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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended February 29, 2000
Commission file number 0-23312
HELEN OF TROY LIMITED
(Exact name of the registrant as specified in its charter)
BERMUDA 74-2692550
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1 HELEN OF TROY PLAZA
EL PASO, TEXAS 79912
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (915) 225-8000
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK - $.10 PAR VALUE
(Title of Class)
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
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates
of the registrant as of May 15, 2000 was $186,099,235.
As of May 15, 2000 there were 28,648,433 shares of Common Stock, $.10
Par Value, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Certain sections of the Company's definitive proxy statement, which is to be
filed under the Securities Exchange Act of 1934 within 120 days of the end of
the Company's fiscal year on February 29, 2000, are incorporated by reference
into Part III hereof. Except for those portions specifically incorporated by
reference herein, such document shall not be deemed to be filed with the
Securities and Exchange Commission as part of this Form 10-K.
Index to Exhibits - Page 47
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TABLE OF CONTENTS
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PAGE
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PART I Item 1. Business 1
Item 2. Properties 5
Item 3. Legal Proceedings 6
Item 4. Submission of Matters to a Vote of Security Holders 6
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PART II Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters 7
Item 6. Selected Financial Data 9
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Item 8. Financial Statements and Supplementary Data 16
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 41
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PART III Item 10. Directors and Executive Officers of the Registrant 41
Item 11. Executive Compensation 41
Item 12. Security Ownership of Certain Beneficial Owners
and Management 41
Item 13. Certain Relationships and Related Transactions 41
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PART IV Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K 42
Signatures 46
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PART I
ITEM 1. BUSINESS
GENERAL
The registrant was incorporated as Helen of Troy Corporation in 1968.
The registrant reincorporated as Helen of Troy Limited in Bermuda on February
16, 1994. Unless the context requires otherwise, references to the "Company"
refer to Helen of Troy Limited and its subsidiaries.
The Company designs, develops and sells a variety of personal care and
comfort products, including hair dryers, curling irons, hot air brushes, brush
irons, lighted mirrors, hairsetters, hair brushes, combs, hair accessories,
women's shavers, foot baths, body massagers and hair clippers and trimmers. The
Company sells products under trademarks licensed from third parties, as well as
under trademarks owned by the Company. Third party manufacturers produce all of
the products sold by the Company. Most of the Company's products are sold by
mass merchandisers, drug chains, warehouse clubs, grocery stores and beauty
supply retailers and wholesalers.
Products bearing licensed trademarks include those sold under the
trademarks of Vidal Sassoon, licensed from Procter & Gamble Co.; Revlon(R),
licensed from Revlon Consumer Products Corporation; Dr. Scholl's(R), licensed
from Schering Plough Health Care Products, Inc.; Scholl's(R) (in areas other
than North America), licensed from Scholl PLC; Barbie(R), licensed from Mattel,
Inc. and Sunbeam(R) and Oster(R) licensed from Sunbeam Corporation. Trademarks
owned by the Company include Helen of Troy(R), Salon Edition(R), Hot Tools(R),
Ecstasy(R), Hotspa(R), Gallery Series(R), WIGO(R), Taifun(R), Caruso, Dazey(R),
Lady Dazey(R), Carel (R), Lady Carel(R), Sable(R), Karina(R), Kurl*Mi(R),
Detangle*Mi(R), Heat*Mi(R) and DCNL.
PRODUCTS
The Company designs, develops and sells a full line of personal care
and comfort products, including hair dryers, curling irons, hot air brushes,
brush irons, lighted mirrors, hairsetters, hair care appliances, hair brushes,
combs, hair care accessories, women's shavers, foot baths, body massagers and
hair clippers and trimmers. The Company sells full-size, mid-size and compact
hand-held hair dryers in a variety of sizes in order to accommodate the needs
and preferences of individual consumers. The Company's hand-held hair dryers
sell under the trademarks Vidal Sassoon, Revlon(R), Sunbeam(R), Helen of
Troy(R), Salon Edition(R), Hot Tools(R), Ecstasy(R), Gallery Series(R), WIGO(R),
Taifun(R), and Sable(R). Hard and soft-bonnet hair dryers are sold under the
Dazey(R), Lady Dazey(R), Carel(R) and Hot Tools(R) trademarks. The Company sells
curling irons and brush irons under trademarks that include Vidal Sassoon,
Revlon(R), Sunbeam(R), Helen of Troy(R), Salon Edition(R), Hot Tools(R), Gallery
Series(R) and Sable(R). The Company sells hairsetters that bear the Vidal
Sassoon, Revlon(R) and Caruso trademarks. The trademarks under which the Company
sells hair brushes and combs include Vidal Sassoon, Revlon(R), Barbie(R),
Detangle*Mi(R), Kurl*Mi(R), Kent and Altesse. Hair accessories sold by the
Company include bows, barrettes, clips, rollers, headbands, ponytail holders and
bobby pins. The Company sells hair accessories under trademarks that include
Vidal Sassoon, Karina(R), Barbie(R), Sweet Things(R) and Trend Setters. The
Company also sells foot baths, foot massagers and body massagers under the Dr.
Scholl's(R), Scholl's(R), Carel(R) and Hotspa(R) trademarks.
The Company continues to develop new products and enhance existing
products in order to maintain and improve its position in the personal care and
comfort product market. The Company's marketing and engineering departments
develop new products with assistance from independent consulting firms. In
addition to internal product development, the Company expanded its product lines
through the acquisitions of the WIGO(R) trademark for hair care appliances,
Karina, Inc. and DCNL, Inc. in fiscal 1999. In December 1999 the Company
expanded its product lines through the acquisition of the Sunbeam trademark for
hair care appliances. In January 2000 the Company expanded its product lines
through the acquisition of a license from Sunbeam Corporation to design, develop
and sell human
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hair clippers and trimmers under the Sunbeam(R) and Oster(R) tradenames. In
March 2000 the Company expanded its product lines through its investment in
Tactica International, Inc. (see Item 1. Business - Recent Investment).
SALES AND MARKETING
The Company markets its products primarily within the United States of
America. Sales within the United States comprised 88% of total sales in fiscal
2000 and 92% of total sales in fiscal 1999 and 1998. The products discussed
above are sold primarily through mass merchandisers, drug chains, warehouse
clubs, grocery stores and beauty supply retailers and wholesalers. The Company
markets its products in the United States through approximately 100
manufacturers' representative organizations, beauty and barber supply
representative organizations and through its own sales staff.
Products sold under the Vidal Sassoon, Revlon(R), and Scholl's(R)
trademarks comprise most of the Company's international sales. The Company sells
products under the Vidal Sassoon trademark in various countries in Western
Europe and under the Revlon(R) trademark worldwide, except in Western Europe.
Certain products are sold internationally under the Scholl's(R) trademark.
WIGO(R) professional hair care appliances are also marketed worldwide. The
Company is licensed to sell various other products outside of the United States.
The Company's products are sold outside of the United States through mass
merchandisers, chain drug stores, catalogs, grocery stores and beauty supply
retailers and wholesalers. Internationally, the Company markets its products
through manufacturers' representative organizations, independent distributors,
and its own sales staff.
Revlon Consumer Products Corporation engages in extensive national
advertising of its beauty care products. The Proctor & Gamble Company is in the
process of embarking on a new advertising and marketing plan to be launched
during the Company's 2001 fiscal year. The Dr. Scholl's trademark is also widely
recognized, partially because of advertising and the sale of a variety of
products. The Company benefits from the name recognition associated with the
Vidal Sassoon, Revlon and Dr. Scholl's trademarks and works through its own
advertising and product development efforts to further improve the name
recognition and perceived quality of all the trademarks under which it sells
products. The Company promotes its products primarily through print media,
including consumer and trade magazines, and sales promotions.
MANUFACTURING AND DISTRIBUTION
The Company contracts with unaffiliated manufacturers in the Far East,
primarily in the Peoples' Republic of China (the "PRC"), Thailand, Taiwan and
South Korea, to build most of its products. The Company purchases a small
percentage of its products from third party manufacturers in North America,
Europe and South America. Third party manufacturers use molds and certain other
tooling, most of which are owned by the Company, in manufacturing our products.
The Company employs numerous technical and quality control persons to monitor
the quality of products purchased by the Company. Most of the Company's products
are subject to various customs duties because they are imported.
The Company is subject to certain risks as a result of the manufacture
of the vast majority of its products in the Far East. These risks include
changing international political relations, changes in customs duties and other
trade barriers, changes in shipping costs, currency exchange fluctuations and
local political unrest. To date, these factors have not significantly affected
the Company's production in the Far East.
The Company's products that are sold in North America and manufactured
in the Far East are shipped to the West Coast of the United States. The products
are then shipped by truck or rail service to warehouse facilities in El Paso,
Texas; Memphis, Tennessee; and Toronto, Canada or directly to customers. The
Company ships substantially all of its products sold to North American customers
from these warehouses by ground
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transportation services. Products sold throughout the rest of the world are
shipped from manufacturers, primarily in the Far East, to warehouses that the
Company rents in Veenendaal, The Netherlands and Nottinghamshire, the United
Kingdom, or directly to customers. Products stored at the warehouses in The
Netherlands and United Kingdom are shipped from those warehouses to distributors
or retailers.
LICENSE AGREEMENTS, TRADEMARKS AND PATENTS
The Company is materially dependent upon the continued use of the Vidal
Sassoon and Revlon(R) trademarks.
Two license agreements with Procter & Gamble (P&G) allow the Company to
sell certain products using the Vidal Sassoon trademark in the United States and
Canada. Products covered by these licenses include hair dryers, curling irons,
brush irons, hairsetters, lighted mirrors, brushes, combs and hair care
accessories in the United States and Canada. The Company is also licensed to
sell the above categories of Vidal Sassoon products in Western Europe and
Mexico.
The Company is licensed to use the Revlon(R) trademark worldwide,
except in Western Europe, on electric hair care appliances, brushes, combs,
functional hair accessories and lighted mirrors, as well as battery-operated and
electric women's shavers.
The Company sells foot baths, foot massagers and body massagers bearing
the Dr. Scholl's(R) trademark in the United States and North America, under a
license agreement with Schering-Plough Corporation. The Company also sells these
products bearing the Scholl's(R) trademark in other areas of the world through a
license agreement with Scholl PLC.
The Company entered into a license agreement with Mattel, Inc. in 1999.
Under this license agreement, the Company develops and markets hair dryers, hair
brushes, combs, and combination packs in the United States and Canada under the
Barbie(R) trademark.
The Company entered into three license agreements with Sunbeam
Corporation in December 1999 and January 2000. Under these license agreements,
the Company will market and distribute Oster(R) and Sunbeam(R) retail hair
clippers and trimmers previously handled by Sunbeam Corporation. Also, the
Company will develop and market hair dryers, curling irons, hairsetters,
mirrors, styling products, hot air brushes and personal spa products under the
Sunbeam trade name in the United States and Canada.
All of the license agreements under which the Company sells or intends
to sell products with trademarks owned by other entities require approval from
the various licensors prior to the Company's introduction of new products under
those trademarks. Additionally, the licensors must approve packaging the Company
intends to use and the agreements generally require the Company to make minimum
levels of advertising expenditures.
Although the Company has filed or obtained licenses for design and
utility patents in the United States and several foreign countries, the Company
does not believe that any particular patent or patent license is materially
important to its business.
RECENT INVESTMENT
On March 14, 2000 the Company acquired a 55% ownership interest in
Tactica International, Inc. ("Tactica") for $2,500,000. The Company has also
agreed to fund Tactica's working capital requirements through an intercompany
revolving credit facility limited to $17,500,000. Tactica designs, develops and
sells
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a variety of personal care appliances, including depilatories, paraffin baths
and health wellness products. Tactica also designs, develops and sells numerous
houseware "niche" products. Under the IGIA trade name, Tactica produces a line
of hair care products utilizing ion technology, including the IGIA Ion-Aire
hairdryer. Marketed under the IGIA trade name is the Therma-Spa Paraffin Bath
and the patented Touch `N' Go Hair Removal System. Products marketed under the
Epil-Stop trade names include a variety of topical products for long lasting,
painless hair removal. To create product awareness and interest, Tactica uses
television infomercials and direct response marketing extensively.
