Edgewell Personal Care Co (EPC) 2004 Q1 法說會逐字稿

Good day ladies and gentlemen and welcome to your quarter one 2004 Playtex Inc. earnings conference call. (OPERATOR INSTRUCTIONS) I would now like to turn your presentation over to your host for today's conference, Ms. Laura Kiernan, Director of Investor Relations. Please go ahead.

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

I would 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 evening's press release which discuss in full the 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 Monday, April 26th. The dial in number is 888-286-8010 and the pass code is 57243776. To access the webcast replay of this call go to the investor relations portion of our website, playtexproductsinc.com.

Now I will hand it over to Mike for his comments.

Thanks Laura.

Today we will cover the summary of our first quarter results; I will review the highlights my product line. We will comment on the conclusion of the review of our strategic alternatives. Then we will give the financial highlights and 2004 guidance. We will do Q&A and then we will wrap up.

I guess it is not a surprise to say that we think we had an excellent start to the year. Our new products have sold in very well; our market shares remain stable; we've seen good results in our key brand categories. Net sales were up eight percent over a year ago. Operating earnings were up 16 percent, driven mostly by sales. We're holding our outlook for 2004 pending greater visibility of the Beyond impact in terms of consumption and cannibalization and the weather impact on the Sun Care category growth rate.

In Feminine Care our sales were up 17 percent as we launched our new tampon, Beyond, and we continue to see stability in Gentle Glide. Beyond has received outstanding support from retailers. Shipments began January 15th. We achieved excellent distribution by the end of the quarter. Our advertising began March 15th. Our share in the month of March for Beyond was 2.1. Our total dollar share for tampons for the quarter was 25.9 versus 25.6 the previous quarter and 26.8 a year ago.

In analyzing the shares versus year ago keep in mind three factors -- first, Pearl was growing significantly in the first half of last year from about a 10 share to a 14 share; our Silk Glide product has been discontinued in the traditional sales channels and it had about a 1.5 share point in the previous year's quarter; and Beyond has just beginning to reach shelf in the quarter.

We will continue to evaluate shares over the next few quarters on a sequential basis as the trial, repeat and cannibalization levels of Beyond are determined. In summary, we're very pleased with our progress in this segment.

In Infant Care our net sales showed an increase of 11 percent for the quarter. We're seeing the benefit of strong reception by retailers of our new products, a more normalized competitive arena and ongoing progress from our positioning and better tie-in with the breast-feeding moms.

Overall market shares remain stable. We saw significant increases in feeding products, disposable, reusables and cups as a result of new product shipments and continued momentum of VentAir. Wet Ones continues to grow; it's share was up 9.5 points to a 73 share. We remain the dominant number one player in hand and face wipes. Over the past several years this category has expanded nicely as a result of significant competitive entries, none of which have established a strong viable position.

In Sun Care our sales were up three percent over a year ago. We continue to effectively manage the timing of shipments to better align with the consumption period. We experienced a shift of opening orders from the fourth quarter of 2003 into the first quarter of 2004 and further shifts into the second quarter this year, as we had expected. We're encouraged by the early season category and consumption trends. We are up 10 percent over a year ago. However, it is early, as only about 11 percent of the season consumption occurs in the first quarter.

Overall we are well-positioned to have a great season, assuming the category returns to normal weather patterns. We will continue to maximize the positive impact of our returns program throughout the 2004 season.

A brief comment on the strategic alternative process. As noted in our press release, we've concluded the review of strategic alternatives and determined that it is the best interest of a company to remain independent and stand alone. We believe the best way to maximize shareholder value at this time is to continue to execute our strategy to build our leadership brand positions, while enhancing on our ongoing cost structure and working capital requirements. With the recent refinancing we have greater flexibility to execute this strategy, and we can make the right long-term decisions, as we did throughout all of last year, as we evaluate our strategic alternatives. Going forward, we will continue to consider any strategic opportunities that increase shareholder value.

I'd like to express my great appreciation to our family of Playtex employees who have done an outstanding job of staying focused on the key priorities of the business during this highly uncertain time and managing through 2003, which we all recognize was a challenging period. They did a great job.

Now I will turn this over to Glenn.

Thanks Mike and good morning everyone.

First quarter of 2004 financial highlights, I will reiterate that we obviously had a very positive quarter; a good start to the year with sales up eight percent, operating earnings up 16 percent over the prior year. Our gross margin of about 53.2 percent was pretty much in line with year ago, and we remain committed to increasing the gross margin over the course of the year. Based upon our cost restructuring program that will have more benefit as the year progresses. SG&A of about $67 million was up modestly versus a year ago and down as a percent of sales. EBITDA -- 34.1 -- also includes 6.4 million of net charges related to the refinancing and other expenses of 0.3. Total interest expense was as expected at about $16.7 million. We continue to make very good progress in our working capital trends. Our receivable DSO was down from 78 last year to 68 this year. We continue to make good improvement there. And our inventory was down about $9 million in the absolute versus prior year. And our weeks of coverage approximates about 11 versus 13 prior year.

