<PAGE> 1
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 MAY 31, 1995
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 May 31, 1995, there were 6,847,730 shares of Common Stock and 3,048,029
shares of Class B Common Stock outstanding.
<PAGE> 2
Helene Curtis Industries, Inc. and Subsidiaries
Index
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Statements of Earnings for the Three Months
Ended May 31, 1995 and 1994 3
Consolidated Balance Sheets as of May 31, 1995 and 4
February 28, 1995
Consolidated Statements of Cash Flows for the Three Months
Ended May 31, 1995 and 1994 5
Notes to Consolidated Financial Statements 6-7
Item 2. Management's Discussion and Analysis 8-10
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURE 12
EXHIBIT 11 - Computation of Earnings Per Share 13
EXHIBIT 27 - Financial Data Schedule (submitted with EDGAR filing)
</TABLE>
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<PAGE> 3
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
Ended May 31,
----------------------------
1995 1994
--------- ---------
<S> <C> <C>
Net sales $ 270,857 $ 265,670
--------- ---------
Costs and expenses:
Cost of sales 121,619 116,432
Selling, general and administrative 146,622 144,449
Interest 2,256 2,080
--------- ---------
270,497 262,961
--------- ---------
Earnings before income taxes 360 2,709
Provision for income taxes 169 1,273
--------- ---------
Net earnings $ 191 $ 1,436
========= =========
Net earnings per share $ .02 $ .15
========= =========
Average number of shares outstanding 9,524,008 9,457,597
========= =========
Cash dividends per share:
Common Stock $ .08 $ .06
Class B Common Stock $ .03 $ .01
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
-3-
<PAGE> 4
Helene Curtis Industries, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
(Unaudited)
May 31, February 28,
1995 1995
----------- ------------
<S> <C> <C>
Assets
Current assets:
Cash and equivalents $ 14,574 $ 5,136
Receivables-net 217,888 270,824
Inventories 138,036 108,178
Other current assets 35,783 22,029
--------- ---------
Total current assets 406,281 406,167
--------- ---------
Property, plant and equipment 323,840 315,545
Less accumulated depreciation 107,419 100,209
--------- ---------
Net property, plant and equipment 216,421 215,336
--------- ---------
Other assets 25,957 25,329
--------- ---------
Total assets $ 648,659 $ 646,832
========= =========
Liabilities and stockholders' equity
Current liabilities:
Short-term debt $ 8,023 $ 6,706
Accounts payable 122,533 121,199
Income taxes 4,292 15,099
Advertising and promotion 62,755 62,193
Other accrued expenses 46,864 48,385
--------- ---------
Total current liabilities 244,467 253,582
Long-term debt 141,751 137,248
Deferred income taxes 11,688 11,686
Accrued retirement and other benefits 26,566 23,898
--------- ---------
Total liabilities 424,472 426,414
--------- ---------
Stockholders' equity:
Common Stock, issued 7,946,111 shares
(May) and 7,933,611 shares (Feb.) 3,973 3,967
Class B Common Stock, issued 3,048,029
shares (May) and 3,060,529 shares (Feb.) 1,524 1,530
Capital in excess of par value 42,998 42,027
Retained earnings 177,549 177,997
Currency translation adjustment 9,039 5,539
Treasury Stock (Common), 1,098,381 shares
(May) and 1,123,990 shares (Feb.), at cost (10,896) (10,642)
--------- ---------
Total stockholders' equity 224,187 220,418
--------- ---------
Total liabilities and stockholders' equity $ 648,659 $ 646,832
========= =========
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
-4-
<PAGE> 5
Helene Curtis Industries, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
For the Three Months
Ended May 31,
----------------------------
1995 1994
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 191 $ 1,436
Adjustments to net earnings:
Depreciation and amortization 8,128 6,806
Other 1,128 895
Changes in operating assets and liabilities:
Receivables-net 64,995 47,122
Inventories (27,479) (11,894)
Other current assets (13,887) (14,024)
Payables and accrued expenses (22,577) 5,995
Other (710) 283
--------- ---------
Net cash provided by operating activities 9,789 36,619
--------- ---------
Cash flows from investing activities:
Capital expenditures (7,593) (6,516)
Other 7 (2)
--------- ---------
Net cash used by investing activities (7,586) (6,518)
--------- ---------
Cash flows from financing activities:
Proceeds from borrowings 6,338 585
Repayment of borrowings (442) (19,780)
Dividends paid (639) (439)
Other (156) -
--------- ---------
Net cash provided (used) by financing activities 5,101 (19,634)
--------- ---------
Effect of exchange rate changes on cash and
equivalents 2,134 533
--------- ---------
Increase in cash and equivalents 9,438 11,000
Cash and equivalents at beginning of period 5,136 2,802
--------- ---------
Cash and equivalents at end of period $ 14,574 $ 13,802
========= =========
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
-5-
<PAGE> 6
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 herein. 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, 1995. The
consolidated balance sheet as of February 28, 1995 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 $6,965 and $6,659 for the three months ended May 31, 1995 and
1994, respectively.
