Helen of Troy Ltd (HELE) 2007 Q3 法說會逐字稿

Good morning, and welcome, ladies and gentlemen, to the Helen of Troy Third Quarter Earnings Conference Call for Fiscal 2007.

At this time, I would like to inform you that all participants are in a listen-only mode. [OPERATOR INSTRUCTIONS] At the request of the Company, we will open the conference up for questions and answers after the presentation.

Our speakers for this morning's conference call are Gerald Rubin, Chairman, Chief Executive Officer, and President;

Thomas Benson, Senior Vice President, and Chief Financial Officer; and Robert Spear, Senior Vice President and Chief Information Officer.

I will now turn the conference over to Robert Spear.

Please go ahead, sir.

Good morning, everyone, and welcome to Helen of Troy Third Quarter Earnings Conference Call for Fiscal 2007.

The agenda for this mornings conference call is as follows.

We'll have a brief forward-looking statement review followed by Mr. Rubin who will discuss our third quarter earnings release and related results of operations for Helen of Troy, followed by a financial review of our income statement and balance sheet for the quarter by Tom Benson, our Chief Financial Officer.

And finally, we'll open it up for a question-and-answer session for those of you with any further questions.

First, the Safe Harbor Statement.

This conference call may contain certain forward-looking statements that are based on management's current expectation with respect to future events or financial performance.

A number of risks or uncertainties could cause actual results to differ materially from historical or anticipated results.

Generally the words, anticipates, believes, expects, and other similar words identify forward-looking statements.

The Company cautions listeners to not place undo reliance on forward-looking statements.

Forward-looking statements are subject to risks that could cause such statements to differ materially from actual results.

Factors that could cause actual results to differ from those anticipated are described in the Company's form10-Q filed with the Securities and Exchange Commission for the third quarter, fiscal year 2007 ended November 30, 2006.

Before I turn the conference call over to our Chairman, Mr. Rubin, I would like to inform all interested parties that a copy of today's earnings release has been posted to our Web site at www.HOTUS.com.

The release can be accessed by selecting the Investor Relations tab on our home page and then the News tab.

I'll now turn the conference over to Mr. Gerald Rubin, Chairman, CEO and President of Helen of Troy.

Thank you, Bob and good morning to everybody and welcome to our Third Quarter Conference Call.

Helen of Troy Limited today reported sales and net earnings for the quarter ended November 30, 2006.

Third quarter sales increased 8% to $213,437,000 versus sales of $197,458,000 in the period of the prior year.

Third quarter earnings before income tax increased 7% to $25.5 million from $23.8 million in the prior-year quarter.

Third quarter net earnings were $22.8 million or $0.72 per fully diluted share compared to $22.7 million or $0.72 per fully diluted share for the same period a year earlier, an increase in net earnings of 1%.

Sales for the net -- for the nine months ending November 30, 2006, increased 8% to $491 million versus $455 million for the previous year.

Net earnings for the first nine months of this year were $40,366,000 or $1.28 per diluted share versus $42,666,000 or $1.34 per share in the same period of last year.

Third quarter earnings before interest, taxes, depreciation, and amortization, EBITDA, increased 8% to $33 million versus $30.6 million for the prior-year quarter.

EBITDA for the nine-month period increased 4% to $68.3 million compared to $65.8 million for the same period of the prior year.

For the third quarter, sales in our Personal Care Segment increased 8% to $174 million compared with $161 million for the same period last year.

Net sales in the Personal Care Segment for the nine month period increased 8% to $390 million compared to $362 million for the same period last year.

Net sales in our Housewares Segment for the third fiscal quarter increased 9% to $39,700,000 compared with $36,500,000 for the same period last year.

Net sales for the Housewares segment for the nine month period increased 9% to $101 million compared to $93 million for the same period last year.

We are very pleased with our sales increase for the quarter and for the year.

There was gross margin pressure in both the Personal Care and Houseware Segment and expenses associated with the OXO warehouse transition and related shipping difficulties impacted our overall operating margins and negatively impacted our net earnings for the quarter and the year.

The increased expenses related to operating two warehouses will continue through this year's fourth quarter, but we do not expect to incur these additional warehouse expenses in the next fiscal year as we plan to be out of our old warehouse by March 1st.

As of November 30th, Helen of Troy's balance sheet remains strong with stockholder equity of $567 million or 10% -- (inaudible) -- from the comparable period last year.

Our cash position as of November 30th, stood at $59 million versus cash of $20 million in the prior year, an increase of $39 million.

Our inventories at November 30th, declined 21% to $146 million versus $185 million, a decrease of $38.5 million for the same period in the prior year while sales increased by 8%.