The total debt at the end of the quarter was $827.5 million, which included $20 million of revolver drawings at the time. We also have additional borrowing capacity under our new credit agreement of about $94 million. As we noted, we've completed and closed the refinancing on February 19th. Again, to reiterate, we issued 460 million of senior secured notes, entered into $150 million credit facility, which is primarily asset-based, we paid off the existing credit agreement and terminated the accounts receivable facility, bringing the full accounts receivable back onto our balance sheet. We had fees and expenses of about $12 million. It also included a non-cash write-off of 6.9 million related to the early extinguishment of debt. And we recorded a $500,000 gain on the retirement of $10 million of sub-notes that we purchased on the open market. And that all went according to plan.

For our 2004 guidance we're reconfirming the 27 to 30 cents earnings per share for the year, which includes the non-cash write-off of 7 cents per share. We have indicated no change to the year expectations. As Mike indicated, we will reevaluate the year for the next quarter's call when we have more visibility behind the consumption trends in both tampons and the Sun Care category.

I will reiterate the highlights that we previously committed during the last call, and obviously, as always, you can work with Laura to tweak your models as necessary.

Total net sales for the year checking up in the four to five percent range, and that should be good for the remaining quarters as well. Within our key categories Feminine Care would be up at the upper end of the range for the year; up a little more in the first half and lower in the second half. Infant Care will be at the lower end of the range with sales growth relatively low in the second quarter and stepping up in the third and fourth quarters. Sun Care will be significantly above the range and highly dependent upon the growth in the category in the second quarter, but at this point we anticipate that the second quarter could be up in the high teens given the shift in the timing that we've experienced and communicated to date. Household Personal Grooming will continue to be modestly down versus the year, as we saw in the first quarter.

As I have indicated, the gross margin, 100 basis point improvement for the year still looks like it's very much in reach. SG&A should be about the same percentage of sales for the year on average. No change to the quarterly EPS guidance. For the next three quarters it should average about five to six cents per quarter, as we gave you last time. Cash flow prior to financing activities is estimated at 30 to $35 million, and with the refinancing we will have the fees of about 12, and we brought the accounts receivable back at 21, so the net debt position will change modestly over the course of the year from a balance sheet perspective. But the important part is that we are continuing to generate positive cash flow out of the business. Interest is expected to run at about 71 million for the year, CapEx in the 17 to 18 range and working capital should be about flat for the year with receivables growing with sales, offset by improvements in our inventory management.

Final comment on the restructuring cost saving status -- we're on target during the first quarter. We generated savings in about the $1.5 million range and had onetime expenses of about $1.5 million, of which 1.4 is isolated and designated in the SG&A area. For the full year of 2004 we're on track, expecting targeted savings of 6 to $7 million and implementation costs of approximately 4 million. And the 2005 impact is 12 to $14 of savings, plus about a $9 million reduction in inventory over the two year period.

Operator, could you please begin the Q&A?

(OPERATOR INSTRUCTIONS) George Chaloub, Deutsche Bank.

Glenn, quickly on the gross margin, it was, as you mentioned, very close to the year ago, but slightly lower despite the nice jump in sales. Can you give us more specifics about that dynamic please?

As we said, we're expecting improvement over the course of the year because most of the cost savings net impact will really benefit us more in the back half of the year, and the back half of last year was pretty low. We also in the first quarter, as a result of some of the new products, had a little bit of a timing difference of some of our trade spending that gets some of the new products set up, etc., that's a little higher as a percentage of sales in the first quarter than it was prior year. Other than that, it pretty much came out as we expected it to.

On the SG&A margin, Glenn, you had a nice decrease in Q1. You're keeping the full year SG&A margin flat to the year ago. Is that because a lot of the advertising and promotion behind Beyond is going to start kicking in really in full force starting and Q2?

Absolutely correct.

On the working capital side, obviously the DSOs and inventory turns in Q1 showed significant improvement. Is it a little bit conservative on your part to maintain working capital flat? I know sales are increasing, so in normal ways working capital would be a use of cash. You are saying it is going be flay? Could it be a source of cash potentially as well?

I think the call for the year still is pretty good. Again, it's going to be driven by the level of business that we incur in the fourth quarter, which will drive our receivables, which we clearly hope to be better than last year. And the inventory would be -- as we said, we're going to make improvements of that through our cost restructuring, so that would be the offset. But I don't think it's going to move too much from the range of zero plus or minus a couple of million dollars. But we are continuing to do the kind of things that we've always done in terms of managing our receivables and inventories, and what ever opportunities are there we will certainly taken advantage of.

My next question is on the market share. Mike, you gave us a pretty detailed kind of assessment of the Feminine Care market share dynamics between Beyond, Gentle Glide and Silk Glide. Is this what you expected or is it slightly better or is it slightly worse? And do you see -- I know it a little bit early because this is the initial launch period, but the stability of Gentle Glide, is that a positive surprise or as expected?

