SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTERLY PERIOD ENDED NOVEMBER 30, 1994
Commission file number 1-8797
HELENE CURTIS INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 36-3398349
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
325 NORTH WELLS STREET, CHICAGO, ILLINOIS 60610
(Address of principal executive offices)
(312) 661-0222
(Registrant's telephone number)
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
--- ---
At November 30, 1994, there were 6,808,825 shares of Common Stock and 3,062,369
shares of Class B Common Stock outstanding.
Helene Curtis Industries, Inc. and Subsidiaries
Index
Page No.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Statements of Earnings for the Three and
Nine Months Ended November 30, 1994 and 1993 3
Consolidated Balance Sheets as of November 30, 1994 and 4
February 28, 1994
Consolidated Statements of Cash Flows for the Nine
Months Ended November 30, 1994 and 1993 5
Notes to Consolidated Financial Statements 6-7
Item 2. Management's Discussion and Analysis 8-10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURE 11
EXHIBIT 11 - Computation of Earnings Per Share 12
EXHIBIT 27 - Financial Data Schedule (submitted with EDGAR filing)
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Helene Curtis Industries, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
(Dollars in thousands, except per-share data)
For the Three Months For the Nine Months
Ended November 30, Ended November 30,
------------------------ -------------------------
1994 1993 1994 1993
--------- --------- --------- ----------
Net sales $ 282,370 $ 266,918 $ 900,579 $ 848,425
--------- ---------- --------- ----------
Costs and expenses:
Cost of sales 127,007 120,060 403,014 380,044
Selling, general and administrative 146,832 139,688 469,512 447,765
Interest 2,186 1,830 6,551 5,526
--------- ---------- --------- ----------
276,025 261,578 879,077 833,335
--------- ---------- --------- ----------
Earnings before income taxes and
cumulative effect of accounting change 6,345 5,340 21,502 15,090
Provision for income taxes 2,982 2,563 10,106 7,243
--------- ---------- --------- ----------
Earnings before cumulative effect
of accounting change 3,363 2,777 11,396 7,847
Cumulative effect of accounting change -- -- -- (1,351)
--------- ---------- --------- ----------
Net earnings $ 3,363 $ 2,777 $ 11,396 $ 6,496
--------- ---------- --------- ----------
--------- ---------- --------- ----------
Net earnings per share:
Earnings before cumulative effect
of accounting change $ .35 $ .30 $ 1.20 $ .83
Cumulative effect of accounting change -- -- -- (.14)
--------- ---------- --------- ----------
Net earnings $ .35 $ .30 $ 1.20 $ .69
--------- ---------- --------- ----------
--------- ---------- --------- ----------
Average number of shares outstanding 9,525,498 9,459,415 9,486,604 9,481,501
--------- ---------- --------- ----------
--------- ---------- --------- ----------
Cash dividends per share:
Common Stock $ .06 $ .06 $ .18 $ .18
Class B Common Stock $ .06 $ .06 $ .13 $ .13
The accompanying notes are an integral part of the consolidated financial
statements.
