Edgewell Personal Care Co (EPC) 2004 Q2 法說會逐字稿

Welcome to Playtex Products second-quarter 2004 earnings results conference call. At this time we placed all attendees on the listen-only mode. Our speakers are (technical difficulty) open the call to the question-and-answer session. If at any time during this call you require (OPERATOR INSTRUCTIONS) I want to remind you that this call is being webcast and recorded for replay. Now I like to turn the call over to Laura Kiernan, director of Investor Relations.

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 conveyed 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 discussed in full factors that could cause actual results to differ from those made by any forward-looking statements. Please note that in response to a standard review of our public filings and recommendations for improvements by the SEC, the Company decided to modify its reporting of tax discounts to retailers for paying on time from SG&A to net sales.

A reconciliation schedule was attached to our press release to show the impact of net sales to SG&A. And for historical information about this please go to the Investor Relations portion of our website and select financial reports. And as always if you have any questions about it feel free to call me. The replay of this call will be available beginning this afternoon and will run through the end of the day on Monday, July 26. The replay dial in is 1-888-286-8010, and the pass code is 11104782. To access the webcast replay go to our Investor Relations website. Now I'll hand it over to Mike.

Thanks, Laura. Today we will cover a summary of the second-quarter and first-half results, key productline highlights. I will make a couple of comments related to my retirement and the process to find a new CEO. I will turn it over to Glenn who will provide you with details and financial results and update on our 2004 guidance and a recap of cost savings initiatives. Will do Q&A and then I will make some final comments. We do this well we can all be at lunch by noon.

Let me begin by review of the second-quarter and first-half results. Second-quarter results were very good. Net sales were up 5 percent in the quarter. Fem Care was up 10 percent. Infant Care was off 3 percent, Sun Care was up 23 percent. For the first-half net sales were up 7 percent, Fem Care was up 13 percent, infant care up 3 percent, sun care up 11. Operating earnings were up 28 percent for the quarter and up 21 percent for the first-half driven by higher volumes. Favorable impact of restructuring partially offset by higher spending, Beyond new products and restructuring related costs.

Feminine care, sales were up 10 percent in the quarter as we went through early phases of our Beyond launch, saw continued stability of Gentle Glide and essentially stopped shipping Silk Glide in traditional channels as we discontinued that brand in January. We shipped the consumption in plastic plus we shipped some high (indiscernible) replenishment on Beyond.

Total capital on dollar share for the quarter was a 26.2 versus 25.8 in the first quarter and 27.3 a year ago. We were pleased that we are up on a sequential basis, and we still continue to measure our progress on this approach. Beyond is off to a good start. We've had very good support by retailers. Shipments began on the 15th of January. We achieved about 99 percent distribution by the end of the quarter. Advertising began March 15th. Sixty percent of our retailers have moved to our or about to moved to our planogram design. Beyond share was 3.3 for the quarter.

We saw a good pop in April due to promotional support in the second phase of our support begins in July. We have a very strong support program for Beyond and for Gentle Glide for the balance of the year. We need more data at this time to assess trial repeat and cannibalization levels but so far data suggests we are within our expectation, and we are at or above plan for these key businesses.

In infant care sales were down 3 percent in the quarter, but up 3 percent in the first half due to a few factors. New products contributed significantly to first-quarter results, and infant feeding chairs were basically mixed. We experienced excellent performance in hard bottles taking leadership of that segment. Solid share performance in disposable feeding, but we are unhappy with our cup performance in the second quarter and we are taking steps to strengthen it in the third quarter and fourth quarter.

We have achieved the number one share in hard bottles on the success of our natural shape vent air bottle giving us the number one spot in all three of our feeding categories, disposable cups and hard bottles. Wet Ones continue to perform well as we gain share. We were up 6 points 72 percent, an all-time high for that brand. Competition appears to be declining significantly or leaving the category, and we've done well with our seasonal displays and our in-store activity. A competitor to Diaper Genie recently lost distribution at Wal-Mart and our improved Diaper Genie is doing very well. The new more convenient Diaper Genie model began shipping in the first week of May, and our Diaper Genie share is flat at 92 percent of the category.

In sun care our sales were up 23 percent in the quarter and up 11 percent in the first half as we are seeing category growth versus declines last year. In the first half we experienced normal weather pattern, and we benefited from shipping closer to consumption. Response to new products has been great, enabling us to gain share in sun protection and after sun categories. We're up 3/10 of a share point year to date in those segment. While our sunless share has been impacted by heavy competition in the category and a new entry, L'Oreal to the sunless segment. Our overall share is 20.9 year-to-date versus 21.7 prior year basis.

We have seen normal weather patterns this season with warm weather early in the season and most recently a weakness in the weather pattern. But overall the category consumption is up 12 percent for the year; Banana Boat consumption is up 8 percent. We're in the second half of the season, so the balance of the year will be highly influenced by the weather for the remainder of July and August. We're very pleased with the sun care category this year and our performance in this category. Overall we've had a great quarter and a solid first half. We've had good momentum as we move into the second half. We expect to drive second half results with higher volumes particularly behind our new products.

