O n e H e l e n o f Tr o y P l a z a • E l P a s o , Te x a s 7 9 9 1 2
P h o n e 9 1 5 . 2 2 5 . 8 0 0 0 • F a x 9 1 5 . 2 2 5 . 8 0 0 1
w w w. H e l e n o f Tr o y U S A . c o m
C o m p a n y P r o f i l e
Helen of Troy Limited (NASDAQ:HELE) has established a leadership
position in the personal care products market through new product
innovation, superior product quality, and competitive pricing. The
Company designs, produces, and markets brand-name personal care
electrical products which include hair dryers, curling irons,
hairsetters, hot air brushes, home hair clippers, and paraffin baths, as
well as comfort products such as foot baths and body massagers.
The Company also produces and markets non-electrical products,
including brushes, combs, hair accessories, mirrors, and grooming
implements. The Company’s products are sold primarily through
mass merchandisers, drug chains, warehouse clubs, and grocery
stores. Additionally, through our affiliation with Tactica International,
Inc., products are also marketed through direct response marketing
and through retail channels.
Company growth strategy is facilitated by our sales of products under
world-respected trade names. Helen of Troy is licensed to sell
products under the trade names of Vidal Sassoon, Revlon®, Dr.
Scholl’s®, and Sunbeam®. Helen of Troy’s owned trade names include
Dazey®, Caruso®, Karina®, Wave Rage™, Hot Things™, Nandi™, and
DCNL™. The company also markets professional and personal care
products under the Helen of Troy®, Hot Tools®, Hot Spa®, Salon
Edition®, Gallery Series®, Wigo®, Solingen™, and Ecstasy® trade
names to the beauty salon industry.
Helen of Troy’s U.S. operations are headquartered in El Paso, Texas,
with offices and warehouse facilities around the world.
its relationship with Tactica, a 55-percent owned
subsidiary of the Company that directly markets
products to
consumers using
extensive television
and print advertising
and sells to major
mass
merchandisers, drug
store chains, and
specialty stores.
Igia Twist-A-Braid™
Helen of Troy combines technological innovations
and marketing
strategies to solidify
the Company's
leadership position,
and provide it with
strong direction to fuel
growth and expand its
lead in the personal
care marketplace.
Hot Tools® Professional 1 1/2 inch
Straightener and Curling Iron
INTERNATIONAL
Helen of Troy has established itself as a leader in
the domestic market and the world marketplace
as well, making its products a part of consumers'
lives everywhere. Under the Vidal Sassoon
trademark in Europe, the Company has added to
its product line the Vidal Sassoon Steam
Straightener, one of the most successful styling
products in Germany, and offers a family of
exciting products
under the Maximum
Range line, including
the 'Funk It Up!' hair
dryer. Outside of the
European market, the
Company sells hair
care appliances and
accessories under
Vidal Sassoon Maximum
'Funk It Up!' 2000 Watt Dryer
Revlon’s trusted brand name.
Scholl's remains prominant internationally in the
personal therapeutic field with extensive brand-
name recognition and a complete line of foot
spas, personal massagers, and cushions. With
its decades of experience, Helen of Troy
continues to grow and
build on its worldwide
reputation of personal
therapeutic care
under the Scholl’s
brand.
Vidal Sassoon
Steam Straightener
With international
offices firmly
established, and with strong recognition of its
associated brand names, Helen of Troy is making
strides in increasing the Company’s international
market share and expanding its worldwide
market opportunities, continuing to fuel its
growth well into the future.
Revlon is a registered trademark of Revlon Consumer Products Corporation
Dr. Scholl’s and Scholl are registered trademarks of Schering-Plough
HealthCare Products, Inc. (US) and Scholl Ltd. (UK)
Sunbeam is a registered trademark of Sunbeam Products, Inc.
H e l e n o f T r o y P r o d u c t s
Also, the Revlon family
of brushes, combs
and mirrors
experiences continued
growth and has been
established as a true
beauty-oriented
product line.
Vidal Sassoon Twist ‘n’ Clip™
Revlon Brushes
The Company’s Nandi
brand produces unique
hair care items and
accessories, and its
DCNL and Karina line
of accessories are
known worldwide for
their high quality.
To build such brand recognition and brand
loyalty, Helen of Troy engages in product
promotion through television- and print-media
advertising, including consumer and trade
magazines and
various industry
trade shows,
increasing the
name recognition
of Helen of Troy
and all its
associated
trademarks and
improving their perceived quality. This enables
the Company to expand market share, capture
additional shelf space, and enter and expand
new markets domestically and worldwide.
Nandi™ Solar Rollers
INNOVATIONS
Over the years, Helen of Troy has developed
ground-breaking
technologies that have
become industry
standards. One
major breakthrough is
the introduction of
Ionic Technology™ in
many hair care
appliances such as
the top-selling Vidal Sassoon Anti-static Ionic
Dryer. With Ionic Technology™, negative ions
reduce the size of water droplets on the hair,
allowing more water to be absorbed. This dries
hair more quickly and adds moisture to the hair
follicle, helping condition, soften, and make hair
shinier.
Vidal Sassoon Fast Dry™
Anti-static Ionic Dryer
Another example of Helen of Troy's innovation is
the use of gold plating in many of its styling tools.
Gold plating eliminates heat loss and maintains a
constant level of heat,
allowing easy styling.
Many styling tools use
Thermal Response
Technology™ or Pulse
Auto Heat Control® for
fast heat up.
Wigo® Professional
3-inch Straightener
Helen of Troy expands
its distribution through
Dear Shareholders:
Fiscal year 2002 was a very
successful year for Helen of Troy.
We fulfilled many of our long-term strategic goals and
achieved many new corporate milestones. Sales
increased 25 percent to a record $451.2 million from
$361.4 million in fiscal 2001. Net income climbed to a
record $29.2 million or $1.00 per diluted share in fiscal
2002, representing a 69 percent gain over net income
of $17.3 million or $0.60 per diluted share last year.
This has been the most profitable year since Helen of
Troy’s inception in 1968 and we look forward to
continuing to pursue record profitability in our upcoming
fiscal year.
Our balance sheet for the year ended February 28,
2002, also continues to remain strong with cash for the
year more than doubling over the prior fiscal year,
reaching $64.3 million versus $25.9 million at last fiscal
year’s end. Inventory declined 15.4 percent, from
$118.5 million to $100.3 million, even though sales for
the year increased 25 percent over the prior year. The
Company’s net worth increased 14 percent to $250.3
million from $219.6 million at last fiscal year end.
Sales increases during fiscal 2002, were driven
primarily by increased sales of beauty and personal
care products from our Retail and Professional
divisions, consumer health and wellness products and
international personal care products. Our retail personal
care products include Revlon, VS Sassoon and Sunbeam
hair care appliances, as well as the new Sunbeam clipper
lines. Health and wellness products include our spa and
massager products, as well as related product sales of Dr.
Scholl’s and Tactica International.
Delivering on our commitment to product innovation,
Helen of Troy introduced 50 new products at the 2002
International Housewares Show in Chicago. New product
introductions included over fifteen new Dr. Scholl’s
massager products. These newly introduced foot massagers
incorporate the most sought after consumer preferred
features such as toe-touch control, acupressure rollers,
interchangeable massage attachments and multiple settings
for heat, massage and invigorating bubbles. We also
introduced various new products in our hair care appliance
and personal care product lines.
Building on the success of our Ion hair drying
technology, Helen of Troy, under the VS Sassoon brand
name, has developed a revolutionary line of Ion products.
This line includes a variety of dryers, hot air brushes and kits
containing styling plates, to create a variety of chic salon
styles in the comfort of your own home. This new Ion
technology dries hair faster by reducing the size of water
droplets. Anti-static ions dry hair faster, while moisture is
absorbed for a conditioning style, leaving hair more
manageable with less static electricity.
Identifying a growing demand in a broad international
market for our branded personal care products, we have
aggressively set out to further penetrate the rapidly
emerging international marketplace of our global business
enterprise. International sales have increased steadily over
the last several years with the establishment of international
sales offices in the United Kingdom, Germany and France
and distribution in Latin America, South America, and
Australia. Helen of Troy stands ready to provide quality
name brand products to world markets with the same level
of service and convenience that our domestic customers
have come to expect.
The results of this fiscal year are impressive by any
standards. However, to have achieved these results in the
midst of one of the most challenging economic
environments in recent years, highlights the exceptional
performance of our employees and business partners
worldwide. Our successful performance, in all its aspects,
results from the hard work and dedication of our many
employees. Their experience, commitment, and creativity
have shaped the successes of this fiscal year.
I would like to express my sincere thanks to the many
individuals who helped us achieve these results and to our
shareholders for remaining confident in our abilities.
Gerald J. Rubin
Chairman, Chief Executive Officer and President
Responding to the exploding teen/pre-teen market, Helen
of Troy also introduced the new Wave-Rage line which
includes three-barrel wavers, spiral curling irons,
straighteners, hair-setters, and multi-stylers, creating a mix
of today’s most popular teen styles.
Partnering with Vidal Sassoon, one of the world’s most
innovative hairstylists and Marc Newson, one of the
world’s most innovative industrial designers, Helen of Troy
has launched a bold, new line of professional styling tools.
This line includes a hair dryer, curling irons, and a
straightener, blending Marc’s exclusive designs and
signature colors with expertise from one of the world’s
foremost hair experts.
New products from Tactica International were also
introduced at this year’s Annual International Housewares
Show. These products include a line of pore cleansing
and skin care products, a line of nail care products,
additional products in the depilatory and hair removal
category, and a unique line of hair coloring applicator
products.
In addition to our continued commitment to new
product development and innovation, Helen of Troy also
continued to improve its internal operations and support
functions with new technologies and productivity-
enhancing software with the goal to transform ourselves
into a leaner, financially stronger and more flexible
company, capable of more readily serving our customers
worldwide. We have made significant progress in the
assessment and improvement of our information systems
technology, and developed and implemented more
advanced methods to improve the sharing of both
information and data resources throughout our global
organization. Based on our most recent performance and
the expectation of continued improvements in our business
model, we eagerly look ahead to fiscal 2003 for the
fulfillment of the corporate and financial goals that we have
set for ourselves this year.
its high-quality
personal care and hair
care products, such
as the innovative line
of Wigo® and Hot
Tools® professional
straighteners,
introduced to meet
demands for high-quality straighteners and
straighteners with smaller heating plates.
Together, these new products are major
contributors to the professional division's growth
because of their strong brand names, excellent
performance, high quality, and unique features.
Wigo® Professional
1-inch Straightener
Helen of Troy satisfies consumer demand in all
areas of hair styling products by marketing a
variety of brushes, combs, mirrors and hair
accessories under the Vidal Sassoon brand,
including the innovative
Twist 'n' Clip™
Headband and
Barrette.
expertise in personal wellness seriously.
The Company also continues to market under
such trusted brand names as Sunbeam, a
household name for decades, and moves forward
with its line of personal hair care tools for the
home and family. Helen of Troy’s years
of experience and Sunbeam’s name recognition
allow the Company to expand its reach and
growth in the home hair care and clipper
markets.
Helen of Troy has also made a major push into
the teen market, which
is expected to
experience substantial
growth in the future.
Helen of Troy has
launched Wave Rage,
a line of personal care
products specifically
geared for teens, a
market of over 24
million in the U.S. alone. With hot colors and
edgy designs, Wave Rage gives teenagers the
tools they need for
their favorite styles.
Wave Rage™ 4-in-1 Multi-Styler™
Helen of Troy’s
professional
division
continues
expansion of
market share through
Dr. Scholl's Steam Footbath
H e l e n o f T r o y P r o d u c t s
F i n a n c i a l H i g h l i g h t s
CONSUMER AND
PROFESSIONAL BRANDING
Helen of Troy has become one of the most
trusted names in personal beauty and care items
throughout the world. This trust has resulted
from the steady years of Helen of Troy’s
representation of
major consumer
brand names.
Vidal Sassoon Gold Series®
3-Barrel Waver
Helen of Troy
markets a wide
range of products
under the Vidal
Sassoon banner, a
name that has been at the forefront of hair
fashion and design for over 40 years. Helen of
Troy builds on this solid brand foundation,
marketing combs,
brushes,
accessories, and
hair care
appliances, such
as the family of
professional Gold
Series® styling
tools, a line of
products incorporating breakthrough Ionic
Technology,™ and styling tools designed by
world-renowned designer Marc Newson.
Marc Newson Fast Dry™
1875 Watt Dryer
Revlon Perfect Heat®
Straightener
lasting beauty and
glamour. With
innovative product
designs and instant
brand recognition,
Revlon is always a
powerful shelf
Helen of Troy also
capitalizes on Revlon’s
recognized leadership
position in hair and
personal care
products, which
evokes an image of
Revlon MoistureStay™
Manicure / Pedicure System
presence in the spa,
hair, and personal care
markets.
In addition, Helen of
Troy markets a variety
of personal wellness
Revlon MoistureStay™ Luxury
Paraffin Bath with Digital Timer
items under the Dr. Scholl's brand, a trusted
name in foot care for over 90 years, which has
quickly expanded into the areas of therapeutic
care for the entire body. With a variety of
innovative products ranging from body massagers
to groundbreaking footbaths with a revolutionary
“water heat up” feature, Helen of Troy takes its
2002
(1)
2001
(1)
2000
1999
1998
Tw e l v e M o n t h s E n d e d L a s t D a y o f F e b r u a r y
( i n t h o u s a n d s , e x c e p t p e r s h a r e a m o u n t s )
Net sales
$451,249
$361,398
$299,513
$294,487
$248,098
Operating income
41,657
22,996
9,801
36,714
30,482
Net income
29,215
17,332
13,111
28,330
22,332
Diluted income per share
1.00
0.60
0.44
0.96
0.77
Working capital
191,438
157,809
154,395
150,940
154,294
Total assets
357,558
337,181
304,252
294,036
227,560
Long-term debt
55,000
55,000
55,000
55,450
55,450
Stockholders’ equity (2)
250,326
219,609
209,624
199,842
149,484
Fiscal 2001 and 2002 results include the results of Tactica, a subsidiary in which the Company acquired a
55 percent interest in March 2000.
In fiscal 2000, the Company repurchased 526,485 shares of common stock at a cost of $4,076,000. In
fiscal 2001, the Company repurchased 815,946 shares of common stock at a cost of $4,623,000.
(1)
(2)
$ MILLIONS
500
450
400
350
300
250
200
150
100
50
0
Year in Review
NET SALES
4
5
1
.
2
$ MILLIONS
3
6
1
4
.
2
9
4
.
5
2
9
9
.
5
2
4
8
.
1
NET INCOME
2
9
.
2
2
8
.
3
1
7
.
3
1
3
.
1
40
35
30
25
20
2
2
.
3
15
10
5
0
$1.20
EARNINGS PER
SHARE DILUTED
1.05
.90
.
0
9
6
.
1
0
0
0
.
6
0
0
.
4
4
.75
0
.
7
7
.60
.45
.30
.15
$0
98
99
00
01
02
98
99
00
01
02
98
99
00
01
02
H e l e n o f T r o y L i m i t e d a n d S u b s i d i a r i e s
H e l e n o f Tr o y C o r p o r a t e O f f i c e r s a n d D i r e c t o r s
S t o c k P r i c e s
Fiscal 2002
First quarter
Second quarter
Third quarter
Fourth quarter
Fiscal 2001
First quarter
Second quarter
Third quarter
Fourth quarter
High
Low
$9.42
14.80
13.20
15.79
$7.88
6.94
7.50
7.06
$5.16
7.75
7.99
10.26
$6.19
4.75
4.00
4.00
Stock Traded Over the Counter
National NASDAQ Symbol HELE
Registrar, Transfer Agent and Dividend Disbursing Agent
Computershare Investor Service, LLC
Chicago, Illinois 60606
The Annual Meeting of Shareholders
The Annual Meeting of Shareholders will be held
on August 27, 2002, at one o’clock p.m. at the Hilton
Camino Real Hotel, 101 South El Paso Street,
El Paso, Texas 79901.
Form 10-K
A copy of the company’s annual report on Form 10-K, as
filed with the Securities and Exchange Commission, will
be furnished to any stockholder free of charge on request
to the Chief Financial Officer or Secretary of the
Company.
Board of
Directors
Gerald J. Rubin
Chairman, Chief Executive Officer and President
Stanlee N. Rubin
Director
Daniel C. Montano
Director
Byron H. Rubin
Director
Gary B. Abromovitz
Director
Christopher L. Carameros
Director
Officers
Gerald J. Rubin
Chairman, Chief Executive Officer and President
Arthur A. August
Executive Vice President, Sales – Personal Care Division
Donald Hall
Senior Vice President, Manufacturing
Robert D. Spear
Senior Vice President and Chief Information Officer
Rosanna Hall
Senior Vice President, Purchasing
Kevin James
Senior Vice President, International
Michael Cafaro
Senior Vice President, New Product Development and Engineering
Russell G. Gibson
Senior Vice President, Finance and Chief Financial Officer
Dave Knox
Senior Vice President, Accessories
James R. Cooper
Vice President, Product Procurement and Forecasting
Felix Chavez
Vice President, Sales Operations
Robert C. Johnson
Vice President, Management Information Systems
Stuart Fox
Vice President, Sales – Appliances
Scott Thrasher
Vice President, Sales – Appliances
Vincent Carson
Vice President, General Counsel and Secretary
Mark Riley
Controller
Deanna Nasser
Treasurer
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
P ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended February 28, 2002
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission file number 001-14669
HELEN OF TROY LIMITED
(Exact name of the registrant as specified in its charter)
Bermuda
(State or other jurisdiction of
incorporation or organization)
Clarendon House
Church Street
Hamilton, Bermuda
(Address of Principal Executive Offices)
1 Helen of Troy Plaza
El Paso, Texas
(Registrant’s United States Mailing Address)
74-2692550
(I.R.S. Employer
Identification No.)
79912
(Zip Code)
Registrant's telephone number, including area code: (915) 225-8000
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock - $.10 par value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes P No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K. [P]
The aggregate market value of the voting stock held by non-affiliates of the registrant as of May 17, 2002 was $340,052,483.
As of May 17, 2002 there were 28,211,017 shares of Common Stock, $.10 Par Value, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Certain sections of the Company’s definitive proxy statement, which is to be filed under the Securities Exchange Act of 1934
within 120 days of the end of the Company’s fiscal year on February 28, 2002, are incorporated by reference into Part III
hereof. Except for those portions specifically incorporated by reference herein, such document shall not be deemed to be
filed with the Securities and Exchange Commission as part of this Form 10-K.
TABLE OF CONTENTS
______________________________________________________________________________
Page
PART I
1
5
6
6
______________________________________________________________________________
Business
Properties
Legal Proceedings
Submission of Matters to a Vote of Security Holders
Item 1.
Item 2.
Item 3.
Item 4.
7
8
10
22
23
PART II
Item 5.
Item 6.
Item 7.
Market for Registrant's Common Equity and Related
Stockholder Matters
Selected Financial Data
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Item 8.
Changes in and Disagreements with Accountants on
Item 9.
Accounting and Financial Disclosure
48
______________________________________________________________________________
PART III
Item 10.
Item 11.
Item 12.
Directors and Executive Officers of the Registrant
Executive Compensation
Security Ownership of Certain Beneficial Owners
48
and Management
48
Certain Relationships and Related Transactions
______________________________________________________________________________
Item 13.
