<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended May 31, 1994
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Commission File Number 1-8797
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Helene Curtis Industries, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 36-3398349
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
325 North Wells Street, Chicago, Illinois 60610
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (312) 661-0222
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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 May 31, 1994 - $.50 par value
Common 6,803,791 shares
Class B Common 3,072,669 shares
Total number of pages: 11
Exhibit index is located at sequential page: 10
<PAGE>
HELENE CURTIS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
(Unaudited)
May 31, February 28,
1994 1994
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<S> <C> <C>
Assets
Current assets:
Cash and equivalents $ 13,802 $ 2,802
Receivables-net 198,645 242,514
Inventories 114,921 102,344
Other current assets 34,182 20,059
-------- --------
Total current assets 361,550 367,719
-------- --------
Property, plant and equipment 299,193 292,671
Less accumulated depreciation 82,894 77,402
-------- --------
Net property, plant and equipment 216,299 215,269
-------- --------
Other assets 28,554 29,495
-------- --------
Total assets $606,403 $612,483
======== ========
Liabilities and stockholders' equity
Current liabilities:
Short-term debt $ 7,453 $ 7,361
Accounts payable 95,039 99,566
Income taxes 4,093 8,401
Advertising and promotion 69,210 54,843
Other accrued expenses 50,228 46,353
-------- --------
Total current liabilities 226,023 216,524
Long-term debt 141,811 160,990
Deferred income taxes 15,231 15,230
Accrued retirement and other benefits 21,366 20,295
-------- --------
Total liabilities 404,431 413,039
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Stockholders' equity:
Common Stock, issued 7,921,471 shares (May)
and 7,921,471 shares (Feb.) 3,961 3,961
Class B Common Stock, issued 3,072,669
shares (May) and 3,072,669 shares (Feb.) 1,536 1,536
Capital in excess of par value 40,548 40,548
Retained earnings 162,042 161,045
Currency translation adjustment 2,766 1,218
Treasury shares (Common), 1,117,680
(May) and 1,114,031 (Feb.), at cost (8,881) (8,864)
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Total stockholders' equity 201,972 199,444
-------- --------
Total liabilities and stockholders' equity $606,403 $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 EARNINGS (Unaudited)
(Dollar amounts in thousands, except per-share data)
<TABLE>
<CAPTION>
For the Three Months
Ended May 31,
--------------------------
1994 1993
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<S> <C> <C>
Net sales $265,670 $243,372
-------- --------
Costs and expenses:
Cost of sales 116,432 106,670
Selling, general and administrative 144,449 133,413
Interest 2,080 1,773
-------- --------
262,961 241,856
-------- --------
Earnings before income taxes and
cumulative effect of accounting change 2,709 1,516
Provision for income taxes 1,273 682
-------- --------
Earnings before cumulative effect
of accounting change 1,436 834
Cumulative effect of accounting change -- (1,351)
-------- --------
Net earnings (loss) $ 1,436 $ (517)
======== ========
Net earnings (loss) per share:
Earnings before cumulative effect
of accounting change $ .15 $ .09
Cumulative effect of accounting change -- (.14)
-------- --------
Net earnings (loss) $ .15 $ (.05)
======== ========
Average number of shares outstanding 9,457,597 9,537,281
========= =========
Cash dividends per share:
Common Stock $ .06 $ .06
Class B Common Stock $ .01 $ .01
</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)
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
For the Three Months Ended
May 31,
--------------------------
1994 1993
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ 1,436 $ (517)
Adjustments to net earnings (loss):
Depreciation and amortization 6,806 5,901
Cumulative effect of accounting change -- 1,351
Other 895 333
Changes in operating assets and liabilities:
Receivables-net 47,122 66,926
Inventories (11,894) (22,908)
Other current assets (14,024) (26,538)
Payables and accrued expenses 6,012 (13,583)
Other 283 (4,028)
-------- --------
Net cash provided by operating 36,636 6,937
activities -------- --------
Cash flows from investing activities:
Capital expenditures (6,516) (8,456)
Other (2) (46)
-------- --------
Net cash used by investing activities (6,518) (8,502)
-------- --------
Cash flows from financing activities:
Proceeds from borrowings 585 5,585
Repayment of borrowings (19,780) (1,152)
Dividends paid (439) (435)
Other (17) 115
-------- --------
Net cash provided (used) by
financing activities (19,651) 4,113
-------- --------
Effect of exchange rate changes on cash
and equivalents 533 656
-------- --------
Increase in cash and equivalents 11,000 3,204
Cash and equivalents at beginning of period 2,802 7,564
-------- --------
Cash and equivalents at end of period $ 13,802 $ 10,768
======== ========
Supplemental cash flow data:
Cash paid during the period for:
Interest $ 1,351 $ 1,492
Income taxes $ 6,793 $ 11,085
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
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<PAGE>
HELENE CURTIS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
May 31, 1994
(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, 1994, 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.
