe earlier on the call you gave a breakout of what -- I think you came out to a net debt reduction of somewhere around $5 million for the year, if I heard you correctly.

Right.

What are the other cash uses that are --?

We're bringing the accounts receivable facility on balance sheet, so that is 21 of the change. We have season expenses associated with the refinancing of about 10. That's primarily the biggest use.

And your cash taxes were very high. You had an 11 million of cash taxes.

Right. We should have relatively modest cash taxes next year, as a result of a refund we're getting from this year, some tax benefit on the write-off of the early extinguishment item, and an addition to some other timing differences in our deferred taxes. So our taxes will be pretty small.

So on a cash basis, I'm more between $1 to $5 million?

Yes.

And, Mike, we've talked in the past before. If I look at your Feminine Care business, I think you did $166 to $70 million of sales, roughly, wholesale on the tampons side of the business. Using your 26 to 27 percent market share, that suggests the total business to be had out there of roughly $640 to $650 million. Does that make sense?

You're saying category size?

Category, right.

At retail or factory?

Factory.

We think the category size at factory is in the vicinity of $600 to $700 million.

Okay, then we are in agreement. I came up with $640 million. And you've indicated that this Beyond -- you're not going to spend, obviously, the marketing dollars that P&G did; you don't expect to get the 13 percent share. Would it be realistic to say that maybe your plan is to get to at least a 5 percent share, so maybe there's $30 million of business to be had here?

We are not giving out this information. From a competitive standpoint, we are basically not providing share target targets or spending levels or cannibalization rates, or any further detail about what our activity will be. I hope you can appreciate that.

No, no; I can. I can definitely appreciate that. Let me ask you another way, a different slant. Historically, roughly 90 percent of your business had been the plastic applicator. And obviously, you are exiting, I think, the Silk Glide, the cardboard segment, and obviously you're placing that with Playtex Beyond. I would assume that in your modeling, you're not assuming a lot of cannibalization to the core business due to the introduction of Beyond. That's fair to say?

We're assuming cannibalization, and it's not fair to say that it's extensive, and it's not fair to say that it's not much. It's an impact that we have considered to be acceptable in our ability to grow our tampon business as we go forward, because it should lead to good, solid share growth for the franchise.

But lastly, and this is strategic; if you can answer it, I'd appreciate it. Obviously, November of 2002, we all got our hopes up that maybe there would be a transaction here. And you've clearly been in the process, you have continued to be in the process to maximize your shareholders' value. I have always been of the opinion that the sum of the parts are worth more than the whole. I guess, at this point in time, if you put in this cap structure, it kind of indicates to me that you're looking to go it alone for quite some period of time. And your free cash flow has been pressured; you do have some of us wondering, can you spend enough money to compete with P&G and really get your share back? I was optimistic when you announced Beyond; I think you will get some traction there. But I guess -- should I anticipate -- do you agree with me that Sun Care, Infant Care and Feminine Care, those three pieces are worth more than the whole Company together?

I'm not going to comment on then. I thought I actually might get through this entire conference call without someone asking a question about strategic alternatives. Glenn was going to fall off his chair if that happened.

I ruined it for you.

Yes, you did. Here we are down to the last few minutes, and you came up to a question that I've got to say that I can't make a comment at all on strategic alternatives. We have not announced that it's over, which means that it's still ongoing. And I'll let you interpret what that means as we go forward. I am not going to talk about anything really related to that. Let me pick up a question that you did have within that that is not related to strategic alternatives. And that is, do we have the ability to compete with P&G. And we have planned that our spending behind tampons in 2004 will be at the highest level we have really ever spent, even including the defensive period of time behind Gentle Glide, because we will be spending base support behind the Gentle Glide franchise at normal levels.. And we will be putting our launch dollars against Beyond. So the combination is a lot of spending for us in the marketplace. It is not as much as P&G spent to launch Pearl. And I don't expect that P&G will be spending as much in 2004 behind Pearl as they spent in 2003, because the economics don't make any sense at all, even to a very large company like P&G. If they took that approach to every business that they were in, they would be bankrupt before the end of the year. I think they're solid businesspeople, they're good businesspeople. And it's my expectation that they will continue to support their pearl brand, and continue to promote heavily against their Tampax brand. But we anticipate that it will be more than what would be a traditional, normal year, but certainly nothing like what they spent in the past year.

