EXHIBIT 13
FINANCIAL TABLE OF CONTENTS
Management's Report 17
Ten-Year Summary 18
Common Stock Data 18
Management's Discussion and Analysis 20
Consolidated Financial Statements 22
Notes to Consolidated Financial Statements 26
Independent Accountants' Report 33
Management Information 34
Corporate and Stockholder Information 35
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MANAGEMENT'S REPORT Helene Curtis Industries, Inc. and Subsidiaries
- --------------------------------------------------------------------------------
The consolidated financial statements presented in this annual report have been
prepared by the Company in conformity with generally accepted accounting
principles. The management of Helene Curtis Industries, Inc. is responsible for
all information and representations made in this report and for the integrity
and objectivity of the financial statements. The statements include informed
judgements and estimates necessary for their preparation.
Systems of internal accounting controls are designed to be cost-effective
while providing reasonable assurance that assets are safeguarded from
unauthorized use or disposition, that transactions are properly recorded and
that financial statements conform in all material respects with generally
accepted accounting principles. Internal accounting control systems and related
financial policies and procedures are communicated to employees responsible for
accounting and reporting activities. The systems are continually reviewed and
modified, where appropriate.
Internal auditors, using audit programs designed to determine compliance
with financial policies and procedures and the systems of internal accounting
controls, independently monitor the effectiveness of the Company's application
of these control systems. Their findings are reported to operating management
for resolution as needed.
The selection of the Company's independent accountants, Coopers & Lybrand,
has been approved by the Board of Directors. The audit of the Company's
consolidated financial statements by the independent accountants is made in
accordance with generally accepted auditing standards and is coordinated with
the Company's internal audit program.
The Audit Committee, comprised solely of outside directors who are not
employees of the Company, meets regularly with the independent accountants and
with management to review the results and findings of the audit work, the
evaluation of the adequacy of internal controls and the quality of financial
reporting. The internal auditors, as well as all financial and other personnel
of the Company, are available to the Audit Committee and to the independent
accountants. Reports of the internal auditors are, as a matter of regular
procedure, available to the independent accountants and to the Audit Committee.
/s/ Ronald J. Gidwitz /s/ Mary J. Oyer
Ronald J. Gidwitz Mary J. Oyer
President and Chief Executive Officer Vice President and Corporate Controller
17
TEN-YEAR SUMMARY
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Dollar amounts in thousands, except per-share data
Years ended February 28 or 29, 1994 1993 1992 1991 1990
- ----------------------------------------------------------------------------------------------------------------------
CONTINUING OPERATIONS
Net sales . . . . . . . . . . . . . . . . $1,187,081 $1,167,819 $1,019,911 $ 867,708 $ 690,863
Gross profit. . . . . . . . . . . . . . . $ 657,414 $ 653,372 $ 565,931 $ 493,293 $ 403,380
Gross profit percent. . . . . . . . . . . 55.4% 55.9% 55.5% 56.9% 58.4%
Earnings before income taxes. . . . . . . $ 27,486 $ 40,492 $ 35,622 $ 16,272 $ 30,196
Earnings. . . . . . . . . . . . . . . . . $ 14,293 $ 22,109 $ 19,236 $ 6,502 $ 17,446
Earnings per share. . . . . . . . . . . . $ 1.51 $ 2.33 $ 2.04 $ .70 $ 1.87
Average number of
shares outstanding . . . . . . . . . . 9,476,484 9,506,541 9,439,493 9,323,897 9,320,787
Dividends paid per share:
Common Stock . . . . . . . . . . . . . $ .24 $ .24 $ .20 $ .20 $ .175
Class B Common Stock . . . . . . . . . $ .19 $ .19 $ .15 $ .15 $ .125
- ------------------------------------------------------------------------------------------------------------------------
FINANCIAL POSITION
Total assets. . . . . . . . . . . . . . . $ 612,483 $ 600,085 $ 542,380 $ 479,981 $ 403,476
Working capital . . . . . . . . . . . . . $ 151,195 $ 151,484 $ 146,931 $ 121,189 $ 124,467
Current ratio . . . . . . . . . . . . . . 1.7 1.7 1.7 1.7 2.0
Long-term debt. . . . . . . . . . . . . . $ 160,990 $ 154,438 $ 146,412 $ 126,298 $ 108,545
Stockholders' equity. . . . . . . . . . . $ 199,444 $ 186,200 $ 168,455 $ 150,971 $ 148,826
Stockholders' equity per share. . . . . . $ 21.12 $ 19.85 $ 18.07 $ 16.36 $ 16.21
Return on stockholders' equity. . . . . . 6.7% 12.5% 12.0% 1.1% 12.0%
Capital expenditures. . . . . . . . . . . $ 44,991 $ 35,381 $ 35,583 $ 32,307 $ 49,319
- ----------------------------------------------------------------------------------------------------------------------
Per-share data reflects a two-for-one stock split in 1990.
Gross profit and gross profit percent amounts for all years prior to 1994
were restated to reflect the reclassification of certain amounts to conform
to the current year's presentation.
COMMON STOCK DATA
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Helene Curtis Industries, Inc. shares are traded on the New York Stock
Exchange (ticker symbol: HC).
