U.
      S.
      SECURITIES AND EXCHANGE COMMISSION


Washington,
      D. C. 20549





FORM
      10-Q





[
                X ]
            QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934





For
                the quarterly period ended December
                31, 2007





OR





[    ]
            TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934





For
                the transition period from ____ to _____





Commission
                File Number: 001-32433








PRESTIGE
      BRANDS HOLDINGS, INC.


(Exact
      name of Registrant as specified in its charter)





Delaware
            
            20-1297589(State
                or other
                jurisdiction of
              incorporation
                or
                organization)
            
            (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)







Indicate
      by check mark
      whether the Registrant (1) has filed all reports required to be filed by Section
      13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
      months (or for such shorter period that the Registrant was required to file
      such
      reports), and (2) has been subject to such filing requirements for the past
      90
      days.


Yes
      x No o





Indicate
      by check mark
      whether the Registrant is a large accelerated filer, an accelerated filer,
      a
      non-accelerated filer, or a smaller reporting company. See definitions of “large
      accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule
      12b-2 of the Exchange Act.  (Check one):







Large
              accelerated filer o
            Accelerated
              filer x
            Non-accelerated
              filer o
            Smaller
              reporting company o







Indicate
      by check mark
      whether the Registrant is a shell company (as defined in Rule 12b-2 of the
      Exchange Act).


Yes  o No
x





As
      of
      January 31, 2008, there were 50,002,705 shares of common stock
      outstanding.


























Prestige
      Brands Holdings, Inc.


Form
      10-Q


Index




PART
                  I.
              FINANCIAL
                  INFORMATIONItem
                  1.
              Consolidated
                  Financial StatementsConsolidated
                Statements of Operations – three months ended December
                31, 2007and
                  2006 and nine months ended December 31, 2007 and 2006
                  (unaudited)
              2Consolidated
                    Balance
                    Sheets – December 31, 2007 and March 31, 2007
                    (unaudited)
              3Consolidated
                Statement of Changes in Stockholders’ Equity andComprehensive
                  Income – nine months ended December 31, 2007
                  (unaudited)
              4Consolidated
                Statements of Cash Flows – three months ended December 31,
                2007and
                  2006 and nine months ended December 31, 2007 and 2006
                  (unaudited)
              5Notes
                    to Unaudited
                    Consolidated Financial Statements
              6Item
                  2.
              Management’s
                  Discussion and Analysis of FinancialCondition
                and
                  Results of Operations
              24Item
                  3.
              Quantitative
                  and
                  Qualitative Disclosure About Market Risk
              41Item
                  4.
              Controls
                  and
                  Procedures
              41PART
                  II.
              OTHER
                  INFORMATIONItem
                  1.
              Legal
                  Proceedings
              42Item
                  1A.
              Risk
                  Factors
              42Item
                  2.
              Unregistered
                  Sales
                  of Equity Securities and Use of Proceeds
              43Item
                5.
              Other
                Information
              43Item
                  6.
              Exhibits
              44Signatures
              45










-1-


PART
                I
            FINANCIAL
                INFORMATION





Item
                1.
            FINANCIAL
                STATEMENTS





Prestige
      Brands Holdings, Inc.


Consolidated
      Statements of Operations


(Unaudited)








Three
                Months
              Ended
                December 31
            
            
            Nine
                Months
              Ended
                December 31(In
                thousands, except per share data)
            
            2007
            
            
            2006
            
            
            2007
            
            
            2006RevenuesNet
                sales
            
            $
            79,644
            
            
            $
            79,564
            
            
            $
            244,525
            
            
            $
            239,164Other
                revenues
            
            
            578
            
            
            
            560
            
            
            
            1,645
            
            
            
            1,434Total
                revenues
            
            
            80,222
            
            
            
            80,124
            
            
            
            246,170
            
            
            
            240,598Cost
                of SalesCosts
                of
                sales
            
            
            38,783
            
            
            
            36,766
            
            
            
            118,875
            
            
            
            114,350Gross
                profit
            
            
            41,439
            
            
            
            43,358
            
            
            
            127,295
            
            
            
            126,248Operating
                ExpensesAdvertising
                and
                promotion
            
            
            9,572
            
            
            
            8,952
            
            
            
            28,375
            
            
            
            25,809General
                and
                administrative
            
            
            6,209
            
            
            
            7,068
            
            
            
            24,039
            
            
            
            20,761Depreciation
            
            
            126
            
            
            
            177
            
            
            
            379
            
            
            
            616Amortization
                of
                intangible assets
            
            
            2,627
            
            
            
            2,627
            
            
            
            7,881
            
            
            
            7,013Total
                operating
                expenses
            
            
            18,534
            
            
            
            18,824
            
            
            
            60,674
            
            
            
            54,199Operating
                income
            
            
            22,905
            
            
            
            24,534
            
            
            
            66,621
            
            
            
            72,049Other
                income (expense)Interest
                income
            
            
            164
            
            
            
            199
            
            
            
            524
            
            
            
            787Interest
                expense
            
            
            (9,490
            )
            
            
            (10,355
            )
            
            
            (29,132
            )
            
            
            (30,478
            )Total
                other income
                (expense)
            
            
            (9,326
            )
            
            
            (10,156
            )
            
            
            (28,608
            )
            
            
            (29,691
            )Income
                before
                provision for
              income
                taxes
            
            
            13,579
            
            
            
            14,378
            
            
            
            38,013
            
            
            
            42,358Provision
                for income
                taxes
            
            
            5,160
            
            
            
            3,735
            
            
            
            14,445
            
            
            
            14,675Net
                income
            
            $
            8,419
            
            
            $
            10,643
            
            
            $
            23,568
            
            
            $
            27,683Basic
                earnings per
                share
            
            $
            0.17
            
            
            $
            0.21
            
            
            $
            0.47
            
            
            $
            0.56Diluted
                earnings per
                share
            
            $
            0.17
            
            
            $
            0.21
            
            
            $
            0.47
            
            
            $
            0.55Weighted
                average
                shares outstanding:
              Basic
            
            
            49,799
            
            
            
            49,535
            
            
            
            49,744
            
            
            
            49,425Diluted
            
            
            50,035
            
            
            
            50,024
            
            
            
            50,040
            
            
            
            50,016





See
      accompanying notes.




-2-


Prestige
      Brands Holdings, Inc.


Consolidated
      Balance Sheets


(Unaudited)





(In
      thousands)


Assets
            
            December
                31, 2007
            
            
            March
                31, 2007Current
                assetsCash
                and cash
                equivalents
            
            $
            11,554
            
            
            $
            13,758Accounts
                receivable
            
            
            38,977
            
            
            
            35,167Inventories
            
            
            30,659
            
            
            
            30,173Deferred
                income tax
                assets
            
            
            3,094
            
            
            
            2,735Prepaid
                expenses and
                other current assets
            
            
            2,002
            
            
            
            1,935Total
                current
                assets
            
            
            86,286
            
            
            
            83,768Property
                and
                equipment
            
            
            1,437
            
            
            
            1,449Goodwill
            
            
            308,915
            
            
            
            310,947Intangible
                assets
            
            
            649,277
            
            
            
            657,157Other
                long-term
                assets
            
            
            7,528
            
            
            
            10,095Total
                Assets
            
            $
            1,053,443
            
            
            $
            1,063,416Liabilities
                and Stockholders’ EquityCurrent
                liabilitiesAccounts
                payable
            
            $
            18,703
            
            
            $
            19,303Accrued
                interest
                payable
            
            
            4,574
            
            
            
            7,552Other
                accrued
                liabilities
            
            
            11,711
            
            
            
            10,505Current
                portion of
                long-term debt
            
            
            3,550
            
            
            
            3,550Total
                current
                liabilities
            
            
            38,538
            
            
            
            40,910Long-term
                debt
            
            
            422,675
            
            
            
            459,800Other
                long-term
                liabilities
            
            
            2,801
            
            
            
            2,801Deferred
                income tax
                liabilities
            
            
            120,066
            
            
            
            114,571Total
                Liabilities
            
            
            584,080
            
            
            
            618,082Commitments
                and Contingencies – Note 13Stockholders’
                EquityPreferred
                stock -
                $0.01 par valueAuthorized
–
5,000
                sharesIssued
                and outstanding –
                None
            
            
            --
            
            
            
            --Common
                stock - $0.01
                par valueAuthorized
–
250,000
                sharesIssued
–
50,060
                shares
            
            
            501
            
            
            
            501Additional
                paid-in
                capital
            
            
            379,983
            
            
            
            379,225Treasury
                stock, at
                cost - 57 shares at December 31, 2007
              and
                55 shares at March 31, 2007
            
            
            (45
            )
            
            
            (40
            )Accumulated
                other
                comprehensive income
            
            
            21
            
            
            
            313Retained
                earnings
            
            
            88,903
            
            
            
            65,335Total
                stockholders’
                equity
            
            
            469,363
            
            
            
            445,334Total
                Liabilities
                and Stockholders’ Equity
            
            $
            1,053,443
            
            
            $
            1,063,416


See
      accompanying notes.




-3-


Prestige
      Brands Holdings, Inc.


Consolidated
      Statement of Changes in Stockholders’ Equity


and
      Comprehensive Income


Nine
      Months Ended December 31, 2007


(Unaudited)








Common
                Stock
              Par
              Shares         
                Value
            
            
            Additional
              Paid-in
              Capital
            
            
            Treasury
                Stock
              Shares        
                Amount
            
            
            Accumulated
              Other
              Comprehensive
              Income
            
            
            Retained
              Earnings
            
            
            Totals(In
                thousands)Balances
                - March 31,
                2007
            
            
            50,060
            
            
            $
            501
            
            
            $
            379,225
            
            
            
            55
            
            
            $
            (40
            )
            
            $
            313
            
            
            $
            65,335
            
            
            $
            445,334Stock-based
                compensation
            
            
            --
            
            
            
            --
            
            
            
            758
            
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            758Purchase
                of common
                stock for treasury
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            2
            
            
            
            (5
            )
            
            
            --
            
            
            
            --
            
            
            
            (5
            )Components
                of
                comprehensive income:Net
                income
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            23,568
            
            
            
            23,568Amortization
                of
                interest rate caps reclassified into earnings, net of income tax
                expense
                of $181
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            296
            
            
            
            --
            
            
            
            296Unrealized
                loss on
                interest rate caps, net of income tax benefit of $367
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            (588
            )
            
            
            --
            
            
            
            (588
            )Total
                comprehensive
                income
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            23,276Balances
–
December
                31, 2007
            
            
            50,060
            
            
            $
            501
            
            
            $
            379,983
            
            
            
            57
            
            
            $
            (45
            )
            
            $
            21
            
            
            $
            88,903
            
            
            $
            469,363





See
      accompanying notes.




-4-


Prestige
      Brands Holdings, Inc.


Consolidated
      Statements of Cash Flows


(Unaudited)








Nine
              Months Ended December 31(In
                thousands)
            
            2007
            
            
            2006Operating
                ActivitiesNet
                income
            
            $
            23,568
            
            
            $
            27,683Adjustments
                to
                reconcile net income to net cash provided by operating
                activities:Depreciation
                and
                amortization
            
            
            8,260
            
            
            
            7,629Deferred
                income
                taxes
            
            
            7,366
            
            
            
            7,686Amortization
                of
                deferred financing costs
            
            
            2,283
            
            
            
            2,422Stock-based
                compensation
            
            
            758
            
            
            
            439Changes
                in operating
                assets and liabilitiesAccounts
                receivable
            
            
            (3,810
            )
            
            
            4,812Inventories
            
            
            (486
            )
            
            
            2,707Prepaid
                expenses and
                other current assets
            
            
            (66
            )
            
            
            (765
            )Accounts
                payable
            
            
            (795
            )
            
            
            1,366Income
                taxes
                payable
            
            
            --
            
            
            
            (1,584
            )Accrued
                liabilities
            
            
            (1,772
            )
            
            
            2,894Net
                cash provided by operating activities
            
            
            35,306
            
            
            
            55,289Investing
                ActivitiesPurchases
                of
                equipment
            
            
            (364
            )
            
            
            (429
            )Change
                in other
                assets due to purchase price adjustments
            
            
            (16
            )
            
            
            386Purchase
                of
                business
            
            
            --
            
            
            
            (31,242
            )Net
                cash used for investing activities
            
            
            (380
            )
            
            
            (31,285
            )Financing
                ActivitiesRepayment
                of
                long-term debt
            
            
            (37,125
            )
            
            
            (27,392
            )Purchase
                of common
                stock for treasury
            
            
            (5
            )
            
            
            (10
            )Net
                cash used for financing activities
            
            
            (37,130
            )
            
            
            (27,402
            )Decrease
                in
                cash
            
            
            (2,204
            )
            
            
            (3,398
            )Cash
                - beginning of
                period
            
            
            13,758
            
            
            
            8,200Cash
                - end of
                period
            
            $
            11,554
            
            
            $
            4,802Supplemental
                Cash Flow InformationFair
                value of assets
                acquired
            
            $
            --
            
            
            $
            35,096Fair
                value of
                liabilities assumed
            
            
            --
            
            
            
            (3,854
            )Cash
                paid to
                purchase business
            
            $
            --
            
            
            $
            31,242Interest
                paid
            
            $
            29,828
            
            
            $
            30,749Income
                taxes
                paid
            
            $
            6,911
            
            
            $
            8,790





See
                accompanying notes.




-5-


Prestige
      Brands Holdings, Inc.


