Jack Jancin - Investor Relations Julien Mininberg - Chief Executive Officer Brian Grass - Chief Financial Officer.

Dan Moore - CJS Securities Jason Gere - KeyBanc Maria Vizuete - Piper Jaffray Frank Camma - Sidoti.

Please standby. Good day, ladies and gentlemen. Welcome to the Helen of Troy Limited Second Quarter 2016 Earnings Call. Today’s conference is being recorded. At this time, I would like to turn the call over to Mr. Jack Jancin, Investor Relations. Please go ahead..

Good afternoon, everyone. And welcome to Helen of Troy’s second quarter 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. Before reviewing our Safe Harbor statement, I’d like to let you all know that we will be webcasting our presentation at the Morgan Stanley Global Consumer and Retail Conference on November 18th and the Goldman Sachs U.S.

Emerging/SMID Cap Growth Conference on November 19th, both in New York. Webcast links will be posted to the Helen of Troy Investor Relations website. 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 maybe considered non-GAAP financial information. These non-GAAP measures are not an alternative to GAAP financial information and maybe 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 website at www.hotus.com.

The earnings release contains tables that reconcile financial information measures to their corresponding GAAP based measures. The release can be obtained by selecting the Investor Relations tab on the company’s homepage and then the news tab. I will now turn the conference call over to Mr. Mininberg..

Thank you, Jack. Good afternoon, everyone. While we had a strong second, revenue growing double-digit, all four business units at Helen of Troy grew in the quarter. I’d like to start off my comments on the business segments by saying that beauty grew in the second quarter. In recent quarters the trend in beauty has been improving.

I am pleased that the efforts to improve our fundamentals in new products for these segments are now starting to flow, building on the strength in the past several quarters in foot care.

While encouraging, I would like to remind you that the second quarter last year was negatively impacted with inventory reductions by a major retailer, not repeated this year, making for a somewhat easier comparison.

While we are certainly pleased with the progress made over the past several quarters in beauty, we do not expect meaningful sales growth in the full fiscal year 2016. This second quarter’s growth was led by our Healthcare and Home Environment, and also our Houseware segments, both growing double digits.

Our Nutritional Supplement segment also contributed $38.1 million in the second quarter. With capital allocation representing a key component of our strategic plan, we returned capital to shareholders by repurchasing stock in the second quarter, which I will discuss in more detail shortly.

We are pleased with our first half performance in which the company grew revenues double digits, despite foreign currency headwinds.

Looking forward to the balance of the fiscal year, we expect to continue our progress and we are raising the lower end of our outlook range to reflect our results to date and our expectations for the remainder of the year.

Stepping back from our financial performance, we continue to make meaningful progress on executing the seven key strategic priorities that guide our multi-year transformation. Today, I’d like to update you on each of them briefly. The first strategy is to invest in our core.

As previously discussed, we have been investing in marketing support behind our major brands and product launches in core categories. Examples include thermometers, humidifiers, air and water purifiers and our largest Personal Care brands as well as new products in Beauty and in Housewares.

We have also been investing in marketing support for our nutritional supplements business including increased online customer acquisition. We are pleased to see these investments contributing to growth. The second strategy involves strategic disciplined mergers and acquisition.

In the first half of the year, we closed the Vicks inhalant transaction as previously discussed.

We will continue to build upon our track record of accretive acquisitions as we are constantly looking at opportunities to expand in categories and geographies where we believe we can develop leadership market positions and carve out a competitive advantage. The third strategy is focusing on consumer-centric innovation.

We’ve talked in the past about our increased focused on innovation based on in-depth customer, consumer and competitive understanding, especially in Beauty. Now a few quarters later, we are pleased to report that we have launched innovative new beauty appliances in both our retail and our professional appliance businesses.

Stylist told us that longer appliances would make a difference. So under our award-winning hotus professional brand, we launched extra long versions of our straighteners and curling irons. In retail appliances, our new Revlon 1 Step Hair Dryer and Styler was inspired by consumers searching for convenience.

