This discussion contains a number of forward-looking statements, all of which are based on current expectations. Actual results may differ materially due to a number of factors, including those discussed in Part I, Item 3. "Quantitative and Qualitative Disclosures about Market Risk", "Information Regarding Forward Looking Statements", and "Risk Factors" in the Company's most recent annual report on Form 10-K and its other filings with the Securities and Exchange Commission (the "SEC"). This discussion should be read in conjunction with our consolidated condensed financial statements included under Part I, Item 1 of this Quarterly Report on Form 10-Q for the fiscal quarter ended May 31, 2009.

OVERVIEW OF THE QUARTER'S ACTIVITIES:

Our first fiscal quarter of each year is generally the quarter in which we experience our lowest sales averaging approximately 21.8 percent of the year's total sales on a historical basis. Our second fiscal quarter is normally characterized by stable sales between June and the first half of July with increasing sales in the second half of July through August as we build towards a peak shipping season in the third fiscal quarter.

Consolidated net sales for the fiscal quarter ended May 31, 2009 decreased 0.8 percent to $143.87 million compared to $145.00 million for the same period last year. Net sales in our Personal Care segment declined 5.0 percent for the three months ended May 31, 2009, when compared to the same period last year mainly due to continued weakness at retail as a result of declines in consumer confidence, consumer spending declines, an overall shift by consumers to spending on lower price point personal care items, and the negative impact of net foreign currency exchange rates. In addition, during the first quarter of fiscal 2010, we lost some appliance placement due to branded competition and private label. Net sales in our Housewares segment were up 11.0 percent for the three months ended May 31, 2009, when compared to the same period last year. Sales growth in Housewares was driven by continued growth in the dry food storage category and category line extensions. During the fiscal quarter ended May 31, 2009, the Housewares segment also began earning royalties from strategic OXO brand licensing agreements with Staples Inc., the world's largest office products company, and UCB S.A., a global biopharmaceutical leader. The products subject to these licensing arrangements are described in further detail under "Housewares Segment" on page 37.

For the fiscal quarter ended May 31, 2009, U.S. net sales contributed 3.3 percentage points of growth in net sales, or $4.81 million, offset by a 4.1 percentage point effect of declines in our international net sales, or $5.94 million, when compared with the same period last year. Net foreign currency exchange rates reduced our international net sales by approximately $4.42 million due to an overall strengthening of the U.S. dollar in most of our foreign markets, compared to the same period last year. Overall international sales were down with quarter over quarter net sales declines of 10.4, 10.2, and 29.9 percent in Canada, Europe and other, and Latin America, respectively. Product costs have moderated in China, where we source a significant portion of our merchandise, and inbound transportation costs have declined. However, we anticipate that we will not fully realize the benefits of these cost savings for approximately another six months due to the length of our sourcing lead times.

On March 31, 2009, we completed the acquisition of certain assets, trademarks, customer lists, distribution rights, patents, goodwill and formulas for Infusium 23® hair care products from The Procter & Gamble Company for a cash purchase price of $60 million, which we paid with cash on hand. Infusium has a heritage of over 80 years and its shampoos, conditioners, and leave-in treatments have an established reputation for product performance with stylists and consumers. The acquisition is a significant addition to the Company's Grooming, Skin Care and Hair Care solutions product portfolio, which should require minimal additional staffing and infrastructure. We are marketing Infusium products in both retail and professional trade channels. The fiscal quarter ended May 31, 2009 includes two months of Infusium net sales totaling $6.02 million.

Highlights of the three month period ended May 31, 2009 include the following:

† Consolidated net sales for the fiscal quarter ended May 31, 2009 decreased 0.8 percent to $143.87 million compared to $145.00 million for the same period last year. Our Housewares segment contributed growth of $4.2 million, or 2.9 percentage points, to consolidated net sales for the three month period ended May 31, 2009, when compared to the same period last year. Growth in our Housewares segment's net sales was offset by declines in our Personal Care segment's net sales totaling $5.3 million, or 3.7 percentage points, to consolidated net sales for the three month period ended May 31, 2009, when compared to the same period last year.

† Consolidated gross profit margin as a percentage of net sales for the fiscal quarter ended May 31, 2009 decreased 2.8 percentage points to 40.7 percent compared to 43.5 percent for the same period last year. The declines in gross profit margin occurred in our appliance product group where inventory acquired at last year's higher prices continues to cycle through cost of sales. All other product groups had flat to improved product margins.