Also I think the impact of what they did will be lessened. Pearl is not the newest kid on the block anymore. We are, with Beyond, and Beyond's offering in many ways is what Pearl wanted to be. Pearl is, at best, a me-too product in the marketplace. And Beyond is a really new, creative product in the marketplace. So we think that we will appeal to a lot of Pearl users who basically are not probably not that committed to that brand, and are still looking for a product that they can support. And I think we will continue to grow the category by reaching out to new users who see a really new tampon coming into the marketplace, one that might appeal to them.

So historically, we have been a very innovative Company; we have been able to defend our brands unsuccessfully. I think, frankly, anyone else having to defend a franchise against what came at us from P&G in tampons would not have fared as well as we did. We have done, I think, a superb job of defending our franchise and keeping it healthy and, then, moving forward in a more offensive way with the new tampon that really has great appeal.

So I think, frankly, we're doing quite well in that category. And I think it's a testimony to this Company that we would take the long-term view of what was important to do behind a brand that was under attack and was important to the franchise. And that was, essentially spend what we needed to in order to end up where we have.

Mitchell Spiegel, Credit Suisse First Boston.

Not surprisingly, all my questions have been answered.

Kerry Telley (ph), Paradox Asset Management.

I'm sorry if this was answered earlier. But on the interest expense guidance for the year, does that have any assumptions about rates during the course of the year?

Obviously, there is a portion of the credit facility that is LIBOR-based. So we have assumed modest increases in LIBOR over the course of the year, which we expect to start rising, but not dramatically. And we will see how that plays out.

If you can give any detail there, is there like 25 basis points somewhere in the latter half of the year? Or is it a 100 basis point move that you're modeling?

It seems that I think we have averaged about 50 basis points for the year, over the last year. That's a rough approximation.

Chris Middleman (ph), Spencer Clark (ph).

I'm wondering -- back in 1989 -- I'm looking at the old Nielsen data, before IRI was publishing it. It shows Playtex market share in tampons was 31 percent. By the time you took over, I think in '95 or '96, it had bottomed out around 24 percent, only to get back to about 31 percent in 2001. What I'm wondering is, what did you guys do back then -- I really can't remember -- to gain that market share back? This is a pretty big amount of market share to win back, from 24 percent to 31 percent. And if you can do that again this time around, from 26 percent, would you guys be able to get back in a position where you were generating the kind of EBITDA and free cash flow numbers you were during the period of like 1998 to 2002, when you did like 160 plus million in EBITDA, on average, over those five years and 50 plus million in free cash flow?

That's a great question, and the simple answer is we built this business really on a two-step basis. The first thing we did was aggressively defend the brand against price competition from, at that time, an independent Company that owned Tampax and was public, and that was trying to build share on the basis of very aggressive promotion, in-store activity and product giveaways (ph). So we fought very aggressively, from a promotional standpoint, to basically defend our turf and to signal that we were not going to allow that kind of activity against our franchise without heavy response. That was effective. It pretty much blunted the growth of the competitive brand, which actually began losing consumption and went through 13 periods of decline. And at that point in time, the Board of that company decided to sell it, and that's when P&G bought the product. During that period of promotional defense, it was our intention to move away from this push kind of marketing approach and to go to more of a pull approach. So we moved away from very aggressive price activity and in-store activity and product giveaway, and we pretty much went naked for about six months from a promotion activity. And we ate up all of the trade inventory, which had been built up over time, so that we could be in a position of shipping to consumption. And most importantly, we developed a position and shifted our promotional dollars to advertising, in order to communicate it to consumers, that basically indicated the quality of our offering in the marketplace and appealing to those dual users of pads and tampons to use Playtex Gentle Glide, because our position was basically, if you are using a pad, it's like using a diaper. And Playtex offers comfort that is so comfortable you can't even feel it. And as a result of that strategy and a consumer outreach approach and marketing activity, we steadily grew our share over a period of time. And certainly, our EBITDA was highly reflective of that.

There is not much different, really, about what we're doing today than what we did back then. We aggressively defended our brand, and made a statement to our competitors that we are not going to give up our franchise. We had a significantly greater competitive attack this time than we did before, because our user was singled out with advertising and couponing and much more money. But we did defend our brands successfully, and we moved to improve our products in the marketplace. Now we have moved towards continuing to support it with marketing activities and reaching out to new users to bring them in and (indiscernible) back to where we were.

