Helen of Troy Ltd (HELE) 2008 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 2008.

At this time I would like to inform you all participants are in a listen-only mode.

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 year 2008.

The agenda for this morning's conference call will be as follows.

We'll have a brief forward-looking statement and review followed by Mr.

Rubin, who will discuss our third quarter earnings release and related results of operation 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 questions and answers for those of who you any further questions.

First the Safe Harbor Statement.

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

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

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

The company cautions listeners to not place undue 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 form 10-K filed with the Securities & Exchange Commission for the third quarter fiscal year 2008 ended November 30, 2007.

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 website at www.hotus.com.

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

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

Good morning, everyone, and welcome to our third quarter conference call.

Helen of Troy today reported sales and net earnings for the third quarter which ended November 30, 2007.

Third quarter sales were $210,348,000 versus sales of $213,437,000 in the same period of the prior year, a decline of 1.4%.

Third quarter net earnings were $22,842,000 or $0.73 per fully diluted share, compared to $22,813,000 or $0.72 per fully diluted share for the same period a year earlier.

Sales for the nine months ended November 30, 2007 increased 3.5% to $508 million versus $491 million for the previous year.

Net earnings for the first nine months of this year were $51,212,000 or $1.60 per fully diluted share, versus $40,366,000 or $1.28 per fully diluted share in the same period last year.

Excluding these third quarter items, net earnings for the quarter were $25,480,000 or $0.81 per fully diluted share, versus net earnings of dollars $22,372,000 or $0.70 per fully diluted share in the previous year, an increase in earnings per share of 15.7%.

Net earnings for the nine months ending November 30, 2007 include an after tax benefit for the second quarter of $7,950,000 or $0.25 per fully diluted share, relating to our Hong Kong IRD tax settlement.

Net earnings for the nine months ending November 30, 2006, including an after tax benefit of $192,000 or $0.01 per fully diluted share, related to a previous Hong Kong IRD settlement and an after-tax gain on the sale of land of $279,000 or $0.01 per fully diluted share.

Excluding all of these items and the third quarter items referred to previously net earnings for the nine months ending November 30, 2007 were $45,900,000 or $1.44 per fully diluted share, compared to $39,454,000 or $1.25 per fully diluted share in the prior year, an increase of earnings per share of 15.2%.

I would like to point out everybody should look at the $1.44 without the extraordinary items versus the $1.25, which gave us a 15% increase.

For the third quarter, sales in our Housewares segment increased 19% to $47 million, compared with $39,700,000 for the same period last year.

Net sales in the Housewares segment for the nine-month period ending November 30, 2007 increased 19% to $120 million, compared with $101 million for the same period last year.

Net sales in the Personal Care segment for the third quarter decreased 6.2% to $163 million, compared with $174 million for the same period last year.

Net sales in the Personal Care segment for the nine-month period decreased .4% to $388 million, compared with $390 million for the same period last year.

As you can see, our Housewares segment had excellent sales and operating results for the quarter.

Our OXO line of products continues to be a very strong leader in its category of products.

Our Personal Care segment is facing a challenging sales environment, which we anticipate will continue at least through the first half of the calendar year.

As we reported previously, we acquired the Belson business during the last quarter.

The existing cost of goods structure produced gross margins that are less than similar products in our existing professional product division.

We're in the process of shifting the Belson sourcing to our current suppliers, which we expect to provide margin improvement opportunities sometime in fiscal 2009.

As of November 30, 2007 Helen of Troy's balance sheet remains strong with stockholder equity of $563 million, an increase of $47 million or 9.2% from the comparable period last year.

Our current book value per outstanding share is $18.30.

Our cash position as of November 30, 2007 was $87 million versus cash of $59 million, an increase of $28 million or 48%.

Today our cash position is in excess of over $100 million.

Inventory at November 30, 2007 was $146.4 million versus $146.2 million for the same period in the prior year, while total sales year-to-date have increased 3.5%.

Based on our sales results for the quarter, we are revising our sales forecast for the fiscal 2008 year ending February 28, 2008 to be sales in the range of 645 to $655 million, versus our previous forecast of sales in the range of 660 to $680 million.

We are also revising our net earning guidance from $1.85 to $1.95 per fully diluted share from previous guidance of $1.90 to $2.10 per fully diluted share.