† SG&A as a percentage of net sales decreased 4.1 percentage points to 27.3 percent for the fiscal quarter ended May 31, 2009 compared to 31.4 percent for the same period last year. SG&A for the fiscal quarter ended May 31, 2009 includes net foreign exchange gains of $2.63 million, bad debt expense of $0.18 million and an insurance claim gain of $0.54 million, which resulted in a net favorable impact to SG&A of $2.99 million. SG&A for the fiscal quarter ended May 31, 2008 includes net foreign exchange gains of $0.27 million, bad debt expense of $3.86 million and insurance claim gains of $2.70 million which resulted in a net unfavorable impact to SG&A of $0.89 million. Excluding the impact of these specified items from both periods, SG&A as a percentage of net sales decreased 1.4 percentage points to 29.4 percent for the fiscal quarter ended May 31, 2009 compared to 30.8 percent for the same period last year. SG&A excluding these items may be a non-GAAP financial measure as contemplated by SEC Regulation G, Rule 100. These measures are discussed further, and reconciled to their applicable GAAP-based measure, on page 38.

† Operating income before impairment increased 1.3 percentage points to $19.19 million for the fiscal quarter ended May 31, 2009, compared to $17.43 million for the same period last year.

† Our net income was $14.51 million for the fiscal quarter ended May 31, 2009 compared to $5.56 million for the same period last year. Our diluted earnings per share was $0.47 for the fiscal quarter ended May 31, 2009 compared to $0.18 per share for the same period last year. Diluted earnings per share for the fiscal quarter ended May 31, 2008 includes the effects of non-cash intangible impairment charges, a charge to bad debt associated with the Linens bankruptcy, partially offset by gains on casualty insurance settlements. Excluding these items from the comparison, diluted earnings per share was $0.47 for the fiscal quarter ended May 31, 2009 compared to $0.42 for the same period last year, which is an 11.9 percent improvement. Earnings and related diluted earnings per share excluding the impact of significant items may be non-GAAP financial measures as contemplated by SEC Regulation G, Rule 100. These measures are discussed further, and reconciled to their applicable U.S. GAAP-based measures, on page 46.

RESULTS OF OPERATIONS

Comparison of three month period ended May 31, 2009 to the same period ended May 31, 2008.

The following table sets forth, for the periods indicated, our selected operating data, in U.S. Dollars, as a year-over-year percentage change, and as a percentage of net sales.

SELECTED OPERATING DATA

(dollars in thousands)

                                Quarter Ended May 31,                             % of Net Sales
                                  2009          2008      $ Change    % Change     2009      2008

Net sales
Personal Care Segment         $    101,185   $  106,531   $  (5,346 )     -5.0 %    70.3 %  73.5%
Housewares Segment                  42,688       38,472       4,216       11.0 %    29.7 %  26.5%
Total net sales                    143,873      145,003      (1,130 )     -0.8 %   100.0 % 100.0%
Cost of sales                       85,364       81,982       3,382        4.1 %    59.3 %  56.5%
Gross profit                        58,509       63,021      (4,512 )     -7.2 %    40.7 %  43.5%

Selling, general, and
administrative expense              39,322       45,595      (6,273 )    -13.8 %    27.3 %  31.4%
Operating income before
impairment                          19,187       17,426       1,761       10.1 %    13.3 %  12.0%

Impairment charges                     -          7,760      (7,760 )       *        0.0 %   5.4%
Operating income                    19,187        9,666       9,521       98.5 %    13.3 %   6.7%

Other income (expense):
Interest expense                    (3,460 )     (3,453 )        (7 )      0.2 %    -2.4 %  -2.4%
Other income, net                      442          915        (473 )    -51.7 %     0.3 %   0.6%
Total other income
(expense)                           (3,018 )     (2,538 )      (480 )     18.9 %    -2.1 %  -1.8%
Earnings before income
taxes                               16,169        7,128       9,041      126.8 %    11.2 %   4.9%
Income tax expense                   1,660        1,570          90        5.7 %     1.1 %   1.1%
Net earnings                  $     14,509   $    5,558   $   8,951      161.0 %    10.1 %   3.8%

* Calculation is not meaningful

Consolidated sales:

Consolidated net sales for the fiscal quarter ended May 31, 2009 decreased 0.8 percent to $143.87 million compared to $145.00 million for the same period last year. Our Housewares segment contributed growth of $4.2 million, or 2.9 percentage points, to consolidated net sales for the three month period ended May 31, 2009, when compared to the same period last year. Growth in our Housewares segment's net sales was offset by declines in our Personal Care segment's net sales totaling $5.3 million, or 3.7 percentage points, to consolidated net sales for the three month period ended May 31, 2009, when compared to the same period last year.

