Good day, ladies and gentlemen, and welcome to the Q3 2014 Prestige Brands Holdings, Inc. Earnings Conference Call. My name is Mark, and I will be your operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to Dean Siegal. Please, proceed.

Good morning. Thank you for joining us. As a reminder, there's a slide presentation which accompanies this call. It can be accessed by visiting prestigebrands.com and clicking on the Q3 webcast link. I am required to remind you at this time that during this call, statements may be made by management of their beliefs and expectations as to the company's future operating results. Statements of management's expectations of what might occur with respect to future operating results are what are known as forward-looking statements. All forward-looking statements involve risks and uncertainties, which in many cases are beyond the control of the company and may cause actual results to differ materially from management's expectations. You are cautioned not to place undue reliance on these forward-looking statements, which speak only of the date of this call. A complete Safe Harbor disclosure appears on Page 2 of the presentation accompanying this call. Additional information concerning the factors that might cause actual results to differ from management's expectations is contained in the company's annual report and quarterly reports, which is filed with the U.S. Securities and Exchange Commission. Now I would like to introduce Matt Mannelly, CEO, and Ron Lombardi, CFO.

Thank you, Dean, and thank you, all, for joining us this morning. We appreciate it. We're happy that the call is scheduled for today versus yesterday, where it might have been a little tougher from a weather standpoint for everyone to join us. So with that, I'd ask you to turn to Page 3 of our presentation that Dean referenced. We'll go through the agenda. I want to offer a little bit of perspective of the current environment, and then I'll take you through the performance highlights. Ronald then, as he does typically, will walk through the financial review in more detail, and then I'll close it with kind of an outlook for the remainder of the year, and we'll open it up for some questions. So with that, if you could turn to Page 5, a few comments. I think if you think back, as we've embarked on FY '14, we said this was going to be a transition year at the start of the year as a result of the returning competing brands. I think last quarter, we talked about the retail environment and specifically the soft retail environment in some of the things, the -- I'll say, the whispers and the drums we're hearing [ph] from retailers in terms of the soft retailer environment. And as a result, in the third quarter, there were a combination of things that came together that has impacted our business in the short term. And those things are, specifically, as I said, the soft retail foot traffic that's led to significant retail inventory reductions that have been publicly stated by a number of the leading retailers, plus the returning competitive pediatric brands, which we have been talking about for several months, plus the weak cough/cold season. And while we had a…

Thanks, Matt, and good morning, everyone. We start the financial review with an overview of the third quarter results on Slide 18, if you'll turn to that slide now. As a reminder, unless otherwise noted, the financial information we are discussing today excludes acquisition-related and other items to arrive at adjusted results. A reconciliation between these adjusted results and reported results can be found on schedules included in today's earnings release. Our results for the quarter reflect the anticipated transitional marketplace, but it was actually a combination of factors that impacted this quarter's result. Soft retail foot traffic and other factors have resulted in retailers meaningfully reducing their inventory. This, along with a double-digit decline in cough/cold incident levels and the competitive dynamics in the cough/cold and GI categories resulted in a sales decline of $14 million and 8.7% during the quarter. The lower sales level also impacted adjusted EBITDA and EPS with both declining approximately 18% compared to the prior year. Our free cash flow continued its consistent and strong trends during the quarter and came in at approximately $41 million for the quarter, an increase of approximately 12% over the prior year. I will give you more details on each of these in the next few slides. Turning to Slide 19, we have our Q3 results. Net revenue declined 8.7% to $146.2 million during the quarter. Excluding an estimated impact of approximately $10 million of retail inventory reductions concentrated in the mass channel, sales would have decreased 2.5% in Q3. This $10 million reduction is in addition to the impact we experienced due to the category dynamics in cough/cold and GI that Matt described earlier. Included in reported sales is a net increase of $4.6 million for the acquisition of Care, less the divestiture of Phazyme. Our Q3…

Thanks, Ron. With that, a couple of comments to close it, and we'll open it up for questions. You turn to Slide 26. In terms of Q4 considerations, I think we remain cautious. If you recall, at the end of Q2, we said we were cautious as a result of some of the things -- the headwinds that we anticipated that came to bear in the third quarter, and we continue to be cautious. When the #1 retailer in the world preannounces and says foot traffic is down, and if they expect the revenue numbers not to be as high, that gives us reason for caution. So we continue to be cautious regarding the next quarter. We believe there is a potential for continued soft retail reduction on foot traffic and potential additional retailer inventory reductions. From a cough/cold standpoint, if you recall, last year cough/cold really raged from mid-December, really, up until the beginning of February. I think at this point, if you look at retailers and other manufacturers, the season is not panning out. Candidly, I think the retailers are not reordering and are now gearing up for the allergy season in anticipation of that. From a competitive brand standpoint, we've said this for 12 to 24 months: It's going to take a couple of seasons for that to pan out in terms of where consumers -- the dust settles in terms of which brand, private label, et cetera. We continue to believe that's going to happen over time. It's going to happen this season and next season. So we are planning for that. And we will also continue to invest appropriately in terms of building those core OTC brands and introducing new products. From a full year for FY '14, as Ron said and as we announced…

[Operator Instructions] Your first question comes from the line of Joe Altobello from Oppenheimer. Joseph Altobello - Oppenheimer & Co. Inc., Research Division: I guess the first question, I wanted to kind of delve into the retailer inventory reductions -- obviously, pretty significant. And you have been talking about that in the past. But were there any particular brands or categories that saw the most significant reductions, or was it really across the board?