Gentle Glide came in about where we thought it would be. I think if there is a positive surprise it looks as though Beyond is getting off a little bit faster than we had planned, and that's an encouragement. But we still have a lot of wood to chop, and we never intended to see this thing shoot up dramatically in a short period of time. It was always a concept that would build over time. It's certainly a little ahead of our expectation. We're encouraged by that.

Mike, on that front obviously AC Nielsen and IRI do not capture Wal-Marts. Can you give us a little bit of flavor? It sounds to me like you might be doing better at Wal-Mart than the rest of the channel base that we can see from the market share readings.

Yes, that's generally the case pretty much for all of our businesses. It's certainly true certainly true for tampons. Our business has been stronger and more buoyant in Wal-Mart. And actually for our Infant Care business it is true for not only Wal-Mart, but the other non-Nielsen read segments like Toys-R-Us, which is an important player in our Infant Care business, and other baby outlets which tend to get our new products out to the marketplace faster and probably have a little bit more in tune, aware and interested clientele than the traditional classes of trade. Unfortunately, the measurements that we've got available to us tend to be the ones that are lagging the ones that are performing better.

Thank you. Nice quarter.

Kathleen Reed, Stanford Financial.

Good morning. Also, great quarter. Just a couple of quick questions. First, on your EPS guidance that you're maintaining for the year of 27 to 30 cents, obviously that excludes the 7 cent debt financing charge that you took in the first quarter. Does that also exclude or is that including the 4 million of restructuring charges?

It includes the 4 million of restructuring, which, as we said, is a net savings of about 2 to 3 for the year. But I just want to clarify -- when you said it excludes the 7 cents, the 27 includes the seven cents (multiple speakers) exclude it, it makes it higher. Just to clarify.

If you put those two back, just be sure, you are saying 27 plus 7 plus 4, right?

Correct.

That would be 38.

Right.

Thanks. Also, just second question. Now that the Board has decided that Playtex is going to continue to operate currently as a stand-alone company, I just wondered if you had an update, Mike, that you could comment on the status of your contract or when we get some update on that.

I was a little surprised when Laura told me the other day that there was so much chatter among analysts and investors about my contract. We have had a very, very difficult year. The Board and the management team have worked very hard on the refinancing, on defending our businesses, on improving our cost structure. And those are the things that have really been on our plate and that we've been addressing, which is I think appropriate. The status of my contract will be addressed in due time, and I think maybe this chatter is heightened by all the activities going on in other consumer packaged goods companies. But suffice it to say, from that standpoint I don't think the chatter needs to be concerned about this.

Just finally, if we strip out both the debt financing charges and the restructuring charges in your first quarter, it looks like your tax rate is a little bit higher than where it's been in 2003; it looks like it's in the 38.4, 38 percent range. And I just wondered if we should expect that ongoing for '04.

I think that at this point in time it's probably prudent to assume a little higher rate this year. We will continue to evaluate that over the course of the year. Last year's rate, which we carried over initially, was benefited by some settlement of some tax audits and some other minor onetime items. In the absolute magnitude of magnitude we're talking about a couple hundred thousand dollars, but it certainly gets magnified with the lower earnings base. And we will continue to refine that as the year goes by.

So is the 38, 39 percent range more accurate for '04?

I think that's what you should use at this point, and we will obviously do everything we can over the course of the year to further refine it, as well as see if other developments help us in a positive way, as they have in the past.

Just one other final question. Can you give us the Infant Care sales if you exclude your baby wipes business?

Yes. We've got to do a little mental math here. When you say baby wipes are you talking -- you're talking about our Baby Magic wipes business, is that right?

The one that you're discontinuing, yes.

It's about $1 million both years. So basically it's a very small number these days. It's almost equal year-to-year, and it's about $1 million.

Actually our baby wipe business was flat year-to-year.

Thanks very much.

Ann Gillin, Lehman Brothers.

Glenn, I just want to go back to the gross margin question with George because a year ago your gross margin dropped fairly significantly because of the negative mix impact. Given that you're getting so much more benefit from the Fem Care business deceit this year, I just wondered why we were not seeing more of an increase in gross margin.

I think the larger thing that's driving it is what I had mentioned to George, Ann, which is it also has the impact of our trade spending, which is largely tied to the timing of when programs occur, as well as there is obviously good support behind new products in terms of getting early display, getting it up, and that I think is a larger driving factor of the margin than -- we clearly had a good mix quarter and we also have new products in there, etc., that have some start-up costs, etc., with them.

Are the new products at similar gross margin levels to their category, to their division or segments?

It varies. As you know, all of our margins are very strong, but I think some of the new products probably have a little lower going-in rate. But as the volume increases over time we tend to get a better benefit.

Secondly, I just wanted to get to the cost restructuring program. I guess we're hearing about some reorgs that have been happening at Playtex, and it feels like there may be some more costs potentially to come. I wondered if you could comment on that.

