pbh10k033108.htm

PRESTIGE BRANDS HOLDINGS, INC.
(Exact name of Registrant as specified in its charter)
Delaware (State or other jurisdiction of incorporation or organization)		20-1297589 (I.R.S. Employer Identification No.)
90 North Broadway Irvington, New York 10533 (Address of Principal Executive Offices, including zip code)

(914) 524-6810 (Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class:	Name of each exchange on which registered:
Common Stock, par value $.01 per share	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None


		Page
Part I
Item 1.	Business	1
Item 1A.	Risk Factors	16
Item 1B.	Unresolved Staff Comments	25
Item 2.	Properties	25
Item 3.	Legal Proceedings	26
Item 4.	Submission of Matters to a Vote of Security Holders	28

Part II
Item 5.	Market for Registrants’ Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	29
Item 6.	Selected Financial Data	32
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	52
Item 8.	Financial Statements and Supplementary Data	52
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	52
Item 9A.	Controls and Procedures	52
Item 9B.	Other Information	53

Part III
Item 10.	Directors, Executive Officers and Corporate Governance	54
Item 11.	Executive Compensation	54
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	54
Item 13.	Certain Relationships and Related Transactions, and Director Independence	54
Item 14.	Principal Accounting Fees and Services	54

Part IV
Item 15.	Exhibits and Financial Statement Schedules	55

	Trademarks and Trade Names
	Trademarks and trade names used in this Annual Report on Form 10-K are the property of Prestige Brands Holdings, Inc. or its subsidiaries, as the case may be. We have utilized the ® and TM symbols the first time each trademark or trade name appears in this Annual Report on Form 10-K.

We sell well-recognized, brand name over-the-counter healthcare, household cleaning and personal care products in a global marketplace. We operate in niche segments of these categories where we can use the strength of our brands, our established retail distribution network, a low-cost operating model and our experienced management team as a competitive advantage to grow our presence in these categories and, as a result, grow our sales and profits. Our ultimate success is dependent on our ability to:

Major Brands

Market

Position (1)

Market Segment (1)

Market

Share (1)

(%)

ACV(1)

(%)

Over-the-Counter Healthcare:

Chloraseptic®

Liquid Sore Throat Relief

42.9

Clear Eyes®

Redness Relief

15.5

Compound W®

Wart Removal

33.4

Wartner®

Wart Removal

10.2

The Doctor’s® NightGuard™

Bruxism (Teeth Grinding)

68.0

The Doctor’s® Brushpicks®

Interdental Picks

21.4

Little Remedies®(2)

N/A

Pediatric Healthcare

N/A

Murine®

Personal Ear Care

21.3

New-Skin®

Liquid Bandages

46.6

Dermoplast®

Pain Relief Sprays

15.5

Household Cleaning:

Comet®

Abrasive Tub and Tile Cleaner

31.1

Chore Boy®

Soap Free Metal Scrubbers

28.9

Spic and Span®

All Purpose Cleaner

3.9

Personal Care:

Cutex®

Nail Polish Remover

26.7

Denorex®

Medicated Shampoo

1.7

(1)

The data included in this Annual Report on Form 10-K as regards the market share and ranking for our brands, has been prepared by the Company, based in part on data generated by the independent market research firm, Information Resources, Inc. (“Information Resources”). Information Resources reports retail sales data in the food, drug and mass merchandise markets. However, Information Resources’ data does not include Wal-Mart point of sale data, as Wal-Mart ceased providing sales data to the industry in 2001. Although Wal-Mart represents a significant portion of the mass merchandise market for us, as well as our competitors, we believe that Wal-Mart’s exclusion from the Information Resources data analyzed by the Company above does not significantly change our market share or ranking relative to our competitors.

While we perform the production planning and oversee the quality control aspects of the manufacturing, warehousing and distribution of our products, we outsource the operating elements of these functions to entities that offer expertise in these areas and cost efficiencies due to economies of scale. Our operating model allows us to focus on our marketing programs and product development and innovation, which we believe enables us to achieve attractive margins while minimizing capital expenditures and working capital requirements.

We have developed our brand portfolio through the acquisition of strong and well-recognized brands from larger consumer products and pharmaceutical companies, as well as other brands from smaller private companies. While the brands we have purchased from larger consumer products and pharmaceutical companies have long histories of support and brand development, we believe that at the time we acquired them they were considered “non-core” by their previous owners. Consequently, they did not benefit from the focus of senior level personnel or strong marketing support. We also believe that the brands we have purchased from smaller private companies had been constrained by the limited financial resources of their prior owners. After adding a brand to our portfolio, we seek to increase its sales, market share and distribution in both new and existing channels through our established retail distribution network. We pursue this growth through increased advertising and promotion, new sales and marketing strategies, improved packaging and formulations and innovative new products. Our business, business model and the following competitive strengths and growth strategy, however, face various risks that are described in “Risk Factors” in Item 1A of this Annual Report on Form 10-K.

We own and market well-recognized consumer brands, many of which were established over 60 years ago. Our diverse portfolio of products provides us with multiple sources of growth and minimizes our reliance on any one product or category. We provide significant marketing support to our key brands that is designed to enhance our sales growth and our long-term profitability. The markets in which we sell our products, however, are highly competitive and include numerous national and global manufacturers, distributors, marketers and retailers. Many of these competitors have greater research and development and financial resources than us and may be able to spend more aggressively on advertising and marketing and research and development, which may have an adverse effect on our competitive position.

“Market share” or “market position” is based on sales dollars in the United States, as calculated by Information Resources for the 52 weeks ended March 23, 2008. "Market segment" has been defined by the Company based on its product offerings and the categories in which it competes. “ACV” refers to the All Commodity Volume Food Drug Mass Index, as calculated by Information Resources for the 52 weeks ended March 23, 2008. ACV measures the weighted sales volume of stores that sell a particular product out of all the stores that sell products in that market segment generally. For example, if a product is sold by 50% of the stores that sell products in that market segment, but those stores account for 85% of the sales volume in that market segment, that product would have an ACV of 85%. We believe that ACV is a measure of a product’s importance to major retailers. We believe that a high ACV evidences a product’s attractiveness to consumers, as major national and regional retailers will carry products that are attractive to their customers. Lower ACV measures would indicate that a product is not as available to consumers because the major retailers do not carry products for which consumer demand may not be as high. For these reasons, we believe that ACV is an important measure for investors to gauge consumer awareness of the Company’s product offerings.

We strategically choose to, and generally, compete in niche product categories that address recurring consumer needs and that we believe are considered “non-core” to larger consumer products and pharmaceutical companies. We believe we are well positioned in these categories due to the long history and consumer awareness of our brands, our strong market positions and our low-cost operating model. However, a significant increase in the number of product introductions by our competitors in these niche markets could have a material adverse effect on our business, financial condition and results from operations.

We focus our marketing and product development efforts on the identification of underserved consumer needs, the design of products that directly address those needs and the ability to leverage our highly recognizable brand names. Demonstrative of this philosophy, in 2008 we introduced Comet SprayGel, a high viscosity mildew stain remover spray and the Murine™ Earigate® Ear Cleaning System, a natural and hypoallergenic wax removal system with a patented “reverse spray action” that safely rinses away ear wax buildup without harming the user’s sensitive eardrums. We also restaged Clear Eyes for Dry Eyes ACR Relief as Clear Eyes for Itchy Eyes to address the needs of allergy sufferers. These product introductions followed a very successful 2007 when we introduced Clear Eyes Maximum Redness Relief, a fast acting formula that lubricates as it relieves redness, and Little Tummys® Gripe Water, an herbal supplement with ginger and fennel for safe, gentle relief of infant colic, hiccups and upset stomach. Similarly, our 2006 product introductions included: Clear Eyes Triple Action Relief, formulated to remove redness, moisturize and relieve irritation; Dermoplast™ Poison Ivy Treatment, a non-irritating wash that controls the itch and removes oils that cause the rash; as well as Murine Homeopathic Earache Relief, formulated to promote the body’s natural ability to relieve ear pain. Although line extensions and new product introductions are important to the overall growth of a brand, our efforts may reduce sales of existing products within that brand. In addition, certain of our product introductions may not be successful. While we did not discontinue any of our recent product introductions during 2008, we did discontinue Murine Homeopathic Allergy Eye Relief, Murine Homeopathic Tired Eye Relief and Chloraseptic Daily Defense Strips in 2007, all of which had been introduced in 2006. In a similar manner, we discontinued Little Teethers® Oral Pain Relief Swabs in 2006, which we introduced in February 2005.

To gain operating efficiencies, we directly manage the production planning and quality control aspects of the manufacturing, warehousing and distribution of our products, while we outsource the operating elements of these functions to well-established third-party providers. This approach allows us to benefit from their core competencies and maintain a highly variable cost structure, with low overhead, limited working capital requirements and minimal investment in capital expenditures as evidenced by the following:

In 2008, our gross profit was adversely affected by the inventory costs associated with the voluntary withdrawal from the marketplace of two medicated pediatric cough and cold products marketed under the Little Remedies brand as part of an industry-wide withdrawal of certain medicated pediatric cough and cold products. During 2007 our gross margin was adversely impacted by the obsolescence reserves associated with certain of our Chloraseptic inventory. Our general and administrative expenses have been impacted by the overall growth of the organization and professional fees incurred while protecting our intellectual property and other rights. Our operating model, however, requires us to depend on third-party providers for manufacturing and logistics services. The inability or unwillingness of our third-party providers to supply or ship our products could have a material adverse effect on our business, financial condition and results from operations.

We will continue to invest in advertising and promotion to drive the growth of our key brands. Our marketing strategy is focused primarily on consumer-oriented programs that include media advertising, targeted coupon programs and in-store advertising. While the absolute level of marketing expenditures differs by brand and category, we typically have increased the amount of investment in our brands after acquiring them. For example, after the acquisition of the Dental Concepts line of products in 2006, we expanded consumer promotion programs and increased advertising, which resulted in domestic annual brand sales growth of approximately 26% during 2007. In 2007, we promoted the introduction of our first dual-action product, Chloraseptic Sore Throat plus Cough Lozenges, as well as 2 sugar free sore throat lozenges. In 2008, a very active year, we vigorously advertised and promoted the introduction of Comet SprayGel, Murine Earigate and Chloraseptic Liquid Center Lozenges all of which were extremely well received by consumers. Given the competition in our industry, there is a risk that our marketing efforts may not result in increased sales and profitability. Additionally, no assurance can be given that we can maintain these increased sales and profitability levels once attained.

One of our strategies is to broaden the categories in which we participate and our share within those categories through ongoing product innovation. As an example, we followed our successful launch in 2005 of an artificial tears product called Clear Eyes for Dry Eyes with another innovative product in 2006 called Clear Eyes Triple Action Relief, formulated to remove redness, moisturize and relieve irritation, as well as Clear Eyes Maximum Redness Relief in 2007. In 2008, we launched Murine Earigate and Comet SprayGel; innovative new products to address specific needs and capitalize on the brand awareness of both Murine and Comet. These successful product introductions were the primary drivers of the brands' continued growth. Future product introductions to be marketed under the Chloraseptic and Little Remedies brand names will include a Food and Drug Administration (“FDA”) cleared, patented topical gel that helps block allergens on contact at the nose to help prevent runny nose, sneezing and nasal congestion. While there is always a risk that sales of existing products may be reduced by new product introductions, our goal is to grow the overall sales of our brands.

Our broad distribution base ensures that our products are well positioned across all available channels and that we are able to participate in changing consumer retail trends. In 2005, we expanded our sales in wholesale club stores, introducing customized packaging and sizes of our products designed specifically for this higher growth channel. Comet grew approximately 18% in this channel during 2006. There is a risk however, that we may not be able to maintain or enhance our relationships across distribution channels, which could adversely impact our sales, business, financial condition and results from operations.

We intend to increase our focus on growing our international business. International sales outside of North America represented 4.0% of revenues in 2008, 4.6% of revenues in 2007 and 3.4% of our revenues in 2006. We have designed and developed both product and packaging for specific international markets and expect our international revenues to grow as a percentage of total revenues. In addition to Clear Eyes, Murine and Chloraseptic, which are currently sold internationally, we license The Procter & Gamble Company to market the Comet brand in Eastern Europe. Since a number of our other brands have previously been sold internationally, we intend to expand the number of brands sold through our existing international distribution network and are actively seeking additional distribution partners for further expansion into other international markets. There is a risk, however, that increasing our focus on international growth may divert attention and resources from implementing our domestic business strategy. There are additional risks associated with the increase of our international business, such as changes in regulatory requirements and currency exchange controls. See “Risk Factors” in Item 1A of this Annual Report on Form 10-K.

Our management team has a solid track record of successfully identifying, acquiring and integrating new brands and we will continue to investigate the acquisition of highly complementary, recognized brands in attractive categories and channels. For example, during 2007 we purchased the Wartner brand of over-the-counter wart treatment products to augment our ownership of Compound W, the number two selling brand in the wart treatment category. Additionally, during 2006, we purchased the Chore Boy brand, which competes in the scrubber and sponge sector of the household cleaning segment, and The Doctor’s brand, which competes in the dental accessories sector of the oral health category, where we previously had a limited presence. While we believe that there will continue to be a strong pipeline of acquisition candidates for us to investigate, strategic fit and relative cost are of the utmost importance in our decision to pursue such opportunities. We believe our business model will allow us to integrate any future acquisitions in an efficient manner, while also providing opportunities to realize significant cost savings. However, there is a risk that our operating results could be adversely affected in the event we do not realize all of the anticipated operating synergies and cost savings from future acquisitions, we do not successfully integrate such acquisitions or we pay too much for these acquisitions. Provisions in our senior credit facility and the indenture governing our senior subordinated notes may also limit our ability to engage in strategic acquisitions.

