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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 May 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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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.)
One Helen of Troy Plaza
El Paso, TX 79912
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (915) 225-8000
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 July 13, 2000 there were 28,419,175 shares of Common Stock, $.10
Par Value, outstanding.
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HELEN OF TROY LIMITED AND SUBSIDIARIES
INDEX
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Page No.
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PART I. FINANCIAL INFORMATION
Item 1 Consolidated Condensed Balance
Sheets as of May 31, 2000 (unaudited) and
February 29, 2000........................................3
Consolidated Condensed Statements
of Income (unaudited) for the Three Months
Ended May 31, 2000 and May 31, 1999.....................5
Consolidated Condensed Statements
of Cash Flows (unaudited) for the Three Months
Ended May 31, 2000 and May 31, 1999.....................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 5 Other information.............................................12
Item 6 Exhibits and Reports on Form 8-K..............................12
SIGNATURES.....................................................................13
</TABLE>
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PART I. FINANCIAL INFORMATION
HELEN OF TROY LIMITED AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands, except shares)
<TABLE>
<CAPTION>
May 31, February 29,
2000 2000
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(unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 17,281 $ 34,265
Investments 588 994
Receivables, principally trade, less allowance for
doubtful receivables of $2,277 at May 31, 2000
and $2,514 at February 29, 2000 58,975 52,916
Inventories 100,755 96,959
Prepaid expenses 3,626 3,919
Deferred income tax benefits 4,755 4,970
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Total current assets 185,980 194,023
Property and equipment, net of accumulated depreciation of $7,099
at May 31, 2000 and $6,212 at February 29, 2000 47,420 47,739
Goodwill, net of accumulated amortization of $5,059 at
May 31, 2000 and $4,569 at February 29, 2000 45,015 40,850
License agreements, at cost less accumulated amortization of $9,573
at May 31, 2000 and $9,384 at February 29, 2000 8,947 5,504
Other assets, net of amortization 20,856 16,136
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$308,218 $304,252
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</TABLE>
(Continued)
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HELEN OF TROY LIMITED AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands, except shares)
<TABLE>
<CAPTION>
May 31, February 29,
2000 2000
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(unaudited)
<S> <C> <C>
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt $ 450 $ 450
Accounts payable, principally trade 9,291 6,295
Accrued expenses:
Advertising and promotional 3,539 4,602
Other 19,178 15,227
Income taxes payable 13,088 13,054
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Total current liabilities 45,546 39,628
Long-term debt 55,000 55,000
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Total liabilities 100,546 94,628
Stockholders' equity:
Cumulative preferred stock, non-voting, $1.00 par value
Authorized 2,000,000 shares; none issued -- --
Common stock, $.10 par value. Authorized 50,000,000 shares;
28,648,133 and 28,837,332 shares issued and outstanding at
May 31, 2000 and February 29, 2000, respectively 2,865 2,884
Additional paid-in capital 53,150 53,494
Retained earnings 154,969 153,246
Minority interest deficit of acquired subsidiary (3,312) --
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Total stockholders' equity 207,672 209,624
Commitments and contingencies -- --
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$ 308,218 $ 304,252
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</TABLE>
See accompanying notes to consolidated condensed financial statements.
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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
May 31,
2000 1999
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<S> <C> <C>
Net sales $ 76,111 $ 72,188
Cost of sales 46,182 43,239
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Gross profit 29,929 28,949
Selling, general and administrative expenses 26,402 21,565
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Operating income 3,527 7,384
Other income (expense):
Interest expense (982) (536)
Other income, net 404 459
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Total other income (expense) (578) (77)
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Earnings before income taxes 2,949 7,307
Income tax expense (benefit):
Current 400 1,487
Deferred 215 (26)
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Net earnings $ 2,334 $ 5,846
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Earnings per share:
Basic $ .08 $ .20
Diluted .08 .20
Weighted average number of common shares used in computing
earnings per share:
Basic 28,716,934 29,048,278
Diluted 29,117,349 29,930,822
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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HELEN OF TROY LIMITED AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
<TABLE>
<CAPTION>
Three months ended May 31,
2000 1999
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Cash flows from operating activities:
Net earnings $ 2,334 $ 5,846
Adjustments to reconcile net income to cash provided (used) by
operating activities
Depreciation and amortization 1,878 1,523
Provision for doubtful receivables 39 534
Deferred taxes, net 215 (26)
Proceeds from sales of marketable securities 286 --
Realized gain - trading securities (17) --
Unrealized loss - trading securities 137 --
Purchases of marketable securities -- (1,566)
Changes in operating assets and liabilities:
Accounts receivable (6,098) (7,235)
Inventory (2,394) 10,211
Prepaid expenses 293 (636)
Accounts payable (3,863) 1,114
Accrued expenses 1,241 (683)
Income taxes payable 34 1,017
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Net cash (used)/provided by operating activities (5,915) 10,099
Cash flows from investing activities:
Capital and license expenditures (3,991) (2,546)
Other assets (3,598) (632)
Cash paid for acquisition, net of cash acquired (2,205) --
-------- --------
Net cash used by investing activities (9,794) (3,178)
</TABLE>
(Continued)
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HELEN OF TROY LIMITED AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
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<CAPTION>
Three months ended May 31,
2000 1999
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Cash flows from financing activities:
Net payments on revolving line of credit -- (10,000)
Exercise of stock options 8 19
Common stock repurchases (1,283) --
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Net cash (used) by financing activities (1,275) (9,981)
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Net (decrease) in cash equivalents (16,984) (3,060)
Cash equivalents, beginning of period 34,265 33,691
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Cash equivalents, end of period $ 17,281 $ 30,631
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Supplemental cash flow disclosures:
Interest paid $ 982 $ 970
Income taxes paid, net of refunds -- 450
</TABLE>
See accompanying notes to consolidated condensed financial statements.