The market price ranges and close, by quarter, for the past two fiscal
years were:
1994 1993
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HIGH LOW CLOSE High Low Close
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First quarter . . . . . . . . . . . . . . 43 3/4 32 1/4 33 3/4 42 1/8 34 1/2 36
Second quarter. . . . . . . . . . . . . . 34 1/8 25 3/4 26 3/4 36 1/8 30 1/4 33
Third quarter . . . . . . . . . . . . . . 27 3/4 25 26 1/2 43 1/2 31 7/8 43 1/2
Fourth quarter. . . . . . . . . . . . . . 29 1/8 24 7/8 25 3/4 47 3/8 41 1/4 43 1/2
Number of stockholders of record at February 28, 1994: 1,687
18
TEN-YEAR SUMMARY Helen Curtis Industries, Inc. And Subsidiaries
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Dollar amounts in thousands, except per-share data
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Years ended February 28 or 29, 1989 1988 1987 1986 1985
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CONTINUING OPERATIONS
Net sales . . . . . . . . . . . . . . . . $ 584,497 $ 458,519 $ 373,927 $ 336,185 $ 306,736
Gross profit. . . . . . . . . . . . . . . $ 352,406 $ 275,068 $ 222,729 $ 198,959 $ 179,199
Gross profit percent. . . . . . . . . . . 60.3% 60.0% 59.6% 59.2% 58.4%
Earnings before income taxes. . . . . . . $ 25,803 $ 19,483 $ 20,212 $ 17,575 $ (1,988)
Earnings. . . . . . . . . . . . . . . . . $ 15,224 $ 10,618 $ 10,157 $ 9,139 $ 1,216
Earnings per share. . . . . . . . . . . . $ 1.81 $ 1.44 $ 1.38 $ 1.25 $ .17
Average number of shares outstanding. . . 8,422,052 7,380,286 7,335,316 7,337,998 7,339,046
Dividends paid per share:
Common Stock. . . . . . . . . . . . . . . $ .15 $ .15 $ .15 -- --
Class B Common Stock. . . . . . . . . . . $ .10 $ .10 $ .10 -- --
- ----------------------------------------------------------------------------------------------------------------------
FINANCIAL POSITION
Total assets. . . . . . . . . . . . . . . $ 325,193 $ 236,662 $ 198,182 $ 175,483 $ 181,096
Working capital . . . . . . . . . . . . . $ 87,283 $ 53,309 $ 48,926 $ 45,972 $ 50,388
Current ratio . . . . . . . . . . . . . . 1.7 1.5 1.6 1.7 1.7
Long-term debt. . . . . . . . . . . . . . $ 50,833 $ 32,403 $ 28,882 $ 29,904 $ 46,518
Stockholders' equity. . . . . . . . . . . $ 131,795 $ 88,827 $ 77,408 $ 67,286 $ 55,490
Stockholders' equity per share. . . . . . $ 14.44 $ 11.98 $ 10.54 $ 9.17 $ 7.56
Return on stockholders' equity. . . . . . 13.1% 13.0% 14.2% 18.0% 5.0%
Capital expenditures. . . . . . . . . . . $ 35,563 $ 15,903 $ 13,182 $ 13,021 $ 14,449
- ----------------------------------------------------------------------------------------------------------------------
19
MANAGEMENT'S DISCUSSION
AND ANALYSIS Helene Curtis Industries, Inc. and Subsidiaries
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RESULTS OF OPERATIONS
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OVERVIEW
Fiscal year 1994 was extremely challenging. The largest market in which the
Company competes, U.S. hair care, was down slightly from the prior year. Despite
the challenging conditions, the Company's consolidated net sales were a record
$1.19 billion in 1994, compared to $1.17 billion in 1993, representing an
increase of $19 million, or 2%. Higher sales in international markets and the
U.S. antiperspirant/deodorant market were offset by lower sales in the U.S. hair
care market.
While the Company does not see any dramatic change in the markets in which
it competes, it is well positioned to grow in both sales and profits for fiscal
year 1995 and beyond. While doing this, the Company will continue to build for
the long term taking the strategic initiatives necessary to remain a key
competitor. As in the past, the Company will continue to support existing brands
(through aggressive promotion/advertising programs and relaunches) and will also
create new brands using proprietary product innovations.
The Company's future results may continue to be affected by a number of
uncertainties regarding economic and market conditions; increased levels of
competitive activity; foreign currency exchange rates; and interest rates.
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FISCAL 1994 COMPARED WITH FISCAL 1993
Domestic net sales decreased approximately 5%, compared with the prior year,
largely due to the decline in sales of the Company's hair care brands--
particularly Salon Selectives and Vibrance. This decline can be attributed to a
decrease in the U.S. hair care market, intense competitive activity and a
reduction in retail inventory levels. Sales of the Company's professional hair
care products also declined as a result of lower sales of perm products due to
current style trends and a decrease in salon traffic attributable to an
uncertain economy. These disappointing results were partially offset by
increases in sales of Suave skin lotion and in the antiperspirant/deodorant
category where the Company's two brands, Degree and Suave, recorded sales
increases of almost 9%--significantly higher than the market growth rate.
International net sales increased approximately 17%, compared with the prior
year, largely due to favorable currency translation in Japan where sales
increased 16%. On a local currency basis, sales increased 1% in Japan in spite
of a weak economy and changing distribution environment. Conversely,
significantly higher local currency sales in the United Kingdom and Canada were
mostly offset by the unfavorable impact of currency translation. Sales from the
Company's two newest wholly-owned subsidiaries in Scandinavia and Italy also
contributed to the increase in international sales.
Cost of sales increased $15 million, or 3%, in 1994 mainly due to higher
sales volume. As a percentage of net sales, cost of sales increased to 44.6% in
1994 from 44.1% in 1993, primarily due to changes in product mix. Domestically,
the shift was unfavorable as sales of higher gross profit margin products, such
as Salon Selectives and Vibrance, decreased. Internationally, gross profit
margins improved reflecting the introduction of higher margin products in the
Company's two new subsidiaries and Japan.
Selling, general and administrative expenses increased $17 million, or 3%,
in 1994. As a percentage of net sales, these expenses increased to 52.4% in 1994
from 51.8% in 1993. Selling and marketing expenses were higher in response to
increased competition and difficult market conditions; and support of new
product and subsidiary initiatives in international markets. These increases
were partially offset by significantly lower executive bonus and profit sharing
expenses as a result of the Company's lower than expected earnings performance.
Interest expense remained constant at $8 million in 1994 and 1993 as the
lower cost of borrowing was offset by higher levels of borrowing compared to the
prior year.
The effective tax rate increased to 48% in 1994, compared with 45% in 1993,
principally due to the increase in the statutory U.S. federal tax rate of 1% and
higher effective tax rates for the Company's international operations compared
to the prior year.
Earnings before the cumulative effect of the accounting change discussed
below decreased approximately 35% to $14 million ($1.51 per share) in 1994 from
$22 million ($2.33 per share) in 1993. The decrease was primarily due to a shift
in sales mix toward products with a lower profit margin, higher selling and
marketing expenses (as a percentage of net sales) and a higher effective tax
rate.
As part of adopting Statement of Financial Accounting Standards No. 106
"Employers' Accounting for Postretirement Benefits Other Than Pensions," the
cumulative effect resulted in a one-time, non-cash charge against earnings of
$2.2 million, or $1.4 million ($.14 per share) after taxes. This new standard
requires the accrual of postretirement benefits during the years an employee
provides service to the Company. These expenses were previously recognized on a
cash basis.
20
Helene Curtis Industries, Inc. and Subsidiaries
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RESULTS OF OPERATIONS (continued)
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FISCAL 1993 COMPARED WITH FISCAL 1992
Consolidated net sales in 1993 were $1.17 billion, representing an increase
of $148 million, or 15% over 1992. This increase reflected significant growth
in all of the Company's product categories, domestically and internationally.
Domestic net sales increased approximately 13%, compared with the prior
year. This increase was primarily attributable to the continued strength of the
Suave brand and the introduction of Vibrance - the Company's newest brand of
shampoos and conditioners - launched in December 1991. Substantial percentage
increases in both of the Company's antiperspirant/deodorant brands, Degree and
Suave, also contributed to the increase in net sales. Net sales for the
Company's professional products showed strong percentage increases from the
prior year.
