Reckitt Benckiser Group plc

Kirsten F. Chapman – Lippert/Heilshorn & Associates Senior, Vice President,Principal/San Francisco Office Bruce J.

Wood, President and CEO, Director Joseph W. Baty, Executive Vice President and CFO

Mike Grant - Diker Management

Thank you, Leticia. Thank you all for joining us this morning for the Schiff Nutrition International fiscal 2007 second quarter results conference call.

By now you should have received a fax or e-mail of the press release, but if you have not, please contact us at Lippert/Heilshorn & Associates, at 415-433-3777, and we will forward a copy to you immediately. As a reminder, this call may contain forward-looking statements, the risks of which are the same as those described in the Safe Harbor language in the press release and those detailed in the company's SEC filings.

Actual results may differ materially from those described during the call. With us from management today are Bruce J.

Wood, President and Chief Executive Officer, and Joe Baty, Executive Vice President and Chief Financial Officer. Please go ahead Bruce.

Thank you Kirsten, and good morning. Happy New Year to you and welcome to Schiff Nutrition International's fiscal 2007 second quarter conference call.

During the second quarter, we remained focused on driving profitable revenue growth in our Schiff-branded business and on our flagship Move Free brand in particular. Our second quarter net sales increased 9.5% versus the year-ago period, the branded sales up 2.2% and private-label sales up 42%.

Our branded joint-care net revenues were flat on a quarter-over-quarter basis. Our flagship Move Free brand net sales increased 10.5%.

But, we experienced reduced sales on our other joint-care brands, which were impacted by new private-label entries present in the current period versus none in the year-ago period. Nevertheless, we view our other joint-care branded business as healthy and we are taking specific measures to defend the business against price-oriented competitors.

The remaining Schiff-branded business and our Tiger's Milk Nutrition Bar brand recorded increased net sales in the second quarter, versus the year-ago period, and our private-label business benefited from both improved volume and timing of customer orders. With respect to second quarter profitability, we recorded significant increases over the year-ago period in our gross margin, our operating earnings and earnings per share.

Joe will cover the earnings comparisons in detail for you in his remarks. We continue to be encouraged by the consumer response to our Move Free Advanced Formula, in terms of both satisfaction level and repeat-purchase rate, as determined from consumer research studies conducted over the last several months.

The marketing support level behind Move Free Advanced was aggressive in the second quarter, representing the majority of the substantial increase in overall spending versus the year-ago period. We invested in national television and magazine advertising, in couponing, sampling and account-specific events, in a continuation of the marketing tactics initiated in the third quarter of fiscal year '06 in support of the launch of Move Free Advanced.

We are optimistic about our Move Free Advanced marketing initiative despite the intense competitive reaction to our launch, which has been primarily in the form of copy-cat products and very aggressive pricing and promotion activities. We expect to encounter continued heavy competitive activity in the second half of fiscal '07, and are therefore somewhat cautious about our balance of year Move Free sales trend.

Nevertheless, we remain committed to growing the Move Free brand and the overall Schiff-branded business in the longer term. We expect to leverage our strong balance sheet as we continue to make the appropriate marketing investments behind Move Free and our other Schiff-branded entries.

At the same time, we continue to explore both organic and external growth initiatives and also periodically evaluate other strategic alternatives with respect to our cash position in conjunction with Schiff's board of directors. Let me now turn the call over to Joe Baty, Schiff's CFO, for a detailed review of the Q2 numbers.

Joe?

Thank you Bruce. Good morning and Happy New Year to everyone.

Earlier today we announced our financial results for our fiscal 2007 second quarter. The six months ended November 30, 2006.

Fiscal 2007 second quarter net sales increased approximately 9.5% to $38.8 million, from fiscal 2006 second quarter net sales of $35.5 million. Net sales increased primarily due to a modest 2.2% increase in our overall branded business, coupled with a 42% increase in quarter-over-quarter private-label sales.

