BERMUDA | 74-2692550 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) |
1 HELEN OF TROY PLAZA | ||
EL PASO, TEXAS | 79912 | |
(Registrants United States Mailing Address) | (Zip Code) |
Large accelerated filer [ ] | Accelerated filer [X] | Non-accelerated filer [ ] |
2
3
| Maximize high growth potential branded products. We seek to maximize high growth potential products by selectively investing in consumer marketing propositions that offer the best opportunities to capture market share and increase growth. | ||
| Accelerate our new product pipeline. We will strive to accelerate the time required to develop and introduce new products to meet changing consumer preferences and take advantage of opportunities sooner. | ||
| Leverage innovation. We intend to enhance and extend our existing products and develop new products to grow our business. We believe that new innovative products will permit us to generate higher margins and increase the value of our brand base. | ||
| Broaden our growth opportunities. We plan to continue to seek opportunities to acquire brands and product categories through aggressive external development and strategic joint ventures and acquisitions. | ||
| Reduce cost and increase productivity. We intend to seek to control our expenses and strengthen operating margins by eliminating unnecessary spending and cost redundancy in the short term, and by making other tools and productivity drivers the cornerstone and fabric of our Company. |
| Vidal Sassoon ® , licensed from The Procter & Gamble Company; | ||
| Revlon ® licensed from Revlon Consumer Products Corporation; | ||
| Dr. Scholls ® , licensed from Schering-Plough HealthCare Products, Inc.; | ||
| Scholl ® (in areas other than North America), licensed from Scholl Ltd.; | ||
| Sunbeam ® , Health at Home ® and Health o meter ® licensed from Sunbeam Products, Inc.; | ||
| Sea Breeze ® , licensed from Shiseido Company Ltd.; | ||
| Vitapointe ® , licensed from Sara Lee Household and Body Care UK Limited; and | ||
| Toni & Guy ® , licensed from Mascolo Brothers Ltd. (acquired March 27, 2006) |
4
OXO
®
|
Ammens ® | Caruso ® | ||
Good Grips
®
|
Condition ® 3-in-1 | Karina ® | ||
Soft Works
®
|
TimeBlock ® | Visage Náturel ® | ||
Touchables
®
|
Skin Milk ® | DCNL ® | ||
Brut
®
|
Epil-Stop ® | Nandi ® | ||
Vitalis
®
|
Studio Tools | Isobel ® | ||
Final Net
®
|
Dazey ® | HOT things ® |
Helen of Troy
®
|
Salon Tools | |
Hot Tools
®
|
Fusion Tools | |
Hot Spa
®
|
Gallery Series ® | |
HOTSetter
|
Wigo ® | |
Salon Edition
®
|
The Beautician |
5
PRODUCT
CATEGORY |
PRODUCTS | BRAND NAMES | ||||
Appliances
and Accessories |
Hand-held dryers | Vidal Sassoon ® , Revlon ® , Sunbeam ® , Helen of Troy ® , Salon Edition ® , Hot Tools ® , HOT Professional ® , Studio Tools, Salon Tools, Gold Series ® , Gallery Series ® , Wigo ® and Cosmopolitan | ||||
|
||||||
|
Curling irons, straightening irons, hot air brushes, and brush irons | Vidal Sassoon ® , Revlon ® , Sunbeam ® , Helen of Troy ® , Salon Edition ® , Hot Tools ® , HOT Professional ® , Studio Tools, Salon Tools, Gold Series ® , Gallery Series ® , Wigo ® and Cosmopolitan | ||||
|
||||||
|
Hairsetters | Vidal Sassoon ® , Revlon ® , Sunbeam ® , HOT Setter, Cosmopolitan and Caruso ® | ||||
|
||||||
|
Paraffin baths, facial brushes, facial saunas, and other skin care appliances | Revlon ® , Hotspa ® , Sunbeam ® , Dr. Scholls ® and Visage Náturel ® | ||||
|
||||||
|
Manicure/pedicure systems | Revlon ® , Dr. Scholls ® , Scholl ® and The Beautician | ||||
|
||||||
|
Foot baths | Dr. Scholls ® , Scholl ® , Revlon ® , Sunbeam ® , Carel ® and Hotspa ® | ||||
|
||||||
|
Foot massagers, hydro massagers, cushion massagers, body massagers, and memory foam products | Dr. Scholls ® , Health o meter ® , Carel ® and Hotspa ® | ||||
|
||||||
|
Hair clippers, trimmers, exfoliators, and shavers | Vidal Sassoon ® , Revlon ® and Hot Tools ® | ||||
|
||||||
|
Hard and soft-bonnet hair dryers | Dazey ® , Carel ® , and Hot Tools ® | ||||
|
||||||
|
Hair styling, hand-held mirrors, lighted mirrors, and utility implements | Vidal Sassoon ® and Revlon ® | ||||
|
||||||
|
Decorative hair accessories | Vidal Sassoon ® , Revlon ® , Karina ® , Karina Girl, HOT things ® , Isobel ® , DCNL ® and Nandi ® | ||||
|
||||||
Grooming,
Skin Care, |
Liquid hair styling products | Vitalis ® , Final Net ® , Condition ® 3-in-1 and Vitapointe ® | ||||
|
||||||
and Hair
|
Liquid skin care products | Sea Breeze ® , TimeBlock ® and Skin Milk ® | ||||
|
||||||
Care
|
Medicated skin care products | Ammens ® | ||||
|
||||||
Products
|
Fragrances, deodorants, and antiperspirants | Brut ® | ||||
|
||||||
|
Hair depilatory products | Epil-Stop ® |
6
PRODUCT
CATEGORY |
PRODUCTS | BRAND NAMES | ||||
Housewares
|
Kitchen tools, cutlery, bar and wine accessories, kitchen mitts and trivets, and barbeque tools | OXO ® , Good Grips ® , Grind it, Steel, Softworks ® , Touchables ® and Good Grips ® Basics | ||||
|
||||||
|
Tea kettles | OXO ® , Good Grips ® and Softworks ® | ||||
|
||||||
|
Household cleaning tools and trash cans | OXO ® , Good Grips ® , Softworks ® and Touchables ® | ||||
|
||||||
|
Storage and organization products | OXO ® , Good Grips ® and Softworks ® | ||||
|
||||||
|
Hand and garden tools | OXO ® , Good Grips ® and Softworks ® |
7
8
9
10
11
12
| building of a new 1,200,000 square foot distribution facility in Southaven, Mississippi which was completed and outfitted with new materials handling equipment and systems; |
13
| transitioning the warehousing, order fulfillment and shipment processes for our OXO products to our new Global Enterprise Resource Planning system; | |
| the physical movement of the existing OXO inventory from its former distribution facility in Illinois to Mississippi; | |
| the physical movement of other inventories from the Companys existing distribution facilities to the new facility in Southaven, Mississippi; and | |
| testing and implementation of the new distribution facility and systems. |
14
| difficulties in the assimilation of the operations, technologies, products and personnel associated with the acquisitions, | |
| the diversion of managements attention from other business concerns, | |
| risks of entering markets in which we have no or limited prior experience, and | |
| the potential loss of key employees associated with the acquisitions. |
15
| our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions, general corporate purposes, or other purposes, |
16
| an increased portion of our cash flow from operations will be required to pay interest on our debt, which will reduce the funds available to us for our operations, | |
| a significant portion of our debt has been issued at variable rates of interest, which may result in higher interest expense in the event of increases in market interest rates, | |
| our level of indebtedness will increase our vulnerability to general economic downturns and adverse industry conditions, | |
| our debt service obligations could limit our flexibility in planning for, or reacting to, changes in our business and conditions in the industries in which we operate, | |
| the debt agreements contain financial and restrictive covenants, and our failure to comply with them could result in an event of default, which if not cured or waived, could have a material adverse effect on us. Significant restrictive covenants include limitations on, among other things, our ability under certain circumstances to: |
| incur additional debt, including guarantees; | ||
| incur certain types of liens; | ||
| sell or otherwise dispose of assets; | ||
| engage in mergers or consolidations; | ||
| enter into substantial new lines of business; and | ||
| enter into certain types of transactions with our affiliates. |
17
18
20
Approximate
Location
Type and Use
Business Segment
Owned or
Square
Leased
Footage
Land & Building Corporate Headquarters
Personal Care & Housewares
Owned
135,000
Land & Building Distribution Facility
Personal Care
Owned
408,000
Land & Building Distribution Facility
Personal Care
Leased
619,000
Land & Building Distribution Facility
Personal Care & Housewares
Owned
1,200,000
Third-Party Managed Distribution Facility
Personal Care
Leased
50,000
Third-Party Managed Distribution Facility
Personal Care
Leased
7,000
Office Space
Personal Care
Leased
16,000
Office Space
Personal Care
Leased
5,000
Office Space
Personal Care
Leased
1,600
Office Space
Personal Care
Leased
1,000
Office Space
Housewares
Leased
9,900
Third-Party Managed Distribution Facility
Housewares
Leased
100,000
Land (3 Parcels) Held for Future
Expansion
None
Owned
32 Acres
Office Space
Personal Care
Leased
2,900
Land & Building European Headquarters
Personal Care
Leased
10,000
Third-Party Managed Distribution Facility
Personal Care
Leased
85,000
Office Space
Personal Care
Leased
1,400
Office Space
Personal Care
Leased
2,300
Third-Party Managed Distribution Facility
Personal Care
Leased
85,000
Office Space
Personal Care
Leased
900
Third-Party Managed Distribution Facility
Personal Care
Leased
20,000
Third-Party Managed Distribution Facility
Personal Care
Leased
20,000
Office Space
Personal Care
Leased
1,100
Third-Party Managed Distribution Facility
Personal Care
Leased
5,400
Office Space
Personal Care
Leased
900
Office Space Supply Chain Management
Personal Care & Housewares
Leased
18,600
Office Space Supply Chain Management
Personal Care & Housewares
Leased
10,100
Office Space Supply Chain Management
Personal Care & Housewares
Leased
11,600
Apartment Temporary Travelers Quarters
Personal Care & Housewares
Leased
1,200
Office Space Supply Chain Management
Personal Care & Housewares
Leased
800
Office Space Supply Chain Management
Personal Care & Housewares
Leased
500
Office Space Supply Chain Management
Personal Care & Housewares
Leased
1,300
Table of Contents
21
22
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Table of Contents
23
Table of Contents
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
ITEM 5.