Notes
      to Consolidated Financial Statements


(Unaudited)











1.
            Business
                and Basis of Presentation





Nature
                of Business


Prestige
      Brands Holdings,
      Inc. (referred to herein as the “Company” which reference shall, unless the
      context requires otherwise, be deemed to refer to Prestige Brands Holdings,
      Inc.
      and all of its direct or indirect wholly-owned subsidiaries on a consolidated
      basis) is engaged in the marketing, sales and distribution of over-the-counter
      healthcare, personal care and household cleaning brands to mass merchandisers,
      drug stores, supermarkets and club stores primarily in the United States, Canada
      and certain international markets.  Prestige Brands Holdings, Inc. is
      a holding company with no assets or operations and is also the parent guarantor
      of the senior secured credit facility and the senior subordinated notes more
      fully described in Note 8 to the consolidated financial statements.





Basis
                of Presentation


The
      unaudited consolidated financial statements presented herein have been prepared
      in accordance with generally accepted accounting principles for interim
      financial reporting and with the instructions to Form 10-Q and Article 10 of
      Regulation S-X.  Accordingly, they do not include all of the
      information and footnotes required by United States generally accepted
      accounting principles (“GAAP”) for complete financial statements.  All
      significant intercompany transactions and balances have been
      eliminated.  In the opinion of management, the financial statements
      include all adjustments, consisting of normal recurring adjustments that are
      considered necessary for a fair presentation of the Company’s consolidated
      financial position, results of operations and cash flows for the interim
      periods.  Operating results for the three and nine month periods ended
      December 31, 2007 are not necessarily indicative of results that may be expected
      for the year ending March 31, 2008.  This financial information should
      be read in conjunction with the Company’s financial statements and notes thereto
      included in the Company’s Annual Report on Form 10-K for the year ended March
      31, 2007.





Use
      of Estimates


The
      preparation of financial statements in conformity with GAAP requires management
      to make estimates and assumptions that affect the reported amounts of assets
      and
      liabilities and disclosure of contingent assets and liabilities at the date
      of
      the financial statements, as well as the reported amounts of revenues and
      expenses during the reporting period.  Although these estimates are
      based on the Company’s knowledge of current events and actions that the Company
      may undertake in the future, actual results could differ materially from those
      estimates.  As discussed below, the Company’s most significant
      estimates include those made in connection with the valuation of intangible
      assets, sales returns and allowances, trade promotional allowances and inventory
      obsolescence.




Cash
                and Cash Equivalents


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





Accounts
                Receivable


The
      Company extends non-interest bearing trade credit to its customers in the
      ordinary course of business.  The Company maintains an allowance for
      doubtful accounts receivable based upon historical collection experience and
      expected collectibility of the accounts receivable.  In an effort to
      reduce credit risk, the Company (i) has established credit limits for all of
      its
      customer relationships, (ii) performs ongoing credit evaluations of customers'
      financial condition, (iii) monitors the payment history and aging of customers’
receivables, and (iv) monitors open orders against an individual customer’s
      outstanding receivable balance.





-6-


Inventories


Inventories
      are stated at
      the lower of cost or fair value, where cost is determined by using the first-in,
      first-out method.  The Company provides an allowance for slow moving
      and obsolete inventory, whereby it reduces inventories for the diminution of
      value, resulting from product obsolescence, damage or other issues affecting
      marketability, equal to the difference between the cost of the inventory and
      its
      estimated market value.  Factors utilized in the determination of
      estimated market value include (i) current sales data and historical return
      rates, (ii) estimates of future demand, (iii) competitive pricing pressures,
      (iv) new product introductions, (v) product expiration dates, and (vi) component
      and packaging obsolescence.





Property
                and Equipment


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


YearsMachinery
            5Computer
                equipment
            3Furniture
                and
                fixtures
            7Leasehold
                improvements
            5





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




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




Goodwill


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





Intangible
                Assets


Intangible
      assets, which
      are composed primarily of trademarks, are stated at cost less accumulated
      amortization.  For intangible assets with finite lives, amortization
      is computed on the straight-line method over estimated useful lives ranging
      from
      five to 20 years.





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





Deferred
      Financing Costs


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


-7-


Revenue
                Recognition


Revenues
      are recognized in
      accordance with Securities and Exchange Commission (“SEC”) Staff Accounting
      Bulletin 104, “Revenue Recognition,” when the following criteria are met: (1)
      persuasive evidence of an arrangement exists; (2) the product has been shipped
      and the customer takes ownership and assumes risk of loss; (3) the selling
      price
      is fixed or determinable; and (4) collection of the resulting receivable is
      reasonably assured.  The Company has determined that the transfer of
      risk of loss occurs when product is received by the customer and, accordingly,
      recognizes 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 the Company’s historical experience.





As
      is customary in the
      consumer products industry,the
      Company
      participatesin the
      promotional programs of its customers to enhance the sale of its
      products.The cost of these promotional programs varies based
      on the actual number of units sold during a finite period of time.The
      Company estimates the cost of such promotional programs at their inception
      based
      on historical experience and current market conditions and reduces sales by
      such
      estimates.These
      promotional programs
      consist of direct to consumer incentives such ascoupons and temporary
      price reductions, as well as incentives to the Company’s customers, such as
      slotting fees and cooperative advertising.  Estimates of the costs of
      these 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.





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





Costs
                of Sales


Costs
      of sales include product costs, warehousing costs, inbound and outbound shipping
      costs, and handling and storage costs.  Shipping, warehousing and
      handling costs were $5.9 million and $6.2 million for the three month periods
      ended December 31, 2007 and 2006, respectively, and $18.2 million and $18.3
      million for the nine month periods ended December 31, 2007 and 2006,
      respectively.





Advertising
                and Promotion Costs


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





Stock-based
                Compensation


During
      fiscal 2006, the
      Company adopted FASB, Statement No. 123(R), “Share-Based Payment” (“Statement
      No. 123(R)”) with the grants of restricted stock and options to purchase common
      stock to employees and directors in accordance with the provisions of the
      Company’s 2005Long-Term Equity Incentive Plan (the
“Plan”).  Statement No. 123(R) requires the Company 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 an
      employee is required to provide service in exchange for the award, generally
      referred to as the requisite service period, and is included as a component
      of
      general and administrative expenses.  During the three month period
      ended December 31, 2007, the Company recorded a net stock-based compensation
      credit of $387,000, while during the nine month period ended December 31, 2007,
      the Company recorded net stock-based compensation costs of
      $758,000.  At December 31, 2007, management determined that the
      Company would not meet the performance goals associated with the grants of
      restricted stock to management and employees in October 2005 and July
      2006.  In accordance with Statement No. 123(R), management reversed
      previously recorded stock-based compensation costs of $538,000 and $394,000
      related to the October 2005 and July 2006 grants, respectively.





The
      Company recorded non-cash compensation expense of $215,000 during the three
      month period ended December 31, 2006, and net non-cash compensation of $439,000
      for the nine month period ended December 31,




-8-


2006.  During
      the three month period ended June 30, 2006, the Company recorded a net non-cash
      compensation credit of $9,000 as a result of the reversal of compensation
      charges in the amount of $142,000 associated with the departure of a former
      member of management.





Income
                Taxes


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





In
      June 2006, the FASB issued FASB Interpretation No. 48, “Accounting for
      Uncertainty in Income Taxes--an interpretation of FASB Statement 109” (“FIN
      48”), which clarifies the accounting for uncertainty in income taxes recognized
      in a company’s financial statements in accordance with Statement No.
      109.  FIN 48 prescribes a recognition threshold and measurement
      attributes for the financial statement recognition and measurement of a tax
      position taken or expected to be taken in a tax return.  As a result,
      the Company has applied a more-likely-than-not recognition threshold for all
      tax
      uncertainties.  FIN 48 allows the recognition of only those tax
      benefits that have a greater than 50% likelihood of being sustained upon
      examination by the various taxing authorities.  The adoption of FIN
      48, effective April 1, 2007, did not result in a cumulative effect adjustment
      to
      the opening balance of retained earnings or adjustment to any of the components
      of assets, liabilities or equity in the consolidated balance sheet.





The
      Company is subject to federal and state taxation in the US, as well as various
      foreign jurisdictions.  The Company remains subject to examination by
      tax authorities for years after 2003.





The
      Company classifies penalties and interest related to unrecognized tax benefits
      as income tax expense in the Statement of Operations.





Derivative
                Instruments


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





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





Earnings
      Per Share


Basic
      earnings per share is calculated based on income available to common
      stockholders and the weighted-average number of shares outstanding during the
      reporting period.  Diluted earnings per share is calculated based on
      income available to common stockholders and the weighted-average number of
      common and potential common shares outstanding during the reporting
      period.  Potential common shares, composed of the incremental common
      shares issuable upon the exercise of stock options, stock appreciation rights
      and unvested restricted shares, are included in the earnings per share
      calculation to the extent that they are dilutive.





Fair
      Value of Financial Instruments


The
      carrying value of cash, accounts receivable and accounts payable at both
      December 31, 2007 and March 31, 2007 approximates fair value due to the
      short-term nature of these instruments. The carrying value of
      long-term




-9-


debt
      at both December 31, 2007 and March 31, 2007 approximates fair value based
      on
      interest rates for instruments with similar terms and maturities.





Recently
                Issued Accounting Standards


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 recognize all assets acquired and
      liabilities assumed in the transaction; establishes acquisition-date fair value
      as the amount to be ascribed to the acquired assets and liabilities and 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.  Earlier
      application of Statement 141(R) is prohibited.





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 Company is evaluating the impact that the adoption of
      Statement No. 159 will have on its 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 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 November
      14, 2007, 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 Company is evaluating the impact that the adoption of Statement
      No. 157 will have on its consolidated financial statements.





Management
      has reviewed
      and continues to monitor the actions of the various financial and regulatory
      reporting agencies and is currently not aware of any other pronouncement that
      could have a material impact on the Company’s consolidated financial
      position, results of operations or cash flows.








2.
            Accounts
                Receivable





Accounts
      receivable consist of the following (in thousands):


December
                31,
              2007
            
            
            March
                31,
              2007Accounts
                receivable
            
            $
            39,125
            
            
            $
            35,274Other
                receivables
            
            
            1,548
            
            
            
            1,68140,673
            
            
            
            36,955Less
                allowances for
                discounts, returns and
              uncollectible
                accounts
            
            
            (1,696
            )
            
            
            (1,788
            )$
            38,977
            
            
            $
            35,167








-10-


3.
            Inventories





Inventories
      consist of the
      following (in thousands):


December
                31,
              2007
            
            
            March
                31,
              2007Packaging
                and raw
                materials
            
            $
            2,575
            
            
            $
            2,842Finished
                goods
            
            
            28,084
            
            
            
            27,331$
            30,659
            
            
            $
            30,173





Inventories
      are shown net
      of allowances for obsolete and slow moving inventory of $1.5 million and $1.8
      million at December
      31, 2007 and March 31, 2007, respectively.








4.
            Property
                and Equipment





Property
      and equipment consist of the following (in thousands):


December
                31,
              2007
            
            
            March
                31,
              2007Machinery
            
            $
            1,407
            
            
            $
            1,480Computer
                equipment
            
            
            612
            
            
            
            566Furniture
                and
                fixtures
            
            
            205
            
            
            
            247Leasehold
                improvements
            
            
            344
            
            
            
            3722,568
            
            
            
            2,665Accumulated
                depreciation
            
            
            (1,131
            )
            
            
            (1,216
            )$
            1,437
            
            
            $
            1,449








5.
            Goodwill





A
      reconciliation of the activity affecting goodwill by operating segment is as
      follows (in thousands):





Over-the-Counter
              Healthcare
            
            
            Household
              Cleaning
            
            
            Personal
              Care
            
            
            ConsolidatedBalance
–
March
                31,
                2007
            
            $
            235,647
            
            
            $
            72,549
            
            
            $
            2,751
            
            
            $
            310,947Acquisition
                purchase
                price adjustments
            
            
            (2,032
            )
            
            
            --
            
            
            
            --
            
            
            
            (2,032
            )Balance
–
December
                31, 2007
            
            $
            233,615
            
            
            $
            72,549
            
            
            $
            2,751
            
            
            $
            308,915








-11-


6.
            Intangible
                Assets





A
      reconciliation of the activity affecting intangible assets is as follows (in
      thousands):





Indefinite
              Lived
              Trademarks
            
            
            Finite
              Lived
              Trademarks
            
            
            Non
              Compete
              Agreement
            
            
            TotalsCarrying
                AmountsBalance
–
March
                31,
                2007
            
            $
            544,963
            
            
            $
            139,470
            
            
            $
            196
            
            
            $
            684,629Additions
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            --Balance
–
December
                31, 2007
            
            $
            544,963
            
            
            $
            139,470
            
            
            $
            196
            
            
            $
            684,629Accumulated
                AmortizationBalance
–
March
                31,
                2007
            
            $
            --
            
            
            $
            27,375
            
            
            $
            97
            
            
            $
            27,472Additions
            
            
            --
            
            
            
            7,847
            
            
            
            33
            
            
            
            7,880Balance
–
December
                31, 2007
            
            $
            --
            
            
            $
            35,222
            
            
            $
            130
            
            
            $
            35,352








At
      December 31, 2007, intangible assets are expected to be amortized over a period
      of five to 30 years as follows (in thousands):





Year
                Ending December 312008
            
            $
            10,5052009
            
            
            9,4422010
            
            
            9,0712011
            
            
            9,0712012
            
            
            9,071Thereafter
            
            
            57,154$
            104,314








7.
            Other
                Accrued Liabilities





Other
      accrued liabilities consist of the following (in thousands):





December
                31,
              2007
            
            
            March
                31,
              2007Accrued
                marketing
                costs
            
            $
            7,537
            
            
            $
            5,687Accrued
                payroll
            
            
            2,515
            
            
            
            3,721Accrued
                commissions
            
            
            660
            
            
            
            335Other
            
            
            999
            
            
            
            762$
            11,711
            
            
            $
            10,505








-12-


8.
            Long-Term
                Debt





Long-term
      debt consists of the following (in thousands):


December
                31,
              2007
            
            
            March
                31,
              2007Senior
                revolving
                credit facility (“Revolving Credit Facility”), which expires on April 6,
                2009 and is available for maximum borrowings of up to $60.0
                million.  The Revolving Credit Facility bears interest at the
                Company’s option at either the prime rate plus a variable margin or LIBOR
                plus a variable margin.  The variable margins range from 0.75%
                to 2.50% and at December 31, 2007, the interest rate on the Revolving
                Credit Facility was 8.25% per annum.  The Company is also
                required to pay a variable commitment fee on the unused portion of
                the
                Revolving Credit Facility.  At December 31, 2007, the commitment
                fee was 0.50% of the unused line.  The Revolving Credit Facility
                is collateralized by substantially all of the Company’s
                assets.
            