The results for our on-going branded business approximated expectation. Aggregate branded sales amounted to approximately $29.6 million and $29 million respectively, for the fiscal 2007 and 2006 second quarters.

The increase in private-label sales was primarily due to timing of customer orders and a modest volume increase. Net sales were $84.5 million and $83.5 million, respectively, for the six months ended November 30, 2006, and 2005.

Branded sales were $66.7 million and $66.8 million, respectively. Gross profit, as a percentage of net sales, modestly exceeded internal expectation at 41.7% for the fiscal 2007 second quarter and was significantly above the 31.6% for the fiscal 2006 second quarter.

Gross profit percentage increased primarily due to lower joint-care raw materials cost, partially offset by a higher mix of private-label sales. Joint category market conditions continue to reflect relatively stable raw material pricing.

Total operating expenses were approximately $13.5 million, or 34.9% of net sales, for our fiscal 2007 second quarter, compared to $9.8 million, or 27.7% of net sales for our fiscal 2006 second quarter. Selling and marketing expenses increased, as expected, to 22.6% of net sales for the fiscal 2007 second quarter, from 17.1% of net sales for the prior year second quarter, due to planned marketing campaigns.

The percentage increase is primarily due to an approximate $3 million increase in quarter-over-quarter advertising, primarily in support of our Move Free Advanced product launched in the latter part of the fiscal 2006 second quarter. The dollar increase during the fiscal 2007 second quarter in other operating expenses was primarily due to a net $0.6 million reduction in quarter-over-quarter reimbursement of import-related costs and a modest increase in research and development costs.

Operating income for the fiscal 2007 and 2006 second quarters was $2.6 million and $1.4 million respectively, including approximately $0.3 million and $0.9 million respectively, of reimbursed import-cost income. Future reimbursements will be minimal.

Other income expense, net, primarily consisting of interest income, net of interest expense, was $0.7 million income for the fiscal 2007 second quarter as compared to $0.3 million income for the fiscal 2006 second quarter. Effective tax rate for the fiscal 2007 second quarter was 33.3%, which was slightly less than expectation, due to favorable impact of tax-exempt interest income, in realization of certain manufacturing tax credits.

Subject to final resolution of certain remaining tax contingencies, and the on-going impact of tax-exempt investments, we believe our overall effective tax rate will be in the 34-35% range for fiscal 2007. We reported net income per diluted share of $0.08 for fiscal 2007 second quarter compared to net income per diluted share of $0.06 for fiscal 2006 second quarter.

And $0.20 per diluted share for six months year-to-date as compared to $0.24 per diluted share for the prior period. As previously noted, financial results for the six months ended November 30, 2005, were favorably impacted by approximately $2.3 million in import cost reimbursement income versus $0.3 million for the first six months of fiscal 2007, $1.6 million in foreign currency gain, and an overall effective tax rate of approximately 11%.

In regards to the balance sheet, working capital was approximately $96.5 million at November 30th, 2006, compared to $90.5 million at May 31, 2006. The overall improvement in working capital was primarily due to the favorable financial results for the first six months of fiscal 2007.

Increase in inventories primarily reflects the impact of forward purchasing of certain raw materials for our joint-care business and promotional priming considerations. We do not believe inventories will noticeably increase during the remainder of fiscal 2007.

The modest decrease in receivables reflects the impact and timing of fiscal 2007 second quarter sales versus fiscal 2006 fourth quarter sales. Depreciation and amortization expense for ongoing operations was approximately $0.8 million and $0.8 million respectively for the fiscal 2007 and 2006 second quarters.

Capital expenditures were approximately $1.7 million and $0.4 million respectively. Capital expenditure commitments for the next 12 months currently approximate $3 million.

Stock based compensation amounts to approximately $2.1 million and $0.1 million respectively for the six months ended November 30th, 2006 and 2005. Regarding fiscal 2007, competitive pricing pressures continue.

The joint-care raw material costing situation and market sharing erosion have led certain competitors to significantly increase promotional activity and/or passed through price decreases. Incremental price discount like promotional activity effectively reduced the sales results.

