~~UNITED~~U. ~~STATES~~S. SECURITIES AND ~~EXCHANGE~~ EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

ý QUARTERLY REPORT ~~PURSUANT~~UNDER TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ~~for the quarterly period ended December 31, 2004~~

ORFor the quarterly period ended June 30, 2005

~~o TRANSITION REPORT PURSUANT TO~~PRESTIGE ~~SECTION~~BRANDS 13HOLDINGS, ~~OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from to~~ INC.

COMMISSION FILE NUMBER:

Delaware		20-1297589		001-32433
(State of Incorporation)		(I.R.S. Employer Identification No.)		(Commission File Number)

PRESTIGE BRANDS INTERNATIONAL, LLC

(Exact name of registrant as specified in its charter)

Delaware		20-0941337		333-11715218-18
(State of Incorporation)		(I.R.S. Employer Identification No.)		(Commission File Number)

DELAWARE		20-0941337
(State of incorporation)		(I.R.S. Employer Identification No.)
90 NORTH BROADWAY IRVINGTON, NEW YORK 10533		(914) 524-6810
(Address of Principal Executive Offices, including Zip Code)		(Registrant’s Telephone Number, Including Area Code)

(Exact name of Registrants as specified in their charters)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes o No ý

90 North Broadway Irvington, New York 10533		(914) 524-6810
(Address of Principal Executive Offices)		(Registrants’ telephone number, including area code)

This Quarterly Report on Form 10-Q is a combined quarterly report being filed separately by Prestige Brands Holdings, Inc. and Prestige Brands International LLC, both registrants. Prestige Brands International, LLC, an indirect wholly owned subsidiary of Prestige Brands Holdings, Inc. is the indirect parent company of Prestige Brands, Inc., the issuer of our 9¼% senior subordinated notes due 2012, and the parent guarantor of such notes. As the indirect holding company of ~~December~~Prestige Brands 31International, ~~2004~~LLC, Prestige Brands Holdings, Inc. does not conduct ongoing business operations. As a result, the ~~registrant~~financial ~~had~~information nofor Prestige Brands Holdings, Inc. and Prestige Brands International, LLC is identical for the purposes of ~~shares~~the discussion of ~~common~~operating ~~stock~~results ~~outstanding~~in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Unless otherwise indicated, we have presented information throughout this Form 10-Q for Prestige Brands Holdings, Inc. and its consolidated subsidiaries, including Prestige Brands International, LLC. The information contained herein relating to each individual registrant is filed by such registrant on its own behalf. Neither registrant makes any representation as to information relating to the other registrant. Prestige Brands International, LLC meets the conditions set forth in general instructions (H)(1)(a) and (b) of Form 10-Q and is therefore filing this Form 10-Q with the reduced disclosure format.

Indicate by check mark whether the ~~registrant~~Registrants is(1) have anfiled ~~accelerated~~all ~~filer~~reports ~~(as~~required ~~defined~~to bybe ~~rule~~filed ~~12b-2~~by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrants were required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes o No ý No o

~~Prestige~~Indicate by ~~Brands~~check ~~International,~~mark ~~LLC~~whether the Registrants are accelerated filers (as defined in Exchange Act Rule 12b-2). Yes o No ý

~~Quarterly~~As ~~Report~~of ~~for~~August 5, 2005, ~~the~~Prestige ~~Three~~Brands ~~and~~Holdings, Inc. ~~Nine~~had ~~Months~~50,053,423 ~~Ended~~shares ~~December~~of 31common stock outstanding. As of such date, ~~2004~~Prestige International Holdings, LLC, a wholly owned subsidiary of Prestige Brands Holdings, Inc., owned 100% of the uncertificated ownership interests of Prestige Brands International, LLC.

~~Table~~Prestige ofBrands ~~Contents~~Holdings, Inc.

PART I. - FINANCIAL INFORMATION
Item 1.		Financial Statements (Unaudited)
		Consolidated Balance Sheet as of December 31, 2004 and March 31, 2004
		Consolidated Statement of Operations for the three and nine months ended December 31, 2004 and 2003
		Consolidated Statement of Members’ Equity for the nine months ended December 31, 2004
		Consolidated Statement of Cash Flows for the nine months ended December 31, 2004 and 2003
		Notes to Unaudited Consolidated Financial Statements
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Item 3.		Quantitative and Qualitative Disclosures About Market Risk.
Item 4.		Controls and Procedures.
PART II. – OTHER INFORMATION
Item 1.	Legal Proceedings.
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.
Item 3.	Defaults Upon Senior Securities.
Item 4.	Submission of Matters to a vote of Security Holders.
Item 5.	Other Information.
Item 6.	Exhibits.

Form 10-Q

~~Item I. Financial Statements~~Index

Prestige Brands International, LLC

PART I.	FINANCIAL INFORMATION

Item 1.	Consolidated Financial Statements
	Prestige Brands Holdings, Inc.
	Consolidated Balance Sheets – June 30, 2005 and March 31, 2005 (unaudited)
	Consolidated Statements of Operations – three months ended June 30, 2005 and 2004 (unaudited)
	Consolidated Statement of Changes in Shareholders’ Equity and Comprehensive Income - three months ended June 30, 2005 (unaudited)
	Consolidated Statements of Cash Flows - three months ended June 30, 2005 and 2004 (unaudited)
	Notes to Unaudited Consolidated Financial Statements

	Prestige Brands International, LLC
	Consolidated Balance Sheets – June 30, 2005 (unaudited) and March 31, 2005
	Consolidated Statements of Operations – three months ended June 30, 2005 and 2004 (unaudited)
	Consolidated Statement of Changes in Members’ Equity and Comprehensive Income - three months ended June 30, 2005 (unaudited)
	Consolidated Statements of Cash Flows - three months ended September 30, 2005 and 2004 (unaudited)
	Notes to Unaudited Consolidated Financial Statements

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operation

Item 3.	Quantitative and Qualitative Disclosure About Market Risk

Item 4.	Controls and Procedures

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds

Item 3.	Defaults Upon Senior Securities

Item 4.	Submission of Matters to a Vote of Security Holders

Item 5.	Other Information

Item 6.	Exhibits

	Signatures

~~Consolidated Balance Sheet (unaudited)~~1

~~(in~~Prestige ~~thousands)~~Brands Holdings, Inc.

	December 31 2004		March 31, 2004
	(successor basis)		(successor basis)
ASSETS
Current assets:
Cash	$	6,754	$	3,393
Accounts receivable, net	36,125		15,391
Other receivables	718		341
Inventories, net	18,888		9,748
Deferred income tax asset	6,574		1,647
Prepaid expenses and other current assets	2,576		234
Total current assets	71,635		30,754
Property and equipment, net	2,670		880
Goodwill	294,660		55,594
Other long-term assets, net	633,067		239,394
Total assets	$	1,002,032	$	326,622
LIABILITIES AND MEMBERS’ EQUITY
Current liabilities:
Accounts payable	$	17,806	$	5,281
Accounts payable - related parties	1,000		—
Accrued expenses	18,857		7,264
Current portion of long-term debt	3,730		2,000
Total current liabilities	41,393		14,545
Long-term debt	676,563		146,694
Deferred income tax liability	85,070		38,874
Total liabilities	803,026		200,113
Commitments and contingencies (Note 7)
Members’ equity:
Contributed capital	183,533		124,719
Retained earnings	15,473		1,790
Total members’ equity	199,006		126,509
Total liabilities and members’ equity	$	1,002,032	$	326,622

Consolidated Balance Sheets

~~The accompanying notes are an integral part of these financial statements.~~(Unaudited)

(Dollars in thousands, except share data	June 30, 2005			March 31, 2005
Assets
Current assets
Cash	$	13,945		$	5,334
Accounts receivable	32,489			43,893
Inventories	27,946			21,580
Deferred income tax assets	6,965			5,699
Prepaid expenses and other current assets	4,039			3,152
Total current assets	85,384			79,658

Property and equipment	2,043			2,324
Goodwill	294,544			294,544
Intangible assets	606,465			608,613
Other long-term assets	14,344			15,996

Total Assets	$	1,002,780		$	1,001,135

Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable	$	18,626		$	21,705
Accrued liabilities	10,705			13,472
Current portion of long-term debt	3,730			3,730
Total current liabilities	33,061			38,907

Long-term debt	490,698			491,630
Deferred income tax liabilities	89,916			84,752

Total liabilities	613,675			615,289

Commitments and Contingencies – Note 7

Shareholders’ Equity
Preferred stock - $0.01 par value Authorized - 5,000,000 shares Issued and outstanding – None	—			—
Common stock - $.01 par value Authorized – 250,000,000 shares Issued and outstanding – 50,000,000 shares at June 30, 2005 and March 31, 2005	500			500
Additional paid-in capital	378,188			378,251
Treasury stock – 2,353 shares at cost	(4		)	(4		)
Accumulated other comprehensive income (loss)	(365		)	320
Retained earnings	10,786			6,779
Total shareholders’ equity	389,105			385,846

Total Liabilities and Shareholders’ Equity	$	1,002,780		$	1,001,135

See accompanying notes.

Prestige Brands ~~International~~Holdings, ~~LLC~~ Inc.

Consolidated Statements ~~Statement~~ of ~~Operations~~ ~~(unaudited)~~Operations

(~~in thousands~~Unaudited)

	Three months ended December 31,						Nine months ended December 31,
			Three Months Ended June 30
	2004			2003			2004			2003
(Dollars in thousands, except share data)			2005			2004
	(successor basis)			(predecessor basis)			(successor basis)			(predecessor basis)
Revenues
REVENUES:
Net sales			$	63,530		$	67,682
Net sales	$	75,829		$	19,122		$	224,831		$	62,085
Other revenues			25			75
Other revenues	25			—			126			—
Total revenues			63,555			67,757
Other revenues - related parties	—			97			—			292
Costs of Sales
Total revenues	75,854			19,219			224,957			62,377
Costs of sales			28,339			36,123
COST OF SALES:
Gross profit			35,216			31,634
Cost of sales	33,923			7,485			107,889			23,572
Operating Expenses
Gross profit	41,931			11,734			117,068			38,805
Advertising and promotion			10,714			13,771
OPERATING EXPENSES:
General and administrative			4,911			4,921
Advertising and promotion	7,265			2,736			31,340			11,990
Depreciation			483			486
General and administrative	5,690			2,879			15,113			7,813
Amortization of intangible assets			2,148			1,803
Depreciation	457			73			1,395			217
Total operating expenses			18,256			20,981
Amortization of intangible assets	2,148			1,246			5,753			3,732
Operating income			16,960			10,653
Total operating expenses	15,560			6,934			53,601			23,752
Other income (expense)
Operating income	26,371			4,800			63,467			15,053
Interest income			81			28
OTHER INCOME (EXPENSE):
Interest expense			(8,591		)	(11,077		)
Interest income	48			14			135			212
Loss on extinguishment of debt			—			(7,567		)
Interest expense	(12,042		)	(2,162		)	(34,012		)	(6,748		)
Total other income (expense)			(8,510		)	(18,616		)
Loss on extinguishment of debt	—			—			(7,567		)	—
Income before income taxes			8,450			(7,963		)
Total other income (expense)	(11,994		)	(2,148		)	(41,444		)	(6,536		)
Provision (benefit) for income taxes			4,443			(2,826		)
Income before income taxes	14,377			2,652			22,023			8,517
Net income (loss)			4,007			(5,137		)
Provision for income taxes	(5,230		)	(1,052		)	(8,340		)	(3,364		)
Cumulative preferred dividends on Senior Preferred and Class B Preferred units			—			(3,619		)
Net income	$	9,147		$	1,600		$	13,683		$	5,153
Net income (loss) available to members and common shareholders			$	4,007		$	(8,756	)
Basic and diluted earnings (loss) per share			$	0.08		$	(0.33	)
Basic and diluted weighted average shares outstanding			49,997,647			26,515,916

~~The~~ See accompanying notes ~~are an integral part of these financial statements~~.

Prestige Brands ~~International~~Holdings, ~~LLC~~ Inc.

Consolidated Statement of Changes ~~Members~~in Stockholders’ Equity and ~~(unaudited)~~Comprehensive Income

~~(in~~Three ~~thousands)~~Months Ended June 30, 2005

	Contributed Capital		Retained Earnings		Total
Balance at March 31, 2004	$	124,719	$	1,790	$	126,509
Cash contribution of capital related to Bonita Bay Acquisition, net of offering costs	58,487		—		58,487
Issuance of Prestige Holdings units in conjunction with Bonita Bay Acquisition	92		—		92
Issuance of Prestige Holdings units	235				235
Net income	—		13,683		13,683
Balance at December 31, 2004	$	183,533	$	15,473	$	199,006

(Unaudited)

The accompanying notes are an integral part of these financial statements.

											Accumulated
	Common Stock			Additional							Other
(Dollars in thousands,		Par		Paid-in			Treasury Stock				Comprehensive			Retained
except share data)	Shares	Value		Capital			Shares	Amount			Income (Loss)			Earnings		Totals
Balances - March 31, 2005	50,000,000	$	500	$	378,251		2,353	$	(4	)	$	320		$	6,779	$	385,846

Additional costs associated with initial public offering				(63		)										(63		)

Components of comprehensive income
Net income														4,007		4,007

Unrealized loss on interest rate cap, net of income tax benefit of $440											(685		)			(685		)
Total comprehensive income																3,322

Balances - June 30, 2005	50,000,000	$	500	$	378,188		2,353	$	(4	)	$	(365	)	$	10,786	$	389,105

See accompanying notes.

Prestige Brands ~~International~~Holdings, ~~LLC~~ Inc.

Consolidated ~~Statement~~Statements of Cash Flows ~~(unaudited)~~

(~~in thousands~~Unaudited)

	Nine months ended
			Three Months Ended June 30
	December 31, 2004			December 31, 2003
(Dollars in thousands, except share data)			2005			2004
	(successor basis)			(predecessor basis)
Operating Activities
Cash flows from operating activities:
Net income (loss)			$	4,007		$	(5,137	)
Net income	$	13,683		$	5,153
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			2,635			2,289
Loss on extinguishment of debt	7,567			—
Deferred income taxes			4,338			2,913
Depreciation	1,395			217
Amortization of deferred financing costs			527			781
Amortization of intangible assets	5,753			3,732
Loss on extinguishment of debt			—			7,567
Amortization of deferred financing costs	2,290			222
Changes in operating assets and liabilities, net of effects of purchases of businesses
Amortization of debt discount	—			924
Accounts receivable			11,404			(5,861		)
Amortization of deferred compensation	—			60
Inventories			(6,366		)	5,200
Increase in long-term debt due to accrued interest	—			333
Prepaid expenses and other assets			(887		)	(5,573		)
Deferred income taxes	12,749			3,113
Accounts payable			(3,079		)	401
Changes in operating assets and liabilities, net of effects of purchase of businesses:
Account payable – related parties			—			934
Accounts receivable	(5,477		)	2,691
Accrued expenses			(2,767		)	5,195
Accounts receivable - related parties	—			(1,085		)
Net cash provided by operating activities			9,812			8,709
Other receivables	(377		)	(1,150		)
Investing Activities
Inventories	8,041			(1,459		)
Purchase of equipment			(206		)	(109		)
Prepaid expenses and other current assets	(914		)	271
Purchase of business, net of cash acquired			—			(373,250		)
Accounts payable	1,160			(995		)
Net cash used for investing activities			(206		)	(373,359		)
Accounts payable - related parties	1,000			(1,114		)
Financing Activities
Accrued expenses	(6,932		)	(2,009		)
Proceeds from the issuance of notes			—			668,512
Net cash provided by operating activities	39,938			8,904
Payment of deferred financing costs			—			(22,651		)
Cash flows from investing activities:
Repayment of notes			(932		)	(330,786		)
Purchase of property and equipment	(198		)	(64		)
Proceeds from the issuance of preferred and common units			—			58,487
Purchase of intangibles	—			(479		)
Additional costs associated with initial public offering			(63		)	—
Purchase of businesses, net of cash acquired	(425,479		)	—
Net cash provided by (used for) financing activities			(995		)	373,562
Net cash used in investing activities	(425,677		)	(543		)
Increase in cash			8,611			8,912
Cash flows from financing activities:
Cash - beginning of period			5,334			3,393
Proceeds from borrowings	698,512			13,539
Cash - end of period			$	13,945		$	12,305
Repayment of borrowings	(344,605		)	(24,647		)
Supplemental Cash Flow Information
Payment of deferred financing costs	(23,529		)	(115		)
Fair value of assets acquired, net of cash acquired			$	—		$	596,955
Proceeds from capital contributions	58,722			—
Fair value of liabilities assumed			—			(223,613		)
Net cash provided by (used in) financing activities	389,100			(11,223		)
Purchase price funded with non-cash contributions			—			(92		)
Net increase in cash	3,361			(2,862		)
Cash paid to purchase business			$	—		$	373,250
Cash at beginning of period	3,393			3,530
Interest paid			$	8,051		$	10,295
Cash at end of period	$	6,754		$	668
Income taxes paid			$	422		$	280
Supplemental disclosure of non-cash
investing and financing activities:
Fair value of assets acquired, net of cash acquired	$	655,537		$	—
Fair value of liabilities assumed	(229,966		)	—
Purchase price funded with non-cash capital contribution	(92		)	—
Cash paid to purchase businesses	$	425,479		$	—

~~The~~See accompanying notes ~~are an integral part of these financial statements~~.

Prestige Brands Holdings, Inc.

Notes to Consolidated Financial Statements

(in thousands, except per share data)

1. Business and Basis of Presentation

Nature of Business

Prestige Brands Holdings, Inc. (“the Company”) and its subsidiaries are engaged in the marketing, sales and distribution of over-the-counter drug, personal care and household cleaning brands to mass merchandisers, drug stores, supermarkets and club stores primarily in the United States. In February 2005, the Company completed an initial public offering.

Basis of Presentation

The unaudited consolidated financial statements presented herein have been prepared in accordance with generally accepted accounting principles for interim financial reporting and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the financial statements include all adjustments, consisting only of normal recurring adjustments that are considered necessary for a fair presentation of the Company’s financial position, results of operations and cash flows for the interim periods. Operating results for the three month period ended June 30, 2005 are not necessarily indicative of results that may be expected for the year ending March 31, 2006. This financial information should be read in conjunction with the Company’s audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K/A for the year ended March 31, 2005.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on the Company’s knowledge of current events and actions that the Company may undertake in the future, actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all short-term deposits and investments with original maturities of three months or less to be cash equivalents. Substantially all of the Company’s cash is held by one bank located in Wyoming. The Company does not believe that, as a result of this concentration, it is subject to any unusual financial risk beyond the normal risk associated with commercial banking relationships.

Accounts Receivable

The Company extends non-interest bearing trade credit to its customers in the ordinary course of business. To minimize credit risk, ongoing evaluations of customers’ financial condition are performed; however, collateral is not required. The Company maintains an allowance for doubtful accounts based on its historical collections experience, as well as its evaluation of current and expected conditions and trends affecting its customers.

Sales Returns

The Company must make estimates of potential future product returns related to current period sales. In order to do this, the Company analyzes historical returns, current economic trends, changes in customer demand and acceptance of the Company’s products when evaluating the adequacy of the Company’s allowance for returns in any accounting period. If actual returns are greater than those estimated by management, the Company’s financial statements in future periods may be adversely affected.

Inventories

Inventories are stated at the lower of cost or fair value where cost is determined by using the first-in, first-out method. The Company provides an allowance for slow moving and obsolete inventory.

Property and Equipment

Property and equipment are stated at cost and are depreciated using the straight-line method based on the following estimated useful lives:

		Years
Machinery		5
Computer equipment		3
Furniture and fixtures		7

Expenditures for maintenance and repairs are charged to expense as incurred. When an asset is sold or otherwise disposed of, the cost and associated accumulated depreciation are removed from the accounts and the resulting gain or loss is recognized in the consolidated statement of operations.

Property and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. An impairment loss is recognized if the carrying amount of the asset exceeds its fair value.

Goodwill

The excess of the purchase price over the fair market value of assets acquired and liabilities assumed in acquisition transactions is classified as goodwill. In accordance with Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets,” the Company does not amortize goodwill, but performs impairment tests of the carrying value at least annually.

Intangible Assets

Intangible assets are stated at the lesser of cost or fair value less accumulated amortization. For intangible assets with finite lives, amortization is computed on the straight-line method over estimated useful lives ranging from five to 30 years.

