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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, 1997
Commission file number 0-23312
HELEN OF TROY LIMITED
(Exact name of the registrant as specified in its charter)
BERMUDA 74-2692550
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6827 MARKET AVENUE
EL PASO, TEXAS 79915
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (915) 779-6363
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK - $.10 PAR VALUE
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates
of the registrant as of April 30, 1997 was $267,049,244.
As of April 30, 1997 there were 13,187,657 shares of Common Stock,
$.10 Par Value, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None
Index to Exhibits - Page 44
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TABLE OF CONTENTS
PAGE
- --------------------------------------------------------------------------------------------------------
PART I Item 1. Business 1
Item 2. Properties 7
Item 3. Legal Proceedings 7
Item 4. Submission of Matters to a Vote of Security Holders 7
- --------------------------------------------------------------------------------------------------------
PART II Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters 8
Item 6. Selected Financial Data 9
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Item 8. Financial Statements and Supplementary Data 13
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 34
- --------------------------------------------------------------------------------------------------------
PART III Item 10. Directors and Executive Officers of the Registrant 34
Item 11. Executive Compensation 36
Item 12. Security Ownership of Certain Beneficial Owners
and Management 39
Item 13. Certain Relationships and Related Transactions 40
- --------------------------------------------------------------------------------------------------------
Part IV Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K 41
Signatures 42
- --------------------------------------------------------------------------------------------------------
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PART I
ITEM 1. BUSINESS
GENERAL
The registrant was originally incorporated in 1968 and has been a
public company since 1971. Helen of Troy Limited, a Bermuda company, was
formed on December 1, 1993. On February 16, 1994, Helen of Troy Texas
Corporation (originally incorporated in 1968), a Texas corporation, became a
subsidiary of Helen of Troy Limited pursuant to the terms of the Exchange
Agreement between Helen of Troy Texas Corporation and Helen of Troy Limited.
Unless the context otherwise requires, references herein to the Company refer
to the current Bermuda company and its subsidiaries.
The Company designs and develops a variety of personal care appliances
including hair dryers, curling irons, brush irons, lighted mirrors,
hairsetters, lady shavers, foot baths and massagers, and markets them primarily
to retailers, distributors and the professional hair care market in the United
States, Canada, Europe, Mexico and other countries throughout the world. The
Company also designs and develops hair brushes, combs and other hair care
accessories, and markets them to the same customers. The percentages of sales
made in the United States for fiscal years ended the last day of February in
1997, 1996 and 1995 were 96%, 98% and 98%, respectively.
The Company markets its products primarily under the trademarks "Vidal
Sassoon" under the license from Procter & Gamble Company, "Revlon" under
license from Revlon Consumer Products Corporation, "Dazey," "Lady Dazey," "Lady
Carel," "Dr. Scholl's," "Sable," "Helen of Troy," "Salon Edition," "HOT Tools,"
"Metropolis," and "Gallery Series." Vidal Sassoon, Revlon, Dazey and Dr.
Scholl's appliances and combs and brushes are sold to retailers, including mass
merchandisers and catalog, drug, and department stores. Helen of Troy, Salon
Edition, HOT Tools, Metropolis, Gallery Series, Lady Dazey and Lady Carel
appliances are sold to specialty stores and to professional stylists and their
customers through a network of independent beauty and barber supply
distributors.
PRODUCTS
Full lines of hair care appliances are sold under three principal
trade names, Vidal Sassoon, Revlon and Helen of Troy. The Vidal Sassoon line
includes hair dryers, curling irons, brush irons, lighted mirrors, hairsetters,
brushes, combs and hair care accessories. The Company entered into license
agreements with Revlon Consumer Products Corporation during the third quarter
of fiscal year 1993 and began sales under this trademark in the United States
during the first half of fiscal 1994. This line includes hair dryers, curling
irons, brush irons, lighted mirrors, hairsetters, lady shavers, brushes, combs
and functional hair care accessories. The Sable and HOT Tools product lines of
electric hair styling appliances were developed for meeting the special hair
care needs of African-American consumers. Where traditional styling irons may
either overheat or not get hot enough, Sable and HOT Tools' variable
temperature controls offer a broad range of heat settings for naturally
textured to fragile hair.
The Company's hair dryers include a variety of popular features.
Full-size dryers offer higher wattage, and more heat settings and blower speeds
than the smaller models. Mid-size and compact dryers are offered to
accommodate individual preferences and provide travel convenience. Special
features such as folding handles and dual electrical current adaptability are
included on several models.
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Curling irons and brush irons are available with variable temperature
settings and in a range of barrel sizes. Because barrel size affects the
tightness of the curl, purchasers often buy multiple irons or kits which
combine two to four different barrel sizes with a common curling iron base.
Selected models also heat-up rapidly and automatically shut-off within one
hour, providing enhanced convenience and safety.
Hairsetters provide hot rollers in several size groups and are
preferred by customers who want a longer lasting curl. Certain models include
such features as quick heat-up and cool touch tips that make the rollers easier
to handle.
The Vidal Sassoon and Revlon brush and comb lines are among the
Company's fastest growing products. Growth is being achieved by taking
advantage of the strong brand name appeal, using competitive pricing and
continually adding new products. Products in this category include a wide
variety of hair care products ranging from classic wooden brushes with boar
bristles to heat retaining aluminum brushes to unique hair styling tools.
One of the Company's more recent product extensions is hair care
accessories. Accessories introduced in fiscal 1996 under the Vidal Sassoon
trade name includes items such as bows, barrettes, clips, rollers, headbands,
ponytail holders and bobby pins. Sales of accessories to mass merchandisers
more than doubled in fiscal 1997 and has led the Company to further expand its
product offering in fiscal 1998.
In the first quarter of fiscal 1997 the Company signed a license
agreement with the Revlon Consumer Products Corporation to produce and
distribute artificial nails and related implements and accessories using the
Revlon trade name. The Company has developed a full line of artificial nails
and related accessories. The first shipment of artificial nails was made in
the first quarter of fiscal 1998.
In October 1996 the Company acquired the assets of two personal care
lines of Dazey Corporation, of Kansas City, Missouri. As a result of this
purchase the Company's products now include foot baths, foot massagers and body
massagers under the Dr. Scholl's trade name and hard hat salon hair dryers and
turbo spa products under the Dazey, Lady Dazey and Lady Carel trade names.
The Company continues to respond to changes in the personal care
appliance market and the health and beauty care market through developing new
products and improving existing products. Development of new products designed
to appeal to diverse consumer markets is performed by the Company's marketing
and engineering staffs with assistance from independent consulting firms.
MARKETING AND DISTRIBUTION
The Company's products are sold primarily in the United States of
America through three marketing divisions: the Consumer Appliances Division,
the Health and Beauty Care Division and the Professional Salon Division.
Extensive television and other national media advertising by The Procter &
Gamble Company ("P & G") , for its Vidal Sassoon liquid hair care products has
resulted in wide recognition of the Vidal Sassoon name throughout the retail
hair care market. The Company executed License Agreements with Revlon Consumer
Products Corporation to market its products under the Revlon trademark. The
Revlon trademark is renowned throughout the world. Products under this
trademark began shipping during the first half of fiscal 1994. It is
advertised extensively by the licensor in the United States and in major
international markets, in television and print media. As a result of the
Company's October 1996 acquisition, which was mentioned above, the Company
obtained the North American rights to the Dr. Scholl's licenses for foot baths,
foot massagers and body massagers from the Schering Plough Corporation. Dr.
Scholl's is a famous trade name which is universally
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recognized and is supported by intensive media advertising. Additionally, the
Company purchased the Dazey, Lady Dazey and Lady Carel trade names with
respect to personal care appliances. The Company's cooperative advertising
and promotion programs and its own media advertising campaigns have extended
trade name recognition into the hair care appliance market and contributed to
the growth of the Consumer Appliances Division and the Health and Beauty Care
Division.
Consumer Appliances Division and Health and Beauty Care Division sales
for the Company were seasonal in fiscal 1997 with 60% of the sales being made
in the second and third fiscal quarters of the year. At February 28, 1997,
consistent with prior years and industry practice, the Company had no material
amount of backlog orders for any product group. Approximately 27% of the
Company's net sales in the year ended February 28, 1997 were made to one
customer and its affiliate. Approximately 29% ,10% and 10% of the Company's
net sales in the year ended February 29, 1996 were made to three customers, and
22% and 11% of the Company's net sales in the year ended February 28, 1995,
were made to two customers.
Consumer Appliances Division and Heath and Beauty Care Division.
These divisions are responsible for marketing products in the United States,
Canada and Mexico. Primary trade names are Vidal Sassoon and Revlon. Vidal
Sassoon and Revlon products consist of lines of hand-held hair dryers, curling
irons, brush irons, hairsetters, lighted mirrors, brushes, combs and other hair
care accessories which are distributed to retailers, including mass
merchandisers and catalog, drug, and department stores. With the October 1996
acquisition of two personal care lines of Dazey Corporation, the Consumer
Appliances Division expanded its product lines to include foot baths, foot
massagers and body massagers under the Dr. Scholl's trade name, and hard hat
salon hair dryers and turbo spa products under the Dazey, Lady Dazey and Lady
Carel trade names. Also a full line of artificial nails and related implements
and accessories bearing the Revlon trade name were added to the products of the
Health and Beauty Care Division in fiscal 1998.
The Company markets its consumer products through approximately 45
independent manufacturers' representative organizations and through its own
sales staff.
The Company promotes its consumer products primarily through print
media and sales promotion campaigns. The Company also advertises its products
on television and in numerous consumer and trade shows.
Professional Salon Division. The Company markets its "professional"
products to professional stylists, beauticians, beauty and barber supply
distributors, and specialty stores for use and for resale. Sales are made
through independent manufacturers' representatives throughout the United
States. This division markets products under the trademarks Helen of Troy,
Salon Edition, Metropolis, Gallery Series, HOT Tools, Dazey, Lady Dazey and
Lady Carel.
The Professional Salon Division also serves as a development resource
for new products to be marketed in all of the Company's product groups. The
Company believes that it has responded to changes in the hair care appliance
market while providing durable appliances that meet the exacting needs of the
professional stylist.