RELIANCE ON ONE CUSTOMER
Sales to Walmart Stores, Inc., and one of its affiliates, accounted for
approximately 26% of the Company's net sales in fiscal 2000. Sales to that same
customer comprised 29% of net sales in fiscal 1999 and in fiscal 1998.
ORDER BACKLOG
There was no backlog of orders at February 29, 2000.
COMPETITIVE CONDITIONS
The Company encounters significant levels of competition with respect
to all of its products. Product pricing, performance, packaging and
availability, as well as brand name recognition, affect competition in the
market for personal care and comfort products. The Company's primary competitors
include Conair; Windmere-Durable Holdings, Inc.; Remington Products Company;
Goody Products, Inc., a division of Newell Rubber Maid Inc.; and The New L & N
Marketing and Sales Corporation. These competitors possess known brand names and
significant resources.
SEASONALITY
The Company's business is somewhat seasonal. Sales in the Company's
fiscal second and third quarters, combined, accounted for 54%, 55% and 58% of
total sales in fiscal 2000, 1999 and 1998, respectively. As a result of the
seasonality of sales, the Company's working capital needs fluctuate during the
year.
REGULATION
The Company's electrical products are designed, manufactured and tested
to meet the safety standards of Underwriters Laboratories, Inc. Electrical
products sold by the Company must meet the safety standards imposed in various
national, state, local and provincial jurisdictions.
EMPLOYEES
The Company employs 513 full-time employees in the United States, Hong
Kong and Europe, of which 215 are marketing and sales employees, 120 are
distribution employees, 58 are engineering and development employees and 120 are
administrative personnel. None of the Company's employees are covered by any
collective bargaining agreement. The Company has never experienced a work
stoppage and believes it has satisfactory working relations with its employees.
RISK FACTORS
Dependence Upon Licenses and Trademarks. A substantial portion of the
Company's sales revenue is derived from sales of products under the Vidal
Sassoon and Revlon trademarks. As a result, the Company is
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materially dependent upon the continued use of the Vidal Sassoon and Revlon
trademarks. The Company believes that its rights in these licensed trademarks is
a significant part of the Company's business and that its ability to create
demand for its products is dependent to a large extent on its ability to exploit
these trademarks. If the Company were unable to sell products under
these licensed trademarks the result would be a material negative impact on the
Company's business, financial condition and results of operations.
Reliance Upon Certain Customers. The Company is dependent on certain of
its principal customers. Wal-mart Stores, Inc., and one of its affiliates,
accounted for approximately 26% of the Company's net sales in fiscal 2000. The
top three customers of the Company accounted for approximately 40% of the
Company's fiscal 2000 net sales. Although the Company has long-standing
relationships with its major customers, there are no contracts that require
these customers to buy from the Company. A substantial decrease in business from
any of its major customers could have a material adverse effect on the Company's
business, financial condition and results of operations.
Competition. The personal care products industry is extremely
competitive. Competition is based upon price and quality, as well as brand name
recognition, innovation in the design of new products and replacement models and
in marketing and distribution approaches. The Company competes with domestic and
international companies, some of which have substantially greater financial and
other resources than those of the Company. The Company believes that its future
success will depend upon its ability to produce reliable products which
incorporate developments in technology and satisfy consumer tastes with respect
to style and design and its ability to market a broad offering of such products
in each applicable category at competitive prices. No assurance can be given
that the Company will be able to successfully compete on the basis of these
factors in the future.
Risks Associated with International Manufacturing and Operations.
Nearly all of the Company's products are manufactured by unaffiliated third
party companies, most of which are in the People's Republic of China. Risks
associated with such foreign manufacturing include changing international
political relations, changes in customs duties and other trade barriers, changes
in shipping costs, currency exchange fluctuations, local political unrest and
the availability and cost of raw materials and merchandise. To date, these
factors have not significantly affected the Company's production in the Far
East; however, any change which affects the Company's ability to obtain products
from such manufacturers at marketable rates would have a negative impact on the
Company's business, financial condition and results of operations.
Risks Associated with Newly Acquired Product Lines and Subsidiaries.
The Company's business plan includes a commitment to growth through the
acquisition of new product lines and businesses. The Company may acquire entire
businesses, acquire part of a business, or merely acquire rights to market and
distribute a particular product or line of products. The acquisition of a
business involves a financial commitment by the Company, usually either cash or
stock consideration. While the Company's strategy is to acquire businesses that
will contribute positively to the Company's earnings figures, there is no
guarantee that all newly acquired businesses will perform as expected.
Anticipated synergies may not materialize, cost savings may be less than
expected, sales of products may not meet expectations, and the acquired
businesses may carry unexpected liabilities. Each of these factors could result
in the newly acquired business having a negative impact on the Company's
business, financial condition and results of operations.
ITEM 2. PROPERTIES
PLANT AND FACILITIES
The corporate offices that the Company owns consist of a 135,000 square
foot office building. The Company's main warehouse in El Paso, Texas totals
408,000 square feet and is adjacent to the headquarters building. The two
buildings are located on a 50-acre plot of land owned by the Company. The
Company also leases 108,000 square feet of warehouse space in El Paso, Texas.
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The Company also owns 22 acres of land in El Paso, Texas, near the 50
acres on which the warehouse and corporate headquarters are located. The Company
is holding this land for future business use, due to its proximity to other
facilities of the Company.
A subsidiary located in Hong Kong leases approximately 19,000 square
feet of office space. Prior to fiscal 1996 this Hong Kong subsidiary was
headquartered in approximately 12,000 square feet of office space that was
acquired by condominium ownership. In fiscal 1998 that office space was leased
to a third party. The Company also leases small offices in the United Kingdom,
Germany and France.
The Company also leases warehouse space in public warehouses located in
Memphis, Tennessee; Veenendaal, The Netherlands; Nottinghamshire, The United
Kingdom; Toronto, Canada; and Hong Kong.
ITEM 3. LEGAL PROCEEDINGS
The Company has purchased $5,750,000 (U.S.) in tax reserve certificates
in Hong Kong as of February 29, 2000. Tax reserve certificates represent the
prepayment by a taxpayer of potential tax liabilities. The amounts paid for tax
reserve certificates are refundable in the event that the value of the tax
reserve certificates exceeds the related tax liability. These certificates are
denominated in Hong Kong currency and are subject to risks associated with
foreign currency fluctuations. The purchase of these certificates is discussed
in note 5.
In October 1999 a demand for Arbitration with the American Arbitration
Association was filed. The demand, filed by Darryl Cohen, Nini Cohen, Lisa Dike
Brown and Dennis L. Bergquist, former shareholders of DCNL, Inc., an entity
acquired by the Company in October 1998, alleges that the Company and certain
executive officers breached the October 16, 1998 Merger Agreement between DCNL
California and the Company regarding the redemption of certain contingent value
rights and the calculation of earnout payments. The claimants seek $5,000,000 in
compensatory and $8,000,000 in punitive damages. The Company denies the
allegations and has filed various counterclaims. The Company is vigorously
defending its position. Although the Company believes its position is
meritorious, the matter remains open and management can offer no assurances that
the Company will prevail on all counts. Management does not expect the matter to
have a material adverse effect on the Company.
Subsequent to the Company's fiscal year end the supplier for some of
the Company's non-core products notified the Company that they considered the
Company to be in default of the distribution agreement between the parties and
were therefore terminating the agreement. During fiscal 2000 the Company sold
$1,124,000 (approximately 0.4% of the Company's consolidated sales) of products
purchased from this supplier. The Company is making counterclaims against the
supplier and will vigorously defend its positions. As of February 29, 2000, the
Company has unamortized distribution costs of approximately $2,487,000
associated with the distribution agreement. The two parties are negotiating and
management believes that there will be no material adverse impact on the
financial condition of the Company. However, no assurances as to the ultimate
outcome of this matter can be given at this time.
The Company is involved in various other legal claims and proceedings
in the normal course of operations. In the opinion of management, the outcome of
these matters will not have a material adverse effect on the consolidated
financial position, results of operations or liquidity of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
PRICE RANGE OF COMMON STOCK
The Company's Common Stock is listed on the NASDAQ National Market
System [symbol: HELE]. The following table sets forth, for the periods
indicated, in dollars per share, the high and low bid prices of the Common Stock
as reported on the NASDAQ National Market System. These quotations reflect the
inter-dealer prices, without retail mark-up, mark-down or commission and may not
necessarily represent actual transactions.
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High Low
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Fiscal 2000
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First quarter 16 1/2 10 5/16
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Second quarter 20 13 3/8
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Third quarter 14 3/8 7 1/4
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Fourth quarter 10 11/16 7
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Fiscal 1999
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First quarter 22 13/16 15 1/8
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Second quarter 26 1/2 17 1/4
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Third quarter 22 7/32 12
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Fourth quarter 17 1/2 12 13/16
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APPROXIMATE NUMBER OF EQUITY SECURITY HOLDERS
The Company had one class of equity security outstanding at February
29, 2000, Common Stock with a par value of $0.10. As of May 2, 2000, there were
527 holders of record of the Company's Common Stock. Shares held in "nominee" or
"street" name at each bank nominee or brokerage house are included in the number
of shareholders of record as a single shareholder.
CASH DIVIDENDS
The Board of Directors' current policy is to retain earnings to provide
funds for the operation and expansion of the Company's business and for
potential acquisitions. The Company has not paid any cash dividends on its
Common Stock since inception. The Company's current intention is to pay no cash
dividends in fiscal 2001. Any change in dividend policy will depend upon future
conditions, including earnings and financial condition, general business
conditions, any applicable contractual limitations and other factors deemed
relevant by the Board of Directors.
SHAREHOLDER RIGHTS PLAN
Under the terms of a Shareholders Rights Plan approved by the Board of
Directors on December 1, 1998 the Board of Directors declared, on that date, a
dividend of one preference share right ("Right") for each outstanding share of
Common Stock. The dividend, which was payable to shareholders of
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record on December 15, 1998, resulted in no cash payment by the Company, created
no liability on the part of the Company and did not change the number of shares
of Common Stock outstanding.
Each Right entitles the registered holder to purchase from the Company
one one-thousandth of a share of Series A First Preference Shares ("Preference
Shares"), par value $1.00, at a price of $100 per one one-thousandth of a
Preference Share. One one-thousandth of a Preference Share would have voting
rights essentially equivalent to those associated with one share of Common
Stock. Should certain person's or groups of affiliated persons acquire more than
15% of the Company's outstanding Common Stock, they would become an "Acquiring
Person." At that time, the Board may distribute Rights that are separable from
the Common Stock (on the "Distribution Date") and may adjust the price of a
Preference Share. The Rights are not exercisable and are inseparable from the
Common Stock until the Distribution Date. The Rights associated with an
Acquiring Person's shares of Common Stock would not be exercisable.
The Rights will expire on December 1, 2008 (the "Final Expiration
Date"), unless the Final Expiration Date is advanced or extended or unless the
Rights are earlier redeemed or exchanged by the Company. A more complete
explanation of the Shareholder Rights Plan, along with the Plan itself, is
contained in the Form 8-K filed by the Company with the Securities and Exchange
Commission on December 4, 1998.
RECENT SALES OF UNREGISTERED SECURITIES
In September and October 1998, the Company issued 691,760 and 350,000
shares of Common Stock, respectively, in connection with the acquisition of
Karina, Inc. and DCNL, Inc. The Company also issued 350,000 contingent value
rights to the owners of DCNL, Inc. in October 1998, in connection with the
acquisition of DCNL, Inc. The contingent value rights have been redeemed for
222,017 shares of Common Stock.