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 $6,659 and $5,313 for the three months ended May 31, 1994 and
1993, respectively.
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<PAGE>
HELENE CURTIS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
May 31, 1994
(Dollar amounts in thousands)
3. RECEIVABLES
Receivables, principally trade, consist of the following amounts:
<TABLE>
<CAPTION>
May 31, February 28,
1994 1994
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<S> <C> <C>
Accounts receivable $155,369 $187,452
Notes receivable 48,528 60,161
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203,897 247,613
Less allowance for doubtful accounts 5,252 5,099
-------- --------
$198,645 $242,514
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</TABLE>
4. INVENTORIES
Inventories consist of the following components:
<TABLE>
<CAPTION>
May 31, February 28,
1994 1994
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<S> <C> <C>
Raw materials $ 28,832 $ 16,252
Work in process 2,440 2,037
Finished goods 83,649 84,055
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$114,921 $102,344
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</TABLE>
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<PAGE>
HELENE CURTIS INDUSTRIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
(Dollar amounts in thousands)
RESULTS OF OPERATIONS
FIRST QUARTER ENDED MAY 31, 1994 vs. FIRST QUARTER ENDED MAY 31, 1993
Helene Curtis' consolidated net sales for the three months ended May 31, 1994
increased $22,298, or 9%, compared to the corresponding period last year.
Higher U.S. sales across all categories in which the Company competes and the
continued strength of the Company's international business contributed
to the sales growth for the quarter.
Domestic net sales increased approximately 9%, compared to the corresponding
period last year. This increase is due in part to the sales growth of the
Company's hair care brands where Suave, Finesse and Salon Selectives recorded
gains in a competitive and relatively flat market. These gains were partially
offset by the lower sales of the Company's newest hair care brand -- Vibrance.
Also contributing were sales in the antiperspirant/deodorant category where
Degree recorded significant first quarter sales increases. Sales of the
Company's skin care, baby care (newest product line with some early shipments
in the first quarter of the current fiscal year) and professional hair care
products were also higher compared to the prior year.
International net sales increased approximately 10%, compared to the
corresponding period last year. This increase was due to higher sales in
Japan -- a result of favorable currency translation and sales increases from
the Company's newest brand -- Program -- launched in Japan at the end of the
first quarter last year. Sales in Italy, the Company's newest wholly-owned
subsidiary, and the United Kingdom also contributed to the increase in
international net sales. Sales in the other foreign markets were down
slightly in the quarter coming off of a strong fourth quarter and with most
new product activity anticipated later in the year.
Cost of sales increased $9,762, or 9%, mainly due to higher sales volume.
As a percent of net sales, cost of sales remained constant at 43.8% in
the current period, compared to the prior year.
Selling, general and administrative expenses increased $11,036, or 8%. As
a percent of net sales, these expenses decreased to 54.4% in the current
period from 54.8% last year. The decrease as a percent of net sales was
principally due to slightly lower selling and administrative expenses which
were mostly offset by slightly higher advertising and promotion costs.
The effective tax rate was 47% in the current period, compared to 45% in
the prior year.
Earnings before the cumulative effect of the accounting change increased to
$1,436 from $834 in the prior year. The increase was primarily due to the
increase in sales and the slight improvement in selling, general and
administrative expenses as a percent of net sales.
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<PAGE>
HELENE CURTIS INDUSTRIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
(Dollar amounts in thousands)
FINANCIAL CONDITION AT MAY 31, 1994
Cash and equivalents increased to $13,802, 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 $36,636
from $6,937 in the first quarter of the prior year primarily due to the
favorable cash flow impact of changes in operating assets and liabilities.