International Sales. During fiscal 1990, the Company entered into a
separate agreement (the "European Agreement") with The Procter & Gamble Company
which grants the Company the exclusive license to sell personal hair care
appliances, lighted mirrors, brushes, combs and hair care accessories in
various countries in western Europe and the United Kingdom under the Vidal
Sassoon trade name. As of January 1, 1993, the European Agreement was amended
to include additional territories and to lengthen the term of the license. The
expanded territory now includes the United Kingdom and all of western Europe.
Effective February 29, 1996, the Company purchased all of the outstanding stock
of a distribution company in the United Kingdom.
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During fiscal 1992, the Company entered into a separate agreement (the
"Mexico Agreement") with The Procter & Gamble Company which grants the Company
the exclusive license to sell personal hair care appliances, lighted mirrors,
combs, brushes, and hair care accessories in Mexico under the Vidal Sassoon
trade name. As of January 1, 1993, the Mexico Agreement was amended to
lengthen the term of the license.
MANUFACTURING AND SUPPLIES
The personal care products sold by the Company are manufactured
primarily in The Peoples Republic of China, Thailand, Taiwan and South Korea
(the "Far East"), utilizing molds and certain other tooling owned by the
Company's wholly owned subsidiary, Helen of Troy Limited ("HOTB"), a Barbados
corporation. The Company purchases from HOTB, which contracts with unrelated
factories. The combined production capacity of these factories exceeds the
Company's current needs and projected sales growth. The Company believes it
will be able to continue purchasing on the same basis for the foreseeable
future and that additional production capacity is available to the Company if
needed.
As a result of the manufacture of the Company's products in the Far
East, the Company is subject to risks associated with trade barriers, currency
exchange fluctuations and political unrest. Political changes in China have
not affected the production of the Company's goods. The Company believes that
adequate production facilities are available in other parts of the world should
they be needed. However, the relocation of production capacity could require
substantial time for the establishment of comparable production levels and
could result in increased production costs.
Virtually all of the Company's products are imported and most are
subject to customs duty. The rates at which duties are charged are subject to
legislative changes as political relationships between countries change.
The Company's U.S. subsidiary operates under Supply Agreements with
HOTB wherein HOTB purchases goods and sells them to the Company. HOTB
contracts with an affiliated service company, a subsidiary of the Company, for
the services of numerous electrical engineers, technicians and quality control
supervisors and inspectors in the Far East to help assure the quality of
products purchased by the Company. Manufacturing processes are supervised by
these personnel and product acceptance is subject to quality control checks by
inspectors in the factories. The Company offers up to a two year limited
warranty on its products.
In fiscal 1997, for distribution in the United States, Canada and
Mexico, products manufactured in the Far East are shipped to the west coast of
the United States and thereafter are transported by truck or rail service to
public warehouse facilities in Sparks, Nevada; Memphis, Tennessee; Dallas,
Texas; and Toronto, Canada. Substantially all of the Company's products are
shipped from these public warehouses. The remaining shipments, particularly
those requiring special packaging or handling, are made from the Company's
warehouse in El Paso, Texas. In the first quarter of fiscal 1998 the Company
began using its newly constructed distribution center in El Paso, Texas. As of
April 1997, the public warehouses in Sparks, Nevada and Dallas, Texas are no
longer being used by the Company. For distribution in Europe, products are
manufactured in the Far East and shipped to public warehouse facilities in
Amsterdam, The Netherlands, Abingdon, the United Kingdom or directly to
customers. See Item 2 Properties - Plant and Facilities.
LICENSE AGREEMENTS
The Company is licensed by P & G to use the trademark Vidal Sassoon to
manufacture, sell and distribute a line of electrical personal hair care
appliances and accessories.
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The agreement provides the Company an exclusive license to distribute
and sell, within the United States and Canada under the Vidal Sassoon
trademark, electric and battery operated personal hair care appliances,
including hair dryers, curling irons, brush irons, hairsetters, lighted mirrors
and hair care accessories. New products, including packaging and advertising,
must be approved by the licensor.
Through two other agreements with P & G, the "U.S. and Canadian Brush
Licenses," the Company has the exclusive use of the trademark Vidal Sassoon on
brushes, combs and hair care accessories in the United States and Canada. The
term of the brush license runs concurrent with the appliance license. Cross
marketing of products under the Vidal Sassoon licenses is allowed.
During fiscal 1990, the Company entered into the European Agreement
with P & G which grants the Company the exclusive license to sell personal hair
care appliances, lighted mirrors and brushes, combs and hair care accessories
in various countries in western Europe and in the United Kingdom under the
Vidal Sassoon trade name. As of January 1, 1993, the European Agreement was
amended to include additional territories and to extend the term of the
license. The expanded territory now includes all of western Europe.
During fiscal 1992, the Company entered into the Mexico Agreement with
P & G which grants the Company the exclusive license to sell personal hair care
appliances, lighted mirrors, brushes, combs, and hair care accessories in
Mexico under the Vidal Sassoon trade name. As of January 1, 1993, the Mexico
Agreement was amended to lengthen the term of the license.
Under License Agreements entered into on September 30, 1992, the
Company is licensed by Revlon Consumer Products Corporation to use the Revlon
trademark to manufacture, sell and distribute a line of electric hair care
appliances, including hair dryers, curling irons, hairsetters, brushes, combs,
lady shavers, hand held mirrors and functional hair care accessories. The
license agreements include the United States, Canada and the rest of the world
other than certain markets.
In fiscal 1996 the Company amended its license agreement with Revlon
to include women's electric and battery operated shavers. During fiscal 1997
the Company's new Revlon Perfect Finish Shaving System for women had its
national introduction at the January 1997 Housewares Show in Chicago.
In the first quarter of fiscal 1997 the Company signed an agreement
with Revlon Consumer Products Corporation to manufacture and distribute
artificial nails and related implements and accessories under the Revlon trade
name. Shipments of these new products began in the first quarter of fiscal
1998. The agreement allows the Company to distribute its products throughout
the world. Initially artificial nails will be distributed in the United
States.
In connection with its acquisition of two personal care lines of Dazey
Corporation in October 1996, the Company obtained the North American rights to
the Dr. Scholl's licenses for foot baths, foot massagers and body massagers
from the Schering Plough Corporation. The Company has also obtained license
rights to the Dr. Scholl's trade name in South America for foot baths, foot
massagers and body massagers. Additionally, as part of the October 1996
acquisition, the Company purchased the Dazey, Lady Dazey and Lady Carel trade
names for personal care appliance products. Products bearing these names are
being distributed primarily in the United States and Canada.
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COMPETITION
The Company encounters significant competition with respect to all its
products. The Company's primary competition for its Consumer Appliances
Division comes from Conair Corporation, Windmere Corporation and Remington
Corporation. Competition for the Company's Health and Beauty Care Division
primarily comes from Goody, a division of Newell Co., Willhold, a division of
American Greeting and L and N Marketing and Sales Corporation, and for
artificial nails, from Cosmar, a division of Renaissance Cosmetics. These
major competitors are large organizations with known brand names and
substantial resources. Product pricing plays an important part in this
competitive market. Product packaging and performance as well as brand name
recognition are other significant factors affecting competition within the hair
care appliance market.
For sales in the United States of America the Company believes that
its Professional Salon Division is one of the primary sellers of personal hair
care appliances to the professional trade. The major competitors for the Helen
of Troy professional product group are Belson Products (a division of Windmere
Corporation) and Conair Corporation.
REGULATION
Most of the Company's retail distributors (as well as several state
and local authorities) require that the Company's retail appliance products
meet the safety standards of Underwriters Laboratories, Inc. ("U.L."). For
products sold in Canada, the Company is subject to the standards of the
Canadian Standards Association. Electrical products sold in Europe or Mexico
meet the safety standards imposed for those countries depending on the sales
location. The Company has not experienced difficulty in satisfying such
standards.
For sales in the United States of America the Company is also subject
to the jurisdiction of the Federal Trade Commission with respect to, among
other things, the content of advertising and other trade practices.
TRADEMARKS AND PATENTS
The Company's business is materially dependent upon the continued use
of the trademarks Vidal Sassoon and Revlon which are registered by the
respective licensors. See Item 1 Business - License Agreements.
Certain of the trademarks and designs used in connection with the sale
of the Company's products are registered with the United States Patent Office
and similar offices in certain other domains. The Company frequently seeks
registrations for various additional trademarks under which its products are
sold. The Company does not believe that its business is otherwise materially
dependent upon patents and patent protection.
EMPLOYEES
The Company employs 260 full-time employees (including officers) in
the United States, Hong Kong and Europe of whom 115 are marketing, sales and
distribution employees and 79 are administrative personnel. The remainder are
engineering and development employees.
The Company has enjoyed satisfactory working relations with its
employees, none of whom are covered by any collective bargaining agreement, and
the Company has never experienced a work stoppage.
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ITEM 2. PROPERTIES
PLANT AND FACILITIES
The corporate offices owned by the Company consist of an office
building with approximately 40,000 square feet, situated on approximately one
acre of land at 6827 Market Avenue in El Paso, Texas. Additionally, the
Company owns and maintains 12,000 square feet of warehouse space on a 62,000
square foot lot adjacent to the headquarters building. During fiscal 1996 the
Company purchased approximately 50 acres of land in El Paso, Texas to house
its corporate offices and distribution center. In fiscal 1997 the Company
constructed a 410,000 square foot distribution center. This facility will be
used for storage and shipping of the Company's products which in the past were
stored in Sparks, Nevada and Dallas, Texas. In fiscal 1998 the Company plans
to begin construction of a corporate office facility adjacent to the
distribution center.
The Company's Hong Kong subsidiary leases an office where it occupies
approximately 19,000 square feet. Previously, the Company's Hong Kong
subsidiary was headquartered in approximately 12,000 square feet of office
space in Hong Kong acquired by condominium ownership. In fiscal 1997 this
owned office was leased to a third party.
