HELEN OF TROY LTD - 10-K Annual Report

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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 28, 2002

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
--- EXCHANGE ACT OF 1934

Commission file number 001-14669

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.)

CLARENDON HOUSE
CHURCH STREET
HAMILTON, BERMUDA
(Address of Principal Executive Offices)

1 HELEN OF TROY PLAZA
EL PASO, TEXAS 79912
(Registrant's United States Mailing Address) (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 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 17, 2002 was $340,052,483.

As of May 17, 2002 there were 28,211,017 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 28, 2002, 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 54

TABLE OF CONTENTS

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PART I

ITEM 1. BUSINESS

GENERAL

Unless the context requires otherwise, references to "the Company," to
"our Company," or to "Helen of Troy" and references such as "we" and "us" refer
to Helen of Troy Limited and its subsidiaries, including Tactica International,
Inc.("Tactica"). Our Company is comprised of three operating segments. The North
American segment sells hair care and other personal care and comfort appliances,
hairbrushes, combs, and utility and decorative hair accessories in the U.S. and
Canada. The International segment sells hair care and other personal care and
comfort appliances, hairbrushes, combs, and utility and decorative hair
accessories outside of the U.S. and Canada. Our third segment, Tactica, sells
personal care and other consumer products directly to consumers through direct
response marketing and to retailers. We present financial information for each
of our operating segments in Note (10) of the Consolidated Financial Statements.
The matters discussed in Item 1 pertain to all three of our operating segments,
unless otherwise specified.

We design, develop and sell a variety of personal care and comfort
products under trademarks licensed from third parties, as well as under
trademarks that we own. We outsource the manufacture of our products to third
parties and sell most of those products to mass merchandisers, drug chains,
warehouse clubs, grocery stores, beauty supply retailers and wholesalers, and
directly to consumers in the U.S. and other countries.

Products bearing licensed trademarks include those sold under the
trademarks of VS Sassoon(R), licensed from The Procter & Gamble Company;
Revlon(R), licensed from Revlon Consumer Products Corporation; Dr. Scholl's(R),
licensed from Schering-Plough HealthCare Products, Inc.; Scholl(R) (in areas
other than North America), licensed from Scholl Limited; and Sunbeam(R),
licensed from Sunbeam Products, Inc. Trademarks owned by the Company include
Helen of Troy(R), Salon Edition(R), Hot Tools(R), Ecstasy(TM), Gold Series(R),
Hotspa(R), Gallery Series(R), Wigo(R), Caruso(TM), Dazey(R), Lady Dazey(R),
Carel(R), Lady Carel(R), Sable(R), Karina(R), Karina Girl(TM), Kurl*Mi(R),
Detangle*Mi(R), Heat*Mi(R), DCNL(TM), DCNL Signature(TM), IGIA(R), and
Epil-Stop(R).

We were incorporated as Helen of Troy Corporation in Texas in 1968 and
reincorporated as Helen of Troy Limited in Bermuda in 1994.

We do not engage in any activities involving special purpose entities
or off-balance sheet financing.

1

PRODUCTS

The business of Helen of Troy's North American and International
segments is designing, developing and selling a full line of personal care and
comfort products. Our products include hair dryers, curling irons, hair
straighteners, hot air brushes, brush irons, home hair clippers and trimmers,
mirrors, hairsetters, foot baths, body massagers, paraffin baths, hairbrushes,
combs and hair accessories. The following table lists some of the products that
the North American and International segments sell and some of the brand names
that appear on those products.

On March 14, 2000 we acquired a 55 percent ownership interest in
Tactica International, Inc. ("Tactica"). Tactica's net sales comprised
approximately 24 percent and five percent of the Company's consolidated net
sales in fiscal 2002 and 2001, respectively. Tactica designs, develops and sells
a variety of personal care and other consumer products in categories such as
hair care, hair removal, dental care, skin care, sports and exercise, household,
and kitchen. Tactica sells these products directly to consumers and through the
retail distribution channel, primarily under the IGIA(R) and Epil-Stop(R)
trademarks. Some of the products developed and marketed by Tactica are
trend-oriented and have shorter product lives than Helen of Troy's other
products. To create product awareness and interest, Tactica uses television
infomercials and direct response marketing extensively.

We continue, primarily through our marketing and engineering
departments, to develop new products and enhance existing products in order to
maintain and improve our position in the personal care and comfort product
market. Significant product additions during fiscal 2002 included hair dryers
and other hair care appliances using ion technology. For fiscal 2003, we are
introducing a number of new products, including new massager products, Memory
Foam(TM) pillows, a quiet hair dryer and other new hair care appliances that
incorporate ionic technology, hair styling products aimed at the teen market,
and a line of appliances created by designer Marc Newson.

SALES AND MARKETING

We market our products primarily within the U.S. Sales within the U.S.
comprised 91 percent of net sales in fiscal 2002, 89 percent of net sales in
fiscal 2001, and 88 percent of net sales in fiscal 2000. Our North American and

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International operating segments sell their products primarily through mass
merchandisers, drug chains, warehouse clubs, catalogs, grocery stores and beauty
supply retailers and wholesalers. Both of these segments market our products
through outside sales representative and through our own sales staff. Tactica
primarily uses direct consumer marketing, such as television infomercials and
catalog advertising to sell its products under the IGIA(R) and Epil-Stop(R)
brands in the U.S.

The companies from whom we license many of our brand names promote
those names extensively. Revlon Consumer Products Corporation engages in
national advertising of its beauty care products. The VS Sassoon(R), Dr.
Scholl's(R) and Sunbeam(R) trademarks are widely recognized, because of
advertising and the sale of a variety of products. We benefit from the name
recognition associated with a number of our licensed trademarks and further
improve the name recognition and perceived quality of all the trademarks under
which we sell products through our own advertising and product development
efforts. We promote our products through television advertising and through
print media, including consumer and trade magazines and various industry trade
shows.

MANUFACTURING AND DISTRIBUTION

We contract with unaffiliated manufacturers in the Far East, primarily
in the Peoples' Republic of China, Thailand, Taiwan, and South Korea, to
manufacture most of the products sold by our North American and International
segments (see discussion of International Manufacturing and Operations in Item
7, "Management's Discussion and Analysis of Financial Condition and Results of
Operations" under the heading "Risk Factors"). For fiscal 2002, goods
manufactured by vendors in the Far East comprised approximately 90 percent of
the dollar value of the North American and International segments' inventory
purchases. Those segments purchase the remainder of their products from
unaffiliated manufacturers in North America and Europe. The manufacturers who
produce our products use molds and certain other tooling, some of which we own,
in manufacturing those products. The North American and International segments
employ numerous technical and quality control persons to assure high product
quality.

Our products that are manufactured in the Far East and sold in North
America are shipped to the West Coast of the U.S. and the West Coast of Canada.
The products are then shipped by truck or rail service to warehouse facilities
in El Paso, Texas; Memphis, Tennessee; Toronto, Canada; and Vancouver, Canada,
or directly to customers. We ship substantially all products to North American
customers from these warehouses by ground transportation services. Products sold
by the International segment outside the U.S. and Canada are shipped from
manufacturers, primarily in the Far East, to warehouse facilities in Veenendaal,
The Netherlands and Nottinghamshire, the United Kingdom, or directly to
customers. Products stored at the warehouses in The Netherlands and the United
Kingdom are shipped from those warehouses to distributors or retailers.

Our customers in both the North American and International segments
seek to minimize their inventory levels, but often demand that we fulfill their
orders within relatively short time frames. Consequently, these inventory
management practices often require us to carry substantial levels of inventory
in order to meet our customers' needs.

Tactica also contracts with unaffiliated manufacturers both within and
outside the U.S. to manufacture its products. Tactica's products are shipped to
a warehouse facility in Reno, Nevada for shipment to individuals or retail
customers. Tactica also sometimes ships products from manufacturers directly to
retailers. When selling to retail customers, Tactica often faces the same
challenges as do our other two segments with regard to retailers' inventory
management practices.

Most of our three segments' products manufactured outside the countries
in which they are sold are subject to import duties.

3

LICENSE AGREEMENTS, TRADEMARKS AND PATENTS

Our North American and International operating segments depend
materially upon the continued use of trademarks licensed under various
agreements. The VS Sassoon(R) and Revlon(R) trademarks are of particular
importance. New product introductions under licensed trademarks require approval
from the respective licensors. The licensors also must approve the product
packaging. Many of the license agreements require the Company to pay minimum
royalties, meet minimum sales volumes, and make minimum levels of advertising
expenditures. The duration of the license agreements for the Revlon(R) and VS
Sassoon(R) trademarks, including the renewal terms, exceeds ten years. Upon
expiration of the current terms of these agreements, we have the unconditional
right to extend their terms, upon payment of a renewal fee.

The discussion below covers the primary product categories that Helen
of Troy currently sells under its major license agreements. The product
categories discussed do not necessarily include all of the products that Helen
of Troy is entitled to sell under these agreements.

Under license agreements with The Procter & Gamble Company, Helen of
Troy is licensed to sell certain products using the VS Sassoon(R) trademark in
the U.S., Canada, Mexico, and Western Europe. Products sold under the terms of
these licenses include hair dryers, curling irons, brush irons, hairsetters, hot
air brushes, hair clippers and hair trimmers, mirrors, brushes, combs and hair
care accessories.

Under agreements with Revlon Consumer Products Corporation, we are
licensed to sell, worldwide, except in Western Europe, hair dryers, curling
irons, hair straighteners, brush irons, hairsetters, brushes, combs, mirrors,
functional hair accessories, personal spa products, hair clippers and trimmers
and battery-operated and electric women's shavers bearing the Revlon(R)
trademark.

We are licensed to sell foot baths, foot massagers, hydro massagers,
cushion massagers, and body massagers bearing the Dr. Scholl's(R) trademark in
the U.S. and Canada, under an agreement with Schering-Plough HealthCare
Products, Inc. We also are licensed to sell the same products under the
Scholl(R) trademark in other areas of the world through an agreement with from
Scholl Limited.

Under agreements with Sunbeam Products, Inc. we are licensed to sell
hair clippers, hair trimmers, hair dryers, curling irons, hairsetters, hot air
brushes, mirrors, manicure kits, hair brushes and combs, hair rollers, hair
accessories, hair removal devices, and paraffin wax devices bearing the
Sunbeam(R)trademark in the U.S., Canada, Mexico, Central America, South America,
and the Caribbean.

