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Alberto Culver Co. (NYSE:ACV)

F3Q08 (Qtr End 6/30/08) Earnings Call

July 28, 2008 11:00 am ET

Executives

Jim Marino - President and CEO

Ralph Nicoletti - CFO

Analysts

Bill Schmitz - Deutsche Bank

Chris Ferrara - Merrill Lynch

Connie Maneaty -Bank of Montreal

Jason Gere - Wachovia Capital

John Anderson - William Blair

Nick Modi - UBS

Jason Rogers - Great Lakes Review

Peter Thompson - Coho Partners

Operator

Welcome to the Alberto Culver conference call. A replay of this call will be available for 30 days beginning this afternoon. The call numbers are 800-642 1687 or 706-645-9291. Please enter ID code 55258422.

All lines will be muted during the broadcast. After the presentation there will be an opportunity to ask questions. (Operator Instructions). If you do have trouble accessing the operator please call Theresa Miller at Alberto Culver at 708-450-2545.

If you are using a speakerphone we suggest you pick up the handset before entering commands.

Before we begin, the Company has asked me to remind you that actual results with respect to any forward-looking statements that are made today might differ materially from those projected in the forward-looking statements. Additional information concerning factors that could cause actual results to materially differ, are spelled out in Alberto Culver’s annual 10-Q and 10-K reports which the Company invites you to study.

In addition, due to the disclosure of organic sales growth and financial results excluding re-structuring expenses this call may include mention of certain non-GAAP financial measures. Reconciliation’s of these financial measures to the most directly comparable GAAP measures are provided on the Company’s web site in the “Investing” section and are attached to the earnings release issued this morning and filed on form 8-K with the Securities and Exchange Commission.

Now I would like to introduce the host of today’s call, Mr. Jim Marino, President and CEO of Alberto Culver Co. Mr. Marino you may begin.

Jim Marino

Good morning and thank you Mindy. I would like to welcome all of you this morning to our third quarter and first nine-month fiscal year 2008 conference call. I am joined today by Ralph Nicoletti, our Chief Financial Officer and Doug Craney, our Head of Investor Relations.

Before I begin I would like to remind everyone that as a result of the pending divestiture of Cederroth, the operations of the Cederroth business are included in discontinued operation for all periods. This has been an exciting and very busy quarter for Alberto-Culver with several meaningful highlights.

Our brands continue to grow and win on the shelf. Our strategy of becoming more focused in beauty care is being realized. We increased our gross margin in a rising input cost environment. Our balance sheet remains strong even after using more than $220 million in cash during the quarter to repurchase shares and retire debt, and our Board of Directors increased our share repurchase authorization by an additional 5 million shares.

Lastly we announced the pending divestiture of our Cederroth business and in our ongoing effort to consolidate our North American supply-chain, we also announced the closure of our Puerto Rico manufacturing facility.

In addition I'm very pleased to report record third quarter sales and earnings for continuing operations for Alberto-Culver and its shareholders. During the quarter, our sales grew 12.3% and pre-tax earnings increased 32.4% to more than $45 million, excluding restructuring expenses of $2.7 million in the current quarter and $1.4 million in the prior year quarter.

On a constant currency basis our third quarter sales increased 11.3%, driven by strengths in our core beauty care brands in the US and internationally. TRESemme continued its terrific growth trends and again generated a strong double-digit sales increase. In the US for the first quarter TRESemme became the number five hair care brand in track channels in the most recent IRI twelve-week recording period.

We also launched TRESemme in Spain during the quarter and while it's very early to measure our success, we are extremely pleased with the initial results. Even when excluding sales in Spain, we would have still generated double-digit organic sales growth for TRESemme during the quarter.

Despite softness in the US hair care category TRESemme remains the number one styling brand in the US and continues to outpace the hair care category in terms of growth. Likewise TRESemmes performance in our other markets remains very strong.

Nexxus net sales increased low mid single-digits during the quarter also outperforming the hair care category. Consumption trends for Nexxus remain positive in both daily hair care and in particular styling. Alberto VO5 sales increased low single-digits on a constants currency basis as a result of our growth in our international markets. In the US,

Alberto VO5 net sales were essentially flat due to declines in some of our older treatment and styling products, which were offset buy mid single-digit increases in our opening price points shampoo and conditioner products.

