Good day ladies and gentlemen and welcome to the Prestige Brands Holdings' Q3 Fiscal 2016 Earnings Conference Call. At this time, all participants are on a listen only mode, later we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference is being recorded. I would like to introduce your host for today's conference, Mr. Dean Siegal, Director of Investor Relations. Sir, please begin.

Good morning and welcome. As a reminder, there's a slide presentation which accompanies this call. It can be accessed by visiting prestigebrands.com, clicking on the Investor link and then on today's webcast and presentation. I am required to remind you that during this call Management may make forward-looking statements regarding their beliefs and expectations as to the company's future business prospects and results. 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 as of the date of this conference call. A complete Safe Harbor disclosure appears on page two 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 and quarterly reports, which is filed with the U.S. Securities and Exchange Commission. Also as a reminder, some of the information contained in this presentation includes adjusted projections which exclude acquisition related and other items. A reconciliation between adjusted results and reported results is included in today's earnings release. Now, I would like to introduce Ron Lombardi, CEO.

Thanks, Dean and good morning, everyone. Today's agenda and presentation will cover our third quarter and nine months performance, give an update on the expected closing of the DenTek acquisition and reconfirm our outlook for the remainder of the year. So with that's let's turn to page five and get started. We are very pleased with our solid results for the quarter and first nine months of the year. The third quarter continued to benefit from strong performance across a number of fronts including strong consumption gains in our Invest for Growth brand and our international business. Sales were in line with our expectations for the quarter coming in at $200 million an increase approximately 3% excluding the FX impact and increased 1.3% with it. Our core OTC business continued its strong consumption in sales trends during the quarter and I'll cover more of this on slide seven and eight. Our nine months year-to-date sales growth came in at plus 14.1% and was in line with the previous outlook for the full year. FX impacted organic growth by approximately 2 points in Q3 and 2.5 points for the nine months year-to-date. Our core OTC brands continue to benefit from our long-term brand building focus with consumption growth of 4.7% in Q3 and year-to-date growth of over 5%. Our gross margin came in at 58.3% for the quarter and improved 1 point versus last year's level of 57.2%. It was also in line with Q2's level of 58.2%. EPS came in at a solid $0.53 for the quarter which was 10.4% above last year's level. Free cash flow came in at a solid $45 million in Q3 and allowed us to continue to rapidly delever ahead of the DenTek acquisition with our Q3 leverage ratio decreasing to approximately 4.8 times. We…

Thank you, Ron and good morning everyone. As Ron just described and is summarized on page 14, we are very pleased with our third quarter and fiscal year-to-date results for revenue, margins EPS and free cash flow. Our results for the third quarter include strong organic sales growth, EPS growth of over 10% and free cash flow generation of $45 million. Moving on to slide 15, we report our consolidated third quarter and nine-month period ended December 31, 2015 results. As a reminder, the information in today's presentation includes adjusted results that exclude acquisition related and other items. Reconciliations between adjusted results and reported results are included in today's earnings release. For the third quarter organic revenues increased 3.2% on a constant currency basis versus the prior year and for the nine months ended December organic revenues increased 2.1% on a constant currency basis or approximately 14% on a reported basis. These results were driven by continued strong multi-outlet and C-store consumption growth in our core OTC portfolio and also reflect the full year-to-date sales impact of the Insight acquisition which closed in early September 2014. Our third quarter adjusted gross margin of 58.3% was the highest level in over two years and was up from 57.2% in the prior year quarter. This was primarily driven by favorable sales mix from growing the core OTC portfolio, which includes brands with higher gross margins than the overall average. Advertising and promotion spending was 15% of sales for the third quarter, which was essentially flat compared to the prior year quarter. A&P spending for the nine months ended December was up 13.4% versus the prior year and reflects our continued brand building and product innovation investment. We will continue to invest in brand building and new product development for our core brands…