MARKET FOR REGISTRANTS COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
High
Low
29.75
21.52
26.19
20.82
23.01
15.55
20.23
15.80
36.25
27.40
37.26
24.65
29.71
23.40
34.44
25.65
Table of Contents
Number of securities
remaining available for
future issuance under
Number of securities to
Weighted-average
equity compensation
be issued upon exercise
exercise price of
plans (excluding
of outstanding options,
outstanding options,
securities reflected in
warrants, and rights
warrants, and rights
column (a))
(a)
(b)
(c)
6,923,094
$
14.83
887,002
(1)
Includes 331,716 shares authorized and available for issuance in connection with the
Helen of Troy Limited 1998 Employee Stock Purchase Plan and 555,286 shares under the 1998
Employee Stock Option and Restricted Stock Plan.
Table of Contents
(in thousands, except per share data)
2006
2005(1)
2004(1)
2003(1)
2002(1)
$
589,747
$
581,549
$
474,868
$
379,751
$
338,644
323,189
307,045
257,651
224,027
211,041
266,558
274,504
217,217
155,724
127,603
195,180
172,480
131,443
105,522
97,876
71,378
102,024
85,774
50,202
29,727
(16,866
)
(9,870
)
(4,047
)
(3,965
)
(4,185
)
1,290
(2,575
)
4,312
2,333
1,927
55,802
89,579
86,039
48,570
27,469
6,492
12,907
14,477
10,778
5,461
49,310
76,672
71,562
37,792
22,008
(222
)
(11,040
)
924
7,207
$
49,310
$
76,450
$
60,522
$
38,716
$
29,215
$
1.65
$
2.58
$
2.52
$
1.34
$
0.78
$
$
(0.01
)
$
(0.39
)
$
0.03
$
0.26
$
1.65
$
2.57
$
2.13
$
1.37
$
1.04
$
1.56
$
2.36
$
2.29
$
1.28
$
0.75
$
$
(0.01
)
$
(0.35
)
$
0.03
$
0.25
$
1.56
$
2.35
$
1.94
$
1.31
$
1.00
29,919
29,710
28,356
28,189
28,089
31,605
32,589
31,261
29,548
29,199
Table of Contents
(in thousands)
2006
2005
2004
2003
2002
$
185,568
$
156,312
$
166,445
$
163,452
$
182,791
857,744
811,449
489,609
405,629
357,558
254,974
260,000
45,000
55,000
55,000
475,377
420,527
350,103
289,602
250,326
(1)
Fiscal year 2005, 2004, 2003 and 2002 results presented include 100 percent of the results of
Tactica under the line item, Income (loss) from discontinued segments operations and
impairment of related assets, 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 Tacticas current assets and current liabilities. Also,
in the fourth fiscal quarter of 2004, we recorded a loss of $5,699 from the impairment of
Tactica goodwill, net of $1,938 of related tax benefits. Our consolidated financial
statements for fiscal 2005 (for the period of time we owned Tactica), 2004, 2003, 2002 and
2001, as restated include 100 percent of Tacticas net income or loss because Tactica had
accumulated a net deficit at the time that we acquired our ownership interest, and because the
minority shareholders of Tactica had not adequately guaranteed their portion of the
accumulated deficit.
(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. Items totaling $3,930 in
fiscal 2002, were classified as selling, general, and administrative expenses have been
reclassified as reductions to net sales.
(3)
No common shares were repurchased during the fiscal years ended 2006, 2003 and 2002. In
fiscal 2005, we repurchased 757,710 common shares at a cost of $25,039. In fiscal 2004, we
repurchased 806,126 common shares at a cost of $20,572.
Table of Contents
ITEM 7.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Table of Contents
Consolidated net sales increased 1.4 percent, or $8,198, to $589,747 in fiscal 2006
versus $581,549 in fiscal 2005. Our Housewares segment provided 8.2 percentage points of
consolidated net sales growth, or $47,657 over a full year of operations. Our Personal
Care segment experienced a decline in sales of 7.9 percent, or $39,459, which is a 6.8
percentage point reduction based on consolidated net sales.
From a geographic perspective, net sales in the United States grew 2.6 percent, or
$12,408, Latin America grew 27.1 percent, or $6,767, Canada grew 7.8 percent, or $1,624,
and European and other international operations (principally the United Kingdom)
experienced an overall 20.8 percent decline in net sales, or $12,601.
Our net sales growth includes the benefit of a net positive foreign exchange impact of
$1,204.
Table of Contents
Consolidated operating income declined 30 percent or $30,646 under the prior year. The
change was due to increased cost of goods sold and increased selling, general and
administrative costs. Key elements of increased cost of goods sold were raw materials
price increases and product mix changes. Key elements of increased selling, general and
administrative costs were increased personnel costs partially offset by lower incentive
compensation costs, higher depreciation and amortization, increased media advertising,
higher warehousing costs, higher outbound freight costs, increased property rental expense,
and non-recurring costs associated with the consolidation of inventories and their
transition to our new 1,200,000 square foot distribution facility in Southaven,
Mississippi.
Interest expense was $16,866 in fiscal 2006 compared to $9,870 in fiscal 2005. The
increase was the result of recognizing a full years worth of interest cost associated with
our OXO acquisition, higher variable interest rates, and $914 of IRS interest costs
incurred due to the settlement of a tax audit.
Other income (expense), net was $1,290 in fiscal 2006 compared to ($2,575) in fiscal
2005. Significant items contributing to the fiscal 2006 amount were $463 of interest income
on an income tax refund, $400 of income from a favorable litigation settlement, a gain on
the sale of a distribution facility of $1,305 and a loss on a bankruptcy settlement of
$1,550. Significant items in the fiscal 2005 amount included an unrealized loss on
marketable securities of ($3,410), interest income of $359, and other miscellaneous income
of $476.
Income tax expense was $6,492 in fiscal 2006, or 11.6 percent of earnings before income
taxes, compared to $12,907 in fiscal 2005, or 14.4 percent of earnings before income
taxes. The decrease in income tax was due to significantly lower earnings before income
taxes, the trend of realizing more of our income in lower tax rate jurisdictions, and tax
losses in certain higher tax rate jurisdictions. These impacts were offset by $2,792 of
additional U.S. taxes arising from a repatriation of $48,554 in foreign earnings as allowed
under The American Jobs Creation Act of 2004.
As a result of the items noted above, our net earnings decreased from $76,450 in fiscal
2005 to $49,310 in fiscal 2006 or, in percentage terms, by 35.5 percent below the prior
year.
Our diluted earnings per share decreased from $2.35 in fiscal 2005 to $1.56 in fiscal
2006, or by 33.5 percent.
Appliances
. Products in this group include electronic curling irons, thermal
brushes, hair straighteners, hair crimpers, hair dryers, massagers, spa products, foot
baths, electric clippers and trimmers. Net sales for fiscal 2006 decreased 10.5 percent
compared to fiscal 2005. The primary reason for the revenue decline was our response to
competitive pricing pressures both domestically and abroad, a loss of product placement,
weak market conditions in the United Kingdom where key retailers ended calendar 2005 with
significant excess retail inventories, and high customer returns in the first quarter of
fiscal 2006. Vidal Sassoon
®
, Revlon
®
, Hot Tools
®
, Dr. Scholls
®
, Sunbeam
®
, and Health o
Meter
®
were key brands in this group.
Grooming, Skin Care, and Hair Products
. Net sales for fiscal 2006 increased
6.3% over fiscal 2005. The gains were the result of the launch of new items and packaging
in the U.S. and Latin America for our Brut
®
and Sea Breeze
®
brands to which we are giving
focused advertising support. Latin American Brut
®
growth was exceptionally strong, with
sales growth up 30.8 percent for the 2006 fiscal year when compared to 2005 fiscal results.
Including the U.S. and Canada, Brut
®
sales grew 15.9
Table of Contents
percent for fiscal 2006 overall when compared to fiscal 2005 results. Our grooming, skin
care, and hair care portfolio includes the following
brands: Brut
®
, Sea Breeze
®
, Skin Milk
®
,
Vitalis
®
, Ammens
®
, Condition 3-in-1
®
, Final Net
®
, Vitapointe
®
, TimeBlock
®
and
Epil-Stop
®
.
