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EX-32 - EX-32 - HELEN OF TROY LTDhele-20151130xex32.htm
EX-10.1 - EX-10.1 - HELEN OF TROY LTDhele-20151130ex101ef5333.htm
EX-31.1 - EX-31.1 - HELEN OF TROY LTDhele-20151130ex31153561b.htm
EX-31.2 - EX-31.2 - HELEN OF TROY LTDhele-20151130ex312fcd52d.htm

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

 

FORM 10-Q

 

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

 

For the quarterly period ended November 30, 2015

 

or

 

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

 

For the transition period from ..... to …..

 

Commission file number: 001-14669

 

Picture 1

HELEN OF TROY LIMITED

 

(Exact name of registrant as specified in its charter)

 

 

 

 

Bermuda

 

74-2692550

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification No.)

 

 

 

Clarendon House

2 Church Street

Hamilton, Bermuda

 

 

(Address of principal executive offices)

 

 

 

 

 

1 Helen of Troy Plaza

 

 

El Paso, Texas

 

79912

(Registrant’s United States Mailing Address)

 

(Zip Code)

 

(915) 225-8000

(Registrant’s telephone number, including area code)

 

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       No 

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes       No 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

 

 

 

Large accelerated filer

 

Accelerated filer       

 

 

 

Non-accelerated filer    

 

Smaller Reporting Company      

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes       No

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

 

 

 

Class

 

Outstanding at January 6, 2016

Common Shares, $0.10 par value, per share

 

28,286,315 shares

 

 

 

 

 

 

 


 

1

 


 

PART I.   FINANCIAL INFORMATION

 

ITEM 1.   FINANCIAL STATEMENTS

 

HELEN OF TROY LIMITED AND SUBSIDIARIES

Consolidated Condensed Balance Sheets (Unaudited)

(in thousands, except shares and par value)

 

 

 

 

 

 

 

 

 

November 30, 

 

February 28, 

 

    

2015

    

2015

Assets

 

 

 

 

 

 

Assets, current:

 

 

 

 

 

 

Cash and cash equivalents

 

$

21,141

 

$

12,295

Receivables - principally trade, less allowances of $8,058 and $5,882

 

 

288,979

 

 

222,499

Inventory, net

 

 

339,397

 

 

293,081

Prepaid expenses and other current assets

 

 

10,075

 

 

9,715

Income taxes receivable

 

 

110

 

 

417

Deferred tax assets, net

 

 

20,688

 

 

26,753

Total assets, current

 

 

680,390

 

 

564,760

 

 

 

 

 

 

 

Property and equipment, net of accumulated depreciation of $91,100 and $82,154

 

 

126,919

 

 

126,068

Goodwill

 

 

582,812

 

 

549,727

Other intangible assets, net of accumulated amortization of $130,991 and $111,627

 

 

384,766

 

 

398,430

Deferred tax assets, net

 

 

1,097

 

 

2,132

Other assets, net of accumulated amortization of $10,132 and $9,166

 

 

6,488

 

 

12,638

Total assets

 

$

1,782,472

 

$

1,653,755

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

Liabilities, current:

 

 

 

 

 

 

Accounts payable, principally trade

 

$

122,584

 

$

98,564

Accrued expenses and other current liabilities

 

 

147,602

 

 

141,201

Deferred tax liabilities, net

 

 

 -

 

 

200

Long-term debt, current maturities

 

 

23,800

 

 

21,900

Total liabilities, current

 

 

293,986

 

 

261,865

 

 

 

 

 

 

 

Long-term debt, excluding current maturities

 

 

450,907

 

 

411,307

Deferred tax liabilities, net

 

 

43,312

 

 

52,711

Other liabilities, noncurrent

 

 

26,333

 

 

23,307

Total liabilities

 

 

814,538

 

 

749,190

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

Cumulative preferred stock, non-voting, $1.00 par. Authorized 2,000,000 shares; none issued

 

 

 -

 

 

 -

Common stock, $0.10 par. Authorized 50,000,000 shares; 28,284,725 and 28,488,411 shares

 

 

 

 

 

 

issued and outstanding

 

 

2,828

 

 

2,849

Additional paid in capital

 

 

197,272

 

 

179,934

Accumulated other comprehensive income (loss)

 

 

1,729

 

 

(76)

Retained earnings

 

 

766,105

 

 

721,858

Total stockholders' equity

 

 

967,934

 

 

904,565

Total liabilities and stockholders' equity

 

$

1,782,472

 

$

1,653,755

 

See accompanying notes to consolidated condensed financial statements.

