Good day everyone and welcome to the Helen of Troy Limited First Quarter 2016 Earnings Call. Today’s conference is being recorded. At this time, I’d like to turn the conference over to Mr. Jack Jancin, Senior Vice President of Corporate Business Development. You may begin.

Good afternoon everyone and welcome to Helen of Troy’s first quarter and fiscal year 2016 earnings conference call. The agenda for the call this afternoon is as follows. I’ll begin with a brief discussion of forward-looking statements, Mr. Julien Mininberg the Company’s CEO will comment on the financial performance and key accomplishments of the quarter and then update you on areas of focus for fiscal year 2016. Then Mr. Brian Grass, the Company’s CFO, will review the financials in more detail and comment on the Company’s outlook for fiscal year 2016. Following this, Mr. Mininberg and Mr. Grass will take 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 not to place undue reliance on forward-looking statements or non-GAAP information. Before I turn the conference call over to Mr. Mininberg, I’d like to inform all interested parties that a copy of today’s earnings release has been posted to the company’s Web site 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 assessed by selecting the Investor Relations tab on the Company’s home page and then the news tab. I will now turn the conference call over to Mr. Mininberg.

Thank you, Jack. Good afternoon everyone. Our first quarter marked a solid start for fiscal '16 positioning us well to achieve our goals for the year. From a number standpoint we reported a double-digit increase in net sales 10.8% and grew adjusted earnings per share 1.9% and that came despite greater than expected impact from foreign currency and the West Coast Port disruption. The quarter was led by our healthcare and home environment segment driven by new product introductions, relatively strong end to the cold and flu season and the VapoSteam acquisition. This segment was the one most impacted by foreign currency headwinds. The Healthy Directions acquisitions contributed almost $40 million to sales revenue. Our Houseware segment had $1.6 million sales decline in the quarter as strong point of sale activity and new product introductions were offset by a shift in timing of customer orders and inventory levels at several key retailers. We reorganized and renamed our beauty segments formerly known as Personal Care. And while sales were down year-over-year in beauty we marked another quarter of progress towards stabilization. Overall I am pleased to see our key initiatives gain traction and believe we are on pace to achieve the objectives we have set for the year. We are progressing well on executing the seven key strategic priorities that guide our multi-year transformation. These were outlined in depth in our Investor Day in May. Thank you to all who attended. We were very much pleased to introduce you to our global leadership council to more of our products, to our culture and to our plants. We spoke specifically about progress to date and the initiatives we are implementing to further advance our strategic plan. I would encourage anyone who has not yet done so to listen to the replay that…

Thank you, Julien. Good afternoon everyone. Before I begin discussing our first quarter fiscal year 2016 results, I would like to briefly touch upon foreign currency. We discussed this in depth on our fourth quarter call and I think it warrants review today given the significant impact we began to have at the close of fiscal year '15 and the expected impact for the full year in fiscal year '16 we have previously provided. As we've discussed in detail on our fourth quarter call, the weakening of foreign currencies against the U.S. dollar affects our company's results in several ways. First when the dollar strengthens it reduces our U.S. dollar reported net sales operating income and net income. However unlike some other multinational companies most of our sourcing is done in U.S. dollar so there is little to no reduction in our reported cost to goods sold when foreign currencies weaken. Further a large portion of our EMEA operating expenses are denominated in the Swiss franc which appreciated fairly significantly as other foreign currencies were weakening. This resulted in higher U.S. dollar reported operating expenses for our company in the first quarter compared to the same quarter last year. We also provided rule of thumb when thinking about the impact of foreign currency fluctuation on Helen of Troy’s results. For every $1 fluctuation in net sales from foreign currency as much as $0.60 to $0.70 could fall the operating income depending on the mix of the currencies and their relative volatility against the U.S. dollar. Second there is also an impact from the settlement of transactions in the re-measurement of the Company's monitory assets and liabilities denominated in foreign currencies which is recorded an SG&A as is the impact of settlements of any hedging transactions that the Company may enter…

Thank you, Brian. Overall a good quarter and a good start to the fiscal year. We are growing the business, improving the organization and also the culture. We are making good progress executing our multi-year transformation strategy and we continue to invest in our business to drive product innovation, demand, long-term growth. I believe we are on track to achieve these objectives and that we have set for ourselves in the current fiscal year and also our long-term targets. With that I’d like to turn the call over to the operator to begin the question-and-answer portion.

Thank you. [Operator Instructions] We’ll take a question from Bob Labick with CJS Securities.

I want to start with OXO, thank you for the explanation on the timing of sales. You have a bunch of exciting launches coming up in the second half in electrics as you mentioned, bakewares. Could you talk a little bit about the timing of sales for those when those might roll in and then also if you could talk about the marketing? I think Brian you just alluded to it at the end, talk about the timing of marketing if that was part of the delta in the margin that we saw in Q1 in OXO.