Without the extraordinary items, we are projecting $1.70 to $1.80 for this fiscal year versus $1.58, which we reported last year.

We expect the retail environment to continue to be challenging.

However, we will continue to execute our strategic initiatives with renewed effort and dedication as we complete this year and formulate our plans for the coming year.

There is a lot of financials that you all would like to hear about, and I would now like to turn over the teleconference to Tom Benson, our CFO, to give you the financial highlights.

Thank you, Gerry, and good morning, everyone.

We faced difficult a domestic retail environment in the third quarter, where many of our retail partners face slowing same-store sales trends and reduced the amount of inventory in their pipelines, contributing to lower overall sales for the quarter.

Our Housewares in international businesses continued to grow.

Gross profit margins improved slightly year-over-year excluding the Belson acquisition, and selling, general and administrative expense as a percentage of sales continued to decrease year-over-year.

We sold land, resulting in a pre-tax gain of $3.6 million.

We recorded pre-tax impairment charges totaling $5 million, representing the carrying value of our Epil-Stop and Time Block brands, which we'll discuss in further detail shortly.

Third quarter net sales decreased 1.4% year-over-year.

This includes 10.5 million of sales from the newly acquired Belson business.

Net sales for the third quarter of fiscal 2008 were $210.3 million, compared to $213.4 million the prior year quarter.

This represents a $3.1 million decrease or 1.4% decrease.

Our third quarter operating income increased by .7% in dollar terms year-over-year.

Operating income in the third quarter of fiscal 2008 was $29.3 million, which is 13.9% of net sales, compared to $29.1 million, or 13.6% of net sales, in the prior year quarter.

This represents an increase of $200,000 or .7%.

Before the impairment charges in the gain on the sale of land, third quarter operating income increased 5.4% in dollar terms year-over-year.

Operating income before impairment and gain was $30.7 million in the third quarter of fiscal 2008, which is 14.6% of sales, compared to $29.1 million, or 13.6% of sales, in the prior year quarter.

This is an increase of $1.6 million or 5.4%.

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

Net earnings for the third quarter of fiscal 2008 were $22.8 million or 10.9% of net sales, compared to $22.8 million or 10.7% of net sales in the prior year quarter.

This was a $29,000 increase.

Excluding the after-tax impacts of the impairment charges and gain on sale of land this quarter, and gain on a litigation settlement in the same quarter last year, net earnings increased by 13.9%.

Net earnings before impairment and gain in the third quarter of fiscal 2008 were $22.5 million, which is 12.1% of sales, compared to $22.4 million without the litigation settlement in the prior year quarter.

This is 10 -- in the prior year quarter it was 10.5% of sales.

This is an increase of $3.1 million or 13.9%.

I am sorry, the net earnings before impairment and gain in the third quarter fiscal 2008 was $25.5 million, 12.1%.

I had said 22.5.

The third quarter diluted earnings per share was $0.73 in the third quarter of fiscal 2008, compared to $0.72 in the prior year quarter.

This represents an increase of $0.01 or 1.4%.

Excluding the after-tax impacts of the impairment charges and the gain on the sale of land this quarter, and the gain on the litigation settlement in the same quarter last year, diluted earnings per share increased 15.7%.

Diluted earnings per share would have been $0.81 in the third quarter fiscal 2008, compared to $0.70 in the prior year quarter, an increase of $0.11 or 15.7%.

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

Our Personal Care segment includes the following product lines.

Appliances - products in this group include hair dryers, curling irons, thermal brushes, hair straighteners, massagers, bar products, foot baths and electronic clippers and trimmers.

Key brands in this category include Revlon, Vidal Sassoon, Bed Head, Gold'N'Hot, Sunbeam, Dr.

Scholl's, Hot Tools, Wigo, and Healthometer.

Grooming, skin care and hair products are included in the Personal Care segment.

Products in this line include liquid hair styling products, men's fragrances, men's deodorant, foot powder, body powder and skin care products.

Key brands include Brut, Sea Breeze, Skin Milk, [Amman's], Vitalis, Condition 3-in-1, Final Net and Vitapointe.

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

Key brands include Revlon, Vidal Sassoon, Bed Head and Karina.

Personal Care net sales were $163 million in the third quarter of fiscal 2008, compared to $173.7 million in the third quarter of the prior year.

This represents a decrease of $10.7 million or 6.2%.