It started shipping to major retailers in the second quarter and initial results are encouraging. We also relaunched our Pro Beauty Tools brand in retail appliances starting with new dryers and new packaging appealing to consumers demand for professional great products at retail. OXO continue to build within its existing categories.

A nice example this quarter is OXO’s hand-held spiralizer for fruits and vegetables which is selling especially well. OXO was also entering new categories such as small kitchen electrics with the OXO On appliances that began shipping in September.

Our nutritional supplements segment is also innovating, introducing multiple new products including launches under all three of its best selling doctors in the second quarter. These include PROMED WHOLE BODY inflammatory response supplements under Dr. Sinatra, Mind and Memory Essentials under Dr.

Whitaker and Probiotic Advantage Bifido Bealdlets under Dr. Williams. The fourth is to update our organization and people systems. With our new Global Human Resources Vice President now onboard, we have conducted our second global summit in this critical area, kicking off a number of key initiatives around people systems.

The fifth is to develop best-in-class shared services, leveraging the new leadership in best practices we now have in place. We are driving improved warehouse efficiency and inventory management. We have now completed the warehouse consolidation for healthy directions which was one of our committed cost savings initiatives.

This brings more sophisticated direct-to-consumer fulfillment capabilities in-house. This project was heavily supported by our information technology department as well, which under our new Chief Information Officer is now focused on enabling additional best-in-class supply chain practices.

I’m particularly pleased to see increased benefits continuing to flow from collaboration under our new shared services structure. A recent example is the reapplication of Helen of Troy’s decade long electrical appliance expertise to our Houseware segment with the launch of the new OXO On appliances. The sixth area is to attack waste.

Our fuel for growth initiative is progressing well. We have reinvested the $4 million of savings identified for fiscal 2016 to grow our core and to offset margin compression and foreign exchange.

We have also progressed well on a meaningful SKU count reduction in our Beauty business across multiple regions to go to market with more efficient assortment and to improve our inventory turns. And the seventh is to improve asset efficiency and maintain our shareholder friendly policies.

We are diligently focused on maintaining a strong balance sheet. Our inventory has decreased slightly even as we reported double-digit revenue growth during the first half of fiscal 2016, resulting in improved turns.

We will continue to use the strong cash flow generation of our business and the financial flexibility of our balance sheet to invest in our core business first, then search for accretive acquisitions and then consider return of capital to shareholders.

With capital allocation representing a key component of our strategic plan, we returned capital to shareholders by repurchasing $50 million of our common stock on the open market in the second quarter.

Since the second quarter of last year, we have invested $92.8 million in acquisition and share repurchase while reducing our total debt by $125.3 million. We will also continue to proactively engage with investors and analysts and plan to attend upcoming investor conferences in New York as Jack previously mentioned.

We look forward to speaking with many of you at these events. In summary, I continue to be very pleased with the strong work of Helen of Troy employees worldwide, who are embracing and implementing these strategies and our new culture with diligent and zeal.

Their work is paying dividend and helping put the company on the path to deliver our targets and build our capabilities for the future. We expect continued progress in the second half of the fiscal year. And with that, I’d like to turn the call over to Brian Grass, who will further discuss our results and our outlook..

Thank you, Julien. Good afternoon everyone. I would like to start by highlight the impact that foreign currency had on our results for the second quarter given the significant impact that begin to have at the close of fiscal year ‘15 and the expected impact for the full fiscal year ‘16.

Foreign currency exchange rate fluctuations reduced our recorded net sales revenue by approximately $8.6 million or 2.7% year-over-year. The impact was slightly worse than the expectations that were assumed in our fiscal ‘16 outlook due to further weakening of the average Euro, Canadian and Mexican peso exchange rates during the second quarter.

As a reminder, a rule of thumb to use when think about the impact of foreign currency on our results is that for every $1 fluctuation in net sales as much as $0.60 to $0.70 can fall the operating income depending on the mix of currencies and their relative volatility against U.S. dollar. Now moving onto my discussions.

Overall results were slightly ahead of our expectations despite a slightly worse than expected drag from foreign currency. Successful new product introductions, strong point of sale activity at retail and strong sellthrough of seasonal products were the primary drivers of our sales performance.

