Helen of Troy Limited Annual Report 2003

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FY2003 Annual Report · Helen of Troy Limited

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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 inno-

vation, superior product quality and competitive pricing. The Company

designs, produces, and markets brand-name personal care electrical

products including 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 acces-

sories, mirrors, liquid hair styling products, body powder and skin care

products. 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., prod-

ucts are also marketed through direct response marketing and through

retail channels.

Company growth strategy is facilitated by our sales of products under

trade names respected throughout the global market. Helen of Troy is

licensed to sell products under the trade names of Vidal Sassoon,

Revlon®, Dr. Scholl’s®, Sunbeam®, Sea Breeze®, and Vitapointe®. Helen

of Troy’s owned trade names include Dazey®, Caruso®, Karina®, dcnl™,

Nandi ™, Isobel™, Wave Rage®, Vitalis®, Final Net®, Ammens®, and

Condition 3-in-1®. The Company also markets hair and beauty care

products under the Helen of Troy®, Hot Tools®, Hot Spa®, Salon Edition®,

Gallery Series®, Wigo® and Ecstasy® trademarks to the professional

beauty salon industry.

Helen of Troy’s U.S. operations are headquartered in El Paso, Texas,

with offices and warehouse facilities around the world.

Dear Shareholders:

We are very pleased to report

that Helen of Troy delivered outstand-
ing performance again in fiscal year
2003. Net income climbed to a record

$38.7 million versus $29.2 million in fiscal 2002, repre-
senting a 33 percent gain in net income. Earnings per
share were $1.31 in fiscal year 2003 versus $1.00 per
diluted share last year, a 31 percent increase in earnings
per share. Sales increased 2.6 percent to a record
$458.8 million from $447.3 million in fiscal 2002.

Our balance sheet remains strong, with year end
cash of $48 million, shareholders’ equity of $290 million,
accounts receivable of $62 million and inventory of $112
million. We used approximately $67 million of internally
generated cash during the year for purchases of fixed
assets, royalty prepayments, the purchase of warehouse
facilities in Mississippi and the acquisition of six consumer
brands from The Procter & Gamble Company. All of
these transactions were entered into with the goals of
reducing SG&A expenses and growing our business.
Helen of Troy’s leadership position in the personal
care market is the result of a combination of highly-recog-
nized, world-class consumer brands and a tried and true
approach to product innovation. Executing our proven
sales and marketing strategies, we introduced more than
70 new products at the 2003 International Housewares
Show in Chicago. Representing the foundation of our

new product introductions for fiscal 2004 are our
Ceramic and Ion technologies. Available under both the
Vidal Sassoon and Revlon® trade names are a wide vari-
ety of ceramic curling irons, straighteners and hairsetters.
These new products are designed to meet our con-
sumers’ desires to create a wider variety of silky, healthi-
er-looking styles without frizz, and without damaging their
hair.

Building on the success of our Ion Technology avail-
able under the Vidal Sassoon and Revlon® brands, Helen
of Troy has applied this technology to new categories
under the Dr. Scholl’s® brand name. Our Dr. Scholl’s®
Ionic Rejuvenator™ foot massager utilizes cool, ionized air
and tapping massage motions to help refresh and revital-
ize tired feet. Under the Revlon Spa category, Helen of
Troy has introduced an Ionic Hot and Cold Mist Facial
Sauna which helps to close and reduce the appearance
of pores. The Revlon Spa line also includes a variety of
shower brushes, massagers and waxing systems for hair
removal.

By allowing our consumer’s needs to drive our

innovation, we are producing state-of-the art products for
our consumer. Our new products boast cutting-edge
technology which includes features from our most sought
after professional appliances, incorporating them into easy
to use products designed for use in the comfort of your
own home.

Our principal focus in the coming year is continuing

to build profitable market share. We plan to use our
strong financial position to expand our existing operations

and take advantage of any appropriate growth
opportunities that match our culture and corporate
strengths. In October of 2002, Helen of Troy obtained
through acquisition and licensing agreements six well
known consumer brands. The acquisition of the
Condition 3-in-1®, Final Net®, Vitalis®, Ammens®, Sea
Breeze® and Vitapointe® trade names prompted the
creation of a new skin and hair care division, Idelle Labs.
In January of this year, we welcomed a new management
team to the Helen of Troy family to oversee the operations
of Idelle Labs, and we are confident that their expertise
and abilities will serve to enhance the overall success of
our Company.

Also during the year the Company finalized a long
term licensing agreement with The Procter & Gamble
Company for the world recognized Vidal Sassoon trade
name. This agreement, including renewal options,
extends the license for up to thirty years. For more than
forty years, the Vidal Sassoon name has been
synonymous with elegance, style, beauty and glamour and
we are honored to continue the Vidal Sassoon trade name
on personal care products that consumers the world over
have come to trust.

In January of 2003, the Company completed the
purchase of a 619,000 square foot distribution facility in
Southaven, Mississippi. The purchase of this
warehousing facility is expected to yield both operational
efficiencies and cost savings for our future growth.

Responding to the increasingly competitive global
business environment, Helen of Troy recently concluded a
thorough assessment of our existing information systems
and internal operations to identify opportunities for
improvement. After careful consideration and extensive
research, your management team has selected Oracle 11i
as the Company’s Enterprise Resource Planning (ERP)
System to help meet future business objectives and
facilitate future growth. The system is expected to be fully
operational by June of 2004.

For the second time in the past few years, Helen of
Troy has received the prestigious honor of being named
to “Forbes Magazine’s 200 Best Small Companies in

America”. The list ranks the nation’s top 200 publicly
traded companies with annual sales of less than $600
million, through the measurements of superior sales
growth, return on equity, and earnings per share. We are
proud to have received this premier designation.

In May of this year, Christopher Carameros, who had

served as a dedicated member of the Company’s Board
of Directors for ten years, was appointed Executive Vice
President and has joined the Helen of Troy management
team. As Executive Vice President, Chris will oversee the
Company’s Finance and Credit division, the Company’s
International Sales function, the Brush, Comb and
Accessory division, as well as the newly established Idelle
Labs division.

As I reflect upon the many exciting events of this past
year, I am reminded that each of our successes is the cul-
mination of the tireless efforts of so many people. I want
to express my gratitude to our loyal and dedicated
employees worldwide who share a common set of
corporate goals, and are committed to building our
brands, our products and our Company. It is truly a
privilege for me to work with so many talented individuals.
For the coming year, Helen of Troy is energized and
focused upon our goal of delivering superior shareholder
value over the long term. To this end, we will continue to
work diligently to become a more efficient and
increasingly competitive organization. Thank you for your
continued confidence in our Company.

Gerald J. Rubin
Chairman, Chief Executive Officer and President

F i n a n c i a l H i g h l i g h t s

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 )

2003

(1)

2002

(1)

2001

(1)

2000

1999

Net sales (2)

$458,825

$447,319

$357,164

$297,257

$293,363

Operating income

52,859

41,657

22,996

9,801

36,714

Net earnings

38,716

29,215

17,332

13,111

28,330

Diluted income per share

1.31

1.00

0.60

0.44

0.96

Working capital

173,809

191,438

157,809

154,395

150,940

Total assets

405,629

357,558

337,181

304,252

294,036

Long-term debt

55,000

55,450

Stockholders’ equity (3)

289,602

250,326

219,609

209,624

199,842

(1) Fiscal 2003, 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) We adopted Emerging Issues Task Force Abstract 01-9 (“EITF 01-9”) for fiscal 2003. EITF 01-9 requires

that certain vendors record certain consideration given to customers as reductions of sales, rather than as
selling, general, and administrative expenses. Certain items that, prior to fiscal 2003, were classified as sell-
ing, general, and administrative expenses have been reclassified as reductions to net sales. Those items
totaled $3,930,000 for fiscal 2002, $4,234,000 for fiscal 2001, $2,256,000 for fiscal 2000, and $1,124,000
for fiscal 1999.

(3)

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. No Common
Stock was repurchased in any other year presented above.

$ MILLIONS

500

NET SALES

3
5
7
.

2
9
3
.
3

2
9
7
.
3

450

400

350

300

250

200

150

100

4
5
8

4
4
7
3

$ MILLIONS

NET EARNINGS

3
8
.
7

2
8
.
3

2
9

1
7
.

1
3
.
1

$1.35

EARNINGS PER
SHARE DILUTED

1
.
3
1

.
0
0

0
.

9
6

0
.

6
0

0
.
4
4

1.20

1.05

.90

.75

.60

.45

.30

.15

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

S t o c k P r i c e s

Fiscal 2003

First quarter
Second quarter
Third quarter
Fourth quarter

Fiscal 2002

First quarter
Second quarter
Third quarter
Fourth quarter

High

Low

$15.00
14.17
12.05
14.58

$9.42
14.80
13.20
15.79

$11.65
11.20
8.20
10.21

$5.16
7.75
7.99
10.26

Stock Traded Over the Counter
National NASDAQ Symbol HELE

Registrar, Transfer Agent and Dividend Disbursing Agent
Computershare Investor Service, LLC
2 North La Salle Street
Chicago, Illinois 60602

The Annual Meeting of Shareholders
The Annual Meeting of Shareholders will be held
on August 26, 2003, at one o’clock p.m. at the
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.

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

FORM 10-K

X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended February 28, 2003

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

Commission file number 001-14669

HELEN OF TROY LIMITED
(Exact name of the registrant as specified in its charter)

BERMUDA 74-2692550
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

CLARENDON HOUSE
CHURCH STREET
HAMILTON, BERMUDA
(Address of principal executive offices)

1 HELEN OF TROY PLAZA
EL PASO, TEXAS 79912
(Registrant's United States Mailing Address) (Zip Code)

Registrant's telephone number, including area code: (915) 225-8000

Securities registered pursuant to Section 12(b) of the Act:
NONE

Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK - $.10 PAR VALUE
(Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes X No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. { }

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act) Yes X No

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as the last day of the
registrant's most recently completed second quarter was $307,175,162.

As of May 28, 2003 there were 28,220,445 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, 2003, 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

Item 1.
Item 2.

Business
Properties

Item 3.

Legal Proceedings

Item 4.

Submission of Matters to a Vote of Security Holders

1
6

________________________________________________________________________________________________________

PART II Item 5.

Market for Registrant's Common Equity and Related
Stockholder Matters

Item 6.

Selected Financial Data

Item 7.

Management's Discussion and Analysis of Financial
Condition and Results of Operations

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

Item 8.

Financial Statements and Supplementary Data

Item 9.

Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure

________________________________________________________________________________________________________

PART III Item 10.

Directors and Executive Officers of the Registrant

Item 11.

Executive Compensation

Item 12.

Security Ownership of Certain Beneficial Owners
and Management

Item 13.

Certain Relationships and Related Transactions

Item 14.

Controls and Procedures

Item 16.

Principal Accountant Fees and Services

________________________________________________________________________________________________________

PART IV

Item 15.

Exhibits, Financial Statement Schedules, and Reports on Form 8-K

Signatures

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. Our Company is comprised of three operating segments.
The North American segment sells hair care and other personal care products in the U.S. and Canada. The International segment
sells the same products outside the U.S. and Canada. Our third segment, Tactica, sells personal care and other consumer products
to retailers and uses direct response marketing to sell such products directly to consumers. The section of Item 1 entitled "Products"
contains more detailed information about the products that we sell. We present financial information for each of our operating
segments in Note (11) of the Consolidated Financial Statements. The matters discussed in Item 1 pertain to all three of our
operating segments, unless otherwise specified.

We use outside manufacturers to produce our goods. We sell our products to mass merchandisers, drug chains, warehouse
clubs, grocery stores, beauty supply retailers and wholesalers, as well as to individual consumers in the U.S. and other countries.

We sell some of our products under licenses from third parties. Our licensed trademarks include Vidal Sassoon(R), licensed
from The Procter & Gamble Company; Revlon(R), licensed from Revlon Consumer Products Corporation; Dr. Scholl's(R), licensed
from Schering-Plough HealthCare Products, Inc.; Scholl(R) (in areas other than North America), licensed from Scholl Limited;
Sunbeam(R), and Sunbeam Health at Home(R), licensed from American Household, Inc; Sea Breeze(R), licensed from Shisheido
Corporation; and Vitapointe(R), licensed from Fizons Corporation. We also own a number of trademarks, including Helen of
Troy(R), Salon Edition(R), Hot Tools(R), Ecstasy(TM), Gold Series(R), Hotspa(R), Gallery Series(R), Wigo(R), Caruso(TM),
Dazey(R), Lady Dazey(R), Carel(R), Lady Carel(R), Sable(R), Karina(R), Karina Girl(TM), Kurl*Mi(R), Detangle*Mi(R),
Heat*Mi(R), DCNL(R), DCNL Signature(TM), Nandi(TM), Isobel(TM), Vitalis(R), Final Net(R), Ammens(R),
Condition 3-in-1(R), IGIA(R), and Epil-Stop(R).

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

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. The following table lists the primary 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, straightening irons,
hot air brushes and brush irons
Hairsetters
Paraffin baths, facial brushes, and
facial saunas, and other skin care
appliances
Foot baths
Foot massagers, hydro massagers,
cushion massagers and body massagers
Hair clippers and trimmers
Hard and soft-bonnet hair dryers
Hair styling and utility implements

Decorative hair accessories

Liquid hair styling products
Liquid skin care products
Medicated skin care powder

Vidal Sassoon(R), Revlon(R), Sunbeam(R), Helen of Troy(R), Salon Edition(R),
Hot Tools(R), Ecstasy(TM), Gold Series(R), Gallery Series(R), Wigo(R), and Sable(R)
Vidal Sassoon(R), Revlon(R), Sunbeam(R), Helen of Troy(R), Salon Edition(R), Hot
Tools(R), Gold Series(R), Gallery Series(R) Ecstasy(TM), Wigo(R), and Sable(R).
Vidal Sassoon(R), Revlon(R) and Caruso(TM)
Revlon(R), Hotspa(R), Sunbeam(R)

Dr. Scholl's(R), Scholl(R), Revlon(R), Carel(R), and Hotspa(R)
Dr. Scholl's(R), Scholl(R), Carel(R) and Hotspa(R)

Vidal Sassoon(R) and Sunbeam(R)
Dazey(R), Lady Dazey(R), Carel(R) and Hot Tools(R)
Vidal Sassoon(R), Revlon(R), Wave Rage(TM), Nandi(TM), DCNL(R), and
Ecstasy(TM)
Vidal Sassoon(R), Karina(R), Karina Girl(TM), HOT things(TM), isobel(TM),
DCNL(R), and DCNL Signature(TM)
Vitalis(R), Final Net(R), Condition 3-in-1(R), and Vitapointe(R)
Sea Breeze(R)
Ammens(R)

We own 55 percent of Tactica International, Inc. ("Tactica"). Tactica's net sales comprised approximately 17 percent, 24

percent and five percent of the Company's consolidated net sales in fiscal 2003, 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, primarily under the IGIA(R) and Epil-Stop(R)
trademarks, to retailers and uses direct response marketing to sell such products directly to consumers. Some of the products
developed and marketed by Tactica are trend-oriented and have shorter product lives than Helen of Troy's other products.

We continue to develop new products and enhance existing products in order to maintain and improve our position in the
personal care and comfort product market. For example, during fiscal 2003 we improved existing products by adding new
technologies to them. Examples include ionic hair care appliances and ceramic hair care appliances. We plan to extend our line of
ceramic hair care appliances during fiscal 2004. During fiscal 2003, we also extended our line of hair care appliances that incorporate
ionic technology.

Our fiscal 2003 acquisition from The Procter & Gamble Company of the rights and formulas associated with six hair and skin
care brand names augmented our internal product development efforts. Under the terms of an October 2002 transaction, we acquired
ownership of the Vitalis(R), Condition 3-in-1(R), Final Net(R), and Ammens(R) trade names. Additionally, we acquired the rights
under long-term license agreements to sell products using the Sea Breeze(R) and Vitapointe(R) trademarks. Currently, we are selling
hair care and styling liquids under the Vitalis(R), Condition 3-in-1(R), Final Net(R), and Vitapointe(R) trademarks; skin care liquid, in
the form of an astringent, under the Sea Breeze(R) trademark; and mediated skin care powder under the Ammens(R) name.

You can learn more about our products at the following Internet addresses:
http://www.helenoftroyusa.com
http://www.igia.com

SALES AND MARKETING

We market our products primarily within the U.S. Sales within the U.S. comprised 90 percent of total net sales in fiscal 2003,
91 percent of net sales in fiscal 2002, and 89 percent of net sales in fiscal 2001. Our North American and 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 sells directly to retailers and distributors and uses direct consumer marketing, such as direct response and
catalog advertising to sell its products to consumers.