Indefinite lived intangible assets are tested for impairment at least annually, while intangible assets with finite lives are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. An impairment loss is recognized if the carrying amount of the asset exceeds its fair value.

Deferred Financing Costs

The Company has incurred debt issuance costs in connection with its long-term debt. These costs are capitalized as deferred financing costs and amortized using the effective interest method over the term of the related debt.

Revenue Recognition

Revenues are recognized when the following revenue recognition criteria are met: (1) persuasive evidence of an arrangement exists; (2) there is a fixed or determinable price; (3) the product has been shipped and the customer takes ownership and assumes risk of loss; and (4) collectibility of the resulting receivable is reasonably assured. These criteria are satisfied upon shipment of product, and revenues are recognized accordingly. Provision is made for estimated customer discounts and returns at the time of sale based on the Company’s historical experience.

The Company frequently participates in the promotional programs of its customers, as is customary in this industry. The ultimate cost of these promotional programs varies based on the actual number of units sold during a finite period of time. These programs may include coupons, scan downs, temporary price

reductions or other price guarantee vehicles. The Company estimates the cost of such promotional programs at their inception based on historical experience and current market conditions and reduces sales by such estimates. At the completion of the promotional program, the estimated amounts are adjusted to actual results.

Costs of Sales

Costs of sales include product costs, warehousing costs, inbound and outbound shipping costs, and handling and storage costs. Shipping, warehousing and handling costs were $5.5 million and $5.3 million for the periods ended June 30, 2005 and 2004, respectively.

Advertising and Promotion Costs

Advertising and promotion costs are expensed as incurred. Slotting fees associated with products are recognized as a reduction of sales. Under slotting arrangements, the retailers allow the Company’s products to be placed on the stores’ shelves in exchange for such fees. Direct reimbursements of advertising costs are reflected as a reduction of advertising costs in the period earned.

Stock-based Compensation

The Company accounts for employee stock-based compensation in accordance with the provisions of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”) and complies with the disclosure provisions of FASB Statement No. 123, “Accounting for Stock-Based Compensation” (“Statement No. 123”) and FASB Statement No. 148, “Accounting for Stock-Based Compensation—Transition and Disclosure, an amendment of FASB Statement No. 123.” Under APB 25, compensation expense is based on the difference, if any, on the date of grant, between the fair value of the Company’s common stock and the exercise price of the equity instrument.

Income Taxes

Income taxes are recorded in accordance with the provisions of FASB Statement No. 109, “Accounting for Income Taxes” (“Statement No. 109”). Pursuant to Statement No. 109, deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is established when necessary to reduce deferred tax assets to the amounts expected to be realized.

Derivative Instruments

FASB Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“Statement No. 133”), requires companies to recognize derivative instruments as either assets or liabilities in the balance sheet at fair value. The accounting for changes in the fair value of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and further, on the type of hedging relationship. For those derivative instruments that are designated and qualify as hedging instruments, a company must designate the hedging instrument, based upon the exposure being hedged, as a fair value hedge, a cash flow hedge or a hedge of a net investment in an international operation.

The Company has designated its derivative financial instruments as cash flow hedges because they hedge exposure to variability in expected future cash flows that is attributable to interest rate risk. For these hedges, the effective portion of the gain or loss on the derivative instrument is reported as a component of other comprehensive income (loss) and reclassified into earnings in the same line item associated with the forecasted transaction in the same period or periods during which the hedged transaction affects earnings. Any ineffective portion of the gain or loss on the derivative instruments is recorded in results of operations immediately.

Earnings Per Share

Basic and diluted earnings per share are calculated based on income (loss) available to common shareholders and the weighted-average number of shares outstanding during the reported period. For the period ended June 30, 2004, the weighted average number of common shares outstanding includes the

Company’s common units as if the common units had been converted to common stock using the February 2005 initial public offering conversion ratio of one common unit to 0.4543 shares of common stock. The Company had no potentially dilutive securities outstanding during the periods ended June 30, 2005 or June 30, 2004.

Recently Issued Accounting Standards

In March 2005, the FASB issued FASB Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations” (“FIN 47”) which clarifies guidance provided by Statement No. 143, “Accounting for Asset Retirement Obligations.” FIN 47 is effective for the Company no later than March 31, 2006. The adoption of FIN 47 is not expected to have a significant impact on the Company’s financial position, results of operations or cash flows.

In April 2005, the Securities and Exchange Commission approved an amendment to Rule 4-01 of Regulation S-X that delays the effective date of Statement No. 123 (Revised 2004), “Shared-Based Payments” (“Statement No. 123R”), which requires companies to expense the value of employee and director stock options and similar awards. The Company is currently reviewing its options for implementation of Statement No. 123(R). The results of operations for the period ended June 30, 2005 would not have been affected had the Company applied the fair value recognition provisions of Statement 123(R) during this period.

In May 2005, the FASB issued Statement of Financial Accounting Standards No. 154, “Accounting Changes and Error Corrections” (“Statement No. 154”) which replaces Accounting Principles Board Opinion No. 20, “Accounting Changes” (“APB Opinion No. 20”) and FASB Statement No. 3, “Reporting Accounting Changes in Interim Financial Statements.” Statement No. 154 requires that voluntary changes in accounting principle be applied retrospectively to the balances of assets and liabilities as of the beginning of the earliest period for which retrospective application is practicable and that a corresponding adjustments be made to the opening balance of retained earnings. APB Opinion No. 20 had required that most voluntary changes in accounting principle be recognized by including in net income the cumulative effect of changing to the new principle. Statement No. 154 is effective for all accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005.

2. Accounts Receivable

The components of accounts receivable consist of the following:

	June 30, 2005			March 31, 2005

Accounts receivable	$	32,654		$	45,329
Other receivables	1,251			835
	33,905			46,164
Less allowances for discounts, returns and uncollectible accounts	(1,416		)	(2,271		)

	$	32,489		$	43,893

3. Inventories

Inventories consist of the following:

	June 30, 2005		March 31, 2005

Packaging and raw materials	$	5,192	$	3,587
Finished goods	22,754		17,993

	$	27,946	$	21,580

Inventories are shown net of allowances for obsolete and slow moving inventory of $1.4 million at June 30, 2005 and March 31, 2005, respectively.

4. Property and Equipment

Property and equipment consist of the following:

	June 30, 2005			March 31, 2005

Machinery	$	2,828		$	2,828
Computer equipment	784			771
Furniture and fixtures	542			515
Leasehold improvements	339			173
	4,493			4,287

Accumulated depreciation	(2,450		)	(1,963		)

	$	2,043		$	2,324

5. Intangible Assets

Intangible assets consist of the following:

	June 30, 2005
	Gross		Accumulated			Net
	Amount		Amortization			Amount

Indefinite lived trademarks	$	522,346	$	—		$	522,346

Amortizable intangible assets
Trademarks	94,900		(10,915		)	83,985
Non-compete agreement	158		(24		)	134
	95,058		(10,939		)	84,119

	$	617,404	$	(10,939	)	$	606,465

	March 31, 2005
	Gross			Accumulated				Net
	Amount			Amortization				Amount

Indefinite lived trademarks	$	522,346		$	—			$	522,346

Amortizable intangible assets
Trademarks	94,900			(8,775			)	86,125
Non-compete agreement	158			(16			)	142
	95,058			(8,791			)	86,267

	$		617,404	$		(8,791	)	$	608,613

At June 30, 2005, intangible assets are expected to be amortized over a period of five to 30 years as follows:

Twelve Months Ending June 30
2006	$	8,592
2007	8,592
2008	8,592
2009	8,592
2010	8,592
Thereafter	41,159

	$	84,119

6. Long-Term Debt

Long-term debt consists of the following:

	June 30, 2005			March 31, 2005

Senior revolving credit facility (“Revolving Credit Facility”), which expires on April 6, 2009, is available for maximum borrowings of up to $60.0 million. The Revolving Credit Facility bears interest at the Company’s option at either the prime rate plus a variable margin or LIBOR plus a variable margin. The variable margin ranges from 0.75% to 2.50% and at June 30, 2005, the interest rate on the Revolving Credit Facility was 7.0% per annum. The Company is also required to pay a variable commitment fee on the unused portion of the Revolving Credit Facility. At June 30, 2005, the commitment fee was 0.50% of the unused line. The Revolving Credit Facility is collateralized by substantially all of the Company’s assets.	$	—		$	—

Senior secured term loan facility, (“Tranche B Term Loan Facility”) bears interest at the Company’s option at either the prime rate or LIBOR plus a variable margin of 2.25%. At June 30, 2005, the applicable interest rate on the Tranche B Term Loan Facility was 5.38%. Principal payments of $933 and interest are payable quarterly. In February 2005, the Tranche B Term Loan Facility was amended to increase the amount available thereunder by $200.0 million, all of which is available at June 30, 2005. Current amounts outstanding under the Tranche B Term Loan Facility mature on April 6, 2011, while amounts borrowed pursuant to the amendment will mature on October 6, 2011. The Tranche B Term Loan Facility is collateralized by substantially all of the Company’s assets.	368,428			369,360

Senior Subordinated Notes (“Senior Notes”) that bear interest at 9.25% which is payable on April 15^th and October 15^th of each year. The Senior Notes mature on April 15, 2012; however, the Company may redeem some or all of the Senior Notes on or prior to April 15, 2008 at a redemption price equal to 100% plus a make-whole premium, and on or after April 15, 2008 at redemption prices set forth in the indenture governing the Senior Notes. The Senior Notes are unconditionally guaranteed by Prestige Brands International, LLC (“Prestige International”), a wholly owned subsidiary, and Prestige International’s wholly owned subsidiaries (other than the issuer). There are no significant restrictions on the ability of any of the guarantors to obtain funds from their subsidiaries.	126,000			126,000

	494,428			495,360
Current portion of long-term debt	(3,730		)	(3,730		)

	$	490,698		$	491,630

The Revolving Credit Facility and the Tranche B Term Loan Facility (together the “Senior Credit Facility”) contain various financial covenants, including provisions that require the Company to maintain certain leverage ratios, interest coverage ratios and fixed charge coverage ratios. Additionally, the Senior Credit Facility contains provisions that restrict the Company from undertaking specified corporate actions, such as asset dispositions, acquisitions, dividend payments, changes of control, incurrence of indebtedness, creation of liens and transactions with affiliates. The Company was in compliance with its financial and restrictive covenants under the Senior Credit Facility at June 30, 2005.

Future principal payments required in accordance with the terms of the Senior Credit Facility and the Senior Notes are as follows:

Twelve Months Ending June 30
2006	$	3,730
2007	3,730
2008	3,730
2009	3,730
2010	3,730
Thereafter	475,778

	$	494,428

The Company entered into a 5% interest rate cap agreement with a financial institution to mitigate the impact of changing interest rates. The agreement provides for a notional amount of $20.0 million and terminates in June 2006. The Company also entered into interest rate cap agreements with another financial institution that become effective August 30, 2005, with a total notional amount of $180.0 million and cap rates ranging from 3.25% to 3.75%. The agreements terminate on May 30, 2006, 2007 and 2008 as to $50.0 million, $80.0 million and $50.0 million, respectively. The Company is accounting for the interest rate cap agreements as cash flow hedges. The fair value of the interest rate cap agreements was $1.7 million at June 30, 2005.

7. Commitments and Contingencies

In July 2002, the Company entered into a ten year manufacturing and supply agreement with an unrelated company. Pursuant to this agreement, the Company agreed to purchase certain minimum quantities of product over the initial three years of the agreement or to pay liquidated damages of up to $360. The Company had recorded a liability of $308 at June 30, 2005 and March 31, 2005, which represents its estimate of the probable liquidated damages. Such estimate is based on historical and expected purchases during the initial three years of the agreement.

In June 2003, Dr. Jason Theodosakis filed a lawsuit, Theodosakis v. Walgreens, et al., in Federal District Court in Arizona, alleging that two of the Company’s subsidiaries, Medtech Products and Pecos Pharmaceutical, as well as other unrelated parties, infringed the trade dress of two of his published books. Specifically, Dr. Theodosakis published “The Arthritis Cure” and “Maximizing the Arthritis Cure” regarding the use of dietary supplements to treat arthritis patients. Dr. Theodosakis alleged that his books have a distinctive trade dress, or cover layout, design, color and typeface, and those products that the defendants sold under the ARTHx trademarks infringed the books’ trade dress and constituted unfair competition and false designation of origin. Additionally, Dr. Theodosakis alleged that the defendants made false endorsements of the products by referencing his books on the product packaging and that the use of his name, books and trade dress invaded his right to publicity. The Company sold the ARTHx trademarks, goodwill and inventory to a third party, Contract Pharmacal Corporation, in March 2003. On January 12, 2005, the court granted the Company’s motion for summary judgment and dismissed all

claims against Pecos and Medtech. The plaintiff has filed an appeal in the U.S. Court of Appeals which is pending.

On January 3, 2005, the Company was served with process by its former lead counsel in the Theodosakis litigation seeking $679 plus interest. The case was filed in the Supreme Court of New York and is styled as Dickstein Shapiro et al v. Medtech Products, Inc. In February 2005, the plaintiffs filed an amended complaint naming the Pecos Pharmaceutical Company as defendant. The Company has answered and filed a counterclaim against Dickstein and also filed a third party complaint against the Lexington Insurance Company. The Company believes that if there is any obligation to the Dickstein firm relating to this matter, it is an obligation of Lexington and not the Company.

On May 9, 2005, the Company was served with a complaint in a class action lawsuit filed in Essex County, Massachusetts, styled as Dawn Thompson v. Wyeth, Inc. relating to the Company’s Little Remedies pediatric cough products. The Company is one of several corporate defendants, all of whom market over-the-counter cough syrup products for pediatric use. The complaint alleges that the ingredient dextromethorphan is no more effective than a placebo. There is no allegation of physical injury caused by the product or the ingredient. In June 2005, the Company was served in a second class action complaint involving dextromethorphan. The second case, styled Tina Yescavage v. Wyeth was filed in Lee County Florida and similarly involves multiple corporate defendants. The Company believes that both of the dextromethorphan cases are without merit and is actively pursuing appropriate defenses. The use of dextromethorphan in pediatric products is fully consistent with and supported by Food and Drug Administration regulations.

The Company is also involved from time to time in routine legal matters and other claims incidental to its business. When it appears probable in management’s judgment that the Company will incur monetary damages or other costs in connection with such claims and proceedings, and such costs can be reasonably estimated, liabilities are recorded in the financial statements and charges are recorded against earnings. The Company believes the resolution of such routine matters and other incidental claims, taking into account reserves and insurance, will not have a material adverse effect on its financial condition or results of operation.

8. Equity Incentive Plan

In connection with the Company’s IPO, the Board of Directors adopted the 2005 Long-Term Equity Incentive Plan (“the Plan”). The Plan provides for grants of stock options, restricted stock, restricted stock units, deferred stock units and other equity-based awards. Directors, officers and other employees of the Company and its subsidiaries, as well as others performing services for the Company, are eligible for grants under the Plan. At June 30, 2005, there were 5,000,000 shares available for issuance under the Plan; however, no grants have been made under the Plan.

9. Related Party Transactions

The Company had entered in an agreement with an affiliate of GTCR Golder Rauner II, LLC (“GTCR”), a private equity firm and an investor in the Company, whereby the GTCR affiliate was to provide

management and advisory services to the Company for an aggregate annual compensation of $4.0 million. The agreement was terminated in February 2005. During the period ended June 30, 2004, the Company paid the affiliate of GTCR a management fee of $934.

10. Income Taxes

Income taxes are recorded in the Company’s quarterly financial statements based on the Company’s estimated annual effective income tax rate. The effective rates used in the calculation of income taxes were 52.6% and 35.5% for the periods ended June 30, 2005 and 2004, respectively. The increase in the effective tax rate for 2005 resulted primarily from a one time charge of approximately $1.2 million due to the increase in the Company’s graduated federal income tax rate from 34% to 35% and its related impact on the Company’s deferred tax liabilities.

11. Concentrations of Risk

The Company’s sales are concentrated in the areas of over-the-counter pharmaceutical products, personal care products and household cleaning products. The Company sells its products to mass merchandisers, food and drug accounts, and dollar and club stores. During the period ended June 30, 2005, approximately 60.8% of the Company’s total sales were derived from its four major brands while during the period ended June 30, 2004, approximately 64.4% of the Company’s total sales were derived from these four brands. During the periods ended June 30, 2005 and 2004, approximately 22.8% and 23.3%, respectively, of the Company’s net sales were made to one customer. At June 30, 2005, approximately 20% of accounts receivable were owed by one customer.

The Company manages product distribution in the continental United States through a main distribution center in St. Louis, Missouri. A serious disruption, such as a flood or fire, to the main distribution center could damage the Company’s inventory and could materially impair the Company’s ability to distribute its products to customers in a timely manner or at a reasonable cost. The Company could incur significantly higher costs and experience longer lead times associated with the distribution of its products to its customers during the time that it takes the Company to reopen or replace its distribution center. As a result, any such disruption could have a material adverse effect on the Company’s sales and profitability.

12. Business Segments

Segment information has been prepared in accordance with FASB Statement No. 131, “Disclosures about Segments of an Enterprise and Related Information.” The Company’s operating segments are based on its product lines and consist of (i) Over-the-Counter Drugs, (ii) Personal Care and (iii) Household Cleaning. Accordingly, within each reportable segment are operations that have similar economic characteristics, including the nature of their products, production process, type of customer and method of distribution.

There were no inter-segment sales or transfers during the periods ended June 30, 2005 and 2004. The Company evaluates the performance of its product lines and allocates resources to them based primarily on contribution margin. The table below summarizes information about reportable segments.

	Period Ended June 30, 2005
	Over-the- Counter		Personal		Household
	Drug		Care		Cleaning		Consolidated

Net sales	$	32,866	$	7,484	$	23,180	$	63,530
Other revenues	—		—		25		25

Total revenues	32,866		7,484		23,205		63,555
Cost of sales	11,165		3,884		13,290		28,339

Gross profit	21,701		3,600		9,915		35,216
Advertising and promotion	7,402		1,103		2,209		10,714

Contribution margin	$	14,299	$	2,497	$	7,706	24,502
Other operating expenses							7,542

Operating income							16,960
Other income (expense)							(8,510		)
Provision for income taxes							(4,443		)

Net income							$	4,007

	Period Ended June 30, 2004
	Over-the-
	Counter		Personal		Household
	Drug		Care		Cleaning		Consolidated

Net sales	$	34,599	$	8,438	$	24,645	$	67,682
Other revenues					75		75

Total revenues	34,599		8,438		24,720		67,757
Cost of sales	14,722		4,445		16,956		36,123

Gross profit	19,877		3,993		7,764		31,634
Advertising and promotion	7,989		2,621		3,161		13,771

Contribution margin	$	11,888	$	1,372	$	4,603	17,863
Other operating expenses							7,210

Operating income							10,653
Other income (expense)							(18,616		)
Benefit for income taxes							2,826

Net loss							$	(5,137	)

During the periods ended June 30, 2005 and 2004, 97.9% and 97.4%, respectively, of sales were made to customers in the United States and Canada. No individual geographical area accounted for more than 10% of net sales in any of the periods presented. At June 30, 2005 and 2004, all of the Company’s long-term assets were located in the United States of America and have not been allocated between segments.

13. Subsequent Events

On July 22, 2005, the Company entered into a material definitive asset sale and purchase agreement with Reckitt Benckiser Inc. for the acquisition of the Chore Boy line of household cleaning products for an aggregate consideration of $22.3 million.

Pursuant to the provisions of the Company’s 2005 Long-Term Equity Incentive Plan, on July 29, 2005, each of the Company’s four independent members of the Board of Directors received an award of 6,222 shares of common stock in connection with Company’s directors’ compensation arrangements. Of such amount, 1,778 shares represent a one-time grant of unrestricted shares while the remaining 4,444 shares represent restricted shares that vest over a two year period.

On August 3, 2005, a complaint in a class action lawsuit, Charter Township of Clinton Police and Fire Retirement System v. Prestige Brands Holdings, Inc. et al, was filed in United States District Court for the Southern District of New York, on behalf of all persons who purchased the Company’s securities pursuant to and/or traceable to the Company’s initial public offering (the “IPO”) on or about February 9, 2005 through July 28, 2005. The complaint also names as defendants Merrill Lynch, Pierce, Fenner & Smith Incorporated, Goldman, Sachs & Co and J.P. Morgan Securities Inc., the lead or co-lead underwriters of the IPO. The complaint charges the Company, certain of its officers and directors, and other insiders with violations of the Securities Act of 1933. The Company plans to defend this matter vigorously.