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Helene Curtis Industries, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
November 30, February 28,
1994 1994
---------- ----------
Assets
Current assets:
Cash and equivalents $ 10,544 $ 2,802
Receivables-net 204,894 242,514
Inventories 130,406 102,344
Other current assets 30,115 20,059
---------- ----------
Total current assets 375,959 367,719
---------- ----------
Property, plant and equipment 309,127 292,671
Less accumulated depreciation 94,600 77,402
---------- ----------
Net property, plant and equipment 214,527 215,269
---------- ----------
Other assets 26,723 29,495
---------- ----------
Total assets $ 617,209 $ 612,483
---------- ----------
---------- ----------
Liabilities and stockholders' equity
Current liabilities:
Short-term debt $ 5,980 $ 7,361
Accounts payable 116,917 99,566
Income taxes 9,859 8,401
Advertising and promotion 54,505 54,843
Other accrued expenses 53,296 46,353
---------- ----------
Total current liabilities 240,557 216,524
Long-term debt 124,190 160,990
Deferred income taxes 15,231 15,230
Accrued retirement and other benefits 23,418 20,295
---------- ----------
Total liabilities 403,396 413,039
---------- ----------
Stockholders' equity:
Common Stock, issued 7,931,771 shares
(Nov.) and 7,921,471 shares (Feb.) 3,966 3,961
Class B Common Stock, issued 3,062,369
shares (Nov.) and 3,072,669 shares (Feb.) 1,531 1,536
Capital in excess of par value 42,009 40,548
Retained earnings 170,817 161,045
Currency translation adjustment 6,078 1,218
Treasury shares (Common), 1,122,946
(Nov.) and 1,114,031 (Feb.), at cost (10,588) (8,864)
---------- ----------
Total stockholders' equity 213,813 199,444
---------- ----------
Total liabilities and stockholders' equity $ 617,209 $ 612,483
---------- ----------
---------- ----------
The accompanying notes are an integral part of the consolidated financial
statements.
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Helene Curtis Industries, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in thousands)
For the Nine Months Ended
November 30,
---------------------------
1994 1993
---------- -----------
Cash flows from operating activities:
Net earnings $ 11,396 $ 6,496
Adjustments to net earnings:
Depreciation and amortization 21,592 18,664
Cumulative effect of accounting change -- 1,351
Other 3,808 267
Changes in operating assets and liabilities:
Receivables-net 48,870 70,419
Inventories (25,439) (14,234)
Other current assets (9,625) (25,406)
Payables and accrued expenses 13,519 (15,007)
Other (63) (7,974)
---------- ----------
Net cash provided by operating activities 64,058 34,506
---------- ----------
Cash flows from investing activities:
Capital expenditures (17,824) (30,498)
Other 117 195
---------- ----------
Net cash used by investing activities (17,707) (30,303)
---------- ----------
Cash flows from financing activities:
Proceeds from borrowings 3,675 6,455
Repayment of borrowings (42,323) (14,050)
Dividends paid (1,624) (1,621)
Other (263) 1,842
---------- ----------
Net cash used by financing activities (40,535) (7,374)
---------- ----------
Effect of exchange rate changes on cash and
equivalents 1,926 1,328
---------- ----------
Increase (decrease) in cash and equivalents 7,742 (1,843)
Cash and equivalents at beginning of period 2,802 7,564
---------- ----------
Cash and equivalents at end of period $ 10,544 $ 5,721
---------- ----------
---------- ----------
The accompanying notes are an integral part of the consolidated financial
statements.
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Helene Curtis Industries, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in thousands)
1. BASIS OF PRESENTATION
The interim consolidated financial statements are unaudited. In the opinion
of management, all adjustments necessary for a fair presentation are
reflected herein. All such adjustments are of a normal recurring nature.
The results of operations for the interim periods are not necessarily
indicative of the results that may be expected for the entire fiscal year.
These statements do not include all disclosures required by generally
accepted accounting principles and should be read in conjunction with the
audited financial statements and related notes included in the Company's
annual report to stockholders for the year ended February 28, 1994. The
consolidated balance sheet as of February 28, 1994 is derived from these
audited financial statements.
Certain prior year amounts have been reclassified to conform to the current
year's presentation.
Advertising and promotion costs are generally expensed in the fiscal year
incurred. For interim reporting purposes, such costs are charged to
operations as a percentage of sales, based on estimated sales and estimated
advertising and promotion costs for the full year.
2. SUPPLEMENTAL INFORMATION
The consolidated statements of earnings include research and development
costs of $6,720 and $20,481 for the three and nine months ended November 30,
1994, respectively, and $5,313 and $16,952 for the three and nine months
ended November 30, 1993, respectively.
