1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES - - - EXCHANGE ACT OF 1934 For the quarterly period ended May 31, 1996 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES - - - EXCHANGE ACT OF 1934 For the transition period from......................to....................... Commission file number 0-23312 HELEN OF TROY LIMITED (Exact name of registrant as specified in its charter) Bermuda 74-2692550 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 6827 Market Avenue El Paso, TX 79915 (Address of principal executive offices, including zip code) Registrant's telephone number, including area code: (915) 779-6363 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- As of July 8, 1996 there were 13,021,662 shares of Common Stock, $.10 Par Value, outstanding.
2 HELEN OF TROY LIMITED AND SUBSIDIARIES INDEX <TABLE> <CAPTION> Page No. <S> <C> PART I. FINANCIAL INFORMATION Item 1 Consolidated Condensed Balance ------ Sheets as of May 31, 1996 and February 29, 1996 . . . . . . . . . . . . . . . 3 Consolidated Condensed Statements of Income for the Three Months Ended May 31, 1996 and May 31, 1995 . . . . . . 5 Consolidated Condensed Statements of Cash Flows for the Three Months Ended May 31, 1996 and May 31, 1995 . . . . . . 6 Notes to Consolidated Condensed Financial Statements . . . . . . . . . . . . . 8 Item 2 Management's Discussion and Analysis of ------ Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . 9 PART II. OTHER INFORMATION Item 6 Exhibits and Reports on Form 8-K . . . . . . . . . . . . 10 ------ SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 </TABLE> 2
3 PART I. FINANCIAL INFORMATION HELEN OF TROY LIMITED AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (in thousands, except shares) <TABLE> <CAPTION> May 31, February 29, 1996 1996 ---- ---- (unaudited) Assets <S> <C> <C> Current Assets: Cash and cash equivalents $ 36,805 44,195 Receivables - principally trade, less allowance for doubtful receivables of $744 at May 31, 1996 and $390 at February 29, 1996 34,347 28,854 Inventories 51,414 48,572 Prepaid expenses 1,082 422 Deferred income tax benefits $ 992 823 -------- ------- Total current assets 124,640 122,866 Property and equipment net of accumulated depreciation of $3,419 at May 31, 1996 and $3,229 at February 29, 1996 17,428 15,750 License agreements, at cost, less accumulated amortization of $6,550 at May 31, 1996 and $6,361 at February 29, 1996 10,502 8,191 Note receivable 850 1,006 Other assets, net of amortization 6,686 6,775 -------- ------- Total assets $160,106 154,588 ======== ======= </TABLE> (continued) 3
4 HELEN OF TROY LIMITED AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (in thousands, except shares) <TABLE> <CAPTION> May 31, February 29, 1996 1996 ---- ---- (unaudited) <S> <C> <C> Liabilities and Stockholders' Equity Current liabilities: Notes payable $ -- 2,593 Accounts payable, principally trade 3,724 1,005 Accrued expenses: Advertising and promotional 3,943 1,740 Other 4,931 4,912 Income taxes payable 2,769 2,010 -------- ------- Total current liabilities 15,367 12,260 Long-term Debt 40,450 40,450 -------- ------- Total liabilities 55,817 52,710 Stockholders' equity: Cumulative preferred stock, non-voting, $1.00 par value. authorized 2,000,000 shares; none issued -- -- Common stock, $.10 par value. authorized 25,000,000 shares; issued and outstanding 12,966,662 shares at May 31, 1996 and 12,965,162 shares at February 29, 1996 648 648 Additional paid-in capital 25,872 25,863 Retained earnings 77,769 75,367 --------- ------- Total stockholders' equity 104,289 101,878 --------- ------- Commitments and contingencies (Note 2) -- -- Total liabilities and stockholders' equity $ 160,106 154,588 ========== ======= </TABLE> See accompanying notes to consolidated condensed financial statements. 4
5 HELEN OF TROY LIMITED AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF INCOME (unaudited) (in thousands, except shares and earnings per share) <TABLE> <CAPTION> Three Months Ended May 31, 1996 1995 ---- ---- <S> <C> <C> Net Sales $ 43,836 33,544 Cost of sales 27,496 21,048 ---------- ---------- Gross profit 16,340 12,496 Selling, general and administrative expenses 13,119 10,238 ---------- ---------- Operating income 3,221 2,258 Other income (expense): Interest expense, net (755) (256) Other income, net 633 158 ---------- ---------- Total other income (expense) (122) (98) ---------- ----------- Earnings before income taxes 3,099 2,160 Income tax expense (benefit): Current 866 523 Deferred (169) (37) ----------- ---------- Net earnings $ 2,402 1,674 ========== ========== Net earnings per common and common equivalent share: (Note 3) .18 .13 Weighted average number of common and common equivalent shares used in computing net earnings per share - Primary 13,619,014 13,377,226 </TABLE> See accompanying notes to consolidated condensed financial statements. 5
6 HELEN OF TROY LIMITED AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (unaudited, in thousands) <TABLE> <CAPTION> Three Months Ended May 31, 1996 1995 ---- ---- <S> <C> <C> Cash flows from operating activities: Net earnings $2,402 1,674 Adjustments to reconcile net income to net cash used by operating activities: Depreciation and amortization 592 578 Provision for doubtful receivables 354 (17) Provision for deferred tax benefit (169) (37) Changes in operating assets and liabilities: Accounts receivable (5,847) (1,083) Inventory (2,842) (7,020) Prepaid expenses (660) (681) Accounts payable 2,719 1,432 Accrued expenses 2,222 634 Income taxes payable 759 506 ------- ------ Net cash used by operating activities (470) (4,014) Cash flows from investing activities: Capital and license expenditures (4,348) (1,154) Other assets (144) 202 Collection on note receivable 156 129 -------- ------ Net cash used by investing activities (4,336) (823) </TABLE> (continued) 6
