<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTERLY PERIOD ENDED AUGUST 31, 1994
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)
(312) 661-0222
(Registrant's telephone number)
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
----- -----
At August 31, 1994, there were 6,803,791 shares of Common Stock and 3,072,669
shares of Class B Common Stock outstanding.
<PAGE>
Helene Curtis Industries, Inc. and Subsidiaries
Index
Page No.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Statements of Earnings for the
Three and Six Months Ended August 31, 1994 and 1993 3
Consolidated Balance Sheets as of August 31, 1994 and
February 28, 1994 4
Consolidated Statements of Cash Flows for the Six Months Ended
August 31, 1994 and 1993 5
Notes to Consolidated Financial Statements 6-7
Item 2. Management's Discussion and Analysis 8-10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURE 11
EXHIBIT 11 - Computation of Earnings Per Share 12
EXHIBIT 27 - Financial Data Schedule (submitted with EDGAR filing)
-2-
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Helene Curtis Industries, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
(Dollars in thousands, except per-share data)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended August 31, Ended August 31,
------------------------- -------------------------
1994 1993 1994 1993
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales $ 352,539 $ 338,135 $ 618,209 $ 581,507
---------- ---------- ---------- ----------
Costs and expenses:
Cost of sales 159,575 153,314 276,007 259,984
Selling, general and administrative 178,231 174,664 322,680 308,077
Interest 2,285 1,923 4,365 3,696
---------- ---------- ---------- ----------
340,091 329,901 603,052 571,757
---------- ---------- ---------- ----------
Earnings before income taxes and
cumulative effect of accounting change 12,448 8,234 15,157 9,750
Provision for income taxes 5,851 3,998 7,124 4,680
---------- ---------- ---------- ----------
Earnings before cumulative effect
of accounting change 6,597 4,236 8,033 5,070
Cumulative effect of accounting change -- -- -- (1,351)
---------- ---------- ---------- ----------
Net earnings $ 6,597 $ 4,236 $ 8,033 $ 3,719
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net earnings per share:
Earnings before cumulative effect
of accounting change $.70 $.44 $.85 $.53
Cumulative effect of accounting change -- -- -- (.14)
---------- ---------- ---------- ----------
Net earnings $ .70 $ .44 $ .85 $ .39
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Average number of shares outstanding 9,476,716 9,447,809 9,467,156 9,492,545
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Cash dividends per share:
Common Stock $ .06 $ .06 $ .12 $ .12
Class B Common Stock $ .06 $ .06 $ .07 $ .07
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
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<PAGE>
Helene Curtis Industries, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
(Unaudited)
August 31, February 28,
1994 1994
----------- ------------
<S> <C> <C>
Assets
Current assets:
Cash and equivalents $ 15,059 $ 2,802
Receivables-net 246,702 242,514
Inventories 110,879 102,344
Other current assets 21,163 20,059
--------- ---------
Total current assets 393,803 367,719
--------- ---------
Property, plant and equipment 304,047 292,671
Less accumulated depreciation 88,595 77,402
--------- ---------
Net property, plant and equipment 215,452 215,269
--------- ---------
Other assets 27,300 29,495
--------- ---------
Total assets $ 636,555 $ 612,483
--------- ---------
--------- ---------
Liabilities and stockholders' equity
Current liabilities:
Short-term debt $ 5,519 $ 7,361
Accounts payable 115,646 99,566
Income taxes 8,427 8,401
Advertising and promotion 59,801 54,843
Other accrued expenses 53,005 46,353
--------- ---------
Total current liabilities 242,398 216,524
Long-term debt 146,570 160,990
Deferred income taxes 15,231 15,230
Accrued retirement and other benefits 22,389 20,295
--------- ---------
Total liabilities 426,588 413,039
--------- ---------
Stockholders' equity:
Common Stock, issued 7,921,471 shares 3,961 3,961
Class B Common Stock, issued 3,072,669 shares 1,536 1,536
Capital in excess of par value 40,628 40,548
Retained earnings 168,047 161,045
Currency translation adjustment 4,771 1,218
Treasury shares (Common), 1,117,680
(Aug.) and 1,114,031 (Feb.), at cost (8,976) (8,864)
--------- ---------
Total stockholders' equity 209,967 199,444
--------- ---------
Total liabilities and stockholders' equity $ 636,555 $ 612,483
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