A word on my retirement. After 36 years in this industry and nine years at the helm of Playtex it is time for me to pursue other interests, and I plan to return to retire from Playtex by the end of the year. I'm working with the Board to find an exceptional replacement who will provide new energy, new enthusiasm and ideas to Playtex. We expect this individual to be identified and on board sometime in the fourth quarter this year.

This is really an excellent time for a change of leadership at Playtex. The business is solid. We refinanced our debt. We're no longer sensitive to interest rate fluctuations. We've reorganized the Company, and we have a highly energized employee base on a ready to win in the marketplace. So I do not think there could be a better time to move to new leadership than when a company is healthy and thriving. I will now turn this over to Glenn.

Thanks, Mike. Good morning, everyone. The second-quarter Mike obviously covered the dynamics of the sales and the operating income that led to a very strong second quarter and first half. In the quarter our gross margins were 52.4 percent, reflecting significant solid improvement over a year ago, and that is driven in part by the higher volumes, positive mix as well as the beginning phases of our operational restructuring savings that we talked to you about.

SG&A was up modestly. Some of the initial spending is behind the Beyond launch is starting to hit in the second quarter. We also remind you that includes $1.1 million in restructuring related expenses. Our EBITDA for the quarter was 31.2 million compared to 24.4 the prior year, up 28 percent and same growth rate as operating earnings had been. Our EPS for the quarter on a GAAP basis was 13 cents per diluted share. I'd remind you that that includes the negative impact of one cent in restructuring related expenses incurred during the quarter plus the positive impact of 4 cents due to the favorable settlement of certain tax audits.

The total interest expense was on target as 18 as you know that is relatively fixed. Our taxes for the quarter included that 4 cents per share impact of roughly $2.8 million, and our normalized rate is about 40 percent excluding that. Our working capital trends continue to be positive. Our DSO was down a couple of days versus prior year and our inventory weeks are also down by a couple of days. We continue to generate inventory reductions as part of our restructuring program.

Our total debt at the end of the quarter was $807.5 million. We had zero revolver drawings at the time, and we have availability under our credit agreement of $105 million. Our cost reduction program remains on target as we covered in the past. And all those savings are still on target at the $6 to $7 million this year.

For our guidance perspective we adjusted the year from 31 to 34 cents on a GAAP basis. That obviously still includes 7 cents for the debt write-off incurred in the first quarter, 4 cents for the restructuring, as well as the positive impact of 4 cents for the favorable tax settlement. Through the third and the fourth quarter based upon the first half, as you all know we're running a couple pennies ahead through the first half. We've generated very strong operating earnings. At this time we continue to evaluate our back half programs, and we may invest some of that in the business, particularly behind Beyond to be sure that that gets the best chance to continue to generate trial and repeat purchase, as well as maintaining solid programs behind Gentle Glide as well as a couple of other new items.

In EPS for the upcoming quarters we expect the third quarter to be on a GAAP basis between zero and 2 cents. That will also include 1 cent restructuring charges and the fourth quarter we would expect to be in the 4 cents to 5 cent range. We continue to be on track with net sales up for the year of about 4 to 5 percent. The third quarter will probably be in the 3 to 4 percent and the fourth quarter back in the 4 to 5 percent range. We continue to seen the low to mid single digit growth on infant care and sun care in both of the quarters. And sun care is a bit of a wild-card. Third quarter is typically a relatively low sales period of 2 to $5 million and depending upon the weather and the back end of the season consumption, that can vary on us fairly significantly so the percentage could be very different, but we continue to monitor that and see how that shakes out.

Household and personal grooming will continue to be modestly below year ago. We remain on track to generate gross margin improvements of 100 basis points for the year based upon the cost savings program and the improved volumes. SG&A will be slightly below year ago as the percentage of sales but obviously that will include the brand support impact of the second half of the year.

Our taxes for the year, including the favorable settlement will be about 30 percent and about 40 percent on an ongoing basis in the third and fourth quarter. We continue to expect to generate free cash flow of 30 to $35 million, and that covers the refinancing fees and expenses of 13 (ph) and bringing back the accounts receivable back onto the balance sheet beginning of the year of $21 million so the net net on balance sheet debt picture will continue to be about the same. But the operational cash flow remains very positive.

Interest, as you know pretty well fixed and runs about 18 million a quarter for the rest of the year. We remain comfortable with CapEx in the 17 to 18 and other working capital dynamics remain about the same. Operator, could you please begin the Q&A?

(OPERATOR INSTRUCTIONS) Kathleen Reed from Stanford Financial.

First just on your guidance for the back half of the year you beat the quarter in the first quarter; you also had a great quarter the second quarter. Guidance, not on a GAAP basis but excluding the extraordinary items hasn't changed, and we're seeing good momentum in your sales line. And we should see some restructuring savings pick up in the second half. So again why are we trimming numbers in the back half of the year?