International net sales increased approximately 19%, compared with the prior
year. This increase was led by a 22% (15% in local currency) growth rate in
Japan due to significant sales gains for Salon Selectives brand products. Salon
Selectives also performed well in the United Kingdom and Australia, following
its fiscal 1992 introductions in those markets.
Cost of sales increased $60 million, or 13%, in 1993 as a result of higher
sales volume. As a percentage of net sales, cost of sales decreased to 44.1% in
1993 from 44.5% in 1992, primarily due to the introduction of products with
higher gross profit margins and decreases in certain component costs.
Selling, general and administrative expenses increased $85 million, or 16%,
in 1993. As a percentage of net sales, these expenses increased to 51.8% in 1993
from 51.0% in 1992. The increase as a percentage of net sales was principally
due to the increase in promotion initiatives including the support of new
product launches, as well as both trade customer and consumer activities for
established products.
Interest expense decreased to $8 million in 1993 from $10 million in 1992,
as a result of a lower cost of borrowing due to generally declining interest
rates in the marketplace. The lower cost was partially offset by higher levels
of borrowing during 1993 to support capital spending.
Income taxes increased with earnings while the effective tax rate decreased
to 45% in 1993, compared with 46% in 1992.
Earnings increased approximately 15% to $22 million ($2.33 per share) in
1993 from $19 million ($2.04 per share) in 1992. The increase was primarily due
to higher net sales as reduced interest expense and the lower cost of sales (as
a percentage of net sales) were mostly offset by higher selling, general and
administrative expenses (as a percentage of net sales). New product launches,
such as Vibrance and Suave facial care in the U.S., and a response to increased
competition in Japan resulted in higher advertising and promotional spending in
the current year.
FINANCIAL CONDITION
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LIQUIDITY AND CAPITAL RESOURCES
Cash and equivalents decreased to $3 million at year end, compared with $8
million the prior year. The Company continues to fund capital expenditures
through cash provided from operations and additional borrowings.
Net cash provided by operating activities increased 31% to $38 million in
1994 from $29 million in 1993, as lower earnings in 1994 compared to 1993 were
more than offset by the favorable cash flow impact of changes in operating
assets and liabilities. The decrease in receivables of $12 million was largely
due to the corresponding fourth-quarter decrease in net sales (excluding impact
of exchange rate changes) as compared with the fourth quarter of the prior year.
The decrease in payables and accrued expenses of $16 million was primarily due
to the timing of purchases and payments affecting trade payables and the
reduction of certain compensation related accruals which are based on the
Company's earnings performance. At year end, working capital of $151 million and
the current ratio of 1.7 to 1 were the same as the prior year end.
Capital spending increased to $45 million in 1994 from $35 million in 1993.
The capital expenditures in both years included a large number of moderate
investments primarily to increase the Company's manufacturing and distribution
output and efficiencies. One of the larger capital expenditures in 1994 was the
continued investment in a multi-year project to manufacture
antiperspirant/deodorant sticks in-house which will result in long-term cost
savings in this rapidly growing category. The Company expects to continue this
level of investment to support the business operations.
The total debt to capitalization ratio decreased to 46% at year end,
compared with 47% the prior year as total debt increased slightly to $168
million from $164 million. The effect of the increase in total debt was more
than offset by the increase in stockholders' equity from the current year's net
earnings. In March of 1994, the Company borrowed $50 million under a private
placement agreement whereby senior unsecured notes were issued. These notes
mature in March 2001 and 2004. The funds will be used for general corporate
purposes and to refinance existing debt.
Dividend payments remained constant at $2.2 million in 1994 and 1993. The
Company's dividend policy is to grant a quarterly dividend of six cents per
share to holders of its Common Stock, and one cent per share in the first
quarter and six cents per share in each of the final three quarters of the
fiscal year for holders of its Class B Common Stock. The Company expects to
grant the same quarterly dividends in 1995.
Management believes the funds to be provided from operations and present
credit arrangements will be sufficient to meet the Company's anticipated working
capital needs and capital expenditure requirements.
21
CONSOLIDATED STATEMENTS
OF EARNINGS Helene Curtis Industries, Inc. and Subsidiaries
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Dollar amounts in thousands, except per-share data
Years ended February 28 or 29, 1994 1993 1992
- ----------------------------------------------------------------------------------------------------
NET SALES. . . . . . . . . . . . . . . . . . . . . . . $1,187,081 $1,167,819 $1,019,911
---------- ---------- ----------
Costs and expenses:
Cost of sales. . . . . . . . . . . . . . . . . . . . 529,667 514,447 453,980
Selling, general and administrative. . . . . . . . . 622,288 605,113 520,049
Interest . . . . . . . . . . . . . . . . . . . . . . 7,640 7,767 10,260
---------- ---------- ----------
1,159,595 1,127,327 984,289
---------- ---------- ----------
EARNINGS BEFORE INCOME TAXES
AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE . . . . . 27,486 40,492 35,622
Provision for income taxes . . . . . . . . . . . . . . 13,193 18,383 16,386
---------- ---------- ----------
EARNINGS BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGE . . . . . . . . . . . . . . . . 14,293 22,109 19,236
Cumulative effect of accounting change . . . . . . . . (1,351) -- --
---------- ---------- ----------
NET EARNINGS . . . . . . . . . . . . . . . . . . . . . $ 12,942 $ 2,109 $ 19,236
---------- ---------- ----------
---------- ---------- ----------
NET EARNINGS PER SHARE:
Earnings before cumulative effect
of accounting change . . . . . . . . . . . . . . . $ 1.51 $ 2.33 $ 2.04
Cumulative effect of accounting change . . . . . . . (.14) -- --
---------- ---------- ----------
Net earnings . . . . . . . . . . . . . . . . . . . . $ 1.37 $ 2.33 $ 2.04
---------- ---------- ----------
---------- ---------- ----------
Average number of shares outstanding . . . . . . . . . 9,476,484 9,506,541 9,439,493
---------- ---------- ----------
---------- ---------- ----------
The accompanying notes are an integral part of the consolidated financial
statements.
