<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 AUGUST 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 August 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 and
Six Months Ended August 31, 1995 and 1994 3
Consolidated Balance Sheets as of August 31, 1995 and 4
February 28, 1995
Consolidated Statements of Cash Flows for the Six Months
Ended August 31, 1995 and 1994 5
Notes to Consolidated Financial Statements 6-7
Item 2. Management's Discussion and Analysis 8-12
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURE 13
EXHIBIT 11 - Computation of Earnings Per Share 14
EXHIBIT 27 - Financial Data Schedule (submitted with EDGAR filing)
</TABLE>
-2-
<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 For the Six Months
Ended August 31, Ended August 31,
--------------------- -------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales $ 352,265 $ 352,539 $ 623,122 $ 618,209
---------- ---------- ---------- ----------
Costs and expenses:
Cost of sales 162,731 159,575 284,350 276,007
Selling, general and administrative 173,389 178,231 320,011 322,680
Interest 2,539 2,285 4,795 4,365
---------- ---------- ---------- ----------
338,659 340,091 609,156 603,052
---------- ---------- ---------- ----------
Earnings before income taxes 13,606 12,448 13,966 15,157
Provision for income taxes 6,395 5,851 6,564 7,124
---------- ---------- ---------- ----------
Net earnings $ 7,211 $ 6,597 $ 7,402 $ 8,033
========== ========== ========== ==========
Net earnings per share $ .76 $ .70 $ .78 $ .85
========== ========== ========== ==========
Average number of shares outstanding 9,491,300 9,476,716 9,507,654 9,467,156
========== ========== ========== ==========
Cash dividends per share:
Common Stock $ .08 $ .06 $ .16 $ .12
Class B Common Stock $ .08 $ .06 $ .11 $ .07
</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)
August 31, February 28,
1995 1995
------------ ------------
<S> <C> <C>
Assets
Current assets:
Cash and equivalents $ 4,573 $ 5,136
Receivables-net 251,374 270,824
Inventories 129,198 108,178
Other current assets 35,414 22,029
--------- ----------
Total current assets 420,559 406,167
--------- ----------
Property, plant and equipment 330,638 315,545
Less accumulated depreciation 114,550 100,209
--------- ----------
Net property, plant and equipment 216,088 215,336
--------- ----------
Other assets 25,828 25,329
--------- ----------
Total assets $ 662,475 $ 646,832
========= ==========
Liabilities and stockholders' equity
Current liabilities:
Short-term debt $ 9,511 $ 6,706
Accounts payable 125,635 121,199
Income taxes 11,942 15,099
Advertising and promotion 48,864 62,193
Other accrued expenses 52,791 48,385
--------- ----------
Total current liabilities 248,743 253,582
Long-term debt 143,565 137,248
Deferred income taxes 11,688 11,686
Accrued retirement and other benefits 27,159 23,898
--------- ----------
Total liabilities 431,155 426,414
--------- ----------
Stockholders' equity:
Common Stock, issued 7,946,111 shares
(Aug.) and 7,933,611 shares (Feb.) 3,973 3,967
Class B Common Stock, issued 3,048,029
shares (Aug.) and 3,060,529 shares (Feb.) 1,524 1,530
Capital in excess of par value 42,998 42,027
Retained earnings 183,969 177,997
Currency translation adjustment 9,752 5,539
Treasury Stock (Common), 1,098,381 shares
(Aug.) and 1,123,990 shares (Feb.), at cost (10,896) (10,642)
--------- ----------
Total stockholders' equity 231,320 220,418
--------- ----------
Total liabilities and stockholders' equity $ 662,475 $ 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 Six Months
Ended August 31,
-------------------
1995 1994
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 7,402 $ 8,033
Adjustments to net earnings:
Depreciation and amortization 16,582 13,625
Other 2,208 2,873
Changes in operating assets and liabilities:
Receivables-net 36,808 3,559
Inventories (17,304) (6,775)
Other current assets (11,607) (815)
Payables and accrued expenses (26,486) 19,683
Other (2,667) 542
--------- ---------
Net cash provided by operating activities 4,936 40,725
--------- ---------
Cash flows from investing activities:
Capital expenditures (13,927) (12,198)
Other 7 78
--------- ---------
Net cash used by investing activities (13,920) (12,120)
--------- ---------
Cash flows from financing activities:
Proceeds from borrowings 9,789 3,317
Repayment of borrowings (600) (19,948)
Dividends paid (1,430) (1,031)
Other (156) (32)
--------- ---------
Net cash provided (used) by financing activities 7,603 (17,694)
--------- ---------
Effect of exchange rate changes on cash and
equivalents 818 1,346
--------- ---------
Increase (decrease) in cash and equivalents (563) 12,257
Cash and equivalents at beginning of period 5,136 2,802
--------- ---------
Cash and equivalents at end of period $ 4,573 $ 15,059
========= =========
</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 $7,598 and $14,563 for the three and six months ended August 31,
1995, respectively, and $7,102 and $13,761 for the three and six months
ended August 31, 1994, respectively.