            $
            --
            
            
            $
            --Senior
                secured term
                loan facility (“Tranche B Term Loan Facility” and together with the
                Revolving Credit Facility, the “Senior Credit Facility”) that bears
                interest at the Company’s option at either the prime rate plus a margin of
                1.25% or LIBOR plus a margin of 2.25%.  At December 31, 2007,
                the
                average interest rate on the Tranche B Term Loan Facility was
                6.98%.  Principal payments of $887,500 plus accrued interest are
                payable quarterly.  At December 31, 2007, the Company may borrow
                up to a maximum amount of $200.0 million under the Tranche B Term
                Loan
                Facility.  Current amounts outstanding under the Tranche B Term
                Loan Facility mature on April 6, 2011, while any additional amounts
                borrowed will mature on October 6, 2011.  The Tranche B Term
                Loan Facility is collateralized by substantially all of the Company’s
                assets.
            
            
            300,225
            
            
            
            337,350Senior
                Subordinated
                Notes that bear interest at 9.25% which is payable on April 15th
                and October 15th
                of each year.  The Senior Subordinated Notes mature on April 15,
                2012; however, the Company may redeem some or all of the Senior
                Subordinated Notes on or prior to April 15, 2008 at a redemption
                price
                equal to 100% plus a make-whole premium, and after April 15, 2008,
                at
                redemption prices set forth in the Indenture governing the Senior
                Subordinated Notes.  The Senior Subordinated Notes are
                unconditionally guaranteed by Prestige Brands Holdings, Inc. and
                its
                domestic wholly-owned subsidiaries other than Prestige Brands, Inc.,
                the
                issuer.  Each of these guarantees is joint and
                several.  There are no significant restrictions on the ability
                of any of the guarantors to obtain funds from their
                subsidiaries.
            
            
            126,000
            
            
            
            126,000426,225
            
            
            
            463,350Current
                portion of
                long-term debt
            
            
            (3,550
            )
            
            
            (3,550
            )$
            422,675
            
            
            $
            459,800





Effective
      as of December
      19, 2006: (i) a Second Supplemental Indenture (“Second Supplemental Indenture”),
      and (ii) a Guaranty Supplement (“Indenture Guaranty Supplement”) were entered
      into with the trustee for the holders




-13-


of
      the
      Senior Subordinated Notes.  The Second Supplemental Indenture
      supplements and amends the Indenture, dated as of April 6, 2004, as supplemented
      on October 6, 2004 (“Indenture”).  Pursuant to the terms of the Second
      Supplemental Indenture and the Indenture Guaranty Supplement, Prestige
      Brands Holdings, Inc. agreed to guaranty all of the obligations of Prestige
      Brands, Inc., an indirect wholly-owned subsidiary of Prestige Brands
      Holdings, Inc. (“PBI”), set forth in the Indenture governing PBI’s Senior
      Subordinated Notes.





Also
      effective as of December 19, 2006, a Joinder Agreement (“Joinder Agreement”) and
      a Guaranty Supplement (“Credit Agreement Guaranty Supplement”) were entered into
      with the administrative agent for the lenders under the Senior Credit
      Facility.  Pursuant to the terms of the Joinder Agreement and the
      Credit Agreement Guaranty Supplement, Prestige Brands Holdings, Inc. agreed
      to become a party to the Pledge and Security Agreement (“Security Agreement”)
      and the Guaranty (“Credit Agreement Guaranty”), each dated as of April 6, 2004,
      by PBI and certain of its affiliates in favor of the lenders.  The
      Security Agreement and the Credit Agreement Guaranty secure the performance
      by
      PBI of its obligations under the Credit Agreement, dated as of April 6, 2004,
      as
      amended (“Credit Agreement”), by granting security interests to PBI’s lenders in
      collateral owned by the Company and certain of its subsidiaries and providing
      guaranties of such obligations by certain of PBI’s affiliates.





The
      Senior Credit Facility contains various financial covenants, including
      provisions that require the Company to maintain certain leverage ratios,
      interest coverage ratios and fixed charge coverage ratios.  The Senior
      Credit Facility and the Indenture also contain provisions that restrict the
      Company from undertaking specified corporate actions, such as asset
      dispositions, acquisitions, dividend payments, repurchase of common shares
      outstanding, changes of control, incurrence of indebtedness, creation of liens,
      making of loans and transactions with affiliates.  Additionally, the
      Senior Credit Facility and the Indenture contain cross-default provisions
      whereby a default pursuant to the terms and conditions of either indebtedness
      will cause a default on the remaining indebtedness.  At December 31,
      2007, the Company was in compliance with its applicable financial and other
      covenants under the Senior Credit Facility and the Indenture.





Future
      principal payments required in accordance with the terms of the Senior Credit
      Facility and the Indenture are as follows (in thousands):





Year
                Ending December 312008
            
            $
            3,5502009
            
            
            3,5502010
            
            
            3,5502011
            
            
            289,5752012
            
            
            126,000$
            426,225





In
      an
      effort to mitigate the impact of changing interest rates, the Company entered
      into interest rate cap agreements with various financial
      institutions.  In June 2004, the Company purchased a 5% interest rate
      cap with a notional amount of $20.0 million which expired in June
      2006.  In March 2005, the Company purchased interest rate cap
      agreements with a total notional amount of $180.0 million and cap rates ranging
      from 3.25% to 3.75%.  On May 31, 2006, an interest rate cap agreement
      with a notional amount of $50.0 million and a 3.25% cap rate
      expired.  Additionally, an interest rate cap agreement with a notional
      amount of $80.0 million and a 3.50% cap rate expired on May 30,
      2007.  The remaining agreement, with a notional amount of $50.0
      million and a cap rate of 3.75%, terminates on May 30, 2008.  The
      Company is accounting for the interest rate cap agreements as cash flow
      hedges.  The fair values of the interest rate cap agreements, which
      are included in other long-term assets, were $241,000 and $1.2 million at
      December 31, 2007 and March 31, 2007,
      respectively.




-14-


9.
            Stockholders’
                Equity





The
      Company is authorized to issue 250.0 million shares of common stock, $0.01
      par
      value per share, and 5.0 million shares of preferred stock, $0.01 par value
      per
      share. The Board of Directors may direct the issuance of the undesignated
      preferred stock in one or more series and determine preferences, privileges
      and
      restrictions thereof.





Each
      share of common stock has the right to one vote on all matters submitted to
      a
      vote of stockholders. The holders of common stock are also entitled to receive
      dividends whenever funds are legally available and when declared by the Board
      of
      Directors, subject to prior rights of holders of all classes of stock
      outstanding having priority rights as to dividends. No dividends have been
      declared or paid on the Company’s common stock through December 31,
      2007.








10.
            Earnings
                Per Share





The
      following table sets forth the computation of basic and diluted earnings per
      share (in thousands):





Three
                Months Ended
              December
                31
            
            
            Nine
                Months Ended
              December
                312007
            
            
            2006
            
            
            2007
            
            
            2006NumeratorNet
                income
            
            $
            8,419
            
            
            $
            10,643
            
            
            $
            23,568
            
            
            $
            27,683DenominatorDenominator
                for
                basic earnings per share – weighted average shares
            
            
            49,799
            
            
            
            49,535
            
            
            
            49,744
            
            
            
            49,425Dilutive
                effect of
                unvested restricted common stock
            
            
            236
            
            
            
            489
            
            
            
            296
            
            
            
            591Denominator
                for
                diluted earnings
              per
                share
            
            
            50,035
            
            
            
            50,024
            
            
            
            50,040
            
            
            
            50,016Earnings
                per Common Share:Basic
            
            $
            0.17
            
            
            $
            0.21
            
            
            $
            0.47
            
            
            $
            0.56Diluted
            
            $
            0.17
            
            
            $
            0.21
            
            
            $
            0.47
            
            
            $
            0.55





At
      December 31, 2007, 198,000 shares of restricted stock issued to management
      and
      employees prior to the Company’s initial public offering are unvested and
      excluded from the calculation of basic earnings per share; however, such shares
      are included in the calculation of diluted earnings per share.  At
      December 31, 2007, 160,000 shares of restricted stock granted to management,
      directors and employees, subject only to time vesting requirements, have been
      excluded from basic earnings per share; however, such shares are included in
      the
      calculation of diluted earnings per share.  Additionally, 378,000
      shares of restricted stock granted to management and employees, as well as
      16,000 stock appreciation rights have been excluded from the calculation of
      both
      basic and diluted earnings per share since vesting of such shares is subject
      to
      contingencies, while options to purchase 255,000 shares of common stock have
      been excluded from diluted earnings per shares because their inclusion would
      be
      anti-dilutive.





At
      December 31, 2006, 399,000 shares of restricted stock issued to management
      and
      employees prior to the Company’s initial public offering were unvested and
      excluded from the calculation of basic earnings per share; however, such shares
      are included in the calculation of diluted earnings per share.  At
      December 31, 2007, 41,000 shares of restricted stock granted to management,
      directors and employees, subject only to time vesting requirements, have been
      excluded from basic earnings per share; however, such shares are included in
      the
      calculation of diluted earnings per share.  Additionally, at December
      31, 2006, 270,000 shares of restricted stock




-15-


granted
      to management and
      employees have been excluded from the calculation of both basic and diluted
      earnings per share since vesting of such shares is subject to
      contingencies.








11.
            Share-Based
                Compensation





In
      connection with the Company’s initial public offering, the Board of Directors
      adopted the Plan which provides for the grant, to a maximum of 5.0 million
      shares, of stock options, restricted stock units, deferred stock units and
      other
      equity-based awards.  Directors, officers and other employees of the
      Company and its subsidiaries, as well as others performing services for the
      Company, are eligible for grants under the Plan.  The Company believes
      that such awards better align the interests of its employees with those of
      its
      stockholders.





During
      2006, the Company adopted 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.  During the nine month
      period ended December 31, 2007, the Company recorded compensation costs and
      related tax benefits of $758,000 and $288,000, respectively, while during the
      nine month period ended December 31, 2006, the Company recorded compensation
      costs and related tax benefits of $439,000 and $169,000,
      respectively.





Restricted
      Shares


Restricted
      shares granted
      under the Plan generally vest in 3 years, contingent on attainment of Company
      performance goals, including both revenue and earnings per share growth targets,
      or time vesting, as determined by the Compensation Committee of the Board of
      Directors.  Certain restricted share awards provide for accelerated
      vesting if there is a change of control.  The fair value of nonvested
      restricted shares is determined as the closing price of the Company’s common
      stock on the day preceding the grant date.  The weighted-average
      grant-date fair value of restricted shares granted during the nine month period
      ended December 31, 2007 was $12.52.





A
      summary of the Company’s restricted shares granted under the Plan is presented
      below:





Restricted
                Shares
            
            Shares
              (000)
            
            
            Weighted-Average
              Grant-Date
              Fair
                ValueNonvested
                at March
                31, 2006
            
            
            198.0
            
            
            $
            12.32Granted
            
            
            156.5
            
            
            
            9.83Vested
            
            
            (13.1
            )
            
            
            10.67Forfeited
            
            
            (47.0
            )
            
            
            12.47Nonvested
                at
                December 31, 2006
            
            
            294.4
            
            
            $
            11.05Nonvested
                at March
                31, 2007
            
            
            294.4
            
            
            $
            11.05Granted
            
            
            292.0
            
            
            
            12.52Vested
            
            
            (24.8
            )
            
            
            10.09Forfeited
            
            
            (23.2
            )
            
            
            11.39Nonvested
                at
                December 31, 2007
            
            
            538.4
            
            
            $
            11.88








-16-


Options


The
      Plan provides that the exercise price of the option granted shall be no less
      than the fair market value of the Company's common stock on the date the option
      is granted.  Options granted have a term of no greater than 10 years
      from the date of grant and vest in accordance with a schedule determined at
      the
      time the option is granted, generally 3 years.





The
      fair value of each option award is estimated on the date of grant using the
      Black-Scholes Option Pricing Model (“Black-Scholes Model”) that uses the
      assumptions noted in the following table.  Expected volatilities are
      based on the historical volatility of the Company's common stock and other
      factors, including the historical volatilities of comparable
      companies.  The Company uses appropriate historical data, as well as
      current data, to estimate option exercise and employee termination
      behaviors.  Employees that are expected to exhibit similar exercise or
      termination behaviors are grouped together for the purposes of
      valuation.  The expected terms of the options granted are derived from
      management’s estimates and information derived from the public filings of
      companies similar to the Company and represent the period of time that options
      granted are expected to be outstanding.  The risk-free rate represents
      the yield on U.S. Treasury bonds with a maturity equal to the expected term
      of
      the granted option.  The weighted-average grant-date fair value of the
      options granted during the nine month period ended December 31, 2007 was
      $5.30.  There were no options granted during 2006.