This was one of our company objectives to lower our inventory and we achieved a major reduction in our inventory by lowering the inventory almost $39 million.

For the fourth quarter ending February 28, 2007, we currently expect overall sales to be in the range of $135 to $140 million compared to last year's fourth quarter sales of $134.5 million.

Earnings per share for the fourth quarter are currently expected to be in the range of $0.25 to $0.30 per diluted share versus the prior-year's fourth quarter earnings of $0.21 per diluted share.

Sales for the fiscal year ended February 28, 2007, are currently expected to be in the range of $626 to $630 million.

With earnings per share anticipated to be in the range of $1.53 to $1.58 versus our previous guidance of $1.70 to $1.80.

For the fiscal year beginning March 1, 2007, we are providing guidance of annual sales in excess of $660 million, and annual earnings in excess of $2 per diluted share.

We believe these increases will be driven by new product introductions, reductions in nonrecurring expenses and more efficient operations.

Some of our specific objectives for fiscal 2008 that we believe should help us drive expected increases in sales and net earnings are as follows.

The placement and sales of Bed Head by TIGI and Tony & Guy appliances both domestically and internationally.

This is a new licenses that we can talk about later.

Expansion of Fusion Tool appliance placement and sales in the Professional Salon distribution channels.

Lower warehouse shipping and transportation expenses as our staff gains efficiencies through experience and the elimination of expenses associated with our currently-leased 619 ,000 square foot warehouse at the beginning of the new fiscal year.

New OXO product introductions including but not limited to the Candela line of rechargeable lighting products, as well as expanded international OXO distribution and placement in the retail markets of the U.K., England, and Japan.

Increased profitability for Idelle Labs and international appliance sales as expenses are reduced over prior year and expected sales of higher-margin goods that will favorably impact the overall sales mix.

Expanded distribution in the Brush, Comb and Accessory category, and price increases to customers in several of our Personal Care and Housewares categories going to affect next year.

We especially believe that the new Bed Head by TIGI product line of appliances and related products has significant future growth potential and we are very excited that this new line of products will become a major contributor to Helen of Troy's overall future increased profitability.

I would now like to turn this conference call over to Tom Benson, our CFO, who will do the financial review.

Thank you, Gerry, and good morning, everyone.

We are pleased with our sales performance for the third quarter, but are still having gross profit pressure and higher selling, general and administrative expenses as a result of our domestic warehouse transition.

Third quarter net sales increased 8% year-over-year.

Sales for the third quarter of fiscal 2007 were $213.4 million compared to $197.5 million in the prior year.

This is an increase of $15.9 million or 8%.

I will discuss the reasons for the sales increase under our segment net sales information.

Our third quarter operating income increased 1.6% year-over-year.

Operating income for the third quarter of fiscal 2007 was $29.1 million, which is 13.6% of sales compared to $28.6 million, which is 14.5% of sales in the prior-year fiscal quarter.

This represents an increase of $500,000 or 1.6%.

Third quarter net income increased 1% in dollar terms year-over-year.

Net income for the third quarter of fiscal 2007 was $22.8 million, which is 10.7% of sales compared to $22.7 million, which is 11.5% of sales in the prior-year quarter.

This represents an increase of $100,000 or 0.6%.

Third quarter diluted earnings per share was $0.72 this fiscal quarter compared to $0.72 in the year-ago fiscal quarter.

Now I'll provide a more detailed review of the various components of our financial performance.

Our Housewares segment is the OXO business.

OXO is a leader in providing innovative consumer product tools in a variety of areas, including kitchen, cleaning, barbecue, barware, garden, automotive, hardware, storage and organization.

Brands that we sell include OXO Good Grips, OXO Steel, and OXO SoftWorks.

The Housewares Segment's net sales for the third fiscal quarter in 2007 were $39.7 million compared to $36.5 million in the year-ago quarter.

This represents an increase of $3.2 million or 9%.

Sales increases have been primarily driven by continued new product introduction us with existing customers as well as new distribution in the grocery channel.

Our other segment is our Personal Care segment and includes the following product lines.

Appliances; products in this group include hair dryers, curling irons, thermal brushes, hair straightners, massagers, spa products, foot bath, and electric clippers and trimmers.

Key brands in appliance include Revlon, Vidal Sassoon, Sunbeam, Health O Meter, Dr. Scholl's, Hot Tools, and Wigo.

Grooming, skin care, and hair products are included in the Personal Care Segment and consist of the following brands.

Brut, Sea Breeze, SkinMilk, Vitalis, Ammens, Condition 3-in-1, Final Net, and Vitapointe.

Brushes, comb, and accessories are also included in the Personal Care segment.

Key brands in the product category include Revlon, Vidal Sassoon, and Karina.