Thanks, Dave. Turning to page 18, we'll wrap up our prepared comments before we open the lines for questions. We continue to feel very good about the business and the consumption trends in our Invest for Growth brands as they head into the last quarter of this fiscal year. However, we do remain cautious related to the retail environment and what we see across the mass drug and dollar channels. Brand building and NPD will continue to be our long-term focus and continue to deliver results as witnessed by the consumption trends of our largest brands as highlighted on page seven. Finally, we continue to feel confident in our full year outlook and more importantly, in our strategy that is creating shareholder value. Our sales outlook remains at the midpoint of the plus 10% to plus 11% range with Q4 sales of $190 million to $192 million anticipated. As Dave just mentioned, our outlook for free cash flow remains at $175 million or more and our adjusted EPS outlook is now at the upper range of the $2.05 to $2.10 range or slightly above that. All of this excludes any impact from DenTek in Q4. So with that, let me turn the call back over to the operator and they'll open the lines for questions. Thank you.

Thank you. [Operator Instructions] Our first question is from Frank Camma of Sidoti. Your line is open.

Good morning, guys.

Good morning, Frank.

Good morning, Frank.

Congratulations on the quarter. Hey, I didn’t have a chance to go through the whole 10-Q, but I noticed a couple of things. First of all, the cold/cough was down by 5%, but considering the seasonal so and then if you could comment on that, why - it seems like it might have been down more given the incident levels?

Yes, so Frank I think year-to-date incident levels are down about 15% and cough/cold is broken up into a number of subcategories, but if you look into the subcategories, sore throat and cough is down more like 5% or 6% and that's really where our group is concentrated. So we're performing well. One thing I'll point out is our Luden's business is actually up on a year-to-date basis over last year. So our new flavors are allowing us to buck the trend of cough/cold incident levels.

Okay good, and MONISTAT looks like it is driving some good growth in the woman's health, I was wondering if you could comment about that?

MONISTAT continues to performance well. Our investment in brand building strategy is long-term and is focused not only on the doctor detailing initiatives that we've talked about in the past, but also updating our consumer advertising as well. So we continue to do well with that and expect to do for a long time Frank.

Great and a last on the categories, what's going on with the dermatological, it was up like 12%, was there anything new in that category that would have driven that?

Yes, so the Compound W brand is really the big driver in that skin care section for us and we've had really good success with the new product Compound W Advanced [ph] that's helped us increase share significantly in that category over the last few quarters.

Okay, great. And then final question for me is just, if you can comment on the kind of the state of the debt markets as you see them because obviously longer term that’s a good driver for you as you reload up for acquisitions?

Sure, over the last four months or so the debt market has been, I guess fluid is the best way to describe it. It has been choppy, although the market tends to be pretty good and stable for borrowers who the market is comfortable with and certainly we feel Prestige fits into that category. We actually end up with pricing that's usually a couple of notches above where rating agencies may rate us because of our financial profile and our consistent free cash flow.

Right.

So as we get ready to close on the DenTek acquisition, we think we’re going to be well positioned to be well situated to close on that.

Great. Thanks guys.

Sure, thank you Frank.

Thank you. Our next question is from Joe Altobello of Raymond James. Your line is open.

Good morning it's Christine on for Joe.

Good morning.

Good morning.

Good morning, just a follow up on Frank’s question, how is the decline in incidences in cough/cold impacting margins?

Because our portfolio is so diversified we’re not overly impacted by any one category. Cough/cold a few years ago was over 20% of revenue and after we close on DenTek it will be closer to 10%. So it's not really impacting the financial profile of the business one way or the other.

Okay and then just a follow up on the gross margin question, can you talk a little bit more about the drivers this quarter and was there any transactional FX drug from other companies have been reporting ahead from that?

Yes, so the second of those two questions in terms of FX, although we do get an impact on the top line and we’re impacted by the Australian dollar and the Canadian dollar, in terms of gross margin and EPS we're able to mitigate whatever transactional impact we do have. So it's really not impacting the bottom line for us like it is a lot of other companies. What was the first part of the question, Christina?