The shares of Common Stock were issued to the owners of Karina, Inc.
and DCNL, Inc. in reliance on the exemption from registration provided by
Section 4(2) of the Securities Act of 1933, as amended. A registration statement
on Form S-3, which included 691,760 shares of Common Stock issued in September
1998, was declared effective by the Securities and Exchange Commission on
October 21, 1998. Additionally, a registration statement on Form S-3, which
included 350,000 shares of Common Stock and 350,000 shares of Common Stock
issuable upon exercise or redemption of contingent value rights issued in
October 1998, was declared effective by the Securities and Exchange Commission
on December 2, 1998.
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ITEM 6. SELECTED FINANCIAL DATA
The selected consolidated financial information set forth below has
been summarized from the Company's Consolidated Financial Statements. This
information should be read in conjunction with the Consolidated Financial
Statements and the related Notes to Consolidated Financial Statements included
in Item 8 - "Financial Statements and Supplementary Data". All currency amounts
in this document are denominated in U.S. dollars.
<TABLE>
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Twelve Months Ended
Last Day of February
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2000 1999 1998 1997 1996
---------- ---------- ---------- ---------- ----------
(in thousands, except earnings per share)
<S> <C> <C> <C> <C> <C>
Statements of Income Data:
Net sales $ 299,513 294,487 248,098 213,035 167,053
Cost of sales(1) 185,685 175,293 153,087 132,861 102,341
---------- ---------- ---------- ---------- ----------
Gross profit 113,828 119,194 95,011 80,174 64,712
Selling, general and
administrative expenses(1) 104,409 82,862 64,911 57,438 47,356
---------- ---------- ---------- ---------- ----------
Operating income 9,419 36,332 30,100 22,736 17,356
Interest expense (3,530) (3,337) (3,487) (2,262) (1,795)
Other income, net 7,208 2,418 2,203 1,665 1,286
---------- ---------- ---------- ---------- ----------
Earnings before income taxes 13,097 35,413 28,816 22,139 16,847
Income taxes (14) 7,083 6,484 4,981 3,790
---------- ---------- ---------- ---------- ----------
Net earnings $ 13,111 28,330 22,332 17,158 13,057
========== ========== ========== ========== ==========
Per Share Data: (2)
Basic $ .45 1.00 .83 .66 .51
Diluted $ .44 .96 .77 .62 .49
Weighted average number of
common shares outstanding:
Basic 29,053 28,279 26,856 26,078 25,834
Diluted 29,885 29,596 28,851 27,770 26,746
</TABLE>
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<TABLE>
<CAPTION>
Last Day of February
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2000 1999 1998 1997 1996
---------- ---------- ---------- ---------- ----------
(in thousands)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital $ 154,395 150,940 154,294 111,937 110,606
Total assets 304,252 294,036 227,560 182,226 154,588
Long-term debt 55,000 55,450 55,450 40,450 40,450
Stockholders' equity(3) 209,624 199,842 149,484 120,482 101,878
</TABLE>
(1) See "Item 6 - Selected Financial Data - Fiscal Year Ended February 29, 2000
versus Fiscal Year Ended February 28, 1999" for a discussion of certain
charges taken during the fourth quarter of fiscal 2000.
(2) Per share data has been adjusted for a 100% stock dividend that was paid on
September 22, 1997 and for a 100% stock dividend that was paid on July 1,
1996.
(3) In fiscal 2000 the Company repurchased 526,485 shares of common stock at a
cost of $4,076,000.
10
<PAGE> 13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, selected
consolidated operating data for the Company as a percentage of net sales.
<TABLE>
<CAPTION>
Relationship to Net Sales
Fiscal Year
-----------------------------------------
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Net sales 100.0% 100.0 100.0
Cost of sales 62.0 59.5 61.7
-------- -------- --------
Gross Profit 38.0 40.5 38.3
Selling, general and
administrative expenses 34.9 28.2 26.2
-------- -------- --------
Operating income 3.1 12.3 12.1
Interest expense (1.1) (1.1) (1.4)
Other income, net 2.4 .8 .9
-------- -------- --------
Earnings before income taxes 4.4 12.0 11.6
Income taxes -- 2.4 2.6
-------- -------- --------
Net earnings 4.4% 9.6 9.0
======== ======== ========
</TABLE>
11
<PAGE> 14
FISCAL YEAR ENDED FEBRUARY 29, 2000 VERSUS FISCAL YEAR ENDED FEBRUARY 28, 1999
Net sales for fiscal 2000 increased $5,026,000 or 2% when compared to
fiscal 1999. Increased competition and sluggish U.S. retail sales of some
categories of the Company's products constrained sales growth for the year.
Gross profit as a percentage of sales decreased to 38.0% in fiscal 2000
from 40.5% in fiscal 1999. Changes in the mix of products sold and a $2,669,000
charge for the write-off of inventory associated with the fourth quarter
discontinuance of certain product lines discussed below caused the decrease in
gross profit as a percentage of sales. The gross profit percentage in fiscal
2000 is more comparable to that in fiscal 1998 of 38.3%. As noted below in the
section "Fiscal year ended February 28, 1999 versus fiscal year ended February
28, 1998", in fiscal 1999 the Company experienced an increased gross profit
percentage due to increases in sales of certain comfort products and hair
accessories. The Company's fiscal 2000 sales were more comparable in mix to
fiscal 1998 than fiscal 1999. An increase in transportation costs from the Far
East was another important factor in the reduction of gross profit as a
percentage of sales.
Selling, general, and administrative expenses (SG&A) as a percentage
of sales increased to 34.9% in fiscal 2000 compared to 28.2% in fiscal 1999.
The Company recorded pre-tax charges of approximately $9 million in the fourth
quarter of fiscal 2000, including primarily charges related to the
discontinuation of non-core products. Also during the fourth quarter, the
Company implemented several major organizational changes. These changes
realigned organizational responsibilities, restructured various departments and
streamlined certain functions within the Company. These charges and higher
cooperative advertising and freight expenses accounted for a portion of the
increase in SG&A expenses as a percentage of sales. Depreciation and
amortization expenses increased as the Company placed its new corporate
headquarters in service and began the amortization of goodwill associated with
its fiscal 1999 acquisitions. As reported in the third fiscal quarter, customer
chargebacks in excess of those experienced in prior years also contributed to
the increase. The rise in customer chargebacks was, in part, due to issues
associated with the Company taking over the operations of its El Paso warehouse
from an outside contractor in January 1999.
Interest expense for fiscal 2000 remained relatively constant with that
of fiscal 1999. In fiscal 2000 the Company recorded approximately $6.3 million
in net realized gains from sales of trading securities. These gains are included
in "Other income, net" on the consolidated statements of income. The Company's
marketable securities consist of shares of common stock of several publicly
traded companies and are stated at market value, as determined by the most
recent trading price of each security as of the balance sheet date. The market
risk associated with investments in equity securities is summarized in the
"Liquidity and Capital Resources" section.
The Company recorded a net tax benefit of $14,000 on pretax income of
$13,097,000 for the year ended February 29, 2000. The tax is less than the
Company's normal 20% rate because of two factors. First, Helen of Troy Limited
holds the consolidated group's investments in marketable securities and is not
subject to any capital gains tax or other income tax on the sale of equity
securities. Therefore no income tax expense was recognized on the approximate
$6.3 million gains noted above on trading securities. Second, the Company
discontinued certain product lines in the fourth quarter of the fiscal year. The
costs associated with the discontinuance of product lines created an overall
loss for the Company's U.S. operations that offset the required taxable gains of
the Company's non-U.S. operations.
12
<PAGE> 15
FISCAL YEAR ENDED FEBRUARY 28, 1999 VERSUS FISCAL YEAR ENDED FEBRUARY 28, 1998
Fiscal 1999 net sales increased $46,389,000 or 18.7%, to $294,487,000
compared to fiscal 1998 net sales of $248,098,000. The introduction of new
product lines, including the Caruso molecular steam hair setter, and the
expansion of the Company's line of comfort products, such as foot baths and
massagers, contributed significantly to the sales increase. During fiscal 1999,
in separate transactions, the Company acquired 100% of the outstanding stock of
Karina, Inc., a New Jersey corporation, and of DCNL, Inc., a California
corporation, both of which market and distribute hair brushes, combs, and hair
care accessories. Increased sales of hair accessories, including those
attributable to the Company's acquisitions of Karina, Inc. and DCNL, Inc.,
played an important role in the overall increase in net sales. In addition, the
Company's non-U.S. business continues to grow.
Gross profit as a percentage of sales increased to 40.5% in fiscal 1999
from 38.3% in fiscal 1998. Increases in sales of certain comfort products and
hair accessories, which generate slightly higher gross margins than many of the
Company's other products, as a percentage of the Company's overall sales had a
positive effect on gross profit as a percentage of sales. Additionally, a lower
cost per unit on some goods was partially responsible for the increase in gross
profit as a percentage of sales from fiscal 1998 to 1999.
Selling, general and administrative expenses (SG&A) as a percentage of
sales increased to 28.2% in fiscal 1999 from 26.2% in fiscal 1998. Advertising
expense increased as a percentage of sales, due partially to the Company's
fiscal 1999 Caruso infomercial campaign. Other administrative charges connected
with the Caruso infomercial also increased SG&A as a percentage of sales in
fiscal 1999, compared to fiscal 1998. Additionally, the Company recognized bad
debt expenses of $740,000 in the second quarter of fiscal 1999, due to the
bankruptcy of a Russian distributor of its product. That account was the
Company's only significant exposure to credit risk in Russia or Asia.
Interest expense decreased $150,000, or 4.3%, in fiscal 1999, compared
to fiscal 1998. The decrease was primarily due to the capitalization of interest
on the construction of the Company's new corporate headquarters office building.
Construction is expected to be complete in the summer of 1999.
Other income increased by $215,000, or 9.8% in fiscal 1999, compared to
fiscal 1998. Interest income increased as a result of the receipt of interest
payments on a note receivable. The effect of the increase in interest income was
partially offset by the fact that the Company recorded a gain on the sale of
land in fiscal 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash balance increased $574,000 from $33,691,000 at
February 28, 1999 to $34,265,000 at February 29, 2000. The Company's operating
activities produced a positive cash flow of $28,630,000 during fiscal 2000. Net
earnings, adjusted for expenses that did not utilize cash, such as depreciation
and amortization, had a significant positive effect on cash flows from
operations. Changes in the operating assets and liabilities of the Company also
had a positive effect on cash. Investing activities utilized $14,727,000 in cash
as the Company made capital expenditures associated with constructing a new
office building and paid in cash in connection with acquisitions. Financing
activities decreased the Company's cash balance by $13,329,000. The primary uses
of cash included repaying short-term borrowing and repurchasing the Company's
stock.
The Company periodically invests or may invest in certain equity
securities. Investing in equity securities entails certain market risks. Should
the stock prices of one or more of the entities in which the Company has
invested decline, the Company could lose part or all of its investment in such
securities. The total value of outstanding marketable securities increased as
the Company purchased securities during the year as a means of identifying
potential acquisitions. Accounts receivable decreased due to less sales in the
fourth fiscal quarter and
13
<PAGE> 16
improved collections. The Company's days' sales outstanding improved in fiscal
2000 to 73 days when compared to 79 days at February 28, 1999. The increases in
inventory, prepaid expenses and goodwill are primarily due to the acquisition of
licenses and of lines of products from Sunbeam in the fourth fiscal quarter. The
increases in deferred taxes and accrued expenses, and the decrease in license
agreements resulted from the fourth quarter write-off of products that the
Company will no longer sell.
The increase in property and equipment is due to the construction of
the Company's new corporate headquarters. Other assets increased because of
deposits paid for a new order picking system that is being installed in the
Company's main warehouse.
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 own stock over a period extending to
September 29, 2002. As of February 29, 2000, the Company has repurchased 526,485
of its shares under this resolution at a total cost of $4,076,000. During the
period March 1, 2000 to May 15, 2000 the Company repurchased an additional
190,776 shares at a total cost of $1,281,000, bringing the total number of
shares repurchased at May 10, 2000 and the total cost of those shares to 717,261
and $5,357,000, respectively.
