SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended November 30, 1993
Commission File Number 1-8797
Helene Curtis Industries, Inc.
(Exact name of registrant as specified in its charter)
Delaware 36-3398349
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
325 North Wells Street, Chicago, Illinois 60610
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (312) 661-0222
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Outstanding common stock at November 30, 1993 - $.50 par value
Common 6,806,775 shares
Class B Common 3,072,669 shares
Total number of pages: 12
Exhibit index is located at sequential page: 11
HELENE CURTIS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands)
(Unaudited)
November 30, February 28,
1993 1993
ASSETS:
Cash and equivalents $ 5,721 $ 7,564
Receivables, net 188,077 245,769
Inventories 119,033 102,095
Other current assets 48,358 22,406
Total current assets 361,189 377,834
Property, plant and equipment 280,085 253,388
Less accumulated depreciation (72,647) (60,986)
Net property, plant and equipment 207,438 192,402
Other assets 34,023 29,849
TOTAL ASSETS $ 602,650 $ 600,085
========= =========
LIABILITIES:
Short-term debt $ 3,740 $ 9,252
Accounts payable 105,885 106,759
Income taxes 5,261 9,425
Advertising and promotion 59,094 55,029
Other accrued expenses 44,553 45,885
Total current liabilities 218,533 226,350
Long-term debt 152,314 154,438
Deferred income taxes 15,713 15,720
Accrued retirement and other benefits 20,474 17,377
Total liabilities 407,034 413,885
STOCKHOLDERS' EQUITY:
Common Stock, issued 7,921,471 shares
(Nov.) and 7,913,771 shares (Feb.) 3,961 3,957
Class B Common Stock, issued 3,072,669
shares (Nov.) and 3,080,369 shares (Feb.) 1,536 1,540
Capital in excess of par value 40,525 39,032
Retained earnings 155,193 150,318
Currency translation adjustment 3,242 543
Treasury shares (Common), 1,114,696
(Nov.) and 1,168,673 (Feb.), at cost (8,841) (9,190)
Total stockholders' equity 195,616 186,200
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 602,650 $ 600,085
========= =========
The accompanying notes are an integral part of the consolidated financial
statements.
-2-
HELENE CURTIS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited)
(Dollar amounts in thousands, except per-share data)
For the Three Months For the Nine Months
Ended November 30, Ended November 30,
1993 1992 1993 1992
Net Sales $266,918 $266,450 $848,425 $833,662
Costs and Expenses:
Cost of goods sold 120,761 118,031 384,287 373,311
Advertising, promotion,
selling and administrative 138,987 139,346 443,522 427,318
Interest 1,830 1,465 5,526 5,989
261,578 258,842 833,335 806,618
Earnings before Income Taxes
and Cumulative Effect of
Accounting Change 5,340 7,608 15,090 27,044
Provision for Income Taxes 2,563 3,424 7,243 12,170
Earnings before Cumulative
Effect of Accounting Change 2,777 4,184 7,847 14,874
Cumulative Effect of Accounting
Change, Net of Income Taxes -- -- (1,351) --
Net Earnings $ 2,777 $ 4,184 $ 6,496 $ 14,874
======== ======== ======== ========
Net Earnings per Share:
Earnings before Cumulative
Effect of Accounting Change $ .30 $ .44 $ .83 $ 1.57
Cumulative Effect of
Accounting Change -- -- (.14) --
Net Earnings per Share $ .30 $ .44 $ .69 $ 1.57
======== ======== ======== ========
Weighted Average Number of
Shares Outstanding 9,459,415 9,500,927 9,481,501 9,481,331
========= ========= ========= =========
Cash Dividends Per Share:
Common Stock $ .06 $ .06 $ .18 $ .18
Class B Common Stock $ .06 $ .06 $ .13 $ .13
The accompanying notes are an integral part of the consolidated financial
statements.