2007
            
            
            2006Expected
                volatility
            
            
            33.2
            %
            
            
            --Expected
                dividends
            
            
            --
            
            
            
            --Expected
                term in
                years
            
            
            6.0
            
            
            
            --Risk-free
                rate
            
            
            4.5
            %
            
            
            --





A
      summary of option activity under the Plan is as follows:





Options
            
            Shares
              (000)
            
            
            Weighted-Average
              Exercise
              Price
            
            
            Weighted-
              Average
              Remaining
              Contractual
                TermOutstanding
                at March
                31, 2006
            
            
            61.8
            
            
            $
            12.95
            
            
            
            4.3Granted
            
            
            --
            
            
            
            --
            
            
            
            --Exercised
            
            
            --
            
            
            
            --
            
            
            
            --Forfeited
                or
                expired
            
            
            (61.8
            )
            
            
            12.95
            
            
            
            --Outstanding
                at
                December 31, 2006
            
            
            --
            
            
            $
            --
            
            
            
            --Outstanding
                at March
                31, 2007
            
            
            --
            
            
            $
            --
            
            
            
            --Granted
            
            
            255.1
            
            
            
            12.86
            
            
            
            10.0Exercised
            
            
            --
            
            
            
            --
            
            
            
            --Forfeited
                or
                expired
            
            
            --
            
            
            
            --
            
            
            
            --Outstanding
                at
                December 31, 2007
            
            
            255.1
            
            
            $
            12.86
            
            
            
            10.0Exercisable
                at
                December 31, 2007
            
            
            --
            
            
            $
            --
            
            
            
            --








Stock
      Appreciation Rights (“SARS”)


The
      Plan provides that the issuance price of a SAR shall be no less than the market
      price of the Company’s common stock on the date the SAR is
      granted.  SARS may be granted with a term of no greater than 10 years
      from the date of grant and will vest in accordance with a schedule determined
      at
      the time the SAR is granted, generally 3 years.  The Board of
      Directors, in its sole discretion, may settle the Company’s obligation to the
      executive under a SAR in shares of the Company’s common stock, cash, other
      securities of the Company or any combination thereof.  The
      weighted-average grant date fair value of the SARS granted during the nine
      month
      period ended December 31, 2006 was $3.68.  There were no SARS granted
      during the nine month period ended




-17-


December
      31,
      2007.  The fair value of each SAR award was estimated on the date of
      grant using the Black-Scholes Model using the assumptions noted in the following
      table.





2007
            
            
            2006Expected
                volatility
            
            
            --
            
            
            
            50.0
            %Expected
                dividends
            
            
            --
            
            
            
            --Expected
                term in
                years
            
            
            --
            
            
            
            2.8Risk-free
                rate
            
            
            --
            
            
            
            5.0
            %





A
      summary of SARS activity under the Plan is as follows:





SARS
            
            Shares
              (000)
            
            
            Grant
              Date
              Stock
              Price
            
            
            Weighted-
              Average
              Remaining
              Contractual
                TermOutstanding
                at March
                31, 2006
            
            
            --
            
            
            $
            --
            
            
            
            --Granted
            
            
            16.1
            
            
            
            9.97
            
            
            
            2.75Forfeited
                or
                expired
            
            
            --
            
            
            
            --
            
            
            
            --Outstanding
                at
                December 31, 2006
            
            
            16.1
            
            
            $
            9.97
            
            
            
            2.5Exercisable
                at
                September 30, 2006
            
            
            --
            
            
            $
            --
            
            
            
            --Outstanding
                at March
                31, 2007
            
            
            16.1
            
            
            $
            9.97
            
            
            
            2.00Granted
            
            
            --
            
            
            
            --
            
            
            
            --Forfeited
                or
                expired
            
            
            --
            
            
            
            --
            
            
            
            --Outstanding
                at
                December 31, 2007
            
            
            16.1
            
            
            $
            9.97
            
            
            
            1.50Exercisable
                at
                December 31, 2007
            
            
            --
            
            
            $
            --
            
            
            
            --





At
      December 31, 2007 and March 31, 2007, there were $3.5 million and $1.4 million,
      respectively, of unrecognized compensation costs related to nonvested
      share-based compensation arrangements under the Plan based on management’s
      estimate of the shares that will ultimately vest.  The Company expects
      to recognize such costs over the next 2.75 years.  However, certain of
      the restricted shares vest upon the attainment of Company performance goals
      and
      if such goals are not met, no compensation costs would ultimately be recognized
      and any previously recognized compensation cost would be reversed.  At
      December 31, 2007, there were 4.1 million shares available for issuance under
      the Plan.








12.
            Income
                Taxes





Income
      taxes are recorded in the Company’s quarterly financial statements based on the
      Company’s estimated annual effective income tax rate.  The effective
      tax rate used in the calculation of income taxes was 38.0% for the three month
      and nine month periods ended December 31, 2007.  During the three
      month and nine month periods ended December 31, 2006, the effective tax rates
      used in the calculation of income taxes were 25.9% and 34.6%,
      respectively.  The reduction in the income tax rates during the 2006
      period results from the implementation of initiatives to obtain operational,
      as
      well as tax, efficiencies during the fiscal year ended March 31,
      2007.





At
      December 31, 2007, Medtech Products Inc., a wholly-owned subsidiary of the
      Company, had a net operating loss carryforward of approximately $2.6 million
      which may be used to offset future taxable income of the consolidated group
      and
      which begins to expire in 2020.  The net operating loss carryforward
      is subject to an annual limitation as to usage under Internal Revenue Code
      Section 382 of approximately $240,000.





-18-





13.
            Commitments
                and Contingencies





The
      legal proceedings in which we are involved have been disclosed previously in
      our
      Annual Report on Form 10-K for the fiscal year ended March 31, 2007, our
      Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2007, our
      Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2007
      and our Current Report on Form 8-K filed with the SEC on October 24, 2007.
      The
      following disclosure contains recent developments in our pending legal
      proceedings which we deem to be material to the Company and should be read
      in
      conjunction with the legal proceedings disclosure contained in Part I, Item
      3 of
      our Annual Report on Form 10-K for the fiscal year ended March 31, 2007, Part
      II, Item 1 of our Quarterly Report on Form 10-Q for the fiscal quarter ended
      June 30, 2007, Part II, Item 1 of our Quarterly Report on Form 10-Q for the
      fiscal quarter ended September 30, 2007 and our Current Report on Form 8-K
      filed
      with the SEC on October 24, 2007.





Securities
      Class Action Litigation


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 is scheduled to be held in Court on February 8,
      2008.  While discovery in the action 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 reasonably estimate the
      potential range of loss, if any.





OraSure
      Technologies Arbitration


On
      December 18, 2007, the arbitration panel concluded the arbitration by issuing
      a
      Final Award for certain counsel fees and arbitrator compensation to be paid
      by
      the Company.  Pursuant to the Final Award, the Company has made
      payment to OraSure Technologies, Inc. in an amount that did not have a material
      impact on the Company’s results from operations for the three or nine month
      periods ended December 31, 2007.  No further arbitration proceedings
      are expected by the Company.





DenTek
      Oral Care, Inc. Litigation


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.  Discovery requests have been served by the parties and
      discovery is ongoing.  A hearing before the Court is scheduled to be held
      on February 14, 2008, regarding pending procedural motions and
      discovery.





In
      addition to the matters described above, the Company is involved from time
      to
      time in other routine legal matters and other claims incidental to its
      business.  The Company reviews outstanding claims and proceedings
      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.





Lease
      Commitments


The
      Company has operating leases for office facilities and equipment in New
      York and Wyoming, which expire at various dates through 2011.





-19-


The
      following summarizes future minimum lease payments for the Company’s operating
      leases (in thousands) :





Facilities
            
            
            Equipment
            
            
            TotalYear
                Ending December 31,2008
            
            $
            650
            
            
            $
            122
            
            
            $
            7722009
            
            
            200
            
            
            
            89
            
            
            
            2892010
            
            
            --
            
            
            
            47
            
            
            
            472011
            
            
            --
            
            
            
            3
            
            
            
            3$
            850
            
            
            $
            261
            
            
            $
            1,111





Rent
      expense for the three month periods ended December 31, 2007 and 2006 was
      $150,000 and $144,000, respectively, while during the nine month periods ended
      December 31, 2007 and 2006, rent expense was $448,000 and $418,000,
      respectively.








14.
            Concentrations
                of Risk





The
      Company’s sales are concentrated in the areas of over-the-counter healthcare,
      household cleaning and personal care products.  The Company sells its
      products to mass merchandisers, food and drug accounts, and dollar and club
      stores.  During the three and nine month periods ended December 31,
      2007 approximately 60.7% and 57.8%, respectively, of the Company’s total sales
      were derived from its four major brands, while during the three and nine month
      periods ended December 31, 2006, approximately 55.5% and 58.6%, respectively,
      of
      the Company’s total sales were derived from these four major
      brands.  During the three and nine month periods ended December 31,
      2007, approximately 23.4% and 23.6%, respectively, of the Company’s sales were
      made to one customer, while during the three and nine month periods ended
      December 31, 2006, 21.4% and 23.6% of sales were to this customer.  At
      December 31, 2007, approximately 19.4% of accounts receivable were owed by
      the
      same customer.





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





The
      Company has relationships with over 40 third-party manufacturers. Of those,
      the
      top 10 manufacturers produced items that accounted for approximately 79% of
      the
      Company’s gross sales during the nine months ended December 31,
      2007.  The Company does not have long-term contracts with 4 of these
      manufacturers and certain manufacturers of various smaller brands, which
      collectively, represented approximately 35% of the Company’s gross sales for
      2007.  The lack of manufacturing agreements for these products exposes
      the Company to the risk that a manufacturer could stop producing the Company’s
      products at any time, for any reason or fail to provide the Company with the
      level of products the Company needs to meet its customers’
demands.  Without adequate supplies of merchandise to sell to the
      Company’s customers, sales would decrease materially and the Company’s business
      would suffer.  In addition, the Company's manufacturers could impose price
      increases that it is unable to pass through to its customers.  Such a price
      increase could adversely affect a product's gross profit and ultimately the
      Company's profitability.








15.
            Business
                Segments





Segment
      information has
      been prepared in accordance with FASB Statement No. 131, “Disclosures about
      Segments of an Enterprise and Related Information.”  The Company’s
      operating and reportable segments consist of (i) Over-the-Counter Healthcare,
      (ii) Household Cleaning and (iii) Personal Care.





-20-


There
      were no inter-segment sales or transfers during any of the periods
      presented.  The Company evaluates the performance of its operating
      segments and allocates resources to them based primarily on contribution
      margin.





The
      table below summarizes information about the Company’s operating and reportable
      segments (in thousands).





Three
                Months Ended December 31, 2007Over-the-Counter
            
            
            Household
            
            
            PersonalHealthcare
            
            
            Cleaning
            
            
            Care
            
            
            ConsolidatedNet
                sales
            
            $
            45,015
            
            
            $
            29,568
            
            
            $
            5,061
            
            
            $
            79,644Other
                revenues
            
            
            51
            
            
            
            527
            
            
            
            --
            
            
            
            578Total
                revenues
            
            
            45,066
            
            
            
            30,095
            
            
            
            5,061
            
            
            
            80,222Cost
                of
                sales
            
            
            16,994
            
            
            
            18,332
            
            
            
            3,457
            
            
            
            38,783Gross
                profit
            
            
            28,072
            
            
            
            11,763
            
            
            
            1,604
            
            
            
            41,439Advertising
                and
                promotion
            
            
            7,045
            
            
            
            2,271
            
            
            
            256
            
            
            
            9,572Contribution
                margin
            
            $
            21,027
            
            
            $
            9,492
            
            
            $
            1,348
            
            
            
            31,867Other
                operating
                expenses
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            8,962Operating
                income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            22,905Other
                (income)
                expense
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            9,326Provision
                for income
                taxes
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            5,160Net
                income
            
            
            
            
            
            
            
            
            
            
            
            
            
            $
            8,419








Nine
                Months Ended December 31, 2007Over-the-Counter
            
            
            Household
            
            
            PersonalHealthcare
            
            
            Cleaning
            
            
            Care
            
            
            ConsolidatedNet
                sales
            
            $
            137,444
            
            
            $
            89,838
            
            
            $
            17,243
            
            
            $
            244,525Other
                revenues
            
            
            51
            
            
            
            1,566
            
            
            
            28
            
            
            
            1,645Total
                revenues
            
            
            137,495
            
            
            
            91,404
            
            
            
            17,271
            
            
            
            246,170Cost
                of
                sales
            
            
            52,068
            
            
            
            56,312
            
            
            
            10,495
            
            
            
            118,875Gross
                profit
            
            
            85,427
            
            
            
            35,092
            
            
            
            6,776
            
            
            
            127,295Advertising
                and
                promotion
            
            
            21,080
            
            
            
            6,474
            
            
            
            821
            
            
            
            28,375Contribution
                margin
            
            $
            64,347
            
            
            $
            28,618
            
            
            $
            5,955
            
            
            
            98,920Other
                operating
                expenses
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            32,299Operating
                income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            66,621Other
                (income)
                expense
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            28,608Provision
                for income
                taxes
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            14,445Net
                income
            
            
            
            
            
            
            
            
            
            
            
            
            
            $
            23,568








-21-


Three
                Months Ended December 31, 2006Over-the-Counter
              Healthcare
            
            
            Household
              Cleaning
            
            
            Personal
              Care
            
            
            ConsolidatedNet
                sales
            
            $
            45,574
            
            
            $
            28,155
            
            
            $
            5,835
            
            
            $
            79,564Other
                revenues
            
            
            --
            
            
            
            560
            
            
            
            --
            
            
            
            560Total
                revenues
            
            
            45,574
            
            
            
            28,715
            
            
            
            5,835
            
            
            
            80,124Cost
                of
                sales
            
            
            15,800
            
            
            
            17,787
            
            
            
