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Vitalis
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Company Profile
Company Profile
Helen of Troy Limited (NASDAQ:HELE)
has established a leadership position in the
personal care products market through new
product innovation, superior product
quality and competitive pricing.
Helen of Troy designs, produces, and markets brand-
name personal care electrical products, which include hair
dryers, straighteners, curling irons, hairsetters, mirrors, hot
air brushes and home hair clippers, as well as comfort
products such as massage cushions, footbaths and body
massagers. The Company also produces and markets non-electrical products, including: brushes, combs, hair
accessories, mirrors, hair care products, body powder, skin care products, and kitchen, household and gardening
tools. The Company’s products are sold primarily through mass merchandisers, drug chains, warehouse clubs, and
grocery stores.
Company growth strategy is facilitated by our sales of products under world-respected trade names. Helen of
Troy is licensed to sell products under the trade names of Vidal Sassoon, Revlon®, Dr. Scholl’s®, Sunbeam®,
Health o meter®, Sea Breeze® and Vitapointe®. Helen of Troy’s owned trade names include Brut®, Vitalis®, Final
Net®, Visage Náturel™, Dazey®, Caruso®, Karina®, DCNL®, Nandi®, Isobel™, Ammens® and Condition 3-in-1®, as
well as OXO Good Grips®, OXO Steel™ and OXO SoftWorks® in consumer product categories. The Company also
markets hair and beauty care products under the Helen of Troy®, Hot Tools®, Hot Spa®, Salon Edition®, Gallery
Series® and Wigo® 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.
Helen of Troy Limited and Subsidiaries
Helen of Troy Limited and Subsidiaries
Stock Price Ranges
Stock Price Ranges
Fiscal 2004
Fiscal 2004
High
Low
First quarter
Second quarter
Third quarter
Fourth quarter
$16.50
22.00
27.20
30.80
Fiscal 2003
Fiscal 2003
First quarter
Second quarter
Third quarter
Fourth quarter
$15.00
14.17
12.05
14.58
$11.80
14.45
19.29
21.63
$11.65
11.20
8.20
10.21
Financial Highlights
Financial Highlights
Twelve Months Ended Last Day of February
(in thousands, except per share amounts)
2004
2003
2002
2001
2000
Net sales
$474,868
$379,751 $338,644 $333,154
$297,257
Operating income
85,774
50,202
29,727
27,625
9,801
Income from continuing operations
71,562
37,792
22,008
21,684
13,111
Net earnings
60,522
38,716
29,215
17,332
13,111
Diluted income per share
1.94
1.31
1.00
0.60
0.44
Working capital
Total assets
Long-term debt
166,445
163,452
182,791
151,533
154,395
489,609
405,629
357,558
337,181
304,252
45,000
55,000
55,000
55,000
55,000
Stockholders’equity
350,103
289,602
250,326
219,609
209,624
Dear Shareholders:
We are pleased to
report that Helen of Troy
Limited has delivered yet
another record financial
performance in fiscal year
2004, continuing our
year-over-year sales and
earnings increases since
fiscal year 2000. As we
approach the milestone
level of nearly $500 million in sales and
ever-increasing profitability, we reflect on the
numerous business opportunities and successes
that helped us reach these record sales and
earnings levels during the past year.
For the fiscal year ended February 29,
2004, net income climbed to a record $60.5
million or $1.94 per diluted share, representing
a 56 percent increase over net income of
$38.7 million or $1.31 per diluted share in the
previous fiscal year. Sales increased 25 percent
to a record $474.9 million from $379.8
million in fiscal 2003, reflecting strong financial
performance results over the prior year’s record
sales and earnings levels. Our balance sheet
also remains strong, with year-end cash of $53
million, shareholders’ equity of $350 million,
accounts receivable of $73 million and
inventory of $104 million.
As we have demonstrated over the years,
we continue to strengthen our leadership
position in the personal care market. We
accomplish this through the execution of proven
sales and marketing strategies by providing
consumers with innovative, high-quality
products at affordable prices.
At the 2004 International Housewares
Show in Chicago, we introduced over 95 new
products, the most in our history. We also
introduced several market-leading items,
including next-generation Ion and Ceramic
styling tools and new hair straighteners with
solid jade plates that deliver more efficient, high
heat. Our new Ion Select™ hair dryers let users
dial-in the perfect amount of hair-conditioning
ions for any hair type. Our new foot spas with
toe-touch controls that help prevent spills, hand-
held body massagers that generate soothing
infrared heat, and complete spa packs that help
consumers take in a full spa treatment at home
demonstrate our commitment to leading-edge
technological improvements for our consumers.
These and many other items in our product line
fulfill our customers’ personal care needs,
ranging from more luxurious-looking hair styles,
to perfect manicures and pedicures, to personal
care and relaxation.
Several significant business events have
taken place over the past year that we believe
will expand Helen of Troy's market presence
and provide beneficial returns this year and into
the future:
In September 2003, Helen of Troy acquired
the world-known Brut® trade name from
Unilever. We will market a wide range of Brut®
fragrances, deodorants, and antiperspirants in
the United States, Canada and the rest of the
Western Hemisphere. These products are
expected to produce sales of approximately
$40 million over the next twelve months.
In February 2004, we revised our licensing
agreements with Revlon Consumer Products
Corporation, which, including renewal options,
extends our licensing agreements with Revlon
for the next 59 years. These revised agreements
expanded our North American coverage to
include Mexico for appliances, spa products,
brushes and hair accessories, thereby creating
exciting new market opportunities for us.
In April 2004, Helen of Troy sold its
completion during this fiscal year, providing
additional opportunities for improved efficiency
and quality.
As you can see, Helen of Troy has been
very busy over the past year, and it certainly has
been a very profitable year for us as well.
Judging from prior years’ performances, we
expect a continuation of our success in the form
of another record year. And as our results
improve each year, I am continually reminded
that it takes a dedicated, hard-working team to
produce these kinds of results. I sincerely
appreciate the tireless efforts of the Helen of
Troy team in making us successful year after
year.
To our loyal shareholders, we appreciate
your continued support, and we remain
energized and dedicated to delivering superior
shareholder value every year, along with
successfully managing our business enterprise.
As we plan for the future, we will work diligently
to bring increasing value to our company. Thank
you for your support and confidence.
Gerald J. Rubin
Chairman, Chief Executive Officer
and President
ownership interest in Tactica International, Inc.,
and concurrently announced the acquisition of
the OXO International line of business from
World Kitchen, Inc. OXO International is a
recognized world leader in the design and
production of innovative consumer products,
offering over 500 consumer tools in several
product categories including kitchen wares,
cleaning tools, barbecue utensils, barware,
gardening tools, automotive accessories, and
storage and organization solutions. Many of
OXO's uniquely designed products have been
included in the permanent collections of several
prominent museums. We are extremely pleased
with our acquisition of OXO and look forward
to its contribution to our success during the
remainder of fiscal 2005 and for many years to
come.
And, finally, in June 2004, we announced
a licensing agreement with Sunbeam Products,
Inc., to market a complete line of personal
wellness products under the Health o meter®
name, a brand renowned for its precision
scales, thermometers and blood pressure
monitors. We look forward to creating many
new opportunities for Helen of Troy in this
expanding personal care market by helping
consumers alleviate stress with a whole array of
footbaths, hand-held massagers, massage
cushions and other products under the
Health o meter® banner.
In the crucial areas of efficiency, quality,
and customer service, we have expanded
operations in a number of key areas. We have
opened a new sales office in Mexico City,
which will enable us to ramp up sales in Mexico
as well as in Central and South America. In
Asia, we are moving quality control and quality
assurance support activities into China to be
even closer to our manufacturers. Our Oracle
systems installation is also targeted for
NOTE: Revenue and balance sheet information referenced in the chairman’s letter excludes revenue, assets and liabilities of Tactica International, Inc., as its operations were classified as discontinued in the
fourth fiscal quarter of 2004, and it was subsequently sold on April 29, 2004.
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 29, 2004
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 001-14669
HELEN OF TROY LIMITED
(Exact name of the registrant as specified in its charter)
BERMUDA
(State or other jurisdiction of
incorporation or organization)
74-2692550
(I.R.S. Employer
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 (§ 229.405 of this chapter) is
not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]
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 $573,049,954.
As of May 11, 2004 there were 29,471,111 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 29, 2004, are incorporated by reference into Part III hereof.
Except for those portions specifically incorporated by reference herein, such document shall not be deemed to be filed with the
Securities and Exchange Commission as part of this Form 10-K.
Index to Exhibits - Page 75
TABLE OF CONTENTS
PAGE
PART I
Item 1. Business
Properties
Item 2.
Legal Proceedings
Item 3.
Submission of Matters to a Vote of Security Holders
Item 4.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters and
Issuer Purchases of Equity Securities
Selected Financial Data
Item 6.
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.
Item 9.
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
Item 9A. Controls and Procedures
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 and
Related Stockholders Matters
Item 13. Certain Relationships and Related Transactions
Item 14. Principal Accountant Fees and Services
PART IV
Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
Signatures
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10
10
12
13
16
18
36
38
72
72
74
74
74
74
74
75
78
1
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", "our" and "us" refer to Helen of Troy Limited and its subsidiaries.
Helen of Troy Limited is a global designer, developer, importer and distributor of hair care appliances,
hair brushes, combs, hair accessories, hair and skin care liquids and powders and other personal care products.
In past years, our Company has reported segment information for three operating segments: North America,
International, and Tactica. The North American and International segments sell the same portfolio of products,
principally through mass merchants, general retail and specialty retail outlets. Tactica sells personal care and
other consumer products to retailers and uses direct response marketing to sell such products directly to
consumers. As more fully described in Note (15) to our consolidated financial statements, in the fourth fiscal
quarter of 2004, we made the decision to sell our business activities with Tactica, and have made appropriate
reclassifications to reflect its activities as a discontinued operation in the accompanying consolidated financial
statements. On April 29, 2004 we completed the sale of our ownership interest in Tactica International, Inc.
("Tactica") back to certain of its key operating manager-shareholders. In exchange for our 55 percent ownership
share of Tactica and $17,161,000 of its secured debt and accrued interest, we received marketable securities,
intellectual properties, and the right to certain tax refunds. We do not expect a material gain or loss to arise
from this sale transaction. We expect to conclude all related exit activities by the end of the second fiscal
quarter of 2005.
Our brand portfolio and operations continue to expand and evolve. During the year, we completed the
operating integration of six liquid and powder hair and skin care brands acquired from Procter & Gamble
Company in October 2002. Additionally, at the end of September 2003, we acquired the rights to produce and
distribute Brut® fragrances, deodorants and antiperspirants throughout North America, Latin America, and the
Caribbean. We are currently completing our operating integration of the Brut® product line. We believe these
brand acquisitions provide us a solid foothold in grooming, skin care, and hair care products, and represent a
significant growth opportunity for us over the coming years. In addition to the core growth (growth from other
than acquisition) of our existing brands, when the right opportunity presents itself, we expect to continue to
make selective acquisitions of brands that fit our marketing expertise, distribution capability, and return on
investment requirements.
With this strategy in mind, over the past fiscal year we have started an effort to simplify our operating
structure in advance of conversion to a new global information system (to be placed into service in fiscal 2005).
With the implementation of our new information system, substantially all of our business will be operated under
one integrated reporting platform. Management's philosophy is to emphasize uniform processes within a global
operating system that markets and distributes an optimal mix from its product portfolio tailored to the needs,
requirements, and economics of local markets. Our Discussion and Analysis of Financial Condition and
Results of Operations beginning on page 18 reflects certain changes in content and organization necessary and
appropriate to your understanding of our performance. We expect our financial presentations to continue to
evolve further next year as the full impact of our recently announced acquisition of OXO International from
WKI Holding Company, Inc. becomes reflected in our continuing operations. Our pending acquisition of OXO
is further discussed in Note (15) to our consolidated financial statements. We present financial information for
each of our operating segments in Note (11) of the consolidated financial statements. The matters discussed in
Item 1, herein pertain to all of our existing operating segments, unless otherwise specified.
2
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 United States and other countries.
We sell certain of our products under licenses from third parties. Our licensed trademarks include Vidal
Sassoon®, licensed from The Procter & Gamble Company; Revlon® licensed from Revlon Consumer Products
Corporation; Dr. Scholl's®, licensed from Schering-Plough HealthCare Products, Inc.; Scholl® (in areas other
than North America), licensed from SSL Int. Ltd.; Sunbeam®, licensed from American Household, Inc.; Sea
Breeze®, licensed from Shisheido Corporation; and Vitapointe®, licensed from Sara Lee Household and Body
Care UK Limited.
We own and actively market a number of trademarks, including Brut®, Vitalis®, Final Net®,
Ammens®, Condition 3-in-1®, Dazey®, Caruso®, Karina®, DCNL™, Nandi™, Isobel™, and WaveRage™.
We also market hair and beauty care products under the Helen of Troy®, Hot Tools®, Hot Spa®, Salon
Edition®, Gallery Series®, and Wigo® trademarks to the professional beauty salon industry.
We were incorporated as Helen of Troy Corporation in Texas in 1968 and reincorporated as Helen of
Troy Limited in Bermuda in 1994.
3
PRODUCTS
Our business is designing, developing, and selling a full line of personal care and comfort products. The
following table lists the primary products we sell and some of the brand names that appear on those products.
PRODUCT
CATEGORY
Appliances and
Accessories
PRODUCTS
BRAND NAMES
Hand-held dryers
Curling irons, straightening
irons, hot air brushes, and
brush irons
Hairsetters
Vidal Sassoon®, Revlon®, Sunbeam®, Helen of
Troy®, Salon Edition®, Hot Tools®, Ecstasy™, Gold
Series®, Gallery Series®, Wigo®, Cosmopolitan™, and
Sable®
Vidal Sassoon®, Revlon®, Sunbeam®, Helen of
Troy®, Salon Edition®, Hot Tools®, Gold Series®,
Gallery Series®, Straight To The Maxx™, Ecstasy™,
Wigo®, Cosmopolitan™, and Sable®
Vidal Sassoon®, Revlon®, Cosmopolitan™, and
Caruso™
Revlon®, Hotspa®, Sunbeam®, Dr. Scholl's®, and
Visage Naturel™
Dr. Scholl's®, Scholl®, Carel®, and Hotspa®
Paraffin baths, facial
brushes, and facial saunas,
and other skin care
appliances
Foot baths Dr. Scholl's®, Scholl®, Revlon®, Carel®, and Hotspa®
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 Vidal Sassoon®, Karina®, Karina Girl™, HOT
Vidal Sassoon®, Revlon®, Wave Rage™, Nandi™,
DCNL®, and Ecstasy™
Vidal Sassoon® and Sunbeam®
Dazey®, Lady Dazey®, Carel®, and Hot Tools®
Grooming, Skin
Care, and Hair Care
Products
things™, Isobel™, DCNL®, and DCNL Signature™
Liquid hair styling products Vitalis®, Final Net®, Condition 3-in-1®, Straight To
Liquid skin care products
Medicated skin care
products
Fragrances, deodorants, and
antiperspirants
The Maxx™, and Vitapointe®
Sea Breeze® and Visage Naturel™
Ammens®
Brut®
In addition to the products shown above, we owned 55 percent of Tactica which we re-classified as a
discontinued operation at the end of fiscal 2004, and subsequently sold on April 29, 2004. 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.
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
4
existing products by adding new technologies to them. Examples include ionic hair care appliances and ceramic
hair care appliances. We continued to extend our line of ceramic hair care appliances during fiscal 2004.
Ceramic heating surfaces allow infrared heat to penetrate hair quickly and evenly, drying hair faster with
superior results. We also continued to extend our line of hair care appliances that incorporate Ionic
Technology™. Ionic appliances introduce negative ions into the hair which breaks up moisture on the hair's
surface allowing for quicker drying, better conditioning and smoothing, giving hair a shinier, silkier look and
feel. During fiscal 2005 we expect to introduce cordless rechargeable hair care appliances. Also, to provide our
consumers more precise thermal application and styling control, we expect to continue to add digital controls,
pulse heat and a wider range of wattages to the appliances in our product line.
Our internal product development efforts were augmented by our fiscal 2003 acquisition from The
Procter & Gamble Company of the rights and formulas associated with six hair and skin care brand names.
Pursuant to this acquisition, we acquired ownership of the Vitalis®, Condition 3-in-1®, Final Net®, and
Ammens® trade names. Additionally, we acquired the rights under long-term license agreements to sell
products using the Sea Breeze® and Vitapointe® trademarks. Currently, we are selling hair care and styling
liquids under the Vitalis®, Condition 3-in-1®, Final Net®, and Vitapointe® trademarks; skin care liquid, in the
form of an astringent, under the Sea Breeze® trademark; and medicated skin care powder under the Ammens®
name.
At the end of September 2003 we acquired certain assets related to the Western Hemisphere production
and distribution of Brut® fragrances, deodorants, and antiperspirants from Conopco, Inc., a wholly owned
subsidiary of Unilever NV. This acquisition continues to expand our brand presence in the grooming, skin care,
and hair products categories of our business.
You can learn more about our currently marketed products at the following Internet address:
SALES AND MARKETING
http://www.hotus.com
We market our products primarily within the United States. Sales within the United States comprised
84, 90 and 88 percent of total net sales in fiscal 2004, 2003, and 2002, respectively. Both our North American
and International 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
products through a combination of outside sales representatives and our own internal sales staff.
The companies from whom we license many of our brand names promote those names extensively. The
Revlon®, Vidal Sassoon®, Dr. Scholl's® and Sunbeam® trademarks are widely recognized because of
advertising and the sale of a variety of products. We believe 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.
In fiscal 2004 we reached an agreement to become the title sponsor of the Sun Bowl for the next three
years starting with the December 2004 game. The Sun Bowl is one of the longest running invitational post
season college football games in the United States with a history that spans over 70 years. The "Vitalis Sun
Bowl" will be the official name of this event. CBS Sports will broadcast the game to a nationwide audience and
5
we believe this sponsorship will provide us an opportunity to re-introduce the Vitalis brand to a whole new
generation of consumers.
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 "Forward-Looking Information and Factors
That May Affect Future Results"). For fiscal 2004, goods manufactured by vendors in the Far East comprised
approximately 89 percent of the dollar value of the North American and International segments' inventory
purchases. 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. Our mix of Far East
production continues to decrease with the expansion of our product offerings (most of our grooming, skin care
and hair care products are sourced with unaffiliated manufacturers in North America). We purchase the
remainder of our products from unaffiliated manufacturers, primarily in Europe.
The manufacturers who produce our products use formulas, molds, and certain other tooling, some of
which we own, in manufacturing those products. All our business 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 United States and 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 outside the United States and Canada are shipped from manufacturers
primarily in the Far East, to warehouse facilities in The Netherlands, the United Kingdom, Mexico, Brazil, or
directly to customers. We ship products stored at the warehouses in The Netherlands, the United Kingdom,
Mexico, and Brazil to distributors or retailers.
Our customers in 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.
Most of our 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
The North American and International operating segments depend materially upon the continued use of
trademarks licensed under various agreements. The Vidal Sassoon®, Revlon®, Sunbeam® and Dr. Scholl's®
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®, Vidal Sassoon®,
Sunbeam®, and Dr. Scholl's® 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.
6
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® 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 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® 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® trademark in the United States and
Canada, under an agreement with Schering-Plough HealthCare Products, Inc. We also are licensed to sell the
same products under the Scholl® 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® and Sunbeam Health at
Home® trademarks in the United States, 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® pursuant to a perpetual royalty free license from Shisheido Corporation. We currently
sell a line of liquid skin care products under the Sea Breeze® name in the United States and Canada.
Helen of Troy has filed or obtained licenses for design and utility patents in the United States and
several foreign countries. We also protect certain details about our processes, products and strategies as trade
secrets, keeping confidential the information that we believe provides us with a competitive advantage. Our
ability to enforce patents, copyrights, licenses, and other intellectual property is subject to general litigation
risks, as well as uncertainty as to the enforceability of various intellectual property rights in various countries.
RELIANCE ON ONE CUSTOMER
Sales to Wal-Mart Stores, Inc., and its affiliate, SAM'S Club, accounted for approximately 28 percent,
29 percent, and 29 percent of our net sales in fiscal 2004, 2003, and 2002, 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. There was no significant backlog of orders in any of our distribution
channels as of the end of fiscal 2004.
7
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
Our business is somewhat seasonal. Net sales in third fiscal quarter accounted for approximately 35, 33,
and 33 percent of fiscal 2004, 2003 and 2002 net sales, respectively. 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 United States 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® trademark is regulated by the United
States Food and Drug Administration.
EMPLOYEES
As of fiscal year end 2004, we employed 681 full-time employees in the United States, Hong Kong,
Europe, Brazil and Mexico of which 205 are marketing and sales employees, 158 are distribution employees, 34
are engineering and development employees, and 284 are administrative personnel. As more fully discussed in
Note (15) to our consolidated financial statements, these totals include 58 employees from Tactica, a
discontinued business segment sold on April 29, 2004. At the end of fiscal 2004, Tactica employed 41
administrative and 17 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.hotus.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
8
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.
9
ITEM 2. PROPERTIES
PLANT AND FACILITIES
North American Operations (servicing all business segments, except Tactica). 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. We also lease sales offices in Danbury, Connecticut; Bentonville, Arkansas; Minneapolis, Minnesota;
Troy, Michigan; and Toronto, Canada.
We also 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 Operations (servicing all business segments, except Tactica). In mid fiscal 2004, we
purchased and moved into a new 10,000 square foot sales and administrative facility in Sheffield, England. 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 France, Germany, Mexico, and Brazil.
Tactica. Tactica leases administrative offices in New York, New York and leases public warehouse
space in Reno, Nevada.
Corporate Procurement Operations (servicing our North American and International segments). A
subsidiary located in Hong Kong leases approximately 18,000 square feet of office space in Hong Kong. Prior
to fiscal 1996 this subsidiary was headquartered in approximately 12,000 square feet of office space in Hong
Kong that the Company still owns. This facility is used as a sales office, showroom and staff training site. In
January 2004 we entered into a lease for approximately 12,000 square feet of Macao office space to be occupied
early in fiscal 2005.
In December 2003, we sold 12,000 square feet of warehouse space on a 62,000 square foot lot located in
El Paso, Texas.
ITEM 3. LEGAL PROCEEDINGS
Hong Kong Income Taxes - The Inland Revenue Department ("the IRD") in Hong Kong assessed
$6,753,000 (U.S.) in tax on certain profits of our foreign subsidiaries for the fiscal years 1995 through 1997. In
March of 2004, the IRD made an additional assessment of $3,583,000 (U.S.) for fiscal year 1998. 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
percent of the liability assessed by the IRD. The Company purchased additional tax reserve certificates in the
amount of $3,583,000 (U.S.) on April 26, 2004 as required 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
10
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.
If the IRD's position were to prevail and if it were to assert the same position for years after fiscal 1998,
the resulting assessment could total $44,053,000 (U.S.) for the period from fiscal 1995 through fiscal 2004. We
vigorously disagree with the proposed adjustments and intend to aggressively contest this matter through
applicable taxing authority and judicial procedures, as appropriate. Although the final resolution of the proposed
adjustments is uncertain and involves unsettled areas of the law, based on currently available information, the
Company has provided for the best estimate of the probable tax liability for this matter. While the resolution of
the issue may result in tax liabilities which are significantly higher or lower than the reserves established for this
matter, management currently believes that the resolution will not have a material effect on our financial
position or liquidity. However, an unfavorable resolution could have a material effect on our results of
operations or cash flows in the quarter in which an adjustment is recorded or the tax is due or paid.
The IRD also assessed $4,468,000 (U.S.) in tax on certain profits of our foreign subsidiaries for the
fiscal years 1990 through 1994. During the second quarter of fiscal 2003, we settled our dispute with the IRD
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 Sheets and paid the IRD approximately $137,000 in cash. The tax reserve certificates
that we forfeited were included on our Consolidated Balance Sheet as of fiscal year end 2003, on the line
entitled "Other assets." The settlement did not affect the current status of the IRD's assessments for fiscal years
1995 through 1998 and did not have a material effect on our consolidated results of operations.
United States Income Taxes - The Internal Revenue Service ("the IRS") audited the U.S. federal tax
returns of the Company's largest U.S. subsidiary for the fiscal years through 1999 and all associated taxes have
been settled.
The IRS is currently auditing the U.S. federal tax returns of our largest U.S. subsidiary for fiscal years
2000, 2001, and 2002. The IRS has provided notice of certain proposed adjustments to taxable income. We
vigorously disagree with the proposed adjustments and intend to aggressively contest this matter through
applicable IRS and judicial procedures, as appropriate. Although the final resolution of the proposed
adjustments is uncertain and involves unsettled areas of the law, based on currently available information, we
have provided for the best estimate of the probable tax liability for these matters. While the resolution of the
issue may result in tax liabilities which are significantly higher or lower than the reserves established for this
matter, management currently believes that the resolution will not have a material effect on our financial
position or liquidity. However, an unfavorable resolution could have a material effect on our results of
operations or cash flows in the quarter in which an adjustment is recorded or the tax is due or paid.
We plan to permanently reinvest all of the undistributed earnings of the non-U.S. subsidiaries of the U.S.
subsidiaries. We have made no provision for U.S. federal income taxes on these undistributed earnings. At
February 29, 2004, undistributed earnings for which we had not provided deferred U.S. federal income taxes
totaled $50,244,000.
Other Matters - We are 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 our consolidated financial position, results of operations or liquidity.
11
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 2004.
12
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
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 2004
First quarter
Second quarter
Third quarter
Fourth quarter
FISCAL 2003
First quarter
Second quarter
Third quarter
Fourth quarter
High
Low
--------------------- ---------------------
16.50
22.00
27.20
30.80
15.00
14.17
12.05
14.58
11.80
14.45
19.29
21.63
11.65
11.20
8.20
10.21
APPROXIMATE NUMBER OF EQUITY SECURITY HOLDERS
We have one class of equity security outstanding at February 29, 2004; Common Stock with a par value
of $0.10. As of May 05, 2004 there were approximately 405 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 24,500 individuals
and institutions hold our Common Stock.
CASH DIVIDENDS
Our current policy is to retain earnings to provide funds for the operation and expansion of the
Company's business and for potential acquisitions. We have not paid any cash dividends on our Common Stock
since inception. Our current intention is to pay no cash dividends in fiscal 2005. 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 our Board of Directors.
13
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The following table summarizes information about our equity compensation plans as of February 29, 2004. All
outstanding awards relate to our common stock.