Helen of Troy has filed or obtained licenses for design and utility
patents in the U.S. and several foreign countries. The Company does not believe
that the loss of any particular patent or patent license would have a materially
adverse effect on its business.

RELIANCE ON ONE CUSTOMER

Sales to Wal-Mart Stores, Inc., and one of its affiliates, accounted
for approximately 22 percent, 23 percent, and 26 percent of our net sales in
fiscal 2002, 2001, and 2000, respectively. No other customer accounted for ten
percent or more of net sales in fiscal 2002, 2001, or 2000.

ORDER BACKLOG

There was no significant backlog of orders at February 28, 2002.

COMPETITIVE CONDITIONS

The markets in which we sell our products are very competitive.
Maintaining and gaining market share depends heavily on product development and
enhancement, pricing, quality, performance, packaging and availability, brand
name recognition, patents, and marketing and distribution approaches. Our
primary competitors include The Conair Corporation; Applica Incorporated;
Remington Products Company; Goody Products, Inc., a division of Newell
Rubbermaid

4

Inc.; Homedics-USA, 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 approximately 57
percent of fiscal 2002 and 2001 net sales and for approximately 54 percent of
net sales in fiscal 2000. As a result of the seasonality of sales, working
capital needs fluctuate during the year.

REGULATION

Our electrical products must meet the safety standards imposed in
various national, state, local and provincial jurisdictions. Our electrical
products sold in the U.S. are designed, manufactured and tested to meet the
safety standards of Underwriters Laboratories, Inc. or Electronic Testing
Laboratories.

EMPLOYEES

We employ 625 full-time employees in the U.S., Hong Kong and Europe, of
which 216 are marketing and sales employees, 153 are distribution employees, 53
are engineering and development employees and 203 are administrative personnel.
Included in these totals are 61 employees of Tactica. Tactica employs 44
administrative and 17 sales and marketing personnel. None of the Company's
employees are covered by any collective bargaining agreement. We have never
experienced a work stoppage and we believe that we have satisfactory working
relations with our employees.

GEOGRAPHIC INFORMATION

Note (10) to the Consolidated Financial Statements contains geographic
information concerning our net sales and long-lived assets.

ITEM 2. PROPERTIES

PLANT AND FACILITIES

North American Segment. We own a 135,000 square foot office building in
El Paso, Texas that houses our U.S. operations. The warehouse that we own in El
Paso, Texas totals 408,000 square feet and is adjacent to the building housing
the U.S. operations. The two buildings are located on a 50-acre plot of land
that we own. We lease 108,000 square feet of warehouse space in El Paso, Texas;
360,000 square feet of warehouse space in Memphis, Tennessee; 60,000 square feet
of warehouse space in Toronto, Canada; and 20,000 square feet of warehouse space
in Vancouver, Canada. We also lease sales offices in Bentonville, Arkansas,
Minneapolis Minnesota, Troy, Michigan, and Toronto, Canada.

We own 22 acres of land in El Paso, Texas, near the 50 acres on which
the warehouse and the U.S. office building that we own are located. The Company
is holding this land for future business use.

International Segment. We lease warehouse space in public warehouses
located in Hong Kong; Veenendaal, The Netherlands and Nottinghamshire the United
Kingdom. In addition, we also lease sales offices in the United Kingdom, France,
and Germany.

Tactica. Tactica leases administrative offices in New York, New York
and leases public warehouse space in Reno, Nevada.

Corporate. A subsidiary located in Hong Kong leases approximately
23,000 square feet of office space. Prior to fiscal 1996 this subsidiary was
headquartered in approximately 12,000 square feet of office space that was
acquired by condominium ownership. In fiscal 1998 the Company leased that office
space to an unaffiliated company.

5

We also own 12,000 square feet of warehouse space on a 62,000 square
foot lot adjacent to the building that formerly housed our U.S. operations. We
are holding this property for sale and leasing it to an unaffiliated company.

ITEM 3. LEGAL PROCEEDINGS

The Hong Kong Inland Revenue Department ("the IRD") has assessed tax on
certain profits of the Company's foreign subsidiaries for the fiscal years 1990
through 1997. Hong Kong taxes income earned from certain 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 and if it were to
assert the same position for years after fiscal 1997, the resulting tax
liability could total $30,520,000 (U.S.) for the period from fiscal 1990 through
fiscal 2002. In connection with the IRD's tax assessment, the Company was
required to purchase $5,750,000 (U.S.) in tax reserve certificates in Hong Kong.
The $5,750,000 represented approximately 50 percent of the liability assessed by
the IRD for fiscal 1990 through fiscal 1997. 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 dollars and are subject to the risks associated with
foreign currency fluctuations. 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 the resolution of the
IRD's claims.

In the fourth quarter of the fiscal year ended February 28, 2001, the
Company recorded a $2,457,000 charge for the remaining unamortized costs under a
distribution agreement (which was later formally terminated) with The Schawbel
Corporation ("Schawbel"), the supplier of the Company's butane hair care
products. In a related matter, in September 1999, Schawbel commenced litigation
in the U.S. District Court for the District of Massachusetts against The Conair
Corporation ("Conair"), the predecessor distributor for Schawbel's butane
products. In its action, amended in June 2000, Schawbel alleged, among other
things, that Conair, following Schawbel's termination of the Conair distribution
agreement, stockpiled and sold Schawbel product beyond the 120 day "sell-off"
period afforded under the agreement, and manufactured, marketed and sold its own
line of butane products which infringed patents held by Schawbel. In November
2000, the Massachusetts court granted Schawbel its request for preliminary
injunction, and ordered that Conair cease selling all allegedly infringing
products. The Company intervened as a plaintiff in the action to assert claims
against Conair similar to the claims raised by Schawbel. The Company is seeking
to recover damages in excess of $10 million, arising from the Company's
inability to meet minimum purchase requirements under its distribution agreement
with Schawbel and the subsequent termination of that agreement by Schawbel.
Conair responded by filing a counterclaim alleging that the Company conspired
with Schawbel to unlawfully terminate Conair's distribution agreement with
Schawbel, and to disparage Conair's reputation in the industry. The counterclaim
seeks $15 million in damages. Although the ultimate outcome of the matter cannot
be predicted, the Company contends that Conair's counterclaims lack validity.
The Company intends to pursue vigorously its claims and defense in the
litigation.

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

No matters were submitted to a vote of security holders during the
fourth quarter of fiscal 2002.

6

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

PRICE RANGE OF COMMON STOCK

Our 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.

APPROXIMATE NUMBER OF EQUITY SECURITY HOLDERS

We have one class of equity security outstanding at February 28, 2002;
Common Stock with a par value of $0.10. As of May 3, 2002, there were 409
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. We estimate that
approximately 11,000 individuals and institutions hold our common stock.

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 2003. 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.

7

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.

For the year ended the last day of February
(all numbers except earnings per share in thousands)

8

ITEM 6. SELECTED FINANCIAL DATA - CONTINUED

(1) Fiscal 2002 and 2001 results include 100 percent of the results of Tactica,
a subsidiary in which the Company acquired a 55 percent interest in March
2000.

(2) In fiscal 2000, the Company incurred $2,669,000 of charges to cost of goods
sold and $8,725,000 of charges to selling, general and administrative
expenses as a result of the discontinuance of its artificial nails product
line. In fiscal 2000 the Company also incurred $770,000 of charges related
to the restructuring and reorganization of several departments.

(3) Other income includes gains of approximately $147,000 in fiscal 2002,
$1,400,000 in fiscal 2001 and $6,300,000 in fiscal 2000 from the sale and
appreciation of marketable securities. See "Item 7. "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
for a further discussion of gains from marketable securities.

(4) Certain items that, prior to fiscal 2002, were classified as "other income"
have been reclassified as reductions to SG&A expense. Those items totaled
$434,000 in fiscal 2001 and $382,000 in each of fiscal 2000, 1999, and
1998.

(5) In fiscal 2000 the Company repurchased 526,485 shares of its Common Stock
at a cost of $4,076,000. In fiscal 2001, the Company repurchased 815,946
shares of its Common Stock at a cost of $4,623,000. No Common Stock was
repurchased in any other year presented above.

9

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

This discussion contains a number of forward-looking statements, all of
which are based on current expectations. Actual results may differ materially
due to a number of factors, including those discussed in the sections entitled
"Risk Factors" and "Information Relating to Forward Looking Statements" and in
Item 7A. "Quantitative and Qualitative Disclosures About Market Risk."

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.

10

Sales by operating segment for fiscal 2002, 2001 and 2000 were as
follows:

Operating income (loss) by operating segment for fiscal 2002, 2001 and
2000 was as follows:

RESULTS OF OPERATIONS

Consolidated Sales and Gross Profit Margins

Net sales for the 12 months ended February 28, 2002 ("fiscal 2002")
improved 24.9 percent or $89,851,000, versus the 12 month period ended February
28, 2001 ("fiscal 2001"). All three of our operating segments exceeded their
prior year sales totals, with the Tactica operating segment producing
$84,665,000 of the fiscal 2002 sales increase. The International operating
segment was responsible for most of the remaining sales growth.

Net sales for fiscal 2001 increased 20.7 percent or $61,885,000
compared to the 12 months ended February 29, 2000 ("fiscal 2000"). Increased
North American sales and the addition of the sales of Tactica contributed most
of the fiscal 2001 sales growth. Sales in our International segment also
improved during fiscal 2001, versus fiscal 2000. Excluding the Tactica segment,
which was acquired in fiscal 2001, we achieved net sales growth of 12.6 percent
in fiscal 2001.

Gross profit, as a percentage of sales, for fiscal 2002 improved from
39.0 to 47.1 percent. Most of this increase was attributable to Tactica's higher
sales. Tactica's net revenues made up 24.1 percent of our consolidated fiscal
2002 net sales, versus 6.6 percent in fiscal 2001, thus increasing the effect of
its relatively high gross margins on consolidated gross margins. North American
segment gross margins also improved from fiscal 2001 to fiscal 2002, primarily
because of a favorable change in the mix of products sold and our ability to
source product more efficiently.