Yes. I guess we'll hit the second part of it first and then Julien maybe you want to touch on the timing on introductions. So yes there is incremental investments that is occurring in the first and second quarters largely in support of key initiatives in our peak selling season in the third and fourth quarters. And so as we try to kind of point out at the end of Q4 and also in the Investor Day that the margins would be compressed slightly in the first and second quarters as a result of that incremental spend and then the benefit of that spend occurs in the third quarters and fourth quarters. And so there is a little bit more spend as a percentage of sales in the first half then there would be in the second half. Does that answer your question?

Yes. Absolutely.

Yes. And on that spend, Bob, we're beefing up the OXO Web site, beefing up the product knowledge level of in store reps, places like bed, bath and others as I think you yourself saw in the pots and pans we wanted to make the store level folks understand more those new pots and pans and that will pay off as we bring other new products to them in the back half. And on your question about launch timing we are planning to be in the market with the electrics and time to this holiday season. So I think late fall shipping and in the case of the bakeware it's a little too soon to get the detail on that one but also in the back half of our fiscal year.

And then jumping over to the HHE sales were quite strong I think despite the FX and I thought you had a pretty tough European spends comparable as I remember, could you talk again a little bit like some of the drivers on the sales there.

Yes. Appreciate that, I appreciate you recognizing the tough base in the history so growing over that base is always impressive and as Brian mentioned they climbed over 3.5 points of foreign exchange relate -- I think it was 5.2 million that he mentioned, so bravo; the thermometers helped a lot so you remember that we had those three new thermometers in the market on Braun. We got benefit from that as the cold and flu season which was above the average has sort of the last of its strength period which traditionally happens in March and April. So squarely in this quarter so they got the benefit of that. They also got the benefit while [fans][ph] weren’t their strongest piece of other parts of that business holding on strong, and then in the case of the growth to grow over that historical base, not so shabby. Health and home has a lot of good stuff planned for the rest of the fiscal year, we've got new professional thermometers coming online and other good drivers, so we're optimistic and as you've seen from our Investor Day and others we continue to be a very strong share performer and also a market share grower in air purifiers and we’re putting in plenty of fire power behind our pure water filter business to pump that one up as well.

And then on Healthy Directions the sales were nice; we obviously haven’t seen a previous Q1 margins were down I think probably marketing related. Could you just talk about where you expect those margins to be over a full year basis and if is that typical marketing spend quarterly margins for Healthy Direction?

Yes. I would say that this quarter is not typical with respect to margin, you saw declines sequentially in the margin compared to what we have for the eight month in fiscal year '15 and you are correct if that's largely due to promotions developments of the online business in that channel and we're doing some advertising around direct response and we're also doing some things where when we get new customers we're offering promotions, free product to get on auto delivery. And so what you're seeing is a little bit of a double impact of the cost of acquiring the customer but then also the reduction in sales through the promotion and so that's causing a little bit of compression in margin but we believe there is a future pay off in increasing the customer buyer file and then also getting them on Healthy Directions. And so this is not typical on an ongoing basis, the margin should be -- operating margin should be somewhere between 11% and 13%, so, yes, that should improve on a go forward basis.

And on your growth question for Healthy Directions, while we haven’t published year-over-year comparison haven’t yet anniversaried it, we can't say that it is growing, it's growing in line with our expectation, it's growing faster than any other segment in the company, that's exactly what we were expecting. I can also say that on this margin period-to-period stuff that Brain is talking about as we say in our 10-Q we are expecting Healthy Directions warehouse consolidation project to come online in the back half of the fiscal year and that is on track execution wise and that will be a margin help for Healthy Directions and also help spread some overhead around the company.

And Bob I'll just take one more point the Healthy Directions or the nutritional supplement segment absorbed $750,000 of allocation that it didn’t have previously. So, that’s also a drag on the margin.

Okay, great, appreciate that. Okay, I’ll jump back in queue, let others go, but look forward to seeing you next week at our conference. Thanks.

Next we will hear from Jason Gere with KeyBanc.

I actually missed part of Bob's early question on OXO. So I guess the first question I was going to ask in terms of the inventory adjustments that you saw out there. If you can provide any color on that? And then just I guess in general, you're talking about some of the A&P spending being higher in the first half, I was just wondering about with OXO on what you might be planning for the back half of the year, how big of a rollout will that be? And then I have an additional question.