EQUITY COMPENSATION PLAN INFORMATION
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
7,982,648
$
12.98
878,673 (1)
-
---------------
7,982,648
=========
-
---------------
$
12.98
=========
-
---------------
878,673
=========
(1) Includes 366,262 shares authorized and available for issuance in connection with the Helen of Troy Limited
1998 Employee Stock Purchase Plan
PURCHASES OF HELEN OF TROY COMMON STOCK
The SEC recently amended Item 5 of Form 10-K to add the requirement that a registrant furnish the
information required by Item 703 of SEC Regulation S-K for any repurchase of shares made in a month within
the fourth quarter of the fiscal year covered by the Form 10-K. Although compliance with this new requirement
is not required in a Form 10-K for a fiscal year ending prior to March 15, 2004, we have voluntarily included
the following table in order to provide information regarding our purchases of our Common Stock during the
three fiscal months ended February 29, 2004:
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs
Maximum
Number of Shares
that May Yet Be
Purchased Under
the Plans or
Programs (1)
Period
Total Number of
Shares Purchased
Average Price
Paid per Share
------------------------------------------------------- ----------------------- ----------------------- ----------------------- -----------------------
2,681,000
December 1 through December 31, 2003
2,193,874
January 1 through January 31, 2004
2,193,874
February 1 through February 29, 2004
----------------------- ----------------------- ----------------------- -----------------------
2,193,874
87,200
487,126
-
87,200
487,126
-
$22.67
27.44
-
574,326
574,326
$26.72
Total
==================== ==================== ==================== ====================
(1) The number shown represents, as of the end of each period, the maximum number of shares of Common
Stock that may yet be purchased under our publicly announced stock repurchase program. During the
quarter ended August 31, 2003, our Board of Directors approved a resolution authorizing the purchase, in
open market or through private transactions, of up to 3,000,000 shares of our common stock over a period
extending through May 31, 2006.
14
During the third fiscal quarter ended November 30, 2003, we purchased and retired a total of 231,800 shares
under this resolution at a total purchase price of $5,226,000, for a $22.55 per share average price. For the
fourth fiscal quarter ended February 29, 2004, as noted above we purchased and retired an additional
574,326 shares under this resolution at a total purchase price of $15,346,000, for a $26.72 per share average
price. We did not purchase any shares during the first half of fiscal 2004.
15
ITEM 6. SELECTED FINANCIAL DATA
The selected consolidated financial information set forth below has been summarized from our
consolidated financial statements. This information contains certain reclassifications necessary to restate prior
years operations of Tactica as a discontinued segment. 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,
(in thousands, except per share data)
Statements of Income Data
Net sales (2)
Cost of sales
Gross profit
Selling, general, and administrative expenses (2)
Operating income
Interest expense
Other income (5)
Earnings before income taxes
Income tax expense (benefit)
Income from continuing operations
Income (loss) from discontinued segment's
operations and impairment of related assets,
net of tax (1)
Net earnings
Per Share Data
Basic
Continuing operations
Discontinued operations
Total basic earnings per share
Diluted
Continuing operations
Discontinued operations
Total diluted earnings per share
Weighted average number of Common shares
outstanding:
Basic
Diluted
2004(1)
---------------
2003(1)
---------------
2002(1)
---------------
2001(1)
---------------
2000
---------------
$
474,868
257,651
---------------
217,217
131,443
---------------
85,774
(4,047)
4,312 (3)
---------------
86,039
14,477
---------------
71,562
$
379,751
224,027
---------------
155,724
105,522
---------------
50,202
(3,965)
2,333
---------------
48,570
10,778
---------------
37,792
$
338,644
211,041
---------------
127,603
97,876
---------------
29,727
(4,185)
1,927
---------------
27,469
5,461
---------------
22,008
$
333,154
211,013
---------------
122,141
94,516 (3)
---------------
27,625
(3,989)
3,122
---------------
26,758
5,074
---------------
21,684
$
297,257
185,685 (4)
---------------
111,572
101,771 (4)
---------------
9,801
(3,530)
6,826
---------------
13,097
(14)
---------------
13,111
(11,040)
---------------
$
60,522
=========
924
---------------
38,716
$
=========
7,207
---------------
29,215
$
=========
(4,352)
---------------
$
17,332
=========
-
---------------
13,111
$
=========
$
$
$
2.52
(0.39)
2.13
$
$
$
2.29
(0.35)
1.94
$
$
$
1.34
0.03
1.37
$
$
$
1.28
0.03
1.31
$
$
$
0.78
0.26
1.04
$
$
$
0.75
0.25
1.00
$
$
$
0.76
(0.15)
0.61
$
$
$
0.75
(0.15)
0.60
0.45
$
$
-
$
0.45
0.44
$
$
-
$
0.44
28,356
31,261
28,189
29,548
28,089
29,199
28,420
28,729
29,053
29,885
16
ITEM 6. SELECTED FINANCIAL DATA - CONTINUED
As of last day of February,
(in thousands)
2002
-------------------- -------------------- -------------------- -------------------- --------------------
2001
2004
2003
2000
Balance Sheet Data:
Working capital (1)
Total assets
Long-term debt
Stockholders' equity (6)
Cash dividends
$
166,445
489,609
45,000
350,103
-
$
163,452
405,629
55,000
289,602
-
$
182,791
357,558
55,000
250,326
-
$
151,533
337,181
55,000
219,609
-
$
154,395
304,252
55,000
209,624
-
(1) Fiscal 2004, 2003, 2002 and 2001 results include 100 percent of the results of Tactica under the line item,
"Income from discontinued operations, net of tax". We acquired a 55 percent interest in Tactica in March
2000. On April 29, 2004 we completed the sale of our interest in Tactica back to certain of its key operating
manager-shareholders. Accordingly, the results of operations of Tactica have been reclassified out of
income from continuing operations and working capital has been restated to eliminate the impact of
Tactica's current assets and current liabilities. Also, in the fourth fiscal quarter of 2004, we recorded a loss
of $5,699,000 from the impairment of Tactica goodwill, net of $1,938,000 of related tax benefits. Because
Tactica had accumulated a net deficit at the time that we acquired our interest in it, and because the minority
shareholders of Tactica had not adequately guaranteed their portion of the accumulated deficit, our
consolidated financial statements for fiscal 2004, 2003, 2002, 2001 and 2000, as restated include 100
percent of Tactica's net income or loss. See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations" for a further explanation of the accounting for Tactica.
(2) In fiscal 2003, we adopted Emerging Issues Task Force Abstract 01-9 ("EITF 01-9"). 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, $4,234,000, and $2,256,000 for fiscal years 2002, 2001, and 2000, respectively.
(3) In fiscal 2001, we recorded a $2,457,000 charge for the remaining unamortized costs under a distribution
agreement, which was later formally terminated. In the fiscal 2004, we recorded income of $2,600,000, net
of legal fees, in connection with the settlement of litigation matters related to this item. This income is
included in the line item entitled "Other income".
(4) In fiscal 2000, we 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 our artificial nails product line. In
fiscal 2000, we also incurred $770,000 of charges related to the restructuring and reorganization of several
departments.
(5) Other income includes gains from the sale and appreciation of trading securities of approximately $311,000,
$75,000, $165,000, $1,400,000, and $6,300,000 for fiscal years 2004, 2003, 2002, 2001 and 2000,
respectively.
(6) In fiscal 2004, we repurchased 806,126 shares of Common Stock at a cost of $20,572,000. In fiscal 2001,
we repurchased 815,946 shares of Common Stock at a cost of $4,623,000. In fiscal 2000 we repurchased
526,485 shares of Common Stock at a cost of $4,076,000. No Common Stock was repurchased during the
fiscal years ended 2002 and 2003.
17
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
section entitled " Forward-Looking Information And Factors That May Affect Future Results" and in Item 7A.
"Quantitative and Qualitative Disclosures About Market Risk."
OVERVIEW OF THE YEAR'S ACTIVITIES
As a leading designer, producer and marketer of brand name personal care products, we are constantly
searching for new avenues of sales growth. We use product innovation to enhance the versatility, speed, and
convenience of our appliances, enabling us to keep our product offerings fresh and exciting to our consumers.
Our business over the last year was characterized by the following changes in our business and the market place
in which we operate:
• Electronic Curling Irons, Thermal Brushes, Hair Straighteners, and Hair Crimpers. The curling iron
category is a cyclical style driven business. Industry trade estimates place the total market dollar
volume growth for this category at approximately 3 percent over the last three years. We continue to add
life to this category and additional margin through higher price points by offering numerous
performance updates including ceramic elements, higher wattages and pulse heat, and variable rheostat
controls for faster heat-up and more precise heat applications. High powered hot air thermal brushes
which combine curling brush and hair dryer in one appliance were a top seller in this category. Ceramic
hair straighteners continue to grow as an industry category as the straight-hair, sleek-with-a-shine look
has gained prominence in the fashion and entertainment industries. Specialty crimpers and wavers have
also shown signs of growth. Over the year, we showed gains in market share in this group. Revlon®,
Sunbeam®, Vidal Sassoon®, Hot Tools®, Wigo®, and Wave Rage™ were key brands in this group.
• Hair Dryers. Hair dryers that offer consumers styling versatility continue to be an important product
category in our business. The category is subject to aggressive price competition at entry level price
points. The retail market for this group, while still the largest of our product categories has been
decreasing. Industry trade estimates place the total market volume growth as trending down
approximately 2 percent over the last three years. Innovation has helped us to thrive in this category and
perform against the general trend. We were the first to market with Ionic hair dryers. Ionic dryers dry
rapidly while leaving hair softer and shinier compared with standard dryers. We have extended our
price points, increased volume and broadened the appeal of this category by including nice value added
touches such as volumizers, hair pik, and concentrator attachments which allow for more precision
styling. Additionally, professional-styles with more powerful AC motors and heavier duty cords and
construction are gaining popularity with the retail consumer. Revlon®, Sunbeam®, Vidal Sassoon®,
Hot Tools®, Wigo®, and Wave Rage™ were key brands in this group.
• Electronic Clippers and Trimmers. Increasing popularity of facial hair has picked up the pace of growth
in our clippers and trimmers business. The focus of numerous infomercials on this product group has
helped to fuel sales. Industry trade estimates place the total dollar volume market growth over the last
three years at over 12 percent with most of this growth occurring last year. While we expect that overall
market sales in this group will level out over the coming year, we are a relatively new entrant to the
market, and expect to see continuing sales growth in our offerings for the category. Vidal Sassoon® and
Sunbeam® were key brands in this group.
18
• Massagers and Wellness Products. This category includes hand held massagers, cushion massagers, foot
spas, home spa facial and manicure appliances, paraffin baths, and spa care gift sets. The overall size of
the Massager and Wellness market is about one half of the personal hair care market. The massager
market was trending down over the previous three years, driven by lower retail unit prices but showed
new signs of life in calendar 2003. Industry trade estimates place the total market growth overall as
down approximately 3 percent over the last three years, but overall dollar volumes were up 16 percent in
the latest calendar year with higher end cushioned and heated back and body massagers leading the
growth. Another key trend is the health, fitness, and wellness movement which is being helped with the
addition of technology to the group. Given the size of this market, we believe there are opportunities to
leverage our core competencies of innovation and speed to market to create additional sales growth for
Helen of Troy. During fiscal 2004, we embarked on a new product development initiative that resulted
in a combined share growth for our wellness and massager brands of 26.3 percent in our served market
segments. For fiscal 2005 and beyond, we plan to build on our successes by continuing to track the
consumer and retail landscape to develop and offer unique and innovative solutions for our customers.
Revlon® and Dr. Scholl's® were key brands in this group.
• Grooming, Skin Care, and Hair Products. We are a new entrant into this market. In October of 2002 we
formed Idelle Labs to revive and energize trusted brand names in our recently acquired Men’s
Grooming, Skin Care, and Hair Care portfolio. We are focused on aggressively growing the Vitalis®,
Sea Breeze®, Ammens®, Condition 3-in-1®, Final Net®, and Vitapointe® product franchises. Our key
strategies are to bring growth to these brands through increased investment in consumer advertising and
customer promotion. Focusing in the near term on launching complementary, innovative extensions, we
are also developing new product lines based on our consumer insights. These brands are contributing
positive sales growth momentum to our family of products.
During September of 2003, we also acquired the rights to produce and distribute the Brut® men’s
grooming product line throughout the Western Hemisphere. Fiscal 2004 operations contain five months
of Brut® sales.
• Brushes, Combs, and Accessories. This very traditional category of our business was down 4 percent in
total dollar volume in fiscal 2004. With the trend towards straighter, cleaner hair styles, the accessory
business has suffered. In order to combat the general trend in this market, we are looking to new
technologies such as ceramic brushes, Ionic brushes and Ion-ceramic brushes to capitalize on grooming
trends. If successful, these will not only bring back volume, but we believe will allow us to sell at
higher price points. Vidal Sassoon product packaging is also being refreshed for greater eye appeal and
ease of consumer shopping. Finally, an expanded broad advertising program from a key licensor,
Revlon will benefit brand awareness for our Revlon® grooming products in fiscal 2005.
• Hairsetters. This is an older technology that tends to be cyclical and is not seeing much current
consumer emphasis due to fashion trending toward straighter hair. Retailers continue to de-emphasize
this category to make display space for newer more exciting hair-styling products. In fiscal 2004, our
business in this group continued to trend down. Revlon®, Vidal Sassoon®, and Wave Rage™ were key
brands in this group.
In addition to the above activities, we continued to pursue the following activities to strengthen our business,
and lay the foundation for significant future growth, both organically and through acquisition:
• We continued with the development and implementation of a new Global Enterprise Resource Planning
system. In connection with this, we have devoted a significant amount of our staff's time to re-thinking
19
every aspect of how we transact business. Through the end of fiscal 2004, we had spent approximately
$5,523,000 on this project. We plan to go live on the new system during fiscal 2005.
• We completed the integration of Ammens®, Brut®, Condition 3-in-1®, Final Net®, Sea Breeze®,
Vitalis®, and Vitapointe® brands into our operations, and we believe we are now positioned to expand
the sales of these products.
• At the end of September, 2003, as more fully described in Note (4) to our consolidated financial
statements, we entered into a new $50,000,000 unsecured revolving credit facility to facilitate our short-
term borrowings and issuances of letters of credit. We immediately used $32,000,000 of this credit
facility and available cash to fund the acquisition of the Brut® family of products from Unilever NV.
By year end of fiscal 2004, we repaid these borrowings from cash generated from operations.
• We reached an agreement to become the title sponsor of the Sun Bowl for the next three years starting
with the December 2004 game. The Sun Bowl is one of the longest running invitational post season
college football games in the United States with a history that spans over 70 years. We have chosen the
"Vitalis Sun Bowl" to be the official name of this event which will be broadcast to a nationwide
audience by CBS. In addition to being of great benefit to the community where we are headquartered,
we believe the "Vitalis Sun Bowl" will provide us the opportunity to showcase the Vitalis® brand to a
whole new generation of users.
• We continued to invest and expand our presence internationally. Overall, our international sales grew
73 percent in fiscal 2004. Due to continued growth in Europe, we had outgrown our existing sales and
administrative facilities in Great Britain. Early in fiscal 2004, we invested approximately $2,142,000 to
open a new 10,000 square foot office facility in Sheffield, England. Great Britain serves as the base of
operations for our European business and oversees our operations in Germany and France. In
connection with our Brut® acquisition, we expanded our Latin America activity. In 2003, we opened a
Mexico City office which will serve as our base of operations for Latin America. We now have a sales
presence in the following countries: the United States, Canada, Great Britain, France, Germany, China,
Greece, Australia, Mexico, Brazil, Venezuela, Panama, Chile, Cost Rica, Peru, Trinidad & Tobago, The
Dominican Republic, Guatemala, and El Salvador.
•
In order to continue to expand our global market for personal care products under the Revlon® trade
name, we amended our trademark licensing agreements with Revlon Consumer Products Corporation, to
expand our Revlon® brand name geographic coverage in North America to include Mexico for
appliances, spa products, brushes, and hair accessories. The new agreements also allow for the sale of
fashion hair care accessories on a worldwide basis except for Western Europe. As part of the new
agreement, we prepaid $5,251,000 for calendar years 2006 and 2007 minimum royalties at a fifteen
percent per annum discount. Revlon, at its option can require us to prepay our 2008 minimum royalties
by December 15, 2004, also at a fifteen percent per annum discount. In the fourth quarter of 2004, in
connection with these amendments, we paid $4,749,000 as full payment of a license renewal fee on all
Revlon® license agreements which commence January 1, 2008 and run for fifteen years. Additionally,
we received two new 20 year renewal options, which allow us to extend the life of the agreements for up
to 59 years.
20
OTHER SIGNIFICANT ACTIVITIES:
During fiscal 2004 we addressed and/or concluded certain matters which had significant impact on our
consolidated financial condition. These are highlighted below:
As announced in October, 2003 we began evaluating strategic alternatives for our investment in Tactica
International, Inc. ("Tactica"), with a view towards maximizing shareholder value. In the fourth fiscal quarter
of 2004, we made the decision to exit our business activities with Tactica, and have made reclassifications to
reflect its activities as a discontinued operation in the accompanying consolidated financial statements. For
fiscal 2004, in connection with the discontinued operations of Tactica and the impairment of its goodwill, we
recorded a total loss of $11,040,000, net of taxes. On April 29, 2004 we completed the sale of Tactica back to
certain of its key operating manager-shareholders. In exchange for our 55 percent ownership share of Tactica
and $17,161,000 of its secured debt and accrued interest, we received marketable securities, intellectual
properties, and the right to certain tax refunds. We do not expect a material gain or loss to arise from this sale
transaction. We expect to conclude all related exit activities by the end of the second fiscal quarter of 2005.
This matter is more fully discussed in Note (15) to our consolidated financial statements.
21
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, our selected operating data, in dollars, as a percentage
of net sales, and as a year-over-year percentage change.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
% of Net Sales (1)
-------------------------------------
2003
------------ ------------ ------------
2004
2002
% Change
------------------------
04/03
03/02
------------ ------------
------------------------------------------------------------------- ------------- ------------- -------------
Net sales
2004
2003
2002
North American Segment
International Segment
Total net sales
Cost of sales
Gross profit
Selling, general and administrative expense
Operating income
Other income (expense):
Interest expense
Other income, net
Total other income (expense)
Earnings before income taxes
Income tax expense
Income from continuing operations
Income (loss) from discontinued segment's
operations and impairment of related assets,
net of tax
Net earnings
* Calculation is not meaningful
$
$
$
474,868
416,312
58,556
345,992
33,759
308,738
29,906
------------- ------------- -------------
338,644
379,751
------------- ------------- -------------
211,041
224,027
------------- ------------- -------------
127,603
155,724
257,651
217,217
131,443
97,876
105,522
------------- ------------- -------------
29,727
------------- ------------- -------------
85,774
50,202
265
(3,965)
2,333
(4,047)
4,312
(4,185)
1,927
------------- ------------- -------------
(2,258)
------------- ------------- -------------
27,469
5,461
------------- ------------- -------------
22,008
86,039
14,477
48,570
10,778
(1,632)
71,562
37,792
924
(11,040)
7,207
------------- ------------- -------------
$
29,215
======== ======== ========
60,522
38,716
$
$
87.7%
12.3%
91.1%
8.9%
91.2%
8.8%
------------ ------------ ------------
100.0% 100.0% 100.0%
------------ ------------ ------------
62.3%
------------ ------------ ------------
37.7%
41.0%
59.0%
54.3%
45.7%
27.7%
27.8%
28.9%
------------ ------------ ------------
8.8%
------------ ------------ ------------
13.2%
18.1%
0.1%
-1.0%
0.6%
-0.9%
0.9%
-1.2%
0.6%
------------ ------------ ------------
-0.7%
------------ ------------ ------------
8.1%
1.6%
------------ ------------ ------------
6.5%
12.8%
2.8%
18.1%
3.0%
10.0%
15.1%
-0.4%
0.2%
-2.3%
2.1%
------------ ------------ ------------
8.6%
======= ======= =======
10.2%
12.7%
25.0%
20.3%
73.5%
12.1%
12.9%
------------ ------------
12.1%
------------ ------------
6.2%
------------ ------------
22.0%
15.0%
39.5%
24.6%
7.8%
------------ ------------
68.9%
------------ ------------
70.9%
2.1%
84.8%
-5.3%
21.1%
------------ ------------
-116.2% -27.7%
------------ ------------
76.8%
97.4%
------------ ------------
71.7%
77.1%
34.3%
89.4%
*
-87.2%
------------ ------------
32.5%
======= =======
56.3%
(1) Cost of sales percentages by segment are computed as a percentage of the related segment's net sales. All
other percentages shown are computed as a percentage of total net sales.
Net Sales:
Consolidated net sales increased 25.0 percent or $95,117,000 in fiscal 2004 over fiscal 2003.
$41,074,000 or 10.8 percent of the fiscal 2004 incremental sales growth is due to the acquisition in October
2002 of six new brands and September 2003 of one new brand in the grooming, skin care, and hair care product
group. Core growth (growth without acquisitions) in fiscal 2004 was $54,043,000 or 14.2 percent. Our core
growth was as a result of both unit growth and higher price points due to new product enhancements through
technology and added features. Examples include hair care appliances utilizing ionic and ceramic technology
rather than traditional heating systems. Incremental sales volume in all distribution channels also came from an
expansion of our line of massagers under the Dr. Scholl's® brand and introduction of new products marketed on
infomercials and sold at retail outlets.
Consolidated net sales increased 12.1 percent or $41,107,000 in fiscal 2003 over fiscal 2002.
$12,997,000 or 3.8 percent of the fiscal 2003 incremental sales growth is due to the acquisition in October 2002
of six brands in the grooming, skin care, and hair care product group. Core growth (growth without
22
acquisitions) in fiscal 2003 was $28,110,000 or 8.3 percent. Our core growth was as a result of product
enhancements through technology and added features. Examples include hair care appliances utilizing ionic
and ceramic technology rather than traditional heating systems. We also experienced increased sales in our
Vidal Sassoon® line of hair clippers, as well as hair care appliances sold under our Wave Rage™ trademark.
Partially offsetting the gains discussed above, our fiscal 2003 net sales of hair brushes, combs, and accessories
were 14.9 percent lower than fiscal 2002.
Net sales increased 20.3 percent or $70,320,000 in our North American segment in fiscal 2004 over
fiscal 2003. $32,966,000 or 9.5 percent of the fiscal 2004 incremental sales growth is due to the acquisitions
explained above and $37,354,000 or 10.8 percent is due to core growth.
Net sales increased 12.1 percent or $37,254,000 in our North American segment in fiscal 2003 over
fiscal 2002. $11,200,000 or 3.6 percent of fiscal 2003 incremental sales growth is due to the acquisitions
explained above and $26,054,000 or 8.4 percent is due to core growth.
Net sales increased 73.5 percent or $24,797,000 in our International segment in fiscal 2004 over fiscal
2003. $8,108,000 or 24.2 percent of the fiscal 2004 incremental sales growth is due to the acquisitions
explained above and $16,689,000 or 49.3 percent is due to core growth. The International segment core sales
increases came 60 percent from United Kingdom sales, 17 percent from French sales, and 23 percent from other
International segment countries. The strength of the British Pound and Euro against the U.S. dollar in fiscal
2004 also had a positive impact on our International segment's net sales.
Net sales increased 12.9 percent or $3,853,000 in our International segment in fiscal 2003 over fiscal
2002. $1,797,000 or 6.0 percent of fiscal 2003 incremental sales growth is due to the acquisitions explained
above and $2,056,000 or 6.9 percent is due to core growth. The strength of the British Pound and Euro against
the U.S. dollar in fiscal 2003 also had a positive impact on our International segment's net sales.
Gross Profit Margins:
Gross profit, as a percentage of sales increased to 45.7 percent in fiscal 2004 from 41.0 percent in fiscal
2003 and 37.7 percent in fiscal 2002. In addition to a more favorable product mix from our North American
and International operating segments, and the impact of higher gross margins on grooming, skin care, and hair
products, we achieved declines in costs of goods sold due to better sourcing agreements and higher production
volumes. Favorable currency exchange rates for the British Pound and Euro also helped improve margins in
fiscal 2004 and fiscal 2003. Almost all of our products are purchased in U.S. dollars. 72.3 percent and 85.1
percent of International sales were in British Pounds or Euros during fiscal 2004 and fiscal 2003, respectively.
Selling, general, and administrative expense ("SG&A"):
SG&A decreased to 27.7 percent of sales in fiscal 2004 from 27.8 percent in fiscal 2003. The 0.1
percent decrease in SG&A between fiscal 2004 and fiscal 2003 resulted from the continued decrease in royalty
expense as a percentage of sales due to our renewing of royalty agreements on more favorable terms, the benefit
of prepaying minimum royalties early, and an increase in sales for which we own the brand and thus do not
incur royalty payments. Freight out costs continue to increase mostly due to higher fuel sur-charges. The
increased transportation costs were offset by lower distribution costs as a result of opening our new Southaven,
Mississippi warehouse in early fiscal 2004.
SG&A expenses decreased to 27.8 percent of sales in fiscal 2003 from 28.9 percent in fiscal 2002. Two
factors contributed to the 1.1 percent decrease. First, we experienced a $2,035,000 reduction in SG&A due to
23
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.
Operating Income by Segment:
Operating income (loss) by operating segment for fiscal 2004, 2003 and 2003 was as follows:
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------- ------------- ------------- -------------
2004
2003
2002
% of Net Sales
-------------------------------------
2003
------------ ------------ ------------
2004
2002
% Change
------------------------
04/03
03/02
------------ ------------
Operating Income
North American Segment
International Segment
Corporate / Other **
Total Segment Operating Income
* Calculation is not meaningful
$49,554
2,995
(2,347)
$84,631
10,662
(9,519)
$32,203
(244)
(2,232)
------------- ------------- -------------
$29,727
$50,202
======== ======== ========
$85,774
17.8%
2.2%
-2.0%
13.0%
0.8%
-0.6%
9.5%
-0.1%
-0.7%
------------ ------------ ------------
8.8%
======= ======= =======
13.2%
18.1%
70.8%
*
305.6%
53.9%
*
5.2%
------------ ------------
68.9%
======= =======
70.9%
The North American segment's operating income grew $35,077,000, or 70.8 percent for fiscal 2004
compared to fiscal 2003, and $17,351,000, or 53.4 percent for fiscal 2003 compared to fiscal 2002. Net sales
growth, improved gross margins, and decreased SG&A, as previously discussed were the significant
contributing factors.
The International segment's operating income grew $7,667,000 for fiscal 2004 compared to fiscal 2003,
and $3,239,000 for fiscal 2003 compared to fiscal 2002. Net sales growth and improved gross margins, as
previously discussed were the significant contributing factors.
Corporate / other operating loss increased $7,172,000 for fiscal 2004 over fiscal 2003. This increase
was attributable to $5,400,000 of executive compensation and $1,600,000 of community relations expenditures
included in this line item in fiscal 2004. With shareholder approval, the executive compensation of Mr. Rubin,
the Company's Chief Executive Officer and President, was changed effective September 1, 2003 to provide Mr.
Rubin an increased incentive bonus opportunity. Also, effective September 1, 2003, Mr. Rubin's employment
agreement was amended to reduce his quarterly options grants.
