Prestige Consumer Healthcare Inc (PBH) 2008 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the first-quarter 2008 Prestige Brands Holdings, Inc.

earnings conference call.

My name is Amy and I will be your coordinator for today.

At this time, all participants are in listen-only mode.

We will be conducting a question-and-answer session towards the end of this conference.

(OPERATOR INSTRUCTIONS) As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the presentation over to your host for today's call, Mr.

Dean Siegal, Director of Investor Relations.

Please proceed, sir.

Good morning.

Welcome to Prestige Brands fiscal 2008 first-quarter conference call.

During this call, statements may be made by management of their beliefs and expectations as to the Company's future operating results.

Statements of management's expectations of what might occur with respect to future operating results or what is known as forward-looking statements.

All forward-looking statements involve risks and uncertainties which in many cases are beyond the control of the Company, and may cause actual results to differ materially from management's expectation.

Additional information concerning the factors that may cause actual results to differ from management's expectations is contained in the Company's annual and quarterly reports as filed with the U.S.

Securities and Exchange Commission.

Now I'd like to introduce Mark Pettie, Chairman and CEO.

Thank you, Dean, and good morning to all of you joining us on the call today.

In addition to Dean, with me is Pete Anderson, Prestige's Chief Financial Officer.

The main agenda item for today is an in-depth discussion of our first-quarter results, and Pete and I will handle that portion of the call.

After those comments, I will also share some perspectives regarding certain of our growth initiatives and our outlook for the remainder of fiscal 2008.

I hope that most of you have had the opportunity to review our June quarter results, which we released earlier this morning.

The results are also available on our website, www.prestigebrandsinc.com.

Now let's start with a summary of the quarter's performance from the overall corporate perspective.

For the June quarter, revenues were $78.6 million, which was 4% greater than last year.

As you know, during the quarter we benefited from our September 2006 acquisition of Wartner, and if that impact was removed from the quarter's performance, revenues would have declined by just under 1%.

Net income of $8.3 million for the quarter was flat to last year and delivered EPS of $0.17 per share.

This is consistent with the perspective we shared in our last call that all of fiscal year '08 earnings growth is projected to occur in the back half of the year.

Turning to the cash flow performance of the Company, you will see the cash flow for the quarter was $8.3 million, which is below last year's cash flow of $21.2 million.

People will discuss this change in a few minutes, but we would like you to know that our full-year cash flow picture remains intact and above our net income expectations.

And finally, during the quarter we paid down approximately $15.9 million of senior bank debt.

With these payments, our total debt has declined to $447.5 million.

That's the overall corporate performance brief.

Now let's look at the quarter on a segment and key brand basis, starting with our over-the-counter drug portfolio.

For the quarter, this largest of our operating segments posted a 7% increase in revenues to $42.2 million.

Excluding the impact of the Wartner acquisition, OTC organic sales declined by 1%.

Among our key brands, the Compound W line experienced a sales increase of 15% over last year's first quarter, in part due to the timing of promotional shipments ahead of the start of the wart treatment season.

The Little Remedies line of pediatric over-the-counter products also exhibited growth as first-quarter sales were 3% greater than the prior-year quarter.

This was primarily due to expanded distribution of the line and the introduction of Little Tummys Gripe Water in late Q4, the latest item in the growing Little Remedies line.

Our Murine brand grew 6% for the quarter, behind pipeline fill of our important new Irrigate ear wax products.

Q1 shipments met our expectations, which sets us up nicely for Q2 when our consumer support investment begins.

Businesses with sales declines this quarter included Clear Eyes, down 12% despite positive consumption trends of plus 2%.

Our new maximum redness relief item, which began shipping in late Q4 of the last fiscal year, has done well, but pipeline shipments in the first quarter did not equal the pipeline shipments of the two new Clear Eyes items introduced in the year-ago quarter.

Our Chloraseptic brand was also down in this contraseasonal period, primarily due to certain year-ago promotions that were not repeated.

However, acceptance of our two new liquid center lozenges is running ahead of expectations, which is a positive development heading into the key cough/cold season.

