Helen of Troy Ltd (HELE) 2009 Q4 法說會逐字稿

Good morning everyone and welcome to the Helen of Troy fourth quarter and year end conference call for fiscal 2009.

Just a quick reminder, this conference is being recorded.

Also, I would like to inform you, that 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 mornings conference 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.

At this time, I'd now like to turn this conference over to Mr.

Robert Spear.

Please go ahead, sir.

Thank you.

Good morning everyone and welcome to Helen of Troy's fourth quarter and year end financial results conference call for fiscal 2009.

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 fourth quarter earnings release and our related results with 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 question and answers for those of you with any further questions.

Safe Harbor.

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 anticipate, believes, expects and other similar words identify forward-looking statements.

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

This conference call may also include information that may be considered non-GAAP financial information.

These non-GAAP measures are not an alternative to GAAP financial information.

Any may be calculated differently than the non-GAAP financial information disclosed by other companies.

The company cautions listeners not to place undue reliance on forward-looking statements or non-GAAP information.

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 contains tables -- has been posted on our website at www.hotus.com.

The earnings release contains tables the reconcile non-GAAP financial measures to there corresponding GAAP based measures.

The release can be accessed by selecting investor relations tab on our home page and then the news tab.

I'll now turn the conference call over to Mr.

Gerald Rubin, Chairman, CEO and President of Helen of Troy.

Thank you, Bob.

And good morning, everyone.

Helen of Troy Limited today reported sales in earnings for the fourth quarter and fiscal year ended February 28, 2009.

Fourth quarter sales decreased 3.8%, to $138.580 million from $144.106 million in the same period of the prior year and include the negative impact from foreign currency exchange of $5 million or 3.5% of sales.

Fourth quarter sales in the Houseware segment increased to 1.4% or $44.594 million compared to $44 million for the same period last year, reflecting continued strength in the OXO brands.

Sales in the Personal Care segment decreased 6.1% to $94 million in the fourth quarter compared to $100 million for the same period last year, reflecting the continued difficult retail environment.

On a non-GAAP basis, fourth quarter earnings excluding significant items were $11 million or $0.36 per fully diluted share compared to $9.8 million or $0.31per fully diluted shares for the same quarter of the prior year.

And increase of 16.1% per fully diluted share.

Fourth quarter earnings before interest, taxes, depreciation and amortization and share based compensation charged to allowance for doubtful accounts and a gain on the sale of land, gain on litigation settlement and a gain on casualty insurance settlement, increased 6.9% to $18.669 million versus $17.467 million from the prior year fourth quarter.

Net loss for the fourth quarter including significant items was $88 million or $2.93 per fully diluted share compared to net earnings of $10.297 million or $0.33 per fully diluted share in the prior year fourth quarter.

The net loss for the quarter includes $99.514 pretax impairment charge to good will and intangibles.

These impairment charges for the fourth quarter on -- are non-cash and do not have any effect on our ongoing business liquidity, or cash flow.

Fiscal year net sales decreased 4.6% to $622.744 million from $652.548 million in the prior fiscal year and include the negative impact from foreign currency exchange of $8.781 million or 1.4% of sales.

Net sales for the Housewares segment for the full year increased 6.9% to $175.501 compared to $164.134 for the same period last year.

Net sales for the Personal Care segment for the full year, decreased 8.4% to $447.244 million compared to $488.414 million for the same period last year.

On a non-GAAP basis earnings for the full year excluding significant items were $49.293 million or $1.59 per fully diluted share compared to $55.709 million or $1.75 per fully diluted share for the prior year.

ull year earnings before interest, tax, depreciation and amortization, impairment charge, share based compensation, charged to allowance for doubtful accounts, the gain on the sale of land, the gain on litigation settlement, and a gain on casualty insurance settlements, decreased 6.5% to $83.623 million versus $89.455 million for the prior year.

During the fiscal year-ended February 28, 2009, the company recorded a non-cash pretax impairment charge to goodwill and intangibles of $107.274 million.

The net loss for the year including significant items was $56.793 million or $1.88 per fully diluted share compared to net earnings of $61.509 million or $1.93 per fully diluted share in the prior fiscal year.

Again, these impairment charges for the fiscal year are non-cash and do not have any effect on our ongoing business liquidity or cash flow.