Working capital increased from $150,940,000 at February 28, 1999 to
$154,395,000 at February 29, 2000. The Company's current ratio (computed by
dividing current assets by current liabilities) was 4.9 at February 29, 2000 and
February 28, 1999.
On March 14, 2000 the Company acquired a 55% ownership interest in
Tactica International, Inc. ("Tactica") for $2,500,000. The Company has also
agreed to fund Tactica's working capital requirements through an intercompany
revolving credit facility limited to $17,500,000.
The Company maintains a line of credit with a bank to facilitate
short-term borrowings and for the issuance of letters of credit. This line of
credit is limited to $10,000,000, bears interest at the bank's prime interest
rate (8.75% at February 29, 2000) or at alternate rates based on Eurodollar
investment rates for specific time periods and expires July 31, 2000. This line
of credit allows the Company to finance up to $3,500,000 in letters of credit,
subject to the $10,000,000 total limit. At February 29, 2000, the Company did
not have any borrowings outstanding under this line of credit. $3,408,000 of
this line of credit was committed for the issuance of letters of credit at
February 29, 2000.
In order to allow the issuance of letters of credit, the Company
maintains a facility with another bank. This facility is limited to $2 million
and bears interest at the bank's prime interest rate plus two percent (10.75% at
February 29, 2000). At February 29, 2000, $674,000 of this facility was used to
finance letters of credit, which were funded by the Company after February 29,
2000. This facility expires July 31, 2000.
The Company had a total of $55,000,000 of long-term debt outstanding at
February 29, 2000, consisting of $40,000,000 in long-term Series A Senior Notes
and a $15,000,000 long-term Series B Senior Note. The interest rate on the
Company's Series A Senior Notes was 7.01% at February 29, 2000. Principal
payments on the Series A Senior Notes begin in fiscal 2005, with the remaining
unpaid principal amount due in fiscal 2008. The interest rate on the Series B
Senior Note was 7.24% at February 29, 2000, with principal payments beginning in
fiscal 2009 and the remaining unpaid principal amount due in full in 2013.
Capital expenditures totaled $8,340,000, $17,731,000 and $3,255,000 in
fiscal 2000, 1999 and 1998 respectively. The Company's operations are not
capital intensive. Management believes that the Company's short and long-term
capital needs will stem primarily from factors associated with its normal
operations, such as the need to carry sufficient levels of inventory. Based on
the Company's current financial condition, management believes that cash flows
from operations and available financing sources will continue to provide
sufficient capital resources to fund the Company's ongoing liquidity needs for
the foreseeable future.
14
<PAGE> 17
INFORMATION RELATING TO FORWARD-LOOKING STATEMENTS
This report, including the matters discussed in Management's Discussion
and Analysis of Financial Condition and Result of Operations, financial
projections and Year 2000, 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 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 to not
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
number 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 representation of third parties, (12) risks
associated with newly acquired product lines and subsidiaries and (13) the risks
described from time to time in the Company's reports to the Securities and
Exchange Commission, including this report.
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 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.
15
<PAGE> 18
Item 8. Financial Statements and Supplementary Data
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report 17
Consolidated Financial Statements:
Consolidated Balance Sheets as of February 29, 2000 and February 28, 1999 18
Consolidated Statements of Income for each of the years in the
Three-year period ended February 29, 2000 20
Consolidated Statements of Stockholders' Equity for each of
The years in the three-year period ended February 29, 2000 21
Consolidated Statements of Cash Flows for each of the years
In the three year period ended February 29, 2000 22
Notes to Consolidated Financial Statements 24
Financial Statement Schedule -
Schedule II - Valuation and Qualifying Accounts for each of
The years in the three-year period ended February 29, 2000 40
</TABLE>
All other schedules are omitted as the required information is included in
the consolidated financial statements or is not applicable.
16
<PAGE> 19
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Helen of Troy Limited:
We have audited the consolidated financial statements of Helen of Troy Limited
and subsidiaries as listed in the index on page 16. In connection with our
audits of the consolidated financial statements, we also have audited the
financial statement schedule as listed in the index on page 16. These
consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Helen of Troy
Limited and subsidiaries as of February 29, 2000 and February 28, 1999, and the
results of their operations and their cash flows for each of the years in the
three-year period ended February 29, 2000, in conformity with accounting
principles generally accepted in the United States of America. Also, in our
opinion, the related financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
KPMG LLP
El Paso, Texas
May 10, 2000
17
<PAGE> 20
HELEN OF TROY LIMITED
AND SUBSIDIARIES
Consolidated Balance Sheets
February 29, 2000 and February 28, 1999
(in thousands, except par value and shares)
<TABLE>
<CAPTION>
Assets 2000 1999
-------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 34,265 33,691
Marketable securities, at market value 994 --
Receivables - principally trade, less
allowances $2,514 in 2000 and
$1,756 in 1999 52,916 59,799
Inventories 96,959 90,288
Prepaid expenses 3,919 2,048
Deferred income tax benefits 4,970 3,858
-------- --------
Total current assets 194,023 189,684
Property and equipment,
net of accumulated depreciation of $6,212
in 2000 and $6,905 in 1999 47,739 42,464
Goodwill, net of accumulated
amortization of $4,569 in 2000
and $2,224 in 1999 40,850 39,052
License agreements, at cost less accumulated
amortization of $9,384 in 2000
and $9,085 in 1999 5,504 7,967
Other assets at cost, net of amortization 16,136 14,869
-------- --------
$304,252 294,036
======== ========
</TABLE>
(Continued)
18
<PAGE> 21
HELEN OF TROY LIMITED
AND SUBSIDIARIES
Consolidated Balance Sheets
February 29, 2000 and February 28, 1999
(in thousands, except par value and shares)
<TABLE>
<CAPTION>
2000 1999
-------- --------
<S> <C> <C>
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable to banks $ -- 10,000
Current portion of long-term debt 450 --
Accounts payable, principally trade 6,295 1,592
Accrued expenses:
Advertising and promotional 4,602 4,935
Other 15,227 8,563
Income taxes payable 13,054 13,654
-------- --------
Total current liabilities 39,628 38,744
Long-term debt, net of current portion 55,000 55,450
-------- --------
Total liabilities 94,628 94,194
-------- --------
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; 28,837,609 and 29,047,332
shares issued and outstanding at February 29,
2000 and February 28, 1999, respectively 2,884 2,905
Additional paid-in-capital 53,494 53,750
Retained earnings 153,246 143,187
-------- --------
Total stockholders' equity 209,624 199,842
-------- --------
Commitments and contingencies -- --
$304,252 294,036
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
19
<PAGE> 22
HELEN OF TROY LIMITED
AND SUBSIDIARIES
Consolidated Statements of Income
(in thousands, except shares and earnings per share)
<TABLE>
<CAPTION>
Year Ended the Last Day of February
--------------------------------------------
2000 1999 1998
------------ ------------ ------------
<S> <C> <C> <C>
Net sales $ 299,513 294,487 248,098
Cost of sales 185,685 175,293 153,087
------------ ------------ ------------
Gross profit 113,828 119,194 95,011
Selling, general and administrative
Expenses 104,409 82,862 64,911
------------ ------------ ------------
Operating Income 9,419 36,332 30,100
Other income (expense):
Interest expense (3,530) (3,337) (3,487)
Other income, net 7,208 2,418 2,203
------------ ------------ ------------
Total other income (expense) 3,678 (919) (1,284)
------------ ------------ ------------
Earnings before income taxes 13,097 35,413 28,816
------------ ------------ ------------
Income taxes (14) 7,083 6,484
------------ ------------ ------------
Net earnings $ 13,111 28,330 22,332
============ ============ ============
Earnings per share:
Basic $ .45 1.00 .83
Diluted $ .44 .96 .77
Weighted average number of common
shares used in computing net earnings per share:
Basic 29,052,788 28,278,545 26,856,463
Diluted 29,885,260 29,596,189 28,850,689
</TABLE>
See accompanying notes to consolidated financial statements.
20
<PAGE> 23
HELEN OF TROY LIMITED
AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Years ended last day of February 2000, 1999 and 1998
(in thousands)
<TABLE>
<CAPTION>
Additional Total
Common Paid-In Retained Stockholders'
Stock Capital Earnings Equity
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Balances, February 28, 1997 $ 1,314 26,643 92,525 120,482
Exercise of common stock
options, net 63 6,607 -- 6,670
Stock dividend 1,351 (1,351) -- --
Net earnings -- -- 22,332 22,332
------------ ------------ ------------ ------------
Balances, February 28, 1998 2,728 31,899 114,857 149,484
Exercise of common stock
options, net 73 255 -- 328
Issuance of common stock to
acquire subsidiaries 104 21,596 -- 21,700
Net earnings -- -- 28,330 28,330
------------ ------------ ------------ ------------
Balances, February 28, 1999 2,905 53,750 143,187 199,842
Exercise of common stock
options, net 16 913 -- 929
Issuance of common stock
in connection with employee
stock purchase plan 4 360 -- 364
Net issuance (recovery) of common stock
in connection with acquisitions 12 (558) -- (546)
Acquisition and retirement
of treasury stock (53) (971) (3,052) (4,076)
Net earnings -- -- 13,111 13,111
------------ ------------ ------------ ------------
Balances, February 29, 2000 $ 2,884 53,494 153,246 209,624
============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
21
<PAGE> 24
HELEN OF TROY LIMITED
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(in thousands)
<TABLE>
<CAPTION>
Years Ended Last Day of February
--------------------------------
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 13,111 28,330 22,332
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation and amortization 6,921 4,965 3,999
Provision for doubtful receivables 559 993 168
Deferred taxes, net (1,112) (511) (246)
Gain on sale of assets -- -- (216)
Purchases of marketable securities (16,340) -- --
Proceeds from sales of marketable securities 21,530 -- --
Realized gain - trading securities (6,265) -- --
Unrealized loss - trading securities 81 -- --
Impairment of asset held for sale 650 -- --
Intangible asset write-off 1,783 -- --
Changes in operating assets and liabilities:
Accounts receivable 6,324 (13,403) (7,786)
Inventory (6,671) (15,720) (3,090)
Prepaid expenses (1,871) 1,963 (2,863)
Accounts payable 4,703 (4,030) (1,215)
Accrued expenses 5,827 688 2,474
Income taxes payable (600) 8,402 4,074
-------- -------- --------
Net cash provided by operating
activities 28,630 11,677 17,631
Cash flows from investing activities:
Capital and license expenditures (8,340) (17,731) (3,255)
Cash paid for acquisitions, net of cash acquired (1,798) (7,471) (2,227)
Proceeds from sale of assets -- -- 1,692
Additions to other assets (4,589) (11,211) (2,160)
Collection on notes receivable -- -- 522
-------- -------- --------
Net cash used by investing
activities (14,727) (36,413) (5,428)
</TABLE>
(Continued)
22
<PAGE> 25
HELEN OF TROY LIMITED
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(in thousands)
<TABLE>
<CAPTION>
Years Ended Last Day of February
--------------------------------
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Cash flows from financing activities:
Net proceeds from (payments on)
short-term borrowings (10,000) 10,000 (4,001)
Proceeds from (payments on) long-term debt (1,663) 15,000
Payment of payroll tax and income tax withholding
associated with stock options exercised (6,669) --
Proceeds from exercise of stock options, net 747 1,089 6,670
Common stock repurchases (4,076) -- --
-------- -------- --------
Net cash (used in) provided
by financing activities (13,329) 2,757 17,669
-------- -------- --------
Net increase (decrease) in cash and cash equivalents 574 (21,979) 29,872
Cash and cash equivalents, beginning
of year 33,691 55,670 25,798
-------- -------- --------
Cash and cash equivalents, end of year $ 34,265 $ 33,691 $ 55,670
======== ======== ========
Supplemental cash flow disclosures:
Interest paid $ 4,210 4,003 3,459
Income taxes paid (net of refunds) 1,177 (1,123) (213)
Details of acquisitions in which common stock was issued
Fair value of assets acquired -- 32,107 --
Less:
Liabilities assumed -- 6,804 --
Common stock issued -- 21,700 --
-------- -------- --------
Cash paid -- 3,603 --
Less: cash acquired -- (488) --
-------- -------- --------
Net cash paid for acquisitions in which
Common stock was issued $ -- 3,115 --
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements
23
<PAGE> 26
HELEN OF TROY LIMITED
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) General
Helen of Troy Limited, a Bermuda company, and its subsidiaries (the
"Company") design, develop, import, and engage in wholesale
distribution of hair care appliances, hair brushes, combs and
accessories and other personal care products. The Company purchases
products that it sells from unaffiliated manufacturers most of
which are located in the Far East, including manufacturers in The
People's Republic of China, Thailand, Taiwan and South Korea.