48
48
PART IV Item 14.
Exhibits, Financial Statement Schedule, and Reports
on Form 8-K
49
52
_____________________________________________________________________________
Signatures
i
Item 1. Business
General
PART I
Unless the context requires otherwise, references to “the Company,” to “our Company,” or to “Helen of Troy”
and references such as “we” and “us” refer to Helen of Troy Limited and its subsidiaries, including Tactica International,
Inc. (“Tactica”). Our Company is comprised of three operating segments. The North American segment sells hair care
and other personal care and comfort appliances, hairbrushes, combs, and utility and decorative hair accessories in the
U.S. and Canada. The International segment sells hair care and other personal care and comfort appliances, hairbrushes,
combs, and utility and decorative hair accessories outside of the U.S. and Canada. Our third segment, Tactica, sells
personal care and other consumer products directly to consumers through direct response marketing and to retailers. We
present financial information for each of our operating segments in Note (10) of the Consolidated Financial Statements.
The matters discussed in Item 1 pertain to all three of our operating segments, unless otherwise specified.
We design, develop and sell a variety of personal care and comfort products under trademarks licensed from
third parties, as well as under trademarks that we own. We outsource the manufacture of our products to third parties
and sell most of those products to mass merchandisers, drug chains, warehouse clubs, grocery stores, beauty supply
retailers and wholesalers, and directly to consumers in the U.S. and other countries.
Products bearing licensed trademarks include those sold under the trademarks of VS Sassoon(cid:226)
The Procter & Gamble Company; Revlon(cid:226)
licensed from Schering-Plough HealthCare Products, Inc.; Scholl(cid:226)
Scholl Limited; and Sunbeam(cid:226)
, Salon Edition(cid:226)
Helen of Troy(cid:226)
Dazey(cid:226)
, Carel(cid:226)
DCNL™, DCNL Signature™, IGIA(cid:226)
, licensed from
,
(in areas other than North America), licensed from
, licensed from Sunbeam Products, Inc. Trademarks owned by the Company include
, Hot Tools(cid:226)
, Hotspa(cid:226)
, Caruso™,
, Heat*Mi(cid:226)
, Karina Girl™, Kurl*Mi(cid:226)
, Lady Carel(cid:226)
,
, Ecstasy™, Gold Series(cid:226)
, Karina(cid:226)
, Sable(cid:226)
.
, licensed from Revlon Consumer Products Corporation; Dr. Scholl’s(cid:226)
, Wigo(cid:226)
, Detangle*Mi(cid:226)
, and Epil-Stop(cid:226)
, Gallery Series(cid:226)
, Lady Dazey(cid:226)
We were incorporated as Helen of Troy Corporation in Texas in 1968 and reincorporated as Helen of Troy
Limited in Bermuda in 1994.
We do not engage in any activities involving special purpose entities or off-balance sheet financing.
1
Products
The business of Helen of Troy’s North American and International segments is designing, developing and selling
a full line of personal care and comfort products. Our products include hair dryers, curling irons, hair straighteners, hot
air brushes, brush irons, home hair clippers and trimmers, mirrors, hairsetters, foot baths, body massagers, paraffin baths,
hairbrushes, combs and hair accessories. The following table lists some of the products that the North American and
International segments sell and some of the brand names that appear on those products.
PRODUCTS
BRAND NAMES
Hand-held hair dryers
Curling irons, hair straighteners,
hot air brushes and brush irons
Hairsetters
Paraffin baths, facial brushes, and
facial saunas
Foot baths
Foot massagers, hydro massagers,
cushion massagers and body
massagers
Hair clippers and trimmers
Paraffin baths and other skin care
appliances
Hard and soft-bonnet hair dryers Dazey(cid:226)
and
Hair
implements
Decorative hair accessories
styling
utility
, Revlon(cid:226)
, Ecstasy™, Gold Series(cid:226)
, Revlon(cid:226)
, Gold Series(cid:226)
, Sunbeam(cid:226)
, Gallery Series(cid:226)
and Caruso™
VS Sassoon(cid:226)
Tools(cid:226)
VS Sassoon(cid:226)
Tools(cid:226)
VS Sassoon(cid:226)
Revlon®
, Sunbeam(cid:226)
, Helen of Troy(cid:226)
, Gallery Series(cid:226)
, Wigo(cid:226)
, Helen of Troy(cid:226)
Ecstasy™, Wigo(cid:226)
, Salon Edition(cid:226)
, and Sable(cid:226)
, Salon Edition(cid:226)
, and Sable(cid:226)
.
, Hot
, Hot
, Revlon(cid:226)
, Scholl(cid:226)
, Scholl(cid:226)
Dr. Scholl’s(cid:226)
Dr. Scholl’s(cid:226)
, Revlon®, Carel(cid:226)
, Carel(cid:226)
and Hotspa(cid:226)
and Hotspa(cid:226)
Sunbeam(cid:226)
Revlon(cid:226)
and VS Sassoon(cid:226)
, and Hotspa(cid:226)
, Lady Dazey(cid:226)
, Revlon(cid:226)
VS Sassoon(cid:226)
VS Sassoon(cid:226)
DCNL Signature™
, Karina(cid:226)
and Hot Tools(cid:226)
, Carel(cid:226)
, Wave Rage™, Nandi™, DCNL™, and Ecstasy™
, Karina Girl™, HOT things™, isobel™, DCNL™, and
On March 14, 2000 we acquired a 55 percent ownership interest in Tactica International, Inc. (“Tactica”).
Tactica’s net sales comprised approximately 24 percent and five percent of the Company’s consolidated net sales in fiscal
2002 and 2001, respectively. Tactica designs, develops and sells a variety of personal care and other consumer products
in categories such as hair care, hair removal, dental care, skin care, sports and exercise, household, and kitchen. Tactica
sells these products directly to consumers and through the retail distribution channel, primarily under the IGIA(cid:226)
and
Epil-Stop(cid:226)
trademarks. Some of the products developed and marketed by Tactica are trend-oriented and have shorter
product lives than Helen of Troy’s other products. To create product awareness and interest, Tactica uses television
infomercials and direct response marketing extensively.
We continue, primarily through our marketing and engineering departments, to develop new products and
enhance existing products in order to maintain and improve our position in the personal care and comfort product market.
Significant product additions during fiscal 2002 included hair dryers and other hair care appliances using ion technology.
For fiscal 2003, we are introducing a number of new products, including new massager products, Memory Foam(cid:228)
pillows, a quiet hair dryer and other new hair care appliances that incorporate ionic technology, hair styling products
aimed at the teen market, and a line of appliances created by designer Marc Newson.
Sales and Marketing
We market our products primarily within the U.S. Sales within the U.S. comprised 91 percent of net sales in
fiscal 2002, 89 percent of net sales in fiscal 2001, and 88 percent of net sales in fiscal 2000. Our North American and
2
International operating segments sell their products primarily through mass merchandisers, drug chains, warehouse clubs,
catalogs, grocery stores and beauty supply retailers and wholesalers. Both of these segments market our products through
outside sales representatives and through our own sales staff. Tactica primarily uses direct consumer marketing, such
as television infomercials and catalog advertising to sell its products under the IGIA® and Epil-Stop® brands in the U.S.
The companies from whom we license many of our brand names promote those names extensively. Revlon
Consumer Products Corporation engages in national advertising of its beauty care products. The VS Sassoon(cid:226)
, Dr.
Scholl’s® and Sunbeam® trademarks are widely recognized, because of advertising and the sale of a variety of products.
We benefit from the name recognition associated with a number of our licensed trademarks and further improve the name
recognition and perceived quality of all the trademarks under which we sell products through our own advertising and
product development efforts. We promote our products through television advertising and through print media, including
consumer and trade magazines and various industry trade shows.
Manufacturing and Distribution
We contract with unaffiliated manufacturers in the Far East, primarily in the Peoples’ Republic of China,
Thailand, Taiwan, and South Korea, to manufacture most of the products sold by our North American and International
segments (see discussion of International Manufacturing and Operations in Item 7, “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” under the heading “Risk Factors”). For fiscal 2002, goods
manufactured by vendors in the Far East comprised approximately 90 percent of the dollar value of the North American
and International segments’ inventory purchases. Those segments purchase the remainder of their products from
unaffiliated manufacturers in North America and Europe. The manufacturers who produce our products use molds and
certain other tooling, some of which we own, in manufacturing those products. The North American and International
segments employ numerous technical and quality control persons to assure high product quality.
Our products that are manufactured in the Far East and sold in North America are shipped to the West Coast of
the U.S. and the West Coast of Canada. The products are then shipped by truck or rail service to warehouse facilities
in El Paso, Texas; Memphis, Tennessee; Toronto, Canada; and Vancouver, Canada, or directly to customers. We ship
substantially all products to North American customers from these warehouses by ground transportation services.
Products sold by the International segment outside the U.S. and Canada are shipped from manufacturers, primarily in
the Far East, to warehouse facilities in Veenendaal, The Netherlands and Nottinghamshire, the United Kingdom, or
directly to customers. Products stored at the warehouses in The Netherlands and the United Kingdom are shipped from
those warehouses to distributors or retailers.
Our customers in both the North American and International segments seek to minimize their inventory levels,
but often demand that we fulfill their orders within relatively short time frames. Consequently, these inventory
management practices often require us to carry substantial levels of inventory in order to meet our customers’ needs.
Tactica also contracts with unaffiliated manufacturers both within and outside the U.S. to manufacture its
products. Tactica’s products are shipped to a warehouse facility in Reno, Nevada for shipment to individuals or retail
customers. Tactica also sometimes ships products from manufacturers directly to retailers. When selling to retail
customers, Tactica often faces the same challenges as do our other two segments with regard to retailers’ inventory
management practices.
Most of our three segments’ products manufactured outside the countries in which they are sold are subject to
import duties.
3
License Agreements, Trademarks and Patents
Our North American and International operating segments depend materially upon the continued use of
trademarks licensed under various agreements. The VS Sassoon(cid:226)
trademarks are of particular importance.
New product introductions under licensed trademarks require approval from the respective licensors. The licensors also
must approve the product packaging. Many of the license agreements require the Company to pay minimum royalties,
meet minimum sales volumes, and make minimum levels of advertising expenditures. The duration of the license
agreements for the Revlon(cid:226)
trademarks, including the renewal terms, exceeds ten years. Upon
expiration of the current terms of these agreements, we have the unconditional right to extend their terms, upon payment
of a renewal fee.
and VS Sassoon(cid:226)
and Revlon(cid:226)
The discussion below covers the primary product categories that Helen of Troy currently sells under its major
license agreements. The product categories discussed do not necessarily include all of the products that Helen of Troy
is entitled to sell under these agreements.
Under agreements with The Procter & Gamble Company, Helen of Troy is licensed to sell certain products using
the VS Sassoon(cid:226)
trademark in the U.S., Canada, Mexico, and Western Europe. Products sold under the terms of these
licenses include hair dryers, curling irons, brush irons, hairsetters, hot air brushes, hair clippers and hair trimmers,
mirrors, brushes, combs and hair care accessories.
Under agreements with Revlon Consumer Products Corporation, we are licensed to sell, worldwide, except in
Western Europe, hair dryers, curling irons, hair straighteners, brush irons, hairsetters, brushes, combs, mirrors, functional
hair accessories, personal spa products, hair clippers and trimmers, and battery-operated and electric women’s shavers
bearing the Revlon® trademark.
We are licensed to sell foot baths, foot massagers, hydro massagers, cushion massagers, and body massagers
trademark in the U.S. and Canada, under an agreement with Schering-Plough HealthCare
trademark in other areas of the world
bearing the Dr. Scholl’s(cid:226)
Products, Inc. We also are licensed to sell the same products under the Scholl(cid:226)
through an agreement with Scholl Limited.
Under agreements with Sunbeam Products, Inc. we are licensed to sell hair clippers, hair trimmers, hair dryers,
curling irons, hairsetters, hot air brushes, mirrors, manicure kits, hair brushes and combs, hair rollers, hair accessories,
hair removal devices, and paraffin wax devices bearing the Sunbeam(cid:226)
trademark in the U.S., Canada, Mexico, Central
America, South America, and the Caribbean.
Helen of Troy has filed or obtained licenses for design and utility patents in the U.S. and several foreign
countries. The Company does not believe that the loss of any particular patent or patent license would have a materially
adverse effect on its business.
Reliance on One Customer
Sales to Wal-Mart Stores, Inc., and one of its affiliates, accounted for approximately 22 percent, 23 percent, and
26 percent of our net sales in fiscal 2002, 2001, and 2000, respectively. No other customer accounted for ten percent
or more of net sales in fiscal 2002, 2001, or 2000.
Order Backlog
There was no significant backlog of orders at February 28, 2002.
4
Competitive Conditions
The markets in which we sell our products are very competitive. Maintaining and gaining market share depends
heavily on product development and enhancement, pricing, quality, performance, packaging and availability, brand name
recognition, patents, and marketing and distribution approaches. Our primary competitors include The Conair
Corporation; Applica Incorporated; Remington Products Company; Goody Products, Inc., a division of Newell
Rubbermaid Inc.; Homedics-USA, Inc.; and The New L & N Marketing and Sales Corporation. These competitors
possess known brand names and significant resources.
Seasonality
The Company’s business is somewhat seasonal. Sales in the Company’s fiscal second and third quarters,
combined, accounted for approximately 57 percent of fiscal 2002 and 2001 net sales and for approximately 54 percent
of net sales in fiscal 2000. As a result of the seasonality of sales, working capital needs fluctuate during the year.
Regulation
Our electrical products must meet the safety standards imposed in various national, state, local and provincial
jurisdictions. Our electrical products sold in the U.S. are designed, manufactured and tested to meet the safety standards
of Underwriters Laboratories, Inc. or Electronic Testing Laboratories.
Employees
We employ 625 full-time employees in the U.S., Hong Kong and Europe, of which 216 are marketing and sales
employees, 153 are distribution employees, 53 are engineering and development employees and 203 are administrative
personnel. Included in these totals are 61 employees of Tactica. Tactica employs 44 administrative and 17 sales and
marketing personnel. None of the Company’s employees are covered by any collective bargaining agreement. We have
never experienced a work stoppage and we believe that we have satisfactory working relations with our employees.
Geographic Information
Note (10) to the Consolidated Financial Statements contains geographic information concerning our net sales
and long-lived assets.
Item 2. Properties
Plant and Facilities
North American Segment. We own a 135,000 square foot office building in El Paso, Texas that houses our U.S.
operations. The warehouse that we own in El Paso, Texas totals 408,000 square feet and is adjacent to the building
housing the U.S. operations. The two buildings are located on a 50-acre plot of land that we own. We lease 108,000
square feet of warehouse space in El Paso, Texas; 360,000 square feet of warehouse space in Memphis, Tennessee;
50,000 square feet of warehouse space in Toronto, Canada; and 20,000 square feet of warehouse space in Vancouver,
Canada. We also lease sales offices in Bentonville, Arkansas, Minneapolis Minnesota, Troy Michigan, and Toronto,
Canada.
We own 22 acres of land in El Paso, Texas, near the 50 acres on which the warehouse and the U.S. office
building that we own are located. The Company is holding this land for future business use.
International Segment. We lease warehouse space in public warehouses located in Hong Kong; Veenendaal,
The Netherlands and Nottinghamshire the United Kingdom. In addition, we also lease sales offices in the United
Kingdom, France, and Germany.
5
Tactica. Tactica leases administrative offices in New York, New York and leases public warehouse space in
Reno, Nevada.
Corporate. A subsidiary located in Hong Kong leases approximately 23,000 square feet of office space. Prior
to fiscal 1996 this subsidiary was headquartered in approximately 12,000 square feet of office space that was acquired
by condominium ownership. In fiscal 1998 the Company leased that office space to an unaffiliated company.
We also own 12,000 square feet of warehouse space on a 62,000 square foot lot adjacent to the building that
formerly housed our U.S. operations. We are holding this property for sale and leasing it to an unaffiliated company.
Item 3. Legal Proceedings
The Hong Kong Inland Revenue Department (“the IRD”) has assessed tax on certain profits of the Company’s
foreign subsidiaries for the fiscal years 1990 through 1997. Hong Kong taxes income earned from certain activities
conducted in Hong Kong. The Company is vigorously defending its position that it conducted the activities that produced
the profits in question outside of Hong Kong. The Company also asserts that it has complied with all applicable reporting
and tax payment obligations. If the IRD’s position were to prevail and if it were to assert the same position for years after
fiscal 1997, the resulting tax liability could total $30,520,000 (U.S.) for the period from fiscal 1990 through fiscal 2002.
In connection with the IRD’s tax assessment, the Company was required to purchase $5,750,000 (U.S.) in tax reserve
certificates in Hong Kong. The $5,750,000 represented approximately 50 percent of the liability assessed by the IRD
for fiscal 1990 through fiscal 1997. Tax reserve certificates represent the prepayment by a taxpayer of potential tax
liabilities. The amounts paid for tax reserve certificates are refundable in the event that the value of the tax reserve
certificates exceeds the related tax liability. These certificates are denominated in Hong Kong dollars and are subject to
the risks associated with foreign currency fluctuations. Although the ultimate resolution of the IRD’s claims cannot be
predicted with certainty, management believes that adequate provision has been made in the financial statements for the
resolution of the IRD’s claims.
In the fourth quarter of the fiscal year ended February 28, 2001, the Company recorded a $2,457,000 charge for
the remaining unamortized costs under a distribution agreement (which was later formally terminated) with The
Schawbel Corporation (“Schawbel”), the supplier of the Company’s butane hair care products. In a related matter, in
September 1999, Schawbel commenced litigation in the U.S. District Court for the District of Massachusetts against
The Conair Corporation (“Conair”), the predecessor distributor for Schawbel’s butane products. In its action, amended
in June 2000, Schawbel alleged, among other things, that Conair, following Schawbel’s termination of the Conair
distribution agreement, stockpiled and sold Schawbel product beyond the 120 day “sell-off” period afforded under the
agreement, and manufactured, marketed and sold its own line of butane products which infringed patents held by
Schawbel. In November 2000, the Massachusetts court granted Schawbel its request for preliminary injunction, and
ordered that Conair cease selling all allegedly infringing products. The Company intervened as a plaintiff in the action
to assert claims against Conair similar to the claims raised by Schawbel. The Company is seeking to recover damages
in excess of $10 million, arising from the Company’s inability to meet minimum purchase requirements under its
distribution agreement with Schawbel and the subsequent termination of that agreement by Schawbel. Conair
responded by filing a counterclaim alleging that the Company conspired with Schawbel to unlawfully terminate
Conair’s distribution agreement with Schawbel, and to disparage Conair’s reputation in the industry. The counterclaim
seeks $15 million in damages. Although the ultimate outcome of the matter cannot be predicted, the Company contends
that Conair’s counterclaims lack validity. The Company intends to pursue vigorously its claims and defense in the
litigation.
The Company is involved in various other legal claims and proceedings in the normal course of operations. In
the opinion of management, the outcome of these matters will not have a material adverse effect on the consolidated
financial position, results of operations or liquidity of the Company.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the fourth quarter of fiscal 2002.
6
PART II
Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters
Price Range of Common Stock
Our Common Stock is listed on the NASDAQ National Market System [symbol: HELE]. The following table
sets forth, for the periods indicated, in dollars per share, the high and low bid prices of the Common Stock as reported
on the NASDAQ National Market System. These quotations reflect the inter-dealer prices, without retail mark-up, mark-
down or commission and may not necessarily represent actual transactions.