Just a little bit more color on the gross margin during the quarter?

Yes, Christina this is Dave. As I mentioned in my comments, it's really driven by mix. So, by driving the core OTC sales at that level we tend to have higher margin, gross margin brands in that portfolio. So, we get a real benefit from sales mix by growing the core OTC segment.

Okay, great. Thank you so much.

Thank you.

Thank you. Our next question is from Linda Bolton Weiser of B. Riley. Your line is open.

Hi, I was just curious on the A&P ratio, the A&P spending, I think you said it was – the ratio was flat in the quarter and year-to-date, you’ve been catch up down even, so how are you managing to drive consumption growth so effectively even though your A&P is kind of flattish or even down a little bit? Thanks.

Sure. As a percent of sales it is essentially flat year-to-date 14 to 14.2% last year, 14.1% this year. So more importantly went the spending is up $10 million year-over-year, so you're really going to step back and take a look at the dollars on the year-to-date basis. But really the impact we're having on consumption growth is by concentrating our A&P investment, our new product development behind our biggest brands. So that’s what driving the consumption growth there. And in the past couple of quarters we’ve highlighted the initiatives that we had against BC, Goody's, MONISTAT, Clear Eyes and Luden's for example of where we are focusing our efforts and we’re getting results from that concentration.

Okay and it sounds like just your tone with regards to breaking up the core versus the non-core brands and the growth rates you seem very assertive in stating those growth rates. I’m just wondering is that the result of some strategic planning process you’ve done or are you looking to accelerate innovation or just kind of what is the root of your - maybe I’m wrong, but your tone sounds just more sort of with regard to the core growing 4% to 5%, so can you just comment on that?

Sure, it’s really consistent with the strategy and what we’ve been talking about for this business for a long time, Linda. What we've said all along is that we expect to outgrow the categories that we compete in for our Invest for Growth portion of the business. And we expect the categories to grow 1% to 2% low single digits and we expect to our A&P investments in new products to outgrow that. And the other thing that I highlighted on the slide showing the impact of DenTek on the portfolio is that we’ve morphed our portfolio from 50% Invest for Growth to about 80% with the target of getting us to 85% over time. So really it’s just the accumulation of M&A's impact on our portfolio and a reminder that we use M&A as a brand building tool. We don’t use M&A to get bigger. We don’t use M&A to influence the financial profile and just to get more cash flow. Those are benefits that we get when we use it for an M&A tool.

Okay, that sounds good and congratulations, thanks.

Thank you, Linda. Have a good day.

Thank you. Our next question is from Carla Casella of JPMorgan. Your line is open.

Hi, one question on inventory, you said I like the chart of the consumption versus your sales and I’m just wondering can you talk about inventory levels at retailer are there any categories where you think the retailers are heavy or light on inventory?

Yes, in general we feel pretty good about our inventory levels at retail or something we do track. Clearly the low cost whole incident levels may impact Q4 reorder levels compared to last year where it was much more robust cough/cold season. So retailers may have a little bit of inventory to get through based on current incidence levels. But generally we feel pretty good about our overall inventory levels at retail.

Okay. And then you talked about growing the Invest for Growth side of the portfolio, are there any on the other side or even in there any non-core brands or categories you may consider exiting to help fund the Invest for Growth side?

Sure, you know what we've said Carla is that we’re open to sell really any of the non-core brands if a buyer would be willing to pay a value that is equal to what our shareholders benefit from today. I think that benefit is not only EPS and cash flow, but it also adds to our M&A capacity over time. So if somebody is willing to pay a value that is equal to that we would consider selling any of the non-core brands.

Okay, great. And your commentary on the debt markets is correct, you’re trading, well better than your category and rating at this point. So those markets recognize your performance.

Thank you.

That’s all I have.

Okay, thanks Carla.

Thank you. At this time, I'd like to turn the call back to Mr. Lombardi for any closing comments.

Thank you. We'll end the call at this point and thanks for joining us today.