The consolidated financial statements are prepared in U.S. dollars and
in accordance with accounting principles generally accepted in the
United States of America. These principles require management to
make estimates and assumptions that affect the reported amounts of
assets, liabilities, revenues, expenses, and the disclosure of
contingent assets and liabilities. Actual results could differ from
those estimates.
(b) Principles of Consolidation
The consolidated financial statements include the accounts of Helen of
Troy Limited and its subsidiaries. Intercompany balances and
transactions have been eliminated in consolidation.
(c) Inventories
Inventories are stated at the lower of cost (first-in, first-out) or
market (net realizable value) and consist primarily of finished
goods.
(d) Property and Equipment
Property and equipment are stated at cost. Depreciation is recorded on
a straight-line basis over the estimated useful lives of the
assets.
(e) Intangible Assets
Intangible assets consist primarily of goodwill, license agreements
and trademarks. The Company amortizes intangible assets using the
straight-line method over appropriate periods ranging from five to
forty years. The Company recorded amortization of intangible assets
totaling $4,527,000, $3,370,000 and $2,695,000 during fiscal 2000,
1999 and 1998, respectively.
The Company assesses the recoverability of goodwill by determining
whether the amortization of the asset balance over its remaining
life can be recovered through undiscounted future operating cash
flows of the acquired operation. The amount of impairment, if any,
is measured based on projected discounted future operating cash
flows. The discount rate used will be based on the Company's cost
of capital. The Company believes no impairment of goodwill has
occurred and that no reduction of the estimated useful lives is
warranted.
The great majority of the Company's sales are made subject to license
agreements with the licensors of the Vidal Sassoon, Revlon(R) and
Dr. Scholl's(R) trademarks. The Company amortizes the acquisition
costs of the existing license agreements on a straight line basis
over the lives of the respective agreements. Net sales subject to
license agreements comprised 73%, 80%, and 85% of total net sales
for the fiscal years 2000, 1999 and 1998, respectively.
(Continued)
24
<PAGE> 27
HELEN OF TROY LIMITED
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(f) Income Taxes
The Company uses the asset and liability method to account for income
taxes. Deferred income tax assets and liabilities are recognized
for the future tax consequences of temporary differences between
the book and tax bases of various assets and liabilities.
Generally, deferred tax assets represent future tax reductions
while deferred tax liabilities represent future tax liabilities.
The Company measures deferred tax assets and liabilities using
enacted tax rates for the years in which it expects that temporary
differences will reverse or be settled. Changes in tax rates affect
the carrying values of deferred tax assets and liabilities. The
effects of tax rate changes are recognized in the periods in which
they are enacted.
(g) Earnings per Share
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 potentially dilutive
securities. The number of potentially dilutive securities was
832,472, 1,317,644 and 1,994,226 for fiscal years 2000, 1999 and
1998, respectively. Dilutive securities for the years ended
February 29, 2000 and February 28, 1999 included 739,615 and
1,271,565 shares, respectively, attributable to dilutive stock
options and 92,857 and 46,079 shares, respectively, contingently
issuable as part of an acquisition (see note 10). All dilutive
securities in fiscal 1998 were attributable to dilutive stock
options. For fiscal years 2000, 1999 and 1998, options to purchase
3,786,612, 2,040,800 and 1,445,800, respectively, were outstanding
but were not included in the computation of earnings per share
because the exercise prices of such options were greater than the
average market price of the Company's common stock. On August 26,
1997, the Company's Directors approved a 2-for-1 stock split, which
was paid as a 100% stock dividend on September 27, 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.
(h) Cash Equivalents
The Company considers all highly liquid debt instruments purchased
with an original maturity of three months or less to be cash
equivalents.
(i) Marketable Securities
Marketable securities consist of shares of common stock of several
publicly traded companies and are stated at market value, as
determined by the most recent trading price of each security as of
the balance sheet date. Management determines the appropriate
classification of the Company's investments when those investments
are purchased and reevaluates those determinations at each balance
sheet date. At February 29, 2000, the Company held its investments
in equity securities of unaffiliated companies for the purpose of
trading them in the near term. Therefore, all investments in equity
securities are classified as trading securities, with all
unrealized gains and losses attributable to such securities
included in earnings. Included in the heading "Other income" on the
Consolidated Statement of Income for the year ended February 29,
2000 are $6,265,000 in realized gains and $81,000 net unrealized
losses.
(Continued)
25
<PAGE> 28
HELEN OF TROY LIMITED
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
The net unrealized loss on marketable securities is based on the
differences between the market values of such securities and the
amounts that the Company paid for them.
(j) Foreign Currency Transactions
The U.S dollar is the functional currency of the Company in accordance
with SFAS No. 52, "Foreign Currency Translation." If applicable,
all transactions of Helen of Troy Limited's non-U.S. subsidiaries
have been re-measured in U.S. dollars using historical exchange
rates. Changes in exchange rates that affect cash flows and the
related receivables or payables are recognized as transaction gains
and losses in the determination of net earnings.
(k) Revenue Recognition
Revenue is recognized when products are shipped to customers.
(l) Advertising
Advertising costs are expensed as incurred. During the fiscal years
ended February 29, 2000 and February 28, 1999, and 1998,
$18,527,000, $18,212,000 and $13,522,000, respectively, of
advertising costs were charged to selling, general and
administrative expenses.
(m) Warranties
The Company's products are under warranty against defects in material
and workmanship for a maximum of two years. The Company has
established an accrual of approximately $2,868,000 and $2,369,000
for the fiscal years ended February 29, 2000 and February 28, 1999,
respectively that management believes is sufficient to cover future
warranty costs.
(n) Long-Lived Assets
The Company accounts for long-lived assets in accordance with the
provisions of SFAS No. 121, "Accounting for the Impairment of
Long-lived Assets and for Long-lived Assets to be Disposed of". The
Statement requires that long-lived assets and certain identifiable
intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may
not be recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset to
future net cash flows expected to be generated by the asset. If
such assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amount
of the assets exceeds the fair value of the assets. Assets to be
disposed of are reported at the lower of the carrying amount or
fair value less costs to sell.
(o) Interest Income
Interest income is included in "Other income, net" on the Consolidated
Statements of Income. Interest income totaled $987,000, $1,496,000
and $1,686,000 in fiscal 2000, 1999 and 1998, respectively.
(Continued)
26
<PAGE> 29
HELEN OF TROY LIMITED
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(p) Financial Instruments
The carrying amounts of cash and cash equivalents, receivables,
accounts payable, accrued expenses and income taxes payable
approximate fair value because of the short maturity of these
items. Based on prevailing interest rates for similar instruments,
the fair value of the current note payable approximates its
carrying value. See note 4 for management's assessment of the fair
value of the Company's guaranteed Senior Notes.
(q) Stock-based Compensation Plans
The Company accounts for its stock-based compensation plans in
accordance with Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB No. 25").
Therefore, no compensation cost has been recognized in connection
with the Company's stock option plans. Disclosures in accordance
with Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation," ("SFAS No. 123"), appear
in note 6.
(Continued)
27
<PAGE> 30
HELEN OF TROY LIMITED
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(2) PROPERTY AND EQUIPMENT
A summary of property and equipment is as follows:
<TABLE>
<CAPTION>
As of the last day
Estimated of February
Useful Lives ------------------------
(Years) 2000 1999
------------ -------- --------
<S> <C> <C> <C>
Land - $ 10,111 9,627
Buildings and improvements 20 - 40 29,184 13,080
Computer and other equipment 3 - 5 7,567 7,755
Furniture and fixtures 5 - 15 6,192 1,451
Transportation equipment 3 - 5 897 906
Construction in progress - -- 16,550
-------- --------
53,951 49,369
Less accumulated depreciation (6,212) (6,905)
-------- --------
Property and equipment, net $ 47,739 42,464
======== ========
</TABLE>
During fiscal 2000 and 1999 the Company capitalized $721,000 and $663,000,
respectively, of interest in connection with the construction of a new
office facility.
The Company recorded $2,394,000, $1,595,000 and $1,304,000 of depreciation
expense for fiscal 2000, 1999 and 1998, respectively.
Capital expenditures totaled $8,340,000, $17,731,000 and $3,255,000 in
fiscal 2000, 1999 and 1998, respectively. As of February 29, 2000, the
Company had entered into commitments of $504,000 for capital
expenditures.
The Company recognized a $650,000 impairment charge during the third quarter
of its fiscal year. The amount was estimated to be the excess of the
book value over the estimated net realizable value of the Company's
former headquarters. The former headquarters is classified as an asset
held for sale and is included in the heading "Other assets" on the
February 29, 2000 Consolidated Balance Sheet. The charge against the
value of the former headquarters is included in "Other income, net" on
the Consolidated Statement of Income.
(Continued)
28
<PAGE> 31
HELEN OF TROY LIMITED
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(3) NOTES PAYABLE
The Company maintains a line of credit with a bank to facilitate short-term
borrowings and for the issuance of letters of credit. This line of
credit is limited to $10,000,000 and allows the issuance of up to
$3,500,000 in letters of credit and bears interest at the bank's prime
rate (8.75% at February 29, 2000) or at alternate rates based on
Eurodollar investment rates for specific time periods. This line of
credit expires on July 31, 2000. At February 29, 2000 no loans were
outstanding under this line of credit and $3,408,000 was used to finance
letters of credit which were funded by the Company subsequent to
February 29, 2000.
To allow the issuance of letters of credit, a non-U.S. subsidiary maintains
a facility with a bank. This facility is limited to $2,000,000 (U.S.)
and bears interest at the bank's prime interest rate plus two percent
(10.75% at February 29, 2000), with all outstanding balances due July
31, 2000. At February 29, 2000, no loans were outstanding under this
facility and $674,000 was used to finance letters of credit, which were
funded by the Company subsequent to February 29, 2000.
(4) LONG-TERM DEBT
On January 5, 1996 a U.S. subsidiary issued guaranteed Senior Notes at face
value of $40,000,000. Interest is paid quarterly at a rate of 7.01%. The
Senior Notes are unsecured, are guaranteed by Helen of Troy Limited and
certain of its subsidiaries and are due January 5, 2008. Annual
principal payments of $10,000,000 begin in fiscal 2005. Using a
discounted cash flow analysis based on estimated market rates, the
estimated fair value of the guaranteed Senior Notes at February 29, 2000
is approximately $36,714,000.
On July 18, 1997 one of the Company's U.S. subsidiaries issued a $15,000,000
Senior Note. Interest is paid quarterly at a rate of 7.24%. The
$15,000,000 Senior Note is unsecured, is guaranteed by Helen of Troy
Limited and certain of its subsidiaries and is due July 18, 2012.
Principal payments begin in fiscal 2009. Using a discounted cash flow
analysis based on estimated market rates, the estimated fair value of
the guaranteed Senior Note at February 29, 2000 is approximately
$13,578,000.
The current portion of long-term debt consists of a note for $450,000. The
note is payable in full on January 25, 2001.