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<PAGE> 7
Helene Curtis Industries, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in thousands)
3. Receivables
Receivables, principally trade, consist of the following amounts:
<TABLE>
<CAPTION>
May 31, 1995 February 28, 1995
------------ -----------------
<S> <C> <C>
Accounts receivable $170,344 $210,755
Notes receivable 53,889 66,282
-------- --------
224,233 277,037
Less allowance for doubtful accounts 6,345 6,213
-------- --------
$217,888 $270,824
======== ========
</TABLE>
4. Inventories
Inventories consist of the following components:
<TABLE>
<CAPTION>
May 31, 1995 February 28, 1995
------------ -----------------
<S> <C> <C>
Raw materials $ 30,150 $ 18,336
Work in process 1,636 3,003
Finished goods 106,250 86,839
--------- ---------
$ 138,036 $ 108,178
========= =========
</TABLE>
-7-
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
Helene Curtis Industries, Inc. and Subsidiaries
RESULTS OF OPERATIONS - THREE MONTHS ENDED MAY 31, 1995 AND 1994
(Dollars in thousands)
Consolidated net sales for the three months ended May 31, 1995 increased
$5,187, or 2%, compared with the corresponding period last year. Excluding the
benefit of favorable foreign currency translation, overall sales declined less
than a percentage point.
Domestic net sales, accounting for 63% of worldwide net sales, increased 4%
compared with the corresponding period last year. This increase was
attributable primarily to Suave Baby Care (introduced last year at the end of
the first quarter) as well as continued growth in the antiperspirant/deodorant
and skin care categories. The Company's hair care sales in total were flat as
gains for Suave and Finesse were offset by declines for Salon Selectives and
Vibrance.
The U.S. hair care market, the largest market in which the Company competes,
has grown about 4% after several relatively level years. Sales of Suave and
Finesse increased with particularly strong results in both shampoos and
conditioners. Salon Selectives sales decreased due to significantly lower
sales of styling aids. Vibrance sales were down as the brand has just been
reformulated, repackaged and repositioned as Vibrance Organic Care.
The Company's sales growth in the antiperspirant/deodorant category exceeded
the overall U.S. market growth of 5% where Suave and Degree combined for sale
increases of over 9%. In other domestic categories, skin care recorded a 34%
increase led by Suave Skin Therapy Lotions while sales of the Company's
professional or salon business decreased in a declining market.
International net sales, representing 37% of consolidated net sales, decreased
2% (8% in local currency) compared with the corresponding period last year.
This decline was attributable to lower sales in Japan and the United Kingdom
which were partially offset by sales increases in Canada, Australia and U.S.
exports.
Sales in Japan, the Company's largest foreign subsidiary, decreased 17% in
local currency and 8% with the benefit of favorable foreign currency
translation. All of the subsidiary's hair care brands recorded lower sales in
local currency as a result of difficult market and economic circumstances
coupled with increased competition. The compounded effects of the Kobe
earthquake, a surging yen, a weak economy and increasingly aggressive
discounting practices across all major retail segments resulted in shrinking
retail sales for the Company and the hair care industry as a whole. In the
United Kingdom, sales decreased considerably due to the continuing impact of
significant advertising and promotion by the Company's largest competitors and
the disappointing results of last year's restage of Finesse.