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Helene Curtis Industries, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in thousands)
3. RECEIVABLES-NET
Receivables-net, principally trade, consist of the following amounts:
November 30, 1994 February 28, 1994
----------------- -----------------
Accounts receivable $154,527 $187,452
Notes receivable 56,322 60,161
-------- --------
Total 210,849 247,613
Less allowance for doubtful accounts 5,955 5,099
-------- --------
Net $204,894 $242,514
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-------- --------
4. INVENTORIES
Inventories consist of the following components:
November 30, 1994 February 28, 1994
----------------- -----------------
Raw materials $ 29,492 $ 16,252
Work in process 1,710 2,037
Finished goods 99,204 84,055
-------- --------
Total $130,406 $102,344
-------- --------
-------- --------
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
Helene Curtis Industries, Inc. and Subsidiaries
RESULTS OF OPERATIONS - THREE MONTHS ENDED NOVEMBER 30, 1994 AND 1993
(Dollars in thousands)
Consolidated net sales for the three months ended November 30, 1994 increased
$15,452, or 6%, compared with the corresponding period last year.
Domestic net sales increased 5%, compared with the corresponding period last
year and accounted for 59% of consolidated net sales. This increase was
attributable to the Suave Baby Care introduction (which appeared in stores
nationwide in August) and growth in sales of Suave hair care products. Also
contributing to the increase was significant growth in sales of skin care
products. These gains were partially offset by a decline in sales for Salon
Selectives and the Company's professional hair care products.
International net sales increased 7%, compared with the corresponding period
last year and represented 41% of consolidated net sales. This increase was
attributable to higher sales in Japan driven by Salon Selectives hair care
products and favorable currency translation. Sales increases in U.S. exports,
the United Kingdom, Australia and New Zealand also contributed to the increase
in international net sales. These gains were partially offset by a decline in
sales in Canada, Italy and Scandinavia.
Cost of sales increased $6,947, or 6%, as a result of higher sales volume. As
a percent of net sales, cost of sales remained constant at 45.0% in the current
period compared with the prior year.
Selling, general and administrative expenses increased $7,144, or 5%. As a
percent of net sales, these expenses decreased to 52.0% in the current period
from 52.3% last year. The decrease as a percent of net sales was principally
attributable to lower advertising costs for Vibrance hair care products which
were offset, in part, by higher selling, research and development, and
administrative costs.
Interest expense increased $356, or 19%, as the higher cost of borrowing was
partially offset by lower levels of borrowing compared to the prior year. At
November 30, 1994, fixed-rate borrowings represented over one-half of the
total debt outstanding.
The effective tax rate was 47% in the current period compared with 48% in the
prior year, primarily as a result of a higher proportion of total profitability
attributable to domestic operations which have a lower tax rate.
Net earnings increased to $3,363 from $2,777 in the prior year. The increase
was primarily attributable to the increase in net sales and the lower
advertising expenses as a percent of net sales.
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Helene Curtis Industries, Inc. and Subsidiaries
RESULTS OF OPERATIONS - NINE MONTHS ENDED NOVEMBER 30, 1994 AND 1993
(Dollars in thousands)
Consolidated net sales for the nine months ended November 30, 1994 increased
$52,154, or 6%, compared with the corresponding period last year.
Domestic net sales increased 5%, compared to the corresponding period last year
and accounted for 63% of consolidated net sales. This increase is largely
attributable to the Company's sales of Suave Baby Care (launched in the second
quarter of the current fiscal year) and increases in the skin care category
where Suave Skin Lotion recorded significant nine month sales increases. There
was moderate sales growth in the Company's hair care brands where Suave, Finesse
and Salon Selectives recorded gains which were offset by a decline in sales for
Vibrance.
International net sales increased 8%, compared with the corresponding period
last year and represented 37% of consolidated net sales. This increase was
attributable to higher sales in Japan which benefited from favorable currency
translation and Italy where the Company's newest wholly-owned subsidiary was
formed in the second quarter of last year. Sales increases in U.S. exports and
the United Kingdom also contributed to the increase in international net sales.