At the same time, because of our innovative capabilities, and because we have been working on the product for quite some time, we are able to introduce a really unique product in the marketplace that should be appealing to a segment of the marketplace. And again, we will be positioned on the basis of what it can offer consumers rather than how it's priced. And certainly it's our goal to see our business build back to the levels that it was in the late 90's, and we believe that's achievable if we continue to work aggressively against this business and implement our brand of marketing.

Russell Gorman (ph), Merrill Lynch.

Just a very quick follow-up question on the taxes, Glenn. Can you tell me, given the profile the Company has right now, what your effective GAAP taxes are going to be, and what you think the effective tax rate will be on a cash basis?

Well, the tax rate is still 36.5 percent on a GAAP basis. And then, because of timing and deferred taxes, if we have no taxes due next year, it's going to be almost 0.

Constance Maneaty, Prudential Equity Group.

It's Darryl (indiscernible) for Connie. Could you just give some more specifics on the restructuring program? I know the initial program focused, if I remember correctly, on shift planning and consolidating packaging operations. I just wanted to get some more color on what the -- I guess, the incremental savings are coming from.

We are basically undertaking a major program to revamp our entire demand planning forecasting logistics system. As we have grown over time, and as our company has become more complex, one of the things we really have not put our attention to are our internal processes related to forecasting a product, manufacturing it, warehousing it and delivering it. And we believe, by working together through our organization, we will be able to find significant improvements in time and efficiency. And that will benefit not only our continued cost structure reduction, but also maintain the very high levels of trade service that we have built over time and, at the same time, help us to manage our assets significantly lower, as well as, therefore, benefiting from reduced carrying costs of those assets. This is a project that will take six to nine months in our implementation. It's underway and offers, we think, a significant overall efficiency benefit to the organization.

Is there more facility rationalization involved?

Not contemplated at this time. We are always looking at our facilities and our sourcing of our products. And as long as our cost structure internally is better than the cost structure externally, we are happy also; as long as our flexibility and ability to manufacture products maintains itself, then we will continue to do that. More than half of our manufacturing is done outside, through contract packers. And we have, over time, moved product in that area. The remaining product that we have that we manufacture is all customized manufacturing. Nobody else does it, nobody else really can do it, frankly, as well as we can. And there's lots of secrets of technology that we maintain as a result of doing it the way we do. So I won't say never; it's certainly something we are always open to, and it depends a lot on what alternatives present themselves.

Reza Vahabzadeh, Lehman Brothers.

My question has already been answered.

Mark Kaufman, Lazard Freres.

Do you care to comment about your international business?

Our international business is relatively small. We have a very nice size business in Canada, very similar to the portfolio of products that we offer in the U.S. or the good business in Puerto Rico. In both of those places, we have our own teams. The rest of the world is done through distribution. We have a solid business in Mexico, Brazil, Australia and a number of items offered in various countries in Europe.

This business is done through distribution, because we have no intentions of investing in bricks and mortar or organizational structure outside of North America. 97 percent of our business is in the North American market, and that's where we know best how to compete. That's where the market is the most stable, and that's where the economies of scale work most dramatically for us. So, being a leveraged company and a relatively small company in competition with much bigger companies, we have got to make some priorities. And our priority is really to be everything we can be successfully in the North American market, and use the international market business as an add-on for additional volume on a profitable basis.

George Chalhoub, Deutsche Bank.

Glenn, on the free cash flow, just to kind of make a point of clarification, I think if we start with the capital structure on a pro forma basis for the refinancing on January 1st, I think the net debt reduction from that anchor point, from that level, will be $25 to $30 million, not $5 million. I think your $5 million is more related to the existing capital structure before the refinancing. Is that right?

That's right. On a GAAP basis, if you look at our balance sheet, the balance sheet, that's the way it will be. But you are absolutely right; if you throw the accounts receivable facility in, at the end of the year, then the debt reduction will be north of $25 million. Thank you for clarifying that for us.

Esther Chung, Banc of America Securities, which I believe is Ron Phillis.

Hi, guys. I'm going to ask another question that is frequent in nature on the phones over here at BofA, and one that I'm also not sure I can answer for folks. So I thought I would put it up for you guys to answer for people on the call. Having gone through the Infant Care competitive situation, which was arguably a, longer than expected and b, definitively damaging, and then having gone through the Feminine Care competitive situation, which was, a, longer than arguably expected and, b, also very damaging, why would you -- perhaps, Mike -- look the same bullies in the face with another product that could incite another round of this?