Brushes, Combs, and Accessories
. Net sales for fiscal 2006 decreased 10.9
percent compared to fiscal 2005. The drop was primarily due to certain customers moving to
other sourcing alternatives. We continue to aggressively market a new line of Revlon
®
accessories and other product initiatives to reverse the sales trend. We are emphasizing
promotional placements across all channels of distribution with key branded products, which
we believe is helping us to secure new business in selected accounts. Vidal Sassoon
®
,
Revlon
®
and Karina
®
were key brands in this group.
The Housewares segments reported net sales were $127,800 and $80,143 for fiscal years
2006 and 2005, respectively. We acquired OXO on June 1, 2004. Therefore, our reported net
sales for fiscal 2005 did not include the net sales of OXO for the three months ended May
31, 2004, which was $21,255. On a fully comparable period basis, our Housewares segment
sales would be $127,800 for fiscal 2006 versus $101,398 for the comparable months in fiscal
2005, for a net sales increase of 26.0 percent. Growth was driven by continued extension
of our business within existing key customers and the addition of a new line of hand tools
featuring our highly desired non-slip Good Grips
®
comfort and ergonomic design, which had
significant initial shipments in the second half of fiscal 2006. In addition to our new
line of hand tools, we expanded our tea kettle line and introduced a line of unique
silicone based textile kitchen mitts and trivets which have been well received. Good
Grips
®
, OXO Steel and OXO SoftWorks
®
are our key brands in this group.
During the third fiscal quarter of 2005, we began the implementation and transition of
our Housewares segment to our own internal management system. The transition was completed
late in the fourth fiscal quarter of 2006 and included a conversion of the warehousing,
order fulfillment and shipment processes for our OXO products to our new Global Enterprise
Resource Planning system and the physical movement of inventory from a leased managed
distribution facility in Illinois to the Companys new distribution facility in Southaven,
Mississippi. We continue to implement several significant functionality enhancements
related to the Housewares segments systems and expect this process to continue during
fiscal 2007.
During the initial months after the transition of our Housewares segment to the new systems
and our distribution facility in Southaven, Mississippi, we experienced warehouse order
processing and shipment delays. These delays were the result of both software issues and
adapting to the new equipment, new employees, and the operation of our new distribution
facility. In response to these issues, management dedicated additional personnel and sent a
seasoned operations management team to Southaven, Mississippi to assist local management in
resolving technical and operational issues. The delays did cause a backlog in orders and in
some cases, order cancellations. We continue to work this backlog down. We believe that the
impact was immaterial in the fourth quarter of fiscal 2006; however, we do expect some impact
in the first fiscal quarter of 2007 due to lost revenue and costs associated with related
concessions and accommodations to certain customers, and associated start up costs of the
distribution center. The extent of the impact on the first fiscal quarter of 2007 is not yet
determinable. We continue to work the backlog down, and expect operations to normalize in
fiscal 2007. We have addressed these issues with the affected customers and believe that
over the long-term, the strength of our customer relationships will not be affected by the
shipment delays.
Table of Contents
While we believe we have taken appropriate measures to mitigate the recent shipment
disruptions arising from the transition of our Housewares segment, there can be no assurance
that additional disruptions will not occur.
(1)
Net sales percentages by segment are computed as a percentage of the related segments net
sales to total net sales. All other percentages shown are computed as a percentage of total
net sales.
Table of Contents
(in thousands)
Fiscal Years Ended
2006
2005
2004
$
581,549
$
474,868
$
379,751
(21,277
)
3,075
54,043
29,475
103,606
41,074
8,198
106,681
95,117
$
589,747
$
581,549
$
474,868
1.4
%
22.5
%
25.0
%
-3.7
%
0.7
%
14.2
%
5.1
%
21.8
%
10.8
%
Table of Contents
Table of Contents
Fiscal Year Ended (in thousands)
% of Net Sales (1)
% Change
2006
2005
2004
2006
2005
2004
06/05
05/04
$
487,620
$
475,212
$
397,856
82.7
%
81.7
%
83.8
%
2.6
%
19.4
%
22,331
20,707
15,801
3.8
%
3.6
%
3.3
%
7.8
%
31.0
%
48,070
60,671
50,154
8.2
%
10.4
%
10.6
%
-20.8
%
21.0
%
31,726
24,959
11,057
5.4
%
4.3
%
2.3
%
27.1
%
125.7
%
$
589,747
$
581,549
$
474,868
100.0
%
100.0
%
100.0
%
1.4
%
22.5
%
(1)
Net sales percentages by geographic region are computed as a percentage of the
geographic regions net sales to total net sales.
Table of Contents
a combination of the higher costs of customer promotion programs which reduced net sales;
a reduction in sales prices on certain key items in order to maintain our competitive position; and
price increases on raw materials used in our grooming, skin care, and hair products.
a combination of sales mix changes to higher margin items resulting from the acquisition
of six liquid and powder hair and skin care brands from The Procter & Gamble Company in
October 2002, the Brut
®
acquisition in September 2003 and the OXO acquisition in June 2004;
selected product cost decreases; and
new item introductions at higher margins, all of which were partially offset by selling
price decreases on selected items.
increased personnel expenses partially offset by lower incentive compensation costs;
higher depreciation associated with our new information system;
increased advertising;
higher warehouse costs due to the use of outside third party warehouses to manage and
distribute certain inventories which were consolidated into our new 1,200,000 square foot
distribution facility in Mississippi (as more fully discussed in Note 2 to our consolidated
financial statements);
non-recurring moving and start-up costs incurred in fourth fiscal quarter 2006 in
connection with the physical transition to the new distribution facility;
higher outbound freight costs (primarily from a sharp rise in fuel surcharges);
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higher royalty costs due to the growth in the Housewares segment; and
increased operating rent expense and property taxes.
increased personnel expenses and incentive compensation costs;
increased consulting fees and depreciation associated with our new information system,
which was placed into service early in our third fiscal quarter of fiscal 2005;
increased consulting fees resulting from our compliance efforts with Section 404 of the
Sarbanes-Oxley Act of 2002; and
an exchange rate loss of $1,142 in fiscal 2005 versus an exchange rate gain of $1,216 in fiscal 2004.
Fiscal Year Ended (in thousands)
% of Net Sales (1)
% Change
2006
2005
2004
2006
2005
2004
06/05
05/04
$
37,260
$
76,993
$
85,774
8.1
%
15.4
%
18.1
%
-51.6
%
-10.2
%
34,118
25,031
26.7
%
31.2
%
0.0
%
36.3
%
*
$
71,378
$
102,024
$
85,774
12.1
%
17.5
%
18.1
%
-30.0
%
18.9
%
(1)
Operating income percentages by segment shown are computed as a percentage of the segments
net sales.
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(1)
Sales percentages shown are computed as a percentage of total net sales.
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2006
2005
75.2
70.0
1.9
2.4
$
185,568
$
155,738
2.5 : 1
2.2 : 1
55.7
%
64.2
%
11.0
%
19.9
%
(1)
Accounts receivable turnover, inventory turnover, and return on average equity computations
use 12 month trailing sales, cost of sales or net income components as required by the
particular measure. The current and four prior quarters ending balances of accounts
receivable, inventory, and equity are used for the purposes of computing the average balance
component as required by the particular measure.
(2)
Total debt is defined as all debt outstanding at the balance sheet date. This includes the
sum of the following lines on our consolidated balance sheets: Current portion of long-term
debt and Long-term debt, less current portion. For further information regarding this
financing, see Notes (2), (4), (5), (7) and (17) to our consolidated financial statements and
our discussion below under Financing Activities.
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During the second fiscal quarter of 2006, we commenced construction of a 1,200,000
square foot distribution facility in Southaven, Mississippi. On November 22, 2005 we took
possession of the completed facility paying a final purchase price of $33,744. Total costs
of the project, including warehouse equipment and fixtures was $45,862. The project was
funded out of a combination of cash from operations, our existing revolving line of credit
and draws against $15,000 of Industrial Revenue Bonds, as further
discussed under Note (7) to our consolidated financial statements
and the proceeds from the sale of our existing facility in Southaven, Mississippi, as
discussed below.
On February 2, 2006, we sold a 619,000 square foot distribution facility in Southaven,
Mississippi for $16,850 recording a gain on the sale of $1,304. We are currently in the
process of transitioning the operations in this facility to the new distribution facility
discussed above. We entered into a temporary lease agreement with the new owners through
April 2006 calling for monthly rentals of $141 per month including insurance and property
tax payments. After April 2006, we will pay rent for this facility on a month to month
basis, as required in order for us to complete our transition of operations to our new
facility.
For the 2006 fiscal year, we incurred capital expenditures of $267 on our Global
Enterprise Resource Planning System. Capital expenditures on this system have moderated
over levels of spending in the past two years. We expect to continue to invest in
functionality enhancements to the new system in the quarters to follow. Also during the
latest fiscal year, we spent $842 converting OXO to the new system. We currently estimate
the balance of costs yet to be incurred on enhancements and the OXO conversion to be $507.
In fiscal 2006, we also invested $1,497 in new molds and tooling, $689 on distribution
equipment and material handling systems at our existing operational facilities, $1,183 on
general computer software and hardware and $1,589 for recurring additions and/or
replacements of fixed assets in the normal and ordinary course of business.