22
CONSOLIDATED BALANCE SHEETS Helene Curtis Industries, Inc. and Subsidiaries
- -------------------------------------------------------------------------------
Dollar amounts in thousands
As of February 28, 1994 1993
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ASSETS
Current assets:
Cash and equivalents . . . . . . . . . . . . . . . $ 2,802 $ 7,564
Receivables--net . . . . . . . . . . . . . . . . . 242,514 245,769
Inventories. . . . . . . . . . . . . . . . . . . . 102,344 102,095
Other current assets . . . . . . . . . . . . . . . 20,059 22,406
--------- ---------
Total current assets. . . . . . . . . . . . . . 367,719 377,834
--------- ---------
Property, plant and equipment:
Land . . . . . . . . . . . . . . . . . . . . . . . 16,142 16,129
Buildings and improvements . . . . . . . . . . . . 102,271 90,852
Machinery and equipment. . . . . . . . . . . . . . 128,012 112,715
Construction in progress . . . . . . . . . . . . . 46,246 33,692
--------- ---------
292,671 253,388
Less accumulated depreciation. . . . . . . . . . . 77,402 60,986
--------- ---------
Net property, plant and equipment . . . . . . . 215,269 192,402
--------- ---------
Other assets . . . . . . . . . . . . . . . . . . . . 29,495 29,849
--------- ---------
Total assets . . . . . . . . . . . . . . . . . . . . $ 612,483 $ 600,085
--------- ---------
--------- ---------
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt. . . . . . . . . . . . . . . . . . $ 7,361 $ 9,252
Accounts payable . . . . . . . . . . . . . . . . . 99,566 106,759
Income taxes . . . . . . . . . . . . . . . . . . . 8,401 9,425
Advertising and promotion. . . . . . . . . . . . . 54,843 55,029
Other accrued expenses . . . . . . . . . . . . . . 46,353 45,885
-------- --------
Total current liabilities . . . . . . . . . . . 216,524 226,350
Long-term debt . . . . . . . . . . . . . . . . . . . 160,990 154,438
Deferred income taxes. . . . . . . . . . . . . . . . 15,230 15,720
Accrued retirement and other benefits. . . . . . . . 20,295 17,377
-------- --------
Total liabilities . . . . . . . . . . . . . . . 413,039 413,885
-------- --------
Stockholders' equity:
Common Stock, issued 7,921,471 shares (1994)
and 7,913,771 (1993). . . . . . . . . . . . . . 3,961 3,957
Class B Common Stock, issued 3,072,669 shares (1994)
and 3,080,369 (1993). . . . . . . . . . . . . . 1,536 1,540
Capital in excess of par value . . . . . . . . . . 40,548 39,032
Retained earnings. . . . . . . . . . . . . . . . . 161,045 150,318
Currency translation adjustment. . . . . . . . . . 1,218 543
Treasury shares (Common), 1,114,031 (1994)
and 1,168,673 (1993), at cost . . . . . . . . . (8,864) (9,190)
--------- ---------
Total stockholders' equity. . . . . . . . . . . 199,444 186,200
--------- ---------
Total liabilities and stockholders' equity . . . . . $ 612,483 $ 600,085
--------- ---------
--------- ---------
The accompanying notes are an integral part of the consolidated financial
statements.
23
CONSOLIDATED STATEMENTS
OF CASH FLOWS Helene Curtis Industries, Inc. and Subsidiaries
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Dollar amounts in thousands
Years ended February 28 or 29, 1994 1993 1992
- ----------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings . . . . . . . . . . . . . . . . . . . . $12,942 $22,109 $19,236
Adjustments to net earnings:
Depreciation and amortization. . . . . . . . . . . 25,717 22,277 18,765
Provision for deferred taxes . . . . . . . . . . . 1,656 2,733 (180)
Cumulative effect of accounting change . . . . . . 1,351 -- --
Other. . . . . . . . . . . . . . . . . . . . . . . 1,256 4,519 2,599
Changes in operating assets and liabilities:
Receivables--net . . . . . . . . . . . . . . . . 11,826 (21,961) (33,029)
Inventories. . . . . . . . . . . . . . . . . . . 1,186 (7,910) 1,731
Payables and accrued expenses. . . . . . . . . . (16,482) 19,407 17,868
Other. . . . . . . . . . . . . . . . . . . . . . (1,865) (12,191) (2,120)
------- ------- -------
Net cash provided by operating activities. . . 37,587 28,983 24,870
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures . . . . . . . . . . . . . . . . (44,991) (35,381) (35,583)
Other . . . . . . . . . . . . . . . . . . . . . . . (815) (6,527) (360)
------- ------- -------
Net cash used by investing activities. . . . . (45,806) (41,908) (35,943)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings . . . . . . . . . . . . . . 18,852 71,343 42,427
Repayment of borrowings. . . . . . . . . . . . . . . (14,199) (57,347) (22,564)
Dividends paid . . . . . . . . . . . . . . . . . . . (2,215) (2,195) (1,790)
Other . . . . . . . . . . . . . . . . . . . . . . . 589 (471) (75)
------- ------- -------
Net cash provided by financing activities. . . 3,027 11,330 17,998
------- ------- -------
Effect of exchange rate changes on cash
and equivalents. . . . . . . . . . . . . . . . . . . 430 (382) 353
------- ------- -------
Increase (decrease) in cash and equivalents. . . . . . (4,762) (1,977) 7,278
Cash and equivalents at beginning of year. . . . . . . 7,564 9,541 2,263
------- ------- -------
Cash and equivalents at end of year. . . . . . . . . . $ 2,802 $ 7,564 $ 9,541
------- ------- -------
------- ------- ------
- ----------------------------------------------------------------------------------------------------
Supplemental cash flow data:
Cash paid during the year for:
Interest . . . . . . . . . . . . . . . . . . . . . $ 7,702 $ 8,117 $10,291
Income taxes . . . . . . . . . . . . . . . . . . . $13,035 $14,509 $15,200
- ----------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated financial
statements.
24
CONSOLIDATED STATEMENTS
OF STOCKHOLDERS' EQUITY Helene Curtis Industries, Inc. and Subsidiaries
- -------------------------------------------------------------------------------
Dollar amounts in thousands
Class B Treasury Shares
Common Stock Common Stock Capital in Currency (Common)
------------------ ------------------- Excess of Retained Translation ------------------
Shares Amount Shares Amount Par Value Earnings Adjustment Shares Amount
- ---------------------------------------------------------------------------------------------------------------------------------
BALANCE, FEBRUARY 28, 1991 . . 7,711,766 $3,856 3,282,374 $1,641 $34,919 $112,958 $1,904 1,314,357 $(4,307)
Net earnings 1992 . . . . . . 19,236
Currency translation
adjustment . . . . . . . . 96
Issuance of treasury stock
for various plans. . . . . 1,698 (152,821) 583
Repurchase of
Common Stock . . . . . . . 65,894 (2,339)
Exchange of Class B
Common Stock for
Common Stock . . . . . . . 201,665 101 (201,665) (101)
Cash dividends paid . . . . . (1,790)
--------- ------ --------- ------ ------- -------- ------ --------- -------
BALANCE, FEBRUARY 29, 1992 . . 7,913,431 $3,957 3,080,709 $1,540 $36,617 $130,404 $2,000 1,227,430 $(6,063)
Net earnings 1993 . . . . . . 22,109
Currency translation
adjustment . . . . . . . . (1,457)
Issuance of treasury stock
for various plans. . . . . 2,415 (152,453) 906
Repurchase of
Common Stock . . . . . . . 93,696 (4,033)
Exchange of Class B
Common Stock for
Common Stock . . . . . . . 340 (340)
Cash dividends paid . . . . . (2,195)
--------- ------ --------- ------ ------- -------- ------ --------- -------
BALANCE, FEBRUARY 28, 1993 . . 7,913,771 $3,957 3,080,369 $1,540 $39,032 $150,318 $ 543 1,168,673 $(9,190)
Net earnings 1994 . . . . . . 12,942
Currency translation
adjustment . . . . . . . . 675
Issuance of treasury stock
for various plans. . . . . 1,516 (68,750) 543
Repurchase of
Common Stock . . . . . . . 14,108 (217)
Exchange of Class B
Common Stock for
Common Stock . . . . . . . 7,700 4 (7,700) (4)
Cash dividends paid . . . . . (2,215)
--------- ------ --------- ------ ------- -------- ------ --------- -------
BALANCE, FEBRUARY 28, 1994 . . 7,921,471 $3,961 3,072,669 $1,536 $40,548 $161,045 $1,218 1,114,031 $(8,864)
--------- ------ --------- ------ ------- -------- ------ --------- -------
--------- ------ --------- ------ ------- -------- ------ --------- -------
The accompanying notes are an integral part of the consolidated financial
statements.