Kathy we believe it is prudent to continue to be where we are with our guidance on an operational basis, as we mentioned we certainly appreciate the fact that we've had a great start to the year in the first-half of the year. We're talking a couple of pennies. We will continue to evaluate our programs and make the appropriate investments. We particularly want to do everything we can on Beyond in the back half of the year, and we still have the wild-card of the sun care season. It is very volatile, the first half was tremendous after July it slowed down. I know a lot of the parts of the country it's been pretty wet, so the rest of the season could swing our sun care consumption by a couple million dollars up or a couple million dollars down. We just want to see that play out before we make any further commitments. And from an investment point of view, up a couple of pennies we certainly continue to do what we believe is right for the long-term, and basically we think that on balance its prudent to be where we are.

It would be great if it turns out that we beat the guidance that we gave at the beginning of the year and we've basically have increased recently. But we want to keep the flexibility of doing the right thing for the business. If it looks like we want to continue heavier support on our business or influence a competitive situation through heavier defense of activity rather than make a commitment to increasing our guidance and then losing the flexibility of doing that later on. I think that is the smart prudent way of managing this year.

Do you think your guidance is conservative, or do you think that it's more realistic given the current promotional environment from what you're seeing from competitors?

I think its conservative.

And secondly, just your Playtex, your sun care shares are improving sequentially which is great and I just wondered if we are still on track to see market shares turn positive on a year-over-year basis going into the Fall?

That is our goal, and I think we're on track to do that. We're basically right where we thought we would be if not slightly better on our shares for our tampon business and we're pleased at this point where we are. And we think continuing with this momentum will take us where we need to be.

Okay, great. Finally, can you quantify how much of your sun care benefit was the revenue shift from the first-quarter to the second-quarter? I think on the first-quarter call we were saying it was in the $5 million range?

Yes, that's about right.

Great. Thank you very much.

George Chalhoub from Deutsche Bank.

Mike, in past years sometimes the weather has had an impact on feminine care, not only on sun care. Is this something that could be a little bit of a wild-card this time around as well or that's not as bad as it was in prior years, and therefore you don't see that as a concern?

I don't see it as a problem this year. The weather pattern has been generally good. We had a kind of a late start, but it was very strong particularly in the East Coast. Then a little bit mixed, the Midwest has certainly been deluged with a lot of rain, and that has been a bit of a disappointment and some parts of the South as well. But when you look at this year versus the previous year this is a much better overall, and I'd say more typical year. And therefore I don't see any influence negatively on the tampon category as a result of what we've seen so far.

Okay, and looking at the market share data, Mike, the latest data that I IRI had, basically showed Beyond declining a bit because of some promotion and discounting by competitors. Obviously that is skewed by the fact that it does not include Wal-Mart. Now from your perspective if you were to adjust for the few (indiscernible) you get from Wal-Mart, was it as much down as maybe if Nielsen (indiscernible) shows number one and number two, do you see that trend readjusting as you go through July with your own FSIs?

Yes, actually we're very pleased with where the share is on Beyond. We got a big bump in April, well beyond what we had expected. And I think your kind of comparing it to what was an unusually large benefit related to our first FSI drop on Beyond. We dropped another one in July just recently and so we would expect to see a nice lift in the business against that FSI. So we're basically, George, right on where we thought we would be. We got a little bit of benefit more benefit than we had expected after that first FSI. So from our standpoint we were very pleased with the Beyond position todate.

At this point, your sell through and your sell (indiscernible)are kind of coming in line, you are not anymore just shipping in before you see the sell through happen?

We pretty much shipped in all of the introductory activity, and it was a good sell in. There's no question about that. But we're getting reorders from the trade at this point, so we're feeling good about Beyond.

My second question is on the gross margin obviously we saw a nice bump in Q2. For all the reasons you cite the outlook now including some what we're seeing obviously around material going on. Obviously you went back and decide it is going to be another 100 basis points improvement still stands. You are comfortable with that despite what we saw in higher material costs for the balance of the year?

Yes, George. We have obviously played into balance cost approach that not only has the cost savings plus what we know about material prices, as well as other cost savings things that we have in place. So yes, we remain very comfortable with that.

And my last question here is on the kind of new entrants, if you will into the tampon business I was reading an article yesterday in the medicated side of the business with Rossman (ph). Is that something, Mike, that you think you could get into or could become a competitive situation that have to deal with over the course of the next year or so?

Yes, George. Let me give a little background because I am not sure everybody that was out in the journal yesterday. I'm not sure everybody saw it. Rossman is a private-label supplier to the U.S. market in cardboard and plastic applicator tampons. And they had a filing with the FDA of their basic tampon that also contained a lactic or citric acid with the intention of changing the vaginal pH during the menstrual cycle. And the medical facts are that the vaginal fluid tends to be acidic during much of the month, but that acidity level drops during the seven days of menstruation. The concept has been around for a while of neutralizing that drop in pH in order to provide a more normal level of acidity even during menstruation. We've checked that idea out. In the past years we concept tested the idea with consumers, and frankly they are lukewarm to it because it is kind of like the prevention of normalcy.