We continue to invest in new patents. During the first three quarters of fiscal 2006 we
spent $438 on new patent costs and registrations.
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Listed below are some significant highlights of our 2005 and 2004 investing activities:
On June 1, 2004 we spent $273,173 to acquire certain assets and liabilities of
OXO International from WKI Holding Company, Inc. OXO serves as the underlying business
platform for our new Housewares segment, offering home product tools in several categories
including kitchen, cleaning, barbecue, barware, garden, automotive, storage and
organization. During fiscal 2005, $262,228 of the purchase price and subsequent purchase
price adjustments were recorded under the investing activities section of the cash flow
statement for the fiscal year ended February 28, 2005.
On September 29, 2004, we acquired certain assets related to the worldwide production
and distribution of TimeBlock
®
and Skin Milk
®
body and skin care products lines from
Naterra International, Inc. TimeBlock
®
is a line of clinically tested anti-aging skin care
products. Skin Milk
®
is a line of body, bath and skin care products enriched with real
milk proteins, vitamins and botanical extracts. The assets consist principally of patents,
trademarks and trade names, product formulations and production technology, distribution
rights and customer lists. The Company paid the purchase price of $12,001 in cash funded
out of the Companys revolving line of credit. The purchase price was allocated $11,906 to
trademarks and $95 to property and equipment. The entire purchase price was recorded in
the investing activities section of the cash flow statement for the fiscal year ended
February 28, 2005.
On December 15, 2004, we sold a 12,000 square foot office facility in Hong Kong for
$6,726 resulting in a $22 loss. The facility was previously used as a procurement office,
procurement showroom and staff training site. These functions were moved to other
facilities we maintain in Macao and China. The proceeds from the sale of this facility are
recorded under the investing activities section of the cash flow statement for the fiscal
year ended February 28, 2005.
During fiscal 2005, we incurred capital expenditures of $5,760 on our Global Enterprise
Resource Planning System. On September 7, 2004, we went live on the new system. Capital
spending on the initial implementation was substantially complete. In fiscal 2005, we
spent $198 to begin the process of converting OXO to the new system.
During fiscal 2005, we also invested $991 in new molds and tooling, $1,734 on land to be
used for future expansion, $876 on additional computer software and hardware and $2,101 for
recurring additions and/or replacements of fixed assets in the normal and ordinary course
of business.
During fiscal 2005, we also invested an additional $374 in patent development costs
primarily on behalf of our Housewares segment.
In fiscal 2004, we spent $55,255 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 Caribbean. This transaction is more fully described in Note (4) to the
consolidated
financial statements.
We spent $947 in fiscal 2004 completing the outfitting and startup of our former
Mississippi distribution facility, $2,142 on our new office facility in the UK, $5,523 on
our global information system, and $444 for normal and recurring additions and/or
replacements of fixed assets in the normal and ordinary course of business.
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During fiscal 2006, financing activities used $2,923 of cash. Highlights of those activities
follow.
During fiscal 2006, 161,675 share option grants were exercised for common shares
providing $1,798 of cash and $402 of tax benefits. Purchases through our employee stock
purchase plan of 22,171 shares provided an additional $396 of cash. No common shares were
repurchased during the fiscal year.
In August, 2005, we entered into a Loan Agreement with the Mississippi Business Finance
Corporation (the MBFC) in connection with the issuance by the MBFC of up to $15,000
Mississippi Business Finance Corporation Taxable Industrial Development Revenue Bonds,
Series 2005 (Helen of Troy LP Southaven, MS Project) (the Bonds). The proceeds of the
Bonds are to be used for the acquisition and installation of equipment, machinery and
related assets located in our new Southaven, Mississippi distribution facility then under
construction. Interim draws, accumulating up to the $15,000 limit can be made through May
31, 2006, with interest paid quarterly. When all draws are completed, the outstanding
principal will convert to five-year Bonds with principal paid in equal annual installments
beginning May 31, 2007, and interest paid quarterly. The Bonds can be prepaid without
penalty any time after August 11, 2006.
The Bonds will bear interest at a variable rate as elected by
the Company: based on either Bank of Americas
prime rate, or the respective 1, 2, 3, 6, or 12-month LIBOR rate plus a margin of 0.75% to
1.25% based upon the Leverage Ratio at the time. The Leverage Ratio is defined by the
Loan Agreement as the ratio of total consolidated indebtedness, including the subject funding
on such date to consolidated EBITDA (earnings before interest, taxes, depreciation and
amortization) for the period of the four consecutive fiscal quarters most recently ended.
In September 2005 we made an initial draw of $4,974 under the Bonds. At that time, pursuant
to the loan agreement, we elected a 12-month LIBOR rate plus a margin of 1.125 percent. As
of February 28, 2006, we had principal outstanding of $4,974 under this agreement with interest
payable at 5.42 percent. In connection with the new Loan
Agreement, we incurred $91 of financing costs, which will be
amortized over the life of the new agreement.
As of February 28, 2006, we were in compliance with all covenants under all of our
outstanding financing agreements.
During fiscal 2005, financing activities provided $202,451 of cash. Highlights of those
activities follow.
During fiscal 2005, we entered into a series of financing transactions that established
a new five-year, $75,000 revolving credit facility, cancelled an existing $50,000 revolving
credit facility, borrowed and subsequently repaid $200,000 under a Term Loan Credit
Agreement, and issued $225,000 of floating rate senior debt with five, seven and ten year
maturities.
On June 1, 2004, we acquired certain assets and liabilities of OXO International for a net
cash purchase price of $273,173, including the assumption of $4,040 of certain liabilities.
To fund the acquisition, we entered into a five-year $75,000 Revolving Line of Credit
Agreement, dated as of June 1, 2004, with Bank of America, N.A. and other lenders and a one
year $200,000 Term Loan Credit Agreement, dated as of June 1, 2004, with Banc of America
Mezzanine Capital, LLC. The purchase price of the OXO International acquisition was funded by
borrowings of $73,173 under the Revolving Line of Credit Agreement and $200,000 under the
Term Loan Credit Agreement.
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Borrowings under the Revolving Line of Credit Agreement accrue interest equal to the higher
of the Federal Funds Rate plus 0.50 percent or Bank of Americas prime rate. Alternatively,
upon timely election by the Company, borrowings accrue interest based on the respective 1, 2,
3, or 6-month LIBOR rate plus a margin of 0.75 percent to 1.25 percent based upon the
Leverage Ratio at the time of the borrowing. The Leverage Ratio is defined by the
Revolving Line of Credit Agreement as the ratio of total consolidated indebtedness, including
the subject funding on such date to consolidated EBITDA for the period of the four
consecutive fiscal quarters most recently ended, with EBITDA adjusted on a pro forma basis to
reflect the acquisition of OXO and the disposition of Tactica. The rates paid on various
draws during the period from June 1, 2004 through February 28, 2005 ranged from 2.195 percent
to 5.500 percent. The new credit line allows for the issuance of letters of credit up to
$10,000. Outstanding letters of credit reduce the $75,000 borrowing limit dollar for dollar.
Upon the execution of this credit facility, our previous $50,000 unsecured revolving credit
facility with Bank of America was cancelled. As of February 28, 2006, no borrowings or
letters of credit were outstanding under the Revolving Line of Credit. All amounts are due
and the facility terminates on June 1, 2009. The five, seven and ten year notes mature on
June 29, 2009, 2011 and 2014, respectively. The Revolving Line of Credit Agreement requires
the maintenance of certain Debt/EBITDA, fixed charge coverage ratios, and other customary
covenants. The obligations under the agreement are unsecured. The agreement has been
guaranteed, on a joint and several basis, by the parent company, Helen of Troy Limited, and
certain U.S. subsidiaries.
Borrowings under the $200,000 Term Loan Credit Agreement were subsequently paid off with the
proceeds of the funding of $225,000 Floating Rate Senior Notes on June 29, 2004, as discussed
in Notes (5) and (7) to the consolidated financial statements. For the period, outstanding
borrowings under the Term Loan Credit Agreement accrued interest at LIBOR plus a margin of
1.125 percent.
On June 29, 2004, we closed on a $225,000 Floating Rate Senior Note (Senior Notes)
financing arranged by Banc of America Securities LLC with a group of ten financial
institutions. The Senior Notes consist of $100,000 of five year notes, $50,000 of seven year
notes, and $75,000 of ten year notes. Interest on the notes is payable quarterly. Interest
rates are reset quarterly based on the three-month LIBOR rate plus 85 basis points for the
five and seven year notes, and the three-month LIBOR rate plus 90 basis points for the ten
year notes. Interest rates during the latest fiscal year on these notes ranged from 2.436 to
3.410 percent for the five and seven year notes, and 2.486 to 3.460 percent for the ten year
notes. The Senior Notes allow for prepayment subject to the following terms: five year
notes could be prepaid in the first year with a 2 percent penalty, thereafter there is no
penalty; seven and ten year notes could be prepaid after one year with a 1 percent penalty,
and after two years with no penalty. The proceeds of the Senior Notes financing were used to
repay the $200,000 borrowings under the Term Loan Credit Agreement, and $25,000 of the
outstanding borrowings on our $75,000 Revolving Line of Credit Agreement. The Senior Notes
are unsecured and require the maintenance of certain Debt/EBITDA, fixed charge coverage
ratios, consolidated net worth levels, and other customary covenants. The Senior Notes have
been guaranteed, on a joint and several basis, by the parent company, Helen of Troy Limited,
and certain U.S. subsidiaries.