7
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HELEN OF TROY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
May 31, 2000
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 position as of May
31, 2000 and the results of its operations for the three month
periods ended May 31, 2000 and 1999. While the Company
believes that the disclosures presented are adequate to make
the information not misleading, these statements should be
read in conjunction with the financial statements and the
notes included in the Company's latest annual report on Form
10-K.
A reclassification was made to information for the three
months ended May 31, 1999 in order to conform to the
presentation for the three months ended May 31, 2000.
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.
Note 3 - Basic earnings per share is computed based upon the weighted
average number of common shares outstanding during the
period. Diluted earnings per share is computed based upon
the weighted average number of common shares plus the
effects of dilutive securities. The number of dilutive
securities was 400,415 and 882,544 for the three months
ended May 31, 2000 and 1999, respectively. All dilutive
securities for the three months ended May 31, 2000 consisted
of dilutive stock options issued under the Company's stock
option plans. Dilutive securities for the three months ended
May 31, 1999 consisted of 791,599 shares attributable to
dilutive stock options issued under the Company's stock
option plans and 90,945 shares that are contingently
issuable as part of an acquisition that occurred in fiscal
1999. All potentially dilutive securities are included in
the calculations of diluted earnings per share.
Note 4 - On September 29, 1999, the Company's Board of Directors
approved a resolution authorizing the Company to purchase, in
open market or private transactions, up to 3,000,000 shares of
its common stock over a period extending to September 29,
2002. As of May 31, 2000, the Company had repurchased 717,561
of its shares under this resolution at a total cost of
$5,359,000. During the period June 1, 2000 to July 13, 2000,
the Company repurchased an additional 228,958 shares at a
total cost of $1,357,000, bringing the total number of shares
repurchased at July 13, 2000 and the total cost of those
shares to 946,519 and $6,716,000, respectively.
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Note 5 - On March 14, 2000 the Company acquired a 55% ownership
interest in Tactica International, Inc. (Tactica) for
$2,500,000. The purchase method of accounting was used to
record the acquisition of Tactica and the Company recorded
goodwill of $6,183,000 that will be amortized over a
thirty-year period. The results of Tactica's operations from
the date of the acquisition through the end of May are
included in the consolidated financial statements of the
Company. Tactica's sales and results of operations for the
period from March 14, 2000 to the end of the Company's first
fiscal quarter were $3,845,000 and a loss of $662,000,
respectively. Tactica's assets at May 31, 2000 were
$9,804,000. Tactica produces and markets personal care
appliances and houseware products.
As of the date of the acquisition, Tactica had a deficit of
approximately $6,697,000. The Company has classified the
minority interest in deficit related to this acquisition as a
reduction in stockholders' equity. The Company will record
100% of the earnings (or losses) of Tactica until such time as
the minority interest in deficit has been satisfied.
The Company has also agreed to fund Tactica's working capital
requirements through an intercompany revolving credit facility
limited to $17,500,000. Additionally the Company has loaned
$3,500,000 to stockholders of Tactica. The notes receivable
are included in other assets in the consolidated condensed
balance sheets. The notes bear interest at 8.75% and are due
March 14, 2005.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Net sales for the three months ended May 31, 2000 (the first quarter of
fiscal 2001) increased $3,923,000, or 5.4%, to $76,111,000, compared to
$72,188,000 for the three months ended May 31, 1999 (the first quarter of fiscal
2000). The increase is due to sales from the Company's recent acquisitions of
Tactica International and the clipper product lines from Sunbeam.
Gross profit as a percentage of sales decreased to 39.3% in the first
quarter of fiscal 2001 from 40.1% in the first quarter of fiscal 2000. The
decrease is due to an unfavorable change in the mix of products sold.