            3,179
            
            
            
            36,766Gross
                profit
            
            
            29,774
            
            
            
            10,928
            
            
            
            2,656
            
            
            
            43,358Advertising
                and
                promotion
            
            
            7,089
            
            
            
            1,595
            
            
            
            268
            
            
            
            8,952Contribution
                margin
            
            $
            22,685
            
            
            $
            9,333
            
            
            $
            2,388
            
            
            
            34,406Other
                operating
                expenses
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            9,872Operating
                income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            24,534Other
                (income)
                expense
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            10,156Provision
                for income
                taxes
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            3,735Net
                income
            
            
            
            
            
            
            
            
            
            
            
            
            
            $
            10,643








Nine
                Months Ended December 31, 2006Over-the-Counter
              Healthcare
            
            
            Household
              Cleaning
            
            
            Personal
              Care
            
            
            ConsolidatedNet
                sales
            
            $
            131,427
            
            
            $
            88,625
            
            
            $
            19,112
            
            
            $
            239,164Other
                revenues
            
            
            --
            
            
            
            1,434
            
            
            
            --
            
            
            
            1,434Total
                revenues
            
            
            131,427
            
            
            
            90,059
            
            
            
            19,112
            
            
            
            240,598Cost
                of
                sales
            
            
            48,198
            
            
            
            54,882
            
            
            
            11,270
            
            
            
            114,350Gross
                profit
            
            
            83,229
            
            
            
            35,177
            
            
            
            7,842
            
            
            
            126,248Advertising
                and
                promotion
            
            
            19,573
            
            
            
            5,304
            
            
            
            932
            
            
            
            25,809Contribution
                margin
            
            $
            63,656
            
            
            $
            29,873
            
            
            $
            6,910
            
            
            
            100,439Other
                operating
                expenses
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            28,390Operating
                income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            72,049Other
                (income)
                expense
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            29,691Provision
                for income
                taxes
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            14,675Net
                income
            
            
            
            
            
            
            
            
            
            
            
            
            
            $
            27,683








During
      the three month periods ended December 31, 2007 and 2006, approximately 96.8%
      and 95.9%, respectively, of the Company’s sales were made to customers in the
      United States and Canada while during the nine month periods ended December
      31,
      2007 and 2006, approximately 96.0% and 95.6%, respectively, of sales




-22-


were
      made to customers in the US and Canada.  At December 31, 2007,
      substantially all of the Company’s long-term assets were located in the United
      States of America and have been allocated to the operating segments as
      follows:





Over-the-Counter
            
            
            Household
            
            
            PersonalHealthcare
            
            
            Cleaning
            
            
            Care
            
            
            ConsolidatedGoodwill
            
            $
            233,615
            
            
            $
            72,549
            
            
            $
            2,751
            
            
            $
            308,915Intangible
                assetsIndefinite
                lived
            
            
            374,070
            
            
            
            170,893
            
            
            
            --
            
            
            
            544,963Finite
                lived
            
            
            89,093
            
            
            
            11
            
            
            
            15,210
            
            
            
            104,314463,163
            
            
            
            170,904
            
            
            
            15,210
            
            
            
            649,277$
            696,778
            
            
            $
            243,453
            
            
            $
            17,961
            
            
            $
            958,192











-23-


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








The
      following discussion of our financial condition and results of operations should
      be read together with the consolidated financial statements and the related
      notes included in our Annual Report on Form 10-K for the fiscal year ended
      March
      31, 2007. 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 Part I, Item 1A., “Risk Factors” in our Annual Report
      on Form 10-K for the fiscal year ended March 31, 2007, as well as those
      described in future reports filed with the SEC.  See also “Cautionary
      Statement Regarding Forward-Looking Statements” on page 40 of this Quarterly
      Report on Form 10-Q.





General


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, Canada and certain international markets.  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 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.





In
      October 2005, we completed the acquisition of the “Chore Boy®” brand of cleaning
      pads and sponges.  The purchase price of this acquisition was $22.6
      million, including direct costs of $400,000.  We purchased the Chore
      Boy brand with funds generated from operations.





In
      November 2005, we completed the acquisition of Dental Concepts LLC, a marketer
      of therapeutic oral care products sold under “The Doctor’s®”
brand.  The purchase price of the ownership interests was
      approximately $30.2 million, including fees and expenses of the acquisition
      of
      $1.3 million.  We financed the acquisition price through the
      utilization of our Revolving Credit Facility in the amount of $30.0 million
      and
      cash on hand.





In
      September 2006, we completed the acquisition of Wartner USA B.V., a privately
      held Netherlands limited liability company, which owned the intellectual
      property associated with the “Wartner®” brand
      of
      over-the-counter wart treatment products.  The purchase price of this
      acquisition was $31.2 million, inclusive of direct costs of the acquisition
      of
      $216,000.  We purchased the Wartner brand with funds generated from
      operations and the assumption of approximately $5.0 million of contingent
      payments to the former owner of the Wartner brand.





-24-


Three
                Month Period Ended December 31, 2007 compared to the


Three
                Month Period Ended December 31, 2006








Revenues


2007
              Revenues
            
            
            %
            
            
            2006
              Revenues
            
            
            %
            
            
            Increase
              (Decrease)
            
            
            %OTC
                Healthcare
            
            $
            45,066
            
            
            56.2
            
            
            $
            45,574
            
            
            
            56.9
            
            
            $
            (508
            )
            
            
            (1.1
            )Household
                Cleaning
            
            
            30,095
            
            
            37.5
            
            
            
            28,715
            
            
            
            35.8
            
            
            
            1,380
            
            
            
            4.8Personal
                Care
            
            
            5,061
            
            
            6.3
            
            
            
            5,835
            
            
            
            7.3
            
            
            
            (774
            )
            
            
            (13.3
            )$
            80,222
            
            
            100.0
            
            
            $
            80,124
            
            
            
            100.0
            
            
            $
            98
            
            
            
            0.1





Revenues
      for the three
      month period ended December 31, 2007 were essentially flat, increasing by
      $98,000, or 0.1%, versus the comparable period in 2006, primarily as a result
      of
      revenue growth in the Household Cleaning segment, offset by declines in the
      Over-the-Counter Healthcare and Personal Care segments.  Revenues from
      customers outside of North America, which represent 3.2% of total revenues,
      decreased 23% in 2007 versus the comparable period in 2006.





Over-the-Counter
      Healthcare Segment


Revenues
      of the
      Over-the-Counter Healthcare segment decreased by $508,000, or 1.1%, for 2007
      versus the comparable period in 2006.  Revenue increases for Murine,
      Clear eyes, New Skin and Compound W were offset by revenue decreases from
      Chloraseptic, Little Remedies and The Doctor’s brands.  Murine’s
      revenue increase is primarily the result of the MurineTM
      EarigateTM
      launch; a new product that helps prevent earwax build-up with its patented
      reverse spray technology.  Clear eyes and
      New Skin
      revenue increased as a result of increased retail
      consumption.  Compound W revenue increased as a result of improving
      consumption trends behind late wart season promotions.The
      decline in Chloraseptic is primarily the result of a weak cough/cold flu season
      with the number of sore throat incidences down 9% season to-date versus the
      prior year.  Little Remedies’ revenues were adversely impacted by the
      voluntary withdrawal of two medicated pediatric cough and cold products in
      October 2007.  Increased competition
      in
      the bruxism category resulted in lower sales ofThe Doctor’s®
NightGuardTM
      dental protector.





Household
      Cleaning Segment


Revenues
      of the Household
      Cleaning segment increased $1.4 million, or 4.8%, during the period versus
      the
      comparable period in 2006.   Revenues of the Comet® brand increased
      during
      the period as a result of Comet Mildew SpayGel, which was launched in the last
      quarter of fiscal 2007, and increased shipments of Comet Powder tothe
      dollar and club trade
      class of stores.The decline in Spic and Span’s revenue reflected a
      decline in consumer consumption.  Chore Boy sales declined as a result
      of weaker consumption and lower shipments to small grocer wholesale
      accounts.





Personal
      Care Segment


Revenues
      of the Personal
      Care segment declined $774,000, or 13.3%, for the period versus the comparable
      period in 2006.  All major brands in this segment experienced revenue
      declines during the period.  The decrease in revenue of Cutex®, Prell and
      Denorex® wasin line
      with consumption.








-25-


Gross
      Profit


2007
              Gross
                Profit
            
            
            %
            
            
            2006
              Gross
                Profit
            
            
            %
            
            
            Increase
              (Decrease)
            
            
            %OTC
                Healthcare
            
            $
            28,072
            
            
            
            62.3
            
            
            $
            29,774
            
            
            
            65.3
            
            
            $
            (1,702
            )
            
            
            (5.7
            )Household
                Cleaning
            
            
            11,763
            
            
            
            39.1
            
            
            
            10,928
            
            
            
            38.1
            
            
            
            835
            
            
            
            7.6Personal
                Care
            
            
            1,604
            
            
            
            31.7
            
            
            
            2,656
            
            
            
            45.5
            
            
            
            (1,052
            )
            
            
            (39.6
            )$
            41,439
            
            
            
            51.7
            
            
            $
            43,358
            
            
            
            54.1
            
            
            $
            (1,919
            )
            
            
            (4.4
            )





Gross
      profit for the three month period ended December 31, 2007 decreased by $1.9
      million, or 4.4%, versus the comparable period in 2006.  As a percent
      of total revenue, gross profit decreased from 54.1% in 2006 to 51.7% in
      2007.  The decrease in gross profit as a percent of revenues is
      primarily the result of unfavorable segment and product sales mix toward lower
      margin brands, an increase in promotional allowances and higher product costs
      in
      the Personal Care segment.  The sales increase in the Household
      Cleaning segment, which has a lower gross profit percentage than the overall
      Company, represented a higher proportion of the overall sales versus the same
      period in 2006.





Over-the-Counter
      Healthcare Segment


Gross
      profit for the Over-the-Counter Healthcare segment decreased $1.7 million,
      or
      5.7%, for 2007 versus the comparable period in 2006.  As a percent of
      OTC revenue, gross profit decreased from 65.3% for 2006 to 62.3% during
      2007.  The decrease in gross profit as a percent of revenues is the
      result of unfavorable product mix, higher promotional allowances and an increase
      in the returns reserve related to the Little Remedies medicated product
      withdrawal in October 2007.  The unfavorable product mix is related to
      an increase in revenue from Murine Earigate which has a lower gross profit
      margin than the segment’s average.





Household
      Cleaning Segment


Gross
      profit for the Household Cleaning segment increased by $835,000, or 7.6%, for
      2007 versus the comparable period in 2006.  As a percent of household
      cleaning revenue, gross profit increased from 38.1% for 2006 to 39.1% during
      2007.  The increase in gross profit percentage is primarily a result
      of lower distribution costs.





Personal
      Care Segment


Gross
      profit for the Personal Care segment decreased $1.1 million, or 39.6%, for
      2007
      versus the comparable period in 2006.  As a percent of personal care
      revenue, gross profit decreased from 45.5% for 2006 to 31.7% during
      2007.  The decrease in gross profit percentage was the result of
      higher product costs in the shampoo brands and increased inventory obsolescence
      costs related to Cutex.





Contribution
      Margin


2007
              Contribution
                Margin
            
            
            %
            
            
            2006
              Contribution
                Margin
            
            
            %
            
            
            Increase
              (Decrease)
            
            
            %OTC
                Healthcare
            
            $
            21,027
            
            
            
            46.7
            
            
            $
            22,685
            
            
            
            49.8
            
            
            $
            (1,658
            )
            
            
            (7.3
            )Household
                Cleaning
            
            
            9,492
            
            
            
            31.5
            
            
            
            9,333
            
            
            
            32.5
            
            
            
            159
            
            
            
            1.7Personal
                Care
            
            
            1,348
            
            
            
            26.6
            
            
            
            2,388
            
            
            
            40.9
            
            
            
            (1,040
            )
            
            
            (43.6
            )$
            31,867
            
            
            
            39.7
            
            
            $
            34,406
            
            
            
            42.9
            
            
            $
            (2,539
            )
            
            
            (7.4
            )





Contribution
      margin,
      defined as gross profit less advertising and promotional expenses, for the
      three
      month period ended December 31, 2007 decreased by $2.5 million, or 7.4%, versus
      the comparable period in 2006.  The contribution margin decrease was
      the result of the changes in sales and gross profit as previously discussed,
      and
      a $600,000, or a 6.9%, increase in advertising and promotional
      spending.  The increased advertising and promotional spending was
      primarily attributable to support behind the launches of Murine Earigate and
      Comet Mildew SprayGel.


-26-


Over-the-Counter
      Healthcare Segment


Contribution
      margin for
      the Over-the-Counter Healthcare segment decreased by $1.7 million, or 7.3%,
      for
      2007 versus the comparable period in 2006.  The contribution margin
      decrease was the result of the decrease in sales and gross profit as previously
      discussed, while advertising and promotional spending remained essentially
      flat.  An increase in television media support behind the launch of
      Murine Earigate was mostly offset with a decrease in support behind The Doctor’s
      NightGuard and Chloraseptic.





Household
      Cleaning Segment


Contribution
      margin for
      the Household Cleaning segment increased by $159,000, or 1.7%, for 2007 versus
      the comparable period in 2006.  The contribution margin increase was
      the result of an increase in gross profit as previously discussed, partially
      offset by a $700,000 increase in advertising and promotional
      spending.  The A&P increase was principally the result of
      increased television media support behind Comet Mildew SprayGel.





Personal
      Care Segment


Contribution
      margin for
      the Personal Care segment decreased $1.0 million, or 43.6%, for 2007 versus
      the
      comparable period in 2006.  The contribution margin decrease was
      primarily the result of the sales and gross profit decrease previously
      discussed.