We were originally formed in 1996 as a joint venture of Medtech Labs and The Shansby Group (a private equity firm), to acquire over-the-counter drug brands from American Home Products. Since 2001, our portfolio of brand name products has expanded from over-the-counter healthcare to include household cleaning and personal care products. We have added brands to our portfolio principally by acquiring strong and well-recognized brands from larger consumer products and pharmaceutical companies. In February 2004, GTCR Golder Rauner II, LLC (“GTCR”), a private equity firm, acquired our business from the owners of Medtech Labs and The Shansby Group. In addition, we acquired the Spic & Span business in March 2004.

In October 2004, we acquired the Little Remedies brand of pediatric over-the-counter healthcare products through our purchase of Vetco, Inc. Products offered under the Little Remedies brand include Little Noses® nasal products, Little Tummys digestive health products, Little Colds® cough/cold remedies and Little Remedies New Parents Survival Kits. The Little Remedies products deliver relief from common childhood ailments without unnecessary additives such as saccharin, alcohol, artificial flavors, coloring dyes or harmful preservatives.

In February 2005, we raised $448.0 million through an initial public offering of 28.0 million shares of common stock. We used the net proceeds of the offering ($416.8 million), plus $3.0 million from our revolving credit facility and $8.8 million of cash on hand to (i) repay $100.0 million of our existing senior indebtedness, (ii) redeem $84.0 million in aggregate principal amount of our existing 9 1/4% senior subordinated notes, (iii) repurchase an aggregate of 4.7 million shares of our common stock held by the investment funds affiliated with GTCR and TCW/Crescent Mezzanine, LLC (“TWC/Crescent”) for $30.2 million, and (iv) redeem all outstanding senior preferred units and class B preferred units of one of our subsidiaries for $199.8 million.

In November 2005, we acquired Dental Concepts LLC (“Dental Concepts”), a marketer of therapeutic oral care products sold under “The Doctor’s” brand. The business is driven primarily by two niche segments, bruxism (nighttime teeth grinding) and interdental cleaning. Its products include The Doctor’s NightGuard Dental Protector, the first FDA cleared over-the-counter treatment for bruxism and The Doctor’s BrushPicks, which are disposable interdental toothpicks.

Over-the-Counter Healthcare Segment

Our portfolio of over-the-counter healthcare products consists primarily of Clear Eyes, Murine, Chloraseptic, Compound W, Wartner, the Little Remedies line of pediatric healthcare products, The Doctor’s brand of oral care products and first aid products such as New-Skin and Dermoplast. Our other brands in this category include Percogesic®, Momentum®, Freezone®, Mosco®, Outgro®, Sleep-Eze® and Compoz®. In 2008, the over-the-counter healthcare segment accounted for 56.2 % of our revenues compared to 54.8% and 54.3% in 2007 and 2006, respectively.

Clear Eyes, with an ACV of 88%, has been marketed as an effective eye care product that helps take redness away and helps moisturize the eye. In 2008, we launched Clear Eyes for Itchy Eyes to address eye symptoms related to allergies. In February 2007, we introduced Clear Eyes Maximum Redness Relief, while in February 2006, we introduced Clear Eyes Triple Action Relief. Clear Eyes is among the leading brands in the over-the-counter personal eye care category. The 0.5 oz. size of Clear Eyes redness relief eye drops is the number two selling product in the eye redness relief category and Clear Eyes is the number two brand in that category with 15.5 % market share.

Murine has been on store shelves for over 100 years and is the leading brand in the over-the-counter ear care category. Murine products consist of lubricating, soothing eye drops and ear wax removal aids. Murine Ear Care is the leading brand in the over-the-counter ear care category with a market share of 21.3% up from the number three brands with a 13.4 % market share in 2007. The ear drop category is composed of products that loosen earwax and treat trapped water (swimmer’s ear) and ear aches. In 2008, we expanded our market share in the ear care category with the introduction of Murine Earigate, Ear Cleaning System, a natural and hypoallergenic wax removal system with a patented “reverse spray action” that safely rinses away ear wax build-up without harming the user’s sensitive eardrums.

Historically, Chloraseptic products were limited to sore throat lozenges and traditional sore throat sprays that were stored and used at home. In 2006, we introduced our first dual-action product, Sugar Free Chloraseptic Sore Throat plus Cough Lozenges. In 2007, we launched another dual action product, Chloraseptic Center-Filled Sore Throat Plus Coating Protection lozenges, designed to stop sore throat pain fast, and to soothe sore throats with the unique center-filled technology, the only product of its kind in the sore throat segment. And, in 2009, Chloraseptic is launching Chloraseptic Allergen Block, an FDA cleared, patented topical gel that helps block allergens on contact at the point of entry, the nose, to help prevent runny nose, sneezing and nasal congestion. These product introductions enable us to market Chloraseptic products as a system, encourage consumers to buy multiple types of Chloraseptic products, and increase volume for the entire product line.

Compound W has a long heritage; its wart removal products having been introduced almost 50 years ago. Compound W products are specially designed to provide relief from common and plantar warts and are sold in multiple forms of treatment depending on the consumer’s need, including Fast-Acting Liquid, Fast-Acting Gel, One Step Pads for Kids, One Step Pads for Adults and Freeze Off®. We believe that Compound W is one of the most trusted names in wart removal.

Compound W is the number two wart removal brand in the United States with a 33.4% market share and an ACV of 90%. Since Compound W’s acquisition, we have successfully expanded the wart remover category and enhanced the value associated with the Compound W brand by introducing several new products, such as Compound W Freeze Off, Fast Acting Liquid, One Step Pads for Kids, Waterproof One Step Pads and Invisible Strips Pads. Compound W Freeze Off, a cryogenic wart removal product, has achieved high trade acceptance, as it allows consumers to use a wart freezing treatment similar to that used by doctors.

Wartner

Wartner is the number three brand in the United States in the wart removal category with a 10.2% share of the cryogenic segment and an ACV rating of 60%. Launched in 2003, Wartner is recognized by consumers and the trade as the first ever over-the-counter wart freezing (cryogenic therapy) treatment in the U. S and Canada.

The Doctor’s

The Doctor’s is a line of products designed to help consumers that are highly motivated to maintain good oral

hygiene in between dental office visits. The product line was part of the 2006 acquisition of Dental Concepts LLC. The market is driven primarily by two niche segments, bruxism (nighttime teeth grinding) and interdental cleaning. The Doctor’s NightGuard Dental Protector was the first FDA cleared over-the-counter treatment for bruxism and The Doctor’s BrushPicks are disposable interdental toothpicks. The Doctor’s OraPik is a nondisposable, interdental pick and mirror.

Little Remedies is a full line of pediatric over-the-counter products that contain no alcohol, saccharin, artificial flavors or coloring dyes including: (i) Little Noses, a product line consisting of saline nasal spray/drops, decongestant nose drops, a nasal aspirator for the removal of mucous from nasal passages and moisturizing nasal gel, (ii) Little Colds, a product line consisting of a multi-symptom cold relief formula, sore throat relief Saf-T-Pops®, a cough relief formula, and a combined decongestant plus cough relief formula, and (iii) Little Tummys, a product line consisting of gas relief drops, laxative drops, a nausea relief aid, as well as the recently introduced gripe water, an herbal supplement used to ease discomfort often associated with colic and hiccups. In 2009, Little Remedies is launching Little AllergiesTM Allergen Block, leveraging the same technology as ChlorasepticTM Allergen Block, in a drug free formulation that blocks allergens on contact to help prevent allergic symptoms like runny nose, sneezing and nasal congestion.

New-Skin, believed to have originated over 100 years ago, consists of liquid bandages that are designed to replace traditional bandages in an effective and easy to use form for the protection of small cuts and scrapes. Each New-Skin product works by forming a thin, clear, protective covering after it is applied to the skin. New-Skin competes in the liquid bandage segment of the first aid bandage category where it has a 46.6% market share and an 81% ACV.

The introduction of retail versions of the product has approximately doubled the size of the business. In addition to the traditional hospital uses, Dermoplast offers sanitary, convenient first aid relief for pain and itching from minor skin irritations, including sunburn, insect bites, minor cuts, scrapes and burns. Dermoplast is currently offered in two formulas: regular strength and antibacterial strength. In February 2006, we introduced Dermoplast Poison Ivy Treatment as the only poison ivy wash that also contains over-the-counter medicine. Dermoplast enjoys significant distribution across the drug and mass merchandise channels, with an ACV of 63%.

Comet was originally introduced in 1956 and is one of the most widely recognized household cleaning brands, with an ACV of 99%. Comet competes in the abrasive and non-abrasive tub and tile cleaner sub-category of the household cleaning category that includes abrasive powders and liquids and non-abrasive sprays. Comet products include several varieties of cleaning powders, sprays and cream, both abrasive and non-abrasive. The non-abrasive tub and tile cleaner segment is more fragmented and competitive than the abrasive sector and we have been attempting, through focused advertising and promotions, including free-standing insert coupons and television advertising, to build momentum in our efforts to increase Comet’s market share in the non-abrasive tub and tile cleaner sector.

We have expanded the brand’s distribution, increased advertising and promotion and implemented focused marketing initiatives. During 2008, we introduced Comet SprayGel, a unique chlorine mildew stain remover

spray product that sticks to mildew stains and offers increased cleaning power due to its high viscosity. Previously, we introduced new fragrances, including Comet Lavender Powder Abrasive Cleanser and Comet Orange. We have also extended the brand into underdeveloped demographic targets, and employed new inverted bottle packaging, which improves evacuation and ease of use, for Comet Soft Cleanser Cream. Additionally, multi-packs have been introduced in the warehouse club trade class extending the brand’s distribution.

Chore Boy scrubbing pads and sponges were initially launched in the 1920's. Over the years the line has grown to include metal and non-metal scrubbers that are used for a variety of household cleaning tasks. While many of the brand’s products find use in the kitchen, with cooking clean up being the primary use, they are also used in clean up jobs in the home work shop, garage, and other areas, including outdoor grill cleaning. The newest additions to the line, launched in 2004, consist of patented mesh materials that clean most surfaces without scratching. Chore Boy products are currently sold in food and drug stores, mass merchandisers, and in hardware and convenience stores.

Spic and Span was introduced in 1925 and is marketed as the complete home cleaner with three product lines consisting of (i) dilutables, (ii) an anti-bacterial hard surface spray for counter tops and (iii) glass cleaners. Each of these products can be used for multi-room and multi-surface cleaning. Following our acquisition of the brand, the product line has grown from eight to 33 separate items and we have expanded distribution into new channels such as dollar stores.

Our major personal care brands include Denorex dandruff shampoo, Cutex nail products and Prell® shampoo. Other portfolio brands in this segment include EZO® denture cushion, Oxipor VHC® psoriasis lotion, Cloverine® skin salve, Zincon® medicated dandruff shampoo and Kerodex® barrier cream. The Company’s strategy has been to de-emphasize the personal care segment, and partially as a result, it accounted for 6.7% of our revenues in 2008 compared with 7.8% and 9.4% in 2007 and 2006, respectively.

Denorex was originally launched in 1971 as an effective solution to scalp problems. Denorex competes in the therapeutic segment of the dandruff shampoo category and holds a 1.6% market share. The current lineup of Denorex products includes Daily, with gentle but effective relief for mild dandruff sufferers; Extra Strength, for moderate dandruff sufferers; and for those with more serious dandruff conditions, Therapeutic Strength with coal tar.

Acquired from The Procter & Gamble Company (“Procter & Gamble”) in 1999, Prell Shampoo was launched in 1947. While the shampoo category is fragmented and populated by hundreds of brands, Prell continues to have strong brand recognition. We believe Prell has a small, but very loyal, base of consumers who value its superior cleansing and foaming properties; and who seek a premium shampoo at a more affordable price point.

For additional information concerning our business segments, please refer to Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operation and Note 17 to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.

Our marketing strategy is based upon the acquisition and the rejuvenation of established consumer brands that possess what we believe to be significant brand value and unrealized potential. Our marketing objective is to increase sales and market share by developing innovative new products and line extensions and executing professionally designed, creative and cost-effective advertising and promotional programs. After we acquire a brand, we implement a brand building strategy that uses the brand’s existing consumer awareness to maximize sales of current products and provides a vehicle to drive growth through product innovation. This brand building process involves the evaluation and enhancement of the existing brand name, the development and introduction of innovative new products and the execution of professionally designed support programs. Recognizing that financial resources are limited, we allocate our resources to focus on those brands that we believe have the greatest opportunities for growth and financial success. Brand priorities vary from year-to-year and generally revolve around new product introductions.

Our senior management team and dedicated sales force strive to maintain long-standing relationships with our top 50 domestic customers, which accounted for approximately 80.9% of our combined gross sales for 2008 and 77.1% and 77.9% for 2007 and 2006, respectively. Our sales management team consists of 15 people and is expected to grow in order to focus on our key customer relationships. We also contract with third-party sales management enterprises that interface directly with our remaining customers and report directly to members of our sales management team.

Our principal customer relationships include Wal-Mart, Walgreens, CVS, Target and Dollar General. Gross sales to our top five and ten customers account for 46% and 57%, respectively, in 2008 compared with approximately 43% and 53%, respectively, in 2007 and approximately 41% and 51%, respectively, in 2006. No single customer other than Wal-Mart accounted for more than 10% of our gross sales in any of those years and none of our other top five customers accounted for less than 3% of our gross sales in any those years. Our top ten customers each purchase products from essentially all of our major brands.