Yes, let me start and then I'll turn over to Brian on the inventory one. You've missed I am not sure which part you missed. So just to reiterate OXO you probably remember had a very strong Q4 at the end of fiscal '15 and there were several million dollars of sales that were taking into that period. In addition there was about $1 million of sales that pushed from Q1 now into Q2, so we're enjoying that benefit as Q2 gets rolling. All that said those are $4 million out of Q1 and that is reflected in the OXO top-line number. The inventory side at the customer level also impacted Q1 specifically to your question and we did see a couple of customers making adjustments at that inventory level. That said please don't be concerned we're seeing very strong POS lift or point of sales at the shelf level for OXO in line with or even a little ahead of OXO's historical growth rate, so we see that as trade inventory not in any way softening of consumer demand which is in fact a little bit stronger than what we've seen historically. And in terms of the spending side, we're spending, again I don't know which parts you heard, we're spending a bit on improving the Web site of OXO, taking e-commerce to the next level. We are spending a bit on in-store product knowledge of clerks at the store level because we're bringing new categories online and have new competitors to differentiate our products against in areas like pots and pans now in the GreenSaver type of products and soon enough in the electrics. And then we're inventing significantly and preparing to launch our new products on OXO such as bakeware and also the electric themselves. So these are the kind of things where the money is going and in terms of what it sets us up for is our expectations that we'll see the benefit of those as the consumer demand continues, as OXO continues its proven recipe of maxing out stores in terms of distribution then adding new categories and ultimately also growing international and that's been a good recipe for OXO over many years.

And then just adding on OXO, so you guys are still -- or have been absent with one obviously large retailer and I guess I was just wondering if you could talk a little bit about any possibility of revisiting that relationship where you sell other products but just not OXO at this point, what we've seen in HPC is that some brands that have never sold there before are finding is to sell I guess maybe a lower price point version of their product to cater to that customer. So I was just wondering just kind of broadly and obviously not tipping your hat, but just are you open to that relationship and is there an opportunity for increased distribution if you are able to kind of proceed with that one retailer?

Yes I understand, first of all starting off you're talking about our biggest customer and one of the largest retailers in the world and first of all we deeply respect them. We have a very large relationship with them that cuts across most of our product lines and we consider them an exceptional customer and partner across all the businesses that we do with them. As we consider the positioning of all of our brands OXO tends to be in the premium end of things in those categories and while we do have a one click down price point line in the software which we sell for example at Target, it's not our intention to introduce a yet lower line to go further in mass and it's not our intention to broaden distribution in that part of the mass channel large though it maybe. It is our intention to continue working the premium end of OXO; you can see that with the electrics. You've probably seen the price points are as high as $299 and that's obviously a different segment a different type of consumer that would buy products at the very high end of those categories. And all that said differentiation is the magic word and we're always working very hard to side off commoditization and that works against the area that you're talking about. So differentiation premium and category expansion international growth we think that's the better recipe and the appropriate one the OXO brand.

And then just a last question as we think about the M&A environment obviously you're anniversarying now Healthy Directions and that's now going to be part of the organic sales base and now usually you guys are good for good sizable bolt-on acquisitions or as you think about M&A in the use of the cash and where your leverage is right now, do you think more about additional smaller adjacent kind of tuck-ins like you do with Vicks acquisition that you’ve just -- that you did a few months ago or is there a still -- as you think about the portfolio think about a bigger global I guess scale as other HPC companies are now thinking, is there a room to do maybe another leg in the portfolio to get further scale and maybe this would be more fuel to the -- you know fuel for growth kind of cost saving opportunity longer term. So just -- I know you talked about this at the Analyst Day but I was just wondering if any kind of updated thoughts from just what you've seen in the landscape right now from an M&A perspective.

Yes sure. Very interesting question and a good one. Yes we have seen we've seen acquisitions like the Armored 1 from our friends at Spectrum, everyone I'm sure saw in the newspaper the announcement today with regard to Cody and so those are big moves. If you look at our own history what you'll see is both the types of acquisitions that you're talking about conducted within the last 12 months meaning bolting on a new leg that was vitamin and mineral supplements under Healthy Directions and that was a -- I don't know if it's a bold but nonetheless moving far into a new area consisting with our overall healthcare business which is now roughly a third of the company and so a big bolt-on and a big new leg. You've also seen us go close in adding the high margin consumable under Vicks around the VapoSteam and those VapoPad licensed buyout. And so if we're able to do both, it's strategic for us to do both and we have done both. And in terms of our balance sheet you heard Brian talk about our debt ratio now coming down under two times and if you project our cash flow forward what you'll see is the ability to have significant balance sheet flexibility to make large acquisitions should we choose to or also other smaller ones. And then rewinding just for a moment to Investor Day that string of pearls approach that we talked about I think we went out of our way to talk about the string of pearls has to be strategic meaning along the line of pearls but nonetheless can have different size of pearls in it, and ending up with on strategy, multi size, some bolt in, some tucking into our existing businesses and then bolting on new legs it's all available. Jack Jancin was here with us today, spends much of his time combing through that and I can assure you that he and I are in constant contact on opportunity after opportunity and we are literally visiting, looking, trying all of the different ways that appeal to us, when we find just the right fit we'll grab it.

