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, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ............ to .............. Commission file number 0-23312 HELEN OF TROY LIMITED (Exact name of registrant as specified in its charter) Bermuda 74-2692550 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 6827 Market Avenue El Paso, TX 79915 (Address of principal executive offices, including zip code) Registrant's telephone number, including area code: (915) 779-6363 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] As of July 3, 1997 there were 13,291,666 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, 1997 and February 28, 1997 . . . . . . . . . . . . . . 3 Consolidated Condensed Statements of Income for the Three Months Ended May 31, 1997 and May 31, 1996 . . . . . 5 Consolidated Condensed Statements of Cash Flows for the Three Months Ended May 31, 1997 and May 31, 1996 . . . . . 6 Notes to Consolidated Condensed Financial Statements . . . . . . . . . . . . 8 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . 9 PART II. OTHER INFORMATION Item 5 Other information . . . . . . . . . . . . . . . . . . 10 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 28, 1997 1997 ---------- ---------- (unaudited) <S> <C> <C> Assets Current assets: Cash and cash equivalents $ 25,565 $ 25,798 Receivables - principally trade, less allowance for doubtful receivables of $595 at May 31, 1997 and $400 at February 28, 1997 42,496 36,951 Inventories 64,511 68,267 Prepaid expenses 2,454 939 Deferred income tax benefits 1,161 1,276 ---------- ---------- Total current assets 136,187 133,231 Property and equipment net of accumulated depreciation of $4,283 at May 31, 1997 and $3,983 at February 28, 1997 26,082 25,780 License agreements, at cost, less accumulated amortization of $7,306 at May 31, 1997 and $7,117 at February 28, 1997 9,746 9,935 Note receivable 405 522 Other assets, net of amortization 12,602 12,758 ---------- ---------- Total assets $ 185,022 $ 182,226 ========== ========== </TABLE> (continued) 3
4 HELEN OF TROY LIMITED AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (in thousands, except shares) <TABLE> <CAPTION> May 31, February 28, 1997 1997 ---------- ---------- (unaudited) <S> <C> <C> Liabilities and Stockholders' Equity Current liabilities: Notes payable $ -- $ 4,001 Accounts payable, principally trade 2,103 2,645 Accrued expenses: Advertising and promotional 5,564 2,580 Other 6,450 6,934 Income taxes payable 5,915 5,134 ---------- ---------- Total current liabilities 20,032 21,294 Long-term debt 40,450 40,450 ---------- ---------- Total liabilities 60,482 61,744 Stockholders' equity: Cumulative preferred stock, non-voting, $1.00 par value. authorized 2,000,000 shares; none issued -- -- Common stock, $.10 par value authorized 25,000,000 shares; issued and outstanding 13,207,632 shares at May 31, 1997 and 13,143,437 shares at February 28, 1997 1,321 1,314 Additional paid-in capital 27,142 26,643 Retained earnings 96,077 92,525 ---------- ---------- Total stockholders' equity 124,540 120,482 ---------- ---------- Commitments and contingencies (Note 2) -- -- Total liabilities and stockholders' equity $ 185,022 $ 182,226 ========== ========== </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, 1997 1996 ------------ ------------ <S> <C> <C> Net sales $ 52,448 $ 43,836 Cost of sales 32,637 27,496 ------------ ------------ Gross profit 19,811 16,340 Selling, general and administrative expenses 14,944 13,119 ------------ ------------ Operating income 4,867 3,221 Other income (expense): Interest expense (711) (755) Other income, net 427 633 ------------ ------------ Total other income (expense) (284) (122) ------------ ------------ Earnings before income taxes 4,583 3,099 Income tax expense (benefit): Current 916 866 Deferred 115 (169) ------------ ------------ Net earnings $ 3,552 $ 2,402 ============ ============ Net earnings per common and common equivalent share: (Notes 3 and 5) $ .25 $ .18 Weighted average number of common and common equivalent shares used in computing net earnings per share 14,208,758 13,619,014 </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, 1997 1996 -------- -------- <S> <C> <C> Cash flows from operating activities: Net earnings $ 3,552 $ 2,402 Adjustments to reconcile net income to net cash used by operating activities: Depreciation and amortization 872 592 Provision for doubtful receivables 195 354 Provision for deferred tax benefit 115 (169) Changes in operating assets and liabilities: Accounts receivable (5,740) (5,847) Inventory 3,756 (2,842) Prepaid expenses (1,515) (660) Accounts payable (542) 2,719 Accrued expenses 2,500 2,222 Income taxes payable 781 759 -------- -------- Net cash provided (used) by operating activities 3,974 (470) Cash flows from investing activities: Capital and license expenditures (652) (4,348) Other assets (177) (144) Collection on note receivable 117 156 -------- -------- Net cash used by investing activities (712) (4,336) </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, 1997 1996 -------- -------- <S> <C> <C> Cash flows from financing activities: Net payments on revolving line of credit (4,001) (2,593) Proceeds from exercise of options 506 9 -------- -------- Net cash used by financing activities (3,495) (2,584) -------- -------- Net decrease in cash and cash equivalents (233) (7,390) -------- -------- Cash and cash equivalents, beginning of period 25,798 44,195 -------- -------- Cash and cash equivalents, end of period $ 25,565 $ 36,805 ======== ======== Supplemental cash flow disclosures: Interest paid $ 728 $ 821 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, 1997 Note 1 - In the opinion of the Company, the accompanying consolidated condensed financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly its financial condition as of May 31, 1997 and February 28, 1997 and the results of its operations for the periods ended May 31, 1997 and 1996. While the Company believes that the disclosures presented are adequate to make the information not misleading, it is suggested that these statements be read in conjunction with the financial statements and the notes included in the Company's latest annual report on Form 10-K. Note 2 - The Company is involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of such claims and legal actions will not have 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 are based on the weighted average number of common shares plus equivalents determined on the basis of maximum potential dilution from stock options and warrants. Earnings per common and common equivalent share, assuming full dilution, is not materially dilutive for any of the periods presented. Note 4 - The business of the Company is seasonal with greater than 60% of annual sales volume normally occurring in the second and third fiscal quarters. Note 5 - On June 4, 1996, the Company's Directors approved a 2-for-1 stock split which was paid as a 100% stock dividend 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 $8,612,000 during the first quarter of fiscal 1998, a 20% increase in net sales when compared with the first quarter of fiscal 1997. The increase is attributable to increased volume as the Company's market share increased throughout the Divisions that make retail sales and in the Professional Salon Division, and also to the incremental sales resulting from the October 1996 Dazey acquisition. Gross profit, as a percentage of net sales, increased to 37.8% for the first quarter of fiscal 1998, from 37.3% in the first quarter of fiscal 1997. The increased gross profit margin is attributable to a favorable change in the mix of products sold. Selling, general and administrative expenses decreased as a percent of net sales to 28.5% in the first quarter of fiscal 1998 from 29.9% in the first quarter of fiscal 1997. The decrease in expenses as a percentage of net sales is due to the fixed nature of certain expenses. Other income decreased approximately 33% in the first quarter of fiscal 1998 when compared to the same period in the previous year. The decrease in other income was due to the Company having less cash for short term investment purposes during the quarter ended May 31, 1997 when compared with the quarter ended May 31, 1996. Liquidity and Capital Resources The Company's working capital was $116,155,000 at May 31, 1997 and the current ratio was 6.8 to 1. Short term debt decreased $4,001,000 from February 28, 1997 to May 31, 1997. The Company believes its capital resources are adequate to finance normal growth and service the Company's debt obligations. Additionally, the Company believes that internal funds and available credit will be adequate to finance a new headquarters office building, which is planned for construction within the next two years. 9
10 PART II. OTHER INFORMATION Item 5. Other Information None. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 11 Earnings Per Share Computation 27 Financial Data Schedule 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) Date July 14, 1997 /s/ Gerald J. Rubin -------------------------- ----------------------------- Gerald J. Rubin Chairman of the Board, Chief Executive Officer, President and Chief Operating Officer (Principal Executive Officer) Date July 14, 1997 /s/ Sam L. Henry --------------------------- -------------------------------- Sam L. Henry Senior Vice-President, Finance, and Chief Financial Officer (Principal Financial Officer) 11
12 INDEX TO EXHIBITS <TABLE> <CAPTION> EXHIBIT NUMBER DESCRIPTION - ------- ----------- <S> <C> 11 Earnings Per Share Computation 27 Financial Data Schedule </TABLE>