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 Vidal Sassoon(R), Dr. Scholl's(R) and Sunbeam(R)
trademarks are widely recognized because of advertising and the sale of a variety of products. We benefit from the name recognition
associated with a number of our licensed trademarks and seek to 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 also 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 hair and personal care appliances and hair brushes, combs, and hair care accessories 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 2003, goods manufactured by vendors in the Far East comprised approximately 95 percent of the dollar value of the North
American and International segments' inventory purchases and approximately 58 percent of the Tactica segment's inventory
purchases. We purchase the remainder of our products from unaffiliated manufacturers, primarily in North America and Europe. The
manufacturers who produce our products use formulas, 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; Southaven,
Mississippi; 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 The Netherlands, the United
Kingdom, Brazil, or directly to customers. We ship products stored at the warehouses in The Netherlands, the United Kingdom, and
Brazil to distributors or retailers.

Our customers in both the North American and International segments seek to minimize their inventory levels and 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 toa 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,
which have the effect of increasing the amount we pay to obtain such products.

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

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

Under an agreement with The Procter & Gamble Company, Helen of Troy is licensed to sell certain products bearing the Vidal
Sassoon(R) trademark worldwide, except in Asia. Products sold under the terms of this license include hair dryers, curling irons,
straightening irons, styling 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 Mexico and
Western Europe, hair dryers, curling irons, straightening irons, brush irons, hairsetters, brushes, combs, mirrors, functional hair
accessories, personal spa products, hair clippers and trimmers, and battery-operated and electric women's shavers bearing the
Revlon(R) trademark.

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

Under an agreement with American Household, 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, paraffin baths, and spa
products bearing the Sunbeam(R) and Sunbeam Health at Home(R) trademarks in the U.S., Canada, Mexico, Central America, South
America, and the Caribbean.

In October 2002, we acquired from The Procter & Gamble Company the right to sell products under the trademark Sea
Breeze(R) pursuant to a perpetual license from Shisheido Corporation. We currently sell a line of liquid skin care products under the
Sea Breeze(R) name.

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 its affiliate, SAM'S Club, accounted for approximately 24 percent, 22 percent, and 23
percent of our net sales in fiscal 2003, 2002, and 2001, respectively. No other customer accounted for ten percent or more of net sales
during those fiscal years.

ORDER BACKLOG

When placing orders, our retail and wholesale customers usually request that we ship the related products within specific time
frames. Our Tactica segment ships some of its products to direct response customers and provides these customers with estimated
delivery dates at the time that it receives their respective orders. There was no significant backlog of orders in any of our distribution
channels at February 28, 2003.

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., The New L & N
Marketing and Sales Corporation, Chattem, J&J Boots, Andrew Jergens, Loreal, Unilever, and Alberto Culver. Some of these
competitors have significantly greater financial and other resources than we do.

SEASONALITY

The Company's business is somewhat seasonal. Net sales in the Company's fiscal second and third quarters, combined,
accounted for approximately 55 percent of fiscal 2003 net sales and for approximately 57 percent of fiscal 2002 and 2001 net sales.
As a result of the seasonality of sales, our 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.

The medicated skin powder that we sell under the Ammens(R) trademark is regulated by the United States Food and Drug
Administration.

EMPLOYEES

We employ 672 full-time employees in the U.S., Hong Kong, and Europe, of which 238 are marketing and sales employees, 159 are
distribution employees, 55 are engineering and development employees, and 220 are administrative personnel. Included in these
totals are 76 employees of Tactica. Tactica employs 57 administrative and 19 sales and marketing personnel. None of the Company's
employees are covered by a 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 (11) to the Consolidated Financial Statements contains geographic information concerning our net sales and long-lived
assets.

SECURITIES EXCHANGE ACT REPORTS

We maintain an Internet site at the following address: http://www.helenoftroyusa.com. We make available on or through our
Internet website certain reports and amendments to those reports that we file with or furnish to the Securities and Exchange
Commission (the "SEC") in accordance with the Securities Exchange Act of 1934 (the "Securities Exchange Act"). These include our
annual reports on Form 10-K, our quarterly reports on Form 10-Q and our current reports on Form 8-K. We make this information
available on our website free of charge as soon as reasonably practicable after we electronically file the information with, or furnish it
to, the SEC. The public may read and copy any of the materials we file with the SEC in accordance with the Securities Exchange Act
at the SEC's Public Reference Room at 450 Fifth Street, N.W. Washington, D.C. 20549. The public may obtain information on the
operation of the Public Reference Room by calling the SEC at 1-800-SEC-0300. The SEC maintains an Internet site that contains
reports, proxy and information statements, and other information about our Company. The address of the SEC's Internet site is
http://www.sec.gov.

ITEM 2. PROPERTIES

PLANT AND FACILITIES

North American Segment. We own a 135,000 square foot office building and a 408,000 square foot warehouse in El Paso,
Texas. The office building houses our U.S. operations. The El Paso office building and warehouse are located on a 50-acre plot of
land that we own. We also own a 619,000 square foot warehouse in Southaven, Mississippi, as well as the 29-acre plot of land on
which that warehouse is located. We purchased the Southaven warehouse in January 2003. It became fully operational during May
2003. We lease 108,000 square feet of warehouse space in El Paso, Texas; 50,000 square feet of warehouse space in Toronto,
Canada; and 20,000 square feet of warehouse space in Vancouver, Canada. During fiscal 2003 we also leased 360,000 square feet of
warehouse space in Memphis, Tennessee. Our lease in Memphis terminated upon the Southaven warehouse becoming fully
operational. 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; The Netherlands, and the
United Kingdom. In addition, we also lease sales offices in the United Kingdom, France, Germany, and Brazil.

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 the Company still owns.

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.

ITEM 3. LEGAL PROCEEDINGS

The Hong Kong Inland Revenue Department (the "IRD") has assessed $6,753,000 in tax on certain profits of our foreign
subsidiaries for the fiscal years 1995 through 1997. Hong Kong taxes income earned from certain activities conducted in Hong Kong.
We are vigorously defending our position that we conducted the activities that produced the profits in question outside of Hong Kong
and that we have 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 assessment could total $34,101,000 (U.S.) for the period
from fiscal 1995 through fiscal 2003.

In connection with the IRD's tax assessment for the fiscal years 1995 through 1997, we were required to purchase $3,282,000
(U.S.) in tax reserve certificates in Hong Kong, which represented approximately 49 percent of the liability assessed by the IRD. 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 included
on our Consolidated Balance Sheets as of February 28, 2003 and 2002 on the line entitled "Other assets." The tax reserve certificates
are denominated in Hong Kong dollars and are, therefore, subject to the risks associated with foreign currency fluctuations.

The IRD also assessed $4,468,000 in tax on certain profits of our foreign subsidiaries for the fiscal years 1990 through 1994.
During the second quarter of the fiscal year ended February 28, 2003, we and the IRD settled our dispute related to those years for
$2,505,000 (56 percent of the assessed amount), plus interest of approximately $100,000. As a result of the assessment, we forfeited
tax reserve certificates previously valued at $2,468,000 on our Consolidated Balance Sheet and paid approximately $137,000 in cash
to the IRD. The tax reserve certificates that we forfeited were included on our Consolidated Balance Sheet as of February 28, 2002
on the line entitled "Other assets." The settlement did not affect the current status of the IRD's assessments for fiscal years 1995
through 1997 and did not have a material effect on our consolidated results of operations.

Although the ultimate resolution of the IRD's claims cannot be predicted with certainty, we believe that we have made adequate
provision in the financial statements for the resolution of the IRD's claims and potential future assessments relating to activity since
fiscal 1997. Such provision appears on our Consolidated Balance Sheets as of February 28, 2003 and 2002 on the line entitled
"Income taxes payable."

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 2003.

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 2003

First quarter
Second quarter
Third quarter
Fourth quarter

Fiscal 2002

First quarter
Second quarter
Third quarter
Fourth quarter

High
------

15.00
14.17
12.05
14.58

9.42
14.80
13.20
15.79

Low
------

11.65
11.20
8.20
10.21

5.16
7.75
7.99
10.26

APPROXIMATE NUMBER OF EQUITY SECURITY HOLDERS

We have one class of equity security outstanding at February 28, 2003; Common Stock with a par value of $0.10. As of April 30,
2003 there were 404 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 14,000 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 2004. 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.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

Number Of Securities To Be
Issued Upon Exercise Of
Outstanding Options,
Warrants, And Rights
(a)

Weighted-Average Exercise
Price Of
Outstanding Options,
Warrants, And Rights
(b)

Number Of Securities
Remaining Available For
Future Issuance Under Equity
Compensation Plans
(Excluding Securities
Reflected In Column (a))
(c)

Equity Compensation Plans
Approved By Security
Holders
Equity Compensation Plans
Not Approved By Security
Holders Total

8,614,738

$ 10.83

1,769,226

—
8,614,738

—
$ 10.83

—
1,769,226

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 shares and earnings per share in thousands)

2003(1)
---------
Statements of Income Data
Net Sales (2)

$ 458,825

2002(1) 2001(1) 2000 1999
---------

---------

$ 447,319

$ 357,164

$ 297,257

$ 293,363

Cost of sales

Gross Profit

247,794
---------
211,031

238,859
---------
208,460

220,530
---------
136,634

185,685(4) 175,293
---------
---------
118,070
111,572

Selling, general and
administrative expenses (2)

Operating income

Interest expense
Other income (5)

158,172
---------
52,859

(3,965)
1,852
---------

166,803
---------
41,657

(4,256)
1,146
---------

113,638(3) 101,771(4) 81,356
---------
---------
---------
36,714
9,801
22,996

(3,989)
1,883
---------

(3,530)
6,826
---------

(3,337)
2,036
---------

Earnings before income taxes

50,746

38,547

20,890

13,097

35,413

Income tax expense (benefit)

12,030
---------

9,332
---------

3,558
---------

(14)
---------

7,083
---------

Net earnings

Per Share Data
Basic
Diluted

Weighted average number of
Common shares outstanding:
Basic
Diluted

$ 38,716 $ 29,215 $ 17,332 $ 13,111
=======
======

=======

$ 28,330
=======

$ 1.37
$ 1.31

$ 1.04
$ 1.00

$ .61
$ .60

$ .45
$ .44

$ 1.00
$ .96

28,189
29,548

28,089
29,199

28,420
28,729

29,053
29,885

28,279
29,596

ITEM 6. SELECTED FINANCIAL DATA - CONTINUED

Last Day of February
(in thousands)

Balance Sheet Data:
Working capital
Total assets
Long-term debt
Stockholders' equity
Cash dividends

2003

2002

2001

2000

1999

$173,809
405,629
55,000
289,602
--

$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
--

Fiscal 2003, 2002 and 2001 results include 100 percent of the results of Tactica, a subsidiary in which

(1)
the Company acquired a 55 percent interest in March 2000. See "Item 7. "Management's Discussion and
Analysis of Financial Condition and Results of Operations" for a further explanation of this accounting policy.

(2) We adopted Emerging Issues Task Force Abstract 01-9 ("EITF 01-9") for fiscal 2003. EITF 01-9
requires that certain vendors record certain consideration given to customers as reductions of sales, rather than
as selling, general, and administrative expenses. Certain items that, prior to fiscal 2003, were classified as
selling, general, and administrative expenses have been reclassified as reductions to net sales. Those items
totaled $3,930,000 for fiscal 2002, $4,234,000 for fiscal 2001, $2,256,000 for fiscal 2000, and $1,124,000 for
fiscal 1999.

In fiscal 2001, the Company recorded a $2,457,000 charge for the remaining unamortized costs under a

(3)
distribution agreement, which was later formally terminated.

(4)
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.

(5)
Other income includes gains of approximately $75,000 in fiscal 2003, $165,000 in fiscal 2002,
$1,400,000 in fiscal 2001 and $6,300,000 in fiscal 2000 from the sale and appreciation of trading securities.

In fiscal 2000 the Company repurchased 526,485 shares of its Common Stock at a cost of $4,076,000.

(6)
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.

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

2003

2002

2001

100.0%
54.0
------
46.0

100.0%
53.4
------
46.6

100.0%
61.7
------
38.3

34.5
------
11.5

(0.9)
0.4
------
11.0

2.6
------
8.4%

37.3
------
9.3

(1.0)
0.3
------
8.6

2.1
------
6.5%

31.8
------
6.5

(1.1)
0.5
------
5.9

1.0
------
4.9%

Net sales
Cost of sales

Gross Profit

Selling, general and
administrative expenses
Operating income

Interest expense
Other income, net

Earnings before income taxes

Income taxes

Net earnings

Sales by operating segment for fiscal 2003, 2002 and 2001 were as follows:

(In Thousands)

% Increase (Decrease)

Segment
-------------------
North American
International
Tactica

2003
-------
$345,992
33,759
79,074
-------
$458,825

2002
-------
$308,738
29,906
108,675
-------
$447,319

2001
-------
$307,764
25,390
24,010
-------
$357,164

2003
versus
2002
-------
12%
13
(27)
-------
3%

2002
versus
2001
-------
—%
18
353
-------
25%

Operating income (loss) by operating segment for fiscal 2003, 2002 and 2001 was as follows:

(In Thousands)

% Increase (Decrease)

Segment
-------------------
North American
International
Tactica
Corporate / other (1)

2003
-------
$ 49,554
2,995
2,657
(2,347)
-------
$ 52,859

2002
-------
$ 32,203
(244)
11,930
(2,232)
-------
$ 41,657

2001
-------
$ 28,736
94
(4,629)
(1,205)
-------
$ 22,996

(1) Includes items not allocated to the three operating segments.

2003
versus
2002
-------
54%
1,327
(78)
(5)
-------
27%

2002
versus
2001
-------
12%
(360)
358
(85)
-------
81%

RESULTS OF OPERATIONS
Consolidated Sales and Gross Profit Margins
Our net sales for the 12-month period ended February 28, 2003 ("fiscal 2003") grew by $11,506,000, or
2.6 percent, compared to the 12-month period ended February 28, 2002 ("fiscal 2002"). Net sales increased in
our North American and International operating segments, while our Tactica segment's net sales decreased.

Fiscal 2002 net sales improved 25.2 percent or $90,155,000 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.

Gross profit, as a percentage of sales decreased from 46.6 percent in fiscal 2002 to 46.0 percent in fiscal
2003, primarily because of the mix of net sales among our operating segments. Our North American and
International segments' net sales increased during fiscal 2003, both in absolute terms and as a percentage of
consolidated net sales. These segments generally achieve lower gross margins than Tactica, but also incur
lower selling, general, and administrative expenses, as a percentage of net sales, than Tactica. This change in
sales mix contributed to the decrease in gross profit margins. The North American and International segments
both achieved improved gross margins during fiscal 2003, offsetting, in part, the effect of the change in our
sales mix.

Our fiscal 2002 gross profit margins improved from 38.3 to 46.6 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

6.7 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.

Selling, general, and administrative expense

During fiscal 2003, selling, general, and administrative expenses ("SG&A"), expressed as a percentage

of sales, decreased from 37.3 percent to 34.5 percent. Three factors contributed significantly to this decrease.
First, we experienced a $2,035,000 reduction in SG&A due to the discontinuance of goodwill amortization
associated with the adoption of Statement of Financial Accounting Standards No. 142, "Goodwill and Other
Intangible Assets." Second, SG&A dropped by $1,945,000, compared to fiscal 2002, because of foreign
exchange gains. Finally, our North American and International segments comprised larger portions of our
business in fiscal 2003 than in fiscal 2002. As mentioned above, the North American and International
segments generally incur lower SG&A, as a percentage of sales, than our other segment, Tactica. The
difference in SG&A rates is largely due to the fact that Tactica's business model requires it to spend higher
percentages of its net sales on media advertising. Because the North American and International segments
contributed larger percentages of our consolidated net sales in fiscal 2003 than in fiscal 2002, the lower
SG&A, as a percentage of sales, that they incurred, had a greater weight in determining consolidated SG&A
as a percentage of net sales.
From fiscal 2001 to fiscal 2002, SG&A expressed as a percentage of net sales, increased from 31.8
percent to 37.3 percent. 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 net 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 its fiscal 2002
net 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.

North American Segment
The North American segment sells hair care and other personal care and comfort appliances, hair
brushes, combs, utility and decorative hair accessories, liquid hair care products, and liquid and powder skin
care products 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.
Net sales in the North American segment grew $37,254,000 or 12.1 percent from fiscal 2002 to fiscal
2003. On October 23, 2002, we expanded our product lines into the liquid and powder hair and skin care
category by acquiring four brand names and licenses to sell products under two additional brand names. Sales
of liquid and powder hair and skin care products under the six new brand names resulted in $11,200,000 of
sales growth in the North American segment. Exclusive of these sales our North American segment grew 8.4
percent. The growth, exclusive of the liquid and powder product lines, resulted from increased sales of existing
product lines that have been enhanced with new technologies and features. Examples include hair care
appliances utilizing ionic technology and ceramic, rather than traditional, heating surfaces. We also
experienced increased sales in our Vidal Sassoon(R) line of hair clippers, as well as hair care appliances sold
under our Wave Rage(TM) trade name. Partially offsetting the gains discussed above, our fiscal 2003 net sales
of hair brushes, combs and accessories were lower than in fiscal 2002.
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 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.
The North American segment's operating income grew $17,351,000, or 53.9 percent, for fiscal 2003,
compared to fiscal 2002. Operating income in the North American segment was 14.3 percent of sales,
compared to 10.4 percent in fiscal 2002. The sales growth discussed above was a significant factor in the North
American segment's achievement of higher operating income. The North American segment benefited from the
absence of goodwill amortization during fiscal 2003, due to the adoption of SFAS 142, and achieved better
gross margins in fiscal 2003 than fiscal 2002. The increased gross margins were attributable primarily to more
efficient product sourcing. In addition, the North American segment benefited during fiscal 2003 from the
reclassification of $580,000 that was accrued during fiscal 2000 for anticipated customer credits related to the
artificial fingernails business, but was not needed for that purpose. This amount was reclassified in fiscal 2003
to accrue for customer credits related to 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 9.3 percent to 10.4 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.