The Company has been made aware of the possibility of additional similar class action lawsuits. If these potential lawsuits are filed, the Company plans to defend these matters vigorously.

On August 4, 2005, Frank Palantoni joined the Company as President and Chief Operating Officer. In connection therewith, the Board of Directors granted Mr. Palantoni 30,888 shares of restricted common stock and options to purchase an additional 61,776 shares of common stock at a purchase price of $12.95 per share. The options vest over a period of five years while the restricted shares will vest contingent upon the attainment of certain performance-based benchmarks.

Prestige Brands International, LLC

~~Notes to Unaudited~~ Consolidated ~~Financial~~ ~~Statements~~Balance Sheets

(~~in thousands~~Unaudited)

1. BUSINESS AND BASIS OF PRESENTATION

(Dollars in thousands, except share data)	June 30, 2005			March 31, 2005
Assets
Current assets
Cash	$	13,945		$	5,334
Accounts receivable	32,489			43,893
Inventories	27,946			21,580
Deferred income tax assets	6,965			5,699
Prepaid expenses and other current assets	4,039			3,152
Total current assets	85,384			79,658

Property and equipment	2,043			2,324
Goodwill	294,544			294,544
Intangible assets	606,465			608,613
Other long-term assets	14,344			15,996

Total Assets	$	1,002,780		$	1,001,135

Liabilities and Members’ Equity
Current liabilities
Accounts payable	$	18,626		$	21,705
Accrued liabilities	10,705			13,472
Current portion of long-term debt	3,730			3,730
Total current liabilities	33,061			38,907

Long-term debt	490,698			491,630
Deferred income tax liabilities	89,916			84,752

Total liabilities	613,675			615,289

Commitments and Contingencies – Note 7

Members’ Equity
Contributed capital – Prestige Holdings	370,214			370,277
Accumulated other comprehensive income (loss)	(365		)	320
Retained earnings	19,256			15,249
Total members’ equity	389,105			385,846

Total liabilities and members’ equity	$	1,002,780		$	1,001,135

~~Nature~~See accompanying ~~of Business~~notes.

On February 6, 2004, Prestige International Holdings, LLC (“Prestige Holdings” or the “Company”), through two indirect, wholly owned subsidiaries, acquired all of the outstanding capital stock of Medtech Holdings, Inc. (“Medtech”) and The Denorex Company (“Denorex”) (collectively the “Predecessor Company”) (the “Medtech Acquisition”). Prestige Holdings is controlled by affiliates of GTCR Golder Rauner II, LLC. On March 5, 2004, the Company, through an indirect, wholly-owned subsidiary, acquired all of the outstanding capital stock of The Spic and Span Company (“Spic and Span”) (the “Spic and Span Acquisition”). On April 6, 2004, the Company, through an indirect, wholly owned subsidiary, acquired all of the outstanding capital stock of Bonita Bay Holdings, Inc. (“Bonita Bay”) (the “Bonita Bay Acquisition”). On October 6, 2004, the Company acquired all of the outstanding capital stock of Vetco Inc. (“Vetco”) (the “Vetco Acquisition”).18

~~The~~Prestige ~~Company~~Brands ~~is engaged in the marketing~~International, ~~sales and distribution of over-the-counter, personal care and household cleaning brands to mass merchandisers, drug stores, supermarkets and club stores primarily in the United States.~~LLC

~~Basis~~Consolidated Statements of ~~Presentation of Unaudited Interim Financial Information~~Operations

The unaudited consolidated financial information herein has been prepared in accordance with accounting principles generally accepted in the United States of America. In the opinion of management, the financial statements include all adjustments, consisting only of normal recurring adjustments that are considered necessary for a fair presentation of the Company’s financial position, results of operations and cash flows for the interim periods. Operating results for the three and nine months ended December 31, 2004 are not necessarily indicative of results that may be expected for the entire year. This financial information should be read in conjunction with the audited financial statements and notes thereto for the year ended March 31, 2004 of the Company, which are included in the amended Registration Statement on Form S-4 filed with the Securities and Exchange Commission on October 25, 2004.(Unaudited)

The Medtech Acquisition was accounted for as a purchase transaction. As a result, the combined Medtech and Denorex assets and liabilities were adjusted to fair value as of February 6, 2004, in accordance with SFAS No. 141, “Business Combinations.” For financial reporting purposes, Medtech and Denorex, which were under common control and management, are considered the predecessor entities. Accordingly, the results of operations for the three and nine months ended December 31, 2003 and cash flows for the nine months ended December 31, 2003 represent the combined historical financial statements of Medtech and its subsidiaries and Denorex (“predecessor basis”). The balance sheets of the Company as of December 31 and March 31, 2004 and the results of operations for the three and nine months ended December 31, 2004 and cash flows for the nine months ended December 31, 2004 reflect those purchase accounting adjustments resulting from the Medtech Acquisition (“successor basis”). The Spic and Span, Bonita Bay and Vetco Acquisitions were also accounted for as purchase transactions. The results of operations and cash flows for Spic and Span, Bonita Bay and Vetco have been reflected in the Company’s consolidated statements of operations and cash flows beginning on their respective acquisition dates. All significant intercompany transactions and balances have been eliminated.

	Three Months Ended June 30
(Dollars in thousands, except share data	2005			2004
Revenues
Net sales	$	63,530		$	67,682
Other revenues	25			75
Total revenues	63,555			67,757

Costs of Sales
Costs of sales	28,339			36,123
Gross profit	35,216			31,634

Operating Expenses
Advertising and promotion	10,714			13,771
General and administrative	4,911			4,921
Depreciation	483			486
Amortization of intangible assets	2,148			1,803
Total operating expenses	18,256			20,981

Operating income	16,960			10,653

Other income (expense)
Interest income	81			28
Interest expense	(8,591		)	(11,077		)
Loss on extinguishment of debt	—			(7,567		)
Total other income (expense)	(8,510		)	(18,616		)

Income before income taxes	8,450			(7,963		)

Provision (benefit) for income taxes	4,443			(2,826		)

Net income (loss)	$	4,007		$	(5,137	)

6See accompanying notes.

~~Recently Issued Accounting Standards~~19

InPrestige ~~December~~Brands ~~2004~~International, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard (“SFAS”) No. 123R (“Share-Based Payment”). SFAS 123R requires the Company to recognize compensation expense for equity instruments awarded to employees. SFAS 123R is effective for the Company as of the beginning of the first interim period that begins after June 15, 2005. The Company does not expect the adoption of this standard to have a significant impact on its financial statements.LLC

~~2. ACQUISITIONS~~Consolidated Statement of Changes OFin ~~BUSINESS~~Members’ Equity and Comprehensive Income

OnThree ~~April~~Months 6,Ended ~~2004, the Company acquired all of the outstanding capital stock of Bonita Bay for a purchase price of approximately $562,858~~June ~~(including working capital adjustments totaling $1~~30,~~091). In~~ ~~accordance with SFAS No. 141, the Company was determined to be the accounting acquirer.~~2005

The Bonita Bay Acquisition, including fees and expenses related to the new financing of $22,651 and funds used to pay off $154,422 of debt and accrued interest incurred to finance the Medtech Acquisition, was financed through the following sources:(Unaudited)

Revolving Credit Facility	$	3,512
(Dollars in thousands, expect share data)		Contributed Capital Prestige Holdings			Accumulated Other Comprehensive Income (loss)			Retained Earnings		Totals
Tranche B Term Loan	355,000
Balances - March 31, 2005		$	370,277		$	320		$	15,249	$	385,846
Tranche C Term Loan Facility	100,000
Additional costs associated with capital contributions from Prestige Brands Holdings		(63		)						(63		)
9.25% Senior Subordinated Notes	210,000
Components of comprehensive income
Capital contributions from Prestige Holdings	58,579
Net income for the period								4,007		4,007
Total sources of funds	$	727,091
Unrealized loss on interest rate cap, net of income tax benefit of $440					(685		)			(685		)
										3,322
Balances - June 30, 2005		$	370,214		$	(365	)	$	19,256	$	389,105

~~The total purchase price~~See ofaccompanying the Bonita Bay Acquisition (which included cash paid to the selling shareholders of $382,269, 94 Prestige Holdings Class B Preferred Units valued at an aggregate of $91 and 18,842 Prestige Holdings Common Units valued at an aggregate of $1, assumed debt and accrued interest which was retired of $176,918 and acquisition costs of $3,579) was allocated to the acquired assets and liabilities as set forth in the following table:notes.

	Bonita Bay
Cash	$	4,304
Accounts receivable	13,121
Inventories	16,271
Prepaid expenses and other current assets	1,391
Property, plant and equipment	2,982
Goodwill	217,860
Intangible assets	352,460
Accounts payable and accrued liabilities	(27,745		)
Long-term debt	(172,898		)
Deferred income taxes	(28,520		)
	$	379,226

AsPrestige aBrands ~~result of the Bonita Bay Acquisition~~International, ~~the Company recorded indefinite lived trademarks of $340,700 and $11,760 of trademarks with an estimated weighted average useful life of 7 years.~~LLC

7Consolidated Statements of Cash Flows

On October 6, 2004, the Company acquired all of the outstanding stock of Vetco, Inc. for a purchase price of approximately $50,649. To finance the acquisition, the Company used cash on hand of approximately $20,649 and borrowed an additional $12,000 from its revolving credit facility and $18,000 on its tranche B term loan facility.(Unaudited)

The total purchase price of the Vetco Acquisition was allocated to the acquired assets and liabilities as set forth in the following table:

	Three Months Ended June 30
(Dollars in thousands, except share data)	2005			2004
Operating Activities
Net income (loss)	$	4,007		$	(5,137	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	2,635			2,289
Deferred income taxes	4,338			2,913
Amortization of deferred financing costs	527			781
Loss on extinguishment of debt	—			7,567
Changes in operating assets and liabilities, net of effects of purchases of businesses
Accounts receivable	11,404			(5,861		)
Inventories	(6,366		)	5,200
Prepaid expenses and other assets	(887		)	(5,573		)
Accounts payable	(3,079		)	401
Account payable – related parties	—			934
Accrued expenses	(2,767		)	5,195
Net cash provided by operating activities	9,812			8,709

Investing Activities
Purchase of equipment	(206		)	(109		)
Purchase of business, net of cash acquired	—			(373,250		)
Net cash used for investing activities	(206		)	(373,359		)

Financing Activities
Net proceeds from the issuance of notes	—			668,512
Payment of deferred financing costs	—			(22,651		)
Repayment of notes	(932		)	(330,786		)
Proceeds from capital contributions	—			58,487
Additional costs associated with initial public offering	(63		)	—
Net cash provided by (used for) financing activities	(995		)	373,562

Increase in cash	8,611			8,912
Cash – beginning of period	5,334			3,393

Cash – end of period	$	13,945		$	12,305

Supplemental Cash Flow Information
Fair value of assets acquired, net of cash acquired	$	—		$	596,955
Fair value of liabilities assumed	—			(223,613		)
Purchase price funded with non-cash contributions	—			(92		)
Cash paid to purchase business	$	—		$	373,250

Interest paid	$	8,051		$	10,295
Income taxes paid	$	422		$	280

	Vetco
Cash	$	—
Accounts receivable	2,136
Inventories	910
Prepaid expenses and other current assets	37
Property, plant and equipment	5
Goodwill	21,206
Intangible assets	27,158
Accounts payable and accrued liabilities	(803		)
Long-term debt	—
Deferred income taxes	—
	$	50,649

See accompanying notes.

As a result of the Vetco acquisition, the Company recorded $27,000 of trademarks with an estimated useful life of 20 years and $158 related to a 5 year non-compete agreement with the former owner of Vetco.21

~~The~~Prestige ~~following~~Brands ~~table reflects the unaudited results of the Company’s operations on a pro forma basis as if the Medtech~~International, Spic and Span, Bonita Bay and Vetco Acquisitions had been completed on April 1, 2003. The pro forma financial information is not necessarily indicative of the operating results that would have occurred had the acquisitions been consummated as of April 1, 2003, nor is it necessarily indicative of future operating results.LLC

	Pro Forma Three months ended December 31, 2003
	(unaudited)
Net sales	$	81,138
Income before income taxes	$	16,387
Net income	$	9,842

Notes to Consolidated Financial Statements

	Pro Forma Nine months ended December 31, 2004		Pro Forma Nine months ended December 31, 2003
	(unaudited)		(unaudited)
Net sales	$	231,173	$	219,035
Income before income taxes	$	31,124	$	32,331
Net income	$	19,297	$	20,278

(in thousands, except per share data)

81. Business and Basis of Presentation

~~The~~Nature ~~results~~ of ~~operations of Vetco for the period October 1, 2004 to October 5 2004 were not material. Accordingly, pro forma information for the three months ended December 31, 2004 has not been presented.~~Business

3Prestige Brands International, LLC, (“Prestige International”) is an indirect wholly owned subsidiary of Prestige Brands Holdings, Inc. ~~INVENTORIES~~ (“the Company”) and the indirect parent company of Prestige Brands, Inc., the issuer of the 9.25% senior subordinated notes due 2012 (“Senior Notes”) and the borrower under the senior credit facility consisting of a Revolving Credit Facility, Tranche B Term Loan Facility and a Tranche C Term Loan Facility (together the “Senior Credit Facility”). Prestige International is also the parent guarantor of the obligations. The Company and its subsidiaries are engaged in the marketing, sales and distribution of over-the-counter drug, personal care and household cleaning brands to mass merchandisers, drug stores, supermarkets and club stores primarily in the United States.

~~Inventories,~~Basis ~~net consist~~ of ~~the following:~~Presentation

	December 31, 2004		March 31, 2004
	(successor basis)
Packaging and raw materials	$	4,110	$	1,562
Finished goods	14,778		8,186
Total	$	18,888	$	9,748

~~Inventories~~Use ~~are shown net~~ of ~~reserves for obsolete and slow moving inventory of $1,791 and $125 at December 31 and March 31, 2004, respectively.~~Estimates

4The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. ~~OTHER~~ Although these estimates are based on the ~~LONG-TERM~~Company’s ~~ASSETS~~knowledge of current events and actions that the Company may undertake in the future, actual results could differ from those estimates.

~~Other~~Cash ~~long-term~~and ~~assets~~Cash ~~consist of the following at December 31, 2004:~~Equivalents

	Carrying Amount		Accumulated Amortization			Net Carrying Amount
	(successor basis)
Intangible assets:
Indefinite lived trademarks	$	522,346	$	—		$	522,346
Amortizable intangible assets:
Trademarks	94,900		(6,635		)	88,265
Non-compete agreement	158		(8		)	150
	617,404		(6,643		)	610,761
Deferred financing costs, net	21,248		—			21,248
Deferred offering costs	1,058		—			1,058
Total	$	639,710	$	(6,643	)	$	633,067

9Accounts Receivable

~~Other long~~The Company extends non-~~term~~interest ~~assets~~bearing ~~consist~~trade credit ofto its customers in the ~~following~~ordinary atcourse ~~March~~of 31business. To minimize credit risk, ~~2004:~~ongoing evaluations of customers’ financial condition are performed; however, collateral is not required. The Company maintains an allowance for doubtful accounts based on its historical collections experience, as well as its evaluation of current and expected conditions and trends affecting its customers.

	Carrying Amount		Accumulated Amortization			Net Carrying Amount
	(successor basis)
Intangible assets:
Indefinite lived trademarks	$	181,361	$	—		$	181,361
Amortizable intangible assets:
Trademarks	56,140		(890		)	55,250
	237,501		(890		)	236,611
Deferred financing costs, net	2,783		—			2,783
Total	$	240,284	$	(890	)	$	239,394

AsSales ~~of December 31, 2004, the Company’s future amortization of intangible assets is expected to be as follows:~~Returns

Year ending
March 31,
2005	$	2,148
2006	8,592
2007	8,592
2008	8,592
2009	8,592
Thereafter	51,899
Total	$	88,415

~~5. LONG-TERM DEBT~~Inventories

~~Long-term~~Inventories ~~debt~~are ~~consists~~ stated at the lower of cost or fair value where cost is determined by using the ~~following:~~first-in, first-out method. The Company provides an allowance for slow moving and obsolete inventory.

	December 31, 2004			March 31, 2004
	(successor basis)
Revolving Credit Facility	$	—		$	—
Tranche B Term Loan Facility	370,293			—
Tranche C Term Loan Facility	100,000			—
Senior Subordinated Notes	210,000			—
Medtech Revolving Credit Facility	—			10,548
Medtech Term Loan Facility	—			100,000
Medtech Subordinated Notes	—			38,146
	680,293			148,694
Less: current portion	(3,730		)	(2,000		)
Long-term debt	$	676,563		$	146,694

Property and Equipment

~~Interest~~Property ~~Rate~~and ~~Protection~~equipment ~~Agreement~~are stated at cost and are depreciated using the straight-line method based on the following estimated useful lives:

On June 30, 2004, the Company purchased a 5% interest rate cap covering $20,000 of its debt. The interest rate cap terminates in June 2006.

		Years
Machinery		5
Computer equipment		3
Furniture and fixtures		7

10Expenditures for maintenance and repairs are charged to expense as incurred. When an asset is sold or otherwise disposed of, the cost and associated accumulated depreciation are removed from the accounts and the resulting gain or loss is recognized in the consolidated statement of operations.

6Property and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. ~~BUSINESS~~ An impairment loss is recognized if the ~~SEGMENTS~~carrying amount of the asset exceeds its fair value.

Segment information has been prepared in accordance with SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information.” Operating segments are determined based on product lines. Within each reportable segment are operating segments which have similar economic characteristics, including the nature of the products, production process, type of customer and method of distribution.Goodwill

~~There were~~The noexcess ~~inter-segment~~of ~~sales~~the orpurchase ~~transfers~~price ~~during~~over the ~~three~~fair market orvalue ~~nine~~of ~~months~~assets ~~ended December~~acquired ~~31, 2004~~ and ~~2003.~~liabilities ~~The~~assumed ~~Company~~in ~~evaluates~~acquisition transactions ~~the~~is ~~performance~~classified ofas ~~its~~goodwill. ~~product~~In ~~lines~~accordance ~~and~~with ~~allocates~~Statement ~~resources to them based primarily on contribution margin~~No. ~~The~~ 142, ~~tables~~“Goodwill ~~below~~and ~~summarize~~Other ~~information~~Intangible ~~about~~Assets,” ~~reportable~~the ~~segments. The~~ Company ~~did~~does not ~~operate~~amortize ingoodwill, ~~the~~but ~~household~~performs impairment ~~cleaning~~tests ~~segment~~of ~~during~~ the ~~three~~ ~~and~~carrying ~~nine~~value ~~months~~at ~~ended~~least ~~December 31, 2003~~annually.

Three months ended December 31, 2004	Over-the-Counter Drug		Personal Care		Household Cleaning		Consolidated
(successor basis)
Net sales	$	44,755	$	7,517	$	23,557	$	75,829
Other revenues	—		—		25		25
Total revenues	44,755		7,517		23,582		75,854
Cost of sales	16,376		3,601		13,946		33,923
Gross profit	28,379		3,916		9,636		41,931
Advertising and promotion	4,780		864		1,621		7,265
Contribution margin	23,599		3,052		8,015		34,666
Other operating expenses							8,295
Operating income							26,371
Other income (expense)							(11,994		)
Provision for income taxes							(5,230		)
Net Income							$	9,147

Intangible Assets

Three months ended December 31, 2003	Over-the-Counter Drug		Personal Care		Other		Consolidated
(predecessor basis)
Net sales	$	12,664	$	6,458	$	—	$	19,122
Other revenues - related party	—		—		97		97
Total revenues	12,664		6,458		97		19,219
Cost of sales	4,536		2,949		—		7,485
Gross profit	8,128		3,509		97		11,734
Advertising and promotion	1,101		1,635		—		2,736
Contribution margin	7,027		1,874		97		8,998
Other operating expenses							4,198
Operating income							4,800
Other income (expense)							(2,148		)
Provision for income taxes							(1,052		)
Net income							$	1,600

11Indefinite lived intangible assets are tested for impairment at least annually, while intangible assets with finite lives are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. An impairment loss is recognized if the carrying amount of the asset exceeds its fair value.