Fiscal 2002
First quarter
Second quarter
Third quarter
Fourth quarter
Fiscal 2001
First quarter
Second quarter
Third quarter
Fourth quarter
High
Low
9.42
14.80
13.20
15.79
7.88
6.94
7.50
7.06
5.16
7.75
7.99
10.26
6.19
4.75
4.00
4.00
Approximate Number of Equity Security Holders
We have one class of equity security outstanding at February 28, 2002; Common Stock with a par value of
$0.10. As of May 3, 2002, there were 409 holders of record of the Company’s Common Stock. Shares held in
“nominee” or “street” name at each bank nominee or brokerage house are included in the number of shareholders of
record as a single shareholder. We estimate that approximately 11,000 individuals and institutions hold our common
stock.
Cash Dividends
The Board of Directors’ current policy is to retain earnings to provide funds for the operation and expansion
of the Company’s business and for potential acquisitions. The Company has not paid any cash dividends on its Common
Stock since inception. The Company’s current intention is to pay no cash dividends in fiscal 2003. Any change in
dividend policy will depend upon future conditions, including earnings and financial condition, general business
conditions, any applicable contractual limitations, and other factors deemed relevant by the Board of Directors.
7
Item 6. Selected Financial Data
The selected consolidated financial information set forth below has been summarized from the
Company’s Consolidated Financial Statements. This information should be read in conjunction with the
Consolidated Financial Statements and the related Notes to Consolidated Financial Statements included in Item
8. “Financial Statements and Supplementary Data.” All currency amounts in this document are denominated
in U.S. dollars.
For the year ended the last day of February
(all numbers except earnings per share in thousands)
2002 (1)
2001 (1)
2000
1999
1998
Statements of Income Data
Net sales
Cost of sales
Gross profit
Selling, general and
administrative expenses (4)
$ 451,249
361,398
299,513
294,487
248,098
238,859
212,390
220,530
140,868
185,685 (2)
113,828
175,293
119,194
153,087
95,011
170,733
117,872
104,027 (2)
82,480
64,529
Operating income
41,657
22,996
9,801
36,714
30,482
Interest expense
Other income (3) (4)
(4,256)
1,146
(3,989)
1,883
(3,530)
6,826
(3,337)
2,036
(3,487)
1,821
Earnings before income taxes
38,547
20,890
13,097
35,413
28,816
Income tax expense (benefit)
9,332
3,558
(14)
7,083
6,484
Net earnings
Per share data
Basic
Diluted
Weighted average number of
common shares outstanding:
Basic
Diluted
$29,215
17,332
13,111
28,330
22,332
$ 1.04
$ 1.00
.61
.60
.45
.44
1.00
.96
.83
.77
28,089
29,199
28,420
28,729
29,053
29,885
28,279
29,596
26,856
28,851
8
Item 6. Selected Financial Data - continued
Last Day of February
(in thousands)
2002
2001
2000
1999
1998
Balance Sheet Data:
Working capital
Total assets
Long-term debt
Stockholders’ equity (5)
Cash dividends
$191,438
357,558
55,000
250,326
-
157,809
337,181
55,000
219,609
-
154,395
304,252
55,000
209,624
-
150,940
294,036
55,450
199,842
-
154,294
227,560
55,450
149,484
-
(1) Fiscal 2002 and 2001 results include 100 percent of the results of Tactica, a subsidiary in which the
Company acquired a 55 percent interest in March 2000.
(2) In fiscal 2000, the Company incurred $2,669,000 of charges to cost of goods sold and $8,725,000 of charges
to selling, general and administrative expenses as a result of the discontinuance of its artificial nails product
line. In fiscal 2000 the Company also incurred $770,000 of charges related to the restructuring and
reorganization of several departments.
(3) Other income includes gains of approximately $147,000 in fiscal 2002, $1,400,000 in fiscal 2001 and
$6,300,000 in fiscal 2000 from the sale and appreciation of marketable securities. See “Item 7.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a further
discussion of gains from marketable securities.
(4) Certain items that, prior to fiscal 2002, were classified as “other income” have been reclassified as reductions
to SG&A expense. Those items totaled $434,000 in fiscal 2001 and $382,000 in each of fiscal 2000, 1999,
and 1998.
(5) In fiscal 2000 the Company repurchased 526,485 shares of its Common Stock at a cost of $4,076,000. In
fiscal 2001, the Company repurchased 815,946 shares of its Common Stock at a cost of $4,623,000. No
Common Stock was repurchased in any other year presented above.
9
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This discussion contains a number of forward-looking statements, all of which are based on current expectations.
Actual results may differ materially due to a number of factors, including those discussed in the sections entitled “Risk
Factors” and “Information Relating to Forward Looking Statements” and in Item 7A. “Quantitative and Qualitative
Disclosures About Market Risk.”
Results of Operations
The following table sets forth, for the periods indicated, selected consolidated operating data for the
Company as a percentage of net sales.
Relationship to Net Sales
Fiscal Year
2002
2001
2000
100.0%
52.9
47.1
100.0
61.0
39.0
100.0
62.0
38.0
37.9
9.2
32.6
6.4
34.7
3.3
Net sales
Cost of sales
Gross Profit
Selling, general and
administrative expenses
Operating income
Interest expense
Other income, net
(0.9)
0.3
(1.1)
0.5
(1.2)
2.3
Earnings before income taxes
8.6
5.8
4.4
Income taxes
Net Earnings
2.1
1.0
-
6.5%
4.8
4.4
10
Sales by operating segment for fiscal 2002, 2001 and 2000 were as follows:
(in thousands)
Segment
2002
2001
2000
% increase
(decrease)
2002
versus
2001
2001
versus
2000
North American
International
Tactica
$312,668
29,906
108,675
311,998
25,390
24,010
275,827
23,686
-
0%
18
353
13%
7
n/a
$451,249
361,398
299,513
25%
21%
Operating income (loss) by operating segment for fiscal 2002, 2001 and 2000 was as follows:
(in thousands)
Segment
2002
2001
2000
North American
International
Tactica
Corporate / other
$32,203
(244)
11,930
(2,232)
28,736
94
(4,629)
(1,205)
9,857
835
-
(891)
% increase
(decrease)
2002
versus
2001
12%
(359)
358
(85)
2001
versus
2000
192 %
(89)
-
(29)
$41,657
22,996
9,801
81% 140%
Results of operations
Consolidated Sales and Gross Profit Margins
Net sales for the 12 months ended February 28, 2002 (“fiscal 2002”) improved 24.9 percent or $89,851,000,
versus the 12 month period ended February 28, 2001 (“fiscal 2001”). All three of our operating segments exceeded their
prior year sales totals, with the Tactica operating segment producing $84,665,000 of the fiscal 2002 sales increase. The
International operating segment was responsible for most of the remaining sales growth.
Net sales for fiscal 2001 increased 20.7 percent or $61,885,000 compared to the 12 months ended February 29,
2000 (“fiscal 2000”). Increased North American sales and the addition of the sales of Tactica contributed most of the
fiscal 2001 sales growth. Sales in our International segment also improved during fiscal 2001, versus fiscal 2000.
Excluding the Tactica segment, which was acquired in fiscal 2001, we achieved net sales growth of 12.6 percent in fiscal
2001.
Gross profit, as a percentage of sales, for fiscal 2002 improved from 39.0 to 47.1 percent. Most of this increase
was attributable to Tactica’s higher sales. Tactica’s net revenues made up 24.1 percent of our consolidated fiscal 2002
net sales, versus 6.6 percent in fiscal 2001, thus increasing the effect of its relatively high gross margins on consolidated
gross margins. North American segment gross margins also improved from fiscal 2001 to fiscal 2002, primarily because
of a favorable change in the mix of products sold and our ability to source product more efficiently.
11
Gross profit as a percentage of sales rose from 38.0 percent in fiscal 2000 to 39.0 percent in fiscal 2001. The
sales of Tactica contributed significantly to the increase in gross profit. Additionally, gross profit for fiscal 2000 was
reduced by a $2,669,000 pre-tax charge for the write-down of the Company’s artificial nails inventory. The absence of
such a charge in fiscal 2001contributed to that year’s improved gross profit as a percentage of sales. Slightly lower gross
margins on some of the Company’s other North American and International products partially offset factors that increased
fiscal 2001 gross profit margins.
Selling, general and administrative expense
From fiscal 2001 to fiscal 2002, selling, general, and administrative expenses (“SG&A”), expressed as a
percentage of net sales, increased from 32.6 to 37.9 percent. Tactica incurs substantially higher SG&A, as a percentage
of its sales, than do the North American and International segments because of its more extensive use of infomercials
and other forms of advertising. Because Tactica grew significantly during fiscal 2002, both in its sales volume and as
a percentage of our consolidated business, all of its operating statistics, including SG&A as a percentage of sales, became
much more significant to our overall results. This was the primary reason for higher SG&A, as a percentage of sales,
during fiscal 2002. Although its SG&A percentage was higher than the percentages incurred by the other segments,
Tactica’s SG&A declined as a percentage of its sales from fiscal 2001 to fiscal 2002. The main reason for the decline
was a drop in Tactica’s fixed expenses as a percentage of its increased sales. The variable portion of Tactica’s SG&A
expense rose slightly as a percentage of sales, mainly because of higher advertising expense. Excluding Tactica, our
fiscal 2002 SG&A as a percentage of sales was consistent with fiscal 2001, as lower media advertising expenses largely
offset slightly higher personnel, insurance, and inventory storage costs.
SG&A as a percentage of sales decreased to 32.6 percent in fiscal 2001, from 34.7 percent in fiscal 2000.
Excluding Tactica, selling, general, and administrative expenses as a percentage of sales decreased from 34.7 percent
in fiscal 2000 to 29.3 percent in fiscal 2001. Two factors contributed significantly to the decrease. First, because of
fiscal 2001 sales growth, fixed expenses represented a smaller percentage of sales in fiscal 2001 than in fiscal 2000.
Second, in fiscal 2000, we recognized more net expense than in fiscal 2001 in connection with the discontinuance of
certain product lines and certain organizational changes. In fiscal 2000, we incurred $8,725,000 in pre-tax SG&A
expenses related primarily to the discontinuance of our artificial nails business and also to other charges associated with
strategic reorganizations of certain operations. In fiscal 2001, the Company recognized a charge for the discontinuance
of a product line, combined with a benefit from the settlement of a license obligation which, when combined, resulted
in a net $562,000 charge to fiscal 2001 SG&A. Partially offsetting the SG&A items that decreased in fiscal 2001 were
higher media advertising expenditures in the North American segment and the higher levels of SG&A incurred by
Tactica, relative to our other segments.
North American Segment
The North American segment sells hair care and other personal care and comfort appliances, hairbrushes, combs,
and utility and decorative hair accessories in the U.S. and Canada. The North American segment’s main customers are
mass merchandisers, drug chains, warehouse clubs, grocery stores, and beauty supply retailers and wholesalers.
North American segment sales remained relatively constant from fiscal 2001 to fiscal 2002, increasing by less
than one percent. In the retail distribution channel, our new line of Ion hair care appliances and our private label products
produced sales increases. Slight decreases in sales of some of our branded hair care and personal care appliances, as well
as lower sales of brushes, combs and accessories offset partially the sales increases. Sales in the North American
professional distribution channel grew mainly because of new product introductions and the expansion of some of our
larger customers in this channel of distribution. The weakness of the U.S. economy in fiscal 2002, relative to the recent
past, contributed to a difficult North American sales environment. We believe that new product introductions, strong
positioning of our current products, and a healthier U.S. economy should lead to fiscal 2003 North American segment
sales growth in all product categories and distribution channels.
12
The increase in the Company’s fiscal 2001 North American sales, compared to fiscal 2000, was largely due to
the internal development of new products and sales of a new product line. The Company introduced new quiet hair
dryers, a new line of halogen hair care appliances, and a new line of personal spa products, including paraffin baths,
during fiscal 2001. Additionally, sales of home hair clippers and trimmers under the Sunbeam® and Oster® names
helped the Company achieve increased sales in the North American segment during fiscal 2001. Fiscal 2001 was the
first year in which the Company sold hair clippers and trimmers. Sales of certain brush, comb and accessory products
declined in fiscal 2001, partially offsetting the sales growth produced by the segment’s other products.
Operating income generated by the North American segment increased 12.1 percent in the fiscal year ended
February 28, 2002, compared to the same period a year earlier. Expressed as a percentage of sales, the North American
segment’s operating income rose from 9.2 percent to 10.3 percent from fiscal 2001 to fiscal 2002. The improved North
American operating results were primarily the result of higher gross profit margins, arising from favorable changes in
the mix of products sold and our ability to source product more efficiently.
Fiscal 2001 North American segment operating income increased by 191.5 percent over fiscal 2000. Operating
income in the North American segment totaled 9.2 percent of net sales in that segment during fiscal 2001, versus 3.6
percent during fiscal 2000. During fiscal 2000, we recognized $8,725,000 in non-recurring expenses related to the
discontinuance of the artificial nails product line and strategic reorganizations of some of our North American operations.
By contrast, in fiscal 2001, we recognized net expenses of a non-recurring nature totaling $562,000.
International Segment
The International segment sells hair care and other personal care and comfort appliances, hairbrushes, combs,
and utility and decorative hair accessories outside of the U.S. and Canada. The International segment, like the North
American segment, sells primarily to mass merchandisers, drug chains, warehouse clubs, grocery stores, and beauty
supply retailers and wholesalers.
Increased sales in Latin and South America, France, and the United Kingdom (“U.K.”) drove International
segment sales up 17.8 percent during fiscal 2002. The growth in Latin America and South America was attributable to
our successful efforts to increase distribution by expanding our customer base in that geographic area. The net sales
increase in France was due both to the development of relationships with a larger number of customers and the growth
of our business with existing customers. Expanded sales to some of our larger customers in the U.K. drove sales
increases there.
Higher sales in Latin and South America, particularly in Brazil, were the primary factor increasing International
sales during fiscal 2001, relative to fiscal 2000. Sales in Germany and France also grew in fiscal 2001.
Our International segment incurred an operating loss of $244,000 in fiscal 2002, compared to operating income
of $94,000 in fiscal 2001. During fiscal 2002, we experienced collection difficulties with a customer in the Latin and
South American market, as well as several customers in the Middle East. We are currently exploring strategies that might
reduce our credit risk in the Latin and South American market. Such strategies will result in lower Latin and South
American sales volume during the first quarter of and possibly throughout fiscal 2003. In addition to collection
difficulties, inventory markdowns and currency exchange losses contributed to the International segment’s operating loss.
The International segment’s operating profit declined from $835,000 in fiscal 2000 to $94,000 in fiscal 2001.
This decrease in International operating income was largely the result of foreign exchange losses, as the U.S. Dollar
gained substantial strength against foreign currencies, particularly the British Pound Sterling during fiscal 2001.
13
Tactica Segment
We own a 55 percent ownership interest in Tactica International, Inc. (“Tactica”). Tactica sells a variety of
personal care and other products to retailers and to individuals. Tactica uses infomercials and other forms of advertising
extensively. As a result, Tactica incurs higher SG&A expenses, as a percentage of sales, than the North American and
International operating segments.
At the time that we acquired Tactica, we determined that use of the purchase method of accounting and
consolidation was appropriate and we continue to use that method of consolidation. Tactica had accumulated a net deficit
at the time that we acquired our interest in it and the minority shareholders have not adequately guaranteed their portion
of the accumulated deficit. Therefore, our Consolidated Statements of Income for fiscal 2002 and fiscal 2001 include
100 percent of Tactica’s net income and loss, respectively. We will continue to recognize all of Tactica’s net income
or loss until such time as Tactica’s accumulated deficit is extinguished. After that time, our consolidated net earnings
will include 55 percent of Tactica’s net income or loss. We anticipate that Tactica’s accumulated deficit will be
extinguished during the quarter ending August 31, 2002.
During fiscal 2002, Tactica’s net revenues increased to over four times their fiscal 2001 levels. Tactica’s line
of Epil-Stop(cid:226)
hair removal products played the most significant role of any product in its fiscal 2002 sales increase. The
Electrosage™ muscle stimulation / exercise product line and its new Twist-A-Braid™ hair styling accessory also
contributed to higher fiscal 2002 sales. The Tactica segment is selling Epil-Stop(cid:226)
, Electrosage™ and Twist-A-Braid™
to retailers and through direct response media.
Tactica’s operating income of $11,930,000 in fiscal 2002 was a $16,559,000 improvement over its fiscal 2001
operating loss of $4,629,000. Tactica’s improvement in net sales was the primary factor leading to its better operating
results in fiscal 2002. Higher fiscal 2002 revenues produced more gross profit for Tactica and caused its SG&A
expenses, as a percentage of sales, to decrease.
As discussed above, Tactica’s net sales grew substantially in fiscal 2002 from fiscal 2001, comprising 24 percent
and five percent, respectively, of the Company’s consolidated net sales during such periods. In addition, the increase in
Tactica’s sales in fiscal 2002 accounted for 94 percent of the increase in our consolidated sales during this period.
Tactica’s sales in fiscal 2002 were comprised heavily of the Epil-Stop® product line, which has an unproven product life
cycle. Tactica also sells other products that have short life cycles. Furthermore, Tactica relies on television infomercials
and direct response marketing campaigns for the marketing of its products. Accordingly, Tactica’s sales may be more
volatile than the business of our other two segments. The results of our business could be adversely affected by decreases
in sales of Tactica products.
Interest expense and Other income / expense
Interest expense increased by 6.7, or $267,000, percent in fiscal 2002, versus fiscal 2001, due to increased
borrowings under our line of credit during the first three quarters of fiscal 2002. The increase in borrowings was due
to our relatively high levels of inventory purchases early in the year. Such purchases enabled us to obtain products from
suppliers at favorable prices.
Interest expense increased to $3,989,000 in fiscal 2001 from $3,530,000 in fiscal 2000. The capitalization of
interest on the construction of our new U.S. office building during the first two quarters of fiscal 2000 lowered interest
expense for that year. No interest was capitalized during fiscal 2001.
Other income decreased to $1,146,000 in fiscal 2002, compared to $1,883,000 in fiscal 2001. The primary
reason for the decrease was a drop in income from the sale and appreciation of marketable securities from approximately
$1,400,000 in fiscal 2001 to $147,000 in fiscal 2002. Interest income also fell because of lower interest rates and because
of lower cash balances for most of fiscal 2002, versus fiscal 2001.
14
Other income decreased to $1,883,000 in fiscal 2001 from $6,826,000 in fiscal 2000. Lower income from the
sale and appreciation of marketable securities accounted for most of this decrease. Income from the sale and appreciation
of marketable securities was approximately $1,400,000 in fiscal 2001, versus $6,300,000 for fiscal 2000.
