<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934
For the transition period from..............to..............
Commission file number 0-23312
HELEN OF TROY LIMITED
---------------------
(Exact name of registrant as specified in its charter)
Bermuda 74-2692550
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6827 Market Avenue
El Paso, TX 79915
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (915) 779-6363
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
--- ---
As of October 2, 1996 there were 13,053,462 shares of Common Stock, $.10
Par Value, outstanding.
<PAGE> 2
HELEN OF TROY LIMITED AND SUBSIDIARIES
INDEX
Page No.
PART I. FINANCIAL INFORMATION
Item 1 Consolidated Condensed Balance
------ Sheets as of August 31, 1996 and
February 29, 1996...................................3
Consolidated Condensed Statements
of Income for the Three and Six
Months Ended August 31, 1996 and
August 31, 1995.....................................5
Consolidated Condensed Statements
of Cash Flows for the Six Months
Ended August 31, 1996 and
August 31, 1995.....................................6
Notes to Consolidated Condensed
Financial Statements................................8
Item 2 Management's Discussion and Analysis of
------ Financial Condition and Results of
Operations.........................................10
PART II. OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K..........................13
------
SIGNATURES..................................................................14
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
HELEN OF TROY LIMITED AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands, except shares)
<TABLE>
<CAPTION>
August 31, February 29,
1996 1996
---- ----
(unaudited)
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 28,715 $ 44,195
Receivables - principally trade,
less allowance for doubtful
receivables of $849 at August 31, 1996
and $390 at February 29, 1996 38,938 28,854
Inventories 59,077 48,572
Prepaid expenses 930 422
Deferred income tax benefits 1,183 823
--------- ---------
Total current assets 128,843 122,866
Property and equipment
net of accumulated depreciation of
$3,599 at August 31, 1996 and
$3,229 at February 29, 1996 21,410 15,750
License agreements, at cost, less accumulated
amortization of $6,739 at August 31, 1996
and $6,361 at February 29, 1996 10,313 8,191
Note receivable 772 1,006
Other assets, net of amortization 6,790 6,775
--------- ---------
Total assets $ 168,128 $ 154,588
========= =========
</TABLE>
(continued)
3
<PAGE> 4
HELEN OF TROY LIMITED AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands, except shares)
<TABLE>
<CAPTION>
August 31, February 29,
1996 1996
---- ----
(unaudited)
<S> <C> <C>
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable $ -- $ 2,593
Accounts payable, principally trade 4,502 1,005
Accrued expenses:
Advertising and promotional 5,666 1,740
Other 5,801 4,912
Income taxes payable 2,956 2,010
--------- --------
Total current liabilities 18,925 12,260
Long-term Debt 40,450 40,450
--------- --------
Total liabilities 59,375 52,710
Stockholders' equity:
Cumulative preferred stock, non-voting,
$1.00 par value. authorized 2,000,000
shares; none issued -- --
Common stock, $.10 par value.
Authorized 25,000,000 shares;
issued and outstanding 13,027,362 shares at
August 31, 1996 and 12,965,162 shares at
February 29, 1996 1,303 648
Additional paid-in-capital 25,587 25,863
Retained earnings 81,863 75,367
--------- --------
Total stockholders' equity 108,753 101,878
--------- --------
Commitments and contingencies (Note 2) -- --
Total liabilities and stockholders' equity $ 168,128 $154,588
========= ========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
4
<PAGE> 5
HELEN OF TROY LIMITED AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(unaudited)
(in thousands, except shares and earnings per share)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
August 31, August 31,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales $ 50,491 $ 42,682 $ 94,327 $ 76,226
Cost of sales 31,805 25,457 59,301 46,505
---------- ---------- ---------- ----------
Gross profit 18,686 17,225 35,026 29,721
Selling, general and administrative expenses 13,157 12,544 26,275 22,774
---------- ---------- ---------- ----------
Operating income 5,529 4,681 8,751 6,947
Other income (expense):
Interest expense (710) (413) (1,466) (669)
Other income, net 465 77 1,098 235
---------- ---------- ---------- ----------
Total other income (expense) (245) (336) (368) (434)
---------- ---------- ---------- ----------
Earnings before income taxes 5,284 4,345 8,383 6,513
Income tax expense (benefit):
Current 1,376 1,148 2,242 1,671
Deferred (187) (160) (356) (197)
---------- ---------- ---------- ----------
Net earnings $ 4,095 $ 3,357 $ 6,497 $ 5,039
========== ========== ========== ==========
Net earnings per common and common equivalent
share: (Note 3) - Primary $ .30 $ .25 $ .47 $ .38
Weighted average number of common and common
equivalent shares used in computing net
earnings per share -
Primary 13,801,225 13,426,796 13,709,970 13,402,010
</TABLE>
See accompanying notes to consolidated condensed financial statements.