Our strong customer relationships and product recognition provide us with a number of important benefits including (i) minimization of slotting fees, (ii) maximization of new product introductions, (iii) maximization of shelf space prominence and (iv) minimization of cash collection days. We believe that management’s emphasis on strong customer relationships, speed and flexibility, leading sales technology capabilities, including (i) electronic data interchange, (ii) e-mail, (iii) the Internet, (iv) integrated retail coverage, (v) consistent marketing support programs and (vi) ongoing product innovation will continue to maximize our competitiveness in the increasingly complex retail environment.

In order to maximize our competitiveness and efficiently allocate our resources, third-party manufacturers fulfill all of our manufacturing needs. We have found that contract manufacturing maximizes our flexibility and responsiveness to industry and consumer trends while minimizing the need for capital expenditures. We select contract manufacturers based on their core competencies and our perception of the best overall value, including factors such as (i) depth of services, (ii) professionalism and integrity of the management team, (iii) manufacturing flexibility, (iv) regulatory compliance and (v) competitive pricing. We also conduct thorough reviews of each potential manufacturer’s facilities, quality standards, capacity and financial stability. We generally purchase only finished products from our manufacturers.

Our primary contract manufacturers provide comprehensive services from product development through the manufacturing of finished goods. They are responsible for such matters as (i) production planning, (ii) product research and development, (iii) procurement, (iv) production, (v) quality testing, and (vi) almost all capital expenditures. In most instances, we provide our contract manufacturers with guidance in the areas of (i) product development, (ii) performance criteria, (iii) regulatory guidance, (iv) sourcing of packaging materials and (v) monthly master production schedules. This management approach results in minimal capital expenditures and maximizes our cash flow, which is reinvested to support our marketing initiatives, used to fund brand acquisitions or to repay outstanding indebtedness.

We have relationships with over 40 third-party manufacturers. Of those, our top 10 manufacturers produce items that accounted for 80% of our sales for 2008 compared to 78% in 2007. We do not have long-term contracts with the manufacturers of products of approximately 23% of our gross sales in 2008. The lack of manufacturing agreements for these products exposes us to the risk that the manufacturer could stop producing our products at any time, for any reason or fail to provide us with the level of products we need to meet our customers’ demands. Should one or more of our manufacturers stop producing product on our behalf, it could have a material adverse effect on our business, financial condition and results from operations.

At March 31, 2008, suppliers for our key brands included (i) Procter & Gamble, (ii) Access Business Group, (iii) Kolmar Canada and (iv) Altaire Pharmaceuticals, Inc. We enter into manufacturing agreements for a majority of our products by sales volume, each of which vary based on the capabilities of the third-party manufacturer and the products being supplied. These agreements explicitly outline the manufacturer’s obligations and product specifications with respect to the brand or brands being produced. The purchase price of products under these agreements is subject to change pursuant to the terms of these agreements due to fluctuations in raw material, packaging and labor costs. All of our other products are manufactured on a purchase order basis which is generally based on batch sizes and result in no long-term obligations or commitments.

We receive orders from retailers and/or brokers primarily by electronic data interchange, which automatically enters each order into our computer systems and then routes the order to our distribution center. The distribution center will, in turn, send a confirmation that the order was received, fill the order and ship the order to the customer, while sending a shipment confirmation to us. Upon receipt of the confirmation, we send an invoice to the customer.

We manage product distribution in the mainland United States primarily through one facility located in St. Louis, owned and operated by The Jacobson Companies (“Jacobson”). Jacobson handles all finished goods storage, as well as the receipt and disposition of customer returns. In addition, Jacobson provides warehouse services, including without limitation, storage, handling and shipping with respect to our full line of products, as well as transportation services, including without limitation, (i) complete management services, (ii) claims administration, (iii) proof of delivery, (iv) procurement, (v) report generation, and (vi) automation and freight payment services with respect to our full line of products.

If Jacobson abruptly stopped providing warehousing or transportation services to us, our business operations could suffer a temporary disruption while new service providers are engaged. We believe this process could be completed quickly and any temporary disruption resulting therefrom would not be likely to have a significant effect on our operating results and financial condition. However, a serious disruption, such as a flood or fire, to our distribution center could damage our inventory and could materially impair our ability to distribute our products to customers in a timely manner or at a reasonable cost. We could incur significantly higher costs and experience longer lead times associated with the distribution of our products to our customers during the time required to reopen or replace our distribution center. As a result, any such serious or prolonged disruption could have a material adverse effect on our business, financial condition and results from operations.

The business of selling brand name consumer products in the over-the-counter healthcare, household cleaning and personal care categories is highly competitive. These markets include numerous national and global manufacturers, distributors, marketers and retailers that actively compete for consumers’ business both in the United States and abroad. Many of these competitors are larger and have substantially greater research and development and financial resources than we do, and may therefore have the ability to spend more aggressively on advertising and marketing and research and development, and to respond more effectively to changing business and economic conditions. If this were to occur, our sales, operating results and profitability could be adversely affected.

Our principal competitors vary by industry category. Competitors in the over-the counter healthcare category include Johnson & Johnson, maker of Visine®, which competes with our Clear Eyes and Murine brands; McNeil-PPC, maker of Tylenol® Sore Throat, Procter & Gamble, maker of Vicks®, and Combe Incorporated, maker of Cepacol®, each of which compete with our Chloraseptic brand. Other competitors in the over-the counter healthcare category include Schering-Plough, maker of Dr. Scholl’s®, which competes with our Compound W and Wartner brands; Johnson & Johnson, maker of BAND-AID® Brand Liquid Bandage, which competes with our New-Skin brand; GlaxoSmithKline, maker of Debrox®, which competes with our Murine ear care brand; Sunstar America, Inc., maker of GUM® line of oral care products; as well as DenTek® Oral Care, Inc., Power Products, Inc. and Ranir LLC, each of which markets a dental protector for nighttime teeth grinding, which competes with The Doctor’s NightGuard Dental Protector.

We compete on the basis of numerous factors, including brand recognition, product quality, performance, price and product availability at the retail level. Advertising, promotion, merchandising and packaging, the timing of new product introductions and line extensions also have a significant impact on customers’ buying decisions and, as a result, on our sales. The structure and quality of our sales force, as well as sell-through of our products, affects in-store position, wall display space and inventory levels in retail outlets. If we are unable to maintain the inventory levels and in-store positioning of our products in retail stores, our sales and operating results will be adversely affected. Our markets are also highly sensitive to the introduction of new products, which may rapidly capture a significant share of the market. An increase in the amount of product introductions by our competitors could have a material adverse effect on our business, financial condition and results from operations.

The formulation, manufacturing, packaging, labeling, distribution, importation, sale and storage of our products are subject to extensive regulation by various federal agencies, including the FDA, the Federal Trade Commission (“FTC”), the Consumer Product Safety Commission (“CPSC”), the Environmental Protection Agency (“EPA”), and by various agencies of the states, localities and foreign countries in which our products are manufactured, distributed and sold. Our Regulatory Team is guided by a senior member of management and staffed by individuals with appropriate legal and regulatory experience. Our Regulatory and Operations teams work closely with our third-party manufacturers on quality related matters while we monitor their compliance with FDA regulations and perform periodic audits to ensure such compliance. This continual evaluation process ensures that our manufacturing processes and products are of the highest quality and in compliance with all known regulatory requirements. When and if the FDA chooses to audit a particular manufacturing facility, we are required to be notified immediately and updated on the progress of the audit as it proceeds. If we or our manufacturers fail to comply with applicable regulations, we could become subject to significant claims or penalties or be required to discontinue the sale of the non-compliant product, which could have a material adverse effect our business, financial condition and results from operations. In addition, the adoption of new regulations or changes in the interpretations of existing regulations may result in significant additional compliance costs or discontinuation of product sales and may also have a material adverse effect on our business, financial condition and results from operations.

All of our over-the-counter drug products are regulated pursuant to the FDA’s monograph system. The monographs, both tentative and final, set out the active ingredients and labeling indications that are permitted for certain broad categories of over-the-counter drug products. When the FDA has finalized a particular monograph, it has concluded that a properly labeled product formulation is generally recognized as safe and effective and not misbranded. A tentative final monograph indicates that the FDA has not made a final determination about products in a category to establish safety and efficacy for a product and its uses. However, unless there is a serious safety or efficacy issue, the FDA typically will exercise enforcement discretion and permit companies to sell products conforming to a tentative final monograph until the final monograph is published. Products that comply with either final or tentative final monograph standards do not require pre-market approval from the FDA.

In accordance with the Federal Food, Drug and Cosmetic Act (“FDC Act”) and FDA regulations, the manufacturing processes of our third-party drug and device manufacturers must also comply with the FDA’s current Good Manufacturing Processes (“cGMPs”). The FDA inspects our facilities and those of our third-party manufacturers periodically to determine that both the Company and our third-party manufacturers are complying with cGMPs.

In October 2007, we removed two medicated pediatric cough and cold products marketed under the Little Remedies brand from the marketplace. This action was part of an industry-wide voluntary withdrawal of these items pending the final recommendations of an FDA advisory board meeting to review the safety and efficacy of

We are also subject to a variety of other regulations in various foreign markets, including regulations pertaining to import/export regulations and antitrust issues. To the extent we decide to commence or expand operations in additional countries, we may be required to obtain an approval, license or certification from the country’s ministry of health or comparable agency. We must also comply with product labeling and packaging regulations that may vary from country-to-country. Government regulations in both our domestic and international markets can delay or prevent the introduction, or require the reformulation or withdrawal, of some of our products. Our failure to comply with these regulations can result in a product being removed from sale in a particular market, either temporarily or permanently. In addition, we are subject to FTC and state regulations, as well as foreign regulations, relating to our product claims and advertising. If we fail to comply with these regulations, we could be subject to enforcement actions and the imposition of penalties which could have a material adverse effect on our business, financial condition and results from operations.

Certain of our household cleaning products are considered pesticides under the Federal Insecticide, Fungicide and Rodenticide Act (“FIFRA”). Generally speaking, any substance intended for preventing, destroying, repelling, or mitigating any pest (which includes bacteria) is considered to be a pesticide under FIFRA. We market and distribute certain products under our Comet and Spic and Span brands which make antibacterial and/or disinfectant claims. Due to the antibacterial and/or disinfectant claims on certain of the Comet and Spic and Span products, such products are considered to be pesticides under FIFRA and are required to be registered with the EPA and contain certain disclosures on the product labels. In addition, the contract manufacturers from which we source these products must be registered with the EPA. Our Comet and Spic and Span products that make antibacterial and/or disinfectant claims are also subject to state regulations and the rules and regulations of any foreign jurisdictions in which these products are sold.

We own a number of trademark registrations and applications in the United States, Canada and other foreign countries. The following are some of the most important registered trademarks we own in the United States and/or Canada: Chloraseptic, Chore Boy, Clear Eyes, Cinch, Cloverine, Comet, Compound W, Freeze Off, Compoz®, Cutex, The Doctor’s Brushpicks, Denorex, Dermoplast, Essential Care®, Freezone®, Kerodex®, Little Remedies, Longlast®, Momentum®, Mosco®, Murine, New-Skin, Outgro®, Oxipor VHC®, Percogesic®, Prell®, Sleep-Eze®, Spic and Span, Wartner, Vacuum Grip® and Zincon®. In addition, we have exclusive royalty bearing licenses to use the EZO® and Earigate trademarks in the United States which expire on December 31, 2012 and November 9, 2016, respectively. While we own the U.S. trademark registration for Kerodex, we have an obligation to pay royalties to Unilever/Scientific with respect to the manufacture and sale of barrier creams sold in the United States under the Kerodex trademark. This royalty obligation will continue as long as we make, use or sell products utilizing the Kerodex trademark in the United States.

Our trademarks and trade names are how we convey that the products we sell are “brand name” products. Our ownership of these trademarks and trade names is very important to our business as it allows us to compete based on the value and goodwill associated with these marks. We may also license others to use these marks. Additionally, we own or license patents on innovative and proprietary technology. Such patents evidence the unique nature of our products, provide us with exclusivity and afford us protection from the encroachment of others. Enforcing our rights represented by these trademarks, trade names and patents is critical to our business, but is expensive. If we are not able to effectively enforce our rights, others may be able to dilute our trademarks, trade names and patents and diminish the value associated with our brands and technologies, which could have a material adverse effect on our business, financial condition and results from operations.

Other intellectual property rights were acquired from Procter & Gamble and Abbott Laboratories when we acquired the trademarks related to the Comet, Chloraseptic, Clear Eyes, Murine and Prell product lines; however, we did not in all cases obtain title to all of the intellectual property used to manufacture and sell those products. Therefore, we are dependent upon Procter & Gamble and other third parties for intellectual property used in the

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 to the increased advertising and promotional spending to support those brands with a summer selling season, such as Compound W, Wartner and New-Skin. The increased level of advertising and promotional campaigns in the third quarter influence sales of Chloraseptic products during the fourth quarter cough/cold winter months. Additionally, the fourth quarter typically has the lowest level of advertising and promotional spending as a percent of revenue.

Our Internet address is www.prestigebrandsinc.com. We make available free of charge on or through our Internet website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports, and the Proxy Statement for our annual stockholders’ meetings, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (the “SEC”). The information found on our website shall not be deemed incorporated by reference by any general statement incorporating by reference this Annual Report on Form 10-K into any filing under the Securities Act of 1933, as amended (the “Securities Act”), or under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and shall not otherwise be deemed filed under such Acts. Information on our Internet website does not constitute a part of this Annual Report on Form 10-K and is not incorporated herein by reference.