 

 

 

2

 


 

HELEN OF TROY LIMITED AND SUBSIDIARIES

Consolidated Condensed Statements of Income (Unaudited)

(in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended November 30, 

 

Nine Months Ended November 30, 

 

    

2015

    

2014

    

2015

    

2014

Sales revenue, net

 

$

445,503

 

$

435,674

 

$

1,159,977

 

$

1,067,401

Cost of goods sold

 

 

262,979

 

 

254,263

 

 

686,129

 

 

632,726

Gross profit

 

 

182,524

 

 

181,411

 

 

473,848

 

 

434,675

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expense ("SG&A")

 

 

126,891

 

 

116,368

 

 

356,240

 

 

312,906

Asset impairment charges

 

 

 -

 

 

 -

 

 

3,000

 

 

9,000

Operating income

 

 

55,633

 

 

65,043

 

 

114,608

 

 

112,769

 

 

 

 

 

 

 

 

 

 

 

 

 

Nonoperating income, net

 

 

142

 

 

87

 

 

233

 

 

234

Interest expense

 

 

(2,741)

 

 

(4,173)

 

 

(8,135)

 

 

(11,588)

Income before income taxes

 

 

53,034

 

 

60,957

 

 

106,706

 

 

101,415

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense (benefit):

 

 

 

 

 

 

 

 

 

 

 

 

Current

 

 

3,842

 

 

9,328

 

 

17,564

 

 

14,255

Deferred

 

 

2,414

 

 

(3,748)

 

 

(2,498)

 

 

(3,454)

Net income

 

$

46,778

 

$

55,377

 

$

91,640

 

$

90,614

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.66

 

$

1.95

 

$

3.23

 

$

3.17

Diluted

 

$

1.63

 

$

1.92

 

$

3.17

 

$

3.12

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares of common stock used in

 

 

 

 

 

 

 

 

 

 

 

 

computing net earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

28,129

 

 

28,414

 

 

28,361

 

 

28,630

Diluted

 

 

28,634

 

 

28,824

 

 

28,903

 

 

29,070

 

See accompanying notes to consolidated condensed financial statements.

 

3

 


 

HELEN OF TROY LIMITED AND SUBSIDIARIES

Consolidated Condensed Statements of Comprehensive Income (Unaudited)

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended November 30, 

 

 

2015

 

2014

 

 

Before

 

 

 

 

Net of

 

Before

 

 

 

 

Net of

 

 

Tax

 

Tax

 

Tax

 

Tax

 

Tax

 

Tax

Income

 

$

53,034

 

$

(6,256)

 

$

46,778

 

$

60,957

 

$

(5,580)

 

$

55,377

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flow hedge activity - interest rate swaps

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Changes in fair market value

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

Settlements reclassified to income

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

Subtotal

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flow hedge activity - foreign currency contracts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Changes in fair market value

 

 

1,841

 

 

(270)

 

 

1,571

 

 

301

 

 

(59)

 

 

242

Settlements reclassified to income

 

 

(263)

 

 

100

 

 

(163)

 

 

(201)

 

 

31

 

 

(170)

Subtotal

 

 

1,578

 

 

(170)

 

 

1,408

 

 

100

 

 

(28)

 

 

72

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total other comprehensive income

 

 

1,578

 

 

(170)

 

 

1,408

 

 

100

 

 

(28)

 

 

72

Comprehensive income

 

$

54,612

 

$

(6,426)

 

$

48,186

 

$

61,057

 

$

(5,608)

 

$

55,449

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended November 30, 

 

 

2015

 

2014

 

 

Before

 

 

 

 

Net of

 

Before

 

 

 

 

Net of

 

 

Tax

 

Tax

 

Tax

 

Tax

 

Tax

 

Tax

Income

 

$

106,706

 

$

(15,066)

 

$

91,640

 

$

101,415

 

$

(10,801)

 

$

90,614

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flow hedge activity - interest rate swaps

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Changes in fair market value

 

 

 -

 

 

 -

 

 

 -

 

 

28

 

 

(10)

 

 

18

Settlements reclassified to income

 

 

 -

 

 

 -

 

 

 -

 

 