5
<PAGE> 6
HELEN OF TROY LIMITED AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
<TABLE>
<CAPTION>
Six Months Ended
May 31,
1996 1995
---- ----
<S> <C> <C
Cash flows from operating activities:
Net earnings $ 6,497 $ 5,039
Adjustments to reconcile net income
to net cash used by operating activities:
Depreciation and amortization 1,202 1,089
Provision for doubtful receivables 459 69
Provision for deferred tax benefit (360) (198)
Changes in operating assets and liabilities:
Accounts receivable (10,543) (11,300)
Inventory (10,505) (13,108)
Prepaid expenses (508) (563)
Accounts payable 3,497 559
Accrued expenses 4,815 3,761
Income taxes payable 946 531
------- --------
Net cash used by
operating activities (4,500) (14,121)
Cash flows from investing activities:
Capital and license expenditures (8,510) (1,283)
Other assets (489) 22
Collection on note receivable 234 207
------- --------
Net cash used by investing activities (8,765) (1,054)
</TABLE>
(continued)
6
<PAGE> 7
HELEN OF TROY LIMITED AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
<TABLE>
<CAPTION>
Six Months Ended
May 31,
1996 1995
---- ----
<S> <C> <C>
Cash flows from financing activities:
Net payments on revolving
line of credit (2,593) 700
Proceeds from exercise of options 378 232
-------- -------
Net cash used by financing activities (2,215) 932
-------- -------
Net decrease in cash and cash equivalents (15,480) (14,243)
-------- -------
Cash and cash equivalents, beginning of period 44,195 31,917
-------- -------
Cash and cash equivalents, end of period $ 28,715 $17,674
======== =======
Supplemental cash flow disclosures:
Interest paid $ 1,530 $ 639
Income taxes paid, net of refund 1,189 669
</TABLE>
See accompanying notes to consolidated condensed financial statements.
7
<PAGE> 8
HELEN OF TROY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENT
August 31, 1996
Note 1 - In the opinion of the Company, the accompanying
consolidated condensed financial statements contain all
adjustments (consisting of only normal recurring
adjustments) necessary to present fairly its financial
condition and the results of its operations for the
periods ended August 31, 1996 and 1995. While the Company
believes that the disclosures presented are adequate to
make the information not misleading, it is suggested that
these statements be read in conjunction with the financial
statements and the notes included in the Company's latest
annual report on Form 10-K.
Note 2 - The Company is involved in various claims and legal
actions arising in the ordinary course of business. In
the opinion of management, the ultimate disposition of
such claims and legal actions will not have a material
adverse effect on the financial position of the Company.
As of August 31, 1996, the Company has unused advertising
credits, with a carrying amount of $3,198,000 which are
available until used. Benefits to be received by the
Company from utilization of all remaining credits could
exceed the carrying amount. In July 1995, the company
which is obligated to provide advertising in connection
with the credits (the Bankrupt Entity) filed a voluntary
Chapter 11 petition in the United States Bankruptcy Court
(Court). Through September 25, 1996, a plan of
reorganization had not been filed in the bankruptcy
proceedings and the Court had not ruled as to the
treatment of the Company's advertising credits.
Management has been informed that counsel for the
Bankruptcy Entity has petitioned in Court for approval to
classify or treat these barter credits as executory
contracts. If the Court determines that barter credits
are executory contracts and the Bankrupt Entity emerges
from Chapter 11, the Company could realize the full value
of the barter credits. In the event the Court rules that
the advertising credits represent unsecured liabilities of
the Bankrupt Entity, the value of the advertising credits
to the Company would be reduced significantly, and
therefore, this reduction in the value of the advertising
credits would be charged against income in the fiscal
quarter in which that determination were made. The loss
of these credits to the Company would have no impact on
the liquidity or the future operations of the Company.
The ultimate outcome of the bankruptcy proceeding cannot
currently be determined.
(continued)
8
<PAGE> 9
Note 3 - Primary earnings per common and common equivalent share
are computed based upon the weighted average number of
common shares plus common share equivalents (dilutive
stock options and warrants) outstanding during the period.
Fully diluted earnings per share is based on the weighted
average number of common shares plus equivalents
determined on the basis of maximum potential dilution from
stock options and warrants. Earnings per common and
common equivalent share, assuming full dilution, is not
materially dilutive for any of the periods presented.
Note 4 - The business of the Company is seasonal with greater than
60% of annual sales volume normally occurring in the
second and third fiscal quarters.