General
      and Administrative


General
      and administrative
      expenses were $6.2 million for 2007 versus $7.1 million for
      2006.  Higher legal costs associated with intellectual property
      protective actions initiated by the Company in connection with The Doctor’s®
NightGuardTM
      dental protector were offset by a reduction in management incentive and
      long-term stock based compensation costs.  At December 31, 2007, the
      Company reversed previously recorded stock-based compensation of $932,000 upon
      management’s determination that it would not meet stated performance goals
      associated with grants of restricted stock to management and
      employees.





Depreciation
      and Amortization


Depreciation
      and
      amortization expense was essentially flat at $2.8 million for 2007 and
      2006.





Interest
      Expense


Net
      interest expense was $9.3 million for 2007 versus $10.2 million for
      2006.  The reduction in interest expense was the result of a lower
      level of indebtedness, partially offset by higher interest rates on our variable
      rate indebtedness.  The average cost of funds increased from 8.4% for
      2006 to 8.6% for 2007 while the average indebtedness decreased from $480.5
      million for 2006 to $431.7 million for 2007.





Income
      Taxes


The
      income tax provision for 2007 was $5.2 million, with an effective rate of 38.0%,
      compared to $3.7 million, with an effective rate of 26% for 2006.  The
      2006 period includes a $1.7 million tax benefit resulting from the reduction
      of
      the deferred income tax rate to 38.6% from 39.1% in connection with the
      implementation of initiatives to obtain operational, as well as tax,
      efficiencies.





-27-


Nine
                Month Period Ended December 31, 2007 compared to the


Nine
                Month Period Ended December 31, 2006








Revenues


2007
              Revenues
            
            
            %
            
            
            2006
              Revenues
            
            
            %
            
            
            Increase
              (Decrease)
            
            
            %OTC
                Healthcare
            
            $
            137,495
            
            
            
            55.9
            
            
            $
            131,427
            
            
            
            54.7
            
            
            $
            6,068
            
            
            
            4.6Household
                Cleaning
            
            
            91,404
            
            
            
            37.1
            
            
            
            90,059
            
            
            
            37.4
            
            
            
            1,345
            
            
            
            1.5Personal
                Care
            
            
            17,271
            
            
            
            7.0
            
            
            
            19,112
            
            
            
            7.9
            
            
            
            (1,841
            )
            
            
            (9.6
            )$
            246,170
            
            
            
            100.0
            
            
            $
            240,598
            
            
            
            100.0
            
            
            $
            5,572
            
            
            
            2.3





Revenues
      for the nine
      month period ended December 31, 2007 increased by $5.6 million, or 2.3%, versus
      the comparable period in 2006, primarily as a result of the acquisition of
      the
      Wartner brand in September of 2006.  Excluding the impact of the
      Wartner acquisition, revenues were essentially flat versus the comparable period
      in 2006.  Revenues from customers outside of North America, which
      represent 4.0% of total revenues, decreased 7.2% in 2007 versus the comparable
      period in 2006.





During
      the nine month period ended December 31, 2007, the Company increased its
      allowance for returns by $1.4 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 $247.6 million, or 3.3% greater than the same period
      last year and up 0.7% excluding the Wartner acquisition.





Over-the-Counter
      Healthcare Segment


Revenues
      of the
      Over-the-Counter Healthcare segment increased by $6.1 million, or 4.6%, for
      2007
      versus the comparable period in 2006.  The revenue increase was
      primarily due to the acquisition of the Wartner brand in September 2006 and
      the
      launch of Murine EarigateTM,
      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 0.5% for the period.  Revenue increases from Murine
      EarigateTM,
      Clear eyes, New
      Skin, Dermoplast and Compound W were partially offset by decreases in
      Chloraseptic,The Doctor’s® and Little Remedies.  Clear eyes
      and New Skin’s revenue increases were a result of increased consumer
      consumption, while Dermoplast’s revenue increased as a result of strong
      shipments of the institutional size to wholesale distributors.  Compound W®
revenues
      were up primarily due to lower promotional allowances as gross shipments were
      down slightly due to softness in the Cyrogenic 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 season to-date versus the prior year.The Doctor’s®
revenue decreased
      as a result of increased competition in the bruxism
      category.  Little Remedies’ revenue declined due to a $1.4
      million increase in the allowance for returns and lost sales in connection
      with
      the voluntary withdrawal from the marketplace of Little Remedies medicated
      pediatric cough and cold products in October 2007.





Household
      Cleaning Segment


Revenues
      of the Household
      Cleaning segment increased $1.3 million, or 1.5% during the period versus the
      comparable period in 2006.  Increased revenues across the Comet® brand more than
      offset
      declines in the Spic and Span and Chore Boy brands.  Revenue for Comet
      Mildew SprayGel, which launched in the last quarter of fiscal 2007, was
      partially offset by weaker factory sales of Comet bathroom sprays, a
      reflection of declining consumption trends.  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.





-28-


Personal
      Care Segment


Revenues
      of the Personal
      Care segment declined $1.8 million or 9.6% for 2007 versus the comparable period
      in 2006.  All major brands in this segment, except for Prell,
      experienced revenue declines during the period.  The decrease in
      revenues of Cutex® and Denorex®
was
      a result of
      declining consumption.Prell’s revenue increased for the
      period primarily due to improved consumption.








Gross
      Profit


2007
              Gross
                Profit
            
            
            %
            
            
            2006
              Gross
                Profit
            
            
            %
            
            
            Increase
              (Decrease)
            
            
            %OTC
                Healthcare
            
            $
            85,427
            
            
            
            62.1
            
            
            $
            83,229
            
            
            
            63.3
            
            
            $
            2,198
            
            
            
            2.6Household
                Cleaning
            
            
            35,092
            
            
            
            38.4
            
            
            
            35,177
            
            
            
            39.1
            
            
            
            (85
            )
            
            
            (0.2
            )Personal
                Care
            
            
            6,776
            
            
            
            39.2
            
            
            
            7,842
            
            
            
            41.0
            
            
            
            (1,066
            )
            
            
            (13.6
            )$
            127,295
            
            
            
            51.7
            
            
            $
            126,248
            
            
            
            52.5
            
            
            $
            1,047
            
            
            
            0.8





Gross
      profit for the nine month period ended December 31, 2007, increased by $1.0
      million, or 0.8%, versus the comparable period in 2006.  As a percent
      of total revenue, gross profit decreased from 52.5% in 2006 to 51.7% during
      2007.  The decrease in gross profit as a percent of revenues was
      primarily a result of unfavorable sales mix to lower margin products and a
      $1.4
      million increase in the allowance for returns in connection with the voluntary
      withdrawal of the two Little Remedies medicated products in October 2007 and
      related obsolescence charges of $800,000.





Over-the-Counter
      Healthcare Segment


Gross
      profit for the Over-the-Counter Healthcare segment increased $2.2 million,
      or
      2.6%, for 2007 versus the comparable period in 2006.  As a percent of
      OTC revenue, gross profit decreased from 63.3% for 2006 to 62.1% during
      2007.  The decrease in gross profit as a percent of revenues was the
      result of a $1.4 million increase in the allowance for returns in connection
      with the voluntary withdrawal of Little Remedies medicated product discussed
      above and related obsolescence charges of $800,000, as well as the launch of
      Murine Earigate, which has a lower margin than the segment’s average gross
      profit percentage.





Household
      Cleaning Segment


Gross
      profit for the Household Cleaning segment decreased by $85,000, or 0.2%, for
      2007 versus the comparable period in 2006.  As a percent of household
      cleaning revenue, gross profit decreased from 39.1% for 2006 to 38.4% during
      2007.  The decrease in gross profit percentage was primarily the
      result of higher product costs partially offset by lower distribution
      costs.  The product cost increases were a result of higher raw
      material costs.





Personal
      Care Segment


Gross
      profit for the Personal Care segment decreased $1.1 million, or 13.6% for 2007
      versus the comparable period in 2006.  As a percent of personal care
      revenue, gross profit decreased from 41.0% for 2006 to 39.2% during
      2007.  The decrease in gross profit percentage was primarily the
      result of lower returns and a reduction in promotional pricing allowances,
      offset by higher product and inventory obsolescence costs.








Contribution
      Margin


2007
              Contribution
                Margin
            
            
            %
            
            
            2006
              Contribution
                Margin
            
            
            %
            
            
            Increase
              (Decrease)
            
            
            %OTC
                Healthcare
            
            $
            64,347
            
            
            
            46.8
            
            
            $
            63,656
            
            
            
            48.4
            
            
            $
            691
            
            
            
            1.1Household
                Cleaning
            
            
            28,618
            
            
            
            31.3
            
            
            
            29,873
            
            
            
            33.2
            
            
            
            (1,255
            )
            
            
            (4.2
            )Personal
                Care
            
            
            5,955
            
            
            
            34.5
            
            
            
            6,910
            
            
            
            36.2
            
            
            
            (955
            )
            
            
            (13.8
            )$
            98,920
            
            
            
            40.2
            
            
            $
            100,439
            
            
            
            41.7
            
            
            $
            (1,519
            )
            
            
            (1.5
            )





-29-


Contribution
      margin,
      defined as gross profit less advertising and promotional expenses, for the
      nine
      month period ended December 31, 2007, decreased $1.5 million, or 1.5%, for
      2007
      versus the comparable period in 2006.  The contribution margin
      decrease was the result of the increase in sales and gross profit as previously
      discussed, offset by a $2.6 million, or 9.9%, 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.





Over-the-Counter
      Healthcare Segment


Contribution
      margin for
      the Over-the-Counter Healthcare segment increased by $691,000, or 1.1%, for
      2007
      versus the comparable period in 2006.  The contribution margin
      increase was a result of the increase in sales and gross profit as previously
      discussed, partially offset by a $1.5 million, or 7.7%, 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, partially offset by a reduction in Chloraseptic
      spending.





Household
      Cleaning Segment


Contribution
      margin for
      the Household Cleaning segment decreased by $1.3 million, or 4.2%, for 2007
      versus the comparable period in 2006.  The contribution margin
      decrease was a result of the sales increase and gross profit decrease previously
      discussed and a $1.2 million, or 22.0%, increase for advertising and television
      media support behind Comet Mildew SprayGel.





Personal
      Care Segment


Contribution
      margin for
      the Personal Care segment decreased $955,000, or 13.8%, for 2007 versus the
      comparable period in 2006.  The contribution margin decrease was
      primarily the result of the sales and gross profit decrease previously discussed
      offset by a $100,000 reduction in advertising and promotional
      spending.





General
      and Administrative


General
      and administrative
      expenses were $24.0 million for 2007 versus $20.8 million for
      2006.  Higher legal costs associated with the OraSure litigation and
      intellectual property protective actions initiated by the Company in connection
      with The Doctor’s® NightGuardTM
      dental protector were offset by a reduction in management incentive and
      long-term stock based compensation costs.  At December 31, 2007, the
      Company reversed previously recorded stock-based compensation of $932,000 upon
      management’s determination that it would not meet stated performance goals
      associated with grants of restricted stock to management and
      employees.





Depreciation
      and Amortization


Depreciation
      and
      amortization expense was $8.3 million for 2007 versus $7.6 million for
      2006.  The increase in amortization of intangible assets is primarily
      related to the Wartner acquisition.





Interest
      Expense


Net
      interest expense was $28.6 million for 2007 versus $29.7 million for
      2006.  The reduction in interest expense was the result of a lower
      level of indebtedness, partially offset by higher interest rates on our variable
      rate indebtedness.  The average cost of funds increased from 8.1% for
      2006 to 8.6% for 2007, while the average indebtedness decreased from $484.9
      million for 2006 to $444.8 million for 2007.





Income
      Taxes


The
      income tax provision for 2007 was $14.5 million, with an effective rate of
      38.0%, compared to $14.7 million, with an effective rate of 34.6% for
      2006.  The 2006 period includes a $1.7 million tax benefit resulting
      from the reduction of the deferred income tax rate to 38.6% from 39.1% in
      connection with the implementation of initiatives to obtain operational, as
      well
      as tax, efficiencies.





-30-


Liquidity
      and Capital Resources





Liquidity


We
      have financed and expect to continue to finance our operations with a
      combination of internally generated funds and borrowings.  Pursuant to
      the terms of the Senior Credit Facility, we may borrow an additional $200.0
      million under our Tranche B Term Loan Facility and up to a maximum of $60.0
      million under our Revolving Credit Facility.  Our principal uses of
      cash are for operating expenses, debt service, acquisitions, working capital
      and
      capital expenditures.





Nine
              Months Ended December 31(In
                thousands)
            
            2007
            
            
            2006Cash
                provided by
                (used for):Operating
                Activities
            
            $
            35,306
            
            
            $
            55,289Investing
                Activities
            
            
            (380
            )
            
            
            (31,285
            )Financing
                Activities
            
            
            (37,130
            )
            
            
            (27,402
            )





Operating
      Activities


Net
      cash provided by operating activities was $35.3 million for 2007 compared to
      $55.3 million 2006.  The $20.0 million decrease in net cash provided
      by operating activities was primarily the result of the following:





·
            A
                decrease of net
                income of $4.1 million from $27.7 million for 2006 to $23.6 million
                for
                2007, and


·
            An
                increase in the
                components of working capital caused primarily by an increase in
                accounts
                receivable at December 31, 2007 versus March 31, 2007, compared to
                a
                decrease in accounts receivable at December 31, 2006 versus March
                31,
                2006.





Investing
      Activities


Net
      cash used for investing activities was $380,000 for 2007 compared to $31.3
      million for 2006.  The net cash used for investing activities for 2007
      was primarily for the acquisition of machinery, computers and office equipment,
      while for 2006, net cash was used primarily for the acquisition of Wartner
      USA
      B.V.