And lastly, after three quarters of very strong growth, the Doctor's line of oral care items and the Doctor's Night Guard in particular were negatively impacted by both new branded and private-label competition in the bruxism category.

As a result of this competition, The Doctor's Night Guard experienced factory decline -- or declines in factory revenues, with total sales for the line 16% below last year's first quarter.

We are aggressively implementing tactical and strategic defense plans, but expect to be operating in this intensified competitive environment for the foreseeable future.

From a profitability standpoint as measured by brand contribution, the OTC segment experienced an increase of 7% for the quarter, driven by the overall sales improvement.

Turning to the Company's Household Cleaners segment, total revenues for the segment of $29.9 million were 1% below prior year for the quarter, as increases for Comet and Spic and Span were offset by a decline in Chore Boy revenues.

With respect to the individual brands, the segment largest brand, Comet, registered a low single-digit revenue increase.

This was below consumer movement, which was up 5% in the first quarter.

Importantly, our new Comet Mildew Spray Gel continued to gain distribution during the quarter, and factory sales were slightly ahead of plan.

We began advertising in late June, and a very early read of our lead markets is encouraging with the business well ahead versus the prior nonadvertised period.

As with Murine Irrigate, our consumer support begins in earnest in Q2 behind this innovative new item.

Our newest household brand, Chore Boy, experienced a sales decline in the midteens for the quarter.

However, this was a difficult and nonrepresentative comp period for the brand as shipments in Q1 of last fiscal year were extraordinarily high, due to heavy distributor purchases in advance of a July 2006 price increase.

From a profit perspective, contribution margin for the Household Cleaning segment declined by 4% compared to prior-year quarter.

The decline was primarily due to the sales decline, but also reflects increased cost of goods primarily on Chore Boy Copper Scrubbers.

And finally, our smallest reporting segment, Personal Care, with quarterly revenues of $6.3 million experienced a revenue increase of 1%.

The three major brands in the segment -- Cutex, Denorex and Prell -- experienced sales increases versus year ago.

Contribution margin of $2.5 million for the segment was 14% better than prior year, driven by the favorable sales performance.

And finally, we experienced another quarter of solid growth in our international business.

These markets which represent our business outside North America grew a collective 18% and represented 5% of total quarterly revenues versus 4% for the same quarter year ago.

So that is the summary for the quarter, and now I'd like to turn the call over to Pete who will provide additional financial perspective.

Pete.

Thank you, Mark, and good morning everyone.

As Mark mentioned earlier, net revenues for the quarter of $78.6 million were 4% higher than prior-year net revenues of $75.9 million, while operating income of $23.1 million was $200,000 or 1% below last year's operating income of $23.3 million, and net income of $8.3 million was equal to last year's net income.

The $200,000 decline in operating income compared to last year was due to the following factors.

The sales increase resulted in a gross profit increase of $1.7 million.

That increase was offset by increased advertising and promotion, G&A and depreciation and amortization expenses.

Cost of sales for the quarter of $37.3 million was $1 million or 3% higher than cost of sales in the prior year.

As a percent of revenue, cost of sales decreased from 47.8% in fiscal year 2007 to 47.5% in the current year's quarter.

This cost of sales decrease was primarily due to a favorable sales mix and a reduction in transportation costs.

Advertising and promotion expenses of $7.8 million were $400,000 greater than spending of $7.4 million in the prior-year period.

The increase in advertising was due to increased media and consumer promotion spending in the OTC segment.

G&A expense of $7.6 million was $1.2 million higher than last year's expense.

The main drivers of the increase were increases in stock-based compensation expense and legal expenses.

The stock-based compensation expense was $500,000 higher than last year, which benefited from a credit.

Legal expenses increased by approximately $500,000 over the prior year quarter, driven by expenses related to the Orasure arbitration and expenses related to four copyright and patent infringement actions related to the Doctor's Night Guard product.

Now I will briefly review first-quarter results by segment.

Net revenues for the OTC segment of $42.4 million were $2.8 million or 7% greater than the previous year's quarter.