I think, Joe, it's a good question. I think we're seeing it, I don't want to say across the board, but it's not limited to 1 or 2 brands. It's just, as I said, it really started in late November and through December that we saw retailers really pulling back and really cutting back on inventory across a number of different things. So it's not limited to one brand, but it's not wholesale across brands. But it's pretty significant. And I think, if you talk to other people, it's certainly not limited to us. We're seeing it and hearing it from other people as well. Joseph Altobello - Oppenheimer & Co. Inc., Research Division: And in terms of the March quarter, you mentioned that, that you expect that to continue. I guess in terms of order of magnitude, is the December quarter the brunt of it, or would you expect something similar in terms of an impact in the March quarter?

Joe, I think it's a great question. And to be candid with you, I think from our perspective, from a planning perspective, I think these things came together in the third quarter. They came together late in the third quarter. And we felt like, as we reviewed the numbers, it wouldn't be prudent for us to not at this time say, "Hey, we think there could be potentially more of this to come." Especially, like I said, when the #1 retailer in the world announced last week preearnings that said the revenue was not going to be what they anticipated. So with those sort of things, we're saying, there could be more inventory reduction. We don't know at this point, but that's why we guided in this direction. Joseph Altobello - Oppenheimer & Co. Inc., Research Division: And just one last one in terms of the gross margin. Actually, I was surprised it was up given the top line weakness and the mix hit that you probably took, given that OTC was down more than household. What was going on there? And as you look at fiscal '15, is that still your main margin driver, that gross margin sort of lever?

Joe, first of all, we weren't negatively impacted by mix during the quarter. And our margin is actually fairly stable with the exception of seasonal differences and merchandising other programs that we've talked about in the past. But in addition to that, we don't talk about it a lot as we actually have a very well-defined, long-term cost reduction and margin improvement program in place that we continue to execute again. So really, those are the 2 drivers that helped our margin stay fairly consistent, and actually, up over last year during the quarter.

And, Joe, I just would add to your point. As a result, we have a defined program in place for '15, and what we've said in the past is, we want to continue to improve gross margins through those cost reductions so that we can invest in the businesses appropriately over time. So we are going to continue to pursue that path in '15 as well. Does that answer your question? Joseph Altobello - Oppenheimer & Co. Inc., Research Division: Yes, it does.

Your next question comes from Linda Bolton-Weiser from B. Riley.

Just a little question just on the numbers. Being that earnings is going to be lower than we had projected, why would it be that the cash flow projection would remain the same for the year? And then secondly, I guess my question is a little bit on consumption. Because I understand what you're saying about the retailer inventory reductions, and you have quantified that. But the consumption seems low given how -- that you've still been investing pretty heavily in A&P. So can you comment on how the consumption growth is for the brands that are non-cough/cold and flu-related? And also, do you feel like you're getting adequate returns on investment on your A&P?

I'll let Ron start with cash flow, and then I'll talk about consumption and returns.

Okay. So Linda, as you know, our cash flow is really driven by 3 factors: high EBITDA margins, low capital spending and consistent deferred tax cash savings of approximately $25 million a year. So the second and third part of that equation is fairly consistent for us. In addition to that, we're managing a reduction in working capital to help maintain that cash flow. If you take a look at our year-to-date cash flow, and for the quarter, we've been able to reduce working capital as part of that. Matt?

Linda, I think your question is good in terms of -- our consumption is -- for us, it's off. And it's off across the pediatric brands as well as some other ones. I think in terms of the return on A&P, I think for us, we've said, "We're a brand-building company. We're going to continue to invest. We're going to invest appropriately." So I think our strategy of investment doesn't change moving forward. But to your point, what does is we need to evaluate which marketing programs and where are we having success and where should we try something different. And that's where we're in the process of doing right now. I'll give you an example. I'll take Dramamine. We tested some things one year or so ago in terms of some advertising at gas stations on highways, et cetera, where people were traveling, thinking if we got them at the point of contact, that, that would be beneficial. It didn't pay out as much. So what we tested this year was some online digital advertising for Dramamine of people that are going to travel sites to pursue travel options and doing some advertising to them directly once we found them. That did have a return on investment. So those are the types of things -- our strategy won't change on brand building, but reviewing each of our programs and trying alternative things is what's going to change, I think, moving forward. Does that answer your question, Linda?

Yes, I guess so. And then, can I just follow-up on -- in terms of the retailer inventory reductions -- - you quantified the impact on sales in the quarter -- but do you -- I didn't catch whether you've said what you think the inventory levels are right now? Like, do you think your inventories are up year-over-year or flattish or up low-single digit? Do you have some rough sense of how the levels are at retail?