Interest expense and Other income / expense:
Interest expense was $82,000, or 2.1 percent, higher in fiscal 2004 than fiscal 2003. This is due to our
draw of $32,000,000 under our revolving line of credit at the end of September 2003 to purchase the rights to
produce and distribute Brut® product. By fiscal year end we had repaid all borrowings against this loan.
Interest expense was $220,000, or 5.3 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.
The increase of $1,979,000, or 84.8 percent, in our other income for fiscal 2004, over fiscal 2003, was
primarily due to the favorable settlement of two litigation matters, resulting in our recording $2,600,000, net of
related legal costs, of other income. This was partially offset by a drop in interest income of $658,000 for the
year due to less investable cash and lower interest rates.
24
The increase of $406,000, or 21.1 percent, in our other income for fiscal 2003 over fiscal 2002, was due
primarily to the fact that we had more cash available for investment during most of fiscal 2003 than fiscal 2002.
Income tax expense:
Our fiscal 2004 income tax expense was 16.8 percent of net income before taxes, a rate substantially
lower than the 22.2 percent rate that we experienced in fiscal 2003. The decline was due to more of our income
in fiscal 2004 being taxed in lower tax rate jurisdictions.
Our fiscal 2003 income tax expense of 22.2 percent of net income before taxes, was higher than the 19.9
percent rate that we experienced in fiscal 2002. The higher rate in fiscal 2003 over fiscal 2002 was a result of
additional tax reserves set up in fiscal 2003 to provide for potential tax audit exposures and the comparative
impact of the removal of a valuation allowance from a deferred tax asset during fiscal 2002, thereby making
that year's effective tax rate lower than it otherwise would have been.
DISCONTINUED OPERATIONS
As more fully described in Note (15) to our consolidated financial statements, on October 2, 2003 we
announced that we had begun evaluating strategic alternatives for our investment in Tactica International, Inc.
("Tactica"), with a view towards maximizing shareholder value. On April 29, 2004 we completed the sale of
our 55 percent interest in Tactica back to certain shareholder-operating managers. In exchange for our 55
percent share of Tactica and $17,161,000 of its secured debt and accrued interest, we received marketable
securities, intellectual properties, and the right to certain tax refunds. We do not expect a material gain or loss to
arise from this sale transaction.
Tactica was sold because we believed it no longer fit into our business model. We believe selling
Tactica was the most appropriate course of action to maximize our long-term shareholder value. The sale will
free key corporate managers to concentrate their efforts on our remaining core operating divisions and to
explore and integrate new business opportunities better suited to our long-term objectives and operating system.
Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets" ("SFAS 144") provides accounting guidance for accounting for segments to be disposed by
sale and, in our circumstances, requires us to report Tactica as a discontinued operation. In accordance with
SFAS 144, we classified all assets and liabilities of Tactica as "Assets of discontinued segment held for sale"
and "Liabilities of discontinued segment held for sale" in the accompanying Consolidated balance sheets as of
the end of fiscal 2004 and 2003. SFAS 144 also requires us to report Tactica's operating results, net of taxes, as
a separate summarized component after net income from continuing operations for each year presented. For
fiscal 2004, in connection with the discontinued operations of Tactica and the impairment of its goodwill, we
recorded a total loss of $11,040,000, net of taxes. The accompanying Statements of Income and Consolidated
Statements of Cash Flows contain all appropriate reclassifications for each year presented.
25
FINANCIAL CONDITION, LIQUIDITY, AND CAPITAL RESOURCES
Selected measures of our liquidity and capital resources as of fiscal year end 2004 and 2003 are shown
below:
2004
2003
-------------------- --------------------
Accounts Receivable Turnover (Days)
Inventory Turnover (Times)
Working Capital
Current Ratio
Ending Debt to Equity Ratio
Return on Average Equity
Operating Activities:
49.9
2.5
$166,445,000
3.2 : 1
15.7%
18.9%
57.7
2.3
$163,452,000
4.0 : 1
19.0%
14.3%
Our cash balance was $53,048,000 at the end of fiscal 2004 compared to $47,441,000 at the end of fiscal
2003. Operating activities provided $77,656,000 of cash during fiscal 2004, compared to $47,339,000 during
fiscal 2003. During fiscal 2004, net income, along with an increase in accounts payable, accrued expenses,
and income taxes payable provided operating capital necessary to fund $18,953,000 of growth in accounts
receivable and inventory. During fiscal 2003, our growth in receivables and payables was relatively flat over
the prior year.
In 2004, the growth in inventory and accounts receivable were required to support growth in our core
business and our grooming, skin care, and hair care products. Accounts receivable grew $15,674,000, or 27.4
percent during fiscal 2004, compared to a decrease of $5,084,000, or 8.1 percent during fiscal 2003. Inventory
grew $3,279,000 or 3.3 percent during fiscal 2004, compared to $5,967,000 or 6.3 percent during fiscal 2003.
In fiscal 2004, our accounts receivable turnover improved to 49.9 days from 57.7 days in fiscal 2003,
due to improved collections procedures. In fiscal 2004, inventory turnover improved slightly to 2.5 from 2.3 in
fiscal 2003. The improved turns were due to the annualization of a full year's sales and operations in fiscal
2004 against inventory acquired from The Procter & Gamble Company late in fiscal 2003.
Working Capital increased to $166,445,000 during fiscal 2004 from the levels we reported at the end of
fiscal 2003. Our current ratio dropped to 3.2:1 in fiscal 2004 from 4.0:1 in fiscal 2003. The principal reasons
for this decrease was a $10,254,000 increase in accrued expenses, a $2,784,000 increase in income taxes due
and the classification of a $10,000,000 long-term note payment due in January 2005 as a current liability. This
payment represents the first in a series of scheduled payments we will make against our $55,000,000 unsecured
Senior Notes, as more fully discussed below.
Investing Activities:
In fiscal 2004, we acquired the Brut® brand from Unilever NV with internally generated cash flow and
$32,000,000 drawn against a revolving credit line and in fiscal 2003 we acquired six brands from The Procter &
Gamble Company with internally generated cash flow. These acquisitions resulted in the recording of
inventory, capital equipment, trademarks, long-term licenses, and goodwill. In both years, we prepaid certain
minimum royalties and licensing renewals in order to secure advantageous modifications of terms in our
licensing agreements, and favorable payment discounts against our future royalty obligations. In addition, over
the past two years, we have made significant investments to position our corporate infrastructure for future
growth opportunities. In the latter half of fiscal 2003 and early fiscal 2004, we completed the purchase and
26
transition to a new warehouse facility in Mississippi, which expanded our ability to serve our customer base in
the midwest and eastern United States. In our International operations, we moved to a new owned
administrative facility in the UK, which is the base for our European operations. Finally, over the last two
years, we have made a significant investment in internal staff time, external consulting resources, software and
hardware in developing an integrated Global Information System which we expect to go live with during fiscal
2005.
Listed below are some highlights of our investing activities:
•
•
•
In fiscal 2004, we spent $55,255,000 to acquire from Unilever NV all marketing rights, formulas, fixed
assets and production process know-how to distribute the Brut® brands in North America, Latin
America and the Carribean. This transaction is more fully described in Note (12) to the consolidated
financial statements.
In fiscal 2003, we spent $16,920,000 to acquire from The Procter & Gamble Company all rights to the
trademarks and certain rights to the formulas and production processes for four trademarks: Ammens®,
Vitalis®, Condition 3-in-1®, and Final Net®. In connection with this acquistion, we also spent
$19,000,000 to acquire rights under licenses to sell products for two additional trademarks, Sea Breeze®
and Vitapointe®.
In fiscal 2004, we spent $4,749,000 prepaying license renewals and $5,251,000 prepaying certain future
minimum royalty obligations. In fiscal 2003, we spent $11,500,000 prepaying certain minimum royalty
obligations.
• During fiscal 2003, we signed a new agreement with The Procter & Gamble Company and paid a
$2,000,000 licensing fee allowing us to sell appliances and combs, hair brushes, and accessories using
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 addition,
we are obligated under the agreement to pay royalties on a quarterly basis. The initial agreement was for
a ten-year term with options to extend the agreement for two additional ten-year periods.
• We spent $947,000 in fiscal 2004 and $16,700,000 in fiscal 2003 on the purchase, outfitting, and start-
up of our Mississippi warehouse operation.
• We spent $2,142,000 in fiscal 2004 on our new office facility in the UK.
• We spent $5,523,000 in fiscal 2004 on our global information system to be deployed later in fiscal 2005.
• Other capital expenditures of $444,000 in fiscal 2004 and $312,000 in fiscal 2003 were for normal and
recurring additions and/or replacements of fixed assets in the normal and ordinary course of business. In
fiscal 2003, we also spent $3,664,000 on transportation equipment.
Financing Activities:
During fiscal 2004 and fiscal 2003, we funded our activities with internally generated cash flow. While
we borrowed from time to time against certain revolving credit facilities, all borrowings were short-term and
repaid within months of the initial advances. Our most significant short-term borrowing was the draw of
$32,000,000 of cash to initially fund our September 29, 2004 acquisition of the Brut® brand. As of fiscal year
end, we used internally generated operating cash flow to pay off this advance.
27
We are always looking for the most advantageous use for the cash we generate from operations. During
fiscal 2004, we concluded that repurchase of our own stock on the open market would be beneficial to the long
term interests of our shareholders. During the second fiscal quarter of 2004, our Board of Directors approved a
resolution to purchase, in open market or through private transactions, up to 3,000,000 shares of our common
stock. During the year, we purchased and retired a total of 344,000 shares of our common stock on the open
market at a total purchase price of $7,877,000. An additional 462,126 shares of common stock were tendered
by a key shareholder and retired as payment and satisfaction of $12,695,000 of stock purchase price and federal
income tax obligations arising from the exercise of 1,200,000 options by a key employee-shareholder. This
transaction was valued at an average share price of $27.47 using the average of the high bid and low bid prices
for Helen of Troy stock as reported on the NASDAQ National Market System on the day the stock was
tendered.
Proceeds from employee option exercises and purchases through our employee stock purchase plan
combined to provide $13,426,000 of cash and $ 8,045,000 in tax benefits in fiscal 2004.
During fiscal 2003 and through October 30, 2003, we maintained a revolving line of credit with a bank
providing for borrowings up to $25,000,000, accruing interest at the three-month LIBOR rate plus a percentage
that varied based on the ratio of our debt to earnings before interest, taxes, depreciation, and amortization
(EBITDA). This facility was terminated on October 30, 2003. Letters of credit issued and outstanding under
this facility at the end of fiscal 2004 were approximately $389,000. We are currently arranging to transfer this
letter of credit to our new lender, Bank of America.
On September 22, 2003, certain of our subsidiaries entered into a new $50,000,000 unsecured revolving
credit facility with Bank of America to facilitate short-term borrowings and the issuance of letters of credit. All
borrowings accrue interest equal to the higher of the Federal Funds Rate plus 0.50 percent or Bank of America's
prime rate. Alternatively, upon our timely election, borrowings accrue interest based on the respective 1, 2, 3, or
6 month LIBOR rate plus 0.75 percent (based upon the term of the borrowing). The new credit facility allows
for the issuance of letters of credit up to $10,000,000. Outstanding letters of credit will reduce the $50,000,000
borrowing limit dollar for dollar. The credit facility terminates in September 2004. As previously mentioned, we
used $32,000,000 of this credit facility to fund the acquisition of the Brut® family of products from Unilever
NV. As of the end of fiscal 2004, no revolving loans or letters of credit were outstanding under this facility.
The Bank of America credit agreement requires the maintenance of certain Debt/EBITDA, fixed charge
coverage ratios, and other customary covenants. The agreement has been guaranteed, on a joint and several
basis, by our parent company, Helen of Troy Limited, and certain U.S. subsidiaries.
As more fully described in Note (15) of our consolidated financial statements, on April 29, 2004, we
entered into an agreement to acquire certain assets and liabilities of OXO International from WKI Holding
Company, Inc. Banc of America Securities, LLC has been engaged to assist us in securing funding for this
acquisition which will require an estimated $275,000,000 at closing and is expected to close sometime in our
second fiscal quarter of 2005. We are currently negotiating the interest rates, maturities, and payment terms of
various potential financing instruments associated with the acquisition.
28
Contractual Obligations:
Our contractual obligations and commercial commitments, as of the end of fiscal 2004 were:
PAYMENTS DUE BY PERIOD
(in thousands)
Contractual Obligations
------------------------------------------------------------------------ ------------- ------------- ------------- ------------- ------------- ------------- -------------
Total
2005
1 year
2006
2 years
2007
3 years
2008
4 years
2009
5 years
After
5 years
Long-term debt
Open purchase orders - inventory
Minimum royalty payments
Advertising and promotional
Operating leases
Purchase and implementation of enterprise resource
planning system
Other
Total contractual obligations
Off-Balance Sheet Arrangements:
$
55,000
35,521
22,682
28,685
3,241
$
10,000
35,521
3,489
5,987
1,674
$
10,000
-
3,661
6,253
1,167
$
10,000
-
3,766
6,546
280
$
10,000
-
3,809
5,368
116
$
3,000
$
12,000
3,825
1,342
4
4,132
3,189
-
2,484
4,496
2,484
975
-
989
-
1,003
-
929
-
600
-
-
------------- ------------- ------------- ------------- ------------- ------------- -------------
19,321
$
======== ======== ======== ======== ======== ======== ========
152,109
60,130
20,222
22,070
21,595
8,771
$
$
$
$
$
$
We have no existing activities involving special purpose entities or off-balance sheet financing.
Current and Future Capital Needs:
Based on our current financial condition and current operations, and subject to the satisfactory
completion of our financing the acquisition of certain assets and liabilities of OXO International from WKI
Holding Company, Inc., we believe that cash flows from operations and available financing sources will
continue to provide sufficient capital resources to fund the Company's foreseeable short and long-term liquidity
requirements. Except for the OXO International transaction, we expect that our capital needs will stem
primarily from the need to purchase sufficient levels of inventory and to carry normal levels of accounts
receivable on our balance sheet. In addition, we will continue to evaluate acquisition opportunities on a regular
basis and may augment our internal growth with acquisitions of complementary businesses or product lines. We
may 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 the status of the capital markets at the time of such
acquisition.
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®, Vitalis®, Condition 3-in-1®, and Final Net®. The Procter & Gamble Company
assigned to us its rights under licenses to sell products bearing the other two trade names; Sea Breeze® and
Vitapointe®. The Sea Breeze® license is perpetual. The portion of the purchase price assigned to the four
trademarks purchased is included in our consolidated balance sheet as of the end of fiscal 2004 and fiscal 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® and Vitapointe® licenses appears on our consolidated balance sheets as of the end of fiscal 2004
29
and fiscal 2003 on the line entitled "License agreements, at cost less accumulated amortization." After
consideration of the fact that the Sea Breeze® 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® license has an
indefinite economic useful life. Therefore it is not subject to amortization. The Vitapointe® license expires on
December 31, 2010. Although, our long-range expectation is to renew this license upon its expiration, we
determined that the finite nature of this license indicates that it has a definite life and is, therefore subject to
amortization in the annual amount of $128,000.
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 $1,400,000 and $600,000 of the advertising credits during fiscal 2004 and fiscal 2003,
respectively, and expect to use substantially all remaining advertising credits during the third and fourth
quarters of fiscal 2005. The credits are valued at $1,100,000 and $2,500,000 on our consolidated balance sheets
at the end of fiscal 2004 and 2003, respectively, and are included in the line item entitled "Prepaid Assets."
30
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." We consider the following policies to meet this definition.
Hong Kong Income Taxes - The Inland Revenue Department ("the IRD") in Hong Kong assessed
$6,753,000 (U.S.) in tax on certain profits of our foreign subsidiaries for the fiscal years 1995 through 1997. In
March of 2004, the IRD made an additional assessment of $3,583,000 (U.S.) for fiscal year 1998. 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
percent of the liability assessed by the IRD. The Company purchased additional tax reserve certificates in the
amount of $3,583,000 (U.S.) on April 26, 2004 as required 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.
If the IRD's position were to prevail and if it were to assert the same position for years after fiscal 1998,
the resulting assessment could total $44,053,000 (U.S.) for the period from fiscal 1995 through fiscal 2004. We
vigorously disagree with the proposed adjustments and intend to aggressively contest this matter through
applicable taxing authority and judicial procedures, as appropriate. Although the final resolution of the proposed
adjustments is uncertain and involves unsettled areas of the law, based on currently available information, the
Company has provided for the best estimate of the probable tax liability for this matter. While the resolution of
the issue may result in tax liabilities which are significantly higher or lower than the reserves established for this
matter, management currently believes that the resolution will not have a material effect on our financial
position or liquidity. However, an unfavorable resolution could have a material effect on our results of
operations or cash flows in the quarter in which an adjustment is recorded or the tax is due or paid.
United States Income Taxes - The IRS is currently auditing the U.S. federal tax returns of our largest
U.S. subsidiary for fiscal years 2000, 2001, and 2002. The IRS has provided notice of certain proposed
adjustments to taxable income. We vigorously disagree with the proposed adjustments and intend to
aggressively contest this matter through applicable IRS and judicial procedures, as appropriate. Although the
final resolution of the proposed adjustments is uncertain and involves unsettled areas of the law, based on
currently available information, we have provided for the best estimate of the probable tax liability for these
matters. While the resolution of the issue may result in tax liabilities which are significantly higher or lower
than the reserves established for this matter, management currently believes that the resolution will not have a
material effect on our financial position or liquidity. However, an unfavorable resolution could have a material
effect on our results of operations or cash flows in the quarter in which an adjustment is recorded or the tax is
due or paid.
We plan to permanently reinvest all of the undistributed earnings of the non-U.S. subsidiaries of the U.S.
subsidiaries. We have made no provision for U.S. federal income taxes on these undistributed earnings. At
February 29, 2004, undistributed earnings for which we had not provided deferred U.S. federal income taxes
totaled $50,244,000.
31
Income Tax Provisions - We must make certain estimates and judgments in determining income tax
expense for financial statement purposes. These estimates and judgments occur in the calculation of certain tax
assets and liabilities, which arise from differences in the timing of recognition of revenue and expense for tax
and financial statement purposes.
We must assess the likelihood that we will be able to recover our deferred tax assets. If recovery is not
likely, we must increase our provision for taxes by recording a valuation allowance against the deferred tax
assets that we estimate will not ultimately be recoverable. As changes occur in our assessments regarding our
ability to recover our deferred tax assets, our tax provision is increased in any period in which we determine that
the recovery is not probable.
In addition, the calculation of our tax liabilities involves dealing with uncertainties in the application of
other complex tax regulations. We recognize liabilities for anticipated tax audit issues in the United States and
other tax jurisdictions based on our estimate of whether, and the extent to which, additional taxes will be due. If
we ultimately determine that payment of these amounts are unnecessary, we reverse the liability and recognize a
tax benefit during the period in which we determine that the liability is no longer necessary. We record an
additional charge in our provision for taxes in the period in which we determine that the recorded tax liability is
less than we expect the ultimate assessment to be.
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. This process entails a significant amount of inherent subjectivity and uncertainty.
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 us 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 we
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. In fiscal 2004, we recorded a goodwill impairment charge in connection with the
discontinued operations of our Tactica segment, as more fully described in Note (15) to our consolidated
financial statements. 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
32
we 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.
For a more comprehensive list of our accounting policies, we encourage you to read Note 1 - Summary
of Significant Accounting Policies, included in the accompanying consolidated financial statements. Note (1)
contains several other policies, including policies governing the timing of revenue recognition, that are
important to the preparation of our consolidated financial statements, but do not meet the SEC's definition of
critical accounting policies because they do not involve subjective or complex judgments.
FORWARD-LOOKING INFORMATION AND FACTORS THAT MAY AFFECT FUTURE RESULTS
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", "plans", "may", "will", "should",
"seeks", "estimates", "predict", "potential", "continue", "intends", and other similar words identify forward-
looking statements. All statements that address operating results, events or developments that we expect or
anticipate will occur in the future, including statements related to sales, earnings per share results, and
statements expressing general expectations about future operating results, are forward-looking statements. The
Company cautions readers not to place undue reliance on forward-looking statements. Forward-looking
statements are subject to risks that could cause such statements to differ materially from actual results. The
Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a
result of new information, future events, or otherwise.
Factors that could cause actual results to differ from those anticipated include:
• general industry conditions and competition, including our ability to continue to competitively market
products with broad consumer appeal,
• credit risks,
• the Company's, or its operating segments', material reliance on individual customers or small numbers
of customers,
• the Company's material reliance on certain trademarks, and its ability to protect this and other
intellectual property both domestically and internationally,
• the Company’s material concentration of licensing agreements with a limited number of licensors, and
the continuing long-term financial capability of those licensors to perform under the terms of such
agreements,
33
• the impact of tax legislation, regulations, or treaties, including proposed legislation in the United
States that would affect companies or subsidiaries of companies that have headquarters outside the
United States and file U.S. income tax returns,
• the impact of other current and future laws and regulations,
• the results of continuing disagreements with the Hong Kong Inland Revenue Department concerning
the portion of our profits that are subject to Hong Kong income tax,
• any disagreements with the United States Internal Revenue Service or other taxing authority regarding
our assessment of the effects or interpretation of existing tax laws, regulations, or treaties,
• risks associated with inventory, including potential obsolescence and our ability to accurately forecast
our customer demand,
• risks associated with new products and new product lines,
• risks associated with the Company's material reliance on certain manufacturers for a significant
portion of its production needs,
• risks associated with operating in foreign jurisdictions,
• interest rate risk, particularly those associated with debt instruments we will issue in connection with
our recently announced transaction to acquire substantially all the assets and liabilities of OXO
International from WKI Holding Company, Inc.,
• foreign currency exchange losses,
• general worldwide and domestic economic conditions,
• uninsured losses,
• changes in business, political and economic conditions due to the threat of future terrorist activity in
the United States and other parts of the world, and related U.S. military action overseas,
• reliance on computer systems,
• management's reliance on the representations of third parties,
• risks associated with new business ventures and acquisitions, including our ability to manage the
transition and integration, and our ability to obtain the anticipated results and synergies from our
recently announced transaction to acquire certain assets and liabilities of OXO International from WKI
Holding Company, Inc.,
• risks associated with any current or future investments in equity securities,
• risks associated with the sale of all our interest in Tactica, including our ability to realize the full value
of the sales price from certain assets, including marketable securities, intellectual properties and the
34
right to tax refunds that Tactica transferred to us as payment for our 55 percent interest in its stock and
secured debt,
• the risks described from time to time in the Company's reports to the Securities and Exchange
Commission, including this report,
• the risks associated with the impact that any future changes in generally accepted accounting
principles may have on the reported results of operations, and
• the risks associated with our ability to avoid classification of our parent company as a Controlled
Foreign Corporation. In order for us to preserve our current tax treatment of our non-U.S. earnings, it
is critical we avoid Controlled Foreign Corporations status. A Controlled Foreign Corporation is a
non-U.S. corporation whose largest U.S. shareholders (i.e., those owning 10 percent or more of its
stock) together own more than 50 percent of the stock in such corporation. If a change of ownership of
the Company were to occur such that the parent company became a Controlled Foreign Corporation,
such a change could have a material negative effect on the largest U.S. shareholders and, in turn, on
the Company's business.
NEW ACCOUNTING GUIDANCE
In May 2003, the FASB issued FASB Statement No. 150 "Accounting for Certain Financial Instruments
with Characteristics of Both Liabilities and Equity" ("SFAS 150"). This statement establishes standards for how
an issuer classifies and measures in its statement of financial position certain financial instruments with
characteristics of both liabilities and equity. It requires that issuers classify as liabilities a financial instrument
that is within its scope as a liability because that financial instrument embodies an obligation of the issuer. This
statement does not affect the timing of recognition of financial instruments as contingent consideration nor does
it apply to obligations under stock-based compensation arrangements if those obligations are accounted for
under APB Opinion No. 25. We are still reviewing the effects of SFAS 150 on our financial statements. We
currently do not have any financial instruments that are covered under this statement.
In December 2003, the FASB issued FASB Interpretation No. 46R (FIN 46R), Consolidation of
Variable Interest Entities ("FIN 46R"). FIN 46R replaces the same titled FIN 46 that was issued in January
2003. FIN 46R identifies when entities must be consolidated with the financial statements of a company where
the investors in an entity do not have the characteristics of a controlling financial interest or the entity does not
have sufficient equity at risk for the entity to finance its activities without additional subordinated financial
support. Application of this Interpretation is effective for any financial statements we issue after December 15,
2003. We have no interests in entities covered by FIN 46R. Therefore, FIN 46R had no affect on our
consolidated financial statements.
35
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 and
the amount of interest expense we incur on our short-term borrowings. 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 "Financial Condition, Liquidity, and Capital Resources", interest rates on our revolving
credit agreement varies based on the LIBOR rate and the period we lock LIBOR in for. Therefore, the potential
for interest rate increases exposes us to interest rate risk on our revolving credit agreement. Our revolving
credit agreement with Bank of America, entered into on September 22, 2003 allows for maximum revolving
borrowings of $50,000,000. At the end of fiscal 2004, there were no outstanding borrowings or open letters of
credit under this credit line. The need to borrow under this agreement could ultimately subject us to higher
interest rates, thus increasing the future cost of such debt. We do not currently hedge against interest rate risk.
As mentioned under "Financial Condition, Liquidity, and Capital Resources", and "Forward-Looking
Information and Factors that may affect Future Results", on April 29, 2004, we entered into an agreement to
acquire certain assets and liabilities of OXO International from WKI Holding Company, Inc., which will require
approximately $275,000,000 at closing and is expected to close sometime in our second fiscal quarter of 2005.
We are currently negotiating the interest rates, maturities, and payment terms of various potential financing
instruments associated with the acquisition. The addition of this level of debt exposure to our consolidated
operations, and the uncertainty regarding the associated interest rates, maturities, and payment terms yet to be
negotiated, substantially increases our risk profile.
Because we purchase a 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 the United States are transacted in U.S.
Dollars. The majority of our sales in the United Kingdom are transacted in British Pounds, in France and
Germany are transacted in Euros, and in Canada are transacted in Canadian Dollars. 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.
Our net sales denominated originally in currencies other than the U.S. Dollar totaled approximately
$73,259,000, $43,366,000 and $25,500,000, for the fiscal years ended 2004, 2003 and 2002, respectively. Our
foreign currency exchange gains totaled $1,216,000 and $1,638,000 for the fiscal years ended 2004 and 2003,
respectively. In fiscal 2002, we recorded a foreign exchange loss of $307,000.