1,199

 

 

(420)

 

 

779

Subtotal

 

 

 -

 

 

 -

 

 

 -

 

 

1,227

 

 

(430)

 

 

797

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flow hedge activity - foreign currency contracts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Changes in fair market value

 

 

2,653

 

 

(480)

 

 

2,173

 

 

515

 

 

(97)

 

 

418

Settlements reclassified to income

 

 

(503)

 

 

135

 

 

(368)

 

 

15

 

 

(11)

 

 

4

Subtotal

 

 

2,150

 

 

(345)

 

 

1,805

 

 

530

 

 

(108)

 

 

422

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total other comprehensive income

 

 

2,150

 

 

(345)

 

 

1,805

 

 

1,757

 

 

(538)

 

 

1,219

Comprehensive income

 

$

108,856

 

$

(15,411)

 

$

93,445

 

$

103,172

 

$

(11,339)

 

$

91,833

 

See accompanying notes to consolidated condensed financial statements.

 

4

 


 

HELEN OF TROY LIMITED AND SUBSIDIARIES

Consolidated Condensed Statements of Cash Flows (Unaudited)

(in thousands)

 

 

 

 

 

 

 

 

 

 

Nine Months Ended November 30, 

 

  

2015

  

2014

Cash provided (used) by operating activities:

 

 

 

 

 

 

Net income

  

$

91,640

  

$

90,614

Adjustments to reconcile net income to net cash provided by operating activities:

  

 

 

  

 

 

Depreciation and amortization

  

 

31,946

  

 

29,075

Amortization of financing costs

  

 

869

  

 

1,457

Provision for doubtful receivables

  

 

501

  

 

417

Non-cash share-based compensation

  

 

6,146

  

 

4,539

Intangible asset impairment charges

  

 

3,000

  

 

9,000

Loss on the sale of property and equipment

  

 

66

  

 

43

Deferred income taxes and tax credits

  

 

(3,833)

  

 

(3,454)

Changes in operating capital, net of effects of acquisition of businesses:

  

 

 

  

 

 

Receivables

  

 

(66,981)

  

 

(76,555)

Inventories

  

 

(46,316)

  

 

(23,468)

Prepaid expenses and other current assets

  

 

(361)

  

 

2,946

Other assets and liabilities, net

  

 

8,251

  

 

4,638

Accounts payable

  

 

24,020

  

 

19,377

Accrued expenses and other current liabilities

  

 

22,892

  

 

(113)

Accrued income taxes

  

 

919

  

 

4,956

Net cash provided by operating activities

  

 

72,759

  

 

63,472

 

  

 

 

  

 

 

Cash provided (used) by investing activities:

  

 

 

  

 

 

Capital and intangible asset expenditures

  

 

(12,418)

  

 

(4,893)

Proceeds from the sale of property and equipment

  

 

7

 

 

 -

Payments to acquire businesses

  

 

(42,750)

  

 

(195,943)

Net cash used by investing activities

  

 

(55,161)

  

 

(200,836)

 

  

 

 

  

 

 

Cash provided (used) by financing activities:

  

 

 

  

 

 

Proceeds from line of credit

  

 

415,200

  

 

694,400

Repayment of line of credit

  

 

(371,800)

  

 

(254,400)

Repayment of long-term debt

  

 

(1,900)

  

 

(76,900)

Payment of financing costs

  

 

(19)

  

 

(2,321)

Proceeds from share issuances under share-based compensation plans, including tax benefits

  

 

10,778

  

 

5,268

Payment of tax obligations resulting from cashless share award exercises

  

 

 -

  

 

(4,569)

Payment of tax obligations resulting from cashless share settlement of severance obligation

 

 

(12,000)

 

 

 -

Payments for repurchases of common stock

  

 

(50,000)

  

 

(273,599)

Share-based compensation tax benefit

  

 

989

  

 

514

Net cash (used) provided by financing activities

  

 

(8,752)

  

 

88,393

 

  

 

 

  

 

 

Net increase (decrease) in cash and cash equivalents

  

 

8,846

  

 

(48,971)

Cash and cash equivalents, beginning balance

  

 

12,295

  

 

70,027

Cash and cash equivalents, ending balance

  

$

21,141

  

$

21,056

 

See accompanying notes to consolidated condensed financial statements.