Nine months ended December 31, 2004	Over-the-Counter Drug		Personal Care		Household Cleaning		Consolidated
(successor basis)
Net sales	$	121,910	$	25,545	$	77,376	$	224,831
Other revenues	—		—		126		126
Total revenues	121,910		25,545		77,502		224,957
Cost of sales	46,935		12,745		48,209		107,889
Gross profit	74,975		12,800		29,293		117,068
Advertising and promotion	19,430		5,306		6,604		31,340
Contribution margin	55,545		7,494		22,689		85,728
Other operating expenses							22,261
Operating income							63,467
Other income (expense)							(41,444		)
Provision from income taxes							(8,340		)
Net income							$	13,683

Deferred Financing Costs

Nine months ended December 31, 2003	Over-the-Counter Drug		Personal Care		Other		Consolidated
(predecessor basis)
Net sales	$	39,441	$	22,644	$	—	$	62,085
Other revenues - related party	—		—		292		292
Total revenues	39,441		22,644		292		62,377
Cost of sales	13,166		10,406		—		23,572
Gross profit	26,275		12,238		292		38,805
Advertising and promotion	6,239		5,751		—		11,990
Contribution margin	20,036		6,487		292		26,815
Other operating expenses							11,762
Operating income							15,053
Other income (expense)							(6,536		)
Provision for income taxes							(3,364		)
Net income							$	5,153

~~During the~~Revenue ~~nine months ended December 31, 2004, virtually all sales were made to customers in the United States and Canada.~~Recognition

~~No individual~~Revenues ~~geographical~~are ~~area~~recognized ~~accounted~~when ~~for~~the ~~more~~following revenue ~~than~~recognition ~~10%~~criteria are met: (1) persuasive evidence of ~~net~~an arrangement ~~sales~~exists; in(2) there ~~any~~is ofa fixed or determinable price; (3) the ~~periods~~product ~~presented. At~~has ~~December~~been ~~31,~~shipped and the customer takes ownership and ~~2004,~~assumes ~~all~~risk of loss; and (4) collectibility of the ~~Company’s~~resulting ~~long-term~~receivable is ~~assets~~reasonably ~~were~~assured. These ~~located~~criteria are insatisfied ~~the~~upon ~~United~~shipment ~~States.~~of product, and revenues are recognized

1223

7accordingly. ~~Commitments~~ Provision is made for estimated customer discounts and ~~Contingencies~~returns at the time of sale based on the Company’s historical experience.

InThe ~~June~~Company ~~2003,~~frequently aparticipates ~~lawsuit, Theodosakis v. Walgreens, et al, was filed~~ in ~~Federal District Court in Arizona, in which~~ the ~~plaintiff~~promotional ~~alleged~~programs ~~that~~of ~~Medtech~~its ~~Products~~customers, aas ~~wholly-owned~~is ~~subsidiary~~customary ofin ~~Medtech, and~~this ~~others~~industry. The ~~infringed~~ultimate ~~the~~cost ~~dress trade~~ of athese ~~book~~promotional programs ~~titled~~varies ~~“The~~based ~~Arthritis~~on ~~Cure” in connection with~~ the ~~sale~~actual number of ~~dietary~~units ~~supplement~~sold ~~products~~during ~~under~~a ~~the~~finite ~~core~~period ~~trademark~~of ~~ARTHx~~time. InThese ~~addition,~~programs ~~the complaint~~may ~~alleged that Medtech Products and others made false endorsements,~~include ~~engaged~~coupons, inscan ~~unfair competition~~downs, ~~made~~temporary ~~false~~price ~~designations~~reductions ofor ~~origin~~other ~~and~~price ~~invaded~~guarantee ~~the~~vehicles. The ~~privacy~~Company ~~rights~~estimates of the ~~plaintiff. The~~cost ~~ARTHx~~of ~~trademarks,~~such ~~goodwill~~promotional ~~and~~programs ~~inventory~~at ~~were~~their ~~sold~~inception bybased ~~Medtech~~on ~~Products~~historical ~~to a~~experience ~~third~~and ~~party,~~current ~~Contract~~market ~~Pharmacal~~conditions ~~Corporation,~~and inreduces ~~March~~sales ~~2003~~by such estimates. OnAt ~~January 12, 2005 our motions for summary judgment on~~ the ~~basis~~completion of ~~Laches~~the ~~and~~promotional ~~Statute of Limitations were granted by the~~program, ~~court. The~~the ~~plaintiff~~estimated ~~has~~amounts aare ~~right~~adjusted to ~~a perfect~~actual ~~appeal within 30 days~~results.

~~The~~Costs Company is also involved from time to time in routine legal matters and other claims incidental to its business. When it appears probable in management’s judgment that the Company will incur monetary damages or other costs in connection with such claims and proceedings, and such costs can be reasonably estimated, liabilities are recorded in the financial statements and charges are recorded against earnings. The Company believes the resolution of ~~such routine matters and other incidental claims, taking into account reserves and insurance, will not have a material adverse effect on the Company’s financial condition or results of operations.~~Sales

8Costs of sales include product costs, warehousing costs, inbound and outbound shipping costs, and handling and storage costs. ~~Subsequent~~ Shipping, ~~Events~~warehousing and handling costs were $5.5 million and $5.3 million for the periods ended June 30, 2005 and 2004, respectively.

InAdvertising ~~January~~and ~~2005,~~Promotion ~~the Prestige Brands Holdings, Inc., the ultimate parent of the company, filed an amended registration statement on Form S-1 to offer 23,333,333 shares of its common stock to the public.~~Costs

13Advertising and promotion costs are expensed as incurred. Slotting fees associated with products are recognized as a reduction of sales. Under slotting arrangements, the retailers allow the Company’s products to be placed on the stores’ shelves in exchange for such fees. Direct reimbursements of advertising costs are reflected as a reduction of advertising costs in the period earned.

~~Item~~Stock-based ~~2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.~~Compensation

The ~~following~~Company ~~discussion should~~accounts befor ~~read~~employee ~~together~~stock-based compensation in accordance with the ~~unaudited~~provisions ~~consolidated~~of ~~financial~~APB ~~statements~~25 and complies with the disclosure provisions of Statement No. 123 and Statement No. 148. Under APB 25, compensation expense is based on the ~~related~~difference, ~~notes~~if ~~included~~any, ~~elsewhere~~on inthe ~~this~~date ~~document~~of grant, between the fair value of the Company’s common stock and the exercise price of the equity instrument.

~~GENERAL~~Income Taxes

~~Overview. We~~Income taxes are arecorded ~~branded~~in ~~consumer products~~accordance ~~company~~ with athe provisions ~~diversified portfolio~~ of ~~well-recognized~~Statement ~~brands~~No. 109. Pursuant into ~~the over-the-counter~~Statement ~~drug~~No. 109, ~~household~~deferred ~~cleaning~~tax assets and ~~personal care categories. Our products~~ liabilities are ~~sold~~determined bybased ~~mass~~on ~~merchandisers, and~~the indifferences ~~drug,~~between ~~grocery,~~the ~~dollar~~financial reporting and ~~club stores.~~ tax ~~Our~~bases ~~senior~~of ~~management~~assets ~~team~~ and ~~dedicated~~liabilities ~~sales~~using ~~force~~the ~~maintain long-standing~~enacted ~~relationships~~tax ~~with~~rates ~~our~~and ~~top~~laws 50that ~~customers, which accounted for approximately~~will ~~81%~~be ofin ~~our~~effect ~~gross~~when ~~sales,~~the ondifferences aare ~~pro~~expected ~~forma~~to ~~basis~~reverse. A ~~excluding~~valuation ~~the~~allowance ~~Vetco~~is ~~acquisition,~~established when ~~for~~necessary ~~the~~to ~~year~~reduce ~~ended~~deferred ~~March~~tax ~~31,~~assets ~~2004. Our principal~~to ~~customer~~the ~~relationships~~amounts ~~include~~expected ~~Wal-Mart,~~to ~~Walgreens,~~be ~~Target, CVS and Kroger~~realized.

WeDerivative ~~conduct our operations through three principal business segments: Over-the-Counter Drug, Household Cleaning and Personal Care.~~Instruments

~~Results~~Statement No. 133 requires companies to recognize derivative instruments as either assets or liabilities in the balance sheet at fair value. The accounting for changes in the fair value of ~~Operations~~a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and further, on the type of hedging relationship. For those derivative instruments that are designated and qualify as hedging instruments, a company must designate the hedging instrument, based upon the exposure being hedged, as a fair value hedge, a cash flow hedge or a hedge of a net investment in an international operation.

The ~~following~~Company ~~tables~~has ~~set~~designated its derivative ~~forth~~financial ~~the~~instruments ~~net~~as ~~sales,~~cash ~~gross~~flow ~~profit~~hedges ~~and~~because ~~contribution~~they ~~margin~~hedge (iexposure to variability in expected future cash flows that is attributable to interest rate risk.e. For these hedges, ~~gross~~the ~~profit~~effective ~~less~~portion ~~advertising~~of ~~and~~the ~~promotion,~~gain or ~~A&P~~loss byon ~~segment~~the derivative instrument is reported as a component of other comprehensive income (loss) and reclassified into earnings in the same line item associated with the forecasted transaction in the same period or periods during which the hedged transaction affects earnings. Any ineffective portion of the gain or loss on the derivative instruments is recorded in results of operations immediately.

The summary unaudited pro forma segment data are provided for informational purposes only and are not necessarily indicative of the operating results that would have occurred had the transactions been consummated on the date indicated above, nor are they necessarily indicative of our future results of operations.24

14Recently Issued Accounting Standards

	Three months ended (unaudited)
	December 31, 2004		December 31, 2003		December 31, 2003
	(successor basis)		(predecessor basis)		(pro forma basis)
Net Sales
Over-the-counter drug	$	44,755	$	12,664	$	41,020
Personal care	7,517		6,458		8,190
Household cleaning	23,582		—		27,588
Other	—		97		97
Total net sales	75,854		19,219		76,895
Gross Profit
Over-the-counter drug	28,379		8,128		27,356
Personal care	3,916		3,509		4,423
Household cleaning	9,636		—		11,902
Other	—		97		97
Total gross profit	41,931		11,734		43,778
Contribution Margin
Over-the-counter drug	23,599		7,027		22,250
Personal care	3,052		1,874		2,572
Household cleaning	8,015		—		7,107
Other	—		97		97
Total contribution margin	34,666		8,998		32,026

In March 2005, the FASB issued FIN 47 which clarifies guidance provided by Statement No. 143, “Accounting for Asset Retirement Obligations.” FIN 47 is effective for the Company no later than March 31, 2006. The adoption of FIN 47 is not expected to have a significant impact on the Company’s financial position, results of operations or cash flows.

~~Three~~In ~~months~~April 2005, ~~ended~~the ~~December~~Securities ~~31,~~and ~~2004~~Exchange Commission ~~compared~~approved an amendment to Rule 4-01 of Regulation S-X that delays the ~~three~~effective ~~months~~date ~~ended~~of ~~December~~Statement 31No. 123(R) which requires companies to expense the value of employee and director stock options and similar awards. The Company is currently reviewing its options for implementation of Statement No. 123(R). The results of operations for the period ended June 30, ~~2003~~2005 would not have been affected had the Company applied the fair value recognition provisions of Statement 123(R) during this period.

~~The~~In ~~following~~May 2005, ~~includes a discussion of~~ the ~~results~~FASB ~~for~~issued ~~the~~Statement No. 154 ~~historical~~which ~~quarters~~replaces ~~ended~~APB ~~December~~Opinion ~~31,~~No. 20 ~~2004~~ and ~~2003~~FASB Statement No. 3, as“Reporting ~~well~~Accounting ~~as,~~Changes ain ~~discussion~~Interim ofFinancial ~~the~~Statements.” Statement ~~pro~~No. 154 ~~forma~~requires ~~quarter~~that voluntary ~~ended~~changes ~~December~~in ~~31, 2003~~accounting ~~compared~~principle tobe ~~actual~~applied ~~results~~retrospectively ~~for~~to the balances ~~quarter~~of ~~ended~~assets ~~December~~and ~~31,~~liabilities ~~2004. Use~~as of the ~~term~~beginning ~~“pro~~of ~~forma”~~the ~~throughout~~earliest ~~the~~period ~~following~~for ~~discussion~~which ~~reflects~~retrospective ~~the~~application ~~unaudited~~is ~~results~~practicable ofand ~~our~~that ~~operations~~a ascorresponding adjustments ifbe ~~the Spic~~made ~~and~~to ~~Span~~the ~~acquisition~~opening ~~and~~balance ~~the~~of ~~Bonita~~retained ~~Bay~~earnings. APB ~~acquisition~~Opinion No. 20 had ~~both~~required ~~been~~that ~~completed~~most onvoluntary ~~April~~changes 1,in ~~2003,~~accounting ~~without~~principle ~~giving~~be recognized by including in net income the cumulative effect of changing to the ~~Vetco~~new ~~acquisition, which~~principle. Statement No. 154 is ~~not~~effective ~~considered~~for ~~material~~all accounting tochanges ~~the~~and ~~pro~~corrections ~~forma~~of ~~results~~errors made in fiscal years beginning after December 15, 2005.

~~Net Sales. Net sales increased by $56.6 million, or 294.7%, from $19.~~2 ~~million for the quarter ended December 31, 2003 to $75~~.9 Accounts million for the quarter ended December 31, 2004. The sales increase is driven by the acquisitions of Bonita Bay, Spic and Span, and Vetco in April 2004, March 2004 and October 2004, respectively. The over-the-counter (“OTC”) segment had net sales of $44.8 million for the quarter ended December 31, 2004, an increase of $32.1 million over the quarter ended December 31, 2003, primarily as a result of the Bonita Bay Acquisition. The personal care segment had net sales of $7.5 million for the quarter ended December 31, 2004, an increase of $1.1 million over the quarter ended December 31, 2003, primarily as a result of the Bonita Bay Acquisition. The household cleaning segment, which was acquired through the Spic and Span and Bonita Bay acquisitions, had sales of $23.6 million for the quarter ended December 31, 2004 compared to no sales for the quarter ended December 31, 2003. On a pro forma basis, net sales decreased by $1.0 million, or 1.4%, from $76.9 million for the quarter ended December 31, 2003 to $75.9 million for the quarter ended December 31, 2004. The decrease in sales resulted from declines in the household cleaning and personal care categories, partially offset by an increase in the OTC drug category.Receivable

~~Over-the-Counter Drug~~The ~~Category. Pro forma~~components ~~net~~of ~~sales~~accounts ~~for~~receivable consist of the ~~OTC drug category were~~following:

	June 30, 2005			March 31, 2005

Accounts receivable	$	32,654		$	45,329
Other receivables	1,251			835
	33,905			46,164
Less allowances for discounts, returns and uncollectible accounts	(1,416		)	(2,271		)

	$	32,489		$	43,893

$44.8 million for the quarter ended December 31, 2004 compared to pro forma net sales of $41.0 million for the quarter ended December 31, 2003. The strong sales increase was driven by increases in the Clear Eyes (+$2.1 million) and Compound W (+$1.7 million) brands. In addition, the Little Remedies brand, acquired in the Vetco Acquisition in October 2004, contributed $4.4 million of net sales in the quarter. Partially offsetting the sales increases discussed above were decreases for the Chloraseptic (-$3.~~2 million) and Murine (-$1.3 million) brands.~~ Inventories

~~The Chloraseptic~~Inventories ~~decline~~consist ~~is related to the timing~~ of the flu season in the FY 2003 quarter. A severe flu season in November and December 2003 led to an extremely strong sales performance in December 2003. The flu season in the quarter ended December 31, 2004 was comparatively mild.following:

Personal Care Category. On a pro forma basis, net sales for the personal care category declined by $0.7 million or, 8.2%, from $8.2 million for the quarter ended December 31, 2003 to $7.5 million for the quarter ended December 31, 2004.

	June 30, 2005		March 31, 2005

Packaging and raw materials	$	5,192	$	3,587
Finished goods	22,754		17,993

	$	27,946	$	21,580

~~Household Cleaning~~Inventories ~~Category. On a~~are ~~pro~~shown ~~forma basis, the household cleaning category~~ net ~~sales~~of ~~decreased~~allowances ~~by $4.0 million, or 14.5% from $27.6 million~~ for ~~the quarter ended December 31, 2003 to~~ ~~$23.6~~obsolete ~~million~~and ~~for~~slow ~~the~~moving ~~quarter~~inventory ~~ended December 31, 2004. The decrease was attributable to Comet, which declined from net sales~~ of $221.~~5 million in the quarter ended December 31, 2003 to $18.~~4 million inat ~~the quarter ended December 31~~June 30, ~~2004. Sales~~2005 ~~in the 2003 quarter were bolstered by $2.7 million of volume for two new products launches - a disposable toilet bowl brush (Comet Clean~~ and ~~Flush) and toilet bowl tablets - which were discontinued~~ inMarch 31, FY 2005, respectively.

Gross Profit. Gross profit increased by $30.2 million, or 257.3%, from $11.7 million for the quarter ended December 31, 2003 to $41.9 million for the quarter ended December 31, 2004. The increase in gross profit is driven by the sales increase in the current year. As a percentage of sales, gross profit declined from 61.1% for the quarter ended December 31, 2003 to 55.3% for the quarter ended December 31, 2004. The margin decline is due to the addition of the household cleaning segment in the current year. Gross margins in the household cleaning segment are significantly lower than gross margins in the OTC and personal care categories.25

~~On a pro forma basis, gross profit decreased by $1.8 million, or~~ 4.~~2%, from $43.8~~ Property ~~million~~and for the quarter ended December 31, 2003 to $41.9 million for the quarter ended December 31, 2004. The decrease in gross profit is a result of the sales decrease in the current year. As a percentage of sales, gross profit declined from 56.9% for the quarter ended December 31, 2003 to 55.3% for the quarter ended December 31, 2004.Equipment

~~Over-the-Counter~~Property ~~Drug~~and ~~Category.~~equipment Onconsist a pro forma basis, OTC gross profit increased by $1.0 million, or 3.7%, from $27.4 million for the quarter ended December 31, 2003 to $28.4 million for the quarter ended December 31, 2004. The increase was due to the sales increase in the current year. Gross profit as a percentage of ~~sales declined from 66.7% for~~ the ~~quarter ended December 31, 2003 to 63.4% for the quarter ended December 31, 2004. The decline in margin as a percentage of sales was driven by a change in sales mix.~~following:

Personal Care Category. On a pro forma basis, the personal care segment’s gross profit decreased by $0.5 million, or 11.5%, from $4.4 million for the quarter ended December 31, 2003 to $3.9 million for the quarter ended December 31, 2004. The decrease in gross profit was due to the sales decline.

	June 30, 2005			March 31, 2005

Machinery	$	2,828		$	2,828
Computer equipment	784			771
Furniture and fixtures	542			515
Leasehold improvements	339			173
	4,493			4,287

Accumulated depreciation	(2,450		)	(1,963		)

	$	2,043		$	2,324

~~Household Cleaning Category~~5. On Intangible a pro forma basis, the household cleaning segment’s gross profit decreased by $2.3 million, or 19.0%, from $11.9 million for the quarter ended December 31, 2003 to $9.6 million for the quarter ended December 31, 2004. The decline in gross profit was due to the sales decline.Assets

16Intangible assets consist of the following:

Contribution Margin. Contribution margin increased by $25.7 million, or 285.3%, from $9.0 million for the quarter ended December 31, 2003 to $34.7 million for the quarter ended December 31, 2004. The increase in contribution margin was due to the sales increase discussed above.

	June 30, 2005
	Gross			Accumulated			Net
	Amount			Amortization			Amount

Indefinite lived trademarks	$		522,346	$	—		$	522,346

Amortizable intangible assets
Trademarks	94,900			(10,915		)	83,985
Non-compete agreement	158			(24		)	134
	95,058			(10,939		)	84,119

	$	617,404		$	(10,939	)	$	606,465

On a pro forma basis, contribution margin increased by $2.6 million, or 8.2%, from $32.0 million for the quarter ended December 31, 2003 to $34.7 million for the quarter ended December 31, 2004. The increase was due to a reduction of $4.5 million in advertising and selling expenses, from $11.8 million for the quarter ended December 31, 2003 to $7.3 million for the quarter ended December 31, 2004, offset by the gross profit decline discussed above. The decrease in advertising and selling expenses was due to the following: (i) approximately $2.0 million in advertising and selling expenses related to the Comet disposable toilet bowl brush in the December 2003 quarter (which were not incurred in the December 2004 quarter); (ii) synergies savings (as a result of the Acquisitions) related to agency fees, media buying and broker commissions amounted to approximately $0.7 million in the quarter; and (iii) other sales promotion and trade promotion expenses were $1.7 million lower than the quarter ended December 31, 2003. This decrease was offset by an increase in price allowances of $1.2 million for the quarter ended December 31, 2004.