During fiscal 2003, we began hedging against foreign currency exchange rate-risk by entering into a
series of forward contracts designated as cash flow hedges to protect against the foreign currency exchange risk
inherent in our forecasted transactions denominated in currencies other than the U.S. Dollar. For transactions
designated as cash flow hedges, the effective portion of the change in the fair value (arising from the change in
the spot rates from period to period) is deferred in Other Comprehensive Income. These amounts are
subsequently recognized in "Other income (net)" in the Consolidated Statements of Income in the same period
as the forecasted transactions close out over the remaining balance of their terms. The ineffective portion of the
change in fair value (arising from the change in the difference between the spot rate and the forward rate) is
36
recognized in the period it occurred. These amounts are also recognized in "Other income (net)" in the
Consolidated Statements of Income. We do not enter into any forward exchange contracts or similar
instruments for trading or other speculative purposes.
The following table summarizes the various forward contracts we designated as cash flow hedges that
were open at the end of fiscal 2004 and 2003:
Contract
Type
February 29, 2004
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Market Value
of the
Contract in
US Dollars
(Thousands)
------------- ------------- -------------- ---------------- ---------------- ---------------- ---------------- ---------------- ------------------ ------------------ ----------------
($888)
Sell
$46
Sell
($141)
Sell
----------------
($983)
==============
Weighted
Average
Forward Rate
at February 29,
2004
Weighted
Average
Forward Rate
at Inception
Spot Rate at
February 29,
2004
Range of Maturities
----------------------------------
11/18/2003
2/13/2004
12/2/2003
$5,000,000
$5,000,000
$3,000,000
Spot Rate at
Contract Date
$1.6950
1.8800
1.2070
$1.6392
1.7854
1.1928
$1.8666
1.8666
1.2492
$1.8167
1.7763
1.2399
Pounds
Pounds
Euros
11/9/2004
11/10/2005
Notational
Amount
Currency
to Deliver
2/8/2005
2/17/2006
Contract Date
2/8/2005
From
To
February 28, 2003
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Market Value
of the
Contract in
US Dollars
(Thousands)
------------- ------------- -------------- ---------------- ---------------- ---------------- ---------------- ---------------- ------------------ ------------------ ----------------
($34)
Sell
==============
Weighted
Average
Forward Rate
at February 28,
2003
Weighted
Average
Forward Rate
at Inception
Notational
Amount Contract Date
Spot Rate at
February 28,
2003
Range of Maturities
----------------------------------
Spot Rate at
Contract Date
Currency
to Deliver
Contract
Type
10/24/2002
$1,000,000
3/7/2003
$1.5734
$1.5520
$1.5393
$1.5738
Pounds
From
To
We expect that as currency market conditions warrant, and our foreign denominated transaction
exposure grows, we will continue to execute additional contracts in order to hedge against potential foreign
exchange losses.
37
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE
PAGE
Independent Auditors' Report
Consolidated Financial Statements:
Consolidated Balance Sheets as of February 29, 2004 and February 28, 2003
Consolidated Statements of Income for each of the years in the three-year period
ended February 29, 2004
Consolidated Statements of Stockholders' Equity and Comprehensive Income for each of the
years in the three-year period ended February 29, 2004
Consolidated Statements of Cash Flows for each of the years in the three-year period
ended February 29, 2004
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 29, 2004
39
40
41
42
43
44
71
All other schedules are omitted as the required information is included in the consolidated financial statements
or is not applicable.
38
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Helen of Troy Limited:
We have audited the accompanying consolidated balance sheets of Helen of Troy Limited and
subsidiaries (the Company) as of February 29, 2004 and February 28, 2003, and the related consolidated
statements of income, stockholders' equity and comprehensive income and cash flows for each of the years in
the three year period ended February 29, 2004. These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these consolidated financial
statements 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 29, 2004 and February
28, 2003, and the results of their operations and their cash flows for each of the years in the three-year period
ended February 29, 2004, in conformity with accounting principles generally accepted in the United States of
America.
Our audits were made for the purpose of forming an opinion on the basic consolidated financial
statements taken as a whole. The schedule titled "Schedule II - Valuation and Qualifying Accounts" is
presented for purposes of additional analysis and is not a required part of the basic consolidated financial
statements. Such information has been subjected to the auditing procedures applied in the audits of the basic
consolidated financial statements and, in our opinion, the information is fairly stated in all material respects in
relation to the basic consolidated financial statements taken as a whole.
/s/ KPMG LLP
El Paso, Texas
May 12, 2004
39
HELEN OF TROY LIMITED AND SUBSIDIARIES
Consolidated Balance Sheets
February 29, 2004 and February 28, 2003
(in thousands, except shares and par value)
Assets
Current assets:
Cash and cash equivalents
Trading securities, at market value
Receivables - principally trade, less allowance of $1,100 in 2004 and $1,089 in 2003
Inventories
Prepaid expenses
Deferred income tax benefits
Total current assets
Property and equipment, at cost less accumulated depreciation of $17,085 in 2004 and $14,015 in 2003
Goodwill, net of accumulated amortization of $7,726 in 2004 and 2003
Trademarks, net of accumulated amortization of $215 in 2004 and $211 in 2003
License agreements, at cost net of accumulated amortization of $11,634 in 2004 and $10,194 in 2003
Assets of discontinued operations held for sale
Other assets
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt
Accounts payable, principally trade
Accrued expenses:
Advertising and promotional
Other
Income taxes payable
Total current liabilities
Liabilities of discontinued operations held for sale
Long-term debt, less current portion
Total liabilities
Stockholders' equity
Cumulative preferred stock, non-voting, $1.00 par. Authorized 2,000,000 shares; none issued
Common stock, $.10 par. Authorized 50,000,000 shares; 29,288,307 and 28,196,517 shares
issued and outstanding at February 29, 2004 and February 28, 2003, respectively
Additional paid-in-capital
Retained earnings
Accumulated other comprehensive loss
Total stockholders' equity
Commitments and contingencies
See accompanying notes to consolidated financial statements.
40
2004
2003
-------------------- --------------------
$
$
53,048
692
72,801
104,057
7,212
5,930
47,441
1,442
57,165
100,778
7,465
4,139
-------------------- --------------------
218,430
243,740
68,704
52,786
50,643
30,681
23,185
19,870
62,847
35,068
17,048
27,372
26,803
18,061
-------------------- --------------------
$
405,629
============ ============
489,609
$
$
10,000
15,642
$
-
16,363
5,114
22,935
23,604
5,662
12,133
20,820
-------------------- --------------------
54,978
77,295
17,211
45,000
6,049
55,000
-------------------- --------------------
116,027
-------------------- --------------------
139,506
-
-
2,929
73,679
274,413
(918)
2,820
53,984
232,798
-
-------------------- --------------------
289,602
-------------------- --------------------
350,103
$
405,629
============ ============
489,609
$
HELEN OF TROY LIMITED AND SUBSIDIARIES
Consolidated Statements of Income
(in thousands, except per share data)
Net sales
Cost of sales
Gross profit
Selling, general, and administrative expense
Operating income
Other income (expense):
Interest expense
Other income, net
Total other income (expense)
Earnings before income taxes
Income tax expense
Income from continuing operations
Income (loss) from discontinued segment's operations and impairment of
related assets, net of tax benefit (expense) of $8,394, ($1,252) and ($3,871) in
2004, 2003, and 2002, respectively
Net earnings
Earnings per share:
Basic
Continuing operations
Discontinued operations
Total basic earnings per share
Diluted
Continuing operations
Discontinued operations
Total diluted earnings per share
Weighted average common shares used in computing net earnings per share
Basic
Diluted
2004
Years Ended The Last Day of February,
--------------------------------------------------------------
2003
-------------------- -------------------- --------------------
338,644
$
211,041
-------------------- -------------------- --------------------
127,603
474,868
257,651
379,751
224,027
217,217
155,724
$
$
2002
131,443
97,876
-------------------- -------------------- --------------------
29,727
-------------------- -------------------- --------------------
105,522
85,774
50,202
265
(3,965)
2,333
(4,047)
4,312
(4,185)
1,927
-------------------- -------------------- --------------------
(2,258)
-------------------- -------------------- --------------------
27,469
5,461
-------------------- -------------------- --------------------
22,008
86,039
14,477
48,570
10,778
(1,632)
71,562
37,792
(11,040)
7,207
-------------------- -------------------- --------------------
29,215
$
============ ============ ============
$
$
60,522
38,716
924
$
$
$
2.52
(0.39)
2.13
$
$
$
1.34
0.03
1.37
$
$
$
0.78
0.26
1.04
$
$
$
2.29
(0.35)
1.94
$
$
$
1.28
0.03
1.31
$
$
$
0.75
0.25
1.00
28,356
31,261
28,189
29,548
28,089
29,199
See accompanying notes to consolidated financial statements.
41
HELEN OF TROY LIMITED AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity and Comprehensive Income
Years Ended The Last Day of February, 2004, 2003, and 2002
(in thousands)
Balances February 28, 2001
Net earnings
Exercise of common stock
options, net
Issuance of common stock
in connection with employee
stock purchase plan
Capital contribution to subsidiary by
minority shareholder
Balances February 28, 2002
Net earnings
Exercise of common stock
options, net
Issuance of common stock
in connection with employee
stock purchase plan
Cancellation of stock recovered from escrow
Balances February 28, 2003
Components of comprehensive Income:
Net earnings
Unrealized loss on cash flow hedging derivatives
Total comprehensive Income
Exercise of common stock
Other
Compre-
hensive
(Loss)
---------------- ---------------- ---------------- ---------------- ----------------
219,609
$ -
$
Total
Stockholders'
Equity
Additional
Paid-In
Capital
Common
Stock
Retained
Earnings
164,597
52,206
$
2,806
$
$
-
10
4
-
710
178
-
-
-
29,215
29,215
-
-
720
182
-
600
---------------- ---------------- ---------------- ---------------- ----------------
250,326
194,082
53,424
2,820
270
330
-
-
-
3
-
336
-
-
38,716
38,716
-
339
2
(5)
219
5
-
-
-
-
221
-
---------------- ---------------- ---------------- ---------------- ----------------
289,602
232,798
53,984
2,820
-
-
-
-
-
-
(918)
60,522
-
60,522
(918)
----------------
59,604
----------------
options, including tax benefits of $8,045
187
21,036
-
-
-
-
21,224
246
2
245
Issuance of common stock
in connection with employee
stock purchase plan
Acquisition and retirement of
common stock
Balances February 29, 2004
(81)
(20,572)
---------------- ---------------- ---------------- ---------------- ----------------
$
350,103
========== ========== ========== ========== ==========
(18,906)
$
274,413
(1,586)
73,679
$
2,929
(918)
$
$
-
See accompanying notes to consolidated financial statements.
42
HELEN OF TROY LIMITED AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(in thousands)
Cash flows from operating activities:
Net earnings
Adjustments to reconcile net earnings to net cash provided by operating activities
$
60,522
$
38,716
$
29,215
Years Ended The Last Day of February,
------------------------------------------------------------------
2003
--------------------- --------------------- ---------------------
2002
2004
Depreciation and amortization
Provision for doubtful receivables
Purchases of trading securities
Proceeds from sales of trading securities
Realized gain - trading securities
Unrealized (gain) loss - trading securities
Deferred taxes, net
Loss (gain) on disposal of property, plant, and equipment
Loss (earnings) from operations of discontinued segment
Loss from impairment of goodwill of discontinued segment
Changes in operating assets and liabilities:
Accounts receivable
Inventories
Prepaid expenses
Prepayment of royalties
Other assets
Accounts payable
Accrued expenses
Income taxes payable
Net cash provided by operating activities
Cash flows from investing activities:
Capital and license expenditures
Purchase of trademarks
Proceeds from sales of property, plant, and equipment
Retirements of property and equipment
Increase in other assets
Net cash used by investing activities
Cash flows from financing activities:
Net borrowings on revolving line of credit
Capital contribution to subsidiary by minority shareholder
Proceeds from exercise of stock options, net
Common stock repurchases
Net cash provided by (used in) financing activities
Net increase (decrease) in cash and cash equivalents
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)
Common stock received as exercise price of options
6,128
38
(197)
1,252
(223)
(82)
(1,791)
-
7,279
3,761
6,422
719
(3,487)
2,258
(157)
90
684
(58)
(924)
-
8,374
2,153
(431)
2,407
(777)
612
782
17
(7,207)
-
(15,674)
(3,279)
253
(5,251)
3,115
(721)
10,254
10,829
(4,122)
19,574
(266)
-
-
(10,281)
2,396
(1,170)
--------------------- --------------------- ---------------------
41,276
--------------------- --------------------- ---------------------
5,084
(5,967)
(5,226)
(11,500)
5,392
8,863
2,565
3,865
47,339
76,213
(42,676)
(16,920)
-
536
1,109
(759)
-
43
73
--------------------- --------------------- ---------------------
(643)
--------------------- --------------------- ---------------------
(63,460)
(57,951)
-
-
560
-
(10,000)
600
902
-
560
(7,146)
--------------------- --------------------- ---------------------
(8,498)
--------------------- --------------------- ---------------------
32,135
25,358
--------------------- --------------------- ---------------------
57,493
$
============ ============ ============
(10,052)
57,493
5,607
47,441
$
$
47,441
53,048
$
$
$
4,131
2,319
5,400
$
3,890
$
5,025
$
-
$
4,278
$
5,690
$
-
(13,805)
(51,314)
-
80
1,580
-
-
8,026
(15,172)
See accompanying notes to consolidated financial statements.
43
HELEN OF TROY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 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. We purchase our products from unaffiliated manufacturers, most
of which are located in The People's Republic of China, Thailand, Taiwan, South Korea, and The United
States.
Our financial statements are prepared in U.S. dollars and in accordance with U.S. generally accepted
accounting principles. 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. We have reclassified certain prior-year amounts
to conform to this year's presentation.
(b) Consolidation
Our consolidated financial statements include the accounts of Helen of Troy Limited and its subsidiaries.
Tactica International, Inc. ("Tactica"), a subsidiary in which we acquired a 55 percent interest in fiscal 2001,
is now presented as a discontinued operation in accordance with the requirements of Statement of Financial
Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets".
Accordingly, the consolidated balance sheets present Tactica's total assets in the line "Assets of discontinued
operation held for sale", and its total liabilities in the line "Liabilities of discontinued operations held for
sale". Our 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. We eliminate intercompany balances and transactions in consolidation.
(c) Revenue recognition
Sales are recognized when revenue is realized or realizable and has been earned. Sales and shipping terms
vary among our 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
We offer our customers certain incentives in the form of cooperative advertising arrangements, volume
rebates, product markdown allowances, trade discounts, cash discounts, and slotting fees. We account for
these 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 us with proof of performance, reductions in amounts received from customers as a result
of cooperative advertising programs are included in our 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.
44
HELEN OF TROY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Markdown allowances, slotting fees, trade discounts, cash discounts, and volume rebates are all recorded as
reductions of net sales. Customer incentives included in SG&A were $16,603,000, $14,942,000, and
$12,261,000 for the fiscal years 2004, 2003, and 2002, respectively.
(e) Inventories and cost of sales
Our inventories consist almost entirely of finished goods. We account for inventory using a first-in-first-out
system in which we record inventory on our balance sheet at the lower of our cost or net realizable value. A
product's cost is comprised of the amount that we pay our manufacturer for product, tariffs and duties
associated with transporting product across national borders, freight costs associated with transporting the
product from our manufacturers to our warehouse locations, and capitalized general and administrative
expenses directly attributable to the procurement of inventory.
Capitalized general and administrative expenses include all the expenses of operating the Company's Hong
Kong sourcing facility, expenses incurred for production forecasting, and expenses incurred for product
design, engineering and packaging. We charged $11,373,000, $10,195,000 and $9,608,000 of such general
and administrative expenses to inventory during fiscal years 2004, 2003, and 2002, respectively. We
estimate that $4,745,000 and $4,493,000 of capitalized general and administrative expenses were included
in our inventory balances on hand at fiscal year ends 2004 and 2003, respectively. When circumstances
dictate that we use net realizable value in lieu of cost, we base our estimates on expected future selling
prices less expected 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
We report revenue from shipping and handling charges on the "Net sales" line of our 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." We only include charges for shipping and
handling in "Net sales" for sales made to direct response customers and retail customers ordering relatively
small dollar amounts of product. Our shipping and handling expenses far exceed our shipping and handling
revenues. Shipping and handling expenses are included in our Consolidated Statements of Income on the
"Selling, general, and administrative expenses" line. Our expenses for shipping and handling totaled
$28,760,000, $22,178,000 and $20,506,000 during the fiscal years ended 2004, 2003, and 2002,
respectively.
(g) Valuation of accounts receivable
Our allowance for doubtful accounts reflects our best estimate of probable losses, determined principally on
the basis of historical experience and specific allowances for known troubled accounts.
45
HELEN OF TROY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(h) Property and equipment
These assets are stated at cost. Depreciation is recorded primarily 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. For tax purposes, accelerated depreciation methods are used as allowed by tax laws.
(i) License agreements and trademarks
A significant portion of our sales are made subject to license agreements with the licensors of the Vidal
Sassoon®, Revlon®, Sunbeam®, and Dr. Scholl's® trademarks. Our license agreements are reported on the
Company's Consolidated Balance Sheets at cost, less accumulated amortization. The cost of our license
agreements represents amounts paid to licensors to acquire the license or to alter the terms of the license in a
manner which we believe to be in our best interest. Royalty payments are not included in the cost of license
agreements. We amortize license costs on a straight-line basis over the appropriate lives of the respective
agreements. Net sales subject to license agreements comprised 64 percent, 71 percent and 74 percent of total
consolidated net sales for fiscal years 2004, 2003, and 2002, respectively. Royalty expense under our license
agreements is recognized as incurred and is included in our Consolidated Statements of Income on the
"Selling, general, and administrative expenses" line.
We also sell products under trademarks that we own. Trademarks that we acquire from other entities are
recorded on our Consolidated Balance Sheets at the appraised cost of acquiring the trademark, net of any
accumulated amortization. Costs associated with developing trademarks internally are recorded as expenses
in the period incurred. When trademarks have readily determinable useful lives, we amortize their costs on a
straight-line basis over such lives. In certain instances, we have determined that particular trademarks have
an indefinite useful life. In these cases, no amortization is recorded.
See Note (3) for additional information on our licenses and trademarks.
(j) Income taxes
We use 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
applicable assets and liabilities. Generally, deferred tax assets represent future income tax reductions while
deferred tax liabilities represent income taxes that we expect to pay in the future. We measure deferred tax
assets and liabilities using enacted tax rates for the years in which we expect temporary differences to be
reversed or be settled. Changes in tax rates affect the carrying values of our deferred tax assets and
liabilities. The effects of any tax rate changes are recognized in the periods where they become effective.
(k) Earnings per share
We compute basic earnings per share based upon the weighted average number of common shares
outstanding during the period. We compute diluted earnings per share based upon the weighted average
number of common shares plus the effects of potentially dilutive securities. Our dilutive securities consist
entirely of stock options.
46
HELEN OF TROY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
The number of potentially dilutive securities was 2,905,000, 1,359,000 and 1,110,000 for fiscal years 2004,
2003, and 2002, respectively. 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 our common stock totaled -0-, 4,162,662 and 2,794,900 for fiscal 2004, 2003, and
2002, respectively.
(l) Cash equivalents
We consider all highly liquid debt instruments purchased with an original maturity of three months or less to
be cash equivalents. Cash equivalents comprised $31,159,000 and $37,049,000 of the amount reported on
our consolidated balance sheets as "Cash and cash equivalents" at fiscal year ends 2004 and 2003,
respectively. Our cash equivalents consist primarily of variable rate demand bonds that mature in 35 or
fewer days.
(m) Trading securities
Trading securities consist of shares of common stock of publicly traded companies and are stated on our
Consolidated Balance sheets at market value, as determined by the most recent trading price of each security
as of the balance sheet date. We determine the appropriate classification of our investments when those
investments are purchased and reevaluate those determinations at each balance sheet date. At February 29,
2004, we held 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 our 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 $311,000, $67,000,
and $165,000 in fiscal 2004, 2003, and 2002, respectively.
(n) Foreign currency transactions and derivative financial instruments
The U.S. dollar is our functional currency. All our 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". Our foreign exchange gains/(losses) totaled $1,216,000,
$1,638,000 and ($307,000) during the fiscal years ended 2004, 2003, and 2002, respectively.
In order to manage our exposure to changes in foreign currency exchange rates, we use forward currency
contracts to exchange foreign currencies for U.S. dollars at specified rates. We first entered into such
contracts in fiscal 2003. We account for these transactions in accordance with Statement of Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133").
SFAS 133 requires that these forward currency contracts be recorded on the balance sheet at their fair value
and that changes in the fair value of the forward exchange contracts are recorded each period in our
Consolidated Statements of Income on the line entitled "Selling, general, and administrative expenses", or
our Consolidated Statement of Stockholders' Equity and Comprehensive Income on the line entitled "Other
income, net", depending on the type of hedging instrument and the effectiveness of the hedges. All our
47
HELEN OF TROY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
current contracts are highly effective cash flow hedges and are adjusted to their fair market values at the end
of each calendar quarter. We evaluate all hedging transactions each quarter to determine that they are
highly effective. Any ineffectiveness is recorded in our consolidated statements of income. See Note (13) to
these consolidated financial statements for a further discussion of our hedging activities.
(o) Advertising
Advertising costs are expensed in the fiscal year in which they are incurred and included in our
Consolidated Statements of Income on the "Selling, general, and administrative expenses" line. We incurred
advertising costs of $27,106,000, $20,133,000 and $17,817,000 during the fiscal years ended 2004, 2003,
and 2002, respectively.
(p) Warranties
Our products are under warranty against defects in material and workmanship for a maximum of two years.
We have established accruals to cover future warranty costs of approximately $4,114,000 and $3,263,000 as
of fiscal year ends 2004 and 2003, respectively. We estimate our warranty accrual using historical trends
and believe that these trends are the most reliable method by which we can estimate our warranty liability.
The following table summarizes the activity in the Company's accrual for the past three fiscal years:
ACCRUAL FOR WARRANTY RETURNS
(in thousands)
FISCAL YEAR
ENDED FEBRUARY balance
Beginning
Additions to
accrual
2004
2003
2002
-------------------- -------------------- -------------------- --------------------
4,114
$
3,263
$
3,428
$
$
$
$
$
$
$
$
$
$
15,848
12,408
13,915
14,996
12,573
13,433
3,263
3,428
2,946
Ending balance
Reductions of
accrual -
payments and
credits issued
Certain entities whose financial statements are a part of these consolidated financial statements have
guaranteed obligations of other entities within the consolidated group. FASB Interpretation No. 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others" requires disclosure of these guarantees, of our product warranty liabilities, and of
various indemnity arrangements to which we are a party. Additional disclosures related to this policy are
contained in Notes (4), (5) and (8) to these consolidated financial statements.
(q) 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 we consider whether circumstances or
conditions exist that suggest that the carrying value of a long-lived asset might be impaired. If such
48
HELEN OF TROY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
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. In fiscal 2004, we recorded a goodwill impairment charge in connection with the discontinued
operations of our Tactica segment, as more fully described in Note (15) to our consolidated financial
statements. We did not record any charges for impairment of long-lived assets during fiscal 2003. Also refer
to the subsection of this note entitled "New accounting guidance", for additional background on these
standards.
(r) Economic useful lives and amortization 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 report on
our consolidated balance sheets. SFAS 142 requires that we 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 existing intangible assets as well. We review the economic useful lives of our intangible
assets at least annually. Determining the economic useful life of an intangible asset requires a significant
amount of judgment, subjectivity, and uncertainty.
Intangible assets consist primarily of goodwill, license agreements, and trademarks. We amortize certain
intangible assets using the straight-line method over appropriate periods ranging from five to forty years.
We recorded intangible asset amortization totaling $1,344,000, $1,329,000, and $3,244,000 during fiscal
2004, 2003, and 2002, respectively. See Note (3) to these consolidated financial statements for more
information about our intangible assets.
(s) Interest income
Interest income is included in "Other income, net" on the Consolidated Statements of Income. Interest
income totaled $438,000, $1,088,000, and $402,000 in fiscal 2004, 2003, and 2002, 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
our assessment of the fair value of our guaranteed Senior Notes. We hedge a portion of our 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 our hedging activities.
49
HELEN OF TROY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 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. We have chosen to account for our 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, we recognize no expense in connection with our
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." In fiscal 2004, we credited $8,045,000 of tax benefits arising from such exercise. In fiscal 2003,
tax benefits associated with stock options exercised were immaterial. 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", as previously discussed under subsection (d)
above, entitled "Consideration paid to customers". 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 selling, general and administrative expenses had the standard been in effect for all fiscal years
presented in our consolidated financial statements.
YEARS ENDED LAST DAY OF FEBRUARY,
(in thousands)
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
2004
2003
-------------------- -------------------- --------------------
$
342,574
-------------------- -------------------- --------------------
481,948
383,489
$
$
2002
(861)
(2,877)
(1,029)
(6,051)
(1,607)
(2,323)
-------------------- -------------------- --------------------
(3,930)
-------------------- -------------------- --------------------
338,644
$
============ ============ ============
474,868
379,751
$
$
(7,080)
(3,738)
$
101,806
-------------------- -------------------- --------------------
138,523
109,260
$
$
(861)
(2,877)
(1,029)
(6,051)
(1,607)
(2,323)
-------------------- -------------------- --------------------
(3,930)
-------------------- -------------------- --------------------
97,876
$
============ ============ ============
$
131,443
105,522
$
(7,080)
(3,738)
In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial
Accounting Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"). We 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
50
HELEN OF TROY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
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, our
goodwill was not impaired as of March 1, 2003 or March 1, 2002. As more fully described in Note (15) to
the consolidated financial statements, the facts and circumstances surrounding the fiscal 2004 operations of
our Tactica operating segment and its subsequent sale, when interpreted under the guidelines established by
SFAS 142, required that we record a loss of $5,699,000 from the impairment of Tactica goodwill net of
$1,938,000 of related tax benefits, in the fourth fiscal quarter of 2004. Except for the goodwill of our
Tactica operating segment, no other goodwill was impaired as of March 1, 2004.
Because it eliminates the amortization of goodwill, SFAS 142 decreased our selling, general and
administrative expenses ("SG&A") by $2,220,000 in fiscal 2004 and $2,035,000 in fiscal 2003. The table on
the following page presents the impact of SFAS 142 on our net earnings and earnings per share had the
standard been in effect for the fiscal years ended February 2004, 2003 and 2002.
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
YEARS ENDED LAST DAY OF FEBRUARY,
(in thousands, except per share amounts)
2004
2002
2003
-------------------- -------------------- --------------------
29,215
$
$
$
60,522
38,716
-
-
-
-
2,035
(407)
-------------------- -------------------- --------------------
1,628
-------------------- -------------------- --------------------
30,843
$
============ ============ ============
$
$
60,522
38,716
-
-
$
$
$
$
2.13
2.13
1.94
1.94
$
$
$
$
1.37
1.37
1.31
1.31
$
$
$
$
1.04
1.10
1.00
1.06
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 2004 or 2003
that required the application of SFAS 141. Our purchases of brand names and rights under license from The
Procter & Gamble Company in fiscal 2003, and Conopco, Inc., a wholly owned subsidiary of Unilever NV,
in fiscal 2004, were purchases of specific assets, rather than business combinations.