As a reminder, our results for the second quarter of last year included the negative impact of inventory reductions by a major retailer making for somewhat easier year-over-year comparison.

Consolidated sales revenue was $359.1 million for the quarter, a 15.4% increase over the prior year period which includes an increase in our core business of $34.9 million or 10.9%. The increase in core business sales revenue includes a negative impact of $8.6 million or 2.7% from the foreign currency fluctuations referred to previously.

As Julien touched on, our Healthcare and Home environment segment achieved growth of 13.5% despite a foreign currency headwind of $5.7 million or 4.5%. The Houseware segment increased 13.2% and benefited from new product introductions and strong point-of-sale activity.

Healthy Directions contributed $38.1 million in sales for the three months of operating results included in the second quarter of fiscal ’16, compared to $24.6 million for the two months of results included in the same period last year.

The Beauty segment achieved the sales increase of 9.6% in the quarter despite a foreign currency headwind of $2.6 million, or 2.6% and benefited from new distribution of foot care, new product introductions and the resolution of the West Coast port disruption that pushed sales from the first quarter of fiscal year ’16 into the second quarter.

Consolidated gross profit was 40.1% of net sales compared to 41.8% of net sales in the second quarter of fiscal year ’15. The decline was primarily due to the negative impact of foreign currency fluctuations and a lower margin sales mix, partially offset by the favorable impact of an incremental month of Nutritional Supplements results.

SG&A was 31.3% of net sales compared to 34.1% of net sales for the same period last year.

The decrease was primarily due to operating leverage on higher net sales revenue, partially offset by the impact of one additional month of Nutritional Supplements results, which operates with the higher relative SG&A ratio because it is a direct-to-consumer business.

Operating income was $32.4 million compared to $24.6 million in the same period last year.

Adjusted operating income excluding non-cash intangible asset amortization expense, acquisition-related expenses, and non‐cash share based compensation, as applicable was $41.5 million compared to $36.5 million in the same period last year, representing a 13.9% increase.

Adjusted operating margin was 11.2% compared to 11.4% in the same period last year, primarily reflecting the drag from foreign currency, a lower margin sales mix and investments in product development and advertising. Income tax expense as a percentage of pretax income was 18.2% compared to 9% for the same period last year.

The year-over-year comparison of our effective tax rate was primarily impacted by shifts in the mix of taxable income in our various tax jurisdictions and the comparative impact of a tax benefit of $2.07 million recorded in the same period last year.

We continue to expect our effective tax rate to range between 14% and 16% for the full fiscal year 2016. Net income was $24.5 million, or $0.84 per diluted share on 29 million weighted average diluted shares outstanding.

This compares to net income in the second quarter of fiscal year 2015 of $18.8 million, or $0.65 per diluted share on 28.8 million shares. Adjusted income was $32.3 million, or $1.12 per diluted share, compared to $28.5 million, or $0.99 per diluted share, for the second quarter of fiscal year ‘15. Now moving onto our financial position.

At August 31, 2015, accounts receivable was $227.1 million compared to $217.1 million at the same time last year. Receivable turnover was 55.7 days compared to 63.8 days at the same time last year, reflecting the favorable impact of Healthy Directions, which collects the majority of its revenue before the product is shipped to the customer.

Inventory decreased slightly to $348.5 million compared to $351.8 million at the same time last year. Inventory decreased $3.3 million despite sales growth of 13.1% for the six months ended August 31, 2015. Inventory turnover improved to 2.8 times, compared to 2.6 times for the same period last year.

Total short and long-term debt decreased to $479.3 million at August 31, 2015, compared to $604.6 million at August 31, 2014, a net reduction of $125.3 million after funding the VapoSteam acquisition for $42.8 million in March 2015 and share repurchases of $50 million in August 2015.

We ended the second quarter with a leverage ratio of 2.11 times compared to 2.93 times at the end of the second quarter of fiscal year 2015. Now, I’d like to turn to our outlook for the fiscal year 2016. .