(Continued)
29
<PAGE> 32
HELEN OF TROY LIMITED
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(5) INCOME TAXES
The components of earnings before income tax expense are as follows:
<TABLE>
<CAPTION>
Years ended the last day of February
------------------------------------
(in thousands)
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
U.S. $ (5,725) 9,697 6,588
Non-U.S 18,822 25,716 22,228
-------- -------- --------
$ 13,097 35,413 28,816
======== ======== ========
</TABLE>
The components of income tax expense (benefit) are as follows:
<TABLE>
<CAPTION>
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Current
U.S $ (182) 4,734 4,199
Non-U.S 1,280 2,860 2,531
Deferred (1,112) (511) (246)
-------- -------- --------
$ (14) 7,083 6,484
======== ======== ========
</TABLE>
Total income tax expense differs from the amounts computed by applying the
statutory tax rate to earnings before income taxes. The reasons for these
differences are as follows:
<TABLE>
<CAPTION>
Years ended the last day of February
--------------------------------------
(in thousands)
2000 1999 1998
---------- ---------- ----------
<S> <C> <C> <C>
Expected tax expense at the U.S.
statutory rate of 35% $ 4,584 12,395 10,086
Decrease in income
taxes resulting from income
from non-U.S. operations
subject to varying income
tax rates (4,598) (5,312) (3,602)
---------- ---------- ----------
Actual tax expense $ (14) 7,083 6,484
========== ========== ==========
</TABLE>
(Continued)
30
<PAGE> 33
HELEN OF TROY LIMITED
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(5) INCOME TAXES, CONTINUED
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and liabilities at February 29, 2000 and February
28, 1999 are as follows:
<TABLE>
<CAPTION>
2000 1999
-------- --------
<S> <C> <C>
Deferred tax assets: (in thousands)
Net operating losses generated by the
tax benefit of stock option exercises $ 718 1,825
Inventories, principally due to additional
costs of inventories for tax purposes 1,314 922
Accrued expenses 3,051 758
Accounts receivable 130 524
-------- --------
Total gross deferred tax assets 5,213 4,029
-------- --------
Deferred tax liabilities:
Depreciation and amortization (243) (171)
-------- --------
Net deferred tax asset $ 4,970 3,858
======== ========
</TABLE>
Current accounting standards require that deferred income taxes reflect the tax
consequences of future tax benefits, such as NOLs, to the extent that
realization of such benefits is more likely than not. Although realization
is not assured, management believes that the deferred tax asset, including
NOLs, will be realized. The amount of the deferred tax asset considered
realizable, however, could be reduced if estimates of future taxable
income during the carryforward period are reduced.
The Inland Revenue Department (the IRD) in Hong Kong has asserted that it may
tax certain profits of the Company's foreign subsidiaries for the years
1990 through 1999. Hong Kong tax law allows for the taxation of profits
earned from activities conducted in Hong Kong. The Company is vigorously
defending its position that it conducted the activities that produced the
profits in question outside of Hong Kong. The Company also asserts that it
has complied with all applicable reporting and tax payment obligations. If
the IRD's position were to prevail, the resulting tax liability could
range from $400,000 to $13,000,000 (U.S.). Although the ultimate
resolution of the IRD's claims cannot be predicted with certainty,
management believes that adequate provision has been made in the financial
statements for settlement of the IRD's claims.
The Company has purchased $5,750,000 (U.S.) in tax reserve certificates in Hong
Kong as of February 29, 2000. Tax reserve certificates represent the
prepayment by a taxpayer of potential tax liabilities. The amounts paid
for tax reserve certificates are refundable in the event that the value of
the tax reserve certificates exceeds the related tax liability. These
certificates are denominated in Hong Kong currency and are subject to
risks associated with foreign currency fluctuations.
(Continued)
31
<PAGE> 34
HELEN OF TROY LIMITED
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The U.S. federal tax return of the Company's largest domestic subsidiary for the
fiscal year 1997 is being examined by the Internal Revenue Service (IRS).
No adjustments have been proposed by the IRS. Although the ultimate
outcome of the examination cannot be predicted with certainty, management
is of the opinion that adequate provision has been made in the financial
statements for the estimated impact of the examination.
The Company plans to permanently reinvest all of the undistributed earnings of
the non-U.S. subsidiaries of the United States subsidiaries. In accordance
with generally accepted accounting principles, the Company has made no
provision for U.S. federal income taxes on a portion of these
undistributed earnings. At February 29, 2000, undistributed earnings for
which the Company had not provided deferred U.S. federal income taxes
totaled $50,244,000. The Company's United States of America net operating
loss of $2,051,000 expires if not utilized by fiscal 2020.
During fiscal years 2000, 1999 and 1998 officers and employees exercised certain
stock options, resulting in a U.S. federal income tax deduction for the
Company. The deductions attributable to the exercise of stock options did
not affect income tax expense for financial reporting purposes. The tax
effect of the stock option exercises increased additional paid-in-capital
by $239,000, $5,907,000 and $2,533,000, respectively, in fiscal 2000, 1999
and 1998.
(6) STOCK-BASED COMPENSATION PLANS
The Company sponsors four stock-based compensation plans. The plans consist of
two employee stock option plans, a non-employee director stock option plan
and an employee stock purchase plan. These plans are described below. The
Company accounts for its stock-based compensation plans under APB No. 25.
Accordingly, no compensation expense has been recognized for the Company's
stock option plans or its stock purchase plan. Had the Company recorded
compensation expense for its stock option plans based on the fair value of
the options at the dates of grant for those awards, consistent with the
method of SFAS Number 123, the Company's net income and earnings per share
would have been reduced to the following pro forma amounts:
<TABLE>
<CAPTION>
Years Ended the last day of February
-------------------------------------
2000 1999 1998
----------- ----------- -----------
<S> <C> <C> <C>
Net Income: As Reported $13,111,000 28,330,000 22,332,000
Pro forma 5,054,000 25,533,000 19,539,000
Earnings per share:
Basic: As Reported $ .45 1.00 .83
Pro forma $ .17 .90 .73
Diluted: As Reported $ .44 .96 .77
Pro forma $ .17 .86 .68
</TABLE>
(Continued)
32
<PAGE> 35
HELEN OF TROY LIMITED
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(6) STOCK-BASED COMPENSATION PLANS, CONTINUED
The Company computed the pro forma figures disclosed above using the
Black-Scholes option pricing model with the following weighted-average
assumptions used for grants in fiscal 2000, 1999 and 1998, respectively;
expected dividend yields of zero for all years; expected volatility 35.1%
for fiscal 2000, 27.4% for fiscal 1999 and 23.4% for fiscal 1998;
risk-free interest rates of 6.6% for fiscal 2000, 5.4% for fiscal 1999 and
6.5% for fiscal 1998; and expected lives of 3, 4, 5 or 10 years depending
on the option granted. In fiscal 2000 1 million non-qualified stock
options were granted that vested on the date they were granted.
Under stock option and restricted stock plans adopted in 1994 and 1998 (the
"1994 Plan" and the "1998 Plan" respectively), the Company reserved a
total of 11,000,000 shares of its common stock for issuance to key
officers and employees. Pursuant to the 1994 and 1998 Plans, the Company
grants options to purchase its common stock at a price equal to or greater
than the fair market value on the grant date. Both plans contain
provisions for incentive stock options ("ISOs"), non-qualified stock
options ("Non-Qs") and restricted stock grants. Generally, options granted
under the 1994 and 1998 Plans become exercisable over a four or five-year
vesting period and expire on a date ranging from seven to ten years from
their date of grant.
A summary of stock option activity under all plans is as follows:
<TABLE>
<CAPTION>
Years Ended the last day of February
------------------------------------------------------------------------------
2000 1999 1998
------------------------ ------------------------ ------------------------
Weighted- Weighted- Weighted-
Average Average Average
Shares Exercise Shares Exercise Shares Exercise
(000S) Price (000s) Price (000s) Price
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding,
beginning of year 4,393 $ 11.53 4,554 8.10 4,005 3.95
Options granted 1,386 12.16 1,110 15.76 1,643 15.68
Options exercised (146) 4.72 (724) 2.75 (994) 4.16
Options forfeited (192) 8.95 (547) 3.20 (100) 5.46
---------- ---------- ----------
Options outstanding, end of year 5,441 11.96 4,393 11.53 4,554 8.10
========== ========== ==========
Options exercisable at year-end 3,032 9.54 1,683 6.62 1,966 3.28
========== ========== ==========
Weighted-average fair value of
options granted during the 6.40 7.13 7.04
year
</TABLE>
Under a stock option plan for non-employee directors (the "Directors' Plan"),
adopted in fiscal 1996, the Company reserved a total of 480,000 shares of
its common stock for issuance to non-employee members of the Board of
Directors. The Company grants options under the Directors' Plan at a price
equal to the fair market value of the Company's common stock at the date
of grant. Options granted under the Directors' Plan vest one year from
their date of issuance and expire ten years after issuance.
(Continued)
33
<PAGE> 36
HELEN OF TROY LIMITED
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(6) STOCK-BASED COMPENSATION PLANS, CONTINUED
The following table summarizes information about stock options at February 29,
2000:
<TABLE>
<CAPTION>
Outstanding Stock Options Exercisable Stock Options
---------------------------------------------- ---------------------------
Weighted-
Average Weighted Weighted-
Remaining Average Average
Number of Contractual Exercise Number of Exercise
Options Price Range Life Price Options Price
--------- ---------------- ----------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
ISOs
126,982 $ 3.65 to $ 7.91 3.90 $ 5.07 85,410 $ 4.80
296,156 $ 9.69 to $15.00 6.02 11.99 33,122 11.76
103,470 $15.59 to $24.31 6.32 17.37 21,160 17.03
--------- ---------
Total 526,608 5.57 $ 11.38 139,692 $ 8.30
========= =========
Non-Q's
1,511,272 $ 4.13 to $ 7.09 5.89 $ 4.95 1,500,272 $ 4.94
3,206,986 $10.00 to $20.00 8.49 15.20 1,236,082 14.54
--------- ---------
Total 4,718,258 7.66 $ 11.92 2,736,354 $ 9.28
========= =========
Directors' Plan
36,000 $ 5.13 to $10.63 8.09 $ 8.61 16,000 $ 6.09
160,000 $14.47 to $17.63 7.87 16.02 140,000 16.25
--------- ---------
Total 196,000 7.91 $ 14.66 156,000 $ 15.20
========= =========
</TABLE>
In fiscal 1999 the Company's shareholders approved an employee stock purchase
plan (the "Stock Purchase Plan") under which 500,000 shares of common
stock are reserved for issuance to the Company's employees, nearly all of
whom are eligible to participate. Under the terms of the stock purchase
plan employees authorize the Company to withhold from 1% to 15% of their
wages or salaries to purchase the Company's common stock. The purchase
price for stock purchased under the plan is equal to 85 percent of the
stock's fair market value on either the first day of each option period or
the last day of each period, whichever is lower. During fiscal 2000,
42,148 shares of common stock were issued under the stock purchase plan.
(Continued)
34
<PAGE> 37
HELEN OF TROY LIMITED
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(7) COMMITMENTS AND CONTINGENCIES
The Company has employment contracts with certain of its officers. These
agreements provide for minimum salary levels and potential incentive
bonuses. One agreement automatically renews itself each month for a
five year period and provides that in the event of a merger,
consolidation or transfer of all or substantially all of the assets of
the Company to an unaffiliated party, the officer may make an election
to receive a cash payment for the balance of the obligations under the
agreement. The expiration dates for these agreements range from
September 2, 2000 to February 28, 2005. The aggregate commitment for
future salaries, at February 29, 2000, excluding incentive
compensation, was approximately $3,200,000.