First of all, I am not sure I buy your promise, Ron.

I can go back and -- I can get you conference call transcripts, if you want, Mike. We have all of them.

(multiple speakers) said, Ron. But I think the point I would make is, first of all, our Infant Care business has come through this very heavy competitive activity fully intact and ready to go. I think our portfolio today is stronger than it was. Competitive activity in many of the categories has abated. Pretty much what we've said would happen -- maybe it's taken longer for it to happen than what we said; I'll certainly grant you that. But our Infant Care businesses is, I think, stronger than it was before all of this happened. And I think the marketplace results will show that. As far as tampons go, everybody knew that P&G was going to launch some sort of major activity in the tampon market. It took them five years to do it. And I think there were a lot of people saying, hey, once that happens, that's the end of you guys. And it's not the end of us. We did what it took to defend our business, and we are running our business the right way. Launching a new product isn't, in essence, something that we are doing because of the threat of P&G; we're doing it because it's the right thing. We developed a great concept. It proved out. We invested in the machinery and equipment, we learned how to run it and got up to scale. The trade response has been phenomenal.

And it's not about us versus P&G. We've said all along that both companies can be very successful in the tampon market if they both act and behave responsibly. I think all of the efforts that we have undertaken have been responsible. I think that they have ended up cannibalizing their own business dramatically, ending up with two franchises. One is really critical mass, and it's propped up with significant amounts of money that I don't think they are going to be able to continue to do. They certainly have the wherewithal, but I don't think they have the lack of intelligence to do it -- and then an eroding base business that provides them with heavy profit that is now being drained dramatically by themselves, and probably will continue to drain over time. And that weakened that franchise.

If you want to measure it on the basis of a 12-month basis, hey, I grant you that have gained a significant amount of dollar share and we have given up some. Overall, they grew their business by 3 percent from a consumption standpoint in the first 12 months of Pearl. Overall franchise growth was 3 percent of sticks. That's not what you get for $80 million launches. It should have been a hell of a lot better.

Now, as we go forward, we are offering a true, meaningful differentiated product in the marketplace. And we're doing it, I think, reasonably from the standpoint of we're not trying to take away somebody else's franchise. We are trying to grow this business. So I think, as in the previous tampon war that was cited by one of the callers, we came out of that very well. I expect that we'll come out of this one very well.

So I guess, Ron, I guess I am much more optimistic about Playtex and its possibilities, given where we are today and what we have been through, than you seem to be on us.

Mitchell Spiegel, Credit Suisse First Boston.

I just wanted to offer Ron, if he's having problems answering questions, he can call over to us. And we'd be happy to walk been through any of the questions that he may have.

I agree.

Thank you very much. Let me wrap up. I think, frankly, that was actually a good question. It was a tough question. I'm sure it was well intended, and it gave me an opportunity to show some of the passion I have about what we do and how we do it.

We don't control the weather, we don't control the economy and we don't control competitors who want to throw a lot of money at a category to unseat us. That's out of our control. We control our pipeline of new products, we control how we market our brands, we control how we defend those brands. We control, to a large degree, our cost structure.

And in all of those areas, I think we're doing a very good job of stewarding this business from a long-term perspective, so that it can be as healthy as possible as we go forward. We have defended our tampon business against aggressive competition, and we are now back to running our business the way we did before that competition, with an outreach program. We have launched an exciting new product that I think is going to stimulate growth in the category. We (technical difficulty) a tough patch of weather, held onto our franchise position and, more importantly, significantly improved our cost structure as it relates to the return initiative. And we are well poised as the category shows normal growth to see significant increase in our business in 2004 over 2003.

And our Infant Care business has indeed come through a very intense firestorm of competitive activity over the past several years. And now we emerge with a stronger portfolio, better positionings, better offerings and, in many cases, a more weakened competitive environment. We are excited about that, as the go forward.

We have new initiatives related to cost reductions that will improve our overall cost structure, and at the same time should improve our efficiency and effectiveness in getting products to the consumer. And we have refinanced our package in order to end up with a package that really frees our hands to operate the business the right way, and at the same time eliminates the concern about escalating interest rates that will eventually occur in our marketplace.

So from that standpoint, we are excited about 2004, and we are proud of the accomplishments that we made in 2003 that will lead to our success in 2004. Thank you all for your support.

Ladies and gentlemen, thank you for your participation in today's conference. You may now disconnect. Have a great day.