Net sales from acquisitions for the fiscal quarter ended May 31, 2009 contributed 5.4 percentage points to our sales growth. Net sales from acquisitions included three months of net sales totaling $1.85 million from our Ogilvie® line of home permanent and hair-straightening products acquired in October 2008, and two months of net sales totaling $6.02 million of our Infusium 23® line of shampoos, conditioners, and leave-in hair treatments acquired on March 31, 2009. This growth was offset by net sales declines in our core business (business owned and operated over the same fiscal period last year) of 6.2 percentage points, or $9.00 million. Most of this decline was due to weak quarter over quarter performance in our appliances and accessories product groups for the reasons further discussed below. The following table sets forth the impact acquisitions had on our net sales:

IMPACT OF ACQUISITION ON NET SALES

(in thousands)

                                                            Three Months Ended May 31,
                                                              2009              2008

Prior year's net sales for the same period               $      145,003    $      140,170

Components of net sales change
Core business net sales change                                   (9,003 )             703
Net sales from acquisitions (non-core business net
sales)                                                            7,873             4,130
Change in net sales                                              (1,130 )           4,833
Net sales                                                $      143,873    $      145,003

Total net sales growth                                            -0.8%              3.4%
Core business net sales change                                    -6.2%              0.5%
Net sales change from acquisitions (non-core business
net sales change)                                                  5.4%              2.9%

During the three month periods ended May 31, 2009 and 2008, we transacted approximately 14 and 17 percent, respectively, of our net sales in foreign currencies. These sales were primarily denominated in the British Pound, Euro, Mexican Peso, Canadian Dollar, Brazilian Real, Chilean Pesos, Peruvian Soles, and Venezuelan Bolivares Fuertes. The overall net impact of foreign currency changes was to reduce reported net sales in U.S. dollars by approximately $4.42 million and increase reported net sales approximately $1.29 million for the quarters ended May 31, 2009 and 2008, respectively.

Segment net sales:

Personal Care Segment - Net sales in the Personal Care segment for the first fiscal quarter decreased $5.35 million, or 5.0 percent to $101.19 million compared with $106.53 million for the same period last year. Sales increases in grooming, skin care, and hair care solutions categories were more than offset by a decrease in appliances and accessories net sales, when compared to the same period last year. Almost all of the $4.42 million negative impact of foreign currency changes on our net sales occurred in our appliance category.

Domestically, we operate in mature markets where we compete on product innovation, price, quality, and customer service. We continuously adjust our product mix, pricing, and marketing programs with the objective of

maintaining, and, when possible, acquiring additional retail shelf space. In some cases, we have been successful raising prices to customers, or passing on cost increases by moving customers to newer product models with enhancements that justify a higher price. Sales price increases and product enhancements can have long lead times before their impact is realized. Last fiscal year, we experienced significant price increases in raw materials such as copper, steel, plastics, and alcohol, and escalations in our inbound transportation costs as a result of petroleum pricing. These prices have recently begun to moderate or decline, but are still impacting our cost of sales as the higher costs cycle through inventory. The extent to which we will be able to maintain price increases, and the interplay with, and extent to which product costs will continue to moderate or decline further is uncertain. Accordingly it is difficult to predict the magnitude and timing of the benefits to be received as a result of recent general selling price and cost trends.

Our Personal Care segment has three major product categories and comments specific to each category follow:

† Appliances. Products in this category include hair dryers, styling irons, curling irons, hairsetters, shavers, mirrors, hot air brushes, home hair clippers and trimmers, paraffin baths, massage cushions, footbaths, and body massagers. Net sales for the three month period ended May 31, 2009 declined 13.6 percent when compared to the same period last year.

For the quarter ended May 31, 2009, increases in average unit selling prices and changes in product mix had a favorable 3.6 percent impact on net sales while a decrease in sales volume had a negative 17.2 percent impact on net sales, when compared to the same period last year. Net sales declines in this category were primarily due to continued weakness at retail as a result of declines in consumer confidence, consumer spending declines, an overall shift by consumers to spending on lower price point personal care items, and the negative impact of net foreign currency exchange rates.

Revlon®, Vidal Sassoon®, Hot Tools®, Dr. Scholl's®, Gold 'N Hot®, Bed Head®, Toni&Guy®, and Veet® were key selling brands in this product line.