International Segment
The International segment sells hair care and other personal care and comfort appliances, hairbrushes,
combs, utility and decorative hair accessories, liquid hair care products, and liquid and powder skin care
products 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.
Net sales in the International segment grew $3,853,000 or 12.9 percent from fiscal 2002 to fiscal 2003.
As discussed in the North American segment sales analysis above, on October 23, 2002, we expanded our
product lines into the liquid and powder hair and skin care category by acquiring four brand names and
licenses to sell products under two additional brand names. Sales of liquid and powder hair and skin care
products under the six new brand names resulted in $1,797,000 of sales growth in the International segment.
Exclusive of these sales our International segment grew 6.9 percent. The International segment sales increase,
exclusive of the liquid and powder products, is mainly comprised of improved sales in the United Kingdom
("UK"). The introduction of hair straighteners under the Vidal Sassoon(R) trade name in the UK produced part
of the sales growth, while the introduction of a new line of hair care appliances under the Cosmopolitan trade
name contributed the balance. The strengtheningduring fiscal 2003 of the British pound and the Euro versus
the U.S. dollar also had a positive effect on our International segment's net sales.
Increased sales in Latin and South America, France, and the UK drove International segment net 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 businesswith existing customers. Expanded sales to some of our larger customers in the
UK drove sales increases there.
The International segment generated $2,995,000 of operating income, compared to a $244,000 operating
loss in fiscal 2002. Higher net sales, along with better gross profit margins, were keys to the International
segment's improved operating results for fiscal 2003. As was the case with the North American segment, more
efficient sourcing contributed to the International segment's improved gross margins. Foreign currency
exchange gains also increased the International segment's operating profits by approximately $1,900,000. Our
operations in the UK, Germany, and France purchase inventory using United States dollars and bill customers
in British pounds or Euros upon selling such inventory. This method of purchasing and billing combined with a
weakening U.S. dollar to produce foreign exchange gains during fiscal 2003.

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. In addition to
collection difficulties, inventory markdowns and currency exchange losses contributed to the International
segment's fiscal 2002 operating loss.

Tactica Segment
We own a 55 percent interest in Tactica International, Inc. ("Tactica"). Tactica sells a variety of personal
care and other products to retailers and directly to consumers. Tactica uses television and print media
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. At February 28, 2003, Tactica's accumulated deficit totaled
$2,172,000. Therefore, our Consolidated Statements of Income for fiscal 2003, 2002 and 2001 include 100
percent of Tactica's net earnings or loss. We will continue to recognize all of Tactica's net income or loss until
such time as Tactica's $2,172,000 accumulated deficit is extinguished.

Tactica's fiscal 2003 net revenues decreased 27.2 percent, compared to fiscal 2002. Sales of Tactica's
Epil-Stop(R) hair removal products decreased approximately 50 percent, with this change being the primary
reason for Tactica's lower net revenues. We expect Tactica's fiscal 2004 net revenues to remain relatively
constant, compared to fiscal 2003. Please refer to the section below entitled "Risk Factors" regarding this and
other forward-looking statements.

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

Due mainly to the sales decrease discussed above, Tactica's operating income decreased from

$11,930,000 in fiscal 2002 to $2,657,000 in fiscal 2003. In addition to lower sales, Tactica also achieved
slightly lower gross profit, as a percentage of sales, in fiscal 2003 than in fiscal 2002 as its sales mix shifted
more heavily toward retailers and away from sales directly to consumers. Because its sales decreased, Tactica
experienced an increase in SG&A as a percentage of sales, despite lowering its SG&A spending by
approximately $16,000,000.

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.

Interest expense and Other income / expense

Interest expense was $291,000, or 6.8 percent, lower in fiscal 2003 than in fiscal 2002. We did not
borrow any funds under our line of credit during fiscal 2003, as opposed to fiscal 2002, when we borrowed
funds during the first three quarters of that fiscal year and incurred the related interest expense. During fiscal
2003, our interest expense consisted entirely of interest on our fixed rate long-term notes payable.

Interest expense increased 6.7 percent, or $267,000, from fiscal 2001 to fiscal 2002. This was largely

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.

The increase of $706,000, or 62 percent, in our other income for fiscal 2003, over fiscal 2002, was due
mainly to the fact that we had more cash available for investment during most of fiscal 2003 than fiscal 2002.

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 trading 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.

Income tax expense

Our fiscal 2003 income tax expense was 23.7 percent of net income before taxes, a rate relatively
constant with the 24.2 percent rate that we experienced in fiscal 2002. Because of our corporate structure, the
earnings produced by our North American and International operating segments are generally taxed at lower
rates than earnings produced by Tactica. The North American and International segments, combined,
contributed a significantly larger portion of our earnings in fiscal 2003 than in fiscal 2002. This change in the
mix of our earnings served to reduce our consolidated effective income tax rate. However, as discussed below,
we removed a valuation allowance from a deferred tax asset during fiscal 2002, thereby making that year's
effective income tax rate lower than it otherwise would have been. This factor offset the reduction of income
taxes as a percentage of earnings before income taxes, caused by the reduction in Tactica's contribution to pre-
tax earnings.

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. As mentioned above, Tactica
usually incurs higher income tax rates than do our other two segments combined. Because Tactica produced
net income during fiscal 2002, as opposed to a loss in fiscal 2001, our fiscal 2002 effective tax rate rose. The
removal during fiscal 2002 of a valuation allowance from a $1,115,000 deferred tax asset reduced Tactica's
income tax expense for fiscal 2002.

LIQUIDITY AND CAPITAL RESOURCES
During fiscal 2003, we funded several significant capital, trademark, and license expenditures with cash
generated internally. Our largest such expenditures consisted of the purchase of four trade names and the rights
under licenses for two additional trade names. We now sell hair care liquids and skin care liquids and powder
under those six brand names. In addition, we purchased a warehouse in Mississippi and entered an agreement
with a licensor whereby we prepaid royalties due in future years. We used approximately $63,000,000 of cash
in these transactions and ended the year with cash of more than $47,000,000.
Operating activities provided $43,513,000 during fiscal 2003, compared to $52,632,000 during fiscal
2002. The primary reason for the difference between these two figures was our use of $11,500,000 to prepay
royalties under a license agreement in connection with alterations to the terms of that agreement. Investing
activities used $60,529,000 of cash during fiscal 2003, compared with $5,778,000 in fiscal 2002, mainly
because of our purchase of a warehouse in Mississippi and our acquisition of four trade names under which we
will sell hair care liquids and skin care liquids and powder, as well as licenses to sell such products under two
additional trade names. The new warehouse replaces space that we were leasing in a warehouse operated by a
third party in the Southeast. The purchase of the brand names and rights under licenses allows us to expand
into an additional portion of the personal care market. We believe that this transaction will result in increased
net sales and earnings for the Company.

Net accounts receivable decreased 11.4 percent from February 28, 2002 to February 28, 2003. This
decrease is largely a result of the timing of our fourth quarter sales. Our sales during the first month of the
fourth quarter were higher in fiscal 2003 than in fiscal 2002. The reverse was true of sales for the third month
of the quarter. This pattern resulted in earlier collection of fiscal 2003 fourth quarter sales, compared to fiscal
2002.
Our February 28, 2003 inventory balance increased 11.6 percent, compared to the same time a year
earlier, while net sales grew by 2.6 percent. The primary reason for the difference between the percentage
increase in inventory and sales was an increase in the Tactica segment's inventory, while its sales decreased.
Our working capital balance decreased to $173,809,000 at February 28, 2003, from $191,438,000 at
February 28, 2002. Our current ratio was 3.8 at February 2003, compared to 4.7 at February 28, 2002. The
decreases in our working capital and current ratio resulted from the conversion of cash into non-current assets
in connection with the purchases of brand names and a new warehouse facility, as well as the prepayment of
royalties, all of which are discussed earlier in this section.
In connection with its acquisition of a 55 percent interest in Tactica, the Company loaned $3,500,000 to
the minority shareholders of Tactica. The annual interest rate on these loans is 8.75 percent. All principal and
unpaid interest on these loans is due March 14, 2005. These loans are secured by the shares of Tactica held by
the minority shareholders. The total amounts of principal and accrued interest due to the Company under the
loans to Tactica's minority shareholders were $4,409,000 and $4,103,000 at February 28, 2003 and 2002,
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,
2003 the interest rate charged under the line of credit was 2.31 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, 2003, there were no borrowings under
this line of credit and outstanding letters of credit totaled $828,000. The revolving credit agreement provides
that the Company must satisfy requirements concerning its minimum net worth, debt to capitalization ratio,
debt to EBITDA ratio and its fixed charge coverage ratio. The Company is in compliance with all of these
requirements. Under the terms of the revolving credit agreement, one of our U.S. subsidiaries is the borrower.
Our parent company, located in Bermuda and three of our U.S. subsidiaries fully guarantee any amounts
outstanding under the revolving line of credit on a joint and several basis.
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 annual interest rate of 7.01 percent, as well as an unsecured Senior Note with a
face value of $15,000,000 and an annual interest rate of 7.24 percent. We pay interest on these notes each
calendar quarter. The $40,000,000 group of Senior Notes requires 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. Under the
terms of the Senior Notes, one of our U.S. subsidiaries is the borrower. Our parent company, located in
Bermuda, one of our subsidiaries located in Barbados, and three of our U.S. subsidiaries fully guarantee the
Senior Notes on a joint and several basis.
Capital and license expenditures totaled $42,865,000, $878,000, and $3,185,000 in fiscal 2003, 2002, and
2001, respectively. Capital and license expenditures during fiscal 2003 included $16,700,000 associated with
our purchase of a new warehouse facility in Mississippi, $19,000,000 paid for the acquisition of the rights to
sell Sea Breeze(R) and Vitapointe(R) products under a license agreement, and $2,000,000 paid in connection
with the renewal and alteration of terms of a license agreement.

We also used $16,920,000 of cash to acquire trademarks. We are in the process of replacing certain of our key
information technology systems. We estimate that we will spend a total of approximately $5,000,000 to
$6,000,000 on this project, with the expenditures occurring during fiscal 2004 and fiscal 2005. It is our
expectation that we will capitalize at least 80 percent of the amount spent on the information technology
project. In addition, we plan to move our UK operation into a new office facility during fiscal 2004. We expect
to make a capital expenditure of approximately $1,800,000 in connection with the construction of our new
office facility in the UK. We expect to pay for the information technology project and the new UK office
facility with funds generated internally.

Our contractual obligations and commercial commitments, as of February 28, 2003 were:

Payments Due By Period (In 000s)

1 year

4 years

3 years

5 years

2 years

Total

$ 55,000
68,249
24,830

After
5 years
Contractual Obligations
________________________________________________________________________________________
10,000
— 10,000
15,000
Long-term debt
— —
—
68,249
Open purchase orders – inventory
8,720
2,658
3,829
3,705
Minimum royalty payments
Advertising commitments under
license agreements
Management fees - Corporate jet
Operating leases
New office facility in UK
Purchase of software

5,724
868
4,326
878
362
362
362
—
— —
6
894
— — — — —
— — — — —
---------
---------
---------
28,046
13,894
20,809

23,775
1,811
3,678
1,800
1,113
-----------
$180,256

6,274
362
1,960
1,800
1,113
---------
83,463

5,705
363
818

Total contractual obligations

----------
20,146

---------
13,898

10,000

3,260

2,658

Our 55 percent-owned subsidiary, Tactica International, Inc. ("Tactica") leases office space in New York
City. One of our U.S. subsidiaries has issued a $389,000 standby letter of credit to the lessor. The lessor may
draw funds from the standby letter of credit if Tactica fails to pay its rent. The standby letter of credit decreases
to $195,000 on April 30, 2005 and expires on the same date as the related lease, February 27, 2006.

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

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. Other than the planned capital expenditures
discussed above, 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 complementary 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.

Acquisition Of Trade Names And Licenses
On October 21, 2002, we acquired from The Procter & Gamble Company the right to sell products under
six trade names. We acquired all rights to the trademarks, formulas, and production processes for four of the
six trade names; Ammens(R), Vitalis(R), Condition 3-in-1(R), and Final Net(R). The Procter & Gamble
Company assigned to us its rights under licenses to sell products bearing the other two trade names; Sea
Breeze(R) and Vitapointe(R). The Sea Breeze(R) license is perpetual. The portion of the purchase price
assigned to the four trademarks purchased is included in our consolidated balance sheet as of February 28,

2003 on the line entitled "Trademarks, net of accumulated amortization." We have concluded that the useful
economic lives of these trademarks are indefinite, meaning that they are not subject to amortization. This
conclusion was reached after consideration of the history of the brands and of our plans and forecasts for sales
of products under these trademarks. The portion of the purchase price assigned to the rights obtained under the
Sea Breeze(R) and Vitapointe(R) licenses appears on our consolidated balance sheet as of February 28, 2003
on the line entitled "License agreements, at cost less accumulated amortization." After consideration of the fact
that the Sea Breeze(R) license is perpetual and an analysis of the history of the brand as well as our plans and
forecasts with respect to the brand, we determined that the Sea Breeze(R) license has an indefinite economic
useful life. Therefore it is not subject to amortization. The Vitapointe(R) license expires on December 31,
2010. Although, our long-range expectation is to renew this license upon its expiration, we that the finite
nature of this license indicates that it has a definite life and is, therefore subject to amortization. We expect
annual amortization expense associated with the Vitapointe(R) license to be approximately $125,000.

Trademark License Agreement Renewal
During December 2002, we signed a new agreement with The Procter & Gamble Company to sell
appliances and combs, hair brushes, and accessories using the Vidal Sassoon trade name. The agreement
allows us to sell products under the Vidal Sassoon trade name worldwide except in Australia, China, Hong
Kong, India, Indonesia, Japan, Korea, Malaysia, New Zealand, The Philippines, Singapore, Taiwan, and
Thailand. In connection with the new agreement, we paid a $2,000,000 non-refundable licensing fee, which we
will amortize over the agreement's initial term, January 2003 through December 2012. In addition, we are
obligated under the agreement to pay royalties on a quarterly basis. We also have options to extend the
agreement for two additional ten-year periods.

Non-Monetary Transactions
During fiscal 2003, we entered into two non-monetary transactions in which we exchanged inventory
with a net book value of approximately $3,100,000 for advertising credits. As a result of these transactions, we
recorded both sales and cost of goods sold equal to the exchanged inventory's net book value. We used
approximately $600,000 of the advertising credits during fiscal 2003 and expect to use the remaining
advertising credits by February 28, 2004. The remaining credits are valued at $2,500,000 on our Consolidated
Balance Sheet at February 28, 2003 and are included in the line item entitled "Prepaid Assets."

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 2003, 2002 and 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.

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. During fiscal

2003, we came to an agreement with the IRD, settling its assessment for fiscal 1990 through 1994 for
approximately 56 percent of the amount originally assessed. The ultimate resolution of the remaining IRD
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 $34,101,000 (U.S.) for the period from fiscal 1995 through fiscal 2003.

Estimates of credits to be issued to customers - We regularly receive requests for credits from retailers for
returned products or in connection with sales incentives, such as cooperative 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.

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.

Carrying value of long-lived assets - We apply the provisions of Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142") and Statement of Financial
Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS
144") in assessing the carrying values of our long-lived assets. SFAS 142 and SFAS 144 both require that a
company consider whether circumstances or conditions exist that suggest that the carrying value of a long-
lived asset might be impaired. If such circumstances or conditions exist, further steps are required in order to
determine whether the carrying value of the asset exceeds its fair market value. If analyses indicate that the
asset's carrying value does exceed its fair market value, the next step is to record a loss equal to the excess of
the asset's carrying value over its fair value. The steps required by SFAS 142 and SFAS 144 entail significant
amounts of judgment and subjectivity. We did not record any charges for impairment of long-lived assets
during fiscal 2003.

Economic useful life of intangible assets - We apply Statement of Financial Accounting Standards No.