-3-
HELENE CURTIS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollar amounts in thousands)
For the Nine Months Ended
November 30,
1993 1992
Operating Activities:
Net earnings $ 6,496 $ 14,874
Adjustments to net earnings:
Depreciation and amortization 18,664 15,891
Cumulative effect of accounting change 1,351 --
Other 267 1,012
Changes in operating assets and liabilities:
Receivables, net 70,419 42,375
Inventories (14,234) (13,809)
Other current assets (25,406) (31,702)
Payables and accrued expenses (15,077) 8,413
Other (7,974) (5,683)
Net cash provided from operations 34,506 31,371
Investing Activities:
Capital expenditures (30,498) (26,777)
Other 195 (78)
Net cash used by investing (30,303) (26,855)
Financing Activities:
Proceeds from borrowings 6,455 40,192
Repayment of borrowings (14,050) (49,667)
Dividends paid (1,621) (1,606)
Other 1,842 113
Net cash used by financing (7,374) (10,968)
Effect of Exchange Rate Changes on Cash 1,328 (288)
Decrease in cash and equivalents (1,843) (6,740)
Cash and Equivalents at Beginning of Period 7,564 9,541
Cash and Equivalents at End of Period $ 5,721 $ 2,801
======== ========
Supplemental Cash Flow Data:
Cash paid during the period for:
Interest $ 5,227 $ 6,479
Income taxes $ 12,012 $ 13,375
The accompanying notes are an integral part of the consolidated financial
statements.
-4-
HELENE CURTIS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
November 30, 1993
(Dollar amounts in thousands)
This interim financial information should be read in conjunction with the
Company's consolidated financial statements and accompanying notes as
reported in the Company's latest Annual Report on Form 10-K.
1. Basis of Presentation
The consolidated financial information presented herein is unaudited,
other than the consolidated balance sheet at February 28, 1993, which is
derived from audited financial statements but does not include all
disclosures required by generally accepted accounting principles. In
management's opinion, all adjustments of a normal recurring nature
necessary for a fair presentation are reflected in the interim periods
presented. The interim results of operations and cash flows are not
necessarily indicative of the results for an entire fiscal year.
Advertising and promotion costs are generally expensed in the fiscal year
incurred. For interim reporting purposes, such costs are charged to
operations as a percentage of sales based on estimated sales and estimated
advertising and promotion costs for the full year.
2. Supplemental Information
The consolidated statements of earnings include research and development
costs of $5,313 and $16,952 for the three and nine months ended
November 30, 1993, respectively, and $5,443 and $15,973 for the three
and nine months ended November 30, 1992, respectively.
-5-
HELENE CURTIS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
November 30, 1993
(Dollar amounts in thousands)
3. Receivables
Receivables, principally trade, consist of the following amounts:
November 30, February 28,
1993 1993
Accounts receivable $136,915 $198,968
Notes receivable 56,465 51,247
193,380 250,215
Less allowance for doubtful accounts 5,303 4,446
$188,077 $245,769
======== ========
4. Inventories
Inventories consist of the following components:
November 30, February 28,
1993 1993
Raw materials $ 23,529 $ 20,705
Work in process 2,036 1,912
Finished goods 93,468 79,478
$119,033 $102,095
======== ========
-6-
HELENE CURTIS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
November 30, 1993
(Dollar amounts in thousands)
5. Postretirement Benefits
Effective March 1, 1993, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions." This new standard
requires that the expected cost of retiree health benefits, such as
the Company's payment of Medicare Part B premiums for retirees, be
charged to expense during the years the employees render service
rather than the Company's past practice of recognizing this cost on
a cash basis. As part of adopting the new standard, the Company
recorded in the first quarter, a one-time, non-cash charge against
earnings of $2,178 before taxes and $1,351 after taxes or $.14
per share. In addition to the cumulative effect, the Company
recorded $81 and $242 in additional postretirement benefit cost for
the three and nine months ended November 30, 1993, respectively, as
a result of adopting the new standard.
The following table sets forth the postretirement benefits' combined
status reconciled with the amount included in the consolidated balance
sheet at November 30, 1993:
Accumulated postretirement benefit obligation:
Retirees $ 732
Active employees fully eligible 513
Active employees not fully eligible 1,117
Total accumulated postretirement benefit
obligation $2,362
======
For measurement purposes, a 12% annual rate of increase in the
per-capita cost of covered health benefits was assumed for
fiscal years 1994 and 1995 based on the actual Medicare Part B
premiums set by legislation. The rate was assumed to decrease to 4%
through fiscal year 1997 and remain at that level thereafter.