Third quarter net sales were down in all three product categories year-over-year.

The Belson business, which we acquired effective May 1, 2007, contributed $10.5 million of net sales for the quarter.

The decrease in Personal Care net sales compared to the same quarter last year was due to a difficult domestic retail environment, a reduction in the amount of inventory held by certain key retail partners, a decrease in sales in our grooming and wellness appliance categories, expanded product line offerings by certain competitors, and a move by certain professional customers to replace random merchandise with private label.

Our Housewares segment consisted of the OXO business.

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

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

The Housewares segment's net sales were $47.4 million in the third quarter of fiscal 2008, compared to $39.7 million in the third quarter of the prior year.

This is an increase of $7.7 million or 19.3%.

The sales increase resulted from a continuing trend of product mix expansion and geographic expansion in the United Kingdom and Japan.

The company's gross profit for the third quarter was $90.1 million, which is 42.8% of net sales, in the third quarter of fiscal 2008, compared to $91.5 million, or 42.9% of sales, in the prior year quarter.

This represents a dollar decrease of $1.4 million; in percentage terms it is 1.5% of the dollars.

The gross profit margin declined .1 percentage point year-over-year.

We continue to experience product sourcing cost pressures due to raw material priced increases, changes in exchange rates, and labor cost increases.

Despite these pressures, gross profit margin excluding the Belson acquisition improved 50 basis points compared to the same quarter last year.

To compensate for rising costs, we are implementing selling price increases when possible, introducing new products, sourcing from alternative suppliers, and focusing on our internal costs.

For the third quarter, selling, general administrative expense was $59.4 million, which is 28.2% of net sales, compared to $62.4 million, or 29.2% of net sales, in the prior year quarter.

This represents a dollar decrease of $3 million, which is a 4.8% decrease in dollar terms, and is a 1 percentage point increase year-over-year.

I am sorry, 1 percentage point decrease year-over-year.

The decrease in SG&A expense as a percentage of sales is mostly due to an improved distribution cost structure, off/on freight cost improvements, and lower information technology sourcing costs, partially offset by higher advertising and personnel expenses.

In the fourth quarter of fiscal 2007 we commenced our reintroduction of the newly formulated Epil-Stop product line.

In response to unsatisfactory consumer sales and the discontinuance of the Epil-Stop line by certain retailers, we conducted a strategic review of the Epil-Stop trademark in the third quarter of fiscal 2008.

We also evaluated the potential of our Time Block brand in light of our recent experience with Epil-Stop.

From these reviews we concluded that the future undiscounted cash flows associated with these trademarks were insufficient to recover the carrying values.

Accordingly, we recorded non-cash pre-tax impairment charges totaling $4,983,000, representing the carrying value of these trademarks.

We also sold 16.5 acres of raw land adjacent to our El Paso, Texas, office and distribution center.

The sale resulted in a pre-tax gain of $3.6 million.

Interest expense for the third quarter was $3.6 million, which is 1.7% of net sales, compared to $4.5 million, or 2.1% of net sales, in the prior year quarter.

The decrease in interest expense is due to the lower amounts of debt outstanding in the third quarter of fiscal 2008 compared to the third quarter of fiscal 2007.

Income tax expense for the third quarter was $3.6 million, compared to $2.7 million in the third quarter of the prior year.

Third quarter income tax expense was 13.6% of pre-tax earnings, compared to 10.5% in the same quarter last year.

The effective tax rate for the current quarter was impacted by the impairment charges and the gain on the sale of land.

Excluding these items, the tax expense is 8.4% of pre-tax earnings.

The year-over-year decrease in tax expense is due to shifts in the mix of taxable income earned between the various high tax rate and low tax rate jurisdictions in which we conduct our business.

I will now discuss our financial position.

Our cash and temporary investment balance was $87.1 million at November 30, 2007, and we have had no borrowings on our $50 million revolving line of credit.

Accounts receivable were $162.7 million at November 30, 2007, compared to $168.4 million at November 2006, on sales in the third quarter of the current year that were $3.1 million lower than the same period last year.

Accounts receivable turnover improved to 76.2 days at November 30, 2007, from 78.5 days at November 30, 2006.

Inventories at November 30, 2007, were 146.4 million, an increase of 258,000 from November 30, 2006.