Financing
      Activities


Net
      cash used for financing activities was $37.1 million for 2007 compared to $27.4
      million for 2006.  During 2007, the Company repaid $34.5 million of
      the Tranche B Term Loan Facility in excess of normal maturities with cash
      generated from operations.  This reduced our outstanding indebtedness
      to $426.2 million from $463.4 million at March 31, 2007.  During 2006,
      the Company repaid the remaining $7.0 million indebtedness related to our
      Revolving Credit Facility which was drawn upon in connection with the November
      2005 acquisition of Dental Concepts LLC, as well as $17.4 million in excess
      of
      normal maturities against the Tranche B Term Loan Facility.





The
      Company’s cash flow from operations is normally expected to exceed net income
      due to the substantial non-cash charges related to depreciation and amortization
      of intangibles, increases in deferred income tax liabilities resulting from
      differences in the amortization of intangible assets and goodwill for income
      tax
      and financial reporting purposes, the amortization of certain deferred financing
      costs and stock-based compensation.








Capital
      Resources


As
      of
      December 31, 2007, we had an aggregate of $426.2 million of outstanding
      indebtedness, which consisted of the following:





·
            $300.2
                million of
                borrowings under the Tranche B Term Loan Facility, and





·
            $126.0
                million of
                9.25% Senior Subordinated Notes due 2012.





We
      had
      $60.0 million of borrowing capacity available under the Revolving Credit
      Facility at December 31, 2007, as well as $200.0 million available under the
      Tranche B Term Loan Facility.





-31-


All
      loans under the Senior Credit Facility bear interest at floating rates, based
      on
      either the prime rate, or at our option, the LIBOR rate, plus an applicable
      margin. As of December 31, 2007, an aggregate of $300.2 million was outstanding
      under the Senior Credit Facility at a weighted average interest rate of
      6.98%.





In
      June 2004, we purchased a 5% interest rate cap agreement with a notional amount
      of $20.0 million which expired in June 2006. In March 2005, we purchased
      interest rate cap agreements that became effective August 30, 2005, with a
      total
      notional amount of $180.0 million and LIBOR cap rates ranging from 3.25% to
      3.75%. On May 31, 2006, an interest rate cap agreement with a notional amount
      of
      $50.0 million and a 3.25% cap rate expired. Additionally, an interest rate
      cap
      agreement with a notional amount of $80.0 million and a 3.50% cap rate expired
      on May 30, 2007. The remaining agreement, with a notional amount of $50.0
      million and a cap rate of 3.75%, terminates on May 30, 2008. The fair value
      of
      the interest rate cap agreement was $241,000 at December 31, 2007.





The
      Tranche B Term Loan Facility matures in October 2011. We must make quarterly
      principal payments on the Tranche B Term Loan Facility equal to $887,500,
      representing 0.25% of the initial principal amount of the term loan. The
      Revolving Credit Facility matures and the commitments relating to the Revolving
      Credit Facility terminate in April 2009.





The
      Senior Credit Facility contains various financial covenants, including
      provisions that require us to maintain certain leverage ratios, interest
      coverage ratios and fixed charge coverage ratios. In addition, the Senior Credit
      Facility, as well as the Indenture governing the Senior Subordinated Notes,
      contain provisions that accelerate our indebtedness on certain changes in
      control and restrict us from undertaking specified corporate actions, including
      asset dispositions, acquisitions, payment of dividends and other specified
      payments, repurchasing the Company’s equity securities, incurrence of
      indebtedness, creation of liens, making loans and investments and transactions
      with affiliates.  Specifically, we must:





·
            Have
                a leverage
                ratio of less than 4.5 to 1.0 for the quarter ended December 31,
                2007,
                decreasing over time to 3.75 to 1.0 for the quarter ending September
                30,
                2010, and remaining level
                thereafter,





·
            Have
                an interest
                coverage ratio of greater than 2.75 to 1.0 for the quarter ended
                December
                31, 2007, increasing over time to 3.25 to 1.0 for the quarter ending
                March
                31, 2010, and remaining level thereafter,
                and





·
            Have
                a fixed charge
                coverage ratio of greater than 1.5 to 1.0 for the quarter ended December
                31, 2007, and for each quarter thereafter until the quarter ending
                March
                31, 2011.





At
      December 31, 2007, we were in compliance with the applicable financial and
      restrictive covenants under the Senior Credit Facility and the Indenture
      governing the Senior Subordinated Notes.





Our
      principal sources of funds are anticipated to be cash flows from operating
      activities and available borrowings under the Senior Credit Facility. We believe
      that these funds will provide us with sufficient liquidity and capital resources
      for us to meet our current and future financial obligations, as well as to
      provide funds for working capital, capital expenditures and other needs for
      at
      least the next 12 months. As part of our growth strategy, we regularly review
      acquisition opportunities and other potential strategic transactions, which
      may
      require additional debt or equity financing. If additional financing is
      required, there are no assurances that it will be available, or if available,
      that it can be obtained on terms favorable to us or on a basis that is not
      dilutive to our stockholders.





-32-


Off-Balance
      Sheet Arrangements





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





Inflation





Inflationary
      factors such
      as increases in the costs of raw materials, packaging materials, purchased
      product and overhead may adversely affect our operating
      results.  Although we do not believe that inflation has had a material
      impact on our financial condition or results from operations for the periods
      referred to above, a high rate of inflation in the future could have a material
      adverse effect on our business, financial condition or results from
      operations.  The current volatility of the crude oil markets will
      continue to impact, at times favorably and at times unfavorably, our
      transportation costs, as well as, certain petroleum based raw materials and
      packaging materials.  Although the Company takes efforts to minimize
      the impact of inflationary factors, including raising prices to our customers,
      a
      sustained rate of pricing increases associated with crude oil or other supplies
      may have an adverse effect on our operating results.





Seasonality





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





Critical
                Accounting Policies and Estimates





The
      Company’s significant accounting policies are described in the notes to the
      unaudited financial statements included elsewhere in this Quarterly Report
      on
      Form 10-Q, as well as in our Annual Report on Form 10-K for the year ended
      March
      31, 2007. 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:





Revenue
      Recognition


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




-33-


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, 2007 was $16.5
      million, we participated in 5,900 promotional campaigns, resulting in an average
      cost of $2,800 per campaign. Of such amount, only 582 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
      three and nine month periods ended December 31, 2007, our sales and
      operating income would have been adversely affected by approximately $475,000
      and $1.5 million, respectively.





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
      the year ended March 31, 2007, we had 17 coupon events.  The amount
      recorded against revenues and accrued for these events during the year was
      $2.7
      million, of which $2.3 million was redeemed during the year.  During
      the nine month period ended December 31, 2007, we had 25 coupon events. The
      amount recorded against revenues and accrued for these events during the three
      and nine month periods ended December 31, 2007 was $558,000 and $1.6 million,
      respectively. Redemptions during the three and nine month periods ended December
      31, 2007 were $514,000 and $1.6 million, respectively.





Allowances
      for Product Returns


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, 2007, 2006 and 2005, returns
      represented 3.7%, 3.5%, and 3.6%, respectively, of gross sales. At December
      31,
      2007 and March 31, 2007, the allowances for sales returns were $1.9 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. Based upon the methodology described above and our actual returns'
      experience, management believes the likelihood of such a material occurrence
      is
      remote. As noted, over the last three years, our actual product return rate
      has
      stayed within a range of 3.5% to 3.7% 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 three and nine month
      periods ended December 31, 2007 by approximately $93,000 and $286,000,
      respectively.





-34-


Allowances
      for Obsolete and Damaged Inventory


We
      value our inventory at the lower of cost or market value. Accordingly, we reduce
      our inventories for the diminution of value resulting from product obsolescence,
      damage   or other issues affecting marketability equal to the difference
      between the cost of the inventory and its estimated market value. Factors
      utilized in the determination of estimated market value include (i) current
      sales data and historical return rates, (ii) estimates of future demand, (iii)
      competitive pricing pressures, (iv) new product introductions, (v) product
      expiration dates, and (vi) component and packaging obsolescence.





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 December 31, 2007 and March 31, 2007, the allowance for obsolete and
      slow moving inventory represented 4.8% and 5.8%, respectively, of total
      inventory. Inventory obsolescence costs charged to operations for the three
      and
      nine month periods ended December 31, 2007 were $361,000 and $944,000,
      respectively. During the three month period ended June 30, 2007, the Company
      recorded a credit of $289,000 to operations for obsolescence due to the
      settlement of a claim from a vendor. A 1.0% increase in our allowance for
      obsolescence at December 31, 2007 would have adversely affected our reported
      operating income for the three and nine month periods ended December 31, 2007
      by
      approximately $322,000.





Allowance
      for Doubtful Accounts


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 at both December 31,
      2007
      and March 31, 2007 amounted to 0.10 % of accounts receivable. For the three
      and nine month periods ended December 31, 2007 we recorded bad debt expense
      of
      $27,000 and $126,000, respectively, while during the three and nine month
      periods ended December 31, 2006 we recorded bad debt expense of $37,000 and
      $25,000, respectively. Bad debt expense for the nine month period ended December
      31, 2006 was favorably influenced by a $67,000 recovery during the three month
      period ended June 30, 2006.





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 net sales
      would have resulted in a decrease in operating income for the three and nine
      month periods ended December 31, 2007 of approximately $80,000 and $245,000,
      respectively.





Valuation
      of Intangible Assets and Goodwill


Goodwill
      and intangible
      assets amounted to $958.2 million and $968.1 million at December 31, 2007 and
      March 31, 2007, respectively.  As of December 31, 2007, goodwill
      and intangible assets were apportioned among our


-35-


three
      operating segments as follows:





Over-the-Counter
              Healthcare
            
            
            Household
              Cleaning
            
            
            Personal
              Care
            
            
            ConsolidatedGoodwill
            
            $
            233,615
            
            
            $
            72,549
            
            
            $
            2,751
            
            
            $
            308,915Intangible
                assetsIndefinite
                lived
            
            
            374,070
            
            
            
            170,893
            
            
            
            --
            
            
            
            544,963Finite
                lived
            
            
            89,093
            
            
            
            11
            
            
            
            15,210
            
            
            
            104,314463,163
            
            
            
            170,904
            
            
            
            15,210
            
            
            
            649,277$
            696,778
            
            
            $
            243,453
            
            
            $
            17,961
            
            
            $
            958,192








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 comprise 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:





·
            Brand
                History


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.





·
            Market
                Position


Consumer
      products that
      rank number one or two in their respective market generally have greater name
      recognition and are known as quality product offerings, which warrant a higher
      valuation and longer life than products that lag in the marketplace.





·
            Recent
                and Projected Sales Growth


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,
      that is required to reinvigorate a brand that has fallen from favor.





·
            History
                of and Potential for Product Extensions


Consideration
      also is
      given to the product innovation that has occurred during the brand’s history and
      the potential for continued product innovation that will determine the brand’s
      future.  Brands




-36-


that
      can be
      continually enhanced by new product offerings generally warrant a higher
      valuation and longer life than a brand that has always “followed the leader”.





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 Statements No. 141 and 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.





On
      an
      annual basis, or more frequently if conditions indicate that the carrying value
      of the asset may not be recovered, management performs a review of both the
      values and useful lives assigned to goodwill and intangible assets and tests
      for
      impairment.





Finite-Lived
      Intangible Assets


As
      mentioned above, management performs an annual review or more frequently if
      necessary, to ascertain the impact of events and circumstances on the estimated
      useful lives and carrying values of our trademarks and trade names. In
      connection with this analysis, management:





·
            Reviews
                period-to-period sales and profitability by brand,


·
            Analyzes
                industry
                trends and projects brand growth rates,


·
            Prepares
                annual
                sales forecasts,


·
            Evaluates
                advertising effectiveness,


·
            Analyzes
                gross
                margins,


·
            Reviews
                contractual
                benefits or limitations,


·
            Monitors
                competitors’ advertising spend and product innovation,


·
            Prepares
                projections
                to measure brand viability over the estimated useful life of the
                intangible asset, and


·
            Considers
                the
                regulatory environment, as well as industry litigation.





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.





Indefinite-Lived
      Intangible Assets


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




-37-


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.





Goodwill


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.





In
      estimating the value of trademarks and trade names, as well as goodwill, at
      March 31, 2007, management applied a discount rate of 9.5%, 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.





Stock-Based
      Compensation


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:





·
            Type
                of instrument
                (i.e.: restricted shares vs. an option, warrant or performance
                shares),


·
            Strike
                price of the
                instrument,


·
            Market
                price of the
                Company’s common stock on the date of
                grant,


·
            Discount
                rates,


·
            Duration
                of the
                instrument, and


·
            Volatility
                of the
                Company’s common stock in the public
                market.





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 stock-based compensation costs of
      $655,000 and $383,000 during the fiscal years ended March 31, 2007 and 2006,
      respectively.  During the three month period ended December 31, 2007,
      the Company recorded a net stock-based compensation credit of $387,000, while
      during the nine month period ended December 31, 2007, the Company recorded
      net
      stock-based compensation costs of $758,000.  At December 31, 2007,
      management determined that the Company would not meet the performance goals
      associated with the grants of restricted stock to management and employees
      in
      October 2005 and July 2006.




-38-


In
      accordance with Statement No. 123(R), management reversed previously recorded
      stock-based compensation costs of $538,000 and $394,000 related to the October
      2005 and July 2006 grants, respectively.





The
      Company recorded non-cash compensation expense of $215,000 during the three
      month period ended December 31, 2006, and net non-cash compensation of $439,000
      for the nine month period ended December 31, 2006.  During the three
      month period ended June 30, 2006, the Company recorded a net non-cash
      compensation credit of $9,000 as a result of the reversal of compensation
      charges in the amount of $142,000 associated with the departure of a former
      member of management.








