Good day, and welcome to the Helen of Troy Limited Fourth Quarter and Fiscal Year 2013 Earnings Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to John Boomer, Senior Vice President of Helen of Troy. Please go ahead, sir.

Good afternoon, everyone, and welcome to Helen of Troy's fourth quarter and fiscal year 2013 results conference call. The agenda for the call this afternoon is as follows: I will begin with a brief forward-looking statement; Mr. Gerald Rubin, our Chairman, CEO and President will then discuss our results and highlight the priorities we set for the business at the start of fiscal 2014; then Tom Benson, our Chief Financial Officer, will review our financials and outlook in more detail. Following this, we will take the questions you have for us today. 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. Generally, the words anticipates, believes, expects and other similar words identify forward-looking statements. Forward-looking statements are subject to a number of risks and uncertainties that could cause anticipated results to differ materially from actual results. 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, and may be calculated differently than the non-GAAP financial information disclosed by other companies. The company cautions listeners to not place undue reliance on forward-looking statements or non-GAAP information. Before I turn the conference call over to our Chairman, I'd 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 earnings release contains tables that reconcile non-GAAP financial measures to their corresponding GAAP-based measures. The release can be accessed by selecting the Investor Relations tab on our homepage and then the News tab. I will now turn the conference over to Gerald Rubin.

Thank you, John. Good afternoon, everybody, and welcome to our fourth quarter and fiscal year 2013 earnings conference call. I am pleased to report a solid quarter in which we achieved a double digit increase in net sales, with all 3 of our operating segments contributing to this growth. Amidst a challenging retail sales environment, we continued to diligently control our cost and increase our operating income compared to the fourth quarter of last year, even as we continued to invest in our business. For the fourth quarter of fiscal year 2013, we grew EBITDA without noncash share-based compensation by 8%, and achieved diluted earnings per share of $0.98, surpassing our expectations. Growth in the quarter was led by the Healthcare/Home Environment segment, which grew sales by 18%, benefiting from a strong increase in illness levels midway through the cough/cold/flu season. Healthy replenishment, driven by retail inventory levels, more in line with sales, as well as one incremental month of sales from PUR, which was acquired on December 30, 2011. We also achieved double-digit growth in the Housewares segment, illustrating the strength of our new innovative quality products. Performance of the Personal Care segment was ahead of the prior year, despite the tough consumer environment, which hampered sales of higher ticket hair dryers and flat irons, as well as increased trade promotion activities by key competitors in the grooming, skin care and hair care categories. The fourth quarter caps off a solid year of performance for our company, where we made further progress on many of our long-term strategic business objectives. We achieved overall organic growth for the second consecutive year, strengthened our competitive positioning in the Housewares business through the introduction of new and innovative products, designed to meet the needs and desires of our customers, and made significant…

Thank you, Gerry. Good afternoon, everyone. I'd like to start my discussion by reviewing our reported fourth quarter fiscal year 2013 financial results from this afternoon's press release. Net sales revenue for the fourth quarter of fiscal 2013 increased 10.9% to $326 million, reflecting one month of incremental sales from the PUR acquisition of $8.1 million, and core growth in the Housewares, Healthcare/Home Environment and Personal Care segments of 11.9%, 11.6% and 2.2%, respectively. Foreign currency positively impacted revenue by $0.9 million, which mostly benefited the Personal Care and Healthcare/Home Environment segments. Looking at the performance of our key business segments in more detail. Personal Care net sales revenue in fourth quarter fiscal 2013 increased 2.2% to $112 million, compared to the fourth quarter of fiscal 2012. The increase in Personal Care net sales revenue primarily reflects growth in international markets, and the U.S. appliance category, offset by a continued difficult U.S. retail sales environment in the grooming, skin care and hair care category. Net sales revenue in the Housewares segment, which consists of the OXO business, grew by 11.9% to $66.4 million, compared to fourth quarter of fiscal 2012. This segment continues to experience growth in its food storage, bath accessories, tools and gadgets and cleaning product categories. Our Healthcare/Home Environment consists of the Kaz business, acquired on December 31, 2010, and the PUR business, acquired on December 30, 2011. Healthcare/Home Environment net sales revenue for the fourth quarter increased by 18% to $147.6 million, compared to the same quarter last year. Of this increase, $8.1 million relates to the PUR acquisition. The core business in this segment grew 11.6% year-over-year, led by a strong increase in illness levels midway through the cold/cough/flu season. Our Thermometer and Pharmacy Humidifier business grew by double digits in the fourth quarter, and…

[Operator Instructions] And our first question will come from Bob Labick from CJS Securities.

I just wanted to start with -- firstly, you had a very nice quarter, and so, wanted to understand the guidance a little more. You gave us a lot of details a minute ago. It sounds like you expect Housewares, OXO to be up next year, and Personal Care to be down. And I wasn't sure about your outlook for the Kaz and PUR division. If you could just maybe walk us through as much detail as you want, but outlooks for those divisions, and particularly what you expect -- why you expect declines in the Personal Care.