Our St. Ives skin care brands generated solid mid single-digit sales growth on a constant currency basis, mainly due to growth in the US facial and lotion products, and growth in our Latin America markets. During the quarter we became the number one hand and body lotion in Chile. We continue to invest in St. Ives and believe the brand continues to have great potential due to its on trends natural positioning.

Gross profit margin in the third quarter increased a 140 basis points compared to last year. The improvement was mainly due to more effective inventory management and manufacturing efficiencies, partially offset by higher input costs. Our inventory days improved versus last year, which is reflected in our P&L and cash flow by way of lower material handling, warehousing and inventory obsolescence costs.

Our advertising and marketing investments increased more than 14% from the prior year third quarter due to higher investments in TRESemme, St. Ives, our multicultural brands and impact of foreign exchange. As a percentage of net sales, selling and administrative expenses decreased approximately 90 basis points from the prior year third quarter, mainly due to the reversal of a contingent liability that was favorably settled during the quarter that offset costs related to our planned implementation of a new worldwide ERP system, costs associated with the start up of our Jonesboro, Arkansas manufacturing facility, and higher stock option and other incentive expenses.

Net interest income was in line versus the prior year quarter but was down sequentially from the second quarter due to lower interest income as a result of cash used to repurchase approximately 3.8 million shares during the quarter and retiring $120 million of debt as well as lower investments rates. Our balance of cash in investments decreased to $222 million at June 30, 2008 due to the share repurchases and the retirement of debt I just mentioned.

During the quarter, $7.5 million of auction rate securities were called at par and our balance was lower to $67 million of higher quality auction rate securities. All of these securities are AAA rated student loans with a backing of the Federal Government.

In the quarter, we recorded approximately $2.7 million in pre-tax restructuring expenses consisting primarily of severance and other costs associated with the closure of our Puerto Rico and Canada manufacturing facilities, partially offset by a gain from the sales of the Canadian plant.

I am happy that we were finally able to answer what has become a common question regarding our intention on the Cederroth business. As announced, in May, we are in the process of divesting Cederroth. We expect the transaction to close in the middle part of our fourth quarter. In evaluating our options, we determine that the Cederroth business was too far removed from our strategy of focusing on beauty care as well as significantly more complex than the rest our business and therefore pursued the divestiture.

We believe a buyer like CapMan can add a lot to the business and give it added attention that would have likely been too much of a distraction for us. What should make our financial modeling efforts easier, we have posted on our website today the consolidated statements of earnings for each of the quarters in fiscal 2007 and first three quarters of fiscal 2008 reclassified to present the results of operations related to Cederroth as discontinued operations.

Let me make a few points on Cederroth and what it means to our results this quarter, next quarter and into next year. As presented in this morning's press release, the net operating earnings of the Cederroth business were $3.8 million in the current quarter. Third quarter Cederroth sales were $76.2 million, an increase of nearly 26% from the prior year quarter or approximately 19% of the increase attributable to foreign exchange.

There is a seasonal element to Cederroth's earning stream. Looking at previous years the majority of their earnings occur in the back half of the fiscal year with the fourth quarter representing the most significant contribution. In fiscal 2007, the Cederroth business contributed approximately $0.09 to our earnings per share of which approximately $0.06 was generated in the fourth quarter. It is important to recognize that our fourth quarter of this year when considering the pending divestiture of Cederroth, will include only a limited amount of any fourth quarter Cederroth earnings in discontinued operations.

Regarding the fourth quarter, as previously stated we will have a difficult sales comparison due to the timing of various initiatives and the expansion of Nexxus into the club channel a year ago. With Cederroth reclassified to discontinued operations diluted earnings per share from continuing operations in the fourth quarter of 2007 were $0.29 which included $0.04 of earnings related to a one-time tax benefit and a one set loss from restructuring costs.

Now, before taking your questions; a few additional comments. Each state that read the newspaper, it seems there is some negative economic news. While our categories are somewhat resilient and less acceptable to economic downturns, they are not totally immune.