Income tax expense
In fiscal 2002 our income tax expense was 24.2 percent of net income before income taxes, as opposed to 17.0
percent in fiscal 2001. The main reason for this change was Tactica. Tactica incurs a total income tax rate of
approximately 45 percent, versus 20 percent for our other two segments combined. Because Tactica produced net income
during fiscal 2002, our effective tax rate rose above 20 percent. The removal during fiscal 2002 of a valuation allowance
from a $1,115,000 deferred tax asset reduced Tactica’s income tax expense below 45 percent for the fiscal year. Fiscal
2001 income tax expense totaled $3,558,000 or 17.0 percent of earnings before income taxes, versus a tax benefit of
$14,000 in fiscal 2000 on $13,097,000 in earnings before income taxes. The Company’s effective tax rate for each of
fiscal 2001 and fiscal 2000 was reduced below rates of approximately 20 percent that it had experienced prior to fiscal
2000. During both fiscal 2001 and fiscal 2000, the Company’s tax rate was reduced by the fact that Helen of Troy
Limited, the Bermuda Corporation, which is not subject to any capital gains or other income tax, holds the consolidated
group’s investments in marketable securities. In addition, the charges associated with the Company’s discontinuance
of its artificial nails product line created tax benefits on the books of a U.S. subsidiary that offset much of the tax expense
associated with the income of non-U.S. subsidiaries.
Liquidity and Capital Resources
During fiscal 2002, we substantially strengthened our financial condition. Our cash balance increased, while
our inventory balance decreased. In addition, at February 28, 2002 we had no borrowings outstanding on our working
capital line of credit, versus a $10,000,000 balance on the same date a year earlier.
Our cash balance increased 147.9 percent to $64,293,000 at February 28, 2002, compared to $25,937,000 at
February 28, 2001. Operating activities provided $52,589,000 of cash during fiscal 2002, compared to using $185,000
during the previous fiscal year. In addition to net income, our successful efforts to reduce inventory balances were
instrumental in the production of cash from operating activities. Investing activities used $5,735,000, due primarily to
our prepayment of approximately $3,000,000 in royalties on an international royalty agreement. Financing activities
used $8,499,000, mainly because we began the year with $10,000,000 borrowed under our line of credit and reduced
that amount to zero by the end of fiscal 2002.
Net accounts receivable increased 8.8 percent from February 28, 2001 to February 28, 2002. The percentage
increase in accounts receivable is substantially less than the 24.9 percent increase in net sales that we achieved during
fiscal 2002. The fiscal 2002 growth in Tactica’s cash sales to consumers, relative to total net sales, was the primary
reason that accounts receivable grew by a smaller percentage than net sales.
Our February 28, 2002 inventory balance totaled $100,306,000, versus $118,544,000 at February 28, 2001, a
15.4 percent decrease. After making substantial purchases during the first half of fiscal 2002 in order to obtain favorable
pricing from suppliers, we engaged in a successful effort to reduce our inventory levels mainly by curtailing inventory
purchases in the second half of fiscal 2002.
Our working capital balance increased to $191,438,000 at February 28, 2002 from $157,809,000 at February
28, 2001. Our current ratio was 4.7 at February 28, 2002, compared to 3.5 at February 28, 2001. The increase in our
current ratio was largely due to the production of cash by our operating activities, lower levels of accounts payable, and
the repayment of borrowings under the working capital line of credit in fiscal 2002. The decrease in accounts payable
is primarily the result of lower levels of inventory purchases.
In connection with its acquisition of a 55 percent interest in Tactica, the Company loaned $3,500,000 to the
15
minority shareholders of Tactica. The interest rate on these loans is 8.75 percent. All principal and unpaid interest on
these loans is due March 14, 2005. The total amounts of principal and accrued interest due to the Company under these
loans were $4,103,000 and $3,826,000 at February 28, 2002 and 2001, respectively. These amounts are included in
“Other assets” on the Consolidated Balance Sheets.
We maintain a revolving credit loan with a bank to facilitate short-term borrowings and the issuance of letters
of credit. This line of credit allows borrowings totaling $25,000,000, incurs interest at the three-month LIBOR rate plus
a percentage that varies based on the ratio of the Company’s debt to its earnings before interest, taxes, depreciation, and
amortization (EBITDA), and expires August 31, 2003. At February 28, 2002 the interest rate charged under the line of
credit was 2.89 percent. This line of credit allows for the issuance of letters of credit up to $7,000,000. Any outstanding
letters of credit reduce the $25,000,000 maximum borrowing limit on a dollar-for-dollar basis. At February 28, 2002,
there were no borrowings under this line of credit and outstanding letters of credit totaled $439,000. The revolving credit
agreement provides that the Company must satisfy requirements concerning its minimum net worth, total debt to
consolidated total capitalization ratio, debt to EBITDA ratio and its fixed charge coverage ratio. The Company is in
compliance with all of these requirements.
Our $55,000,000 of long-term debt is comprised of a group of unsecured Senior Notes with face values totaling
$40,000,000 and an interest rate of 7.01 percent, as well as an unsecured Senior Note with a face value of $15,000,000
and an interest rate of 7.24 percent. We pay interest on these notes each calendar quarter. The $40,000,000 group of
Senior Notes require annual principal payments of $10,000,000 beginning January 5, 2005, with the final payment due
January 5, 2008. The $15,000,000 Senior Note requires annual principal payments of $3,000,000 beginning July 18,
2008, with the final payment due July 18, 2012. The Senior Notes contain covenants that require the Company to meet
certain net worth and other financial requirements. Additionally, the Senior Notes restrict the Company from incurring
liens on any of its properties, except under certain conditions. The Company is in compliance with all the terms of these
notes.
Capital and license expenditures totaled $878,000, $3,185,000, and $8,340,000 in fiscal 2002, 2001, and 2000,
respectively. Our operations are not typically capital intensive. On a normal operating basis, we are likely to incur
approximately $1,000,000 in capital expenditures annually. In fiscal 2000, capital expenditures included $3,788,000
of expenditures associated with the construction of our U.S. office facility. We incurred capitalized license fees of
$1,834,000 and $1,798,000 in fiscal 2001 and 2000, respectively. We are in the process of negotiating the renewal and
modification of certain license agreements, which we expect to complete during fiscal 2003 at aggregate expenditures
during fiscal 2003 of $3,000,000.
Our contractual obligations and commercial commitments as of February 28, 2002 were:
Contractual Obligations
Total
Less than 1
year
1-3 years
4-5 years After 5 years
Payments Due by Period (in 000s)
Long-term debt
Open purchase orders – inventory
Minimum royalty payments
Total contractual obligations
$ 55,000
18,828
49,220
$ 123,048
-
18,828
8,655
27,483
20,000
-
13,621
33,621
10,000
-
13,730
23,730
25,000
-
13,214
38,214
We do not engage in any activities involving special purpose entities or off-balance sheet financing.
Under a September 1999 Board of Directors resolution, the Company may repurchase up to a total of 3,000,000
shares of its Common Stock over a period extending to September 29, 2002. Since the inception of this Common Stock
repurchase program, the Company repurchased a total of 1,342,431 shares of its Common Stock for $8,699,196,
including commissions, or an average price per share of $6.48. No Common Stock was repurchased during fiscal 2002.
16
Based on our current financial condition and current operations, we believe that cash flows from operations and
available financing sources will continue to provide sufficient capital resources to fund the Company’s ongoing liquidity
needs for the foreseeable future. We expect that our capital needs will stem primarily from the needs to purchase
sufficient levels of inventory and to carry normal levels of accounts receivable on our balance sheet. In addition, we
evaluate acquisition opportunities on a regular basis and might augment our internal growth with acquisitions of
complimentary businesses and product lines. We might finance acquisition activity with available cash, the issuance of
stock, or with additional debt, depending upon the size and nature of any such transaction and upon conditions in the
capital markets.
Critical Accounting Policies
The U.S. Securities and Exchange Commission defines critical accounting policies as “those that are both most
important to the portrayal of a company’s financial condition and results, and require management’s most difficult,
subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are
inherently uncertain.” Preparation of our financial statements involves the application of several such policies. These
policies include: consolidation of Tactica International, Inc. (Tactica) under the purchase method, estimates of our
exposure to liability for income taxes in Hong Kong, estimates of credits to be issued to customers for sales that have
already been recorded, the calculation of our allowance for doubtful accounts, and the valuation of inventory on a lower-
of-cost-or-market basis.
Consolidation of Tactica – In March 2000 (fiscal 2001), we acquired a 55 percent interest in Tactica. At that
time, we determined that use of the purchase method of accounting and consolidation was appropriate and we
continue to use that method of consolidation. Because Tactica had accumulated a net deficit at the time that we
acquired our interest in it and because the minority shareholders of Tactica have not adequately guaranteed their
portion of the accumulated deficit, our Consolidated Statements of Income for fiscal 2002 and fiscal 2001
include 100 percent of Tactica’s net income or loss. We will continue to recognize all of Tactica’s net income
or loss until such time as Tactica’s accumulated deficit is extinguished. After that time, our consolidated net
earnings will include 55 percent of Tactica’s net income or loss.
Hong Kong Income Taxes – The Inland Revenue Department (“the IRD”) in Hong Kong assessed tax on certain
profits of the Company’s foreign subsidiaries for the fiscal years 1990 through 1997. The ultimate resolution
of the IRD’s claims cannot be predicted with certainty. However, we have recorded a liability for the IRD’s
claims, based on consultations with outside Hong Kong tax experts as to the probability that some or all of the
IRD’s claims prevail. Such liability is included in “Income taxes payable” on the Consolidated Balance Sheets.
If the IRD’s position were to prevail and it were to assert the same position with respect to fiscal years after
1997, the resulting tax liability could total $30,520,000 (U.S.) for the period from fiscal 1990 through fiscal
2002.
Estimates of credits to be issued to customers – We regularly receive requests for credits from retailers for
returned product or in connection with sales incentives, such as co-operative advertising and volume rebate
agreements. We reduce sales or increase selling, general, and administrative expenses, depending on the nature
of the credits, for estimated future credits to customers. Our estimates of these amounts are based either on
historical information about credits issued, relative to total sales, or on specific knowledge of incentives offered
to retailers.
Allowance for doubtful accounts – From time to time, amounts due from our customers become uncollectible
due to the customers’ inability to pay. We record allowances specifically for customers’ balances based on the
probability that we will not receive payment. When major customers declare bankruptcy, we record an
allowance equal to the amount due from that customer, less the portion of the receivable that we expect to collect
either by selling the receivable in a secondary market or through settlement with the bankruptcy estate.
17
Valuation of inventory – We account for our inventory using a first-in-first-out system in which we record
inventory on our balance sheet at the lower of its cost or its net realizable value. Determination of net realizable
value requires management to estimate the point in time at which an item’s net realizable value drops below its
cost. We regularly review our inventory for slow-moving items and for items that we are unable to sell at prices
above their original cost. When we identify such an item, we reduce its book value to the net amount that we
expect to realize upon its sale. This process entails a significant amount of inherent subjectivity and uncertainty.
In addition to the above policies, several other policies, including policies governing the timing of revenue
recognition, are important to the preparation of our financial statements, but do not meet the definition of critical
accounting policies because they do not involve subjective or complex judgements.
Risk Factors
Competition. The personal care and comfort products industry is extremely competitive. Maintaining and
gaining market share depends heavily upon price, quality, brand name recognition, patents, innovation in the design of
new products and replacement models, and marketing and distribution approaches. We compete with domestic and
international companies, some of which have substantially greater financial and other resources than those of the
Company. We believe that our ability to produce reliable products that incorporate developments in technology and to
satisfy consumer tastes with respect to style and design, as well as our ability to market a broad offering of products in
each applicable category at competitive prices, are keys to our future success. No assurance can be given that we will
be able to successfully compete on the basis of these factors in the future.
Dependence Upon Licenses and Trademarks. A substantial portion of our sales revenue is derived from sales
of products under licensed trademarks. As a result, we are materially dependent upon the continued use of such
trademarks, particularly the VS Sassoon(cid:226)
trademarks. Actions taken by licensors and other third parties
could diminish greatly the value of any of our licensed trademarks. If we were unable to sell products under these
licensed trademarks the effect on our business, financial condition and results of operations could be both negative and
material.
and Revlon(cid:226)
Income Taxes. Currently, we benefit from an international corporate structure that results in relatively low tax
rates on a consolidated basis. If we were to encounter significant changes in the rates or rules imposed by certain key
taxing jurisdictions, such changes could have a material adverse effect on the Company’s financial position and
profitability. In 1994, we engaged in a corporate restructuring that, among other things, resulted in a greater portion of
our income not being subject to taxation in the U.S. If such income were subject to U.S. federal income taxes, our
effective income tax rate would increase materially. Several bills have been introduced recently in the U.S. Congress
that, if enacted into law, could adversely affect our U.S. federal income tax status. At least one of the bills introduced
would apply to companies such as ours that restructured several years ago. That bill could, if enacted into law, subject
a greater portion of our income to U.S. income taxes, thereby reducing our net income. Other bills introduced recently
would exempt restructuring transactions, such as ours, that were completed before certain dates in 2001 and 2002, but
would limit the deductibility of payments made in certain intercompany transactions for U.S. income tax purposes and
would subject gains on certain asset transfers to U.S. income tax. In addition to the legislation introduced in Congress,
the U.S. Treasury Department recently published a study of restructurings such as ours. It is not currently possible to
predict whether the legislation that has been introduced will become law, whether any additional bills will be introduced,
or the consequences of the U.S. Treasury Department’s study. However, there is a risk that new laws in the U.S. could
eliminate or substantially reduce the current income tax benefits of our corporate structure. If this were to occur, such
changes could have a material adverse effect on our financial condition and results of operations.
In addition to potential changes in tax laws, the Company’s position on various tax matters may be challenged,
as is the case with the Hong Kong Inland Revenue Department matter discussed in “Item 3. Legal Proceedings.”
Our ability to maintain our position that the parent company is not a Controlled Foreign Corporation (as defined
under the U.S. Internal Revenue Code) is critical to the tax treatment of our non-U.S. earnings. A Controlled Foreign
18
Corporation is a non-U.S. corporation whose largest U.S. shareholders (i.e., those owning ten percent or more of its stock)
together own more than 50 percent of the stock in such corporation. If a change of ownership of the Company were to
occur such that the parent company became a Controlled Foreign Corporation, such a change could have a material
negative effect on the largest U.S. shareholders and, in turn, on the Company’s business.
International Manufacturing and Operations. All of our products are manufactured by unaffiliated companies,
most of which are in the Far East. Risks associated with such foreign manufacturing include: changing international
political relations; changes in laws, including tax laws, regulations, and treaties; changes in labor laws, regulations, and
policies; changes in customs duties and other trade barriers; changes in shipping costs; currency exchange fluctuations;
local political unrest; and the availability and cost of raw materials and merchandise. To date, these factors have not
significantly affected our production in the Far East. However, any change that impairs our ability to obtain products
from such manufacturers, or to obtain products at marketable rates, could have a material negative effect on our business,
financial condition and results of operations.
Inventory. Because of our reliance on manufacturers in the Far East, our production lead times are relatively
long. Therefore, we must commit to production in advance of customer orders. If we fail to forecast customer or
consumer demand accurately we may encounter difficulties in filling customer orders or in liquidating excess inventories,
or may find that customers are canceling orders or returning products. Distribution difficulties may have an adverse
effect on our business by increasing the amount of inventory and the cost of storing inventory. Additionally, changes
in retailer inventory management strategies could make inventory management more difficult. Any of these results could
have a material adverse effect on our business, financial condition and result of operations.
Newly Acquired Product Lines and Subsidiaries. We may decide to grow our business through the acquisition
of new product lines and businesses. The acquisition of a business or of the rights to market specific products or use
specific product names involves a financial commitment. In the case of an acquisition such commitments are usually
in the form of either cash or stock consideration. In the case of a new license, such commitments could take the form
of license fees, prepaid royalties and future minimum royalty and advertising payments. While our strategy is to acquire
businesses and to develop products that will contribute positively to earnings, there is no guarantee of such results.
Anticipated synergies may not materialize, cost savings may be less than expected, sales of products may not meet
expectations, and acquired businesses may carry unexpected liabilities. Each of these factors could result in a newly
acquired business or product line having a material negative impact on financial condition and results of operations.
Reliance Upon Certain Customers. We are dependent on certain principal customers. Wal-Mart Stores, Inc.,
and one of its affiliates, accounted for approximately 22 percent of the Company’s net sales in fiscal 2002. Our top three
customers accounted for approximately 35 percent of fiscal 2002 net sales. Although we have long-standing relationships
with our major customers, no contracts require these customers to buy from us. A substantial decrease in sales to any of
our major customers could have a material adverse effect on our financial condition and results of operations.
Tactica’s Potential Sales Volatility. Tactica’s net sales grew substantially in fiscal 2002 from fiscal 2001,
comprising 24 percent and five percent, respectively, of the Company’s consolidated net sales during such periods. In
addition, the increase in Tactica’s sales in fiscal 2002 accounted for 94 percent of the increase in our consolidated sales
during this period. Tactica’s sales in fiscal 2002 were comprised heavily of the Epil-Stop® product line, which has an
unproven product life cycle. Tactica also sells other products that have short life cycles. Furthermore, Tactica relies on
television infomercials and direct response marketing campaigns for the marketing of its products. Accordingly,
Tactica’s sales may be more volatile than the business of our other two segments. The results of our business could be
adversely affected by decreases in sales of Tactica products.
Tactica Stockholders’ Agreement. One of our subsidiaries is a party to a stockholders’ agreement with the
former owners of Tactica, who retained a 45 percent interest in Tactica (collectively the “other Tactica stockholders”).
Under the terms of the stockholders' agreement, we have been granted the right to initiate a process whereby we can
purchase, and the other Tactica stockholders are required to sell, the shares they own. In addition, the other Tactica
stockholders have the right to initiate a process regarding the sale of their remaining interest in Tactica. We may elect
19
at our option not to purchase the shares owned by the other Tactica stockholders and under the terms of the stockholders'
agreement the parties will then be required to initiate a procedure under which the entire business of Tactica would be
offered for sale to third parties. In either case, the purchase price will be based upon fair market value as determined by
independent appraisal. A sale to a third party would be subject to the approval of the other Tactica stockholders and us.
In the event that either party exercises its rights under the stockholders’ agreement, our financial position and profitability
could be adversely affected.
U.S. and Worldwide Economic Conditions. Adverse changes in economic conditions that affect consumer
spending or worldwide economic conditions could have a material negative effect on the Company’s financial condition
and results of operations.
Information Relating to Forward-looking Statements
Certain written and oral statements made by our Company and subsidiaries or with the approval of an authorized
executive officer of our Company may constitute “forward-looking statements” as defined under the Private Securities
Litigation Reform Act of 1995. This includes statements made in this report, in other filings with the Securities and
Exchange Commission, in press releases, and in certain other oral and written presentations. Generally, the words
“anticipates,” “believes,” “expects” and other similar words identify forward-looking statements. All statements that
address operating results, events or developments that we expect or anticipate will occur in the future, including
statements related to sales, earnings per share results and statements expressing general expectations about future
operating results, are forward-looking statements. The Company cautions readers not to place undue reliance on
forward-looking statements. Forward-looking statements are subject to risks that could cause such statements to differ
materially from actual results. The Company undertakes no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events, or otherwise.