-6-
<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>
August 31, 1995 February 28, 1995
--------------- -----------------
<S> <C> <C>
Accounts receivable $200,841 $210,755
Notes receivable 55,763 66,282
-------- --------
256,604 277,037
Less allowance for doubtful accounts 5,230 6,213
-------- --------
$251,374 $270,824
======== ========
</TABLE>
4. Inventories
Inventories consist of the following components:
<TABLE>
<CAPTION>
August 31, 1995 February 28, 1995
--------------- -----------------
<S> <C> <C>
Raw materials $ 32,104 $ 18,336
Work in process 2,580 3,003
Finished goods 94,514 86,839
-------- --------
$129,198 $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 AUGUST 31, 1995 AND 1994
(Dollars in thousands)
Consolidated net sales for the three months ended August 31, 1995, were
$352,265 compared with the $352,539 in the corresponding period last year.
Excluding the benefit of favorable foreign currency translation, overall sales
declined almost four percentage points.
Domestic net sales, accounting for 68% of worldwide net sales, increased 1%
compared with the corresponding period last year. This increase was
attributable primarily to continued growth in the antiperspirant/deodorant and
skin care categories.
The Company's U.S. hair care sales in total were down 2% as gains for Suave
were offset by declines for Salon Selectives, Finesse and Vibrance. Sales of
Suave increased with particularly strong results in both shampoos and
conditioners. Salon Selectives and Finesse sales decreased due to
significantly lower sales of styling aids. Vibrance sales were also 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 where Suave and Degree combined for a sales
increase of over 20%. In other domestic categories, skin care recorded a 16%
increase led by Suave Skin Therapy Lotions while sales of the Company's
professional or salon business decreased 16% as the market continued to
decline.
International net sales, representing 32% of consolidated net sales, decreased
3% (14% in local currency) compared with the corresponding period last year.
This decline was attributable primarily to lower sales in Japan and the United
Kingdom which were adversely impacted by the same economic and competitive
circumstances experienced in the first quarter.
Sales in Japan, the Company's largest foreign subsidiary, decreased 17% in
local currency and increased 1% 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 the combined effects of a weak economy,
aggressive industry-wide discounting practices and increased competitive
activity. 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 AUGUST 31, 1995 AND 1994
(Dollars in thousands)
(continued)
In Canada, lower sales in Salon Selectives and Finesse were partly offset by
the positive response to initial shipments of Helene Curtis Organic Care.
Degree antiperspirant/deodorant sales continued to register strong growth in
all international markets in which the brand competes including Canada,
Australia, New Zealand and Scandinavia.
Cost of sales increased $3,156, or 2%, despite the slightly lower sales volume.
As a percent of net sales, cost of sales increased to 46.2% in the current
period from 45.3% last year. The increase is attributable to changes in
product sales mix to lower margin products and increases in material and
packaging costs.