Fortunately, we have a very strong portfolio of beauty care brands that are well positioned in the marketplace. With increasing raw material and packaging costs and weakening consumer confidence, to continue to win we need to protect our gross margins through cost saving programs and leveraging our new Jonesboro manufacturing facility while maintaining our strategy of investing in our brands with innovation and targeted advertising. However, latter is key. We will not sacrifice the health of our brands to offset category softness, increased in food cost or any other economic trend that could negatively impact our business.

Having said that, it is a beautiful day here in Melrose Park and I would like to open the call up to questions.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from Bill Schmitz from Deutsche Bank. Your line is open.

Bill Schmitz - Deutsche Bank

Thanks. Hi, good morning guys.

Jim Marino

Hey, Bill. How are you? How was it at your roof top?

Bill Schmitz - Deutsche Bank

We missed you, but it was great.

Jim Marino

Okay good.

Bill Schmitz - Deutsche Bank

Hey, the price increase of Proctor now is I think -- mid point about 10% in hair care. Do you guys intend to follow that increase?

Jim Marino

Well, it's interesting, first of all Proctor did not take it across the broad price increase. If you looked at it closely it was on selected brands, not on everything. We're analyzing all of our cost inputs very, very closely. We're in the process of doing that as we speak and I am sure we'll make a determination as to what the right course of action for us will be sometime in the next 60 days or so.

Bill Schmitz - Deutsche Bank

Okay. Great. Then just on Cederroth and the closing is there any financing contingency on the deal or is it pretty much locked up?

Ralph Nicoletti

Financing shouldn’t be a problem, Bill.

Bill Schmitz - Deutsche Bank

Okay. Is there a continuity in the contract though?

Ralph Nicoletti

No.

Bill Schmitz - Deutsche Bank

Okay, great. Thanks and then one last, if I can. Just on trade down. It looks like the value VO5 is really starting to accelerate. Does that mean that we are seeing a lot more trade down in the category?

Jim Marino

I don’t think so, Bill. I really don’t see that because if you look at the entire sub segment, of opening price point which would include VO5 and the competitive brands you are not seeing an increase in that sub segment. So, I would say not. We haven’t seen any trading down in the category this far.

Bill Schmitz - Deutsche Bank

Okay, so VO5's opening price point just taking share from Schwab effectively?

Jim Marino

Exactly and any other competitive entry.

Bill Schmitz - Deutsche Bank

Great. Thanks so much.

Jim Marino

Sure.

Operator

Your next question comes from Chris Ferrara from Merrill Lynch. Your line is open.

Chris Ferrara -Merrill Lynch

Hey. Good Morning guys.

Jim Marino

Hi Chris. How are you?

Chris Ferrara -Merrill Lynch

Just wanted to ask. So obviously you guys have gone a little more aggressive on share buy back, increased the authorization. Can you just give us an update and how this syncs with the desire to add brand, you know, to acquire something and then what the market looks like out there.

Ralph Nicoletti

Well, Chris in the financial end, given our position with cash and no debt at this point. We are very comfortable that our balance sheet can handle both between what we generate in cash and then the fact that we have little leverage or no leverage. We can make acquisitions and have the flexibility to repurchase shares as well.

I think Jim wants to comment

Jim Marino

Well I would just say that strategically we haven’t changed at all, we are still very aggressively pursuing acquisition candidates, both here in the US and outside the US. So, it hasn't changed our thinking whatsoever and you know as Ralph just mentioned we have a strong balance sheet. We feel very, very comfortable that if need be we can re-buy shares and still leverage our balance-sheet in order to make the appropriate acquisitions that can compliment our portfolio in a positive way.

Chris Ferrara - Merrill Lynch

And 2 to 2.5 times EBITDA as a leverage ratio about what you guys think is right? So, in other words they get back in how much share you can buyback if you have a perspective acquisition of a certain size, and that way you think you can levered to?

Ralph Nicoletti

2 to 2.5 would allow us to remain investment grade.

Chris Ferrara - Merrill Lynch

Got it, hey and just on -- I think last quarter you guys had said SAP Jonesboro and options added about 70 basis points to SG&A and you guys said, I think that was going to come to a lot this quarter. Did that -- was the impact lasting this quarter?

Jim Marino

A little this quarter but there is still some impact from Jonesboro and our ERP system this quarter.

Chris Ferrara - Merrill Lynch

Sure, I’m saying it didn’t go from 70 to 20 it went from 70 and then down a little bit in the next quarter, would it still be going to a drag? Is that right?