Most people don't have any problem at all related to lowering of the vaginal pH during the menstrual cycle. And therefore it is not solving any particular problem that that creates. Secondly, women tend to be uncomfortable with the idea of a tampon discharging anything into the vaginal area. And third, we're not even sure that it actually works. And I do not think Rossman has any data that shows they have influenced in any way the acidity level of the vaginal fluid from their tampon. And the reason for that is tampon material tends to be absorbent and its pulling liquid into the tampon. It's very difficult to impart anything from it at the same time. And fight that flow into the tampon and secondly, it is very difficult to do it any kind of quantity in order to really influence the acidity level of the vaginal fluid.

So from that standpoint this is an idea that we've kicked around and looked at and know a lot about. We do not think it has any benefits, there are no claims that they can really make about this and the FDA -- at least the article suggests strongly the FDA has not granted them any claims because there is no data that says the thing actually does anything. If anything I would put this more along the lines of when tam brands launched an all cotton tampon and called it natural product, and I think its max share was about 1.5 share points in the marketplace. It was gone within about 18 months of its introduction.

Consumers probably will not be interested in this. We got it best in our concept scoring a very tepid interest on the part of consumers so we're not seeing this as a major factor influencing the market in next year or the year after that or any time in the future.

Okay. Thanks, Mike, for the explanation.

Its probably a lot more discussion about vaginal fluid than you really wanted to hear, but I had to explain it.

Alexis Gold from CIBC World Markets.

Just had a couple questions. Trying to get (inaudible) there was an article last week that indicated you were exploring some potential asset sales and you mentioned specifically Banana Boat, Woolite, Binaca, Ogilvy. Can you comment on that at all?

It remains obviously our policy not to comment on rumors or articles whatsoever. Clearly as we said when we concluded the strategic review process that we would always in the normal course of business continue to evaluate any opportunities that help shareholder value or certainly sale of assets as a possibility. But beyond that we really wouldn't comment or speculate other than we would continue to look at it and if it's the right thing to do among the options we have we would certainly consider it.

Okay, that's helpful. And just a couple questions about infant care. Can you give us any sense of what you think the impasse might be on (indiscernible) Diaper Genie with its competitor out of Wal-Mart and just what is the price point on the new product as well?

It is the same. We didn't raise our price. We just basically gave an incremental benefit of convenience to the consumer. It is much easier to use. It is much easier to replace the refill. We found in our studies that one area that consumers were somewhat critical of Diaper Genie was in its convenience, particularly related to the refill change. We simplified the mechanism. We built in as far as the consumers are have to deal with and we've made it easier to create the sausage as well as to cut the film on the refill when the sausage is filled. From that standpoint this is a significant improvement in the convenience aspect of Diaper Genie, and it is brought to the consumer at no additional cost. We think that this will not only increase the penetration of Diaper Genie in households, but also increase the long-term usage of the device and the sale of more refills in the long haul.

As far as the competitor it will boost our business within Wal-Mart which has been growing very nicely on Diaper Genie this year.

Reza Vahabzadeh from Lehman Brothers.

Wondering if sales mix contributed to your strong margins this quarter or was it primarily just operating leverage from higher sales?

Are you talking about gross margin?

Yes.

Well, clearly just like we were negatively impacted last year when Fem care was declining, we are benefiting from that this year because as we said, we have good margins across our business but Fem care is at the upper end of that range. So clearly mix helps in that regard. But obviously that played into our guidance and estimates as we went forward. But clearly it is a positive.

On Beyond I thought you were hoping that retailers would reset shelves so that Beyond product would be closer to cardboard product. To what extent have you seen any progress along those lines, if any?

It's been good, about 60 percent of the retailers are moving to our suggested planogram set. And about half of them have already done it, and the balance are this summer.

And how do you think the cup business is going to unfold? In the balance of this year and into next year? Do you have any new initiatives on the product front or promotional front?

We have an excellent product lineup. Our disappointment cup performance this quarter, I think was related to the fact that we've seen a number of new entries on the part of a number of different companies, and the trade is kind of cherry picking their trade activity around those new items. None of them, while there is some share growth for these smaller companies, none of them are really developing what I would consider to be a long-term viable position. It's almost like the situation we saw in the moist towelette category a couple of years ago when everybody and his brother decided to introduce new items into (indiscernible) and there was significant amount of activity, and we lost some trade support.

But we maintained our leadership position and as they kind of lost traction, we've seen this brand gobble up share by the handholds. And we think that's really what's going to happen in the cup business. This is no longer really a Gerber Playtex war. Gerber seems to be operating much more rationally in this segment as they are in children's toiletry area. It's more along the lines of trade attention to some new items that we just do not think are going to get significant new positions in the marketplace. And so we beefed up our promotional programs on our cup business for the balance of the year and we are looking at other ways of stimulating more trade activity supporting our businesses. When you got the lion's share of a market, when any time somebody new comes along they steal a little bit of trade attention, which generally tends to be yours and so we lost a little bit of that. It is our attention to get it back aggressively in the balance of the year.