We are very pleased with our fourth quarter results considering the challenging retail environment.

We are pleased with the progress we continue to make in achieving the strategic business objectives initiated during the past year.

We were able to end the fiscal year with $103 million in cash, trading securities and temporary investments.

On March 31, 2009, we utilized $60 million of our cash to acquire the global Infusium23 hair care business from Proctor and Gamble Company.

The impact in the Infusium23 business will be reflected in our results of operations beginning in the first quarter of fiscal 2010.

We will be reporting two months of the sales from Infusium23 since we did purchase it on March 31.

Our ongoing efforts to reduce selling G&A expenses as a percent of sales, are reflected in our results for the full year and we continue to focus on overall expense reductions.

SG&A expenses for the fourth quarter were $38.9 million or 28.1% of sales compared to $49.9 million or 34.7% of sales for the same quarter of the prior year.

For fiscal 2009, SG&A expenses were $188 million or 30.2% of sales versus $207.8 million or 31.8% of sales for the prior year.

Excluding the impact of the specific items, our bad debt expense, our foreign exchange, gains or losses in insurance claims gains on the SG&A expense, the year-to-date SG&A expenses were $180 million or 28.9% of sales compare to $207.8 million or 31.8% of sales for the prior year.

A reduction of 290 basis points or 9.1%.

The under lying improvement in 2009 were primarily the results of reduced personnel expenses due to lower incentive comp cost, a decrease in royalties, sales commissions, outbound freight and advertising expenses.

At February 28, 2009, the company's balance sheet included stock holder's equity of $508.7 million or 16.86 -- $16.86 per fully diluted share.

During fiscal 2009, we repurchased 574,365 shares of Helen of Troy Limited common stock for $7.4 million or an average price of $12.91 per share.

The domestic retail environment continues to be challenging and is expected to continue that way for a number of quarters.

However, as the business environment begins to improve we are well positioned to take advantage of our leadership role in our market place and categories.

I would now like to turn over our conference call to Tom Benson, our CFO, for financial review.

Thank you, Gerry.

And good morning, everyone.

In the fourth quarter, we experienced a year-over-year sales decline of 3.8% reflecting the impact of foreign currency fluctuations and difficult macroeconomic conditions on consumer demand.

Gross profit margins declined by 5.3 percentage points year-over-year as a result of higher cost to products out of the far east and the unfavorable margin impact of the strengthening of the US dollar against foreign currencies in which we transact sales.

Selling, general and administrative expense, as a percentage of sales, improved by 6.6 percentage points year-over-year.

In the fourth quarter of fiscal 2009, we recorded a non-cash after tax impairment charges of $99.06 million in our Personal Care segment which I will discuss in further detail shortly.

Excluding these impairment charges and the tax -- and the benefit of a tax settlement, a gain on litigation and a net operating loss valuation allowance recorded in the same quarter last year, fourth quarter net earnings improved to $11.02 million or $0.36 per fully diluted share.

Compared to $9.81 million or $0.31per fully diluted share in the year ago quarter.

Please refer to the supplemental schedule to the press release for a reconciliation of non-GAAP earnings.

during the quarter we amended our $50 million revolving credit agreement which extended the maturity date from to June 1, 2009 to December 15, 2013 and adjusted certain other terms.

Subsequent to our fiscal year-end, we completed the acquisition of the Infusium23 business from the Proctor and Gamble Company, for a purchase price of $60 million, funded out of cash on hand.

Net sales for the fourth quarter decreased 3.8% year-over-year.

Net sales were $138.6 million in the fourth quarter of fiscal 2009, compared to $144.1 million in the fiscal fourth quarter of 2008.

This was a decrease of $5.5 million or 3.8%.

The net sales decline reflects the impact of the strengthening of the US dollar against other currencies in which we transact sales which resulted in a decrease to reported to US dollar sales of $5.09 million or 3.5% when compared to the same period last year.

It also reflects deteriorating economic global conditions on the retail environments in most of our markets.

And reduction in inventory levels maintained by key retail partners.

Operating income before impairment in gain increased 9.9% in dollar terms, year-over-year.

Operating income before impairment and gain, $14.8 million or 10.7% of net sales in the fourth quarter of fiscal 2009, compared to $13.4 million, which is 9.3% of net sales in the prior year fourth quarter.