 

 

 

 

 

 

 

 

5

 


 

HELEN OF TROY LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited)

November 30, 2015

 

Note 1 - Basis of Presentation and Conventions Used in this Report

 

The accompanying consolidated condensed financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly our consolidated financial position as of November 30, 2015 and February 28, 2015, and the results of our consolidated operations for the interim periods presented. We follow the same accounting policies when preparing quarterly financial data as we use for preparing annual data. These statements should be read in conjunction with the consolidated financial statements and the notes included in our latest annual report on Form 10-K for the fiscal year ended February 28, 2015, and our other reports on file with the Securities and Exchange Commission (the “SEC”).

 

In this report and the accompanying consolidated condensed financial statements and notes, unless otherwise indicated or the context suggests otherwise, references to “the Company”, “our Company”, “Helen of Troy”, “we”, “us”, or “our” refer to Helen of Troy Limited and its subsidiaries. We refer to the Company's common shares, par value $0.10 per share, as “common stock.” References to “OXO” refer to the operations of OXO International and certain of its affiliated subsidiaries that comprise our Housewares segment. References to “Kaz” refer to the operations of Kaz, Inc. and its subsidiaries, which comprise a segment within the Company referred to as the Health & Home segment. References to “Healthy Directions” refer to the operations of Healthy Directions, LLC and its subsidiaries, acquired on June 30, 2014, that comprise the Nutritional Supplements segment. We use product and service names in this report for identification purposes only and they may be protected in the United States and other jurisdictions by trademarks, trade names, service marks, and other intellectual property rights of the Company and other parties. The absence of a specific attribution in connection with any such mark does not constitute a waiver of any such right. All trademarks, trade names, service marks, and logos referenced herein belong to their respective owners. References to “the FASB” refer to the Financial Accounting Standards Board. References to “GAAP” refer to U.S. generally accepted accounting principles. References to “ASU” refer to the codification of GAAP in the Accounting Standards Updates issued by the FASB. References to “ASC” refer to the codification of GAAP in the Accounting Standards Codification issued by the FASB.

 

We incorporated as Helen of Troy Corporation in Texas in 1968 and were reorganized as Helen of Troy Limited in Bermuda in 1994. We are a global designer, developer, importer, marketer, and distributor of an expanding portfolio of brand-name consumer products. We have four segments: Housewares, Health & Home (formerly referred to as “Healthcare / Home Environment”), Nutritional Supplements, and Beauty (formerly referred to as “Personal Care”). Our Housewares segment provides a broad range of innovative consumer products for the home. Product offerings include food and beverage preparation tools and appliances, gadgets, storage containers, cleaning, organization, and baby and toddler care products. The Health & Home segment focuses on healthcare devices such as thermometers, humidifiers, blood pressure monitors, and heating pads; water filtration systems, small home appliances such as portable heaters, fans, air purifiers, and insect control devices. Our Nutritional Supplements segment is a leading provider of premium branded vitamins, minerals and supplements, as well as other health products sold directly to consumers. Our Beauty segment products include electric hair care, beauty care and wellness appliances; grooming tools and accessories; and liquid-, solid- and powder-based personal care and grooming products.

 

Our business is seasonal due to different calendar events, holidays and seasonal weather patterns. Historically, our highest sales volume and operating income occur in our third fiscal quarter ending November 30th. We purchase our products from unaffiliated manufacturers, most of which are located in China, Mexico and the United States.

 

Our consolidated condensed financial statements are prepared in U.S. Dollars and in accordance with GAAP, which requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and the disclosure of contingent assets and liabilities. Actual results could differ from those estimates. We have reclassified, combined or separately disclosed certain amounts in the prior period’s consolidated condensed financial statements and accompanying footnotes to conform to the current period’s

6

 


 

presentation. These reclassifications had no effect on previously reported results of operations, working capital or stockholders’ equity.

 

Note 2 – New Accounting Pronouncements

 

From time to time, new accounting pronouncements are issued by the FASB or other standards setting bodies that we adopt according to the various timetables the FASB specifies. Unless otherwise discussed below, we believe the impact of recently issued standards that are not yet effective, will not have a material impact on our consolidated financial position, results of operations and cash flows upon adoption.

 

In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes, which eliminates the current requirement for companies to present deferred tax liabilities and assets as current and non-current in a classified balance sheet. Instead, companies will be required to classify all deferred tax assets and liabilities as non-current. This guidance is effective for annual and interim periods beginning after December 15, 2016. The Company does not expect the provisions of ASU 2015-17 to have a material effect on its consolidated financial position, results of operations or cash flows.