Selling, general and administrative expenses as a percentage of sales
increased to 34.7% of sales for the three months ended May 31, 2000, compared to
29.9% during the three months ended May 31, 1999. The increase was due primarily
to expenses associated with Tactica International. Also the Company's
cooperative advertising and freight out costs were higher in the first quarter
of fiscal 2001 than in the first quarter of fiscal 2000.
Interest expense for the three months ended May 31, 2000 totaled
$982,000, an increase of $446,000 compared to interest expense of $536,000 for
the three months ended May 31, 1999. This increase was due to the capitalization
of interest on the construction of the Company's new corporate headquarters
facility in the first quarter of fiscal 2000. That facility was completed in the
second quarter of fiscal 2000, and therefore no interest was capitalized in the
first quarter of fiscal 2001.
Liquidity and Capital Resources
The Company's working capital and current ratio were $140,385,000 and
4.1 to 1, respectively at May 31, 2000, compared to working capital of
$154,395,000 and a current ratio of 4.9 to 1 at February 29, 2000.
Cash decreased from $34,265,000 at February 29, 2000 to $17,281,000 at
May 31, 2000. The Company's operating activites used cash of $5,915,000 as net
earnings and increases in accruals were less than increases in net accounts
receivable and inventories, and decreases in accounts payable. Items that
utilized cash during the quarter ended May 31, 2000 included the purchase of the
Company's common stock and cash paid for acquisitions.
The Company believes that its capital resources are adequate to service
its debt obligations and that its capital resources and available credit are
adequate to finance the growth of its existing business.
Information relating to forward-looking statements
This report, some of the Company's press releases and some of the
Company's comments to the news media, contain certain forward-looking statements
that are based on management's current expectations with respect to future
events or financial performance. A number of risks or
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uncertainties could cause actual results to differ materially from historical or
anticipated results. Generally, the words "anticipates," "believes," "expects"
and other similar words identify forward-looking statements. The Company
cautions readers not to place undue reliance on forward-looking statements.
Forward-looking statements are subject to risks that could cause such statements
to differ materially from actual results. Factors that could cause actual
results to differ from those anticipated include: (1) general industry
conditions and competition, (2) credit risks, (3) the Company's material
reliance on individual customers or small numbers of customers, (4) the
Company's material reliance on certain trademarks, (5) risks associated with
inventory, including potential obsolescence, (6) risks associated with operating
in foreign jurisdictions, (7) worldwide and domestic economic conditions, (8)
the impact of current and future laws, including tax laws and litigation, (9)
uninsured losses, (10) reliance on computer systems, (11) management's reliance
on the representations of third parties, (12) risks associated with newly
acquired product lines and subsidiaries, (13) risks associated with investments
in equity securities, (14) technological issues associated with Year 2000
compliance efforts and (15) the risks described from time to time in the
Company's reports to the Securities and Exchange Commission, including the
Company's Annual Report on Form 10-K for the year ended February 29, 2000.
New Accounting Guidance
In June 1998, the Financial Accounting Standards Board, ("FASB") issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS 133). SFAS 133 establishes accounting
and reporting standards for derivative instruments and is effective for
financial statements issued for fiscal quarters of fiscal years beginning after
June 15, 2000. Earlier application is encouraged. Based on the nature of its
current operations, the Company does not expect SFAS 133 to have a material
effect on its financial statements.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 (SAB101). The bulletin provides guidance to a large
number of revenue recognition issues and is effective no later than the fourth
quarter of fiscal years beginning after December 15, 1999. The Company does not
expect SAB101 to have a material effect on the financial statements.
In March 2000, FASB issued FASB Interpretation No. 44 "Accounting for
Certain Transactions involving Stock Compensation" ("Interpretation 44").
Interpretation 44 clarifies the application of the Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" for certain issues
and is effective for financial statements issued after July, 2000. The Company
does not expect Interpretation 44 to have a material effect on its financial
statements.
11
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PART II. OTHER INFORMATION
Item 5. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule for the three months ended
May 31, 2000.
99.1 Audit Committee Charter.
(b) Reports on Form 8-K
On May 12, 2000, the Company filed a report on Form 8-K in
connection with the public announcement of its fiscal 2000
earnings release.
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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 July 14, 2000 /s/ Gerald J. Rubin
--------------------------------- --------------------------------
Gerald J. Rubin
Chairman of the Board, Chief
Executive Officer
(Principal Executive Officer)
Date July 14, 2000 /s/ Dona Fisher
--------------------------------- --------------------------------
Dona Fisher
Senior Vice-President, Finance,
and Chief Financial Officer
(Principal Financial Officer)
13
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Index to Exhibits
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27 - Financial Data Schedule for the three months ended May 31, 2000.
99.1 - Audit Committee Charter.
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