The weighted average discount rate used in determining the
accumulated postretirement benefit obligation was 8%.
-7-
HELENE CURTIS INDUSTRIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(Dollar amounts in thousands)
RESULTS OF OPERATIONS
Third Quarter Ended November 30, 1993 vs. Third Quarter Ended November 30, 1992
Consolidated net sales for the three months ended November 30, 1993 were
relatively flat as compared to the corresponding period last year. The
higher sales in international markets and the lower sales in the U.S.
hair care markets were the major factors impacting sales for the quarter.
Domestic net sales decreased approximately 10% as compared to the
corresponding period last year due to declines in sales of Salon Selectives,
Finesse and Suave brands in the hair care category. Sales of the Company's
two antiperspirant/deodorant brands, Degree and Suave, were relatively flat
as compared to the corresponding period last year.
International net sales increased approximately 22%, as compared to the
corresponding period last year, due to increased sales in Japan resulting
from the favorable impact of exchange rate changes. Conversely, increased
sales in Canada and the United Kingdom were mostly offset by the unfavorable
impact of exchange rate changes. Sales from the Company's two newest wholly-
owned subsidiaries in Scandinavia and Italy also contributed to the increase
in international net sales.
Cost of goods sold increased $2,730, or 2%. As a percentage of net sales,
cost of goods sold increased to 45% in 1993 from 44% in 1992, primarily due
to changes in product mix.
Advertising, promotion, selling and administrative expenses were relatively
flat. As a percent of net sales, these expenses remained constant at 52%
in the current period as compared to the prior year.
The effective tax rate was 48% in the current period, as compared to 45% in
the prior year, principally due to a greater proportion of total profitability
for international operations which have a higher tax rate and the increase
in U.S. federal tax rate of 1%.
Earnings decreased to $2,777 from $4,184 in the prior year. The decrease was
primarily due to increases in cost of goods sold while net sales were flat.
-8-
HELENE CURTIS INDUSTRIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(Dollar amounts in thousands)
RESULTS OF OPERATIONS
Nine Months Ended November 30, 1993 vs. Nine Months Ended November 30, 1992
Consolidated net sales for the nine months ended November 30, 1993 increased
$14,763, or 2%, as compared to the corresponding period last year. The
higher sales in international markets and the U.S. antiperspirant/deodorant
markets and the lower sales in the U.S. hair care markets were the major
factors impacting sales.
Domestic net sales decreased approximately 5%, as compared to the
corresponding period last year. This decrease is largely due to the decline
in sales of the Company's hair care brands, particularly Salon Selectives and
Vibrance. Sales of the Company's professional hair care products were also
lower as compared to the prior year. These unfavorable results were partially
offset by increases in sales in the antiperspirant/deodorant category where
the Company's two brands, Degree and Suave, recorded sales increases of more
than 15 percent.
International net sales increased approximately 18%, as compared to the
corresponding period last year, due to increased sales in Japan resulting
primarily from the favorable impact of exchange rate changes as the yen
continued to strengthen relative to the dollar. Conversely, increased sales
in the United Kingdom and Canada were mostly offset by the unfavorable impact
of exchange rate changes as local currencies continued to weaken relative to
the dollar. Sales from the Company's two newest wholly-owned subsidiaries in
Scandinavia and Italy also contributed to the increase in international net
sales.
Cost of goods sold increased $10,976, or 3%, mainly due to higher sales
volume. As a percentage of net sales, cost of goods sold remained constant
at 45% in the current period as compared to the prior year.
Advertising, promotion, selling and administrative expenses increased $16,204,
or 4%. As a percent of net sales, these expenses increased to 52% in the
current period from 51% last year. The increase as a percent of net sales
was principally due to higher selling expenses and increased advertising and
promotion activities including support of a new product launch in Japan.
The effective tax rate was 48% in the current period, as compared to 45%
in the prior year, principally due to a greater proportion of total
profitability for international operations which have a higher tax rate
and the increase in U.S. federal tax rate of 1%.
Earnings before the cumulative effect of the accounting change decreased to
$7,847 from $14,874 in the prior year. The decrease was primarily due to
higher advertising, promotion, and selling expenses as a percentage of net
sales.