Factors that could cause actual results to differ from those anticipated include:
•
•
•
•
•
•
•
•
general industry conditions and competition,
credit risks,
the Company’s, or its operating segments’ material reliance on individual customers or small
numbers of customers,
the Company’s material reliance on certain trademarks,
the impact of tax legislation, regulations, or treaties, including proposed legislation in the U.S. that
would affect companies or subsidiaries of companies that have headquarters outside the U.S. and file
U.S. income tax returns,
the impact of other current and future laws, and regulations,
the results of our disagreement with the Hong Kong Internal Revenue Department concerning the
portion of our profits subject to Hong Kong income tax,
any future disagreements with the U.S. Internal Revenue Service or other taxing authority regarding
our assessment of the effects or interpretation of existing tax laws, regulations, or treaties,
risks associated with inventory, including potential obsolescence,
risks associated with new products and new product lines,
risks associated with operating in foreign jurisdictions,
foreign currency exchange losses,
•
•
•
•
• worldwide and domestic economic conditions,
•
•
• management’s reliance on the representations of third parties,
•
risks associated with new business ventures and acquisitions,
•
risks associated with investments in equity securities, and
•
the risks described from time to time in the Company’s reports to the Securities and Exchange
Commission, including this report.
uninsured losses,
reliance on computer systems,
20
New Accounting Guidance
In April 2001, the FASB’s Emerging Issues Task force (“EITF”) reached consensus on EITF Issue 00-25
(“EITF 00-25”), “Vendor Income Statement Characterization of Consideration from a Vendor to a Retailer.” EITF 00-
25 requires vendors who offer certain allowances to customers to characterize those allowances as reductions of net
sales, rather than as selling, general, and administrative expenses (“SG&A”). EITF 00-25 is applicable for fiscal
quarters beginning after December 15, 2001 and requires restatement of prior periods if possible. Had the Company
applied EITF 00-25 its net sales and SG&A in fiscal 2002, 2001, and 2000 would have decreased by $3,023,000,
$2,672,000 and $1,665,000, respectively. EITF 00-25 will be applied beginning in fiscal 2003.
In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards
No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS 133”). SFAS 133 requires that an
entity recognize all derivatives in its financial statements and measure those instruments at fair value. SFAS 133 was
effective for fiscal quarters of fiscal years beginning after June 15, 2000. The adoption of SFAS 133 did not affect the
Company’s Consolidated Financial Statements.
In June 2001, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting
Standards No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”). SFAS 142 is effective for the Company
beginning March 1, 2002. It eliminates the amortization of goodwill and other intangible assets that have indefinite
useful lives. Amortization will continue to be recorded for intangible assets with definite useful lives. SFAS 142 also
requires at least an annual impairment review of goodwill and other intangible assets. Any asset deemed to be impaired
is to be written down to its fair value. In complying with SFAS 142, we will review the goodwill on our Consolidated
Balance Sheets to determine whether it is impaired. We will determine fair values using discounted cash flow analysis.
We estimate that the cumulative effect of adopting SFAS 142 will be a non-cash after-tax charge ranging from $15
million to $20 million in the first quarter of fiscal 2003. We will record this amount as a cumulative effect of an
accounting change. Because it eliminates the amortization of goodwill, SFAS 142 will decrease our SG&A expense by
approximately $2,000,000 in fiscal 2003.
21
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Changes in interest rates and currency exchange rates represent our primary financial market risks. Fluctuation
in interest rates causes variation in the amount of interest that we can earn on our available cash. Our long-term debt is
at fixed rates ranging from 7.01 percent to 7.24 percent. Increases in interest rates do not expose us to risk on this debt.
However, as interest rates drop below the rates on our long-term debt, our interest cost can exceed the cost of capital of
other companies who are borrowing at lower rates of interest.
As mentioned in the “Liquidity and Capital Resources” discussion, interest rates on our revolving credit
agreement vary based on the three-month LIBOR rate and on our ratio of debt to EBITDA. Therefore, the potential for
interest rate increases exposes us to interest rate risk on our revolving credit agreement. That agreement allows maximum
borrowings of $25,000,000. At the end of fiscal 2002, no borrowings were outstanding under this agreement. However,
if the need to borrow under the revolving credit agreement were to arise, higher interest rates would increase the cost of
such debt. We do not currently hedge against interest rate risk.
Because we purchase a substantial majority of our inventory using U.S. dollars, we are subject to minimal foreign
exchange rate risk in purchasing inventory. Sales in countries other than the United Kingdom, Germany, and France are
transacted in U.S. dollars. Our sales in the United Kingdom are transacted in British Pounds and our sales in France and
Germany are invoiced in Euros. Until January 1, 2002, we also transacted sales in France and Germany in French Francs
and German Marks, respectively. When the U.S. dollar strengthens against other currencies in which we transact sales,
we are exposed to foreign exchange losses on those sales because our foreign currency sales prices are not adjusted for
currency fluctuations. In fiscal 2002, our gross sales in currencies other than the U.S. dollar totaled approximately
$22,500,000, converted at average monthly exchange rates. Our fiscal 2002 foreign currency exchange loss totaled
$307,000. We do not currently hedge against foreign currency fluctuations.
The transition in 12 European countries from their local currencies to the Euro on January 1, 2002 did not affect
our business materially. The effect of the transition for us is that sales that would previously have been invoiced in
French Francs or German Marks are now invoiced in Euros.
22
Item 8. Financial Statements and Supplementary Data
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE
Page
Independent Auditors’ Report
Consolidated Financial Statements:
Consolidated Balance Sheets as of February 28, 2002 and 2001
Consolidated Statements of Income for each of the years in the
three-year period ended February 28, 2002
Consolidated Statements of Stockholders’ Equity for each of
the years in the three-year period ended February 28, 2002
Consolidated Statements of Cash Flows for each of the years
in the three-year period ended February 28, 2002
Notes to Consolidated Financial Statements
Financial Statement Schedule –
Schedule II – Valuation and Qualifying Accounts for each of
the years in the three-year period ended February 28, 2002
24
25
27
28
29
31
47
All other schedules are omitted as the required information is included in the consolidated financial statements or
is not applicable.
23
INDEPENDENT AUDITORS’ REPORT
The Board of Directors and Stockholders
Helen of Troy Limited:
We have audited the consolidated financial statements of Helen of Troy Limited and subsidiaries (the Company) as listed
in the index on page 23. In connection with our audits of the consolidated financial statements, we also have audited the
financial statement schedule as listed in the index on page 23. These consolidated financial statements and financial
statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on
these consolidated financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of Helen of Troy Limited and subsidiaries as of February 28, 2002 and February 28, 2001, and the results of their
operations and their cash flows for each of the years in the three-year period ended February 28, 2002, in conformity with
accounting principles generally accepted in the United States of America. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth thereon.
El Paso, Texas
May 3, 2002
KPMG LLP
24
HELEN OF TROY LIMITED
AND SUBSIDIARIES
Consolidated Balance Sheets
February 28, 2002 and 2001
(in thousands, except par value and shares)
Assets
2002
2001
Current assets:
Cash and cash equivalents
Marketable securities, at market value
Receivables – principally trade, less
allowance of $5,794 in 2002 and
$4,081 in 2001
Inventories
Prepaid expenses
Deferred income tax benefits
$ 64,293
145
69,943
100,306
3,256
5,727
25,937
1,956
64,310
118,544
2,516
7,118
Total current assets
243,670
220,381
Property and equipment, at cost less
accumulated depreciation of $11,998 in
2002 and $9,133 in 2001
Goodwill, net of accumulated
amortization of $8,629 in 2002
and $6,594 in 2001
License agreements, at cost less accumulated
amortization of $11,842 in 2002
and $10,676 in 2001
Other assets at cost, net
45,716
47,763
40,767
42,808
6,678
7,844
20,727
18,385
$357,558
337,181
(Continued)
25
HELEN OF TROY LIMITED
AND SUBSIDIARIES
Consolidated Balance Sheets
February 28, 2002 and 2001
(in thousands, except par value and shares)
Liabilities and Stockholders’ Equity
Current liabilities
Notes payable to banks
Accounts payable, principally trade
Accrued expenses:
Advertising and promotional
Other
Income taxes payable
Total current liabilities
Long-term debt
Total liabilities
Stockholders’ equity
Cumulative preferred stock, non-voting, $1.00
par value. Authorized 2,000,000 shares;
none issued
Common stock, $.10 par value. Authorized
50,000,000 shares; 28,196,517 and 28,065,526
shares issued and outstanding at February 28,
2002 and 2001, respectively
Additional paid-in-capital
Retained earnings
Minority interest in deficit of acquired subsidiary
Total stockholders’ equity
Commitments and contingencies
See accompanying notes to consolidated financial statements.
2002
2001
$ -
11,549
5,183
15,369
20,131
52,232
55,000
107,232
10,000
21,003
5,101
8,343
18,125
62,572
55,000
117,572
-
-
2,820
53,424
195,474
(1,392)
250,326
2,806
52,206
169,503
(4,906)
219,609
$ 357,558
337,181
26
HELEN OF TROY LIMITED
AND SUBSIDIARIES
Consolidated Statements of Income
(in thousands, except shares and earnings per share)
Net Sales
Cost of sales
Year Ended the Last Day of February
2002
2001
2000
$451,249
238,859
361,398
220,530
299,513
185,685
Gross profit
212,390
140,868
113,828
Selling, general and administrative
expenses
170,733
117,872
104,027
Operating income
41,657
22,996
9,801
Other income (expense):
Interest expense
Other income, net
(4,256)
1,146
(3,989)
1,883
Total other income (expense)
(3,110)
(2,106)
Earnings before income taxes
38,547
20,890
(3,530)
6,826
3,296
13,097
Income tax expense (benefit)
9,332
3,558
(14)
Net earnings
$ 29,215
17,332
13,111
Earnings per share:
Basic
Diluted
$ 1.04
$ 1.00
.61
.60
.45
.44
Weighted average number of common
shares used in computing net earnings per share
Basic
Diluted
28,089,072
29,198,972
28,420,073
28,728,762
29,052,788
29,885,260
See accompanying notes to consolidated financial statements.
27
HELEN OF TROY LIMITED
AND SUBSIDIARIES
Consolidated Statements of Stockholders’ Equity
Years ended last day of February 2002, 2001 and 2000
(in thousands)
Balances, February 28, 1999
Exercise of common stock
options, net
Issuance of common stock
in connection with employee
stock purchase plan
Net issuance of (recovery) common
stock in connection with
Acquisitions
Acquisition and retirement
of common stock
Net earnings
Common
Stock
$ 2,905
Additional
Paid-In
Capital
Retained
Earnings
$ 53,750
$ 143,187
Minority
Interest in
Deficit of
Acquired
Subsidiary
$ -
Total
Stockholders’
Equity
$ 199,842
16
4
12
913
360
-
-
-
-
929
364
(558)
-
-
(546)
(53)
-
(971)
-
(3,052)
13,111
-
-
(4,076)
13,111
Balances, February 29, 2000
$ 2,884
53,494
153,246
-
209,624
Exercise of common stock
options, net
Issuance of common stock
in connection with employee
stock purchase plan
Acquisition and retirement
of common stock
Minority interest in deficit of
1
3
52
168
-
-
-
-
-
53
171
(4,623)
(82)
(1,508)
(3,033)
acquired subsidiary at date of acquisition
Net earnings
-
-
-
-
-
19,290
(2,948)
(1,958)
(2,948)
17,332
Balances February 28, 2001
Exercise of common stock
options, net
Issuance of common stock
in connection with employee
stock purchase plan
Capital contribution to subsidiary by minority
shareholders
Net earnings
$ 2,806
52,206
169,503
(4,906)
219,609
10
4
710
178
-
-
-
-
720
182
-
-
330
-
-
25,971
270
3,244
600
29,215
Balances February 28, 2002
$ 2,820
$ 53,424
$ 195,474
$ (1,392)
$ 250,326
See accompanying notes to consolidated financial statements.
28
HELEN OF TROY LIMITED
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(in thousands)
Cash flows from operating activities:
Net earnings
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation and amortization
Provision for doubtful receivables
Deferred taxes, net
Purchases of marketable securities
Proceeds from sales of marketable securities
Realized gain – trading securities
Unrealized (gain) loss – trading securities
Loss on disposal of property, plant and
equipment
Impairment of asset held for sale
Other non-cash adjustments to income
Changes in operating assets and liabilities:
Accounts receivable
Inventory
Prepaid expenses
Accounts payable
Accrued expenses
Income taxes payable
Years Ended Last Day of February
2002
2001
2000
$ 29,215
17,332
13,111
8,630
2,153
1,391
(431)
2,407
(777)
612
17
-
-
(7,786)
18,238
(740)
(9,454)
7,108
2,006
8,137
1,003
(2,148)
(1,579)
2,006
(688)
(701)
-
158
2,457
(12,053)
(20,011)
1,483
8,240
(8,892)
5,071
6,921
559
(1,112)
(16,340)
21,530
(6,265)
81
-
650
1,783
6,324
(6,671)
(1,871)
4,703
5,827
(600)
Net cash provided (used) by operating
activities
52,589
(185)
28,630
Cash flows from investing activities:
Capital and license expenditures
Cash paid for acquisitions, net of cash acquired
Proceeds from sales of property, plant, and
equipment
Increase in other assets
Net cash used by investing
activities
(878)
-
43
(4,900)
(3,185)
(2,205)
-
(7,904)
(8,340)
(1,798)
-
(4,589)
(5,735)
(13,294)
(14,727)
(Continued)
29
HELEN OF TROY LIMITED
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(in thousands)
Years Ended Last Day of February
2002
2001
2000
Cash flows from financing activities:
Net proceeds from (payments on) short-term borrowings
Payments on long-term debt
Capital contribution to subsidiary by minority shareholders
Proceeds from exercise of stock options, net
Common stock repurchases
(10,000)
-
600
902
-
10,000
(450)
-
224
(4,623)
(10,000)
-
-
747
(4,076)
Net cash (used in) provided by financing activities
(8,498)
5,151
(13,329)
Net increase (decrease) in cash and cash equivalents
38,356
(8,328)
574
Cash and cash equivalents, beginning
of year
25,937
34,265
33,691
Cash and cash equivalents, end of year
$ 64,293
25,937
34,265
Supplemental cash flow disclosures:
Interest paid
Income taxes paid (net of refunds)
$ 4,278
$ 5,776
3,982
1,015
4,210
1,177
See accompanying notes to consolidated financial statements.
30
HELEN OF TROY LIMITED
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Policies
(a) General
Helen of Troy Limited, a Bermuda company, and its subsidiaries (the “Company”) design, develop, import, and
distribute hair care appliances, hairbrushes, combs, hair accessories and other personal care products. The
Company purchases its products from unaffiliated manufacturers most of which are located in The People’s
Republic of China, Thailand, Taiwan and South Korea.
The consolidated financial statements are prepared in U.S. dollars and in accordance with accounting principles
generally accepted in the United States of America. These principles require management to make estimates
and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and the disclosure
of contingent assets and liabilities. Actual results could differ from those estimates.
(b) Consolidation
The consolidated financial statements include the accounts of Helen of Troy Limited and its subsidiaries,
including Tactica International, Inc. (“Tactica”), a subsidiary in which the Company acquired a 55 percent
interest in fiscal 2001. The Company’s consolidated net income includes and will continue to include one
hundred percent of Tactica’s net income or loss until such time as the minority interest in Tactica’s
accumulated deficit has been extinguished. Intercompany balances and transactions have been eliminated in
consolidation.
(c) Revenue recognition
The Company recognizes revenues when it ships its product to customers. Customers at times request credits
for returned product or in connection with incentives such as co-operative advertising agreements. The
Company reduces sales or increases selling, general, and administrative expenses, depending on the nature
of the credits, for estimated future credits to customers. Management bases such estimates either on historical
information about credits issued, relative to total sales, or on specific knowledge of incentives offered to
retailers.
(d) Inventories
The Company accounts for its inventory using a first-in-first-out system in which it records inventory on its
balance sheet at the lower of its cost or its net realizable value. Determination of net realizable value requires
management to estimate the point in time at which an item’s value drops below its cost and the dollar amount
of the item’s net realizable value. The Company regularly reviews its inventory for slow-moving items and
for items that it is unable to sell at prices above their original cost. When it identifies such an item, the
Company reduces its book value to the amount that it expects to realize upon sale of that item.
(e) Valuation of accounts receivable
The allowance for doubtful accounts reflects the Company’s best estimate of probable losses, determined
principally on the basis of historical experience and specific allowances for known troubled accounts.
(f) Property and equipment
Property and equipment are stated at cost. Depreciation is recorded on a straight-line basis over the estimated
useful lives of the assets.
31
HELEN OF TROY LIMITED
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Policies, continued
(g) License agreements
A substantial majority of the Company’s sales are made subject to license agreements with the licensors of the
VS Sassoon(cid:226)
, Revlon®, Sunbeam® and Dr. Scholl’s® trademarks. The Company amortizes the acquisition
costs of the existing license agreements on a straight-line basis over the lives of the respective agreements.
Net sales subject to license agreements comprised 55 percent, 72 percent, and 73 percent of total net sales
for fiscal years 2002, 2001, and 2000, respectively. Royalty expense under the Company’s license
agreements is recognized as it is incurred.
(h) Income taxes
The Company uses the asset and liability method to account for income taxes. Deferred income tax assets and
liabilities are recognized for the future tax consequences of temporary differences between the book and tax
bases of various assets and liabilities. Generally, deferred tax assets represent future income tax reductions
while deferred tax liabilities represent income taxes that the Company expects to pay in the future. The
Company measures deferred tax assets and liabilities using enacted tax rates for the years in which it expects
that temporary differences will reverse or be settled. Changes in tax rates affect the carrying values of
deferred tax assets and liabilities. The effects of tax rate changes are recognized in the periods in which they
are enacted.
(i) Earnings per Share
Basic earnings per share is computed based upon the weighted average number of common shares outstanding
during the period. Diluted earnings per share is computed based upon the weighted average number of
common shares plus the effects of potentially dilutive securities. The number of potentially dilutive securities
was 1,109,900; 308,689; and 832,472 for fiscal years 2002, 2001, and 2000, respectively. Dilutive securities
for the year ended February 28, 2002 consisted entirely of stock options. Dilutive securities for the years
ended February 28, 2001 and February 29, 2000 included 258,084 and 739,615 shares, respectively,
attributable to dilutive stock options, as well as 50,605 and 92,857 shares, respectively, contingently issuable
as part of an acquisition. Options to purchase common stock that were outstanding but not included in the
computation of earnings per share because the exercise prices of such options were greater than the average
market price of the Company’s common stock totaled 2,794,900; 4,319,762; and 3,786,612 for fiscal 2002,
2001, and 2000, respectively.
(j) Cash Equivalents
The Company considers all highly liquid debt instruments purchased with an original maturity of three months
or less to be cash equivalents.
(k) Foreign Currency Transactions
The U.S dollar is the Company’s functional currency. All of Helen of Troy Limited’s non-U.S. subsidiaries’
transactions involving other currencies have been re-measured in U.S. dollars using average exchange rates
for the months in which the transactions occurred. Changes in exchange rates that affect cash flows and the
related receivables or payables are recognized as transaction gains and losses in the determination of net
earnings.
32
HELEN OF TROY LIMITED
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Policies, continued
(l) Advertising
Advertising costs are expensed in the fiscal year in which they are incurred. During the fiscal years ended
February 28, 2002, February 28, 2001 and February 29, 2000, the Company charged $49,261,000,
$31,675,000, and $18,527,000, respectively, of advertising costs to selling, general, and administrative
expenses.
(m) Warranties
The Company’s products are under warranty against defects in material and workmanship for a maximum of two
years. The Company has established an accrual of approximately $3,428,000, $2,946,000 and $2,868,000
as of February 28, 2002, February 28, 2001 and February 29, 2000, respectively, to cover future warranty
costs.