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 has no effect on our consolidated financial statements.
51
HELEN OF TROY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
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 we consider whether conditions are present that would indicate
impairment of any of their long-lived assets. If such conditions are present we compare the projected future
undiscounted cash flows from such assets to their book value. If the cash flows exceed the book value, no
further action is required. If the book value exceeds the projected undiscounted cash flows, a loss must be
recognized for the excess of the asset's book value over its fair value. For the long-lived assets of a segment
intended to be disposed of, SFAS No. 144 establishes six criteria that must be met before such asset may be
classified as “held for sale or disposal.” Assets that meet those criteria are no longer depreciated and are
measured at the lower of book value or its fair value less costs to sell at the date the asset initially is
determined to be held for sale or other disposal. SFAS 144 did not affect our consolidated financial
statements as of or for the fiscal years ended February 2004 and 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." Accordingly, 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. Our interim and annual financial statements for fiscal periods ending after fiscal 2003
provide the new disclosures required by SFAS 148. See Note (7) to these consolidated financial statements
for these related disclosures about our stock-based compensation.
On April 30, 2003, the FASB issued Statement of Financial Accounting Standards No. 149 "Amendment of
Statement 133 on Derivative Instruments and Hedging Activities" ("SFAS 149"). These amendments clarify
the definition of derivatives, expand the nature of exemptions from Statement 133, clarify the application of
hedge accounting when using certain instruments and modify the cash flow presentation of derivative
instruments that contain financing elements. SFAS 149 clarifies the accounting for option-based contracts
used as hedging instruments in a cash flow hedge of the variability of the functional-currency-equivalent
cash flows for a recognized foreign-currency-denominated asset or liability that is remeasured at spot
exchange rates. This approach was issued to alleviate income statement volatility that is generated by the
mark-to-market accounting of an option's time value component. SFAS 149 is effective for all derivative
transactions and hedging relationships entered into or modified after June 30, 2003. These types of contracts
are discussed in Note (14) in our consolidated financial statements.
In May 2003, the FASB issued Statement of Financial Accounting Standards No. 150 "Accounting for
Certain Financial Instruments with Characteristics of Both Liabilities and Equity" ("SFAS 150"). This
statement establishes standards for how an issuer classifies and measures in its statement of financial
position certain financial instruments with characteristics of both liabilities and equity. It requires that
issuers classify as liabilities a financial instrument that is within its scope as a liability because that financial
instrument embodies an obligation of the issuer. SFAS 150 does not affect the timing of recognition of
52
HELEN OF TROY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
financial instruments as contingent consideration nor does it apply to obligations under stock-based
compensation arrangements if those obligations are accounted for under APB Opinion No. 25. We are still
reviewing the effects of SFAS 150 on our consolidated financial statements. We currently do not have any
financial instruments that are covered under this statement.
In December 2003, the FASB issued FASB Interpretation No. 46R (FIN 46R), "Consolidation of Variable
Interest Entities" ("FIN 46R"). FIN 46R replaces the same titled FIN 46 that was issued in January 2003.
FIN 46R identifies when entities must be consolidated with the financial statements of a company where the
investors in an entity do not have the characteristics of a controlling financial interest or the entity does not
have sufficient equity at risk for the entity to finance its activities without additional subordinated financial
support. Application of this Interpretation is effective for any financial statements we issue after December
15, 2003. We have no interests in entities covered by FIN 46R. Therefore, FIN 46R had no affect on our
consolidated financial statements.
NOTE 2 - PROPERTY AND EQUIPMENT
A summary of property and equipment (in thousands) is as follows:
Estimated
Useful Lives
(Years)
Last day of February,
-----------------------------------------
2004
-------------------- -------------------- --------------------
2003
$
$
Land
Building and improvements
Computer and other equipment
Transportation equipment
Furniture and fixtures
Information system under development
Less accumulated depreciation
Property and equipment, net
-
20 - 40
3 - 5
3 - 5
5 - 15
-
12,123
45,868
11,287
3,741
7,247
5,523
12,123
43,667
10,518
3,703
6,850
-
85,789
(17,084)
-------------------- --------------------
76,861
(14,014)
-------------------- --------------------
62,847
$
============ ============
$
68,704
We recorded $3,118,000, $2,943,000, and $2,844,000 of depreciation expense for fiscal 2004, 2003, and 2002,
respectively. Capital expenditures totaled $13,805,000, $19,294,000, and $759,000 in fiscal 2004, 2003, and
2002, respectively.
We lease 108,000 square feet of warehouse space, as well as various administrative office spaces, from a real-
estate partnership in which our Chief Executive Officer and another member of our Board of Directors are
limited partners. During fiscal 2004, 2003, and 2002, we paid this real-estate partnership rentals of $454,000,
$614,000, and $624,000, respectively.
53
HELEN OF TROY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - INTANGIBLE ASSETS
The following table is a summary, by operating segment, of our goodwill balances as of February 29, 2004 and
February 28, 2003. As more fully described in Note (12), during the fiscal fourth quarter of 2004, we recorded
additional goodwill of $17,717,000 associated with the acquisition of certain assets related to the Western
Hemisphere production and distribution of Brut® fragrances, deodorants, and antiperspirants from Conopco,
Inc., a wholly owned subsidiary of Unilever NV.
Total Goodwill by Operating Segment (thousands)
-------------------------------------------------------------- --------------------------------------------------------------
February 29, 2004
February 28, 2003
Operating Segment:
North American
International
Total
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
-------------------- -------------------- -------------------- -------------------- -------------------- --------------------
$
$
59,431
1,081
34,420
648
-------------------- -------------------- -------------------- -------------------- -------------------- --------------------
$
35,068
============ ============ ============ ============ ============ ============
(7,293)
(433)
(7,293)
(433)
52,138
648
41,713
1,081
$
$
$
$
$
$
$
$
$
(7,726)
(7,726)
52,786
60,512
42,794
The following table discloses information regarding the carrying amounts and associated accumulated
amortization for our intangible assets, other than goodwill.
Intangible Assets (in thousands)
-------------------------------------------------------------- --------------------------------------------------------------
February 29, 2004
February 28, 2003
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
-------------------- -------------------- -------------------- -------------------- -------------------- --------------------
17,048
$
27,372
(211)
(10,194)
(216)
(11,634)
50,643
30,681
50,859
42,315
17,259
37,566
$
$
$
$
$
Trademarks
Licenses
Gross and net carrying amounts include $50,520,000 of trademarks and $18,000,000 of licenses not subject to
amortization as of February 29, 2004 and $16,920,000 of trademarks and $18,000,000 of licenses not subject to
amortization as of February 29, 2003. As more fully described in Note (12), during the fiscal fourth quarter of
2004, we recorded additional trademarks with indefinite useful lives (and thus not subject to amortization) of
$33,600,000 associated with the acquisition of certain assets related to the Western Hemisphere production and
distribution of Brut® fragrances, deodorants, and antiperspirants from Conopco, Inc., a wholly owned
subsidiary of Unilever NV.
The following table summarizes the amortization expense attributable to intangible assets for the years ending
on the last day of February 2004, 2003, and 2002, as well as estimated amortization expense for the fiscal years
ending the last day of February 2005 through 2009.
54
HELEN OF TROY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - INTANGIBLE ASSETS, CONTINUED
Aggregate Amortization Expense
For the twelve months ended
------------------------------------------------------------
February 29, 2004
February 28, 2003
February 28, 2002
Estimated Amortization Expense
For the fiscal years ended
------------------------------------------------------------
February 2005
February 2006
February 2007
February 2008
February 2009
(in thousands)
$
$
$
1,445
1,330
3,244
(a)
$
$
$
$
$
1,445
1,445
1,445
1,395
1,145
(a) Totals for the twelve months ending February 28, 2002 include $2,035,000 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 28, 2005, minimum royalties due and minimum
advertising expenditures under these agreements total $8,395,000 and $7,381,000, respectively.
NOTE 4 - REVOLVING LINE OF CREDIT
We maintained a revolving line of credit with a bank providing for borrowings up to $25,000,000, which
incurred interest at the three-month LIBOR rate plus a percentage that varies based on the ratio of our debt to
earnings before interest, taxes, depreciation, and amortization (EBITDA). This facility was terminated on
October 30, 2003. At February 29, 2004, there were $389,000 open letters of credit against this facility. We are
currently arranging to transfer this letter of credit to our new lender, Bank of America.
On September 22, 2003, certain subsidiaries of the Company entered into a new $50,000,000 unsecured
revolving credit facility with Bank of America to facilitate short-term borrowings and the issuance of letters of
credit. All borrowings accrue interest equal to the higher of the Federal Funds Rate plus 0.50 percent or Bank of
America's prime rate. Alternatively, upon our timely election, borrowings can accrue interest based on the
respective 1, 2, 3, or 6-month LIBOR rate plus 0.75 percent (based upon the term of the borrowing). The new
credit facility allows for the issuance of letters of credit up to $10,000,000. Outstanding letters of credit will
reduce the $50,000,000 borrowing limit dollar for dollar. The new credit facility terminates in September 2004.
As mentioned in Note (12) below, we used $32,000,000 of this credit facility to fund the acquisition of the
Brut® family of products from Unilever NV. As of February 29, 2004, no revolving loans or letters of credit
were outstanding under this facility.
Our new credit agreement requires the maintenance of certain Debt/EBITDA, fixed charge coverage ratios, and
other customary covenants. We are in compliance with all these requirements. The agreement has been
guaranteed, on a joint and several basis, by our parent company, Helen of Troy Limited, and certain U.S.
subsidiaries.
55
HELEN OF TROY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - LONG-TERM DEBT
On January 5, 1996, one of our U.S. subsidiaries 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 our 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 29, 2004 is
approximately $42,128,000.
On July 18, 1997, one of our U.S. subsidiaries 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 our 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 29, 2004 is
approximately $16,650,000.
Both the $40,000,000 and $15,000,000 Senior Notes contain covenants that require that we meet certain net
worth and other financial requirements. Additionally, the notes restrict us from incurring liens on any of our
properties, except under certain conditions as defined in the Senior Note agreements. We are 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 consolidated group's 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. See Note (8) to these
consolidated financial statements for maturity schedules of principal amounts due under the Senior Notes.
56
HELEN OF TROY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - INCOME TAXES
Our components of earnings from continuing operations before income tax expense are as follows:
Years Ended Last Day of February,
(in thousands)
--------------------------------------------------------------
2003
-------------------- -------------------- --------------------
2004
2002
U.S.
Non-U.S.
$
$
13,760
72,279
6,684
20,785
-------------------- -------------------- --------------------
27,469
$
============ ============ ============
11,866
36,704
$
$
$
48,570
86,039
Our components of income tax expense attributable to continuing operations are as follows:
Years Ended Last Day of February,
(in thousands)
--------------------------------------------------------------
2003
-------------------- -------------------- --------------------
2002
2004
Current
Deferred
U.S.
Non-U.S.
$
$
$
5,105
8,444
928
2,990
1,689
782
-------------------- -------------------- --------------------
5,461
$
============ ============ ============
3,507
5,465
1,806
$
$
10,778
14,477
Our total income tax expense from continuing operations differs from the amounts computed by applying the
statutory tax rate to earnings before income taxes. The reasons for these differences are as follows:
Years Ended Last Day of February,
(in thousands)
--------------------------------------------------------------
2003
-------------------- -------------------- --------------------
2002
2004
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
$
30,114
$
17,000
$
9,614
(15,637)
(4,153)
-------------------- -------------------- --------------------
$5,461
$
============ ============ ============
$10,778
(6,222)
14,477
57
HELEN OF TROY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - INCOME TAXES, CONTINUED
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and
liabilities as of the last day of February 2004 and 2003 are as follows:
Deferred tax assets:
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
2004
2003
-------------------- --------------------
(in thousands)
$
4,256
$
651
1,190
926
2,412
1,731
2,011
1,849
-------------------- --------------------
6,242
(169)
8,784
(70)
(2,784)
(1,934)
-------------------- --------------------
4,139
$
============ ============
$
5,930
As of the end of fiscal 2004, U.S. net operating loss carryforwards included in our gross deferred tax asset
totaling $4,048,000 expire if not utilized by various dates ranging from fiscal 2019 to 2024. Non-U.S. net
operating loss carryforwards included in our gross deferred tax asset totaling $208,000 expire if not utilized by
various dates between fiscal 2005 and fiscal 2013.
Hong Kong Income Taxes - The Inland Revenue Department ("the IRD") in Hong Kong assessed $6,753,000
(U.S.) in tax on certain profits of our foreign subsidiaries for the fiscal years 1995 through 1997. In March of
2004, the IRD made an additional assessment of $3,583,000 (U.S.) for fiscal year 1998. 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
percent of the liability assessed by the IRD. The Company purchased additional tax reserve certificates in the
amount of $3,583,000 (U.S.) on April 26, 2004 as required 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.
If the IRD's position were to prevail and if it were to assert the same position for years after fiscal 1998, the
resulting assessment could total $44,053,000 (U.S.) for the period from fiscal 1995 through fiscal 2004. We
vigorously disagree with the proposed adjustments and intend to aggressively contest this matter through
applicable taxing authority and judicial procedures, as appropriate. Although the final resolution of the proposed
adjustments is uncertain and involves unsettled areas of the law, based on currently available information, the
Company has provided for the best estimate of the probable tax liability for this matter. While the resolution of
the issue may result in tax liabilities which are significantly higher or lower than the reserves established for this
58
HELEN OF TROY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - INCOME TAXES, CONTINUED
matter, management currently believes that the resolution will not have a material effect on our financial
position or liquidity. However, an unfavorable resolution could have a material effect on our results of
operations or cash flows in the quarter in which an adjustment is recorded or the tax is due or paid.
The IRD also assessed $4,468,000 (U.S.) in tax on certain profits of our foreign subsidiaries for the fiscal years
1990 through 1994. During the second quarter of fiscal 2003, we settled our dispute with the IRD 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 Sheets and paid the IRD approximately $137,000 in cash. The tax reserve certificates that
we forfeited were included on our Consolidated Balance Sheet as of fiscal year end 2003, on the line entitled
"Other assets." The settlement did not affect the current status of the IRD's assessments for fiscal years 1995
through 1998 and did not have a material effect on our consolidated results of operations.
United States Income Taxes - The Internal Revenue Service ("the IRS") audited the U.S. federal tax returns of
the Company's largest U.S. subsidiary for the fiscal years through 1999 and all associated taxes have been
settled.
The IRS is currently auditing the U.S. federal tax returns of our largest U.S. subsidiary for fiscal years 2000,
2001, and 2002. The IRS has provided notice of certain proposed adjustments to taxable income. We
vigorously disagree with the proposed adjustments and intend to aggressively contest this matter through
applicable IRS and judicial procedures, as appropriate. Although the final resolution of the proposed
adjustments is uncertain and involves unsettled areas of the law, based on currently available information, we
have provided for the best estimate of the probable tax liability for these matters. While the resolution of the
issue may result in tax liabilities which are significantly higher or lower than the reserves established for this
matter, management currently believes that the resolution will not have a material effect on our financial
position or liquidity. However, an unfavorable resolution could have a material effect on our results of
operations or cash flows in the quarter in which an adjustment is recorded or the tax is due or paid.
We plan to permanently reinvest all of the undistributed earnings of the non-U.S. subsidiaries of the U.S.
subsidiaries. We have made no provision for U.S. federal income taxes on these undistributed earnings. At
February 29, 2004, undistributed earnings for which we had not provided deferred U.S. federal income taxes
totaled $50,244,000.
Income Tax Provisions - We must make certain estimates and judgments in determining income tax expense
for financial statement purposes. These estimates and judgments occur in the calculation of certain tax assets
and liabilities, which arise from differences in the timing of recognition of revenue and expense for tax and
financial statement purposes.
We must assess the likelihood that we will be able to recover our deferred tax assets. If recovery is not likely,
we must increase our provision for taxes by recording a valuation allowance against the deferred tax assets that
we estimate will not ultimately be recoverable. As changes occur in our assessments regarding our ability to
recover our deferred tax assets, our tax provision is increased in any period in which we determine that the
recovery is not probable.
59
HELEN OF TROY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - INCOME TAXES, CONTINUED
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 United States. If such income were subject to U.S. federal income
taxes, our effective income tax rate would increase materially. 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 percent or more of its stock) together own
more than 50 percent of the stock in such corporation. If a change of ownership of the Company were to occur
such that the parent company became a Controlled Foreign Corporation, such a change could have a material
negative effect on the largest U.S. shareholders and, in turn, on the Company's business.
In addition, the calculation of our tax liabilities involves dealing with uncertainties in the application of other
complex tax regulations. We recognize liabilities for anticipated tax audit issues in the United States and other
tax jurisdictions based on our estimate of whether, and the extent to which, additional taxes will be due. If we
ultimately determine that payment of these amounts are unnecessary, we reverse the liability and recognize a
tax benefit during the period in which we determine that the liability is no longer necessary. We record an
additional charge in our provision for taxes in the period in which we determine that the recorded tax liability is
less than we expect the ultimate assessment to be.
NOTE 7 - STOCK-BASED COMPENSATION PLANS
We sponsor 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. All
options to date have been granted at or above market prices on the dates of grant. Accordingly, no
compensation expense has been recognized for our stock option plans or our stock purchase plan. Had we
recorded compensation expense for our 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:
Net earnings
Earnings per share:
As Reported
Fair-value cost
Pro forma
As Reported
Pro forma
As Reported
Pro forma
Basic:
Diluted:
Years Ended The Last Day of February,
-----------------------------------------------------------------------------
2003
--------------------
38,716,000
$
7,004,000
--------------------
$
31,712,000
=================
2004
--------------------
60,522,000
$
6,620,000
--------------------
$
53,902,000
=================
2002
--------------------
29,215,000
$
7,416,000
--------------------
$
21,799,000
=================
$
$
2.13
1.90
$
$
1.37
1.12
$
$
1.04
0.78
$
$
1.94
1.72
$
$
1.31
1.07
$
$
1.00
0.75
60
HELEN OF TROY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 - STOCK-BASED COMPENSATION PLANS, CONTINUED
We computed the pro forma figures disclosed above using the Black-Scholes option pricing model to estimate
grant date fair value of stock options for the periods shown above. The following Black-Scholes assumptions
were used:
Option Assumptions
--------------------------------------------------------------------------------------------------------- -------------------- -------------------- --------------------
2004
Years Ended The Last Day of February,
--------------------------------------------------------------
2003
2002
Dividend yield
Expected volatility
Risk-free interest rate
Expected option term
0.0%
42.5%
3.6%
(1)
0.0%
39.6%
4.1%
(1)
0.0%
40.8%
4.7%
(1)
(1) Expected lives of 3, 4, 5, or 10 years are used 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) we reserved a total of 14,000,000 shares of our common stock for issuance to key officers and
employees. Pursuant to the 1994 and 1998 Plans, we grant options to purchase our 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. As of February 29, 2004, 80,411
shares remained available for issue under these plans.
In fiscal 1996, we reserved a total of 980,000 shares of our common stock for issuance to non-employee
members of our Board of Directors (the "Directors' Plan"). We grant options under the Directors' Plan at a price
equal to the fair market value of our 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. As of February 29, 2004,
432,000 shares remained available for issue under the Directors' Plan.
A summary of stock option activity under all plans is as follows:
Years Ended Last Day of February,
----------------------------------------------------------------------------------------------------------------------------
2003
----------------------------------------- ----------------------------------------- -----------------------------------------
2002
2004
WEIGHTED
AVERAGE
EXERCISE
PRICE
SHARES
(000's)
WEIGHTED
AVERAGE
EXERCISE
PRICE
SHARES
(000's)
Shares
(000's)
Weighted
Average
Exercise
Price
-------------------- -------------------- -------------------- -------------------- -------------------- --------------------
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
$
$
10.83
18.43
7.03
10.73
8,615
1,315
(1,874)
(73)
10.52
10.26
6.57
10.25
-------------------- -------------------- -------------------- -------------------- -------------------- --------------------
10.53
============ ============ ============ ============ ============ ============
9.96
============ ============ ============ ============ ============ ============
7,323
1,384
(56)
(36)
6,203
1,353
(108)
(125)
10.53
12.33
10.00
9.09
$
$
$
$
7,566
7,983
8,615
7,182
12.69
12.97
5,870
10.83
7,323
10.66
8.97
$
61
$
6.28
$
5.74
HELEN OF TROY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 - STOCK-BASED COMPENSATION PLANS, CONTINUED
The following table summarizes information about stock options at February 29, 2004:
--------------------------------------------------------------------------------------------------- -------------------------------------------
Ou ts tand ing Stock Optio ns
Exercis ab le Stock Op tion s
W eighted-
A v erage
Remain ing
Con tractual
Life (years )
W eig hted-
A verag e
Exercis e
Price
Price Rang e
--------------------------------
$
11.53
to
14.76
to
$
23.38
to
$
4.13
11.78
14.81
$
$
$
--------------------- --------------------- --------------------- ---------------------
8.01
13.08
15.61
7.17
13.59
22.36
5.49
6.16
7.50
$
$
ISOs
Total
Non-Qs
Total
Directors ' Plan
Total
Number of
Op tion s
---------------------
192,850
229,050
215,970
---------------------
637,870
============
2,350,225
2,179,336
2,511,717
---------------------
7,041,278
============
108,000
78,500
117,000
---------------------
303,500
============
$
$
$
4.13
11.84
14.94
$
$
$
4.41
11.84
14.94
to
to
to
to
to
to
$
$
$
10.75
14.47
23.38
$
$
$
10.75
14.47
22.81
6.41
$
14.62
6.76
7.17
5.71
$
7.77
13.07
17.32
6.51
$
12.82
6.38
7.88
6.62
$
7.94
12.98
18.03
6.86
$
13.13
W eig hted-
A verag e
Exercis e
Price
$
11.01
$
7.81
13.06
17.13
$
12.73
$
7.94
12.98
18.03
$
13.13
Nu mber of
Optio ns
42,175
30,825
13,554
---------------------
86,554
============
2,300,050
2,147,086
2,405,000
---------------------
6,852,136
============
108,000
58,500
77,000
---------------------
243,500
============
In fiscal 1999 our shareholders approved an employee stock purchase plan (the "Stock Purchase Plan") under
which 500,000 shares of common stock are reserved for issuance to our employees, nearly all of whom are
eligible to participate. Under the terms of the Stock Purchase Plan, employees authorize the withholding of from
1 percent to 15 percent of their wages or salaries to purchase our common stock. The purchase price for stock
purchased under this 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 2004, employees purchased 17,758 shares
of common stock from the Company under the Stock Purchase Plan.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
Under agreements with customers, licensors, and parties from whom we have acquired assets or entered into
business combinations, we indemnify these parties against liability associated with our products. Additionally,
we are party to a number of agreements under leases where we indemnify the lessor for liabilities attributable to
our action or conduct. The indemnity agreements to which we are a party do not, in general, increase our
liability for claims related to our products or actions and have not materially affected our accompanying
consolidated financial statements.
The parent company of our consolidated group, Helen of Troy Limited, has guaranteed a commitment of one of
its subsidiaries based in the United Kingdom. Helen of Troy Limited has guaranteed up to 600,000 British
Pounds to a marketing company, whose services are used by the subsidiary. Our Consolidated Balance Sheet as
of February 29, 2004 does not contain any recorded liability for this guarantee.
We guarantee a lease obligation of our 55-percent owned subsidiary, Tactica International, Inc. ("Tactica") for
office space they lease in New York City. Under this guarantee, one of our U.S. subsidiaries has issued a
62
HELEN OF TROY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - COMMITMENTS AND CONTINGENCIES, CONTINUED
$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. We are currently arranging to
transfer this letter of credit to our new lender, Bank of America.
We have entered into employment contracts with certain of our 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 our assets 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,
2005 to February 28, 2009. The aggregate commitment for future salaries pursuant to such contracts, at
February 29, 2004, excluding incentive compensation, was approximately $4,000,000. In connection with the
sale of Tactica on April 29, 2004, future obligations under certain employment agreements in the aggregate
amount of $1,000,000 were cancelled.
We purchase most of our appliances and a significant portion of other products that we sell 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 our products are manufactured in the Far East, we are subject to risks
associated with trade barriers, currency exchange fluctuations, and political unrest. These risks have not
historically affected our operations. Additionally, we believe that we could obtain similar products from
facilities in other countries, if necessary. However, the relocation of any production capacity could require
substantial time and increased costs.
We regularly enter into arrangements with customers whereby we offer those customers incentives, including
incentives in the form of volume rebates. Our estimate of the liability for such incentives is included on the
consolidated balance sheets on the line entitled "Accrued liabilities" and is based on incentives applicable to
sales up to the respective balance sheet dates.
We are involved in various other legal claims and proceedings in the normal course of operations. We believe
the outcome of these matters will not have a material adverse effect on our consolidated financial position,
results of operations, or liquidity.
Under the terms of a Shareholders' Rights Plan approved by our Board of Directors in fiscal 1999, we declared
a dividend of one preference share right ("right") for each outstanding share of common stock. The dividend
resulted in no cash payment by us, created no liability on our part, and did not change the number of shares of
our common stock outstanding. The rights are inseparable from the shares of our common stock and entitle its
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 percent of our outstanding common stock, our
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. These rights have certain anti-takeover effects. The rights
could cause substantial dilution to a person or group that attempts to acquire Helen of Troy Limited in certain
circumstances, but should not interfere with any merger or other business combination approved by our Board
of Directors. These rights expire December 1, 2008, unless their expiration date is advanced or extended or
unless under the terms of the agreement these rights are earlier redeemed or exchanged.
63
HELEN OF TROY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - COMMITMENTS AND CONTINGENCIES, CONTINUED
Our contractual obligations and commercial commitments, as of February 29, 2004 were:
PAYMENTS DUE BY PERIOD
(in thousands)
Contractual Obligations
------------------------------------------------------------------------ ------------- ------------- ------------- ------------- ------------- ------------- -------------
Total
2005
1 year
2006
2 years
2007
3 years
2008
4 years
2009
5 years
After
5 years
Long-term debt
Open purchase orders - inventory
Minimum royalty payments
Advertising and promotional
Operating leases
Purchase and implementation of enterprise resource
planning system
Other
Total contractual obligations
$
55,000
35,521
22,682
28,685
3,241
$
10,000
35,521
3,489
5,987
1,674
$
10,000
-
3,661
6,253
1,167
$
10,000
-
3,766
6,546
280
$
10,000
-
3,809
5,368
116
$
3,000
$
12,000
3,825
1,342
4
4,132
3,189
-
2,484
4,496
2,484
975
-
989
-
1,003
-
929
-
600
-
-
------------- ------------- ------------- ------------- ------------- ------------- -------------
$
19,321
======== ======== ======== ======== ======== ======== ========
152,109
60,130
21,595
22,070
20,222
8,771
$
$
$
$
$
$
NOTE 9 - FOURTH QUARTER CHARGES/TRANSACTIONS
In the forth quarter of fiscal 2004, we recorded a goodwill impairment loss of $ 5,699,000, net of tax benefits of
$1,938,000 in connection with our discontinued operations of Tactica, and its subsequent sale in fiscal 2005.