The Company utilizes warehouse space in public warehouses in Sparks,
Nevada; Memphis, Tennessee; Dallas, Texas; Amsterdam, The Netherlands,
Abingdon, the United Kingdom and Toronto, Canada to facilitate inventory
distribution. During fiscal 1997, the Company leased approximately 36,000
square feet of warehousing space in El Paso, Texas. The Company's use of this
small warehouse along with the warehouses in Sparks, Nevada and Dallas, Texas
ended in the first quarter of fiscal 1998 after the Company's new distribution
center became operational. The Company believes storage capacity of its
warehouses and the public warehouse space is sufficient for its present needs,
but anticipated growth necessitates the planning of additional corporate office
facilities.
ITEM 3. LEGAL PROCEEDINGS
The Company is not aware of any legal proceedings of a material
nature, pending or threatened, to which the Company is or may become a party.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Nothing was submitted.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
PRICE RANGE OF COMMON STOCK
The Common Stock is currently 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.
High Low
---- ---
Fiscal 1996
First quarter $ 9 7/8 $ 8 1/2
Second quarter 10 5/8 9 1/2
Third quarter 10 1/2 8 3/4
Fourth quarter 11 1/2 9
Fiscal 1997
First quarter 13 5/8 10 7/8
Second quarter 16 11 1/4
Third quarter 21 1/2 13 3/4
Fourth quarter 25 1/2 19 1/4
APPROXIMATE NUMBER OF EQUITY SECURITY HOLDERS
Approximate Number of
Holders of Record
Title of Class (as of April 30, 1997)
- ------------------------------------------ --------------------------
Common Stock, $.10 Par Value 302 (1)
- -------------
(1) 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.
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. 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.
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ITEM 6. SELECTED FINANCIAL DATA
The selected consolidated financial information set forth below has
been summarized from the Company's Consolidated Financial Statements which, for
each of the years in the five year period ended February 28, 1997, have been
audited by KPMG Peat Marwick LLP, independent certified public accountants.
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.
Twelve Months Ended
Last Day of February
-------------------------------------------------------------
1997 1996 1995 1994 1993
--------- --------- --------- --------- ---------
(in thousands, except earnings per share)
Statements of Income Data:
Net sales $ 213,035 $ 167,053 $ 138,143 $ 123,198 $ 131,995
Cost of sales 132,861 102,341 86,405 77,917 81,037
--------- --------- --------- --------- ---------
Gross profit 80,174 64,712 51,738 45,281 50,958
Selling, general and
administrative expense 57,438 47,356 37,139 35,473 36,819
--------- --------- --------- --------- ---------
Operating income 22,736 17,356 14,599 9,808 14,139
Interest expense (2,262) (1,795) (915) (881) (651)
Other income (expense), net 1,665 1,286 811 109 65
Gain on sale of asset -- -- -- 344 2,628
--------- --------- --------- --------- ---------
Earnings before income taxes 22,139 16,847 14,495 9,380 16,181
Income taxes 4,981 3,790 3,279 1,455 3,275
--------- --------- --------- --------- ---------
Earnings before cumulative
effect of change in
accounting principle 17,158 13,057 11,216 7,925 12,906
Cumulative effect of change
in accounting principle -- -- -- (397) --
--------- --------- --------- --------- ---------
Net earnings $ 17,158 $ 13,057 $ 11,216 $ 7,528 $ 12,906
========= ========= ========= ========= =========
Per Share Data: (1)
Earnings before cumulative
effect of change in
accounting principle $ 1.24 $ .98 $ .82 $ .54 $ .89
Cumulative effect of change
in accounting principle -- -- -- (.03) --
--------- --------- --------- --------- ---------
Net earnings $ 1.24 $ .98 $ .82 $ .51 $ .89
========= ========= ========= ========= =========
Weighted average number of
common and common equivalent
shares outstanding 13,885 13,373 13,596 14,740 14,582
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Last Day of February
--------------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
(in thousands)
Balance Sheet Data:
Working capital $ 111,937 $ 110,606 $ 59,079 $ 57,494 $ 52,339
Total assets 182,226 154,588 133,243 122,759 122,660
Long-term debt 40,450 40,450 -- -- --
Stockholders' equity (2) $ 120,482 $ 101,878 $ 88,627 $ 85,683 $ 80,209
(1) Per share data has been adjusted for a 100% stock dividend that was paid on
July 1, 1996 and a 50% stock dividend that was paid on October 1, 1992.
(2) In fiscal 1994 the Company repurchased 196,000 shares at a cost of
$2,752,000. In fiscal 1995 the Company repurchased 649,400 shares at a
cost of $9,309,000.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, selected
consolidated operating data for the Company as a percentage of net sales.
Relationship to Net Sales
Fiscal Year
----------------------------------
1997 1996 1995
-------- -------- --------
Net sales 100.0% 100.0% 100.0%
Cost of sales 62.4 61.3 62.5
-------- -------- --------
Gross profit 37.6 38.7 37.5
Selling, general and
administrative expenses 27.0 28.3 26.9
-------- -------- --------
Operating income 10.6 10.4 10.6
Interest expense (1.0) (1.1) (.7)
Other income, net .8 .7 .6
-------- -------- --------
Earnings before income taxes 10.4 10.0 10.5
Income taxes 2.3 2.2 2.4
-------- -------- --------
Net earnings 8.1% 7.8% 8.1%
======== ======== ========
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FISCAL YEAR ENDED FEBRUARY 28, 1997 COMPARED WITH FISCAL YEAR ENDED FEBRUARY
29, 1996
Net sales increased $45,982,000 during fiscal 1997, a 28% increase
from fiscal 1996 net sales. Excluding the effect of sales attributed to the
purchase of new lines of business in October 1996, the Company's increase in
sales was 22%. The increase is attributable to increased volume as the
Company's market share increased in the Divisions that make retail sales and
the Professional Salon Division. The introduction of new hair care appliance
models, increased brush and comb sales, and sales of hair care accessories were
the primary causes of the market share increase.
Gross profit, as a percent of net sales, decreased to 37.6% in fiscal
1997 from 38.7% in fiscal 1996. The lines of business acquired in October 1996
experienced lower than normal gross profit margins in the last five months of
fiscal 1997. The exclusion of these sales and cost of goods sold during fiscal
1997 would have resulted in a gross profit margin of 38%. Gross profit margins
in fiscal 1996 were higher than normal.
Selling, general and administrative expenses decreased as a percent of
net sales to 27.0% in fiscal 1997 from 28.3% in fiscal 1996. The decreased
percentage is a result of the relatively fixed nature of certain expenses.
Interest expense in fiscal 1997 increased over interest expense in
fiscal 1996 due to the increase in average outstanding debt which resulted from
issuance of the $40,000,000 in Senior Notes issued by the Company's U.S.
subsidiary in January 1996. The issuance of those notes, net of payment of
outstanding bank loans, resulted in increased investments in short term
securities, which increased interest income in fiscal 1997.
FISCAL YEAR ENDED FEBRUARY 29, 1996 COMPARED WITH FISCAL YEAR ENDED FEBRUARY
28, 1995
Net sales increased $28,910,000 during fiscal 1996, a 21% increase
from fiscal 1995 net sales. The increase is attributable to increased volume
as the Company's market share increased in both the Consumer Sales Division and
the Professional Salon Division. Hair care appliance sales make up the great
majority of Consumer Products Division volume. The introduction of new hair
care appliance models, increased brush and comb sales, and sales of hair care
accessories to certain large customers were the primary causes of the market
share increase.
Gross profit, as a percent of net sales, increased to 38.7% in fiscal
1996 from 37.5% in fiscal 1995. The increased gross profit is primarily
attributable to a favorable combination of changes in the mix of products sold.
Selling, general and administrative expenses increased as a percent of
net sales to 28.3% in fiscal 1996 from 26.9% in fiscal 1995. These costs
increased $10,217,000 in fiscal 1996 over fiscal 1995. The increase in
expenses resulted from significant media advertising and additional overhead
costs necessitated by increased sales, new products, and the Company's
introduction of hair care accessories.
LIQUIDITY AND CAPITAL RESOURCES
The Company's U.S. subsidiary ("HOT") operates under a supply
agreement with HOTB, which contracts with unrelated factories for the
manufacture of products, which are sold to HOT and other purchasers. To allow
the issuance of letters of credit, HOT and HOTB maintain lines of credit
through two banks. The facilities are limited to $5 million and $4 million,
respectively, expire in July 1997 and bear interest at the banks' prime rates
or, for HOT's line of credit, at alternate rates based on Eurodollar investment
rates for specific time periods.
Cash and cash equivalents decreased $18,397,000 from $44,195,000 at
February 29, 1996 to $25,798,000 at February 28, 1997. The decrease in cash
was due primarily to increases in receivables and inventory, and the use of
internal funds to finance the construction of a new company owned distribution
facility and the acquisition of assets of two personal care lines of the Dazey
Corporation, of Kansas City, Missouri.
11
14
The increases in receivables, inventory and current liabilities are
attributable to the Company's sales growth. Property and equipment increased
as the Company's U.S. subsidiary constructed a distribution facility.
Increases in license agreements and other assets are due to obtaining the
Revlon artificial nails license and to the acquisition of two personal care
lines of the Dazey Corporation, respectively.
From February 29, 1996 to February 28, 1997, working capital
increased $1,331,000 to $111,937,000. The current ratio is 6.3 to 1 at
February 28, 1997. Management expects that operations and available financing
sources will continue providing sufficient capital resources for the Company.
On August 30, 1993, the Board of Directors approved a stock repurchase
program under which Helen of Troy Corporation may buy up to one million five
hundred thousand shares of its common stock from time to time as market
conditions dictate. On February 22, 1994, the Board of Directors of Helen of
Troy Limited approved and ratified the continuation of that program. As of the
end of fiscal 1995, the Company had repurchased 845,400 shares under this
program at a cost of $12,061,000. During fiscal 1997 and 1996 no repurchase of
stock occurred.
During March 1995, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long Lived Assets to be
Disposed of". The Company adopted SFAS No. 121 in fiscal 1997. SFAS No. 121
requires that long-lived assets and certain identifiable intangibles to be held
and used by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The adoption of SFAS No. 121 did not have a material adverse
impact on the Company's financial position or the results of its operations.