7 HELEN OF TROY LIMITED AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (unaudited, in thousands) <TABLE> <CAPTION> Three Months Ended May 31, 1996 1995 ---- ---- <S> <C> <C> Cash flows from financing activities: Net payments on revolving line of credit (2,593) (6,530) Proceeds from exercise of options 9 112 --------- ---------- Net cash used by financing activities (2,584) (6,418) --------- ---------- Net decrease in cash and cash equivalents (7,390) (11,255) ---------- ----------- Cash and cash equivalents, beginning of period 44,195 31,917 --------- ---------- Cash and cash equivalents, end of period $ 36,805 $ 20,662 ========= ========== Supplemental cash flow disclosures: Interest paid $ 821 $ 282 Income taxes paid, net of refund 427 -- </TABLE> See accompanying notes to consolidated condensed financial statements. 7
8 HELEN OF TROY LIMITED AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENT May 31, 1996 Note 1 - In the opinion of the Company, the accompanying consolidated condensed financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly its financial condition of the results of its operations for the periods ended May 31, 1996 and 1995. While the Company believes that the disclosures presented are adequate to make the information not misleading, it is suggested that these statements be read in conjunction with the financial statements and the notes included in the Company's latest annual report on Form 10-K. Note 2 - The Company is involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of such claims and legal actions will not have a material adverse effect on the financial position of the Company. Note 3 - Primary earnings per common and common equivalent share are computed based upon the weighted average number of common shares plus common share equivalents (dilutive stock options and warrants) outstanding during the period. Fully diluted earnings per share is based on the weighted average number of common shares plus equivalents determined on the basis of maximum potential dilution from stock options and warrants. Earnings per common and common equivalent share, assuming full dilution, is not materially dilutive for any of the periods presented. Note 4 - The business of the Company is seasonal with greater than 60% of annual sales volume normally occurring in the second and third fiscal quarters. Note 5 - On June 4, 1996, the Company's Directors approved a 2-for-1 stock split which will be paid as a 100% stock dividend. The stock dividend is payable on July 1, 1996 to stockholders of record on June 17, 1996. All references in the financial statements to number of shares and per share amounts of the Company's common stock have been retroactively restated to reflect the increased number of common shares outstanding. 8
9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Net sales increased $10,292,000 during the first quarter of fiscal 1997, a 31% increase in net sales when compared with the first quarter of fiscal 1996. The increase is attributable to increased volume as the Company's market share increased in both the Consumer Sales Division and the Professional Salon Division. Hair care appliance sales make up the great majority of Consumer Products Division volume. The introduction of new hair care appliance models, increased brush and comb sales, and sales of hair care accessories were the primary causes of the market share increase. Gross profit, as a percentage of net sales, remained constant at 37.3% for the first quarter of fiscal 1997, as compared to the first quarter of fiscal 1996. Selling, general and administrative expenses decreased as a percent of net sales to 30.0% in the first quarter of fiscal 1997 from 30.5% in the first quarter of fiscal 1996. These costs increased $2,881,000 which was primarily due to the variable nature of expenses associated with increased sales. Liquidity and Capital Resources The Company's working capital was $109,273,000 at May 31, 1996 and the current ratio was 8.1 to 1. Short term debt decreased $2,593,000 from February 29, 1996 to May 31, 1996. The Company believes its capital resources are adequate to finance normal growth and service the Company's debt obligations. 9
10 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 11 Earnings Per Share Computation 27 Financial Data Schedule 10
11 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. HELEN OF TROY LIMITED (Registrant) <TABLE> <S> <C> <C> Date July 9, 1996 s/ Gerald J. Rubin ----------------------- ---------------------------------- Gerald J. Rubin Chairman of the Board and Chief Executive Officer (Principal Executive Officer) Date July 9, 1996 s/Sam L. Henry ----------------------- ---------------------------------- Sam L. Henry Senior Vice-President, Finance, and Chief Financial Officer (Principal Financial Officer) </TABLE> 11
12 EXHIBIT INDEX <TABLE> <CAPTION> EXHIBIT NUMBER DESCRIPTION - - ------- ----------- <S> <C> 11 Earnings Per Share Computation 27 Financial Data Schedule </TABLE>