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Gross profit as a percentage of sales rose from 38.0 percent in fiscal
2000 to 39.0 percent in fiscal 2001. The sales of Tactica contributed
significantly to the increase in gross profit. Additionally, gross profit for
fiscal 2000 was reduced by a $2,669,000 pre-tax charge for the write-down of the
Company's artificial nails inventory. The absence of such a charge in fiscal
2001 contributed to that year's improved gross profit as a percentage of sales.
Slightly lower gross margins on some of the Company's other North American and
International products partially offset factors that increased fiscal 2001 gross
profit margins.

Selling, general and administrative expense

From fiscal 2001 to fiscal 2002, selling, general, and administrative
expenses ("SG&A"), expressed as a percentage of net sales, increased from 32.6
to 37.9 percent. Tactica incurs substantially higher SG&A, as a percentage of
its sales, than do the North American and International segments because of its
more extensive use of infomercials and other forms of advertising. Because
Tactica grew significantly during fiscal 2002, both in its sales volume and as a
percentage of our consolidated business, all of its operating statistics,
including SG&A as a percentage of sales, became much more significant to our
overall results. This was the primary reason for higher SG&A, as a percentage of
sales, during fiscal 2002. Although its SG&A percentage was higher than the
percentages incurred by the other segments, Tactica's SG&A declined as a
percentage of its sales from fiscal 2001 to fiscal 2002. The main reason for the
decline was a drop in Tactica's fixed expenses as a percentage of its increased
sales. The variable portion of Tactica's SG&A expense rose slightly as a
percentage of sales, mainly because of higher advertising expense. Excluding
Tactica, our fiscal 2002 SG&A as a percentage of sales was consistent with
fiscal 2001, as lower media advertising expenses largely offset slightly higher
personnel, insurance, and inventory storage costs.

SG&A as a percentage of sales decreased to 32.6 percent in fiscal 2001,
from 34.7 percent in fiscal 2000. Excluding Tactica, selling, general, and
administrative expenses as a percentage of sales decreased from 34.7 percent in
fiscal 2000 to 29.3 percent in fiscal 2001. Two factors contributed
significantly to the decrease. First, because of fiscal 2001 sales growth, fixed
expenses represented a smaller percentage of sales in fiscal 2001 than in fiscal
2000. Second, in fiscal 2000, we recognized more net expense than in fiscal 2001
in connection with the discontinuance of certain product lines and certain
organizational changes. In fiscal 2000, we incurred $8,725,000 in pre-tax SG&A
expenses related primarily to the discontinuance of our artificial nails
business and also to other charges associated with strategic reorganizations of
certain operations. In fiscal 2001, the Company recognized a charge for the
discontinuance of a product line, combined with a benefit from the settlement of
a license obligation which, when combined, resulted in a net $562,000 charge to
fiscal 2001 SG&A. Partially offsetting the SG&A items that decreased in fiscal
2001 were higher media advertising expenditures in the North American segment
and the higher levels of SG&A incurred by Tactica, relative to our other
segments.

North American Segment

The North American segment sells hair care and other personal care and
comfort appliances, hairbrushes, combs, and utility and decorative hair
accessories in the U.S. and Canada. The North American segment's main customers
are mass merchandisers, drug chains, warehouse clubs, grocery stores, and beauty
supply retailers and wholesalers.

North American segment sales remained relatively constant from fiscal
2001 to fiscal 2002, increasing by less than one percent. In the retail
distribution channel, our new line of Ion hair care appliances and our private
label products produced sales increases. Slight decreases in sales of some of
our branded hair care and personal care appliances, as well as lower sales of
brushes, combs and accessories offset partially the sales increases. Sales in
the North American professional distribution channel grew mainly because of new
product introductions and the expansion of some of our larger customers in this
channel of distribution. The weakness of the U.S. economy in fiscal 2002,
relative to the recent past, contributed to a difficult North American sales
environment. We believe that new product introductions, strong positioning of
our current products, and a healthier U.S. economy should lead to fiscal 2003
North American segment sales growth in all product categories and distribution
channels.

12

The increase in the Company's fiscal 2001 North American sales,
compared to fiscal 2000, was largely due to the internal development of new
products and sales of a new product line. The Company introduced new quiet hair
dryers, a new line of halogen hair care appliances, and a new line of personal
spa products, including paraffin baths, during fiscal 2001. Additionally, sales
of home hair clippers and trimmers under the Sunbeam(R) and Oster(R) names
helped the Company achieve increased sales in the North American segment during
fiscal 2001. Fiscal 2001 was the first year in which the Company sold hair
clippers and trimmers. Sales of certain brush, comb and accessory products
declined in fiscal 2001, partially offsetting the sales growth produced by the
segment's other products.

Operating income generated by the North American segment increased 12.1
percent in the fiscal year ended February 28, 2002, compared to the same period
a year earlier. Expressed as a percentage of sales, the North American segment's
operating income rose from 9.2 percent to 10.3 percent from fiscal 2001 to
fiscal 2002. The improved North American operating results were primarily the
result of higher gross profit margins, arising from favorable changes in the mix
of products sold and our ability to source product more efficiently.

Fiscal 2001 North American segment operating income increased by 191.5
percent over fiscal 2000. Operating income in the North American segment totaled
9.2 percent of net sales in that segment during fiscal 2001, versus 3.6 percent
during fiscal 2000. During fiscal 2000, we recognized $8,725,000 in
non-recurring expenses related to the discontinuance of the artificial nails
product line and strategic reorganizations of some of our North American
operations. By contrast, in fiscal 2001, we recognized net expenses of a
non-recurring nature totaling $562,000.

International Segment

The International segment sells hair care and other personal care and
comfort appliances, hairbrushes, combs, and utility and decorative hair
accessories outside of the U.S. and Canada. The International segment, like the
North American segment, sells primarily to mass merchandisers, drug chains,
warehouse clubs, grocery stores, and beauty supply retailers and wholesalers.

Increased sales in Latin and South America, France, and the United
Kingdom ("U.K.") drove International segment sales up 17.8 percent during fiscal
2002. The growth in Latin America and South America was attributable to our
successful efforts to increase distribution by expanding our customer base in
that geographic area. The net sales increase in France was due both to the
development of relationships with a larger number of customers and the growth of
our business with existing customers. Expanded sales to some of our larger
customers in the U.K. drove sales increases there.

Higher sales in Latin and South America, particularly in Brazil, were
the primary factor increasing International sales during fiscal 2001, relative
to fiscal 2000. Sales in Germany and France also grew in fiscal 2001.

Our International segment incurred an operating loss of $244,000 in
fiscal 2002, compared to operating income of $94,000 in fiscal 2001. During
fiscal 2002, we experienced collection difficulties with a customer in the Latin
and South American market, as well as several customers in the Middle East. We
are currently exploring strategies that might reduce our credit risk in the
Latin and South American market. Such strategies will result in lower Latin and
South American sales volume during the first quarter of and possibly throughout
fiscal 2003. In addition to collection difficulties, inventory markdowns and
currency exchange losses contributed to the International segment's operating
loss.

The International segment's operating profit declined from $835,000 in
fiscal 2000 to $94,000 in fiscal 2001. This decrease in International operating
income was largely the result of foreign exchange losses, as the U.S. Dollar
gained substantial strength against foreign currencies, particularly the British
Pound Sterling during fiscal 2001.

13

Tactica Segment

We own a 55 percent ownership interest in Tactica International, Inc.
("Tactica"). Tactica sells a variety of personal care and other products to
retailers and to individuals. Tactica uses infomercials and other forms of
advertising extensively. As a result, Tactica incurs higher SG&A expenses, as a
percentage of sales, than the North American and International operating
segments.

At the time that we acquired Tactica, we determined that use of the
purchase method of accounting and consolidation was appropriate and we continue
to use that method of consolidation. Tactica had accumulated a net deficit at
the time that we acquired our interest in it and the minority shareholders have
not adequately guaranteed their portion of the accumulated deficit. Therefore,
our Consolidated Statements of Income for fiscal 2002 and fiscal 2001 include
100 percent of Tactica's net income and loss, respectively. We will continue to
recognize all of Tactica's net income or loss until such time as Tactica's
accumulated deficit is extinguished. After that time, our consolidated net
earnings will include 55 percent of Tactica's net income or loss. We anticipate
that Tactica's accumulated deficit will be extinguished during the quarter
ending August 31, 2002.

During fiscal 2002, Tactica's net revenues increased to over four times
their fiscal 2001 levels. Tactica's line of Epil-Stop(R) hair removal products
played the most significant role of any product in its fiscal 2002 sales
increase. The Electrosage(TM) muscle stimulation / exercise product line and its
new Twist-A-Braid(TM) hair styling accessory also contributed to higher fiscal
2002 sales. The Tactica segment is selling Epil-Stop(R), Electrosage(TM) and
Twist-A-Braid(TM) to retailers and through direct response media.

Tactica's operating income of $11,930,000 in fiscal 2002 was a
$16,559,000 improvement over its fiscal 2001 operating loss of $4,629,000.
Tactica's improvement in net sales was the primary factor leading to its better
operating results in fiscal 2002. Higher fiscal 2002 revenues produced more
gross profit for Tactica and caused its SG&A expenses, as a percentage of sales,
to decrease.

As discussed above, Tactica's net sales grew substantially in fiscal
2002 from fiscal 2001, comprising 24 percent and five percent, respectively, of
the Company's consolidated net sales during such periods. In addition, the
increase in Tactica's sales in fiscal 2002 accounted for 94 percent of the
increase in our consolidated sales during this period. Tactica's sales in fiscal
2002 were comprised heavily of the Epil-Stop(R) product line, which has an
unproven product life cycle. Tactica also sells other products that have short
life cycles. Furthermore, Tactica relies on television infomercials and direct
response marketing campaigns for the marketing of its products. Accordingly,
Tactica's sales may be more volatile than the business of our other two
segments. The results of our business could be adversely affected by decreases
in sales of Tactica products.

Interest expense and Other income / expense

Interest expense increased by 6.7 percent, or $267,000, in fiscal 2002,
versus fiscal 2001, due to increased borrowings under our line of credit during
the first three quarters of fiscal 2002. The increase in borrowings was due to
our relatively high levels of inventory purchases early in the year. Such
purchases enabled us to obtain products from suppliers at favorable prices.

