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Russ Berrie and Company, Inc. (RUS)

Q1 2008 Earnings Call

May 13, 2008 10:00 am ET

Executives

Erica Pettit – Financial Dynamics

Bruce Crain – President &CEO
Anthony Cappiello – Exec. VP & Interim CFO

Analysts

Richard Whitman – Benchmark Capital
Arnie Brief – Goldsmith & Harris
David Liebowicz – Burnham Securities
Glen Sussman – [Latide Asset Management]

Mark Cooper – Wells Capital Management

Dave Thomas – Blue Sky Asset Management

Presentation

Operator

Good morning ladies and gentlemen and welcome to the Russ Berrie and Company conference call. (Operator Instructions) I would now like to introduce your host for today’s conference, Ms. Erica Pettit of Financial Dynamics; please go ahead.

Erica Pettit

Good morning everyone and welcome to Russ Berrie’s first quarter 2008 conference call. If you have not viewed the press release issued this morning and would like to receive one by email please call Financial Dynamics at 212-850-5600 and someone will send you one immediately.

As stated in the company’s earnings release this call is being webcast and can be accessed on the company’s website at www.russberrie.com. The webcast of the call will be archived online shortly after the conference call for 90 days. A replay of the call will be available through May 20th, 2008, by dialing 800-642-1687 access code 46484608.

We will begin the call with comments from management and then we’ll open up the line for questions. Before we begin we would like to remind everyone of the cautionary language regarding forward-looking statements contained in the press release. That same language applies to comments made on this morning’s conference call.

Now I would like to turn the call over to Bruce Crain, Chief Executive Officer and President of Russ Berrie. Bruce, go ahead please.

Bruce Crain

Thanks Erica, good morning and thank you for joining us everybody. It’s been just over a month since our last call, so we’ll try to keep our remarks brief today. I’ll start out with a brief review of our recent highlights, then Anthony Cappiello, our Chief Administrative Officer and Interim Financial Officer, will provide a more detailed discussion of our financial results. Later I will come back and discuss some of our strategies for the year.

We achieved modest year-over-year improvements during the first quarter as we grew our top line. We continue to make solid progress on our design led and branded product strategy. This has been an over-arching priority for our businesses which also helps to offset some of the pressure from the macro economy. As we all know the consumer environment is changing and has become even more challenging compared to 2007. In particular, our cost of finished goods are increasing driven mostly by our suppliers’ rising raw material and labor costs as well as the impact from currency.

With this in mind we must be prepared to protect our businesses from these external factors that are affecting many retail and consumer products companies. That said I believe we have the right strategies in place to do just that while we continue to grow our business and prudently manage our expenses in this less-then-ideal consumer and retail environment.

Now I’d like to briefly review some of our recent highlights from both segments. First, we announced the acquisitions of LaJobi and CoCaLo at the time of our last conference call and we successfully completed those on April 2nd. Both LaJobi and CoCaLo are innovative and complementary businesses that really are an excellent fit for our Infant and Juvenile segment. By the way, our Infant and Juvenile segment I’ll be referred to as the I and J area going forward here today.

LaJobi and CoCaLo are already adding value to our business with their own design-led and branded product lines. We are very excited about the early collaboration among our various I and J businesses as well as the future opportunities. LaJobi has allowed us to enter the important crib market as we seek to leverage their strong brands and extend our presence throughout the baby nursery. CoCaLo has expanded our presence in the infant bedding and accessories market with their distinctive product designs and unique brands.

To further capitalize on the positive trends of this recession-resistant at least infant and juvenile industry, we plan to further leverage these newly acquired businesses as well as well as Kids Line and Sassy. I’ll spend more time discussing the acquisitions later in the call.

Second let me highlight a few of our many accomplishments in our gift segment which were encouraging given the difficult gift market. Those of you who follow Russ gift closely know that the key gift trade shows occur early each year in the first quarter. At those shows we remained very focused on our design-led and branded strategies to ensure that our products are distinct, trend right and allow us to leverage our brand strength. At the trade shows we launched several new product lines that fit with this strategy including Sea Pals, a new line of viral plush product to continue addressing the popularity for plush products featuring a web-based component.

Further Sea Pals is designed to bring together all of the best features available in the viral category including educational, nurturing and of course fun components, all within a safe web environment complemented by great plush products. This proprietary line will begin shipping out to retailers in the second quarter and we plan to launch the website during the quarter as well. We remain optimistic about our new gift products for this year.

Read the rest of this transcript for free on seekingalpha.com