Jim Marino

Each quarter they’ll be, less and less. On this quarter in our period costs it is about a penny a shares roughly of an impact.

Chris Ferrara - Merrill Lynch

Okay, thanks appreciate that.

Jim Marino

Thanks Chris.

Operator

Your next question comes from Connie Maneaty from Bank of Montreal. Your line is open.

Connie Maneaty -Bank of Montreal

Good morning.

Jim Marino

Hi Connie, how are you?

Connie Maneaty -Bank of Montreal

I am fine. Thanks. I have a couple of questions, I noticed in the press release and you also commented this morning that the company is becoming ever more focused on beauty care, also in the press release you called out Mrs. Dash’s and Static Guard as niche products. Can we infer from that, that those might be possible divestiture candidates?

Jim Marino

Although our focus continues to be on beauty care and we think that strategy has served us very, very well, we have no intentions at this point of divesting what we call are Culver specialty brands business which includes Mrs. Dash, that’s a very nice business for us as we've talked about, managed very independently, autonomously and continues to contribute a great deal of cash that we redeploy and invest behind our core beauty care brands and we like that strategy, its works for us, we're going to continue that strategy.

Connie Maneaty -Bank of Montreal

Okay. Now that you have essentially one segment, are you going to be reporting one segment or would you breakout Culver specialty product?

Jim Marino

Connie, once we complete the divestiture of Cederroth, we're going to reevaluate how we report our segments.

Connie Maneaty -Bank of Montreal

Okay.

Jim Marino

We are in the process of doing that.

Connie Maneaty -Bank of Montreal

Then finally, in the fourth quarter, you said we know you have a tough comparison, but does that mean sales would be up or down in this year's fourth quarter?

Jim Marino

You're talking about Q4?

Connie Maneaty -Bank of Montreal

Yeah, Q4 '08.

Jim Marino

We would expect to increase our sales in Q4 this year versus Q4 of last year.

Connie Maneaty -Bank of Montreal

Okay. Then finally, you have a tough sales comp but it looks like you have a pretty easy operating income comp. Last year I think in the segment, sales were up by 12.5% but operating profit was up 4, so you must have put a lot of support before -- into the quarter last year, so does that also make sense that this year's operating income growth should be faster than sales growth in the fourth quarter?

Jim Marino

We certainly would expect operating income to grow at a faster rate than sales in Q4, but I will tell you that comps are never easy, regardless of what may have occurred in the previous year. But certainly we would expect to grow our operating income at a faster rate than sales in the upcoming quarter.

Connie Maneaty -Bank of Montreal

Okay. That's it from me. Thanks.

Jim Marino

Great, Connie. Take care.

Operator

Your next question comes from Jason Gere from Wachovia Capital. Your line is open.

Jason Gere - Wachovia Capital

Thanks. Good morning guys.

Jim Marino

Hey, Jason. How are you?

Jason Gere - Wachovia Capital

Good. I was wondering if you can just give an update on the UK market, I know last quarter you kind of, I guess mentioned about the competitive nature there and I think you did not part take in some of the more aggressive commercial activity. But in hinting that you might do a little bit more this quarter and certainly with your gross margins as strong as they were just wondering if you can give us an update on the market and maybe your strategy out there?

Jim Marino

Well the market remains very, very competitive in the UK. We are fortunate to have two brands that continue to perform extremely well VO5 and TRESemme. Consumer consumption across the board remains positive. In the UK hair care category is flat to down of tad, and we’re growing and continuing to gain shares. So, all and all, we feel pretty good about how we have been performing in the UK. But it is a very, very competitive promotional environment, and it has been for sometime and continues to be for the foreseeable future.

Jason Gere - Wachovia Capital

Okay and I will just maybe ask a little bit more about your marketing strategy right now and obviously it was pretty nice to hear that VO5 at the end -- opening price point as gaining share without the trade down. So, how do you take advantage of that right now? Can you -- I mean, can you talk about your overall marketing strategy out there and then two, just -- I guess really more in terms of going after that trade down that's still hasn't happened yet in a soft US economy. Thanks.

