<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, 1997
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 8, 1997 there were 27,019,792 shares of Common Stock,
$.10 Par Value, outstanding.
<PAGE> 2
HELEN OF TROY LIMITED AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1 Consolidated Condensed Balance
Sheets as of August 31, 1997 and
February 28, 1997.............................. 3
Consolidated Condensed Statements
of Income for the Three and Six
Months Ended August 31, 1997 and
August 31, 1996................................ 5
Consolidated Condensed Statements
of Cash Flows for the Six Months
Ended August 31, 1997 and
August 31, 1996................................ 6
Notes to Consolidated Condensed
Financial Statements........................... 8
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of
Operations..................................... 9
PART II. OTHER INFORMATION
Item 5 Other Information......................................... 11
Item 6 Exhibits and Reports on Form 8-K......................... 11
SIGNATURES................................................................. 12
</TABLE>
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 28,
1997 1997
---------- ----------
(unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 40,464 $ 25,798
Receivables - principally trade,
less allowance for doubtful
receivables of $484 at August 31, 1997
and $400 at February 28, 1997 50,007 36,951
Inventories 64,670 68,267
Prepaid expenses 3,189 939
Deferred income tax benefits 1,210 1,276
---------- ----------
Total current assets 159,540 133,231
Property and equipment
net of accumulated depreciation of
$4,599 at August 31, 1997 and
$3,983 at February 28, 1997 25,354 25,780
License agreements, at cost, less accumulated
amortization of $7,560 at August 31, 1997
and $7,117 at February 28, 1997 9,492 9,935
Note receivable 288 522
Other assets, net of amortization 15,516 12,758
---------- ----------
Total assets $ 210,190 $ 182,226
========== ==========
</TABLE>
(Continued)
3
<PAGE> 4
HELEN OF TROY LIMITED AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands, except shares)
<TABLE>
<CAPTION>
August 31, February 28,
1997 1997
---------- ----------
(unaudited)
<S> <C> <C>
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable $ -- $ 4,001
Accounts payable, principally trade 786 2,645
Accrued expenses:
Advertising and promotional 6,292 2,580
Other 6,816 6,934
Income taxes payable 7,965 5,134
---------- ----------
Total current liabilities 21,859 21,294
Long-term debt 55,450 40,450
---------- ----------
Total liabilities 77,309 61,744
Stockholders' equity:
Cumulative preferred stock, non-voting,
$1.00 par value. Authorized 2,000,000
shares; none issued -- --
Common stock, $.10 par value
Authorized 50,000,000 shares; issued and outstanding
27,008,692 shares at August 31, 1997 and 26,286,874 shares at
February 28, 1997 1,350 1,314
Additional paid-in-capital 29,557 26,643
Retained earnings 101,974 92,525
---------- ----------
Total stockholders' equity 132,881 120,482
---------- ----------
Commitments and contingencies (Note 2) -- --
Total liabilities and stockholders' equity $ 210,190 $ 182,226
========== ==========
</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,
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $ 60,929 $ 50,491 $ 113,356 $ 94,327
Cost of sales 37,666 31,805 70,303 59,301
------------ ------------ ------------ ------------
Gross profit 23,263 18,686 43,053 35,026
Selling, general and administrative expenses 15,537 13,157 30,460 26,275
------------ ------------ ------------ ------------
Operating income 7,726 5,529 12,593 8,751
Other income (expense):
Interest expense (846) (710) (1,558) (1,466)
Other income, net 729 465 1,157 1,098
------------ ------------ ------------ ------------
Total other income (expense) (117) (245) (401) (368)
------------ ------------ ------------ ------------
Earnings before income taxes 7,609 5,284 12,192 8,383
Income tax expense (benefit):
Current 1,760 1,376 2,676 2,242
Deferred (48) (187) 67 (356)
------------ ------------ ------------ ------------
Net earnings $ 5,897 $ 4,095 $ 9,449 $ 6,497
============ ============ ============ ============
Net earnings per common and common equivalent
share (Note 3) - Primary $ .21 $ .15 $ .33 $ .24
Weighted average number of common and
common equivalent shares used in
computing net earnings per share -
Primary 28,728,096 27,602,450 28,572,212 27,419,940
</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
August 31,
1997 1996
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 9,449 $ 6,497
Adjustments to reconcile net income
to net cash used by operating activities:
Depreciation and amortization 1,893 1,202
Provision for doubtful receivables 84 459
Provision for deferred taxes, net 66 (360)
Gain on sale of assets (282) --
Changes in operating assets and liabilities:
Accounts receivable (13,140) (10,543)
Inventory 3,597 (10,505)
Prepaid expenses (2,250) (508)
Accounts payable (1,859) 3,497
Accrued expenses 3,594 4,815
Income taxes payable 2,831 946