	March 31, 2005
	Gross			Accumulated			Net
	Amount			Amortization			Amount

Indefinite lived trademarks	$		522,346	$	—		$	522,346

Amortizable intangible assets
Trademarks	94,900			(8,775		)	86,125
Non-compete agreement	158			(16		)	142
	95,058			(8,791		)	86,267

	$	617,404		$	(8,791	)	$	608,613

Over-the-Counter Drug Category. Pro forma contribution margin for the OTC segment increased by $1.4 million, or 6.1%, from $22.2 million for the quarter ended December 31, 2003 to $23.6 million for the quarter ended December 31, 2004. The increase in contribution margin was due to the sales increase.26

~~Personal~~At ~~Care Category. Pro forma contribution margin for the personal care segment increased by $0.5 million~~June 30, ~~or 18.7%~~2005, ~~from~~intangible ~~$2.6~~assets ~~million~~are ~~for~~expected ~~the quarter ended December 31, 2003~~ to ~~$3.1~~ ~~million~~be ~~for~~amortized ~~the~~over ~~quarter ended December 31, 2004. The increase in contribution margin was~~a ~~driven~~period byof ~~reductions~~five into ~~sales~~30 ~~promotion,~~years ~~trade~~as ~~promotion and broker commissions in the current quarter.~~follows:

Household Cleaning Category. Pro forma contribution margin for the household cleaning segment increased by $0.9 million, or 12.8%, from $7.1 million for the quarter ended December 31, 2003 to $8.0 million for the quarter ended December 31, 2004. The increase in contribution margin was due to the reductions in advertising and trade promotion expenditures for Comet in the current quarter primarily due to the discontinuance of advertising related to the disposable toilet bowl brush.

Twelve Months Ending June 30
2006	$	8,592
2007	8,592
2008	8,592
2009	8,592
2010	8,592
Thereafter	41,159

	$	84,119

General and Administrative Expenses. General and administrative expenses increased by $2.8 million, or 97.6%, from $2.9 million for the quarter ended December 31, 2003 to $5.7 million for the quarter ended December 31, 2004. The increase in expenses was due to the additional expenses associated with adding the brands acquired in the Bonita Bay, Spic and Span and Vetco Acquisitions to the portfolio. The acquisitions resulted in increases to most general and administrative line items including compensation, office space, insurance costs, and legal and accounting expenses. In addition, the decision to abandon our proposed IDS offering during the quarter resulted in recognition of $0.5 million of IDS related legal and accounting expenses in the period ending December 31, 2004.27

~~Depreciation and Amortization Expense. Depreciation and amortization expense increased by $1.3 million, or 97.5%, from $1.3 million for the quarter ended December 31, 2003 to $2.~~6 ~~million for the quarter ended September 30, 2004~~. ~~The~~ Long-Term ~~increase is due primarily to amortization of intangible assets related to the acquisitions and an increase in depreciation related to the Bonita Bay Acquisition~~Debt

~~Interest~~Long-term ~~Expense,~~debt ~~net. Net~~consists ~~interest expense~~of ~~increased by $9.8 million, or 458.8%, from $2.2 million for~~ the ~~quarter ended December 31, 2003 to $12.0 million for the quarter ended December 31, 2004. The increase in interest expense is due primarily to the increased levels of indebtedness~~following:

	June 30, 2005		March 31, 2005

Senior revolving credit facility (“Revolving Credit Facility”), which expires on April 6, 2009, is available for maximum borrowings of up to $60.0 million. The Revolving Credit Facility bears interest at the Company’s option at either the prime rate plus a variable margin or LIBOR plus a variable margin. The variable margin ranges from 0.75% to 2.50% and at June 30, 2005, the interest rate on the Revolving Credit Facility was 7.0% per annum. The Company is also required to pay a variable commitment fee on the unused portion of the Revolving Credit Facility. At June 30, 2005, the commitment fee was 0.50% of the unused line. The Revolving Credit Facility is collateralized by substantially all of the Company’s assets.	$	—	$	—

Senior secured term loan facility, (“Tranche B Term Loan Facility”) bears interest at the Company’s option at either the prime rate or LIBOR plus a variable margin of 2.25%. At June 30, 2005, the applicable interest rate on the Tranche B Term Loan Facility was 5.38%. Principal payments of $933 and interest are payable quarterly. In February 2005, the Tranche B Term Loan Facility was amended to increase the amount available thereunder by $200.0 million, all of which is available at June 30, 2005. Current amounts outstanding under the Tranche B Term Loan Facility mature on April 6, 2011, while amounts borrowed pursuant to the amendment will mature on October 6, 2011. The Tranche B Term Loan Facility is collateralized by substantially all of the Company’s assets.	368,428		369,360

Senior Subordinated Notes (Senior Notes) that bear interest at 9.25% which is payable on April 15^th and October 15^th of each year. The Senior Notes mature on April 15, 2012; however, the Company may redeem some or all of the Senior Notes on or prior to April 15, 2008 at a redemption price equal to 100% plus a make-whole premium, and on or after April 15, 2008 at redemption prices set forth in the indenture governing the Senior Notes. The Senior Notes are unconditionally guaranteed by Prestige International and Prestige International’s wholly owned subsidiaries (other than the issuer). There are no significant restrictions on the ability of any of the guarantors to obtain funds from their subsidiaries.	126,000		126,000

	494,428		495,360
Current portion of long-term debt	(3,730)		(3,730)

	$	490,698	$	491,630

~~outstanding after the acquisitions and related financing transactions.~~28

~~Income Taxes.~~ The Revolving ~~income~~Credit ~~tax provision~~Facility ~~for~~and the ~~quarter~~Tranche ~~ended~~B ~~December~~Term ~~31,~~Loan ~~2004~~Facility ~~was~~(together ~~$5.2~~the “Senior ~~million,~~Credit ~~with~~Facility”) ~~an effective~~contain ~~rate~~various offinancial ~~36.4%~~covenants, ~~compared~~including provisions that require the Company to amaintain ~~provision~~certain ofleverage $1ratios, interest coverage ratios and fixed charge coverage ratios.1 Additionally, ~~million~~the ~~for~~Senior Credit Facility contains provisions that restrict the Company from undertaking specified ~~quarter~~corporate ~~ended~~actions, ~~December~~such 31as asset dispositions, ~~2003~~acquisitions, ~~with~~dividend anpayments, changes ~~effective~~of ~~rate~~control, incurrence of ~~39.7%. The~~indebtedness, ~~difference~~creation ~~between~~of ~~the~~liens Uand transactions with affiliates.S. The ~~federal~~Company ~~statutory~~was ~~rate~~in ofcompliance ~~34%~~with its financial and ~~the~~restrictive ~~effective~~covenants ~~rates~~under isthe ~~primarily~~Senior Credit ~~due~~Facility toat ~~state~~June 30, ~~tax considerations~~2005.

	Nine months ended (unaudited)
	December 31, 2004		December 31, 2003		December 31, 2003
	(successor basis)		(predecessor basis)		(pro forma basis)
Net Sales
Over-the-counter drug	$	121,910	$	39,441	$	108,363
Personal care	25,545		22,644		28,170
Household cleaning	77,502		—		78,579
Other	—		292		292
Total net sales	224,957		62,377		215,404
Gross Profit
Over-the-counter drug	74,975		26,275		71,977
Personal care	12,800		12,238		14,905
Household cleaning	29,293		—		34,093
Other	—		292		292
Total gross profit	117,068		38,805		121,267
Contribution Margin
Over-the-counter drug	55,545		20,036		52,473
Personal care	7,494		6,487		7,530
Household cleaning	22,689		—		22,963
Other	—		292		292
Total contribution margin	85,728		26,815		83,258

Future principal payments required in accordance with the terms of the Senior Credit Facility and the Senior Notes are as follows:

Nine months ended December 31, 2004 compared to the nine months ended December 31, 2003

Twelve Months Ending June 30
2006	$	3,730
2007	3,730
2008	3,730
2009	3,730
2010	3,730
Thereafter	475,778

	$	494,428

The ~~following~~Company ~~includes~~entered into a 5% interest rate cap ~~discussion~~agreement ofwith ~~the~~a ~~year-to-date~~financial ~~results~~institution ~~for~~to mitigate the ~~nine~~impact ~~months~~of ~~ended~~changing interest ~~December~~rates. The ~~31,~~agreement provides a ~~2004~~notional ~~and~~amount ~~2003~~of as$20.0 ~~well~~million ~~as,~~and aterminates ~~discussion~~in ofJune 2006. The ~~the~~Company ~~pro~~also ~~forma~~entered ~~December~~into ~~31,~~interest ~~2003~~rate ~~year-to-date~~cap ~~results~~agreements ~~compared~~with toanother ~~actual~~financial ~~December~~institution 31that become effective August 30, ~~2004~~2005, ~~year-to-date~~with ~~results. Use~~a oftotal ~~the~~notional ~~term~~amount ~~“pro~~of ~~forma”~~$180.0 ~~throughout~~million ~~the~~and cap ~~following~~rates ~~discussion~~ranging ~~reflects~~from ~~the~~3.25% ~~unaudited~~to ~~results~~3.75%. The agreements ofterminate ~~our~~on ~~operations~~May 30, 2006, 2007 and 2008 as ifto ~~the~~$50.0 million, ~~Spic~~$80.0 million and ~~Span~~$50.0 ~~acquisition~~million, ~~and~~respectively. The ~~the~~Company ~~Bonita~~is ~~Bay~~accounting ~~acquisition~~for ~~had~~the ~~both~~interest ~~been completed~~rate oncap ~~April~~agreements 1,as ~~2003,~~cash flow ~~without~~hedges. The ~~giving~~fair ~~effect~~value toof the ~~Vetco acquisition,~~ ~~which~~interest israte ~~not~~cap ~~considered~~agreements ~~material~~was to$1.7 ~~the~~million ~~pro~~at ~~forma~~June 30, ~~results~~2005.

~~Net Sales~~7. ~~Net~~ Commitments sales increased by $162.6 million, or 260.6%, from $62.4 million for the nine months ended December 31, 2003 to $225.0 million for the nine months ended December 31, 2004. On a pro forma basis, net sales increased by $9.6 million, or 4.4%, from $215.4 million for the nine months ended December 31, 2003 to $225.0 million for the nine months ended December 31, 2004. The sales increase was driven by the acquisitions of Spic and Span, Bonita Bay and Vetco in March 2004, April 2004 and October 2004, respectively. The Over-the- Counter Drug Category had net sales of $121.9 million for the nine months ended December 31, 2004, an increase of $82.5 million over net sales of $39.4 million for the nine months ended December 31, 2003. The Personal Care Category has net sales of $25.5 million for the nine months ended December 31, 2004 compared to net sales of $22.6 million for the nine months ended December 31, 2003. The Household Cleaning Category, which was acquired as part of the Spic and Span and Bonita BayContingencies

18In July 2002, the Company entered into a ten year manufacturing and supply agreement with an unrelated company. Pursuant to this agreement, the Company agreed to purchase certain minimum quantities of product over the initial three years of the agreement or to pay liquidated damages of up to $360. The Company had recorded a liability of $308 at June 30, 2005 and March 31, 2005 which represents its estimate of the probable liquidated damages. Such estimate is based on historical and expected purchases during the initial three years of the agreement.

~~Acquisitions~~In June 2003, ~~had~~Dr. Jason Theodosakis filed a lawsuit, Theodosakis v. ~~sales~~Walgreens, ofet ~~$77~~al.5, ~~million~~in ~~for~~Federal District Court in Arizona, alleging that two of the ~~nine~~Company’s ~~months~~subsidiaries, ~~ended~~Medtech ~~December~~Products 31and Pecos Pharmaceutical, ~~2004~~as ~~compare~~well as other unrelated parties, infringed the trade dress of two of his published books. Specifically, Dr. Theodosakis published “The Arthritis Cure” and “Maximizing the Arthritis Cure” regarding the use of dietary supplements to treat arthritis nopatients. Dr. Theodosakis ~~sales~~alleged that ~~during~~his books have a distinctive trade dress, or cover layout, design, color and typeface, and those products that the ~~same~~defendants ~~period~~sold under the ARTHx trademarks infringed the books’ trade dress and constituted unfair competition and false designation of origin. Additionally, Dr. Theodosakis alleged that the ~~prior~~defendants ~~year~~made false endorsements of the products by referencing his books on the product packaging and that the use of his name, books and trade dress invaded his right to publicity. The Company sold the ARTHx trademarks, goodwill and inventory to a third party, Contract Pharmacal Corporation, in March 2003. On January 12, 2005, the court granted the Company’s motion for summary judgment and dismissed all

Over-the-Counter Drug Category. On a pro forma basis, the increase in overall net sales was driven by the Over-the-Counter Drug Category which had net sales of $121.9 million for the nine months ended December 31, 2004 compared to net sales of $108.4 million in the prior year. The Compound W (+$11.5 million) and Clear eyes (+$6.4 million) brands exhibited strong sales growth for the nine months ended December 31, 2004. Partially offsetting the strong sales performance for those two brands were declines in sales for the Chloraseptic (-$4.6 million) and Murine (-$3.6 million) brands. The Little Remedies brands, acquired in the Vetco acquisition contributed $4.4 million to the nine month over-the-counter sales.29

~~Personal~~claims ~~Care~~against ~~Category. On~~Pecos a pro forma basis, the Personal Care Category showed a sales decline of $2.6 million, or 9.3%, from $28.2 million for the nine months ended December 31, 2003 to $25.5 million for the nine months ended December 31, 2004. The decrease in sales was driven by declines for Cutex and ~~Denorex~~Medtech. The ~~Cutex decline~~plaintiff ~~reflects~~has afiled ~~decline~~an ~~for~~appeal ~~the entire nail polish category~~ in ~~2004 versus~~ the ~~prior year~~U. ~~The~~S. ~~decline~~Court inof ~~Denorex~~Appeals ~~sales~~which ~~reflects~~is ~~market share losses from 2003~~pending.

~~Household~~On ~~Cleaning~~January 3, ~~Category. On~~2005, athe ~~pro~~Company ~~forma~~was ~~basis,~~served ~~the~~with ~~Household~~process ~~Cleaning~~by ~~Category~~its ~~had~~former ~~a sales~~lead ~~decline~~counsel ofin ~~$1.1~~the ~~million,~~Theodosakis orlitigation ~~1.4%,~~seeking ~~from~~ $78679 plus interest.6 The ~~million~~case ~~for~~was filed in the ~~nine~~Supreme ~~months~~Court ~~ended~~of ~~December~~New ~~31,~~York ~~2003~~and tois ~~$77.5~~styled ~~million~~as ~~for~~Dickstein ~~the~~Shapiro ~~nine~~et ~~months~~al ~~ended~~v. ~~December 31,~~Medtech ~~2004~~Products, Inc. ~~The~~In February 2005, ~~decline~~the inplaintiffs ~~sales~~filed ~~was~~an ~~due~~amended tocomplaint ~~a decline~~naming inthe ~~Comet, partially offset by an increase~~Pecos ~~for~~Pharmaceutical ~~Spic~~Company ~~and~~as ~~Span~~defendant. ~~Comet sales~~The ~~decreased~~Company byhas ~~$2.5~~answered ~~million,~~and orfiled ~~3.9%~~a ~~from~~counterclaim ~~$63.4~~against ~~million~~Dickstein ~~for~~and ~~the~~also ~~nine months ended~~filed ~~December~~a ~~31,~~third ~~2003~~party tocomplaint ~~$60.9~~against ~~million for~~ the ~~nine~~Lexington ~~months~~Insurance ~~ended December 31, 2004~~Company. ~~Spic~~The ~~and Span~~Company ~~sales~~believes ~~increased~~that byif ~~$1.4~~there ~~million,~~is orany ~~9.2%~~obligation ~~from~~to ~~$15.1 million for~~ the ~~nine~~Dickstein ~~months~~firm ~~ended~~relating ~~December~~to 31this matter, ~~2003~~it tois ~~$16.5~~an obligation ~~million~~of ~~for~~Lexington ~~the~~and ~~nine~~not ~~months~~the ~~ended December 31, 2004~~Company.

~~Gross~~On ~~Profit. Gross profit~~May 9, ~~increased~~2005, bythe ~~$78.3~~Company ~~million,~~was orserved ~~201.7%~~with ~~from~~a ~~$38.8~~complaint ~~million~~in ~~for~~a ~~the~~class ~~nine months~~action ~~ended~~lawsuit ~~December~~filed 31in Essex County, ~~2003~~Massachusetts, tostyled ~~$117~~as Dawn Thompson v.1 Wyeth, Inc. ~~million~~relating ~~for~~to the ~~nine~~Company’s ~~months~~Little ~~ended~~Remedies ~~December 31,~~pediatric ~~2004~~cough products. ~~This~~The ~~increase~~Company is ~~driven primarily~~one byof ~~the~~several corporate ~~sales~~defendants, ~~increase. As~~all ~~a percentage~~ of ~~sales,~~whom ~~gross~~market ~~profit~~over-the-counter ~~declined~~cough ~~from~~syrup ~~62.2%~~ products for ~~the~~pediatric ~~nine~~use. The ~~months~~complaint ~~ended~~alleges ~~December~~that ~~31,~~the ~~2003~~ingredient todextromethorphan ~~52.0%~~is ~~for~~no ~~the~~more ~~nine~~effective ~~months~~than ~~ended~~a ~~December 31, 2004~~placebo. ~~This~~There ~~decrease~~ is ~~gross~~no ~~margin~~allegation asof aphysical ~~percentage~~injury ofcaused ~~sales~~by isthe ~~driven~~product byor ~~two~~the ~~factors~~ingredient. ~~The~~ ~~nine~~In ~~months~~June 2005, ~~ended~~the ~~December~~Company ~~31,~~was ~~2004~~served ~~included~~in ~~$5.3~~a ~~million~~second ofclass ~~charges~~action complaint ~~due~~involving todextromethorphan. ~~step-ups~~The insecond ~~inventory~~case, ~~related~~styled toTina ~~purchase~~Yescavage ~~accounting~~v. ~~The~~ ~~second~~Wyeth ~~reason~~was ~~for~~filed ~~the~~in ~~deterioration~~Lee inCounty ~~gross~~Florida ~~margin~~and ~~percentage~~similarly isinvolves ~~the~~multiple ~~addition~~corporate todefendants. The ~~the~~Company ~~Household~~believes ~~Cleaning~~that ~~Category~~both in of the dextromethorphan ~~current~~cases ~~year. Gross~~are ~~margins~~without inmerit ~~the Household~~and ~~Cleaning~~is ~~Category~~actively ~~are~~pursuing ~~significantly~~appropriate defenses. The ~~lower~~use ~~than~~of ~~gross~~dextromethorphan ~~margins~~in pediatric ~~for~~products ~~the Over-the-Counter~~is ~~Drug~~fully ~~Category~~consistent with and ~~Personal~~supported ~~Care~~by ~~Category~~Food and Drug Administration regulations.

~~On a~~The ~~pro~~Company ~~forma~~is ~~basis,~~also ~~gross~~involved ~~profit~~from ~~decreased~~time byto ~~$4.2~~time ~~million,~~in orroutine ~~$3.4%,~~legal ~~from~~matters ~~$121.3~~and other ~~million~~claims ~~for~~incidental ~~the~~to ~~nine~~its ~~months~~business. ~~ended~~When ~~December~~it ~~31,~~appears ~~2003~~probable toin ~~$117.1~~management’s judgment ~~million~~that ~~for~~ the ~~nine~~ ~~months~~Company ~~ended~~will ~~December~~incur ~~31,~~monetary ~~2004. The decrease~~damages inor ~~gross~~other ~~profit~~costs onin connection awith ~~pro~~such ~~forma~~claims ~~basis~~and isproceedings, ~~primarily~~and ~~due~~such tocosts ~~charges related~~can tobe anreasonably estimated, ~~inventory~~liabilities ~~step-up~~are ofrecorded ~~$5.3~~in ~~million~~the ~~for~~financial ~~the~~statements ~~nine~~and ~~months~~charges ~~ended~~are ~~December~~recorded ~~31,~~against ~~2004~~earnings. ~~compared~~The toCompany anbelieves ~~inventory~~the ~~step-up~~resolution of ~~$1.2~~such ~~million in the nine~~routine ~~months~~matters ~~ended~~and ~~December~~other ~~31,~~incidental ~~2003. Excluding the inventory step-up~~claims, ~~gross~~taking ~~profit~~into ~~would~~account bereserves ~~flat at $122.4~~and ~~million~~insurance, ~~for~~will ~~the~~not ~~nine~~have ~~months~~a ~~ended~~material ~~December~~adverse ~~31,~~effect ~~2003~~on ~~and~~its ~~for~~financial ~~the nine months~~condition ~~ended~~or ~~December~~results ~~31,~~of ~~2004~~operation.