Selling, general and administrative expenses decreased $4,842, or 3%. As a
percent of net sales, these expenses decreased to 49.2% in the current period
from 50.6% last year, driven by a 7% decrease in advertising and promotion
expense. This decrease reflects lower spending domestically on Finesse and
Vibrance while spending in Canada was higher in support of the Organic Care
introduction. Lower total advertising and promotion expenses were offset by
higher selling expense and increased investment in research and development.
Interest expense increased $254, or 11%, attributable to the higher average
cost of borrowing 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 increased to $7,211 ($.76 per share) from $6,597 ($.70 per share)
in the prior year. The increase was attributable primarily to lower advertising
and promotion expenses which were partly offset by lower gross margins. On a
geographic basis, earnings were lower in Japan and the UK as a result of the
impact of economic and competitive pressures on sales. Earnings from other
international businesses declined reflecting primarily the launch of Organic
Care in Canada. These declines in our international business overall were
offset by the continued improvement in the U.S. consumer business.
-9-
<PAGE> 10
Helene Curtis Industries, Inc. and Subsidiaries
RESULTS OF OPERATIONS - SIX MONTHS ENDED AUGUST 31, 1995 AND 1994
(Dollars in thousands)
Consolidated net sales for the six months ended August 31, 1995, increased
$4,913, or 1%, compared with the corresponding period last year. Excluding the
benefit of favorable foreign currency translation, overall sales declined about
two percentage points.
Domestic net sales, accounting for 66% of worldwide net sales, increased 3%
compared with the corresponding period last year. This increase was
attributable primarily to continued growth in the antiperspirant/deodorant and
skin care categories. The Company's hair care sales in total were down 1% 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 4% where Suave and Degree combined for a
sales increase of over 15%. In other domestic categories, skin care recorded a
23% increase led by Suave Skin Therapy Lotions and sales of Suave Baby Care
(introduced at the end of the first quarter last fiscal year) were also higher.
Sales of the Company's professional or salon business decreased 21% as the
market continued to decline.
International net sales, representing 34% of consolidated net sales, decreased
2% (11% 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 3% 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 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.
-10-
<PAGE> 11
Helene Curtis Industries, Inc. and Subsidiaries
RESULTS OF OPERATIONS - SIX MONTHS ENDED AUGUST 31, 1995 AND 1994
(Dollars in thousands)
(continued)
In Canada, the positive response to initial shipments of Helene Curtis Organic
Care and continued growth in Salon Selectives were offset mostly by lower sales
of Finesse. Degree antiperspirant/deodorant sales continued to register strong
growth in all international markets in which the brand competes including
Canada, Australia, New Zealand and Scandinavia.
Cost of sales increased $8,343, or 3%, attributable partly to higher sales
volume. As a percent of net sales, cost of sales increased to 45.6% in the
current period from 44.6% 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 decreased $2,669, or 1%. As a
percent of net sales, these expenses decreased to 51.4% in the current period
from 52.2% last year, driven by a 5% decrease in advertising and promotion
expense. This decrease reflects lower spending in the U.S. while spending in
Canada was higher in support of the Organic Care introduction. Lower total
advertising and promotion expenses were offset by higher selling and
administrative costs.
Interest expense increased $430, or 10%, attributable to the higher average
cost of borrowing 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 $7,402 ($.78 per share) from $8,033 ($.85 per share)
in the prior year. The decrease was attributable primarily to the lower gross
margins which were partly offset by lower advertising and promotion expenses.
On a geographic basis, earnings were lower in Japan and the UK as a result of
the impact of economic and competitive pressures on sales. Earnings from other
international businesses declined reflecting the launch of Organic Care in
Canada and the Company's recent entry into Mexico. These declines in the
international business overall were offset by the continued improvement in the
U.S. consumer business.