Please note that we have provided a reconciliation of fiscal year 2016 projected GAAP diluted EPS to non-GAAP adjusted diluted EPS in our earnings release issued this afternoon.

We discussed results for the second quarter of the fiscal year was slightly ahead of our expectations and we are revising the bottom end of our outlook range for the full fiscal year 2016. We now expect consolidated net sales revenue in the range of $1.5 billion to $1.536 billion and GAAP diluted EPS in the range of $4.43 to $4.73.

On a segment basis for fiscal year 2016, we continue to expect sales growth for Housewares and Healthy Directions in the mid single digits and for Healthcare/Home Environment in the low single digits. For Beauty, we now expect to see a sales decline in the low single digits compared to our prior expectation of low to mid single digits.

We now expect consolidated non-GAAP adjusted diluted EPS to be in the range of $5.50 to $5.85, which excludes after-tax non-cash asset impairment charges, non-cash share-based compensation expense and intangible asset amortization expense.

For fiscal year 2016, outlook assumes foreign currency exchange rates for the balance of the fiscal year will remain at current levels. As mentioned, we continue to expect our fiscal year 2016 effective tax rate to range between 14% and 16% for the full year.

The diluted EPS outlook is based on an estimated weighted average shares outstanding of $28.8 million for the full fiscal year 2016. Further, our outlook assumes that the severity of the cold/flu season will be in line with historical averages. As a reminder, the prior year cold/flu season was above average.

Our outlook also reflects our cautious view on retail inventory levels, upward pressure on hourly wages, foreign currency and the global economic environment.

The likelihood and potential impact of any fiscal year 2016 acquisitions other than VapoSteam, future asset impairment charges, future foreign currency fluctuations, including any potential currency devaluation in Venezuela, or share repurchases are unknown and cannot be reasonably estimated; therefore, they are not included in our sales and earnings outlook.

As a reminder in fiscal year ’15, the company benefited from an after-tax gain of $0.24 per share from the amendment of a license agreement, an after-tax decrease in product liability estimates of $0.05 per share and tax benefits of $0.15 per share that are not expected to repeat in fiscal year 2016.

These items negatively impact the year-over-year comparison of adjusted diluted EPS by a combined $0.44. As mentioned previously, the year-over-year comparison is also negatively impacted by the estimated foreign currency impact of $0.59 in fiscal year 2016. And now, I’d like to turn the call back over to Julien for some closing remarks..

Thank you, Brian. Overall, a good first half for the year. We continue to make good progress, executing our multi-year transformation strategy to grow the business, to improve the organization and also the culture. We remain focused on and investing in product innovation, brand marketing and talent development.

We feel confident in our outlook for the second half of the fiscal year and believe we are well positioned for the longer term. With that, I’d like to turn the call over to the operator to begin the question-and-answer session..

Thank you. [Operator Instructions] And we will take our first question from Bob Labick, CJS Securities..

Good afternoon. It’s actually Dan Moore sitting in for Bob..

Hey, Dan..

Thanks for taking the questions. Let us focus on beauty a little bit, obviously some improvement.

Maybe just drill down on or touch a bit on product launches and new product innovation, specifically how is the pipeline and any detail you might -- or color you might be able to give on timing of new products would be very helpful?.

Sure. Great question. And nice to talk to you, Dan. I know Bob not able to join today, so thank you. In terms of beauty, it started a couple of quarters ago. You probably remember and others on the call that we said we would need some time to first get in touch with consumers a bit more, develop several consumer insights, new products etcetera.

And that pipeline we said at the time will take 12 to 18 months. It turns out we’re able to go a little faster on the products that you heard about and one or two already in the works. So we’re able to come out a little sooner. As far as the pipeline is concerned, we are pleased that we have a multi-year plan for beauty of innovation.

And that said, it’s not all dialed in yet. It’s not fully locked. And there is lots of testing going on. As part of increasing the rigor and fixing the fundamentals in beauty, we put a much more disciplined process for new product developments in place.