Jim Marino

Well. All right. I think Jason the key is we have a portfolio particular in hair care that can appeal to a wide, wide array of consumer segments. So whether you're talking about the opening price point customer and VO5 or whether you're talking about the salon customer and Nexxus or whether you're talking about the multi-cultural customer and our multi-cultural brands or whether you're talking about the mid-price segment with TRESemme. So, we feel pretty comfortable that whether consumer’s trading up to Nexxus trading down to VO5 and TRESemme case trading up or down because we catch them on both ways. We're very well positioned in the category to take advantage of a very vital way of consumers. So we feel pretty good about it.

Jason Gere - Wachovia Capital

Okay, and then just I guess the last question on marketing, do you have what the full year marketing spend was for Cederroth? I know we have a couple of quarters in there but just in terms of thinking going forward?

Jim Marino

I don’t know if I have that at my finger tips, Jason.

Jason Gere - Wachovia Capital

I could follow off-line.

Jim Marino

Yeah. You could probably, if you want to call Doug a little later he could probably give you that info.

Jason Gere - Wachovia Capital

Sounds good. Thanks a lot.

Jim Marino

All right Jason. Take care.

Operator

Your next question comes from John Anderson from William Blair. Your line is open.

John Anderson - William Blair

Good morning.

Jim Marino

Hey, John how are you?

John Anderson - William Blair

Good and yourself.

Jim Marino

I am really good, thanks.

John Anderson - William Blair

A quick question on the TRESemme launch in Spain, could you help us to understand what the organic growth rate in the quarter would have been ex the TRESemme launch in Spain?

Jim Marino

Well, even without the TRESemme launch in Spain our organic growth in Q3 would have been almost double-digit. So, yes, it contributed positively to our Q3 results but our Q3 results would have been stellar even without that launch.

John Anderson - William Blair

Great. Thank you. Then just a more broader question. As you think about the international opportunity for your major hair and skin care brands going forward, I know you've said that even with the launch in Spain you are only in the five of the top 15 hair care selling geographies around the world. How do you, kind of, view that over the next three to five years, the opportunity in terms of the kind of pacing, the numbers new markets you may be able to enter and which brands would be the focus of that approach?

Jim Marino

Well, as we have said, we like several markets that we are not in that may be in that top 15 group. We are looking forward; we like to think that we could enter one, maximum of two markets on an annual basis. So our evaluation is with several of the markets, but spacing them over the next three to five years. TRESemme strategically has been our lead brand and going into a brand new market, but also remember that we continue to feel that Nexxus has opportunities in more markets beyond the US and that's something we are looking at very closely too.

John Anderson - William Blair

Great. Thank you very much. Nice quarter.

Jim Marino

Okay, John. Thank you.

Operator

Your next question comes from Connie Maneaty from Bank of Montreal. Your line is open.

Connie Maneaty - Bank of Montreal

Hi.

Jim Marino

Hi Connie.

Connie Maneaty -Bank of Montreal

Now, beginning with a follow-up question.

Jim Marino

Sure.

Connie Maneaty - Bank of Montreal

How much of TRESemme's growth is tied to project Runway?

Jim Marino

You know, I am not even sure we could answer that question. Connie our Project Runway has been a good investments for us up until now, we are very pleased with the results of that investment but to try to piece that our versus all of the other investments we’ve made, on TRESemme would be very, very difficult thing to do. But, we think it's been a very positive thing for the brand, reinforcing its positioning and certainly gaining access to the right consumer segment that brand appeals to.

Connie Maneaty - Bank of Montreal

Maybe a different way to ask it is what portion of TRESemme's ad budget goes to Project Runway versus different media?

Jim Marino

That's not something we would normally disclose Connie. It's certainly not a huge piece, so I would just -- leave it at that -- the majority of investments going in different direction.

Connie Maneaty - Bank of Montreal

Okay, and then finally I don't think you mentioned that you advertise in excess in quarter, did you?

Jim Marino

Oh, I’m sure we did, yes we advertised in excess in every quarter.

Connie Maneaty - Bank of Montreal

Okay, that's it from me, thanks.

Jim Marino

Alrighty.

Operator

Your next question comes from Nick Modi from UBS. Your line is open.

Nick Modi - UBS

Good morning guys.

Jim Marino

Hi Nick,

Ralph Nicoletti

Good morning.