-9-
HELENE CURTIS INDUSTRIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(Dollar amounts in thousands)
As part of adopting Statement of Financial Accounting Standards (SFAS) No. 106
"Employers Accounting for Postretirement Benefits Other Than Pensions", there
was a one-time, non-cash charge against earnings of $1,351 after taxes. This
statement requires the accrual of postretirement benefits during the years an
employee provides service to the Company. These expenses were previously
recognized on a cash basis.
FINANCIAL CONDITION AT NOVEMBER 30, 1993
Cash and equivalents decreased to $5,721, compared with $7,564 at year end.
The Company continues to fund capital expenditures through cash provided from
operations.
Net cash provided from operations increased 10% to $34,506 from $31,371 in the
prior year as the lower earnings for the current year compared to last year were
more than offset by the favorable cash flow impact of changes in operating
assets and liabilities. The decrease in receivables of $70,419 was largely
due to lower sales in the current quarter compared to the fourth quarter of
the prior year. The decrease in receivables was partially offset by the
$15,077 decrease in payables and accrued expenses, the $14,234 increase in
inventories and the $25,406 increase in other current assets as a result of
the deferral of advertising and promotion costs during interim quarters.
Working capital decreased to $142,656 at November 30, 1993, compared with
$151,484 at February 28, 1993, while the current ratio remained constant at
1.7.
Capital spending increased to $30,498 from $26,777 in the prior year. Capital
expenditures in both years included a large number of moderate investments
primarily to maintain capacity and to increase the Company's manufacturing and
distribution output and efficiencies. One of the larger capital expenditures
in both years was for the investment in a multi-year project which will allow
the Company to manufacture antiperspirant/deodorant sticks in-house.
The total debt to capitalization ratio decreased to 43%, compared with 46% at
year end as total debt decreased to $156,054 at November 30, 1993 from
$163,690 at February 28, 1993. The excess cash provided from operations
was used to reduce both short-term and long-term borrowings by $5,512 and
$2,124, respectively.
On October 12, 1993, the Company's Board of Directors declared a quarterly
cash dividend of six cents per share to Common and Class B Common
stockholders, payable November 24 to holders of record on November 9, 1993.
Management believes that funds provided from operations and from present
credit facilities are sufficient to meet the Company's anticipated working
capital needs and capital expenditure requirements.
-10-
HELENE CURTIS INDUSTRIES, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit A - Computations of Earnings per Share
(b) Reports on Form 8-K: No reports were filed on Form 8-K during the
quarter ended November 30, 1993.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Helene Curtis Industries, Inc.
(Registrant)
January 14, 1994
(Date)
/S/ MARY J. OYER
(Signature)
MARY J. OYER
Vice President, Corporate Controller
and Principal Accounting Officer
-11-
HELENE CURTIS INDUSTRIES, INC. AND SUBSIDIARIES
Exhibit A: COMPUTATIONS OF EARNINGS PER SHARE
(Dollar amounts in thousands, except per-share data)
For the Three Months For the Nine Months
Ended November 30, Ended November 30,
1993 1992 1993 1992
Primary Earnings Per Share:
Net Earnings $ 2,777 $ 4,184 $ 6,496 $ 14,874
Weighted Average Number of
Shares Outstanding:
Common and Class B
Common Shares 9,443,445 9,339,710 9,417,164 9,331,418
Common Stock Equivalents 15,970 161,217 64,337 149,913
TOTAL 9,459,415 9,500,927 9,481,501 9,481,331
Primary Earnings Per Share $ 0.30 $ 0.44 $ 0.69 $ 1.57
========== ========== ========== ==========
Fully Diluted Earnings
Per Share:
Net Earnings $ 2,777 $ 4,184 $ 6,496 $ 14,874
Weighted Average Number of
Shares Outstanding:
Common and Class B
Common Shares 9,443,445 9,339,710 9,417,164 9,331,418
Common Stock Equivalents 14,490 204,195 36,257 211,474
TOTAL 9,457,935 9,543,905 9,453,421 9,542,892
Fully Diluted Earnings
Per Share $ 0.30 $ 0.44 $ 0.69 $ 1.56
========== ========== ========== ==========
Note:
Fully diluted amounts are not included on the face of the consolidated
statements of earnings because they differ from primary earnings per share
by less than 3%.