And that, a, takes a bit more time, and, b, weeds out a number of products that might have been launched in the past, but probably would not have had good results. And so while we are pleased with we have in the pipeline we do want more, we are working on more, and we’re very selective about what we will bring to market.

Obviously, I am not in a position to tip off to our competition exactly what will launch, when it will be, in what form, in market and channel, and all of that, let alone price points and features. So that kind of detail we would stay away from.

And I would also like to say that the foot care business is helping us in beauty, because there we’ve had a nice lift for several quarters and that certainly is helping us as we continue to pull the basic together..

Very helpful. Appreciate it. And then maybe just switching gears to healthy directions. Talk a little bit about or update us in your customer acquisitions strategies.

I believe in Q1 you ran promotions that impacted margins a bit, how did those work, are they sticking, any color there would be great?.

Yes. It’s a little soon to tell. And it’s true that we did run a number of promotions, also some important testing in Healthy Directions in Q1, as we continue to learn our way from the tremendous trade that that business has in direct mail, which is squarely on its target audience, which tends to be older.

Remember the average age for Healthy Directions is 70 years old. So these are people, who are substantial consumers of direct mail, but today’s 60-year-old are much more digital savvy and they are tomorrow’s, call it 65 year olds and we have a couple of years to do this. So it’s more of a testing regimen. There is some promotional activity as well.

The promotions team generally did well. I guess despite my comments they are too soon to assess. And that said, not all of them pay out perfectly. So we’re calling through that date now and deciding which to expand and which to invest further in and also testing some new ones..

Great. And lastly, switching to capital allocation, obviously the new piece information on the pretty significant buyback.

Just talk about how you think about balancing pipeline of potential acquisitions versus buybacks, will it be more opportunistic or should we expect to see more of the same?.

Yes. So on this one, we are careful on this subject obviously not to permit ourselves to a specific buyback at a specific time. So we are in an opportunistic mode in that regard. And the reason for it is because we continue to prefer investing in our core and acquisition. We have a very active acquisition pipeline.

There is always several active ones that we’re looking at. You’ve seen us made the move twice in the last year and the quarter now. And I can say that there is always a strong interest to us at any one time including now. That said, we’re not prepared to make any announcement or even to suggest that we are close to one. That’s not the case.

What we would like to do is to continue to remain flexible with our balance sheet to get that balance right.

So as we see opportunity to continue to pay down debt, which is coming from our significant cash flow, and opportunity to return capital to shareholders while still maintaining enough dry powder to go over the higher order of priority of acquisitions, we will make that move as we see appropriate.

That’s what we did this quarter and we retain the ability to continue to do it as it fits that sort of lens that I just described..

And we will take our next question today from Jason Gere, KeyBanc..

Okay. Thanks. Nice quarter, guys..

Thank you, Jason. Nice to hear from you..

Thanks. Same here. So just if we could just maybe continue on the topic of acquisition. So as you think about and obviously you have the financial flexibility. Can you maybe help us prioritize where you would potentially look at acquisitions because I kind of see kind of three buckets that are out there.

One that would kind of leverage the existing brick and mortars portfolio get a little bit more scale. There is, two, maybe international opportunities that kick some of your strong brands domestically, internationally and maybe get some additional distribution.

And then three kind of maybe leveraging off of Healthy Directions in the B2C type of capabilities. And all three present interesting opportunities.

So I was just wondering, how do you guys internally talk about that? Is one a stronger priority over the other two?.

Yes. Sure. So we have some pretty clear criteria. We shared them in Investor Day and they are largely available on our website in condensed form. And so they haven’t changed. So we don’t bucket the way you just described, although the logic of what you described makes a ton of sense. We bucket them according to our criteria.

And then when we look at acquisition, we have a fairly different outlook by segment. So as we look at beauty, it’s different how we would apply those, then Housewares or Nutritional Supplements or the Health and Home area.

We also have a lens that we look through for new legs of business that we wouldn’t tuck in to one of the existing but rather bolt on like we’ve done in the past with the OXO acquisition in Housewares, the3 Kaz acquisition in Health and Home and recently the Healthy Directions in nutrition. So we’ve done it multiple times in each way.