This represents an increase of $1.3 million or 9.9%.

he increase in operating income before impairment and gain reflects the impact of improvements and selling, general and administrative expenses, partially offset by lower net sales and gross profit margin.

Fourth quarter net earnings decreased by $98.3 million to a loss of $88 million primarily due to the impairment charges referred to previously.

The net loss for the fourth quarter of fiscal 2009 was $88 million compared to a gain of $10.3 million in the prior year fourth quarter.

This is a decrease in $98.3 million.

The comparison of the fourth quarter loss to the same period last year, is impacted by the following items that we do not expect to occur in the normal course of business as detailed in the supplemental schedules to the press release.

As a result of the continued deterioration in macroeconomic conditions, we determined it necessary to perform interim impairment testing of our good will and other intangible assets.

As a result of this testing we recorded after tax impairment charges of $99.06 million in the fourth quarter of fiscal 2009.

In the fourth quarter of fiscal 2008, we recorded a tax benefit of $1.36 million due to a settlement with the IRS and after tax gain on litigation of $102, 000 and tax expense of $977,000 associated with the net operating loss evaluation allowance.

Net earnings without significant items for the fourth quarter of fiscal 2009, were $11 million, 8% of net sales.

his compares to $9.8 million or 6.8% of net sales in a prior year fourth quarter.

This is an increase of $1.2 million or 12.4%.

Fourth quarter diluted earnings per share was a loss of $2.93 in the fourth quarter of fiscal 2009 compared to a gain of $0.33 in the fourth quarter of fiscal 2008.

This is a decrease of $3.26.

excluding the significant items referred to previously, diluted earnings per share was $0.36 in the fourth quarter of fiscal 2009.

Compared to $0.31 in the fourth quarter of fiscal 2008.

This is an increase of $0.05 or 16.1%.

Now.

I will 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, fat irons, curling irons, thermal brushes, massagers, spa products, foot baths and electric clippers and trimmers.

Key brands in this category include Revlon, Vidal Sassoon, Bed Head, Toni and Guy, Hot Tools, Dr.

Scholl's, Sunbeam, Gold'n Hot, (inaudible) and Health-O-Meter.

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

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

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

The newly acquired Infusium23 will be part of the grooming, skin and hair care line of products.

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

Key brands are Revlon, Vidal Sassoon, Bed Head, DCNL and Karina.

Personal Care net sales for the fourth quarter of fiscal 2009, were $94 million compared to $100.1 million in the prior year fiscal quarter.

This represents a decrease of $6.1 million or 6.1%.

The principle factors contributing to the decrease in sales were the continued deterioration of global macroeconomic conditions that began last year and accelerated throughout fiscal 2009.

The strengthening of the US dollar against other currencies in which we transact sales, which reduce consolidated sales by $5.09 million year-over-year, most of which impacts the Personal Care segment.

Product availability issues due to the closure of certain suppliers in the far east are reduction in inventories held by key retail partners and a new product line introduction that did not meet expectations.

Our Housewares segment consists of the OXO business.

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

Brands that we sell include OXO Good Grips, OXO steel, OXO soft works and Candela.

The Houseware segments net sales for the fourth quarter of fiscal 2009 were $44.6 million compared to $44 million in the fourth quarter of fiscal 2008.

This is an increase to $600,000 or 1.4%.

Unit volume increases were partially off set by average unit price decreases due to shifts in product mix.

Including significant declines and sales of higher priced trash cans and tea kettles.

Unit volume increases were due to new product and line extensions particularly our Good Grips Pop, modular line of food storage containers.

Growth with existing accounts and our continued expansion of the UK and Japan.

Unit volume was up year-over-year despite the impact of the liquidation of Linens 'n Things, in addition the the current and future loss of sales we believe the impact of Linens merchandise liquidation negatively effected other competing retailers by diverting consumer purchases to Linen's deeply discounted merchandise in the third and fourth quarter of fiscal 2009.

Consolidated gross profit for the fourth quarter of fiscal 2009 was $53.7 million which is 38.7% of net sales compared to $63.4 million or 44% of net sales in the prior year quarter.

This represents the dollar decrease of $9.7 million.