 

In April 2015, the FASB issued ASU 2015-03, “Simplifying the Presentation of Debt Issuance Costs”. ASU 2015-03 changes the presentation of debt issuance costs in financial statements. ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability rather than as an asset. ASU 2015-03 is effective for annual periods and for interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. The Company does not expect the provisions of ASU 2015-03 to have a material effect on its consolidated financial position, results of operations or cash flows.

 

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers”, issued as a new Topic, ASC Topic 606. The new revenue recognition standard provides a five-step analysis of transactions to determine when and how revenue is recognized. The core principle of the guidance is that a Company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In July 2015, the FASB affirmed its proposal to defer the effective date of the standard to annual reporting periods beginning after December 15, 2017 (and interim reporting periods within those years). Accordingly, we will be required to adopt the new standard in our fiscal year 2019 and can adopt either retrospectively or as a cumulative effect adjustment as of the date of adoption. We are currently evaluating the effect this new accounting guidance may have on our consolidated results of operations, cash flows and financial position.

 

Note 3 – Commitments and Contingencies

 

We are involved in various legal claims and proceedings in the normal course of operations. We believe the outcome of these matters will not have a material adverse effect on our consolidated financial position, results of operations or liquidity.

 

On November 12, 2015, the Company resolved a lawsuit with its former CEO, which resulted in the payment of severance compensation due under his employment and separation agreements. The severance compensation was previously accrued and disclosed in fiscal year 2014 and was paid through the issuance of common shares of the Company. The Company also transferred ownership of a life insurance policy on the lives of its former CEO and his spouse as part of the settlement.  As a result of the transfer of the policy and other expenses incurred in connection with the settlement, the Company recorded CEO succession costs of $6.71 million ($4.64 million after tax), or $0.16 per fully diluted share, in the third quarter of fiscal year 2016. 

 

Notes 7, 10, 12, 13, and 14 to these consolidated condensed financial statements provide additional information regarding certain of our significant commitments and contingencies.

7

 


 

Our products are under warranty against defects in material and workmanship for periods ranging from two to five years. We estimate our warranty accrual using historical trends and believe that these trends are the most reliable method by which we can estimate our warranty liability. The following table summarizes the activity in our warranty accrual for the periods covered below:

 

ACCRUAL FOR WARRANTY RETURNS

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended November 30, 

 

Nine Months Ended November 30, 

 

 

2015

    

2014

    

2015

 

2014 (1)

Beginning balance

 

$

20,797

 

$

22,492

 

$

23,553

 

$

19,269

Additions to the accrual

 

 

17,127

 

 

16,574

 

 

43,885

 

 

46,088

Reductions of the accrual - payments and credits issued

 

 

(14,386)

 

 

(13,821)

 

 

(43,900)

 

 

(40,112)

Ending balance

 

$

23,538

 

$

25,245

 

$

23,538

 

$

25,245

(1)

Includes opening balance accrual additions totaling $3.19 million and related payments and credits issued of $1.82 million attributed to the Healthy Directions acquisition.

 

Note 4 – Earnings per Share

 

We compute basic earnings per share using the weighted average number of shares of common stock outstanding during the period. We compute diluted earnings per share using the weighted average number of shares of common stock outstanding plus the effect of dilutive securities. Dilutive securities at any given point in time may consist of outstanding stock options, issued and contingently issuable unvested restricted share units, and other performance-based share awards. Options for common stock are excluded from the computation of diluted earnings per share if their effect is antidilutive. See Note 15 to these consolidated condensed financial statements for more information regarding share-based payment arrangements. 