In connection our fiscal 2005 financing transactions, we incurred $4,429 of financing costs.
These costs are being amortized over the related lives of the various notes financed, ranging
from 5 to 10 years.
During fiscal 2005, we purchased and retired a total of 376,060 common shares on the
open market at a total purchase price of $11,242. An additional 381,650 common shares were
tendered by a key shareholder and retired as payment and satisfaction of $13,797 on share
purchase price and federal income tax obligations arising from the exercise of 1,000,000
options by a key employee-shareholder. This transaction was valued at an average share
price of $36.15 using the average of the high bid and
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low bid prices for Helen of Troy shares as reported on the NASDAQ National Market System on
the day the shares were tendered.
Proceeds from employee option exercises and purchases through our employee stock
purchase plan combined to provide $3,122 of cash and $8,320 in tax benefits in fiscal 2005.
On September 22, 2003, certain of our subsidiaries entered into a $50,000 unsecured
revolving credit facility with Bank of America to facilitate short-term borrowings and the
issuance of letters of credit. All borrowings accrued interest equal to the higher of the
Federal Funds Rate plus 0.50 percent or Bank of Americas prime rate. Alternatively, upon
our timely election, borrowings accrued 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 credit
facility was cancelled on June 1, 2004.
During the second fiscal quarter of fiscal 2004, our Board of Directors approved a
resolution to purchase, in open market or through private transactions, up to 3,000,000 of
our common shares. During fiscal 2004, we purchased and retired a total of 344,000 common shares on the open
market at a total purchase price of $7,877. An additional 462,126 common shares were tendered
by a key shareholder and retired as payment and satisfaction of $12,695 of share 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 shares as reported on
the NASDAQ National Market System on the day the shares were tendered.
Proceeds from employee option exercises and purchases through our employee stock
purchase plan combined to provide $8,026 of cash and $8,044 in tax benefits in fiscal 2004.
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2007
2008
2009
2010
2011
After
Contractual Obligations
Total
1 year
2 years
3 years
4 years
5 years
5 years
$
229,974
$
$
995
$
995
$
100,995
$
995
$
125,994
35,000
10,000
10,000
3,000
3,000
3,000
6,000
72,424
13,399
13,356
13,298
9,367
7,372
15,632
6,621
2,371
1,670
951
733
516
380
61,838
61,838
11,989
3,292
2,524
2,712
1,144
1,279
1,038
26,771
12,066
9,836
1,802
800
800
1,467
3,862
2,039
1,109
394
285
35
1,706
1,498
208
507
507
762
401
361
$
451,454
$
105,913
$
41,349
$
23,360
$
116,324
$
13,997
$
150,511
*
The future obligation for interest on our variable rate debt is estimated assuming the rates
in effect as of February 28, 2006. This is only an estimate as actual rates will vary over
time. For instance, a 1 percent increase in interest rates could add $2,300 per year to
floating rate interest expense over the next year.
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February 28, 2006
Weighted
Weighted
Average
Market
Value of the
Contract
Currency
Notional
Contract
Range of Maturities
Spot Rate at
Contract
Spot Rate at
Feb.
28,
Average
Forward Rate
Forward Rate
at Feb.
Contract in
U.S. Dollars
Type
to Deliver
Amount
Date
From
To
Date
2006
at Inception
28, 2006
(Thousands)
Pounds
£
10,000,000
1/26/2005
12/11/2006
2/9/2007
1.8700
1.7540
1.8228
1.7644
$
584
February 28, 2005
Weighted
Weighted
Average
Market
Value of the
Contract
Currency
Notional
Contract
Range of Maturities
Spot Rate at
Contract
Spot Rate at
Feb.
28,
Average
Forward Rate
Forward Rate
at Feb.
Contract in
U.S. Dollars
Type
to Deliver
Amount
Date
From
To
Date
2006
at Inception
28, 2006
(Thousands)
Pounds
£
5,000,000
2/13/2004
11/10/2005
2/17/2006
1.8800
1.9231
1.7854
1.8949
($547
)
Pounds
£
5,000,000
5/21/2004
12/14/2005
2/17/2006
1.7900
1.9231
1.7131
1.8913
(891
)
Pounds
£
10,000,000
1/26/2005
12/11/2006
2/9/2007
1.8700
1.9231
1.8228
1.8776
(548
)
Euros
3,000,000
5/21/2004
2/10/2006
1.2000
1.3241
1.2002
1.3344
(403
)
($2,389
)
Change in Fair Value Due To
a 10% Movement in Forward Rates
(in thousands)
Favorable
Unfavorable
$
1,764
($1,764
)
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AND FINANCIAL STATEMENT SCHEDULE
PAGE
52
53
56
57
58
59
60
94
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pertain to the maintenance of records that in reasonable detail accurately and fairly
reflect the transactions and dispositions of the assets of the Company;
provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the Company are being made only in
accordance with authorizations of management and the Board of Directors of the Company; and
provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the Companys assets that could have a material effect
on the financial statements.
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Helen of Troy Limited:
May 12, 2006
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Helen of Troy Limited:
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May 12, 2006
Table of Contents
(in thousands, except shares and par value)
2006
2005
$
18,320
$
21,752
97
192
584
107,289
111,739
168,401
137,475
5,793
8,421
10,690
6,582
311,174
286,161
100,703
71,551
201,003
201,200
157,711
157,716
27,801
29,241
15,757
17,077
28,425
28,425
1,073
15,170
19,005
$
857,744
$
811,449
$
10,000
$
10,000
30,175
34,192
54,145
59,820
31,286
26,411
125,606
130,423
1,706
499
81
254,974
260,000
382,367
390,922
3,001
2,983
90,300
87,723
380,916
331,606
1,160
(1,784
)
475,377
420,527
$
857,744
$
811,449
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(in thousands, except per share data)
Years Ended The Last Day of February,
2006
2005
2004
$
589,747
$
581,549
$
474,868
323,189
307,045
257,651
266,558
274,504
217,217
195,180
172,480
131,443
71,378
102,024
85,774
(16,866
)
(9,870
)
(4,047
)
1,290
(2,575
)
4,312
(15,576
)
(12,445
)
265
55,802
89,579
86,039
6,492
12,907
14,477
49,310
76,672
71,562
(222
)
(11,040
)
$
49,310
$
76,450
$
60,522
$
1.65
$
2.58
$
2.52
$
$
(0.01
)
$
(0.39
)
$
1.65
$
2.57
$
2.13
$
1.56
$
2.36
$
2.29
$
$
(0.01
)
$
(0.35
)
$
1.56
$
2.35
$
1.94
29,919
29,710
28,356
31,605
32,589
31,261
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(in thousands)
Accumulated
Additional
Other
Total
Common
Paid-In
Comprehensive
Retained
Shareholders
Shares
Capital
Income (Loss)
Earnings
Equity
$
2,820
$
53,984
$
$
232,798
$
289,602
60,522
60,522
(918
)
(918
)
59,604
187
21,036
21,224
2
245
246
(81
)
(1,586
)
(18,906
)
(20,572
)
2,929
73,679
(918
)
274,413
350,103
76,450
76,450
2,610
2,610
(2,610
)
(2,610
)
(866
)
(866
)
75,584
2,679
2,679
129
16,747
16,876
2
322
324
(77
)
(3,025
)
(21,937
)
(25,039
)
2,983
87,723
(1,784
)
331,606
420,527
49,310
49,310
2,944
2,944
52,254
16
2,184
2,200
2
394
396
$
3,001
$
90,300
$
1,160
$
380,916
$
475,377
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(in thousands)
Years Ended The Last Day of February,
As Restated - See Note (1)(a)
2006
2005
2004
$
49,310
$
76,450
$
60,522
12,427
9,708
6,128
(1,317
)
1,067
38
(197
)
1,252
(223
)
95
3,410
(82
)
(2,954
)
(1,725
)
(1,791
)
(1,304
)
(180
)
222
7,279
3,761
(2,973
)
1,406
949
5,767
(37,473
)
(15,674
)
(30,926
)
(33,418
)
(3,279
)
2,628
(1,209
)
253
(1,689
)
(5,251
)
(25,144
)
(3,282
)
1,819
2,798
6,606
(4,017
)
18,550
(721
)
866
21,476
9,305
5,334
11,554
3,534
(433
)
(5,132
)
34,755
45,370
63,995
(52,367
)
(286,263
)
(65,120
)
16,850
7,068
80
253
81
1,580
(2
)
(3,121
)
(35,264
)
(279,116
)
(66,581
)
4,974
425,000
(200,000
)
(10,000
)
(10,000
)
(91
)
(4,429
)
2,194
3,122
8,026
(11,242
)
(7,877
)
8,044
(2,923
)
202,451
8,193
(3,432
)
(31,295
)
5,607
21,752
53,048
47,441
$
18,320
$
21,752
$
53,048
$
15,342
$
8,589
$
4,131
$
4,062
$
4,395
$
2,319
$
$
5,758
$
5,400
Table of Contents
(a)
General
Helen of Troy Limited, a Bermuda company, and its subsidiaries (the Company) design, develop,
import, and distribute an expanding portfolio of brand-name consumer products. We currently
manage and report on our business in two active segments: Personal Care and Housewares. The
Personal Care segments products include hair dryers, straighteners, curling irons, hairsetters,
womens shavers, mirrors, hot air brushes, home hair clippers, paraffin baths, massage cushions,
footbaths, body massagers, brushes, combs, hair accessories, liquid hair styling products, mens
fragrances, mens deodorants, body powder, and skin care products. The Housewares segment
reports the operations of OXO International (OXO), which we acquired on June 1, 2004, as
further discussed in Notes (4),(5), (7) and (17) to our consolidated financial statements. The
Houseware segments products include kitchen tools, cutlery, bar and wine accessories, household
cleaning tools, tea kettles, trash cans, storage and organization products, hand tools,
gardening tools, kitchen mitts and trivets, and barbeque tools. Both operating segments sell
their portfolio of products principally through mass merchants, general retail and specialty
retail outlets in the United States and other countries. We purchase our products from
unaffiliated manufacturers, most of which are located in The Peoples 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. Unless otherwise indicated, references in the consolidated financial statements to
2006, 2005 and 2004 are to Helen of Troys fiscal years ended February 28, 2006 and 2005 and
February 29, 2004. We have reclassified certain prior-year amounts to conform to this years
presentation.