142, "Goodwill and Other Intangible Assets" ("SFAS 142") in determining the useful economic lives of
intangible assets that we acquire and that we report on our consolidated balance sheets. SFAS 142 requires that
companies amortize intangible assets, such as licenses and trademarks, over their economic useful lives, unless
those assets' economic useful lives are indefinite. If an intangible asset's economic useful life is deemed to be
indefinite, that asset is not amortized. When we acquire an intangible asset, we consider factors such as the
asset's history, our plans for that asset, and the market for products associated with the asset. We consider these
same factors when reviewing the economic useful lives of our previously acquired intangible assets as well.
We review the economic useful lives of our intangible assets at least annually. The determination of the
economic useful life of an intangible asset requires a significant amount of judgment and entails significant
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 judgments.

Risk Factors
OUR FINANCIAL POSITION AND RESULTS OF OPERATIONS COULD BE MATERIALLY ADVERSELY AFFECTED
BY CHANGES IN TAX LAWS. Currently, we benefit from an international corporate structure that produces
relatively low tax effective tax rates on a consolidated basis. If we were to encounter 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. In addition to the legislation introduced in Congress, the U.S. Treasury
Department has 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.
Our ability to maintain our position that the parent company is not a Controlled Foreign Corporation (as
defined under the U.S. Internal Revenue Code) is critical to the tax treatment of our non-U.S. earnings. A
Controlled Foreign Corporation is a non-U.S. corporation whose largest U.S. shareholders (i.e., those owning
10% or more of its stock) together own more than 50% 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.

THE HONG KONG INLAND REVENUE DEPARTMENT HAS CHALLENGED OUR POSITION ON CERTAIN PROFITS
AND ASSESSED TAXES ON SUCH PROFITS. WE HAVE SETTLED CERTAIN OF THE CHALLENGES; HOWEVER,
CERTAIN AMOUNTS ARE STILL OUTSTANDING AND WE MAY HAVE TO PAY FURTHER MATERIAL AMOUNTS IN
THE FUTURE. The Hong Kong Inland Revenue Department ("the IRD") assessed $6,753,000 in tax on certain
profits of our foreign subsidiaries for the fiscal years 1995 through 1997. Hong Kong taxes income earned
from certain activities conducted in Hong Kong. We are vigorously defending our position that we 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. In connection with the IRD's tax
assessment for the fiscal years 1995 through 1997, we were required to purchase $3,282,000 (U.S.) in tax
reserve certificates in Hong Kong, which represented approximately 49% of the liability assessed by the IRD.
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.

The IRD also assessed $4,468,000 in tax on certain profits of our foreign subsidiaries for fiscal 1990
through 1994. During the second quarter of fiscal 2003, the Company and the IRD agreed on a settlement for
fiscal years 1990 through 1994. The Company and the IRD agreed to settle the amount for $2,505,000 (56% of
the assessed amount), plus interest of approximately $100,000. In addition to the tax reserve certificates
discussed above, we previously purchased $2,468,000 in tax reserve certificates in connection with the IRD's
assessment for 1990 through 1994. We were able to apply these reserve certificates to amounts due under the
settlement. We paid the IRD approximately $37,000 of additional cash, plus interest to settle the issues raised
by the IRD for fiscal 1990 through 1994. The settlement of the IRD's assessments for fiscal 1990 through 1994
did not affect the status of the IRD's assessments for fiscal years 1995 through 1997. If the IRD's position were
to prevail and if it were to assert the same position for years after fiscal 1997, the resulting assessment could
total $34,101,000 (U.S.) for the period from fiscal 1995 through fiscal 2003. Although the ultimate resolution
of the IRD's claims cannot be predicted with certainty, we believe that adequate provision through 1997 and

potential future assessments relating to activity since fiscal 1997. However, such provisions do not reserve for
the full amount of such contingency and if the IRD's position was to prevail the Company's financial condition
and future results of operations could be materially adversely affected.

A FEW CUSTOMERS ACCOUNT FOR A SUBSTANTIAL PERCENTAGE OF OUR SALES. OUR FINANCIAL CONDITION
AND RESULTS OF OPERATIONS COULD SUFFER IF WE LOST ALL OR A PORTION OF THE SALES TO THESE
CUSTOMERS. We are dependent on certain principal customers. Wal-Mart Stores, Inc. and its affiliate, SAM'S
Club accounted for approximately 24 percent of the Company's net sales in fiscal 2003. Our top three
customers accounted for approximately 36 percent of fiscal 2003 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.

THE SALES OF OUR TACTICA PRODUCTS ARE VERY VOLATILE. ACCORDINGLY, OUR FINANCIAL
CONDITION COULD BE ADVERSELY AFFECTED AND THE RESULTS OF OPERATIONS COULD FLUCTUATE
MATERIALLY. Tactica's net sales increased by approximately 353 percent from fiscal 2001 and fiscal 2002 and
decreased by approximately 27 percent from fiscal 2002 to fiscal 2003. Tactica's net sales comprised
approximately 17 percent and 24 percent of the Company's consolidated net sales during fiscal 2003 and 2002,
respectively. Tactica sells some products that have short life cycles. Furthermore, Tactica relies on television
infomercials and direct response marketing campaigns for the marketing of some of its products. Accordingly,
Tactica's sales could continue to be more volatile than the sales of our other two segments. Our financial
position could be adversely affected and the results of operations could fluctuate materially because of the
volatility of sales of Tactica products.

ONE OF OUR SUBSIDIARIES IS SUBJECT TO A STOCKHOLDERS' AGREEMENT WITH THE FORMER
STOCKHOLDERS OF TACTICA. UNDER THE TERMS OF THE STOCKHOLDERS' AGREEMENT, UNDER CERTAIN
CIRCUMSTANCES WE COULD BE REQUIRED TO BUY THE REMAINING OUTSTANDING SHARES OF TACTICA OR
SELL OUR TACTICA SHARES TO A THIRD PARTY. THE COMPANY'S FINANCIAL CONDITION AND RESULTS OF
OPERATIONS COULD BE NEGATIVELY AFFECTED IF IT WAS FORCED TO CHANGE ITS OWNERSHIP POSITION IN
TACTICA. One of our subsidiaries is a party to a stockholders' agreement with the former owners of Tactica,
who retained a 45% 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 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 results of operations could be adversely affected.

WE ARE DEPENDENT ON THIRD PARTY MANUFACTURERS, MOST OF WHICH ARE IN THE FAR EAST.
CHANGES IN FOREIGN POLICY, INTERNATIONAL LAW OR THE INTERNAL LAWS OF THE COUNTRIES WHERE OUR
MANUFACTURERS ARE LOCATED COULD HAVE A MATERIAL NEGATIVE EFFECT ON OUR BUSINESS, FINANCIAL
CONDITION AND RESULTS OF 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.

THE RECENT OUTBREAK OF SEVERE ACUTE RESPIRATORY SYNDROME ("SARS") COULD DISRUPT THE

FLOW OF FINISHED GOODS THAT WE PURCHASE AND RE-SELL. Our subsidiary in Hong Kong assists in the
procurement of a large portion of the products that we sell. Many of these products are produced in South
China. SARS has been most prevalent in these two regions. Should a SARS outbreak interfere with the
operations of the third party factories from whom we purchase product or should it interfere with the operation
of our office in Hong Kong, we might experience a shortage of inventory. This type of shortage could have a
material negative effect on our financial position, results of operations, and cash flow. Thus far, SARS has had
no effect on our business.

OUR INDUSTRY IS EXTREMELY COMPETITIVE. OUR BUSINESS WILL SUFFER IF WE DO NOT DEVELOP

AND COMPETITIVELY MARKET PRODUCTS THAT APPEAL TO CONSUMERS. The personal care and comfort
products industry is extremely competitive. Maintaining and gaining market share depends heavily upon price,
quality, brand name recognition, patents, innovative designs 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.

WE ARE MATERIALLY DEPENDENT ON OUR LICENSED TRADEMARKS AS A SUBSTANTIAL PORTION OF

OUR SALES REVENUE COMES FROM SELLING PRODUCTS UNDER LICENSED TRADEMARKS. OUR BUSINESS,
FINANCIAL CONDITION AND RESULTS OF OPERATIONS COULD BE MATERIALLY ADVERSELY AFFECTED IF WE
ARE UNABLE TO SELL PRODUCTS UNDER THESE 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 Vidal Sassoon(R) and Revlon(R) trademarks. Actions taken
by licensors and other third parties could diminish greatly the value of any of our licensed trademarks. If we
were unable to sell products under these licensed trademarks or the value of the trademarks were diminished by
the licensor or third parties, the effect on our business, financial condition and results of operations could be
both negative and material.

OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS WILL SUFFER IF WE DO NOT
ACCURATELY FORECAST OUR CUSTOMERS' DEMANDS. 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 results of operations.

OUR FUTURE ACQUISITIONS, IF ANY, AND NEW PRODUCTS MAY NOT BE SUCCESSFUL, WHICH COULD
HAVE A MATERIAL ADVERSE EFFECT ON OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS. 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 our 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 the factors discussed above in the section entitled "Risk Factors" and other risks
described from time to time in the Company's reports to the Securities and Exchange Commission, including
this report.

New Accounting Guidance
As explained in Note 1 to the consolidated condensed financial statements, on March 1, 2002, we adopted
EITF 01-9 "Vendor Income Statement Characterization of Consideration Paid to a Reseller of a Vendor's
Products." Our adoption of EITF 01-9 in fiscal 2003 had no effect on operating income, net earnings, or
earnings per share. The following table presents the impact of EITF 01-9 on net sales and SG&A had the
standard been in effect for all fiscal years during the three-year period ending February 28, 2003.

(in thousands)

Fiscal Year Ended February 28,

Net sales prior to application of EITF 01-9
Adjustments:
Slotting fees
Cooperative advertising arrangements
Net adjustments
Net sales as reported herein

SG&A prior to application of EITF 01-9
Adjustments:
Slotting fees
Cooperative advertising arrangements
Net adjustments
SG&A as reported herein

2003
$ 462,563

(861)
(2,877)
(3,738)
$ 458,825

2002
$ 451,249

(1,607)
(2,323)
(3,930)
$ 447,319

2001
$ 361,398

(1,275)
(2,959)
(4,234)
$ 357,164

$ 161,910

$ 170,733

$ 117,872

(861)
(2,877)
(3,738)
$ 158,172

(1,607)
(2,323)
(3,930)
$ 166,803

(1,275)
(2,959)
(4,234)
$ 113,638

In June 2001, the Financial Accounting Standards ("FASB") issued Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"). The Company adopted SFAS 142
on March 1, 2002. SFAS 142 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. We completed reviews of our goodwill to
determine whether any of that goodwill was impaired. Based on the results of these reviews, we concluded

that our goodwill was not impaired as of March 1, 2002 or March 1, 2003. Therefore, we incurred no
impairment charge as a result of the adoption of SFAS 142. Because it eliminates the amortization of goodwill,
SFAS 142 decreased our SG&A expense by $2,035,000 for the fiscal year ended February 28, 2003.

The following tables present the impact of SFAS 142 on net earnings and earnings per share had the standard been in
effect for the fiscal years ended February 28, 2003, 2002 and 2001. (In thousands, except per-share amounts):

(in thousands, except per share amounts)

Years Ended February 28,

Reported net earnings
Adjustments:
Amortization of Goodwill
Income tax effect

Net adjustments
Adjusted net earnings

Reported earnings per share - basic
Adjusted earnings per share - basic
Reported earnings per share - diluted
Adjusted earnings per share - diluted

2003
$ 38,716

2002
$ 29,215

2001
$ 17,332

—
—

—
$ 38,716

$ 1.37
$ 1.37
$ 1.31
$ 1.31

2,035
(407)

1,628
$ 30,843

$ 1.04
$ 1.10
$ 1.00
$ 1.06

2,025
(405)

1,620
$ 18,952

$ .61
$ .67
$ .60
$ .66

In June 2001, the FASB issued Statement of Financial Accounting Standards No. 141, "Business
Combinations" ("SFAS 141"). SFAS 141 requires all business combinations to be accounted for using the
purchase method and requires the recognition of intangible assets apart from goodwill if they arise from
contractual or legal rights or if they are separable from goodwill. SFAS 141 applies to all business combinations
initiated after June 30, 2001. We did not enter into any transactions during fiscal 2003 that required the
application of SFAS 141. Our fiscal 2003 purchase from The Procter & Gamble Company of four brand names
and rights under licenses for two additional brand names was a purchase of specific assets, rather than a
business combination.

In June 2001, the FASB issued Statement of Financial Accounting Standards No. 143, "Accounting for
Asset Retirement Obligations" ("SFAS 143"). SFAS 143 requires that legal obligations associated with the
retirement of an asset be recorded as liabilities as incurred and capitalized as part of the cost of the associated
asset. These obligations are then depreciated over the course of the asset's useful life. We believe that SFAS 143
will have no effect on our consolidated financial statements.

In August 2001, the FASB issued Statement of Financial Accounting Standards No. 144, "Accounting for
the Impairment of Long-Lived Assets" ("SFAS 144"). We adopted the provisions of SFAS 144 effective March
1, 2002. SFAS 144 requires that companies consider whether indicators are present that would indicate
impairment of any of their long-lived assets. If such indicators are present the company compares the projected
future undiscounted cash flows from the asset to its book value. If the cash flows exceed the book value, no
further action is necessary. If the book value exceeds the projected undiscounted cash flows, a loss is
recognized for the excess of the asset's book value over its fair value. SFAS 144 did not affect our consolidated
financial statements as of or for the year ending February 28, 2003.

In December 2002, the FASB issued Statement of Financial Accounting Standards No. 148, "Accounting
for Stock-Based Compensation - Transition and Disclosure" ("SFAS 148"). This statement amends Statement of
Financial Accounting Standards No. 123, "Accounting For Stock-Based Compensation" ("SFAS 123") by
providing alternative methods of transition to the fair-value-based method of accounting for stock-based
employee compensation. It also amends the disclosure requirements of SFAS No. 123 to require prominent

disclosures of stock compensation information, including the method used to account for stock-based
compensation and the effects of that method on reported financial results in interim, as well as annual, financial
statements. We account for stock-based compensation using the intrinsic value method in accordance with the
provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." We
recognize no compensation expense in our financial statements for stock options issued with exercise prices
that equal or exceed the cost of our common stock on the date such options are issued. As a result, we do not
expect the provisions of SFAS 148 covering the transition to fair-value method accounting for stock-based
compensation to affect our financial statements. We make the disclosures required by SFAS 148 in Note (7) to
our consolidated financial statements. Beginning with our financial statements as of and for the three months
ended May 31, 2003, we will make the interim disclosures required by SFAS 148.

In November 2002, the FASB issued FASB Interpretation No. 45, "Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others" ("FIN 45").
FIN 45 requires that a guarantor record a liability for and disclose certain types of guarantees. For certain other
guarantees, FIN 45 requires only disclosure in the notes to the financial statements. We have not made any of
the types of guarantees for which FIN 45 requires that a liability be recorded. However, certain entities whose
financial statements are a part of our consolidated financial statements have guaranteed obligations of other
entities within our consolidated group. FIN 45 requires disclosure of these guarantees and of our product
warranties. These disclosures are contained in the notes to our consolidated financial statements.

In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation of Variable Interest
Entities" ("FIN 46"). FIN 46 requires that a company with an interest in a variable interest entity include such
an entity in its consolidated financial statements if its financial interest in the entity indicates control. The
statement applies immediately to interests in all variable interest entities acquired after January 1, 2003. For
other variable interest entities, FIN is to be applied effective July 1, 2003. We have no interests in entities
covered by FIN 46. Therefore, we do not expect FIN 46 to affect our consolidated financial statements.

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.
Interest on our long-term debt is fixed at 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 companies who borrow 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 2003, 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 short-term foreign exchange rate risk in purchasing inventory. However long-term declines in the
value of the U.S. dollar could subject us to higher inventory costs. Such an increase in inventory costs
could occur if foreign vendors were to react to such a decline by raising prices. 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.
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. When the U.S. dollar weakens against those currencies, we could realize foreign currency gains.
27

In fiscal 2003, our net sales denominated originally in currencies other than the U.S. dollar totaled
approximately $43,366,000, converted at average monthly exchange rates. Our fiscal 2003 foreign currency
exchange gains totaled $1,638,000. During fiscal 2003, we began hedging against foreign currency exchange
rate risk by entering into forward contracts to exchange a total of 5,000,000 British pounds for U.S. dollars at
rates ranging from 1.5393 to 1.548 dollars per British pound. At February 28, 2003, one forward contract to
exchange 1,000,000 British pounds for U.S. dollars at a rate of 1.5393 U.S. dollars per British pound remained
outstanding. We expect to enter into additional forward contracts to hedge foreign currency risk up to one year
in advance in the future.