-8-
<PAGE> 9
Helene Curtis Industries, Inc. and Subsidiaries
RESULTS OF OPERATIONS - THREE MONTHS ENDED MAY 31, 1995 AND 1994
(Dollars in thousands)
(continued)
In Canada, the continued growth in Salon Selectives and positive response to
initial shipments of Helene Curtis Organic Care contributed to a 13% increase
in sales as compared to the corresponding period last year. Degree
antiperspirant/deodorant sales continued to register strong growth in all
international markets in which it competes including Canada, Australia, New
Zealand and Scandinavia.
Cost of sales increased $5,187, or 4%, attributable partly to higher sales
volume. As a percent of net sales, cost of sales increased to 44.9% in the
current period from 43.8% last year. Changes in product sales mix to lower
margin products and increases in material and packaging costs domestically were
partially offset by negotiated cost decreases in Japan.
Selling, general and administrative expenses increased $2,173, or 2%, equal to
the rate of consolidated net sales increase. As a percent of net sales, these
expenses decreased slightly to 54.1% in the current period from 54.4% last
year, driven by a 3% decrease in advertising and promotion expense. This
decrease reflects lower spending domestically on Salon Selectives and Vibrance
which had higher spending last year in support of new product activity while
spending in Canada and Japan was higher. Lower total advertising and promotion
expenses were offset by higher selling and administrative costs.
Interest expense increased $176, or 8%, as the higher average cost of borrowing
was partially offset by lower average borrowing levels as compared to the same
period a year ago.
The effective tax rate remained constant at 47% in the current period compared
with the prior year.
Net earnings decreased to $191 ($.02 per share) from $1,436 ($.15 per share) in
the prior year. The decrease was attributable primarily to the lower gross
margins which were partly offset by higher sales and lower advertising and
promotion expenses.
-9-
<PAGE> 10
Helene Curtis Industries, Inc. and Subsidiaries
FINANCIAL CONDITION - LIQUIDITY AND CAPITAL RESOURCES
(Dollars in thousands)
Cash and equivalents increased to $14,574, compared with $5,136 at year end.
Capital expenditure requirements were funded through operating cash flows and
increased borrowings.
Net cash provided by operating activities decreased to $9,789 from $36,619 in
the first three months of the prior year. This decrease was attributable to
lower net earnings and increased working capital. Receivables decreased by
$64,995 due to lower sales for the current quarter compared with the fourth
quarter of the prior year. Inventories increased by $27,479 to build levels in
anticipation of historically higher second quarter sales as well as promotional
programs and product line changeovers. The increase in other current assets of
$13,887 was attributable to the deferral of advertising and promotion costs
during interim quarters. Payables and accrued expenses decreased by $22,577
due primarily to the payment in the first quarter of income tax and
compensation related liabilities that were accrued during the prior year.
Working capital increased to $161,814 at May 31, 1995, compared with $152,585
at February 28, 1995. The current ratio increased from 1.60 to 1.66 : 1.
Capital spending increased to $7,593 from $6,516 in the first three months of
the prior year. Capital expenditures in both years reflected primarily a large
number of smaller projects to improve manufacturing and distribution
capabilities and efficiencies.
The total-debt-to-total-capital ratio increased to 40.1%, compared with 39.5%
at year end. The total debt increased to $149,774 from $143,954 with
fixed-cost borrowings representing about 53% of total outstanding debt.
Dividend payments increased to $639 from $439 in the prior year reflecting an
increase in the first quarter dividend to eight cents per share (previously six
cents per share) for Common stockholders and three cents per share (previously
one cent per share) for Class B Common stockholders.
Management believes that funds to be provided from operations and present
credit arrangements will be sufficient to meet anticipated working capital,
capital spending and other funding requirements.