Inventory turnover improved to 2.4 times at November 30, 2007, compared to 2 times at November 30, 2006.

Shareholders equity increased $47.2 million to $562.9 million at November 30, 2007, compared to November 30, 2006.

I will now turn it over to Gerry for additional comments and q-and-a.

Thank you, Tom.

I'd like now to turn over the conference for questions, operator.

(OPERATOR INSTRUCTIONS)

Our first question comes from Kathy Reed with Stanford Financial.

Please state your question.

Hi.

Good morning.

First, can you just clarify your revised earnings guidance?

The $1.70 to $1.80, does that include or exclude the $0.24 gain from the Hong Kong tax settlement that you booked in your Q2?

The $1.70 to $1.80 excludes the Hong Kong tax settlement, excludes the gain on the sale of the land, and it excludes the impairment.

So that's a clean number, that excludes everything?

Yes.

Your previous $1.90 to $2.10 guidance, though, I did not think that included -- I thought that included the $0.24 gain?

The $1.90 to 2.10 did include the $0.24 gain.

Okay.

That was the gain on the taxes.

So the $1.85 to $1.95 number that you put in your press release, that reflects the charges, that reflects all charges, is that correct?

The $1.85 to $1.95 that is in our press release includes the tax gain and the impairments and the gain on the sale of land.

If you want to take those three items out, it is approximately $0.16.

So the clean $1.70 to 1.80.

Right.

So $1.85 to $1.95 minus the 16 is approximately $1.70 to $1.80.

Okay, great.

Thanks.

Also, can you comment - on the retail environment, what you're seeing overall, it is a challenging environment for the Personal Care space, but it doesn't seem for your OXO business, and I just wondered if you can talk about what's really changed or worsened since your October call, and I know you commented in your prepared remarks in your press release that you think it is going to be tough for the first half of the year, and is that both businesses or particularly Personal Care, if you can just give us more information there?

Well, in the OXO division they had increases geographically because of us taking over the sales in the U.K.

and in Japan.

In the Personal Care area, we have dropped a lot of SKUs that we thought were not profitable.

As Tom told you in his comments, without the Belson division we actually increased our gross profit, which has been decreasing for many, many quarters, by .5%, and that's because we are cleaning up and getting rid of a lot of SKUs that just are not profitable for us, and that was - partially had to do with some of the sales decrease.

I would say that our business is competitive, but it is also very steady.

We have not lost any market share based on the last report that we got.

So we're looking forward to a better year coming up because of a lot of the new products that we have.

As you all know, we do show at our major show which is in March in Chicago, and those of you that can come by, I would appreciate you can come by and seen our new products and talk to us and get a feel for the business at that time.

Was it meaningful, the lost business or the switch by either, and if you can clarify that, one customer or you're seeing a trend on the professional side of appliances to private label?

Is that just an isolated incident or is that a trend that's continuing?

That's basically an isolated incident.

On the positive side, our international business, Latin America, and Europe actually has increased.

We didn't break that out for you, but those were positives, we have increases in those areas.

But to your question about the private label customer, no, that's one isolated incident, customer.

And then just finally, can you comment a little bit on your thoughts on share repurchase?

You have over $100 million of cash on your books.

Your stock is down already and - even though it is early in '08, and was down in '07, if you can talk about your priorities for cash and maybe share repurchase versus acquisition and just your thoughts with your stock down at this level?

Okay.

As I mentioned in my comments, we currently have in excess of $100 million in the bank.

We have also made off $10 million of our long-term debt, so our long-term debt now instead of $225 million is $215 million.

We're looking for acquisitions, and we believe that if we accumulate the cash which is important for an acquisition, which we believe there will be some during the year, we believe we're better off to use that money for acquisitions.

But if we don't have any major acquisitions during the coming year, when we talk to you three quarters from now or four quarters from now, we'll have the cash flow from this year, which will almost pay off our debt of $215 million because the company is generating a lot of cash.

So if we don't have an acquisition, we could almost be debt-free twelve months from now.

But the point I want to point out to you is we're looking for acquisitions and that's where we feel the best use of our money is.

Okay.

Thank you.

We'll take our next question from Gary Giblon with Goldsmith Harris.

Hi, good morning, Gerry and Tom.

Good morning, Gary.

Since there were a lot of factors that drove the soft results in Personal Care, can you kind of parse it out and tell us how much of that was company specific versus the environment?