25
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS Helene Curtis Industries, Inc. and Subsidiaries
- -------------------------------------------------------------------------------
Dollar amounts in thousands
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- -------------------------------------------------------------------------------
The consolidated financial statements include the accounts of all subsidiaries.
All significant intercompany transactions and balances have been eliminated in
consolidation. Subsidiaries located outside the United States and Canada have
been included on the basis of their years ended December 15 or 31 to facilitate
timely consolidation of financial statements.
Assets and liabilities of foreign operations are translated at year-end
rates of exchange and the income statements are translated at the average rates
of exchange for the year. Gains or losses resulting from translating foreign
currency financial statements are accumulated in a separate component of
stockholders' equity. Gains or losses resulting from foreign currency
transactions are generally included in net earnings and were not material in any
of the years presented.
The Company considers securities with original maturities of three months or
less to be cash equivalents.
Property, plant and equipment is stated at cost. Provision for depreciation
is computed principally using the straight-line method over estimated useful
lives.
Income taxes are provided based on the provisions of Statement of Financial
Accounting Standard (SFAS) No. 109, "Accounting for Income Taxes." Deferred
income taxes are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which temporary differences are estimated to be recovered
or settled. The effect on deferred taxes of a change in tax rates is recognized
in income in the period of enactment.
Certain prior year amounts have been reclassified to conform to the current
year's presentation.
Additional significant accounting policies are presented in the following
notes, as appropriate.
2. RECEIVABLES
- -------------------------------------------------------------------------------
Receivables, principally trade, consist of the following amounts at February 28:
1994 1993
- -------------------------------------------------------------------------------
Accounts receivable. . . . . . . . . . . . . . . . $187,452 $198,968
Notes receivable . . . . . . . . . . . . . . . . . 60,161 51,247
-------- --------
247,613 250,215
Less allowance for doubtful accounts . . . . . . . 5,099 4,446
-------- --------
$242,514 $245,769
-------- --------
-------- --------
3. INVENTORIES
- -------------------------------------------------------------------------------
Inventories consist of the following components at February 28:
1994 1993
- -------------------------------------------------------------------------------
Raw materials. . . . . . . . . . . . . . . . . . . $ 16,252 $ 20,705
Work in process. . . . . . . . . . . . . . . . . . 2,037 1,912
Finished goods . . . . . . . . . . . . . . . . . . 84,055 79,478
-------- --------
$102,344 $102,095
-------- --------
-------- --------
Year-end inventories, valued using the LIFO method, amounted to $70,552 and
$71,844 for 1994 and 1993, respectively, with remaining inventories valued at
the lower of FIFO cost or market. Approximate current cost exceeded LIFO cost at
year end by $2,893 and $2,562 for 1994 and 1993, respectively.
26
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS Helene Curtis Industries, Inc. and Subsidiaries
- -------------------------------------------------------------------------------
Dollar amounts in thousands
4. LONG-TERM DEBT
- -------------------------------------------------------------------------------
Long-term debt consists of the following at February 28:
1994 1993
- -------------------------------------------------------------------------------
$180,000 Unsecured Revolving Credit Facility -
due 1998; 1994 - 4.2%, 1993 - 4.1%. . . . . . . $124,000 $117,000
6.68% Unsecured Notes - due 1996 . . . . . . . . . 25,000 25,000
Industrial Development Revenue Bonds - due 2007;
1994 - 2.5%, 1993 - 2.1%. . . . . . . . . . . . 6,000 6,000
Other. . . . . . . . . . . . . . . . . . . . . . . 6,646 6,966
-------- --------
161,646 154,966
Less current maturities included in
short-term debt . . . . . . . . . . . . . . . . 656 528
-------- --------
$160,990 $154,438
-------- --------
-------- --------
The $180,000 Unsecured Revolving Credit Facility has an "evergreen"
provision allowing the Company to request a one-year extension on each
anniversary date. The various debt agreements require the Company to maintain
certain financial ratios relating to fixed charge coverage and leverage among
others. The following payments are required during the next five fiscal years:
1995 - $656; 1996 - $25,706; 1997 - $415; 1998 - $124,211 and 1999 - $51.
The Company had unused lines of credit of approximately $76,785 with various
banks at February 28, 1994. The related commitment fees are not material.
The fair values of long-term debt instruments approximate the recorded
values.
Subsequent to the fiscal year end, the Company entered into a $50,000
private placement whereby senior unsecured notes were issued in March of 1994.
The private placement was comprised of $27,500 of 6.11% unsecured notes,
maturing in March of 2001, and $22,500 of 6.50% unsecured notes, maturing in
March of 2004. The funds will provide the Company with additional debt capacity
to be used for general corporate purposes and to refinance existing debt.
5. RETIREMENT PLANS AND OTHER BENEFITS
- -------------------------------------------------------------------------------
RETIREMENT PLANS
The Company provides retirement benefits to substantially all employees
through profit sharing plans and other retirement plans. The profit sharing
plans cover employees in the U.S. and Canada; and, Company contributions are
discretionary. Retirement coverage for employees in the other foreign
subsidiaries is provided through separate plans often based on local statutes.
The provision for retirement benefit costs charged to operations was as
follows:
1994 1993 1992
- -------------------------------------------------------------------------------
Profit sharing plans . . . . . . . . . . . $ 8,281 $ 9,509 $7,793
Other retirement plans . . . . . . . . . . 2,098 1,287 1,041
------- ------- ------
$10,379 $10,796 $8,834
------- ------- ------
------- ------- ------
At February 28, 1994, the liability for unfunded retirement benefits for
all plans combined was $11,586.