The Personal Care segment net sales for the third quarter of fiscal 2007 were $173.7 million compared to $161 million in the prior-year fiscal quarter.

This represents an increase of $12.7 million or 8%.

Net sales increases were a result of new product introductions include Fusion Tools, Brut Revolution, and Toni & Guy brand appliances and [uni-volume] and price increases.

Gross profit for the third quarter was $91.5 million, which is 42.9% of sales compared to $86 million or 43.6% of sales in the prior-year quarter.

This represents an increase of $5.4 million, or 6.3% the dollar growth.

The decrease in gross profit percentage of 0.7 percentage points is primarily due to a combination of the Houseware Segment expansion into a higher unit, lower margin product lines, more direct import sales, which are sold at a lower margin, and product cost increases.

Selling, general and administrative expenses for the third quarter increased 0.1 percentage point as a percent of sales.

SG&A expense was $62.4 million for the third fiscal quarter of 2007, which is 29.2% of sales compared to $57.4 million, 29.1% of sales in the prior year fiscal quarter.

This is an increase of $5 million or 0.1 percentage point.

The increase in SG&A percentage is primarily due to the impact of increases in depreciation, higher facility-related cost and compliance charges from the operational transition of our domestic distribution system, as well as increased personnel costs.

Interest expense is up $228,000 for the quarter due to higher interest rates on debt.

Total debt was down $67 million at November 30, 2006, compared to November 30, 2005.

Our tax expense for the third fiscal quarter of 2007 was 2.7 million, which is 10.5% of income before taxes.

This compares to $1.1 million, 4.6% of income before taxes in the prior-year quarter.

The effective tax rate is up 5.9 percentage points compared to the prior year.

We believe a 10 to 12% rate is a normalized rate.

Last year's tax rate was low due to lower income in the United States and losses in Europe, which are both high tax rate jurisdictions.

I will now discuss our financial position.

Our cash balance was $59 million at November 30, 2006, compared to $20 million the prior year.

We have a $75 million revolving line of credit in place, of which we have no borrowings.

Our cash position as of today is approximately $70 million, and that is after a $10 million debt repayment we made in the last week.

Accounts receivable increased $2.8 million year-over-year.

On a trailing 12-month basis, accounts receivable days outstanding decreased to 78.5 days at November 30, 2006, compared to 85.7 days at November 30, 2005.

On a current sales basis, accounts receivable days outstanding are 69 days compared to 74 days a year ago, an improvement of five days.

Inventories at November 30, 2006, decreased $38.6 million from November 30, 2005.

As Gerry mentioned, that was one out of our initiatives for this year, and we have accomplished our goal.

Shareholders' equity increased $46.8 million to $515.7 million at November 30, 2006, compared to November 30, 2005.

I'll now turn it over to Gerry for additional comments and questions.

Operator, I would like to open the floor up for questions.

Thank you very much. [OPERATOR INSTRUCTIONS] The first question comes from Kathleen Reed, Stanford Financial.

Good morning.

Good morning.

First question on the warehouse and the move to the one new facility.

Can you just tell us what the total charges are that you expect to incur in fiscal '07?

What actually are the problems, I guess, if it's still with OXO.

It sounds like Idelle Labs is transitioning fine.

And if you are still on track -- or if you are moving the Personal Care Appliance business to that new center, I guess in your fourth quarter, so I guess that would be now.

Okay.

We are in the middle of the transition of the Personal Care appliance business over to the new warehouse.

It's currently going very well.

As most people know, the initial opening of that warehouse opened late last year where we moved our grooming and skin care business into it in late December.

Then in early calendar 2006, we moved our OXO inventory in it.

The start-up of the OXO was troubling for us, and as a result of that, we made a decision to leave our appliance inventory in the old warehouse.

Currently, we expect to be out of the old warehouse by the end of February, and not to incur both the duplicate warehouse costs and also the cost of transition next year.

We're not putting specific numbers out on those costs, but they were in the millions of dollars this year that we do not expect to incur next year.

Okay.

Are you still -- you had given savings from the new warehouse in the 8 to $10 million range on an annualized basis.

Is that still a good run rate to use for fiscal '08 for your new facility?

When we gave that 8 to $10 million savings out, we said that was savings in SG&A including the warehouse and other costs.

Some of those savings have already been achieved in this fiscal year, and the remaining ones will really be the warehouse costs and some of the start-up costs associated that we are anticipating achieving next year.

Okay.

Can you -- not to keep asking about the warehouse, because it sounds like your sales did real well this quarter, but can you break out if there were any warehouse costs in your gross margin line or if they were all in your SG&A line?

You usually in your SG&A line give us -- since it increased $5 million, you usually break out the components of the SG&A year-over-year increase.