Nick Modi - UBS

Just a quick questions I guess for Ralph. Can you quantify the impact hiring that cost had on gross margins in the quarter, and then secondly can you give us any clarity on the economics with the distribution agreement you have in Spain, kind of how it works your job there?

Ralph Nicoletti

Nick just on your first question, I couldn't hear the beginning part something on the impact?

Nick Modi - UBS

Right. Yeah, the actual impact upfront input costs on the gross margins?

Jim Marino

Oh, about the input costs on the gross margins?

Nick Modi - UBS

Yeah.

Ralph Nicoletti

In the quarter it probably was about -- on a gross basis it's about point on the gross margin and we more than offset that with other initiatives as Jim alluded to in his commentary.

Nick Modi - UBS

Yup.

Ralph Nicoletti

On the arrangement that we have Spain, I really wouldn’t want to disclose the particulars of it, but it's in an arms length contract that we have with a company that manufactures and distributes fragrances and they are very well positioned in Spain and we are very happy thus far with how its started out.

Nick Modi - UBS

Great, and then Jim, just on the consumer you said the category was soft or weak, can you give us some more perspective exactly what the consumer is doing, how they're behaving from any of your consumer research?

Jim Marino

Well, as I said earlier we haven’t seen any trading down in the category. The softness that we see quite frankly at this point it’s a little hypothetical in terms of why it's soft. You can imagine that consumers are just being a little more discerning; they're not shopping as often. If retail traffic is down on every category it’s a little piece of that. They are probably just holding back on purchases, if you have three or four shampoos in your shower and maybe you're going to wait till one of them is empty before you buy the next one. But again, all of that supposition at this point and we'll see how all this will play out over the longer horizon. But the one thing for sure, we have not seen consumers trading down, I think they're still in our categories at least very interested in high quality products and are willing to pay for high quality products.

Nick Modi - UBS

Then just one last question Jim, sorry. We've done some consumer research and it suggests that there is a fair degree of interaction between Pantene and TRESemme and Nexxus. And I was just wondering if that sounded right to you from the work you guys have done internally?

Jim Marino

Well as always -- Pantene is the largest brand in the category. So, all the brands and every brand in the category is going to have some interaction with the largest brand just by virtue of its sheer size. So, but -- we don’t target any particular brand in the category, we are targeting consumers in that brands, and the interaction kind of takes care of itself.

Nick Modi - UBS

Great. Thanks, Jim.

Jim Marino

Sure anytime, Nick.

Operator

Your next question comes from Jason Rogers from Great Lakes Review. Your line is open.

Jason Rogers - Great Lakes Review

Hello and congratulations.

Jim Marino

Hi, Jason

Jason Rogers - Great Lakes Review

Hi. Congratulations on the good results.

Jim Marino

Well, thank you.

Jason Rogers - Great Lakes Review

Do you have the cash flow from operations what it was in the quarter and the adjusted number a year ago?

Ralph Nicoletti

We don’t have the year ago adjusted number. But yes we are working on that the year-to-date cash flow would be a $131 million that includes the Cederroth business which as at the end of the second quarter it was $99 million including Cederroth.

Jason Rogers - Great Lakes Review

Okay, and what is your expectation as far as the tax rate either for the full year or the fourth quarter and then your early indication for next year.

Ralph Nicoletti

Still working through the tax rate for next year. We will probably talk about that on the next call a little bit more. On this year around 32.5% is what we were looking at.

Jason Rogers - Great Lakes Review

For the full year?

Ralph Nicoletti

For the full year.

Jason Rogers - Great Lakes Review

Okay and what do you expect CapEx and D&A to end up for this year?

Ralph Nicoletti

CapEx in the mid 60s is $65 million range, $65 to $70 million and D&A at around $28 million that includes Cederroth.

Jason Rogers - Great Lakes Review

Okay, and the shares repurchased in the quarter, do you have the total spend or the average paid?

Ralph Nicoletti

Total spend was about $98 million.

Jason Rogers - Great Lakes Review

Okay. And how many are left under the existing…

Ralph Nicoletti

About 1.2 under the existing authorization, 1.2 million are left.

Jason Rogers - Great Lakes Review

Okay, and finally I don’t think you've broken this out in the past but I don’t know if you have the numbers for sales and operating profit etcetera by geography?