Joe Norton from Banc of America Securities.

Good morning, thank you. A couple of follow-up questions on the Fem care side. First of all, do you have an idea of when exactly the sell in was complete? Was that during the second quarter, or was it more during the first quarter?

Was mostly during the first quarter, but there was still some sell in going on in the beginning part of the second quarter.

Okay. And then just a little more color on, it sounds like most of the stepped up promotional spending in the second half is going to be behind sun care. Is that due to increased levels? Are you seeing increased levels of promotional activity over the past few months and this is kind of a response to that, or how would you characterize kind of what the spending plan --

I think the spending and the category in tampons is more normal than abnormal. Proctor seems to be spending more aggressively against their cardboard business, but they're not overly aggressive at all on the plastic business. And there is no additional energy behind the Kotex business, and very little on O.B. Private label is not doing great. They've been introducing private-label plastic tampons, but it is really eroded their cardboard business and doesn't seem to be getting much traction. And I'm not surprised by that. There is very little gap between their pricing and that of say Kotex, which is a branded item in the marketplace. And in many cases actually Kotex is lower than the private-label plastic. So I wouldn't expect that to become a big factor. So if anything, it's more normal, than abnormal. It's kind of as we thought it would be, settling back down to kind of a normal spending against the category as we go forward.

So you would say then, it sounds like your increased spending level is more opportunistic?

No, it's basically to continue the momentum on Beyond, make sure we have enough media attention out there and enough trial devices. It is not intended for additional promotional activity of any major impact.

And lastly I'm wondering if you can in all the rollouts that you see which is obviously more than we have, do you have any sense of on a year-to-date basis what the consumption has been on your sun care business as opposed to what the shipments have been?

They are pretty much in balance on our plastic applicator brand which is what we've said we would be doing through the year and we are shipping pretty much against consumption on our plastic business as we had anticipated.

So all in you are seeing like 10 to 11 percent?

Well, what we're saying is were not building up in inventory at the trade level on our plastic applicator business; we are basically shipping as it is consumed.

Kevin Banyan from Kelsie Capitol.

Good morning, I was wondering if you can help me out with the increase in accrued expenses and whether that has anything to do with Sun care return reserves or what is (inaudible) fairly large at 27 million (inaudible).

It is mostly going to be driven by the increase in Sun Care returns as you would expect; we build it up over the first half of the year and then obviously the returns from a processing point of view start coming in in the fourth quarter. So that is the driving force. We also would have interest expense, et cetera, that would be.

On a year-over-year basis regardless of whether it's the March quarter or the June quarter, it seems to be significantly higher.

I'm sorry?

On a year-over-year basis I understand the seasonality and also the shifting in seasonality for the March quarter to the June quarter. It's higher than both the prior March and June quarters by a bit I think.

Okay. Also remember we have accrued interest, as well. We have another bond offering, you know we have the two bond things out there. That is probably also driving a year-over-year change, and that payment comes due in September.

Are return reserves higher than usual, right now? I guess just to simplify the question.

What was the question?

Was wondering why accrued expenses were up $27 million and whether that was related to return reserves and whether those were added normally higher levels.

No, they're not at abnormally high levels. They are at what we would expect to be a normal seasonal level.

Ann Gillin from Lehman Brothers.

If I could just go back to the second half SG&A outlook, is it true that in last year's second half we were already seeing a measurable increase in SG&A because of the response of Beyond or not ex-Beyond actually, but the sun care needing to respond to the (indiscernible) We're starting to see operating leverage and we are not seeing much category spending that necessitates a defensive response like we did a year ago. And so I am still quite confused as to what's happening on the SG&A line. It looks like the comp would actually be in your favor second half.

We converted what was heavy promotional activity to more marketing oriented activity Beyond launch sampling advertising. And we are really only in since we started the advertising in mid-March, we are only in about the fourth month of support behind Beyond, and our launch plan is really for a full year of support. So second half of this year we will see spending related to Beyond launch. Not a huge launch from the standpoint of major launches, but we believe that its a solid launch with good business building and trial oriented devices related to.

Also, and last year most of our defensive activities behind Gentle Glide were in the first half relative versus the second half. We had very strong first and second quarter support in Gentle Glide, and it trailed off by a fairly significant amount in the third quarter and then further in the fourth quarter as we started getting into the preparatory stuff for Beyond.

That is on the sales type of promotion but on the SG&A line it actually rose pretty measurably for (inaudible) the second half year-over-year.

I am just looking at the absolute level this year versus last year in Fem care.

I wish I had your numbers, I only have the companywide. I guess if I go to the media spend then, we just came out of a full quarter of media spent already. Are you suggesting you're going to be raising it even over this quarter's level?

I don't have that number, but we spend high against tampons in the third quarter. It is a high consumption period for the category, and it is a key time for us to advertise Gentle Glide and also we have continuation of Beyond advertised, which we did not have a year ago.