- -------------------------------------------------------------------------------
POSTRETIREMENT BENEFITS
In fiscal 1994, the Company adopted SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions." This new standard requires that
the expected cost of retiree health benefits, such as the Company's payment of
Medicare Part B premiums for retirees, be charged to expense during the years
the employees render service rather than the Company's past practice of
recognizing this cost on a cash basis. As part of adopting the new standard in
the first quarter, the Company recorded a one-time, non-cash charge against
earnings of $2,178 before taxes and $1,351 after taxes or $.14 per share. In
addition to the cumulative effect, the Company recorded $323 in additional
postretirement benefit cost in fiscal 1994 as a result of adopting the new
standard. The unfunded accumulated postretirement benefit obligation as of
February 28, 1994 was $2,424.
- -------------------------------------------------------------------------------
POSTEMPLOYMENT BENEFITS
In November 1992, the Financial Accounting Standards Board issued SFAS No.
112, "Employers' Accounting for Postemployment Benefits." This new standard will
require the accrual of postemployment benefits during the years an employee
provides service to the Company. The current annual expense for these benefits,
presently recognized on a pay-as-you-go basis, is not material. The impact of
the adoption is not expected to have a material effect on the Company's
consolidated financial position. The Company plans to adopt SFAS No. 112 on the
fiscal 1995 required effective date.
27
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS Helene Curtis Industries, Inc. and Subsidiaries
- -------------------------------------------------------------------------------
Dollar amounts in thousands, except per-share data
6. COMMON STOCK AND STOCK PLANS
- -------------------------------------------------------------------------------
At February 28, 1994, 10,000,000 shares of $.50 par value Preferred Stock were
authorized and unissued, and 30,000,000 shares each of $.50 par value Common
Stock and $.50 par value Class B Common Stock were authorized.
The Class B Common Stock is identical to the Common Stock, except that it
has ten-times greater voting power but lesser dividend rights per share than the
Common Stock. While transfer of the Class B Common Stock is restricted, the
Class B Common Stock is convertible at no cost into Common Stock on a
share-for-share basis; under certain conditions, all outstanding shares of the
Class B Common Stock must be converted.
Earnings per share are computed by dividing net earnings by the weighted
average number of shares outstanding during the year. Common stock equivalents,
which are shares issuable on the exercise of stock options net of shares assumed
to have been purchased with the proceeds, have been included in this
computation.
- -------------------------------------------------------------------------------
1979 NON-QUALIFIED STOCK OPTION PLAN
Under the 1979 Non-Qualified Stock Option Plan, which expired in 1989,
options were granted to officers and other key employees of the Company and its
subsidiaries to purchase shares from the Company for $1 each. Acquired shares
are non-transferable and may be resold at any time, but only to the Company, and
must be resold to the Company within 60 days after termination of employment.
The repurchase price to be paid by the Company for the shares is the exercise
price plus the increase in book value per share from the date of exercise of the
option to the date the shares are resold to the Company. The aggregate change in
book value for these shares during the year is accrued and charged to
operations. Shares repurchased under this Plan during fiscal years 1994, 1993
and 1992 were 8,000, zero and 6,000, respectively. Shares outstanding under this
Plan are restricted and excluded from the calculation of the weighted average
number of shares outstanding and stockholders' equity per share. Shares
outstanding under this Plan at February 28 or 29, 1994, 1993 and 1992, were
436,000, 444,000 and 444,000, respectively.
- -------------------------------------------------------------------------------
1992, 1991 AND 1983 STOCK OPTION PLANS
The 1992 Stock Option Plan, which expires in 2002, provides for the grant of
incentive stock options (ISOs), non-qualified stock options (NQSOs) and
restricted stock to officers and other key employees to purchase up to 1,500,000
shares of the Company's Common Stock. This plan supersedes the 1983 and 1991
Stock Option Plans which expired in fiscal 1993.
The exercise price for ISOs must be 100% of the fair market value of the
Company's Common Stock as of the date of grant. The exercise price for NQSOs may
be at a price less than the fair market value. Granted options are exercisable
in four equal annual installments commencing one year after the date of grant
and expire ten years from the date of grant except for options granted under the
1983 Stock Option Plan which expire five years from the date of grant. The
Company has the first right to purchase shares acquired by an optionee. The
following summarizes the activity of these plans for fiscal 1992, 1993 and 1994:
Option Price Available
Per Share Outstanding Exercisable For Grant
- ---------------------------------------------------------------------------------------------------------
At February 28, 1991 . . . . . . . . . . $14.00 to $34.25 442,904 250,605 455,024
------- ---------
------- ---------
Granted. . . . . . . . . . . . . . . . . $29.75 250,300
Exercised. . . . . . . . . . . . . . . . $14.00 to $34.25 (145,498)
Cancelled. . . . . . . . . . . . . . . . $18.31 to $34.25 (14,250)
-------
At February 29, 1992 . . . . . . . . . . $18.31 to $34.25 533,456 180,341 218,974
------- ---------
------- ---------
Granted. . . . . . . . . . . . . . . . . $43.63 269,550
Exercised. . . . . . . . . . . . . . . . $18.31 to $34.25 (152,453)
Cancelled. . . . . . . . . . . . . . . . $29.75 to $34.25 (10,700)
-------
At February 28, 1993 . . . . . . . . . . $18.31 to $43.63 639,853 165,690 1,230,450
------- ---------
------- ---------
Exercised. . . . . . . . . . . . . . . . $18.31 to $34.25 (38,750)
Cancelled. . . . . . . . . . . . . . . . $29.75 to $43.63 (34,600)
-------
At February 28, 1994 . . . . . . . . . . $29.75 to $43.63 566,503 273,241 1,249,150
------- ------- ---------
------- ------- ---------
Under the restricted stock program, Common Stock of the Company may be
granted at no cost to officers and other key employees. Plan participants are
entitled to cash dividends and to vote their respective shares. Restrictions
limit the sale or transfer of these shares during a five-year period whereby the
restrictions lapse on 20% of these shares after each of the five years. In
fiscal 1994, the Company awarded 30,000 shares of stock which had a fair value
at the date of grant of $1,253. Compensation under the plan is charged to
earnings over the five-year restriction period and amounted to $209 in fiscal
1994.
28
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS Helene Curtis Industries, Inc. and Subsidiaries
- -------------------------------------------------------------------------------
Dollar amounts in thousands, except per-share data
6. COMMON STOCK AND STOCK PLANS (continued)
- -------------------------------------------------------------------------------
DIRECTORS' STOCK OPTION PLAN
Under the Directors' Stock Option Plan, which expires in 1998, a total of
120,000 shares are authorized and each non-employee director is entitled to
receive options for 8,000 shares of the Company's Common Stock. Options are
issued at the fair market value of the Company's Common Stock on the date of
grant and have a term of ten years. Granted options vest over a five-year
period. In fiscal years 1994, 1993 and 1992, no options were granted, exercised
or cancelled.