Yes, Bob, this is Tom Benson. On the Healthcare/Home Environment, we are expecting sales to be up year-over-year. As you know, last year we had significant sales growth in that -- segments, but some of it had to do with the PUR acquisition that was anniversarying. So in the Personal Care, for the full year next year, we do expect a sales decrease. As we have been mentioning throughout this year, there's a lot of new competition in the liquids area. Some very large competitors have come out with some shampoo lines that are competing directly with us. Also, in our hair care appliances with the planogram -- the recent planogram reset, we have lost some position at a key customer. We are coming out with some very innovative new products that we feel position us in a good, good place, going forward.

Would you be able to quantify the magnitude of expected decline in the PC area for next year, 5%?

We're not giving out specific projected declines. So we're not giving out a percentage.

So Bob, it's all built into the estimated sales that we just gave you.

Okay, understood, great. And then on the margin side, on the home and health environment, the -- looks like, and I went very quickly into the K, so I could've computed this wrong, but it looks like EBIT was actually down year-over-year, despite the higher sales. The margins were down a little bit. And I know the timing of the flu season and replenishments have a lot to do with that. How should we look at the operating margin for that division, now that you have it fully in?

Bob, What I think you're probably looking at the chart where we have the operating income, and that, I think when you read the details there, it indicates that there is -- our corporate overhead, we did not allocate to that segment last year. We wanted to get a full year operation, so we could understand the cost. We have allocated corporate head this year. The details of how much increase it was year-over-year is in the K, I don't remember it off the top of my head right now, so that's one of the reasons there was an impact.

Okay, and then on a go forward basis, is this a 7% to 8% EBIT margin business? Or where do you see this falling? Above that, below that?

We've -- our goal in the -- part of our infrastructure enhancements is to be in a position to grow the margin in the Healthcare/Home Environment area. That is the lowest margin business. When we acquired it, we did talk about -- we had a multi-year plan to try to increase it. Over time we would like to get it to double digits. Some of it is the cost side, some of it is we're moving to new factories. We're also -- have a strong product line coming up over the next few years, so we have a lot of initiatives to grow that area.

And our next question will come from Jason Gere from RBC Capital Markets.

Just -- I guess a question more on the EPS guidance. So I was wondering if you could just walk us through the impact of the higher product costs you saw in the fourth quarter, and just how that should kind of play through the rest of the year. So with the guidance I guess, you kind of laid out the 4 pillars of impact on the EPS, and we kind of went through the flu and some of the -- I guess a little bit about the retail environment. But can you talk about the gross margin? Are you expecting that to be up this year, or it should be down rather materially, and then you'll again offset more in the SG&A with the leverage on the expense front? So I was wondering if, just first, if could talk a little about margins?

Well, the margins, we believe, will be the same as they were this past year. And the SG&A should stay stable, also with the same numbers.

So okay, but if -- you're saying margins are going to be 11.5% this year? I mean, is that what you're saying, or...

I think you're talking about the operating income. On our gross profit percent, I mean, we have been and we continue to experience product cost increases. We work to try to pass those on to retailers through new products or price increases where we can. We can't always pass them on. A large portion of our products come out of China, and there continues to be wage increases that are happening, so not only us, but our competitors are in the same situation, so we're working with our retail partners to try to pass those costs on as we can. On the operating income, we are going to have some higher SG&A expense for the year, and that's how we went through and figured out our guidance for next year.

Okay. So, in -- I guess with the leverage that you're getting, because it still seems like with your guidance, your sales will be, your organic sales x FX, will still be in the low single digit range, at least based on the guidance. So it seems like you guys are in cost control mode, like you did in the fourth quarter. So is the higher noncash compensation expense offsetting some of that? I guess I'm just trying to think about -- it seems like gross margins are going to be in the 39% range or somewhere down for the year, so obviously some of the offset, to get to the number you get for full-year EPS has to be on the SG&A, so I'm just trying to piece again the puzzle a little bit here.

Right. The SG&A is going to be up because of noncash compensation, and secondly, this is a transition year for our warehousing operations. We are going to incur some duplicate and some transition expenses as we move out of a rented warehouse into our new warehouse. On a longer-term basis, we are looking at -- the new warehouse will be less expensive than the rented facilities we were in. But this is a transition year to accomplish that. And that will be accomplished the second half of the year, and there will still be some moving going on in the first quarter of fiscal year 2015.

Okay. And then, again, and then going back to the sales, when you think about the guidance for the year. How much pricing are you pulling into that sales? So you're talking about some of the product costs, how much pricing are you able to take to kind of offset that? So I'm trying to think about volume versus price within, I guess, what is the low single-digit organic sales expectation.

Well, as we talked about over the past few years, it's not that easy to get price increases from our retailers, although we try to do it every time that we do get price increases. Most of the price increases we get are on new products, because then the price can be built-in. And it's kind of a mix. I can't tell you that every time we get a price increase from our manufacturers we increase the price, because we have planograms with the major retailers and we can't change the price until the following year when the planogram expires. Most planograms start around March or April, and they finish the next year. But as far as new products, that's where we tend to get the increase -- increased gross profit.

