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 August 31, 2009.

OVERVIEW OF THE QUARTER'S RESULTS:

Our second fiscal quarter's net sales traditionally average 24.0 percent of the year's total 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 quarter. We continued to face a very difficult retail sales environment in the second quarter of fiscal 2010. Although retail inventory levels appear to have stabilized, the economy continues to negatively impact retail sales, primarily in our Personal Care segment.

On March 31, 2009, we completed the acquisition of certain assets, trademarks, customer lists, distribution rights, patents, goodwill and formulas for Infusium 23® ("Infusium") hair care products from The Procter & Gamble Company for a 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, but should require minimal additional staffing and infrastructure. We are marketing Infusium products in both retail and professional trade channels. The three- and six-month periods ended August 31, 2009 includes three and five months, respectively, of Infusium net sales totaling $10.66 and $16.68 million, respectively.

Consolidated net sales for the three- and six-month periods ended August 31, 2009 increased 5.6 and 2.5 percent to $162.19 and $306.07 million, respectively, compared to $153.54 and $298.55 million, respectively, for the same periods last year. For the second quarter of fiscal 2010, net sales in our Personal Care segment increased 4.9 percent compared to the same period last year. For the first half of fiscal 2010, net sales were flat compared to the same period last year. Year-over-year net sales growth was achieved in the second quarter despite declines in consumer confidence, consumer spending declines, an overall shift by consumers to spending on lower price point personal care items, the loss of some appliance placement due to branded and private label competition, and the negative impact of net foreign currency exchange rates. Net sales in our Housewares segment were up 7.3 and 8.9 percent for the three- and six-month periods ended August 31, 2009, when compared to the same periods last year. Sales growth in Housewares was driven by continued growth in the dry food storage category and other line extensions. Beginning with the fiscal quarter ended May 31, 2009, the Housewares segment 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 26.

For the three- and six-month periods ended August 31, 2009, U.S. net sales contributed 5.7 and 4.6 percentage points, respectively, to growth in net sales, or $8.82 and $13.63 million, respectively. U.S. growth was offset by declines of 0.1 and 2.1 percentage points, respectively, in our international net sales, or $0.17 and $6.11 million, respectively, when compared with the same period last year. For the three- and six-month periods ended August 31, 2009, net foreign currency exchange rates reduced our international net sales, primarily in the Personal Care's appliance category, by approximately $3.48 and $7.90 million, respectively, due to an overall strengthening of the U.S. dollar in most of our foreign markets, compared to the same period last year.

In addition to our sales performance discussed above, highlights of the three- and six-month periods ended August 31, 2009 include the following:

† Consolidated gross profit margin as a percentage of net sales for the fiscal quarter ended August 31, 2009 increased 0.1 percentage points to 42.5 percent compared to 42.4 percent for the same period last year. Consolidated gross profit margin as a percentage of net sales for the six month period ended August 31, 2009 decreased 1.3 percentage points to 41.6 percent compared to 42.9 percent for the same period last year. The decline in gross profit margin for the six month period ended August 31, 2009 occurred in our Personal Care segment's appliance product group where inventory acquired at last year's higher commodity prices continues to cycle through cost of sales. All other product groups had improved profit margins for the six month period.

† Selling, general and administrative expenses ("SG&A") as a percentage of net sales decreased 3.1 percentage points to 29.7 percent for the three months ended August 31, 2009 compared to 32.8 percent for the same period last year. SG&A expense as a percentage of net sales for the six months ended August 31, 2009 decreased 3.5 percentage points to 28.6 percent compared to 32.1 percent for the same period last year.

† For the three- and six-month periods ended August 31, 2009, operating income before impairment as a percentage of net sales increased 3.0 and 2.2 percentage points to $20.64 and $39.83 million compared to $14.85 and $32.28 million, respectively, for the same periods last year. For the three- and six-month periods ended August 31, 2009, this represents a year-over-year improvement of 39.0 and 23.4 percent, respectively.

† For the three- and six-month periods ended August 31, 2009, our net earnings were $15.91 and $30.42 million, respectively, compared to $10.60 and $16.16 million, respectively, for the same periods last year. For the three- and six-month periods ended August 31, 2009, our diluted earnings per share were $0.51 and $0.99 compared to $0.34 and $0.52, respectively for the same periods last year. Diluted earnings per share for the six-month period ended August 31, 2008 includes the effects of non-cash intangible impairment charges, a charge to bad debt associated with the Linens 'n Things ("Linens") bankruptcy, partially offset by gains on casualty insurance settlements. Excluding these items from the six month period ended August 31, 2008, diluted earnings per share were $0.51 and $0.99 for the three- and six-month periods ended August 31, 2009 compared to $0.34 and $0.76, respectively, for the same periods last year, which are improvements of 50.0 and 30.3 percent, respectively. 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 31.