Which is a 15.3% decrease in dollar terms.

Gross profit margin as a percentage of sales decreased by 5.3 percentage points.

The decline in gross profit is due to a reduction in net sales caused by the fluctuation and foreign exchange rates while our cost of sales were not significantly impacted because we purchased the majority of our inventory in US dollars.

The impact of increased product costs source from the far east driven by higher cost of manufacturing including the impact of appreciation of Chinese remnant B with respect to the US dollar and higher raw material, labor, and inbound transportation cost for much of the year.

Fourth quarter selling, general, and administrative expenses improved 22.1% in dollar terms year-over-year.

SG&A expense for the fourth quarter of fiscal 2009 was $38.9 million which is 28.1% of net sales.

Compared to $49.9 million or 34.7% of net sales in the prior year quarter.

This represents a decrease of $11 million.

It's a 22.1% decrease in In dollar terms and a 6.6% decrease in percentage points.

The improvement in selling, general and administrative expense as a percentage of sales is due to lower incentive compensation costs, lower advertising expense, lower outbound transportation costs and lower other general and administrative expenses as a result of cost reduction initiatives.

As a result of the continued deterioration and economic conditions during the second half of fiscal 2009, the company evaluated the impact of these conditions and other developments on its reporting units to access whether impairment indicators were present that would require interim impairment testing.

Because the company's total market capitalization remained below its consolidated shareholders equity the balance.

For the balance of fourth quarter of fiscal 2009, the company determined the events indicated the carrying amount our good will and other intangible assets might not be recoverable and performed interim impairment testing as of February 28, 2009.

As a result of our analysis, we recorded a non-cash.

Pretax impairment charges of $99.5 million in the fourth quarter.

Interest expense for the fourth quarter was $3.4 million which is 2.4% of net sales.

Compared to $3.5 million or 2.4% of net sales in the prior year fourth quarter.

This a decrease in the quarter of $119,000 (inaudible) of interest expense.

The decrease in interest expense is due to lower amounts of debt outstanding in the fourth quarter of fiscal 2009 compared to the fourth quarter of fiscal 2008.

Income tax expense for the fourth quarter fiscal 2009 was a tax expense of $126,000, compared to a tax expense of $1.2 million in the prior year fourth quarter.

Fourth quarter income tax was 0.1% of pretax loss, compared to 10.4% effective tax rate in the same quarter last year.

We incurred tax expense despite the pretax loss due to the minimal tax benefit of the impairment charges.

Excluding the impairment charges, tax expense for the fourth quarter was 5% of free tax earnings for the quarter.

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

As some of you may know, President Obama is proposing new international tax legislation and has announced his intent to support other proposals such as the Stop Tax Haven Abuse Act sponsored by Senator Levin and Congressman Doggett.

Similar legislation has been proposed in the past and we are actively monitoring the potential impact of the proposals.

Individually and in the aggregate and developing our strategy.

It is too early to determine the impact on our company, if any, as there are many moving parts and a definitive direction is not evidence at this point.

I will now discuss the financial position.

Our cash, trading securities, and tempering investment balance was $103.2 million at February 28, 2009.

Compared to $121.7 million at February 29, 2008 and we had no borrowings on our $50 million revolving line of credit.

Our long term investment balance was $20 million at February 28, 2009 compared to zero at February 28, 2008.

Accounts receivable were $103.5 million at February 28, 2009 compared to $105.6 million at February 28, 2008.

Accounts receivable turnover improved to 68.3 days at February 28, 2009 from 69.3 days at February 28 -- I am sorry, February 29, 2008.

Inventories at February 28, 2009 were $169.8 million compared to $144.9 million at February 29, 2008.

Inventory turnover declined slightly to 2.3 times at February 28, 2009.

Compared to 2.4 times at February 29, 2008.

Current inventory levels are higher than normal due to lower sales in the third and fourth quarters of fiscal 2009 and it will take a few quarters to get back to normal levels due to our long source in lead time.

Stock holders equity decreased $59.7 million to $508.7 million at February 28, 2009 compared to $568.4 million at February 29, 2008, mostly due to the impairment charges referred to previously.

I will now turn it over to Gerry for some additional comments and questions.

Operator, we will now take calls.

Thank you very much.