As then as you get specific, there is, I will give you an example only but not to talk through all of them. In beauty, adjacencies are important to us. So another hair dryer business wouldn’t make us much sense as adding another area of beauty. I mentioned foot care on the call that one we happened to do through license, Dr. Scholl's.

And that said, we could certainly add through acquisition and find other ways to grow once the stabilization is done.

That would be very different for example in Healthcare or Home Environment where you’ve seen us act especially around consumables, around tucking into our brands such as we recently did in Vicks or adding on a new capability that had that consumable cycle life we did with Pur.

And when it comes to new businesses, there it’s important that it meets our criteria or we wouldn’t be adding a whole new leg. And in this case, you saw us act with Healthy Directions.

Within Healthy Directions itself since you asked about it, hear that online capabilities important to us so that would be a place that will attract our attention and then direct-to-consumer businesses that fit our acquisition, consumer acquisition capability, the incredible database technology that’s available there and now our fulfillments ability, those would be nice things to add into healthy directions.

So my intention is not to be comprehensive across all the units but to show you the question you asked, which is how do we look at it, what buckets do we use and how do we apply our criteria..

I appreciate the color there. I guess the second question I was going to ask was just, obviously your results go through the August timeframe and what we’ve been hearing is September was a tougher time for a lot of retailers. So just wondering if there is any kind of color you can provide on how the environment is right now.

Just in general whether it’s at specialty retail or even at the mass channel? Did anything change from, I guess, from the summer months into September that you can kind of highlight at this point?.

Yeah. Retail is a tricky world. You read the same newspaper as we do around. Retailer one will announce a terrific growth like you saw targets kind of on a roll these days at a macro level and retailer two will announce some strokes, some struggles like you saw in Wal-Mart’s most recent announcement.

So if they’re all over the map in that regard and you can go right down the line of all the tough customers, some of the drug chains et cetera. And so, what I would say is that it’s a customer-by-customer situation. I would also say that on a macro level there’s a tremendous amount of caution still out there in the retailer world.

There is also therefore caution around inventory. Some retailer will increase their inventory because they’re gearing up for the holidays. And the very next day perplexingly another retailer will tell you for some reason that they’re taking down inventory even if they themselves prepare for the same holiday season against the same forecast.

So it’s a bit of a black box in that regard. And that said we’re very close to our customers. We talk to them constantly almost everyday, depends on the subject. And we know their situation, so as they talk to us we respond.

And in the case of the macro environment from an economic standpoint, again same newspaper, the stock market waits to see what the Fed will do and consumers don’t necessarily respond to that. They respond to things like wages and other things.

And we’ve seen wage increases at the lowest levels due to initiatives like the one Wal-Mart announced around the hourly wages. In fact, as we mentioned in our press release, that’s affecting our ability to hire in areas like our warehouse there and we’ve taken up our wages in that regard. It also creates an uncertainty.

All that said, those same consumers now have more wage money in their pocket and they go out and spend it. So you see the reason why the answer is not so black and white as we see X or we see Y, we see the same range as you read about in the paper everyday..

Okay. Fair enough. Last question is just the housekeeping.

So in the Housewares business, could you quantify how much the sell-in for OXO On contributed in the quarter?.

Essentially zero. It didn’t start shipping until September..

Okay. That’s what I thought you said but I wasn’t sure that there were some….

Yes. Sorry, if I was unclear in my remarks but it really doesn’t start until September and I would add the bakeware category to that statement as well. OXO did a wonderful job of launching into its existing businesses. Spiralizer, an example this quarter, the GreenSaver product, an example last quarter, and now expanding into new categories.

Pots and pans we talked about a few quarters ago by our license and now OXO On and Bakeware Direct are just to be crystal. Bakeware and On started shipping in Q3..

Thank you. I’ll pass on to the next caller..

We’ll take our next question today from Stephanie Wissink, Piper Jaffray..

Hi, Steph..

Hi. It’s actually Maria everybody on for Steph. Thank so much for taking our questions and congrats on a great quarter..