(n) Long-Lived Assets
The Company reviews long-lived assets and certain identifiable intangibles for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability
of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash
flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to
be recognized is measured as the amount by which the carrying amount of the assets exceeds the fair value
of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs
to sell.
Intangible assets consist primarily of goodwill, license agreements and trademarks. The Company amortizes
intangible assets using the straight-line method over appropriate periods ranging from five to forty years. The
Company recorded amortization of intangible assets totaling $5,765,000, $5,292,000, and $4,527,000 during
fiscal 2002, 2001, and 2000, respectively.
The Company assesses the recoverability of goodwill by determining whether the amortization of the asset
balance over its remaining life can be recovered through undiscounted future operating cash flows of the
acquired operation. The amount of impairment, if any, is measured based on projected discounted future
operating cash flows. The discount rate used would be based on the Company’s cost of capital. Beginning
in fiscal 2003, the Company will apply the provisions of Statement of Financial Accounting Standards No.
142 (“SFAS 142”), “Goodwill and Other Intangible Assets,” in assessing the valuation of its goodwill. See
the section of this footnote entitled “New Accounting Guidance” for a discussion of the implications of SFAS
142.
(o) Interest Income
Interest income is included in “Other income, net” on the Consolidated Statements of Income. Interest income
totaled $727,000, $931,000, and $987,000 in fiscal 2002, 2001, and 2000, respectively.
(p) Financial Instruments
The carrying amounts of cash and cash equivalents, receivables, accounts payable, accrued expenses and income
taxes payable approximate fair value because of the short maturity of these items. See note 4 for
management’s assessment of the fair value of the Company’s guaranteed Senior Notes.
33
HELEN OF TROY LIMITED
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Policies, continued
(q) Stock-based Compensation Plans
Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation,”
encourages, but does not require companies to record compensation expense for stock-based compensation
plans at fair value. The Company has chosen to account for its stock-based compensation plans using the
intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, “Accounting for Stock
Issued to Employees,” and related interpretations. Accordingly, the Company recognizes no expense in
connection with its stock-based compensation plans, as all stock option grants are made at market value on
the date of grant. Income tax benefits attributable to stock options exercised are credited to Additional paid-
in capital.
(r) New Accounting Guidance
In April 2001, the Financial Accounting Standards Board’s (“FASB’s”) Emerging Issues Task force (“EITF”)
reached consensus on EITF Issue 00-25 (“EITF 00-25”), “Vendor Income Statement Characterization of
Consideration from a Vendor to a Retailer.” EITF 00-25 requires vendors who offer certain allowances
to customers to characterize those allowances as reductions of net sales, rather than as selling, general, and
administrative expenses (“SG&A”). EITF 00-25 is applicable for fiscal quarters beginning after December
15, 2001 and requires restatement of prior periods if possible. Had the Company applied EITF 00-25 its
net sales and SG&A in fiscal 2002, 2001, and 2000 would have decreased by $3,023,000, $2,672,000 and
$1,665,000, respectively. EITF 00-25 will be applied beginning in fiscal 2003.
In June 1998, the FASB issued Statement of Financial Accounting Standards No. 133, “Accounting for
Derivative Instruments and Hedging Activities” (“SFAS 133”). SFAS 133 requires that an entity recognize
all derivatives in its financial statements and measure those instruments at fair value. SFAS 133 was
effective for fiscal quarters of fiscal years beginning after June 15, 2000. The adoption of SFAS 133 did
not affect the Company’s Consolidated Financial Statements.
In June 2001, the FASB issued Statement of Financial Accounting Standards No. 142, “Goodwill and Other
Intangible Assets” (“SFAS 142”). SFAS 142 is effective for the Company beginning March 1, 2002. It
eliminates the amortization of goodwill and other indefinite intangible assets. Amortization will continue
to be recorded for intangible assets with definite useful lives. SFAS 142 also requires at least an annual
impairment review of goodwill and other intangible assets. Any asset deemed by such analysis to be
impaired is to be written down to its fair value. In complying with SFAS 142, the Company will review
the goodwill on its Consolidated Balance Sheets to determine whether it is impaired. Fair values will be
determined using discounted cash flow analysis. The Company estimates that the cumulative effect of
adopting SFAS 142 will be a non-cash after-tax charge ranging from $15 million to $20 million in the first
quarter of fiscal 2003. This amount will be recorded as a cumulative effect of an accounting change.
Because it eliminates the amortization of goodwill, SFAS 142 will decrease the Company’s SG&A expense
by approximately $2,000,000 in fiscal 2003.
34
HELEN OF TROY LIMITED
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(2) Property and Equipment
A summary of property and equipment is as follows:
Estimated
Useful Lives
(Years)
As of February 28,
2002
2001
Land
Building and improvements
Computer and other equipment
Transportation equipment
Furniture and fixtures
-
20–40
3 – 5
3 – 5
5–15
Less accumulated depreciation
Property and equipment, net
$10,157
29,315
10,416
862
6,964
57,714
(11,998)
$ 45,716
10,157
29,242
9,809
897
6,791
56,896
(9,133)
47,763
The Company recorded $2,865,000, $3,003,000, and $2,394,000 of depreciation expense for fiscal 2002, 2001, and
2000, respectively. Capital expenditures totaled $878,000, $1,351,000, and $8,340,000 in fiscal 2002, 2001,
and 2000, respectively.
The Company recognized a $650,000 impairment charge during fiscal 2000 and an additional $158,000 charge
during the fourth quarter of fiscal 2001. These amounts represent the estimated excess of the carrying amount
over the estimated net realizable value of the Company’s former El Paso, Texas office facility and warehouse.
The former office facility was sold during fiscal 2002, is classified as an asset held for sale and is included in
the heading “Other assets” on the accompanying February 28, 2001 Consolidated Balance Sheet. The carrying
value of the former warehouse is included in the heading “Other assets” on the accompanying February 28, 2002
and February 28, 2001 Consolidated Balance Sheets.
During fiscal 2000 the Company capitalized $721,000 of interest in connection with the construction of a new office
facility. No interest was capitalized in fiscal 2002 or fiscal 2001.
The Company leases 108,000 square feet of warehouse space, as well as various administrative office spaces, from
a real estate partnership in which the Chief Executive Officer and another member of the Board of Directors
are limited partners. During fiscal 2002 the Company paid the real estate partnership $624,000 under these
leases.
35
HELEN OF TROY LIMITED
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(3) Notes Payable
The Company maintains a revolving credit loan with a bank to facilitate short-term borrowings and the issuance of
letters of credit. This line of credit allows borrowings totaling $25,000,000, charges interest at the three-month
LIBOR rate plus a percentage that varies based on the ratio of the Company’s debt to its earnings before interest,
taxes, depreciation, and amortization (EBITDA), and expires August 31, 2003. At February 28, 2002 the interest
rate charged under the line of credit was 2.89 percent. This line of credit allows for the issuance of letters of
credit up to $7,000,000. Any outstanding letters of credit reduce the $25,000,000 maximum borrowing limit
on a dollar-for-dollar basis. At February 28, 2002, there were no borrowings under this line of credit and
outstanding letters of credit totaled $439,000. The revolving credit agreement provides that the Company must
satisfy requirements concerning its minimum net worth, total debt to consolidated total capitalization ratio, debt
to EBITDA ratio, and its fixed charge coverage ratio. The Company is in compliance with all of these
requirements.
(4) Long-Term Debt
On January 5, 1996, a U.S. subsidiary issued guaranteed Senior Notes at face value of $40,000,000. Interest is paid
quarterly at a rate of 7.01%. The Senior Notes are unsecured, and are guaranteed by Helen of Troy Limited and
certain of its subsidiaries. Annual principal payments of $10,000,000 each begin January 5, 2005, with the final
payment due January 5, 2008. Using a discounted cash flow analysis based on estimated market rates, the
estimated fair value of the guaranteed Senior Notes at February 28, 2002 is approximately $41,119,000.
On July 18, 1997, a U.S. subsidiary of the Company issued a $15,000,000 Senior Note. Interest is paid quarterly
at a rate of 7.24%. The $15,000,000 Senior Note is unsecured, is guaranteed by Helen of Troy Limited and
certain of its subsidiaries and is due July 18, 2012. Annual principal payments of $3,000,000 each begin July
18, 2008, with the final payment due July 18, 2012. Using a discounted cash flow analysis based on estimated
market rates, the estimated fair value of the guaranteed Senior Note at February 28, 2002 is approximately
$15,818,000.
Both the $40,000,000 and $15,000,000 Senior Notes contain covenants that require the Company to meet certain
net worth and other financial requirements. Additionally, the notes restrict the Company from incurring liens
on any of its properties, except under certain conditions as defined in the Senior Note agreements. The Company
is in compliance with all the terms of these notes.
36
HELEN OF TROY LIMITED
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(5) Income Taxes
The components of earnings before income tax expense are as follows:
Years ended the last day of February
(in thousands)
2002
2001
2000
$ 17,762
20,785
$ 38,547
4,524
16,366
20,890
(5,725)
18,822
13,097
U.S.
Non-U.S.
The components of income tax expense (benefit) are as follows:
Current
U.S.
Non-U.S.
Deferred
2002 2001
2000
$ 6,252
1,689
1,391
$ 9,332
2,990
2,716
(2,148)
3,558
(182)
1,280
(1,112)
(14)
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:
Expected tax expense at the U.S.
statutory rate of 35%
Decrease in income taxes resulting
from income from non-U.S.
operations subject to
varying income tax rates
Actual tax expense
Years ended the last day of February
(in thousands)
2002
2001
2000
$ 13,491
7,312
4,584
(4,159)
$ 9,332
(3,754)
3,558
(4,598)
(14)
37
HELEN OF TROY LIMITED
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(5) Income Taxes, continued
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and
liabilities at February 28, 2002 and 2001 are as follows:
Deferred tax assets:
2002
2001
(in thousands)
Net operating loss carryforwards
Inventories, principally due to additional
cost of inventories for tax purposes
Accrued expenses
Accounts receivable
Total gross deferred tax assets
Valuation allowance
Deferred tax liabilities:
Depreciation and amortization
Net deferred tax asset
$ 1,510
2,164
2,246
2,679
8,599
(1,076)
(1,796)
$ 5,727
1,615
1,287
3,557
2,926
9,385
(1,627)
(640)
7,118
The Company’s U.S. net operating loss carryforward of $1,248,000 expires if not utilized by fiscal 2019.
Accounting standards require that deferred income taxes reflect the tax consequences of future tax benefits,
including net operating losses, to the extent that realization of such benefits is more likely than not. Certain of
the Company’s gross deferred tax assets did not, in the opinion of management, meet that standard as of
February 28, 2002 and 2001. Therefore, the Company placed a valuation allowance against those assets.
Although realization is not assured, management believes it is more likely than not that the remaining net
deferred tax assets, including net operating losses, will be realized. The amount of the deferred tax assets
considered realizable, however, could be lower if estimates of future taxable income during the carryforward
period are reduced.
The Hong Kong Inland Revenue Department (“the IRD”) has assessed income tax on certain profits of the
Company’s foreign subsidiaries for the fiscal years 1990 through 1997. The ultimate resolution of the IRD’s
claims cannot be predicted with certainty. However, the Company has recorded a liability for the IRD’s claims,
based on consultations with outside Hong Kong tax experts as to the probability that some or all of the IRD’s
claims prevail. If the IRD’s position were to prevail the resulting tax liability could total $30,520,000 (U.S.)
for the period from fiscal 1990 through fiscal 2002. In connection with the IRD’s tax assessment, the Company
purchased tax reserve certificates in Hong Kong. The certificates were valued at $5,750,000 (U.S.) as of
February 28, 2002. The $5,750,000 represented approximately 50 percent of the liability assessed by the IRD
for fiscal 1990 through 1997. Tax reserve certificates represent the prepayment of potential tax liabilities by
a taxpayer. The amounts paid for tax reserve certificates are refundable in the event that the value of the tax
reserve certificates exceeds the related tax liability. These certificates are denominated in Hong Kong dollars
and are subject to the risks associated with foreign currency fluctuations. Although the ultimate resolution of
the IRD’s claims cannot be predicted with certainty, management believes that adequate provision has been
made in the financial statements for the resolution of the IRD’s claims.
38
HELEN OF TROY LIMITED
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(5) Income Taxes, continued
The Internal Revenue Service (“IRS”) is examining the U.S. federal tax returns of the Company’s largest domestic
subsidiary for the fiscal years 1997, 1998 and 1999. To date, the IRS has proposed no adjustments. Although
the ultimate outcome of the examination cannot be predicted with certainty, management is of the opinion that
adequate provision has been made in the financial statements for the estimated effect of the examination.
The Company plans to permanently reinvest all of the undistributed earnings of the non-U.S. subsidiaries of the
U.S. subsidiaries. The Company has made no provision for U.S. federal income taxes on these undistributed
earnings. At February 28, 2002, undistributed earnings for which the Company had not provided deferred U.S.
federal income taxes totaled $50,244,000.
(6) Stock-Based Compensation Plans
The Company sponsors four stock-based compensation plans. The plans consist of two employee stock option
plans, a non-employee director stock option plan and an employee stock purchase plan. These plans are
described below. As all options were granted at or above market prices on the dates of grant, no compensation
expense has been recognized for the Company’s stock option plans or its stock purchase plan. Had the
Company recorded compensation expense for its stock option plans based on the fair value of the options at
the dates of grant for those awards, consistent with the method of Statement of Financial Accounting Standards
No. 123, “Accounting For Stock-Based Compensation,” net income and earnings per share would have been
reduced to the following pro forma amounts:
Years Ended the last day of February
2001
2002
2000
Net Income:
Earnings per share:
As Reported
Pro forma
$ 29,215,000
21,799,000
17,332,000
12,502,000
13,111,000
5,054,000
Basic: As Reported
Pro forma
Diluted:As Reported
Pro forma
$ 1 .04
$ .78
$ 1.00
$ .75
.61
.44
.60
.44
.45
.17
.44
.17
The Company computed the pro forma figures disclosed above using the Black-Scholes option pricing model with
the following weighted-average assumptions used for grants in fiscal 2002, 2001, and 2000, respectively;
expected dividend yields of zero for all years; expected volatility of 40.8 percent for fiscal 2002, 34.9 percent
for fiscal 2001, and 27.4 percent for fiscal 1999; risk-free interest rates of 4.7 percent for fiscal 2002, 4.9
percent for fiscal 2001, and 6.6 percent for fiscal 2000; and expected lives of 3, 4, 5 or 10 years depending
on the option granted.
39
HELEN OF TROY LIMITED
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(6) Stock-Based Compensation Plans, continued
Under stock option and restricted stock plans adopted in 1994 and 1998 (the “1994 Plan” and the “1998 Plan,”
respectively) the Company reserved a total of 14,000,000 shares of its common stock for issuance to key
officers and employees. Pursuant to the 1994 and 1998 Plans, the Company grants options to purchase its
common stock at a price equal to or greater than the fair market value on the grant date. Both plans contain
provisions for incentive stock options (“ISOs”), non-qualified stock options (“Non-Qs”) and restricted stock
grants. Generally, options granted under the 1994 and 1998 Plans become exercisable immediately, or over
a one, four or five-year vesting period and expire on a date ranging from seven to ten years from their date of
grant.
Under a stock option plan for non-employee directors (the “Directors’ Plan”), adopted in fiscal 1996, the Company
reserved a total of 480,000 shares of its common stock for issuance to non-employee members of the Board
of Directors. The Company grants options under the Directors’ Plan at a price equal to the fair market value
of the Company’s common stock at the date of grant. Options granted under the Directors’ Plan vest one year
from their date of issuance and expire ten years after issuance.
A summary of stock option activity under all plans is as follows:
Years Ended the last day of February
2002
2001
2000
Weighted
Average
Exercise
Price
$10.52
10.26
6.57
10.25
10.53
$ 9.96
Shares
(000s)
6,203
1,353
(108)
(125)
7,323
5,870
Weighted
Average
Exercise
Price
$11.96
5.95
4.31
14.78
10.52
$ 9.01
Shares
(000s)
5,441
1,273
(12)
(499)
6,203
4,362
Weighted
Average
Exercise
Price
$11.53
12.16
4.72
8.95
11.96
9.54
Shares
(000s)
4,393
1,386
(146)
(192)
5,441
3,032
$ 5.72
$ 3.00
6.40
Options outstanding,
beginning of year
Options granted
Options exercised
Options forfeited
Options outstanding, at
year end
Options exercisable at year-end
Weighted-average fair value of
options granted during
the year
40
HELEN OF TROY LIMITED
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(6) Stock-Based Compensation Plans, continued
The following table summarizes information about stock options at February 28, 2002:
Outstanding Stock Options
Exercisable Stock Options
ISOs
Total
Non-Qs
Total
Number of
Options
224,054
173,077
164,992
562,123
2,834,272
3,606,643
6,440,915
Price Range
$4.13 to $6.35
$6.75 to $11.67
$12.13 to $23.91
$4.13 to $9.17
$10.00 to $20.00
Directors’ Plan
Total
140,000
180,000
320,000
$4.41 to $10.75
$12.53 to $17.63
Weighted-
Average
Remaining
Contractual
Life (years)
6.30
6.56
4.71
5.91
6.15
7.24
6.76
8.35
6.27
7.18
Weighted-
Average
Exercise
Price
$ 5.49
8.46
13.66
$ 8.80
Number of
Options
51,830
40,177
74,241
166,248
$ 5.64
14.49
$ 10.59
2,763,072
2,700,669
5,463,741
$ 8.21
15.64
$ 12.39
80,000
160,000
240,000
Weighted –
Average
Exercise
Price
$ 4.69
9.25
14.10
$ 9.99
$ 5.63
14.09
$ 9.81
$ 7.78
16.02
$13.28
In fiscal 1999 the Company’s shareholders approved an employee stock purchase plan (the “Stock Purchase Plan”)
under which 500,000 shares of common stock are reserved for issuance to the Company’s employees, nearly
all of whom are eligible to participate. Under the terms of the Stock Purchase Plan employees authorize the
Company to withhold from 1 percent to 15 percent of their wages or salaries to purchase the Company’s
common stock. The purchase price for stock purchased under the plan is equal to the lower of 85 percent of
the stock’s fair market value on either the first day of each option period or the last day of each period. During
fiscal 2002, employees purchased 22,341 shares of common stock from the Company under the stock purchase
plan.
41
HELEN OF TROY LIMITED
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(7) Commitments and Contingencies
The Company has employment contracts with certain of its officers. These agreements provide for minimum
salary levels and potential incentive bonuses. One agreement automatically renews itself each month for a five
year period and provides that in the event of a merger, consolidation or transfer of all or substantially all of
the assets of the Company to an unaffiliated party, the officer may make an election to receive a cash payment
for the balance of the obligations under the agreement. The expiration dates for these agreements range from
March 15, 2003 to February 28, 2007. The aggregate commitment for future salaries pursuant to such
contracts, at February 28, 2002, excluding incentive compensation, was approximately $4,000,000.
Many of the license agreements under which the Company sells or intends to sell products with trademarks owned
by other entities require the Company to pay minimum royalties, meet minimum sales volumes and make
minimum levels of advertising expenditures. Minimum royalties due under these agreements during fiscal
2003 total $8,655,000.