---------- ----------
Net cash provided/(used) by
operating activities 3,983 (4,500)
Cash flows from investing activities:
Capital and license expenditures (1,587) (8,510)
Proceeds from sale of assets 1,678 --
Other assets (3,591) (489)
Collection on note receivable 234 234
---------- ----------
Net cash used by investing activities (3,266) (8,765)
</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
August 31,
1997 1996
---------- ----------
<S> <C> <C>
Cash flows from financing activities:
Net payments on revolving
line of credit (4,001) (2,593)
Proceeds from long-term debt 15,000 --
Proceeds from exercise of options 2,950 378
---------- ----------
Net cash provided/(used) by financing activities 13,949 (2,215)
---------- ----------
Net increase/(decrease) in cash
and cash equivalents 14,666 (15,480)
---------- ----------
Cash and cash equivalents, beginning of period 25,798 44,195
---------- ----------
Cash and cash equivalents, end of period $ 40,464 $ 28,715
========== ==========
Supplemental cash flow disclosures:
Interest paid $ 1,448 $ 1,530
Income tax (refund, net of payments)/taxes paid (213) 1,189
</TABLE>
See accompanying notes to consolidated condensed financial statements.
7
<PAGE> 8
HELEN OF TROY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
August 31, 1997
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 as of August 31, 1997 and February 28, 1997 and
the results of its operations for the periods ended August 31, 1997
and 1996. 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
material adverse affect on the financial position of the Company.
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.
On August 26, 1997, 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 September 22, 1997 to stockholders of record on September 8,
1997. 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 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 July 18, 1997, the Company's US subsidiary issued a Guaranteed
Senior Note at face value of $15,000,000. The Note was issued
pursuant to the Amended and Restated Note Purchase, Guaranty and
Master Shelf Agreement executed on December 31, 1996. Interest is
paid quarterly at a rate of 7.24%. The Note is unconditionally
guaranteed by the Company and is due July 18, 2012. Principal
payments begin in Fiscal 2009.
8
<PAGE> 9
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Quarter ended August 31, 1997
Net sales increased $10,438,000 during the three month period ended August 31,
1997, a 21% increase in net sales when compared with the quarter ended August
31, 1996. The largest volume increases were registered in the appliances
groups, which benefited from market share increases and sales of Dazey, Dr.
Scholl's and Carel products. That business, acquired in October of 1996, was
not included in the prior year results. Sales of artificial nails were first
shipped in this fiscal year.
Gross profit, as a percentage of net sales, for the quarter ended August 31,
1997, was 38%, as compared with 37% for the quarter ended August 31, 1996. The
increased gross profit margin is attributable to a favorable change in the mix
of products sold.
Selling, general and administrative expenses remained relatively constant as a
percentage of net sales at 26% in the quarter ended August 31, 1997, and in the
same quarter in 1996.
Interest expense for the quarter ended August 31, 1997, increased 19% over
interest expense for the same quarter in the previous year due to the increase
in the average outstanding debt balance which resulted from the issuance of the
$15,000,000 Guaranteed Senior Note by the Company's US subsidiary on July 18,
1997. Other income for the quarter ended August 31, 1997, increased 57% over
the amount for the prior year quarter due to a $237,000 gain from sale of land.
Six-month period ended August 31, 1997
Net sales increased $19,029,000 for the six-month period ended August 31, 1997,
a 20% increase in net sales when compared with the same period in 1996. The
largest volume increases were registered in the appliances groups, which
benefited from market share increases and sales of Dazey, Dr. Scholl's and
Carel products. That business, acquired in October of 1996, was not included in
the prior year results. Market share increases were also gained in the brush,
comb and hair accessory group. Sales of artificial nails were first shipped in
this fiscal year.
The Company's gross profit, as a percentage of net sales, for the six-month
period ended August 31, 1997, increased to 38% from 37% for the six-month
period ended August 31, 1996. The reason for this increase for the six-month
period is the same as for the quarter, as discussed above.
Selling, general and administrative expenses decreased as a percentage of net
sales to 27% during
(Continued)
9
<PAGE> 10
the six-month period ended August 31, 1997, as compared to 28% for the same
period during 1996. The decrease in expenses as a percentage of net sales is
due to the relatively fixed nature of certain expenses associated with
increased sales during the quarter.