Interest expense increased to $3,989,000 in fiscal 2001 from $3,530,000
in fiscal 2000. The capitalization of interest on the construction of our new
U.S. office building during the first two quarters of fiscal 2000 lowered
interest expense for that year. No interest was capitalized during fiscal 2001.

Other income decreased to $1,146,000 in fiscal 2002, compared to
$1,883,000 in fiscal 2001. The primary reason for the decrease was a drop in
income from the sale and appreciation of marketable securities from
approximately $1,400,000 in fiscal 2001 to $147,000 in fiscal 2002. Interest
income also fell because of lower interest rates and because of lower cash
balances for most of fiscal 2002, versus fiscal 2001.

14

Other income decreased to $1,883,000 in fiscal 2001 from $6,826,000 in
fiscal 2000. Lower income from the sale and appreciation of marketable
securities accounted for most of this decrease. Income from the sale and
appreciation of marketable securities was approximately $1,400,000 in fiscal
2001, versus $6,300,000 for fiscal 2000.

Income tax expense

In fiscal 2002 our income tax expense was 24.2 percent of net income
before income taxes, as opposed to 17.0 percent in fiscal 2001. The main reason
for this change was Tactica. Tactica incurs a total income tax rate of
approximately 45 percent, versus 20 percent for our other two segments combined.
Because Tactica produced net income during fiscal 2002, our effective tax rate
rose above 20 percent. The removal during fiscal 2002 of a valuation allowance
from a $1,115,000 deferred tax asset reduced Tactica's income tax expense below
45 percent for the fiscal year. Fiscal 2001 income tax expense totaled
$3,558,000 or 17.0 percent of earnings before income taxes, versus a tax benefit
of $14,000 in fiscal 2000 on $13,097,000 in earnings before income taxes. The
Company's effective tax rate for each of fiscal 2001 and fiscal 2000 was reduced
below rates of approximately 20 percent that it had experienced prior to fiscal
2000. During both fiscal 2001 and fiscal 2000, the Company's tax rate was
reduced by the fact that Helen of Troy Limited, the Bermuda Corporation, which
is not subject to any capital gains or other income tax, holds the consolidated
group's investments in marketable securities. In addition, the charges
associated with the Company's discontinuance of its artificial nails product
line created tax benefits on the books of a U.S. subsidiary that offset much of
the tax expense associated with the income of non-U.S. subsidiaries.

LIQUIDITY AND CAPITAL RESOURCES

During fiscal 2002, we substantially strengthened our financial
condition. Our cash balance increased, while our inventory balance decreased. In
addition, at February 28, 2002 we had no borrowings outstanding on our working
capital line of credit, versus a $10,000,000 balance on the same date a year
earlier.

Our cash balance increased 147.9 percent to $64,293,000 at February 28,
2002, compared to $25,937,000 at February 28, 2001. Operating activities
provided $52,589,000 of cash during fiscal 2002, compared to using $185,000
during the previous fiscal year. In addition to net income, our successful
efforts to reduce inventory balances were instrumental in the production of cash
from operating activities. Investing activities used $5,735,000, due primarily
to our prepayment of approximately $3,000,000 in royalties on an international
royalty agreement. Financing activities used $8,499,000, mainly because we began
the year with $10,000,000 borrowed under our line of credit and reduced that
amount to zero by the end of fiscal 2002.

Net accounts receivable increased 8.8 percent from February 28, 2001 to
February 28, 2002. The percentage increase in accounts receivable is
substantially less than the 24.9 percent increase in net sales that we achieved
during fiscal 2002. The fiscal 2002 growth in Tactica's cash sales to consumers,
relative to total net sales, was the primary reason that accounts receivable
grew by a smaller percentage than net sales.

Our February 28, 2002 inventory balance totaled $100,306,000, versus
$118,544,000 at February 28, 2001, a 15.4 percent decrease. After making
substantial purchases during the first half of fiscal 2002 in order to obtain
favorable pricing from suppliers, we engaged in a successful effort to reduce
our inventory levels mainly by curtailing inventory purchases in the second half
of fiscal 2002.

Our working capital balance increased to $191,438,000 at February 28,
2002 from $157,809,000 at February 28, 2001. Our current ratio was 4.7 at
February 28, 2002, compared to 3.5 at February 28, 2001. The increase in our
current ratio was largely due to the production of cash by our operating
activities, lower levels of accounts payable, and the repayment of borrowings
under the working capital line of credit in fiscal 2002. The decrease in
accounts payable is primarily the result of lower levels of inventory purchases.

15

In connection with its acquisition of a 55 percent interest in Tactica,
the Company loaned $3,500,000 to the minority shareholders of Tactica. The
interest rate on these loans is 8.75 percent. All principal and unpaid interest
on these loans is due March 14, 2005. The total amounts of principal and accrued
interest due to the Company under these loans were $4,103,000 and $3,826,000 at
February 28, 2002 and 2001, respectively. These amounts are included in "Other
assets" on the Consolidated Balance Sheets.

We maintain a revolving credit loan with a bank to facilitate
short-term borrowings and the issuance of letters of credit. This line of credit
allows borrowings totaling $25,000,000, incurs interest at the three-month LIBOR
rate plus a percentage that varies based on the ratio of the Company's debt to
its earnings before interest, taxes, depreciation, and amortization (EBITDA),
and expires August 31, 2003. At February 28, 2002 the interest rate charged
under the line of credit was 2.89 percent. This line of credit allows for the
issuance of letters of credit up to $7,000,000. Any outstanding letters of
credit reduce the $25,000,000 maximum borrowing limit on a dollar-for-dollar
basis. At February 28, 2002, there were no borrowings under this line of credit
and outstanding letters of credit totaled $439,000. The revolving credit
agreement provides that the Company must satisfy requirements concerning its
minimum net worth, total debt to consolidated total capitalization ratio, debt
to EBITDA ratio and its fixed charge coverage ratio. The Company is in
compliance with all of these requirements.

Our $55,000,000 of long-term debt is comprised of a group of unsecured
Senior Notes with face values totaling $40,000,000 and an interest rate of 7.01
percent, as well as an unsecured Senior Note with a face value of $15,000,000
and an interest rate of 7.24 percent. We pay interest on these notes each
calendar quarter. The $40,000,000 group of Senior Notes require annual principal
payments of $10,000,000 beginning January 5, 2005, with the final payment due
January 5, 2008. The $15,000,000 Senior Note requires annual principal payments
of $3,000,000 beginning July 18, 2008, with the final payment due July 18, 2012.
The Senior Notes contain covenants that require the Company to meet certain net
worth and other financial requirements. Additionally, the Senior Notes restrict
the Company from incurring liens on any of its properties, except under certain
conditions. The Company is in compliance with all the terms of these notes.

Capital and license expenditures totaled $878,000, $3,185,000, and
$8,340,000 in fiscal 2002, 2001, and 2000, respectively. Our operations are not
typically capital intensive. On a normal operating basis, we are likely to incur
approximately $1,000,000 in capital expenditures annually. In fiscal 2000,
capital expenditures included $3,788,000 of expenditures associated with the
construction of our U.S. office facility. We incurred capitalized license fees
of $1,834,000 and $1,798,000 in fiscal 2001 and 2000, respectively. We are in
the process of negotiating the renewal and modification of certain license
agreements, which we expect to complete during fiscal 2003 at aggregate
expenditures during fiscal 2003 of $3,000,000.

Our contractual obligations and commercial commitments as of February
28, 2002 were:

We do not engage in any activities involving special purpose entities
or off-balance sheet financing.

Under a September 1999 Board of Directors resolution, the Company may
repurchase up to a total of 3,000,000 shares of its Common Stock over a period
extending to September 29, 2002. Since the inception of this Common Stock
repurchase program, the Company repurchased a total of 1,342,431 shares of its
Common Stock for $8,699,196, including commissions, or an average price per
share of $6.48. No Common Stock was repurchased during fiscal 2002.

16

Based on our current financial condition and current operations, we
believe 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. We expect that our capital needs
will stem primarily from the needs to purchase sufficient levels of inventory
and to carry normal levels of accounts receivable on our balance sheet. In
addition, we evaluate acquisition opportunities on a regular basis and might
augment our internal growth with acquisitions of complimentary businesses and
product lines. We might finance acquisition activity with available cash, the
issuance of stock, or with additional debt, depending upon the size and nature
of any such transaction and upon conditions in the capital markets.

CRITICAL ACCOUNTING POLICIES

The U.S. Securities and Exchange Commission defines critical accounting
policies as "those that are both most important to the portrayal of a company's
financial condition and results, and require management's most difficult,
subjective or complex judgments, often as a result of the need to make estimates
about the effect of matters that are inherently uncertain." Preparation of our
financial statements involves the application of several such policies. These
policies include: consolidation of Tactica International, Inc. (Tactica) under
the purchase method, estimates of our exposure to liability for income taxes in
Hong Kong, estimates of credits to be issued to customers for sales that have
already been recorded, the calculation of our allowance for doubtful accounts,
and the valuation of inventory on a lower-of-cost-or-market basis.

Consolidation of Tactica - In March 2000 (fiscal 2001), we acquired a
55 percent interest in Tactica. At that time, we determined that use of
the purchase method of accounting and consolidation was appropriate and
we continue to use that method of consolidation. Because Tactica had
accumulated a net deficit at the time that we acquired our interest in
it and because the minority shareholders of Tactica have not adequately
guaranteed their portion of the accumulated deficit, our Consolidated
Statements of Income for fiscal 2002 and fiscal 2001 include 100
percent of Tactica's net income or loss. We will continue to recognize
all of Tactica's net income or loss until such time as Tactica's
accumulated deficit is extinguished. After that time, our consolidated
net earnings will include 55 percent of Tactica's net income or loss.

Hong Kong Income Taxes - The Inland Revenue Department ("the IRD") in
Hong Kong assessed tax on certain profits of the Company's foreign
subsidiaries for the fiscal years 1990 through 1997. The ultimate
resolution of the IRD's claims cannot be predicted with certainty.
However, we have recorded a liability for the IRD's claims, based on
consultations with outside Hong Kong tax experts as to the probability
that some or all of the IRD's claims prevail. Such liability is
included in "Income taxes payable" on the Consolidated Balance Sheets.
If the IRD's position were to prevail and it were to assert the same
position with respect to fiscal years after 1997, the resulting tax
liability could total $30,520,000 (U.S.) for the period from fiscal
1990 through fiscal 2002.