Well, thank you. Nice to talk to you..

Nice to see you. Just we have a few questions here. First on healthy direction.

With the performance continuing strong on both through sales and the margin perspective and now that you have the warehouse consolidation behind you, how should we be thinking about margin expansion in the second half?.

I would not assume significant margin expansion. I mean, we’re getting cost savings now that they are in our warehouse. But I think on a full-year basis, the cost savings was going to be $1 million. And so we’re only getting half of that in the second half of the year. So this would not expect a meaningful margin expansion..

Remember foreign exchange which Brian talked a fair amount about, it affects margins a lot. So a revenue dollar in one currency translates the dollars would affect the gross margin line and depending on our costs as well.

So fighting off the foreign exchange with good cash flow and savings and other things is more of a priority for us than margin expansion in the second half..

And they’re working on other cost savings initiatives in that segment but too early to give you any numbers on those..

Okay. That’s helpful. Thank you.

And then can you talk more about the Beauty business improvement in the quarter and so maybe how much of that came from easier comparison?.

Yeah. Jack, do you want talk about the comparison part….

Yeah. The comparison, we talked about the inventory reductions last year, but we did not give a specific dollar amount and so I can’t tell you something specific, but I can say it was -- it had a meaningful impact on….

Mr. Jancin. This is the operator. We can’t hear you anymore. Once again speaker, this is the operator. We show your line established but we can’t hear you anymore. Are you there? Everyone, please standby and remain on the line while we check the speakers line.

Once again ladies and gentlemen please remain on the line, while we check the speakers’ line, you will hear music until we restart. Please begin..

Hello. We’re back. I hope people can hear us again and I’m sorry for the technical problem. I’m not sure what it is, but it seems to be gone now.

With regard to the question, Maria, can you just please rephrase, so we can make sure we have a crystal clear given the interruption?.

And ma’am, can you please re-queue. We did have to remove you from the queue to get audio back. Once again please re-prompt and I’ll place you back into the queue. Thank you, Stephanie. Your line is open..

Great. Thanks. It’s Maria, again. So just thinking about the Beauty business improvement in the quarter, how much of that came from easier compares year-over-year? Thank you..

Yeah. And what I said before was we’ve -- what we’ve disclose this previously, we disclosed that as a meaningful impact, but did not provide a specific dollar amount, because it’s inherently imprecise when you’re trying to do this.

But it was meaningful and we pointed out only, so that you don’t expect 9.6% growth for the Beauty business for the back half of the year. They still would have had meaningful growth in the second quarter without the easy comparison. But the easy comparison is a component of that 9.6%..

Yeah. Let me put a small build on that because I think it may help, which is regardless of the compare year-over-year. The Beauty business for multiple quarters has been improving and I hope you heard today in Brian’s remarks that we are increasing our guidance for the year.

So we started out saying a mid single-digit decline for fiscal ’16 and in my comments I said that we were expecting not much more revenue growth year-over-year, so reduce versus that 9.6% that we reported today.

But nonetheless, we didn’t talk about that much decline either and that’s why we increase that guidance one click up from where we were before and we took the bottom of the range up for the whole company. Just to be crystal clear for everyone on the call, we are not suggesting that we won’t grow revenue for the company year-on-year.

In fact we have taken up the lower end of our guidance on revenue. We have maintained the top of our guidance on the revenue, despite all the various uncertainties that are still out there in the back half.

But on beauty we are just seeing signs of improvement, we like what we see in foot care and we like the new product flow that’s now starting and fundamentals, packaging, quality, improve brand position, distribution, SKU rationalization, all these things that we have been mentioning, slowly but surely are making their way into the marketplace and making a difference..

Thank you. That’s very helpful.

Just lastly, just wondering, maybe taking a step back here, how you are thinking about savings targets and reinvestment of these dollars, maybe like what portion of savings do you expect to flow through to the bottomline versus offsetting incremental expenses such as FX or maybe one-time some type of expenses? Thank you..

Sure.