We have adopted a Code of Conduct Policy, Code of Ethics for Senior Financial Employees, Complaint Procedures for Accounting and Auditing Matters, Corporate Governance Guidelines, Audit Committee Pre-Approval Policy, and Charters for our Audit, Compensation, Nominating and Governance, and Strategic Planning Committees, as well as a Related Persons Transaction Policy and Stock Ownership Guidelines. We will provide to any person without charge, upon request, a copy of the foregoing materials. Any requests for the foregoing documents from us should be made in writing to:

The business of selling brand name consumer products in the over-the-counter healthcare, household cleaning and personal care categories is highly competitive. These markets include numerous manufacturers, distributors, marketers and retailers that actively compete for consumers’ business both in the United States and abroad. Many of these competitors are larger and have substantially greater resources than we do, and may therefore have the ability to spend more aggressively on research and development, advertising and marketing, and to respond more effectively to changing business and economic conditions. If this were to occur, it could have a material adverse effect on our business, financial condition and results from operations.

Certain of our product lines that account for a large percentage of our sales have a small market share relative to our competitors. For example, while Clear Eyes has a number two market share position of 15.5% within the allergy/redness eye drop segment, its top competitor, Visine®, has a market share of 37.1%. In contrast, certain of our brands with number two market positions have a similar market share relative to our competitors. For example, Compound W has a number two market position of 33.4% and its top competitor, Dr. Scholl’s Clear Away® and Freeze Away®, have a market position of 41.1%. Also, while Cutex is the number one brand name nail polish remover with a market share of 26.7%, non-branded, private label nail polish removers account, in the aggregate, for 55.1% of the market. Finally, while our New-Skin liquid bandage product has a number one market position of 46.6%, the size of the liquid bandage market is relatively small, particularly when compared to the much larger bandage category. See “Item 1. Business” section on page 1 of this document for information regarding market share calculations.

We compete for customers’ attention based on a number of factors, including brand recognition, product quality, performance, price and product availability at the retail level. Advertising, promotion, merchandising and packaging, the timing of new product introductions and line extensions also have a significant impact on consumer buying decisions and, as a result, on our sales. The structure and quality of our sales force, as well as sell-through of our products affects in-store position, wall display space and inventory levels in retail stores. If we are unable to maintain the inventory levels and in-store positioning of our products in retail stores, our sales and operating results will be adversely affected. Our markets also are highly sensitive to the introduction of new products, which may rapidly capture a significant share of the market. An increase in the number of product innovations by our competitors could have a material adverse effect on our business, financial condition and results from operations.

In addition, competitors may attempt to gain market share by offering products at prices at or below those typically offered by us. Competitive pricing may require us to reduce prices which may result in lost sales or a reduction of our profit margins. Future price adjustments, product changes or new product introductions by our competitors or our inability to react with price adjustments, product changes or new product introductions of our own could result in a loss of market share which could have a material adverse effect on our business, financial condition and results from operations.

For 2008, our top five and ten customers accounted for approximately 46% and 57%, respectively, of our sales, compared with approximately 43% and 53% and 41% and 51% during 2007 and 2006, respectively. Wal-Mart, which itself accounted for approximately 23%, 24% and 21% of our sales in 2008, 2007 and 2006, respectively, is our only customer that accounted for 10% or more of our sales. We expect that for future periods, our top five and ten customers, including Wal-Mart, will, in the aggregate, continue to account for a large portion of our sales. The loss of one or more of our top customers, any significant decrease in sales to these customers, or a significant decrease in our retail display space in any of these customers’ stores, could reduce our sales, and therefore, could have a material adverse effect on our business, financial condition and results from operations.

In addition, our business is based primarily upon individual sales orders. We typically do not enter into long-term contracts with our customers. Accordingly, our customers could cease buying products from us at any time and for any reason. The fact that we do not have long-term contracts with our customers means that we have no recourse in the event a customer no longer wants to purchase products from us. If a significant number of our smaller customers, or any of our significant customers, elect not to purchase products from us, our business, financial condition and results from operations could be adversely affected.

All of our products are produced by third-party manufacturers. Our ability to retain our current manufacturing relationships and engage in and successfully transition to new relationships is critical to our ability to deliver quality products to our customers in a timely manner. Without adequate supplies of quality merchandise, sales would decrease materially and our business would suffer. In the event that our primary third-party manufacturers are unable or unwilling to ship products to us in a timely manner, we would have to rely on secondary manufacturing relationships or identify and qualify new manufacturing relationships. We might not be able to identify or qualify such manufacturers for existing or new products in a timely manner and such manufacturers may not allocate sufficient capacity to us in order that we may meet our commitments to customers. In addition, identifying alternative manufacturers without adequate lead times can compromise required product validation and stability protocol, which may involve additional manufacturing expense, delay in production or product disadvantage in the marketplace. The consequences of not securing adequate and timely supplies of merchandise would negatively impact inventory levels, sales and gross margins, and could have a material adverse effect on our business, financial condition and results from operations.

In addition, even if our current manufacturers continue to manufacture our products, they may not maintain adequate quality controls, and therefore, may not be able to continue to produce products that are consistent with our standards or applicable regulatory requirements. If we are forced to rely on products of inferior quality, then our brand recognition and customer satisfaction would likely suffer, leading to a reduction in sales. This sales reduction could have a material adverse effect on our business, financial condition and results from operations. These manufacturers may also increase the cost of the products we purchase which could adversely affect our margins in the event we are unable to pass along these increased costs to our customers. A situation such as this could also have a material adverse effect on our business, financial condition and results from operations.

At March 31, 2008, we had relationships with over 40 third-party manufacturers. Of those, our top 10 manufacturers produced items that accounted for 80% of our sales for 2008. We do not have long-term contracts with the manufacturers of products that accounted for approximately 23% of our sales for 2008. The fact that we do not have long-term contracts with these manufacturers means that they could cease manufacturing these products at any time and for any reason, which could have a material adverse effect on our business, financial condition and results from operations.

We manage our product distribution in the continental United States through one primary distribution center in St. Louis, Missouri. A serious disruption, such as a flood or fire, to our primary distribution center could damage our inventory and could materially impair our ability to distribute our products to customers in a timely manner or at a reasonable cost. We could incur significantly higher costs and experience longer lead times during the time required to reopen or replace our primary distribution center. As a result, any serious disruption could have a material adverse effect on our business, financial condition and results from operations.

Heretofore, the majority of our growth has been driven by acquiring other brands and companies. At any given time, we may be engaged in discussions with respect to possible acquisitions that are intended to enhance our product portfolio, enable us to realize cost savings and further diversify our category, customer and channel focus. Our ability to successfully grow through acquisitions depends on our ability to identify, negotiate, complete and integrate suitable acquisition candidates and to obtain any necessary financing. These efforts could divert the attention of our management and key personnel from our business operations. If we complete acquisitions, we may also experience:

In addition, an acquisition could adversely affect our operating results as a result of higher interest costs from the acquisition related debt and higher amortization expenses related to the acquired intangible assets. The diversion of management’s attention to pursue acquisitions, or our failure to successfully integrate acquired companies into our business, could have a material adverse effect on our business, financial condition and results from operations.

During 2008, 2007 and 2006, approximately 4.0%, 4.6% and 3.4%, respectively, of our total revenues were attributable to our international business. We operate in several regions and countries where we have little or no experience, and generally rely on brokers and distributors for the sale of our products. In addition to the risks associated with political instability, changes in the outlook for economic prosperity in these countries could adversely affect the sales of our products in these countries. Other risks of doing business internationally include:

The formulation, manufacturing, packaging, labeling, distribution, importation, sale and storage of our products are subject to extensive regulation by various federal agencies, including (i) the FDA, (ii) the FTC, (iii) the CPSC, (iv) the EPA, and by (v) various agencies of the states, localities and foreign countries in which our products are manufactured, distributed, stored and sold. If we or our third-party manufacturers fail to comply with those regulations, we could become subject to enforcement actions, significant penalties or claims, which could materially adversely affect our business, financial condition and results from operations. In addition, the adoption of new regulations or changes in the interpretations of existing regulations may result in significant compliance costs or the cessation of product sales and may adversely affect the marketing of our products, resulting in a significant loss of revenues which could have a material adverse effect on our business, financial condition and results from operations.

The FDC Act and FDA regulations require that the manufacturing processes of our third-party manufacturers must also comply with the FDA’s cGMPs. The FDA inspects our facilities and those of our third-party manufacturers periodically to determine if we and our third-party manufacturers are complying with cGMPs. A history of past compliance is not a guarantee that future cGMPs will not mandate other compliance steps and associated expense.

In addition, our failure to comply with FTC or any other federal and state regulations, or with similar regulations in foreign markets, that cover our product claims and advertising, including direct claims and advertising by us, may result in enforcement actions and imposition of penalties or otherwise materially adversely affect the distribution and sale of our products, which could have a material adverse effect on our business, financial condition and results from operations.

We may be required to pay for losses or injuries purportedly caused by our products. From time-to-time we have been and may again be subjected to various product liability claims. Claims could be based on allegations that, among other things, our products contain contaminants, include inadequate instructions or warnings regarding their use or inadequate warnings concerning side effects and interactions with other substances. For example, Denorex products contain coal tar which the State of California has determined allegedly causes cancer. Consequently, in order to comply with California law and to mitigate our risks, the Denorex packaging contains a warning to that effect. Any product liability claims may result in negative publicity that may adversely affect our sales and operating results. Also, if one of our products is found to be defective we may be required to recall it. This may result in substantial costs and negative publicity which may adversely affect our sales and operating results. Although we maintain, and require our suppliers and third-party manufacturers to maintain, product

liability insurance coverage, potential product liability claims may exceed the amount of insurance coverage or potential product liability claims may be excluded under the terms of the policy, which could have a material adverse effect on our business, financial condition and results from operations. In addition, in the future we may not be able to obtain adequate insurance coverage or we may be required to pay higher premiums and accept higher deductibles in order to secure adequate insurance coverage.

The market for our products depends to a significant extent upon the goodwill associated with our trademarks, trade names and patents. Our trademarks and trade names convey that the products we sell are “brand name” products. We believe consumers ascribe value to our brands, some of which are over 100 years old. We own or license the material trademark, trade names and patents used in connection with the packaging, marketing and sale of our products. These rights prevent our competitors or new entrants to the market from using our valuable brand names and technologies. Therefore, trademark, trade name and patent protection is critical to our business. Although most of our material intellectual property is registered in the United States and in applicable foreign countries, we may not be successful in asserting protection. If we were to lose the exclusive right to use one or more of our intellectual property rights, the loss of such exclusive right could have a material adverse effect on our business, financial condition and results from operations.

Other parties may infringe on our intellectual property rights and may thereby dilute the value of our brands in the marketplace. Brand dilution or the introduction of competitive brands could cause confusion in the marketplace and adversely affect the value that consumers associate with our brands, and thereby negatively impact our sales. Any such infringement of our intellectual property rights would also likely result in a commitment of our time and resources, financial or otherwise, to protect these rights through litigation or other means. In addition, third parties may assert claims against our intellectual property rights and we may not be able to successfully resolve those claims causing us to lose our ability to use our intellectual property that is the subject of those claims. Such loss could have a material adverse effect on our business, financial condition and results from operations. Furthermore, from time-to-time, we may be involved in litigation in which we are enforcing or defending our intellectual property rights which could require us to incur substantial fees and expenses and have a material adverse effect on our business, financial condition and results from operations.

As our financial statements indicate, virtually all of our assets consist of goodwill and intangibles, principally the trademarks, trade names and patents that we have acquired. In the event that the value of those assets became impaired or our business is materially adversely affected in any way, we would not have tangible assets that could be sold to repay our liabilities. As a result, our creditors and investors may not be able to recoup the amount of the indebtedness that they have extended to us or the amount they have invested in us.

We have licenses or manufacturing agreements with third parties that own intellectual property (e.g., formulae, copyrights, trademarks, trade dress, patents and other technology) used in the manufacture and sale of certain of our products. In the event that any such license or manufacturing agreement expires or is otherwise terminated, we will lose the right to use the intellectual property covered by such license or agreement and will have to develop or obtain rights to use other intellectual property. Similarly, our rights could be reduced if the applicable licensor or third-party manufacturer fails to maintain the licensed intellectual property because, in such event, our competitors could obtain the right to use the intellectual property without restriction. If this were to occur, we might not be able to develop or obtain replacement intellectual property in a timely manner. Additionally, any modified products may not be well-received by customers. The consequences of losing the right to use or having reduced rights to such intellectual property could negatively impact our sales due to our failure to meet consumer demand for the affected products or require us to incur costs for development of new or different intellectual property, either of which could have a material adverse effect on our business, financial condition and results

Our success depends to a significant degree upon the continued contributions of our senior management, many of whom would be difficult to replace. These employees may voluntarily terminate their employment with us at any time. We may not be able to successfully retain existing personnel or identify, hire and integrate new personnel. While we believe we have developed depth and experience among our key personnel, our business may be adversely affected if one or more of these key individuals were to leave. We do not maintain any key-man or similar insurance policies covering any of our senior management or key personnel.

Our senior credit facility and the indenture governing our senior subordinated notes impose restrictions that could impede our ability to enter into certain corporate transactions, as well as increase our vulnerability to adverse economic and industry conditions by limiting our flexibility in planning for, and reacting to, changes in our business and industry. These restrictions limit our ability to, among other things:

Our ability to engage in these types of transactions is generally limited by the terms of the senior credit facility and the indenture governing the senior subordinated notes, even if we believe that a specific transaction would positively contribute to our future growth, operating results or profitability. However, if we are able to enter into these types of transactions under the terms of the senior credit facility and the indenture, or if we obtain a waiver with respect to any specific transaction, that transaction may cause our indebtedness to increase, may not result in the benefits we anticipate or may cause us to incur greater costs or suffer greater disruptions in our business than we anticipate, and could therefore, have a material adverse effect on our business, financial condition and results from operations.