The decrease in receivables of $47,122 was largely due to lower sales for
the current quarter compared to the fourth quarter of the prior year. The
decrease in receivables was partly offset by the $11,894 increase in
inventories and the $14,024 increase in other current assets as a result of
the deferral of advertising and promotion costs during interim quarters.
Working capital decreased to $135,527 at May 31, 1994, compared with $151,195
at February 28, 1994, and the current ratio decreased to 1.6:1 from 1.7:1.
Capital spending decreased to $6,516 from $8,456 in the first quarter 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 output and efficiencies.
The total debt to capitalization ratio decreased to 42.5%, compared with
45.8% at year end as total debt decreased to $149,264 from $168,351. The
excess cash provided from the lower working capital needs was used for the
repayment of borrowings. In March of 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 April 12, 1994, the Company's Board of Directors declared a quarterly
dividend of six cents per share to Common stockholders and one cent per share
to Class B Common stockholders, payable May 27 to holders of record on
May 13, 1994.
Management believes that funds provided from operations and present credit
arrangements will be sufficient to meet the Company's anticipated working
capital needs and capital expenditure requirements.
-8-
<PAGE>
HELENE CURTIS INDUSTRIES, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's Annual Meeting of Stockholders held on June 28, 1994,
the following matters were voted upon:
1) Marshall L. Burman, Frank W. Considine and Ronald J. Gidwitz were
re-elected as directors to serve until the 1997 Annual Meeting.
The votes were cast in the following manner:
FOR WITHHELD
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Marshall L. Burman 35,823,983 49,822
Frank W. Considine 35,823,983 49,822
Ronald J. Gidwitz 35,822,429 51,376
2) The material terms of the Company's Executive Management Incentive
Plan, which authorizes a performance-based bonus for certain
executive officers, were ratified. The votes were cast in the
following manner:
For 35,565,840
Against 265,406
Abstain 42,559
3) The material terms of the Company's 1994 Stock Appreciation Right
Plan, which authorizes the issuance of up to 2,000,000 stock
appreciation rights, were ratified. The votes were cast in the
following manner:
For 34,490,973
Against 1,340,598
Abstain 42,234
4) The appointment of Coopers & Lybrand to serve as the Company's
independent accountants for the fiscal year ended February 28, 1995
was ratified. The votes were cast in the following manner:
For 35,845,917
Against 11,115
Abstain 16,773
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<PAGE>
HELENE CURTIS INDUSTRIES, INC. AND SUBSIDIARIES
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit A - Computations of Earnings per Share
Matters Submitted to a Vote of Security Holders - Definitive Proxy
Material for the Company's Annual Meeting of Stockholders held on
June 28, 1994, filed via EDGAR on May 25, 1994.
(b) Reports on Form 8-K: No reports were filed on Form 8-K during the
quarter ended May 31, 1994.
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.
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(Registrant)
July 14, 1994
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(Date)
/S/ MARY J. OYER
--------------------------------------
(Signature)
MARY J. OYER
Vice President, Corporate Controller
and Principal Accounting Officer
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<PAGE>
HELENE CURTIS INDUSTRIES, INC. AND SUBSIDIARIES
Exhibit A: COMPUTATIONS OF EARNINGS PER SHARE
(Dollar amounts in thousands, except per-share data)
<TABLE>
<CAPTION>
For the Three Months
Ended May 31,
----------------------------
1994 1993
---------- ----------
<S> <C> <C>
Primary earnings (loss) per share:
Net earnings (loss) $ 1,436 $ (517)
========== ==========
Weighted average number of
shares outstanding:
Common and Class B
Common Shares 9,443,785 9,385,338
Common stock equivalents 13,812 151,943
---------- ----------
Total 9,457,597 9,537,281
========== ==========
Primary earnings (loss) per share $ .15 $ (.05)
========== ==========
Fully diluted earnings (loss) per share:
Net earnings (loss) $ 1,436 $ (517)
========== ==========
Weighted average number of
shares outstanding:
Common and Class B
Common Shares 9,443,785 9,385,338
Common stock equivalents 12,433 150,560
---------- ----------
Total 9,456,218 9,535,898
========== ==========
Fully diluted earnings (loss)
per share $ .15 $ (.05)
========== ==========
</TABLE>
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%.