Can you do that for us this quarter?

In our gross profit line, there is no meaningful impact from the warehouse transition.

In earlier quarters, there were concessions we made to certain customers, but those had ended by the time we got into this third quarter.

Our SG&A costs do have higher warehousing costs as a result of this ongoing transition.

And we expect that in the fourth quarter we're going to have -- again, as I said, some of these duplicate costs.

Starting first quarter next year, some of them will be gone, some of our ongoing employee training and efficiencies will still continue in the early part of next year.

Okay.

And is part of the reason that your Personal Care Appliance transition is easier, was that -- were you sourcing that one and the other one in Mississippi already, or somewhere in Texas, and wasn't it the OXO one had to come all the way from Illinois?

Right.

Well, the grooming part of our Personal Care that we moved last December came from El Paso.

And what we were doing is we were moving the inventory, but we were using the same system and processes.

When we moved the OXO from Illinois, that was a business that we had not shipped ourselves, it was shipped by a third party.

The company that we bought OXO from during the transition.

So that was new business to us that was a-- the volume of orders was much higher, the size of orders was much smaller.

We're doing a lot more store-by-store packing, so it was a much more complex business that we did not have experience with.

The Personal Care remaining appliances that we're currently moving, that move is approximately eight miles from the old warehouse to the new warehouse.

We are going to -- the employees that are currently shipping that business will be working in the new warehouse, shipping those customers, and we are not changing systems or processes as a result of this move.

Okay.

That's really helpful.

Last quick question.

If you can give us an update on Brut Revolution and Fusion.

How much Fusion accounted for personal care sales if the pipeline was meaningful to the overall Personal Care sales in the quarter.

And then just some color on Brut Revolution?

We do not give out sales on particular products or product lines.

We probably sell over 60 different lines, but can I tell you the Fusion Tool introduction is successful, and there are more customers coming on this year.

And Brut Revolution, from what we see initially looks good.

Sales are, in most cases, better than we had expected.

And these are from the major retailers.

So we're very optimistic about both of those.

Okay, great.

Thank you so much.

Thank you.

Our second question comes from Gary Giblen, Brean, Murray, Carret.

Good morning.

Good morning, Gary.

Is it possible the shipping problems would have any ongoing effects in terms of customer issues, or did the concession, Tom, that you mentioned take care of that?

Gary, I think the shipping issues are behind us at this time, but when we were having the initial shipping issues, the focus with the customers was filling our current order, and there was not a lot of discussion about new business and new opportunities.

Those discussions, now that we're fulfilling the day to day customer needs, we are discussing with customers and we are bringing on new products in the OXO area.

I think we -- not think.

We did have a short-term impact to our new sales and new rollout opportunities in OXO until we overcame our shipping issues.

I do not feel that there's going to be long-term implication of that, but there was short-term impact of it.

Okay.

That helps a lot.

In the release, it talks about gross margin pressures on both Personal Care and Housewares, but is that just the warehouse-related stuff plus the -- maybe, the concession, or are there other aspects of it coming from trade pressures and pricing and what not?

Well, there's a little of all the things you mentioned.

There is increased, of course, always pricing pressures, some from the retailers.

There's also increased costs for the products, but we believe they have stabilized because of copper prices and plastic and oil.

But we're trying to offset all that by price increases, which we're putting in in all divisions, as much as we can to offset it.

So we're trying to balance the increased prices versus the increased costs.

Okay, thanks.

Just a couple more.

Some Housewares companies found that there was a -- kind of a slowdown of orders in November because retailers got cautious having seen Wal-Mart's poor results and outlook in the early part of the fall, but your sales were excellent in both segments, so did you see any glitch in orders?

Is it possible orders should have been even stronger, except for that glitch?

As you know, there were many quarters where we didn't have price increase of sales, and yet we achieved an 8% sales increase in the quarter, and that is all organic.

We did not buy any new companies, so we were happy with the 8% goal.

We were not disappointed.

I don't think we expected anymore than the 8% for the quarter.

But you didn't see any retail ordering pattern change or anything --?

No.

Keep in mind that our third quarter is different from the calendar third quarter.

Our third quarter was September, October, and November.

So the November you just mentioned was included in this 8% growth.

Yes.

Good point.

Just finally, I understand the tax rate is a range between 10 and 12%, but what brought it to the very low end of that range for this quarter?

What was the swing factor?

Well, Gary, this is Tom Benson.

We file taxes in probably over 40 jurisdictions, so what you do is you really -- it's a mechanical process.

You calculate the taxes in all the jurisdictions and it rolls up.