Gross profit for the segment of $27 million was 7% greater than prior year.

As a percent of revenues, gross profit of 64% equaled last year's gross profit percentage.

And advertising and promotion expenses of $5.9 million were 8% greater than the prior year.

The increase was driven by an increase of 17% in working media spending compared to last year.

Contribution margin of $21.2 million for the segment was $1.4 million or 7% above the year-ago quarter.

The increase was driven by the sales increase, partially offset by the increased advertising spend.

Household products net revenues of $29.9 million were $200,000 less than last year.

Gross profit of $10.5 million was $400,000 less than the prior year, due to increased product costs due to mix, partially offset by increased freight expenses.

Gross profit as a percent of revenues was 38.5% for fiscal year 2008, compared to 39.7% in the prior-year quarter.

Contribution margin for the quarter of $9.9 million was $400,000 below last year, resulting from the gross margin decline, as advertising and promotion expenses were flat to last year's quarter.

Net revenues of $6.3 million for the Personal Care segment were $100,000 above prior year.

Gross margin of $2.8 million was $300,000 above prior year, due to the sales increase and favorable product mix.

Contribution margin of $2.5 million was $300,000 greater than last year, due to the gross profit increase combined with flat advertising and promotion expenditures.

Free cash flow for the quarter which we define as operating cash flow less capital expenditures was $8.3 million.

While that represents a substantial decline from free cash flow of $21.3 million generated in the quarter ended June 30, 2006, it was very much in line with our projections for the quarter, and we are on track to deliver free cash flow of between $55 million and $60 million for fiscal year of 2008.

The large change from last year was primarily related to changes in two elements of working capital.

Accounts receivable experienced a large decline of $5.8 million in the June 2006 quarter compared to an increase of $2 million in the June 2007 quarter.

Last year's large decline was the result of a reduction in days sales outstanding from 47 days at March 31, 2006 to 38 days at June 30, 2006.

Our DSO at June 30, 2007 was 41 days.

The second large year-to-year change was in accrued liabilities.

Last fiscal year's quarter had an increase in accrued liabilities compared to a $4.3 million decline in the current year's quarter.

The decrease in fiscal year 2008 related to payments of March 31, 2007 accrued bonus and media expenses.

There were no accrued bonuses or media at March 31, 2006.

As Mark mentioned earlier, our continued strong cash flow enabled us to pay down $15.9 million on our long-term loan during the quarter.

Total debt has been reduced to $447.5 million at June 30, 2007.

Now, Mark will discuss our outlook for the remainder of fiscal year 2008.

Thanks, Pete.

Before we open the call up to questions, I want to spend just a few minutes on our progress against certain of our sustainable organic growth initiatives and also provide perspective on the balance of fiscal '08.

As was mentioned in our press release this morning, we're beginning to gain traction in several areas that are crucial to achieving our growth goals in fiscal 2008 and beyond.

The first of these is focused innovation where we are pleased with the early results of our two major new launches, Comet Mildew Spray Gel and Murine Irrigate.

Although the significant consumer investment behind these items begins this quarter, our authorization and distribution builds in Q1 were on track, and the early returns on spray gel advertising that I mentioned previously are particularly encouraging.

In addition to these two initiatives, our Clear Eyes Maximum Redness and Little Tummys Gripe Water introductions are performing as planned, and consumer support for both of these begins this quarter as well.

And finally with respect to this year, it is worth reiterating the strong customer acceptance we received behind our new Chloraseptic lozenges, which is a critical element in getting this important business back on track.

Equally meaningful are the steps we are taking to extend the horizon of our innovation pipeline.

In Q1 we began fielding consumer research behind several key brands to identify the most promising innovation drill sites.

We reorganized our small but effective in-house new product development group to improve efficiencies.

We advanced several of the more promising ideas already in our pipeline, and we began initiating relationships to broaden our access to new technologies and development muscle.

All of these steps represent a promising start to filling and extending our innovation pipeline.

On the distribution front, our sales team has done a good job identifying incremental opportunities across our established franchises.