-10-
<PAGE> 11
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 27, 1995, the
following were voted upon:
1) Joseph L. Gidwitz, Michael Goldman and Gilbert P. Smith were
re-elected as directors to serve until the 1998 Annual Meeting. The
votes for the combined total of Common and Class B Common Stock were
cast in the following manner:
<TABLE>
<CAPTION>
Broker
For Withheld Non-votes
--- -------- ---------
<S> <C> <C> <C>
Joseph L. Gidwitz 35,958,034 172,031 0
Michael Goldman 35,961,121 167,943 1,001
Gilbert P. Smith 35,961,471 167,593 1,001
</TABLE>
2) The material terms of an amendment to the Fourth Article of the
Company's Certificate of Incorporation, which increases the number of
authorized shares of capital stock from 35,000,000 to 50,000,000.
The votes for the total of Common Stock and total of Class B Common
Stock were cast in the following manner:
<TABLE>
<CAPTION>
Class B
Common Stock Common Stock
------------ ------------
<S> <C> <C>
For 5,123,015 30,223,070
Against 759,176 4,000
Abstain 19,803 0
Broker Non-votes 1,001 0
</TABLE>
3) The appointment of Coopers & Lybrand to serve as the Company's
independent accountants for the fiscal year ended February 29, 1996.
The votes for the combined total of Common and Class B Common Stock
were cast in the following manner:
<TABLE>
<S> <C>
For 36,105,005
Against 10,999
Abstain 13,059
Broker Non-votes 1,002
</TABLE>
-11-
<PAGE> 12
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)
Matters Submitted to a Vote of Security Holders - Definitive Proxy
Material for the Company's Annual Meeting of Stockholders held on
June 27, 1995, filed via EDGAR on May 25, 1995.
(b) Reports on Form 8-K: No reports were filed on Form 8-K during the
quarter ended May 31, 1995.
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.
(REGISTRANT) Helene Curtis Industries, Inc.
BY (SIGNATURE) S/ Mary J. Oyer
(NAME AND TITLE) Mary J. Oyer, Vice President
and Corporate Controller
DATE July 14, 1995
-12-
<PAGE> 1
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
Ended May 31,
----------------------------
1995 1994
--------- ---------
<S> <C> <C>
Primary earnings per share:
Net earnings $ 191 $ 1,436
========= =========
Weighted average number of
shares outstanding:
Common and Class B Common Shares 9,439,954 9,443,785
Common stock equivalents 84,054 13,812
--------- ---------
Total 9,524,008 9,457,597
========= =========
Primary earnings per share $ 0.02 $ 0.15
========= =========
Fully diluted earnings per share:
Net earnings $ 191 $ 1,436
========= =========
Weighted average number of
shares outstanding:
Common and Class B Common Shares 9,439,954 9,443,785
Common stock equivalents 83,312 12,433
--------- ---------
Total 9,523,266 9,456,218
========= =========
Fully diluted earnings per share $ 0.02 $ 0.15
========= =========
</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%.
-13-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from the Consolidated
Statements of Earnings and Consolidated Balance Sheets on pages 3 and 4, and
footnote three from Page 7, of the Company's Form 10-Q for the period ending May
31, 1995, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1996
<PERIOD-END> MAY-31-1995
<CASH> 14,574
<SECURITIES> 0
<RECEIVABLES> 224,233
<ALLOWANCES> 6,345
<INVENTORY> 138,036
<CURRENT-ASSETS> 406,281
<PP&E> 323,840
<DEPRECIATION> 107,419
<TOTAL-ASSETS> 648,659
<CURRENT-LIABILITIES> 244,467
<BONDS> 141,751
<COMMON> 5,497
0
0
<OTHER-SE> 218,690
<TOTAL-LIABILITY-AND-EQUITY> 648,659
<SALES> 270,857
<TOTAL-REVENUES> 270,857
<CGS> 121,619
<TOTAL-COSTS> 121,619
<OTHER-EXPENSES> 146,622<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,256
<INCOME-PRETAX> 360
<INCOME-TAX> 169
<INCOME-CONTINUING> 191
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 191
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0.02
<FN>
<F1>Represents selling, general and administrative expenses.
</FN>
</TABLE>