Estimates of credits to be issued to customers - We regularly receive
requests for credits from retailers for returned product or in
connection with sales incentives, such as co-operative advertising and
volume rebate agreements. We reduce sales or increase selling, general,
and administrative expenses, depending on the nature of the credits,
for estimated future credits to customers. Our estimates of these
amounts are based either on historical information about credits
issued, relative to total sales, or on specific knowledge of incentives
offered to retailers.

Allowance for doubtful accounts - From time to time, amounts due from
our customers become uncollectible due to the customers' inability to
pay. We record allowances specifically for customers' balances based on
the probability that we will not receive payment. When major customers
declare bankruptcy, we record an allowance equal to the amount due from
that customer, less the portion of the receivable that we expect to
collect either by selling the receivable in a secondary market or
through settlement with the bankruptcy estate.

Valuation of inventory - We account for our inventory using a
first-in-first-out system in which we record inventory on our balance
sheet at the lower of its cost or its net realizable value.
Determination of net realizable

17

value requires management to estimate the point in time at which an
item's net realizable value drops below its cost. We regularly review
our inventory for slow-moving items and for items that we are unable to
sell at prices above their original cost. When we identify such an
item, we reduce its book value to the net amount that we expect to
realize upon its sale. This process entails a significant amount of
inherent subjectivity and uncertainty.

In addition to the above policies, several other policies, including
policies governing the timing of revenue recognition, are important to the
preparation of our financial statements, but do not meet the definition of
critical accounting policies because they do not involve subjective or complex
judgements.

RISK FACTORS

Competition. The personal care and comfort products industry is
extremely competitive. Maintaining and gaining market share depends heavily upon
price, quality, brand name recognition, patents, innovation in the design of new
products and replacement models, and marketing and distribution approaches. We
compete with domestic and international companies, some of which have
substantially greater financial and other resources than those of the Company.
We believe that our ability to produce reliable products that incorporate
developments in technology and to satisfy consumer tastes with respect to style
and design, as well as our ability to market a broad offering of products in
each applicable category at competitive prices, are keys to our future success.
No assurance can be given that we will be able to successfully compete on the
basis of these factors in the future.

Dependence Upon Licenses and Trademarks. A substantial portion of our
sales revenue is derived from sales of products under licensed trademarks. As a
result, we are materially dependent upon the continued use of such trademarks,
particularly the VS Sassoon(R) and Revlon(R) trademarks. Actions taken by
licensors and other third parties could diminish greatly the value of any of our
licensed trademarks. If we were unable to sell products under these licensed
trademarks the effect on our business, financial condition and results of
operations could be both negative and material.

Income Taxes. Currently, we benefit from an international corporate
structure that results in relatively low tax rates on a consolidated basis. If
we were to encounter significant changes in the rates or rules imposed by
certain key taxing jurisdictions, such changes could have a material adverse
effect on the Company's financial position and profitability. In 1994, we
engaged in a corporate restructuring that, among other things, resulted in a
greater portion of our income not being subject to taxation in the U.S. If such
income were subject to U.S. federal income taxes, our effective income tax rate
would increase materially. Several bills have been introduced recently in the
U.S. Congress that, if enacted into law, could adversely affect our U.S. federal
income tax status. At least one of the bills introduced would apply to companies
such as ours that restructured several years ago. That bill could, if enacted
into law, subject a greater portion of our income to U.S. income taxes, thereby
reducing our net income. Other bills introduced recently would exempt
restructuring transactions, such as ours, that were completed before certain
dates in 2001 and 2002, but would limit the deductibility of payments made in
certain intercompany transactions for U.S. income tax purposes and would subject
gains on certain asset transfers to U.S. income tax. In addition to the
legislation introduced in Congress, the U.S. Treasury Department recently
published a study of restructurings such as ours. It is not currently possible
to predict whether the legislation that has been introduced will become law,
whether any additional bills will be introduced, or the consequences of the U.S.
Treasury Department's study. However, there is a risk that new laws in the U.S.
could eliminate or substantially reduce the current income tax benefits of our
corporate structure. If this were to occur, such changes could have a material
adverse effect on our financial condition and results of operations.

In addition to potential changes in tax laws, the Company's position on
various tax matters may be challenged, as is the case with the Hong Kong Inland
Revenue Department matter discussed in "Item 3. Legal Proceedings."

Our ability to maintain our position that the parent company is not a
Controlled Foreign Corporation (as defined under the U.S. Internal Revenue Code)
is critical to the tax treatment of our non-U.S. earnings. A Controlled Foreign
Corporation is a non-U.S. corporation whose largest U.S. shareholders (i.e.,
those owning ten percent or more of its stock) together own more than 50 percent
of the stock in such corporation. If a change of ownership of the Company were
to occur

18

such that the parent company became a Controlled Foreign Corporation, such a
change could have a material negative effect on the largest U.S. shareholders
and, in turn, on the Company's business.

International Manufacturing and Operations. All of our products are
manufactured by unaffiliated companies, most of which are in the Far East. Risks
associated with such foreign manufacturing include: changing international
political relations; changes in laws, including tax laws, regulations, and
treaties; changes in labor laws, regulations, and policies; 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 our production in the Far East. However, any change that impairs our
ability to obtain products from such manufacturers, or to obtain products at
marketable rates, could have a material negative effect on our business,
financial condition and results of operations.

Inventory. Because of our reliance on manufacturers in the Far East,
our production lead times are relatively long. Therefore, we must commit to
production in advance of customer orders. If we fail to forecast customer or
consumer demand accurately we may encounter difficulties in filling customer
orders or in liquidating excess inventories, or may find that customers are
canceling orders or returning products. Distribution difficulties may have an
adverse effect on our business by increasing the amount of inventory and the
cost of storing inventory. Additionally, changes in retailer inventory
management strategies could make inventory management more difficult. Any of
these results could have a material adverse effect on our business, financial
condition and result of operations.

Newly Acquired Product Lines and Subsidiaries. We may decide to grow
our business through the acquisition of new product lines and businesses. The
acquisition of a business or of the rights to market specific products or use
specific product names involves a financial commitment. In the case of an
acquisition such commitments are usually in the form of either cash or stock
consideration. In the case of a new license, such commitments could take the
form of license fees, prepaid royalties and future minimum royalty and
advertising payments. While our strategy is to acquire businesses and to develop
products that will contribute positively to earnings, there is no guarantee of
such results. Anticipated synergies may not materialize, cost savings may be
less than expected, sales of products may not meet expectations, and acquired
businesses may carry unexpected liabilities. Each of these factors could result
in a newly acquired business or product line having a material negative impact
on financial condition and results of operations.

Reliance Upon Certain Customers. We are dependent on certain principal
customers. Wal-Mart Stores, Inc., and one of its affiliates, accounted for
approximately 22 percent of the Company's net sales in fiscal 2002. Our top
three customers accounted for approximately 35 percent of fiscal 2002 net sales.
Although we have long-standing relationships with our major customers, no
contracts require these customers to buy from us. A substantial decrease in
sales to any of our major customers could have a material adverse effect on our
financial condition and results of operations.

Tactica's Potential Sales Volatility. Tactica's net sales grew
substantially in fiscal 2002 from fiscal 2001, comprising 24 percent and five
percent, respectively, of the Company's consolidated net sales during such
periods. In addition, the increase in Tactica's sales in fiscal 2002 accounted
for 94 percent of the increase in our consolidated sales during this period.
Tactica's sales in fiscal 2002 were comprised heavily of the Epil-Stop(R)
product line, which has an unproven product life cycle. Tactica also sells other
products that have short life cycles. Furthermore, Tactica relies on television
infomercials and direct response marketing campaigns for the marketing of its
products. Accordingly, Tactica's sales may be more volatile than the business of
our other two segments. The results of our business could be adversely affected
by decreases in sales of Tactica products.

Tactica Stockholders' Agreement. One of our subsidiaries is a party to
a stockholders' agreement with the former owners of Tactica, who retained a 45
percent interest in Tactica (collectively the "other Tactica stockholders").
Under the terms of the stockholders' agreement, we have been granted the right
to initiate a process whereby we can purchase, and the other Tactica
stockholders are required to sell, the shares they own. In addition, the other
Tactica stockholders have the right to initiate a process regarding the sale of
their remaining interest in Tactica.

19

We may elect at our option not to purchase the shares owned by the other Tactica
stockholders and under the terms of the stockholders' agreement the parties will
then be required to initiate a procedure under which the entire business of
Tactica would be offered for sale to third parties. In either case, the purchase
price will be based upon fair market value as determined by independent
appraisal. A sale to a third party would be subject to the approval of the other
Tactica stockholders and us. In the event that either party exercises its rights
under the stockholders' agreement, our financial position and profitability
could be adversely affected.

U.S. and Worldwide Economic Conditions. Adverse changes in economic
conditions that affect consumer spending or worldwide economic conditions could
have a material negative effect on the Company's financial condition and results
of operations.

INFORMATION RELATING TO FORWARD-LOOKING STATEMENTS

Certain written and oral statements made by our Company and
subsidiaries or with the approval of an authorized executive officer of our
Company may constitute "forward-looking statements" as defined under the Private
Securities Litigation Reform Act of 1995. This includes statements made in this
report, in other filings with the Securities and Exchange Commission, in press
releases, and in certain other oral and written presentations. Generally, the
words "anticipates," "believes," "expects" and other similar words identify
forward-looking statements. All statements that address operating results,
events or developments that we expect or anticipate will occur in the future,
including statements related to sales, earnings per share results and statements
expressing general expectations about future operating results, are
forward-looking statements. The Company cautions readers not to place undue
reliance on forward-looking statements. Forward-looking statements are subject
to risks that could cause such statements to differ materially from actual
results. The Company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events, or otherwise.