There were 52,800, 41,600 and 30,400 options exercisable at February 28 or
29, 1994, 1993 and 1992, respectively. Options for 64,000 shares were available
for future grants at February 28 or 29, 1994, 1993 and 1992. There were 56,000
options (48,000 at $18.06 and 8,000 at $25.13) outstanding at February 28 or 29,
1994, 1993 and 1992.
- -------------------------------------------------------------------------------
ALL-EMPLOYEE STOCK OPTION PROGRAM
The All-Employee Stock Option Program provided for the one-time grant of
incentive stock options to each employee (who was on the Company's payroll on
March 30, 1992) to purchase 100 shares of the Company's Common Stock. Options
become exercisable on March 30, 1997, and expire on March 30, 2002. The Company
has the first right to purchase shares acquired by an optionee. The one-time
grant included options for 324,100 shares at $35.88. In fiscal 1994 and 1993,
options for 21,600 and 17,700 were cancelled, respectively. There were 284,800
and 306,400 options outstanding at February 28, 1994 and 1993, respectively.
- -------------------------------------------------------------------------------
EMPLOYEE STOCK PURCHASE PLAN
Under the Employee Stock Purchase Plan, which expires in 1998, a total of
400,000 shares are authorized for sale to employees. Weekly payroll deductions
are accumulated for plan participants and applied to the purchase of shares on a
quarterly basis. The price per share is 85% of the lower of the market price at
the beginning or end of the quarterly period. In fiscal 1994, 50,576 shares were
purchased by employees at $21.41 to $35.28 per share. In fiscal 1993, 33,998
shares were purchased by employees at $26.19 to $30.34 per share. In fiscal
1992, 27,569 shares were purchased by employees at $21.30 to $30.76 per share.
29
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS Helene Curtis Industries, Inc. and Subsidiaries
- -------------------------------------------------------------------------------
Dollar amounts in thousands
7. INCOME TAXES
- -------------------------------------------------------------------------------
Earnings before income taxes and cumulative effect of accounting change is
comprised of:
1994 1993 1992
- ------------------------------------------------------------------------------------------
Domestic . . . . . . . . . . . . . . . . . . $22,771 $28,961 $17,911
Foreign. . . . . . . . . . . . . . . . . . . 4,715 11,531 17,711
------- ------- -------
$27,486 $40,492 $35,622
------- ------- -------
------- ------- -------
The provision for income taxes is comprised of:
1994 1993 1992
- ------------------------------------------------------------------------------------------
Currently payable:
Federal . . . . . . . . . . . . . . . . . $ 5,227 $ 6,227 $ 3,790
Foreign, including taxes withheld . . . . 5,293 8,053 11,886
State . . . . . . . . . . . . . . . . . . 1,017 1,370 890
------- ------- -------
Total currently payable . . . . . . . 11,537 15,650 16,566
Deferred . . . . . . . . . . . . . . . . . . 1,656 2,733 (180)
------- ------- -------
$13,193 $18,383 $16,386
------- ------- -------
------- ------- -------
The provision for income taxes as shown in the financial statements differs
from a provision computed using the statutory rate for the following reasons:
1994 1993 1992
- ------------------------------------------------------------------------------------------
Statutory rate . . . . . . . . . . . . . . . 35% 34% 34%
------- ------- -------
------- ------- -------
Tax expense using statutory rate . . . . . . $ 9,620 $13,767 $12,111
Increase in taxes resulting from:
State income taxes net of federal
tax benefit . . . . . . . . . . . . . . 718 767 680
Effect of foreign operations. . . . . . . 2,026 2,601 2,764
Other . . . . . . . . . . . . . . . . . . 829 1,248 831
------- ------- -------
$13,193 $18,383 $16,386
------- ------- -------
------- ------- -------
Provision has not been made for taxes on $20,065 of undistributed earnings
of foreign subsidiaries as those earnings are considered to be permanently
reinvested in the operations of those subsidiaries. If these earnings were
remitted, the credit for foreign taxes paid would substantially offset the
applicable U.S. income taxes.
The components of deferred tax assets and liabilities are as follows at
February 28:
1994 1993
- ------------------------------------------------------------------------------------------
Accrued liabilities. . . . . . . . . . . . . $21,603 $20,383
Capitalized and deferred costs . . . . . . . 6,107 3,473
Discontinued operations. . . . . . . . . . . 375 624
Other . . . . . . . . . . . . . . . . . . . 851 80
------- -------
Total deferred tax assets . . . . . . . . 28,936 24,560
------- -------
Depreciation . . . . . . . . . . . . . . . . 18,778 20,342
Capitalized and deferred costs . . . . . . . 7,803 2,993
Prepaid expenses . . . . . . . . . . . . . . 2,078 516
Other . . . . . . . . . . . . . . . . . . . 63 140
------- -------
Total deferred tax liabilities. . . . . . 28,722 23,991
------- -------
Net deferred tax assets . . . . . . . $ 214 $ 569
------- -------
------- -------
Deferred tax assets and liabilities are classified in the consolidated
balance sheets as follows at February 28:
1994 1993
- ------------------------------------------------------------------------------------------
Assets:
Other current assets. . . . . . . . . . . $13,384 $14,517
Other assets. . . . . . . . . . . . . . . 2,060 1,772
Liabilities: . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . 15,230 15,720
------- -------
Net deferred tax assets . . . . . . . $ 214 $ 569
------- -------
------- -------
30
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS Helene Curtis Industries, Inc. and Subsidiaries
- -------------------------------------------------------------------------------
Dollar amounts in thousands, except per-share data
8. SUPPLEMENTAL INFORMATION
- -------------------------------------------------------------------------------
The consolidated statements of earnings include the following which are
classified as part of selling, general and administrative expenses:
1994 1993 1992
- ------------------------------------------------------------------------------------------
Advertising. . . . . . . . . . . . . . . . . $152,309 $147,597 $132,536
Research and development . . . . . . . . . . $ 22,474 $ 21,983 $ 18,681
9. LEASES
- --------------------------------------------------------------------------------
Rental expense under operating leases (principally for computer equipment,
research facility, office and warehouse space) for the fiscal years 1994, 1993
and 1992 was $15,853, $12,334 and $11,273, respectively. Renewal and purchase
options are available on certain of these leases. Future minimum lease payments
under noncancellable operating leases at February 28, 1994, are as follows:
Fiscal Year
- ------------------------------------------------------------------------------------------
1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,618