For fiscal years 2005 and 2004, the Company has changed its presentation of its consolidated
statements of cash flows to separately disclosed the operating, investing and financing portions
of the cash flows attributable to its discontinued operations of Tactica International, Inc.,
which in prior periods were reported on a combined basis as part of the single amount change in
Other assets under the caption Changes in operating assets and liabilities.
In these consolidated financial statements and accompanying notes, amounts shown are in
thousands of U.S. dollars, except as otherwise indicated.
(b)
Consolidation
Our consolidated financial statements include the accounts of Helen of Troy Limited and its
wholly owned subsidiaries. All significant intercompany accounts and transactions have been
eliminated in consolidation.
Tactica International, Inc. (Tactica), a subsidiary in which we acquired a 55 percent interest
in fiscal 2001, has been 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. As more fully described in Note (16) to our
consolidated financial statements, on April 29, 2004 we completed the sale of our ownership
interest in Tactica back to certain of its key operating manager-shareholders. For the periods
presented through the date of Tacticas sale, our consolidated net income included 100 percent
of Tacticas net income or loss because the minority interest in Tacticas accumulated deficit
had not been extinguished.
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(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.
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 $12,124, $13,869,
and $16,603, for the fiscal years 2006, 2005, and 2004, 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
average cost or net realizable value. A products average 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 general and administrative expenses directly
attributable to the procurement of inventory.
General and administrative expenses in inventory include all the expenses of operating the
Companys Hong Kong and Macao sourcing facilities, expenses incurred for production forecasting,
and expenses incurred for product design, engineering and packaging. We charged $10,667,
$11,082, and $11,373 of such general and administrative expenses to inventory during fiscal
years 2006, 2005, and 2004, respectively. We estimate that $5,075 and $4,192 of general and
administrative expenses directly attributable to the procurement of inventory were included in
our inventory balances on hand at fiscal year ends 2006 and 2005, 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 average cost or net realizable value) of inventory sold to customers during the
reporting period.
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(f)
Shipping and handling revenues and expenses
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 $51,017, $38,355, and $32,701 during fiscal years 2006, 2005, and 2004, respectively. 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 directly to consumers and retail customers ordering
relatively small dollar amounts of product. Our shipping and handling expenses far exceed our
shipping and handling revenues.
(g)
Valuation of accounts receivable
Our allowance for doubtful receivables reflects our best estimate of probable losses, determined
principally on the basis of historical experience and specific allowances for known troubled
accounts.
(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, trademarks, patents and other intangible assets.
A significant portion of our sales are made subject to license agreements with the licensors of
the Vidal Sassoon
®
, Revlon
®
,
Sunbeam
®
, Health o meter
®
and
Dr. Scholls
®
trademarks. Our license
agreements are reported on the Companys 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 trademark license agreements comprised 52 percent, 56 percent, and 64
percent of total consolidated net sales for fiscal years 2006, 2005, and 2004, 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 based upon 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.
Patents acquired through purchase from other entities, if material, are recorded on our
consolidated balance sheets based upon the appraised cost of the acquired patents and amortized
over the remaining life of the patent in the jurisdiction filed. Additionally, we incur certain
internal costs, primarily legal fees in connection with the design, development and filing of
patents on new products under development which
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are capitalized as incurred and amortized on a straight-line basis over the life of the patent
in the jurisdiction filed, typically 14 years.
Other intangible assets include customer lists and a non-compete agreement that we acquired from
other entities. These are recorded on our consolidated balance sheets based upon the appraised
cost of the acquired asset and amortized on a straight-line basis over the remaining life of the
asset as determined either through outside appraisal (customer lists) or the term of the
non-compete agreement.
See Notes (3) and (4) for additional information on our intangible assets.
(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 options for common shares.
The number of potentially dilutive securities was 1,686,000, 2,879,000 and 2,905,000 for fiscal
years 2006, 2005, and 2004, respectively. Options to purchase common shares 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 shares totaled
934,161, 40,500, and -0- for fiscal 2006, 2005, and 2004, 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 $18,549 and $17,530 of the
amount reported on our consolidated balance sheets as Cash and cash equivalents at fiscal year
ends 2006 and 2005, respectively. Our cash equivalents consist primarily of variable rate demand
bonds that mature in 35 or fewer days.
(m)
Trading securities and stock available for sale
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 28,
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2006, we held investments in equity securities of unaffiliated companies for the purpose of
trading them in the near term. Therefore, certain 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 and (losses) attributable to trading securities
totaled ($95), ($500) and $311 in fiscal 2006, 2005, and 2004, respectively.
In connection with the sale of Tactica, as further discussed in Note (16) to these consolidated
financial statements, we acquired certain marketable securities; which carried a restriction
that prevented us from disposing of the stock prior to July 31, 2005. Accordingly, we have
classified this stock as available for sale, which is included in the Other assets section of
our consolidated balance sheets. If gains or losses on stock available for sale are considered
temporary, they are recognized as an element of Other
comprehensive income in our consolidated statement of shareholders equity and comprehensive
income. If losses are incurred which are considered other than temporary, they are included as
an unrealized loss in Other income in our consolidated statements of income. The stock
available for sale had a market value at acquisition of $3,030. In the third fiscal quarter of
2005, management determined the decline in market value to be other than temporary and
accordingly reversed the accumulated other comprehensive losses taken to date and began
recording unrealized losses on the stock. The stock had a market value of $90 and $120 at fiscal
year ends 2006 and 2005, respectively. Unrealized loss on stock available for sale was $30 and
$2,910 for fiscal 2006 and 2005, 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 remeasured 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), including
the impact of currency hedges totaled $105, ($1,142) and $1,216 during fiscal years 2006, 2005,
and 2004, 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 or our
consolidated statement of shareholders equity and comprehensive income, depending on the type
of hedging instrument and the effectiveness of the hedges. In our case, we record these
transactions on the line entitled Selling, general, and administrative expenses in our
consolidated statements of income, or the line entitled Unrealized gain (loss) on cash flow
hedging derivatives in our consolidated statement of shareholders equity and comprehensive
income, as appropriate. All our 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
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income. See Note (14) 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 $29,066, $25,559 and $27,106 during fiscal years 2006, 2005,
and 2004, 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 $7,373 and $5,767 as of
fiscal year ends 2006 and 2005, 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 Companys accrual for the
past three fiscal years:
(in thousands)
Reductions of
accrual -
Fiscal Year
Beginning
Additions to
payments and
Ended February
balance
accrual
credits issued
Ending balance
$
5,767
$
22,901
$
21,295
$
7,373
$
4,114
$
19,880
$
18,227
$
5,767
$
3,263
$
15,848
$
14,996
$
4,114
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,
Guarantors 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 (5), (6), (7) and (10) 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
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
assets carrying value does exceed its fair market value, the next step is to record a loss
equal to the excess of the assets carrying value over its fair value. In fiscal 2006 and 2005,
we did not record any charges for impairment of long-lived assets. 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 (16) to our consolidated financial statements.
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(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 assets 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 assets 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.
Intangible assets consist primarily of goodwill, license agreements, trademarks, customer lists
and patents. 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 $3,202, $2,732 and $1,445 during fiscal 2006, 2005 and 2004, respectively. See Notes
(3) and (4) 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 $888, $359 and $438 in fiscal 2006, 2005, and 2004, respectively.
Interest income is normally earned on cash invested in short term accounts and cash equivalents,
however in fiscal 2006, interest income included interest earned on an income tax receivable of
$463.
(t)
Deferred financing costs
The Company has incurred debt issuance costs in connection with its long-term debt. These
costs are capitalized as deferred financing costs and amortized using the straight-line
method over the term of the related debt.
(u)
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 (7) 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 (14) for more information on our
hedging activities.
(v)
Stock-based compensation plans
Statement of Financial Accounting Standards No. 123 (SFAS 123) and No. 123(R) (SFAS 123(R)),
Accounting for Stock-Based Compensation, currently encourage, but do not require, companies to
record compensation expense for stock-based compensation plans at fair value. We have chosen to
account for our share-based compensation plans using the intrinsic value method prescribed in
Accounting Principles Board
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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. We credited $402, $8,301
and $8,045 of tax benefits arising from such exercises in fiscal 2006, 2005, and 2004,
respectively. Disclosures about the Companys share-based compensation plans are included in
Note (9) to these consolidated financial statements.