(Operator Instructions) The first question will come from Gary Giblen of Goldsmith and Harris.

Hello, good morning, Gerry and Tom.

Good morning.

Following up on the inventories that you mentioned towards the end of your comments, is it possible that would lead to some incremental mark downs to move the high inventories.

No.

We have evaluated the inventory.

And its -- it may be a little bit more than normal.

But it's still 2.3 times turns.

And that'll decrease over the next few months.

So, its all kind of current inventory.

Its just that sales were (inaudible).

Right, Gary, it's current inventory that we're selling in our plano-grams with our customers.

So, we're long on it.

Its not discontinued or obsolete.

Okay, got it.

And then my second question was -- I couldn't quite tell -- are you saying that the macro conditions and destocking and et cetera, are getting better or just have stabilized?

From what we see I think they are stabilized.

Actually, there were a couple of things that happened this year that were different than last year.

Last year, many of our large retailers reset their plan-o-grams and we shipped the merchandise in February.

For what ever reason, the retailers decided that they weren't going to begin their plan-o-gram change until May and thusly, we shipped them the new plan-o-gram in April.

So, that has partially to due with the inventory, but also -- and also partially due to sales.

But we believe that the plan-o-grams that we have going forward with the major retailers, will be better than what we had prior.

But that starts with the April sales.

But, is that you getting good placements or is it the (inaudible)?

Well, its two things, its getting better placement on more products.

But also, eliminating the slow moving items -- or they have eliminated slow moving items and put in what we believe will be better sellers which I had mentioned.

It usually occurs in February of each year but the major retailers decided that it would be May.

And then we did the shipments in April.

I see okay, and then finally should we think of Infusium as a product that will yield corporate average -- you know, Helen of Troy average operating margins and are there any transition expenses of any consequence like, just transitioning it over or maybe losing sales if there were accounts that dealt with P&G but would'nt deal with Helen of Troy.

That kind of thing.

Okay, again, we believe that Infusium 23 is going to be one of our major brands and drivers for the Idel labs division.

As you know, we bought it at the end of March.

So, we will be reporting in the first quarter, only two months and for the year eleven months since we didn't own it for the first month of the year -- P&G did.

But sales for -- I can report that sales for the month of April -- the first month, we're on budget.

And didn't lose any sales because of P&G.

We planned not to lose anything because of P&G, and actually we believe we can make some end-roads into some retailers who didn't buy the Infusium23, for what ever reason, but do want it.

So, we think Infusium23 is going to be a major brand for us.

As far as the contribution, as a percentage of profit because we did not absorb -- we did not take over any physical facilities or people from Proctor and Gamble.

Our projections are that we will make more money percentage wise on Infusium23 than the corporate average.

So, that's going to help us out.

And of course ongoing, it is about $40 million in sales.

We think it's a feather in our cap that we were able to buy Infusium23 from Proctor and Gamble because I think its going to do very will in the hands of Idel Labs and Helen of Troy.

That sounds good.

So -- and there's no transition expenses in terms of getting sales people trained or anything that is significant of that kind?

Actually not, because Idel labs, has already -- their set of reps which sell all the other products, Brut, Vitalis, Seabreeze, and all the other brands.

And so it's just going to be incorporated there.

We did add a couple of more people for marketing, but as far as transition costs, no, there was no transition cost.

The only thing that we're transitioning, which we're doing currently is moving the inventory from the Proctor and Gamble warehouse to our warehouse in South Haven, Mississippi, which we are able to accommodate without paying any extra for warehouse space.

We're able to accommodate the Infusium23.

So, there's a lot of good synergies and we're looking for a lot of profit from that brand.

Was the brand on a solid positive sales trends coming out of P&G?

Or was it lagging because they were thinking of selling it, I suppose?

I think it was pretty stable from the year before.

There were years that it was better.

But, at the time we bought it, it was basically stable from the year before.

Okay.

Well good luck with that.

And thanks, Gerry.

Don't forget to use Infusium23 shampoo and conditioner.

Yes, I'll even learn how to pronounce it.

Okay, thank you.

We will move on to Rommel Dionisio with Wedbush Morgan.

Yes, good morning.

Gerry, I wonder if you could you talk about the product sourcing for a minute.