 

For the periods covered below, the basic and diluted shares are as follows:

 

WEIGHTED AVERAGE DILUTED SECURITIES

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended November 30, 

 

Nine Months Ended November 30, 

 

 

2015

    

2014

    

2015

    

2014

Weighted average shares outstanding, basic

 

28,129

 

28,414

 

28,361

 

28,630

Incremental shares from share-based payment arrangements

 

505

 

410

 

542

 

440

Weighted average shares outstanding, diluted

 

28,634

 

28,824

 

28,903

 

29,070

 

 

 

 

 

 

 

 

 

Dilutive securities, stock options

 

505

 

643

 

553

 

686

Dilutive securities, unvested or unsettled share awards

 

269

 

278

 

292

 

267

Antidilutive securities, stock options

 

139

 

245

 

162

 

240

 

 

 

8

 


 

Note 5 – Segment Information

 

The following tables contain segment information for the periods covered below:

 

THREE MONTHS ENDED

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nutritional

 

 

 

 

 

November 30, 2015

    

Housewares

    

Health & Home

    

Supplements

    

Beauty

    

Total

Sales revenue, net

 

$

87,816

 

$

186,418

 

$

37,492

 

$

133,777

 

$

445,503

Asset impairment charges

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

Operating income (2)

 

 

15,536

 

 

18,072

 

 

3,034

 

 

18,991

 

 

55,633

Capital and intangible asset expenditures

 

 

406

 

 

4,734

 

 

865

 

 

467

 

 

6,472

Depreciation and amortization

 

 

1,065

 

 

5,281

 

 

1,956

 

 

2,417

 

 

10,719

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nutritional

 

 

 

 

 

November 30, 2014

    

Housewares

    

Health & Home

    

Supplements

    

Beauty

    

Total

Sales revenue, net

 

$

85,984

 

$

176,994

 

$

38,462

 

$

134,234

 

$

435,674

Asset impairment charges

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

Operating income

 

 

18,275

 

 

18,694

 

 

6,214

 

 

21,860

 

 

65,043

Capital and intangible asset expenditures

 

 

233

 

 

535

 

 

211

 

 

226

 

 

1,205

Depreciation and amortization

 

 

892

 

 

5,125

 

 

2,032

 

 

2,533

 

 

10,582

 

NINE MONTHS ENDED

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nutritional

 

 

 

 

 

November 30, 2015

    

Housewares

    

Health & Home

    

Supplements (1)

    

Beauty

    

Total

Sales revenue, net

 

$

231,850

 

$

472,714

 

$

114,980

 

$

340,433

 

$

1,159,977

Asset impairment charges

 

 

 -

 

 

 -

 

 

 -

 

 

3,000

 

 

3,000

Operating income (2)

 

 

41,861

 

 

31,298

 

 

8,623

 

 

32,826

 

 

114,608

Capital and intangible asset expenditures

 

 

1,022

 

 

6,258

 

 

2,771

 

 

2,367

 

 

12,418

Depreciation and amortization

 

 

3,148

 

 

15,858

 

 

5,889

 

 

7,051

 

 

31,946

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nutritional

 

 

 

 

 

November 30, 2014

    

Housewares

    

Health & Home

    

Supplements (1)

    

Beauty

    

Total

Sales revenue, net

 

$

222,377

 

$

445,701

 

$

63,096

 

$

336,227

 

$

1,067,401

Asset impairment charges

 

 

 -

 

 

 -

 

 

 -

 

 

9,000

 

 

9,000

Operating income

 

 

45,201

 

 

31,919

 

 

6,324

 

 

29,325

 

 

112,769

Capital and intangible asset expenditures

 

 

1,275

 

 

2,022

 

 

388

 

 

1,208

 

 

4,893

Depreciation and amortization

 

 

2,669

 

 

15,384

 

 

3,391

 

 

7,631

 

 

29,075

(1)

Includes nine- and five-months of operations of the Nutritional Supplements segment for the nine months ending November 30, 2015 and 2014, respectively. The segment was formed upon the acquisition of Healthy Directions on June 30, 2014.

 

(2)   Operating income for the three and nine months ended November 30, 2015 includes each segment’s allocated share of CEO succession costs totaling $6.71 million. There was no comparable expense in the same periods last year.

 

We compute segment operating income based on net sales revenue, less cost of goods sold, SG&A, and any asset impairment charges associated with the segment. The SG&A used to compute each segment’s operating income is directly associated with the segment, plus shared service and corporate overhead expenses that are allocable to the segment. In fiscal year 2016, we began making an allocation of shared service and corporate overhead costs to the Nutritional Supplements segment. For the three- and nine-months ended November 30, 2015, those allocations totaled $2.59 and $4.19 million, respectively, which includes an allocation of CEO succession costs referred to above. We do not allocate nonoperating income and expense, including interest or income taxes, to operating segments.