-11-
<PAGE> 12
Helene Curtis Industries, Inc. and Subsidiaries
FINANCIAL CONDITION - LIQUIDITY AND CAPITAL RESOURCES
(Dollars in thousands)
Cash and equivalents decreased to $4,573, 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 $4,936 from $40,725 in
the first six months of the prior year due primarily to increased working
capital. In comparing amounts on August 31, 1995 to the prior year end,
receivables decreased by $36,808 due to lower sales for the current quarter
compared with the fourth quarter of the prior year. Inventories increased by
$17,304 as a result of lower than anticipated sales in Japan and higher raw
material levels in the U.S. The increase in other current assets of $11,607
was attributable to the deferral of advertising and promotion costs during
interim quarters. Payables and accrued expenses decreased by $26,486 due
primarily to the payment of income tax and compensation-related liabilities
that were accrued during the prior year and lower advertising and promotion
accruals in Japan. Working capital increased to $171,816 at August 31, 1995,
compared with $152,585 at February 28, 1995. The current ratio increased from
1.60 to 1.69 : 1.
Capital spending increased to $13,927 from $12,198 in the first six 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 slightly to 39.8%, compared
with 39.5% at year end. The total debt increased to $153,076 from $143,954
with fixed-cost borrowings representing about 52% of total outstanding debt.
Dividend payments increased to $1,430 from $1,031 in the prior year reflecting
an increase of two cents per share for each quarterly cash dividend. On July
11, 1995, the Board of Directors declared the second quarterly cash dividend of
eight cents per share (previously six cents per share) for Common stockholders
and 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.
-12-
<PAGE> 13
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, 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 October 13, 1995
-13-
<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 For the Six Months
Ended August 31, Ended August 31,
--------------------- ---------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Primary earnings per share:
Net earnings $ 7,211 $ 6,597 $ 7,402 $ 8,033
========== ========== ========== ==========
Weighted average number of
shares outstanding:
Common and Class B
Common Shares 9,462,759 9,443,460 9,451,356 9,443,622
Common stock equivalents 28,541 33,256 56,298 23,534
---------- ---------- ---------- ----------
Total 9,491,300 9,476,716 9,507,654 9,467,156
========== ========== ========== ==========
Primary earnings per share $ .76 $ .70 $ .78 $ .85
========== ========== ========== ==========
Fully diluted earnings per share:
Net earnings $ 7,211 $ 6,597 $ 7,402 $ 8,033
========== ========== ========== ==========
Weighted average number of
shares outstanding:
Common and Class B
Common Shares 9,462,759 9,443,460 9,451,356 9,443,622
Common stock equivalents 27,432 76,091 47,364 70,065
----------- ---------- ---------- ----------
Total 9,490,191 9,519,551 9,498,720 9,513,687
========== ========== ========== ==========
Fully diluted earnings per share $ .76 $ .69 $ .78 $ .84
========== ========== ========== ==========
</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%.
-14-
<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
August 31, 1995, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-28-1996
<PERIOD-END> AUG-31-1995
<CASH> 4,573
<SECURITIES> 0
<RECEIVABLES> 256,604
<ALLOWANCES> 5,230
<INVENTORY> 129,198
<CURRENT-ASSETS> 420,559
<PP&E> 330,638
<DEPRECIATION> 114,550
<TOTAL-ASSETS> 662,475
<CURRENT-LIABILITIES> 248,743
<BONDS> 143,565
<COMMON> 5,497
0
0
<OTHER-SE> 225,823
<TOTAL-LIABILITY-AND-EQUITY> 662,475
<SALES> 623,122
<TOTAL-REVENUES> 623,122
<CGS> 284,350
<TOTAL-COSTS> 284,350
<OTHER-EXPENSES> 320,011<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,795
<INCOME-PRETAX> 13,966
<INCOME-TAX> 6,564
<INCOME-CONTINUING> 7,402
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,402
<EPS-PRIMARY> 0.78
<EPS-DILUTED> 0.78
<FN>
<F1>Represents selling, general and administrative expenses.
</FN>
</TABLE>