Factors that could cause actual results to differ from those
anticipated include:

o general industry conditions and competition,

o credit risks,

o the Company's, or its operating segments' material reliance on
individual customers or small numbers of customers,

o the Company's material reliance on certain trademarks,

o the impact of tax legislation, regulations, or treaties,
including proposed legislation in the U.S. that would affect
companies or subsidiaries of companies that have headquarters
outside the U.S. and file U.S. income tax returns,

o the impact of other current and future laws, and regulations,

o the results of our disagreement with the Hong Kong Internal
Revenue Department concerning the portion of our profits subject
to Hong Kong income tax,

o any future disagreements with the U.S. Internal Revenue Service
or other taxing authority regarding our assessment of the effects
or interpretation of existing tax laws, regulations, or treaties,

o risks associated with inventory, including potential
obsolescence,

o risks associated with new products and new product lines,

o risks associated with operating in foreign jurisdictions,

o foreign currency exchange losses,

o worldwide and domestic economic conditions,

o uninsured losses,

o reliance on computer systems,

o management's reliance on the representations of third parties,

o risks associated with new business ventures and acquisitions,

o risks associated with investments in equity securities, and

o the risks described from time to time in the Company's reports to
the Securities and Exchange Commission, including this report.

20

NEW ACCOUNTING GUIDANCE

In April 2001, the FASB's Emerging Issues Task force ("EITF") reached
consensus on EITF Issue 00-25 ("EITF 00-25"), "Vendor Income Statement
Characterization of Consideration from a Vendor to a Retailer." EITF 00-25
requires vendors who offer certain allowances to customers to characterize those
allowances as reductions of net sales, rather than as selling, general, and
administrative expenses ("SG&A"). EITF 00-25 is applicable for fiscal quarters
beginning after December 15, 2001 and requires restatement of prior periods if
possible. Had the Company applied EITF 00-25 its net sales and SG&A in fiscal
2002, 2001, and 2000 would have decreased by $3,023,000, $2,672,000 and
$1,665,000, respectively. EITF 00-25 will be applied beginning in fiscal 2003.

In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 requires that an
entity recognize all derivatives in its financial statements and measure those
instruments at fair value. SFAS 133 was effective for fiscal quarters of fiscal
years beginning after June 15, 2000. The adoption of SFAS 133 did not affect the
Company's Consolidated Financial Statements.

In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 142, "Goodwill and Other
Intangible Assets" ("SFAS 142"). SFAS 142 is effective for the Company beginning
March 1, 2002. It eliminates the amortization of goodwill and other intangible
assets that have indefinite useful lives. Amortization will continue to be
recorded for intangible assets with definite useful lives. SFAS 142 also
requires at least an annual impairment review of goodwill and other intangible
assets. Any asset deemed to be impaired is to be written down to its fair value.
In complying with SFAS 142, we will review the goodwill on our Consolidated
Balance Sheets to determine whether it is impaired. We will determine fair
values using discounted cash flow analysis. We estimate that the cumulative
effect of adopting SFAS 142 will be a non-cash after-tax charge ranging from $15
million to $20 million in the first quarter of fiscal 2003. We will record this
amount as a cumulative effect of an accounting change. Because it eliminates the
amortization of goodwill, SFAS 142 will decrease our SG&A expense by
approximately $2,000,000 in fiscal 2003.

21

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Changes in interest rates and currency exchange rates represent our
primary financial market risks. Fluctuation in interest rates causes variation
in the amount of interest that we can earn on our available cash. Our long-term
debt is at fixed rates ranging from 7.01 percent to 7.24 percent. Increases in
interest rates do not expose us to risk on this debt. However, as interest rates
drop below the rates on our long-term debt, our interest cost can exceed the
cost of capital of other companies who are borrowing at lower rates of interest.

As mentioned in the "Liquidity and Capital Resources" discussion,
interest rates on our revolving credit agreement vary based on the three-month
LIBOR rate and on our ratio of debt to EBITDA. Therefore, the potential for
interest rate increases exposes us to interest rate risk on our revolving credit
agreement. That agreement allows maximum borrowings of $25,000,000. At the end
of fiscal 2002, no borrowings were outstanding under this agreement. However, if
the need to borrow under the revolving credit agreement were to arise, higher
interest rates would increase the cost of such debt. We do not currently hedge
against interest rate risk.

Because we purchase a substantial majority of our inventory using U.S.
dollars, we are subject to minimal foreign exchange rate risk in purchasing
inventory. Sales in countries other than the United Kingdom, Germany, and France
are transacted in U.S. dollars. Our sales in the United Kingdom are transacted
in British Pounds and our sales in France and Germany are invoiced in Euros.
Until January 1, 2002, we also transacted sales in France and Germany in French
Francs and German Marks, respectively. When the U.S. dollar strengthens against
other currencies in which we transact sales, we are exposed to foreign exchange
losses on those sales because our foreign currency sales prices are not adjusted
for currency fluctuations. In fiscal 2002, our gross sales in currencies other
than the U.S. dollar totaled approximately $22,500,000, converted at average
monthly exchange rates. Our fiscal 2002 foreign currency exchange loss totaled
$307,000. We do not currently hedge against foreign currency fluctuations.

The transition in 12 European countries from their local currencies to
the Euro on January 1, 2002 did not affect our business materially. The effect
of the transition for us is that sales that would previously have been invoiced
in French Francs or German Marks are now invoiced in Euros.

22

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE

All other schedules are omitted as the required information is included
in the consolidated financial statements or is not applicable.

23

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 (the Company) as listed in the index on page 23. 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 23. 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 28, 2002 and February 28, 2001, and the
results of their operations and their cash flows for each of the years in the
three-year period ended February 28, 2002, 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 thereon.

KPMG LLP

El Paso, Texas
May 3, 2002

24

HELEN OF TROY LIMITED
AND SUBSIDIARIES

Consolidated Balance Sheets

February 28, 2002 and 2001
(in thousands, except par value and shares)

(Continued)

25

HELEN OF TROY LIMITED
AND SUBSIDIARIES

Consolidated Balance Sheets

February 28, 2002 and 2001
(in thousands, except par value and shares)

See accompanying notes to consolidated financial statements.

26

HELEN OF TROY LIMITED
AND SUBSIDIARIES

Consolidated Statements of Income
(in thousands, except shares and earnings per share)

See accompanying notes to consolidated financial statements.

27

HELEN OF TROY LIMITED
AND SUBSIDIARIES

Consolidated Statements of Stockholders' Equity

Years ended last day of February 2002, 2001 and 2000
(in thousands)

See accompanying notes to consolidated financial statements.

28

HELEN OF TROY LIMITED
AND SUBSIDIARIES

Consolidated Statements of Cash Flows
(in thousands)

(Continued)

29

HELEN OF TROY LIMITED
AND SUBSIDIARIES

Consolidated Statements of Cash Flows
(in thousands)

See accompanying notes to consolidated financial statements.

30

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 distribute hair care
appliances, hairbrushes, combs, hair accessories and other personal
care products. The Company purchases its products from unaffiliated
manufacturers most of which are located 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) Consolidation

The consolidated financial statements include the accounts of Helen of
Troy Limited and its subsidiaries, including Tactica International,
Inc. ("Tactica"), a subsidiary in which the Company acquired a 55
percent interest in fiscal 2001. The Company's consolidated net
income includes and will continue to include one hundred percent of
Tactica's net income or loss until such time as the minority
interest in Tactica's accumulated deficit has been extinguished.
Intercompany balances and transactions have been eliminated in
consolidation.

(c) Revenue recognition

The Company recognizes revenues when it ships its product to customers.
Customers at times request credits for returned product or in
connection with incentives such as co-operative advertising
agreements. The Company reduces sales or increases selling,
general, and administrative expenses, depending on the nature of
the credits, for estimated future credits to customers. Management
bases such estimates either on historical information about credits
issued, relative to total sales, or on specific knowledge of
incentives offered to retailers.

(d) Inventories

The Company accounts for its inventory using a first-in-first-out
system in which it records inventory on its balance sheet at the
lower of its cost or its net realizable value. Determination of net
realizable value requires management to estimate the point in time
at which an item's value drops below its cost and the dollar amount
of the item's net realizable value. The Company regularly reviews
its inventory for slow-moving items and for items that it is unable
to sell at prices above their original cost. When it identifies
such an item, the Company reduces its book value to the amount that
it expects to realize upon sale of that item.

(e) Valuation of accounts receivable

The allowance for doubtful accounts reflects the Company's best
estimate of probable losses, determined principally on the basis of
historical experience and specific allowances for known troubled
accounts.

(f) 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.

31

HELEN OF TROY LIMITED
AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED

(g) License agreements

A substantial majority of the Company's sales are made subject to
license agreements with the licensors of the VS Sassoon(R),
Revlon(R), Sunbeam(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 55 percent,
72 percent, and 73 percent of total net sales for fiscal years 2002,
2001, and 2000, respectively. Royalty expense under the Company's
license agreements is recognized as it is incurred.

(h) 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 income tax reductions while deferred tax
liabilities represent income taxes that the Company expects to pay in
the future. 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.

(i) 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 1,109,900; 308,689;
and 832,472 for fiscal years 2002, 2001, and 2000, respectively.
Dilutive securities for the year ended February 28, 2002 consisted
entirely of stock options. Dilutive securities for the years ended
February 28, 2001 and February 29, 2000 included 258,084 and 739,615
shares, respectively, attributable to dilutive stock options, as well
as 50,605 and 92,857 shares, respectively, contingently issuable as
part of an acquisition. Options to purchase common stock that were
outstanding but 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 totaled 2,794,900;
4,319,762; and 3,786,612 for fiscal 2002, 2001, and 2000,
respectively.

(j) Cash Equivalents

The Company considers all highly liquid debt instruments purchased with
an original maturity of three months or less to be cash equivalents.

(k) Foreign Currency Transactions

The U.S. dollar is the Company's functional currency. All of Helen of
Troy Limited's non-U.S. subsidiaries' transactions involving other
currencies have been re-measured in U.S. dollars using average
exchange rates for the months in which the transactions occurred.
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.

32

HELEN OF TROY LIMITED
AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED

(l) Advertising

Advertising costs are expensed in the fiscal year in which they are
incurred. During the fiscal years ended February 28, 2002, February
28, 2001 and February 29, 2000, the Company charged $49,261,000,
$31,675,000, and $18,527,000, respectively, of advertising costs 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 $3,428,000, $2,946,000 and
$2,868,000 as of February 28, 2002, February 28, 2001 and February
29, 2000, respectively, to cover future warranty costs.