In other words you have competitive activity which maybe just happen to exist against your brands, and then have you the retail - retailer attitude towards reducing inventories, which is probably universal, but if you sort out the total thing, I mean the total degree of softness, how much would you attribute to industry conditions versus ones particular to Helen of Troy's brands?

Gary, I would say most of it has certainly contributed to the economic situation, not to our brand.

As I mentioned, our market share has not changed.

The softness at retail of customers coming through our major retailers, and of course many of them are public, and you get the reports on what's going on in the retail, it has nothing to do with our brands or marketing or products.

But I did tell you that we did drop some nonprofitable SKUs, and that affected the sales, but we believe that that was a benefit to us because we did increase the profit, the gross profit, without those items.

Uh-huh.

And the competitive activity directed against your brands, is that continuing for the next six months?

Is that part of why you say you expect difficulty --

It is always competitive out there.

I think it is competitive -- I was talking more the next six months of the softness in the economic retailer situation more than the competitive situation.

The competitive situation has been there for 30 years and will continue.

It is just the softness in retail right now.

Okay.

That's very helpful.

Are there the retailers frightened enough where they're actually reducing replenishment orders of even basic items, or is it just reducing days on hand - well, I guess it is the same thing, but in other words is it across the board or more on the discretionary products within your PC line?

What's going on now is that the major retailers want to carry less inventory than they did a year ago.

How that affects movement will be decided later, but they all want to have less weeks on hand than they've had in the past, but as far as planogram space and the SKUs we're selling the retailers, it's all the same.

We haven't lost any.

Okay.

I guess what I am getting at, is the desire to reduce inventory, actions to reduce inventory on part of the retailers, is it more in the toward the discretionary end of your spectrum of products, let's say a foot massager versus an in-expensive hair dryer, which would be less of a discretionary item?

Those aren't the best examples but you see --

Actually we haven't seen any.

I think the less inventory that the retailers want to carry, if they can cut it down, I think it due to the softness that they're seeing and has nothing to do with the price points, because all our price points are profit price points and nothing to do with that.

I think it all has to do with store traffic.

Okay.

And then just the last one for me, thanks, in the press release it says you're going to reevaluate the Personal Care segment's product line mix, so does that mean possibly divesting entire brands or is that just the SKU reduction within brands?

No.

It has nothing to do with the brands.

It has to do with what I mentioned about getting rid of low profit SKUs so that we can concentrate on the more profitable SKUs and increase our gross profit.

Okay.

Understood.

Thanks very much.

Thank you, Gary.

We'll take our next question from Doug Lane with Jefferies & Co.

Good morning, everybody.

Good morning, Doug.

Can you talk a little bit about how some of the new initiatives, the newer product initiatives, the bigger ones have done?

I think Fusion Tools on the profession side, the Bed Head, which was the new license you got last year, and then any new product activity at Belson?

What was the response to the new products this year?

On the fusion tools, it was our first year out, and we are getting distribution, and we believe that there is more distribution out there for us.

So it was a good introduction for us for the year.

Although we haven't actually shipped a whole year, but the customers who are buying it are happy with it.

On the Bed Head products, we do have good distribution.

The price points are certainly higher because they're competing with professional products at retail, and I would say we did satisfactory.

The sales are stable, and I think we have built a nice brand with the Bed Head that will go along with the Vidal Sassoon and with the Revlon and the Sunbeam Healthometer brands that we have, so we're happy that we have that brand.

I don't believe it is ever going to be as big as the Revlon and the Vidal Sassoon brands, but it is a good steady brand, and it does fill the niche of professional products at retail under the Bed Head brand.

And any news on Belson?

Have you launched new products there yet or is something in the --

Oh, I forgot to tell you about Belson.

There's a lot of new products coming out.

Well, we just took over I think in May, and they didn't have very many new products if any in the pipeline, and so we have developed a whole new line of products, and we're looking for a good year at Belson, increased sales, because we have a lot of new products coming out, actually basically all new lines are coming out, and we just had our national sales meeting this past week here in El Paso with the Belson group, and they're all excited.

They saw the new products, and they think we're going to have a good year this year.

On that front, both on the retail and professional side, it's mostly appliances I am talking about, how does that work with your retailers?

When do decisions get made on the '09 or calendar '08 planograms?

Is that happening now?