You know, the tough economy and maybe less demand for goods produced in the far east.

And with raw material prices coming down, are you guys seeing some benefits there in terms of the product that you are sourcing from the far east specifically?

Yes, we are.

We just finished doing a review of the pricing and going forward, for almost all products, we will be buying and sourcing them cheaper than the year before.

But, as Tom mentioned to you we have about six or seven months worth of inventory that we need to go through.

That doesn't mean that we're not buying current product at a lower price, we are.

But, to get it all out of the warehouse will take about six months.

But the new prices should start showing up with current shipments but it may not move the needle as much as six months from now.

But, yes we are seeing better prices in the orient.

Due to the plastic prices and I guess the need to keep the factories busy.

Sure, just a follow up question.

You mentioned lower advertising expenses.

Is that partly just due to the fact that ad rates are coming down or are you sort of pulling back from marketing support or a combination of the two?

Okay.

There actually has been -- in basic marketing support advertising, there has been no lowering of that advertising cost.

The reason that we had a difference this year over last year is that last year is that last year we spent over $5 million to sponsor a NHRA car for Brut.

Which we felt didn't generate the increased sale that is we thought we should have.

And so we have taken some of that money and putting it into other media advertising.

But, that one was the big expense that we cut out, is we are not sponsoring this year the NHRA car.

Okay, great, thank you, Gerry.

Okay.

We will move on to Mimi Noel.

Hello, good morning, I have a couple of questions.

Gerry, related to the SG&A cost decrease, obviously that advertising with the NHRA car, perhaps that's something permanent in nature.

But among the other items that remain and especially the reduced incentive compensation, which are permanent in nature and which are more variable with sales.

Well, the one of the major drivers that we're seeing now is freight costs from overseas.

We were paying substantial surcharges for fuel that we are not paying now on the containers that come in.

We've been able to get better freight rates coming into the US and getting better freight rates going out.

So, that's one of the -- the major drivers.

Lower overhead, we -- I guess, we, like every other company in America, evaluated all of our expenses and decided those expenses that we can live without, that we've gotten rid of and those that we need -- can we reduced them?

And that's kind of the overall program.

And they were like, you know, 20, 30, different items that we looked at -- major items that we did cut the overhead.

So, I think for the most part.

Most of those will continue for this year.

Okay, that's helpful.

A couple of more questions if you don't mind.

What was the failed product introduction that you mentioned in Personal Care?

Well, it is a specialized line of [BS] answers that we are transitioning into other products right now without losing any shelf space.

We just -- it didn't produce the sales that we thought we would produce, so we replaced that with other items.

And, I am sorry -- a specialized line of -- ?

Of hair dryers, flatteners -- under the Vidal Sassoon brands.

Okay, and what sort of early plans do you have for Infusium, perhaps restaging it some how getting -- a change in the shelf space?

I notice in most outlets it's spaced at the very top shelf.

And maybe only has about four or five SKUs at this time.

So, what kind of plans do you have?

Okay, we are currently reviewing what Proctor and Gamble did.

And based on what we believe and we know will be our gross profit, we plan to spend more money promoting the brand than P&G did and even then, I think we're going to be -- its going to be very profitable for us.

So, very soon you'll be seeing more national advertising.

We have a big budget for national advertising for them, but that's built into our P&L.

And as I mentioned before, some of the retailers for what ever reason, major retailers -- some of them didn't have enough SKUs or they didn't handle it at all -- are talking to us about handling Infusium23.

One of the problems, and not talking for P&G, is that they have a lot of brands and many of them are billion dollar brands.

And they just cannot support all the brands that they have.

So, of course they push their most popular multi billion dollar brands and basically neglect other good brands.

And this is one that we feel that, it wasn't totally neglected but I would put it in that category.

It has a tremendous potential.

Every place I go in the country, people say I use that Infusium23 shampoo and conditioner.

It is the best.

So, we have a great products, it has a great heritage.

It's been around for many, many years and we just plan to promote it more.

And its, going to be one of our major brands in the Idel lab division.

Okay.

And Tom, where did long-term debt stand at the end of the year?

It was $212 million.

And we have $75 million that is coming due in the end of June.

And between our cash on hand and our revolver, we plan on -- currently plan on using that to pay it off.