The Company accounts for stock-based compensation plans utilizing the
provisions of Accounting Principles Board Opinion No. 25 (APB 25), "Accounting
for Stock Issued to Employees." In October 1995, FASB issued SFAS No. 123,
"Accounting for Stock-Based Compensation." Under SFAS No. 123, companies are
allowed to continue to apply the provisions of APB 25 to their stock-based
employee compensation arrangements. The Company did not adopt the methodology
contemplated by SFAS No. 123. As such, the Company has supplemented its
financial statements with additional disclosures.
In February 1997, the FASB issued Statement of Financial Accounting
Standards ("SFAS") No. 128, Earnings per Share. SFAS No. 128 supersedes APB
Opinion No. 15, Earnings Per Share ("Opinion No. 15"), and requires the
calculation and dual presentation of Basic and Diluted earnings per shares
("EPS"), replacing the measures of Primary and Fully- diluted EPS as reported
under Opinion No. 15. SFAS No. 128 is effective for financial statements
issued for periods ending after December 15, 1997; earlier application is not
permitted. Although the Company has not performed an analysis to determine the
specific impact SFAS No. 128 will have on its EPS calculation, the Company does
not anticipate that diluted EPS under SFAS No. 128 will be materially different
from EPS calculated under Opinion No. 15.
During fiscal years 1990 and 1989, the Company entered into barter
agreements to exchange certain inventory items for advertising credits. As of
February 28, 1997, the Company disposed of unused advertising credits. The
fiscal year 1997 charge of $3,198,000 is included with the Company's selling,
general and administrative expenses.
12
15
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE
Page
----
Independent Auditors' Report 14
Consolidated Financial Statements:
Consolidated Balance Sheets as of February 28, 1997 and February 29, 1996 15
Consolidated Statements of Income for each of the years in the
three-year period ended February 28, 1997 17
Consolidated Statements of Stockholders' Equity for each of
the years in the three-year period ended February 28, 1997 18
Consolidated Statements of Cash Flows for each of the years
in the three-year period ended February 28, 1997 19
Notes to Consolidated Financial Statements 21
Financial Statement Schedule -
Schedule II - Valuation and Qualifying Accounts for each of
the years in the three-year period ended February 28, 1997 33
All other schedules are omitted as the required information is included in
the consolidated financial statements or is not applicable.
13
16
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Helen of Troy Limited:
We have audited the consolidated financial statements of Helen of Troy Limited
and subsidiaries as listed in the index on page 13. 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 13. 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. 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, 1997 and February 29, 1996, and the
results of their operations and their cash flows for each of the years in the
three-year period ended February 28, 1997, in conformity with accounting
principles generally accepted in the United States. Also in our opinion, the
related financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
KPMG PEAT MARWICK LLP
El Paso, Texas
April 30, 1997
14
17
HELEN OF TROY LIMITED
AND SUBSIDIARIES
Consolidated Balance Sheets
February 28, 1997 and February 29, 1996
(in thousands, except shares)
1997 1996
------------ ------------
Assets
Current assets:
Cash and cash equivalents $ 25,798 44,195
Receivables - principally trade, less
allowance for doubtful receivables of
$400 in 1997 and $390 in 1996 36,951 28,854
Inventories 68,267 48,572
Prepaid expenses 939 422
Deferred income tax benefits (note 5) 1,276 823
------------ ------------
Total current assets 133,231 122,866
------------ ------------
Property and equipment
net of accumulated depreciation of $3,983
in 1997 and $3,229 in 1996 (note 2) 25,780 15,750
License agreements, at cost less accumulated
amortization of $7,117 in 1997 and $6,361
in 1996 9,935 8,191
Note receivable, less current portion 522 1,006
Other assets at cost, net of amortization 12,758 6,775
------------ ------------
$ 182,226 154,588
============ ============
(Continued)
15
18
HELEN OF TROY LIMITED
AND SUBSIDIARIES
Consolidated Balance Sheets
February 28, 1997 and February 29, 1996
(in thousands, except shares)
1997 1996
------------ ------------
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable to banks (note 3) $ 4,001 2,593
Accounts payable, principally trade 2,645 1,005
Accrued expenses:
Advertising and promotional 2,580 1,740
Other 6,934 4,912
Income taxes payable (note 5) 5,134 2,010
------------ ------------
Total current liabilities 21,294 12,260
Long-term debt (note 4) 40,450 40,450
------------ ------------
Total liabilities 61,744 52,710
------------ ------------
Stockholders' equity (note 6):
Cumulative preferred stock, non-voting, $1.00
par value. Authorized 2,000,000 shares;
none issued -- --
Common stock, $.10 par value. Authorized
25,000,000 shares; 13,143,437 and 12,965,162
shares issued and outstanding at February 28, 1997
and February 29, 1996, respectively 1,314 648
Additional paid-in-capital 26,643 25,863
Retained earnings 92,525 75,367
------------ ------------
Total stockholders' equity 120,482 101,878
------------ ------------
Commitments and contingencies (notes 5 and 7)
$ 182,226 154,588
============ ============
See accompanying notes to consolidated financial statements.
16
19
HELEN OF TROY LIMITED
AND SUBSIDIARIES
Consolidated Statements of Income
(in thousands, except shares and earnings per share)
Year Ended Last Day of February
--------------------------------------------
1997 1996 1995
------------ ------------ ------------
Net sales $ 213,035 167,053 138,143
Cost of sales 132,861 102,341 86,405
------------ ------------ ------------
Gross profit 80,174 64,712 51,738
Selling, general and administrative
expenses (note 7) 57,438 47,356 37,139
------------ ------------ ------------
Operating income 22,736 17,356 14,599
Other income (expense):
Interest expense (2,262) (1,795) (915)
Other income, net 1,665 1,286 811
------------ ------------ ------------
Total other (expense) (597) (509) (104)
------------ ------------ ------------
Earnings from operations before
income taxes 22,139 16,847 14,495
Income taxes (note 5) 4,981 3,790 3,279
------------ ------------ ------------
Net Earnings $ 17,158 13,057 11,216
============ ============ ============
Earnings per common and common
equivalent share (note 1) $ 1.24 .98 .82
============ ============ ============
Weighted average number of common and
common equivalent shares used in
computing net earnings per share 13,884,804 13,372,730 13,595,750
See accompanying notes to consolidated financial statements.
17
20
HELEN OF TROY LIMITED
AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Years ended last day of February 1997, 1996 and 1995
(in thousands)
Additional Total
Common Paid-In Retained Stockholders'
Stock Capital Earnings Equity
------------ ------------ ------------ ------------
Balances, February 28, 1994 677 27,288 57,718 85,683
Acquisition and retirement
of treasury stock (65) (2,620) (6,624) (9,309)
Exercise of common stock
options, net (notes 5 and 6) 31 1,006 -- 1,037
Net earnings -- -- 11,216 11,216
------------ ------------ ------------ ------------
Balances, February 28, 1995 643 25,674 62,310 88,627
Exercise of common stock
options, net (notes 5 and 6) 5 189 -- 194
Net earnings -- -- 13,057 13,057
------------ ------------ ------------ ------------
Balances, February 29, 1996 648 25,863 75,367 101,878
Exercise of common stock
options, net (notes 5 and 6) 15 1,431 -- 1,446
Stock dividend 651 (651) -- --
Net earnings -- -- 17,158 17,158
------------ ------------ ------------ ------------
Balances, February 28, 1997 $ 1,314 $ 26,643 $ 92,525 $ 120,482
============ ============ ============ ============
See accompanying notes to consolidated financial statements.
18
21
HELEN OF TROY LIMITED
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(in thousands)
Year ended Last Day of February
--------------------------------
1997 1996 1995
-------- -------- --------
Cash flows from operating activities:
Net earnings $ 17,158 13,057 11,216
Adjustments to reconcile net income
to net cash provided (used) by operating
activities:
Depreciation and amortization 2,683 2,156 1,960
Provision for doubtful receivables 10 27 335
Deferred taxes, net (453) (427) 293
Non cash charge to expenses (note 7) 3,198 -- --
Changes in operating assets and liabilities:
Accounts receivable (8,107) (3,697) (6,671)
Inventory (19,695) (2,498) (7,457)
Prepaid expenses (517) (298) 195
Accounts payable 1,640 (1,374) (685)
Accrued expenses 2,862 1,304 759
Income taxes payable 3,124 (4,879) (19)
-------- -------- --------
Net cash provided (used) by operating
activities 1,903 3,371 (74)
Cash flows used for investing activities:
Capital and license expenditures (13,342) (4,627) (627)
Other assets (10,296) (141) (1,907)
Collection on notes receivable 484 438 98
-------- -------- --------
Net cash used for investing
activities (23,154) (4,330) (2,436)
(Continued)
19
22
HELEN OF TROY LIMITED
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(in thousands)
Year Ended Last Day of February
--------------------------------------
1997 1996 1995
---------- ---------- ----------
Cash flows provided (used) by financing activities:
Net (repayments) borrowing on
revolving line of credit 1,408 (27,407) 7,485
Proceeds from long-term
debt -- 40,450 --
Acquisition of treasury shares -- -- (9,309)
Proceeds from exercise of options
and warrants, net 1,446 194 1,037
---------- ---------- ----------
Net cash provided
(used) by financing activities 2,854 13,237 (787)
---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents (18,397) 12,278 (3,297)
Cash and cash equivalents, beginning
of year 44,195 31,917 35,214
---------- ---------- ----------
Cash and cash equivalents, end of year $ 25,798 44,195 31,917
========== ========== ==========
Supplemental cash flow disclosures:
Interest paid $ 2,915 1,368 1,185
Income taxes paid, net 2,882 8,317 1,123
See accompanying notes to consolidated financial statements.
20
23
HELEN OF TROY LIMITED
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
February 28, 1997 and February 29, 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) General
Helen of Troy Limited, a Bermuda company, was formed on December 1,
1993. On February 16, 1994, Helen of Troy Texas Corporation, a
Texas corporation, became a subsidiary of Helen of Troy Limited
pursuant to the terms of the Exchange Agreement between Helen of
Troy Texas Corporation and Helen of Troy Limited. The
accompanying consolidated financial statements are prepared in
U.S. dollars and in accordance with generally accepted accounting
principles followed in the United States of America.