The details of this transaction are more fully described in Note (15). Our results for the fourth quarters of fiscal
2003 and 2002 did not contain any transactions of a non-routine nature.
64
HELEN OF TROY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 - SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected quarterly financial data is as follows (in thousands, except per share amounts):
Unaudited
Fiscal 2004:
Net sales
Gross profit
Net earnings from continuing operations
Income (loss) from discontinued segment's
operations and impairment of related assets,
net of tax
Net earnings
Earnings per share
Basic
Continuing operations
Discontinued operations
Total basic earnings per share
Diluted
Continuing operations
Discontinued operations
Total diluted earnings per share
Fiscal 2003:
Net sales
Gross profit
Net earnings from continuing operations
Income (loss) from discontinued segment's
operations, net of tax
Net earnings
Earnings per share
Basic
Continuing operations
Discontinued operations
Total basic earnings per share
Diluted
Continuing operations
Discontinued operations
Total diluted earnings per share
May
November
-------------------- -------------------- -------------------- -------------------- --------------------
February
August
Total
$
91,236
$
105,335
$
165,386
$
112,911
$
474,868
43,562
14,621
223
14,844
0.52
0.01
0.53
0.49
0.01
0.50
47,121
14,710
75,226
25,933
51,308
16,298
217,217
71,562
(1,612)
13,098
(871)
25,062
(8,780)
7,518
(11,040)
60,522
0.52
(0.06)
0.46
0.47
(0.05)
0.42
0.92
(0.03)
0.89
0.81
(0.03)
0.78
0.55
(0.30)
0.25
0.50
(0.27)
0.23
2.52
(0.39)
2.13
2.29
(0.35)
1.94
$
76,133
$
89,916
$
124,045
$
89,657
$
379,751
29,851
4,801
1,790
6,591
0.17
0.06
0.23
0.16
0.06
0.22
35,129
7,869
1,007
8,876
0.27
0.04
0.31
0.27
0.03
0.30
52,548
16,638
153
16,791
0.59
0.01
0.60
0.56
0.01
0.57
38,196
8,484
(2,026)
6,458
0.30
(0.07)
0.23
0.29
(0.07)
0.22
155,724
37,792
924
38,716
1.34
0.03
1.37
1.28
0.03
1.31
The business of the Company is somewhat seasonal. Between 33 percent and 35 percent of annual sales volume
normally occurs in the third fiscal quarter.
65
HELEN OF TROY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 - SEGMENT INFORMATION
The following table contains segment information for fiscal 2004, 2003, and 2002.
(in thousands)
North
American
Discontinued
Segment (1)
Corporate /
Other
2004
------------------------------------------------------------------ -------------------- -------------------- -------------------- -------------------- --------------------
474,868
Net sales
85,774
Operating income (loss)
489,609
Identifiable assets
65,119
Capital, license, and trademark expenditures
6,128
Depreciation and amortization
$
-
(9,519)
24,057
145
249
$
-
-
23,185
-
-
416,312
84,631
397,313
56,210
5,138
58,556
10,662
45,054
8,764
741
International
$
$
$
Total
North
American
Discontinued
Segment
Corporate /
Other
2003
------------------------------------------------------------------ -------------------- -------------------- -------------------- -------------------- --------------------
379,751
Net sales
50,202
Operating income (loss)
405,629
Identifiable assets
59,596
Capital / license expenditures
6,422
Depreciation and amortization
$
-
(2,347)
15,181
82
514
$
-
-
26,803
-
-
345,992
49,554
337,596
54,100
4,577
33,759
2,995
26,049
5,414
1,331
International
$
$
$
Total
North
American
Discontinued
Segment
Corporate /
Other
2002
------------------------------------------------------------------ -------------------- -------------------- -------------------- -------------------- --------------------
338,644
Net sales
29,727
Operating income (loss)
357,558
Identifiable assets
Capital / license expenditures
758
8,374
Depreciation and amortization
$
-
(2,232)
17,184
-
267
$
-
-
31,229
-
-
308,738
32,203
287,897
647
6,665
29,906
(244)
21,248
111
1,442
International
$
$
$
Total
(1) Segment information from prior periods has been restated due to the classification of Tactica as discontinued
operations.
The North American and International segments sell the same portfolio of products, principally through mass
merchants, general retail, and specialty retail outlets. In these segments, we sell hair care appliances, hair
brushes, combs, hair accessories, hair and skin care liquids and powders, and other personal care products.
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 expenses ("SG&A") 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.
66
HELEN OF TROY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 - SEGMENT INFORMATION, CONTINUED
The Company's domestic and international net revenues from third parties and long-lived assets are as follows
(in thousands):
NET REVENUES FROM THIRD PARTIES:
United States
International
Total
LONG-LIVED ASSETS:
United States
International
Total
2004
2003
-------------------- -------------------- --------------------
2002
$
$
397,856
77,012
296,385
42,259
-------------------- -------------------- --------------------
338,644
$
============ ============ ============
339,537
40,214
474,868
379,751
$
$
$
$
$
190,949
24,222
87,765
22,020
-------------------- -------------------- --------------------
109,785
$
============ ============ ============
145,495
20,600
$
215,171
166,095
$
$
Sales to one customer and its affiliate accounted for 28 percent, 29 percent, and 29 percent of the net sales in
our continuing operations for fiscal 2004, 2003, and 2002, respectively. Of our total sales to that customer and
its affiliate, 100 percent, 92 percent, and 98 percent, respectively were made within the United States during
fiscal 2004, 2003, and 2002, respectively.
NOTE 12 - ACQUISITION OF TRADEMARKS AND OF RIGHTS UNDER LICENSE AGREEMENTS
On October 21, 2002, we acquired from The Procter & Gamble Company the right to sell products under six
trademarks. We acquired all rights to the trademarks and certain rights to the formulas and production processes
for four of the six trademarks: Ammens®, Vitalis®, Condition 3-in-1®, and Final Net®. The Procter &
Gamble Company also assigned to us its rights under licenses to sell products for two additional trademarks,
Sea Breeze® and Vitapointe®. The Sea Breeze® license is perpetual. We have completed an analysis of the
economic lives of the trademarks acquired and believe these trademarks to have indefinite economic lives
except for the Vitapointe® license. We have determined that the license covering the Vitapointe® trademark
has an economic life equal to its initial term through December 2010 and are currently amortizing the intangible
asset over that period. We began recording amortization expense on the Vitapointe® license in the first fiscal
quarter of 2004,which for the year ended February 29, 2004, totaled $128,000.
On September 29, 2003, we acquired certain assets related to the Western Hemisphere production and
distribution of Brut® fragrances, deodorants, and antiperspirants from Conopco, Inc., a wholly owned
subsidiary of Unilever NV. The assets consist principally of patents, trademarks, and trade names, product
formulations and production technology, related finished goods inventories, distribution rights, and customer
lists. We paid $55,255,000 in cash in the transaction. The transaction was funded with $32,000,000 drawn
against a new $50,000,000 short-term revolving credit facility with Bank of America, and $23,255,000 of cash
on hand. We have completed our analysis of the economic lives of all the assets acquired and determined the
appropriate allocation of the initial purchase price. Based upon our analysis, we allocated $33,600,000 to
trademarks having an indefinite economic life, $17,717,000 to goodwill, $3,725,000 to inventory, and $213,000
to fixed assets.
67
HELEN OF TROY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13 - FORWARD CONTRACTS
Our functional currency is the U.S. Dollar. By operating internationally, we are subject to foreign currency risk
from transactions denominated in currencies other than the U.S. Dollar ("foreign currencies"). Such transactions
include sales, certain inventory purchases and operating expense. As a result of such transactions, portions of
our cash, trade accounts receivable, and trade accounts payable are denominated in foreign currencies.
These sales were primarily denominated in Canadian Dollars, British Pounds, and Euros. We make most
inventory purchases from the Far East using the U.S. Dollar for such purchases.
We identify foreign currency risk by regularly monitoring our foreign currency-denominated transactions and
balances. Where operating conditions permit, we reduce foreign currency risk by purchasing most of our
inventory with U.S. Dollars and by converting cash balances denominated in foreign currencies to U.S. Dollars.
We use a series of forward contracts designated as cash flow hedges to protect against the foreign currency
exchange risk inherent in our forecasted transactions denominated in currencies other than the U.S. Dollar. For
transactions designated as cash flow hedges, the effective portion of the change in the fair value (arising from
the change in the spot rates from period to period) is deferred in Other Comprehensive Income. These amounts
are subsequently recognized in "Other income (net)" in the Consolidated Statements of Income in the same
period as the forecasted transactions close out over the remaining balance of their terms. The ineffective
portion of the change in fair value (arising from the change in the difference between the spot rate and the
forward rate) is recognized in the period it occurred. These amounts are also recognized in "Other income
(net)" in the Consolidated Statements of Income.
The following table summarizes the various forward contracts we designated as cash flow hedges that were
open at the end of fiscal 2004 and 2003:
Contract
Type
February 29, 2004
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Market Value
of the
Contract in
US Dollars
(Thousands)
------------- ------------- -------------- ---------------- ---------------- ---------------- ---------------- ---------------- ------------------ ------------------ ----------------
($888)
Sell
$46
Sell
($141)
Sell
----------------
($983)
==============
Weighted
Average
Forward Rate
at February 29,
2004
Weighted
Average
Forward Rate
at Inception
Spot Rate at
February 29,
2004
Range of Maturities
----------------------------------
11/18/2003
2/13/2004
12/2/2003
$5,000,000
$5,000,000
$3,000,000
Spot Rate at
Contract Date
$1.6950
1.8800
1.2070
$1.6392
1.7854
1.1928
$1.8666
1.8666
1.2492
$1.8167
1.7763
1.2399
Pounds
Pounds
Euros
11/9/2004
11/10/2005
Notational
Amount
Currency
to Deliver
2/8/2005
2/17/2006
Contract Date
2/8/2005
From
To
February 28, 2003
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Market Value
of the
Contract in
US Dollars
(Thousands)
------------- ------------- -------------- ---------------- ---------------- ---------------- ---------------- ---------------- ------------------ ------------------ ----------------
($34)
Sell
==============
Weighted
Average
Forward Rate
at February 28,
2003
Weighted
Average
Forward Rate
at Inception
Notational
Amount Contract Date
Spot Rate at
February 28,
2003
Range of Maturities
----------------------------------
Spot Rate at
Contract Date
Currency
to Deliver
Contract
Type
10/24/2002
$1,000,000
3/7/2003
$1.5520
$1.5393
$1.5734
$1.5738
Pounds
From
To
68
HELEN OF TROY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14 - NON-MONETARY TRANSACTIONS
During fiscal 2003, we entered into two non-monetary transactions where 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
$1,400,000 and $600,000 of the advertising credits during the fiscal years ended 2004 and 2003, respectively.
The remaining credits are included in the line item entitled "Prepaid expenses" on our Consolidated Balance
Sheets and valued at $1,100,000 and $2,500,000 at fiscal year ends 2004 and 2003, respectively.
NOTE 15 - SUBSEQUENT EVENTS
Definitive Agreement to Acquire OXO International from WKI Holding Company, Inc.
On April 29, 2004, we entered into an agreement to acquire certain assets and liabilities of OXO International
from WKI Holding Company, Inc. Banc of America Securities, LLC has been engaged to assist us in securing
funding for this acquisition which will require an estimated $275,000,000 at closing, and is expected to close
sometime in our second fiscal quarter of 2005. The closing is subject to the closing of financing for the
transaction and customary closing conditions, including regulatory approvals. We are currently negotiating the
interest rates, maturities, and payment terms of various potential financing instruments associated with the
acquisition.
Based in New York City, OXO International is a world leader in providing innovative consumer products in a
variety of product areas. OXO offers approximately 500 consumer product tools in several categories,
including, kitchen, cleaning, barbecue, barware, garden, automotive, storage, and organization. OXO also has
strong customer relationships with leading specialty and department store retailers. Each year approximately 50
innovative products are introduced through the OXO Good Grips, OXO Steel, OXO Good Grips i-Series, and
OXO SoftWorks product lines.
Assets to be acquired will consist principally of patents, trademarks, tradenames, product design specifications,
production know-how, related finished goods inventories, distribution rights, and customer lists. Liabilities
assumed will be certain identified liabilities, and certain lease obligations assumed in connection with OXO's
principal administrative offices in New York City. Approximately 35 OXO employees, including its President
will be joining Helen of Troy as part of the acquisition. We anticipate the expansion of the OXO brand name
into various consumer-related market categories.
Sale of Tactica International, Inc.
On October 2, 2003 we announced that we had begun evaluating strategic alternatives for our investment in
Tactica International, Inc. ("Tactica"), with a view towards maximizing shareholder value. On April 29, 2004
we completed the sale of our 55 percent interest in Tactica back to certain shareholder-operating managers. In
exchange for our 55 percent ownership share of Tactica and $17,161,000 of its secured debt and accrued
interest, we received marketable securities, intellectual properties, and the right to certain tax refunds. We do
not expect a material gain or loss to arise from this sale transaction.
Tactica was sold because we believed it no longer fit into our business model. We believe selling Tactica was
the most appropriate course of action to maximize our long-term shareholder value. The sale will free certain
key corporate managers to concentrate their efforts on our remaining core operating divisions and to explore
and integrate new business opportunities better suited to or our long-term objectives and operating system.
69
HELEN OF TROY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15 - SUBSEQUENT EVENTS, CONTINUED
Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142")
requires at least an annual impairment review of goodwill and other intangible assets, which we normally
undertake on March 1 of each fiscal year. SFAS 142 also requires a review of goodwill for impairment upon the
occurrence of certain events that would more likely than not reduce the fair value of a segment below its
carrying amount. One of those events is the impending disposal of a segment. After evaluating the facts and
circumstances surrounding the fiscal 2004 operations of our Tactica operating segment and its subsequent sale,
against the guidelines established by SFAS 142, we recorded a loss of $5,699,000 for the impairment of 100
percent of the Tactica goodwill recorded in our consolidated balance sheet, net of $1,938,000 of related tax
benefits, in the fourth fiscal quarter of 2004.
Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-
Lived Assets" ("SFAS 144") provides accounting guidance for accounting segments to be disposed by sale and,
in our circumstances, required us to report Tactica as a discontinued operation. In accordance with SFAS 144,
we classified all assets and liabilities of Tactica as "Assets of discontinued segment held for sale" and
"Liabilities of discontinued segment held for sale" in the accompanying Consolidated Balance Sheets as of the
end of fiscal 2004 and 2003. SFAS 144 also requires us to report Tactica's operating results, net of taxes, as a
separate summarized component after net income from continuing operations for each year presented. The
accompanying Statements of Income and Consolidated Statements of Cash Flows contain all appropriate
reclassifications for each year presented.
70
HELEN OF TROY LIMITED AND SUBSIDIARIES
Schedule II - Valuation and Qualifying Accounts
Years ended the last day of February 2004, 2003 and 2002
(in thousands)
Write-off of
uncollectible Balance at
Description
End of Year
----------------------------------------------------------- ------------------ ------------------ ------------------ ------------------ ------------------
Year ended February 29, 2004
Charged to
cost and
expenses
Balance at
Beginning
of Year
Recoveries
accounts
Additions
------------------------------------
Allowance for accounts receivable
$
1,089
$
1,004
$
31
$
1,024
$
1,100
Year ended February 28, 2003
Allowance for accounts receivable
3,188
1,517
Year ended February 28, 2002
Allowance for accounts receivable
1,547
1,897
77
22
3,693
1,089
278
3,188
71
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
ITEM 9A. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
As of the end of the period covered by this 2004 Form 10-K, we conducted an evaluation of the
effectiveness of the design and operation of our “disclosure controls and procedures” (Disclosure Controls). The
controls evaluation was done under the supervision and with the participation of management, including our
Chief Executive Officer (CEO) and Chief Financial Officer (CFO).
Disclosure Controls are controls and procedures designed to reasonably assure that information required
to be disclosed in our reports filed under the Exchange Act, such as this Annual Report, is recorded, processed,
summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules
and forms. Disclosure Controls are also designed to reasonably assure that such information is accumulated and
communicated to our management, including the CEO and CFO, as appropriate to allow timely decisions
regarding required disclosure. Our Disclosure Controls include components of our internal control over
financial reporting, which consists of control processes designed to provide reasonable assurance regarding the
reliability of our financial reporting and the preparation of financial statements in accordance with generally
accepted accounting principles in the United States.
Our management, including the CEO and CFO, does not expect that our Disclosure Controls or our
internal control over financial reporting will prevent all error and all fraud. A control system, no matter how
well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s
objectives will be met. Further, the design of a control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent
limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues
and instances of fraud, if any, within the company have been detected. These inherent limitations include the
realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error
or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or
more people, or by management override of the controls. The design of any system of controls is based in part
on certain assumptions about the likelihood of future events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future conditions. Over time, controls may become
inadequate because of changes in conditions or deterioration in the degree of compliance with policies or
procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or
fraud may occur and not be detected.
In the process of our evaluation, among other matters, we considered the existence of any “significant
deficiencies” or “material weaknesses” in our internal control over financial reporting, and whether we had
identified any acts of fraud involving personnel with a significant role in our internal control over financial
reporting. In the professional auditing literature, “significant deficiencies” are referred to as “reportable
conditions,” which are deficiencies in the design or operation of controls that could adversely affect our ability
to record, process, summarize and report financial data in the financial statements. Auditing literature defines
“material weakness” as a particularly serious reportable condition in which the internal control does not reduce
to a relatively low level the risk that misstatements caused by error or fraud may occur in amounts that would be
72
material in relation to the financial statements and the risk that such misstatements would not be detected within
a timely period by employees in the normal course of performing their assigned functions.
During the year and through the date of this report, no corrective actions were required to be taken with
regard to either significant deficiencies or material weaknesses in our controls. Based on their evaluation, as of
the end of the period covered by this form 10-K, our CEO and CFO have concluded that our disclosure controls
and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) are effective.
CHANGES IN INTERNAL CONTROLS
In connection with the evaluation described above, we identified no change in our internal control over
financial reporting that occurred during our fiscal quarter ended February 29, 2004, and that has materially
affected, or is reasonably likely to materially affect, our internal control over financial reporting.
In conjunction with our efforts to convert to a new global information system to be placed into service
later in Fiscal 2005, we have committed substantial internal and external resources to revise and document
operational processes and related internal controls. Our objective is to promote greater uniformity and
consistency of transaction processing across all aspects of our operations. Our conversion to the new
information system includes a project phase specifically focused on revising our formal understanding of our
system of internal control over financial reporting with the objective of meeting the formalized requirements of
Section 404 of the Sarbanes-Oxley Act.
Our intent is to maintain the Disclosure Controls and more pervasive Internal Controls over Financial
Reporting as dynamic systems that can undergo appropriately authorized change as conditions warrant. We
anticipate completion of the re-documentation process concurrent with the going live on our new system, during
the second fiscal quarter of 2005. It is likely that after conversion to the new information system, we will
experience a period of significant change and tuning of our procedures as our finance and operations staff gain
hands-on experience in addition to the training they received prior to going live. While nothing has come to our
attention that would lead us to believe that we may experience errors or misstatements of our financial results
during this time-frame, we recognize that this will be a challenging transition for us. We believe we have the
process and appropriate management in place to effectively manage this transition.
73
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information in our Proxy Statement, which we will be filed within 120 days of the end of our 2004 fiscal
year, is incorporated by reference in response to this Item 10., as noted below:
•
•
•
•
•
Information about our Directors;
Information about our Executive Officers;
Information about our compliance with Section 16(a) of the Securities Exchange Act of 1934, regarding
certain beneficial owners of our Common Stock;
Information about our Audit Committee, including the members of the committee, and our Audit
Committee financial experts; and
Information about the Standards of Business Ethics and Conduct governing our employees, including
our Chief Executive Officer, Chief Financial and Principal Accounting Officer, and the Code of
Business Conduct and Ethics.
ITEM 11. EXECUTIVE COMPENSATION
Information in our Proxy Statement, which will be filed within 120 days of the end of our 2004 fiscal
year, is incorporated by reference in response to this Item 11.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
Information in our Proxy Statement, which will be filed within 120 days of the end of our 2004 fiscal
year, is incorporated by reference in response to this Item 12.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information in our Proxy Statement, which will be filed within 120 days of the end of our 2004 fiscal
year, is incorporated by reference in response to this Item 13.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information in our Proxy Statement, which will be filed within 120 days of the end of our 2004 fiscal
year, is incorporated by reference in response to this Item 14.
74
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENTS SCHEDULE, AND REPORTS ON FORM 8-K
(a)
1.
2.
3.
Financial Statements: See "Index to Consolidated Financial Statements" under Item 8 on
page 38 of this Annual Report.
Financial Statement Schedule: See "Schedule II" on page 71 of this Annual Report
Exhibits
The exhibit numbers preceded by an asterisk (*) indicate exhibits physically filed with this
2004 Form 10-K. All other exhibit numbers indicate exhibits filed by incorporation by
reference. Exhibits preceded by two asterisks (**) are management contracts or
compensatory plans or arrangements.
3.1
3.2
4.1
10.1**
10.2**
10.3
10.4
10.5
10.6
10.7
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")).
By-Laws (incorporated by reference to Exhibit 3.2 of the 1993 S-4).
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).
Form of Directors' and Executive Officers' Indemnity Agreement (incorporated by reference to
Exhibit 10.2 to the 1993 S-4).
1994 Stock Option and Restricted Stock Plan (incorporated by reference to Exhibit 10.1 to the
1993 S-4).
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")).
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).
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).
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).
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").
75
10.8
10.9
10.10
10.11
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).
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).
Amended and Restated Note Purchase, Guaranty and Master Shelf Agreement, $40,000,000 7.01
percent 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 333-67369, filed with the Securities and Exchange Commission on November 6, 1998).
10.13** Helen of Troy Limited 1998 Employee Stock Purchase 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 16, 1998).
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 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).
10.17
Acquisition Agreeement, dated August 31, 2003, between Conopco, Inc. (a wholly owned
subsidiary of Unilever NV), Helen of Troy Limited (Barbados), Helen of Troy Limited (Bermuda),
and Helen of Troy Texas Corporation for the purchase of certain assets related to the North
American, Latin American and Caribbean production and distribution of Brut Fragrances,
Deodorants and Antiperspirants (incorporated by reference to Exhibit 2.1 of the Registrant's
Current Report on Form 8-K, filed with the Securities and Exchange Commission on October 14,
2003).
10.18
Loan Agreement, dated September 22, 2003, Helen of Troy Limited (Barbados), Helen of Troy
L.P. (Texas), and Bank of America, N.A. (incorporated by reference to Exhibit 10.1 of the
Registrant's Current Report on Form 8-K, filed with the Securities and Exchange Commission on
October 14, 2003).
10.19** Amended and Restated Helen of Troy 1997 Cash Bonus Performance Plan, dated August 26, 2003
(incorporated by reference to Exhibit 10.1 of Helen of Troy Limited's Quarterly Report on Form
10-Q for the period ended August 31, 2003 (the August 2003 10-Q)).
21*
23*
Subsidiaries of the Registrant.
Independent Auditors' Consent.
31.1*
Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) of the Exchange Act.
76
31.2*
32.1*
32.2*
Certification of Chief Financial Officer and Principal Accounting Officer Pursuant to Rule 13a-
14(a) of the Exchange Act.
Certification of the Chief Executive Officer Pursuant to Rule 13a-14(b) of the Exchange Act and
18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Certification of the Chief Financial and Principal Accounting Officer Pursuant to Rule 13a-14(b)
of the Exchange Act and 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
(b)
Reports on Form 8-K
On January 20, 2004, we furnished a report on Form 8-K relating to financial information
for Helen of Troy Limited for the quarter ended November 30, 2003, as presented in our
January 13, 2004 press release and associated conference call.
(c)
(d)
See (a)(3) above
See (a)(2) above
77
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
May 14, 2004
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.
/s/ Gerald J. Rubin /s/ Thomas J. Benson
Gerald J. Rubin
Chairman of the Board, Chief Executive Officer,
President, Director and Principal Executive Officer
May 14, 2004
Thomas J. Benson
Senior Vice President, Chief Financial Officer and
Principal Accounting Officer
May 14, 2004
/s/ Stanlee N. Rubin
Stanlee N. Rubin
Director
May 14, 2004
/s/ Daniel C. Montano
Daniel C. Montano
Director
May 14, 2004
/s/ John B. Butterworth
John B. Butterworth
Director
May 14, 2004
/s/ Byron H. Rubin
Byron H. Rubin
Director
May 14, 2004
/s/ Gary B. Abromovitz
Gary B. Abromovitz
Director, Deputy Chairman of the Board
May 14, 2004
/s/ Christopher L. Carameros
Christopher L. Carameros
Director
May 14, 2004
78
SUBSIDIARIES OF THE REGISTRANT
Name
Incorporation
Barbados
Barbados
Brazil
Cayman Holdings
Cayman Islands
France
Germany
Hong Kong
Hong Kong
Hong Kong
Jamaica
Helen of Troy Limited
HOT International Marketing Limited
Helen of Troy do Brasil Ltda.
H.O.T. Cayman Holding
Helen of Troy (Cayman) Limited
Helen of Troy SARL
Helen of Troy GmbH
Helen of Troy (Far East) Limited
Helen of Troy Manufacturing Limited
Helen of Troy Services Limited
HOT (Jamaica) Limited
Helen of Troy Comercial Offshore de Macau Limitada Macao
Mexico
Helen of Troy de Mexico S. de R.L. de C.V.
Mexico
Helen of Troy Servicios S. de R.L. de C.V.
Nevada
Helen of Troy Canada, Inc.
Nevada
Helen of Troy Nevada Corporation
Nevada
Helen of Troy, LLC
Nevada
HOT Latin America, LLC
Nevada
HOT Nevada Inc.
Nevada
Idelle Management Company
Nevada
Tactica International, Inc. (55% ownership)
New Jersey
Karina, Inc.
Texas
DCNL, Inc.
Texas
Helen of Troy Texas Corporation
Texas Limited Partnership
Helen of Troy L.P.
Texas Limited Partnership
Idelle Labs, Ltd.
The Netherlands
Helen of Troy International B.V.
United Kingdom
HOT (UK) Limited
Uruguay
Fontelux Trading, S.A.