In addition, the senior credit facility requires us to maintain certain leverage, interest and fixed charge coverage ratios. Although we believe we can continue to meet and/or maintain the financial ratios contained in our credit agreement, our ability to do so may be affected by events outside our control. Covenants in our senior credit facility also require us to use 100% of the proceeds we receive from debt issuances to repay outstanding borrowings under our senior credit facility. Any failure by us to comply with the terms and conditions of the credit agreement and the indenture governing the senior subordinated notes could have a material adverse effect on our business, financial condition and results from operations.

The senior credit facility and the indenture governing the senior subordinated notes contain provisions that allow the respective creditors to declare all outstanding borrowings under one agreement to be immediately due and payable as a result of a default under the other agreement. Consequently, under the senior credit facility, failure to make a payment required by the indenture governing the senior subordinated notes, among other things, may lead to an event of default under the senior credit facility. Similarly, an event of default or failure to make a required payment at maturity under the senior credit facility, among other things, may lead to an event of default under the indenture governing the senior subordinated notes. If the debt under the senior credit facility and indenture governing the senior subordinated notes were to both be accelerated, the aggregate amount immediately due and payable as of March 31, 2008 would have been approximately $411.2 million. We presently do not have sufficient liquidity to repay these borrowings in the event they were to be accelerated, and we may not have sufficient liquidity in the future to do so. Additionally, we may not be able to borrow money from other lenders to enable us to refinance the indebtedness. At March 31, 2008, the book value of our current assets was $85.4 million. Although the book value of our total assets was $1,049.2 million, approximately $955.6 million was in the form of intangible assets, including goodwill of $308.9 million, a significant portion of which is illiquid and may not be available to satisfy our creditors in the event our debt is accelerated.

Any failure to comply with the restrictions of the senior credit facility, the indenture governing the senior subordinated notes or any other subsequent financing agreements may result in an event of default. Such default may allow the creditors to accelerate the related debt, as well as any other debt to which the cross-acceleration or cross-default provisions apply. In addition, the lenders may be able to terminate any commitments they had made to supply us with additional funding. As a result, any default by us under our credit agreement, indenture governing the senior subordinated notes or any other financing agreement, could have a material adverse effect on our business, financial condition and results from operations.

Our business is subject to the risk of litigation by employees, consumers, suppliers, stockholders or others through private actions, class actions, administrative proceedings, regulatory actions or other litigation. The outcome of litigation, particularly class action lawsuits and regulatory actions, is difficult to assess or quantify. Plaintiffs in these types of lawsuits may seek recovery of very large or indeterminate amounts, and the magnitude of the potential loss relating to such lawsuits may remain unknown for substantial periods of time. The cost to defend current and future litigation may be significant. There may also be adverse publicity associated with litigation that could decrease customer acceptance of our products, regardless of whether the allegations are valid or

whether we are ultimately found liable. Conversely, we may be required to initiate litigation against others to protect the value of our intellectual property and the goodwill associated therewith. These matters are extremely time consuming and expensive, but absolutely necessary to maintain enterprise value and safeguard our future. As a result, litigation may adversely affect our business, financial condition and results of operations.

The trading price of our common stock could be subject to significant fluctuations in response to several factors, some of which are beyond our control, including (i) general stock market volatility, (ii) variations in our quarterly operating results, (iii) our leveraged financial position, (iv) potential sales of additional shares of our common stock, (v) general trends in the consumer products industry, (vi) changes by securities analysts in their estimates or investment ratings, (vii) the relative illiquidity of our common stock, (viii) voluntary withdrawal or recall of products and (ix) news regarding litigation in which we are or become involved.

Entities affiliated with GTCR collectively own approximately 30.0% of our outstanding common stock. As a result, these stockholders, acting together, will have the ability to exert substantial influence over all matters requiring approval by our stockholders, including the election and removal of directors and any proposed merger, consolidation or sale of all or substantially all of our assets and other corporate transactions. Subject to applicable law, under our amended and restated certificate of incorporation, the GTCR entities and non-employee directors will not have any duty to refrain from engaging directly or indirectly in the same or similar business activities or lines of business that we do. In the event that any GTCR entity or non-employee director, as the case may be, acquires knowledge of a potential transaction or matter which may be a corporate opportunity for itself and us, the GTCR entity or non-employee director, as the case may be, will not have any duty to communicate or offer such corporate opportunity to us and may pursue such corporate opportunity for itself or direct such corporate opportunity to another person. This concentration of stock ownership also may make it difficult for stockholders to replace management. In addition, this significant concentration of stock ownership may adversely affect the trading price for our common stock because investors often perceive disadvantages in owning stock in companies with stockholders who own significant blocks of stock. This concentration of control could be disadvantageous to other stockholders with interests different from those of our officers, directors and principal stockholders and the trading price of shares of our common stock could be adversely affected.

Sales of substantial amounts of our common stock in the public market by the affiliates of GTCR or management, or the perception that these sales could occur, could adversely affect the price of our common stock and could impair our ability to raise capital through the sale of additional equity securities. Pursuant to an agreement with GTCR, we filed a Registration Statement on Form S-3 (“Form S-3”) with the SEC in December 2006. We expect the Form S-3 to be declared effective by the SEC in the near future and, once effective, GTCR will have the ability to sell common stock, up to the maximum number of common shares registered, into the public marketplace. Such a sale could adversely affect the price of our common stock.

We presently intend to retain our earnings, if any, for use in our operations, to facilitate strategic acquisitions, or to repay our outstanding indebtedness and have no current intention of paying dividends to holders of our common stock. In addition, our debt instruments limit our ability to declare and pay cash dividends on our common stock. As a result, your only opportunity to achieve a return on your investment in our common stock will be if the market price of our common stock appreciates and you sell your shares at a profit.

Our quarterly operating results and revenues may fluctuate as a result of any of these or other factors. Accordingly, results for any one quarter are not necessarily indicative of results to be expected for any other quarter or for any year, and revenues for any particular future period may decrease. In the future, operating results may fall below the expectations of securities analysts and investors. In that event, the market price of our outstanding securities could be adversely impacted.

We are subject to the ongoing internal control provisions of Section 404 of the Sarbanes-Oxley Act of 2002 and the regulations promulgated thereunder. Those provisions provide for the identification and reporting of material weaknesses in our system of internal controls over financial reporting. If such a material weakness is identified, it could indicate a lack of controls adequate to generate accurate financial statements. We routinely assess our internal controls over financial reporting, but we cannot assure you that we will be able to timely remediate any material weaknesses that may be identified in future periods, or maintain all of the controls necessary for continued compliance. Likewise, we cannot assure you that we will be able to retain sufficient skilled finance and accounting personnel, especially in light of the increased demand for such personnel among publicly-traded

Our amended and restated certificate of incorporation provides that our board of directors is authorized to issue from time to time, without further stockholder approval, up to 5.0 million shares of preferred stock in one or more series of preferred stock issuances. Our board of directors may establish the number of shares to be included in each series of preferred stock and determine, as applicable, the voting and other powers, designations, preferences, rights, qualifications, limitations and restrictions for such series of preferred stock. The shares of preferred stock could have preferences over our common stock with respect to dividends and liquidation rights. We may issue additional preferred stock in ways which may delay, defer or prevent a change in control of the Company without further action by our stockholders. The shares of preferred stock may be issued with voting rights that may adversely affect the voting power of the holders of our common stock by increasing the number of outstanding shares having voting rights, and by the creation of class or series voting rights.

These provisions, either alone, or in combination with each other, give our current directors and executive officers the ability to significantly influence the outcome of a proposed acquisition of the Company. These provisions would apply even if an acquisition or other significant corporate transaction was considered beneficial by some of our stockholders. If a change in control or change in management is delayed or prevented by these provisions, the market price of our outstanding securities could be adversely impacted.

Our corporate headquarters are located in Irvington, New York, a suburb of New York City. Primary functions undertaken at the Irvington facility include senior management, marketing, sales, operations, quality control and regulatory affairs, finance and legal. The lease on our Irvington facility expires on April 30, 2014. We also have an administrative center in Jackson, Wyoming. Primary functions undertaken at the Jackson facility include back office functions, such as invoicing, credit and collection, general ledger and customer service. The lease on the Jackson facility expires on December 31, 2008; however, we have the option to renew this lease on an annual basis. We conduct business regarding all of our business segments at each of the Irvington, New York and Jackson, Wyoming facilities.

The Company and certain of its officers and directors are defendants in a consolidated securities class action lawsuit filed in the United States District Court for the Southern District of New York (the “Consolidated Action”). The first of the six consolidated cases was filed on August 3, 2005. Plaintiffs purport to represent a class of stockholders of the Company who purchased shares between February 9, 2005 through November 15, 2005. Plaintiffs also name as defendants the underwriters in the Company’s initial public offering and a private equity fund that was a selling stockholder in the offering. The District Court has appointed a Lead Plaintiff. On December 23, 2005, the Lead Plaintiff filed a Consolidated Class Action Complaint, which asserted claims under Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 and Sections 10(b), 20(a) and 20A of the Securities Exchange Act of 1934. The Lead Plaintiff generally alleged that the Company issued a series of materially false and misleading statements in connection with its initial public offering and thereafter in regard to the following areas: the accounting issues described in the Company’s press release issued on or about November 15, 2005; and the alleged failure to disclose that demand for certain of the Company’s products was declining and that the Company was planning to withdraw several products from the market. Plaintiffs seek an unspecified amount of damages. The Company filed a motion to dismiss the Consolidated Class Action Complaint in February 2006. On July 10, 2006, the Court dismissed all claims against the Company and the individual defendants arising under the Securities Exchange Act of 1934.

On June 1, 2007, a hearing before the Court was held regarding Plaintiffs’ pending motion for class certification in the Consolidated Action. On September 4, 2007, the United States District Court for the Southern District of New York issued an Order certifying a class consisting of all persons who purchased the common stock of the Company pursuant to, or traceable to, the Company’s initial public offering on or about February 9, 2005 through November 15, 2005 and were damaged thereby.

On January 8, 2008, the parties to the action engaged in mediation to explore the terms of a potential settlement of the pending litigation; however, no settlement agreement was reached during mediation. A status conference was held on February 8, 2008 and another status conference is scheduled to be held on July 31, 2008. While discovery in the action has commenced and is continuing, the Company’s management continues to believe that the remaining claims in the case are legally deficient and that it has meritorious defenses to the claims that remain. The Company intends to vigorously defend against the claims remaining in the case; however, the Company cannot, at this time, reasonably estimate the potential range of loss, if any.

On September 28, 2006, OraSure Technologies, Inc. (“OraSure”) moved in the Supreme Court of the State of New York for a preliminary injunction prohibiting the Company from selling cryogenic wart removal products under the Wartner brand, which the Company acquired on September 21, 2006. OraSure was a supplier to the Company for the Company’s Compound W Freeze Off business. The distribution agreement between the parties provides for mediation of contract disputes, followed by arbitration, if necessary. The contract in question had a term ending in December 2007. On October 30, 2006, the Court denied OraSure’s motion for a preliminary injunction. Subsequently, in a decision and order dated December 20, 2006, the Court denied a motion by OraSure for a rehearing regarding a preliminary injunction. An appeal was filed by OraSure in the Appellate Division of the Supreme Court of the State of New York on January 29, 2007, and the Company filed a brief with the Court on February 28, 2007. On May 17, 2007, the Appellate Division reversed the decision of the Supreme Court of the State of New York and issued a preliminary injunction prohibiting the marketing and selling of the Wartner brand by the Company until the underlying arbitration with OraSure was concluded. On May 21, 2007, the Company requested that the Appellate Division issue a stay of the preliminary injunction, consider reargument of the Appellate Division’s decision and grant a leave to appeal to the Court of Appeals of the State of New York. In response to the Company’s request for a stay of the preliminary injunction, the Appellate Division issued a stay of the preliminary injunction pending the Appellate Division’s consideration of the Company’s motion to reargue and request for leave to appeal to the Court of Appeals.

affirming the Order of the Supreme Court of the State of New York which denied OraSure’s petition for a preliminary injunction that would have prohibited the Company from selling cryogenic wart removal products under the Wartner brand. In addition, the Appellate Division dismissed OraSure’s appeal from the Supreme Court’s Order which denied OraSure’s motion for reargument. Based on the foregoing, the Appellate Division held that a preliminary injunction was not an appropriate remedy in the action and recalled and vacated its Order dated May 17, 2007, which granted a preliminary injunction.

At the end of August 2007, the Company and OraSure participated in an arbitration hearing at which each party presented its case to the arbitration panel. On October 22, 2007, the Company received notification from the arbitrators that they had issued a Partial Final Award (the “Award”) in the pending arbitration with OraSure. The arbitrators acknowledged that there was a technical breach of the non-compete clause in the Distribution Agreement between the parties but OraSure’s proof of damages was speculative and not supported by credible evidence. Therefore, the arbitrators awarded nominal damages to OraSure in the amount of One Dollar ($1.00). In addition, the arbitrators awarded to OraSure counsel fees and arbitrator compensation in an amount to be determined pursuant to further proceedings.

In April 2007, the Company filed a lawsuit in the U.S. District Court in the Southern District of New York against DenTek Oral Care, Inc. (“DenTek”) alleging (i) infringement of intellectual property associated with The Doctor’s NightGuard Dental Protector which is used for the protection of teeth from nighttime teeth grinding; and (ii) the violation of unfair competition and consumer protection laws. On October 4, 2007, the Company filed a Second Amended Complaint in which it named Kelly M. Kaplan, Raymond Duane and C.D.S. Associates, Inc. as additional defendants in the action against DenTek and added other claims to the previously filed complaint. Ms. Kaplan and Mr. Duane were formerly employed by the Company and C.D.S. Associates, Inc. is a corporation controlled by Mr. Duane. In the Second Amended Complaint, the Company has alleged patent, trademark and copyright infringement, unfair competition, unjust enrichment, violation of New York’s Consumer Protection Act, breach of contract, tortuous interference with contractual and business relations, civil conspiracy and trade secret misappropriation. On October 19, 2007, the Company filed a motion for preliminary injunction with the Court in which the Company has asked the Court to enjoin the defendants from (i) continuing to improperly use the Company’s trade secrets; (ii) continuing to breach any contractual agreements with the Company; and (iii) marketing and selling any dental protector products or other products in which Ray Duane or Kelly Kaplan has had any involvement or provided any assistance to DenTek. A hearing date for the motion for preliminary injunction has not yet been set by the Court. Discovery requests have been served by the parties and discovery is ongoing.