We began this process initially in our manufacturing operations and instilling new methodologies of team based manufacturing and new processes, which has allowed us to become more efficient in those operations and hopefully more effective. We then have moved on to our whole SG&A operation and the process related to it. And involved in that was the issue of how we structured our businesses from an organizational standpoint, spending a great deal of attention against the sales structure, which heretofore had been essentially divisionalized from a US business standpoint in two consumer divisions and then a separate organization for nontraditional classes of trade. Through our work we determined that by combining the sales organizations we could have a more effective and efficient organization against the trade with more resources for major accounts, still keeping our brand orientation so that we have expertise in the category management with the trade. As a result of that, we decided that it would be best to create one US division and one international division and put all of our brands under one management team and a combined sales organization, and so we've made those change. And that has brought significant efficiencies which were part of our planning process and are incorporated in the numbers that we projected into this year and into the next year.

Suffice it to say this was a big step on our part. We believe that there is the potential for benefit against the business with our major accounts, and streamlines our processes and allows us to get additional cost savings in support areas. So this is really just part of the overall plan that we've been working on and continues to show that there are ways of becoming more efficient and at the same time hopefully more effective.

Two related questions. Should we be then expecting some of the reporting segments to change as a result of the internal changes? And secondly, it feels like, particularly with the concentration in the US, that you may also be addressing issues of succession which definitely are on everybody's minds these days.

Relative to the reporting, Ann, it will not affect our brand reporting. In other words, everything that we've shown you here in the press release and the analysis by segment will not change will not change. But we are evaluating the segment reporting analysis of our SEC filings, which again follows your divisional structure. But again, that is just reshuffling some of the US businesses around.

And on the issue of concentration in US under one president, does this kind of help to also set out more succession planning, which I'm sure the Board does speak with you about?

It was done more from the standpoint of what's the right way to operate the business and to do it as efficiently as possible. We have a very strong management team underneath me here at the company. They have had a lot of experience in the industry and have worked together as a team for quite some time. It is a strong organization without very little change to it. So from that standpoint we think that we are well poised as we go forward from a leadership standpoint and if ever needs to be a succession standpoint.

Not to belabor the point, but on the contract negotiations, given how much other things that you have been concentrating on, if it weren't resolved by the end of June is there any reason for us to think that you wouldn't be there on July 1st?

I don't think there is a reason for you to think that.

Thank you.

Bill Steele.

One question. Could you give me the sales of Beyond in the quarter?

No. I'm sorry, but we don't break out specific details of our businesses by segment. We will tell you that it was a strong sell in, stronger than we had anticipated.

Would you say that it accounts for the vast majority of the year-over-year improvement in Feminine Care?

No. It was a portion of it. We also had a reduction because our Silk Glide business had a healthy size of business a year ago that really evaporated this year. So the slack was taken up by our increase in Gentle Glide. So we had strong Gentle Glide performance and excellent sell-in on Beyond.

Is it to fair to say, then, that Beyond was at least EPS accretive to the quarter considering that you didn't turn on the advertising machine until March 15th?

I think that's a fair statement. It's obviously just a snapshot because the spending and the support comes later, but certainly the pipeline is a positive thing to us.

Considering the trade promotion behind the product, getting it on the shelf, can I assume then that it was kind of gross margin dilutive in the quarter?

I think that's a fair, marginally.

Thank you.

Amy Chasen, Goldman Sachs.

First question is on the sales force consolidation. What exactly is the timing of that because I'm a little bit concerned that there could be some short-term disruption as you get some salespeople who are learning new brands and the businesses? Can you talk a little bit about, number one, the timing and how you're managing that; and whether you are assuming any disruption to your sales in the short-term?

That's a great question, Amy. It really is. Because I've spent the past six months worrying about that issue, as we've talked and discussed the right organizational structure in working with the team here. And I've probably spent more time on that particular area than anything else that I have worked done because I was very concerned that if we didn't do this right there could be some disruption.

We worked through a team effort to find the right structure involving the VPs of sales of our organization, and they add a significant amount of value to our thinking. We reiterated the plan over and over again in order to get to one that made the most sense and gave us the most protection from a business standpoint. Then after we had resolved that, it was a question of how fast can we implement this, secure people for the new positions and begin training and development necessary.

And that process is all underway at this point in time. The announcement of the organization was done over a week ago. We are up and running now. The training is being implemented as we speak. There isn't a significant amount of account disruption. There's just the learning of new businesses for that particular account. We have a lot of continuity at the brand level and at the category management level to facilitate that.

So our whole goal is to execute this without a misstep, without dropping a ball. The sales organization and leadership is committed to doing that, the division president is committed to doing that. And so far the sales organization is highly charged by this new organizational structure. They're exhilarated, they're excited, they see the benefit of it and it looks like everyone is operating on all eight cylinders. From that standpoint I don't anticipate a disruption, but largely because of the work we put into it for the past six months.