It is happening now, and some does happen later.

Some are actually May/June decisions and some are made now.

There is no consistency among all the major retailers.

And early read on your shelf space going into next year versus this year?

It is good.

We're happy.

What was the specific -- as specific as you can get -- competitive threat from - in your categories you were talking about in your prepared comments?

I think you made the comment, Tom.

Competitive expansion into your categories I think was your comment.

There are professional products that have always been in the professional arena that are now being sold in retail stores.

That's where the competitive comes in.

I see.

Okay.

And I know OXO had a terrific quarter.

Can you give us some characterization of how OXO did just in the United States, kind of excluding the international expansion?

I don't have that information.

Maybe Tom -- he can do it now or maybe in a few minutes, but that's been a great acquisition for us.

As you all know, we've had increased sales, double-digit increased sales and profit with that division year after year after year, so I don't think the public appreciates the OXO company that we currently own, what a good company and what a good brand and what good distribution they have.

Doug, it was up double-digits in the U.S.

for the nine months.

Okay.

And for the quarter, was it still up?

Yes, it was, but let me look.

For the quarter it was up double-digits also.

Wow, so that continued strong.

We did have introduction of our pop containers, which is dry food storage container, so as was mentioned, we continue to bring out new products and geographic expansion.

So any time you launch new products you get a - initial fill-in orders that are very positive, and they don't repeat the next year, but as we've done each year, we have plans to continue to expand the product line.

Okay.

And on the cost front, you mentioned excluding Belson your gross margins were up, which is encouraging, after the first half of the year.

What's the outlook for where you are today on fiscal '09?

Can you sustain that?

Assuming that you can get the Belson cost situation righted, if you will, ex that, do we still look for gross margins to be up in '09 or how is the cost outlook from where you stand today?

It is always a challenge.

Although we haven't received any major cost increases, we believe that over the next 12 months we will be getting price increases, and it is our job and challenge to increase our prices and innovate to bring in new products where we can absorb the price increase, and that's what we've been telling you certainly for years and years, is that you can make more money on new products than you can on existing products because you can price it going in on what your costs are versus pricing it and then getting price increases.

Price increases is something we live with, and we to the best of our ability try to pass them onto the retailers.

Okay.

So lastly, I know you had a cautious tone about the retail environment in the first half of next year, understandably so, but from your planning standpoint, I know you didn't give guidance in '09, but with the margin situation improving and your new productivity, are you looking for growth in '09 over '08 even with the lousy environment?

You know, we did not come out with next year's projection.

We just wanted to finish this year because we only had nine months, and but I can tell you internally we are looking for increased profit and sales for next year, yes.

Okay.

We're not looking for any decrease because of all the things that we have going.

So the number that we have just given you, you know, for our estimate for this year, we don't have a number exactly to give you for next year, but we're optimistic that when we do give you the number it is going to be higher than this current year.

Thank you.

Our next question comes from Mimi Noel with Sidoti & Company.

Most of my questions have been answered but I did want to ask about sales at retail.

As you see it, do you see retail merchandisers being pre-emptive in their inventory reductions or are they responding to a lower rate of consumption - your products in particular or just the categories?

You all would know more about that.

You do read the reports from all the retailers, and I think a lot of it is what the press puts out.

I just saw this morning some brokerage firm says that the recession is coming, so I guess that mentally affects the consumers and I guess the retail stores to be a little bit more cautious.

What really will happen will be decided, I guess, during the next six months or year, whether the country is in recession, whether people buy less, there is so many factors, the price of oil, but the inventory and the sales are just basically based on takeout from the retail stores; if they had more traffic, they're going to sell more product.

I don't believe that our business is changing because of competitive situations.

It is more because of what's happening in retail, more retail - if more consumers go to the stores, we will sell more product, and I am sure they will also, and I think that's what they're all looking forward to.

Okay.

Just one more question and a follow-up regarding your commentary on share repurchases versus acquisitions.

Can you provide a little commentary on the acquisition landscape?

Well, we're looking.

We think there are acquisitions out there, and we believe - that are currently being looked at, and we believe that there will be more in the coming years, so we think that cash will be king, and we're accumulating our money, and as I mentioned, if we don't have an acquisition the next year, we probably have enough money just to pay off all the debt and be debt-free company after that.