We are now in the process of prioritizing these opportunities and lining up conversations with buyers across our customer base.

The good news is that we hope to be able to turn a portion of these opportunities into reality in the back half of this year.

The better news is the majority of these opportunities are in our OTC segment, which tends to be higher-margin business for us.

Lastly, we are pleased with the pace of implementation of our systematic cost of goods reduction program.

You may remember from our last call that this inaugural program is designed to reduce cost of goods across our portfolio with no compromise to product quality or efficacy, or consumer and customer satisfaction.

This started as in in-house program which has generated over 400 cost savings ideas to date through active engagement of the broad Prestige organization.

At this point, we expect first-year savings to help offset cost increases we are seeing in areas such as copper and cleaning surfactants.

Equally as importantly, we are beginning to build a pipeline of COGs reduction opportunities that should provide benefits in fiscal year '09 and beyond.

And we have just begun to involve our top suppliers in this effort, which should yield further ideas as we continue to implement this key infrastructure program.

So that is a quick update on the organic growth initiatives that had the greatest potential to influence the balance of this year, and we're happy with our progress to date against each of them.

Turning to our performance expectations for the year, we remain aligned with what we communicated in our last call.

Specifically, we continue to project organic net sales to rise in line with our long-term average range of 3% to 4%, with total net sales growth slightly above that.

A&P investment in support of this growth will continue to rise, particularly in Q2, as consumer support ramps up behind our two major new product launches.

As we indicated on our last call, the combination of increased A&P investment and the absence of certain prior-year tax benefits is expected to result in full-year reported net income and EPS growth at a rate slightly below overall net sales growth.

It is equally important to reiterate that we expect all of that growth to occur in our second half as we move beyond initial new product launch investments, particularly behind Murine Irrigate and Comet Spray Gel.

And as I mentioned earlier, full-year free cash flow should once again exceed our net income and will be used for deleveraging, absent any acquisition activity.

So that is the picture for Q1, an update on some of our growth initiatives, and a revisitation of our full-year outlook.

In summary, we're pleased with the results for the quarter, and although we have a lot of work in front of us, we believe we're taking the right first steps to restore sustainable organic growth.

Thank you, and now we'd like to open the call up to questions.

(OPERATOR INSTRUCTIONS) Amy Chasen, Goldman Sachs.

I had two questions.

You partially just answered one of them but just on the advertising spending, it was below my expectations this quarter.

It sounds like that might have been a timing issue based on the timing of new products.

Is that correct?

Amy, that is exactly right.

The advertising support behind not only the big new items Murine and Comet, but also some of the important line extensions coming out in the Little Remedies and Clear Eyes lines will begin this quarter.

Okay, great.

You just -- the Personal Care business was better than we thought, actually.

Are you still pursuing potential asset sales in that area?

Yes, we remain open to strategic options on that set of businesses, Amy.

Certainly we were pleasantly surprised with first-quarter results but we continue to think that that is more of an indication of a move to a new equilibrium on those businesses than any kind of a long-term turnaround for those businesses because we remain true to our strategic objective on those of moving resources away from them.

Okay.

Great, thank you.

Bill Chappell, SunTrust Robinson Humphrey.

Good morning.

Can you talk a little bit about just on the commodity cost versus your cost savings, is the thought on a go forward basis that they are going to continue to just net each other out?

Could you actually see some operating margin improvement and have you seen any alleviation of pressure from some of commodity costs?

Bill, we believe in the short term that they will equal the commodity rises but that over time with all of the ideas that we're working on, we should have hopefully a modest reduction.

The most volatile commodity that we're dealing with ex oil is copper which is kind of running in tandem with oil prices increases.

Earlier this year copper prices were significantly higher than they are today.

As oil started to come down, the price of copper has started to come down as well.

So it really depends on the day you ask me if we're seeing any moderation in prices because they tend to really yo-yo a lot.

And so I don't want to put words in your mouth but as you look to the longer-term goals in addition to 3% to 4% organic growth, would there also be a goal for operating margin improvement?