EXHIBIT 21
Doing
Business as
Same Name
Same Name
Same Name
Same Name
Same Name
Same Name
Same Name
Same Name
Same Name
Same Name
Same Name
Same Name
Same Name
Same Name
Same Name
Same Name
Same Name
Same Name
Same Name
Same Name
Same Name
Same Name
Same Name
Same Name
Same Name
Same Name
Same Name
Same Name
Same Name
79
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Helen of Troy Limited:
We consent to incorporation by reference in the registration statements No. 33-75832, No. 333-11181,
No. 333-67349, No. 333-67369, No. 333-90776, and No. 333-103825 on Form S-8, and the registration
statement No. 333-99295 on Form S-3, of Helen of Troy Limited of our report dated May 12, 2004, relating to
the consolidated balance sheets of Helen of Troy Limited and subsidiaries as of February 29, 2004 and February
28, 2003, and the related consolidated statements of income, stockholders' equity and comprehensive income,
and cash flows and related financial statement schedule for each of the years in the three-year period ended
February 29, 2004, which report appears in the February 29, 2004 annual report on Form 10-K of Helen of Troy
Limited.
El Paso, Texas
May 12, 2004
/s/ KPMG LLP
80
The following certification includes references to an evaluation of the effectiveness of the design and operation of
the company’s “disclosure controls and procedures” and to certain matters related to the company’s “internal control over
financial reporting.” Item 9A of Part II of this Annual Report presents the conclusions of the CEO and the CFO about the
effectiveness of the company’s disclosure controls and procedures based on and as of the date of such evaluation (relating
to Item 4 of the certification), and contains additional information concerning disclosures to the company’s Audit
Committee and independent auditors with regard to deficiencies in internal control over financial reporting and fraud and
related matters (Item 5 of the certification).
Exhibit 31.1
CERTIFICATION
I, Gerald J. Rubin, certify that:
1. I have reviewed this annual report on Form 10-K of Helen of Troy Limited;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects, the financial condition, results of operations and cash flows of the registrant as of,
and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which
this report is being prepared;
b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial
reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in
the registrant’s internal control over financial reporting.
Date: May 14, 2004
/s/ Gerald J. Rubin
Gerald J. Rubin
Chairman of the Board, Chief Executive Officer,
President and Principal Executive Officer
81
The following certification includes references to an evaluation of the effectiveness of the design and operation of
the company’s “disclosure controls and procedures” and to certain matters related to the company’s “internal control over
financial reporting.” Item 9A of Part II of this Annual Report presents the conclusions of the CEO and the CFO about the
effectiveness of the company’s disclosure controls and procedures based on and as of the date of such evaluation (relating
to Item 4 of the certification), and contains additional information concerning disclosures to the company’s Audit
Committee and independent auditors with regard to deficiencies in internal control over financial reporting and fraud and
related matters (Item 5 of the certification).
Exhibit 31.2
I, Thomas J. Benson, certify that:
CERTIFICATION
1. I have reviewed this annual report on Form 10-K of Helen of Troy Limited;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects, the financial condition, results of operations and cash flows of the registrant as of,
and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which
this report is being prepared;
b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial
reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in
the registrant’s internal control over financial reporting.
Date: May 14, 2004
/s/ Thomas J. Benson
Thomas J. Benson
Senior Vice President, Chief Financial Officer
and Principal Accounting Officer
82
CERTIFICATION
Exhibit 32.1
I, Gerald J. Rubin hereby certify, for the purposes of section 1350 of chapter 63 of title 18 of the United States
Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in my capacity as Chairman of
the Board, Chief Executive Officer, President and Principal Executive Officer of Helen of Troy Limited (the
"Company"), that, to my knowledge, the Annual Report of Helen of Troy Limited on Form 10-K for the period
ended February 29, 2004, fully complies with the requirements of Section 13(a) of the Securities Exchange Act
of 1934 and that the information contained in such report fairly presents, in all material respects, the financial
condition and results of operation of the Company.
Date: May 14, 2004
/s/ Gerald J. Rubin
Gerald J. Rubin
Chairman of the Board, Chief Executive Officer,
President and Principal Executive Officer
83
CERTIFICATION
Exhibit 32.2
I, Thomas J. Benson hereby certify, for the purposes of section 1350 of chapter 63 of title 18 of the United
States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in my capacity as Senior
Vice President, Chief Financial Officer and Principal Accounting Officer of Helen of Troy Limited (the
"Company"), that, to my knowledge, the Annual Report of Helen of Troy Limited on Form 10-K for the period
ended February 29, 2004, fully complies with the requirements of Section 13(a) of the Securities Exchange Act
of 1934 and that the information contained in such report fairly presents, in all material respects, the financial
condition and results of operation of the Company.
Date: May 14, 2004
/s/ Thomas J. Benson
Thomas J. Benson
Senior Vice President, Chief Financial Officer
and Principal Accounting Officer
84
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended February 29, 2004
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 001-14669
HELEN OF TROY LIMITED
(Exact name of the registrant as specified in its charter)
BERMUDA
(State or other jurisdiction of
incorporation or organization)
74-2692550
(I.R.S. Employer
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 (§ 229.405 of this chapter) is
not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]
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 $573,049,954.
As of May 11, 2004 there were 29,471,111 shares of Common Stock, $.10 Par Value, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE: NONE
EXPLANATORY NOTE: This Amendment No. 1 on Form 10-K/A amends the registrant’s Annual Report on Form 10-K for the
fiscal year ended February 29, 2004, as filed by the registrant on May 14, 2004, and is being filed solely to replace Part III, Items 10
through 14. The reference on the cover of the registrant's Form 10-K to the incorporation by reference of registrant’s Definitive Proxy
Statement into Part III of Form 10-K is hereby amended to delete that reference. Except as otherwise stated herein, no other
information contained in the original Form 10-K has been updated by this Amendment. In addition, pursuant to the rules of the
Securities and Exchange Commission, the Company is including with this Amendment certain currently dated certifications and is
amending the Index to Exhibits to include such certifications.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Summary information concerning the Company’s directors and executive officers is set forth below. The Board of Directors
consists of seven members, all of whom are elected to one year terms. The following individuals are the current directors and
executive officers:
Name
---------------------------------
Gerald J. Rubin
Christopher L. Carameros
Thomas J. Benson
Vincent D. Carson
Gary B. Abromovitz
Stanlee N. Rubin
Daniel C. Montano
Byron H. Rubin
John B. Butterworth
Age
------
60
50
47
44
61
60
55
54
52
Position
------------------------------------------------------------------------------------------
Chairman of the Board, Chief Executive Officer, and President
Executive Vice President and Director
Senior Vice President and Chief Financial Officer
Vice President, General Counsel, and Secretary
Deputy Chairman of the Board, and Chairman of the Audit Committee
Director
Director
Director
Director
Set forth below are descriptions of the principal occupations during at least the past five years of the executive officers and
members of our Board of Directors.
GERALD J. RUBIN, age 60, founder of the Company, has been the Chairman of the Board, Chief Executive Officer and President of
the Company since June 2000. From 1984 to June 2000, Mr. Rubin was Chairman of the Board and Chief Executive Officer of the
Company. Mr. Rubin has been a Director of the Company since 1969.
CHRISTOPHER L. CARAMEROS, age 50, has been a Director of the Company since June 1993. Mr. Carameros joined the
Company as an Executive Vice President in January 2003. Mr. Carameros has been an officer and director of L & M Asset
Management Inc., a privately-held company which holds certain of his personal investments, from August 1997 to the present. Mr.
Carameros' principal duties with L & M Asset Management are to oversee its operating and investing activities.
THOMAS J. BENSON, age 47, has been the Senior Vice President of Finance and Chief Financial Officer of the Company since
August 2003. Mr. Benson served as Chief Financial Officer of Elamex, S.A. de C.V., a provider of manufacturing and shelter services,
from June 2002 to August 2003, and as Chief Financial Officer of Franklin Connections / Azar Nut Company, a manufacturer,
packager and distributor of candy and nut products, from May 1994 to June 2002. He has served as an investments director in two
private investment firms and spent seven years in public accounting. He received his B.S. from St. Mary's College and his Masters
Degree of Taxation from De Paul University.
VINCENT D. CARSON, age 44, joined the Company on November 1, 2001, in the capacity of Vice President, General Counsel and
Secretary, after a 16-year legal career in private practice. Prior to joining the Company, Mr. Carson was a shareholder in Brandys
Carson & Pritchard, P.C. from 1993 to 2001, and was a shareholder at Mounce, Green, Myers, Safi & Galatzan, P.C. during 2001.
Both firms are located in El Paso, Texas.
GARY B. ABROMOVITZ, age 61, has been Deputy Chairman of the Board of Directors of the Company since March 2002 and a
Director of the Company since 1990. Mr. Abromovitz is an attorney and is a consultant to several law firms. He is active in real estate
development concentrating on industrial, commercial and historic properties.
1
STANLEE N. RUBIN, age 60, has been a Director of the Company since 1990. Mrs. Rubin is active in civic and charitable
organizations. She is a Partner for the Susan G. Komen Breast Cancer Foundation.
DANIEL C. MONTANO, age 55, has been a Director of the Company since 1980. Mr. Montano has been the Chairman, Chief
Executive Officer, and President of two privately-held biotechnology companies, CardioVascular BioTherapeutics, Inc. and Phage
Biotechnology Corporation, since November 1999. Mr. Montano currently sits on the Board of Directors of both of the
aforementioned companies. He has been the Managing Director of C&K Capital, a private investment company, from January 1997
through May 2002.
BYRON H. RUBIN, age 54, has been a Director of the Company since 1981. Mr. Rubin has been a partner in the firm of Daniels &
Rubin, an insurance and tax planning firm in Dallas, Texas, since 1979.
JOHN B. BUTTERWORTH, age 52, has been a Director of the Company since August 2002. Mr. Butterworth is a Certified Public
Accountant and, since 1982, has been a shareholder in a public accounting firm located in El Paso, Texas.
AUDIT COMMITTEE
The Board of Directors has not determined that any of its members of the Audit Committee qualifies as an “audit committee
financial expert,” as defined by the SEC in Item 401(h) of Regulation S-K promulgated by the SEC. The Company's Board currently
intends to nominate a person for election to the board of directors at the August 31, 2004 Annual Meeting that qualifies as an “audit
committee financial expert."
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company's Directors and executive officers,
and persons who own more than 10% of a registered class of the Company's equity securities, to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes in ownership of Common Stock and other equity securities of the
Company. Directors, executive officers and greater than 10% shareholders are required by SEC regulations to furnish the Company
with copies of all Section 16(a) forms they file.
Except as noted below, to the Company's knowledge, based solely on review of the copies of such reports furnished to the
Company and written representations that no other reports were required, during fiscal 2004 all Section 16(a) filing requirements
applicable to the Directors, executive officers and greater than 10% shareholders were satisfied. Form 4's for the following individuals
were filed late:
Chris Carameros
March 25, 2003 Stock Option Grant was filed late on June 4, 2003
Tom Benson
August 22, 2003 Stock Option Grant was filed late on August 27, 2003
CODE OF ETHICS
The Company has adopted a code of ethics that applies to its chief executive officer, chief financial officer, and finance
department personnel, including the Company's principal accounting officer and controllers. The code of ethics is posted on the
Company's website at: www.hotus.com.
The Company intends to include on its website any amendments to, or waivers from, a provision of its code of ethics that
applies to the Company's chief executive officer, chief financial officer, or finance department personnel, including the Company's
principal accounting officer and controllers, that relates to any element of the code of ethics definition enumerated in Item 406(b) of
Regulation S-K promulgated by the SEC.
2
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth the summary of compensation earned during fiscal 2002 through 2004 by the Company's Chief
Executive Officer and its other Executive Officers.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
-----------------------------------------------------------------------------------
OTHER
ANNUAL
COMPENSATION
($)
----------------------------
LONG-TERM
COMPENSATION
--------------------------
SECURITIES
UNDERLYING
OPTIONS/SARS
(#)
ALL OTHER
COMPENSATION
($)
-------------------------- --------------------------
NAME AND PRINCIPAL
POSITION
FISCAL
YEAR
----------------------------------------------------- ------------ -------------------------- --------------------------
5,474,156
2004
Gerald J. Rubin
2,039,175
2003
Chairman, Chief Executive
1,391,174
2002
Officer, and President
600,000
600,000
600,000
SALARY
($)
BONUS
($)
Christopher L. Carameros
Executive Vice-President (5)
Thomas J. Benson
Senior Vice-President
Finance and Chief Financial Officer (6)
Vincent D. Carson
Vice-President and
General Counsel (7)
2004
2003
2004
2004
2003
2002
________________________
498,000
83,000
135,417
181,788
176,663
58,333
269,154
-
37,306
81,992
45,000
5,562
-
-
-
-
-
-
-
-
-
625,000
1,000,000
1,000,000
300,000
-
56,883
5,000
5,000
10,000
117,077 (1)(2)(3)(4)
105,380 (1)(2)(3)(4)
38,994 (1)(2)(3)(4)
6,725 (5)
-
1,158 (6)
3,334 (7)
270 (7)
-
(1) Includes $ 4,205, $1,000 and $1,000 of the Company's contributions to the Helen of Troy 401(k) Plan, in fiscal 2004, 2003, and
2002, respectively.
(2) Includes amounts representing the premiums paid for executive and Survivorship life insurance policies. The economic benefit
of such policies totaled $21,571, $21,167, and $19,599 in fiscal 2004, 2003, and 2002, respectively. During fiscal 2004 and 2003,
the Company paid annual premiums of $360,000 in respect of the policies. During fiscal 2002, the Company paid annual
premiums of $403,431 in respect of the policies. See Item 13. “Certain Relationships and Related Party Transactions.”
(3) Includes $68,300 and $62,582 attributable to personal and travel expenses and $2,772 and $1,583 attributable to group term life
insurance for fiscal 2004 and 2003, respectively. Also includes $5,798 of disability insurance premiums paid by the Company
during fiscal 2004, 2003 and 2002.
(4) Includes amounts representing the annual lease value of a vehicle provided by the Company. Such amounts totaled $14,431,
$13,250 and $12,597 for fiscal 2004, 2003, and 2002, respectively.
(5) Included for fiscal 2004 is $6,000 of the Company's contributions to the Helen of Troy 401(k) Plan and $725 attributable to life
insurance premiums. Mr. Carameros joined the Company as an employee on January 1, 2003. Prior to such appointment Mr.
Carameros was a non-employee Director of the Company. Mr. Carameros continues to serve on the Board of Directors.
(6) Included for fiscal 2004 is $1,000 of the Company's contributions to the Helen of Troy 401(k) Plan and $158 attributable to life
insurance premiums. Mr. Benson joined the Company in August 2003.
(7) Included for fiscal 2004 is $2,959 of the Company's contributions to the Helen of Troy 401(k), and $375 and $270 attributable to
life insurance premiums in fiscal 2004 and 2003, respectively. Mr. Carson joined the Company in November 2001.
3
The following table sets forth certain information regarding grants of stock options during the fiscal year ended February 29,
2004 to each of the Named Executive Officers:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION
FOR OPTION TERM
INDIVIDUAL GRANTS
-------------------------------------------------------------------------------------------------------------- -----------------------------------------------------------
NUMBER OF
SECURITIES
UNDERLYING
OPTIONS/SARS
GRANTED
(#)
NAME
-------------------------- --------------------------
250,000
G. Rubin
250,000
G. Rubin
125,000
G. Rubin
300,000
C. Carameros
56,883
T. Benson
5,000
V. Carson
% OF TOTAL
OPTIONS/SARS
GRANTED TO
EMPLOYEES IN
FISCAL YEAR
(%)
----------------------------
19%
19%
10%
23%
4%
*
EXERCISE OR
BASE PRICE
($/SH)
EXPIRATION
DATE
5%
($)
10%
($)
-------------------------- -------------------------- ------------------------------- --------------------------
5,950,636
8,552,420
4,544,158
6,203,643
1,922,832
186,269
05/31/2013
08/31/2013
11/30/2013
03/25/2013
08/22/2013
12/01/2013
2,348,135
3,374,806
1,793,136
2,447,972
758,754
73,502
14.935
21.465
22.810
12.975
21.210
23.375
________________________
* Less than one percent of options granted during the fiscal year.
The following table sets forth the number and value of unexercised options held by each of the Named Executive Officers on
February 29, 2004:
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR VALUES
SHARES ACQUIRED
ON EXERCISE
(#)
---------------------------- ----------------------------
27,564,000
3,062,176
NAME
--------------------------
G. Rubin
C. Carameros
T. Benson
V. Carson
________________________
1,200,000
229,414
-
-
-
-
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED
OPTIONS/SARS AT FISCAL
YEAR-END (#)
VALUE OF UNEXERCISED
IN-THE-MONEY OPTIONS / SARS
AT FISCAL YEAR-END ($) (1)
VALUE REALIZED ------------------------------------------------------ ------------------------------------------------------
UNEXERCISABLE
UNEXERCISABLE
-------------------------- -------------------------- -------------------------- --------------------------
EXERCISABLE
EXERCISABLE
($)
6,625,000
134,586
-
3,000
-
-
56,883
17,000
108,512,925
2,174,237
-
53,618
-
-
450,513
234,958
(1) Represents the difference between the last sale price of the Common Stock on February 29, 2004 ($29.13) and the exercise price
of the option, multiplied by the applicable number of options.
DIRECTOR COMPENSATION
For the first half of fiscal 2004, each member of the Board of Directors of the Company who was not an employee of the
Company received a quarterly retainer of $4,000 and a fee of $3,000 for each meeting of the Board of Directors attended. For the
second half of fiscal 2004, each member of the Board of Directors of the Company who was not an employee of the Company
received a quarterly retainer of $6,000 and a fee of $3,000 for each meeting of the Board of Directors attended. Non-chair members of
the Audit Committee also received fees of $3,000 for each Audit Committee meeting attended during the first half of fiscal 2004 and
$6,000 during the second half of fiscal 2004. The Board members also received reimbursement for travel and lodging expenses
incurred in connection with attending all such meetings. During fiscal 2004 the Audit Committee Chair also received quarterly
retainers of $10,000 and the Compensation Committee Chair received quarterly retainers of $5,000. In the second half of fiscal 2004,
the Board approved and began paying quarterly retainers of $10,000 to the Deputy Chairman of the Board.
Under the Helen of Troy Limited 1995 Stock Option Plan For Non-Employee Directors, each non-employee Director
receives, on the first day of each fiscal quarter, stock options to acquire 4,000 shares of the Company's Common Stock. Stock options
4
granted to non-employee Directors have an exercise price equal to the median of the high and low market prices of the Common Stock
on the last trading date preceding the date on which the stock options are granted. Such stock options vest after one year.
EMPLOYMENT CONTRACT
Mr. Rubin's employment contract was amended and restated effective September 1, 2003. Mr. Rubin's employment contract
has a term of five years, renews itself daily and provides for a base salary of $600,000, and a bonus payable based on the earnings
achieved by the Company in any applicable fiscal year according to the following scale:
AMOUNT OF BONUS PAYABLE
AS A PERCENT OF EARNINGS
-----------------------------------------------
5%
6%
7%
8%
9%
10%
AMOUNT OF EARNINGS ACHIEVED BY
THE COMPANY IN THE APPLICABLE
FISCAL YEAR
------------------------------------------------------------------------------
$
30,000,000
to
-
40,000,000
to
$
30,000,001
50,000,000
to
$
40,000,001
60,000,000
to
$
50,000,001
to
$
60,000,001
70,000,000
or more
$
70,000,001
$
$
$
$
$
For the purposes of the bonus calculation, "earnings" means the sum of the consolidated earnings from continuing operations
before all income taxes of the Company and its subsidiaries, minus extraordinary income, plus extraordinary expenses, minus capital
gains, and plus capital losses. All components of the calculation are required to be determined in accordance with accounting
principles generally accepted in the United States.
The amount of the incentive bonus calculated above is then reduced by the salary paid to Mr. Rubin in the fiscal year. Mr.
Rubin's incentive bonus also provides that Mr. Rubin's incentive bonus for any fiscal year may not exceed $15,000,000. The
employment agreement also calls for the reimbursement of certain expenses and taxes. Under the terms of the employment agreement,
Mr. Rubin was entitled to receive options to purchase Common Stock that are immediately vested in the amount of 250,000 shares on
the last business day of each of the Company's fiscal quarters. During fiscal 2004, pursuant to the employment agreement, Mr. Rubin
received option grants of 250,000 each for the first two fiscal quarters. The employment agreement was amended effective September
1, 2003 to grant Mr. Rubin option grants of 125,000 shares on the last business day of the Company's fiscal quarters starting with the
fiscal quarter beginning September 1, 2003. Under the amended employment agreement, Mr. Rubin received an option grant of
125,000 in the third fiscal quarter. In the fourth fiscal quarter, Mr. Rubin declined receipt of the balance of available options in order
to allow the options in the plan to be used to reward selected members of the Company's management with an equity ownership
interest in the financial success of the Company.
The terms of Mr. Rubin's employment agreement require that options continue to be granted subject to such options being
available under the Company's stock option plans. In the event there are not a sufficient number of shares under the stock option
plans to cause the grant of stock options to Mr. Rubin, the Company agrees to use its reasonable efforts to cause the Company's
shareholders to approve additional shares of Common Stock to be subject to such stock option plans to enable such grants. In the
event the Company's shareholders do not approve additional shares to be issued under such stock option plans, the Company is not
obligated to Mr. Rubin to grant such options.
Should Mr. Rubin's employment with the Company be terminated by an occurrence other than death, disability or good
cause, Mr. Rubin will receive payments, each in an amount equal to his monthly rate of basic compensation, which shall commence
on the date of termination and shall continue until the date the employment contract would have expired but for said occurrence. Mr.
Rubin would also receive payments, payable annually after the close of each fiscal year of the Company, each in an amount of
incentive compensation and bonuses that would otherwise have been payable to him if he had continued in the employ of the
Company for the same period, provided, however, the incentive compensation and bonus payable with respect to any fiscal year shall
not be less than the highest annual incentive compensation and bonus award made to Mr. Rubin with respect to the Company's most
recent three fiscal years ending prior to the date of termination.
Upon the occurrence of a change in control of the Company, Mr. Rubin may elect to terminate his employment with the
Company, and upon such termination will receive a present-value lump sum payment of that amount due to him as basic
compensation if his employment contract had continued until the date the employment contract would have expired but for said
occurrence. In the event of a change in control, Mr. Rubin will also receive a lump sum payment in an amount equal to the amount of
5
incentive compensation and bonuses that would otherwise have been payable to him under the employment agreement. Such lump
sum payment shall be calculated using Mr. Rubin's highest incentive compensation and bonuses payable with respect to the
Company's most recent three fiscal years ending prior to the date of the termination, with present value calculated using the applicable
federal rate for the date of the termination of employment. Mr. Rubin's contract also provides for a gross-up for the excise tax on any
amounts that are treated as excess parachute payments under the Internal Revenue Code of 1986, as amended.
If Mr. Rubin's employment is terminated by an occurrence other than by death, disability or good cause, including upon a
change in control, Mr. Rubin will also receive: (1) all amounts earned, accrued or owing but not yet paid to him, (2) immediate vesting
of all options granted to him, (3) removal of all restrictions on restricted stock awarded to him and immediate vesting of the rights to
such stock, if any, (4) medical benefits for him and his wife for life and (5) paid premiums of his life insurance policies, required
under his employment contract. Mr. Rubin will continue to participate in all employee benefits plans, programs or arrangements
available to Company executives in which he was participating on the date of termination until the date the employment contract
would have expired but for said occurrence or, if earlier, until he receives equivalent benefits and coverage by another employer.
In the event of Mr. Rubin's death, all unpaid benefits under these agreements are payable to his estate. Mr. Rubin's contract
grants him the right to elect a cash payment of the remainder of his contract in the event of a merger, consolidation or transfer of all or
substantially all of the Company's assets to any unaffiliated company or other person.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
All members of the Compensation Committee during 2004 were independent Directors, and none of them were employees or
former employees of Helen of Troy. During 2004, no Helen of Troy executive officer served on the Compensation Committee (or
equivalent), or the Board of Directors, of another entity whose executive officer(s) served on Helen of Troy’s Compensation
Committee or Board.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee has submitted the following report:
The Compensation Committee is responsible for developing the Company's executive compensation strategy and for
administering the policies and programs that implement this strategy. The Committee is comprised entirely of independent, non-
employee Directors.
The executive compensation strategy reflects the Company's fundamental philosophy of aligning the interests of management
with Helen of Troy's long-term performance and offering competitive compensation opportunities based on each individual's
contribution to the achievement of shareholder value. This strategy is designed to attract and retain employees with outstanding
qualifications and experience.
The three elements of the Company's executive compensation strategy, all determined by corporate and individual
performance, are:
• Base salary;
• Annual incentive compensation; and
• Long-term incentive compensation.
The Compensation Committee has reviewed the compensation packages for Executives of the Company’s primary
competitors and those of other Companies that sell consumer products. Some of these competitors are privately held and are therefore
not included in the accompanying stock performance graph. The performance of the selected companies was compared to that of
Helen of Troy. Earnings performance, stock price, accretive acquisitions, and other criteria intended to increase shareholder wealth
continue to be the primary considerations in crafting compensation packages for Company Executives to align their interests with that
of the Company’s shareholders.
The base salary for Gerald J. Rubin (Chief Executive Officer and President) for fiscal 2004 was based on his employment
contract. See "Executive Compensation - Employment Contract."
6
The base salaries for the other executive officers during fiscal 2004 were determined by the Chief Executive Officer of the
Company based on the skills and experience required by the position, the effect of the individual's performance on the Company and
the potential of the individual.
Annual incentive compensation consists of cash bonuses. The amount of the cash bonus for Gerald J. Rubin is based upon the
1997 Cash Bonus Performance Plan, as amended, which has been approved by the Company's shareholders. For fiscal 2004, the
Company awarded a bonus of $5,474,156 to Gerald J. Rubin under the 1997 Cash Bonus Performance Plan.
The 2004 incentive bonuses for the other executive officers were determined based upon performance objectives set by the
Company's Chief Executive Officer.
Long-term incentive compensation consists of the Company's stock option plans. Stock options are granted based on the
performance and position of the executive officer, as well as the Company's performance. Executive officers are provided with
opportunities for ownership positions in the Common Stock through the Company's stock option plans. This opportunity for
ownership, combined with a significant performance-based incentive compensation opportunity, forges a strong link between the
Company's management and shareholders. During fiscal 2004 the Company's Board of Directors granted to Gerald J. Rubin,
Christopher L. Carameros, Thomas J. Benson and Vincent D. Carson stock options to purchase 625,000, 300,000, 56,883 and 5,000
shares of the Common Stock, respectively.
Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Tax Code”), places a limit of $1,000,000 on the
amount of compensation that Helen of Troy may deduct in any one year with respect to each of its five most highly paid executive
officers. Certain performance-based compensation approved by shareholders is not subject to the deduction limit. Helen of Troy’s
shareholder-approved 1998 Stock Option and Restricted Stock Plan, in which awards under such plans constitute performance-based
compensation, is not subject to Section 162(m) of the Tax Code. To maintain flexibility in compensating executive officers in a
manner designed to promote varying corporate goals, the Committee has not adopted a policy that all compensation must be
deductible.