9

 


 

Note 6 – Comprehensive Income (Loss)

 

The table below presents the changes in accumulated other comprehensive income (loss) by component and the amounts reclassified out of accumulated other comprehensive income (loss) for the 2016 fiscal year-to-date:

 

CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) BY COMPONENT

(in thousands)

 

 

 

 

 

 

 

Unrealized Holding
 Gains (Losses)

on Cash Flow
Hedges (1)

Balance at February 28, 2015

 

$

(76)

Other comprehensive income before reclassification

 

 

2,653

Amounts reclassified out of accumulated other comprehensive income

 

 

(503)

Tax effects

 

 

(345)

Other Comprehensive Income (Loss)

 

 

1,805

Balance at November 30, 2015

 

$

1,729

(1)

Represents activity associated with foreign currency contracts. Balances at November 30, 2015 and February 28, 2015 include net deferred tax (expense) benefits of ($0.31) and $0.03 million, respectively.

 

 

Note 7 – Supplemental Balance Sheet Information

 

PROPERTY AND EQUIPMENT

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Estimated

 

 

 

 

 

Useful Lives

 

November 30, 

 

February 28, 

 

    

(Years)

    

2015

    

2015

Land

 

 

-

 

 

$

12,800

 

$

12,800

Building and improvements

 

3

-

40

 

 

106,960

 

 

102,058

Computer, furniture and other equipment

 

3

-

15

 

 

66,992

 

 

64,464

Tools, molds and other production equipment

 

1

-

10

 

 

29,074

 

 

25,861

Construction in progress

 

 

-

 

 

 

2,193

 

 

3,039

Property and equipment, gross

 

 

 

 

 

 

218,019

 

 

208,222

Less accumulated depreciation

 

 

 

 

 

 

(91,100)

 

 

(82,154)

Property and equipment, net

 

 

 

 

 

$

126,919

 

$

126,068

 

10

 


 

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

November 30, 

 

February 28, 

 

    

2015

    

2015

Accrued compensation, benefits and payroll taxes

 

$

25,732

 

$

44,382

Accrued sales returns, discounts and allowances

 

 

35,161

 

 

24,271

Accrued warranty returns

 

 

23,538

 

 

23,553

Accrued advertising

 

 

28,042

 

 

18,930

Accrued product liability, legal and professional fees

 

 

5,718

 

 

6,001

Accrued royalties

 

 

8,840

 

 

7,683

Accrued property, sales and other taxes

 

 

10,018

 

 

6,850

Derivative liabilities, current

 

 

7

 

 

240

Liability for uncertain tax positions

 

 

536

 

 

 -

Other

 

 

10,010

 

 

9,291

Total accrued expenses and other current liabilities

 

$

147,602

 

$

141,201

 

OTHER LIABILITIES, NONCURRENT

(in thousands)

 

 

 

 

 

 

 

 

 

 

November 30, 

 

February 28, 

 

    

2015

    

2015

Deferred compensation liability

 

$

6,962

 

$

7,091

Liability for uncertain tax positions

 

 

10,371

 

 

10,295

Other liabilities

 

 

9,000

 

 

5,921

Total other liabilities, noncurrent

 

$

26,333

 

$

23,307

 

 

 

 

 

 

Note 8 – Goodwill and Intangible Assets

 

Annual Impairment Testing in the First Quarter of Fiscal Year 2016 - We performed our annual evaluation of goodwill and indefinite-lived intangible assets for impairment during the first quarter of fiscal year 2016. As a result of our testing of indefinite-lived trademarks, we recorded a non-cash asset impairment charge of $3.00 million ($2.66 million after tax). The charge was related to a trademark in our Beauty segment, which was written down to its estimated fair value, determined on the basis of future discounted cash flows using the relief from royalty valuation method.

 

Annual Impairment Testing in the First Quarter of Fiscal Year 2015 - We performed our annual evaluation of goodwill and indefinite-lived intangible assets for impairment during the first quarter of fiscal year 2015. As a result of our testing of indefinite-lived trademarks and licenses, we recorded a non-cash asset impairment charge of $9.00 million ($8.16 million after tax). The charge was related to certain trademarks in our Beauty segment, which were written down to their estimated fair value, determined on the basis of future discounted cash flows using the relief from royalty valuation method.

 

11

 


 

A summary of the carrying amounts and associated accumulated amortization for all intangible assets by operating segment follows:

 

GOODWILL AND INTANGIBLE ASSETS

(in thousands)