In November 2007, the defendants in the action each filed a motion to dismiss which is pending before the Court. The Company has filed responses to the motions to dismiss and is awaiting a decision by the Court regarding such motions. The Court has ordered the Company’s motion for a preliminary injunction to be held in abeyance pending a determination of the motions to dismiss. A hearing before the Court was held on February 14, 2008 regarding pending procedural motions and discovery and another hearing is scheduled to be held on June 23, 2008 regarding such motions and ongoing discovery. The parties are also scheduled to appear in Court on July 25, 2008 for a status conference.

internally and with external counsel as necessary to assess probability and amount of potential loss. These assessments are re-evaluated at each reporting period and as new information becomes available to determine whether a reserve should be established or if any existing reserve should be adjusted. The actual cost of resolving a claim or proceeding ultimately may be substantially different than the amount of the recorded reserve. In addition, because it is not permissible under GAAP to establish a litigation reserve until the loss is both probable and estimable, in some cases there may be insufficient time to establish a reserve prior to the actual incurrence of the loss (upon verdict and judgment at trial, for example, or in the case of a quickly negotiated settlement). The Company believes the resolution of routine matters and other incidental claims, taking into account reserves and insurance, will not have a material adverse effect on its business, financial condition or results from operations.

		High		Low
Year Ending March 31, 2009
April 1, 2008 - June 6, 2008	$	11.93	$	8.08

Year Ended March 31, 2008
Quarter Ended:
June 30, 2007	$	13.60	$	11.20
September 30, 2007		13.67		10.23
December 31, 2007		11.43		7.47
March 31, 2008		8.58		6.77

Year Ended March 31, 2007
Quarter Ended:
June 30, 2006	$	12.90	$	8.25
September 30, 2006		11.55		8.50
December 31, 2006		13.87		10.77
March 31, 2007		13.53		10.80

Company Purchases of Equity Securities
Period	(a) Total Number of Shares Purchased		(b) Average Price Paid Per Share		(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		(d) Maximum Number (or approximate dollar value) of Shares that May Yet Be Purchased Under the Plans or Programs
1/1/08 - 1/31/08		--	$	--		--		--
2/1/08 - 2/29/08		--		--		--		--
3/1/08 - 3/31/08		1,287		1.70		--		--

Total		1,287	$	1.70		--		--

We have not in the past paid, and do not expect for the foreseeable future, to pay dividends on our common stock. Instead, we anticipate that all of our earnings in the foreseeable future will be used in our operations, to facilitate strategic acquisitions, or to pay down our outstanding indebtedness. Any future determination to pay dividends will be at the discretion of our board of directors and will depend upon, among other factors, our results from operations, financial condition, capital requirements and contractual restrictions, including restrictions under our senior credit facility and the indenture governing our 9 1/4% senior subordinated notes, and any other considerations our board of directors deems relevant.

The following graph compares our cumulative total stockholder return since February 9, 2005, the date of our initial public offering, the Peer Group Index and the Russell 2000 Index (in which the Company is included). The graph assumes that the value of the investment in the Company’s common stock and each index was $100.00 on February 9, 2005. The graph was also prepared based on the assumption that all dividends paid, if any, were reinvested. The Peer Group Index was established by the Company in connection with its research and subsequent implementation of an executive compensation program. Based on the Company’s use of the peer group for benchmarking purposes, the Company believes the peer group should be included in the performance graph.

(2)

The Peer Group Index is a self-constructed peer group consisting of companies in the consumer products industry with comparable revenues and market capitalization, from which the Company has been excluded. Such Peer Group Index was constructed in connection with the Company’s benchmark analysis of executive compensation and is comprised of the following companies: (i) Alpharma Inc., (ii) Chattem Inc., (iii) Elizabeth Arden, Inc., (iv) Hain Celestial Group, Inc., (v) Helen of Troy Limited, (vi) Inter Parfums, Inc., (vii) Lifetime Brands, Inc., (viii) Maidenform Brands, Inc. and (ix) WD-40 Company.

The performance graph representing the comparison of cumulative total return among (i) Company, (ii) the Russell 2000 Index and (iii) the Peer Group Index shall not be deemed incorporated by reference by any general statement incorporating by reference this Annual Report on Form 10-K into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that we specifically incorporate this information by reference, and shall not otherwise be deemed filed under such Acts.

On February 6, 2004, an indirect subsidiary of Prestige Brands Holdings, Inc. acquired Medtech Holdings, Inc. and The Denorex Company, which at the time were both under common control and management, in a transaction recognized using the purchase method of accounting. The summary financial data after such dates, referred to as “successor” information, includes the financial statement impact of recording fair value adjustments arising from such acquisitions. Summary historical financial data for the period from April 1, 2003 to February 5, 2004 is referred to as the “predecessor” information.

(In Thousands, except per share data)	Year Ended March 31
	2008			2007			2006
Income Statement Data
Total revenues	$	326,603		$	318,634		$	296,668
Cost of sales (1)		158,096			153,147			139,430

Gross profit		168,507			165,487			157,238

Advertising and promotion expenses		34,665			32,005			32,082
Depreciation and amortization		11,014			10,384			10,777
General and administrative		31,414			28,416			21,158
Impairment of intangibles and goodwill		--			--			9,317
Interest expense, net		37,393			39,506			36,346
Miscellaneous income		(187	)		--			--
Income before income taxes		54,208			55,176			47,558

Provision for income taxes		20,289			19,098			21,281
Net income	$	33,919		$	36,078		$	26,277

Net income per common share:
Basic	$	0.68		$	0.73		$	0.54
Diluted	$	0.68		$	0.72		$	0.53

Weighted average shares outstanding:
Basic		49,751			49,460			48,908
Diluted		50,039			50,020			50,008

	Year Ended March 31
Other Financial Data	2008			2007			2006
Capital expenditures	$	521		$	540		$	519
Cash provided by (used in):
Operating activities		44,989			71,899			53,861
Investing activities		(537	)		(31,051	)		(54,163	)
Financing activities		(52,132	)		(35,290	)		3,168

	March 31
Balance Sheet Data	2008			2007			2006
Cash and cash equivalents	$	6,078		$	13,758		$	8,200
Total assets		1,049,156			1,063,416			1,038,645
Total long-term debt, including current maturities		411,225			463,350			498,630
Stockholders’ equity		479,073			445,334			409,407

(In Thousands, except per share data)	Year Ended March 31,			February 6, 2004 to March 31,			April 1, 2003 to February 5,
	2005			2004			2004
Income Statement Data	(Successor)			(Successor)			(Predecessor)
Total revenues	$	289,069		$	16,876		$	68,402
Cost of sales (1)		139,009			9,351			26,855

Gross profit		150,060			7,525			41,547

Advertising and promotion expenses		29,697			1,267			10,061
Depreciation and amortization		9,800			931			4,498
General and administrative		20,198			1,649			12,068
Interest expense, net		44,726			1,725			8,157
Other expense(2)		26,863			--			1,404
Income before income taxes		18,776			1,953			5,359

Provision for income taxes		8,556			724			2,214
Net income		10,220			1,229		$	3,145

Cumulative preferred dividends on Senior Preferred and Class B Preferred units		(25,395	)		(1,390	)

Net loss available to members and common stockholders	$	(15,175	)	$	(161	)

Basic and diluted net loss per share	$	(0.55	)	$	(0.01	)
Basic and diluted weighted average shares outstanding		27,546			24,472

	Year Ended March 31,			February 6, 2004 to March 31,			April 1, 2003 to February 5,
Other Financial Data:	2005			2004			2004
Capital expenditures	$	365		$	42		$	66
Cash provided by (used in):
Operating activities		51,042			(1,706	)		7,843
Investing activities		(425,844	)		(166,874	)		(576	)
Financing activities		376,743			171,973			(8,629	)

Balance Sheet Data:	March 31, 2005			March 31, 2004			February 5, 2004
Cash and cash equivalents	$	5,334		$	3,393		$	2,868
Total assets		996,600			325,358			145,130
Total long-term debt, including current maturities		495,360			148,694			71,469
Members’/Stockholders’ equity		382,047			125,948			50,122

The following discussion of our financial condition and results of operations should be read together with the “Selected Financial Data” and the consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 10-K. This discussion and analysis may contain forward-looking statements that involve certain risks, assumptions and uncertainties. Future results could differ materially from the discussion that follows for many reasons, including the factors described in Item 1A., “Risk Factors” in this Annual Report on Form 10-K, as well as those described in future reports filed with the SEC.

We are engaged in the marketing, sales and distribution of brand name over-the-counter healthcare, household cleaning and personal care products to mass merchandisers, drug stores, supermarkets and club stores primarily in the United States and Canada. We operate in niche segments of these categories where we can use the strength of our brands, our established retail distribution network, a low-cost operating model and our experienced management team as a competitive advantage to grow our presence in these categories and, as a result, grow our sales and profits.

We have grown our brand portfolio by acquiring strong and well-recognized brands from larger consumer products and pharmaceutical companies, as well as other brands from smaller private companies. While the brands we have purchased from larger consumer products and pharmaceutical companies have long histories of support 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.

The Company’s significant accounting policies are described in the notes to the audited financial statements included elsewhere in this Annual Report on Form 10-K. While all significant accounting policies are important to our consolidated financial statements, certain 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 results from operations and require our most difficult, subjective and complex estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses or 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 conditions. The most critical accounting policies are as follows:

We comply with the provisions of SEC Staff Accounting Bulletin No. 104 “Revenue Recognition,” which states that revenue should be recognized when the following revenue recognition criteria are met: (i) persuasive evidence of an arrangement exists; (ii) the product has been shipped and the customer takes ownership and assumes the risk of loss; (iii) the selling price is fixed or determinable; and (iv) collection of the resulting receivable is reasonably assured. We have determined that the transfer of risk of loss generally occurs when product is received by the customer, and, accordingly recognize revenue at that time. Provision is made for estimated discounts related to customer payment terms and estimated product returns at the time of sale based on our historical experience.

As is customary in the consumer products industry, we participate in the promotional programs of our customers to enhance the sale of our products. The cost of these promotional programs is recorded in accordance with Emerging Issues Task Force 01-09, “Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products)” as either advertising and promotional expenses or as a reduction of sales. Such costs vary from period-to-period based on the actual number of units sold during a finite period of time. We

estimate the cost of such promotional programs at their inception based on historical experience and current market conditions and reduce sales by such estimates. These promotional programs consist of direct to consumer incentives such as coupons and temporary price reductions, as well as incentives to our customers, such as slotting fees and cooperative advertising. We do not provide incentives to customers for the acquisition of product in excess of normal inventory quantities since such incentives increase the potential for future returns, as well as reduce sales in the subsequent fiscal periods.

Estimates of costs of promotional programs are based on (i) historical sales experience, (ii) the current offering, (iii) forecasted data, (iv) current market conditions, and (v) communication with customer purchasing/marketing personnel. At the completion of the promotional program, the estimated amounts are adjusted to actual results. While our promotional expense for the year ended March 31, 2008 was $18.8 million, we participated in 4,800 promotional campaigns, resulting in an average cost of $3,000 per campaign. Of such amount, only 663 payments were in excess of $5,000. We believe that the estimation methodologies employed, combined with the nature of the promotional campaigns, makes the likelihood remote that our obligation would be misstated by a material amount. However, for illustrative purposes, had we underestimated the promotional program rate by 10% for the year ended March 31, 2008, our sales and operating income would have been adversely affected by approximately $1.9 million. Net income would have been adversely affected by approximately $1.2 million.

We also periodically run coupon programs in Sunday newspaper inserts or as on-package instant redeemable coupons. We utilize a national clearing house to process coupons redeemed by customers. At the time a coupon is distributed, a provision is made based upon historical redemption rates for that particular product, information provided as a result of the clearing house’s experience with coupons of similar dollar value, the length of time the coupon is valid, and the seasonality of the coupon drop, among other factors. During 2008, we had 29 coupon events. The amount recorded against revenues and accrued for these events during the year was $2.1 million, of which $1.9 million was redeemed during the year.

Due to the nature of the consumer products industry, we are required to estimate future product returns. Accordingly, we record an estimate of product returns concurrent with the recording of sales. Such estimates are made after analyzing (i) historical return rates, (ii) current economic trends, (iii) changes in customer demand, (iv) product acceptance, (v) seasonality of our product offerings, and (vi) the impact of changes in product formulation, packaging and advertising.

We construct our returns analysis by looking at the previous year’s return history for each brand. Subsequently, each month, we estimate our current return rate based upon an average of the previous six months’ return rate and review that calculated rate for reasonableness giving consideration to the other factors described above. Our historical return rate has been relatively stable; for example, for the years ended March 31, 2008, 2007 and 2006, returns represented 4.6%, 3.7% and 3.5%, respectively, of gross sales. While the returns rate increased 0.9% from 2007 to 2008, such amount exclusive of the voluntary withdrawal from the marketplace of Little Remedies medicated pediatric cough and cold products in October 2007, would have been 4.1%. At March 31, 2008 and 2007, the allowance for sales returns was $1.4 million and $1.8 million, respectively.