The Company purchases most of the appliances and products that it sells from
unaffiliated manufacturers located in the Far East, principally in the
Peoples' Republic of China, Thailand, Taiwan and South Korea. Due to
the fact that most of its products are manufactured in the Far East,
the Company is subject to risks associated with trade barriers,
currency exchange fluctuations and political unrest. These risks have
not historically affected the Company's operations. Additionally, the
Company's management believes that it could obtain its products from
facilities in other countries, if necessary. However, the relocation of
production capacity could require substantial time and could result in
increased costs.
In October 1999 a demand for Arbitration with the American Arbitration
Association was filed. The demand, filed by Darryl Cohen, Nini Cohen,
Lisa Dike Brown and Dennis L. Bergquist, former shareholders of DCNL,
Inc., an entity acquired by the Company in October 1998, alleges that
the Company and certain executive officers breached the October 16,
1998 Merger Agreement between DCNL California and the Company regarding
the redemption of certain contingent value rights and the calculation
of earnout payments. The claimants seek $5,000,000 in compensatory and
$8,000,000 in punitive damages. The Company denies the allegations and
has filed various counterclaims. The Company is vigorously defending
its position. Although the Company believes its position is
meritorious, the matter remains open and management can offer no
assurances that the Company will prevail on all counts. Management does
not expect the matter to have a material adverse effect on the Company.
The Company is also involved in various other legal claims and proceedings in
the normal course of operations. The Company is insured for
substantially all of the various claims in which it is involved. In the
opinion of management, the outcome of these matters will not have a
material adverse effect on the consolidated financial position, results
of operations or liquidity of the Company and its subsidiaries.
Under the terms of a Shareholders' rights Plan approved by the Board of
Directors in fiscal 1999, the Board of Directors declared a dividend of
one preference share right ("Right") for each outstanding share of
Common Stock. The Rights are inseparable from the shares of Common
Stock and entitle the holders to purchase one one-thousandth of a share
of Series A First Preference Shares ("Preference Shares"), par value
$1.00, at a price of $100 per one-one thousandth of a Preference Share.
Should certain persons or groups of persons ("Acquiring Persons")
acquire more than 15% of the Company's outstanding Common
(Continued)
35
<PAGE> 38
HELEN OF TROY LIMITED
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(7) COMMITMENTS AND CONTINGENCIES, CONTINUED
Stock, the Board of Directors may either adjust the price at which
holders of Rights may purchase Preference Shares or may redeem all of
the then outstanding Rights at $.01 per Right. The Rights associated
with the Acquiring Person's shares of Common Stock would not be
exercisable. The Rights have certain anti-takeover effects. The Rights
could cause substantial dilution to a person or group that attempts to
acquire the Company in certain circumstances, but should not interfere
with any merger or other business combination approved by the Board of
Directors. The Rights expire December 1, 2008, unless their expiration
date is advanced or extended or unless the Rights are earlier redeemed
or exchanged by the Company.
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 February 29, 2000, the Company
had repurchased 526,485 of its shares under this resolution at a total
cost of $4,076,000. During the period March 1, 2000 to May 15, 2000 the
Company repurchased an additional 190,776 shares at a total cost of
$1,281,000, bringing the total number of shares repurchased at May 10,
2000 and the total cost of those shares to 717,261 and $5,357,000,
respectively.
(8) FOURTH QUARTER CHARGES
During the fourth quarter of fiscal 2000 the Company recorded pre-tax charges of
approximately $9,000,000, including primarily charges related to the
discontinuation of non-core products. The pre-tax charges resulting
from such discontinuation included reserves for resolution of future
contractual obligations as well as allowances for customer returns. The
charge to selling, general and administrative expenses included a
$1,783,000 write-off of related license costs. Also during the fourth
quarter, the Company implemented several major organizational changes.
These changes realigned organizational responsibilities, restructured
various departments and streamlined certain functions within the
Company. Additionally the Company recorded a pre-tax charge to cost of
sales of $2,669,000 for the disposal of inventory associated with the
non-core products that were discontinued. At February 29, 2000 accrued
liabilities included approximately $8,000,000 related to these charges.
36
<PAGE> 39
HELEN OF TROY LIMITED
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(9) SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected unaudited quarterly financial data is as follows (in
thousands, except per share amounts):
<TABLE>
<CAPTION>
Three Months Ended the Last Day of
-----------------------------------------------
May August November February Total
<S> <C> <C> <C> <C> <C>
Fiscal 2000:
Net sales $ 72,188 $ 71,520 $ 89,601 $ 66,204 $299,513
Gross profit 28,949 26,995 33,651 24,233(a) 113,828
Net earnings 5,846 8,140 5,978 (6,853)(a) 13,111
Earnings per
share
Basic .20 .28 .21 (.24)(a) .45
Diluted .20 .27 .20 (.23)(a) .44
Fiscal 1999:
Net sales $ 64,136 $ 72,162 $ 89,144 $ 69,045 $294,487
Gross profit 24,989 28,695 36,059 29,451 119,194
Net earnings 4,836 7,544 11,090 4,860 28,330
Earnings per
share
Basic .18 .27 .39 .17 1.00
Diluted .17 .26 .37 .16 .96
</TABLE>
The business of the Company is somewhat seasonal. Between 54% and 55% of annual
sales volume normally occurs in the second and third fiscal quarters.
(a) See note 8 regarding fourth quarter charges relating to the discontinuance
of certain non-core products.
37
<PAGE> 40
HELEN OF TROY LIMITED
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(10) SEGMENT INFORMATION
The Company consists of a single operating segment that sells hair care
and other personal care products in the United States and
internationally. Most of the Company's products are procured
through its subsidiary in Barbados, West Indies. That
subsidiary obtains products from unaffiliated contractors on
an order-by-order basis.
The Company's domestic and international net revenues from third
parties and long-lived assets are as follows:
<TABLE>
<CAPTION>
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
NET REVENUES FROM THIRD PARTIES:
United States $264,238 270,600 228,220
International 35,275 23,887 19,878
-------- -------- --------
Total $299,513 294,487 248,098
======== ======== ========
LONG-LIVED ASSETS:
United States $ 90,674 85,697 37,690
International 19,555 18,655 12,950
-------- -------- --------
Total $110,229 104,352 50,640
======== ======== ========
</TABLE>
Sales to one customer and its affiliate accounted for 26% of the Company's net
sales in fiscal 2000 and 29% in fiscal 1999 and 1998.
(11) ACQUISITIONS AND PURCHASES OF TRADEMARKS
On October 4, 1996 the Company acquired the assets of two personal care lines of
Dazey Corporation, of Kansas City, Missouri. Included in the purchase
were certain inventories, designs, equipment, tooling, license rights
and trademarks for existing products bearing the Dazey, Lady Dazey,
Lady Carel and Dr. Scholl's trade names.
On June 12, 1997 the Company acquired the assets of Caruso International in a
cash transaction. Included in the purchase were certain inventories,
designs and trademarks.
On July 31, 1998, the Company acquired the WIGO(R) trademark and certain assets
from EWT Elektrogerate GmbH & Co. KG of Germany in a cash transaction.
As a result, the Company now has the exclusive worldwide rights to
design, market and sell various appliances, including professional
salon hair care appliances, under the WIGO(R) trademark.
On September 25, 1998, the Company acquired 100% of the stock of Karina, Inc., a
New Jersey corporation. Karina develops, designs and markets basic and
fashion hair accessories, brushes, combs, and various personal care
implements. In exchange for the stock of Karina, the Company issued
691,760 shares of its common stock to Karina's shareholders. During
fiscal 2000 shares held in escrow related to this acquisition were
settled resulting in an escrow recovery to the Company of approximately
$546,000.
38
<PAGE> 41
HELEN OF TROY LIMITED
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(11) ACQUISITIONS AND PURCHASES OF TRADEMARKS, CONTINUED
On October 19, 1998, the Company acquired 100% of the stock of DCNL, Inc., a
California corporation. DCNL develops, designs and markets specialized
hair brushes and accessories. In exchange for the stock of DCNL, the
Company issued 350,000 shares of its Common Stock and made additional
cash payments to DCNL's shareholders. Under the terms of the agreement,
DCNL's shareholders redeemed their contingent value rights issued as
part of the acquisition and received 154,544 additional shares of Helen
of Troy common stock subsequent to fiscal 1999 and 67,473 additional
shares were added to the escrow account.
In January 2000 the Company purchased certain licenses and assets from Sunbeam
Corporation. As a result, the Company now has the exclusive rights to
distribute human hair clippers and trimmers under the Sunbeam(R) and
Oster(R) trademarks.
The Company accounted for the acquisitions discussed above using the purchase
method of accounting. Costs in excess of the fair value of the net
tangible assets acquired in the Dazey, Caruso, WIGO, Karina and DCNL
acquisitions total $43,300,000 and are included in goodwill. The
Company is amortizing these costs over 15 years in the cases of the
Dazey and Caruso transactions and 30 years for the WIGO, Karina and
DCNL transactions.
On a proforma basis these acquisitions would not have a material effect on net
revenues or net earnings.
(12) SUBSEQUENT EVENT
Subsequent to the Company's fiscal year end the supplier for some of the
Company's non-core products notified the Company that they considered
the Company to be in default of the distribution agreement between the
parties and were therefore terminating the agreement. During fiscal
2000 the Company sold $1,124,000 (approximately 0.4% of the Company's
consolidated sales) of products purchased from this supplier. The
Company is making counterclaims against the supplier and will
vigorously defend its positions. As of February 29, 2000, the Company
has unamortized distribution costs of approximately $2,487,000
associated with the distribution agreement. The two parties are
negotiating and management believes that there will be no material
adverse impact on the financial condition of the Company. However, no
assurances as to the ultimate outcome of this matter can be given at
this time.
On March 14, 2000 the Company acquired a 55% ownership interest in Tactica
International, Inc. for $2,500,000. The Company has also agreed to fund
Tactica's working capital requirements through an intercompany
revolving credit facility limited to $17,500,000.
39
<PAGE> 42
HELEN OF TROY LIMITED AND SUBSIDIARIES
Schedule II
Valuation and Qualifying Accounts
Years ended February 29, 2000 and February 28, 1999 and 1998
(in thousands)
<TABLE>
<CAPTION>
Additions
-----------------------------
Charged
Balance at to Write-off of Balance at
Beginning costs and uncollectible end of
Description Of Year expenses Recoveries accounts year
- ----------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Year ended February 29, 2000
Allowances for accounts receivable $ 1,756 $ 2,554 $ 64 $ 1,860 $ 2,514
Year ended February 28, 1999
Allowances for accounts receivable 568 2,267 29 1,108 1,756
Year ended February 28, 1998
Allowances for accounts receivable 400 551 -- 383 568
</TABLE>
40
<PAGE> 43
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information in the Company's Proxy Statement, which will be filed
within 120 days of the end of the Company's 2000 fiscal year, is incorporated
herein by reference in response to this Item 10.
ITEM 11. EXECUTIVE COMPENSATION
Information in the Company's Proxy Statement, which will be filed
within 120 days of the end of the Company's 2000 fiscal year, is incorporated
herein by reference in response to this Item 11.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information in the Company's Proxy Statement, which will be filed
within 120 days of the end of the Company's 2000 fiscal year, is incorporated
herein by reference in response to this Item 12.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information in the Company's Proxy Statement, which will be filed
within 120 days of the end of the Company's 2000 fiscal year, is incorporated
herein by reference in response to this Item 13.
41
<PAGE> 44
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULE, AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Memorandum of Association. (Filed as Exhibit 31 to the
Registrant's Registration Statement on Form S-4, File No.
33-73594, filed with the Securities and Exchange Commission on
December 30, 1993).
3.2 Bye-Laws. (Filed as Exhibit 3.2 to the Registrant's
Registration Statement on Form S-4, File No. 33-73594, filed
with the Securities and Exchange Commission on December 30,
1993).
4.1 Rights Agreement, dated as of December 1, 1998, between Helen
of Troy Limited and Harris Trust and Savings Bank, as Rights
Agent. (Filed as Exhibit 4 to the Registrant's Current Report
on Form 8-K, filed with the Securities and Exchange Commission
on December 4, 1998).