(n) Long-Lived Assets

The Company reviews long-lived assets and certain identifiable
intangibles 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 as 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.

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 $5,765,000, $5,292,000, and $4,527,000 during fiscal 2002,
2001, and 2000, 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 would be based on the Company's cost of capital.
Beginning in fiscal 2003, the Company will apply the provisions of
Statement of Financial Accounting Standards No. 142 ("SFAS 142"),
"Goodwill and Other Intangible Assets," in assessing the valuation of
its goodwill. See the section of this footnote entitled "New
Accounting Guidance" for a discussion of the implications of SFAS
142.

(o) Interest Income

Interest income is included in "Other income, net" on the Consolidated
Statements of Income. Interest income totaled $727,000, $931,000, and
$987,000 in fiscal 2002, 2001, and 2000, respectively.

(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.
See note 4 for management's assessment of the fair value of the
Company's guaranteed Senior Notes.

33

HELEN OF TROY LIMITED
AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED

(q) Stock-based Compensation Plans

Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," encourages, but does not require companies
to record compensation expense for stock-based compensation plans at
fair value. The Company has chosen to account for its stock-based
compensation plans using the intrinsic value method prescribed in
Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees," and related interpretations. Accordingly, the
Company recognizes no expense in connection with its stock-based
compensation plans, as all stock option grants are made at market
value on the date of grant. Income tax benefits attributable to stock
options exercised are credited to Additional paid-in capital.

(r) New Accounting Guidance

In April 2001, the Financial Accounting Standards Board's ("FASB's")
Emerging Issues Task force ("EITF") reached consensus on EITF Issue
00-25 ("EITF 00-25"), "Vendor Income Statement Characterization of
Consideration from a Vendor to a Retailer." EITF 00-25 requires
vendors who offer certain allowances to customers to characterize
those allowances as reductions of net sales, rather than as selling,
general, and administrative expenses ("SG&A"). EITF 00-25 is
applicable for fiscal quarters beginning after December 15, 2001 and
requires restatement of prior periods if possible. Had the Company
applied EITF 00-25 its net sales and SG&A in fiscal 2002, 2001, and
2000 would have decreased by $3,023,000, $2,672,000 and $1,665,000,
respectively. EITF 00-25 will be applied beginning in fiscal 2003.

In June 1998, the FASB issued Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS 133"). SFAS 133 requires that an entity recognize
all derivatives in its financial statements and measure those
instruments at fair value. SFAS 133 was effective for fiscal quarters
of fiscal years beginning after June 15, 2000. The adoption of SFAS
133 did not affect the Company's Consolidated Financial Statements.

In June 2001, the FASB issued Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS
142"). SFAS 142 is effective for the Company beginning March 1, 2002.
It eliminates the amortization of goodwill and other indefinite
intangible assets. Amortization will continue to be recorded for
intangible assets with definite useful lives. SFAS 142 also requires
at least an annual impairment review of goodwill and other intangible
assets. Any asset deemed by such analysis to be impaired is to be
written down to its fair value. In complying with SFAS 142, the
Company will review the goodwill on its Consolidated Balance Sheets
to determine whether it is impaired. Fair values will be determined
using discounted cash flow analysis. The Company estimates that the
cumulative effect of adopting SFAS 142 will be a non-cash after-tax
charge ranging from $15 million to $20 million in the first quarter
of fiscal 2003. This amount will be recorded as a cumulative effect
of an accounting change. Because it eliminates the amortization of
goodwill, SFAS 142 will decrease the Company's SG&A expense by
approximately $2,000,000 in fiscal 2003.

34

HELEN OF TROY LIMITED
AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(2) PROPERTY AND EQUIPMENT

A summary of property and equipment is as follows:

The Company recorded $2,865,000, $3,003,000, and $2,394,000 of depreciation
expense for fiscal 2002, 2001, and 2000, respectively. Capital
expenditures totaled $878,000, $1,351,000, and $8,340,000 in fiscal 2002,
2001, and 2000, respectively.

The Company recognized a $650,000 impairment charge during fiscal 2000 and
an additional $158,000 charge during the fourth quarter of fiscal 2001.
These amounts represent the estimated excess of the carrying amount over
the estimated net realizable value of the Company's former El Paso, Texas
office facility and warehouse. The former office facility was sold during
fiscal 2002, is classified as an asset held for sale and is included in
the heading "Other assets" on the accompanying February 28,
2001 Consolidated Balance Sheet. The carrying value of the former
warehouse is included in the heading "Other assets" on the accompanying
February 28, 2002 and February 28, 2001 Consolidated Balance Sheets.

During fiscal 2000 the Company capitalized $721,000 of interest in
connection with the construction of a new office facility. No interest was
capitalized in fiscal 2002 or fiscal 2001.

The Company leases 108,000 square feet of warehouse space, as well as
various administrative office spaces, from a real estate partnership in
which the Chief Executive Officer and another member of the Board of
Directors are limited partners. During fiscal 2002 the Company paid the
real estate partnership $624,000 under these leases.

35

HELEN OF TROY LIMITED
AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(3) NOTES PAYABLE

The Company maintains a revolving credit loan with a bank to facilitate
short-term borrowings and the issuance of letters of credit. This line of
credit allows borrowings totaling $25,000,000, charges interest at the
three-month LIBOR rate plus a percentage that varies based on the ratio of
the Company's debt to its earnings before interest, taxes, depreciation,
and amortization (EBITDA), and expires August 31, 2003. At February 28,
2002 the interest rate charged under the line of credit was 2.89 percent.
This line of credit allows for the issuance of letters of credit up to
$7,000,000. Any outstanding letters of credit reduce the $25,000,000
maximum borrowing limit on a dollar-for-dollar basis. At February 28,
2002, there were no borrowings under this line of credit and outstanding
letters of credit totaled $439,000. The revolving credit agreement
provides that the Company must satisfy requirements concerning its minimum
net worth, total debt to consolidated total capitalization ratio, debt to
EBITDA ratio, and its fixed charge coverage ratio. The Company is in
compliance with all of these requirements.

(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, and are guaranteed by Helen of Troy Limited
and certain of its subsidiaries. Annual principal payments of $10,000,000
each begin January 5, 2005, with the final payment due January 5, 2008.
Using a discounted cash flow analysis based on estimated market rates, the
estimated fair value of the guaranteed Senior Notes at February 28, 2002
is approximately $41,119,000.

On July 18, 1997, a U.S. subsidiary of the Company 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. Annual
principal payments of $3,000,000 each begin July 18, 2008, with the final
payment due July 18, 2012. Using a discounted cash flow analysis based on
estimated market rates, the estimated fair value of the guaranteed Senior
Note at February 28, 2002 is approximately $15,818,000.

Both the $40,000,000 and $15,000,000 Senior Notes contain covenants that
require the Company to meet certain net worth and other financial
requirements. Additionally, the notes restrict the Company from incurring
liens on any of its properties, except under certain conditions as defined
in the Senior Note agreements. The Company is in compliance with all the
terms of these notes.

36

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:

The components of income tax expense (benefit) are as follows:

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:

37

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 28, 2002
and 2001 are as follows:

The Company's U.S. net operating loss carryforward of $1,248,000 expires if
not utilized by fiscal 2019. Accounting standards require that deferred
income taxes reflect the tax consequences of future tax benefits,
including net operating losses, to the extent that realization of such
benefits is more likely than not. Certain of the Company's gross deferred
tax assets did not, in the opinion of management, meet that standard as of
February 28, 2002 and 2001. Therefore, the Company placed a valuation
allowance against those assets. Although realization is not assured,
management believes it is more likely than not that the remaining net
deferred tax assets, including net operating losses, will be realized. The
amount of the deferred tax assets considered realizable, however, could be
lower if estimates of future taxable income during the carryforward period
are reduced.

The Hong Kong Inland Revenue Department ("the IRD") has assessed income tax
on certain profits of the Company's foreign subsidiaries for the fiscal
years 1990 through 1997. The ultimate resolution of the IRD's claims
cannot be predicted with certainty. However, the Company has recorded a
liability for the IRD's claims, based on consultations with outside Hong
Kong tax experts as to the probability that some or all of the IRD's
claims prevail. If the IRD's position were to prevail the resulting tax
liability could total $30,520,000 (U.S.) for the period from fiscal 1990
through fiscal 2002. In connection with the IRD's tax assessment, the
Company purchased tax reserve certificates in Hong Kong. The certificates
were valued at $5,750,000 (U.S.) as of February 28, 2002. The $5,750,000
represented approximately 50 percent of the liability assessed by the IRD
for fiscal 1990 through 1997. Tax reserve certificates represent the
prepayment of potential tax liabilities by a taxpayer. 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 dollars and are subject to the
risks associated with foreign currency fluctuations. 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 the resolution of the IRD's claims.

38

HELEN OF TROY LIMITED
AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(5) INCOME TAXES, CONTINUED

The Internal Revenue Service ("IRS") is examining the U.S. federal tax
returns of the Company's largest domestic subsidiary for the fiscal years
1997, 1998 and 1999. To date, the IRS has proposed no adjustments.
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 effect of the
examination.

The Company plans to permanently reinvest all of the undistributed earnings
of the non-U.S. subsidiaries of the U.S. subsidiaries. The Company has
made no provision for U.S. federal income taxes on these undistributed
earnings. At February 28, 2002, undistributed earnings for which the
Company had not provided deferred U.S. federal income taxes totaled
$50,244,000.

(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.
As all options were granted at or above market prices on the dates of
grant, 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 Statement of Financial Accounting Standards No. 123, "Accounting
For Stock-Based Compensation," net income and earnings per share would
have been reduced to the following pro forma amounts:

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 2002, 2001, and 2000, respectively;
expected dividend yields of zero for all years; expected volatility of
40.8 percent for fiscal 2002, 34.9 percent for fiscal 2001, and 27.4
percent for fiscal 1999; risk-free interest rates of 4.7 percent for
fiscal 2002, 4.9 percent for fiscal 2001, and 6.6 percent for fiscal 2000;
and expected lives of 3, 4, 5 or 10 years depending on the option granted.