While we utilize the methodology described above to estimate product returns, actual results may differ materially from our estimates, causing our future financial results to be adversely affected. Among the factors that could cause a material change in the estimated return rate would be significant unexpected returns with respect to a product or products that comprise a significant portion of our revenues in a manner similar to the Little Remedies voluntary withdrawal discussed above. Based upon the methodology described above and our actual returns’ experience, management believes the likelihood of such an event remains remote. As noted, over the last three years, our actual product return rate has stayed within a range of 4.6% to 3.5% of gross sales. An increase of 0.1% in our estimated return rate as a percentage of gross sales would have adversely affected our reported sales and operating income for the year ended March 31, 2008 by approximately $380,000. Net income would have been adversely affected by approximately $236,000.

Many of our products are subject to expiration dating. As a general rule our customers will not accept goods with expiration dating of less than 12 months from the date of delivery. To monitor this risk, management utilizes a detailed compilation of inventory with expiration dating between zero and 15 months and reserves for 100% of the cost of any item with expiration dating of 12 months or less. At March 31, 2008 and 2007, the allowance for obsolete and slow moving inventory represented 4.6% and 5.8%, respectively, of total inventory. The year-over-year decrease resulted primarily from the disposition of cough and cold products that had been included in the obsolescence reserve at March 31, 2007 due to short dating, partially offset by the addition of the Little Remedies products that were subject to the voluntary withdrawal from the marketplace of Little Remedies medicated pediatric cough and cold products in October 2007. Inventory obsolescence costs charged to operations for 2008, 2007, and 2006 were $1.4 million, $3.1 million and $526,000, respectively, or 0.4% 1.0% and 0.2%, respectively, of net sales. A 1.0% increase in our allowance for obsolescence at March 31, 2008 would have adversely affected our reported operating income and net income for the year ended March 31, 2008 by approximately $311,000 and $193,000, respectively.

In the ordinary course of business, we grant non-interest bearing trade credit to our customers on normal credit terms. We maintain an allowance for doubtful accounts receivable which is based upon our historical collection experience and expected collectibility of the accounts receivable. In an effort to reduce our credit risk, we (i) establish credit limits for all of our customer relationships, (ii) perform ongoing credit evaluations of our customers’ financial condition, (iii) monitor the payment history and aging of our customers’ receivables, and (iv) monitor open orders against an individual customer’s outstanding receivable balance.

We establish specific reserves for those accounts which file for bankruptcy, have no payment activity for 180 days or have reported major negative changes to their financial condition. The allowance for bad debts amounted to 0.1% of accounts receivable at both March 31, 2008 and 2007. Bad debt expense (recoveries) for 2008, 2007 and 2006 were $124,000, $(100,000) and $(53,000), respectively, each representing 0.0% of net sales in each of the years.

While management believes that it is diligent in its evaluation of the adequacy of the allowance for doubtful accounts, an unexpected event, such as the bankruptcy filing of a major customer, could have an adverse effect on our future financial results. A 0.1% increase in our bad debt expense as a percentage of sales in 2008 would have resulted in a decrease in reported operating income of approximately $325,000, and a decrease in our reported net income of approximately $202,000.

Our Clear Eyes, New-Skin, Chloraseptic, Compound W and Wartner brands comprise the majority of the value of the intangible assets within the Over-The-Counter Healthcare segment. The Comet, Spic and Span and Chore Boy brands comprise substantially all of the intangible asset value within the Household Cleaning segment. Denorex, Cutex and Prell comprised substantially all of the intangible asset value within the Personal Care segment.

Goodwill and intangible assets comprise substantially all of our assets. Goodwill represents the excess of the purchase price over the fair value of assets acquired and liabilities assumed in a purchase business combination. Intangible assets generally represent our trademarks, brand names and patents. When we acquire a brand, we are required to make judgments regarding the value assigned to the associated intangible assets, as well as their respective useful lives. Management considers many factors, both prior to and after, the acquisition of an intangible asset in determining the value, as well as the useful life, assigned to each intangible asset that the Company acquires or continues to own and promote. The most significant factors are:

A brand that has been in existence for a long period of time (e.g., 25, 50 or 100 years) generally warrants a higher valuation and longer life (sometimes indefinite) than a brand that has been in existence for a very short period of time. A brand that has been in existence for an extended period of time generally has been the subject of considerable investment by its previous owner(s) to support product innovation and advertising and promotion.

Recent sales results present a snapshot as to how the brand has performed in the most recent time periods and represent another factor in the determination of brand value. In addition, projected sales growth provides information about the strength and potential longevity of the brand. A brand that has both strong current and projected sales generally warrants a higher valuation and a longer life than a brand that has weak or declining sales. Similarly, consideration is given to the potential investment, in the form of advertising and promotion, which is required to reinvigorate a brand that has fallen from favor.

After consideration of the factors described above, as well as current economic conditions and changing consumer behavior, management prepares a determination of the intangible’s value and useful life based on its analysis of the requirements of Financial Accounting Standards Board ("FASB") Statement of Financial Accounting Standards ("Statement") No. 141, "Business Combinations" and Statement No. 142, "Goodwill and Other Intangible Assets" ("Statement No. 142"). Under 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 and must also be tested for impairment.

Should analysis of any of the aforementioned factors warrant a change in the estimated useful life of the intangible asset, management will reduce the estimated useful life and amortize the carrying value prospectively over the shorter remaining useful life. Management’s projections are utilized to assimilate all of the facts, circumstances and expectations related to the trademark or trade name and estimate the cash flows over its useful life. In the event that the long-term projections indicate that the carrying value is in excess of the undiscounted cash flows expected to result from the use of the intangible assets, management is required to record an impairment charge. Once that analysis is completed, a discount rate is applied to the cash flows to estimate fair value. The impairment charge is measured as the excess of the carrying amount of the intangible asset over fair value as calculated using the discounted cash flow analysis. Future events, such as competition, technological advances and reductions in advertising support for our trademarks and trade names could cause subsequent evaluations to utilize different assumptions.

In a manner similar to finite-lived intangible assets, on an annual basis, or more frequently if necessary, management analyzes current events and circumstances to determine whether the indefinite life classification for a trademark or trade name continues to be valid. Should circumstance warrant a finite life, the carrying value of the intangible asset would then be amortized prospectively over the estimated remaining useful life.

In connection with this analysis, management also tests the indefinite-lived intangible assets for impairment by comparing the carrying value of the intangible asset to its estimated fair value. Since quoted market prices are seldom available for trademarks and trade names such as ours, we utilize present value techniques to estimate fair value. Accordingly, management’s projections are utilized to assimilate all of the facts, circumstances and expectations related to the trademark or trade name and estimate the cash flows over its useful life. In performing this analysis, management considers the same types of information as listed above in regards to finite-lived intangible assets. Once that analysis is completed, a discount rate is applied to the cash flows to estimate fair value. Future events, such as competition, technological advances and reductions in advertising support for our trademarks and trade names could cause subsequent evaluations to utilize different assumptions.

As part of its annual test for impairment of goodwill, management estimates the discounted cash flows of each reporting unit, which is at the brand level, and one level below the operating segment level, to estimate their respective fair values. In performing this analysis, management considers the same types of information as listed above in regards to finite-lived intangible assets. In the event that the carrying amount of the reporting unit exceeds the fair value, management would then be required to allocate the estimated fair value of the assets and liabilities of the reporting unit as if the unit was acquired in a business combination, thereby revaluing the carrying amount of goodwill. In a manner similar to indefinite-lived assets, future events, such as competition, technological advances and reductions in advertising support for our trademarks and trade names could cause subsequent evaluations to utilize different assumptions.

applied a discount rate of 9.1%, the Company’s then current weighted-average cost of funds, to the estimated cash flows; however that rate, as well as future cash flows may be influenced by such factors, including (i) changes in interest rates, (ii) rates of inflation, or (iii) sales or contribution margin reductions. In the event that the carrying value exceeded the estimated fair value of either intangible assets or goodwill, we would be required to recognize an impairment charge. Additionally, continued decline of the fair value ascribed to an intangible asset or a reporting unit caused by external factors may require future impairment charges.

During the three month period ended March 31, 2006, we recorded non-cash charges related to the impairment of intangible assets and goodwill of the Personal Care segment of $7.4 million and $1.9 million, respectively, because the carrying amounts of these “branded” assets exceeded their fair market values primarily as a result of declining sales caused by product competition. Should the related fair values of goodwill and intangible assets continue to be adversely affected as a result of declining sales or margins caused by competition, technological advances or reductions in advertising and promotional expenses, the Company may be required to record additional impairment charges. However, we were not required to record any asset impairment charges during 2007 or 2008.

During 2006, we adopted FASB Statement No. 123(R), “Share-Based Payment” (“Statement No. 123(R)”) with the initial grants of restricted stock and options to purchase common stock to employees and directors in accordance with the provisions of the Plan. Statement No. 123(R) requires us to measure the cost of services to be rendered based on the grant-date fair value of the equity award. Compensation expense is to be recognized over the period which an employee is required to provide service in exchange for the award, generally referred to as the requisite service period. Information utilized in the determination of fair value includes the following:

Additionally, management must estimate the expected attrition rate of the recipients to enable it to estimate the amount of non-cash compensation expense to be recorded in our financial statements. While management uses diligent analysis to estimate the respective variables, a change in assumptions or market conditions, as well as changes in the anticipated attrition rates, could have a significant impact on the future amounts recorded as non-cash compensation expense. The Company recorded net non-cash compensation expense of $1.1 million, $655,000 and $383,000 during 2008, 2007 and 2006, respectively. However, in 2008, management was required to reverse previously recorded stock-based compensation costs of $538,000, $394,000 and $166,000 related to the October 2005, July 2006 and May 2007 grants, respectively, as it determined that the Company would not meet the performance goals associated with such grants of restricted stock. Assuming no changes in assumptions and no new awards authorized by the Compensation Committee of the Board of Directors, we will record non-cash compensation expense of approximately $1.5 million during 2009.

derivative instruments to disclose information to enable users of the financial statements to understand (i) how and why the company uses derivative instruments, (ii) how derivative instruments and related hedged items are accounted for, and (iii) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. Accordingly, Statement No. 161 requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. Statement No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The implementation of Statement No. 161 is not expected to have a material effect on the Company’s consolidated financial statements.

In December 2007, the FASB ratified Emerging Issues Task Force 07-01, “Accounting for Collaborative Arrangements” (“EITF 07-01”). EITF 07-01 provides guidance for determining if a collaborative arrangement exists and establishes procedures for reporting revenues and costs generated from transactions with third parties, as well as between the parties within the collaborative arrangement, and provides guidance for financial statement disclosures of collaborative arrangements. EITF 07-01 is effective for fiscal years beginning after December 15, 2008 and is required to be applied retrospectively to all prior periods where collaborative arrangements existed as of the effective date. The Company currently is assessing the impact of EITF 07-01 on its consolidated financial position and results of operations.

In December 2007, the FASB issued SFAS No. 141 (Revised 2007), “Business Combinations” (“Statement No. 141(R)”) to improve consistency and comparability in the accounting and financial reporting of business combinations. Accordingly, Statement 141(R) requires the acquiring entity in a business combination to (i) recognize all assets acquired and liabilities assumed in the transaction, (ii) establishes acquisition-date fair value as the amount to be ascribed to the acquired assets and liabilities and (iii) requires certain disclosures to enable users of the financial statements to evaluate the nature, as well as the financial aspects of the business combination. Statement 141(R) is effective for business combinations consummated by the Company on or after April 1, 2009.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities - Including an amendment of FASB Statement No. 115” (“Statement No. 159”). Statement No. 159 permits companies to choose to measure certain financial instruments and certain other items at fair value. Unrealized gains and losses on items for which the fair value option has been elected will be recognized in earnings at each subsequent reporting date. Statement No. 159 is effective for the Company’s interim financial statements issued after April 1, 2008. The implementation of Statement No. 159 is not expected to have a material effect on the Company’s consolidated financial statements.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“Statement No. 157”) to address inconsistencies in the definition and determination of fair value pursuant to generally accepted accounting principles (“GAAP”). Statement No. 157 provides a single definition of fair value, establishes a framework for measuring fair value in GAAP and expands disclosures about fair value measurements in an effort to increase comparability related to the recognition of market-based assets and liabilities and their impact on earnings. Statement No. 157 is effective for the Company’s interim financial statements issued after April 1, 2008. However, on February 12, 2008, the FASB deferred the effective date of Statement No. 157 for one year for nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis. The implementation of Statement No. 157 is not expected to have a material effect on financial assets and liabilities included in the Company’s consolidated financial statements as fair value is based on readily available market prices. The Company is currently evaluating the impact that the application of Statement No. 157 will have on its consolidated financial statements as it relates to the non-financial assets and liabilities.

The 2.5% increase in revenues for 2008 versus 2007 was primarily a result of the acquisition of the Wartner brand, acquired in September of 2006. Excluding the impact of this acquisition, revenues increased 0.8%. Revenue increases in the Over-the-Counter Healthcare and Household Cleaning segments were partially offset by a decrease in the Personal Care segment. Revenues from customers outside of North America, which represent 4.0% of total revenues, decreased 11.4% in 2008 versus the comparable period in 2007.

During 2008, the Company increased its allowance for returns by $1.7 million in connection with the voluntary withdrawal from the marketplace in October 2007 of two medicated pediatric cough and cold products marketed under the Little Remedies brand. This action was part of an industry-wide voluntary withdrawal of pediatric cough and cold products pending the final results of an FDA safety and efficacy review. Excluding the impact of the withdrawal, total revenues for the Company would have been $328.3 million, or 3.0% greater than 2007 and up 1.3% excluding the Wartner acquisition.