Item 8. Financial Statements And Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE

Page

Independent Auditors' Report 29

Consolidated Financial Statements:

Consolidated Balance Sheets as of February 28, 2003 and 200230

Consolidated Statements of Income for each of the years in the

three-year period ended February 28, 2003

Consolidated Statements of Stockholders' Equity for each of

the years in the three-year period ended February 28, 2003

Consolidated Statements of Cash Flows for each of the years

in the three-year period ended February 28, 2003

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, 2003

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

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 28. 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 28. 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, 2003 and February 28,
2002, and the results of their operations and their cash flows for each of the years in the three-year period
ended February 28, 2003, 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.

As discussed in Note (1) to the consolidated financial statements, effective March 1, 2002, the Company
adopted the provisions of Statement of Financial Accounting Standards No. 142, "Goodwill and Other
Intangible Assets."

/s/ KPMG LLP

El Paso, Texas
May 13, 2003

HELEN OF TROY LIMITED
AND SUBSIDIARIES

Consolidated Balance Sheets

February 28, 2003 and 2002
(in thousands, except par value and shares)

Assets
Current assets:

Cash and cash equivalents
Trading securities, at market value
Receivables - principally trade, less
allowance of $5,107 in 2003 and
$5,794 in 2002
Inventories
Prepaid expenses
Deferred income tax benefits

2003

2002

$ 47,837
1,442

$ 64,293
145

61,990
111,966
8,454
3,147

69,943
100,306
3,256
5,727

Total current assets

234,836

243,670

Property and equipment, at cost less

accumulated depreciation of $14,302 in 2003
and $11,998 in 2002

Goodwill, net of accumulated

63,082

45,716

amortization of $8,629 in 2003 and 2002

40,767

Trademarks at cost, net of accumulated amortization

of $211 in 2003 and $188 in 2002

17,048

151

License agreements, at cost less accumulated
amortization of $10,194 in 2003 and
$8,888 in 2002

27,372

6,678

Other asset 22,524 20,576

$ 405,629

$ 357,558

(Continued)

HELEN OF TROY LIMITED
AND SUBSIDIARIES

Consolidated Balance Sheets

February 28, 2003 and 2002
(in thousands, except par value and shares)

Liabilities and Stockholders' Equity

Current liabilities
Accounts payable, principally trade
Accrued expenses:

Advertising and promotional
Other

Income taxes payable

2003 2002

$ 19,613

$ 11,549

5,662
16,802
18,950

5,183
15,369
20,131

Total current liabilities

61,027

52,232

Long-term debt

Total liabilities

55,000

116,027

107,232

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; 28,202,495 and 28,196,517
shares issued and outstanding at February 28,
2003 and 2002, respectively

Additional paid-in-capital
Retained earnings
Minority interest in deficit of acquired subsidiary

—

2,820
53,984
233,774
(976)

2,820
53,424
195,474
(1,392)

Total stockholders' equity

289,602

250,326

Commitments and contingencies

$ 405,629

$ 357,558

See accompanying notes to consolidated financial statements.

HELEN OF TROY LIMITED
AND SUBSIDIARIES

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

Years Ended February 28,

Net sales $ 458,825$ 447,319$ 357,164
Cost of sales

Gross profit
Selling, general, and administrative
Expenses

2003

2002

2001

247,794

238,859

220,530

211,031

208,460

136,634

158,172

166,803

113,638

Operating income

52,859

41,657

22,996

Other income (expense):
Interest expense
Other income, net

(3,965)
1,852

(4,256)
1,146

(3,989)
1,883

Total other income (expense)

(2,113)

(3,110)

(2,106)

Earnings before income taxes
Income tax expense

50,746
12,030

38,547
9,332

20,890
3,558

Net earnings

Earnings per share:
Basic
Diluted
Weighted average number of common
shares used in computing net earnings per share
Basic
Diluted

$ 38,716
========

$ 29,215
========

$ 17,332
========

$ 1.37
$ 1.31

$ 1.04
$ 1.00

$ .61
$ .60

28,188,747
29,547,845

28,089,072
29,198,972

28,420,073
28,728,762

See accompanying notes to consolidated financial statements.

HELEN OF TROY LIMITED AND SUBSIDIARIES

Consolidated Statements of Stockholders' Equity

Years ended February 28, 2003, 2002, and 2001
(in thousands)

Additional

Common Paid-In

Retained

Minority
Interest in
Deficit of
Acquired

Total
Stockholders'

Balances, February 29, 2000

Exercise of common stock

options, net

Issuance of common stock

in connection with employee
stock purchase plan
Acquisition and retirement
of common stock

(82)
Minority interest in deficit of

acquired subsidiary at date of
acquisition

Net earnings

Stock Capital Earnings Subsidiary Equity
$ 153,246
$ 2,884

$ — $ 209,624

$ 53,494

— — 53

168

— — 171

(1,508)

(3,033)

— (4,623)

— — — (2,948)
(1,958)
— — 19,290

(2,948)
17,332

Balances February 28, 2001

2,806

52,206

169,503

(4,906)

219,609

Exercise of common stock

options, net

Issuance of common stock

in connection with employee
stock purchase plan

Capital contribution to subsidiary by

minority shareholder

Net earnings
Balances February 28, 2002

Exercise of common stock

options, net

Issuance of common stock

in connection with employee
stock purchase plan

Cancellation of stock recovered
from escrow

(5)

710

— — 720

178

— — 182

— 330
— — 25,971
195,474
2,820

— 270
3,244
(1,392)

53,424

600
29,215
250,326

336

— — 339

219

— — 221

— — —

Net earnings
38,716
Balances February 28, 2003 $ 2,820 $ 53,984 $ 233,774 $ (976) $ 289,602

— — 38,300

416

See accompanying notes to consolidated financial statements.

HELEN OF TROY LIMITED
AND SUBSIDIARIES

Consolidated Statements of Cash Flows
(in thousands)

Years Ended February 28,

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 trading securities
Proceeds from sales of trading securities
Realized gain - trading securities
Unrealized (gain) loss - trading securities
Prepayment of royalties
Proceeds from sales of property, plant, and
equipment
Loss (gain) on disposal of property, plant
and equipment
Impairment of asset held for sale
Other non-cash adjustments to earnings

Changes in operating assets and liabilities:
Accounts receivable
Inventory
Prepaid expenses
Accounts payable
Accrued expenses
Other assets
Income taxes payable
Net cash provided (used) by operating
Activities

Cash flows from investing activities:
Capital and license expenditures
Purchase of trademarks
Retirements of property and equipment
Cash paid for acquisitions, net of cash
acquired
Increase in other assets
Net cash used by investing activities

2003

2002

2001

$ 38,716

$ 29,215

$ 17,332

6,558
(693)
2,580
(3,487)
2,258
(157)
90
(11,500)

—

(58)
—
—

8,646
(11,660)
(1,937)
8,064
1,878
5,396
(1,181)

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

43,513

52,632

(185)

(42,865)
(16,920)
536

—
(1,280)
(60,529)

(878)
—

(3,185)
—

—
(4,900)
(5,778)

(2,205)
(7,904)
(13,294)

35 (Continued)

HELEN OF TROY LIMITED
AND SUBSIDIARIES

Consolidated Statements of Cash Flows
(in thousands)

Years Ended February 28,

Cash flows from financing activities:
Net proceeds from (payments on)
short-term borrowings
Payments on long-term debt
Capital contribution to subsidiary by minority
shareholder

Proceeds from exercise of stock options, net
Common stock repurchases

2003

2002

2001

—
—

(10,000)
—

10,000
(450)

—
560
—

600
902
—

—
224
(4,623)

Net cash provided by (used in)
financing activities

560

(8,498)

5,151

Net increase (decrease) in cash and cash equivalents

(16,456)

38,356

(8,328)

Cash and cash equivalents, beginning
of year

Cash and cash equivalents, end of year

Supplemental cash flow disclosures:
Interest paid
Income taxes paid (net of refunds)

64,293

25,937

34,265

$ 47,837
========

$ 3,890
$ 10,068

$ 64,293
========

$ 25,937
========

$ 4,278
$ 5,776

$ 3,982
$ 1,015

See accompanying notes to consolidated financial statements.

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, hair brushes, combs, hair accessories, hair and skin care liquids and
powders, 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
100 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.

Sales are recognized when revenue is realized or realizable and has been earned. Sales and shipping

terms vary among customers, and, as such, revenue is recognized when risk and title to the product transfer to
the customer. Net sales is comprised of gross revenues less estimates of expected returns, trade discounts, and
customer allowances, which include incentives such as cooperative advertising agreements and off-invoice
markdowns. Such deductions are recorded and/or amortized during the period the related revenue is
recognized.

(d) Consideration paid to customers

The Company offers certain incentives in the form of cooperative advertising arrangements, volume
rebates, product markdown allowances, trade discounts, cash discounts, and slotting fees to customers who
purchase its products. The Company accounts for these types of incentives in accordance with Emerging Issues
Task Force Issue No. 01-9, "Accounting for Consideration Given by a Vendor to a Customer" ("EITF 01-9").
In instances where the customer is required to provide the Company with proof of performance, reductions in
amounts received from customers as a result of cooperative advertising programs are included in the
Consolidated Statement of Income on the line entitled "Selling, general, and administrative expenses"
("SG&A"). Other reductions in amounts received from customers as a result of cooperative advertising
programs are recorded as reductions of net sales. Markdown allowances, slotting fees, trade discounts, cash
discounts, and volume rebates are all recorded as reductions of net sales. After the implementation of EITF 01-
9 customer incentives recorded as part of SG&A totaled $14,942,000, $12,261,000, and $12,390,000,
respectively, for the fiscal years ended February 28, 2003, 2002, and 2001.

HELEN OF TROY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) summary of significant accounting policies

(e) Inventories and cost of sales
The Company's inventories consist almost entirely of finished goods. 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. A product's cost is comprised of the amount that the Company pays a
manufacturer for the product, tariffs and duties associated with transporting the product across national borders,
freight costs associated with transporting the product from its shipping point to the Company's warehouse
locations, and selling, general, and administrative ("SG&A") expenses attributable directly to the procurement
of inventory. SG&A expenses attributable directly to the procurement of inventory include the expenses
associated with operating the Company's Hong Kong sourcing facility, expenses associated with production
forecasting, and certain expenses incurred in designing products and packaging. The Company charged
$10,195,000, $9,608,000 and $10,074,000 of SG&A expenses to inventory during the fiscal years ended
February 28, 2003, 2002, and 2001, respectively. The Company estimates that $4,493,000 and $4,332,000 of its
inventory balances at February 28, 2003 and 2002, respectively, consisted of SG&A expenses charged to
inventory. Net realizable value is based on the Company's estimate of future selling prices, less estimated
disposal costs. The "Cost of sales" line item on the Consolidated Statements of Income is comprised of the book
value (lower of cost or net realizable value) of inventory sold to customers during the reporting period.
(f) Shipping and handling revenues and expenses

The Company reports revenue from shipping and handling charges on the "Net sales" line of its

Consolidated Statements of Income, in accordance with paragraph 5 of Emerging Issues Task Force Issue 00-10,
"Accounting for Shipping and Handling Fees and Costs." The Company only includes charges for shipping and
handling in "Net sales" in respect of sales to direct response customers and retail customers ordering relatively
small dollar amounts of product. The Company's shipping and handling expenses far exceed its shipping and
handling revenues. Shipping and handling expenses are included in our Consolidated Statements of Income on
the line entitled "Selling, general, and administrative expenses." The Company's expenses for shipping and
handling totaled $31,355,000, $32,495,000, and $21,670,000 during its fiscal years ended February 28, 2003,
2002, and 2001.
(g) 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.
(h) 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. Expenditures for repair and maintenance of property and equipment are
expensed as incurred.
(i) License agreements and Trademarks

A substantial majority of the Company's sales are made subject to license agreements with the licensors of

the Vidal Sassoon(R), Revlon(R), Sunbeam(R), and Dr. Scholl's(R) trademarks. License agreements are
reported on the Company's Consolidated Balance Sheets at cost, less accumulated amortization. The cost of
license agreements represents amounts paid to the licensor to acquire the license or to alter the terms of the
license in a manner which the Company believes to be in its favor. Royalty payments are not included in the cost
of license agreements. 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
59 percent, 56 percent, and 73 percent of total net sales for fiscal years 2003, 2002, and 2001, respectively.
Royalty expense under the Company's license agreements is recognized as it is incurred and comprises part of
the totals reported on the line item entitled "Selling, general, and administrative expenses" on our Consolidated
Statements of Income. See Note (3) for more information on the Company's licenses.

HELEN OF TROY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) Summary Of Significant Accounting Policies, Continued

The Company also sells products under trademarks that it owns. Trademarks that the Company

acquires from other entities are reported, at the cost of acquiring the trademark, net of accumulated
amortization, on the Company's Consolidated Balance Sheets. Costs associated with developing trademarks
internally are recorded as expenses in the period incurred. The Company amortizes the costs of trademarks on
a straight-line basis over the useful life of the trademark. See Note (3) for more information on the Company's
trademarks.
(j) 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.
(k) Earnings per share

Basic earnings per share are computed based upon the weighted average number of common shares

outstanding during the period. Diluted earnings per share are computed based upon the weighted average
number of common shares plus the effects of potentially dilutive securities. The number of potentially dilutive
securities was 1,359,098; 1,109,900; and 308,689 for fiscal years 2003, 2002, and 2001, respectively. Dilutive
securities for the years ended February 28, 2003 and February 28, 2002 consisted entirely of stock options.
Dilutive securities for the year ended February 28, 2001 included 258,084 attributable to dilutive stock options,
as well as 50,605 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 4,162,662;
2,794,900; and 4,319,762 for fiscal 2003, 2002, and 2001, respectively.
(l) Cash equivalents

The Company considers all highly liquid debt instruments purchased with an original maturity of three
months or less to be cash equivalents. Cash equivalents comprised $37,049,000 and $48,911,000 of the amount
reported on the Company's consolidated balance sheets as "Cash and cash equivalents" at February 28, 2003
and 2002, respectively. The Company's cash equivalents consist of variable rate demand bonds that mature in
35 or fewer days.
(m) Trading securities

Trading securities consist of shares of common stock of several publicly traded companies and are

stated on the Company's Consolidated Balance sheets at market value, as determined by the most recent
trading price of each security as of the balance sheet date. Management determines the appropriate
classification of the Company's investments when those investments are purchased and reevaluates those
determinations at each balance sheet date. At February 28, 2003, the Company held its investments in equity
securities of unaffiliated companies for the purpose of trading them in the near term. Therefore, all investments
in equity securities are classified as trading securities and included in the "Current assets" section of the
Company's Consolidated Balance Sheets. All unrealized gains and losses attributable to such securities are
included in "Other income" on the Consolidated Statements of Income. The sum of unrealized and realized net
gains attributable to trading securities totaled $67,000, $165,000, and $1,389,000 in fiscal 2003, 2002, and
2001, respectively.

HELEN OF TROY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) Summary Of Significant Accounting Policies, Continued

(n) Foreign currency transactions and derivative financial instruments

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 included as part of the totals on our Consolidated Statements
of Income on the line entitled "Selling, general, and administrative expenses" ("SG&A"). SG&A for fiscal
2003 and 2001, respectively, included reductions for foreign exchange gains of $1,638,000 and $31,000.
SG&A for fiscal 2002 included a charge of $307,000 for foreign exchange losses.

The Company periodically hedges foreign currency risk for up to one year by purchasing contracts to
exchange foreign currencies for U.S. dollars at specified rates. The Company first entered into such contracts
in fiscal 2003. See Note (13) to these consolidated financial statements for a further discussion of the
Company's hedging activities. The Company's accounting for these contracts complies with Statement of
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
133"). The contracts into which the Company entered in fiscal 2003 qualified as "effective hedges." Therefore,
changes in their market value due to changes in exchange rates were recorded to selling, general, and
administrative expenses. The contracts into which the Company entered were "effective hedges" according to
the definition provided by SFAS 133. The Company's forward exchange contracts at February 28, 2003 had a
negative value of $34,000. This amount is included in "Current Liabilities" section of the Company's
Consolidated Balance Sheet as of February 28, 2003 as a component of the line entitled "Other." Since all of
the cash flows hedged by the Company had been realized at February 28, 2003, the entire gain or loss
attributable to the foreign exchange contracts appears on our Consolidated Statement of Income on the line
entitled "Selling, general, and administrative expenses." The gain or loss related to foreign currency exchange
contracts appears in our Consolidated Statements of Cash flows as a line item in the reconciliation of net
earnings to cash flows from operations.
(o) Advertising

Advertising costs are expensed in the fiscal year in which they are incurred. During the fiscal years

ended February 28, 2003, February 28, 2002 and February 28, 2001, the Company charged $45,917,000,
$49,261,000, and $31,675,000, respectively, of advertising costs to selling, general, and administrative
expenses.
(p) 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 $3,263,000 and $3,428,000
as of February 28, 2003 and February 28, 2002, respectively, to cover future warranty costs. The Company
estimates its warranty accrual using historical trends. The Company believes that these trends are the most
reliable method by which it can estimate its warranty liability. The following table summarizes the activity in
the Company's accrual for the past three fiscal years:

Accrual For Warranty Returns
(in thousands)

Fiscal Year
Ended February 28,
2003
2002
2001
40

Additions to
accrual
$ 12,408
$ 13,915
$ 11,314

Ending
balance__
$ 3,263
$ 3,428
$ 2,946

Beginning
balance
$ 3,428
$ 2,946
$ 2,868

Reductions of
accrual -
payments and
credits issued
$ 12,573
$ 13,433
$ 11,236

HELEN OF TROY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) Summary Of Significant Accounting Policies, Continued

(q) Carrying value of long-lived assets

The Company applies the provisions of Statement of Financial Accounting Standards No. 142,
"Goodwill and Other Intangible Assets" ("SFAS 142") and Statement of Financial Accounting Standards No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144") in assessing the
carrying values of its long-lived assets. SFAS 142 and SFAS 144 both require that a company consider
whether circumstances or conditions exist that suggest that the carrying value of a long-lived asset might be
impaired. If such circumstances or conditions exist, further steps are required in order to determine whether the
carrying value of the asset exceeds its fair market value. If the analyses indicate that the asset's carrying value
does exceed its fair market value, the next step is to record a loss equal to the excess of the asset's carrying
value over its fair value. The steps required by SFAS 142 and SFAS 144 entail significant amounts of
judgment and subjectivity. The Company did not record any charges for impairment of long-lived assets during
fiscal 2003. Also see the subsection of this note entitled "New Accounting Guidance."