Loss
      Contingencies


Loss
      contingencies are recorded as liabilities when it is probable that a liability
      has been incurred and the amount of such loss is reasonable estimable.
      Contingent losses are often resolved over longer periods of time and involve
      many factors including:





·
            Rules
                and
                regulations promulgated by regulatory agencies,


·
            Sufficiency
                of the
                evidence in support of our position,


·
            Anticipated
                costs to
                support our position, and


·
            Likelihood
                of a
                positive outcome.





Recent
      Accounting Pronouncements


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 recognize all assets acquired and
      liabilities assumed in the transaction; establishes acquisition-date fair value
      as the amount to be ascribed to the acquired assets and liabilities and 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.  Earlier
      application of Statement 141(R) is prohibited.





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 interim
      financial statements issued during the fiscal year beginning after November
      15,
      2007.  The Company is evaluating the impact that the adoption of
      Statement No. 159 will have on its 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 interim
      financial statements issued during the fiscal year beginning after November
      15,
      2007.  However, on November 14, 2007, 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.





Management
      has reviewed
      and continues to monitor the actions of the various financial and regulatory
      reporting agencies and is currently not aware of any other pronouncement that
      could have a material impact on the Company’s consolidated financial
      position, results of operations or cash flows.


-39-


CAUTIONARY
      STATEMENT REGARDING FORWARD-LOOKING STATEMENTS





This
      Quarterly Report on Form 10-Q contains “forward-looking statements” within
      the meaning of the Private Securities Litigation Reform Act of 1995 (the “PSLR
      Act”), including, without limitation, information within Management’s Discussion
      and Analysis of Financial Condition and Results of Operations.  The
      following cautionary statements are being made pursuant to the provisions of
      the
      PSLR Act and with the intention of obtaining the benefits of the “safe harbor”
provisions of the PSLR Act. Although we believe that our expectations are based
      on reasonable assumptions, actual results may differ materially from those
      in
      our forward-looking statements.





Forward-looking
      statements
      speak only as of the date of this Quarterly Report on Form
      10-Q.  Except as required under federal securities laws and the
      rules and regulations of the SEC, we do not have any intention to update
      any forward-looking statements to reflect events or circumstances arising after
      the date of this Quarterly Report on Form 10-Q, whether as a result of new
      information, future events or otherwise.





Our
      forward-looking statements generally can be identified by the use of words
      or
      phrases such as “believe,” “anticipate,” “expect,” “estimate,” “project,” “will
      be,” “will continue,” “will likely result,” or other similar words and
      phrases.  Forward-looking statements and our plans and expectations
      are subject to a number of risks and uncertainties that could cause actual
      results to differ materially from those anticipated, and our business in general
      is subject to such risks.  As a result of
      these risks
      and uncertainties, readers are cautioned not to place undue reliance on
      forward-looking statements included in thisQuarterly
      Report on Form10-Qor that may be made
      elsewhere from time to time by, or on behalf of, us.All
      forward-looking
      statements attributable to us are expressly qualifiedby these
      cautionary
      statements.For more information, see “Risk Factors” contained
      in Part I, Item 1A of our Annual Report on Form 10-K for the year ended March
      31, 2007.  In addition, our expectations or beliefs concerning future
      events involve risks and uncertainties, including, without
      limitation:





·
            General
                economic
                conditions affecting our products and their respective markets,





·
            The
                high level of
                competition in our industry and markets,





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





·
            Disruptions
                in our
                distribution center,





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





·
            Changing
                consumer
                trends or pricing pressures which may cause us to lower our prices,





·
            Increases
                in
                supplier prices,





·
            Increases
                in
                transportation fees and fuel charges,





·
            Changes
                in our
                senior management team,





·
            Our
                ability to
                protect our intellectual property rights,





·
            Our
                dependency on
                the reputation of our brand names,





·
            Shortages
                of supply
                of sourced goods or interruptions in the manufacturing of our products,





·
            Our
                level of debt,
                and ability to service our debt,





·
            Any
                adverse judgment
                rendered in any pending litigation or arbitration,





·
            Our
                ability to
                obtain additional financing, and





·
            The
                restrictions
                imposed by our financing agreements on our operations.




-40-


ITEM
                3.
              QUANTITATIVE
                AND
                QUALITATIVE DISCLOSURES ABOUT MARKET RISK





We
      are
      exposed to changes in interest rates because our Senior Credit Facility is
      variable rate debt.   Interest rate changes, therefore, generally do not
      affect the market value of our senior secured financing, but do impact the
      amount of our interest payments and, therefore, our future earnings and cash
      flows, assuming other factors are held constant.  At December 31, 2007, we
      had variable rate debt of approximately $300.2 million related to our Tranche
      B
      term loan.





In
      an
      effort to protect the Company from the adverse impact that rising interest
      rates
      would have on our variable rate debt, we have entered into various interest
      rate
      cap agreements to hedge this exposure. In June 2004, we purchased a 5%
      interest rate cap agreement with a notional amount of $20.0 million which
      terminated in June 2006.  In March 2005, we purchased interest rate cap
      agreements that became effective August 30, 2005, with a total notional
      amount of $180.0 million and LIBOR cap rates ranging from 3.25% to 3.75%. On
      May
      31, 2006, an interest rate cap agreement with a notional amount of $50.0 million
      and a 3.25% cap rate expired. Additionally, an interest rate cap agreement
      with
      a notional amount of $80.0 million and a 3.5% cap rate expired on May 31, 2007.
      The remaining agreement, with a notional amount of $50.0 million and a cap
      rate
      of 3.75% terminates on May 31, 2008.





Holding
      other variables
      constant, including levels of indebtedness, a one percentage point increase
      in
      interest rates on our variable rate debt would have an adverse impact on pre-tax
      earnings and cash flows for the twelve month period ending December 31, 2008
      of
      approximately $3.0 million.  However, given the protection afforded by
      the interest rate cap agreements, the impact of a one percentage point increase
      would be limited to $2.8 million.  The fair value of the interest rate
      cap agreement was $241,000 at December 31, 2007.








ITEM4.
            CONTROLS
              AND
              PROCEDURES





Disclosure
      Controls and Procedures


The
      Company’s management, with the participation of its Chief
      Executive Officer and the Chief Financial Officer, evaluated the effectiveness
      of the Company's disclosure controls and procedures, as defined in Rule
      13a–15(e) of the Securities Exchange Act of 1934 (“Exchange Act”), as of
      December 31, 2007.  Based upon that evaluation, the Chief Executive
      Officer and Chief Financial Officer have concluded that, as of December 31,
      2007, the Company’s disclosure controls and procedures were effective to ensure
      that information required to be disclosed by the Company in the reports the
      Company files or submits under the Exchange Act is recorded, processed,
      summarized and reported, within the time periods specified in the SEC’s rules
      and forms, and that such information is accumulated and communicated to the
      Company’s management, including the Company’s Chief Executive Officer and Chief
      Financial Officer, as appropriate to allow timely decisions regarding required
      disclosure.





Changes
      in Internal Control over Financial Reporting


There
      have been no changes during the quarter ended December 31, 2007 in the Company’s
      internal control over financial reporting that have materially affected, or
      are
      reasonably likely to materially affect, the Company’s internal control over
      financial reporting.





-41-


PART
                II.
            OTHER
                INFORMATION





ITEM
                1.
            LEGAL
                PROCEEDINGS





The
      legal proceedings in which we are involved have been disclosed previously in
      our
      Annual Report on Form 10-K for the fiscal year ended March 31, 2007, our
      Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2007, our
      Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2007
      and our Current Report on Form 8-K filed with the SEC on October 24,
      2007.  The following disclosure contains recent developments in our
      pending legal proceedings which we deem to be material to the Company and should
      be read in conjunction with the legal proceedings disclosure contained in Part
      I, Item 3 of our Annual Report on Form 10-K for the fiscal year ended March
      31,
      2007, Part II, Item 1 of our Quarterly Report on Form 10-Q for the fiscal
      quarter ended June 30, 2007, Part II, Item 1 of our Quarterly Report on Form
      10-Q for the fiscal quarter ended September 30, 2007 and our Current Report
      on
      Form 8-K filed with the SEC on October 24, 2007.





Securities
      Class Action Litigation


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 is scheduled to be held in Court on February 8,
      2008.  While discovery in the action 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 reasonably estimate the
      potential range of loss, if any.





OraSure
      Technologies Arbitration


On
      December 18, 2007, the arbitration panel concluded the arbitration by issuing
      a
      Final Award for certain counsel fees and arbitrator compensation to be paid
      by
      the Company.  Pursuant to the Final Award, the Company has made
      payment to OraSure Technologies, Inc. in an amount that did not have a material
      impact on the Company’s results from operations for the three or nine month
      periods ended December 31, 2007.  No further arbitration proceedings
      are expected by the Company.





DenTek
      Oral Care, Inc. Litigation


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.  Discovery requests have been served by the parties and
      discovery is ongoing.  A hearing before the Court is scheduled to be held
      on February 14, 2008, regarding pending procedural motions and
      discovery.





In
      addition to the matters described above, the Company is involved from time
      to
      time in other routine legal matters and other claims incidental to its
      business.  The Company reviews outstanding claims and proceedings
      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.








ITEM
              1A.
            RISK
              FACTORS





There
      have been no material changes to the risk factors previously disclosed in Part
      I, Item 1A, of our Annual Report on Form 10-K for the year ended March 31,
      2007,
      which is incorporated herein by reference.








-42-


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





The
      following table sets forth information with respect to purchases of shares
      of
      the Company’s common stock made during the quarter ended December 31, 2007, by
      or on behalf of the Company or any “affiliated purchaser,” as defined by Rule
      10b-18(a)(3) of the Exchange Act:





Company
                Purchases of Equity SecuritiesPeriod
            
            (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
                Programs10/1/07
                -
                10/31/07
            
            
            616
            
            
            $
            1.70
            
            
            
            --
            
            
            
            --11/1/07
                -
                11/30/07
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            --12/1/07
                -
                12/31/07
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            --Total
            
            
            616
            
            
            $
            1.70
            
            
            
            --
            
            
            
            --





Note:


Activity
      consists of one
      (1) transaction whereby the Company exercised its separation repurchase option
      set forth in a securities purchase agreement between the Company and a former
      employee.




ITEM
                  5.
                OTHER
                  INFORMATION


-43-


Pursuant
                    to the
                    terms of the Employment Agreement, Mr. Parkinson's employment
                    will
                    continue until (i) his death, disability or resignation from
                    employment
                    with the Company and its subsidiaries; or (ii) the Company and
                    its
                    subsidiaries decide to terminate Mr. Parkinson's employment with
                    or
                    without cause.  If (A) Mr. Parkinson's employment is terminated
                    without cause; or (B) Mr. Parkinson resigns from employment with
                    the
                    Company or any of its subsidiaries for good reason, then during
                    the period
                    commencing on the date of termination of employment and ending
                    on the
                    first anniversary date thereof, the Company shall pay to Mr.
                    Parkinson, in
                    equal installments in accordance with the Company's regular payroll,
                    an
                    aggregate amount equal to (I) Mr. Parkinson's annual base salary,
                    plus
                    (II) an amount equal to the annual bonus, if any, paid or payable
                    to Mr.
                    Parkinson by the Company for the last fiscal year ended prior
                    to the date
                    of termination.  In addition, if Mr. Parkinson is entitled on the
                    date of termination to coverage under the medical and prescription
                    portions of the welfare plans, such coverage shall continue for
                    Mr.
                    Parkinson and his covered dependents for a period ending on the
                    first
                    anniversary of the date of termination at the active employee
                    cost payable
                    by Mr. Parkinson with respect to those costs paid by Mr. Parkinson
                    prior
                    to the date of termination.
                  
                  The Employment Agreement also
                    contains
                    certain confidentiality, non-competition and non-solicitation
                    provisions
                    as well as other provisions that are customary for an executive
                    employment
                    agreement.
  ITEM
                6.
              EXHIBITS
  See
        Exhibit Index immediately following signature page.
























-44-


SIGNATURES
   Pursuant
                  to the
                  requirements of the Securities Exchange Act of 1934, the Registrant
                  has
                  duly caused this report to be signed on its behalf by the undersigned
                  thereunto duly authorized.
     Prestige
                Brands Holdings, Inc.RegistrantDate:
              February
                8, 2008
              By:
              /s/
                PETERJ.
                ANDERSONPeter
                J. AndersonChief
                Financial Officer(Principal
                Financial Officer andDuly
                Authorized Officer)
  -45-


Exhibit
      Index











10.1
            Contract
                Manufacturing Agreement, dated December 21, 2007, between Medtech
                Products
                Inc. and Pharmaspray B.V.10.2
            Contract
                Manufacturing Agreement, dated December 21, 2007, between Medtech
                Products
                Inc. and Pharmaspray B.V.10.3
            Executive
                Employment Agreement, dated as of October 1, 2007, between Prestige
                Brands
                Holdings, Inc. and John Parkinson.31.1
            Certification
                of
                Principal Executive Officer of Prestige Brands Holdings, Inc. pursuant
                to
                Rule 13a-14(a) of the Securities Exchange Act of 1934.31.2
            Certification
                of
                Principal Financial Officer of Prestige Brands Holdings, Inc. pursuant
                to
                Rule 13a-14(a) of the Securities Exchange Act of 1934.32.1
            Certification
                of
                Principal Executive Officer of Prestige Brands Holdings, Inc. pursuant
                to
                Rule 13a-14(b) and Section 1350 of Chapter 63 of Title 18 of the
                United
                States Code.32.2
            Certification
                of
                Principal Financial Officer of Prestige Brands Holdings, Inc. pursuant
                to
                Rule 13a-14(b) and Section 1350 of Chapter 63 of Title 18 of the
                United
                States Code.





-46-