~~Over-the-Counter Drug Category~~8. ~~On a~~ Equity ~~pro~~Incentive forma basis, the Over-the-Counter Drug Category’s gross profit increased by $3.0 million, or 4.2%, from $72.0 million for the nine months ended December 31, 2003 to $75.0 million for the nine months ended December 31, 2004. The increase in gross profit was due to the sales increase. Excluding the inventory step-up of $1.2Plan

19In connection with the Company’s IPO, the Board of Directors adopted the 2005 Long-Term Equity Incentive Plan (“the Plan”). The Plan provides for grants of stock options, restricted stock, restricted stock units, deferred stock units and other equity-based awards. Directors, officers and other employees of the Company and its subsidiaries, as well as others performing services for the Company, are eligible for grants under the Plan. At June 30, 2005, there were 5,000,000 shares available for issuance under the Plan; however, no grants have been made under the Plan.

~~million for the nine months ended December 31, 2003 and $2~~9.~~7 million for the nine months ended~~ Related ~~December~~Party 31, 2004, gross profit would have increased by $4.5 million, or 6.1% from $73.2 million for the nine months ended December 31, 2003 to $77.7 million for the nine months ended December 31, 2004. The increase (excluding inventory step-up) was due to the sales increase.Transactions

~~Personal Care~~The ~~Category. On~~Company ~~a pro~~had ~~forma~~entered ~~basis,~~in ~~the~~an ~~Personal~~agreement ~~Care~~with ~~Category’s gross profit decline by $2.1~~an ~~million,~~affiliate orof ~~14.1%,~~GTCR ~~from~~Golder ~~$14.9~~Rauner ~~million for the nine months ended December 31~~II, ~~2003~~ toLLC ~~$12.8 million for the nine months ended December 31~~(“GTCR”), ~~2004. Excluding~~a ~~charges~~private ~~related~~equity tofirm ~~the~~and ~~inventory~~an ~~step-up~~investor ofin ~~$0.2 million during~~ the ~~current year~~Company, ~~gross~~whereby ~~profit decline by $1.9 million, or 12.8%, for~~ the ~~nine~~GTCR ~~months~~affiliate ~~ended December 31, 2004 versus the same period last year. The decline in gross profit~~ was ~~primarily due~~ to ~~the sales decline for the category.~~provide

Household Cleaning Category. On a pro forma basis, the Household Cleaning Category’s gross profit decreased by $4.8 million, or 14.1%, from $34.1 million for the nine months ended December 31, 2003 to $29.3 million for the nine months ended December 31, 2004. Excluding the charges related to the inventory step-up of $2.4 million during the current year, gross profit decline by $2.4 million, or 7.0%, from $34.1 million for the nine months ended December 31, 2003 to $31.7 million for the nine months ended December 31, 2004. The decline in gross profit is due to lower sales, close-out sales related to Comet Clean & Flush and increased shipments to lower margin dollar stores.30

~~Contribution Margin. Contribution~~management ~~margin~~and ~~increased~~advisory byservices ~~$58.9~~to ~~million,~~the ~~or 219.7%, from $26.8~~Company ~~million~~ for ~~the~~an ~~nine~~aggregate ~~months~~annual ~~ended~~compensation ~~December~~of ~~31, 2003 to~~ $854.70 million ~~for the nine months ended December 31, 2004~~. The ~~increase~~ inagreement ~~contribution margin~~ was ~~due~~terminated toin February 2005. During the ~~increased~~period ended ~~gross~~June 30, ~~profit discussed above~~2004, ~~partially~~the ~~offset~~Company bypaid ~~increased advertising and selling expenses associated with~~ the ~~acquisition~~affiliate of ~~the~~GTCR ~~Spic~~a ~~and~~management fee ~~Span~~of ~~and Bonita Bay brands~~$934.

~~On a pro forma basis, contribution margin increased by $2~~10.~~4 million, or 3.0%, from~~ Income $83.3 million for the nine months ended December 31, 2003 to $85.7 million for the nine months ended December 31, 2004. The increase in contribution margin was the result of the net sales increase combined with the decrease in overall advertising and selling expenses. The decrease in advertising and selling expenses in the current year is due to a synergy savings related to advertising agency fees, media buying and broker commissions. In addition, $2.0 million of advertising and selling expenses related to the Comet disposable toilet bowl brush in fiscal year 2003 were not repeated in fiscal year 2004.Taxes

~~Over-~~Income taxes are recorded in the~~-Counter Drug~~ ~~Category. Pro~~Company’s ~~forma~~quarterly ~~contribution~~financial ~~margin~~statements ~~for~~based ~~the~~on ~~Over-~~the~~-Counter~~ ~~Drug~~Company’s ~~Category,~~estimated ~~excluding~~annual effective ~~the~~income tax rate. The effective ~~inventory~~rates ~~step-up,~~used ~~increased~~in bythe ~~$4.5~~calculation ~~million,~~of orincome 8taxes were 52.36% and 35.5% for the periods ended June 30, ~~from~~2005 ~~$53~~and 2004, respectively.7 The ~~million~~increase in the effective tax rate for ~~the~~2005 ~~nine~~resulted ~~months~~primarily ~~ended~~from ~~December~~a ~~31,~~one ~~2003~~time tocharge of approximately $581.2 million due ~~for~~to the ~~nine~~increase ~~months ended~~in ~~December~~the ~~31,~~Company’s ~~2004. The~~graduated ~~increase~~federal inincome tax rate from 34% ~~pro~~to ~~forma~~35% ~~contribution~~and ~~margin~~its ~~was~~related ~~driven~~impact byon the ~~sales~~Company’s ~~increase~~deferred tax liabilities.

~~Personal Care Category~~11. ~~Pro~~ Concentrations ~~forma contribution margin for the Personal Care Category, excluding the inventory step-up~~ of ~~$0.2 million mentioned above, increased by $0.2 million, or 2.2%, from $7.5 million for the nine months ended December 31, 2003 to $7.7 million for the nine months ended December 31, 2004.~~Risk

~~Household Cleaning~~The ~~Category. Excluding~~ Company’s sales are concentrated in the areas ~~inventory~~of ~~step~~over-upthe-counter ofpharmaceutical ~~$2.4~~products, ~~million~~personal ~~mentioned~~care ~~above,~~products ~~pro~~and household ~~forma~~cleaning ~~contribution~~products. The Company ~~margin~~sells ~~for~~its ~~the~~products ~~Household~~to ~~Cleaning~~mass ~~Category~~merchandisers, ~~increased~~food byand $2drug accounts, and dollar and club stores.1 During ~~million~~the period ended June 30, or2005, 9approximately 60.38%, of the Company’s total sales were derived from ~~$23.0~~its ~~million~~four ~~for~~major brands while during the ~~nine~~period ~~months~~ended June 30, 2004, approximately 64.4% of the Company’s total sales were derived from these four brands. During the periods ended June 30, ~~December~~2005 31and 2004, ~~2003~~approximately to22.8% ~~$25~~and 23.13%, ~~million for~~respectively, of the ~~nine~~Company’s ~~months~~net ~~ended~~sales ~~December~~were ~~31,~~made ~~2004~~to one customer. At June 30, 2005, approximately 20% of ~~The~~accounts ~~increase~~receivable ~~was~~were ~~driven~~owed by ~~the~~one ~~reduction in~~customer.

20The Company manages product distribution in the continental United States through a main distribution center in St. Louis, Missouri. A serious disruption, such as a flood or fire, to the main distribution center could damage the Company’s inventory and could materially impair the Company’s ability to distribute its products to customers in a timely manner or at a reasonable cost. The Company could incur significantly higher costs and experience longer lead times associated with the distribution of its products to its customers during the time that it takes the Company to reopen or replace its distribution center. As a result, any such disruption could have a material adverse effect on the Company’s sales and profitability.

~~advertising and promotional support on the Comet disposable toilet bowl brush in fiscal year 2004 compared to fiscal year 2003~~12. Business Segments

~~General and~~Segment ~~Administrative~~information ~~Expenses. General~~has ~~and~~been ~~administrative~~prepared ~~expenses~~in ~~increased~~accordance bywith ~~$7.3~~FASB ~~million,~~Statement ~~or 93~~No.4% 131, ~~from~~“Disclosures ~~$7.8~~about ~~million~~Segments ~~for~~of ~~the nine months~~an ~~ended~~Enterprise ~~December~~and ~~31,~~Related ~~2003 to $15~~Information.~~1 million for the nine months ended December 31, 2004.~~” The Company’s ~~increase~~operating ~~was~~segments ~~primarily~~are ~~due~~based ~~to the~~on ~~additional~~its ~~expenses~~product ~~associated~~lines ~~with~~and ~~adding~~consist of (i) Over-the-Counter ~~brands acquired in the Bonita Bay~~Drugs, ~~Spic~~(ii) Personal ~~and~~Care ~~Span~~ and (iii) Household ~~Vetco Acquisitions to the portfolio~~Cleaning. ~~The acquisitions resulted in increases to~~ ~~most~~Accordingly, ~~general~~within ~~and~~each ~~administrative~~reportable ~~line~~segment ~~items~~are ~~including~~operations ~~compensation,~~that ~~office~~have ~~space,~~similar ~~insurance~~economic ~~costs~~characteristics, ~~and~~including ~~legal~~the ~~and~~nature ~~accounting~~of ~~expenses. In~~their ~~addition~~products, ~~the decision to abandon our~~production ~~proposed~~process, ~~IDS~~type ~~offering resulted in recognition~~ of ~~$0.6~~customer ~~million of IDS related legal~~ and ~~accounting~~method ~~expenses~~of ~~in the period ending December 31, 2004~~distribution.

~~Depreciation and~~There ~~Amortization~~were ~~Expense. Depreciation~~no ~~and~~inter-segment ~~amortization~~sales ~~expense increased by $3.2 million,~~ or transfers ~~81.0%,~~during ~~from $3.9 million for~~ the ~~nine~~periods ~~months~~ ended ~~December 31~~June 30, ~~2003~~2005 toand ~~$7.1 million for the nine months ended December 31,~~ 2004. The ~~increase~~Company isevaluates ~~primarily~~the ~~due~~performance toof ~~amortization~~its ofproduct ~~intangible~~lines ~~assets~~and ~~related~~allocates resources to ~~the~~them ~~acquisitions~~based ~~and~~primarily anon ~~increase in~~contribution ~~depreciation~~margin. The ~~related~~table tobelow ~~the~~summarizes information ~~Bonita~~about ~~Bay~~reportable ~~acquisition~~segments.

~~Interest Expense, net. Net interest expense increased by $27.4 million, or 418.5%, from $6.5 million for the nine months ended December~~ 31~~, 2003 to $33.9 million for the nine months ended December 31, 2004. The increase in interest expense is primarily due to the increased levels of indebtedness outstanding after the acquisition.~~

Other Expense. Other expense of $7.6 million for the nine months ended December 31, 2004 was comprised of a loss on extinguishment of debt related to the write-off of deferred financing costs and discount on debt associated with the borrowing incurred to finance the Medtech acquisition.

	Period Ended June 30, 2005
	Over-the- Counter		Personal		Household
	Drug		Care		Cleaning		Consolidated

Net sales	$	32,866	$	7,484	$	23,180	$	63,530
Other revenues	—		—		25		25

Total revenues	32,866		7,484		23,205		63,555
Cost of sales	11,165		3,884		13,290		28,339

Gross profit	21,701		3,600		9,915		35,216
Advertising and promotion	7,402		1,103		2,209		10,714

Contribution margin	$	14,299	$	2,497	$	7,706	24,502
Other operating expenses							7,542

Operating income							16,960
Other income (expense)							(8,510		)
Provision for income taxes							(4,443		)

Net income							$	4,007

Income Taxes. The income tax provision for the nine months ended December 31, 2004 was $8.3 million, with an effective rate of 37.9% compared to a provision of $3.4 million for the nine months ended December 31, 2003, with an effective rate of 39.5%. The difference between U.S. federal statutory rate of 34% and the effective rates is primarily due to state income taxes.

	Period Ended June 30, 2004
	Over-the- Counter		Personal		Household
	Drug		Care		Cleaning		Consolidated

Net sales	$	34,599	$	8,438	$	24,645	$	67,682
Other revenues					75		75

Total revenues	34,599		8,438		24,720		67,757
Cost of sales	14,722		4,445		16,956		36,123

Gross profit	19,877		3,993		7,764		31,634
Advertising and promotion	7,989		2,621		3,161		13,771

Contribution margin	$	11,888	$	1,372	$	4,603	17,863
Other operating expenses							7,210

Operating income							10,653
Other income (expense)							(18,616		)
Benefit for income taxes							2,826

Net loss							$	(5,137	)

21During the periods ended June 30, 2005 and 2004, 97.9% and 97.4%, respectively, of sales were made to customers in the United States and Canada. No individual geographical area accounted for more than 10% of net sales in any of the periods presented. At June 30, 2005 and 2004, all of the Company’s long-term assets were located in the United States of America and have not been allocated between segments.

~~Liquidity and Capital Resources~~32

~~The Company has historically financed operations with a combination of internally generated funds and borrowings~~13. ~~Principal uses of~~ Subsequent ~~cash are for operating expenses, servicing long term debt, acquisitions, working capital, payment of income taxes and capital expenditures.~~Events

~~Operating~~On July 22, 2005, the Company entered into ~~Activities~~a material definitive asset sale and purchase agreement with Reckitt Benckiser Inc. for the acquisition of the Chore Boy line of household cleaning products for an aggregate consideration of $22.3 million.

~~Nine months~~Pursuant ~~ended December 31, 2004 compared~~ to the ~~nine~~provisions ~~months ended December 31,~~of ~~2003. Net~~the ~~cash provided~~Company’s by2005 ~~operating~~Long-Term ~~activities~~Equity ~~was~~Incentive ~~$39.9 million for the nine months ended December 31~~Plan, ~~2004~~on ~~compared to $8.9 million for the nine months ended December 31~~July 29, ~~2003. The increase in net cash provided by operating activities for the nine months ended December 31~~2005, ~~2004~~each ~~was primarily due to net income~~ of ~~$13.7~~the ~~million,~~Company’s ~~adjusted~~four ~~for~~independent ~~non-cash~~members ~~items~~ of ~~$29.8~~ ~~million~~the inBoard ~~2004, compared to net income~~ of ~~$5.2~~Directors ~~million,~~received ~~adjusted for~~an ~~non-cash~~award ~~items~~ of ~~$8.~~6 ~~million in 2003.~~,222 ~~Working~~shares ~~capital~~of ~~increased~~common bystock ~~$2.3~~in ~~million~~connection ~~for~~with ~~the~~Company’s directors’ ~~nine~~compensation ~~months ended~~arrangements. Of ~~December~~such 31amount, ~~2004~~1,778 shares ~~primarily~~represent ~~due~~a toone-time angrant ~~increase~~of ~~in accounts receivable, related~~unrestricted toshares ~~the~~while ~~an increase in net sales during~~ the ~~period,~~remaining ~~of $5.5 million~~4,444 ashares ~~decrease in~~represent ~~accrued~~restricted ~~expenses~~shares ofthat ~~$6.9~~vest over ~~million offset by~~ a ~~reduction~~two ofyear ~~inventories of $8~~period.~~0 million.~~

~~Investing~~On August 3, 2005, a ~~Activities~~complaint in a class action lawsuit, Charter Township of Clinton Police and Fire Retirement System v. Prestige Brands Holdings, Inc. et al, was filed in United States District Court for the Southern District of New York, on behalf of all persons who purchased the Company’s securities pursuant to and/or traceable to the Company’s IPO or about February 9, 2005 through July 28, 2005. The complaint also names as defendants Merrill Lynch, Pierce, Fenner & Smith Incorporated, Goldman, Sachs & Co and J.P. Morgan Securities Inc., the lead or co-lead underwriters of the IPO. The complaint charges the Company, certain of its officers and directors, and other insiders with violations of the Securities Act of 1933. The Company plans to defend this matter vigorously.

~~Nine months~~The ~~ended~~Company ~~December~~has ~~31,~~been ~~2004~~made ~~compared to the nine months ended December 31,~~aware ~~2003. Net~~of ~~cash used in investing activities was $425.7 million for~~ the ~~nine~~possibility ~~months ended December 31, 2004, compared to net cash used~~ of ~~$0.5~~additional ~~million~~similar ~~for~~class ~~the~~action ~~six months ended December 31, 2003~~lawsuits. ~~The~~If ~~net~~these ~~cash~~potential ~~used~~lawsuits ~~in the~~are ~~nine months ended December 31~~filed, ~~2004 was primarily for~~ the ~~acquisition of~~ ~~Bonita~~Company ~~Bay~~plans onto ~~April~~defend 6,these ~~2004~~matters ~~and Vetco on October 6, 2004~~vigorously.

~~Financing~~On August 4, 2005, Frank ~~Activities~~Palantoni joined the Company as President and Chief Operating Officer. In connection therewith, the Board of Directors granted Mr. Palantoni 30,888 shares of restricted common stock and options to purchase an additional 61,776 shares of common stock at a purchase price of $12.95 per share. The options vest over a period of five years while the restricted shares will vest contingent upon the attainment of certain performance-based benchmarks.

Nine months ended December 31, 2004 compared to the nine months ended December 31, 2003. Net cash provided by financing activities was $389.1 million for the nine months ended December 31, 2004 compared to $11.2 million of cash used in financing activities for the nine months ended December 31, 2003. Net cash provided by financing activities for the nine months ended December 31, 2004 was primarily a result of proceeds of borrowings $698.5 million and the issuance of preferred units and common units of $58.7 million primarily related to the Bonita Bay and Vetco acquisitions. This was partially offset by repayment of debt incurred in February 2004 at the time of the Medtech acquisition, pay down of revolving credit facility and schedule payments on current debt of $344.6 million. In addition, deferred financing costs of $23.5 million offset proceeds from borrowings. Net cash used in financing activities in the nine months ended December 31, 2003 was primarily related to a payment on a note payable for Denorex.33

22ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~Contractual~~The Company, as the indirect ~~Obligations~~holding company of Prestige International, does not conduct ongoing business operations. As a result, the financial information for Prestige Brands Holdings, Inc. and Prestige Brands International, LLC is identical for the purposes of the discussion of operating results in Management’s Discussion and Analysis of Financial Condition and Results of Operations. Prestige Brands International, LLC, is an indirect wholly owned subsidiary of Prestige Brands Holdings, Inc. and the parent company of Prestige Brands, Inc., the issuer of our 9.25% senior subordinated notes due 2012 (“Senior Notes”) and the borrower under the senior credit facility, consisting of a Revolving Credit Facility, Tranche B Term Loan Facility and a Tranche C Term Loan Facility (together the “Senior Credit Facility”). Prestige International is also the parent guarantor of the obligations.

WeThis ~~had~~document ~~ongoing~~should ~~commitments~~be ~~under~~read ~~various~~in conjunction with ~~contractual~~the ~~and~~Management’s ~~commercial~~Discussion ~~obligations~~and asAnalysis section of ~~December~~Amendment No. 1 to our Annual Report on Form 10-K/A for the fiscal year ended March 31, ~~as follows:~~2005.