I feel that we are within our range for this year and as explained last year, it was lower because our European business, as we had discussed last year was not performing very well, and we were having losses in that business, which and we were having losses in that business, which is a high tax rate jurisdiction.

In our U.S. business, we did have a -- a year ago in the quarter, we had impact of the [inaudible] bankruptcy that got settled.

Again, that was a U.S. tax jurisdiction tax rate impact, which is another high tax rate jurisdiction.

So it really comes down to, you have to look at every single jurisdiction and look at the results for them.

And sometimes if you have unusual events or either better or poorer performance in an area, it impacts the tax rate.

Understood.

Okay, thank you.

Moving on, we'll hear from Doug Lane with Avondale Partners.

Good morning, everybody.

Good morning, Doug.

Tom, when you went over your prepared remarks, you gave three bullets for the reason gross margins were down.

And I've got most of the first one regarding a mix shift within OXO.

Can you elaborate on that a little bit, please?

In the Housewares segment, which is OXO, they've been introducing some products that sell at higher price points in retail.

Trash cans, tea kettles, items of that nature.

Those items have a lower gross margin.

Okay?

So that can bring your gross margin down.

Got it.

Okay.

Direct imports, the majority of our direct imports are in our Personal Care Segment is as, when we sell to a customer on a direct import basis, we do not include below-the-line costs for warehousing, for distribution, we don't -- a lot of times, it is sold at -- we take possession of the goods and then we sell them at origin or in the far east and they pay the inbound freight.

So we sell those goods at a lower initial gross profit margin, because we are not incurring the below-line-costs.

Okay?

Yes.

That's very helpful.

So, arguably, then, your SG&A -- those sales would have been made up on the SG&A line without the associated expenses.

So I assume that the operating margin on those sales are about the same as otherwise?

Yes, yes, I think they are.

And the third reason that I gave of why gross profit was down a little, and that's what Gerry had mentioned also.

We've, over the last year, we've had product cost increase, and we're working very hard to work with our customers to pass some of those increases on.

Hopefully, the cost increases are slowing down, but we had cost increases over the last year.

So, I mean, hopefully then, if I'm looking out to fiscal '08, I should be building in better prices if you're able to pass through this price increases, and with stabilized product costs, we should have a more favorable gross margin situation with that dynamic next year, but will we continue at the same pace of direct shipping, and will the OXO business continue to have a negative mix shift next year?

I'm just trying to get a feel for, on the gross margin line, excluding what's going on with the warehouse, just on the gross margin line, pricing and costs, is it going to be more gross margin pressures going into '08, or is that going to alleviate a little bit?

I think that as a company, we hope to expand our gross margin next year.

It's not a slam dunk.

There's a lot of factors in it when you work with your customers on price increase, some of them do agree to it, but there's a time to implement them.

And the cost side is we have purchase agreements on our purchased products, but they may go out from three to six months, and after that, we have to renegotiate with our suppliers.

We do not have long-term purchase commitment s that locks in our cost side.

And everybody knows, raising prices is a very difficult process.

No question, and especially to your constituency, where pricing is obviously very difficult.

Can you tell us where you are in that process?

Just early days, have you seen acceptance, has it been passed on at the counters or on the shelves yet?

Just where are we in this price --

Some of it occurred starting in September/October.

Others started January 1st.

It's continuing.

It's not everybody has been increased, but it's ongoing.

Depends on products, customers, but it is a priority for us to increase the gross profit or at least keep it stable next year over what it was this year.

Hopefully we can increase it, but certainly we don't want it to go down.

That's why we institute price increases.

And on balance, Gerry, you think low single digits, mid-single digits, where do you think it will shake out at the end of the day?

On the gross profit, well --

No, on the percentage of pricing you shall get in your sales increase next year.

Oh, low-single digits.

Okay.

On the OXO.

We haven't talked about new OXO products, but I would like to talk a little bit about OXO, if we could, on two fronts.

One, on this mix shift you talked about, Tom.

Is this something we should look for, continuing strong sales growth, but perhaps some margin erosion with a negative mix shift, like you just talked about? and then on a separate front, OXO is up 9%, but was sort of expected to be a double-digit or a mid-teens grower.

Was there something in the quarter that maybe gave it a hair cut.

Should we look at it to get back to 15% once you get up and running in Mississippi, or do you think a 10% number is a more realistic number going forward for OXO growth?

Next year, which is our next fiscal year, we're expecting double-digit growth for OXO.

Double digit 10 or 15?

Double-digit growth.

I'm not answering the rest.

In the fourth quarter that we're in, last year we had very strong new product introductions.

We came out with a hardware line, we came out with a number of other introductions.

So year-over-year, it is going to be very difficult to beat the sales that we had a year ago for OXO in the fourth quarter.

Okay.