But we are aggressively looking for acquisitions, and if you all know of any, those of you that are listening on this conference call, we're more than happy to talk to you about acquisitions.

Okay.

A final question.

I don't know if it was Tom or you, Gerry, that mentioned it, but reference to OXO as taking over the U.K.

and Japan, or you taking over the OXO business in U.K.

and Japan?

I am not really -- that's a little confusing to me.

What does that mean?

We have distributors in both of those countries, so we mentioned this prior, we did take over the distribution.

We run it through our own sales organizations now.

When does that anniversary?

That will anniversary at the beginning of next year.

Fiscal '09.

Okay.

All right.

Thank you for your help.

Thank you, Mimi.

We'll take our next question from John Harlow with [Bell Hanley].

Let me see if I understand this right.

Did you buy this U.K.

and Japanese distributor during this quarter?

No, we did not buy them during this quarter.

We converted it over early in the beginning of this year, so this has been going on all year, all fiscal year.

So what would be the pickup in sales year-over-year from that merger in your U.K.

and Japanese distribution in New York?

We actually don't split it out, but as I had just --

[indiscernible].

As I had mentioned earlier, the U.S.

is up double-digits, and so at least probably 75% of the gain is coming in the U.S.

and the rest would be coming from the U.K.

and Japan.

But you have a rough cut estimate of what the sales loss would be of the SKUs that you discontinued?

Without Belson we would be down $20 million.

Yeah.

So you're saying that you volunteerly killed SKUs that reduced your sales by $20 million this quarter?

Yes, but we didn't -- the answer is yes, but it is made up by the other products also, because our sales were only down $3 million.

Well, if you exclude Belson's acquisition, it is down more than that, I think.

I don't have those numbers.

I think if you wanted to call, maybe Tom can get you all the breakdowns.

I think you can figure it out.

We've given the Personal Care sales, and we've told you what component of that is Belson and also in our Q we do core and non-core information.

Is the Q out, or is that this afternoon?

It will be going out later today?

Thanks a lot.

We'll take our next question from Steven Friedman with Wachovia Securities.

Good morning, Gerry and Tom and Bob.

Good morning, Steve.

Nice quarter in view of the environment.

I think in your last call, and most of my questions have been answered also, but in your last conference call the quarter had ended you had given a little bit of a guide on how the sales were going for the quarter we're in right now, like December and part of January.

How did you see those come in in the environment we're in?

We're certainly just at the first week in January, but it looks like somewhat, we still have another almost two months to go, but it will be somewhat like the fourth quarter of last year.

Going forward, OXO I presume has performed every bit as well if not better than you had hoped.

Is that, along with Bed Head complementing your Revlon and Vidal Sassoon lines, would you consider that the main thrust of your areas of growth going forward, both for margins, bottom line and growth?

I think it is all our brands.

Certainly OXO is in the Housewares area.

In the Personal Care the brands that we do have, the Bed Head, Revlon, Vidal, Healthometer, Dr.

Scholl's, are doing well worldwide.

As I mentioned, we did have increased sales in South America and in Europe, but I think they're all growth drivers for us actually.

Has the Bed Head line met your expectations?

I mentioned that it was satisfactory.

It didn't do exceptional, but it did what we thought it would do.

It is satisfactory, and I can't give you all the numbers, but it is a good base.

We have good distribution, and we're growing on that base.

We're adding new products for next year, so we wouldn't be adding new products in the Bed Head line if it wasn't satisfactory.

There are a lot of new products coming out for next year.

One final question, and you have touched on this partially, but maybe I can go back to it.

With the book value at 1833 approximately, which is about 80% - or market value is about 80% of the book right now, and you're P.E.

trading at ,depending on which estimates we want to use, the trading or forward estimates, maybe at ten-year lows in the price, a multiple of seven or eight times earnings, do you really feel that going forward you can find an acquisition more attractive than Helen of Troy stock?

You know, as I mentioned in my comments, we're going to give it a good shot.

We're going to sure try this year to get what I call the big acquisition.

If we don't, we'll just have a couple of hundred million dollars cash in the bank, and then management and the Board can decide what direction they want to take.

I don't think people give us the benefit of the way the Company is run.

I have seen some of the press releases that came out, and they're kind of negative, but if you just analyze the business, we made $0.81 for the quarter versus $0.70.