The Company purchases most of the appliances and products that it sells from unaffiliated manufacturers located
in the Far East, principally in the Peoples’ Republic of China, Thailand, Taiwan and South Korea. Due to the
fact that most of its products are manufactured in the Far East, the Company is subject to risks associated with
trade barriers, currency exchange fluctuations and political unrest. These risks have not historically affected
the Company’s operations. Additionally, the Company’s management believes that it could obtain its products
from facilities in other countries, if necessary. However, the relocation of production capacity could require
substantial time and could result in increased costs.
In the fourth quarter of fiscal 2001, the Company recorded a $2,457,000 charge for the remaining unamortized
costs under a distribution agreement (which was later formally terminated) with The Schawbel Corporation
(“Schawbel”), the supplier of the Company’s butane hair care products. In a related matter, in September
1999, Schawbel commenced litigation in the U.S. District Court for the District of Massachusetts against The
Conair Corporation (“Conair”), the predecessor distributor for Schawbel’s butane products. In its action,
amended in June 2000, Schawbel alleged, among other things, that Conair, following Schawbel’s termination
of the Conair distribution agreement, stockpiled and sold Schawbel product beyond the 120 day “sell-off”
period afforded under the agreement, and manufactured, marketed and sold its own line of butane products
which infringed patents held by Schawbel. In November 2000, the Massachusetts court granted Schawbel its
request for preliminary injunction, and ordered that Conair cease selling all allegedly infringing products. The
Company intervened as a plaintiff in the action to assert claims against Conair similar to the claims raised by
Schawbel. The Company is seeking to recover damages in excess of $10 million, arising from the Company’s
inability to meet minimum purchase requirements under its distribution agreement with Schawbel and the
subsequent termination of that agreement by Schawbel. Conair responded by filing a counterclaim alleging
that the Company conspired with Schawbel to unlawfully terminate Conair’s distribution agreement with
Schawbel, and to disparage Conair’s reputation in the industry. The counterclaim seeks $15 million in
damages. Although the ultimate outcome of the matter cannot be predicted, the Company contends that
Conair’s counterclaims lack validity. The Company intends to pursue vigorously its claims and defense in the
litigation.
The Company is also involved in various other legal claims and proceedings in the normal course of operations.
The Company is insured for substantially all of the various claims in which it is involved. In the opinion of
42
HELEN OF TROY LIMITED
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(7) Commitments and Contingencies, continued
management, the outcome of these matters will not have a material adverse effect on the consolidated financial
position, results of operations or liquidity of the Company and its subsidiaries.
Under the terms of a Shareholders’ Rights Plan approved by the Board of Directors in fiscal 1999, the Board
of Directors declared a dividend of one preference share right (“Right”) for each outstanding share of Common
Stock. The dividend resulted in no cash payment by the Company, created no liability on the part of the
Company and did not change the number of shares of Common Stock outstanding. The Rights are inseparable
from the shares of Common Stock and entitle the holders to purchase one one-thousandth of a share of Series
A First Preference Shares (“Preference Shares”), par value $1.00, at a price of $100 per one-one thousandth
of a Preference Share. Should certain persons or groups of persons (“Acquiring Persons”) acquire more than
15% of the Company’s outstanding Common Stock, the Board of Directors may either adjust the price at
which holders of Rights may purchase Preference Shares or may redeem all of the then outstanding Rights at
$.01 per Right. The Rights associated with the Acquiring Person’s shares of Common Stock would not be
exercisable. The Rights have certain anti-takeover effects. The Rights could cause substantial dilution to a
person or group that attempts to acquire the Company in certain circumstances, but should not interfere with
any merger or other business combination approved by the Board of Directors. The Rights expire December
1, 2008, unless their expiration date is advanced or extended or unless the Rights are earlier redeemed or
exchanged by the Company.
On September 29, 1999, the Company’s Board of Directors approved a resolution authorizing the Company to
purchase, in open market or private transactions, up to 3,000,000 shares of its common stock over a period
extending to September 29, 2002. As of February 28, 2001, the Company had repurchased 1,342,431 of its
shares under this resolution at a total cost of $8,699,000. The Company did not repurchase any of its
Common Stock during fiscal 2002.
(8) Fourth Quarter Charges/Transactions
In the fourth quarter of fiscal 2001, the Company recognized $2,457,000 in pre-tax charges due to the planned
discontinuance of a product (see note 7). The Company’s fourth quarter fiscal 2001 results also included a
$1,895,000 reduction in SG&A due to the settlement of a license obligation for which the Company accrued
a liability in fiscal 2000.
During the fourth quarter of fiscal 2000 the Company recorded pre-tax charges of $10,624,000 related to the
discontinuation of its artificial nails product line. The pre-tax charges resulting from such discontinuation
included $2,669,000 for the write-down of artificial nails inventory. In addition, reserves for resolution of
future contractual obligations, allowances for customer returns, and the write-off of related license costs,
resulted in approximately $7,955,000 in fourth quarter 2000 charges. Also during the fourth quarter of
fiscal 2000, the Company implemented several major organizational changes, resulting in fourth quarter
charges of $770,000. These changes realigned organizational responsibilities, restructured various
departments and streamlined certain functions within the Company. At February 29, 2000 accrued liabilities
included approximately $8,000,000 related to these charges.
The Company’s fourth quarter fiscal 2002 results do not contain any transactions of a non-routine nature.
43
HELEN OF TROY LIMITED
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(9) Selected Quarterly Financial Data (Unaudited)
Selected unaudited quarterly financial data is as follows (in thousands, except per share amounts):
Fiscal 2002:
May
August
November
February
Total
Net sales
$92,075
$113,482
$142,624
$103,068
$451,249
Gross profit
Net earnings
Earnings per
Share
42,671
4,591
56,396
7,303
65,006
12,967
48,317
4,354
212,390
29,215
Basic
Diluted
.16
.16
.26
.25
.46
.44
.15
.15
1.04
1.00
Fiscal 2001:
Net sales
$76,111
$88,233
$119,106
$77,948
$361,398
Gross profit
Net earnings
Earnings per
Share
29,929
2,334
33,817
3,746
45,398
7,940
31,724
140,868
3,312
(a)
17,332
Basic
Diluted
.08
.08
.13
.13
.28
.28
.12
.12
.61
.60
The business of the Company is somewhat seasonal. Between 54 percent and 57 percent of annual sales volume
normally occurs in the second and third fiscal quarters.
(a) See note 8 regarding fourth quarter 2001 charges relating to the discontinuance of certain non-core products.
44
HELEN OF TROY LIMITED
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(10) Segment Information
The following table contains segment information for fiscal 2002, 2001, and 2000.
2002
Net sales
Operating income (loss)
Identifiable assets
Capital / license
expenditures
Depreciation and
amortization
2001
Net sales
Operating income (loss)
Identifiable assets
Capital / license
expenditures
Depreciation and
amortization
2000
Net sales
Operating income (loss)
Identifiable assets
Capital / license
expenditures
Depreciation and
amortization
North
American
$312,668
32,203
287,897
647
6,665
(in thousands)
International
$ 29,906
(244)
21,248
Tactica
$ 108,675
11,930
17,184
Corporate /
Other
-
(2,232)
31,229
Total
$ 451,249
41,657
357,558
111
120
-
1,442
256
267
878
8,630
$ 311,998
28,736
273,068
$ 25,390
94
24,331
$ 24,010
(4,629)
19,943
-
(1,205)
19,839
$ 361,398
22,996
337,181
3,056
7,537
125
372
4
228
$ 275,827
9,857
264,460
$ 23,686
835
20,231
8,253
6,025
87
896
-
-
-
-
-
-
-
-
(891)
19,561
-
-
3,185
8,137
$ 299,513
9,801
304,252
8,340
6,921
The operating income and loss totals for the North American segment include $233,000 of income for fiscal 2001
and a $10,801,000 loss for fiscal 2000, related to artificial nails products. The Company has discontinued
production of artificial nails and is in the process of attempting to sell the remainder of its artificial nails
inventory (see note 8). The Company recognized no significant income or loss on artificial nails in fiscal 2002.
The North American segment sells hair care appliances, other personal care appliances, including massagers and
spa products, hairbrushes, combs, and utility and decorative hair accessories in the U.S. and Canada. The
International segment sells hair care appliances, personal care appliances, hairbrushes, combs, and hair
accessories in other counties. Tactica sells a variety of personal care and other consumer products directly to
customers and to retailers.
45
HELEN OF TROY LIMITED
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(10) Segment Information, continued
Operating profit for each operating segment is computed based on net sales, less cost of goods sold, less any
selling, general and administrative expenses associated with the segment. The selling, general, and
administrative expense totals used to compute each segment’s operating profit are comprised of SG&A expense
directly associated with those segments, plus overhead expenses that are allocable to operating segments. Other
items of income and expense, including income taxes, are not allocated to operating segments.
The Company’s domestic and international net revenues from third parties and long-lived assets are as follows:
Net revenues from third parties:
United States
International
Total
Long-lived assets:
United States
International
Total
2002
2001
2000
$ 408,990
42,259
451,249
323,330
38,068
361,398
91,868
22,020
$ 113,888
94,890
21,910
116,800
264,238
35,275
299,513
90,674
19,555
110,229
Sales to one customer and its affiliate accounted for 22 percent, 23 percent, and 26 percent of the Company’s
net sales in fiscal 2002, 2001, and 2000, respectively.
(11) Acquisitions and Purchases of Trademarks
In December 1999, the Company entered into a long-term license with Sunbeam Products, Inc. to develop, market
and distribute hair dryers and curling irons, hairsetters, styling products and hot air brushes under the
Sunbeam(cid:226)
trade name in the U.S. and Canada. In January 2000 the Company acquired a long-term license
from Sunbeam Products, Inc. to design, develop and sell human hair clippers and trimmers under the
Sunbeam(cid:226)
trade name. At the same time Sunbeam Products, Inc. granted Helen of Troy a license to sell the
same products under the Oster(cid:226)
trade name for a transitional period.
In March 2000, the Company acquired a 55 percent ownership interest in Tactica International, Inc. (“Tactica”)
for $2,500,000. In addition, the Company loaned the minority shareholders of Tactica $3,500,000 on March
14, 2000. The interest rate on these loans is 8.75 percent. All principal and accrued interest on the loans
is due March 14, 2005. Included in “Other assets” on the Company’s February 28, 2002 and 2001
consolidated balance sheets are $4,103,000 and $3,826,000, respectively, related to the principal and
accrued interest on these loans. The 45 percent interest held by other shareholders in Tactica’s deficit
appears as a reduction of the Company’s stockholders’ equity on the February 28, 2002 and 2001
consolidated balance sheets. The financial results of Tactica have been included in the accompanying
financial statements of the Company, beginning March 14, 2000, the date of acquisition. It was not practical
to develop pro forma information for the year ended February 29, 2000. The Company accounted for the
Tactica acquisition using the purchase method of accounting. Acquisition costs in excess of the fair value
of the net tangible assets acquired are included in goodwill. During fiscal 2002, the other shareholders of
Tactica contributed $600,000 of cash to Tactica.
46
HELEN OF TROY LIMITED AND SUBSIDIARIES
Schedule II
Valuation and Qualifying Accounts
Years ended February 28, 2002, February 28, 2001 and February 29, 2000
(in thousands)
Additions
Description
Year ended February 28, 2002
Balance at
Beginning
of Year
Charged to
cost and
expenses
Write-off of
uncollectible
accounts
Balance at
End of Year
Recoveries
Allowance for accounts receivable
$4,081
$1,969
$ 22
$ 278
$5,794
Year ended February 28, 2001
Allowance for accounts receivable
2,514
2,469
63
965
4,081
Year ended February 29, 2000
Allowance for accounts receivable
1,756
2,554
64
1,860
2,514
47
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant
Information in the Company’s Proxy Statement, which will be filed within 120 days of the end of the
Company’s 2002 fiscal year, is incorporated herein by reference in response to this Item 10.
Item 11. Executive Compensation
Information in the Company’s Proxy Statement, which will be filed within 120 days of the end of the
Company’s 2002 fiscal year, is incorporated herein by reference in response to this Item 11.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information in the Company’s Proxy Statement, which will be filed within 120 days of the end of the
Company’s 2002 fiscal year, is incorporated herein by reference in response to this Item 12.
Item 13. Certain Relationships and Related Transactions
Information in the Company’s Proxy Statement, which will be filed within 120 days of the end of the
Company’s 2002 fiscal year, is incorporated herein by reference in response to this Item 13.
48
PART IV
Item 14.
Exhibits, Financial Statements Schedule, and Reports on Form 8-K
(a)
Exhibits
3.1 Memorandum of Association. (Filed as Exhibit 3.1 to the Registrant’s Registration Statement
on Form S-4, File No. 33-73594, filed with the Securities and Exchange Commission on
December 30, 1993).
3.2
4.1
Bye-Laws. (Filed as Exhibit 3.2 to the Registrant’s Registration Statement on Form S-4, File
No. 33-73594, filed with the Securities and Exchange Commission on December 30, 1993).
Rights Agreement, dated as of December 1, 1998, between Helen of Troy Limited and Harris
Trust and Savings Bank, as Rights Agent. (Filed as Exhibit 4 to the Registrant’s Current
Report on Form 8-K, filed with the Securities and Exchange Commission on December 4,
1998).
10.1 Vidal Sassoon, Inc. Amended License Agreement of December 22, 1982. (Filed as Exhibit
10.1 to the Helen of Troy Corporation’s Registration Statement on Form S-2, File No. 2-82520,
filed with the Securities and Exchange Commission on March 18, 1983).
10.2
10.3
10.4
Letter Agreements Amending Sassoon License Agreement. (Filed as Exhibit 10.2 to the Helen
of Troy Corporation’s Registration Statement on Form S-2, File No. 33-13253, filed with the
Securities and Exchange Commission on April 8, 1987).
Form of Directors’ and Executive Officers’ Indemnity Agreement dated February 11, 1994
executed by each of Gerald J. Rubin, Robert D. Spear, Stanlee N. Rubin, Gary B. Abromovitz,
Byron H. Rubin, Daniel C. Montano, and Christopher L. Carameros. (Filed as Exhibit 10.2 to
the Registrants Registration Statement on Form S-4, File No. 33-73594, filed with the
Securities and Exchange Commission on December 10, 1993).
1994 Stock Option and Restricted Stock Plan, as previously filed with the Registrants’
Registration Statement on Form S-4, File No. 33-73594, as Exhibit 10.1 filed with the
Securities and Exchange Commission on December 30, 1993, is hereby incorporated herein by
reference.
10.5 Vidal Sassoon, Inc., European License Agreement, dated January 1, 1990. (Filed as Exhibit
10.25 to Helen of Troy Corporation’s Annual Report on Form 10-K for the period ending
February 28, 1990, filed with the Securities and Exchange Commission).
10.6 Revlon Consumer Products Corporation (RCPC) North American Appliances License
Agreement dated September 30, 1992. (Filed as Exhibit 10.31 to Helen of Troy Corporation’s
Quarterly report on Form 10-Q for the period ending November 30, 1992 filed with the
Securities and Exchange Commission).
10.7 Revlon Consumer Products Corporation (RCPC) International Appliances License Agreement
dated September 30, 1992. (Filed as Exhibit 10.32 to Helen of Troy Corporation’s Quarterly
report on Form 10-Q for the period ending November 30, 1992 filed with the Securities and
Exchange Commission).
49
10.8 Revlon Consumer Products Corporation (RCPC) North American Comb and Brush License
Agreement dated September 30, 1992. (Filed as Exhibit 10.33 to Helen of Troy Corporation’s
Quarterly report on Form 10-Q for the period ending November 30, 1992 filed with the
Securities and Exchange Commission).
10.9 Revlon Consumer Products Corporation (RCPC) International Comb and Brush License
Agreement dated September 30, 1992. (Filed as Exhibit 10.34 to Helen of Troy Corporation’s
Quarterly report on Form 10-Q for the period ending November 30, 1992 filed with the
Securities and Exchange Commission).
10.10 First Amendment to RCPC North America Appliance License Agreement, dated September 30,
1992. (Filed as Exhibit 10.26 to Helen of Troy Corporation’s Annual Report on Form 10-K
for the period ending February 28, 1993 filed with the Securities and Exchange Commission).
10.11 First Amendment to RCPC North America Comb and Brush License Agreement, dated
September 30, 1992. (Filed as Exhibit 10.27 to Helen of Troy Corporation’s Annual Report on
Form 10-K for the period ending February 28, 1993 filed with the Securities and Exchange
Commission).
10.12 First Amendment to RCPC International Appliance License Agreement, dated September 30,
1992. (Filed as Exhibit 10.28 to Helen of Troy Corporation’s Annual Report on Form 10-K for
the period ending February 28, 1993 filed with the Securities and Exchange Commission).
10.13 First Amendment to RCPC International Comb and Brush License Agreement, dated September
30, 1992. (Filed as Exhibit 10.29 to Helen of Troy Corporation’s Annual Report on Form 10-K
for the period ending February 28, 1993 filed with the Securities and Exchange Commission).
10.14 License Agreement between Helen of Troy Corporation and Helen of Troy Limited, a Barbados
corporation, dated February 28, 1994. (Filed as Exhibit 10.22 to the Registrant’s Annual
Report on Form 10-K for the period ending February 28, 1994 filed with the Securities and
Exchange Commission).
10.15 Amended and Restated Note Purchase, Guaranty and Master Shelf Agreement, $40,000,000
7.01% Guaranteed Senior Notes and $40,000,000 Guaranteed Senior Note Facility. (Filed as
Exhibit 10.23 to the Registrant’s Quarterly Report on Form 10-Q for the period ending
November 30, 1996).
10.16 Helen of Troy Limited 1998 Employee Stock Option and Restricted Stock Plan. (Filed as
Exhibit 4.3 to the Registrant’s Registration Statement on Form S-8, File Number 333-67349,
filed with the Securities and Exchange Commission on November 6, 1998).
10.17 Helen of Troy Limited 1998 Employee Stock Purchase Plan, as previously filed as Exhibit 4.3
of the Registrant’s Registration Statement on Form S-8, File Number 333-67369, filed with the
Securities and Exchange Commission on November 6, 1998, is hereby incorporated herein by
reference.
10.18 Amended and Restated Employment Agreement between Helen of Troy Limited and Gerald
J. Rubin, dated March 1, 1999. (Filed as Exhibit 10.29 to the Registrant’s Quarterly Report on
Form 10-Q for the period ending August 31, 1999).
10.19 Amended and Restated Helen of Troy Limited 1995 Non-Employee Director Stock Option
50
Plan. (Filed as Exhibit 10.30 to the Registrant’s Quarterly Report on Form 10-Q for the period
ending August 31, 1999).
10.20 Loan Agreement, dated December 31, 1996, between Helen of Troy L.P. and Texas Commerce
Bank National Association.
10.21 First Amendment, dated July 31, 1997, to Loan Agreement between Helen of Troy L.P, and
Texas Commerce Bank National Association.
10.22 Second Amendment, dated July 31, 1998 to Loan Agreement , between Helen of Troy L.P. and
Chase Bank of Texas National Association.
10.23 Third Amendment, dated July 31, 2000 to Loan Agreement , between Helen of Troy L.P. and
The Chase Manhattan Bank.