As further discussed under New accounting guidance below, we plan to change our method of
accounting to comply with new requirements of SFAS 123(R), which will require expensing of the
fair value of options granted over the vesting lives of the options. This change will not take
place until March 1, 2006, the start of our fiscal 2007 year.
(w)
New accounting guidance
Accounting Changes and Error Corrections
- In May 2005, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standard (SFAS) No. 154, Accounting Changes and
Error Corrections a replacement of APB Opinion No. 20 and FASB Statement No. 3. SFAS No. 154
requires retrospective application to prior periods financial statements of changes in
accounting principle, unless it is impracticable to determine either the period-specific effects
or the cumulative effect of the change. SFAS No. 154 also requires that retrospective
application of a change in accounting principle be limited to the direct effects of the change.
Indirect effects of a change in accounting principle, such as a change in contractual bonus
payments resulting from an accounting change, should be recognized in the period of the
accounting change. SFAS No. 154 also requires that a change in depreciation, amortization, or
depletion method for long-lived, nonfinancial assets be accounted for as a change in accounting
estimate affected by a change in accounting principle. SFAS No. 154 is effective for accounting
changes and corrections of errors made in fiscal years beginning after December 15, 2005. Early
adoption is permitted for accounting changes and corrections of errors made in fiscal years
beginning after the date this Statement is issued. The Company will adopt the provisions of SFAS
No. 154, if applicable, beginning in fiscal 2007.
Accounting for Stock Options
- In December 2004, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards (SFAS) No. 123(R) Share-Based Payment which
revises SFAS No. 123, Accounting for Stock-Based Compensation, and supersedes APB Opinion No.
25, Accounting for Stock Issued to Employees. The statement addresses the accounting for
share-based payment transactions (for example, stock options and awards of restricted shares) in
which an employer receives employee-services in exchange for equity securities of the company or
other rights to receive future compensation that are based on the fair value of the companys
equity securities. The statement eliminates the use of APB Opinion No. 25, Accounting for Stock
Issued to Employees, and generally requires such transactions be accounted for using a
fair-value-based method and recording compensation expense rather than an optional pro forma
disclosure of what expense amounts might be. The provisions of SFAS 123(R) are effective for
public companies at the beginning of their first annual period beginning after June 15, 2005.
We will adopt SFAS No. 123(R) on March 1, 2006.
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SFAS No. 123(R) permits public companies to adopt its requirements using one of two methods:
1.
A modified prospective method in which compensation cost is recognized
beginning with the effective date (a) based on the requirements of SFAS No. 123(R) for
all share-based payments granted after the effective date and (b) based on the
requirements of SFAS No. 123(R) for all awards granted to employees prior to the
effective date of SFAS No. 123(R) that remain unvested on the effective date; or
2.
A modified retrospective method which includes the requirements of the
modified prospective method described above, but also permits entities to restate based
on the amounts previously recognized under SFAS No. 123(R) for purposes of pro forma
disclosures either (a) all prior periods presented or (b) prior interim periods of the
year of adoption.
The adoption of SFAS No. 123(R)s fair value method will have an impact on our results of
operations, although it will have an insignificant impact on our overall financial position.
During the fiscal year ended February 28, 2006, we issued an additional 306,000 options to our
employees and directors whose fair values at the date of issue ranged from $6.05 per share to
$9.33 per share. At February 28, 2006, we had 555,286 options available for issue under our
employee stock option plan. 296,000 options previously available for issue under our
non-employee directors stock option plan expired when the directors stock option plan
terminated in June 2005. Also, at February 28, 2006, we had 331,716 shares available for issue
under our employee stock purchase plan. When these shares are sold, the discount on the sale is
subject to valuation and expensing under the provisions of the new standard.
On February 24, 2006, the Compensation Committee of the Companys Board of Directors approved
the immediate acceleration of vesting on unvested and out-of-the money stock options
previously awarded to officers and employees with option exercise prices greater than $19.65.
The affected options held by officers and employees had a range of exercise prices between
$20.35 and $33.88, with a weighted average
exercise price of $24.79. Vesting of options exercisable for a total of 285,217 shares was
accelerated. The closing price per share of the Companys common shares on February 24, 2006 was
$19.65. Except for the vesting change, all affected share options will continue to be governed
by their respective original terms and conditions. The accelerated options represent 4.1% of the
total of all outstanding Company options.
The Company took this action in order to reduce the future compensation expense associated with
unvested stock options following the adoption of SFAS No.123(R) beginning with the first
quarter of fiscal 2007. As a result of the acceleration, the Company estimates that it will
reduce future stock option related compensation expense it otherwise would be required to record
in connection with the accelerated options by $1,641 on a pre-tax
basis over the original option remaining
vesting periods.
We continue to evaluate and revise our estimates of the impact of SFAS No. 123(R) on our
operations. Based upon our latest analysis of our amended stock option plan, using the existing
options outstanding at February 28, 2006 and expected employee stock purchase plan exercises in
the next fiscal year, and accounting for the impact of accelerated options discussed above, the
latest estimated impact of adopting SFAS No. 123(R) for fiscal 2007 (fiscal year of adoption)
will be to add $454 after tax, to our annual operating expense. Future grants could materially
increase the amount of the aforementioned estimate, however, their impact is difficult to
measure because such impact will depend, among other things, on the number of grants issued,
market conditions prior to and as of the date of the grant, and option vesting provisions.
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SFAS No. 123(R) also requires the benefits of tax deductions in excess of recognized
compensation cost to be reported as a financing cash flow, rather than as an operating cash flow
as required under current literature. This requirement will reduce net operating cash flows and
increase net financing cash flows in periods after
adoption. We cannot estimate what those amounts will be in the future (because they depend on,
among other things, when employees exercise stock options).
On November 10, 2005, the FASB issued FASB Staff Position (FSP) No. FAS 123(R)-3 Transition
Election Related to Accounting for Tax Effects of Share-Based Payment Awards. The Company
elected to adopt the alternative transition method provided in this FSP for calculating the tax
effects of share-based compensation pursuant to SFAS 123(R), which method includes simplified
methods to establish the
beginning balance of the additional paid-in capital pool (APIC pool) related to the tax
effects of employee stock-based compensation, and to determine the subsequent impacts on the
APIC pool and Consolidated Statements of Cash Flows of the tax effects of employee stock-based
compensation awards that are outstanding upon adoption of SFAS 123(R).
Foreign Earnings Repatriation
- In December 2004, the FASB issued FASB Staff Position (FSP) No.
109-2, Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision
within the American Job Creation Act of 2004 (AJCA). The AJCA introduces a special one-time
dividends received deduction on the repatriation of certain foreign earnings to a U.S. taxpayer
(repatriation provision), provided certain criteria are met. FSP No.109-2 provides accounting
and disclosure guidance for the repatriation provision. We have described the impact of FSP
No.109-2 on our financial statements in Note (8) to these consolidated financial statements.
Exchanges of Nonmonetary Assets
- In December 2004, the FASB issued SFAS No. 153 Exchanges of
Nonmonetary Assetsan amendment of APB Opinion No. 29. The guidance in APB Opinion No. 29,
Accounting for Nonmonetary Transactions, is based on the principle that exchanges of
nonmonetary assets should be measured based on the fair value of the assets exchanged. The
guidance in that Opinion, however, included certain exceptions to that principle. This Statement
amends Opinion 29 to eliminate the exception for nonmonetary exchanges of similar productive
assets and replaces it with a general exception for exchanges of nonmonetary assets that do not
have commercial substance. A nonmonetary exchange has commercial substance if the future cash
flows of the entity are expected to change significantly as a result of the exchange. The
provisions of this Statement will be effective for nonmonetary asset exchanges occurring in
fiscal periods beginning after June 15, 2005. The adoption of SFAS No. 153 is not expected to
have a material impact on our financial condition, results of operations, or cash flows.
Abnormal Inventory Costs
- In November 2004, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards (SFAS) No. 151, Inventory Costs, an
amendment of ARB No. 43, Chapter 4 (FAS 151). FAS 151 clarifies that abnormal inventory
costs such as costs of idle facilities, excess freight and handling costs, and wasted materials
(spoilage) are required to be recognized as current period charges. The provisions of SFAS 151
are effective for fiscal years beginning June 15, 2005 or later. Management is currently
evaluating the provisions of SFAS 151 and does not expect that the adoption will have a material
impact on the Companys consolidated financial position or results of operations.
Other-Than-Temporary-Investments
- In March 2004, the EITF reached a consensus on EITF Issue No.
03-1 (EITF 03-1), The Meaning of Other-Than-Temporary Impairment and Its Application to
Certain
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Investments, for which the measurement and recognition provisions were to be effective for
reporting periods beginning after June 15, 2004. However, in September 2004, the EITF issued
FASB Staff Position
EITF Issue No. 03-1-1, Effective Date of Paragraphs 10-20 of EITF Issue No. 03-1, `The Meaning
of Other-Than-Temporary Impairment and Its Application to Certain Investments, which postponed
the measurement and recognition provisions of EITF 03-1, but maintained the disclosure
requirements for all
investments within the scope of the guidance to be effective in annual financial statements for
fiscal years ending after June 15, 2004. EITF 03-1 provides a three-step process for determining
whether investments, including equity securities, are other than temporarily impaired and
requires additional disclosures in annual financial statements. An investment is impaired if the
fair value of the investment is less than its cost. EITF 03-1 outlines that an impairment would
be considered other than temporary unless: a) the investor has the ability and intent to hold an
investment for a reasonable period of time sufficient for the recovery of the fair value up to
(or beyond) the cost of the investment, and b) evidence indicating that the cost of the
investment is recoverable within a reasonable period of time outweighs evidence to the contrary.