And then the reserves question with respect to sun care, if I got it correct you kept reserve levels pretty much as they were even two years ago before you started the program to try to shift more towards consumption. And so I was just wondering if you had thoughts yet on whether there is going to be some opportunity towards the end of the year to reverse some of that accrual.

No. We have been obviously adjusting our expected returns rate to reflect the experience that we have achieved in the past two years. So we would have a lower percentage of returns based upon the programs that we put in place, as well as the fact that we're shipping less in. So those adjustments have been made. We make them throughout the course of the year based upon the expected consumption. So I would not anticipate any kind of a significant benefit in the second half of the year because they are pretty much based upon what we're shipping in and what's being consumed on a live quarter to quarter basis.

Okay, and then just last question. Can you comment on the type of experience that the Board is looking for from the next CEO?

I think the ideal prototype would be someone who is clearly run a business, optimistically someone who has run a highly leveraged business, knows how to compete in a very sophisticated consumer package goods market with good marketing skill set as well as good leadership. I hope someone who has the characteristics of being a good player coach and someone who can come in and add fresh and new ideas to growing and developing our businesses here at Playtex. Just another Superman. That's all we're looking for, or Superwoman.

Thanks.

Justin Moore from Lord Abbett.

Just to clarify the Beyond promotional issue did you guys plan the July FSI at the beginning of the year? And I guess going back to George's question earlier relative to the share spike in April falling back in May and June, it just sounds like in the big picture that you guys are overall pleased with where you're at with the business. And just thinking about call it incremental promotional spend, is that something you guys are doing because you see an opportunity here to grab more share, or is it more because you are a little bit concerned that it is falling back?

Beyond got off to such a great start, and we were very pleased, frankly, by both the trade and the initial consumer reaction to our first FSI that as we go forward we have always said this is not a Procter & Gamble kind of a nuclear bomb launch. We don't have the resources to do that. And as we see the brand gaining traction and response to our spending then we will look for ways of increasing spending for Beyond in the principal areas of outreach to the consumer to inform them about the aspects of the brand, its benefits and to provide trial oriented devices.

And we're really, as I said, we are really -- we began shipping in January but we are only about four months into our marketing program. We got another eight months of first-year spending and franchise building. And we are basically pleased. We got off to such a strong start; we are right on about where we thought we would be at this point in time, and we are certainly seeing that there has been response to our activity. So it gives us heart that if we spend more money we get good result against it.

So it does not sound like it is necessarily incremental then, is that fair?

To our plan at this point in time, no, its pretty much on what we had planned to spend, but we may deviate from that if we can turn up some additional monies that we think would best benefit us by having them spend against developing the brand further.

Glenn, relative to the charges you mentioned there's going to be a little bit in the third quarter, I assume therefore the fourth there is nothing in of the 6 to 7 million in savings, how much of that has shown up so far? Is it more back end loaded?

The answer to the first part is yes, there is none in the fourth quarter. And then basically the way just roughly of the 6 million I would say it kind of goes 11 22 across the quarters. So we've probably got about 2 of the 6, and the rest is obviously baked into the numbers.

Mike, just last couple things on some more product issues. On the infant side with the difficulty in cups so far -- and I know you addressed a little bit earlier, but your comments all year from Gerber being a little bit better competitor this year, some relatively new products stuff with the clear lids and the different colors and stuff, it certainly seemed like you guys were setting yourself up for a reasonable year and for the sales to be down in the segment 3 percent, I did not get the sense that the cup business was that big to drive the overall segment down 3 percent number one. But number two more importantly it just seemed like nothing should have acted better for you guys this year.

I'm not going to argue with that. I am disappointed with how our second quarter cup business turned out. And I am moving the organization to find some ways of getting greater trade support for this business in the third and fourth quarter of this year. We have a good lineup of cups. We've got news, and we did okay in the first quarter. But from a shipment standpoint and a share standpoint I am not happy with the cup business.

I went back and looked at every one of our businesses where we thought we would be versus our plan for a six-month basis and pretty much all of our businesses are at or above where we thought we would be except for the cup business. So that's the one I am putting more of my attention to to get that fixed. I really believe it is within our wherewithal to do that, and it is an area that is going to get more attention by the Company in order to turn that situation around because it is one that we should have the capability of doing. And I am very pleased with what is happening in hard bottles. That business has actually done better than we had anticipated.

Disposable feeding is very solid. So from that standpoint cups is the one thing in infant that I am disappointed with. And I guess you always have to have something in the portfolio that is not quite where you want it to be. So we are going to go after this.

Can you give us a sense of direction -- not direction but magnitude -- how big is that business of the overall or saying it another way presumably it was down in the double digits for the overall segment to be down 3, is that fair?

Yes, that is fair. Overall that business I guess -- what is best way to do this Glenn and still be true to our covenant not to give too much detail behind any segment?

It is about just under 15 percent of the segment.

And lastly on sun care you mentioned 8 percent consumption versus 12 percent category growth. You are only down -- you are down less than one point a share. It just seems like you guys are trailing the category a little bit more than I would expected given relatively minor share loss.