The Company and its subsidiaries are principally engaged in the
design, development, importation and wholesale distribution of
hair care appliances, hair brushes, combs and accessories and
related personal care products. Substantially all purchases of
such appliances and products are made from unaffiliated
manufacturers principally located in The Peoples Republic of
China, Thailand, Taiwan and South Korea (the "Far East"). As a
result of the manufacture of the Company's products in the Far
East, the Company is subject to risks associated with trade
barriers, currency exchange fluctuations and political unrest.
Political changes in China have not affected the production of the
Company's goods. The Company believes that adequate production
facilities are available in other parts of the world should they
be needed. However, the relocation of production capacity could
require substantial time for the establishment of comparable
production levels and could result in increased production costs.
(b) Principles of Consolidation
The consolidated financial statements include the accounts of Helen of
Troy Limited and its subsidiaries. All significant intercompany
balances and transactions have been eliminated in consolidation.
(c) Inventories
Inventories are stated at the lower of cost (first-in, first-out) or
market (net realizable value).
(d) Property and Equipment
Property and equipment are stated at cost. Depreciation has been
provided by the straight-line method over the estimated useful
lives of the assets.
21 (Continued)
24
HELEN OF TROY LIMITED
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(e) License Agreements
The great majority of the Company's sales are made subject to License
Agreements with the licensors of the Vidal Sassoon and Revlon
trade names. The costs of the existing license agreements are
being amortized on a straight line basis over the lives of the
respective agreements. Net sales subject to the license
agreements aggregated 89%, 89% and 90% of total net sales for the
fiscal years 1997, 1996 and 1995, respectively.
(f) Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates in recognized in income in
the period that includes the enactment date.
(g) Earnings per Share
Primary earnings per common and common equivalent share is computed
based upon the weighted average number of common shares plus
common share equivalents (dilutive stock options) outstanding
during the period. Common share equivalents consist of stock
options which have a dilutive effect based on the average market
price of common shares during the period, reduced by a number of
shares assumed to be repurchased at the average market price of
common shares during the period from proceeds of assumed exercises
of options and warrants.
Earnings per common and common equivalent share, assuming full
dilution, is not materially dilutive for any of the periods
presented.
On June 4, 1996, the Company's Directors approved a 2-for-1 stock
split which was paid as a 100% stock dividend on July 1, 1996 to
stockholders of record on June 17, 1996. All references in the
financial statements to number of shares and per share amounts of
the Company's common stock have been retroactively restated to
reflect the increased number of common shares outstanding.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 128,
Earnings per Share. SFAS No. 128 supersedes APB Opinion No. 15,
Earnings Per Share ("Opinion No. 15"), and requires the
calculation and dual presentation of Basic and Diluted earnings
per shares ("EPS"), replacing the measures of Primary and
Fully-diluted EPS as reported under Opinion No. 15. SFAS No. 128
is effective for financial statements issued for periods ending
after December 15, 1997; earlier application is not permitted.
Although the Company has not performed an analysis to determine
the specific impact SFAS No. 128 will have on its EPS calculation,
the Company does not anticipate that diluted EPS under SFAS No.
128 will be materially different from EPS calculated under Opinion
No. 15.
22 (Continued)
25
HELEN OF TROY LIMITED
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(h) Cash Equivalents
The Company considers all highly liquid debt instruments purchased
with an original maturity of three months or less to be cash
equivalents.
(i) Foreign Currency Transactions
The U.S. dollar has been determined to be the functional currency of
the Company and each of its subsidiaries in accordance with SFAS
No. 52, "Foreign Currency Translation." If applicable, all
transactions of the non-U.S. companies have been re-measured in
U.S. dollars using historical exchange rates. Changes in exchange
rates which affect cash flows and the related receivables or
payables are recognized as transaction gains and losses in the
determination of net earnings.
(j) Advertising
Advertising costs are expensed as incurred. During the fiscal years
ended February 28, 1997, February 29, 1996 and February 28, 1995,
$10,544,000, $7,319,000 and $6,532,000, respectively, of
advertising costs was charged to selling, general and
administrative expenses.
(k) Warranties
The Company's products are under warranty against defects in material
and workmanship for a period of up to two years. The Company has
established an accrual for these anticipated future warranty
costs.
(l) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
(m) Stock-based Employee Compensation
The Company accounts for stock-based compensation plans utilizing the
provisions of Accounting Principles Board Opinion No. 25 (APB 25),
"Accounting for Stock Issued to Employees." In October 1995, the
FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation." Under SFAS No. 123, companies are allowed to
continue to apply the provisions of APB 25 to their stock-based
employee compensation arrangements. The Company elected to not
adopt the recognition methodology contemplated by SFAS No. 123.
As such, the Company is only required to supplement its financial
statements with additional disclosures (note 6).
23 (Continued)
26
HELEN OF TROY LIMITED
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(n) Accounting for Asset Impairment
During March 1995, FASB issued SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long Lived Assets to be
Disposed of." SFAS No. 121 requires that long-lived assets and
certain identifiable intangibles to be held and used by an entity
be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may
not be recoverable. The adoption of SFAS No. 121 had no material
impact on the Company's financial position or the results of its
operations at the time of adoption.
(o) Financial Instruments
SFAS No. 107, "Disclosure about Fair Value of Financial Instruments",
requires the Company to disclose estimated fair values for its
financial instruments. The carrying amounts of cash and cash
equivalents, receivables, accounts payable, accrued expenses and
income taxes payable approximate fair value because of the short
maturity of these items. Based on prevailing interest rates for
similar instruments, the fair value of the note receivable, notes
payable to banks and a portion of long-term debt approximate their
carrying value. See footnote 4 for management's assessment of the
fair value of the Company's guaranteed Senior Notes.
2) PROPERTY AND EQUIPMENT
A summary of property and equipment is as follows:
Estimated
Useful Lives
(Years) 1997 1996
------------ ------- ------
(dollars in thousands)
Land $ 9,994 9,410
Buildings and improvements 20 - 40 13,046 4,616
Computer and office equipment 3 - 5 4,128 3,077
Furniture and fixtures 5 579 500
Transportation equipment 3 - 5 922 856
Construction in progress 1,094 520
-------- ------
29,763 18,979
Less accumulated depreciation (3,983) (3,229)
-------- ------
Property and equipment, net $ 25,780 15,750
======== ======
During the year ended February 28, 1997 the Company's U.S. subsidiary
capitalized $613,000 of interest expense in connection with the construction of
a distribution center.
24 (Continued)
27
HELEN OF TROY LIMITED
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(3) NOTES PAYABLE
During the fiscal year ended February 28, 1997 and February 29, 1996, the
Company's U.S. subsidiary had borrowings outstanding from a bank
pursuant to a note issued to purchase land. The note bears interest
at the bank's prime rate (8.25% at February 28, 1997), with the
outstanding balance due October 1, 1997.
Additionally, the Company's U.S. subsidiary maintains a line of credit with
a bank for the issuance of letters of credit. The facility is limited
to $5 million (United States currency) and bears interest at the
bank's prime rate or at alternate rates based on Eurodollar investment
rates for specific time periods. The credit facility expires on July
31, 1997. The Company's U.S. subsidiary had $4,000,000 outstanding at
February 28, 1997 under this credit facility and $1,000,000 was used
to finance letters of credit which were paid by the Company's U.S.
subsidiary subsequent to February 28, 1997.
To allow the issuance of letters of credit, one of the Company's non-U.S.
subsidiaries maintains a line of credit with a bank. The facility is
limited to $4 million (United States currency) and bears interest at
the bank's U.S. dollar base rate, with all outstanding balances due
July 31, 1997. At February 28, 1997, no loans were outstanding under
this agreement and $1,756,000 was used to finance letters of credit
which were paid by the Company subsequent to February 28, 1997.
(4) LONG-TERM DEBT
On January 5, 1996 the Company's 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 unconditionally guaranteed by the
Company and are due January 5, 2008. Principal payments begin in
fiscal 2005. Using a discounted cash flow analysis based on estimated
market rates, the estimated fair value of the guaranteed Senior Notes
at February 28, 1997 is approximately $38,600,000.
On December 31, 1996 the Company's U.S. subsidiary executed a $40,000,000
Guaranteed Senior Note Facility ("Facility"). The Facility allows the
Company's U.S. subsidiary to draw up to $40,000,000 over a period of
two years. As borrowing under the facility are made, they become
fixed rate long-term notes. As of February 28, 1997 no notes were
issued with respect to the Facility.
Other long-term debt consists of a note for $450,000. Interest payments
are made monthly based on the prime rate for corporate loans at major
U.S. money center commercial banks (8.4% at February 28, 1997). The
note is payable in full on January 25, 2001.
25 (Continued)
28
HELEN OF TROY LIMITED
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(5) INCOME TAXES
Years Ended
Last Day of February
--------------------------------------------
1997 1996 1995
------------ ------------ ------------
(dollars in thousands)
The components of earnings
before income tax expense are
as follows:
U.S. $ 5,983 4,704 4,601
Non-U.S. 16,156 12,143 9,894
------------ ------------ ------------
$ 22,139 16,847 14,495
============ ============ ============
The components of income tax expense
(benefit) are as follows:
Current:
U.S. $ 4,901 3,938 3,232
Non-U.S. 533 279 88
Deferred (453) (427) (41)
------------ ------------ ------------
$ 4,981 3,790 3,279
============ ============ ============
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:
Years Ended
Last Day of February
--------------------------------------------
1997 1996 1995
------------ ------------ ------------
(dollars in thousands)
Computed "expected" tax expense at the
U.S. statutory rate of 35% $ 7,749 5,896 5,073
Increase (decrease) in income
taxes resulting from:
Income from non-U.S. operations
subject to varying income tax
levies (2,768) (2,106) (1,794)
------------ ------------ ------------
Actual tax expenses $ 4,981 3,790 3,279
============ ============ ============
26 (Continued)
29
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,
1997, February 29, 1996 and February 28, 1995 were:
1997 1996
---------- ----------
(dollars in thousands)
Deferred tax assets:
Inventories, principally due to additional
costs inventoried for tax purposes
pursuant to the U.S. Tax Reform
Act of 1986 $ 507 379
Accrued expenses 601 400
Accounts receivable, property and
equipment, and other 249 512
---------- ----------
Total gross deferred tax assets 1,357 1,291
---------- ----------
Deferred tax liabilities:
Depreciation and amortization (81) (461)
Accrued expenses -- (7)
---------- ----------
Total gross deferred tax liabilities (81) (468)
---------- ----------
Net deferred tax asset $ 1,276 823
========== ==========
The Company's U.S. Federal income tax returns for the fiscal years 1994,
1995 and 1996 are being examined by the Internal Revenue Service (the
IRS). No adjustments have been proposed by the IRS. Although the ultimate
outcome of the examination cannot be predicted with certainty, management
is of the opinion that adequate provision has been made in the financial
statements for the estimated impact of the examination.