(r) Economic useful lives and amortization of intangible assets

The Company applies Statement of Financial Accounting Standards No. 142, "Goodwill and Other

Intangible Assets" ("SFAS 142") in determining the useful economic lives of intangible assets that it acquires
and that it reports on its Consolidated Balance Sheets. SFAS 142 requires that companies amortize intangible
assets, such as licenses and trademarks, over their economic useful lives, unless those assets' economic useful
lives are indefinite. If an intangible asset's economic useful life is deemed to be indefinite, that asset is not
amortized. When the Company acquires an intangible asset, it considers factors such as the asset's history, the
Company's plans for that asset, and the market for products associated with the asset. The Company considers
these same factors when reviewing the economic useful lives of its existing intangible assets as well. The
Company reviews the economic useful lives of its intangible assets at least annually. The determination of the
economic useful life of an intangible asset requires a significant amount of judgment and entails significant
subjectivity and uncertainty. Also see the subsection of this note entitled "New Accounting Guidance."

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 $1,329,000, $3,244,000, and
$3,450,000 during fiscal 2003, 2002, and 2001, respectively. See Note (3) to these consolidated financial
statements for more information about the Company's intangible assets.

(s) Interest income

Interest income is included in "Other income, net" on the Consolidated Statements of Income. Interest

income totaled $1,410,000, $727,000, and $931,000 in fiscal 2003, 2002, and 2001, respectively.

(t) 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 (5) for
management's assessment of the fair value of the Company's guaranteed Senior Notes. The Company hedges a
portion of its foreign exchange rate risk by entering into contracts to exchange foreign currencies for U.S.
dollars at specified rates. The fair value of such contracts is determined in accordance with Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities." See
Note (13) for more information on the Company's hedging activities.

HELEN OF TROY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) Summary Of Significant Accounting Policies, Continued
(u) 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. Disclosures about the Company's stock-based compensation plans are included in Note (7) to these
consolidated financial statements.
(v) New accounting guidance

On March 1, 2002, the Company adopted EITF 01-9 "Vendor Income Statement Characterization of

Consideration Paid to a Reseller of a Vendor's Products." The adoption of EITF 01-9 had no effect on
operating income, net earnings, or earnings per share. The following table presents the impact of EITF 01-9 on
net sales and SG&A had the standard been in effect for all fiscal years during the three-year period ending
February 28, 2003.

Years Ended February 28,
(in thousands)
2003

2002

2001

Net sales prior to application of EITF 01-9
Adjustments:
Slotting fees
Cooperative advertising arrangements
Net adjustments
Net sales as reported herein

$ 462,563

$ 451,249

$ 361,398

(861)
(2,877)
(3,738)
$ 458,825

(1,607)
(2,323)
(3,930)
$ 447,319

(1,275)
(2,959)
(4,234)
$ 357,164

SG&A prior to application of EITF 01-9
Adjustments:
Slotting fees
Cooperative advertising arrangements
Net adjustments
SG&A as reported herein

$ 161,910

$ 170,733

$ 117,872

(861)
(2,877)
(3,738)
$ 158,172

(1,607)
(2,323)
(3,930)
$ 166,803

(1,275)
(2,959)
(4,234)
$ 113,638

In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial
Accounting Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"). The Company adopted
SFAS 142 on March 1, 2002. SFAS 142 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. The Company completed
reviews of its goodwill to determine whether any of that goodwill was impaired. Based on the results of these
reviews, the Company's goodwill was not impaired as of March 1, 2002 or March 1, 2003. Therefore, it
incurred no impairment charge as a result of the adoption of SFAS 142. Because it eliminates the amortization
of goodwill, SFAS 142 decreased the Company's SG&A expense by $2,035,000 for the fiscal year ended
February 28, 2003.

HELEN OF TROY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) Summary Of Significant Accounting Policies, Continued

The following tables present the impact of SFAS 142 on net earnings and earnings per share had the

standard been in effect for the fiscal years ended February 28, 2003, 2002 and 2001. (in thousands, except per-
share amounts):

(in thousands, except per share amounts) Years Ended February 28,

Reported net earnings
Adjustments:
Amortization of Goodwill
Income tax effect
Net adjustments
Adjusted net earnings

Reported earnings per share - basic
Adjusted earnings per share – basic
Reported earnings per share – diluted
Adjusted earnings per share – diluted

2003
$ 38,716

—
—
—
$ 38,716

$ 1.37
$ 1.37
$ 1.31
$ 1.31

2002
$ 29,215

2,035
(407)
1,628
$ 30,843

$ 1.04
$ 1.10
$ 1.00
$ 1.06

2001
$ 17,332

2,025
(405)
1,620
$ 18,952

$ .61
$ .67
$ .60
$ .66

In June 2001, the FASB issued Statement of Financial Accounting Standards No. 141, "Business

Combinations" ("SFAS 141"). SFAS 141 requires all business combinations to be accounted for using the
purchase method and requires the recognition of intangible assets apart from goodwill if they arise from
contractual or legal rights or if they are separable from goodwill. SFAS 141 applies to all business
combinations initiated after June 30, 2001. The Company did not enter into any transactions during fiscal 2003
that required the application of SFAS 141. The Company's purchase from The Procter & Gamble Company of
four brand names and rights under licenses for two additional brand names was a purchase of specific assets,
rather than a business combination.

In June 2001, the FASB issued Statement of Financial Accounting Standards No. 143, "Accounting for

Asset Retirement Obligations" ("SFAS 143"). SFAS 143 requires that legal obligations associated with the
retirement of an asset be recorded as liabilities as incurred and capitalized as part of the cost of the associated
asset. These obligations are then depreciated over the course of the asset's useful life. The Company believes
that SFAS 143 will have no effect on the Company's consolidated financial statements.

In August 2001, the FASB issued Statement of Financial Accounting Standards No. 144, "Accounting
for the Impairment of Long-Lived Assets" ("SFAS 144"). The Company adopted the provisions of SFAS 144
effective March 1, 2002. SFAS 144 requires that companies consider whether indicators are present that would
indicate impairment of any of their long-lived assets. If such indicators are present the company compares the
projected future undiscounted cash flows from the asset to its book value. If the cash flows exceed the book
value, no further action is necessary. If the book value exceeds the projected undiscounted cash flows, a loss is
recognized for the excess of the asset's book value over its fair value. SFAS 144 did not affect the Company's
consolidated financial statements as of or for the year ending February 28, 2003.

HELEN OF TROY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) Summary Of Significant Accounting Policies, Continued

In December 2002, the FASB issued Statement of Financial Accounting Standards No. 148,
"Accounting for Stock-Based Compensation -- Transition and Disclosure" ("SFAS 148"). This statement
amends Statement of Financial Accounting Standards No. 123, "Accounting For Stock-Based Compensation"
("SFAS 123") by providing alternative methods of transition to the fair-value-based method of accounting for
stock-based employee compensation. It also amends the disclosure requirements of SFAS No. 123 to require
prominent disclosures of stock compensation information, including the method used to account for stock-
based compensation and the effects of that method on reported financial results in interim, as well as annual,
financial statements. The Company accounts for stock-based compensation using the intrinsic value method in
accordance with the provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued
to Employees." Accordingly, it recognizes no compensation expense in our financial statements for stock
options issued with exercise prices that equal or exceed the cost of our common stock on the date such options
are issued. As a result, the Company does not expect the provisions of SFAS 148 covering the transition to
fair-value method accounting for stock-based compensation to affect its consolidated financial statements.
Beginning with its financial statements as of and for the three months ended May 31, 2003, the Company will
make the interim disclosures required by SFAS 148. See Note (7) to these consolidated financial statements for
disclosures about the Company's stock-based compensation.

In November 2002, the FASB issued FASB Interpretation No. 45, "Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others" ("FIN 45").
FIN 45 requires that a guarantor record a liability for and disclose certain types of guarantees. For certain other
guarantees, FIN 45 requires only disclosure in the notes to the financial statements. The Company has not
made any of the types of guarantees for which FIN 45 requires that a liability be recorded. However, certain
entities whose financial statements are a part of these consolidated financial statements have guaranteed
obligations of other entities within the consolidated group. FIN 45 requires disclosure of these guarantees, of
the Company's product warranties, and of various indemnity arrangements to which the Company is a party.
These disclosures are contained in the notes to our consolidated financial statements.

In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation of Variable Interest

Entities" ("FIN 46"). FIN 46 requires that a company with an interest in a variable interest entity include such
an entity in its consolidated financial statements if its financial interest in the entity indicates control. The
statement applies immediately to interests in all variable interest entities acquired after January 1, 2003. For
other variable interest entities, FIN is to be applied effective July 1, 2003. The Company has no interests in
entities covered by FIN 46. Therefore, it does not expect FIN 46 to affect its consolidated financial statements.

HELEN OF TROY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(2) Property And Equipment
A summary of property and equipment (in thousands) is as follows:

Land
Building and improvements
Computer and other equipment
Transportation equipment
Furniture and fixtures5 – 15

Estimated
Useful Lives
(Years)
—
20 – 40
3 – 5
3 – 5

Less accumulated depreciation (14,302) (11,998)
Property and equipment, net

As of February 28,

2003
$ 12,166
43,715
10,880
3,724

2002
$ 10,157
29,315
10,416
862

6,899 6,964

77,384

57,714

$ 63,082

$ 45,716

The Company recorded $3,079,000, $2,865,000 and $3,003,000 of depreciation expense for fiscal

2003, 2002, and 2001, respectively. Capital expenditures totaled $20,865,000, $878,000, and $1,351,000 in
fiscal 2003, 2002, and 2001, respectively.

The Company recorded a $158,000 impairment charge in fiscal 2001 related to assets held for sale. The
related assets consisted of the Company's former office and warehouse facilities located in El Paso, Texas. The
Company sold its former office facility during fiscal 2002. The carrying value of the Company's former
warehouse facility is included within the total classified as "Other assets" on the February 28, 2003 and 2002
Consolidated Balance Sheets.

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 2003, 2002, and 2001, the Company paid the real estate
partnership $614,000, $624,000, and $510,540, respectively, under these leases.

(3) Intangible Assets

The following table is a summary, by operating segment, of the Company's goodwill balances as of

February 28, 2003 and February 28, 2002.

February 28, 2003 February 28, 2002

------------------------------------------------ -------------------------------------------------

Total Goodwill by Operating Segment (thousands)

Gross
Carrying
Amount

Accumulated Net
Carrying
Amortization Carrying
Amount
Amount
------------------------------------------------- --------------------------------------------------
Operating
Segment:
North American
International
Tactica
Total

$ (7,792)
(433)
(404)
$ (8,629)

Accumulated Net
Amortization

$ (7,792)
(433)
(404)
$ (8,629)

$ 34,420
648
5,699
$ 40,767

$ 42,212
1,081
6,103
$ 49,396

$ 34,420
648
5,699
$ 40,767

$ 42,212
1,081
6,103
$ 49,396

Gross
Carrying
Amount

HELEN OF TROY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(3) Intangible Assets, Continued
The following table discloses information regarding the carrying amounts and associated accumulated
amortization for intangible assets, other than goodwill.

February 28, 2003 February 28, 2002

------------------------------------------------ -------------------------------------------------

Intangible Assets (in thousands)

Gross
Carrying
Amount

Accumulated Net
Amortization Carrying

Carrying
Amount
Amount
------------------------------------------------- --------------------------------------------------
$ 27,372
Licenses
17,048
Trademarks

$ (10,194)
(211)

$ (8,888)
(188)

$ 37,566
17,259

$ 15,566
339

$ 6,678
151

Accumulated Net
Amortization

Gross
Carrying
Amount

(a) February 28, 2003 gross and net carrying amounts include $16,920,000 of trademarks and $18,000,000 of
licenses not subject to amortization.

The following table summarizes the amortization expense attributable to intangible assets for the year

ending February 28, 2003, 2002, and 2001, as well as estimated amortization expense for the fiscal years
ending the last day of February 2004 through 2008.

Aggregate Amortization Expense:
For the twelve months ended (in thousands)
February 28, 2003
February 28, 2002
February 28, 2001
Estimated Amortization Expense:
For the fiscal years ended
February 2004
February 2005
February 2006
February 2007
February 2008

$ 1,309
$ 1,309
$ 1,309
$ 1,309
$ 1,207

$ 1,330
$ 3,244(a)
$ 3,450(a)

(a) Totals for the twelve months ending February 28, 2002 and 2001 include $2,035,000
and $2,025,000 respectively, of goodwill amortization.

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 and make minimum levels
of advertising expenditures. For the fiscal year ending February 29, 2004, minimum royalties due and
minimum advertising expenditures under these agreements total $3,705,000 and $6,274,000, respectively.
(4) Revolving Line Of Credit

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,
2003 the interest rate charged under the line of credit was 2.31 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

HELEN OF TROY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(4) Revolving Line Of Credit, continued
maximum borrowing limit on a dollar-for-dollar basis. At February 28, 2003, there were no borrowings under
this line of credit and outstanding letters of credit totaled $828,000. 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. Under the terms of the revolving credit agreement, one of the Company's U.S.
subsidiaries is the borrower. The consolidated group's parent company, located in Bermuda and three of its
U.S. subsidiaries fully guarantee the Revolving Line of Credit on a joint and several basis.
(5) 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 an annual rate of 7.01 percent. 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, 2003 is approximately $41,465,000.
On July 18, 1997, a U.S. subsidiary of the Company issued a $15,000,000 Senior Note. Interest is paid
quarterly at an annual rate of 7.24 percent. 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, 2003 is approximately $16,105,000.
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. Under the terms of the Senior Notes, one of the
Company's U.S. subsidiaries is the borrower. The consolidated group's parent company, located in Bermuda,
one of its subsidiaries located in Barbados, and three of its U.S. subsidiaries fully guarantee the Senior Notes
on a joint and several basis.
See Note (8) to these consolidated financial statements for maturity schedules of principal amounts due
under the Senior Notes.
(6) Income Taxes
The components of earnings before income tax expense are as follows:

Years Ended February 28, (in thousands)
2003 2002 2001
U.S.
Non-U.S.

$ 17,762
20,785
$ 38,547

$ 4,524
16,366
$ 20,890

$ 14,042
36,704
$ 50,746

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

Years Ended February 28, (in thousands)
2003 2002 2001
Current
U.S. $ 3,985
5,465
Non-U.S.
2,580
Deferred
$ 12,030

$ 2,990
2,716
(2,148)
$ 3,558

$ 6,252
1,689
1,391
$ 9,332

HELEN OF TROY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(6) Income Taxes, Continued
Total income tax expense differs from the amounts computed by applying the statutory tax rate to
earnings before income taxes. The reasons for these differences are as follows:

Years Ended February 28,
(in thousands)

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

2003

2002

2001

$ 17,761

$ 13,491

$ 7,312

(5,731)
$ 12,030

(4,159)
$ 9,332

(3,754)
$ 3,558

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets
and liabilities at February 28, 2003 and 2002 are as follows:

Deferred tax assets: (in thousands)

2003

2002

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

$ 746

$ 1,510

1,750
1,964
1,073
5,533
(169)

(2,217)
$ 3,147

2,164
2,246
2,679
8,599
(1,076)

(1,796)
$ 5,727

The Company's gross deferred tax asset of $581,000 attributable to U.S. net operating loss carryforwards
expires if not utilized by various dates ranging from fiscal 2019 to 2023. The Company's gross deferred tax
asset of $165,000 attributable to non-U.S. net operating loss carryforwards expire at various dates between
fiscal 2005 and fiscal 2012. 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, 2003 and 2002. 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. During the fiscal year ended February 28, 2003, the Company
removed the valuation allowances that were in place at February 28, 2002. These valuation allowances were
related to net operating loss carryforwards of the Company's United Kingdom subsidiary and one of its U.S.
subsidiaries. During fiscal 2003, circumstances arose that either allowed the use of such net operating losses or
that caused management to believe that it to be more likely than not that they will be used at a future date.