We're doing well in the in sun/after sun portion of the category, which is the most significant portion of the category. We were up in consumption 16 percent in that segment year to date.

Our weakness was in the sunless segment where L'Oreal introduced a new product, and I think Neutrogena which is the leader in that segment did a pretty good job of supporting their business. So we get kind of crunched there. We have a new lineup of sunless offerings for next year which will be much more competitive to the Neutrogena and L'Oreal segment that we think will see us gain share significantly in the sunless segment next year. So when you couple that with our very solid performance in the in sun and after sun and our share gain in that segment, we think that will do very well next year from an overall share performance.

Is that the fastest-growing piece of the business presumably for the industry?

It was in the first part of the year, but it is pretty much settled down, and sunless is actually underperforming the in sun segment at this point in time. Overall sunless is up about 5 percent and in sun is up more than that. So it is settled down quite a bit. And I think that the more entries into the segment got initially more people interested in trying that segment. And so there was an initially large burst of growth in the first part of year. Sunless tends to lead the in sun segment as you can imagine; people preparing for going out in the sun by building a sunless tan and that category starts to wane as the in sun and after sun segments start to pick up in summer time. So now we're seeing it settling out and I think in the long-term what we will see this year is the sunless segment being below the in sun segment for the season.

Do the cosmetics guys tend to dominate that part of the business?

Neutrogena is the leader in the sunless segment, and L'Oreal introduced their product lineup with a significant amount of spending. And they've done fairly well. They lost a lot of money against their launch, but they have developed a position in the sunless segment. And I think next year with the introduction of our product lineup we'll probably -- I would see us being neck and neck in the race for the third-place position in the segment.

Thanks. Good luck.

Amy Chasen from Goldman Sachs.

It's Randy Simpson. Back in May you said you defined success of Beyond as getting back to a 30 share. I was wondering just given a couple of more months of data, can you give us more detail on the coming you expect to get back to that 30 share point?

Yes, I don't think I said it just that way, Randy. Let's not give a false impression. Someone asked me what would I see as being success in our tampon business, and I said eventually getting back to that 30 share level that we had year before last. That wasn't in this year's timeframe or even in next year's timeframe, and I was very clear about that. We will get there gradually over time.

Okay. And kind of turning back maybe to the asset sales potential, let me ask the question this way because I am trying to see if you can help us understand what assets or brands you would potentially consider divesting? Which once are "sacred cows" or off limits. Can you at least tell us what assets you absolutely would not trade and if there is a bucket of assets that you would consider trading? What those would be?

I think that is a slippery slope, Randy. I don't want to go on it.

Then the last thing I would ask if you can give us an update on the sales force consolidation, how that's going todate? And in particular given your intimate involvement in setting that reorganization how that will be affected by your departure later on this year.

I was just at a sales meeting for principally the sun care business where we had for the first time the combined sales organization together, and I can't tell you that I've ever seen a more enthusiastic gung-ho sales organization than the one I experienced just last week. They've melded together very well. They understand they have a big responsibility. They are putting their shoulder to the wheel, and it looks like they are getting everything in place. So from that standpoint I couldn't be more happy, and you judge everything on the basis of plans, enthusiasm and commitments.

And certainly we have those things in our sales organization. I don't think my departure will influence it one bit. The success of the sales organization as they go forward. They are highly principled, highly professional organization who know how to get the job done and know how to compete in the arena against much bigger companies. And they pride themselves in their ability to compete successfully in that arena. And if I have imparted some flavor of that to them, then they'll take that with them but they won't need me to win in the marketplace in the future.

Thank you, Mike. Appreciate it.

Connie Maneaty from Prudential Equity Group.

I think you almost make your noon cutoff time. On the planogram reset, is this a reset test of the Playtex views or is it the whole category is being reset?

Depends on what the trades other goals are. So in some cases it may be a whole reset. In other cases it may just be moving our brand into the cardboard area and making minor changes to the planogram. So it's an account by account thing. There really is no common planogram for the category. It tends to change depending upon the development of the businesses and the brands and the trades idea of what they want to see their stuff look like. So you just have to take it one account by account and influence it as we can.

So when you said some of the retailers were going to your plans, did you just redesign your space, or did you redesigned the whole category?

Again, it depends on what we want to see them accomplish from the standpoint of improving the shopability and volume yield of their category set. So if we think that we can make some suggestions that relate to a significant improvement in their overall planogram, then we can make those. If it is just simply the desire to move beyond or closer to the cardboard category, then we would just do that if we're happy with the rest of the planogram.

And is Wal-Mart one of those retailers that is moving to the changing the planogram?

You know, Connie, I believe it is. I have that list and I am pretty sure it is and I am not sure exactly what their timing is, I don't think they've done it yet, but I think it is planned to happen.

This article that came out yesterday. Do you think Rossman could get distribution if they didn't tie up with one of the major brands?