	Payments Due by Period
			Less than		1 to 3		4 to 5		After 5
Contractual Obligations	Total		1 Year		Years		Years		Years
	(in millions)
Long-term debt	$	680.3	$	3.7	$	7.5	$	7.5	$	661.6
Interest on long-term debt(1)	298.6		44.5		88.4		87.5		78.2
Operating leases (2)	1.3		0.5		0.6		0.2		—
Total contractual cash obligations	$	980.2	$	48.7	$	96.5	$	95.2	$	739.8

General

~~(1) Represents the~~We ~~estimated~~sell ~~interest~~well-recognized, ~~obligations~~brand onname over-the ~~outstanding revolving credit~~-counter ~~facility~~drug, ~~the~~household ~~outstanding~~cleaning ~~balance~~and onpersonal ~~the~~care ~~Tranche~~products. BWe ~~term~~operate ~~loan,~~in ~~the outstanding~~niche ~~balance~~segments onof ~~the~~these ~~Tranche~~categories Cwhere ~~term~~we ~~loan,~~can ~~and~~use the ~~outstanding~~strength ~~balance~~of onour ~~the senior subordinated notes~~brands, ~~together, assuming scheduled principal payments (based on~~our ~~the~~established ~~terms~~retail ofdistribution ~~the~~network, ~~loan~~a ~~agreements)~~low-cost ~~were~~operating ~~made~~model and ~~assuming a weighted average~~our ~~interest~~experienced ~~rate~~management ofteam ~~6.7%.~~as ~~Estimated~~a ~~interest~~competitive ~~obligations~~advantage ~~would~~to begrow ~~different~~our ~~under different~~presence ~~assumptions regarding interest rates or timing of principal payments.~~in Ifthese ~~interest~~categories ~~rates~~and, onas ~~borrowings~~a ~~with variable rates increased by 1/8%~~result, ~~interest expense~~grow ~~would~~our besales ~~increased~~and ~~approximately $0~~profits.~~9 million, in the first year.~~

~~(2) Includes~~We have grown our brand portfolio by acquiring ~~lease~~strong ~~obligations~~and ~~related~~well-recognized tobrands from larger consumer products and pharmaceutical companies, as well as other brands from smaller private companies. While the ~~acquisition~~brands we have purchased from larger consumer products and pharmaceutical companies have long histories of ~~Bonita~~support ~~Bay~~and brand development, we believe that at the time we acquired them they were considered “non-core” by their previous owners and did not benefit from the focus of senior level management or strong marketing support. We believe that the brands we have purchased from smaller private companies have been constrained by the limited resources of their prior owners. After acquiring a brand, we seek to increase its sales, market share and distribution in both existing and new channels. We pursue this growth through increased spending on advertising and promotion, new marketing strategies, improved packaging and formulations and innovative new products.

~~Off-Balance~~In ~~Sheet~~February 2005, we raised $448.0 million ~~Arrangements~~through an initial public offering of 28,000,000 shares of common stock. The net proceeds of the offering were $416.8 million after deducting $28.0 million of underwriters’ discounts and commissions and $3.2 million of offering expenses. The net proceeds of $416.8 million plus $3.0 million from our revolving credit facility and $8.8 million of cash on hand went to repay $100.0 million of our existing senior indebtedness (plus a repayment premium of $3.0 million and accrued interest of $0.5 million as of February 15, 2005), to redeem $84.0 million in aggregate principal amount of our existing 9.25% senior subordinated notes (plus a redemption premium of $7.8 million and accrued interest of $3.3 million as of March 18, 2005), to repurchase an aggregate of 4,397,950 shares of our common stock held by the GTCR funds and the TCW/Crescent funds for $30.2 million, and to contribute $199.8 million to Prestige International Holdings, LLC, which was used to redeem all of its outstanding senior preferred units and class B preferred units. We did not receive any of the proceeds from the sale of 4,200,000 shares by the selling stockholders as a result of the underwriters exercising their over-allotment options.

~~We do not have any off-balance sheet arrangements or financing activities with special-purpose entities.~~34

~~Inflation~~Quarterly Period Ended June 30, 2005 compared to the Quarterly Period Ended June 30, 2004

~~Inflationary~~Net factors such as increases in the costs of raw materials, packaging materials, purchased product and overhead may adversely affect our operating results. Although we do not believe that inflation had a material impact on our financial position or results of operations for the periods referred to above, there can be no assurance that a high rate of inflation in the future would not have an adverse effect on us and our operating results.Sales

~~Recently~~Net ~~Issued~~sales for the period ended June 30, ~~Accounting~~2005 ~~Standards~~were $63.6 million compared to $67.8 million for the comparable period of the prior year. This represented a decrease of $4.2 million or 6.2% from the prior period. All three operating segments experienced sales declines during the period. The Over-the-Counter Drug segment had net sales of $32.9 million for the period ended June 30, 2005, a decrease of $1.7 million, or 5.0% below net sales of $34.6 million for the period ended June 30, 2004. The Household Cleaning segment had net sales of $23.2 million for the period ended June 30, 2005, a decrease of $1.5 million, or 6.1% below net sales of $24.7 million for the period ended June 30, 2004. The Personal Care segment had net sales of $7.5 million for the period ended June 30, 2005, a decrease of $0.9 million, or 11.3% below net sales of $8.4 million for the period ended June 30, 2004.

~~In December 2004,~~ Over-the ~~Financial Accounting Standards Board issued Statement of Financial Accounting Standard (“SFAS”) No. 123R (“Share~~-~~Based~~Counter ~~Payment”). SFAS~~Drug 123R requires the Company to recognize compensation expense for equity instruments awarded to employees. SFAS 123R is effective for the Company as of the beginning of the first interim period that begins after June 15, 2005. The Company does not expect the adoption of this standard to have a significant impact on its financial statements.Segment

23Net sales in the Over-the-Counter Drug segment were $32.9 million for the period ended June 30, 2005 versus $34.6 million for the comparable period of the prior year. This represented a decrease of $1.7 million or 5.0% from the prior period. The sales decrease was the result of declines in Compound W and New Skin partially offset by Little Remedies, which is not included in the June 30, 2004 results, and gains on Chloraseptic. The decline in Compound W is primarily a result of softness in the retail wart remover category and increased competition. The decline in New Skin is a result of the sudden drop in sales in the retail liquid bandage category. The Little Remedies brand was acquired in the Vetco acquisition in October 2004. The Chloraseptic gains are a result of continued strong retail consumer consumption during the period.

~~Item~~Personal ~~3. Quantitative and~~Care ~~Qualitative Disclosures About Market Risk.~~Segment

AsNet sales of ~~December~~the ~~31,~~Personal ~~2004,~~Care wesegment ~~had~~were ~~approximately~~ $~~470~~ 7.5 million offor ~~debt~~the ~~outstanding~~period ~~under~~ended ~~our~~June 30, ~~Senior~~2005 ~~Credit~~versus ~~Facility~~$8. ~~Our~~4 ~~Senior~~million ~~Credit~~for ~~Facility~~the comparable isperiod ~~subject~~of ~~to variable~~the ~~interest~~prior ~~rates~~year. ~~Accordingly,~~ ~~our~~This ~~earnings~~represented ~~and~~a ~~cash~~decrease ~~flows~~of ~~are~~$0.9 ~~affected~~million byor ~~changes~~11.3% infrom ~~interest~~the ~~rates~~prior period. ~~Assuming~~The ~~the~~sales ~~December~~decrease ~~31,~~is ~~2004 level of~~primarily ~~borrowings,~~attributable ~~and~~to ~~further considering~~ the ~~interest~~Denorex ~~rate~~brand’s ~~protection~~continued ~~agreement currently~~decline in ~~place~~consumer (see following paragraph), we estimate that a one percentage point increase in interest on our variable rate debt agreements would have increased interest expense for the nine months ended December 31, 2004 by approximately $3consumption.~~4 million.~~

InHousehold ~~June~~Cleaning ~~2004, we entered into an interest rate protection agreement by purchasing a 5.0% interest rate cap with a notional principal amount of $20.0 million. The interest rate cap terminates in June 2006.~~Segment

~~Item~~Net 4sales of the Household Cleaning segment were $23. ~~Controls~~2 million for the period ended June 30, 2005 versus $24.7 million for the comparable period of the prior year. This represented a decrease of $1.5 million or 6.1% from the prior period. The sales decrease was the result of declines in both household brands — Comet and ~~Procedures~~Spic and Span. The decrease in Comet sales is largely attributable to the discontinuance of the Clean & Flush toilet bowl product during 2004. The on-going Comet product line — powder, sprays and cream — experienced modest increases in sales during the period. The Spic and Span brand decreases are due to the timing of dollar store orders and sales of obsolete product during the same period last year.

~~Evaluation of~~Gross ~~Disclosure Controls and Procedures~~Profit

~~Our~~Gross profit for the period ended June 30, ~~Chief~~2005 ~~Executive~~was ~~Officer~~$35.2 ~~and~~million ~~Chief~~compared ~~Financial~~to ~~Officer~~$31.6 ~~have~~million ~~evaluated~~for the ~~effectiveness~~ comparable period of the ~~our~~prior ~~disclosure~~year. This ~~controls~~represented ~~and~~an increase ~~procedures~~of ~~(as~~$3.6 ~~defined~~million inor 11.3% from the ~~Securities~~ ~~Exchange~~prior ~~Act~~period. The ofperiod ~~1934~~ended ~~Rules~~June 30, ~~13a-15(e)~~2004 ~~and~~included inventory ~~15d~~step-~~15(e))~~up ascosts associated with the acquisitions of the ~~end~~businesses of approximately $5.2 million. Excluding costs associated with the inventory step-up in the period ~~covered~~ended June 30, 2004, gross profit decreased by ~~this~~$1.7 ~~Quarterly~~million ~~Report~~or 4.5% ~~Based~~for onthe ~~this~~period ~~evaluation~~ended June 30, ~~the~~2005. The decrease in ~~Company’s~~gross ~~principal~~profit ~~executive~~is ~~officer~~primarily ~~and~~a ~~principal~~result ~~financial~~of ~~officer~~the ~~concluded that~~sales ~~its~~shortfall. Gross ~~disclosure~~profit ~~controls~~as ~~and~~a ~~procedures~~percent ~~are~~of ~~effective~~sales ~~and~~was ~~provide~~55.4% ~~reasonable~~for ~~assurance~~the ~~that~~period ~~the~~ended ~~material~~June 30, ~~information~~2005 ~~required~~versus to54.4% befor ~~included~~the incomparable period of the ~~Company’s~~prior ~~periodic~~year. The ~~SEC~~increase ~~reports~~in gross profit percentage is ~~recorded,~~primarily ~~processed,~~a ~~summarized~~result ~~and reported~~of ~~within~~improvements in the ~~time~~over-the-counter drug ~~periods~~and ~~specified~~household incleaning ~~the~~segments ~~relevant~~partially ~~SEC~~offset ~~rules~~by ~~and~~declines ~~forms~~in the personal care segment.

~~Changes in~~Over-the-Counter ~~Internal~~Drug ~~Controls~~Segment

~~There were~~Gross noprofit ~~significant~~of ~~changes~~the toOver-the-Counter ~~our~~segment ~~internal~~was $21.7 ~~controls~~million ~~or,~~for tothe ~~our~~period ~~knowledge~~ended June 30, ~~in other~~2005 ~~factors~~versus ~~that~~$19.9 ~~could~~million ~~significantly affect our internal controls, subsequent~~for to the ~~date~~comparable ofperiod ~~our Chief Executive Officer’s and Chief Financial Officer’s last evaluation~~ of ~~our~~the ~~internal~~prior ~~controls, including any corrective actions with~~year. ~~regard~~This torepresented ~~significant~~an ~~deficiencies~~increase ~~and~~of ~~material weaknesses~~$1.8

2435

~~PART~~million IIor –9.2% ~~OTHER~~from the prior period. Excluding $2.6 million of cost associated ~~INFORMATION~~with the inventory step-up in the period ended June 30, 2004, gross profit decreased by $0.8 million or 3.4% for the period ended June 30, 2005. Gross profit as a percent of sales was 66.0% for the period ended June 30, 2005 versus 64.9% for the comparable period of the prior year. The decrease in gross profit is a result of the sales shortfall partially offset by improved gross profit as a percent of sales, excluding cost of inventory step-up, due to favorable sales mix. Compound W Freeze-off has a lower gross profit percentage than the average product in the Over-the-Counter Drug segment and a smaller proportion of the sales in the period ended June 30, 2005 than in the comparable period of the prior year.

~~ITEM~~Personal ~~1. Legal~~Care ~~Proceedings.~~Segment

InGross ~~June~~profit ~~2003,~~of athe ~~lawsuit,~~personal ~~Theodosakis~~care ~~v. Walgreens,~~segment ~~et al,~~ was $3.6 ~~filed~~million infor ~~Federal~~the ~~District~~period ~~Court~~ended ~~in Arizona~~June 30, in2005 ~~which~~versus ~~the plaintiff~~$4.0 ~~alleged~~million ~~that~~for the ~~Medtech~~comparable ~~Products,~~period aof ~~wholly-owned~~the ~~subsidiary~~prior ~~of Medtech,~~year. ~~and~~This ~~others~~represented ~~infringed~~a ~~the~~decrease ~~dress trade~~ of a$0.4 ~~book~~million ~~titled~~or ~~“The~~9.8% ~~Arthritis~~from ~~Cure”~~the inprior ~~connection~~period. Excluding ~~with~~$0.2 ~~the~~million ~~sale~~ of ~~dietary~~costs associated ~~supplement~~with ~~products~~the ~~under~~inventory step-up in the ~~core trademark~~period ~~ARTHx. In~~ended ~~addition~~June 30, ~~the~~2004, ~~complaint~~gross ~~alleged~~profit ~~that~~decreased ~~Medtech~~by ~~Products~~$0.6 ~~and~~million ~~others~~or ~~made~~15.3% ~~false~~for ~~endorsements, engaged~~the inperiod ~~unfair competition~~ended June 30, ~~made~~2005. ~~false~~The ~~designations~~gross ofprofit ~~origin~~decrease ~~and~~is ~~invaded the~~primarily ~~privacy~~due ~~rights~~to of the ~~plaintiff~~sales shortfall. ~~The ARTHx~~Gross ~~trademarks,~~profit ~~goodwill~~as ~~and~~a ~~inventory~~percent ~~were~~of sales ~~sold~~was by48.1% ~~Medtech~~for ~~Products~~the toperiod ~~a third~~ended ~~party~~June 30, ~~Contract~~2005 ~~Pharmacal~~versus ~~Corporation,~~50.3% infor ~~March~~the comparable ~~2003~~period of the prior year. OnThe decrease ~~January~~in ~~12,~~gross ~~2005~~profit ~~our~~percentage ~~motions~~is ~~for~~primarily ~~summary judgment~~a ~~were~~result ~~granted~~of by the ~~court. The~~higher cost ~~plaintiff~~value ~~has~~size afor ~~right~~Denorex towhich ~~appeal~~was ~~within~~introduced 30last ~~days~~fall.

WeHousehold ~~are~~Cleaning also involved from time to time in routine legal matters and other claims incidental to our business. When it appears probable in management’s judgment that we will incur monetary damages or other costs in connection with such claims and proceedings, and such costs can be reasonable estimated, liabilities are recorded in the financial statements and charges are recorded against earnings. We believe the resolution of such routine matters and other incidental claims, taking into account reserves and insurance, will not have a material adverse effect on our financial condition or results of operation.Segment

~~Item~~Gross profit of the Household Cleaning segment was $9.9 million for the period ended June 30, 2005 versus $7.8 million for the comparable period of the prior year. This represented an increase of $2. 1 million or 27.7% from the prior ~~Unregistered~~period. Excluding ~~Sales~~$2.4 million of costs ~~Equity~~associated ~~Securities~~with the inventory step-up in the period ended June 30, 2004, gross profit decreased by $0.3 million or 2.5% for the period ended June 30, 2005. The decrease in gross profit is a result of the sales shortfall, partially offset by improved gross profit as a percent of sales due to discontinuance of the lower margin Clean & Flush toilet bowl product and ~~Use~~sales of ~~Proceeds~~obsolete Spic and Span inventory. Gross profit as a percent of sales was 42.7% for the period ended June 30, 2005 versus 41.1% for the comparable period of the prior year as a result the sale of fewer lower margin items as described above.

~~None.~~Contribution Margin

~~Item~~Contribution margin was $24.5 million for the period ended June 30, 2005 versus $17.9 million for the comparable period of the prior year. This represented an increase of $6.6 million or 37.2% from the prior period. Excluding costs associated with the inventory step-up mentioned above, contribution margin increased by $1.4 million or 6.0% for the period ended June 30, 2005 versus the comparable period of the prior year. The contribution margin increase is primarily attributable to a $3. 1 million reduction in advertising ~~Defaults~~and ~~Upon~~promotion ~~Senior~~spending ~~Securities~~in the period ended June 30, 2005 versus the same period in the prior year, offset by the decrease in gross profits discussed above.

~~None.~~Over-the-Counter Drug Segment

~~Item~~Contribution 4margin of the Over-the-Counter drug segment was $14. 3 million for the period ended June 30, 2005 versus $11.9 ~~Submission~~million for the comparable period of ~~Matters~~the toprior year. Excluding costs associated with the inventory step-up mentioned above, contribution margin decreased by $0.2 million or 1.2% for the period ended June 30, 2005 versus the comparable period of the prior year. The contribution margin decrease is a ~~Vote~~result of ~~Security~~the ~~Holders~~gross profit decline partially offset by $0.6 million reduction in advertising and promotion spending in the period ended June 30, 2005 versus the same period of the prior year. The reduction in advertising and promotion spending was due to a Chloraseptic media test program aimed at the allergy season in the period ended June 30, 2004 which was not repeated in the period ended June 30, 2005.

~~None.~~Personal Care Segment

~~Item~~Contribution margin of the personal care segment was $2.5 million for the period ended June 30, 2005 versus $1. ~~Other~~4 ~~Information~~million for the comparable period of the prior year. This represented an increase of $1.1 million or 82.0% from the prior period. The contribution margin increase is a result of the $1.5 million

~~None.~~36

~~Item~~reduction 6in advertising and promotion spending in the period ended June 30, 2005, offset by the gross profit decline of $0. 4 million. The reduction in ~~Exhibits~~advertising and promotion was primarily a result of a shift in Cutex advertising from television to print media. The Cutex print media advertising campaign is planned throughout the current fiscal year as opposed to television media which was concentrated in the first two fiscal quarters of last year.

Exhibit
No.		Description
31.1		Certification Pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification Pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Household Cleaning Segment

25Contribution margin of the Household Cleaning segment was $7.7 million for the period ended June 30, 2005 versus $4.6 million for the comparable period of the prior year. This represented an increase of $3.1 million or 67.4% from the prior period. Excluding costs associated with the inventory step-up mentioned above, contribution margin increased by $0.7 million or 9.9% for the period ended June 30, 2005 versus the comparable period of the prior year. The contribution margin increase is a result of a $0.9 million reduction in advertising and promotion in the period end June 30, 2005 from the comparable period of the prior year, offset by the gross profit decrease of $0.3 million. The decline in spending is driven by the elimination of advertising and promotional spend behind the discontinued Comet Clean and Flush product.

32.1		Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 9.06 of the Sarbanes-Oxley Act of 2002 (furnished pursuant to Item 601 (b) (32) of Regulation S-K).
32.2		Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 9.06 of the Sarbanes-Oxley Act of 2002 (furnished pursuant to Item 601(b) (32) of Regulation S-K).

General and Administrative

26General and administrative expenses were flat at $4.9 million for the period ended June 30, 2005 versus the comparable period of the prior year. Synergies achieved with the integration of the Medtech, Bonita Bay and Spic and Span acquisitions were partially offset by an increase in costs associated with being a public company, including, Sarbanes-Oxley reporting compliance, regulatory filings and legal fees. The period ended June 30, 2005 includes additional expenses associated with adding the Little Remedies brand in the Vetco acquisition that was completed in October 2004.

~~SIGNATURES~~Depreciation and Amortization

~~Pursuant~~Depreciation and amortization expense was $2.6 tomillion for the ~~requirements~~period ofended ~~the~~June 30, ~~Securities~~2005 ~~Exchange~~versus ~~Act~~$2.3 ofmillion ~~1934,~~for the comparable ~~Registrant~~period ~~has duly~~of ~~caused~~the ~~this~~prior ~~report~~year. The increase was due to beamortization ~~signed~~of onintangible ~~its~~assets ~~behalf~~related byto the ~~undersigned thereunto~~Vetco ~~duly authorized~~acquisition.

~~PRESTIGE~~Interest ~~BRANDS INTERNATIONAL~~Expense, ~~LLC /s/ Peter C. Mann By: Peter C. Mann Its: President /s/ Peter J. Anderson By: Peter J. Anderson Its: Vice President, Secretary & Treasurer Dated: January 24, 2005~~net

27Net interest expense was $8.5 million for the period ended June 30, 2005 versus $11.0 million for the comparable period of the prior year. This represented a decrease of $2.5 million or 23.0% from the prior period. The decrease in interest expense is due to the reduction of indebtedness outstanding.