Longer-term, we expect double-digit sales growth for OXO.

With a -- what do you see margins do you see this mix shift you talked about carrying on through '08, [inaudible] maybe a different story next year?

I think what we want to accomplish in all our businesses is stability of gross profit or slight growth.

That's what we're trying to accomplish.

So I don't see a -- sometimes if they go to direct imports, what we're trying to do is, overall, we're trying to achieve the -- close to the same results, either on a direct basis or a direct import basis.

Customers try that, they find out what they need to do on it, and some people come back and the next year choose not to do it on a direct import basis.

So we work with our customers and they have initiatives to try to do different things, we work with them to accomplish it.

Okay.

Lastly, are you still paying royalty to the previous owner of OXO, or has that gone away now?

No, we've never paid any royalty to any previous owner.

What we do pay is, we pay royalties on the design firms that help us come up with products.

That's how they get paid.

They don't get any up-front money.

But there are no royalties.

We had an initial purchase price, there was no contingent purchase price or anything with OXO.

Wasn't there a management fee when they were running the business?

Well, we paid them for services, transition fees, and those -- that ended last February.

February of 2006, that ended.

Okay.

Thanks.

Thank you.

Moving on, we'll hear from Mimi Sokolowski with Sidoti Company.

Just a few quick questions.

Most of mine have been answered.

Gerry, I was curious, when you have pricing pressure, how do you accomplish price increases the next go-around?

Well, actually, there are two phases to price increases.

One is on new products, where if you -- if it's a new product and you're paying more for that product, you price it in to what you're going to sell the products for.

On older products, you just have to work with the retailer about raising prices.

Not only on our part, but they have to raise their prices also.

So it's a give and take.

The one that is you've initiated thus far, are those with new products, or are those with more mature ones?

The new products, we never say that there are price increase, because that's all built in.

When we say price increases, it's on the current product that is we're selling that we're trying to get increased prices on.

Okay, okay.

And you mentioned that you're pretty excited about TIGI Bed Head.

Have you gotten many indications for product placement there?

It seems like Personal Care, hair care appliances is an area where retailers wouldn't be quick to increase the shelf space?

Well, the reason I tell you that I was excited is because we've shown it to certain customers in the mass retail business.

They're very excited, their going to make space for it.

Also drug chains and --

Does that mean they would expand the shelf space for the category, or does that cannibalize --

Yes, give us additional -- in two of the cases, it will be expanded shelf space.

Okay.

Not taking away from our current line.

But we're real excited about it, because Bed Head is a well-known, professional brand.

It's sold in beauty salons across the country and somewhat in retailers, and we're probably the first one in the history of Personal Care that we're taking a professional line of products and selling them to retailers throughout the country.

Okay.

Do you worry about erosion of the brand name, then?

We do not own the brand name.

That's something you'll have to ask the licensor, we're the licensee.

We're going to try to maximize the sales as much as we can.

On the TIGI, we have a license on the western hemisphere.

We'll be selling it in Canada, the U.S., and subsequently in Latin America.

On the Toni & Guy.

A couple of years ago, we did have it for Europe.

With the new license agreement were the western hemisphere, we have a worldwide license for Toni & Guy.

The last question I had was for Tom.

Thank you, Gerry.

Can you give us the cash flow figures for the quarter, I don't know if I saw them in the press release but cash from operations and any sort of maintenance CapEx you had in the quarter?

That's going to all be in our cash flow in the Q that's going to be filed later today.

Okay.

I'll wait, then.

Thank you very much.

Thank you, Mimi.

Now we will hear from John Harloe with Barrow, Hanley.

I've got to tell you, I'm not trying to follow-up with some of the stuff that Doug asked, and I may have some bad data, but it seems to me last quarter if you go through the numbers pretty carefully, you come up with that you've got a price increase effective about 4%, and that would be -- just a second -- in your appliance business.

And you ought to have year -- so that's one thing that ought to imply that margins should be better.

You've got a 5% differential on what you're paying for OXO.

He called it a royalty, he said it's not, but there's called it a royalty, he said it's not, but there's some real money involved there.

And there are a couple other things you would think that imply that margins would go up.

So it's baffling to me that they actually go down, particularly with -- oh, and you've got the professional line, which I think is your highest-margin business that should be improvement year-over-year.

So can you add anymore color to this, because the numbers -- there's something that takes away from this, and I can't understand what it is, unless it's this direct import phenomenon.

Just as Tom and I have tried to explain, the gross profit is the conglomeration of a lot of different things.

There is the direct import where a lot of customers now have decided they'd rather pick up the goods in Asia than the United States.

It doesn't mean we make less profit, we try to make the same profits by dollars, but since they're carrying the costs of duties and transportation and distribution and warehousing, they pay that.