RESULTS OF OPERATIONS

Comparison of three- and six-month periods ended August 31, 2009 to the same periods ended August 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 August 31,                               % of Net Sales
                                2009             2008         $ Change    % Change     2009     2008

Net sales
Personal Care Segment       $     111,627    $     106,409   $    5,218       4.9%     68.8%    69.3%
Housewares Segment                 50,566           47,134        3,432       7.3%     31.2%    30.7%
Total net sales                   162,193          153,543        8,650       5.6%    100.0%   100.0%
Cost of sales                      93,299           88,399        4,900       5.5%     57.5%    57.6%
Gross profit                       68,894           65,144        3,750       5.8%     42.5%    42.4%

Selling, general and
administrative expense             48,250           50,290       (2,040 )    -4.1%     29.7%    32.8%
Operating income before
impairment charges                 20,644           14,854        5,790      39.0%     12.7%     9.7%

Impairment charges                    900              -            900        *        0.6%     0.0%
Operating income                   19,744           14,854        4,890      32.9%     12.2%     9.7%

Other income (expense):
Interest expense                   (2,587 )         (3,484 )        897     -25.7%     -1.6%    -2.3%
Other income, net                     361              754         (393 )   -52.1%      0.2%     0.5%
Total other income
(expense)                          (2,226 )         (2,730 )        504     -18.5%     -1.4%    -1.8%
Earnings before income
taxes                              17,518           12,124        5,394      44.5%     10.8%     7.9%
Income tax expense                  1,607            1,526           81       5.3%      0.9%     1.0%
Net earnings                $      15,911    $      10,598   $    5,313      50.1%      9.8%     6.9%

                               Six Months Ended August 31,                               % of Net Sales
                                 2009               2008         $ Change    % Change     2009     2008

Net sales
Personal Care Segment       $       212,812    $       212,940   $    (128 )    -0.1%     69.5%    71.3%
Housewares Segment                   93,254             85,606       7,648       8.9%     30.5%    28.7%
Total net sales                     306,066            298,546       7,520       2.5%    100.0%   100.0%
Cost of sales                       178,663            170,381       8,282       4.9%     58.4%    57.1%
Gross profit                        127,403            128,165        (762 )    -0.6%     41.6%    42.9%

Selling, general and
administrative expense               87,572             95,885      (8,313 )    -8.7%     28.6%    32.1%
Operating income before
impairment charges                   39,831             32,280       7,551      23.4%     13.0%    10.8%

Impairment charges                      900              7,760      (6,860 )      *        0.3%     2.6%
Operating income                     38,931             24,520      14,411      58.8%     12.7%     8.2%

Other income (expense):
Interest expense                     (6,047 )           (6,937 )       890     -12.8%     -2.0%    -2.3%
Other income, net                       803              1,669        (866 )   -51.9%      0.3%     0.6%
Total other income
(expense)                            (5,244 )           (5,268 )        24      -0.5%     -1.7%    -1.8%
Earnings before income
taxes                                33,687             19,252      14,435      75.0%     11.0%     6.4%
Income tax expense                    3,267              3,096         171       5.5%      1.1%     1.0%
Net earnings                $        30,420    $        16,156   $  14,264      88.3%      9.9%     5.4%

* Calculation is not meaningful

Consolidated sales:

Consolidated net sales for the fiscal quarter ended August 31, 2009 increased 5.6 percent to $162.19 million compared to $153.54 million for the same period last year. Consolidated net sales for the six month period ending August 31, 2009 increased 2.5 percent to $306.07 million compared to $298.55 million for the same period last year. Our Housewares segment contributed growth of $3.43 and $7.65 million, or 2.2 and 2.6 percentage points, to consolidated net sales for the three- and six-month periods ended August 31, 2009, respectively, when compared to the same periods last year. Our Personal Care segment contributed growth of $5.22 million or 3.4 percentage points to consolidated net sales for the three month period ended August 31, 2009, when compared to the same period last year. Net sales in the Personal Care segment was essentially flat for the six month period ended August 31, 2009, when compared to the same period last year.