Okay.

That's all I had.

Thank you.

(Operator Instructions) We will moved to Doug Lane of Jefferies.

(Inaudible) on for Doug.

A question on the cost of goods.

I don't know if you parsed this out before, Tom.

But, can you quantify the impact of the unfavorable foreign exchange in terms of the minus 5.3% on the gross margin side?

Well, I think I'd -- I talked about it on the impact of sales.

I haven't gone through and calculated, but it impacted sales by, I think it was $5.09 million.

So, you could do a calculation by adding that back to sales and see where the gross profit came out.

Sure.

That makes sense.

So, with a -- as has been discussed, we've got probably a couple of quarters that we're going to still be working through the higher cost inventory.

So, its probably safe to assume that the comparison on that side doesn't turn materially better until later in the year.

What is your sense as to inventory levels at the retail level at this point.

The retailers have been keeping the inventories low.

We think that's -- they've adjusted them down and that's probably not sustainable going forward.

So, we don't see a dramatic decrease in their inventory levels going forward.

And maybe at some point they will start increasing them.

Sure.

They've been working on it for a number of quarters.

Okay.

To what extent, do you have a window into the customer point of sale, purchasing activity?

Is that kind of -- do you suspect that is running ahead of the sell into your customers.

Well, you know, we get POS from all our major customers on a weekly basis by SKUs.

So, we're able to monitor their sales week by week.

And so, we know how much we're shipping them of course.

And we know what they're selling and so we know that the inventories are really at a minimum base.

Not at a maximum base.

So, you know, as sales increase, they will buy more.

Hopefully, they will buy more just to have more inventory.

But even if they don't, it's all based on on the sales.

On the POS and we don't see any big difference between the purchases and the POS, they do balance out.

Okay.

And maybe one final question, if I may.

Kind of following up to what Mimi was asking about.

Not to put too fine a point on it but just looking from a modeling perspective, obviously the SG&A control has been quite, quite good.

Is it reasonable that the 28% to 29% as a percentage of sales over the last couple of quarters is sort of where we want to be looking at it as we project out?

This is Tom Benson.

I think that as our bottom line profitability increases, we could see some increase in SG&A because thats where our incentive compensation is.

So, it has come down and there's a lot of areas in it.

But one area that will increase is incentive compensation as the bottom line improves.

Okay.

That makes sense.

Thank you very much.

You know, one thing that I wanted to mention on this call is some the good things that won't be recurring that were bad the previous year and one of them was, in the past year we took a $4 million write-off because of Linens 'N' Things.

That -- we believe a one time even because Linens 'N' Things is closed up and as Tom told you, even though we've lost Linens 'N' Things, which was a major customer of our OXO division, they are showing increased sales.

So, those sales from Linens 'N' Things, have gone to other retailers in the country.

But that $4 million is certainly a positive that will not be recurring.

I don't know if you've seen some press release that came from Staples, that Staples has -- we've been working on it over the last 1.5 years or so -- that they are introducing 20 new exclusive office products designed by OXO and handled by Staples.

And so that's another positive.

OXO is coming out with between 80 and 100 new products this year that should help increase the sales for the OXO division.

So, we are very, very, positive in looking for increased sales for OXO.

And our appliance division, as I mentioned, the new plan-o-grams have been set.

And they're starting in May, we're looking for increased sales based on the new products that we have.

And of course Idel labs will have a substantial increase in their sales no only in their current products but also because of the Ogilvie hasn't been annualized yet and also Infusium23 we'll -- we'll have 11 months.

You know, other things that we hope are very, very positive this coming year are the overseas currency loss that we've discussed.

It certainly should be a lot less and not effect us as much as it did last year.

And as we talked about -- certainly lower SG&A as we review all the expenses and look for better prices.

And the [orient] and lower overseas freight and domestic.

And so overall, we are very, very positive that -- looking for a good year for this coming year.

Any other questions.

We do have a follow up question from Gary Giblen.

Yes, hello, I was just wondering can you give us any detail on the brands that were -- that incurred good will impairment?

Well, you know, and Tom could probably explain it a little better, but in the big picture -- and on February 28, when they looked at it, the Helen of Troy stock was selling at $10 and we have $30 million shares outstanding, approximately.