The Inland Revenue Department (IRD) in Hong Kong has made assertions
concerning its ability to tax certain profits of two of the Company's
foreign subsidiaries for the years 1990 through 1994. The Company
disagrees with the IRD's assertions and plans to vigorously defend the
position of the two foreign subsidiaries. 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 any potential impact of the IRD's claims.
27 (Continued)
30
HELEN OF TROY LIMITED
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(5) INCOME TAXES, CONTINUED
The Company plans to permanently invest all of the undistributed earnings
of the non U.S. subsidiaries of the U.S. Corporation in non U.S.
locations. In accordance with generally accepted accounting
principles in the U.S., no provision has been made for U.S. federal
income taxes on a portion of these undistributed earnings. At
February 28, 1997, the undistributed earnings for which the Company
has not provided deferred U.S. federal income taxes approximated
$33,332,000.
During fiscal years 1997, 1996 and 1995, certain stock options were
exercised which resulted in a tax deduction for U.S. Federal income
tax purposes but which did not affect tax expense for financial
reporting purposes. The tax effect of these transactions for fiscal
years 1997, 1996 and 1995 has been an increase to paid-in capital of
$362,000, $433,000 and $1,780,000, respectively.
(6) STOCK OPTIONS
Pursuant to a stock option and restricted stock plan adopted in fiscal
1994, the Company has reserved 4,000,000 shares of its common stock
for issuance to officers and key employees. The plan contains
provisions for incentive stock options, non-qualified stock options
and restricted stock options.
Incentive stock options can be granted at an exercise price which is not
less than fair market value of the common stock on the date of grant.
The vesting schedule under the plan adopted in 1994 is determined
individually for each option grant. A total of 156,662 incentive
stock options with a weighted average exercise price of 7.77 was
exercisable at February 28, 1997. At February 28, 1997, there were
incentive stock options issued to purchase 502,059 shares of common
stock at prices ranging from $3.38 to $21.88 per share. 441,559 of
the 502,059 options outstanding at February 28, 1997, have exercise
prices between $3.38 and $10.50, with a weighted average exercise
price of $8.41 and a weighted average remaining contractual life of
6.59 years. 156,662 of these options are exercisable. The remaining
60,500 options have exercise prices between $11.25 and $21.88, with a
weighted-average exercise price of $16.98 and a weighted average
remaining contractual life of 6.86 years. None of these options is
exercisable.
The Company has granted non-qualified stock options to nine persons to
purchase an aggregate of 1,482,236 shares of common stock at prices
ranging from $3.77 to $24.19 per share. The exercise price cannot be
less than the fair market value of the common stock on the date of
grant. The vesting schedules, under the plan adopted in 1994, were
determined separately for each option grant. A total of 812,658
non-qualified stock options with a weighted average exercise price of
$5.81 was exercisable at February 28, 1997. 1,467,236 of the
1,482,236 options outstanding at February 28, 1997 have exercise
prices between $3.77 and $9.59, with a weighted average exercise price
of $7.21 and a weighted-average remaining contractual life of 5.67
years. 812,658 of these options are exercisable. The remaining
15,000 options have exercise prices of $13.50 and $24.19, with a
weighted-average exercise price of $17.06 and a weighted average
remaining contractual life of 8.5 years. None of these options is
exercisable.
28 (Continued)
31
HELEN OF TROY LIMITED
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(6) STOCK OPTIONS, CONTINUED
During the fiscal year end February 29, 1996 the Company's shareholders
approved the Helen of Troy Limited 1995 Stock Option Plan for
Non-Employee Directors (the "Directors Plan"). The Directors Plan
automatically issues 2,000 stock options to eligible directors on
September 1 of each year. The options are exercisable one year after
issuance. The exercise price of each option is the mean between the
high and low prices of the Company's common stock in the market on
September 1. A total of 8,000 options with exercise prices of $10.25
was exercisable at February 28,1997. Under the Directors Plan, 18,000
stock options are outstanding at February 28, 1997 allowing eligible
directors to purchase the Company's stock at prices of $10.25 and
$14.13. These stock options have a weighted average remaining
contractual life of 9.05 years.
The Company accounts for its plans under APB Opinion No. 25, under which no
compensation cost has been recognized. Had compensation cost for
these plans been determined consistent with SFAS No. 123, the
Company's net income and earnings per share would have been reduced to
the following pro forma amounts:
1997 1996
---- ----
Net Income: As reported $17,158,000 13,057,000
Pro Forma 16,204,000 12,157,000
Primary EPS: As Reported $ 1.24 .98
Pro Forma 1.17 .91
The following summarizes activity relating to stock options:
1997 1996 1995
---- ---- ----
Weighted Weighted Weighted
Average Average Average
Shares Exercise Shares Exercise Shares Exercise
(000) Price (000) Price (000) Price
---------- ---------- ---------- ---------- ---------- ----------
Options outstanding, beginning of year 2,107 $ 7.39 1,172 5.13 2,759 5.12
Options granted 85 16.66 1,169 9.05 127 8.46
Options exercised (178) 6.08 (115) 4.53 (617) 5.05
Options forfeited (12) 10.25 (119) 4.28 (1,097) 5.55
---------- ---------- ----------
Options outstanding, end of year 2,002 7.89 2,107 7.39 1,172 5.13
Options exercisable at year-end 977 6.16 714 5.30 862 5.12
Weighted-average fair value of options
granted during the year 4.83 3.55
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following
weighted-average assumptions used for grants in 1997 and 1996: risk
free interest rate of 6.5 % for options granted under the 1994 stock
option and restricted stock plan, and under the Directors Plan; a zero
expected dividend yield; expected lives of 10, 5, 4, and 3 years
depending on the term of the option granted; expected volatility of
20%.
29 (Continued)
32
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 and key
employees. These agreements provide for minimum salary levels,
adjusted in some cases for cost of living changes, 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, an election may be
made by the officer to receive a cash payment for the balance of the
obligations under the agreement. The expiration dates for these
agreements range from December 31, 1997 to February 28, 2002. The
aggregate commitment for future salaries, at February 28, 1997,
excluding incentive compensation, was approximately $4,616,000.
During fiscal years 1990 and 1989, the Company entered into barter
agreements to exchange certain inventory items for advertising
credits. As of February 28, 1997, the Company disposed of unused
advertising credits. The fiscal year 1997 non cash charge of
$3,198,000 is included with the Company's selling, general and
administrative expenses.
There are claims and legal proceedings pending against the Company which
arise in the normal course of the Company's operations. In the
opinion of management, the outcome of these matters will not have a
materially adverse effect on the consolidated financial position,
results of operations or liquidity of the Company and its
subsidiaries.
30 (Continued)
33
HELEN OF TROY LIMITED
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(8) SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected unaudited quarterly financial data is as follows (in thousands,
except per share amounts):
Three Months ended the Last Day of
---------------------------------------------------------------
May August November February Total
---------- ---------- ---------- ---------- -----------
1997:
Net sales $ 43,836 $ 50,491 $ 74,477 $ 44,231 $ 213,035
Gross profit 16,340 18,686 28,334 16,814 80,174
Net earnings 2,402 4,095 7,805 2,856 17,158
Earnings per share .18 .30 .56 .20 1.24
1996:
Net sales 33,544 42,682 55,353 35,474 167,053
Gross profit 12,496 17,225 20,964 14,027 64,712
Net earnings 1,674 3,357 5,974 2,052 13,057
Earnings per share .13 .25 .45 .16 .98
The business of the Company is seasonal, with approximately sixty percent
of annual sales volume normally occurring in the second and third fiscal
quarters.
(9) SEGMENT AND GEOGRAPHIC INFORMATION
The Company operates in one industry segment - health, beauty and personal
care appliances and accessories. Products are procured through the
Company's non-U.S. contract manufacturing subsidiary located in
Barbados, West Indies. Unaffiliated factories are used on an
order-by-order basis. Approximately 91% of total assets are located
in the United States of America at February 28, 1997 and February 29,
1996. The percentages of third party sales made in the United States
for fiscal years ended in 1997, 1996 and 1995 were 96%, 98% and 98%,
respectively.
Approximately 27% of the Company's net sales in the year ended February 28,
1997 were made to one customer and its affiliate. Approximately 29%,
10% and 10% of the Company's net sales in the year ended February 29,
1996 were made to three customers, and 22% and 11% of the Company's
net sales in the year ended February 28,1995 were made to two
customers.
31 (Continued)
34
HELEN OF TROY LIMITED
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(10) ASSET ACQUISITION
On October 4, 1996 the Company acquired the assets of two personal
care lines of Dazey Corporation, of Kansas City, Missouri.
Included in the purchase are certain inventories, designs,
equipment, tooling, license rights and trademarks for existing
products bearing the Dazey, Lady Dazey, Lady Carel and Dr.
Scholl's trade names. The purchase method of accounting was used
to record the acquisition. Costs in excess of the fair value of
assets acquired, which consist of the majority of the purchase
price, are included in other assets and are being amortized over
fifteen years.
