U. S. SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2005

PRESTIGE BRANDS HOLDINGS, INC.

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

PRESTIGE BRANDS INTERNATIONAL, LLC

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

(Exact name of Registrants as specified in their charters)

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 Prestige Brands International, LLC, Prestige Brands Holdings, Inc. 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.” 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 Registrants (1) have 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 Registrants were required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

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

As of August 5, 2005, Prestige Brands Holdings, Inc. had 50,053,423 shares of common stock outstanding. As of such date, 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.

Prestige Brands Holdings, Inc.

Consolidated Balance Sheets

(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 Holdings, Inc.

Consolidated Statements of Operations

(Unaudited)

	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		)

Cumulative preferred dividends on Senior Preferred and Class B Preferred units	—			(3,619		)

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

See accompanying notes.

Prestige Brands Holdings, Inc.

Consolidated Statement of Changes in Stockholders’ Equity
and Comprehensive Income

Three Months Ended June 30, 2005

(Unaudited)

											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 Holdings, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

	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
Proceeds from the issuance of notes	—			668,512
Payment of deferred financing costs	—			(22,651		)
Repayment of notes	(932		)	(330,786		)
Proceeds from the issuance of preferred and common units	—			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

See accompanying notes.

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.

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

	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.

Prestige Brands International, LLC

Consolidated Balance Sheets

(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 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

See accompanying notes.

Prestige Brands International, LLC

Consolidated Statements of Operations

(Unaudited)

	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	)

See accompanying notes.

Prestige Brands International, LLC

Consolidated Statement of Changes in Members’ Equity
and Comprehensive Income

Three Months Ended June 30, 2005

(Unaudited)

(Dollars in thousands, expect share data)	Contributed Capital Prestige Holdings			Accumulated Other Comprehensive Income (loss)			Retained Earnings		Totals
Balances - March 31, 2005	$	370,277		$	320		$	15,249	$	385,846

Additional costs associated with capital contributions from Prestige Brands Holdings	(63		)						(63		)

Components of comprehensive income
Net income for the period							4,007		4,007
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

See accompanying notes.

Prestige Brands International, LLC

Consolidated Statements of Cash Flows

(Unaudited)

	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

See accompanying notes.

Prestige Brands International, LLC

Notes to Consolidated Financial Statements

(in thousands, except per share data)

1. Business and Basis of Presentation

Nature of Business

Prestige Brands International, LLC, (“Prestige International”) is an indirect wholly owned subsidiary of Prestige Brands Holdings, Inc. (“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.

Basis of Presentation

Use of Estimates

Cash and Cash Equivalents

Accounts Receivable

Sales Returns

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

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 Statement 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

Deferred Financing Costs

Revenue Recognition

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

Advertising and Promotion Costs

Stock-based Compensation

The Company accounts for employee stock-based compensation in accordance with the provisions of APB 25 and complies with the disclosure provisions of Statement No. 123 and Statement No. 148. 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 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

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.

Recently Issued Accounting Standards

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.

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(R) 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 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

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 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

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 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.

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