Impact of acquistions on sales:

Net sales from acquisitions contributed 8.3 and 6.9 percentage points, respectively, to our sales growth for the three- and six-month periods ended August 31, 2009. Net sales from acquisitions included three- and six-months of net sales totaling $2.06 and $3.91 million, respectively, from our Ogilvie® line of home permanent and hair-straightening products acquired in October 2008, and three- and five-months of net sales totaling $10.66 and $16.68 million, respectively, of our Infusium 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 2.6 and 4.4 percentage points, or $4.07 and $13.07 million, respectively, for the three- and six-month periods ended August 31, 2009, when compared to the same periods last year. Most of this decline was due to weakness in our appliances and accessories product groups and the year-over-year impact of foreign currency fluctuations on net sales as 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 August 31,
                                                               2009               2008

Prior year's net sales for the same period               $       153,543    $       157,924
Core business net sales change                                    (4,066 )           (4,381 )
Net sales from acquisitions (non-core business net
sales)                                                            12,716                -
Change in net sales                                                8,650             (4,381 )
Net sales                                                $       162,193    $       153,543

Total net sales growth                                              5.6%              -2.8%
Core business net sales change                                     -2.6%              -2.8%
Net sales change from acquisitions (non-core business
net sales change)                                                   8.3%               0.0%




                                                            Six Months Ended August 31,
                                                               2009               2008

Prior year's net sales for the same period               $       298,546    $       289,094
Core business net sales change                                   (13,069 )           (3,678 )
Net sales from acquisitions (non-core business net
sales)                                                            20,589              4,130
Change in net sales                                                7,520                452
Net sales                                                $       306,066    $       298,546

Total net sales growth                                              2.5%               0.2%
Core business net sales change                                     -4.4%              -1.2%
Net sales change from acquisitions (non-core business
net sales change)                                                   6.9%               1.4%

Impact of foreign currencies on sales:

During the three- and six-month periods ended August 31, 2009, we transacted approximately 15 percent of our net sales in foreign currencies. During the three- and six-month periods ended August 31, 2008, we transacted approximately 15 and 16 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 decrease reported net sales in U.S. dollars, primarily in the Personal Care's appliance category, by approximately $3.48 and $7.90 million for the three- and six-month periods ended August 31, 2009, respectively, when compared to the same periods in the prior year.

Segment net sales:

We operate our business under two segments: Personal Care and Housewares. Our Personal Care segment's products include hair dryers, straighteners, curling irons, hairsetters, shavers, mirrors, hot air brushes, home hair clippers and trimmers, paraffin baths, massage cushions, footbaths, body massagers, brushes, combs, hair accessories, 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. 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, hand tools, gardening tools, kitchen mitts and trivets, barbeque tools and rechargeable lighting products. The following table sets forth, for the periods indicated our net sales and the impact of volume and price mix changes for each segment:

NET SALES BY SEGMENT

(dollars in thousands)

                      Quarter Ended August 31,               $ Change                     % Change
                       2009             2008        Volume     Price      Net      Volume     Price    Net

Net sales
Personal Care      $     111,627    $     106,409   $ 1,924   $ 3,294   $ 5,218      1.8%      3.1%    4.9%
Housewares                50,566           47,134       212     3,220     3,432      0.4%      6.8%    7.3%
Total net sales    $     162,193    $     153,543   $ 2,136   $ 6,514   $ 8,650      1.4%      4.2%    5.6%




                      Six Months Ended August 31,                 $ Change                      % Change
                        2009               2008          Volume     Price       Net      Volume     Price    Net

Net sales
Personal Care      $       212,812    $       212,940   $ (7,697 ) $  7,569   $  (128 )   -3.6%      3.5%   -0.1%
Housewares                  93,254             85,606       (870 )    8,518     7,648     -1.1%     10.0%    8.9%
Total net sales    $       306,066    $       298,546   $ (8,567 ) $ 16,087   $ 7,520     -2.9%      5.4%    2.5%

Personal Care Segment - Net sales in the Personal Care segment for the second quarter of fiscal 2010 increased $5.22 million, or 4.9 percent, to $111.63 million compared with $106.41 million for the same period last year. Sales increases in the grooming, skin care, and hair care solutions category were partially offset by a decrease in appliances and accessories net sales, when compared to the same period last year. Appliances and accessories net sales continue to be negatively impacted by declines in consumer confidence, consumer spending declines, an overall shift by consumers to spending on lower price point personal care items, the loss of some appliance placement due to branded and private label competition, and the negative impact of net foreign currency exchange rates year-over-year.

Housewares Segment - Net sales in the Housewares segment for the second quarter of fiscal 2010 increased $3.43 million, or 7.3 percent, to $50.57 million compared with $47.13 million for the same period last year. Sales growth in Housewares was driven by continued growth in the dry food storage category and other line extensions. 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 now sells 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 easier 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.