So of course the percentage that we make is smaller, but then we don't have all the other costs associated with it.

On the other hand, I didn't follow about OXO being 5% less.

It's a constant, everyday --

Let me go back --

-- dilemma trying to increase where we have to and where we can to increase the prices.

You alluded that somehow that we increased the prices 4%.

We never mentioned that.

It's somewhere, a goal in the low digits, but I can't tell you that we increased the prices 4% over the last quarter.

It's a goal of ours, but it's --

-- show that your appliance revenues last quarter were up 9.9%, and doesn't it tell us that the unit growth was 4%, and don't we know you had a letter out to all your customers with a first-time company across the board price increase four or five months ago?

But they didn't all take affect four or five months ago.

Many of the customers gave them time to work out their inventories.

That's what I mentioned that some of them got started in September, some will start in January, and some many March when our fiscal year starts.

The answer is all customers will get price increases, but not all items will get price increases.

A lot of it depend on the customers and are they taking new products where we can make more money.

It's a mix.

And I think on our side, we did very well considering what goes on in China, that the money exchange has dropped like 5%.

The oil went through the roof.

Copper went through the roof.

Metal products that we buy at OXO, the cost went through the roof.

And so what you're seeing is a big effort on our part to maintain the gross profit by passing on the price increases.

On our side, we think we did a heck of a job of considering what the price increases were when we began the year last year.

But some of it is subsiding.

There were a lot of cost increases from a lot of different factor last year.

I've got a follow-up question.

What are your plans with Epil-Stop?

I've noticed that your list of logos in your press release, that that's in there.

We're working on a national rollout this coming year.

We think we have some great product, and hopefully in the next quarter, we'll reveal that to everybody.

But we have shown it to major retailers who are excited about it.

It's all new formulations, new packaging, and we're excited about that also.

Would that be sold on a direct, sort of telemarketing thing as before, or would that be --

No, no.

We're getting mass retailers.

Okay.

Thanks so much.

Thank you.

Moving on, we'll hear from Amy Norfus with Pilot Advisers.

Your line is open.

All right, if there are no more questions, operator, I'd like to thank everybody for listening in and participating in our third quarter conference call and look forward to our fourth quarter, which will be our year-end report, our next conference call, which should occur in May.

I do apologize, we do have a few more questions in queue, gentleman.

Okay.

We'll go to Steve Friedman with Wachovia Securities.

Good morning, Gerry, Tom, and Bob.

Good morning, Steve.

I have a question, Tom, maybe you can clear this up for me.

You talked about it would be difficult -- you had talked about double-digit growth in the OXO line, and yet it would be difficult to match this quarter -- maybe I didn't hear that correctly, maybe you can clear that up for me.

No, I think you did hear it correctly.

What I said is that for the next fiscal year, we're expecting double-digit growth.

I said for the fourth quarter that we're in right now, we're expecting it to be difficult to match the prior-year sales because in the prior-year, we had significant new product introductions that are not repeating in this quarter.

I think when you look quarter to quarter, you can get results that people say, why, why are they so much better, or why are they so much off the prior year.

That's because of the timing of rollouts.

I think when you look at a longer period of time, we expect double-digit growth in OXO.

That's what -- as we're putting our forecast together, that's what we're expecting for next year.

All right.

Are you still as confident -- and now you did mention the higher price points for some of the products being rolled out in the OXO line, which could contribute to a little lower gross profit margin because of a higher price.

Overall, though, are you still as confident of OXO as you were when you originally made the acquisition, that it's going to be a significant contribution to Helen of Troy, along with a good gross margin contributor to the overall mix?

Steve, there's no question that we're excited about OXO and we're very happy we purchased it two years ago.

The sales are going to be increasing.

There are a lot of new products that are coming aboard.

If someone asks me, what are some of the most valuable assets that Helen of Troy owns, I would start with OXO.

I think it's probably the most valuable brand that we own.

It doesn't mean that the others are worth a lot less, but we have great brands in a lot of different categories, but the OXO brand is just a great brand and we're just happy that we own it.

Well, I know you were very optimistic and excited about the brand when you initially bought it, so would you feel that overall the product mix with OXO contributing next year should help the gross profit margin, along with the new introduction of the Bed Head line?

Yes, no question.

We're looking for OXO to be a big contributor.

We're looking for the Bed Head line to be a contributor, too.

Okay.

Steve, this is Tom Benson.

We're expecting sales growth and bottom line growth next year as we reported.

I think it -- when we look at gross margin, as we explained, when you're doing direct imports, you're doing this and that, it gets very complicated exactly how things get impacted.

But overall, we're expecting sales growth and bottom line growth.