Yes, Bill, I think as I stated before, I think that remains to be seen in terms of what we ultimately get out of this program.

It is still early days.

We're very pleased with how things are progressing so far.

But obviously the first order of business of this program is to mitigate any cost increases that we see and the ordinary inflationary pressures.

We will just have to get a little deeper into the program to really be able to give you any sense as to whether it's going to be able to do more than that.

Obviously that would be our ultimate objective.

But early days yet.

Okay, great.

Thank you.

Eric Larson, Piper Jaffray.

Good morning, everyone.

Two questions.

First of all, there was a lot of talk about Wal-Mart I think in the kind of the late May and early June periods starting to moderate a bunch of their orders I think maybe reflecting some of their same-store sales comps.

What was your experience in the quarter with your -- one of your largest customers the sales trends?

I would say, Eric, with respect to Wal-Mart in the quarter was as expected.

They are certainly experiencing some slow down in their business but it hasn't worked its way back through our business in any -- there's no reflection on it in any way beyond what we expected.

They are making some moves on the household product side to high velocity warehouses and that will have an influence on our business at some point.

But it will be a temporary influence as they move to stock those warehouses and move their inventories around.

But in general we're not seeing, as I said, anything outside the ordinary course with that very important customer.

Okay.

And can you talk a little bit about some of the intensified competitive activity in some of your product lines?

Is the competitive activity a new product introduction related to them, is it promotional activity on existing brands?

I mean could you talk a little bit about some of the new intensified competition?

The one area, Eric, where it is worth spending a minute on is in our dental concepts business and specifically The Doctor's NightGuard.

As you may recall that is a business that the bruxism device business is a category that we've had a leadership share in for a period of time since we acquired that business in late 2005.

We began advertising against our Doctor's NightGuard brand in the back half of last year and saw a tremendous growth over the last six months of last year.

And that certainly created an awareness among prospective competitors of the growth potential of that category and it also obviously has a fairly attractive margin profile.

So not surprisingly, we have seen new competition come in in the form a private-label as well as branded competition since the first of this fiscal year.

That was reflected in our first-quarter results.

We are putting defensive programs in place including revamping our advertising, working hard in store at point-of-sale and we expect to start to course correct against the competitive incursions we have seen.

Nonetheless it is a changed competitive environment for us and one that is likely to stay with us for the foreseeable future.

That is really the only area where there has been a major shift in the competitive environment across any of our product lines.

Okay.

And then just a final question.

In your comments regarding your sales volume on Chore Boy, you talked about the year-ago quarter having had a significant pipeline increase mainly in front of a price increase.

Do you not offer -- do you offer still offer the trade volumes -- is there a period where they can buy a certain amount volume ahead of the price increase?

Or do you not like most consumer companies say strike a check of one or two or three 50 seconds to them to sort of avoid that -- those ups and downs in volume flow related to price increases?

The Chore Boy as you recall had just been purchased about four months before or six months before from Reckitt and we do a lot of business to distributors on Chore Boy.

So we didn't have the normal levels that we do of customer history to know what a typical distributor buy is in advance of a price increase.

There hadn't been a Chore Boy price increase in I don't know three or four years before that from Reckitt.

So there was no history to base any buys on.

Okay.

But as a general rule, when you take a price increase --

Yes, typically we definitely dew on any of our existing businesses.

You strike a check to the trade to even out that volume flow?

Yes.

Thank you.

Jon Andersen, William Blair.

Good morning, everybody.

Mark, I was wondering if you had expanded thoughts on a long-term target for advertising and promotion spending?

How we should be thinking about that say 12 to 18 months out?

John, as I think we talked earlier, this is something that will come out of our long-range assessment which is something we are just embarking on as we speak.

So as of right now, no.

Again my sense is that the spending levels that we're planning on this year will be more representative of our go-forward plan than our history.

But whether it is the final resting place or not is yet to be determined.

And at this stage of the game that's about all I can offer up.

Fair enough.

And on the G&A line, I understand that there were some incremental costs associated with legal expense in stock compensation.