Note 5 - On June 4, 1996, the Company's Directors approved a
2-for-1 stock split which was paid as a 100% stock
dividend. The stock dividend was paid on July 1, 1996 to
stockholders of record on June 17, 1996. All references
in the financial statements to number of shares and per
share amounts of the Company's common stock have been
retroactively restated to reflect the increased number of
common shares outstanding.
Note 6 - During September 1996, the Company's U.S. subsidiary and
the Internal Revenue Service (IRS) completed a settlement
which closes all tax years up to and including the year
ended February 28, 1993. Additionally, the settlement
with the IRS is applicable to certain types of foreign
source income for the year ended February 28, 1994. As
discussed in the Company's February 29, 1996 annual report
on Form 10-K, all payments made with respect to the
settlement had been provided for in previous years.
Note 7- On October 4, 1996 the Company acquired the assets of two
personal care lines of the Dazey Corp., of Kansas City,
Missouri. Included in the purchase are certain
inventories, designs, equipment, tooling, license rights
and trademarks for existing products bearing the Dazey,
Carel and Dr. Scholl's trade names.
9
<PAGE> 10
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Quarter ended August 31, 1996
Net sales increased $7,809,000 during the three month period ended August 31,
1996, an 18% increase in net sales when compared with the quarter ended August
31, 1995. The increase is attributable to increased market share. Gains were
registered in both the consumer sales division and the professional salon
division. Hair care appliance sales make up the great majority of consumer
products division volume. The introduction of new hair care appliance models,
increased brush and comb sales, and sales of hair care accessories were the
primary causes of the market share increase.
Gross profit for the quarter ended August 31, 1996 was 37%, as compared with
40% for the quarter ended August 31, 1995. The 40% gross profit margin in the
second quarter of the prior year was higher than normal, which was about 37 to
38 percent. The second quarter fiscal 1997 gross profit margin is about the
same as in the first quarter of this year.
Selling, general and administrative expenses decreased as a percentage of sales
to 26% in the quarter ended August 31, 1996 as compared to 29% for the same
quarter in 1995. This decrease, as a percent of net sales, was primarily due
to the relatively fixed nature of some expenses.
Interest expense for the quarter ended August 31, 1996, increased over interest
expense for the same quarter in the previous year due to the $40,000,000 in
senior notes issued by the Company's US subsidiary in January, 1996. The
issuance of those notes, net of payment of outstanding bank loans, resulted in
increased investments in short term securities, which increased interest
income.
Six-month period ended August 31, 1996
Net sales increased $18,101,000 for the six-month period ended August 31, 1996,
when compared with the same period in 1995. The reason for the 24% increase is
discussed above.
The Company's gross profit margin for the six-month period ended August 31,
1996, decreased to 37% from 39% for the six- month period ended August 31,
1995. The higher gross profit rate of the prior year was above the normal
rate, which is in line with the fiscal 1997 rate of 37%.
(continued)
10
<PAGE> 11
Selling, general and administrative expenses decreased to 28% during the
six-month period ended August 31, 1996, when compared with 30% for the same
period during 1995. The decrease, as a percent of net sales, was due primarily
to the relatively fixed nature of expenses associated with increased sales
during the six-month period ended August 31, 1996.
Interest expense for the six-month period ended August 31, 1996, increased over
interest expense for the six-month period ended August 31, 1995, due to the
$40,000,000 in senior notes issued by the Company's US subsidiary in January,
1996. The issuance of those notes, net of payment of outstanding bank loans,
resulted in increased investments in short term securities, which increased
interest income.
Liquidity and Capital Resources
Cash and cash equivalents declined to $28,715,000 at August 31, 1996 from
$44,195,000 at February 29, 1996, primarily due to the seasonal increase in
accounts receivable and inventory balances and also to the use of internal
funds to finance the construction of a new company owned distribution facility.
Subsequent to August 31, 1996, the Company acquired the assets of two personal
care lines of the Dazey Corp., of Kansas City, Missouri. The purchase price
was made from internal funds.
Receivables increased to $38,938,000 at August 31, 1996 from $28,854,000 at
February 29, 1996, and inventory increased to $59,077,000 at August 31, 1996
from $48,572,000 at February 29, 1996. These increases relate to the seasonal
increase in sales in the second fiscal quarter as compared to the fourth fiscal
quarter.
The Company's working capital was $109,918,000 at August 31, 1996 and the
current ratio was 6.8 to 1. Short term debt decreased $2,593,000 from February
29, 1996 to August 31, 1996.
The Company believes its capital resources are adequate to finance all
anticipated funding requirements. Additionally, the Company believes that
funds are available to finance the construction of a central distribution
facility, which accounts for the increase in property and equipment from
February 29, 1996 to August 31, 1996.