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<PAGE>
Helene Curtis Industries, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
For the Six Months Ended
August 31,
------------------------
1994 1993
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 8,033 $ 3,719
Adjustments to net earnings:
Depreciation and amortization 13,625 12,287
Cumulative effect of accounting change -- 1,351
Other 2,873 804
Changes in operating assets and liabilities:
Receivables-net 3,559 25,637
Inventories (6,775) (3,360)
Other current assets (815) (18,808)
Payables and accrued expenses 19,683 (3,115)
Other 542 (8,189)
-------- --------
Net cash provided by operating activities 40,725 10,326
-------- --------
Cash flows from investing activities:
Capital expenditures (12,198) (19,863)
Other 78 (88)
-------- --------
Net cash used by investing activities (12,120) (19,951)
-------- --------
Cash flows from financing activities:
Proceeds from borrowings 3,317 5,930
Repayment of borrowings (19,948) (2,650)
Dividends paid (1,031) (1,027)
Other (32) 1,754
-------- --------
Net cash provided (used) by financing
activities (17,694) 4,007
-------- --------
Effect of exchange rate changes on cash and
equivalents 1,346 1,353
-------- --------
Increase (decrease) in cash and equivalents 12,257 (4,265)
Cash and equivalents at beginning of period 2,802 7,564
-------- --------
Cash and equivalents at end of period $ 15,059 $ 3,299
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
-5-
<PAGE>
Helene Curtis Industries, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in thousands)
1. BASIS OF PRESENTATION
The interim consolidated financial statements are unaudited. In the
opinion of management, all adjustments necessary for a fair presentation
are reflected therein. All such adjustments are of a normal recurring
nature. The results of operations for the interim periods are not
necessarily indicative of the results that may be expected for the entire
fiscal year.
These statements do not include all disclosures required by generally
accepted accounting principles and should be read in conjunction with the
audited financial statements and related notes included in the Company's
annual report to stockholders for the year ended February 28, 1994. The
consolidated balance sheet as of February 28, 1994 is derived from these
audited financial statements.
Certain prior year amounts have been reclassified to conform to the current
year's presentation.
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 $7,102 and $13,761 for the three and six months ended August 31,
1994, respectively, and $6,326 and $11,639 for the three and six months
ended August 31, 1993, respectively.
-6-
<PAGE>
Helene Curtis Industries, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in thousands)
3. RECEIVABLES-NET
Receivables-net, principally trade, consist of the following amounts:
<TABLE>
<CAPTION>
August 31, 1994 February 28, 1994
--------------- -----------------
<S> <C> <C>
Accounts receivable $194,805 $187,452
Notes receivable 57,480 60,161
-------- --------
Total 252,285 247,613
Less allowance for doubtful accounts 5,583 5,099
-------- --------
Net $246,702 $242,514
-------- --------
-------- --------
</TABLE>
4. INVENTORIES
Inventories consist of the following components:
<TABLE>
<CAPTION>
August 31, 1994 February 28, 1994
--------------- -----------------
<S> <C> <C>
Raw materials $ 26,976 $ 16,252
Work in process 1,387 2,037
Finished goods 82,516 84,055
-------- --------
Total $110,879 $102,344
-------- --------
-------- --------
</TABLE>
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
Helene Curtis Industries, Inc. and Subsidiaries
RESULTS OF OPERATIONS - THREE MONTHS ENDED AUGUST 31, 1994 AND 1993
(Dollars in thousands)
Consolidated net sales for the three months ended August 31, 1994 increased
$14,404, or 4%, compared with the corresponding period last year. The second
quarter launch of new Suave Baby Care products and the continued strength of the
Company's international business contributed to the sales growth for the
quarter.
Domestic net sales increased approximately 4%, compared with the corresponding
period last year. This increase is attributable to the Suave Baby Care
introduction (which appeared in stores nationwide in August) and growth in sales
of the Company's professional hair care products. Also contributing to the
increase were higher sales in the antiperspirant/deodorant category as well as
significant growth in sales of skin care products. These gains were partially
offset by a decline in sales for Vibrance hair care products.