I don't know. That is a really good question. They do have relationships with a number of the trade because their private-label relationship. But that doesn't necessarily mean that they're going to get distribution on an item that would be branded. They don't have a history of success in that area, and there certainly would be some resistance on the part of the other players in the segment. Unless there was some real value to the offering. And as I indicated based on everything we know today there doesn't seen to be any real substance to this and that it probably doesn't have any health benefits. Certainly they can't claim any and it may not even have acidity raising benefit, as well. So it may be more cosmetic than substantial. And if that's the case, then we would certainly recommend that the trade not bother with it.

What about the idea of a painkiller to ease cramps? Did you see that part of the article?

I did not, I read the article but I did not see that part of it. The idea of using a tampon to somehow impart something into the vagina is clearly not a new thought. The technology around that is I think almost impossible in a way given what I described as the nature of the vaginal flow and the absorption of the tampon itself. And there are a lot better ways of relieving cramps than that method is essentially the suggestions that we've seen.

Thank you very much.

(indiscernible) from Lord Abbett.

I was hoping you could comment briefly on where you think the merger and acquisition environment is now in the consumer products sector versus where it was two years ago?

I think it is still ongoing; they're still seems to be consolidations going on. And I would expect it to continue. The big get bigger, and part of it is a struggle for creating growth and buying growth is part of it. And I would expect that M&A will continue and maybe even get a little more hot as it becomes less beachfront property out there, the price of real estate goes up.

And secondly could you comment on the general direction of your EBITDA multiples?

I am going to ask Glenn to take that one.

What do you mean by that question exactly?

I mean do you see them going up in the next few years, your ability to pay down debt?

Certainly, as you may or may not know we had a great history of great EBITDA margins, got a bit sidetracked in '03. And certainly it remains our goal to -- while we focus on top line growth to live with a much improved cost structure to spend effectively and to drive our EBITDA levels up over time to approach the levels that we had in the past. So it's clearly is an objective, and as the top line goes, the rest will follow.

David Maura from First Albany Capital.

Most of my questions have been answered. Obviously at this juncture, Mike if you could give us a little bit more background as to your decision to leave the company; I understand you like the weather better in California and you got a few kids out that way. Is that the primary driver here?

There are a lot of drivers. It is true I come from California. My wife and my family are in California, two children who live in California now are going to school out there. And it has always been our intention to go back to California. I am also looking forward to doing some different things and having a little more freedom in my life. And being free to kind of explore other aspects of the business world. And to get involved in other projects. And this is a good time to do it. I helped to bring Playtex through a very difficult time this past year, keep the organization together, motivate it, put the plans in place like Beyond and our other new products in order to really have solid lineup of business building programs as we go forward.

We reorganized, we got really a non interest influenced interest rate influenced debt structure. And I feel good about leaving Playtex at this point in time because it is a great organization. It's a great team of people. They know how to run this operation and to get results. And the infusion of new leadership at this time is I think is a good boost of vitamins and energy to the Company. So I think this is a win-win for everybody.

When you say you have other interests in business, I mean I am not going to see you show up at a P&G or a Kimberly Clark, am I?

No, the Board has been very wise in protecting the assets of the Company, and we've come to an agreement that whatever I do is not going to be competition to Playtex or with Playtex people. And I think that was prudent on their part, and I am the last guy I'd want to compete with in the marketplace. Where I am going to go and where I am going to end up is probably in more venture oriented activities that don't take my complete time. And just keep involved and keep active.

Will you stay on the Board?

No, I am leaving the Board of Playtex at the end of the year.

And just lastly I hate to beat a dead horse here. There is a lot of speculation out here, but as we look at multiples getting paid for some of these consumer products companies 10 to 12 times EBITDA very healthy multiples, a lot of sponsors paying up to put money to work. Some of your other competitors in the space talking about not much for sale, and as you talk about I think your comments are accurate there is less beachfront property people tend to pay up. In light of that, it would seem that there is probably a little bit of merit to the speculation that you might pursue some asset sales. Do you agree that this is probably a better time to be a seller than a buyer?

I think there's always a good time to be a seller or a buyer. As long as there is someone out there who is interested in buying or selling.

Do you agree I mean you could clearly create some equity value and deleverage the business if you could sell a unit for 10 to 12 times and you are only levered at 6. And let me ask you this other question. If you are planning to leave by the end of the year does that inhibit the Company in any way from executing such a hypothetical transaction?

Doesn't have any influence one way or another positive or negatively against the ability of the Company to do something, and I think this is a good time to be a seller of brands. That does not mean we are necessarily going to do it. It doesn't mean we are not going to do it.

Best of luck and a great quarter.

Thank you very much. I would guess that that's probably the end of the questions; we are about ten minutes over our goal. I want everybody to get off to a good lunch. I am really pleased with the first two quarters the Company has turned in. It's very solid. It is a good six months. We know we got work to do in the back half of the year, where we good plans to do it. Everyone is motivated to do it, and I think these are good times for Playtex, and I see good times ahead as the Company implements its plans.

So I want to thank everyone for their support of me and of the Company, and I wish everyone well. Goodbye.