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, as compared to historical trends.

We had some initial shipments of our new OXO Top wet food storage line, but expect the full impact of the new line's shipments on net sales to occur in the second half of fiscal 2010. We also recently announced the planned roll-out of our OXO Tot line, a full line of baby and toddler products, expected to initially ship late in the fourth quarter of fiscal 2010. The initial line consists of approximately 70 items and covers the categories of feeding, cleaning, bathing and nightlights.

Consolidated gross profit margins:

Consolidated gross profit margin as a percentage of net sales for the fiscal quarter ended August 31, 2009 increased 0.1 percentage points to 42.5 percent compared to 42.4 percent for the same period last year. Consolidated gross profit margin as a percentage of net sales for the six month period ended August 31, 2009 decreased 1.3 percentage points to 41.6 percent compared to 42.9 percent for the same period last year.

The declines in gross profit margin for the six month period ended August 31, 2009 occurred in the Personal Care segment's appliance product group where inventory acquired at last fiscal year's higher commodity 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 accounted for 1.2 and 1.5 percentage points, respectively, of our gross margin declines for the three- and six-month periods ended August 31, 2009, when compared to the same periods last year. The most significant improvement in gross margins was in our grooming, skin care, and hair care solutions product category as a result of a shift in sales mix due primarily to the Infusium and Ogilvie acquisitions. On March 31, 2009, we completed the acquisition of certain assets, trademarks, customer lists, distribution rights, patents, goodwill and formulas for Infusium hair care products from The Procter & Gamble Company for a cash purchase price of $60 million. Additionally, on October 10, 2008, we acquired the trademarks, customer lists, distribution rights, formulas and inventory of the Ogilvie brand of home permanent and hair-straightening products for $4.77 million from Ascendia Brands, Inc. 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.

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

For the fiscal quarter ended August 31, 2009, SG&A as a percentage of net sales decreased 3.1 percentage points to 29.7 percent compared to 32.8 percent for the same period last year. For the fiscal six months ended August 31, 2009, SG&A as a percentage of net sales decreased 3.5 percentage points to 28.6 percent compared to 32.1 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 August 31,                                 % of Net Sales
                                 2009             2008          $ Change    % Change    2009       2008

Selling, advertising and
outbound freight             $      17,803    $      20,880     $  (3,077 )    -14.7 %    11.0 %     13.6 %
Personnel, other than
distribution                        17,425           15,657         1,768       11.3 %    10.7 %     10.2 %
Distribution centers and
related personnel                    7,033            7,700          (667 )     -8.7 %     4.3 %      5.0 %
Other general and
administrative                       6,495            4,779         1,716       35.9 %     4.0 %      3.1 %
Bad debt expense                       161              743          (582 )    -78.3 %     0.1 %      0.5 %
Foreign exchange (gains)
losses                                (668 )            613        (1,281 )      *        -0.4 %      0.4 %
Insurance claim (gains)
losses                                   1              (82 )          83        *         0.0 %     -0.1 %
Total SG&A                   $      48,250    $      50,290     $  (2,040 )     -4.1 %    29.7 %     32.8 %

                              Six Months Ended August 31,                                % of Net Sales
                                 2009             2008          $ Change    % Change    2009       2008

Selling, advertising and
outbound freight             $      32,985    $      38,825     $  (5,840 )    -15.0 %    10.8 %     13.0 %
Personnel, other than
distribution                        32,631           30,282         2,349        7.8 %    10.7 %     10.1 %
Distribution centers and
related personnel                   13,256           14,456        (1,200 )     -8.3 %     4.3 %      4.8 %
Other general and
administrative                      12,199           10,159         2,040       20.1 %     4.0 %      3.4 %
Bad debt expense                       338            4,607        (4,269 )    -92.7 %     0.1 %      1.5 %
Foreign exchange (gains)
losses                              (3,294 )            340        (3,634 )      *        -1.1 %      0.1 %
Insurance claim (gains)               (543 )         (2,784 )       2,241      -80.5 %    -0.2 %     -0.9 %
Total SG&A                   $      87,572    $      95,885     $  (8,313 )     -8.7 %    28.6 %     32.1 %

* 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, for the periods indicated, excluding the items described in the table below. These financial measures may be considered non-GAAP financial information as contemplated by SEC Regulation G, Rule 100, and the accompanying tables reconcile these measures to the corresponding GAAP-based measures presented in our consolidated statements of operations.

. . .