International net sales increased approximately 6%, compared with the
corresponding period last year. This increase was attributable, in part, to
higher sales in Canada (in spite of unfavorable currency translation) driven by
Salon Selectives hair care products and Degree antiperspirant/deodorant. Sales
in the United Kingdom, Italy and Scandinavia also contributed to the increase in
international net sales.
Cost of sales increased $6,261, or 4%, as a result of higher sales volume. As a
percent of net sales, cost of sales remained constant at 45.3% in the current
period compared with the prior year.
Selling, general and administrative expenses increased $3,567, or 2%. As a
percent of net sales, these expenses decreased to 50.6% in the current period
from 51.7% last year. The decrease as a percent of net sales was principally
attributable to lower advertising costs for Vibrance hair care products and
slower growth in administrative expenses which were offset, in part, by higher
research and development costs.
The effective tax rate was 47% in the current period compared with 49% in the
prior year, primarily as a result of a higher proportion of total profitability
attributable to domestic operations which has a lower tax rate.
Net earnings increased to $6,597 from $4,236 in the prior year. The increase
was primarily attributable to the increase in net sales and the lower
advertising and administrative expenses as a percent of net sales.
-8-
<PAGE>
Helene Curtis Industries, Inc. and Subsidiaries
RESULTS OF OPERATIONS - SIX MONTHS ENDED AUGUST 31, 1994 AND 1993
(Dollars in thousands)
Consolidated net sales for the six months ended August 31, 1994 increased
$36,702, or 6%, compared with the corresponding period last year. Higher U.S.
sales across all product categories and the continued strength of the Company's
international business contributed to the sales growth for the first half of the
year.
Domestic net sales increased approximately 6%, compared to the corresponding
period last year. This increase is largely attributable to the Company's sales
of Suave Baby Care (launched in the second quarter of the current fiscal year)
and increases in the antiperspirant/deodorant category where Degree recorded
significant first half sales increases. Higher sales of the Company's skin care
and professional hair care products also contributed to the increase in domestic
net sales. There was moderate sales growth in the Company's hair care brands
where Suave, Finesse and Salon Selectives recorded gains which were offset by a
decline in sales for Vibrance.
International net sales increased approximately 8%, compared with the
corresponding period last year. This increase was attributable to higher sales
in Japan as a result of favorable currency translation and Italy where the
Company's newest wholly-owned subsidiary was formed in the second quarter of
last year. Canada and the United Kingdom also contributed to the increase in
international net sales.
Cost of sales increased $16,023, or 6%, due to higher sales volume. As a
percent of net sales, cost of sales decreased slightly to 44.6% in the current
period from 44.7% last year.
Selling, general and administrative expenses increased $14,603, or 5%. As a
percent of net sales, these expenses decreased to 52.2% in the current period
from 53.0% last year. The decrease as a percent of net sales was primarily
attributable to reduced administrative expenses coupled with slower growth in
advertising and selling costs. These cost improvements were offset, in part, by
higher research and development costs.
The effective tax rate was 47% in the current period compared with 48% in the
prior year, primarily as a result of a higher proportion of total profitability
attributable to domestic operations which has a lower tax rate.
Earnings before the cumulative effect of an accounting change increased to
$8,033 from $5,070 in the prior year. The increase was primarily attributable
to the increase in net sales and lower selling, general and administrative
expenses as a percent of net sales.
-9-
<PAGE>
Helene Curtis Industries, Inc. and Subsidiaries
FINANCIAL CONDITION - LIQUIDITY AND CAPITAL RESOURCES
(Dollars in thousands)
Cash and equivalents increased to $15,059, compared with $2,802 at year end.
The Company used cash provided from operating activities to fund capital
expenditures and temporarily reduce debt levels.
Net cash provided from operating activities increased significantly to $40,725
from $10,326 in the first half of the prior year, primarily attributable to the
favorable cash flow impact of a reduction in net operating assets and increase
in net earnings. The increase in payables and accrued expenses of $19,683 was
largely attributable to the timing of payments for raw material purchases and
advertising and promotion activities. The decrease in receivables of $3,559 was
largely due to lower sales for the current quarter in Japan (excluding the
impact of exchange rate changes) compared with the fourth quarter of the prior
year and the timing of domestic sales within the quarter. The impact of these
changes was partly offset by a $6,775 increase in inventories attributable to
the Company's newest product introduction -- Suave Baby Care. Working capital
increased slightly to $151,405 at August 31, 1994, compared with $151,195 at
February 28, 1994. The current ratio decreased to 1.62:1 from 1.70:1.