10.24 Fourth Amendment, dated July 31, 2001 to Loan Agreement , between Helen of Troy L.P. and
The Chase Manhattan Bank.
10.25 Fifth Amendment, dated August 31, 2001 to Loan Agreement , between Helen of Troy L.P. and
The Chase Manhattan Bank.
10.26* Helen of Troy 1997 Cash Bonus Performance Plan, filed herewith.
10.27* Stockholders Agreement dated March 14, 2000 by and among Tactica International, Inc., Helen
of Troy, LLC, Avi Sivan, Prem Atma Ramchandani, Avraham Ovadia, and APA International,
LLC., filed herewith.
21*
Subsidiaries of the Registrant, filed herewith.
23*
Independent Auditors’ Consent, filed herewith.
*filed herewith
(b)
The following documents are filed as part of the report:
1.
Financial Statements
Independent Auditors’ Report
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
2.
Schedule:
Schedule II – Valuation and Qualifying Accounts
(c)
Reports on Form 8-K
The Company filed a report on Form 8-K January 25, 2002 containing its press release dated January
23, 2002 discussing the effect on the Company of the Kmart bankruptcy filing and reaffirming earnings
expectations for fiscal 2002.
51
The registrant will send its annual report to security holders and proxy solicitation material subsequent to the filing
of this form and shall furnish copies of both to the Commission when they are sent to security holders.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
HELEN OF TROY LIMITED
By: /s/Gerald J. Rubin
Gerald J. Rubin, Chairman,
Chief Executive Officer and Director
Dated May 24, 2002
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/Gerald J. Rubin
(Gerald J. Rubin)
/s/Russell G. Gibson
(Russell G. Gibson)
Chairman of the Board, Chief
Executive Officer, President, and
Director (Principal Executive Officer) May 24, 2002
Senior Vice President, Finance
and Chief Financial Officer
(Principal Financial and Accounting
Officer)
May 24, 2002
/s/Stanlee N. Rubin
(Stanlee N. Rubin)
Director
May 24, 2002
/s/ Christopher L. Carameros
(Christopher L. Carameros)
Director
May 24, 2002
52
/s/Byron H. Rubin
(Byron H. Rubin)
Director
May 24, 2002
(Daniel C. Montano)
Director
/s/Gary B. Abromovitz
(Gary B. Abromovitz)
Deputy Chairman of the Board
and Director
May 24, 2002
53
H e l e n o f T r o y L i m i t e d a n d S u b s i d i a r i e s
H e l e n o f Tr o y C o r p o r a t e O f f i c e r s a n d D i r e c t o r s
S t o c k P r i c e s
Fiscal 2002
First quarter
Second quarter
Third quarter
Fourth quarter
Fiscal 2001
First quarter
Second quarter
Third quarter
Fourth quarter
High
Low
$9.42
14.80
13.20
15.79
$7.88
6.94
7.50
7.06
$5.16
7.75
7.99
10.26
$6.19
4.75
4.00
4.00
Stock Traded Over the Counter
National NASDAQ Symbol HELE
Registrar, Transfer Agent and Dividend Disbursing Agent
Computershare Investor Service, LLC
Chicago, Illinois 60606
The Annual Meeting of Shareholders
The Annual Meeting of Shareholders will be held
on August 27, 2002, at one o’clock p.m. at the Hilton
Camino Real Hotel, 101 South El Paso Street,
El Paso, Texas 79901.
Form 10-K
A copy of the company’s annual report on Form 10-K, as
filed with the Securities and Exchange Commission, will
be furnished to any stockholder free of charge on request
to the Chief Financial Officer or Secretary of the
Company.
Board of
Directors
Gerald J. Rubin
Chairman, Chief Executive Officer and President
Stanlee N. Rubin
Director
Daniel C. Montano
Director
Byron H. Rubin
Director
Gary B. Abromovitz
Director
Christopher L. Carameros
Director
Officers
Gerald J. Rubin
Chairman, Chief Executive Officer and President
Arthur A. August
Executive Vice President, Sales – Personal Care Division
Donald Hall
Senior Vice President, Manufacturing
Robert D. Spear
Senior Vice President and Chief Information Officer
Rosanna Hall
Senior Vice President, Purchasing
Kevin James
Senior Vice President, International
Michael Cafaro
Senior Vice President, New Product Development and Engineering
Russell G. Gibson
Senior Vice President, Finance and Chief Financial Officer
Dave Knox
Senior Vice President, Accessories
James R. Cooper
Vice President, Product Procurement and Forecasting
Felix Chavez
Vice President, Sales Operations
Robert C. Johnson
Vice President, Management Information Systems
Stuart Fox
Vice President, Sales – Appliances
Scott Thrasher
Vice President, Sales – Appliances
Vincent Carson
Vice President, General Counsel and Secretary
Mark Riley
Controller
Deanna Nasser
Treasurer
H e l e n o f T r o y P r o d u c t s
F i n a n c i a l H i g h l i g h t s
CONSUMER AND
PROFESSIONAL BRANDING
Helen of Troy has become one of the most
trusted names in personal beauty and care items
throughout the world. This trust has resulted
from the steady years of Helen of Troy’s
representation of
major consumer
brand names.
Vidal Sassoon Gold Series®
3-Barrel Waver
Helen of Troy
markets a wide
range of products
under the Vidal
Sassoon banner, a
name that has been at the forefront of hair
fashion and design for over 40 years. Helen of
Troy builds on this solid brand foundation,
marketing combs,
brushes,
accessories, and
hair care
appliances, such
as the family of
professional Gold
Series® styling
tools, a line of
products incorporating breakthrough Ionic
Technology,™ and styling tools designed by
world-renowned designer Marc Newson.
Marc Newson Fast Dry™
1875 Watt Dryer
Revlon Perfect Heat®
Straightener
lasting beauty and
glamour. With
innovative product
designs and instant
brand recognition,
Revlon is always a
powerful shelf
Helen of Troy also
capitalizes on Revlon’s
recognized leadership
position in hair and
personal care
products, which
evokes an image of
Revlon MoistureStay™
Manicure / Pedicure System
presence in the spa,
hair, and personal care
markets.
In addition, Helen of
Troy markets a variety
of personal wellness
Revlon MoistureStay™ Luxury
Paraffin Bath with Digital Timer
items under the Dr. Scholl's brand, a trusted
name in foot care for over 90 years, which has
quickly expanded into the areas of therapeutic
care for the entire body. With a variety of
innovative products ranging from body massagers
to groundbreaking footbaths with a revolutionary
“water heat up” feature, Helen of Troy takes its
2002
(1)
2001
(1)
2000
1999
1998
Tw e l v e M o n t h s E n d e d L a s t D a y o f F e b r u a r y
( i n t h o u s a n d s , e x c e p t p e r s h a r e a m o u n t s )
Net sales
$451,249
$361,398
$299,513
$294,487
$248,098
Operating income
41,657
22,996
9,801
36,714
30,482
Net income
29,215
17,332
13,111
28,330
22,332
Diluted income per share
1.00
0.60
0.44
0.96
0.77
Working capital
191,438
157,809
154,395
150,940
154,294
Total assets
357,558
337,181
304,252
294,036
227,560
Long-term debt
55,000
55,000
55,000
55,450
55,450
Stockholders’ equity (2)
250,326
219,609
209,624
199,842
149,484
Fiscal 2001 and 2002 results include the results of Tactica, a subsidiary in which the Company acquired a
55 percent interest in March 2000.
In fiscal 2000, the Company repurchased 526,485 shares of common stock at a cost of $4,076,000. In
fiscal 2001, the Company repurchased 815,946 shares of common stock at a cost of $4,623,000.
(1)
(2)
$ MILLIONS
500
450
400
350
300
250
200
150
100
50
0
Year in Review
NET SALES
4
5
1
.
2
$ MILLIONS
3
6
1
4
.
2
9
4
.
5
2
9
9
.
5
2
4
8
.
1
NET INCOME
2
9
.
2
2
8
.
3
1
7
.
3
1
3
.
1
40
35
30
25
20
2
2
.
3
15
10
5
0
$1.20
EARNINGS PER
SHARE DILUTED
1.05
.90
.
0
9
6
.
1
0
0
0
.
6
0
0
.
4
4
.75
0
.
7
7
.60
.45
.30
.15
$0
98
99
00
01
02
98
99
00
01
02
98
99
00
01
02
Identifying a growing demand in a broad international
market for our branded personal care products, we have
aggressively set out to further penetrate the rapidly
emerging international marketplace of our global business
enterprise. International sales have increased steadily over
the last several years with the establishment of international
sales offices in the United Kingdom, Germany and France
and distribution in Latin America, South America, and
Australia. Helen of Troy stands ready to provide quality
name brand products to world markets with the same level
of service and convenience that our domestic customers
have come to expect.
The results of this fiscal year are impressive by any
standards. However, to have achieved these results in the
midst of one of the most challenging economic
environments in recent years, highlights the exceptional
performance of our employees and business partners
worldwide. Our successful performance, in all its aspects,
results from the hard work and dedication of our many
employees. Their experience, commitment, and creativity
have shaped the successes of this fiscal year.
I would like to express my sincere thanks to the many
individuals who helped us achieve these results and to our
shareholders for remaining confident in our abilities.
Gerald J. Rubin
Chairman, Chief Executive Officer and President
Responding to the exploding teen/pre-teen market, Helen
of Troy also introduced the new Wave-Rage line which
includes three-barrel wavers, spiral curling irons,
straighteners, hair-setters, and multi-stylers, creating a mix
of today’s most popular teen styles.
Partnering with Vidal Sassoon, one of the world’s most
innovative hairstylists and Marc Newson, one of the
world’s most innovative industrial designers, Helen of Troy
has launched a bold, new line of professional styling tools.
This line includes a hair dryer, curling irons, and a
straightener, blending Marc’s exclusive designs and
signature colors with expertise from one of the world’s
foremost hair experts.
New products from Tactica International were also
introduced at this year’s Annual International Housewares
Show. These products include a line of pore cleansing
and skin care products, a line of nail care products,
additional products in the depilatory and hair removal
category, and a unique line of hair coloring applicator
products.
In addition to our continued commitment to new
product development and innovation, Helen of Troy also
continued to improve its internal operations and support
functions with new technologies and productivity-
enhancing software with the goal to transform ourselves
into a leaner, financially stronger and more flexible
company, capable of more readily serving our customers
worldwide. We have made significant progress in the
assessment and improvement of our information systems
technology, and developed and implemented more
advanced methods to improve the sharing of both
information and data resources throughout our global
organization. Based on our most recent performance and
the expectation of continued improvements in our business
model, we eagerly look ahead to fiscal 2003 for the
fulfillment of the corporate and financial goals that we have
set for ourselves this year.
its high-quality
personal care and hair
care products, such
as the innovative line
of Wigo® and Hot
Tools® professional
straighteners,
introduced to meet
demands for high-quality straighteners and
straighteners with smaller heating plates.
Together, these new products are major
contributors to the professional division's growth
because of their strong brand names, excellent
performance, high quality, and unique features.
Wigo® Professional
1-inch Straightener
Helen of Troy satisfies consumer demand in all
areas of hair styling products by marketing a
variety of brushes, combs, mirrors and hair
accessories under the Vidal Sassoon brand,
including the innovative
Twist 'n' Clip™
Headband and
Barrette.
expertise in personal wellness seriously.
The Company also continues to market under
such trusted brand names as Sunbeam, a
household name for decades, and moves forward
with its line of personal hair care tools for the
home and family. Helen of Troy’s years
of experience and Sunbeam’s name recognition
allow the Company to expand its reach and
growth in the home hair care and clipper
markets.
Helen of Troy has also made a major push into
the teen market, which
is expected to
experience substantial
growth in the future.
Helen of Troy has
launched Wave Rage,
a line of personal care
products specifically
geared for teens, a
market of over 24
million in the U.S. alone. With hot colors and
edgy designs, Wave Rage gives teenagers the
tools they need for
their favorite styles.
Wave Rage™ 4-in-1 Multi-Styler™
Helen of Troy’s
professional
division
continues
expansion of
market share through
Dr. Scholl's Steam Footbath
H e l e n o f T r o y P r o d u c t s
Also, the Revlon family
of brushes, combs
and mirrors
experiences continued
growth and has been
established as a true
beauty-oriented
product line.
Vidal Sassoon Twist ‘n’ Clip™
Revlon Brushes
The Company’s Nandi
brand produces unique
hair care items and
accessories, and its
DCNL and Karina line
of accessories are
known worldwide for
their high quality.
To build such brand recognition and brand
loyalty, Helen of Troy engages in product
promotion through television- and print-media
advertising, including consumer and trade
magazines and
various industry
trade shows,
increasing the
name recognition
of Helen of Troy
and all its
associated
trademarks and
improving their perceived quality. This enables
the Company to expand market share, capture
additional shelf space, and enter and expand
new markets domestically and worldwide.
Nandi™ Solar Rollers
INNOVATIONS
Over the years, Helen of Troy has developed
ground-breaking
technologies that have
become industry
standards. One
major breakthrough is
the introduction of
Ionic Technology™ in
many hair care
appliances such as
the top-selling Vidal Sassoon Anti-static Ionic
Dryer. With Ionic Technology™, negative ions
reduce the size of water droplets on the hair,
allowing more water to be absorbed. This dries
hair more quickly and adds moisture to the hair
follicle, helping condition, soften, and make hair
shinier.
Vidal Sassoon Fast Dry™
Anti-static Ionic Dryer
Another example of Helen of Troy's innovation is
the use of gold plating in many of its styling tools.
Gold plating eliminates heat loss and maintains a
constant level of heat,
allowing easy styling.
Many styling tools use
Thermal Response
Technology™ or Pulse
Auto Heat Control® for
fast heat up.
Wigo® Professional
3-inch Straightener
Helen of Troy expands
its distribution through
Dear Shareholders:
Fiscal year 2002 was a very
successful year for Helen of Troy.
We fulfilled many of our long-term strategic goals and
achieved many new corporate milestones. Sales
increased 25 percent to a record $451.2 million from
$361.4 million in fiscal 2001. Net income climbed to a
record $29.2 million or $1.00 per diluted share in fiscal
2002, representing a 69 percent gain over net income
of $17.3 million or $0.60 per diluted share last year.
This has been the most profitable year since Helen of
Troy’s inception in 1968 and we look forward to
continuing to pursue record profitability in our upcoming
fiscal year.
Our balance sheet for the year ended February 28,
2002, also continues to remain strong with cash for the
year more than doubling over the prior fiscal year,
reaching $64.3 million versus $25.9 million at last fiscal
year’s end. Inventory declined 15.4 percent, from
$118.5 million to $100.3 million, even though sales for
the year increased 25 percent over the prior year. The
Company’s net worth increased 14 percent to $250.3
million from $219.6 million at last fiscal year end.
Sales increases during fiscal 2002, were driven
primarily by increased sales of beauty and personal
care products from our Retail and Professional
divisions, consumer health and wellness products and
international personal care products. Our retail personal
care products include Revlon, VS Sassoon and Sunbeam
hair care appliances, as well as the new Sunbeam clipper
lines. Health and wellness products include our spa and
massager products, as well as related product sales of Dr.
Scholl’s and Tactica International.
Delivering on our commitment to product innovation,
Helen of Troy introduced 50 new products at the 2002
International Housewares Show in Chicago. New product
introductions included over fifteen new Dr. Scholl’s
massager products. These newly introduced foot massagers
incorporate the most sought after consumer preferred
features such as toe-touch control, acupressure rollers,
interchangeable massage attachments and multiple settings
for heat, massage and invigorating bubbles. We also
introduced various new products in our hair care appliance
and personal care product lines.
Building on the success of our Ion hair drying
technology, Helen of Troy, under the VS Sassoon brand
name, has developed a revolutionary line of Ion products.
This line includes a variety of dryers, hot air brushes and kits
containing styling plates, to create a variety of chic salon
styles in the comfort of your own home. This new Ion
technology dries hair faster by reducing the size of water
droplets. Anti-static ions dry hair faster, while moisture is
absorbed for a conditioning style, leaving hair more
manageable with less static electricity.
C o m p a n y P r o f i l e
Helen of Troy Limited (NASDAQ:HELE) has established a leadership
position in the personal care products market through new product
innovation, superior product quality, and competitive pricing. The
Company designs, produces, and markets brand-name personal care
electrical products which include hair dryers, curling irons,
hairsetters, hot air brushes, home hair clippers, and paraffin baths, as
well as comfort products such as foot baths and body massagers.
The Company also produces and markets non-electrical products,
including brushes, combs, hair accessories, mirrors, and grooming
implements. The Company’s products are sold primarily through
mass merchandisers, drug chains, warehouse clubs, and grocery
stores. Additionally, through our affiliation with Tactica International,
Inc., products are also marketed through direct response marketing
and through retail channels.
Company growth strategy is facilitated by our sales of products under
world-respected trade names. Helen of Troy is licensed to sell
products under the trade names of Vidal Sassoon, Revlon®, Dr.
Scholl’s®, and Sunbeam®. Helen of Troy’s owned trade names include
Dazey®, Caruso®, Karina®, Wave Rage™, Hot Things™, Nandi™, and
DCNL™. The company also markets professional and personal care
products under the Helen of Troy®, Hot Tools®, Hot Spa®, Salon
Edition®, Gallery Series®, Wigo®, Solingen™, and Ecstasy® trade
names to the beauty salon industry.
Helen of Troy’s U.S. operations are headquartered in El Paso, Texas,
with offices and warehouse facilities around the world.
its relationship with Tactica, a 55-percent owned
subsidiary of the Company that directly markets
products to
consumers using
extensive television
and print advertising
and sells to major
mass
merchandisers, drug
store chains, and
specialty stores.
Igia Twist-A-Braid™
Helen of Troy combines technological innovations
and marketing
strategies to solidify
the Company's
leadership position,
and provide it with
strong direction to fuel
growth and expand its
lead in the personal
care marketplace.
Hot Tools® Professional 1 1/2 inch
Straightener and Curling Iron
INTERNATIONAL
Helen of Troy has established itself as a leader in
the domestic market and the world marketplace
as well, making its products a part of consumers'
lives everywhere. Under the Vidal Sassoon
trademark in Europe, the Company has added to
its product line the Vidal Sassoon Steam
Straightener, one of the most successful styling
products in Germany, and offers a family of
exciting products
under the Maximum
Range line, including
the 'Funk It Up!' hair
dryer. Outside of the
European market, the
Company sells hair
care appliances and
accessories under
Vidal Sassoon Maximum
'Funk It Up!' 2000 Watt Dryer
Revlon’s trusted brand name.
Scholl's remains prominant internationally in the
personal therapeutic field with extensive brand-
name recognition and a complete line of foot
spas, personal massagers, and cushions. With
its decades of experience, Helen of Troy
continues to grow and
build on its worldwide
reputation of personal
therapeutic care
under the Scholl’s
brand.
Vidal Sassoon
Steam Straightener
With international
offices firmly
established, and with strong recognition of its
associated brand names, Helen of Troy is making
strides in increasing the Company’s international
market share and expanding its worldwide
market opportunities, continuing to fuel its
growth well into the future.
Revlon is a registered trademark of Revlon Consumer Products Corporation
Dr. Scholl’s and Scholl are registered trademarks of Schering-Plough
HealthCare Products, Inc. (US) and Scholl Ltd. (UK)
Sunbeam is a registered trademark of Sunbeam Products, Inc.