And next we'll hear from Steph Wissink with Piper Jaffray.

I just want to follow up on a comment that you made regarding the M&A to Jason's question regarding the consumable specifically. Could you just talk a little bit about some of the categories that you look at broadly as having that consumables element that would be attractive. And then just as a follow up to that can you remind us about some of the plans around the integration of some of the consumable businesses. Do they need to tie back to an existing business or is that a characteristic that you're looking for going forward as you think about capital deployment.

Sure, yes interesting question. So let me speak just broadly about consumables for a moment. There's two basic types, there's products like you see in our personal care product area, Infusium 23, Brut, Sure, et cetera where the intention of purchasing the product is to consume it and then repeat the purchase cycle hopefully as a loyal user constantly expanding. You know the basing in your medicine chest or bathroom wherever the product may be used and those types of products have been a part of our portfolio for a long time. We're also adding now increasingly consumables that go with devices, so think printers and cartridges and that's where the VapoSteams of the world come in. In the case of that type of consumable you saw us buy in that space close in to your point and not a huge new reach but also to Jason's comment about Healthy Directions, you also saw that the other kind of consumable under Healthy Directions where in this case the device is your body and the consumables are the products that you're buying to constantly replenish the vitamins and mineral supplementation of your health system. And in the case of both I guess the point is we have pursued both of those on strategy for us. In the case of the cycles and how we look at it, we look for the margins to be significantly above average for the category that they're playing in. We look for leadership as a brand name, Vicks and Healthy Directions both pass those tests with flying colors, you see the very high margins on Healthy Directions in the 70% range of the gross margin and you see it above average for us on the bottom-line as well and while we haven't publically disclosed the Vicks…

Just two follow up questions more related to the reported P&L. Can you talk a little bit about G&A expense and where we are in that migration from a holding company to an operating company, how should we think about the progress in the margin and leverage area? And then also as the follow-up Julien I’d like to hear your thoughts on the beauty business, how are we tracking? How are the milestones looking there? What should we think about in terms of benchmarks here over the next 6 to 12 months?

This is Brain. I’ll talk about the SG&A a little bit, I’d say that our SG&A ratio for the quarter is higher than you’d expect on a normalized basis and I think you would -- that would be expected by you and there as we tried to call out there are advertising and promotional and the product development cost incurred in the quarter that will benefit future quarters and so I think the way we’ve tried the kind of picture this or put this in perspective for you guys is on an annualized, more on an annualized basis, not on the quarter-to-quarter basis and I think what we’ve set for the long-term targets still remains true, which is the 30 to 40 basis points of improvement in operating margin and the cost savings that we've kind of outlaid or laid-out for you guys some of that being return to the bottom line but some of that being pumped back into the business for future growth. So that’s kind of the way that I would layout margin expansion and the SG&A costs.

A quick build on SG&A and then I’ll talk about your beauty question. Remember Healthy Directions by its very nature has higher SG&A and nonetheless higher margins than the average for the company on the bottom-line just because we’re fulfilling the orders, there is no retailer in between the marketing and new product development investments that Brian was talking about scripts in his comments now speak to a bit higher SG&A in this first half of the year as a percentage of the sales ratio at their seasonal low point. So there is a just bit of math there and remember the FX comments as we incurred expenses in foreign exchange such as Swiss francs in Europe the sales come in at a lower dollar translation as they come back to us from euros and nonetheless our dollars go up the door in expense in Swiss franc. So that double-whammy effect. So those are the things that I would add as build on the SG&A front. And in the case of the beauty progress lot to like here, we are taking all those key areas that I’ve mentioned a few times and I’ll just touch each of them here, but before I do I’ll just say the quarterly progress is looking pretty good. If you take that 4.7% that Brian talked about in terms of decline first of all it’s in-line with our mid single-digit target that we set for the year in terms of the decline rate in beauty as we try to get back to flat, remember that was an 18 months glide path. And if you look at the impact of foreign exchange which I believe was about 2% of that 4.7% as well as the port strike -- port labor disruption which largely impacted beauty more…

Steph just one more point, going back to the SG&A. We had multiple impacts to sales in the quarter currency the West Coast Port seeing in the shifting of orders from OXO which obviously impacts our operating leverage and makes our SG&A ratio look higher for the quarter. So it will naturally be higher because of those events but as those normalize and we get more on a normalized sales pattern for the year you should the see the SG&A ratio decrease.

[Operator Instructions]. And there are no other questions at this time.

Alright well. Thank you very much everyone for joining our call and for your continued interest in Helen of Troy and especially for your support. We are looking forward to speaking with many of you in the coming days and weeks and updating you on our second quarter results in October and with there being no further questions. Thank you, and have a wonderful evening.

Ladies and gentlemen this does conclude today's presentation. We do thank everyone for your participation.