Capital spending decreased to $12,198 from $19,863 in the first half of the
prior year. Capital expenditures in both years included a large number of
moderate investments primarily to increase the Company's manufacturing and
distribution capabilities and efficiencies.
The total debt-to-total capital ratio decreased to 42.0%, compared with 45.8% at
year end as total debt decreased to $152,089 from $168,351. The excess cash
provided from reduced net operating assets was used for the repayment of
borrowings. In March 1994, the Company borrowed $50,000 under a private
placement agreement whereby senior unsecured notes were issued. These notes
mature in March 2001 and 2004. The funds were used for general corporate
purposes and to refinance existing debt.
On July 12, 1994, the Company's Board of Directors declared a quarterly dividend
of six cents per share to both the Common and Class B Common stockholders,
payable August 26 to holders of record on August 12, 1994.
Management believes that funds provided from operations and present credit
arrangements will be sufficient to meet the Company's anticipated working
capital and capital spending needs.
-10-
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 11 - Computations of Earnings per Share
Exhibit 27 - Financial Data Schedule(submitted with EDGAR filing)
(b) Reports on Form 8-K: No reports were filed on Form 8-K during the
quarter ended August 31, 1994.
SIGNATURE
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.
October 14, 1994 By: /S/ Mary J. Oyer
Mary J. Oyer
Vice President, Corporate Controller
and Principal Accounting Officer
-11-
<PAGE>
EXHIBIT 11
Helene Curtis Industries, Inc. and Subsidiaries
COMPUTATIONS OF EARNINGS PER SHARE
(Dollars in thousands, except per-share data)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended August 31, Ended August 31,
------------------------- --------------------------
1994 1993 1994 1993
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Primary earnings per share:
Net earnings $ 6,597 $ 4,236 $ 8,033 $ 3,719
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Weighted average number of
shares outstanding:
Common and Class B
Common Shares 9,443,460 9,422,710 9,443,622 9,404,024
Common stock equivalents 33,256 25,099 23,534 88,521
---------- ---------- ---------- ----------
Total 9,476,716 9,447,809 9,467,156 9,492,545
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Primary earnings per share $ .70 $ .44 $ .85 $ .39
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Fully diluted earnings per share:
Net earnings $ 6,597 $ 4,236 $ 8,033 $ 3,719
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Weighted average number of
shares outstanding:
Common and Class B
Common Shares 9,443,460 9,422,710 9,443,622 9,404,024
Common stock equivalents 76,091 23,577 70,065 62,872
---------- ---------- ---------- ----------
Total 9,519,551 9,446,287 9,513,687 9,466,896
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Fully diluted earnings per share $ .69 $ .44 $ .84 $ .39
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
NOTE:
Fully diluted amounts are not included on the face of the consolidated
statements of earnings because they differfrom primary earnings per share by
less than 3%.
-12-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Statements of Earnings and Consolidated Balance Sheets on
pages 3 and 4 of the Company's Form 10-Q for the quarterly period ending
August 31, 1994, and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-28-1995
<PERIOD-END> AUG-31-1994
<CASH> 15,059
<SECURITIES> 0
<RECEIVABLES> 252,285
<ALLOWANCES> 5,583
<INVENTORY> 110,879
<CURRENT-ASSETS> 393,803
<PP&E> 304,047
<DEPRECIATION> 88,595
<TOTAL-ASSETS> 636,555
<CURRENT-LIABILITIES> 242,398
<BONDS> 146,570
<COMMON> 5,497
0
0
<OTHER-SE> 204,470
<TOTAL-LIABILITY-AND-EQUITY> 636,555
<SALES> 618,209
<TOTAL-REVENUES> 618,209
<CGS> 276,007
<TOTAL-COSTS> 276,007
<OTHER-EXPENSES> 322,680<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,365
<INCOME-PRETAX> 15,157
<INCOME-TAX> 7,124
<INCOME-CONTINUING> 8,033
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,033
<EPS-PRIMARY> .85
<EPS-DILUTED> .84
<FN>
<F1>Represents selling, general and administrative expenses.
</FN>
</TABLE>