Okay. And then last one and I'm hopping off. OXO, just to clarify, I think, the last question, I mean, should we continue to see the high single-digit? Or when you talk about the difficult retail environment, some of your retailers have obviously put out, have -- we've the numbers out there, it's been a difficult February. Should we still think about high single-digit growth in this great business? Or is it more a mid to high single-digit, is the right way to think about it?

This is Tom Benson. OXO for the quarter had 11.9% growth and for the year, it had 9.1%. As we've been very pleased, I mean, OXO's had very good growth. As it's getting larger, it's getting harder and harder to have the same percentage growth, so we're looking at more the mid-single digits than the high.

[Operator Instructions] And our next question will come from Lee Giordano from Imperial Capital.

When you look at your capital expenditure plans, excluding the new DC this year and looking ahead, what would be a good normalized run rate to use, going forward?

Lee, the reason it's a little higher for the coming year is we are transitioning the Healthcare/Home Environment over to the current version of Oracle that the rest of the company's operating on. So we have some additional costs there. So we've given a range of like $7 million to $12 million for this year, not including the DC. Going forward, if we're not doing something with the computer system, it could be, probably $5 million to $7 million.

[Operator Instructions] And our next question comes from Jeffrey Matthews from RAM Partners.

Advertising and marketing changes that you plan to make?

I think we missed part of that question. Can you repeat the question?

Yes, I just wanted a little -- yes, I had wanted a little more color, if you could, on the marketing and advertising changes you talked about in the script.

Well, we're going to spend more money on in-store displays and marketing and couponing and a little bit less on TV and print. And also, you can include in that, doing more in social media, also.

What's costing that?

We're just trying to get the biggest bang for the dollar, and we think that there are advertising expenditures out there that we can do better by shifting some dollars from one area to the other. It doesn't mean we're spending less, we're just shifting them from -- to different categories.

And then now we'll take our question from Greg (sic) [Craig] Stone from Kayne Anderson Investment.

Just looking at your organic growth sales for the Personal Care division, it looks like the past 4 or 5 years, it's been relatively challenged. And it sounds like, again, based in your guidance going forward, this coming year will be relatively challenged as well. The question will be, longer-term, in your mind what will it -- what needs to occur or what can be done to overcome the lack of organic growth sales in that particular segment?

Well, what we look for in the Personal Care area is we believe that we could use a major acquisition of a major brand that would also help carry the brands that we have. Outside of that, I don't -- I think that the trend is the trend, and whatever you saw the last couple of years will continue. But we believe that with a major acquisition of a brand, that would help carry the sales upward.

And now we'll take a follow-up from Bob Labick from CJS Securities.

I just wanted to ask about capital allocation. First, your latest thoughts on share repurchases. And then also, if you could talk a little about the acquisition environment. You've said you're looking for accretive acquisitions. Can you tell us, are you expecting any this year? What's the environment like? Anything you could elaborate on would be great.

As you know, we talked about it previously. We do have our acquisition criteria that we would like to look forward to when we do an acquisition. I can tell you that there hasn't been that many quality acquisitions that are out there, that we would like to have. I just think it's -- we're very careful, we're conservative in what we buy. We bought a lot of brands and companies over the last few years, and we're going to stick with our strategy of what we want to do when it comes to acquisitions. Prices are probably a little bit more on the higher side than they've been in the past, but I think a lot of it has to do with the low interest rates. And not that we're competing with strategic buyers, it's more like we're competing with venture capitalists who have a lot of money and need to deploy their capital. But if there's something that we see that we like, we're not hesitant to step up and buy it as we've done in the past. But right now, there's nothing to report to you. We don't have anything that we can say that we're going to be having. But we're certainly hopeful in this coming year to have an acquisition. We've always had an acquisition for the last 4 or 5 years, at least 1 a year. In the last 12 months we have not, but that's not because of us, it's just that there has not been good quality acquisitions out there for us.

Okay. And what's the rate, I guess, leverage ratio for you, because you're getting down close to 1x. You're materially below the peers, and your stocks are trading for 8x earnings. It seems like share repurchase could do a lot for your shareholders in that regard.

Were you talking about leverage? We're down to 1:1. Are you talking about how much would we leverage if we were to do an acquisition?

Sure. Or what's the right one over time and you could buy back stock and add leverage that way, too?

Yes, it's true. Both are on the table. We wouldn't feel uncomfortable with a -- close to 4x leverage. We're at -- and we're getting close to 1x leverage. If you do the numbers, we have a lot of capacity to buy something. On the other hand, if nothing comes our way, then certainly acquiring stock would be the way to go.

And that does conclude our question-and-answer session for today. And I'd the like to turn the call back over to our presenters for any additional or closing remarks.

Well, I want to thank everybody for listening in to our fourth quarter and fiscal year 2013 results conference call, and we look forward to sharing our first quarter of fiscal year 2014 results with you soon. Thank you again for listening in.

That does conclude our conference for today. Thank you for your participation. You may now disconnect.