Contingencies
As of August 31, 1996, the Company has unused advertising credits, with a
carrying amount of $3,198,000 which are available until used. Benefits to be
received by the Company from utilization of all remaining credits could exceed
the carrying amount. In July 1995, the company which is obligated to provide
advertising in connection with the credits (the Bankrupt Entity) filed
(continued)
11
<PAGE> 12
a voluntary Chapter 11 petition in the United States Bankruptcy Court (Court).
Through September 25, 1996, a plan of reorganization had not been filed in the
bankruptcy proceedings and the Court had not ruled as to the treatment of the
Company's advertising credits.
Management has been informed that counsel for the Bankruptcy Entity has
petitioned in Court for approval to classify or treat these barter credits as
executory contracts. If the Court determines that barter credits are executory
contracts and the Bankrupt Entity emerges from Chapter 11, the Company could
realize the full value of the barter credits. In the event the Court rules
that the advertising credits represent unsecured liabilities of the Bankrupt
Entity, the value of the advertising credits to the Company would be reduced
significantly, and therefore, this reduction in the value of the advertising
credits would be charged against income in the fiscal quarter in which that
determination were made. The loss of these credits to the company would have
no impact on the liquidity or the future operations of the Company. The
ultimate outcome of the bankruptcy proceeding cannot currently be determined.
12
<PAGE> 13
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11 Earnings Per Share Computation
27 Financial Data Schedule
13
<PAGE> 14
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.
HELEN OF TROY LIMITED
---------------------
(Registrant)
Date October 8, 1996 s/Gerald J. Rubin
---------------------------- ----------------------------------
Gerald J. Rubin
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
Date October 8, 1996 s/Sam L. Henry
----------------------------- ----------------------------------
Sam L. Henry
Senior Vice-President, Finance,
and Chief Financial Officer
(Principal Financial Officer)
14
<PAGE> 15
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
----------- -----------
11 Computation of Earnings per Share
27 Financial Date Schedule
15
<PAGE> 1
Exhibit 11
HELEN OF TROY LIMITED AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
August 31, August 31,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Primary earnings per Share:
Weighted average number of
common shares outstanding 13,021,169 12,891,354 12,993,766 12,872,964
Increase in weighted average
number of common shares outstanding
due to options and warrants 780,056 535,442 716,204 529,046
Weighted average number of
common shares outstanding, as adjusted 13,801,225 13,426,796 13,709,970 13,402,010
Net earnings $ 4,095,000 $ 3,357,000 $ 6,497,000 $ 5,039,000
Net earnings per common and
common equivalent share $ .30 $ .25 $ .47 $ .38
Fully Diluted Earnings per Share:
Weighted average number of
common shares outstanding 13,021,169 12,891,354 12,993,766 12,872,964
Increase in weighted average
number of common shares outstanding
due to options and warrants 803,402 558,280 801,326 582,036
Weighted average number of
common shares outstanding, as adjusted 13,824,571 13,449,634 13,795,092 13,455,000
Net earnings $ 4,095,000 $ 3,357,000 $ 6,497,000 $ 5,039,000
Net earnings per common and
common equivalent share,
assuming full dilution $ .30 $ .25 $ .47 $ .38
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED, CONDENSED FINANCIAL STATEMENTS OF HELEN OF TORY LIMITED AND
SUBSIDIARIES AS OF, AND FOR THE 3-MONTH PERIOD ENDED AUGUST 31, 1996, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-END> AUG-31-1996
<CASH> 28,715,000
<SECURITIES> 0
<RECEIVABLES> 39,787,000
<ALLOWANCES> 849,000
<INVENTORY> 59,077,000
<CURRENT-ASSETS> 128,843,000
<PP&E> 25,009,000
<DEPRECIATION> 3,599,000
<TOTAL-ASSETS> 168,128,000
<CURRENT-LIABILITIES> 18,925,000
<BONDS> 40,450,000
0
0
<COMMON> 1,303,000
<OTHER-SE> 107,450,000
<TOTAL-LIABILITY-AND-EQUITY> 168,128,000
<SALES> 50,491,000
<TOTAL-REVENUES> 50,491,000
<CGS> 31,805,000
<TOTAL-COSTS> 31,805,000
<OTHER-EXPENSES> 13,157,000
<LOSS-PROVISION> 648,000
<INTEREST-EXPENSE> 710,000
<INCOME-PRETAX> 5,284,000
<INCOME-TAX> 1,189,000
<INCOME-CONTINUING> 4,095,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,095,000
<EPS-PRIMARY> .30
<EPS-DILUTED> .30
</TABLE>