Interest expense for the six-month period ended August 31, 1997, increased 6%
over interest expense for the six-month period ended August 31, 1996, due to
the increase in the average outstanding debt balance which resulted from the
issuance of the $15,000,000 Guaranteed Senior Note by the Company's US
subsidiary on July 18, 1997.
Liquidity and Capital Resources
Cash and cash equivalents increased to $40,464,000 at August 31, 1997, from
$25,798,000 at February 28, 1997, primarily due to the Company's US subsidiary
issuing a $15,000,000 Guaranteed Senior Note.
Receivables increased to $50,007,000 at August 31, 1997, from $36,951,000 at
February 28, 1997, and inventory decreased to $64,670,000 at August 31, 1997,
from $68,267,000 at February 28, 1997. The increase in accounts receivable
relates to the seasonal increase in sales in the second fiscal quarter as
compared to the fourth fiscal quarter. The decrease in inventory is due
primarily to variances in the timing of the manufacture of inventories.
The Company's working capital was $137,681,000 at August 31, 1997, and the
current ratio was 7.3 to 1.
The Company believes its capital resources are adequate to finance normal
growth and service the Company's debt obligations. Additionally, the Company
believes that internal funds and available credit will be adequate to finance a
new headquarters office building, which is planned for construction within the
next fifteen months.
10
<PAGE> 11
PART II. OTHER INFORMATION
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11 Earnings Per Share Computation
27 Financial Data Schedule
11
<PAGE> 12
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 10, 1997 /s/ Gerald J. Rubin
----------------- -------------------------------------
Gerald J. Rubin
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
Date October 10, 1997 /s/ Sam L. Henry
----------------- -------------------------------------
Sam L. Henry
Senior Vice-President, Finance,
and Chief Financial Officer
(Principal Financial Officer)
12
<PAGE> 13
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
11 Earnings Per Share Computation
27 Financial Data Schedule
<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,
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Primary earnings per Share:
Weighted average number of
common shares outstanding 26,706,646 26,042,338 26,539,480 25,987,532
Increase in weighted average
number of common shares outstanding
due to options and warrants 2,021,450 1,560,112 2,032,732 1,432,408
Weighted average number of
common shares outstanding, as adjusted 28,728,096 27,602,450 28,572,212 27,419,940
Net earnings $ 5,897,000 $ 4,095,000 $ 9,449,000 $ 6,497,000
Net earnings per common and
common equivalent share $ .21 $ .15 $ .33 $ .24
Fully Diluted Earnings per Share:
Weighted average number of
common shares outstanding 26,706,646 26,042,338 26,539,480 25,987,532
Increase in weighted average
number of common shares outstanding
due to options and warrants 2,209,222 1,606,804 2,213,468 1,602,652
Weighted average number of
common shares outstanding, as adjusted 28,915,868 27,649,142 28,752,948 27,590,184
Net earnings $ 5,897,000 $ 4,095,000 $ 9,449,000 $ 6,497,000
Net earnings per common and
common equivalent share,
assuming full dilution $ .20 $ .15 $ .33 $ .24
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF HELEN OF TROY LIMITED AND SUBSIDIARIES AS
OF, AND FOR THE SIX MONTHS ENDED AUGUST 31, 1997, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-END> AUG-31-1997
<CASH> 40,464,000
<SECURITIES> 0
<RECEIVABLES> 50,491,000
<ALLOWANCES> 484,000
<INVENTORY> 64,670,000
<CURRENT-ASSETS> 159,540,000
<PP&E> 29,953,000
<DEPRECIATION> 4,599,000
<TOTAL-ASSETS> 210,190,000
<CURRENT-LIABILITIES> 21,859,000
<BONDS> 55,450,000
0
0
<COMMON> 1,350,000
<OTHER-SE> 131,531,000
<TOTAL-LIABILITY-AND-EQUITY> 210,190,000
<SALES> 113,356,000
<TOTAL-REVENUES> 113,356,000
<CGS> 70,303,000
<TOTAL-COSTS> 70,303,000
<OTHER-EXPENSES> 30,460,000
<LOSS-PROVISION> 240,000
<INTEREST-EXPENSE> 1,558,000
<INCOME-PRETAX> 12,192,000
<INCOME-TAX> 2,743,000
<INCOME-CONTINUING> 9,449,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,449,000
<EPS-PRIMARY> .33
<EPS-DILUTED> .33
</TABLE>