So, they have -- we have a market cap of $300 million.

Everybody -- the accountants and everybody said, well, your market -- your book value is $600 million.

So, how can you have $600 million on your books, when the market only gives you $300 million.

So, consequently, there's -- they marked it up a little bit and then they said, no, you need to take a $100 million writeoff.

You know, it's not important where we put it, its just that based on mainly the price the stocks and because of the difference between the book value and the market cap, that we took $100 million writeoff.

You know, today our stock is $18, had it been $18 on February 28, it certainly wouldn't have been $100 million, we wouldn't even be in the category.

The problem is, and I've asked, can I get it back?

And they say no.

We look at February 28, we don't care what happened, we're the auditors, we look at February 28 and what happens if the stock goes to 100, you'll never get it back.

So, that's one of the main reasons.

Its not important where we put it, its just that there's a $100 million writeoff because of the big difference.

Now, there is no big difference.

We're -- the market cap is probably $550 million and our book value is $506 million.

So, its kind of turned around.

So, that's kind of a quicky answer for you.

Yes.

So, its the stock price more than an assessment of the operating earnings potential of certain brands.

Because that's the other thing, that you know -- .

That was the main driver is the difference between the $300 million and the $600 million that we had on the books.

But, had we not taken a $100 million writeoff we -- I think we have over $500 million of book value.

And we would have had (inaudible).

Its not the main driver of the business.

It's aw -- the writeoff was non-cash, it has nothing to do with our ongoing business it doesn't mean anything on the ongoing business.

The most important thing is earnings and as we reported earnings without the writeoff where larger this year than last year.

And so we'll (inaudible) thats the the good trend and it'll continue for this year.

And because of all of the reasons that I told you about, we're looking very positively towards a good year coming up.

Okay, yes..

That's a good understanding.

Thanks Gerry.

We do have a question from Steve Friedman of Wachovia Securities.

Good morning, Gerry and Tom and Bob.

Can you hear me?

Steve, I am sorry.

Good morning.

I am sorry.

Just a little follow up on your comments on OXO, Gerry.

OXO, throughout the entire depressed economy has continued to show stable to increased sales and I think now, if my rough calculations are correct, I believe OXO is approaching 27% of the last year -- or the fiscal year just ended sales.

With the Staples announcement that you just talked about, do you continue to see OXO continuing to show the nice increases as well as -- I think its one of your higher margin products also?

Steve, we bought OXO -- I guess what, about four years ago maybe over four years ago.

2004.

So, it is going on five years.

And every year that we've owned it the sales have gone up as you know you can track them -- very, very nicely.

And this year (inaudible) an exception to that rule.

with the new products that they have and some other things that they are working on and the increased geography.

They will have an increase business this year.

Steve, this is Tom.

Or arrangement, we have a license arrangement with Staples.

So, we will be generating some royalty income out of that.

So, it really will not be seen in our sales and gross profit all of that.

So, I don't want anybody to think that those are going to be OXO sales.

Its a royalty arrangement.

But, the one new products.

But it will be substantial.

But the 100 new products that we plan to pur out this year of course, will increase the sales.

So, profitability wise, they're looking for nice increases.

Can you comment, Tom or Gerry, on the royalty arrangements that you have or -- ?

No.

No, and it is just -- the products have just been introduced.

So, we're not exactly sure exactly what they're going to do either.

So, I think over time, we will see how successful they are.

Steve, keep in mind this is just a new area for us, that's why I mentioned Staples, because they did put out a press release.

These are only 20 products out of 1,000 products that OXO currently sells.

But I was just trying to tell you that its new business and new product category and certainly will be profitable because we're receiving royalties from them.

One of the things as I said -- I rough calculated OXO is now approximately 27% of your total sales.

Do you continue to see that increasing as a percentage of your overall sales?

Yes, I think its -- I just did a quick calculation.

Yes -- I -- percentage wise, it will increase next year.

Okay, thank you very much.

Thanks.

Gentlemen, there appear to be no further questions at this point.

I'd like to turn things back over to Mr.

Rubin for additional or closing remarks.

Thank you all very much for listening in for our to the fourth quarter and year end results and looking forward to speaking with you.

And having you all listen in for the first quarter conference call.

Thank you all again.

That does conclude our conference.

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