As stated above, the compensation to the Company's Chief Executive Officer, Gerald J. Rubin, during fiscal 2004 consisted
of base salary, annual incentive compensation, and long-term incentive compensation. All of the factors discussed above in this report
were taken into consideration by the Compensation Committee in determining the total compensation for Mr. Rubin for fiscal 2004.
Respectfully submitted,
COMPENSATION COMMITTEE OF DIRECTORS
Gary B. Abromovitz (Chairman)
Daniel C. Montano
7
HELEN OF TROY FIVE-YEAR
STOCK PRICE PERFORMANCE GRAPH
The graph below compares the cumulative total return of the Company to the NASDAQ Market Index and a peer group
index, assuming $100 invested March 1, 1999. The Peer Group Index was the Dow Jones Industry Group - Cosmetics.
COMPARISON OF FIVE-YEAR CUMULATIVE RETURN
FOR HELEN OF TROY LIMITED, NASDAQ MARKET INDEX,
AND PEER GROUP INDEX
S
R
A
L
L
O
D
250
200
150
100
50
0
1999
2000
2001
2002
2003
2004
HELEN OF TROY LIMITED
DOW JONES GROUP INDEX
NASDAQ MARKET INDEX
HELEN OF TROY LIMITED
DOW JONES GROUP INDEX
NASDAQ MARKET INDEX
Fiscal Year
------------------------------------------------------------------------------------------------------------------
1999
---------------
100.00
100.00
100.00
2000
--------------
52.67
83.14
204.50
2001
--------------
47.55
82.30
95.63
2002
--------------
93.76
82.75
76.71
2003
--------------
97.44
75.63
58.44
2004
--------------
217.07
92.98
89.01
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
The following table summarizes certain equity compensation plan information as of February 29, 2004:
EQUITY COMPENSATION PLAN INFORMATION
NUMBER OF SECURITIES TO WEIGHTED-AVERAGE
BE ISSUED UPON EXERCISE
EXERCISE PRICE OF
OF OUTSTANDING OPTIONS, OUTSTANDING OPTIONS,
WARRANTS, AND RIGHTS WARRANTS, AND RIGHTS
(b)
----------------------------------------- ----------------------------------------- -----------------------------------------
(a)
NUMBER OF SECURITIES
REMAINING AVAILABLE FOR
FUTURE ISSUANCE UNDER
EQUITY COMPENSATION
PLANS (EXCLUDING
SECURITIES REFLECTED IN
COLUMN (a))
(c)
7,982,648
$
12.98
878,673 (1)
-
---------------
7,982,648
=========
-
---------------
$
12.98
=========
-
---------------
878,673
=========
-------------------------------------------------
Equity compensation plans
approved by security holders
Equity compensation plans not
approved by security holders
TOTAL
________________________
(1) Includes 366,262 shares authorized and available for issuance in connection with the Helen of Troy Limited 1998 Employee
Stock Purchase Plan, 432,000 shares authorized and available for issuance under the Helen of Troy Limited 1996 Stock Option
Plan for Non-Employee Directors, and 80,411 shares authorized and available for issuance under the Helen of Troy Limited 1998
Stock Option and Restricted Stock Plan.
8
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of June 21, 2004, the beneficial ownership of the Common Stock of the Directors and the
executive officers of the Company, the Directors and executive officers of the Company as a group, and each person known to the
Company to be the beneficial owner of more than five percent of the Common Stock:
NAME OF BENEFICIAL OWNER
-----------------------------------------------------------------------------------
Gerald J. Rubin (1)(2)(3)(4)(5)
One Helen of Troy Plaza
El Paso, Texas 79912
Stanlee N. Rubin (1)(2)(3)(4)(5)
One Helen of Troy Plaza
El Paso, Texas 79912
Byron H. Rubin (6)
Daniel C. Montano (7)
Gary B. Abromovitz (8)
Christopher L. Carameros (9)
John B. Butterworth (10)
Thomas J. Benson
Vincent D. Carson (11)
All directors and executive officers as a group
(9 persons) (12)
Columbia Wanger Asset Management, LP (13)
227 West Monroe Street
Suite 3000
Chicago, Illinois 60606
FMR Corp. (14)
82 Devonshire Street
Boston, Massachusetts 02109
________________________
COMMON STOCK
BENEFICIALLY OWNED
-----------------------------------
8,577,922
PERCENT *
------------------
23.43%
8,577,922
23.43%
8,000
64,000
24,500
167,640
9,105
-
4,468
**
**
**
**
**
**
**
8,855,635
24.19%
2,475,000
6.76%
2,400,000
6.56%
* Percent ownership is calculated based on 29,513,890 shares of the Company's Common Stock outstanding on June 21, 2004 and a
total of 7,095,161 of stock options held by all grantees which could be exercised within 60 days of June 21, 2004.
** Ownership of less than one percent of the outstanding Common Stock.
(1) Does not include 144,000 shares in a trust for the children of Gerald J. Rubin and Stanlee N. Rubin in which they disclaim any
beneficial ownership.
(2) Includes 276,980 shares held beneficially through a partnership in which Gerald J. Rubin and Stanlee N. Rubin are partners.
9
(3) Includes 6,625,000 shares in the case of Gerald J. Rubin, subject to stock options that are exercisable within 60 days of June 21,
2004. Gerald J. Rubin's stock options are subject to a one-half undivided community property interest with Stanlee N. Rubin.
(4) Includes 1,575,942 shares owned directly by Gerald J. Rubin, all of which are subject to a one-half undivided community
property interest with Stanlee N. Rubin.
(5) Includes 100,000 stock options, issued under the 1995 Stock Option Plan For Non-Employee Directors and exercisable within 60
days of June 21, 2004, held by Stanlee N. Rubin and subject to a one-half undivided community property interest with Gerald J.
Rubin.
(6) Includes 8,000 stock options issued under the 1995 Stock Option Plan For Non-Employee Directors and exercisable within 60
days of June 21, 2004.
(7) Includes 64,000 stock options issued under the 1995 Stock Option Plan For Non-Employee Directors and exercisable within 60
days of June 21, 2004.
(8) Includes 22,500 stock options issued under the 1995 Stock Option Plan For Non-Employee Directors and exercisable within 60
days of June 21, 2004, and 2,000 shares held in an Individual Retirement Account.
(9) Comprised of 134,586 stock options issued under the 1998 Stock Option and Restricted Stock Plan and exercisable within 60 days
of June 21, 2004, 1,839 shares acquired through the Helen of Troy Employee Stock Purchase Plan, and 31,215 shares held
personally.
(10) Includes 8,000 stock options issued under the 1995 Stock Option Plan For Non-Employee Directors and exercisable within 60
days of June 21, 2004, and 1,105 shares held in an Individual Retirement Account.
(11) Includes 3,000 stock options issued under the 1998 Stock Option and Restricted Stock Plan and exercisable within 60 days of
June 21, 2004 and 1,468 shares acquired through the Helen of Troy Employee Stock Purchase Plan.
(12) Includes all shares and options discussed in notes 2 through 10 above.
(13) According to reviews of schedule 13G/A filed on February 12, 2004, and Form 13F filed on March 31, 2004, Columbia Wanger
Asset Management, LP has shared dispositive and voting power for 2,475,000 shares.
(14) According to reviews of schedule 13G/A filed on February 17, 2004, and Form 13F filed on March 31, 2004, FMR Corp. has sole
dispositive power for 2,400,000 shares and sole voting power for -0- shares.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During fiscal 2004, the Company continued an agreement (the "Lease") under which it leases a 108,000 square foot
warehouse facility in El Paso, Texas, from a real estate partnership (the "Partnership") in which Gerald J. Rubin and Stanlee N. Rubin
are limited partners. The Company entered into the Lease in order to expand its inventory storage capacity in El Paso, Texas. Under
the terms of the Lease, the Company pays $29,250 in monthly rent. The Company also pays certain expenses associated with the
operation of the facility. The Company leased the warehouse facility for the entire fiscal year and made a total of $454,000 in
payments for associated rent and operating expenses during fiscal 2004. The Company has obtained an appraisal from a third party
confirming that the amount of rent under the Lease is comparable to that being paid by other companies for similar facilities in El
Paso. The Company obtained comparable rental information on similar properties from an unaffiliated real estate company at the time
of the Lease. This information was used to establish the rental rate for this facility. The Lease is a month-to-month agreement. Either
the Company or the Partnership may cancel the Lease by providing the other party with notice 30 days in advance of terminating the
Lease.
For the first half of fiscal 2004, the Company was the occupant of offices in various locations throughout the United States
under three separate informal reimbursement arrangements (collectively, the "informal arrangements") with the Partnership. The
Company entered into the informal arrangements in order to facilitate contact with customers. Under the informal arrangements, the
Company paid rent and certain operating expenses in amounts equal to the rent and operating expenses paid by the Partnership under
its leases of these facilities. During fiscal 2004, the Company paid $64,163 under these informal arrangements. During the third fiscal
10
quarter of 2004, the informal arrangements were cancelled and the underlying leases were transferred to one of the Company's
subsidiaries. Accordingly, after October 2004 no further payments were made under the previous informal arrangements with the
Partnership.
In July 1999, the Company entered into an agreement with the Partnership under which the Company leases 3,325 square feet
of office space in El Paso, Texas to the Partnership. The agreement calls for the Company to receive $3,879 in monthly rent. During
fiscal 2004, the Company recorded $46,550 in rental income associated with this agreement. The Company has obtained an appraisal
from a third party confirming that the amount of rent under such agreement is comparable to that being paid by other companies for
similar facilities in El Paso, Texas.
All of the above transactions have been reviewed, approved and ratified by the Company's Audit Commitee.
Byron H. Rubin, a member of the Company's Board of Directors, earns ordinary insurance agent's commissions in connection
with the Company's group health, life and disability insurance policies as well as in connection with certain life insurance policies on
its officers. During fiscal 2004, he received commissions of approximately $30,000 from policies sold to the Company.
Prior to July 2003, the Company had paid premiums for Survivorship life insurance policies on the lives of Gerald J. Rubin
and Stanlee N. Rubin in the aggregate insured amount of $29,000,000. The Company and a trust established for the benefit of Gerald
J. Rubin and Stanlee N. Rubin, which was the beneficiary of the life insurance policies (the “Trust”), entered into a Split Dollar
Insurance Agreement dated March 1994 whereby the Trust agreed to repay the Company all of the premiums paid under the policies
from the proceeds of the policies. The Trust owned the policies and collaterally assigned the proceeds from these policies as collateral
for the obligation to repay the aggregate premiums paid by the Company under these policies. In July 2003, the Trust and the
Company entered into a Life Insurance Agreement under which the Trust transferred ownership of the policies to the Company. The
Company agreed to pay annual premiums up to $360,000 on the policies and upon the death of the second to die of Gerald J. Rubin or
Stanlee N. Rubin, the Company shall receive the cash surrender value of the policies and the Trust shall receive the balance of the
proceeds. As of March 2, 2004, the total aggregate death benefit of the policies was $31,348,972, and the aggregate cash surrender
value of the policies was $3,782,125. The aggregate premiums paid by the Company since inception of the policies is $ 3,600,000.
Through fiscal 2002, the Company paid premiums on an executive universal life insurance policy on the life of Gerald J.
Rubin in the initial insured amount of $5,000,000. Under the split dollar agreement for this policy, entered into in June 2000, the
Company is entitled to reimbursement for all premium payments it has made on the policy out of any death benefits paid on the life of
Gerald J. Rubin. The Company last paid a $43,431 annual premium on the policy in fiscal 2002. No premiums were paid on the
policy in fiscal 2003 and fiscal 2004. As of February 29, 2004, the total aggregate death benefit of the policies was $ 5,469,679, and
the aggregate cash surrender value of the policies was $469,679. The aggregate premiums paid by the Company since inception of the
policies is $958,266.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table presents fees for professional audit services rendered by KPMG LLP for the audit of the Company's
annual financial statements for the years ended February 29, 2004, and February 28, 2003, and fees billed for other services rendered
by KPMG LLP during those periods: Certain amounts for 2003 have been rounded to conform to the 2004 presentation.
2004
2003
-------------------------- --------------------------
Audit Fees
Audit-Related Fees
Tax Fees
All Other Fees
Total
$
$
338,200
11,000
79,900
9,100
318,500
10,400
89,600
37,800
-------------------------- --------------------------
456,300
$
================ ================
$
438,200
In the above table, in accordance with new SEC definitions and rules for proxy statements, “audit fees” are fees Helen of
Troy paid KPMG for professional services for the audit of Helen of Troy’s consolidated financial statements included in Form 10-K
and review of financial statements included in Form 10-Qs, or for services that are normally provided by the accountant in connection
with statutory and regulatory filings or engagements; “audit-related fees” are fees billed by KPMG LLP consisted principally of an
audit of our 401k plan; “tax fees” are fees for tax compliance, tax advice, and tax planning; and “all other fees” are fees billed by
KPMG LLP to Helen of Troy for other permissible work for services not included in the first three categories. In 2004 "all other
fees" consisted of services provided related to the sale of Tactica and research and advice regarding compensation and benefit issues
11
related to stock options. In 2003 "all other fees" consisted of assistance with various SEC filings and services provided to assist us
with the implementation of new accounting standards. These services are actively monitored (both spending level and work content)
by the Audit Committee to maintain the appropriate objectivity and independence in KPMG LLP’s core work, which is the audit of
the Company’s consolidated financial statements.
The Audit Committee pre-approved all of the services described above that were provided in fiscal 2004 in accordance with
the pre-approval requirements of the Sarbanes-Oxley Act, which became effective on May 6, 2003. Accordingly, there were no
services for which the de minimis exception, as defined in Section 202 of the Sarbanes-Oxley Act was applicable.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES, AND REPORTS ON FORM 8-K
The Company is amending the Index to Exhibits to include the certifications required by Rule 13a-14(a) of the Exchange Act and 18
U.S.C. Section 1350, as adopted pursuant to the Sarbanes-Oxley Act of 2002.
(c)
Exhibits
The following Exhibits are filed herewith:
31.3
31.4
32.3
32.4
Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) of the Exchange Act.
Certification of Chief Financial Officer and Principal Accounting Officer Pursuant to Rule 13a-14(a) of the Exchange
Act.
Certification of the Chief Executive Officer Pursuant to Rule 13a-14(b) of the Exchange Act and 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Certification of the Chief Financial and Principal Accounting Officer Pursuant to Rule 13a-14(b) of the Exchange Act
and 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
12
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
June 28, 2004
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.
/s/ Gerald J. Rubin /s/ Thomas J. Benson
Gerald J. Rubin
Chairman of the Board, Chief Executive Officer,
President, Director and Principal Executive Officer
June 28, 2004
Thomas J. Benson
Senior Vice President, Chief Financial Officer and
Principal Accounting Officer
June 28, 2004
/s/ Stanlee N. Rubin
Stanlee N. Rubin
Director
June 28, 2004
/s/ Daniel C. Montano
Daniel C. Montano
Director
June 28, 2004
/s/ John B. Butterworth
John B. Butterworth
Director
June 28, 2004
/s/ Byron H. Rubin
Byron H. Rubin
Director
June 28, 2004
/s/ Gary B. Abromovitz
Gary B. Abromovitz
Director, Deputy Chairman of the Board
June 28, 2004
/s/ Christopher L. Carameros
Christopher L. Carameros
Director
June 28, 2004
13
The following certification includes references to an evaluation of the effectiveness of the design and operation of
the company’s “disclosure controls and procedures” and to certain matters related to the company’s “internal control over
financial reporting.” Item 9A of Part II of the Annual Report on Form 10-K presents the conclusions of the CEO and the
CFO about the effectiveness of the company’s disclosure controls and procedures based on and as of the date of such
evaluation (relating to Item 4 of the certification), and contains additional information concerning disclosures to the
company’s Audit Committee and independent auditors with regard to deficiencies in internal control over financial
reporting and fraud and related matters (Item 5 of the certification).
Exhibit 31.3
CERTIFICATION
I, Gerald J. Rubin, certify that:
1. I have reviewed this Amendment No. 1 to the Annual Report on Form 10-K of Helen of Troy Limited;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects, the financial condition, results of operations and cash flows of the registrant as of,
and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which
this report is being prepared;
b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial
reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in
the registrant’s internal control over financial reporting.
Date: June 28, 2004
/s/ Gerald J. Rubin
Gerald J. Rubin
Chairman of the Board, Chief Executive Officer,
President and Principal Executive Officer
14
The following certification includes references to an evaluation of the effectiveness of the design and operation of
the company’s “disclosure controls and procedures” and to certain matters related to the company’s “internal control over
financial reporting.” Item 9A of Part II of the Annual Report on Form 10-K presents the conclusions of the CEO and the
CFO about the effectiveness of the company’s disclosure controls and procedures based on and as of the date of such
evaluation (relating to Item 4 of the certification), and contains additional information concerning disclosures to the
company’s Audit Committee and independent auditors with regard to deficiencies in internal control over financial
reporting and fraud and related matters (Item 5 of the certification).
Exhibit 31.4
I, Thomas J. Benson, certify that:
CERTIFICATION
1. I have reviewed this Amendment No. 1 to the Annual Report on Form 10-K of Helen of Troy Limited;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects, the financial condition, results of operations and cash flows of the registrant as of,
and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which
this report is being prepared;
b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial
reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in
the registrant’s internal control over financial reporting.
Date: June 28, 2004
/s/ Thomas J. Benson
Thomas J. Benson
Senior Vice President, Chief Financial Officer
and Principal Accounting Officer
15
CERTIFICATION
Exhibit 32.3
I, Gerald J. Rubin hereby certify, for the purposes of section 1350 of chapter 63 of title 18 of the United States
Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in my capacity as Chairman of
the Board, Chief Executive Officer, President and Principal Executive Officer of Helen of Troy Limited (the
"Company"), that, to my knowledge, the Amendment No. 1 to the Annual Report of Helen of Troy Limited on
Form 10-K for the period ended February 29, 2004, fully complies with the requirements of Section 13(a) of the
Securities Exchange Act of 1934 and that the information contained in such report fairly presents, in all material
respects, the financial condition and results of operation of the Company.
Date: June 28, 2004
/s/ Gerald J. Rubin
Gerald J. Rubin
Chairman of the Board, Chief Executive Officer,
President and Principal Executive Officer
16
CERTIFICATION
Exhibit 32.4
I, Thomas J. Benson hereby certify, for the purposes of section 1350 of chapter 63 of title 18 of the United
States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in my capacity as Senior
Vice President, Chief Financial Officer and Principal Accounting Officer of Helen of Troy Limited (the
"Company"), that, to my knowledge, the Amendment No. 1 to the Annual Report of Helen of Troy Limited on
Form 10-K for the period ended February 29, 2004, fully complies with the requirements of Section 13(a) of the
Securities Exchange Act of 1934 and that the information contained in such report fairly presents, in all material
respects, the financial condition and results of operation of the Company.
Date: June 28, 2004
/s/ Thomas J. Benson
Thomas J. Benson
Senior Vice President, Chief Financial Officer
and Principal Accounting Officer
17
Corporate Officers and Directors
Corporate Officers and Directors
Board of Directors
Gerald J. Rubin
Chairman, Chief Executive Officer and President
Daniel C. Montano
Director
Byron H. Rubin
Director
Gary B. Abromovitz
Director
Stanlee N. Rubin
Director
Christopher L. Carameros
Director
John Butterworth
Director
Officers
Gerald J. Rubin
Chairman, Chief Executive Officer and President
Arthur A. August
Executive Vice President, Sales, Marketing – Appliances and
Professional Division
Christopher L. Carameros
Executive Vice President, Finance, Accessories, International,
OXO International, and Idelle Labs
Donald Hall
Senior Vice President, Manufacturing
Robert D. Spear
Senior Vice President and Chief Information Officer
Rosanna Hall
Senior Vice President, Purchasing
Alex Lee
President, OXO International
Kevin James
Senior Vice President, International
Michael Cafaro
Senior Vice President, New Product Development and Engineering
Alan Ames
Senior Vice President, Sales – Accessories
Jack Jancin
Senior Vice President, Idelle Labs
Tom Benson
Senior Vice President and Chief Financial Officer
James R. Cooper
Vice President, Product Procurement and Forecasting
Felix Chavez
Vice President, Sales Operations
Larry S. Witt
Vice President, Sales and Marketing – OXO International
Robert C. Johnson
Vice President, Management Information Systems
Stuart Fox
Vice President, Sales – Appliances
Scott Hagstrom
Vice President, Sales – Professional Division
Scott Thrasher
Vice President, Sales – Appliances
Vincent Carson
Vice President, General Counsel and Secretary
John Boomer
Vice President, Corporate Business Development
Carlos Jovel
Vice President, Latin and Central America
Perry Sansone
Vice President, Sales – Idelle Labs
Uma Tripathi
Vice President, R&D – Idelle Labs
Diana Lesanics
Vice President, Marketing – Accessories
John Hunnicutt
Vice President, Marketing – Idelle Labs
Melinda Jordan
Vice President, Human Resources
Omar A. Tovar
Vice President, Distribution and Logistics
Deanna Nasser
Corporate Treasurer
Chris Weist
Corporate Controller – Operations
Coquis Casavantes
Corporate Tax Director
Rick Oppenheim
Corporate Controller – Finance
Shareholders Annual Meeting
Shareholders Annual Meeting
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 31,2004, 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 and
10-K/A, 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.
®
®
Product Innovation
Product Innovation
For more than 35 years, Helen of Troy has built a tradition of designing, developing and
marketing cutting-edge, high-quality beauty and personal care products. Its strong market
performance results from providing customers with the latest technology and innovations in
high-quality products marketed under the most instantly recognizable and trusted brand
names. And this leading position continues to build on a proven track record of searching
out and developing the latest advances for retail and professional consumers worldwide.
Helen of Troy's product innovations make huge impacts in the cutting-edge
professional salon market, where the Company has been the technological
vanguard with the Wigo®, Hot Tools®, and HotSpa® brands. Breakthroughs
such as jade plates in straighteners that transfer high temperatures and maintain
heat longer than conventional straighteners, and the palm-held Wigo® Onyx
Ionic® dryer with digital and ceramic technology provide professional salon
stylists the high quality, performance, and flexibility their field
Wigo Onyx Dryer
demands. The Company continues to develop new styling innovations and
technologies, cementing its dominance in professional styling salons worldwide.
Such intense drive to provide consumers with the highest-quality, most
technologically advanced styling tools extends to the retail personal care
appliance marketplace under brands with unparalleled name recognition.
Wigo Jade Straightener
In keeping with Revlon's long tradition of glamour and
beauty, the Company's Revlon Perfect Heat® styling irons bring high-heat
ceramic styling technology to the home, and the unique Perfect Heat® Dual
Edge straightener incorporates an innovative plate design that allows users to
create flips or get close to the roots for added volume. And Revlon Spa
appliances and gift sets deliver a wide array of spa-quality skin, facial and
nail treatments to consumers who feel the need to indulge themselves.
Helen of Troy also markets numerous products under the
Revlon Perfect Heat®
Dual Edge Straightener
Vidal Sassoon banner, including new Ion Select™ dryers that let users dial-in the
precise amount of hair-conditioning ions to suit their specific hair types – more
ions for thick hair, less for fine hair. Best-selling hair straightening and styling
irons incorporate Ionic®, ceramic and gold-plating technologies for beautiful,
long-lasting styles.
To relieve today's various stresses and strains, the Company's
Vidal Sassoon Ion Select™
Dryer
Dr. Scholl's line sets the market standard for the finest in personal care solutions.
From footbaths with Smart Heat technology to massage cushions and hand-held
massagers with innovative, patented design technology, the
Dr. Scholl's line provides head-to-toe relief with a trusted household name.
Consumers' trust in Helen of Troy carries through to its Sunbeam-brand
Dr. Scholl’s® Dual Head
Flex Massager
personal care appliances, which feature a full range of styling irons, straighteners, hairsetters
and dryers as well as hair clippers and trimmers, with exceptional quality and value.
¤
®
®
Vitalis
Helen of Troy has also recently introduced Health o meter® personal wellness products, a
complete line of massagers and footbaths specially designed to rejuvenate and revitalize the
body. The Company looks forward to expanding the Health o meter® line in this steadily
growing market.
The Company's reach in hair care product expertise goes beyond
appliances with a wide selection of brushes, combs and hair accessories under
the Vidal Sassoon and Revlon names. The DCNL brand provides the latest in
trendy hair care accessories, while the Karina line continues to be recognized
worldwide for top quality and style.
Building on a well-earned reputation in the world of personal
care appliances, Helen of Troy created the Idelle Labs division to
enter the competitive personal care liquids and lotions market. The
new venture has rapidly re-invigorated and re-energized several
Karina Accessories
and DCNL Brushes
recently acquired, well-known and trusted brands like Vitalis® hair care products,
Brut® cologne, Sea Breeze® skin astringent and Final Net® hair spray.
Helen of Troy continues and accelerates the drive to expand its
Grooming, Skin Care and
Hair Care Products
record for innovation and service into other diverse consumer markets. Recently,
the Company announced the acquisition of OXO International, a leader in the
field of consumer kitchen and storage wares. The OXO acquisition moves
Helen of Troy not only into new and exciting markets, but also into new horizons
of opportunity and innovation.
The Company has also expanded its market share internationally with
products found in homes throughout Europe, Asia and Latin America. In Europe,
OXO Good Grips™
Measuring Cup
the Vidal Sassoon line boasts one of the best-selling straighteners, which styles hair while
emitting hair-conditioning ions, as well as a wide array of personal care products such as
styling irons featuring ceramic technology and Ionic® dryers that produce style with smooth,
shiny results.
Furthermore, the Scholl's brand brings years of trusted and well-known
expertise to the personal therapeutic market with personal massagers that feature
heat and vibratory massage, and footbaths such as the best-selling “Retreat for
the Feet” foot spa, which offers consumers true innovation with a built-in nail
dryer and adjustable footrest. With long experience and successful market
performance, the Company looks forward to increasing its product lines and
worldwide presence under the international brands.
Coupled with Helen of Troy's commitment to unparalleled innovation and new
Retreat for the Feet
Foot Spa
technologies, the Company also realizes the importance of service to customers worldwide
with a customer-first strategy that emphasizes top-quality products and satisfaction.
Customers ensured that their needs are our main priority reward us with repeat business and
trust, enabling us to build a solid foundation of long-lasting loyalty in highly competitive
markets worldwide.
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) / Vitapointe® is a registered trademark of Sara Lee Household and Body Care UK Limited / Sea Breeze® is
a registered trademark of Shiseido Company, Ltd. / Sunbeam®, Health at Home® and Health o meter® are trademarks used under license from
Sunbeam Products, Inc.
®(cid:0)
®
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