Ralph Nicoletti

No, that's not something we disclose.

Jason Rogers - Great Lakes Review

Okay. All right. Thank you very much.

Ralph Nicoletti

Okay Jason.

Jim Marino

Okay. Jason.

Operator

Your next question comes from John Anderson from William Blair. Your line is open.

John Anderson - William Blair

I have just a quick follow-up question. Thanks for taking the call. In the first half of the year, the fiscal the organic growth rate, the company overall is 6% I believe and I think Jim you said like the back half of the year that company will be in a position achieve a similar level of growth on an organic basis, given that you've kind of hit a 11.3 in the third quarter. Is the right way to think about this with the difficult comp and if that, we’d see something more kind of in a low single-digit range which net out kind of a similar level of growth vis-à-vis to first quarter?

Jim Marino

Yeah. I think John the best way to think about this is, we have in all three quarters achieved our internal expectations and what we've said after the first half remains consistent. We continue to think that the second half will be similar to the first half in terms of growth -- it really goes back to something I talked about our earlier on when we split the business from Sally and quarter-to-quarter comps are always going to have some variability because given the size of our business, various initiatives, various launches, various promotional activity, market expansion, etcetera. One quarter to next, we are going to have a lot of variability, so that's going to remain true as we move on into fiscal year '09 too. But, what we said, we continue to believe, we are going to meet our expectations in Q4, and achieve our expectations for the year and in the second half of the year will come true, on a similar basis as the first half.

John Anderson - William Blair

Thank you very much. Best of luck.

Jim Marino

Alright, thanks John.

Operator

Your next question comes from Peter Thompson from Coho Partners. Your line is open.

Peter Thompson - Coho Partners

Actually Jason just asked all of my questions. But I will just ask, for depreciation do you have that number Ralph, for the quarter depreciation and amortization at Cederroth for the quarter.

Ralph Nicoletti

For the quarter it's $5.9 million excluding Cederroth

Peter Thompson - Coho Partners

Okay, great,, and capital in the quarter.

Ralph Nicoletti

Capital in the quarter was $18 million.

Peter Thompson - Coho Partners

Thanks so much. Great quarter.

Jim Marino

Thank you Peter.

Operator

Your next question comes from Bill Schmitz from Deutsche Bank. Your line is open.

Bill Schmitz -Deutsche Bank

Yes I have two more quick ones. Are you going to restate the organic growth. I know you have already restated the financials at Cederroth but I mentioned that you’re grant growth rates are a little higher when you take Cederroth out.

Ralph Nicoletti

We could do that.

Bill Schmitz -Deutsche Bank

Okay, that will be helpful. Then the second thing is, is my math right that pro-forma for Cederroth about 70% of the business is in North America now, including US, Canada and Puerto Rico.

Ralph Nicoletti

Well, we are looking, Yeah. Okay.

Bill Schmitz -Deutsche Bank

Or 65% is in the US?

Ralph Nicoletti

Yeah, fixed around 60% U.S.

Jim Marino

Yeah that’s 60-40 US versus Non US’s this kind of the way we think about it. At Cederroth.

Bill Schmitz -Deutsche Bank

Okay, Thanks again.

Operator

There are no more questions in the queue at this time. Once again if you would like a ask a question (Operator Instructions)

Mr. Marino since there aren’t any more questions in the queue, please continue with any closing remarks.

Jim Marino

Well thank you all for your time this morning. As we started up by saying, we were extremely pleased with our results in the third quarter, where we continued to believe we’re on track for the year. Our brands continue to perform well in a soft economic environment, we continue to win share, we continue to do those kinds of things that we need to do to protect our business against rising input costs and we continue to win.

So enjoy the rest of your summer. We’ll talk again in a few months and after we complete we’ll be in another terrific year for Alberto-Culver. If you have any additional questions always feel free to give us a call. Thanks so much.

Operator

Thank you, Mr. Marino. I’d like to mention a replay of this call will be available for 30 days beginning this afternoon. The call-in numbers are 800-642-1687 or 706-645-9291. Please enter ID code by 55-25-84-22. This concludes the conference call. Thank you and have a good day.

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Source: Alberto Culver Co. F3Q08 (Qtr End 6/30/08) Earnings Call Transcript
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