Cost of sales increased $22,970, or 6%, due to higher sales volume. As a
percent of net sales, cost of sales remained constant at 44.8% in the current
period compared with the prior year.
Selling, general and administrative expenses increased $21,747, or 5%. As a
percent of net sales, these expenses decreased to 52.1% in the current period
from 52.8% last year. The decrease as a percent of net sales was primarily
attributable to slower growth in advertising and promotion costs. These cost
improvements were offset, in part, by higher research and development costs.
Interest expense increased $1,025, or 19%, as the higher cost of borrowing was
partially offset by lower levels of borrowing compared to the prior year. At
November 30, 1994, fixed-rate borrowings represented over one-half of the total
debt outstanding.
The effective tax rate was 47% in the current period compared with 48% in the
prior year, primarily as a result of a higher proportion of total profitability
attributable to domestic operations which have a lower tax rate.
Earnings before the cumulative effect of an accounting change increased to
$11,396 from $7,847 in the prior year. The increase was primarily attributable
to the increase in net sales and lower advertising and promotion costs as a
percent of net sales.
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Helene Curtis Industries, Inc. and Subsidiaries
FINANCIAL CONDITION - LIQUIDITY AND CAPITAL RESOURCES
(Dollars in thousands)
Cash and equivalents increased to $10,544, compared with $2,802 at year end.
The Company used cash provided from operating activities to fund capital
expenditures and reduce debt.
Net cash provided from operating activities increased significantly to $64,058
from $34,506 in the first nine months of the prior year. This increase was
primarily attributable to the favorable cash flow impact of a reduction in net
operating assets and increase in net earnings. The decrease in receivables of
$48,870 was largely due to lower sales for the current quarter in the U.S.
compared with the fourth quarter of the prior year. The increase in payables
and accrued expenses of $13,519 was largely attributable to the timing of
payments for raw material purchases and higher compensation-related accruals
based on the Company's improved earnings. The impact of these changes was
partially offset by an increase of $25,439 in inventories in preparation for
sales anticipated in the fourth quarter (historically the largest sales quarter
of the year) and as a result of the Company's newest product introduction --
Suave Baby Care. The increase in other current assets of $9,625 was
attributable to the deferral of advertising and promotion costs during interim
quarters. Working capital decreased to $135,402 at November 30, 1994, compared
with $151,195 at February 28, 1994. The current ratio decreased to 1.56:1 from
1.70:1.
Capital spending decreased to $17,824 from $30,498 in the first nine months of
the prior year. Capital expenditures in both years included a large number of
smaller investments primarily to increase the Company's manufacturing and
distribution capabilities and efficiencies.
The total-debt-to-total-capital ratio decreased to 37.8%, compared with 45.8% at
year end as total debt decreased to $130,170 from $168,351. The excess cash
provided from reduced net operating assets was used for the repayment of
borrowings. In March 1994, the Company borrowed $50,000 under a private
placement agreement whereby senior unsecured notes were issued. These notes
mature in March 2001 and 2004. The funds were used for general corporate
purposes and to refinance existing debt.
On October 17, 1994, the Company's Board of Directors declared a quarterly
dividend of six cents per share to both the Common and Class B Common
stockholders, payable November 25 to holders of record on November 10, 1994.
Management believes that funds provided from operations and present credit
arrangements will be sufficient to meet the Company's anticipated working
capital and capital spending needs.
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 11 - Computations of Earnings per Share
Exhibit 27 - Financial Data Schedule (submitted with EDGAR filing)
(b) Reports on Form 8-K: No reports were filed on Form 8-K during the
quarter ended November 30, 1994.
SIGNATURE
Pursuant to the requirements 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.
Helene Curtis Industries, Inc.
January 13, 1995 By: /S/ Mary J. Oyer
Mary J. Oyer
Vice President, Corporate Controller
and Principal Accounting Officer
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