† Grooming, Skin Care, and Hair Care Solutions. Products in this line include liquid and aerosol hair styling products, men's fragrances, men's deodorants, liquid and bar soaps, shampoos, hair treatments, foot powder, body powder, and skin care products. Net sales for the three month period ended May 31, 2009 increased 29.9 percent when compared against the same period last year. For the quarter ended May 31, 2009, increases in sales prices and changes in product mix contributed approximately 23.1 percent to net sales growth and increases in sales volume contributed 6.8 percent to net sales growth. Net sales growth in this category primarily resulted from a shift in the sales mix resulting from our acquisition of the Infusium and Ogilvie products, which sell at higher price points than other products we offer in this category, as well as the impact of volume increases from those acquisitions.

North American net sales increases were partially offset by double digit net sales decreases in our Latin American and European regions. These regions are experiencing deeper recessionary contractions in consumer spending than in North America. Net sales outside of North America were also negatively impacted by negative foreign currency exchange rate changes.

Brut®, Infusium 23®, Ammens®, Sea Breeze®, and Olgilvie® were key selling brands for this product line.

† Brushes, Combs, and Accessories. Net sales for the three month period ended May 31, 2009 decreased 15.1 percent, when compared to the same period last year. Unit volume decreases had a negative impact on net sales growth of 9.0 percent. Unit volumes decreased primarily due to weak consumer demand and reductions in stock and the offerings in this category by retailers. Unit price decreases had a negative impact on net sales of 6.1 percent. Unit prices decreases resulted primarily from higher than normal levels of closeout selling.

Vidal Sassoon®, Revlon®, Karina®, and Belson Comare® were the key selling brands in this line.

Housewares Segment - Our Housewares segment reports the operations of OXO International ("OXO") whose products include kitchen tools, cutlery, bar and wine accessories, household cleaning tools, food storage containers, tea kettles, trash cans, storage and organization products, gardening tools, kitchen mitts and trivets, barbeque tools, and rechargeable lighting products. During the fiscal quarter ended May 31, 2009, we also began to earn royalties from strategic brand licensing agreements with Staples Inc., the world's largest office products company, and UCB S.A., a global biopharmaceutical leader. Staples has begun selling an exclusive assortment of more than 30 OXO branded office products. OXO and UCB S.A. have worked together to offer patients suffering from rheumatoid arthritis and related conditions a syringe with an ergonomic design that makes self injection easy to accomplish. The syringe has been approved for use in the United States by the U.S. Food and Drug Administration. While the Staples and UCB royalty revenue streams are not yet significant, we believe they have attractive long term growth potential and will add value to OXO's brand equity by extending its reach into new consumer categories.

Net sales in the Housewares segment for the three month period ended May 31, 2009 increased 11.0 percent to $42.69 million compared to $38.47 million for the same period last year. Unit volumes had a negative 2.7 percent impact on net sales. This impact was offset by the combined effects of price increases and product mix changes, which contributed 13.7 percent to net sales growth. Sales growth in Housewares was driven by continued growth in the dry food storage category and other category line extensions. We expect to begin shipping a wet food storage line in the second half of fiscal 2010, which we believe will provide a significant opportunity for organic sales growth.

The Housewares segment's performance continues to demonstrate resistance to recessionary trends; however, future sales growth in this segment of our business will be dependent on new product innovation, product line expansion, new sources of distribution, continued expansion of strategic brand licensing opportunities and geographic expansion. Domestically, our Housewares segment's market opportunities are maturing within its traditional product categories and its current customer base amongst most tiers of retailers is extensive. Accordingly, we expect a more moderate pace of sales growth in the future.

OXO Good Grips®, OXO SoftWorks® and OXO Steel® are the key selling brands in this product group.

Consolidated gross profit margins:

Consolidated gross profit as a percentage of net sales for the three month period ended May 31, 2009, decreased 2.8 percentage points to 40.7 percent compared to 43.5 percent for the same period last year. The declines in gross profit margin primarily occurred in our appliance product group where inventory acquired at last fiscal year's higher prices continues to cycle through cost of sales. Also, the strengthening of the U.S. Dollar, while reducing reported net sales, had no similar impact on cost of sales because we purchase most of our inventory in U.S. Dollars. We estimate the impact of foreign currency changes on gross margin to account for 1.8 percentage points of our gross margin decline. The most significant improvement in gross margins was in our Grooming, Skin Care, and Hair Care Solutions product group as a result of a shift in sales mix due primarily to the Infusium and Ogilvie acquisitions. The products obtained in these acquisitions sell at higher per unit prices and provide more attractive gross profit margins than many of the existing brands we offer in the category. All other product groups had flat or improved gross profit margins. In all of our product categories we have been recently successful in obtaining price concessions from our vendors due to commodity price declines in raw materials and softness in wholesale demand. We also continue to seek to reduce the cost to produce products. Finally, the cost of inbound transportation has recently begun to decline. However, we anticipate that we will not fully realize the benefits of these cost savings for approximately another six months due to the length of our sourcing lead times.