We made $1.44 versus $1.25 for the nine months, and I think people should look at that and then look at our terrific cash flow, because in order for us to grow the business, we don't have to build any more warehouses or retail stores.

So we do have a good cash flow, and we have -- in all the things that we do, and our interest expense certainly will drop next year because we'll have more cash that will be getting us interested if we don't buy anything, so we're very optimistic that next year is going to be a good year for us, and if we get that acquisition, it will even be better.

Along with that, you wouldn't have the same digestion situation as you had with new warehouses and so forth.

Would a sizable acquisition be easily digested, I would presume with --

Well, I don't have the acquisition to tell you that what it is all about, but it is - certainly a big acquisition would have its own management and warehousing, and distribution and marketing.

Let's see what comes along.

No, there wouldn't be any of the things that we've done because we merged all our warehouses together, when we bought the OXO company, but let's see what what happens, Steve.

All right.

Thank you very much.

Our next question comes from Scott [Reeder] with Scotia Capital.

Hey, guys.

Just had a quick question on the fourth quarter guidance.

In your numbers, how much of an effect are you baking in for the foreign currency charge you're going to take in the fourth quarter?

We're baking in a negative effect of closing our hedges out of about $1.5 million.

Okay.

So without that, I think that's, what, an additional $0.05, your guidance really is - you're guiding to 30 to $0.40 for the fourth quarter ex that item?

Our guidance for the fourth quarter including that item is $0.25 to $0.35 now, so $1.5 million would be about another $0.05.

Okay.

Thanks.

That's all I had.

We have a follow-up question from Kathy Reed.

Thanks.

Just quickly can you tell us if Belson, because 10.5 million in sales, that seems like a real strong number for me, if you're still on track for 20 to $30 million for the full -- for the ten months ,or is Belson do you think doing a little better than you thought?

Yeah.

I think we surpassed the numbers we did put out.

You did see the quarterly sales, and you can multiply that by four, and that's probably what we're looking at for next year, for the full year.

Since May we've had $20 million of sales in Belson already, so we have three months left for the rest of the year, and so we're expecting it to be closer to $30 million for this portion of the year we owned it, which would only have been ten months.

And our original guidance was 20 to $30 million.

Right.

Okay.

Great.

Lastly, any guidance you can help us with on the tax rate for full year or next year, you know, the 8%, is that something we should use or 10?

I think what we said is the 10 to 12 is a good rate to use on an ongoing longer term basis, and when you review the Q we've done reconciliations for the quarter and for the nine months, and it will show that the nine months are just over 10%, without some of these what I would call the items we don't expect to occur every year.

Okay.

What you just said, that excludes the one-time item?

I am sorry?

The 10 to 12 excludes the one-time items.

The 10 to 12 excludes the one-time items, yes.

Lastly, your last quarter call you mentioned there was some IRS tax outstanding issues, and I wondered if you had any update on any of those?

We still have some years under audit with the IRS, and there has been no meaningful changes during the quarter.

Okay.

Thank you.

Thank you.

We'll take a follow-up question from Gary Giblon.

Hi.

On the acquisition front, do you have any preference for Housewares versus Personal Care or is it all equal, of equal interest?

Actually it is of equal interest, Housewares, Personal Care, that whole category that we consider Housewares.

Great.

And then I had just one inventory question.

Your inventory looked good in the sense of being in line with sales, but on the other hand you have now anniversaried the duplicate inventory from last year due to the distribution center situation, so are you happy with where inventory is now?

You know, as we mentioned, our inventory is now 2.4 turns a year versus 2 turns a year, so yes, we are happy that it has gone to 2.4 turns a year.

Uh-huh.

And that includes all - the Belson acquisition also in those turns.

Okay.

Does the retailer actions to reduce inventory basically add inventory on your end or are you able to adjust for that?

No.

I think 2.4 turns is, you know, sufficient for to us take care of the retailers.

Okay.

Good.

Thanks, Gerry.

Thanks, Gary.

At this time there are no further questions.

I will turn the conference back to Gerald Rubin to conclude.

Thank you, all, for participating in our third quarter conference call, and I look forward to talking to you with the year-end results.

Thank you again.

Ladies and gentlemen, if you wish to access the replay for this call you may do so by dialing 888-203-1112 with replay pass code 1624504.

This concludes our conference call for today.

Thank you for participating and have a nice day.

All parties may disconnect.