It sounds like the training is happening at the same time that you have actually executed the shift and I would have thought that you would have wanted to train people kind of three to six months prior to actually putting it in place so that when they would snap their fingers and they're online that they kind of know what they're doing. Is that not --?

First of all, they do know what they're doing. Secondly, your assumption theoretically is probably a good assumption. The problem is that would have been dilutive of their efforts because they would of known about what the new structure is, what their new roles is; they would have been spending more time thinking about what they would have to be doing down the road, and then I would have really worried about the poor implementation that could have existed on such key things as the sell-in on Sun Care in the first quarter and the successful launch of Beyond. We really had to do it this way in order to achieve as much success against those two efforts and at the same time -- the sales guys move from one position to another fairly frequently in their career, so they know how to absorb new information very quickly. And we have plenty of backup and data available as they need it as they go to the accounts. In most cases buyer relationships aren't changed; it's just a matter of representing a broader line. The initiatives are well-defined and there's plenty of organizational knowledge in support of our sales guys as they go through this process. We thought long and hard about it. Trust me, this is really the best way to implement this and it is done at the right time in our cycle of key activities that we needed to implement.

But I am sorry, why are the buyer relationships not changing? It's the same buyer for all your products?

No. The people who have been calling on these buyers generally maintain that relationship at the senior sales support level. In the more junior levels there will be some new people involved.

I'm not sure that I understand that, though, because if you're going -- and I'm sorry to belabor this, but it is important -- if you're going from a situation where you had one salesperson for Infant Care, one for Sun Care, one for tampons, now there's one person, doesn't that one person have to meet this new buyers, just to put it really simply?

That isn't exactly how it's doing. What we're doing is we're shifting our organizational capabilities and we're actually adding more people to accounts that are major accounts. So we have put a stronger team in place for Wal-Mart, for Target and for our major drug and food classes of trade. So we've added people there and we've taken them away from areas where our people were managing, for instance, food brokers. The food brokers haven't changed. They're the ones that are meeting with the buyers on a direct basis. We have just taken some of that management talent out of there and put it against the businesses. So there's a lot more continuity in the major accounts than you would think on the basis of the structure that we've announced.

Within the structure we still have brand level focus by the key categories.

And we've consolidated our category managers. There's been no change or disruption to the category managers. They are still focused on the businesses that they had. There's very little discontinuity there. And all of this has been thought through to the finest detail. It probably is as complete as it possibly could be. Progress to date has been excellent. Everyone's almost in place.

So the only place that you're really getting the savings are on the less important accounts?

We're getting it in lots of different places, but I wouldn't say less important. It's just that we have structure in place for food, for instance, which utilizes food brokers. And we have used one organizational structure there, and all we've done is we've consolidated our resources against that group.

I'm going follow-up online on that because I have just two other questions. Can you, number one, on Beyond quantify the sell-in impact in the quarter and also tell us what percent ACV distribution you have right now?

What was your first question?

What would sales in the quarter for tampons have been without the sell-in?

We haven't given that information out. We had a earlier question. We don't break out our sales by segment or by brand within segments. Beyond was strong sell-in. It was better than we had anticipated for the first quarter. Gentle Glide was about where we had anticipated it to be, and it an was increase over a year ago. And overall our tampon business is on track with where we want it to be, if not slightly ahead when you consider where Beyond is.

What's the Beyond distribution?

Beyond is virtually everywhere at this point in time, in all the major accounts, representing probably 90 percent of ACV. So Beyond is fully in distribution. There are one or two accounts that are slightly behind, but other than that we're there.

Last but not least, on the strategic review, will you now pursue the sale of some of your non-core businesses or is that off the table as well?

We will do whatever a company in our position or any company out there would do, which is to always analyze your businesses to see which ones make sense and which ones don't. And we will treat those as we would whether -- now that we're not in a strategic alternative process, we will operate on a normal basis, as every other company does. At times we may shed brands because they don't fit our strategic needs or because it's the right thing to do from a shareholder evaluation.

Thank you.

Reza Vahabzadeh, Lehman Brothers.

Just as far as distribution of your new products in Infant Care, what kind of distribution have you reached? As you mentioned, you reached 90 percent for tampon products. What about Infant Care?

That's a little bit more difficult because we really have two types of accounts. There are four accounts that represent about half of the business, if not more actually, depending upon the specific Infant Care business. And we get to shelf in those accounts very, very quickly, and we're already there against these new items. The balance of the accounts it takes longer because there are different timings for planogram sets, and they tend to do it once a year on a staggered basis throughout the year, and you kind of come to the shelf in the slower time point. But one of the good things about the concentration of this business is that you can virtually get 50, 60 percent distribution very quickly, and then you can begin your program against that.

Got it. I guess because of the fact that so much of your sales are outside of the AC Nielsen track channels it's hard to see how the consumption of your Infant Care products are progressing. Can you comment on that as well? We see more on tampons than we see in Infant Care. Hello?