Loss on Extinguishment of Debt

Loss on extinguishment of debt was $0 for the period ended June 30, 2005 versus $7.6 million for the comparable period of the prior year. The $7.6 million for the period ended June 30, 2004 related to the write-off of deferred financing costs and debt discounts associated with the borrowings retired in connection with the Bonita Bay acquisition.

Income Taxes

The income tax provision for the period ended June 30, 2005 was $4.4 million, with an effective rate of 52.6%, compared to a benefit of $2.8 million, with an effective rate of 35.5% for period ended June 30, 2004. The increase in effective tax rate is primarily the result of a one time charge of $1.2 million due to an increase in the Company’s graduated federal income tax rate from 34% to 35% and its related impact on deferred tax liabilities.

Liquidity and Capital Resources

We have historically financed our operations with a combination of internally generated funds and borrowings. In February 2005, we completed an initial public offering that provided the Company with net proceeds of $416.8 million which were used to repay $184.0 million of indebtedness, to repurchase common stock held by the GTCR funds and the TCW/Crescent funds, and to redeem all of the outstanding senior preferred units and class B preferred units held by previous investors. Our principal

uses of cash are for operating expenses, debt service, acquisitions, working capital, and capital expenditures.

Net cash provided by operating activities was $9.8 million for period ended June 30, 2005 compared to $8.7 million for comparable period of the prior year. The $1.1 million increase was primarily due to net income of $4.0 million, adjusted for non-cash items of $7.5 million in 2005, compared to net loss of $5.1 million, adjusted for non-cash items of $13.6 million for the period ended June 30, 2004, offset by working capital changes. Working capital increased by $1.7 million for period ended June 30, 2005, primarily due to an increase in inventory of $6.4 million as a result of the net sales shortfall during the period and a decrease in accounts payable and accrued expenses of $5.8 million, offset by a reduction in accounts receivable of $11.0 million.

Net cash used in investing activities was $0.2 million for period ended June 30, 2005 compared to net cash used of $373.4 million for the comparable period of the prior year. The net cash used in investing activities for the June 30, 2005 period was primarily a result of leasehold improvements on the Company’s Irvington, New York offices. The net cash used in investing activities for the period ended June 30, 2004 was for the acquisition of Bonita Bay on April 6, 2004.

Net cash used in financing activities was $1.0 million for the period ended June 30, 2005 compared to $373.6 million for the period ended June 30, 2004. Net cash used in financing activities for June 30, 2005 was primarily due to mandatory scheduled payments on the senior secured term loan facility. In the period ended June 30, 2004, to finance the acquisitions of Bonita Bay, the Company borrowed $668.5 million and issued preferred units and common units of $58.5 million. The increase in debt was partially offset by the payment of deferred financing costs of $22.6 million, repayment of the debt incurred in February 2004 at the time of the Medtech/Denorex acquisition, the pay down of the revolving credit facility and scheduled payments on current debt which all totaled $330.8 million.

Capital Resources

On February 15, 2005, the Company completed an initial public offering of common stock which resulted in net proceeds of $416.8 million. The proceeds were used to repay the $100.0 million outstanding under the Tranche C Term Loan Facility (plus a repayment premium of $3.0 million and accrued interest of $0.5 million as of February 15, 2005), and to redeem $84.0 million in aggregate principal amount of our existing 9.25% Senior Notes (plus a redemption premium of $7.8 million and accrued interest of $3.3 million as of March 18, 2005). Effective upon the completion of the initial public offering, we entered into an amendment to the credit agreement that, among other things, allows us to increase the indebtedness under our Tranche B Term Loan Facility by $200.0 million and allows for an increase in our Revolving Credit Facility up to $60.0 million.

As of June 30, 2005, we had an aggregate of $494.4 million of outstanding indebtedness, which consisted of (i) an aggregate of $368.4 million of borrowings under the Tranche B Term Loan Facility, and (ii) $126.0 million of 9.25% Senior Notes due 2012. We had $60.0 million of borrowing capacity under the Revolving Credit Facility available at such time.

All loans under the Senior Credit Facility bear interest at floating rates, which can be either (i) based on the prime rate, or (ii) LIBOR rate, plus an applicable margin. As of June 30, 2005, an aggregate of $368.4 million was outstanding under the term loans at a weighted average interest rate of 5.3%.

On June 30, 2004, we paid $52 for a 5% interest rate cap agreement with a notional amount of $20 million. The interest rate cap terminates in June 2006. On March 7, 2005, we paid $2.3 million for interest rate cap agreements that become effective August 30, 2005, with a total notional amount of $180 million and LIBOR cap rates ranging from 3.25% to 3.75%. The interest rate cap agreements terminate on May 30, 2006, 2007 and 2008 as to $50.0 million, $80.0 million and $50.0 million, respectively. The fair value of the interest rate cap agreements was $1.7 million at June 30, 2005.

The Tranche B Term Loan Facility matures in April 2011. We must make quarterly amortization payments on the term loan facility equal to 0.25% of the initial principal amount of the term loan. The Revolving Credit Facility matures and the commitments relating to the Revolving Credit Facility terminate in April 2009. The obligations under the Senior Credit Facility are guaranteed on a senior basis by Prestige International and all of its domestic subsidiaries, other than the issuer (Prestige Brands, Inc.), and are secured by substantially all of our assets.

The Senior Credit Facility contains various financial covenants, including financial covenants that require us to maintain certain leverage ratios, interest coverage ratios and fixed charge coverage ratios, as well as covenants restricting us from undertaking specified corporate actions, including asset dispositions, acquisitions, payment of dividends and other specified payments, changes of control, incurrence of indebtedness, creation of liens, making loans and investments and transactions with affiliates. Our Senior Notes require that adjusted EBITDA (as defined in the indenture governing such notes) be used as the basis for calculating our leverage and interest coverage ratios. We were in compliance with our financial and restrictive covenants under the credit facility at June 30, 2005.

Our principal sources of funds are anticipated to be cash flows from operating activities and available borrowings under the Revolving Credit Facility. We believe that these funds will provide us with sufficient liquidity and capital resources for us to meet our current and future financial obligations, as well as to provide funds for working capital, capital expenditures and other needs for at least the next 12 months. We regularly review acquisition opportunities and other potential strategic transactions, which may require additional debt or equity financing.

Commitments

As of June 30, 2005, we had ongoing commitments under various contractual and commercial obligations as follows:

Contractual Obligations	Total		Less than 1 Year		1 to 3 Years		4 to 5 Years		After 5 Years
	(in millions)
Long-term debt	$	494.4	$	3.7	$	7.5	$	7.5	$	475.7

Interest on long-term debt (1)	210.8		31.7		62.4		62.0		54.7

Operating leases	1.6		0.5		0.8		0.3		—

Total Contractual Obligations	$	706.8	$	35.9	$	70.7	$	69.8	$	530.4

(1) Represents the estimated interest obligations on the outstanding balance of the Tranche B Term Loan Facility and the outstanding balance of the Senior Notes, together, assuming scheduled principal payments (based on the terms of the loan agreements) were made and assuming a weighted average interest rate of 6.4%. Estimated interest obligations would be different under different assumptions regarding interest rates or timing of principal payments. If interest rates on borrowings with variable rates increased by 1%, interest expense would increase approximately $3.7 million, in the first year.

Critical Accounting Policies and Estimates

The significant accounting policies are described in the notes of the unaudited financial statements included elsewhere in this document. While all significant accounting policies are important to our consolidated financial statements, some of these policies may be viewed as being critical. Such policies are those that are both most important to the portrayal of our financial condition and require our most difficult, subjective and complex estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and the related disclosure of contingent assets and liabilities. These estimates are based upon our historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. The most critical accounting policies are as follows:

Allowance for doubtful accounts and the allowance for obsolete and damaged inventory

In the ordinary course of business, we grant non-interest bearing trade credit to our customers on normal credit terms. To reduce our credit risk, we perform ongoing credit evaluations of our customers’ financial condition. In addition, we maintain an allowance for doubtful accounts receivable based upon our historical collection experience and expected collectibility of our accounts receivable. If uncollectible account balances exceed our estimates, our financial statements would be adversely affected.

We write down our inventory for estimated obsolescence or damage equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required.

Valuation of long-lived and intangible assets and goodwill

Pursuant to FASB Statement No. 141, “Business Combinations” (“Statement No. 141”) and Statement No. 142, “Goodwill and Other Intangible Assets” (“Statement No. 142”) goodwill and indefinite-lived intangible assets are no longer amortized, but must be tested for impairment at least annually. Intangible assets with finite lives are amortized over their respective estimated useful lives. We are required to make judgments regarding the value assigned to acquired intangible assets and their respective useful lives. Our determination of the values and lives was based on our analysis of the requirements of Statements No. 141 and No. 142, as well as an independent evaluation of such assets. We have determined that a significant portion of our trademarks have indefinite lives. If we determine that any of these assets has a finite life, we would amortize the value of that asset over the remainder of such finite life. Intangible assets with finite lives and other long-lived assets must also be evaluated for impairment when management believes that the carrying value of the asset will not be recovered. Adverse changes in market conditions or poor operating results could result in a future impairment charge. There were no impairments of goodwill, indefinite-lived intangible assets or other long-lived assets during the period ended June 30, 2005. Goodwill and other long-term assets amounted to $901.0 million at June 30, 2005.

Revenue Recognition

We comply with the provisions Securities and Exchange Commission of Staff Accounting Bulletin 104 “Revenue Recognition,” which states that revenue should be recognized when the following revenue recognition criteria are met: (1) persuasive evidence of an arrangement exists; (2) the product has been shipped and the customer takes ownership and assumes the risk of loss; (3) the selling price is fixed or determinable; and (4) collection of the resulting receivable is reasonably assured. These criteria are satisfied upon shipment of product and revenues are recognized accordingly.

We must make estimates of potential future product returns related to current period sales. In order to do this, we analyze historical returns, current economic trends and changes in customer demand and acceptance of our products when evaluating the adequacy of our allowance for returns in any accounting period. If actual returns are greater than those estimated by management, our financial statements in future periods would be adversely affected.

The Company’s frequently participates in the promotional programs of its customers, as is customary in this industry. The ultimate cost of these promotional programs varies based on the actual number of units sold during a finite period of time. These programs may include coupons, scan downs, temporary price reductions or other price guarantee vehicles. The Company estimates the cost of such promotional programs at their inception based on historical experience and current market conditions and reduces sales by such estimates. At the completion of the promotional program, the estimated amounts are adjusted to actual results.

Recent Accounting Pronouncements

In March 2005, the FASB issued FIN 47 which clarifies guidance provided by Statement No. 143, “Accounting for Asset Retirement Obligations.” FIN 47 is effective for the Company no later than March 31, 2006. The adoption of FIN 47 is not expected to have a significant impact on our financial position, results of operations or cash flows.

In April 2005, the Securities and Exchange Commission approved an amendment to Rule 4-01 of Regulation S-X that delays the effective date of Statement No. 123(R), which requires companies to expense the value of employee and director stock options and similar awards. The Company is currently reviewing its options for implementation of Statement No. 123(R). The results of operations for the period ended June 30, 2005 would not have been affected had the Company applied the fair value recognition provisions of Statement 123 during this period.

In May 2005, the FASB issued Statement No. 154 which replaces APB Opinion No. 20 and FASB Statement No. 3, “Reporting Accounting Changes in Interim Financial Statements.” Statement No. 154 requires that voluntary changes in accounting principle be applied retrospectively to the balances of assets and liabilities as of the beginning of the earliest period for which retrospective application is practicable and that a corresponding adjustment be made to the opening balance of retained earnings. APB Opinion No. 20 had required that most voluntary changes in accounting principle be recognized by including in net income the cumulative effect of changing to the new principle. Statement No. 154 is effective for all accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements or financing activities with special-purpose entities.

Inflation

Inflationary factors such as increases in the costs of raw materials, packaging materials, purchased product and overhead may adversely affect our operating results. Although we do not believe that inflation has had a material impact on our financial position or results of operations for the periods referred to above, a high rate of inflation in the future may have an adverse effect on us and our operating results.

Seasonality

The first quarter of our fiscal year typically has the lowest level of revenue due to the seasonal nature of certain of our brands relative to the summer and winter months. In addition, the first quarter is the least profitable quarter due the increased advertising and promotional spending to support those brands with a summer season, such as, Compound W, Cutex and New Skin. The Company’s advertising and promotional campaign in the third quarter influence sales in the fourth quarter winter months. Additionally, the fourth quarter has the lowest level of advertising and promotional spending as a percent of revenue.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report of Form 10-Q contains forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Act”), including information within Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following cautionary statements are being made pursuant to the provisions of the Act and with the intention to obtaining the benefits of the “safe harbor” provisions of the Act. Although we believe that our expectations are based on reasonable assumptions, actual results may differ materially from those in the forward looking statement.

These forward-looking statements may or may not contain the words “believe,” “anticipate,” “expect,” “estimate,” “project,” “will be,” “will continue,” “will likely result,” or other similar words and phrases. Forward-looking statements and our plans and expectations are subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated, including, but not limited to the following:

• general economic conditions affecting our products and their respective markets,

• the high level of competition in our industry and markets,

• our dependence on a limited number of customers for a large portion of our sales,

• disruptions in our distribution center,

• acquisitions or other strategic transactions diverting managerial resources, or incurrence of additional liabilities or integration problems associated with such transactions,

• changing consumer trends, pricing pressures which may cause us to lower our prices,

• increases in supplier prices,

• changes in our senior management team,

• our ability to protect our intellectual property rights,

• our dependency on the reputation of our brand names,

• shortages of supply of sourced goods or interruptions in the manufacturing of our products,

• our level of debt, and ability to service our debt,

• our ability to obtain additional financing, and

• the restrictions imposed by our senior credit facility and the indenture on our operations.

Forward-looking statements speak only as of the date of this quarterly report on Form 10-Q. Except as required under federal securities laws and the rules and regulations of the Securities and Exchange Commission, we do not have any intention to update any forward-looking statements to reflect events or circumstances arising after the date of this Form 10-Q, whether as a result of new information, future events or otherwise. As a result of these risks and uncertainties, readers are cautioned not to place undue reliance on forward-looking statements included in this Form 10-Q or that may be made elsewhere from time to time by, or on behalf of, us. All forward-looking statements attributable to us are expressly qualified by these cautionary statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to changes in interest rates because our senior credit facility is variable rate debt. Interest rate changes, therefore, generally do not affect the market value of such debt, but do impact the amount of our interest payments and, therefore, our future earnings and cash flows, assuming other factors are held constant. At June 30, 2005, we had variable rate debt of approximately $368.0 million related to our Tranche B Term Loan. There were no borrowings outstanding at June 30, 2005 related to our Revolving

Credit Facility. Holding other variables constant, including levels of indebtedness, a one percentage point increase in interest rates on our variable debt would have an adverse impact on pre-tax earnings and cash flows for the next year of approximately $3.7 million.

However, on June 30, 2004, we paid $52 for a 5% interest rate cap agreement with a notional amount of $20.0 million that terminates in June 2006. Additionally, on March 7, 2005 we paid $2.3 million for interest rate cap agreements that become effective August 30, 2005, with a total notional amount of $180.0 million and LIBOR cap rates ranging from 3.25% to 3.75%. These interest rate cap agreements terminate on May 30, 2006, 2007 and 2008 as to $50.0 million, $80.0 million and $50.0 million, respectively. Given the protection afforded by the interest rate cap agreements, the impact on pre-tax earnings and cash flows during the next year of a one percentage point increase in interest rates would be limited to $2.1 million. The fair value of the interest rate cap agreements was $1.7 million at June 30, 2005.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 as of the end of the period covered by this report. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that the Company and Prestige International maintained effective disclosure controls and procedures as of the end of the period covered by this report.

Changes in Internal Controls

During the quarterly period ended June 30, 2005, there were no changes in the Company’s or Prestige International’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s or Prestige International’s internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

filed a counterclaim against Dickstein and also filed a third party complaint against the Lexington Insurance Company. The Company believes that if there is any obligation to the Dickstein firm relating to this matter, it is an obligation of Lexington and not the Company.

On August 3, 2005, a complaint in a class action lawsuit, Charter Township of Clinton Police and Fire Retirement System v. Prestige Brands Holdings, Inc. et al, was filed in United States District Court for the Southern District of New York, on behalf of all persons who purchased the Company’s securities pursuant to and/or traceable to the Company’s IPO on or about February 9, 2005 through July 28, 2005. The complaint also names as defendants Merrill Lynch, Pierce, Fenner & Smith Incorporated, Goldman, Sachs & Co and J.P. Morgan Securities Inc., the lead or co-lead underwriters of the IPO. The complaint charges the Company, certain of its officers and directors, and other insiders with violations of the Securities Act of 1933. The Company plans to defend this matter vigorously.

The Company has been made aware of the possibility of additional similar class action lawsuits. If these potential lawsuits are filed, the Company plans to defend these matters vigorously.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Company’s 2005 Annual Meeting of Stockholders was held on July 29, 2005. The following nominees were elected to the Company’s Board of Directors to serve until the 2006 Annual Meeting of Stockholders and until their respective successors have been elected and qualified, or until their earlier death, resignation or retirement:

	For	Withheld	Broker Non-Votes

Peter C. Mann	43,854,444	2,907,753	—
L. Dick Buell	36,568,359	10,193,838	—
Gary E. Costley	36,568,519	10,193,678	—
David A. Donnini	42,296,352	4,465,845	—
Ronald Gordon	45,782,108	980,089	—
Vincent J. Hemmer	36,467,294	10,294,903	—
Patrick Lonergan	45,840,039	922,158	—

The votes for the ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the audit of the Company’s financial statement s for the fiscal year ending March 31, 2006 were as follows:

For	Against	Withheld	Broker Non-Votes

29,967,938	16,786,058	8,201	—

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS

2.1		Asset Sale and Purchase Agreement, dated July 22, 2005, by and among Reckitt Benckiser Inc., Reckitt Benckiser (Canada) Inc., Prestige Brands Holdings, Inc. and the Spic and Span Company, incorporated by reference to the Form 8-K of Prestige Brands, Inc. filed on July 28, 2005.

10.1		Form of Restricted Stock Agreement

10.2		Executive Employment Agreement, dated August 4, 2005, by and among Prestige Brands Holdings, Inc., Prestige Brands, Inc. and Frank P. Palantoni, incorporated by reference to Form 8-K of Prestige Brands Holdings, Inc. filed on August 9, 2005.

31.1		Rule 13a-14(a)/ 15d-14(a) Certification, executed by Peter C. Mann, Chairman, President and Chief Executive Officer of Prestige Brands Holdings, Inc.

31.2		Rule 13a-14(a)/ 15d-14(a) Certification, executed by Peter J. Anderson, Chief Financial Officer of Prestige Brands Holdings, Inc.

31.3		Rule 13a-14(a)/ 15d-14(a) Certification, executed by Peter C. Mann, Manager, President and Chief Executive Officer of Prestige Brands International, LLC.

31.4		Rule 13a-14(a)/ 15d-14(a) Certification, executed by Peter J. Anderson, Chief Financial Officer of Prestige Brands International, LLC.

32.1		Certification required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code 302 (18 U.S.C. 1350), executed by Peter C. Mann, Chairman, President and Chief Executive Officer of Prestige Brands Holdings, Inc.

32.2		Certification required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code 302 (18 U.S.C. 1350) executed by Peter J. Anderson, Chief Financial Officer of Prestige Brands Holdings, Inc.

32.3		Certification required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code 302 (18 U.S.C. 1350), executed by Peter C. Mann, Manager, President and Chief Executive Officer of Prestige Brands International, LLC.

32.4		Certification required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code 302 (18 U.S.C. 1350) executed by Peter J. Anderson, Chief Financial Officer of Prestige Brands International, LLC.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrants have duly caused this report to be signed on their behalf by the undersigned thereunto duly authorized.

		Prestige Brand Holdings, Inc.
		Registrant

Date:	August 9, 2005		/s/ PETER J. ANDERSON
		Peter J. Anderson
		Chief Financial Officer


		Prestige Brands International, LLC
			Registrant

Date:	August 9, 2005		/s/ PETER J. ANDERSON
		Peter J. Anderson
		Chief Financial Officer

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