How should we think about those for the balance of the year?

Are those recurring costs that will impact the balance of the year as well?

The increase in the LTIP was much more exaggerated in the first quarter than it will be going out and that is simply because as the result of reversing charges for an executive who left the Company in the first quarter of last year essentially there was no LTIP expense.

Going forward over the course of the remainder of the year, we certainly did incur LTIP expenses.

This year will be slightly higher than last year's rate but not to the magnitude of the first quarter.

The legal expenses in a way are kind of driven by the amount of activity that goes on.

The hope is that the Orasure arbitration is scheduled to be heard in August.

So our belief is that by the end of August, September, that portion of the legal expenses should be behind us.

It's anybody's guess what's going to happen down the road though.

All right, thank you.

And then finally, Mark, you commented on distribution opportunities that the sales force has seen internally.

Can you provide some expanded thoughts on that the nature of those opportunities and which businesses you see the greatest potential?

Yes, again, the vast majority of the opportunities that we see are clustered in OTC which is good news for us from a margin standpoint.

They are representative of customers where we already have a presence with our line.

So it's not filling major voids with -- major customer voids with a product portfolio but it's taking a look at the product portfolio inside those customers and optimizing it.

There are certain customers that are under skewed relative to what we think is optimal for them.

And a number of our OTC businesses.

And that is the focus of this initiative over the back half of the year.

Great.

Thanks and good luck.

Mimi Noel, Sidoti & Company.

Thanks.

First question for Pete to start off just so I understand.

The stock compensation in this first quarter was unusually high because of a reversal related to an executive leaving.

Did I catch that?

Last year.

Okay, okay.

You've got an expense this year compared to no expense in the quarter last year.

Okay.

So it is not necessarily that you are paying the same people more?

And any balance would be from new hires?

I mean there is a portion of that because for instance last year, we didn't have a CEO in the first quarter.

Got you.

And the other question I had was for Mark.

Would you please elaborate or reiterate why it is that you feel encouraged by the initial indications of Comet Spray Gel and the Murine product?

Yes, the majority of that has to do with how our authorizations and distribution builds are going, Mimi.

They are going right on our plan.

On top of that, we started our Spray Gel advertising in late June and in the markets where we had a full distribution build already out there, we were able to watch the business performance in a pre-advertised and post-advertised period -- kind of an apples to apples.

And the post-advertised consumer take away in those markets was healthfully above what we saw pre-advertising.

That just bodes well for us as we head into this quarter and really ramp up the advertising on Spray Gel and then also obviously on Irrigate.

Okay, I understand that.

And then one last question maybe it has an obvious answer that I'm missing.

But your exposure to copper, where is that?

It's in our Chore Boy business with our copper scrubbers.

That's what I thought.

Which represent about 50% of that brand's business.

Okay.

And that is not something that is easily passed through?

As we indicated, we took a pricing action on Chore Boy about a year ago and given the volatility in this market at this stage of the game, we think it will be imprudent to take yet another action.

Okay, I can understand that.

That is all I have.

Thank you.

Olivia Tong, Merrill Lynch.

Good morning.

Just want to know, could you talk a little bit more about the customer study, what you do and some early learning from that?

The customer study, are you talking about the research we're doing on consumers or are you talking about our distribution initiatives against our customers?

No, the research initiative.

Okay.

Yes, we are on certain of our key brands we're conducting a round of consumer research to really get a better handle on our current consumer base, who they are, what their demographic profile is and importantly, where that set of consumers will give us permission to go from an innovation standpoint with our brands.

How far can we take these brands into adjacent categories?

It's important information for us as we start to put together a long-term innovation plan.

So it is just a foundational set of consumer research that heretofore we really hadn't done with this innovation effort in mind.

And so we've got those pieces of research in the field.

We will be fielding additional pieces of research next quarter and out of that will come a better understanding of our consumers relative to our current product line and relative to where we can go with those product lines from an innovation standpoint.

Can you talk about any of the things that you've learned as far as which brands can do that and which can't or is that too much information?