Just a second. I had a mental lapse there. I didn't understand exactly what you said and Glenn was interpreting. I apologize for that. We're seeing that the consumption numbers that we have available for the non-Nielsen classes of trade -- we're talking Wal-Mart, Toys-R-Us, Babies-R-Us, other baby accounts -- very good response to our new products and it's very encouraging. I can't really give you any specifics beyond that other than we are quite pleased with how well they've been received. There's initially strong indications of movement in the early distributed accounts for our new nipples, for instance, and our new holders for our disposable feeding system.

The VentAir hard bottle is just continuing to grow dramatically and the new line against that is doing well. We fully anticipate that we will be a clear leader in hard bottles from a dollar standpoint in the next six months as a result of this initiative. And that's one where we really, I think, accomplished a great deal since we hardly were in hard bottles a number of years ago. And now it's looking like we will be the clear dollar leader. At least that's my expectation. So from that standpoint, we're very encouraged.

Wet Ones looks like it's going to have a very good year. It is a heavy competitive environment the past couple of years. I recently looked at the kind of spending that was launched against the new products in the past couple of years in both media and promotion, and it's amazing how much money was spent and how very few of these brands where the spending occurred have really -- many of them are withering very quickly, and Wet Ones is just getting stronger from a share standpoint.

So we're very encouraged really about where we are, what our offerings are, the competitive environment and our Infant Care business overall.

And then speaking of the competitive environment, how would you characterize the competitive side promotional environment in the first quarter versus your expectations and versus last year?

It's about where we thought it would be. There has seemed to be a bit of return to normalcy in the competitive situation. There seems to be a lot less people launching products in the categories with the aggressive spending. I fully anticipate we're going to return to a more normal environment. I think we already have. And I think that augurs well for us.

Thank you.

Justin Marr (ph), Lord Abbott.

Mike, can you just address the earlier point on 90 percent distribution of Beyond? I know you have talked in the past about efforts of merchandising to try to get it merchandised by type, as opposed to buy brand. Have you had any luck on that?

Yes we have, and it's still an effort of ours. We're still continuing to do that. Our first goal is to get to the shelf. And now our second goal is to work on the planograms so that we can be where we want to be within that planogram, and where it makes sense for the trade to put us. And we're making good progress in that area. And that will take a little longer over time than just getting to the shelf was. So we're encouraged.

We're very pleased. We think the competitive environment in tampons is more normal at this point in time. Beyond is moving in nicely. It has good potential. We're obviously cautious, but we're encouraged. And we want to make sure that the tampon environment is healthy and normal and not a competitive arena where we're just throwing money away. We think that that's pretty much the case right now.

The reason for the question obviously is your point on cannibalization. You want to see kind of where it leads you this year as obviously I would guess you stand to have less cannibalization if you're able to prove to guys to merchandise it a little bit differently than just sitting it next to --

Yes, cannibalization is obviously key. It's important to us. We think we will have an acceptable level of cannibalization. Its way too early at this point in time to really know what that's going to be. So far, so good, I guess is the best way to say it.

Secondly on Infant Care, just talking about the growth expectations for the balance of the year, are there any product launches by competitors that you guys are anticipating that would call for the growth rate obviously slowing down? I'm sure there were some products launched in the first quarter that push those numbers up a little bit, but are you guys expecting any competitive response or new product by others?

We really haven't heard of anything that is overly concerning, that's major. Seems, like I said before, pretty much a normal environment and I think a lot of the competitive activity kind of has come and gone and we're still standing.

Lastly, Glenn, if I missed it, in terms of the restructuring you talked about the charge and the savings almost netting each other this past quarter. Was that related to the sales force consolidation or where their other things in there? Or what were some of the buckets of that, of those two things?

It's all part of the entire program that we had in place, and we're starting to see some of the savings in the sales organization. But as we indicated, to large extent the manufacturing side had a much better lead in terms a getting off the blocks. So I think there's more coming out of manufacturing at this point in SG&A. And the restructuring costs were exactly as planned, and they kind of go across the entire effort where we're continuing to do things to put effective processes in place to help the streamlined organization continue to do what they need to do.

So some of those $1.5 million in cost savings, therefore, were in gross margin as well as SG&A then?

Yes.

Thanks very much.

Mark Hoffman, Lazard.

Just had a question about the Canadian sales with the shift in the Canadian dollar year-over-year. What was the favorable impact to revenues on that and was there any favorable impact on profits as well?

We're clearly benefiting from the strong Canadian dollar, but as you know the Canadian business is relatively small as a percentage of our total so that the overall magnitude is relatively immaterial. But it's clearly positive to a small degree.

Canadian business is about six percent of our total.

Thanks.

Jason Horowitz, Credit Suisse First Boston.

Back to Infant Care for a second. With the competitors' promotional abating do you feel that you are gaining shelf space at retail now and did that contribute to the 11 percent sales growth in the quarter? How much of that, also, was products sell-in; would you say maybe like half of it was new product sell-in?