That's good.

Looking from where you plan to come in this year, your earnings per share of expectation over $2 and sales of $660 million or excess, we'd still be looking at 30% increase over this year.

I would think that looking at a stock that's trading at 12 times or 11 times earnings right now, Gerry, you might have some thoughts on the valuation of the company stock?

As you know, there are some things going on in the appliance world where people are trying to buy companies, and I was looking at one today and thought that if Helen of Troy was valued as the same as what they are paying for these other companies that are not as good of marketers as Helen of Troy, Helen of Troy stock should be in the $40 range on a comparison basis to what people are out there bidding for companies for.

That's my comment.

And also going into the new fiscal year, with the substantial decline we've seen on oil, shouldn't that have a positive impact on a double-edged situation where maybe the price increases on cost of goods should slow as well as retail demand be enhanced?

Well, as far as the pricing, the lowering of oil will help stabilize the prices.

Recently, we have not received any new price increases.

I think they're more or less stabilized.

And if oil does keep going down, and a lot of our products are plastic, we'll be asking for price reductions.

But at least it's stabilized now.

We're not getting any major increases right now.

And like I said, we may, as the months go on, be asking for decreases.

So there's a positive there.

How that impacts the retail sales, it's -- on the consumer side, it's hard to tell.

Okay.

Thank you very much.

Thank you, Steve.

And our next question comes from Kathleen Reed, Stanford Financial.

Hi, just a quick follow-up question.

The other income was a positive, other income this quarter versus an expense last quarter.

Can you tell us what the big swing was in your other income line?

Kathleen, all those details are in Q. We go through a comparison of this year versus last year.

Okay.

Last question is on your last 10-Q, and maybe this answer would be in there too, and but if you could give it now, it would be great.

The inventory destocking was negatively impacting the Idelle Labs business was Idelle Labs positive in this quarter?

You don't have to say the amount, but if the sales for the Idelle Labs business was positive?

Our worldwide sales for Idelle Labs was positive this quarter.

Okay, great.

Thank you.

Thank you.

Next question, Doug Lane, Avondale Partners.

Yes, hi.

Quick follow-up question.

Gerry , are you looking to replace the position that Chris Carameros vacated last year?

What we have, as we announced on Monday, Dick Dwyer is joining us in business operations, and you can read all about that -- I don't want to go into it.

And that was some of what Chris did.

And there'll be other announcements coming.

But not at Chris' level or with a board seat?

Well, I can't tell you that right now.

Okay, fair enough.

Thanks, Gerry.

We have a follow-up from Mimi Sokolowski, Sidoti and Company.

Thanks, just one or two, probably for you, Gerry.

In trying to get an idea of with a we could expect from OXO's gross margin in fiscal 2008, can you give me an idea of how Alex and his team are motivated, how they're incentivized?

Whether it be topline goals or certain returns, inventory management?

Everybody who works for Helen of Troy in management is compensated based on profit, not on topline.

Okay.

That includes me.

So everybody is looking for the bottom line, that's how we all get salary and bonuses.

Got it.

And one quick one.

Are you considering any potential asset sales?

Potential asset sales?

No.

I'm looking for acquisitions, if you know any.

We're building up our war chest, and we're looking for acquisitions.

All right.

Thank you very much.

And we have a follow-up from Steve Friedman, Wachovia Securities.

Maybe this would be for you, Tom.

It was a question I forgot to ask.

Is the direct import program and usage of your end consumer impacting at all or the efficiency or the usage of the new warehouse, or would it?

I think that in the last quarter, direct imports as a percentage of our sales year-over-year has grown, but it's not such a large percent that it's affecting our warehouse operations.

It's not like we have -- as we mentioned, we are continuing to move into the warehouse.

Right now, we have the unused capacity.

When we move in there, we feel we are going to be utilizing the warehouse to a capacity that is efficient.

We're not going to have a lot of room available, and we're not going to have a lot unused.

So the direct import, should that increase, you don't foresee that as impacting the capacity utilization of the new warehouse?

No.

We hope to continue to grow our sales.

As Gerry said, we want to do acquisitions.

We want to -- we hope that our growth in other areas will be greater than the direct import growth increase.

Thanks again.

Thank you, Steve.

Gentleman, there are no further questions.

I will turn the call back over to Gerald Rubin to conclude.

Operator, are there any more calls?

We have nothing further.

Thank you again, for everybody that participated in this conference call.

And I am looking forward to speaking to you when we finish our fiscal year and report early May.

Thank you again.

Ladies and gentlemen if you wish to access the replay for this call you may do so by dial 888- 203-1112 with a replay pass code of 9456066.

This concludes our conference call for today.

Thank you all for participating and have a nice day.