Selling, general, and administrative expense ("SG&A"):

For the fiscal quarter ended May 31, 2009, SG&A as a percentage of net sales decreased 4.1 percentage points to 27.3 percent compared to 31.4 percent for the same period last year. The table below sets forth, for the periods indicated, the key components of SG&A as a percentage of net sales and as a year-over-year percentage change.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSE

(dollars in thousands)

                                  Quarter Ended May 31,                                 % of Net Sales
                                   2009           2008        $ Change    % Change     2009       2008

Selling, advertising and
outbound freight               $     15,182    $    17,945   $   (2,763 )   -15.4%      10.6%      12.4%
Personnel, other than
distribution                         15,206         14,625          581       4.0%      10.6%      10.1%
Distribution centers and
related personnel                     6,223          6,756         (533 )    -7.9%       4.3%       4.7%
Other general and
administrative                        5,704          5,380          324       6.0%       4.0%       3.7%
Bad debt expense                        177          3,864       (3,687 )   -95.4%       0.1%       2.7%
Foreign exchange gains               (2,626 )         (273 )     (2,353 )      *        -1.8%      -0.2%
Insurance claim gains                  (544 )       (2,702 )      2,158     -79.9%      -0.4%      -1.9%
Total SG&A                     $     39,322    $    45,595   $   (6,273 )   -13.8%      27.3%      31.4%

* Calculation is not meaningful

In order to provide a better understanding of the impact that certain specified items had on our operations, the analysis that follows reports SG&A excluding the items described in the table below. This financial measure may be considered non-GAAP financial information as contemplated by SEC Regulation G, Rule 100, and the accompanying table reconciles this measure to the corresponding GAAP-based measure presented in our consolidated statements of operations.

IMPACT OF SPECIFIED ITEMS ON SELLING, GENERAL AND ADMINISTRATIVE EXPENSE

(dollars in thousands)

                                   Quarter Ended May 31,                                 % of Net Sales
                                    2009           2008        $ Change    % Change     2009       2008

SG&A, as reported               $     39,322    $    45,595   $   (6,273 )   -13.8%      27.3%      31.4%
Bad debt expense                        (177 )       (3,864 )      3,687     -95.4%      -0.1%      -2.7%
Foreign exchange gains                 2,626            273        2,353        *         1.8%       0.2%
Insurance claim gains                    544          2,702       (2,158 )   -79.9%       0.4%       1.9%
SG&A, without specified items   $     42,315    $    44,706   $   (2,391 )    -5.3%      29.4%      30.8%

* Calculation is not meaningful

The Company believes that this non-GAAP measure provides useful information to management and investors regarding financial and business trends relating to its financial condition and results of operations. The Company believes that this non-GAAP measure, in combination with the Company's financial results calculated in accordance with U.S. GAAP, provides investors with additional perspective regarding the impact of specified items on SG&A. The Company further believes that the specified items excluded from SG&A do not accurately reflect the underlying performance of its continuing operations for the period in which they are incurred, even though some of these excluded items may be incurred and reflected in the Company's U.S. GAAP financial results in the foreseeable future. The material limitation associated with the use of the non-GAAP financial measures is that the non-GAAP measures do not reflect the full economic impact of the Company's activities. This non-GAAP measure is not prepared in accordance with U.S. GAAP, is not an alternative to U.S. GAAP financial information, and may be calculated differently than non-GAAP financial information disclosed by other companies. Accordingly, undue reliance should not be placed on non-GAAP information.

Excluding the impact of the specified items shown in the previous table from both periods, SG&A as a percentage of net sales decreased 1.4 percentage points to 29.4 percent for the fiscal quarter ended May 31, 2009 compared to 30.8 percent for the same period last year. The improvement in our costs are the continued result of:

† A decrease in advertising expenses, sales materials, and market and trade analysis costs.

† A decrease in sales commissions and outbound freight costs.

† Improved distribution costs, including the benefits of the elimination of certain cost intensive product labeling requirements for a significant portion of the Houseware segment's shipments as a result of the Linens' bankruptcy.

† The effects of a comprehensive cost reduction program, which impacted . . .