It's our goal to gain shelf space when we introduce new items. I think we are probably gaining shelf space in hard bottles. I think in disposables we have very good shelf space generally; if not all of it, the lion's share of it. We expect to get more space because of the new nipples that we have put out.

I can't really tell you; I don't know that number as to how much of this was new products selling in. But the obviously it was a chunk of it. We don't expect to do 11 percent growth throughout the year in Infant Care. I don't know if I can dimensionalize that. Three points of it --

About half of it. Yes, four to five percent of the increase over a year ago was probably related to --

Five of the eleven.

Yes.

That's a rough swag (ph) on our part.

Still up about five percent or so?

Yes. Listen, it was a good quarter almost across the board for our Infant Care business in disposables, reusables, Wet Ones -- solid gains.

On Sun Care can you quantify to some extent how much of sales were pushed into the second quarter because of the new returns initiative? Was it 3 million that was pushed into the first quarter from the fourth quarter? Does that sound right?

About that, yes. My guess is it was probably three to five that went from the first to the second. We've shipped in -- you know this, but it bears repeating. If you include December, or the fourth quarter -- mostly December -- we shipped in through the first quarter about what we expect to be maybe this year, about 52 percent of our volume. There's only been 11 percent of the category consumed during that same period of time. And last year we think we probably shipped in about 58 percent of our volume through the first quarter. So assuming we are right on our numbers and everything, we've shifted maybe about $5 million into the second quarter. We would expect by the end of the second quarter we would be about -- from a percentage of full-year shipments about where we were a year ago, which suggests that the second quarter, given some normal sun patterns and everything, ought to be strong versus a year ago.

Thanks very much.

Jeff Kobolarz, Salomon Brothers Asset Management.

Sorry I joined the call a little bit late. I don't know if you commented, Mike, about the tampon category industry-wide. And do you know what the change in consumption was in the first quarter roughly?

The category overall in the first quarter on a dollar basis was off about 1.5 percent. That obviously doesn't include the other classes of trade, which would be Wal-Mart, club stores, dollar stores which we think probably are showing a gain over that period of time from a category standpoint. So as there's more channel shifting going on we continued to face the situation where we look at Nielsens or some people look at IRIs, and they show weaknesses in categories that probably understates the real growth picture of the category. But that's what the situation was from a Nielsen measured standpoint in the first quarter.

Do you care taken a stab at accumulating all of the channels that are not --?

It would be such a guess on our part because all we really know is what we're doing in there, and we have no sense of what overall category is. I just know from a lot of secondary information that and stuff that we're able to see that clearly Wal-Mart seems to be out-performing the other combination of food, drug and mass remaining. Target is showing very strong performances in a lot of their categories, but their food and drug seems to be losing some. And of course the dollar class of trade is a growing phenomenon in these categories. And warehouse price clubs seem to be growing as well. So from that standpoint we keep looking at these kind of negative numbers, but I do think that they're misleading in general for most categories in the consumer and household or in personal care and household categories. But I do believe also that there's a capability for these categories to grow in the traditional classes of trade that are measured by these, and we're working to do what we can to make that happen.

And also, in 2003 your Feminine Care sell-in was less than your consumption. Can you comment about the sell-in versus consumption for Gentle Glide for the first quarter?

It looks like our shipments pretty much paced to our consumption level, as we had anticipated they would.

Thanks very much.

Connie Manini (ph), Prudential Equity Group.

Could you tell us which competitor pulled out of the wet ones category and what that additional shelf space means to you on an annual basis in terms of dollar sales?

It is not so much that they pulled out; it is just that they stopped a significant amount of heavy spending that occurred. In the period of 2002 and 2003 we had Lever Brothers launch a Dove hands and face wipe and Lever 2000 hands and face wipe; P&G had an Old Spice wipe; there was a couple of -- Pampers Refresh was a product that was out there; Kimberly Clark had a few products. And they were spending quite aggressively with very heavy levels of support. I know Lever particularly had great advertising programs and heavy sampling and trial programs. And a year ago, in the month of March a year ago, we had a 63.7 share and Lever 2000 had a 13.3 share and now we have a 74.1 share in the month of March and Lever 2000 has a 2.5 share because they have significantly reduced the amount of support advertised. It doesn't look like they're advertising at all, and certainly not sampling it. That's kind of a microcosm of what has happened to a lot of these brands that were out there and spending to get into the category.

Now the category seems to be much more normal. We have a much larger share of this category than we had prior to the beginning of all that activity, and it's a bigger category. Our next largest competitor has a 9 share now, so we have 74 share to a 9 share. So that gives us not so much more share of shelf. I guess you'd say that the shelf is probably smaller than it was, but certainly significantly more support by the trade because there is just fewer money coming at them from various other contenders and it gives us the opportunity to really do some nice solid promotional activity against this business that's done so well for us.

In a funny way it kind of feels like everybody went into the category because wipes were the hottest thing for about six months -- not just your category, but so many others -- and now that they're not the hottest thing, they're just kind of pulling back.