Well, it's probably a little bit too much information.

And it's also a little premature because as I said, most of these studies are still in the field.

I will say the focus not surprisingly is on our OTC businesses and secondarily on our household businesses, where we have placed our strategic growth efforts.

Got it.

And then for the tax rate for the year are you expecting 38% for the full year?

Yes, yes.

Okay.

Thanks very much.

Henry Capellan, CIBC.

Good morning, gentlemen.

Two questions.

On the international business, I know it was off of a small base but it was up pretty significantly 18% in the quarter; last quarter it was up 23%.

And I was just wondering if you could talk a little bit about is that sort of a growth rate that we could use going forward and what is specifically driving that?

Is it increased distribution and if so, what particular products and in what geographic regions?

Well the primary source of growth in our international area has been geographic expansion.

With respect to growth rates, I won't comment on particular numbers but we've been fairly consistent in stating that we expect our international growth to significantly outpace our domestic growth.

And over the two to three year timeframe, it is not unreasonable to expect our international portfolio to approach double digits in terms of its contribution to our total revenue.

We continue to look to take the core franchises in our international business which are Chloraseptic, Comet, Clear Eyes and Murine and look for new geographic opportunities for those.

And that will be the key thrust.

We got into Mexico with Comet at the very end of last year.

We have a toe hold in China and we're doing some consumer research there with our Comet business.

And we have hopes for our Chloraseptic business to have a broader geographic platform as the year progresses as well.

Okay, great.

Thank you.

And then I guess the last question, Compound W was up pretty strong in the quarter.

I was wondering if you could just talk about some of the benefits and challenges you are seeing with marketing both the Compound W brand and the Wartner brand together?

Yes, I think it is important to point out that the increase in Compound W this quarter was primarily the result of the timing of a promotional buy heading into the wart season.

But nonetheless, we're pleased with how that business performed this quarter and we are working on the right strategy, developing the right strategy from a long-term standpoint for Compound W and Wartner and trying to determine exactly the right way to position each of them in the marketplace to benefit both our customers and ourselves from growth in the wart category.

That ultimate plan is out in front of us but without a doubt, Compound W will continue to be our lead brand in our wart care segment.

Okay, great.

Thank you.

That is it for me.

(OPERATOR INSTRUCTIONS) Eric Larson.

Thanks for taking the follow-up, guys.

One quick question.

It is now getting close to the middle of August I guess the 7th is getting close enough to the middle for analysts purposes anyway.

You are sort of right in the middle of the sell-in for the cold and flu season and obviously Chloraseptic lozenges will be important for that brand.

Can you give us an idea a little bit of how you are seeing the sell-in for that product?

And then for your cough and cold remedies in general, like Little Remedies etc., can you give us a feel for how the sell-in for that season is going?

Yes, Eric, I think the best way to characterize it right now is on plan.

As I mentioned earlier, we are very pleased with the authorization that we've received on a new liquid center lozenges, the two new items in Chloraseptic line.

Those are actually running above expectation.

One thing that does appear to be a bit of a different dynamic this year versus last year is the timing of the shipments into customers of the cough cold remedies.

I think given the inventory situations they found themselves in over the last couple of years, given the weak season, they are tending to be a little bit gun shy in terms of the timing that they are taking these things in on.

So we expect these shipments of these items to occur a little bit later in the quarter than they did year ago but nonetheless, we will capture them in our second quarter.

So right now our leading indicator is the authorizations and the pace of orders that are coming in and those as I said are in line with our plan.

The key thing is you still capture it in the second quarter.

I'm assuming the second quarter last year basically cost the basic sell-in for your cough and cold season?

Yes.

Okay, thank you.

At this time, there are no further questions in queue.

I would like to turn the call back over to Mark Pettie for closing remarks.

Okay, great.

Very simply, thank you very much for joining us today.

Enjoyed the commentary and we look forward to talking to you at the end of our second quarter.

Bye now.

Thank you for your participation in today's conference.

This concludes the presentation.

You may now disconnect and have a great day.