HELEN OF TROY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(6) Income Taxes, Continued

The Hong Kong Inland Revenue Department ("the IRD") has assessed $6,753,000 in income tax on
certain profits of the Company's foreign subsidiaries for the fiscal years 1995 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 were to assert the same position for later years and that
position were to prevail, the resulting tax liability could total $34,101,000 (U.S.) for the period from fiscal
1995 through fiscal 2003. In connection with the IRD's tax assessment, the Company purchased tax reserve
certificates in Hong Kong. The certificates were valued at $3,282,000 (U.S.) as of February 28, 2003, or
approximately 49 percent of the liability assessed by the IRD for fiscal 1995 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.

The IRD also assessed $4,468,000 in tax on certain profits of the Company's foreign subsidiaries for
fiscal years 1990 through 1994. During the second quarter of the fiscal year ended February 28, 2003, the
Company settled its dispute for those years with the IRD for $2,505,000 (56 percent of the assessed amount),
plus interest of approximately $100,000. As a result of the assessment, we forfeited tax reserve certificates
previously valued at $2,468,000 on our balance sheet and paid approximately $137,000 in cash to the IRD. The
tax reserve certificates that we forfeited were included on our Consolidated Balance Sheet as of February 28,
2002 on the line entitled "Other assets, net of accumulated amortization." The settlement did not affect the
current status of the IRD's assessments for fiscal years 1995 through 1997 and did not have a material effect on
the Company's fiscal 2003 consolidated net earnings.

The Internal Revenue Service ("IRS") is auditing the U.S. federal tax returns of the Company's largest
U.S. subsidiary for the fiscal years 1997, 1998, and 1999. The IRS has proposed adjustments to those returns.
If the IRS's position with respect to these adjustments were to prevail, the resulting tax liability could total
$9,884,000. The Company plans to vigorously contest these adjustments and is engaged in the process of
formulating its response. 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 consolidated financial statements
for the adjustments proposed. The IRS is also auditing the U.S. federal tax returns of the Company's largest
U.S. subsidiary for fiscal years 2000, 2001, and 2002. Thus far, the IRS has proposed no adjustments to these
tax returns. The Company cannot predict with certainty the results of the IRS examination for these years.

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, 2003, undistributed earnings for which the Company had not provided
deferred U.S. federal income taxes totaled $50,244,000.

HELEN OF TROY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(7) 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 earnings and earnings per share would have been reduced to
the following pro forma amounts:

Years Ended February 28,
------------------------------------------------------------------------

2003 2002 2001

Net Income:

As Reported
Fair-value cost

Pro forma

----------------
$ 38,716,000
7,004,000
----------------
$ 31,712,000

----------------
$ 29,215,000
7,416,000
----------------
$ 21,799,000

----------------
$ 17,332,000
4,830,000
----------------
$ 12,502,000

Earnings per share:
Basic: As Reported

Pro forma

Diluted: As Reported

Pro forma

$ 1.37
$ 1.12

$ 1.31
$ 1.07

$ 1 .04
$ .78

$ 1.00
$ .75

$ .61
$ .44

$ .60
$ .44

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 2003, 2002, and 2001,
respectively; expected dividend yields of zero for all years; expected volatility of 39.6 percent for fiscal 2003,
40.8 percent for fiscal 2002, and 34.9 percent for fiscal 2001, risk-free interest rates of 4.1 percent for fiscal
2003, 4.7 percent for fiscal 2002, and 4.9 percent for fiscal 2001 and expected lives of 3, 4, 5 or 10 years
depending on the option granted.

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 980,000 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.

HELEN OF TROY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(7) Stock-Based Compensation Plans, Continued
A summary of stock option activity under all plans is as follows:

Years Ended February 28,

2003 2002 2001

Weighted
Average
Shares Exercise
Price
(000S)

7,323
1,384
(56)
(36)

$ 10.53
12.33
10.00
9.09

8,615
7,566

10.83
$ 10.66

WeightedWeighted
Average
Exercise
Price

Shares
(000s)

$ 10.52
10.26
6.57
10.25

10.53
$ 9.96

5,441
1,273
(12)
(499)

6,203
4,362

Average
Exercise
Price

$ 11.96
5.95
4.31
14.78

10.52
$ 9.01

Shares
(000s)

6,203
1,353
(108)
(125)

7,323
5,870

$ 6.28

$ 5.74

$ 3.00

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

The following table summarizes information about stock options at February 28, 2003:

Outstanding Stock Options Exercisable Stock Options

Weighted-

AverageWeighted-Weighted-

Remaining Average

Number of
Options
------------

Contractual
Price Range Life (years)
------------
----------------

ISOs

Total

Non-Qs

Total

Directors' Plan

Total

290,204
217,193
235,426
742,823

$4.13 to $6.97
$7.90 to $13.63
$14.02 to $23.91

2,575,272
2,295,419
2,593,224
7,463,915

$4.13 to $7.09
$9.17 to $13.13
$13.46 to $20.00

228,000
180,000
408,000

$4.41 to $12.63
$13.03 to $17.63

5.41
6.05
5.96
5.77

4.85
8.79
5.51
6.29

8.04
5.36
6.86

Exercise
Price
------------

$ 5.85
11.81
14.45
$ 10.32

Number of
Options
------------

85,882
81,593
44,706
212,181

Average
Exercise
Price
------------

$ 5.35
11.80
16.04
$ 10.08

$ 5.29
11.54
15.63
$ 10.80

2,520,672
2,284,419
2,229,084
7,034,175

$ 5.28
11.54
15.64
$ 10.60

$ 9.55
15.69
$ 12.26

160,000
160,000
320,000

$ 8.75
16.02
$ 12.39

HELEN OF TROY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(7) Stock-Based Compensation Plans, Continued
In fiscal 1999 the Company's shareholders approved an employee stock purchase plan (the "Stoc
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 2003, employees purchased 19,828 shares of common stock from the Company
under the stock purchase plan.
(8) Commitments And Contingencies
Under agreements with customers, licensors, and parties from whom it has acquired assets or entered into
business combinations, the Company indemnifies these parties against liability associated with the Company's
products. Additionally, the Company is party to a number of agreements under leases whereby it indemnifies
lessors for liabilities attributable to the Company's action or conduct. The indemnity agreements to which it is a
party do not, in general, increase the Company's liability for claims related to its products or actions and have
not affected materially the Company's consolidated financial position as of February 28, 2003 and 2002 or its
consolidated earnings and cash flows for the years ended February 28, 2003, 2002, and 2001.
Helen of Troy Limited, the parent company of the consolidated group, has guaranteed two commitments
of its subsidiary based in the United Kingdom ("the UK"). Under one of the guarantees, the parent company
guaranteed a commitment by the UK subsidiary to purchase a new office facility. Under this guarantee, the
parent company is liable for up to 1,150,000 British pounds, should the UK subsidiary fail to fulfill its
obligations under its purchase agreement. Under the second arrangement with a marketing company used by
the UK subsidiary, the parent company guaranteed up to 600,000 British pounds on behalf of the UK
subsidiary. No liability is recorded on the February 28, 2003 Consolidated Balance Sheet for either of the
parent company guarantees on behalf of the UK subsidiary.
The Company's 55-percent owned subsidiary, Tactica International, Inc. ("Tactica") leases office space in
New York City. One of the Company's U.S. subsidiaries has issued a $389,000 standby letter of credit to the
lessor. The lessor may draw funds from the standby letter of credit if Tactica fails to pay its rent due under the
lease. The standby letter of credit decreases to $195,000 on April 30, 2005 and expires on the same date as the
related lease, February 27, 2006.
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, 2004 to February 28, 2008. The aggregate commitment for future salaries pursuant to
such contracts, at February 28, 2003, excluding incentive compensation, was approximately $4,000,000.
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.
The Company regularly enters into arrangements with customers whereby it offers those customers
incentives, including incentives in the form of volume rebates. The Company's estimate of its liability for such
incentives is included on its Consolidated Balance Sheets on the line entitled "Accrued liabilities" and is based
on incentives applicable to sales up to the respective balance sheet dates. 52

HELEN OF TROY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(8) Commitments And Contingencies, Continued
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. In the opinion of management, the outcome of these matters will not have a material adverse effect
on the consolidated financial position, results of operations or liquidity of the Company and its subsidiaries.
One of the Company's subsidiaries is a party to a stockholders' agreement with the former owners of
Tactica, who retained a 45% interest in Tactica (collectively the "other Tactica stockholders"). Under the terms
of the stockholders' agreement, the Company has been granted the right to initiate a process whereby it 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.
The Company may elect at its 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 the Company.
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.

HELEN OF TROY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(8) Commitments And Contingencies, Continued

The Company's contractual obligations and commercial commitments, as of February 28, 2003 were:

Payments Due By Period (In 000s)

Contractual Obligations Total1 year2 years3 years4 years5 years5 years

____________________________________________________________

Long-term debt$ 55,00
Open purchase orders – inventory
Minimum royalty payments
Advertising commitments under
license agreements
Management fees - Corporate jet
Operating leases
New office facility in UK
Purchase of software
Total contractual obligations

0—10,00

68,249
24,830

68,249
3,705

010,00
—
3,829

010,00

015,000
—
2,658

—
8,720

3,260

2,658

23,775
1,811
3,678
1,800
1,113
$180,256

6,274
362
1,960
1,800
1,113
83,463

5,724
362
894
—

5,705
363
818
—

4,326
—
—
—
— — — — —
28,046
13,894
20,809

878
362
—
—

868
362
6
—

13,898

20,146

(9) 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 (8) to these consolidated financial statements for further
discussion of this issue. 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.

The Company's results for the fourth quarters of fiscal 2003 and 2002 do not contain any transactions of a
non-routine nature.

HELEN OF TROY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(10) Selected Quarterly Financial Data (Unaudited)

Selected quarterly financial data is as follows (in thousands, except per share amounts):

Unaudited -- see accompanying accountants' report

May

August

November

February

Total

Fiscal 2003:

Net sales

$ 102,483

$ 111,058

$ 142,998

$ 102,286

$ 458,825

49,515

6,591

.23
.22

Gross profit

Net earnings

Earnings per
Share
Basic
Diluted

Fiscal 2002:

50,910

8,876

65,413

16,791

45,193

211,031

6,458

38,716

.31
.30

.60
.57

.23
.22

1.37
1.31

Net sales

$ 91,383

$ 112,688

$ 141,788

$ 101,460

$ 447,319

Gross profit

Net earnings

Earnings per
Share
Basic
Diluted

41,979

4,591

.16
.16

55,602

64,170

46,709

208,460

7,303

12,967

4,354

29,215

.26
.25

.46
.44

.15
.15

1.04
1.00

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.

HELEN OF TROY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(11) Segment Information
The following table contains segment information for fiscal 2003, 2002, and 2001.

2003 American International Tactica Other Total

(in thousands)

North

Corporate /

Net sales
Operating income (loss)
Identifiable assets
Capital, license, and
trademark expenditures
Depreciation and amortization

$ 345,992
49,554
337,596

$ 33,759
2,995
26,049

$ 79,074
2,657
27,928

$ — $ 458,825
52,859
405,629

(2,347)
14,056

54,100
4,577

North

5,414
1,331

189
136

82
514

59,785
6,558

Corporate /

2002 American International Tactica Other Total

Net sales
Operating income (loss)
Identifiable assets
Capital / license expenditures
Depreciation and amortization

$ 308,738
32,203
287,897
647
6,665

$ 29,906
(244)
21,248
111
1,442

$ 108,675
11,930
17,184
120
256

$ — $ 447,319
41,657
357,558
878
8,630

(2,232)
31,229
—
267

2001 American International Tactica Other Total

North

Corporate /

Net sales
Operating income (loss)
Identifiable assets
Capital / license expenditures
Depreciation and amortization

$ 307,764
28,736
273,068
3,056
7,537

$ 25,390
94
24,331
125
372

$ 24,010
(4,629)
19,943
4
228

$ — $ 357,164
22,996
337,181
3,185
8,137

(1,205)
19,839
—
—

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 countries. Tactica sells a variety of personal care and other consumer products
directly to customers and to retailers. The column above entitled "Corporate / other" contains items not
allocated to any specific operating segment.

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.

HELEN OF TROY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(11) Segment Information, Continued
The Company's domestic and international net revenues from third parties and long-lived assets are as
follows:

2003

2002

2001

Net Revenues From Third Parties:
United States
International
Total

Long-Lived Assets:
United States
International
Total

$ 412,040
46,785
458,825

150,193
20,600
$ 170,793

$ 405,060
42,259
447,319

91,868
22,020
$ 113,888

$ 319,096
38,068
357,164

94,890
21,910
$ 116,800

Sales to one customer and its affiliate accounted for 24 percent, 22 percent, and 23 percent of the
Company's net sales in fiscal 2003, 2002, and 2001, respectively. Of the Company's total sales to that customer
and its affiliate, 92 percent, 98 percent, and 99 percent, respectively were made by the North American
segment during fiscal 2003, 2002, and 2001, respectively. Tactica made the remainder of the Company's sales
to this customer and its affiliate.

(12) Acquisition Of Trademarks And Of Rights Under License Agreements
On October 21, 2002, the Company acquired from The Procter & Gamble Company the right to sell
products under six trade names. The Company acquired all rights to the trademarks, formulas, and production
processes for four of the six trade names; Ammens(R), Vitalis(R), Condition 3-in-1(R), and Final Net(R). The
Procter & Gamble Company assigned the Company its rights under licenses to sell products bearing the other
two trade names; Sea Breeze(R) and Vitapointe(R). The Sea Breeze(R) license is perpetual. The portion of the
purchase price assigned to the four trademarks purchased is included on the Company's February 28, 2003
consolidated balance sheet on the line entitled "Trademarks, at cost, net of accumulated amortization." The
Company concluded that the useful economic lives of these trademarks are indefinite, meaning that these
trademarks are not subject to amortization. This conclusion was reached after consideration of the history of
the brands and of plans and forecasts for sales of products under these trademarks. The portion of the purchase
price assigned to the rights obtained under the Sea Breeze(R) and Vitapointe(R) licenses appears on the
Company's February 28, 2003 consolidated balance sheet on the line entitled "License agreements, at cost less
accumulated amortization." After consideration of the fact that the Sea Breeze(R) license is perpetual and an
analysis of the history of the brand as well as the Company's plans and forecasts with respect to the brand, the
Company determined that the Sea Breeze(R) license has an indefinite economic useful life. Therefore, it is not
subject to amortization. The Vitapointe(R) license expires on December 31, 2010. Although, its long-range
expectation is to renew the Vitapointe(R) license upon its expiration, the Company determined that the finite
nature of this license indicates that it has a definite life and is, therefore subject to amortization. The Company
expects annual amortization expense associated with the Vitapointe(R) license to be approximately $125,000.

HELEN OF TROY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(13) Forward Contracts

The Company's functional currency is the U.S. dollar. Because it operates internationally, the Company
is subject to foreign currency risk from transactions denominated in currencies other than the U.S. dollar
("foreign currencies"). Such transactions include sales and certain inventory purchases. As a result of such
transactions, portions of the Company's cash, trade accounts receivable, and trade accounts payable are
denominated in British pounds or Euros. These sales were primarily denominated in the British pound sterling
and the Euro. The Company makes most of its inventory purchases from the Far East and uses the U.S. dollar
for such purchases.

The Company identifies foreign currency risk by regularly monitoring its foreign currency-denominated
transactions and balances. During fiscal 2003, the Company hedged against foreign currency exchange rate
risk by entering into forward contracts to exchange a total of 5,000,000 British pounds for U.S. dollars at rates
ranging from 1.5393 to 1.548 dollars per British pound. At February 28, 2003, one forward contract to
exchange 1,000,000 British pounds for U.S. dollars at a rate of 1.5393 U.S. dollars per British pound remained
outstanding. The line item entitled "Other income, net" in the Consolidated Statements of Income includes
$34,000 of expense associated with hedges of foreign currency risk.

(14) non-monetary transactions

During fiscal 2003, the Company entered into two non-monetary transactions in which it exchanged
inventory with a net book value of approximately $3,100,000 for advertising credits. As a result of these
transactions, the Company recorded both sales and cost of goods sold equal to the inventory's net book value.
The Company used approximately $600,000 of the advertising credits during fiscal 2003 and expects to use the
remaining advertising credits by February 28, 2004. The remaining credits are valued at $2,500,000 on the
Company's Consolidated Condensed Balance Sheet at February 28, 2003 and are included in the line item
entitled "Prepaid expenses."