Our six months results reflect a very modest increase in net sales. However, our current forecast, which may change, reflects a single digit decrease for our fiscal third quarter.

As previously noted, achievement of near term sales growth is subject to the impact of future competitive pressures as well as the impact of our Move Free Advanced and other marketing initiatives. We continue to believe our gross margin will be in the 38-40 plus percent range for fiscal 2007.

And, previously noted, we believe our core business operating margin will improve for fiscal 2007 as compared to fiscal 2006. Again, thank you for your participation and now I will turn the time back to our president Bruce Wood.

Thank you Joe. To summarize and to re-iterate my comments on the first quarter call, we expect fiscal ’07 to be a very intense year competitively speaking.

That said, we are encouraged by our second quarter and year-to-date results and are confident in the long term prospects for our business. Thanks for your interest in Schiff, and Joe and I are now ready to take your questions.

Hi Bruce. Hi Joe.

Good morning. Wanted to ask you guys a little bit about the unit and volume trends relative to the reported dollar-sales trend?

I’m just trying to understand a bit more about the competitive dynamics that are out there right now.

Well I would say from a unit movement standpoint, there’s more of a growth story. From a sales standpoint, because of the pricing pressures there’s less of a growth story or a relatively flat story.

OK, can you…if you’re reluctant to put actual numbers on it, can you just sort of give me a feel for what the split might be between the two?

Well, our overall sense is, and again we can’t access data for all accounts as far as movements for all brands and so forth, but our overall sense based on our business is that volume, the unit movement, is clearly up in something in the single digit range. But again, back to the higher level of pricing, it doesn’t end up being reflected from a dollar standpoint.

O.K. My next question is just on the private-label business.

In the past you would make comments, I believe, and maybe I’m wrong on this…that you were de-emphasizing that somewhat, that it wasn’t at levels that you found profitable? Has this come back to levels that you find profitable or do you just feel that you need that through put from a utilization standpoint?

Why are we doing so much more of that? Not that it’s a bad thing but I just want to understand where you guys are going with that.

Well, I wouldn’t say that we’re doing dramatically more. I would say that if you were to back up the clock to, say fiscal 2005, our overall split between branded and private-label was closer to 70/30, or 72/28-ish kind of split, branded/private-label.

And then in FY06 it became closer to 80/20 branded/private-label. And overall for FY07 we really expect a fairly consistent split.

Consistent with which of those?

80/20 split as in 80% branded and 20% private-labels. We really don’t expect much of a change there, it’s just that due to the timing of certain customer orders and what not, we can see a little higher mix in a given quarter, but overall from a fiscal year standpoint, we believe the mix will still be somewhere in that range.

Now we have, and we will look for opportunities to potentially add an additional private-label skew or two or whatever, if we believe that we can continue to spread our fixed costs and make some positive contribution.

O.K. Great.

Just finally, on the use of cash question. Can you give us just a little bit more on what you guys are thinking here, what your timing is?

Are you guys giving yourselves a deadline for doing something?

Mike, this is Bruce. Good morning.

That subject is pretty much on a regular basis review with our board and we wouldn’t really want to comment further on timetables or possible ideas but it is something we’re aware of and periodically we talk to our board very actively about that subject.

O.K. But you haven’t given yourselves any deadlines for actually doing something because it’s been on there for a couple of years now and there certainly have been some acquisitions that others have made that you have not made or, I guess opportunities for a dividend or other standpoint?

There are no specific timetables that we’re holding ourselves to at this point and time. That said, it does, as I noted in my prepared comments receive regular review at the board level.

O.K. Thank you.

Thank you Leticia, and thank you listeners for calling in today and once again Happy New Year. We do look forward to scheduling our third quarter earnings call in late March or early April.

Good day.

Thank you.

Thank you for your participation in today’s conference. Ladies and gentlemen, this concludes the presentation.

You may all disconnect, and have a good day.