1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,723
1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,081
1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,908
1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,504
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,491
-------
$66,325
-------
-------
10. UNAUDITED QUARTERLY FINANCIAL DATA
- -------------------------------------------------------------------------------
The following table provides summarized unaudited quarterly financial data for
1994 and 1993:
First Second Third Fourth
Quarter Quarter Quarter Quarter
- --------------------------------------------------------------------------------------------------------------
1994
Net sales. . . . . . . . . . . . . . . . . . . . . $243,372 $338,135 $266,918 $338,656
-------- -------- -------- --------
-------- -------- -------- --------
Gross profit . . . . . . . . . . . . . . . . . . . $136,702 $184,821 $146,858 $189,033
-------- -------- -------- --------
-------- -------- -------- --------
Net earnings (loss):
Earnings before cumulative effect
of accounting change. . . . . . . . . . . . $ 834 $ 4,236 $ 2,777 $ 6,446
Cumulative effect of accounting change. . . . . (1,351) -- -- --
-------- -------- -------- --------
$ (517) $ 4,236 $ 2,777 $ 6,446
-------- -------- -------- --------
-------- -------- -------- --------
Per share:
Net earnings (loss):
Earnings before cumulative effect
of accounting change. . . . . . . . . . . . $ .09 $ .44 $ .30 $ .68
Cumulative effect of accounting change. . . . . (.14) 0 0 0
-------- -------- -------- --------
$ (.05) $ .44 $ .30 $ .68
-------- -------- -------- --------
-------- -------- -------- --------
Dividends:
Common Stock. . . . . . . . . . . . . . . . $ .06 $ .06 $ .06 $ .06
-------- -------- -------- --------
-------- -------- -------- --------
Class B Common Stock. . . . . . . . . . . . $ .01 $ .06 $ .06 $ .06
-------- -------- -------- --------
-------- -------- -------- --------
1993
Net sales. . . . . . . . . . . . . . . . . . . . . $245,143 $322,069 $266,450 $334,157
-------- -------- -------- --------
-------- -------- -------- --------
Gross profit . . . . . . . . . . . . . . . . . . . $134,957 $179,115 $149,250 $190,050
-------- -------- -------- --------
-------- -------- -------- --------
Net earnings . . . . . . . . . . . . . . . . . . . $ 2,489 $ 8,201 $ 4,184 $ 7,235
-------- -------- -------- --------
-------- -------- -------- --------
Per share:
Net earnings. . . . . . . . . . . . . . . . . . $ .26 $ .87 $ .44 $ .76
-------- -------- -------- --------
-------- -------- -------- --------
Dividends:
Common Stock. . . . . . . . . . . . . . . . $ .06 $ .06 $ .06 $ .06
-------- -------- -------- --------
-------- -------- -------- --------
Class B Common Stock. . . . . . . . . . . . $ .01 $ .06 $ .06 $ .06
-------- -------- -------- --------
-------- -------- -------- --------
31
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS Helene Curtis Industries, Inc. and Subsidiaries
- -------------------------------------------------------------------------------
Dollar amounts in thousands
11. BUSINESS SEGMENTS
- -------------------------------------------------------------------------------
The Company is in the personal care products business, which includes the
development, manufacture and sale of brand-name hair and skin care products, and
antiperspirants and deodorants. The Company markets its products to consumers
through supermarkets, mass merchandisers and drugstores, and to beauty salons
through distributors. The following table provides information about the
Company's continuing operations in different geographic areas:
1994 1993 1992
- -----------------------------------------------------------------------------------------------
Net sales:
Domestic. . . . . . . . . . . . . . . . . . . . $ 768,870 $ 810,925 $ 719,125
---------- ---------- ----------
Foreign:
Japan. . . . . . . . . . . . . . . . . . . . 249,785 216,179 177,628
Other geographic areas . . . . . . . . . . . 168,426 140,715 123,158
---------- ---------- ----------
Total foreign. . . . . . . . . . . . . . . . 418,211 356,894 300,786
---------- ---------- ----------
Consolidated. . . . . . . . . . . . . . . $1,187,081 $1,167,819 $1,019,911
---------- ---------- ----------
---------- ---------- ----------
Operating profit (loss):
Domestic. . . . . . . . . . . . . . . . . . . . $ 36,626 $ 52,509 $ 51,717
---------- ---------- ----------
Foreign:
Japan. . . . . . . . . . . . . . . . . . . . 10,917 11,249 15,624
Other geographic areas . . . . . . . . . . . 3,708 7,184 (2,852)
---------- ---------- ----------
Total foreign. . . . . . . . . . . . . . . . 14,625 18,433 12,772
---------- ---------- ----------
Consolidated. . . . . . . . . . . . . . . 51,251 70,942 64,489
General corporate expenses . . . . . . . . . . . . (16,125) (22,683) (18,607)
Interest expense . . . . . . . . . . . . . . . . . (7,640) (7,767) (10,260)
---------- ---------- ----------
Earnings before income taxes and cumulative effect
of accounting change. . . . . . . . . . . . . . $ 27,486 $ 40,492 $ 35,622
---------- ---------- ----------
---------- ---------- ----------
Identifiable assets:
Domestic. . . . . . . . . . . . . . . . . . . . $ 391,125 $ 398,677 $ 366,024
---------- ---------- ----------
Foreign:
Japan. . . . . . . . . . . . . . . . . . . . 125,196 113,749 106,253
Other geographic areas . . . . . . . . . . . 66,840 57,960 41,411
---------- ---------- ----------
Total foreign. . . . . . . . . . . . . . . . 192,036 171,709 147,664
---------- ---------- ----------
Corporate . . . . . . . . . . . . . . . . . . . 29,322 29,699 28,692
---------- ---------- ----------
Consolidated. . . . . . . . . . . . . . . $ 612,483 $ 600,085 $ 542,380
---------- ---------- ----------
---------- ---------- ----------
Operating profit represents net sales less operating expenses and is
exclusive of interest, general corporate expenses and income taxes.
Approximately 13%, 11% and 10% of net sales in fiscal 1994, 1993 and 1992,
respectively, were made to one customer. Export sales, which are included in
other geographic areas, and sales between geographic areas were not material in
any of the years presented.
32
INDEPENDENT ACCOUNTANTS' REPORT
- -------------------------------------------------------------------------------
To the Stockholders and Directors
Helene Curtis Industries, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Helene Curtis
Industries, Inc. and Subsidiaries as of February 28, 1994 and 1993, and the
related consolidated statements of earnings, stockholders' equity and cash flows
for each of the three years in the period ended February 28, 1994. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Helene Curtis
Industries, Inc. and Subsidiaries as of February 28, 1994 and 1993, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended February 28, 1994, in conformity with generally
accepted accounting principles.
Coopers & Lybrand
Chicago, Illinois
April 4, 1994
33