Well, I think we believe -- given the fact that consumption and shipments have now swung the other way that our inventory is actually coming down, right. So we don't believe we have bloated inventory at this point, if that's the question.

So then it seems to me that even if this problem lingers on for another quarter, that it wouldn't go on for, say, 3 quarters or something?

No. I think, to your point, that's why we're hopeful that this is a near-term initiative, meaning you can only -- what happens at retail when foot traffic isn't good? At least in my experience over the last 30 years is, retailers typically reduce inventory and reduce staffing to try and protect profits. And I think we have seen that, right, and during these economic times. But to your point, I think you can only reduce inventories so far before you're out-of-stocks outstrip the lost sales in terms of what that's causing. So I don't see it as a long-term issue, but I also, as I said to Joe at the beginning, I can't tell you that it's a one quarter issue, so that's why we're planning -- we're being cautious for the next quarter or so in terms of what's happening in that arena, but I don't see it as a long-term issue, to your point.

Your next question comes from Jon Andersen from William Blair. Jon Andersen - William Blair & Company L.L.C., Research Division: I guess I'll ask an inventory question as well. So clearly, inventories got to levels which required this to kind of destocking activity to occur in the quarter. If you had to kind of characterize it, Matt, how did the inventories get to those levels? I mean, do you think it's a -- is it a planning and forecasting issue? Is it kind of a real consumer behavior change that's happened of late? Is it, perhaps, bigger than expected impact from the return of your competitors? I'm just trying to kind of, order of magnitude, get a sense for what led to this and what we can do to avoid it again in the future.

Yes, Jon, I think it's a very fair question. I think from our vantage point, there are 2 drivers of it. And I'm sure there are more. The first one and the biggest one is, it's the retailers reducing inventory to reduce working capital. So as an example, the greatest retailer in the world who has proven over the last 30 years that they are the greatest mover of supply or the supply chain in the world, when they announced 3 or 4 months ago that they're going to reduce inventory, our first reaction is, "How can you reduce inventory? You're the already the greatest and most efficient mover of inventory in the world." So that's concerning for us. And then the second mass retailer 3 months ago says, "We're going to reduce SKUs by 5% in order to reduce our inventory." So the biggest thing that's going on is retailers are just making a major move as a result of this environment. And I believe, as I've said, that pendulum has swung back and forth over time. The second one to your point is, we have to look in the mirror and say, "What are we doing from a consumption standpoint, and what can we do better moving forward to drive consumption and pull product off retail shelves?" So I think the second one is clearly in our camp, and we need to reevaluate which programs are effective and which programs we'd consider options. So I think those are the 2 biggest things for us from an inventory standpoint. Jon Andersen - William Blair & Company L.L.C., Research Division: Okay, that's helpful. Narrowing in on the competitive return and the activity around that, is the kind of the return itself and the recovery of shelf space and the level of kind of promotional activity surrounding that return kind of as you expected? And then second part to that would be, which brands -- yes, specifically which brands are you seeing this effect within your portfolio? And is it affecting a broader range of brands, perhaps, than you initially anticipated?

John, I'd say in terms of the competitive returns, remember it's Tylenol, it's Motrin, it's Gas-X, it's Benefiber. Those are the key brands that we're out to return, but really, if pediatrics is probably the biggest one. Is it as expected? Clearly, our competitors said that they were going to spend significantly behind those brands as they return. And in fact, Tylenol has not completely returned yet. It still has more to come next season, as we've said. But they are spending at significant levels, both from a trade and a consumer standpoint. And they announced that, when they came back, they were going to do it. So that's as expected. It's just, as expected, incredibly high levels. I think your second question about -- okay, who is being impacted more, who is being impacted less? I think, for us, in pediatrics, I think we're seeing PediaCare is being impacted more by the returns, and Little Remedies is being impacted less by the returns. So in terms of our planning purposes for the year, I think it has impacted PediaCare a little more than we thought, and I think it has impacted -- and I know it has impacted Little Remedies a little less than we thought. So that's who is bearing the brunt of it in terms of our portfolio. Jon Andersen - William Blair & Company L.L.C., Research Division: Just a last question. I know you're kind of entering fiscal '14 -- characterized it as a transition year for the reasons we've already talked about. Looking ahead to, I guess, fiscal '15 and kind of what you discussed today in terms of some of the shifts happening at retail, some more competitive product, I guess, coming back onto the shelf next season, is there any help you can give us thinking about what kind of organic growth rate you'd be looking for in 2015 or over the year ahead?

Yes, Jon, I think it's a good question. It's a fair question. I think, candidly -- and we talked about this a lot this week -- I think I want to get through the remainder of this cough/cold season and see how things net out, and I think at the May call, we're going to be able to provide some insight on that.

I would now like to turn the call back over to Matt Mannelly for closing remarks.

Thank you. Thank you very much, everyone, for joining us. I'm sure it was not easy today given what's going on in the last few days from a weather standpoint. So we appreciate your time. And have a good day. And we look forward to the next quarterly call. Thank you.

Thank you very much. This concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.