10.1 Vidal Sassoon, Inc. Amended License Agreement of December 22,
1982. (Filed as Exhibit 10.1 to the Helen of Troy
Corporation's Registration Statement on Form S-2, File No.
2-82520, filed with the Securities and Exchange Commission on
March 18, 1983).
10.2 Letter Agreements Amending Sassoon License Agreement. (Filed
as Exhibit 10.2 to the Helen of Troy Corporation's
Registration Statement on Form S-2, File No. 33-13253, filed
with the Securities and Exchange Commission on April 8, 1987).
10.3 Form of Directors' and Executive Officers' Indemnity Agreement
dated February 11, 1994 executed by each of Gerald J. Rubin,
Robert D. Spear, Stanlee N. Rubin, Gary B. Abromovitz, Byron
H. Rubin, Daniel C. Montano, and Christopher L. Carameros.
(Filed as Exhibit 10.2 to the Registrants Registration
Statement on Form S-4, File No. 33-73594, filed with the
Securities and Exchange Commission on December 10, 1993).
10.4 1994 Stock Option and Restricted Stock Plan, as previously
filed with the Registrants' Registration Statement on Form
S-4, File No. 33-73594, as Exhibit 10.1 filed with the
Securities and Exchange Commission on December 30, 1993, is
hereby incorporated herein by reference.
10.5 Vidal Sassoon, Inc., European License Agreement, dated January
1, 1990. (Filed as Exhibit 10.25 to Helen of Troy
Corporation's Annual Report on Form 10-K for the period ending
February 28, 1990, filed with the Securities and Exchange
Commission).
10.6 Revlon Consumer Products Corporation (RCPC) North American
Appliances License
42
<PAGE> 45
Agreement dated September 30, 1992. (Filed as Exhibit 10.31 to
Helen of Troy Corporation's Quarterly report on Form 10-Q for
the period ending November 30, 1992 filed with the Securities
and Exchange Commission).
10.7 Revlon Consumer Products Corporation (RCPC) International
Appliances License Agreement dated September 30, 1992. (Filed
as Exhibit 10.32 to Helen of Troy Corporation's Quarterly
report on Form 10-Q for the period ending November 30, 1992
filed with the Securities and Exchange Commission).
10.8 Revlon Consumer Products Corporation (RCPC) North American
Comb and Brush License Agreement dated September 30, 1992.
(Filed as Exhibit 10.33 to Helen of Troy Corporation's
Quarterly report on Form 10-Q for the period ending November
30, 1992 filed with the Securities and Exchange Commission).
10.9 Revlon Consumer Products Corporation (RCPC) International Comb
and Brush License Agreement dated September 30, 1992. (Filed
as Exhibit 10.34 to Helen of Troy Corporation's Quarterly
report on Form 10-Q for the period ending November 30, 1992
filed with the Securities and Exchange Commission).
10.10 First Amendment to RCPC North America Appliance License
Agreement, dated September 30, 1992. (Filed as Exhibit 10.26
to Helen of Troy Corporation's Annual Report on Form 10-K for
the period ending February 28, 1993 filed with the Securities
and Exchange Commission).
10.11 First Amendment to RCPC North America Comb and Brush License
Agreement, dated September 30, 1992. (Filed as Exhibit 10.27
to Helen of Troy Corporation's Annual Report on Form 10-K for
the period ending February 28, 1993 filed with the Securities
and Exchange Commission).
10.12 First Amendment to RCPC International Appliance License
Agreement, dated September 30, 1992. (Filed as Exhibit 10.28
to Helen of Troy Corporation's Annual Report on Form 10-K for
the period ending February 28, 1993 filed with the Securities
and Exchange Commission).
10.13 First Amendment to RCPC International Comb and Brush License
Agreement, dated September 30, 1992. (Filed as Exhibit 10.29
to Helen of Troy Corporation's Annual Report on Form 10-K for
the period ending February 28, 1993 filed with the Securities
and Exchange Commission).
10.14 License Agreement between Helen of Troy Corporation and Helen
of Troy Limited, a Barbados corporation, dated February 28,
1994. (Filed as Exhibit 10.22 to the Registrant's Annual
Report on Form 10-K for the period ending February 28, 1994
filed with the Securities and Exchange Commission).
43
<PAGE> 46
10.15 Amended and Restated Note Purchase, Guaranty and Master Shelf
Agreement, $40,000,000 7.01% Guaranteed Senior Notes and
$40,000,000 Guaranteed Senior Note Facility. (Filed as Exhibit
10.23 to the Registrant's Quarterly Report on Form 10-Q for
the period ending November 30, 1996).
10.16 Employment contract for H. McIntyre Gardner. (Filed as
Exhibit 10.24 to the Registrant's Quarterly Report on Form
10-Q for the period ending November 30, 1997).
10.17 Helen of Troy Limited 1995 Non-Employee Director Stock Option
Plan. (Filed as Exhibit 4.3 to the Registrant's Registration
Statement on Form S-8, File Number 333-67349, filed with the
Securities and Exchange Commission on August 30, 1996).
10.18 Helen of Troy Limited 1998 Employee Stock Option and
Restricted Stock Plan. (Filed as Exhibit 4.3 to the
Registrant's Registration Statement on Form S-8, File Number
333-67349, filed with the Securities and Exchange Commission
on November 6, 1998).
10.27 Helen of Troy Limited 1998 Employee Stock Purchase Plan, as
previously filed as Exhibit 4.3 of the Registrant's
Registration Statement on Form S-8, File Number 333-67369,
filed with the Securities and Exchange Commission on November
6, 1998, is hereby incorporated herein by reference.
10.28 Amended and Restated Employment Agreement between Helen of
Troy Limited and Gerald J. Rubin, dated March 1, 1999. (Filed
as Exhibit 10.29 to the Registrant's Quarterly Report on Form
10-Q for the period ending August 31, 1999).
10.29 Amended and Restated Helen of Troy Limited 1995 Non-Employee
Director Stock Option Plan. (Filed as Exhibit 10.30 to the
Registrant's Quarterly Report on Form 10-Q for the period
ending August 31, 1999).
21* Subsidiaries of the Registrant, filed herewith.
23* Independent Auditors' Consent, filed herewith.
27* Financial Data Schedule, filed herewith.
*filed herewith
(b) The following documents are filed as part of the report:
1. Financial Statements
Independent Auditors' Report
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
2. Schedule: Schedule II - Valuation and Qualifying Accounts
(c) Reports on Form 8-K
On December 21, 1999 the Company filed a report on Form 8-K in connection with
the public announcement of its third quarter fiscal 2000 earnings.
44
<PAGE> 47
The registrant will send its annual report to security holders and proxy
solicitation material subsequent to the filing of this form and shall furnish
copies of both to the Commission when they are sent to security holders.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
By: /s/ Gerald J. Rubin
--------------------------------------
Gerald J. Rubin, Chairman,
Chief Executive Officer and Director
Dated May 26, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- ------------------------------------------------ ---------------------------------- --------------
<S> <C> <C>
Chairman of the Board, Chief
Executive Officer and Director
s/Gerald J. Rubin (Principal Executive Officer) May 26, 2000
- ------------------------------------------------
(Gerald J. Rubin)
President, Chief Operating Officer
s/H. McIntyre Gardner and Director May 26, 2000
- ------------------------------------------------
(H. McIntyre Gardner)
Senior Vice President, Finance
and Chief Financial Officer
(Principal Financial and Accounting
s/Dona Fisher Officer) May 26, 2000
- ------------------------------------------------
(Dona Fisher)
s/Stanlee N. Rubin Director May 26, 2000
- ------------------------------------------------
(Stanlee N. Rubin)
s/Christopher L. Carameros Director May 26, 2000
- ------------------------------------------------
(Christopher L. Carameros)
</TABLE>
45
<PAGE> 48
<TABLE>
<S> <C> <C>
s/Byron H. Rubin Director May 26, 2000
- ------------------------------------------------
(Byron H. Rubin)
s/Daniel C. Montano Director May 26, 2000
- ------------------------------------------------
(Daniel C. Montano)
s/Gary B. Abromovitz Director May 26, 2000
- ------------------------------------------------
(Gary B. Abromovitz)
</TABLE>
46
<PAGE> 49
Index to Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
21 - Subsidiaries of the Registrant, filed herewith.
23 - Independent Auditors' Consent, filed herewith.
27 - Financial Data Schedule, filed herewith.
</TABLE>
<PAGE> 1
Exhibit 21
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
Doing
Business
Name Incorporation As
- --------------------------------------------- -------------------------- ---------
<S> <C> <C>
International Appliances Limited Hong Kong Same Name
Beauty Biz, Inc. Texas Same Name
Helen of Troy (Far East) Limited,
(formerly Helen of Troy (Services) Limited) Hong Kong Same Name
Helen of Troy (Cayman) Limited, (formerly
(International Appliances (Cayman) Limited Cayman Islands Same Name
Helen of Troy International, B.V. The Netherlands Same Name
Helen of Troy Limited Barbados Same Name
Helen of Troy (Services) Limited Hong Kong Same Name
(formerly Helen of Troy (Far East) Limited
Helen of Troy Corporation Texas Same Name
Helen of Troy Nevada Corporation Nevada Same Name
HOT Nevada Inc. Nevada Same Name
Helen of Troy L.P. Texas Limited Partnership Same Name
Helen of Troy International Marketing Limited Barbados Same Name
HOT(UK) Limited United Kingdom Same Name
Helen of Troy GmbH Germany Same Name
Karina, Inc. New Jersey Same Name
DCNL, Inc. Texas Same Name
Helen of Troy Canada, Inc. Nevada Same Name
Helen of Troy Limited Hong Kong Same Name
Helen of Troy LLC Nevada Same Name
Tactica, International Inc. Nevada Same Name
(55% ownership)
Helen of Troy SARL France Same Name
</TABLE>
<PAGE> 1
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Helen of Troy Limited:
We consent to incorporation by reference in the registration statements No.
33-75832, No. 333-11181, No. 333-67349 and No. 333-67369 on Form S-8, and the
registration statements No. 333-65477 and No. 333-67293 on Form S-3, of Helen of
Troy Limited of our report dated May 10, 2000, relating to the consolidated
balance sheets of Helen of Troy Limited and subsidiaries as of February 29, 2000
and February 28, 1999, and the related consolidated statements of income,
stockholders' equity and cash flows and related financial statement schedule for
each of the years in the three-year period ended February 29, 2000, which report
appears in the February 29, 2000 annual report on Form 10-K of Helen of Troy
Limited.
KPMG LLP
El Paso, Texas
May 26, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF HELEN OF TROY LIMITED AND SUBSIDIARIES AS
OF, AND FOR THE QUARTER ENDED FEBRUARY 29, 2000, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-29-2000
<PERIOD-END> FEB-29-2000
<CASH> 34,265,000
<SECURITIES> 994,000
<RECEIVABLES> 53,475,000
<ALLOWANCES> 559,000
<INVENTORY> 96,959,000
<CURRENT-ASSETS> 194,023,000
<PP&E> 53,951,000
<DEPRECIATION> 6,212,000
<TOTAL-ASSETS> 304,252,000
<CURRENT-LIABILITIES> 39,628,000
<BONDS> 55,000,000
0
0
<COMMON> 2,884,000
<OTHER-SE> 206,740,000
<TOTAL-LIABILITY-AND-EQUITY> 304,252,000
<SALES> 299,513,000
<TOTAL-REVENUES> 299,513,000
<CGS> 185,685,000
<TOTAL-COSTS> 185,685,000
<OTHER-EXPENSES> 104,409,000
<LOSS-PROVISION> 599,000
<INTEREST-EXPENSE> 3,530,000
<INCOME-PRETAX> 13,097,000
<INCOME-TAX> (14,000)
<INCOME-CONTINUING> 13,111,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,111,000
<EPS-BASIC> .45
<EPS-DILUTED> .44
</TABLE>