32
35
Schedule II
HELEN OF TROY LIMITED
AND SUBSIDIARIES
Valuation and Qualifying Accounts
Years Ended February 28, 1997, February 29, 1996 and February 28, 1995
(in thousands)
Balance at Charged to Write-off of Balance at
beginning costs and uncollectible end of
Description of year expenses Recoveries accounts year
----------- ---------- ---------- ---------- ------------ ----------
Year ended February 28, 1997:
Allowance for doubtful
accounts $ 390 $ 349 $ 2 $ 341 $ 400
Year ended February 29, 1996:
Allowance for doubtful
accounts 363 289 1 263 390
Year ended February 28, 1995:
Allowance for doubtful
accounts 278 335 33 283 363
33
36
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been none.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The table below sets forth certain information regarding the
directors and executive officers of the Company as of April 30, 1997.
Director
Name Age Position With the Company Since
- -------------------------------- --- ------------------------- ----------
Gerald J. Rubin 53 Chairman, Chief Executive Officer 1993
President and Director
Aaron M. Shenkman 56 Deputy Chairman and Director 1993
Daniel C. Montano 48 Director 1993
Byron H. Rubin 47 Director 1993
Stanlee N. Rubin 52 Director 1993
Gary B. Abromovitz 54 Director 1993
Christopher L. Carameros 43 Director 1993
Sam L. Henry 47 Senior Vice President, Finance,
Chief Financial Officer, and Secretary
Directors and executive officers each serve for a one year term or
until their successors are elected and qualified to serve. Gerald J. Rubin and
Byron H. Rubin are brothers.
Set forth below are descriptions of the principal occupations during
at least the past five years of the directors and executive officers of the
Company.
Gerald J. Rubin, founder of Helen of Troy Corporation, has been the
Chairman and Chief Executive Officer of the Company since December 1993 and of
Helen of Troy Corporation since 1984. Mr. Rubin has been a Director of the
Company since December 1993 and of Helen of Troy Corporation since 1969.
Aaron M. Shenkman, has been the Deputy Chairman, President and Chief
Operating Officer of the Company since December 1993 and President and Chief
Operating Officer of Helen of Troy Corporation since 1984. Mr. Shenkman has
been a Director of the Company since December 1993 and of Helen of Troy
Corporation since 1975. Effective March 1, 1997 Mr. Shenkman retired as
President and Chief Operating Officer. Mr. Shenkman is a Director of Craftmade
International, Inc. a public corporation.
34
37
Daniel C. Montano, has been a Director of the Company since
December 1993 and of Helen of Troy Corporation since 1980. He has been the
managing Director of CK Capital since January 1997. From January of 1995 to
December 1996, he was Director of Investment Banking at Brook Street
Securities. Mr. Montano was President and a Director of Montano Securities
Corporation from 1979 to January 1995. He is subject to a cease-and-desist
order pursuant to Section 8A of the Securities Act ordering him to permanently
cease and desist from committing or causing any violation, and from committing
or causing any future violation, of Sections 5(b) (1) and 17(a) (2) and (3) of
the Securities Act.
Byron H. Rubin, has been a director of the Company since December
1993 and of Helen of Troy Corporation since 1981. He has been a partner in the
firm Daniels & Rubin, (formerly known as Integrated Financial of Texas), an
insurance and tax planning firm in Dallas, Texas since 1979.
Stanlee N. Rubin, is the wife of Gerald J. Rubin, Chairman of the
Board of Directors. She has been a Director of the Company since December 1993
and of Helen of Troy Corporation since 1990. Mrs. Rubin is active in civic and
charitable organizations. She is a member of the University of Texas at El
Paso Board of Development. She is presently on the Board of Directors of the
Alumni Association of the University of Texas at El Paso, The National
Conference of Christians and Jews and the El Paso Symphony Guild.
Gary B. Abromovitz, has been a Director of the Company since
December 1993 and of Helen of Troy Corporation since 1990. He has been a
partner in the law offices of Bonn/Abromovitz Law Firm in Phoenix, Arizona
since 1990. From 1985 to 1989, he was Of Counsel to the law firm Bonn &
Anderson in Phoenix, Arizona.
Christopher L. Carameros, has been a Director of the company since
December 1993 and of Helen of Troy Corporation since June 1993. He currently
is an officer, director and minority shareholder of Cactus Apparel Inc., an
apparel manufacturing company. He also serves as a Director of Farah
Incorporated.
Sam L. Henry, has been the Senior Vice-President, Finance, Chief
Financial Officer and Secretary of the Company since December 1993 and of Helen
of Troy Corporation since 1986.
Except as indicated above, none of the directors of the Company is
a director of any other publicly held company.
35
38
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth the summary of compensation paid to
the Company's Chief Executive Officer and its other Executive Officers during
fiscal years 1995 through 1997.
SUMMARY COMPENSATION TABLE
LONG TERM ALL OTHER
ANNUAL COMPENSATION COMPENSATION COMPENSATION($)
------------------------------------------------ ------------ -----------------
OTHER
NAME AND ANNUAL
PRINCIPAL COMPENSATION OPTIONS/
POSITION YEAR SALARY ($) BONUS ($) $ SARS (#)
- ---------------- ---- ---------- --------- --------------- --------
Gerald J. Rubin 1997 $623,158 $551,705 -0- -0- $15,821 (1)(2)(4)
Chairman and Chief 1996 600,000 262,000 -0- 600,000 15,363 (1)(2)(4)
Executive Officer 1995 571,403 -0- 2,389,238 (3) -0- 5,748 (2)
Aaron M. Shenkman 1997 588,883 354,398 -0- -0- 14,097 (1)(2)
President and Chief 1996 540,071 150,000 1,105,640 (3) 300,000 4,481 (1)(2)
Operating Officer 1995 514,353 -0- 2,607,109 (3) -0- 3,234 (2)
Sam L. Henry 1997 205,367 40,343 603,671(3) -0- 4,517 (1)(2)
Senior Vice-President 1996 188,343 24,485 -0- 40,000 3,761 (1)(2)
Finance 1995 179,375 17,900 65,813 (3) 10,000 2,558 (1)(2)
(1) These amounts represent the Company's contributions to Helen of Troy
Corporation's 401(k) Profit Sharing Plan.
(2) Amounts representing premiums for life insurance or the economic benefit of
split dollar policies paid by the Company for life insurance arrangements
on behalf of the Executive Officer.
(3) The amounts represent the income attributable to the individuals for the
exercise of stock options. The Company did not make cash payments, but
instead issued shares of stock to the respective executive officers.
(4) Amounts represent the annual lease value of a vehicle provided by the
Company.
36
39
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
VALUE OF
NUMBER OF UNEXERCISED
SHARES UNEXERCISED IN THE-MONEY
ACQUIRED OPTIONS/SARS AT OPTIONS/SARS AT
ON VALUE FISCAL YEAR END (#) FISCAL YEAR END ($) (1)
EXERCISE REALIZED ---------------------------- ----------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------ -------- -------- ----------- ------------- ----------- -------------
G. Rubin - - 650,000 400,000 $12,590,640 $6,300,000
A. Shenkman - - 100,000 200,000 1,575,000 3,150,000
S. Henry 41,250 603,671 36,500 52,500 635,653 847,860
(1) Based on the closing price of the NASDAQ National Market System - Composite
Transactions of the Company's Common Stock on that date ($24.75).
CONTRACTS
The Company has entered into contracts with each of its directors and
officers to indemnify them against certain fees and expenses incurred in legal
proceedings to which the officer or director is made a party by reason of
serving as an officer or director of the Company, so long as the party to be
indemnified acted in good faith or in a manner reasonably believed to be in or
not opposed to the best interests of the Company.
The Company has employment contracts with Messrs. Gerald J. Rubin and Aaron
M. Shenkman. The contract for Mr. Rubin was effective March 1, 1995, provided
for a base salary of $600,000 and a bonus equal to 5% of adjusted earnings from
continuing operations less Mr. Rubin's base salary. Mr. Shenkman's contract is
effective March 1, 1997, provides for a base salary of $150,000 and a bonus
equal to 1.5% of adjusted earnings from continuing operations less Mr.
Shenkman's base salary.
In the event of the death of Messrs. Rubin or Shenkman, all unpaid benefits
under these agreements are payable to their estates.
Gerald J. Rubin's contract renews itself monthly for a new five year term.
Gerald J. Rubin's and Aaron M. Shenkman's contracts grant them the right to
elect a cash payment of the remainder of their contracts in the event of a
merger, consolidation or transfer of all or substantially all of the Company's
assets to any unaffiliated company or other person.
The Company has purchased, pursuant to the terms of their employment
contracts, life insurance in the amount of $5.0 million on the life of Gerald
J. Rubin and in the amount of $2.5 million on the life of Aaron M. Shenkman,
payable in the event of death to their respective designees. The Company has
also purchased three "second to die" life insurance contracts in the cumulative
amount of $29.0 million on the lives of Gerald J. Rubin and Stanlee N. Rubin,
payable to their respective designee. All of the above policies referred to in
this paragraph are Split Dollar policies, which provide for the return of
premiums advanced by the Company to be reimbursed to the Company upon death of
the insured(s).
37
40
DIRECTOR COMPENSATION
Each director who is not an employee or officer of the Company received a
fee of $3,000 for each meeting of the Board of Directors attended, together
with travel and lodging expenses incurred in connection therewith. Additional
payments of $1,500 were made quarterly to each such director. As approved by
the Company's shareholders in 1996, each non-employee director receives 2,000
stock options on September 1st of each year. The stock options have an
exercise price equal to the medium between the high and low market prices on
the day the stock options are issued. The stock options vest after one year.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None
38
41
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of April 30, 1997, the beneficial
ownership of common stock of the directors, all officers and directors of the
Company as a group, and each person known to the Company to be the beneficial
owner of more than 5% of its outstanding common stock:
NAME NUMBER OF SHARES PERCENT
Gerald J. Rubin (1)(2)(3)(4) 2,294,058 15.9%
6827 Market Avenue
El Paso, Texas 79915
Byron H. Rubin -- --
Aaron M. Shenkman (3) 311,920 2.2%
Daniel C. Montano -- --
Gary B. Abromovitz 4,250 --
Stanlee N. Rubin (4) -- --
Christopher L. Carameros -- --
All directors and officers as a group
(15 persons) (3) 2,910,309 20.2%
Fidelity Management and Research
Company (5) 1,361,100 9.5%
82 Devonshire Street
Boston, Massachusetts 02109
Neumeier Investment Counsel (6) 1,242,700 8.6%
26435 Carmel Rancho Blvd
Carmel, California 93923
Brinson Partners (7) 937,700 6.5%
209 South LaSalle
Chicago, Illinois 60604
Neuberger & Berman (8) 872,600 6.1%
605 Third Avenue
New York, NY 10158
A I M Management Group Inc. (9) 750,000 5.2%
11 Greenway Plaza, Suite 1919
Houston, Texas 77046
David L. Babson & Company, Inc. (10) 733,800 5.1%
One Memorial Drive
Cambridge, Massachusetts 02142
39
42
(1) Does not include 72,000 shares in a trust for the children of Gerald J.