At what market share would you consider Beyond to be as success?

We haven't really said that. What we had said is that we're not shooting for the kind of shares that Pearl has achieved. It's not a kind of plan that we're fielding. What we want to do is get to a critical mass position that is a viable, strong, growing factor in the segment that over time continues to grow. We're on track for doing that. We're not spending egregious amounts of money. We don't have the capability of doing that. We have a advertising program. We have excellent advertising. We have a good sampling program. We have a fair trade program. We're not trying to buy consumers with low prices. And over time we think what we have is a very viable business that could take hold and grow over time as more and more people find their way to it. But this is not a nuclear bomb kind of plan like we had to face when P&G launched Pearl, and so we're not expecting significantly high shares. We're not looking forward at this point in time to double-digit shares. We're just looking for a solid position in the marketplace.

The Nielsen data, IRI data, that everybody looks at, what percentage of your Fem Care sales do you think that represents?

Glenn is saying 60 (multiple speakers) more like 55, somewhere in that range. Glenn is probably right in this category. It's probably about 60 percent.

Do you also get the Nielsen data that includes Wal-Mart panel?

No.

We do. Do you want to hear what the growth of the category is?

Sure.

According to this data the category grew 4.5 percent in the last 12 weeks, and P&G sales grew 6.7 percent, yours grew 1.1, J&J was down 7.4 and Kimberly was up 16.7.

We do monitor some of the analysts who provide that kind of information on a number of categories. I would say that sounds good. We obviously know what our numbers are at Wal-Mart and we've done very well there. That sounds right. That still excludes the club store business and the dollar store business.

Thanks a lot.

Howard Choe, Standard & Poor's.

My question has been answered.

Ben Alexander, Alexander Capital.

Congratulations on a good quarter. Most of my questions have been answered, but I have a few follow-ups. On Beyond, you said you all are pleased with how it's going. Are you pleased relative to repeat orders, cannibalization or can you name any metric? Or is still too early to say?

It's too early. We've only been advertising for what now is really just a month. And so it's way too early to get repeat information. We certainly know from our consumer research placement tests that there is a high level of satisfaction for the product when people use it and that it is vastly preferred to the traditional cardboard products that are in the marketplace. So we would anticipate trial would lead to good conversion rates.

As far as cannibalization rates, we also have a number that we got out of research that obviously we felt was an acceptable number. And at this point in time we have no data that would suggest that that number isn't still operable.

It's too early to tell. We've only got two weeks of advertising in the quarter, a thirteen week quarter. The brand is still lifting trade support. We just dropped our first FSI a week ago. And so there's still a lot to go on behind this business. Suffice it to say, we're very pleased with where we are right now.

Very good. On the Household and Personal Grooming segment, I'm not aware of any new products in that line this year. Can you comment on that?

Actually we have a new product and it's an extension of our successful Woolite Oxy Deep Trigger Cleaner that did so well last year, and it is an Oxy Deep products for steam cleaners made specially to work against the heat that's generated in the steam cleaners in order to give full carpet cleaning. And we've just begun selling that product in and the trade seems to be responding to it very well.

Very good. Thank you very much.

Your next question -- I apologize, sir. Please go ahead.

If you have another question, why don't we take it?

Esther Chung (ph), Banc of America Securities.

My question is that -- you guys touched upon this briefly on the call -- but Procter & Gamble a few months ago had indicated it was going to increase it marketing support for its base businesses which include the Tampax line. What is your specific take on that?

They've been spending a ton of money against this business now for 15, 18 months. If anything, at this point in time what we're seeing, they're kind of moving -- obviously they had such very large levels of spending in the launch of Pearl and they seem to have backed of that, as you would expect, as they get into year two. They're not heavily promoting the brand. They are continuing to advertise and consumer support it.

The Tampax brand seems to be getting a larger dose than would be normal of trade activity and support. Frankly we don't understand that. From our standpoint we think that is kind of like wasting money, but it's their choice. So we've been through what I think was probably the most heightened period of support that they would have against this business for quite some time and we're now, I think, in kind of a normalized position as we go forward. I would expect it pretty much to stay that way. I don't see economically it would make a lot of sense for them to throw a lot more money at this, given that they've actually significantly investment spent behind Pearl already and they would still be operating a loss against that business. So It wouldn't make a lot of sense from a business standpoint to throw more money in. I'm not sure they would get the result for it.

Thank you very much.

If there are no other questions, why don't I wrap up? Suffice it to say, we're very pleased with the first quarter. We think it was an excellent quarter. We think it's a solid start to 2004. We believe we put the pieces in place for long-term growth. We've launched several innovative new products with meaningful benefits to consumers. We have completed favorable refinancing and we have continued to implement pieces of our cost savings and restructuring plans. We will continue to follow on our overall strategy of innovations to generate growth and begin earning cash to pay down debt. Thank you for your continued support of Playtex.

Ladies and gentlemen, that concludes today's presentation. We thank you for your participation and have a great day.