39

HELEN OF TROY LIMITED
AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(6) STOCK-BASED COMPENSATION PLANS, CONTINUED

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 14,000,000 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 immediately, or over a
one, four or five-year vesting period and expire on a date ranging from
seven to ten years from their date of grant.

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.

A summary of stock option activity under all plans is as follows:

40

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
28, 2002:

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 percent
to 15 percent of their wages or salaries to purchase the Company's common
stock. The purchase price for stock purchased under the plan is equal to
the lower of 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. During
fiscal 2002, employees purchased 22,341 shares of common stock from the
Company under the stock purchase plan.

41

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 March 15, 2003 to
February 28, 2007. The aggregate commitment for future salaries pursuant
to such contracts, at February 28, 2002, excluding incentive compensation,
was approximately $4,000,000.

Many of the license agreements under which the Company sells or intends to
sell products with trademarks owned by other entities require the Company
to pay minimum royalties, meet minimum sales volumes and make minimum
levels of advertising expenditures. Minimum royalties due under these
agreements during fiscal 2003 total $8,655,000.

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 the fourth quarter of fiscal 2001, the Company recorded a $2,457,000
charge for the remaining unamortized costs under a distribution agreement
(which was later formally terminated) with The Schawbel Corporation
("Schawbel"), the supplier of the Company's butane hair care products. In
a related matter, in September 1999, Schawbel commenced litigation in the
U.S. District Court for the District of Massachusetts against The Conair
Corporation ("Conair"), the predecessor distributor for Schawbel's butane
products. In its action, amended in June 2000, Schawbel alleged, among
other things, that Conair, following Schawbel's termination of the Conair
distribution agreement, stockpiled and sold Schawbel product beyond the
120 day "sell-off" period afforded under the agreement, and manufactured,
marketed and sold its own line of butane products which infringed patents
held by Schawbel. In November 2000, the Massachusetts court granted
Schawbel its request for preliminary injunction, and ordered that Conair
cease selling all allegedly infringing products. The Company intervened as
a plaintiff in the action to assert claims against Conair similar to the
claims raised by Schawbel. The Company is seeking to recover damages in
excess of $10 million, arising from the Company's inability to meet
minimum purchase requirements under its distribution agreement with
Schawbel and the subsequent termination of that agreement by Schawbel.
Conair responded by filing a counterclaim alleging that the Company
conspired with Schawbel to unlawfully terminate Conair's distribution
agreement with Schawbel, and to disparage Conair's reputation in the
industry. The counterclaim seeks $15 million in damages. Although the
ultimate outcome of the matter cannot be predicted, the Company contends
that Conair's counterclaims lack validity. The Company intends to pursue
vigorously its claims and defense in the litigation.

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.

42

HELEN OF TROY LIMITED
AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(7) COMMITMENTS AND CONTINGENCIES, CONTINUED

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 dividend 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. 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 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 28, 2001, the Company had
repurchased 1,342,431 of its shares under this resolution at a total cost
of $8,699,000. The Company did not repurchase any of its Common Stock
during fiscal 2002.

(8) FOURTH QUARTER CHARGES/TRANSACTIONS

In the fourth quarter of fiscal 2001, the Company recognized $2,457,000 in
pre-tax charges due to the planned discontinuance of a product (see note
7). The Company's fourth quarter fiscal 2001 results also included a
$1,895,000 reduction in SG&A due to the settlement of a license obligation
for which the Company accrued a liability in fiscal 2000.

During the fourth quarter of fiscal 2000 the Company recorded pre-tax
charges of $10,624,000 related to the discontinuation of its artificial
nails product line. The pre-tax charges resulting from such
discontinuation included $2,669,000 for the write-down of artificial nails
inventory. In addition, reserves for resolution of future contractual
obligations, allowances for customer returns, and the write-off of related
license costs, resulted in approximately $7,955,000 in fourth quarter 2000
charges. Also during the fourth quarter of fiscal 2000, the Company
implemented several major organizational changes, resulting in fourth
quarter charges of $770,000. These changes realigned organizational
responsibilities, restructured various departments and streamlined certain
functions within the Company. At February 29, 2000 accrued liabilities
included approximately $8,000,000 related to these charges.

The Company's fourth quarter fiscal 2002 results do not contain any
transactions of a non-routine nature.

43

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):

The business of the Company is somewhat seasonal. Between 54 percent and 57
percent of annual sales volume normally occurs in the second and third
fiscal quarters.

(a) See note 8 regarding fourth quarter 2001 charges relating to the
discontinuance of certain non-core products.

44

HELEN OF TROY LIMITED
AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(10) SEGMENT INFORMATION

The following table contains segment information for fiscal 2002, 2001, and
2000.

The operating income and loss totals for the North American segment include
$233,000 of income for fiscal 2001 and a $10,801,000 loss for fiscal 2000,
related to artificial nails products. The Company has discontinued
production of artificial nails and is in the process of attempting to sell
the remainder of its artificial nails inventory (see note 8). The Company
recognized no significant income or loss on artificial nails in fiscal
2002.

The North American segment sells hair care appliances, other personal care
appliances, including massagers and spa products, hairbrushes, combs, and
utility and decorative hair accessories in the U.S. and Canada. The
International segment sells hair care appliances, personal care
appliances, hairbrushes, combs, and hair accessories in other counties.
Tactica sells a variety of personal care and other consumer products
directly to customers and to retailers.

45

HELEN OF TROY LIMITED
AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(10) SEGMENT INFORMATION, CONTINUED

Operating profit for each operating segment is computed based on net sales,
less cost of goods sold, less any selling, general and administrative
expenses associated with the segment. The selling, general, and
administrative expense totals used to compute each segment's operating
profit are comprised of SG&A expense directly associated with those
segments, plus overhead expenses that are allocable to operating segments.
Other items of income and expense, including income taxes, are not
allocated to operating segments.

The Company's domestic and international net revenues from third parties and
long-lived assets are as follows:

Sales to one customer and its affiliate accounted for 22 percent, 23
percent, and 26 percent of the Company's net sales in fiscal 2002, 2001,
and 2000, respectively.

(11) ACQUISITIONS AND PURCHASES OF TRADEMARKS

In December 1999, the Company entered into a long-term license with Sunbeam
Products, Inc. to develop, market and distribute hair dryers and curling
irons, hairsetters, styling products and hot air brushes under the
Sunbeam(R) trade name in the U.S. and Canada. In January 2000 the Company
acquired a long-term license from Sunbeam Products, Inc. to design,
develop and sell human hair clippers and trimmers under the Sunbeam(R)
trade name. At the same time Sunbeam Products, Inc. granted Helen of Troy
a license to sell the same products under the Oster(R) trade name for a
transitional period.

In March 2000, the Company acquired a 55 percent ownership interest in
Tactica International, Inc. ("Tactica") for $2,500,000. In addition, the
Company loaned the minority shareholders of Tactica $3,500,000 on March
14, 2000. The interest rate on these loans is 8.75 percent. All principal
and accrued interest on the loans is due March 14, 2005. Included in
"Other assets" on the Company's February 28, 2002 and 2001 consolidated
balance sheets are $4,103,000 and $3,826,000, respectively, related to the
principal and accrued interest on these loans. The 45 percent interest
held by other shareholders in Tactica's deficit appears as a reduction of
the Company's stockholders' equity on the February 28, 2002 and 2001
consolidated balance sheets. The financial results of Tactica have been
included in the accompanying financial statements of the Company,
beginning March 14, 2000, the date of acquisition. It was not practical to
develop pro forma information for the year ended February 29, 2000. The
Company accounted for the Tactica acquisition using the purchase method of
accounting. Acquisition costs in excess of the fair value of the net
tangible assets acquired are included in goodwill. During fiscal 2002, the
other shareholders of Tactica contributed $600,000 of cash to Tactica.

46

HELEN OF TROY LIMITED AND SUBSIDIARIES

Schedule II

Valuation and Qualifying Accounts

Years ended February 28, 2002, February 28, 2001 and February 29, 2000
(in thousands)

47

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

Not applicable.

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 2002 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 2002 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 2002 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 2002 fiscal year, is incorporated herein
by reference in response to this Item 13.

48

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULE, AND REPORTS ON FORM 8-K

(a) Exhibits

3.1 Memorandum of Association. (Filed as Exhibit 3.1 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 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

49

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).

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 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).

10.17 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.

10.18 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).

10.19 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).

50

10.20 Loan Agreement, dated December 31, 1996, between Helen of
Troy L.P., and Texas Commerce Bank National Association.

10.21 First Amendment, dated July 31, 1997, to Loan Agreement
between Helen of Troy L.P. and Texas Commerce Bank
National Association.

10.22 Second Amendment, dated July 31, 1998, to Loan Agreement,
between Helen of Troy L.P. and Chase Bank of Texas
National Association.

10.23 Third Amendment, dated July 31, 2000, to Loan Agreement,
between Helen of Troy L.P. and The Chase Manhattan Bank.

10.24 Fourth Amendment, dated July 31, 2001, to Loan Agreement,
between Helen of Troy L.P. and The Chase Manhattan Bank.

10.25 Fifth Amendment, dated August 31, 2001 to Loan Agreement,
between Helen of Troy L.P. and The Chase Manhattan Bank.

10.26* Helen of Troy 1997 Cash Bonus Performance Plan, filed
herewith.

10.27* Stockholders Agreement dated March 14, 2000 by and
among Tactica International, Inc., Helen of Troy, LLC, Avi
Sivan, Prem Atma Ramchandani, Avraham Ovadia, and APA
International, LLC., filed herewith.

21* Subsidiaries of the Registrant, filed herewith.

23* Independent Auditors' Consent, 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

The Company filed a report on Form 8-K January 25, 2002 containing
its press release dated January 23, 2002 discussing the effect on
the Company of the Kmart bankruptcy filing and reaffirming
earnings expectations for fiscal 2002.

51

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 24, 2002

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.

52

/s/ Byron H. Rubin Director May 24, 2002
- ----------------------------------------
(Byron H. Rubin)

Director
- ----------------------------------------
(Daniel C. Montano)

/s/ Gary B. Abromovitz Deputy Chairman of the Board May 24, 2002
- ---------------------------------------- and Director
(Gary B. Abromovitz)

53

INDEX TO EXHIBITS