So just to back a moment, I think, people on the call are aware that our project fuel for growth is targeted $10 million of savings and we have already delivered $2 million in the last fiscal could made an additional $4 this fiscal and we are doing very well against that target and we have identified the rest of the $10 million and are aware of each of the project that it would take.

As those savings come online, the foreign exchange difference that Brian was talking about is big enough versus our going in forecast for the year that created our original guidance that all of that money is going into either increase marketing support or offsetting differences in foreign exchange.

And while it’s not dollar for dollar, so I can’t tell you the savings exactly out of the Healthy Directions warehouse consolidation was we targeted toward one of those things, foreign exchange or marketing support. I can’t say that the total amount of spend is being used to offset that and we are very glad that we have that savings.

In terms of additional savings, we are generating now more beyond one or two major projects that have been completed and on track for the year. And then as I’ve talked several times, we are working on identifying the next projects and keep it going on down the line.

Some of that will eventually hit the bottomline, but we didn’t anticipate this much foreign exchange difference versus our going in forecast..

Thank you so much. That’s very helpful. Best of luck..

Well, thank you very much, Maria..

And next we’ll hear from Frank Camma, Sidoti..

Hi, Frank..

Good afternoon, guys..

How are you doing?.

Hi..

[You are not] [ph] telecom company?.

Yeah. Funny, I am not sure what that is all about like to face some of that..

No. Kidding.

Hey, just a question, so you had really good, I mean, looks like, good organic growth here with the sales number? And I’d just -- and I understand the FX issue? But just trying to figure out why you don’t get more of list all the way through the operating income, if you look at it compared to last year, why the margin is essentially flat?.

Well, there is the few there and FX is the huge part of it. I mean, as I mentioned, for every dollar of revenue impact, which it was $8 million for the quarter, about $0.60 to $0.70 falls to the bottomline. So you can do the math on, I mean, that’s a significant drag on operating income.

The other thing that we experienced in the quarter, we did -- have very high sales, but some of those were lower margins sales, especially with respect to the Healthcare/Home Environment part of the business. They had much higher fan sales and then slightly lower water purification sales and so that mix is a drag on the margin.

And then we are continuing to make investments in new product development and marketing, and that is incremental to the prior years. So that will also have a drag on margin in comparison to the prior year. Those are the three major items..

Okay. That’s helpful.

And you did call out -- that was actually a second question, you called out water filtration? Is there something, this sound really a seasonal product, right? So is there something unique that might to happen there that would have cause that decline?.

No. So, just to be clear, we weren’t especially emphasizing it. But what it was mentioned in our comments in Brian’s section. So in the case of water filtration we are actually growing share, but the total dollar value and the categories coming down a little bit as there has been some increase in private label filters….

Okay..

… that will hit our competitor more than it hit us, but the dollar value of the category is actually down a little and nevertheless we are picking up share. So that’s the dynamic that it worked there. We continue to support the business actively with marketing support. We have got some very good new products in the pipeline.

We launched last year new pictures as well, but that was the situation there, and specifically -- on water filters specifically in this quarter..

Okay.

And just a last thing is just, your tax rate going forward, I mean, is this a level we should expect going forward or does it back down -- does it moderate back down?.

Yes. It moderates back down, I mean, you will see year-to-date we are at 16.2% and as we mentioned the couple times, our expectation between 14% and 16% for the full year is still very much in place..

Okay. Great. Thanks guys..

Yeah. Thank you, Frank. Nice to have you join this call..

Thank you..

And everyone at this time there are no further questions, I will hand things back over to our speakers for any additional or closing remarks..

Great. Well, thanks again, and thank you for joining the call. We did have a great quarter. We are very pleased about where we are with the first half and you have heard our guidance now slightly improved for the balance of the fiscal year. Still six strong months to go and we will be checking in with you shortly.

We really appreciate your continued interest and your support for the company. We do look forward to speaking with many of you in the coming days and the coming weeks, and for others we will be updating you on our third quarter results in January. Have a wonderful evening and thank you for joining..

Ladies and gentlemen, that does conclude today’s conference. We would like to thank you all for your participation today..