HELEN OF TROY LIMITED AND SUBSIDIARIES

Schedule II

Valuation and Qualifying Accounts

Years ended February 28, 2003, February 28, 2002 and February 28, 2001
(in thousands)

Additions

Descriptionnnn

Year ended February 28, 2003
Allowance for accounts receivable

Balance atCharged toWrite-off of
Beginningcost anduncollectibleBalance at
Recoveries

of Yearexpense

accounts

End of Year

$5,794

$2,929

$ 77

$ 3,693

$5,107

Year ended February 28, 2002
Allowance for accounts receivable

4,081

1,969

Year ended February 28, 2001
Allowance for accounts receivable

2,514

2,469

278

965

5,794

4,081

HELEN OF TROY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 2003 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 2003 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 2003 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 2003 fiscal year, is incorporated herein by reference in response to this Item 13.

Item 14. Controls And Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to

be disclosed in the Company's Securities Exchange Act reports is recorded, processed, summarized and
reported within the time periods specified in the SEC's rules and forms, and that such information is
accumulated and communicated to the Company's management, including its Chief Executive Officer and
Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing
and evaluating the disclosure controls and procedures, management recognized that any controls and
procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the
desired control objectives, as ours are designed to do, and management necessarily was required to apply its
judgment in evaluating the cost-benefit relationship of possible controls and procedures.

During the 90-day period prior to the date of this report, an evaluation was performed under the
supervision and with the participation of our Company's management, including the Chief Executive Officer
and the Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and
procedures. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded
that our disclosure controls and procedures were effective. Subsequent to the date of this evaluation, there have
been no significant changes in the Company's internal controls or in other factors that could significantly affect
these controls, and no corrective actions taken with regard to significant deficiencies or material weaknesses in
such controls.

Item 16. Principal Accountant Fees And Services

Information in the Company's Proxy Statement, which will be filed within 120 days of the end of the

Company's 2003 fiscal year, is incorporated herein by reference in response to this Item 16.

HELEN OF TROY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Item 15. Exhibits, Financial Statements Schedule, And Reports On Form 8-K
(a) Exhibits

3. Exhibits

PART IV

3.1 Memorandum of Association (incorporated by reference to 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 (the "1993 S-4")).

3.2

Bye-Laws (incorporated by reference to Exhibit 3.2 of the 1993 S-4).

4.1

Rights Agreement, dated as of December 1, 1998, between Helen of Troy Limited and Harris
Trust and Savings Bank, as Rights Agent (incorporated by reference to 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** Form of Directors' and Executive Officers' Indemnity Agreement (incorporated by reference to
Exhibit 10.2 to the 1993 S-4).

10.2** 1994 Stock Option and Restricted Stock Plan (incorporated by reference to Exhibit 10.1 to

the 1993 S-4).

10.3 Revlon Consumer Products Corporation (RCPC) North American Appliances License

Agreement dated September 30, 1992 (incorporated by reference to Exhibit 10.31 to Helen of
Troy Corporation's Quarterly Report on Form 10-Q for the period ending November 30, 1992
(the "November 1992 10-Q")).

10.4 Revlon Consumer Products Corporation (RCPC) International Appliances License Agreement
dated September 30, 1992 (incorporated by reference to Exhibit 10.32 to the November 1992
10-Q).

10.5 Revlon Consumer Products Corporation (RCPC) North American Comb and Brush License

Agreement dated September 30, 1992 (incorporated by reference to Exhibit 10.33 to the
November 1992 10-Q).

10.6 Revlon Consumer Products Corporation (RCPC) International Comb and Brush License
Agreement dated September 30, 1992 (incorporated by reference to Exhibit 10.34 to the
November 1992 10-Q).

10.7

10.8

10.9

First Amendment to RCPC North America Appliance License Agreement, dated September 30,
1992 (incorporated by reference to Exhibit 10.26 to Helen of Troy Corporation's Annual Report
on Form 10-K for the period ending February 28, 1993 (the "1993 10-K").

First Amendment to RCPC North America Comb and Brush License Agreement, dated
September 30, 1992 (incorporated by reference to Exhibit 10.27 to the 1993 10-K).

First Amendment to RCPC International Appliance License Agreement, dated September 30,
1992 (incorporated by reference to Exhibit 10.28 to the 1993 10-K).

HELEN OF TROY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10.10 First Amendment to RCPC International Comb and Brush License Agreement, dated September

30, 1992 (incorporated by reference to Exhibit 10.29 to the 1993 10-K).

10.11 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
(incorporated by reference to Exhibit 10.23 to Helen of Troy Limited's Quarterly Report on
Form 10-Q for the period ending November 30, 1996).

10.12**Helen of Troy Limited 1998 Employee Stock Option and Restricted Stock Plan (incorporated

by reference to Exhibit 4.3 to Helen of Troy Limited's Registration Statement on Form S-8, File
Number 333-67349, filed with the Securities and Exchange Commission on November 6, 1998
(the "1998 S-8").

10.13**Helen of Troy Limited 1998 Employee Stock Purchase Plan (incorporated by reference to
Exhibit 4.3 of the 1998 S-8).

10.14**Amended and Restated Employment Agreement between Helen of Troy Limited and Gerald J.
Rubin, dated March 1, 1999 (incorporated by reference to Exhibit 10.29 to Helen of Troy
Limited's Quarterly Report on Form 10-Q for the period ending August 31, 1999 (the "August
1999 10-Q")).

10.15**Amended and Restated Helen of Troy Limited 1995 Non-Employee Director Stock Option
Plan (incorporated by reference to Exhibit 10.30 to the August 1999 10-Q).

10.16 Loan Agreement, dated December 31, 1996, between Helen of Troy L.P. and Texas Commerce
Bank National Association (incorporated by reference to Exhibit 10.21 to Helen of Troy
Limited's Quarterly Report on Form 10-Q for the period ending August 31, 2001 (the "August
2001 10-Q")).

10.17 First Amendment, dated July 31, 1997, to Loan Agreement between Helen of Troy L.P, and

Texas Commerce Bank National Association (incorporated by reference to Exhibit 10.22 of the
August 2001 10-Q).

10.18 Second Amendment, dated July 31, 1998 to Loan Agreement between Helen of Troy L.P. and
Chase Bank of Texas National Association (incorporated by reference to Exhibit 10.23 of the
August 2001 10-Q).

10.19 Third Amendment, dated July 31, 2000 to Loan Agreement between Helen of Troy L.P. and The

Chase Manhattan Bank (incorporated by reference to Exhibit 10.24 of the August 2001 10-Q).

10.20 Fourth Amendment, dated July 31, 2001 to Loan Agreement between Helen of Troy L.P. and
The Chase Manhattan Bank (incorporated by reference to Exhibit 10.25 of the August
2001 10-Q).

10.21 Fifth Amendment, dated August 31, 2001 to Loan Agreement between Helen of Troy L.P. and
The Chase Manhattan Bank (incorporated by reference to Exhibit 10.26 of the August
2001 10-Q).

HELEN OF TROY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10.22**Helen of Troy 1997 Cash Bonus Performance Plan (incorporated by reference to Exhibit 10.26

of Helen of Troy Limited's Annual Report on Form 10-K for the period ended February 28,
2002 (the "2002 10-K")).

10.23 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 (incorporated by reference to Exhibit 10.27 of the 2002 10-K).

10.24* Master License Agreement dated October 21, 2002, between The Procter & Gamble Company
and Helen of Troy Limited (Barbados) (Confidential treatment has been requested with respect
to certain portions of this exhibit. Omitted portions have been filed separately with the
Commission).

21*

Subsidiaries of the Registrant.

23*

Independent Auditors' Consent.

____________________

*filed herewith

** Indicates management contract or compensatory plan or arrangement

(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

Reports on Form 8-K

HELEN OF TROY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 29, 2003

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 Director (Principal Executive Officer)May 29,2003
(Gerald J. Rubin)

Chairman of the Board, Chief
Executive Officer, President, and

/s/ Russell G. Gibson Officer)May 29, 2003
(Russell G. Gibson)

Senior Vice President, Finance
and Chief Financial Officer
(Principal Financial and Accounting

/s/ Stanlee N. Rubin DirectorMay 29, 2003
(Stanlee N. Rubin)

/s/ Christopher L. Carameros Director May 29, 2003
(Christopher L. Carameros)

HELEN OF TROY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

/s/ Byron H. Rubin Director May 29, 2003
(Byron H. Rubin)

/s/ Daniel C. Montano DirectorMay 29, 2003
(Daniel C. Montano)

/s/ Gary B. Abromovitz Director May 29, 2003
(Gary B. Abromovitz)

/s/ John B. Butterworth Director May 29, 2003
(John B. Butterworth)

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
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

Board of
Directors

Gerald J. Rubin
Chairman, Chief Executive Officer and President

Stanlee N. Rubin
Director

Daniel C. Montano
Director

Christopher L. Carameros
Director

Byron H. Rubin
Director

Gary B. Abromovitz
Director

John B. Butterworth
Director

Officers

Gerald J. Rubin
Chairman, Chief Executive Officer and President

Arthur A. August
Executive Vice President, Sales, Marketing – Appliances & Professional Division

Christopher L. Carameros
Executive Vice President, Finance, Accessories, International & Idelle Labs

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

Jack Jancin
Senior Vice President, Idelle Labs

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 & Secretary

Joann Mangold
Vice President, Marketing – Professional Division

Scott Hagstrom
Vice President, Sales – Professional Division

John Boomer
Vice President, Corporate Business Development

Perry Sansone
Vice President, Sales – Idelle Labs

Deanna Nasser
Treasurer

H e l e n o f T r o y P r o d u c t s

CONSUMER AND PROFESSIONAL
BRANDING

Helen of Troy brands
have become some of
the most trusted
names in beauty and
personal care items
throughout the world.
This trust has been
earned through years
of Helen of Troy’s
successful

Revlon Pro Stylist™ Anti-static
ION™ Dryer

representation of these
major consumer brand
names.

Vidal Sassoon Ionizer™
Dryer with Concentrator

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
more than 40 years. Helen of Troy builds on this
solid foundation, marketing combs, brushes,
accessories, as well as hair care appliances like
the family of professional Gold Series® styling
products, a line of
dryers incorporating
Ionic Technology™, and
a new selection of hair
straighteners and irons
with breakthrough
Ceramic Technology™.

Vidal Sassoon Gold Series®
2 1/4” Straightener with Ceramic

Helen of Troy also capi-
talizes on Revlon’s
recognized leadership

position in hair and
personal care
products, which is
based on the trade
name’s image of last-
ing beauty and glam-
our. With instant
brand recognition and
innovative product
designs such as new

Revlon MoistureStay™ Facial
Sauna with Soft-feel™ Guard

styling tools that combine digital and Ceramic
Technology™, Revlon
has always been and
will continue to be a
powerful shelf pres-
ence in the spa, hair
and personal care
markets.

In addition, Helen of
Troy produces a vari-
ety of personal well-
ness items under the Dr. Scholl's brand, a
long-trusted name in foot care, which has quickly

Revlon Perfect Heat®
1” Straightener with Ceramic

expanded into the
areas of therapeutic
care for the entire
body. Helen of Troy is
dedicated to
advancing
technologies and
expanding market
share within the
personal wellness
category with

Dr. Scholl’s Ultimate Foot Spa
with Water Heat Up

innovative products ranging from body and foot
massagers using Ionic™ and hot and cold
therapeutic technologies to soothing footbaths
with a revolutionary “water heat-up” feature.

The Company
continues to market
under such trusted
brand names as
Sunbeam, a household
name for decades, by
expanding on an
extensive line of
personal hair care
appliances with the
introduction of a complete selection of relaxation
products that includes foot baths and body
massagers. 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, clipper and personal wellness
markets.

Sunbeam Mid-Size Turbo Dryer

Helen of Troy is also
making inroads into
the growing teen
market. The Wave
Rage product line is
specifically geared for
this market through
the use of hot colors
and edgy designs in
everything from styling
irons and straighteners to facial saunas, providing
teenagers the tools they need for their favorite
styles.

Wave Rage™ Palm It™ Dryer

Helen of Troy’s
professional division is
expanding market share
through high-quality Hot
Tools®, Wigo®, and
Ecstasy® personal care
and hair care products.
New styling tools that
fully capitalize on the

Hot Tools® Professional 1 1/2”
Softheat Ceramic Flat Iron

benefits of Ceramic Technology™ and dryers with
Ionic Technology™
can be found in salons
worldwide. These
and other new
products contribute
heavily to the
professional division's
growth from strong
brand names,
excellent performance,
high quality and
unique features.

Wigo® Professional 1”
Ceramic Flat Iron

Helen of Troy also
satisfies consumer
demand in all hair
styling categories with
a variety of brushes,
combs, mirrors, and
hair accessories
under the Vidal
Sassoon brand, while
the Revlon family of
brushes, combs and

Vidal Sassoon
Brushes and Accessories

mirrors has been established as a trusted and
well-recognized beauty-oriented product line.

The Company's Karina brand is extending into
high-end and professional market segments with a
new line of unique
Ceramic / Ionic™
brushes. The dcnl,
Nandi and Isobel
brands continue their
well-earned reputation
for high quality with
complete fashion hair
care accessories and
product selections.

Karina and dcnl
Brushes and Accessories

H e l e n o f T r o y P r o d u c t s

Helen of Troy builds
brand recognition and
loyalty through the
use of television-
and print-media
advertising, including
consumer and trade
magazines and
various industry
trade shows that

Dr. Scholl's Ionic Rejuvenator™
Foot Massager with Heat

increase the name recognition of Helen of Troy
and all its associated trademarks. This enables
the Company to expand market share, capture
additional shelf space, and enter new markets
domestically and worldwide.

PRODUCT
INNOVATIONS

Over the years, Helen
of Troy has developed
ground-breaking
technologies that have
become industry
standards. New
Ceramic Technology™ styling tools help hair retain
moisture by radiating far-infrared heat, which is
less damaging to the hair and offers performance
superior to regular styling tools. The Company
also continues the tradition of bringing salon

Revlon Style-to-Go™ Palm
Straightener with Ceramic

technology to
the mass market with
a variety of Ionic
Technology™ products
that use the benefits of
hair-conditioning
negative ions.

Another example of
the Company's
commitment

Revlon Perfect Heat® Styling
Iron with Ceramic

to innovation is the
revolutionary HotSpa®
Ozone Foot Spa which
uses ozone to safely
and naturally keep water
free from bacteria and
impurities. Helen of
Troy strives to lead the
way in technological

HotSpa® Ozone Foot Bath

excellence, offering the finest styling and personal
care products in the market today.

Building on successes with consumer appliances,
Helen of Troy has also acquired six well-known
consumer brands from The Procter and Gamble
Company—Final Net®, Vitalis®, Condition 3-in-1®,
Ammens®, Sea Breeze®, and Vitapointe® — and
created Idelle Labs: a new division to develop and
market skin and hair
care products. The
addition of Idelle Labs
promises to open
opportunities and
expand horizons.

Helen of Troy expands
distribution through its
relationship with
Tactica, a 55-percent
owned subsidiary of the
Company that sells to major mass merchandisers,
drug store chains and specialty stores, and
directly markets products to consumers using
extensive television and print advertising.

Idelle Product Offerings

Helen of Troy's combination of technological
innovations and marketing strategies solidifies the
Company's leadership position and provides the
strong direction needed to expand its role in the
personal care marketplace into the foreseeable
future.

Vidal Sassoon 1800w Hair
Hydration Dryer

INTERNATIONAL

Helen of Troy is established as a leader not only in the United
States, but also in the global marketplace as well, making

products that are a part of consumers' lives everywhere.
Under the Vidal Sassoon trademark in Europe, the Company
was one of the first to introduce Ionic™ drying technology and
continues its innovative lead with the 1800 Watt Ionic Hair
Hydration Dryer. To meet the increasing demand for hair
straightening tools in the United Kingdom, the Vidal Sassoon
line has also introduced the Straighten It Out! Straightener,
among others to this market. Outside the European market,
the Company sells hair care appliances and accessories
worldwide under the trusted Revlon brand name. Several of
the new Idelle Labs products are

also sold extensively in Europe and
Latin America.

The Scholl line remains prominent
internationally in the personal
therapeutics category, offering
extensive brand-name recognition and
a complete line of foot spas, personal
massagers and cushions. With
decades of experience, Helen of Troy
continues to expand its worldwide reputation of personal
therapeutic care under the Scholl brand.

Revlon Brushes, Combs
and Mirrors

Helen of Troy is moving forward, increasing the Company’s
domestic and international market share as well as world-
wide market opportunities. Strong recognition of its
associated brand names and the firm establishment of
international offices will continue to fuel steady, strong
growth.

Scholl Revitalise Foot Spa

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.

Vitapointe is a registered trademark of Sara Lee Household and Body Care UK Limited

Sea Breeze is a registered trademark of FT Shiseido Company, Ltd.