Revenues of the Over-the-Counter Healthcare segment increased by $9.0 million, or 5.1%, for 2008 versus 2007. The revenue increase was primarily due to the acquisition of the Wartner brand in September 2006 and the launch of Murine Earigate, a new product that helps prevent earwax build-up with its patented reverse spray technology. Excluding the impact of the Wartner acquisition, revenues increased by 2.1% for the year. Revenue increases from Murine Earigate, Clear Eyes, New Skin, Dermoplast and Compound W were partially offset by decreases in Chloraseptic, The Doctor’s NightGuard Dental Protector and Little Remedies. Clear Eyes and New Skin’s revenue increases were the result of increased consumer consumption and distribution gains. Dermoplast’s revenue increase was due to improved consumer consumption. Compound W revenues were up primarily due to lower promotional allowances as gross shipments were flat due to softness in the cryogenic sub-segment of the wart category. Chloraseptic’s revenue decreased due to weaker consumer consumption as a result of the decline in the number of sore throat incidences nationwide versus 2007. The Doctor’s NightGuard Dental Protector revenue decreased as a result of increased competition in the bruxism category. Little Remedies’ revenue declined due to a $1.7 million increase in the allowance for returns, as well as lost sales in connection with the voluntary withdrawal from the marketplace of Little Remedies medicated pediatric cough and cold products in October 2007.

Revenues of the Household Cleaning segment increased $2.1 million, or 1.8% during the year versus 2007. Increased revenues on the Comet brand offset declines in the Spic and Span and Chore Boy brands. Revenue for Comet Mildew SprayGel, which launched in the last quarter of 2007, was partially offset by weaker consumer consumption of Comet bathroom sprays. The decline in Spic and Span’s revenue was the result of weaker consumption and in line with overall declines in the all-purpose cleaning category. Chore Boy’s revenue decreases were in line with consumption trends partially offset by strong shipments to small grocery wholesale accounts.

Gross profit increased $5.2 million, or 4.8%, versus 2007. As a percent of OTC revenue, gross profit decreased from 62.5% in 2007 to 62.2% during 2008. The decrease in gross profit percentage was primarily the result of an increase in promotional price allowances behind The Doctor’s and Little Remedies brands to stimulate consumer takeaway, as well as an increase in sales of the Murine Earigate which has a lower margin than the segment’s average gross profit percentage.

Contribution margin, defined as gross profit less advertising and promotional expenses, increased by $360,000, or 0.3% for 2008 versus 2007. The contribution margin increase was a result of the increase in sales and gross profit as previously discussed, offset by a $2.6 million, or 8.3% increase in advertising and promotional spending. The increase in advertising and promotional spending was primarily attributable to support behind the launches of Murine Earigate and Comet Mildew SprayGel.

Contribution margin in the Over-the-Counter Healthcare segment increased by $3.3 million, or 3.8%, for 2008 versus 2007. The contribution margin increase was a result of the increase in sales and gross profit as previously discussed, partially offset by a $2.0 million, or an 8.2%, increase in advertising and promotional spending. The increase in advertising and promotional spending was primarily a result of television media support behind the launch of Murine Earigate, an increase in spending against the Compound W and Little Remedies brands, partially offset by a reduction in Chloraseptic and Clear Eyes spending.

General and administrative expenses were $31.4 million for 2008 versus $28.4 million for 2007. Higher professional fees associated with the OraSure litigation, as well as protective actions initiated by the Company in connection with The Doctor’s NightGuard Dental Protector intellectual property were partially offset by lower professional fees related primarily to efficiencies gained in the area of Sarbanes-Oxley compliance.

Net interest expense was $37.4 million for 2008 versus $39.5 million for 2007. The reduction in interest expense was the result of a lower level of total indebtedness, partially offset by higher interest rates on our variable rate indebtedness. The average cost of funds increased from 8.2% for 2007 to 8.6% for 2008, while the average indebtedness decreased from $481.0 million for 2007 to $437.3 million for 2008.

The income tax provision for 2008 was $20.3 million, with an effective rate of 37.4%, compared to $19.1 million, with an effective rate of 34.6% for 2007. The 2007 amount includes a $2.2 million tax benefit resulting from the reduction of the deferred income tax rate to 38.4% from 39.1% in connection with the implementation of initiatives to obtain operational, as well as tax, efficiencies. As a result of operational efficiencies identified during 2008, the Company has reduced its ongoing income tax rate to 37.9%.

The 7.4% increase in revenues for 2007 versus 2006 was primarily a result of the acquisitions of the Wartner brand, acquired in September of 2006, and the Chore Boy and The Doctor’s brands acquired in October and November 2005, respectively. Excluding the impact of the acquisitions, revenues were up 0.6%. Revenue increases in Over-the-Counter Healthcare and Household Cleaning segments were partially offset by a decrease in the Personal Care segment.

Revenues for the Over-the-Counter Healthcare segment increased $13.8 million, or 8.6% for 2007 versus 2006. The increase was primarily attributable to the acquisition of the Wartner and The Doctor’s brands. Excluding the impact of these acquisitions, revenues increased 1.2%. Revenue increases for Clear Eyes, Little Remedies, Murine and Dermoplast were partially offset by revenue declines on Compound W, Chloraseptic and New Skin. The Clear Eyes revenue growth was a result of continued strong consumer consumption trends, the launch of Clear Eyes Triple Action and Maximum Redness Relief, and increased shipments to international customers. The Little Remedies revenue increase was a result of improved consumer consumption. Dermoplast’s revenue increase was due to increased shipments to institutional customers and the launch of Dermoplast Poison Ivy. The Murine revenue increase was primarily the result of improved consumer consumption of the ear product. The revenue decrease for Compound W was primarily a result of weaker consumer consumption primarily in the cryogenic segment of the wart remover category. Chloraseptic’s revenue decrease was primarily due to lower consumer consumption as a result of a weak cough and cold flu season. New Skin’s revenue decrease was the result of softness in the liquid bandage category.

Revenues for the Household Cleaning segment increased $11.2 million, or 10.4%, for 2007 versus 2006. Excluding the acquisition of Chore Boy, revenues for this segment increased 2.8% for the period. Comet revenue increased during the period due to strong consumer consumption, expanded distribution and royalty revenues earned from licensing agreements in Eastern Europe and for institutional sales in North America. Revenues for the Spic and Span brand decreased during the period as a result of lower sales to the dollar store channel.

Gross profit for 2007 increased $8.2 million, or 5.2%, versus 2006. As a percent of total revenue, gross profit decreased from 53.0% for 2006 to 51.9% during 2007. The decrease in gross profit percentage was a result of inventory obsolescence, higher product costs and increased shipments to non-North American distributors which have a lower margin than our domestic markets, partially offset by lower distribution expense. Shipments to markets outside of North America represented 4.6% of total revenues in 2007 versus 3.4% for 2006.

Gross profit for 2007 increased $3.3 million, or 7.8%, versus 2006. As a percent of household cleaning revenue, gross profit decreased from 39.6% for 2006 to 38.7% during 2007. The decrease in gross profit percentage is primarily a result of increased product costs partially offset by royalties earned, with no associated costs, from our international and institutional licensing arrangements with Procter & Gamble.

Contribution margin, defined as gross profit less advertising and promotional expenses, increased $8.3 million, or 6.7% for 2007 versus 2006. The contribution margin increase was a result of the increase in sales and gross profit as previously discussed, and a $77,000, or 0.2% reduction in advertising and promotional spending. The reduction in advertising and promotional spending is primarily a result of a $2.0 million reduction in the Personal Care segment mostly offset by an increase of $1.7 million in the Over-the-Counter Healthcare segment and $200,000 in the Household Cleaning segment.

Contribution margin in the Over-the-Counter Healthcare segment increased by $4.9 million, or 6.1%, for 2007 versus 2006. The contribution margin increase was a result of the increase in sales and gross profit as previously discussed, partially offset by a $1.7 million, or an 8.0%, increase in advertising and promotional spending. The increase in advertising and promotional spending was primarily a result of increased media behind The Doctor’s NightGuard Dental Protector, Little Remedies print media and Chloraseptic promotional spending, partially offset by a reduction in Clear Eyes and New Skin media.

Contribution margin in the Household Cleaning segment increased by $3.1 million, or 8.7%, for 2007 versus 2006. The contribution margin increase was a result of the sales and gross profit increase previously discussed, slightly offset with a $184,000, or a 2.8% increase in advertising and promotional spending. The increase is a result of a modest reduction of Comet media and promotional spending offset by increased spending resulting from the Chore Boy acquisition.

Contribution margin in the personal care segment was up $314,000, or 3.5% for 2007 versus 2006. The contribution margin increase was primarily the result of a $2.0 million, or 64.4%, reduction in advertising and promotion spending versus 2006, partially offset by the gross profit decline as previously discussed. The reduction in advertising and promotion was due to the Company’s strategic decision to redeploy advertising and promotional funds in support of its growth brands in the other segments.

General and administrative expenses were $28.4 million for 2007 versus $21.1 million for 2006. The increase was primarily related to additional staff added during the second half of 2006 and employee incentive plan compensation that was not earned in 2006, as well as severance compensation related to the departure of a member of management in 2007, increased stock-based compensation costs in 2007 and increased legal and professional fees in 2007.

Depreciation and amortization expense was $10.4 million for 2007 versus $10.8 million for 2006. An increase in amortization related to intangible assets purchased in the Wartner and Dental Concepts acquisitions was partially offset by a reduction of the carrying value of certain trademarks in our Personal Care segment. During the three month period ended March 31, 2006, the Company recognized an asset impairment charge of approximately $7.4 million related to this segment. Depreciation expense decreased by $1.0 million for 2007 versus 2006 due to the absence of depreciation charges for manufacturing equipment that was fully depreci

	Percentage of Gross Sales(1)
Channel of Distribution	2008			2007			2006
Mass		33.6	%		35.8	%		33.6	%
Food		22.7			23.3			24.9
Drug		28.0			25.6			24.3
Dollar		8.3			7.2			7.8
Club		2.4			2.2			2.7
Other		5.0			5.9			6.7

Distribution Channel	Customers	Distribution Channel	Customers
Mass	Kmart	Drug	CVS
	Meijer		Rite Aid
	Target		Walgreens
	Wal-Mart
		Dollar	Dollar General
Food	Ahold		Dollar Tree
	Kroger		Family Dollar
	Publix
	Safeway	Club	BJ’s Wholesale Club
	Supervalu		Costco
			Sam’s Club

	February 9,		March 31
	2005 (1)		2006		2007		2008

Prestige Brands Holdings	$	100.00	$	76.06	$	74.06	$	51.13
The Peer Group Index (2)		100.00		117.41		129.34		126.11
The Russell 2000 Index		100.00		122.61		127.78		107.83

	Over-the- Counter Healthcare		Household Cleaning		Personal Care		Consolidated

Goodwill	$	233,615	$	72,549	$	2,751	$	308,915

Intangible assets
Indefinite lived		374,070		170,893		--		544,963
Finite lived		87,230		9		14,481		101,720
		461,300		170,902		14,481		646,683

	$	694,915	$	243,451	$	17,232	$	955,598

	2008 Gross Profit		%		2007 Gross Profit		%		Increase (Decrease)			%

OTC Healthcare	$	114,348		62.2	$	109,103		62.5	$	5,245			4.8
Household Cleaning		45,668		37.7		46,034		38.7		(366	)		(0.8	)
Personal Care		8,491		39.0		10,350		41.6		(1,859	)		(18.0	)

	$	168,507		51.6	$	165,487		51.9	$	3,020			1.8

	Gross Profit %		G&A % To Net Sales		CapEx % To Net Sales
2008		51.6		9.6		0.1
2007		51.9		8.9		0.2
2006		53.0		7.1		0.2

	2008 Revenues		%		2007 Revenues		%		Increase (Decrease)			%

OTC Healthcare	$	183,692		56.2	$	174,704		54.8	$	8,988			5.1
Household Cleaning		121,127		37.1		119,036		37.4		2,091			1.8
Personal Care		21,784		6.7		24,894		7.8		(3,110	)		(12.5	)

	$	326,603		100.0	$	318,634		100.0	$	7,969			2.5

	2008 Contribution Margin		%		2007 Contribution Margin		%		Increase (Decrease)			%

OTC Healthcare	$	88,160		48.0	$	84,902		48.6	$	3,258			3.8
Household Cleaning		38,185		31.5		39,355		33.1		(1,170	)		(3.0	)
Personal Care		7,497		34.4		9,225		37.1		(1,728	)		(18.7	)

	$	133,842		41.0	$	133,482		41.9	$	360			0.3

	2007 Revenues		%		2006 Revenues		%		Increase (Decrease)			%

OTC Healthcare	$	174,704		54.8	$	160,942		54.3	$	13,762			8.6
Household Cleaning		119,036		37.4		107,801		36.3		11,235			10.4
Personal Care		24,894		7.8		27,925		9.4		(3,031	)		(10.9	)

	$	318,634		100.0	$	296,668		100.0	$	21,966			7.4

	2007 Gross Profit		%		2006 Gross Profit		%		Increase (Decrease)			%

OTC Healthcare		109,103		62.5	$	102,451		63.7	$	6,652			6.5
Household Cleaning		46,034		38.7		42,713		39.6		3,321			7.8
Personal Care		10,350		41.6		12,074		43.2		(1,724	)		(14.3	)

	$	165,487		51.9	$	157,238		53.0	$	8,249			5.2

	2007 Contribution Margin		%		2006 Contribution Margin		%		Increase (Decrease)		%

OTC Healthcare	$	84,902		48.6	$	80,027		49.7	$	4,875		6.1
Household Cleaning		39,355		33.1		36,218		33.6		3,137		8.7
Personal Care		9,225		37.1		8,911		31.9		314		3.5

	$	133,482		41.9	$	125,156		42.2	$	8,326		6.7