Rubin and Stanlee N. Rubin in which they disclaim any beneficial
ownership.
(2) Includes 138,490 shares in the case of Mr. Gerald J. Rubin held
beneficially through a partnership in which Gerald J. Rubin is a partner.
(3) Includes 850,000 shares in the case of Gerald J. Rubin, 177,780 shares in
the case of Aaron M. Shenkman, and 1,254,111 shares in the case of all
directors and officers which are issuable pursuant to options which are
exercisable within sixty days of April 30, 1997.
(4) Includes 1,305,568 shares and all stock options granted which are subject
to a one-half undivided community property interest with Stanlee N. Rubin.
(5) As extracted from Form 13G filed as of February 14, 1997, by Fidelity
Management and Research Company, this represents sole investment power for
1,361,100 shares and sole voting power for no shares.
(6) As extracted from Form 13G filed January 30, 1997 by Neumeier Investment
Counsel, this represents sole investment power for 1,242,700 shares and
sole voting power for 571,700 shares.
(7) As extracted from Form 13G filed as of February 12, 1997, by Brinson
Partners, Inc., this represents shared investment power for 937,700 shares
and sole voting power for no shares.
(8) As extracted from Form 13G filed as of February 10, 1997, by Neuberger &
Berman L.P., this represents shared investment power for 872,600 shares
and sole voting power for 142,300 shares.
(9) As extracted from Form 13G filed as of February 12, 1997, by A I M
Management Group Inc., this represents shared investment power for 750,000
shares and sole voting power for no shares.
(10) As extracted from Form 13G filed as of February 7, 1997 by David L. Babson
& Company, Inc., this represents sole investment power for 733,800 shares
and sole voting power for 591,700.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
40
43
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES, AND REPORTS ON FORM 8-K
(a) 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. Schedules: Schedule II - Valuation and Qualifying
Accounts
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter ended
February 28, 1997.
(c) Exhibits (numbered in accordance with Item 601 of Regulation
S-K).
3(a) - See Exhibit Index
41
44
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 27, 1997
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.
Signature Title Date
- --------------------------------------------- --------------------------------------- -------------
Chairman, Chief Executive Officer
and Director
s/Gerald J. Rubin (Principal Executive Officer) May 27, 1997
- ---------------------------------------------
(Gerald J. Rubin)
s/Aaron M. Shenkman Deputy Chairman and Director May 27, 1997
- ---------------------------------------------
(Aaron M. Shenkman)
Senior Vice President, Finance
Secretary and Chief Financial Officer
(Principal Financial and Accounting
s/Sam L. Henry Officer) May 27, 1997
- ---------------------------------------------
(Sam L. Henry)
s/Stanlee N. Rubin Director May 27, 1997
- ---------------------------------------------
(Stanlee N. Rubin)
s/Christopher L. Carameros Director May 27,1997
- ---------------------------------------------
(Christopher L. Carameros)
42
45
s/Byron H. Rubin Director May 27, 1997
- ---------------------------------------------
(Byron H. Rubin)
s/Daniel C. Montano Director May 27, 1997
- ---------------------------------------------
(Daniel C. Montano)
s/Gary B. Abromovits Director May 27, 1997
- ---------------------------------------------
(Gary B. Abromovitz)
43
46
HELEN OF TROY LIMITED
EXHIBITS TO FORM 10-K
For the Fiscal Year Ended February 28, 1997
COMMISSION FILE NUMBER 0-23312
44
47
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
3.1 - Memorandum of Association. 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, is hereby
incorporated herein by reference.
3.2 - Bye-Laws. 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, is hereby incorporated herein by
reference.
10.1 - Vidal Sassoon, Inc. Amended License Agreement of December 22, 1982. 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, is hereby incorporated herein by reference. The request for
confidential treatment of certain portions of this agreement has been granted by the Commission.
10.2 - Letter Agreements Amending Sassoon License Agreement. 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, is hereby incorporated herein by reference.
10.3 - Form of Directors' and Executive Officers' Indemnity Agreement dated February 11, 1994 executed by each
of Gerald J. Rubin, Aaron M. Shenkman, Sam L. Henry, Robert D. Spear, Stanlee N. Rubin, Gary B.
Abromovitz, Byron H. Rubin, Daniel C. Montano, and Christopher L. Carameros. Exhibit 10.2 to the
Registrant's Registration Statement on Form 8-K, filed with the Securities and Exchange Commission on
February 25, 1994, is hereby incorporated herein by reference.
10.4 - 1994 Stock Option and Restricted Stock Plan, as previously filed with the Registrant's 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 - 401(k) Profit Sharing Plan, dated April 12, 1988, as previously filed with Form 10-K of Helen of Troy
Corporation for the period ending February 29, 1988, is hereby incorporated herein by reference.
10.6 - Flexible Spending Arrangement Plan, dated May 1, 1988, as previously filed with Form 10-K of Helen of
Troy Corporation for the period ending February 29, 1988, is hereby incorporated herein by reference.
10.7 - Vidal Sassoon, Inc., European License Agreement, dated January 1, 1990, filed with the Securities and
Exchange Commission on February 28, 1990, as previously filed with Form 10-K of Helen of Troy
Corporation for the period ending February 28, 1990, is hereby incorporated herein by reference. The
request for confidential treatment of certain portions of this agreement has been granted by the
Commission.
48
EXHIBIT
NUMBER DESCRIPTION
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10.8 - Form of Employment Agreements, dated March 1, 1995, executed by each of Gerald J. Rubin and Aaron M.
Shenkman, as previously filed with Form 10-K of Helen of Troy Limited for the period ending February
29, 1996, is hereby incorporated herein by reference.
10.9 - 401(k) Profit Sharing Plan Adoption Agreement, dated December 24, 1991, with a retroactive effective
date of January 1, 1988, as previously filed with Form 10-K of Helen of Troy Corporation for the period
ending February 29, 1992, is hereby incorporated herein by reference.
10.10 - 401(k) Profit Sharing Plan Adoption Agreement, dated December 24, 1991, with an effective date of
January 1, 1992, as previously filed with Form 10-K of Helen of Troy Corporation for the period ending
February 29, 1992, is hereby incorporated herein by reference.
10.11 - Flexible Benefits Plan, Section 125, dated June 1, 1991, as previously filed with Form 10-K of Helen of
Troy Corporation for the period ending February 29, 1992, is hereby incorporated herein by reference.
10.12 - Deleted.
10.13 - First Amendment to Revlon Consumer Products Corporation ("RCPC") North America Appliance License
Agreement, dated September 30, 1992, as previously filed with Form 10-K of Helen of Troy Corporation
for the period ending February 28, 1993, is hereby incorporated herein by reference.
10.14 - First Amendment to RCPC North America Comb and Brush License Agreement, dated September 30, 1992, as
previously filed with Form 10-K of Helen of Troy Corporation for the period ending February 28, 1993,
is hereby incorporated herein by reference.
10.15 - First Amendment to RCPC International Appliance License Agreement, dated September 30, 1992, as
previously filed with Form 10-K of Helen of Troy Corporation for the period ending February 28, 1993,
is hereby incorporated herein by reference.
10.16 - First Amendment to RCPC International Comb and Brush License Agreement, dated September 30, 1992, as
previously filed with Form 10-K of Helen of Troy Corporation for the period ending February 28, 1993,
is hereby incorporated herein by reference.
10.17 - Form of Non-Statutory Stock Option Agreement, dated February 28, 1994, executed by each of Gerald J.
Rubin, Aaron M. Shenkman and Don Hall, as previously filed with Form 10-K of Helen of Troy Limited for
the period ending February 28, 1994, is hereby incorporated herein by reference.
49
EXHIBIT
NUMBER DESCRIPTION
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10.18 - Form of Incentive Stock Option Agreement, dated February 28, 1994, executed by each of Gerald J. Rubin,
Aaron M. Shenkman, Arthur A. August, Randolph Maxwell, Wayne Dickson, Sam L. Henry, William D.
McCorvey, Martha Murphy and Robert D. Spear, as previously filed with Form 10-K of Helen of Troy
Limited for the period ending February 28, 1994, is hereby incorporated herein by reference.
10.19 - Form of Employment Agreement, dated March 1, 1995, as executed by each of Sam L. Henry, Martha Murphy
and Wayne Dickson, as previously filed with Form 10-K of Helen of Troy Limited for the period ending
February 29, 1996, is hereby incorporated herein by reference.
10.20 - Form of Employment Agreement, dated January 3, 1994, executed by William D. McCorvey, as previously
filed with Form 10-K of Helen of Troy Limited for the period ending February 28, 1994, is hereby
incorporated herein by reference.
10.21 - Supply Agreement between Helen of Troy Corporation and Helen of Troy Limited, a Barbados corporation,
dated February 28, 1994, as previously filed with Form 10-K of Helen of Troy Limited for the period
ending February 28, 1994, is hereby incorporated herein by reference.
10.22 - License Agreement between Helen of Troy Corporation and Helen of Troy Limited, a Barbados corporation,
dated February 28, 1994, as previously filed with Form 10-K of Helen of Troy Limited for the period
ending February 28, 1994, is hereby incorporated herein by reference.
10.23 - 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, as previously filed with Form 10-Q of
Helen of Troy Limited for the period ending November 30, 1996, is hereby incorporated herein by
reference.
11 - Earnings per Share Computation, filed herewith.
21 - Subsidiaries of the Registrant, filed herewith.
23 - Independent Auditors' Consent, filed herewith.
27 - Financial Data Schedule, filed herewith.