In addition, the severity and duration of the impairment should also be considered in
determining whether the impairment is other than temporary. We have applied the guidance
provided by EITF 03-1 and determined that certain declines in the market value of securities
acquired in connection with the sale of Tactica as discussed in Notes (1) and (16) to our
consolidated financial statements were other than temporary, and recorded the appropriate
recognition of a loss in our fiscal 2005 operating results.
Estimated
Useful Lives
Last day of February,
(Years)
2006
2005
$
9,623
$
8,658
10 - 40
62,374
44,357
3 - 10
37,601
23,330
1 - 3
4,907
13,613
3 - 5
3,875
3,840
5 - 15
7,865
8,127
457
750
1,040
300
127,742
102,975
(27,039
)
(31,424
)
$
100,703
$
71,551
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(in thousands)
February 28, 2006
February 28, 2005
Gross
Accumulated
Net
Gross
Accumulated
Net
Estimated
Carrying
Amortization
Carrying
Carrying
Amortization
Carrying
Type / Description
Segment
Life
Amount
(if Applicable)
Amount
Amount
(if Applicable)
Amount
Housewares
Indefinite
$
165,934
$
$
165,934
$
166,131
$
$
166,131
Personal Care
Indefinite
35,069
35,069
35,069
35,069
201,003
201,003
201,200
201,200
Housewares
Indefinite
75,200
75,200
75,200
75,200
Personal Care
Indefinite
51,317
51,317
51,317
51,317
Personal Care
[1]
338
(225
)
113
338
(220
)
118
Personal Care
Indefinite
31,081
31,081
31,081
31,081
157,936
(225
)
157,711
157,936
(220
)
157,716
Personal Care
Indefinite
18,000
18,000
18,000
18,000
Personal Care
8 - 25 Years
24,315
(14,514
)
9,801
24,315
(13,074
)
11,241
42,315
(14,514
)
27,801
42,315
(13,074
)
29,241
Housewares
2 - 13 Years
18,801
(3,044
)
15,757
18,364
(1,287
)
17,077
$
420,055
$
(17,783
)
$
402,272
$
419,815
$
(14,581
)
$
405,234
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(in thousands)
Aggregate Amortization Expense
For the twelve months ended
$
3,202
$
2,732
$
1,445
Estimated Amortization Expense
For the fiscal years ended
$
2,979
$
2,905
$
2,855
$
2,561
$
2,088
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Last day of February,
2006
2005
$
24,176
$
20,008
7,603
13,507
7,617
9,392
2,671
1,929
2,577
1,732
1,502
1,239
1,495
1,229
858
1,640
593
123
2,389
5,053
6,632
$
54,145
$
59,820
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Original
Latest
Date
Range of Interest Rates
Rate
Last day of February,
Borrowed
2006
2005
Payable
Maturity
2006
2005
January 1996
7.01
%
7.01
%
7.01
%
January 2008
$
20,000
$
30,000
July 1997
7.24
%
7.24
%
7.24
%
July 2012
15,000
15,000
June 2004
3.41%
to
5.371%
2.436%
to
3.410%
5.81
%
June 2009
100,000
100,000
June 2004
3.41%
to
5.371%
2.436%
to
3.41%
5.81
%
June 2011
50,000
50,000
June 2004
3.46%
to
5.421%
2.486%
to
3.460%
5.86
%
June 2014
75,000
75,000
August 2005
5.295%
to
5.42%
5.42
%
May 2011
4,974
264,974
270,000
(10,000
)
(10,000
)
$
254,974
$
260,000
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Years Ended Last Day of February,
(in thousands)
2006
2005
2004
$
7,045
$
15,529
$
13,760
48,757
74,050
72,279
$
55,802
$
89,579
$
86,039
Years Ended Last Day of February,
(in thousands)
2006
2005
2004
$
2,481
$
5,410
$
5,105
1,869
9,108
8,444
2,142
(1,611
)
928
$
6,492
$
12,907
$
14,477
Years Ended Last Day of February,
(in thousands)
2006
2005
2004
$
19,531
$
31,353
$
30,114
(15,831
)
(16,400
)
(15,637
)
(2,046
)
2,792
$
6,492
$
12,907
$
14,477
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2006
2005
Deferred tax assets:
(in thousands)
$
4,861
$
6,080
1,801
2,502
4,275
1,723
1,170
1,039
3,078
609
793
721
15,978
12,674
(368
)
(5,001
)
(5,019
)
$
10,609
$
7,655
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Years Ended The Last Day of February,
(in thousands)
2006
2005
2004
As Reported
$
49,310
$
76,450
$
60,522
1,951
1,437
6,620
1,181
Pro forma
$
46,178
$
75,013
$
53,902
Basic:
As Reported
$
1.65
$
2.57
$
2.13
Pro forma
$
1.54
$
2.52
$
1.90
Diluted:
As Reported
$
1.56
$
2.35
$
1.94
Pro forma
$
1.46
$
2.30
$
1.72
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Years Ended The Last Day of February,
Option Assumptions
2006
2005
2004
0.0
%
0.0
%
0.0
%
41.6
%
39.3
%
42.5
%
3.6
%
3.7
%
3.6
%
(1
)
(1
)
(1
)
(1)
Expected lives of 3, 4, 5, or 10 years are used depending on the option granted.
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Years Ended Last Day of February,
2006
2005
2004
WEIGHTED
WEIGHTED
WEIGHTED
AVERAGE
AVERAGE
AVERAGE
SHARES
EXERCISE
SHARES
EXERCISE
SHARES
EXERCISE
(000s)
PRICE
(000s)
PRICE
(000s)
PRICE
6,846
$
14.60
7,983
$
12.97
8,615
$
10.83
306
18.83
190
29.49
1,315
18.43
(162
)
11.16
(1,288
)
6.65
(1,874
)
7.03
(67
)
23.21
(39
)
17.01
(73
)
10.73
6,923
14.83
6,846
14.60
7,983
12.97
6,494
$
14.64
6,142
$
13.97
7,182
$
12.69
$
7.14
$
9.92
$
8.97
Outstanding Stock Options
Exercisable Stock Options
Weighted-
Average
Weighted-
Weighted-
Remaining
Average
Average
Number of
Contractual
Exercise
Number of
Exercise
Options
Price Range
Life (years)
Price
Options
Price
71,850
$
3.89
to
$
12.13
4.38
$
8.66
48,800
$
8.52
110,825
$
12.75
to
$
14.02
4.49
13.77
40,675
13.58
6,116
$
14.34
to
$
15.51
3.50
15.06
2,916
14.96
464,300
$
17.76
to
$
35.25
6.86
22.47
262,985
25.03
653,091
6.15
$
19.40
355,376
$
21.37
1,539,125
$
5.69
to
$
11.84
5.32
$
9.82
1,524,875
$
9.86
1,658,311
$
12.53
to
$
14.02
5.29
13.05
1,642,986
13.04
1,756,834
$
14.47
to
$
15.94
2.89
15.56
1,756,834
15.56
1,029,233
$
17.63
to
$
23.38
5.34
19.63
975,008
19.72
5,983,503
4.59
$
14.09
5,899,703
$
14.07
62,500
$
4.41
to
$
11.84
4.49
$
8.02
62,500
$
8.02
20,000
$
12.53
to
$
13.13
6.36
12.89
20,000
12.89
36,000
$
14.47
to
$
15.94
3.64
15.44
36,000
15.44
168,000
$
16.41
to
$
33.35
8.18
26.06
120,000
26.19
286,500
6.67
$
19.87
238,500
$
18.69
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The term of the agreement was reduced from five years to three years, renewing on a
daily basis for a new three-year term as currently provided in the original agreement; and
Reduced the period for severance payouts from five years to three years. The formula
for calculating the amount of the annual severance payments required by the agreement
remains unchanged.
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(in thousands)
2007
2008
2009
2010
2011
After
Contractual Obligations
Total
1 year
2 years
3 years
4 years
5 years
5 years
$
229,974
$
$
995
$
995
$
100,995
$
995
$
125,994
35,000
10,000
10,000
3,000
3,000
3,000
6,000
72,424
13,399
13,356
13,298
9,367
7,372
15,632
6,621
2,371
1,670
951
733
516
380
61,838
61,838
11,989
3,292
2,524
2,712
1,144
1,279
1,038
26,771
12,066
9,836
1,802
800
800
1,467
3,862
2,039
1,109
394
285
35
1,706
1,498
208
507
507
762
401
361
$
451,454
$
105,913
$
41,349
$
23,360
$
116,324
$
13,997
$
150,511
*
The future obligation for interest on our variable rate debt is estimated assuming the rates
in effect as of February 28, 2006. This is only an estimate; actual rates will vary over
time. For instance, a 1 percent increase in interest rates could add $2,300 per year to
floating rate interest expense over the next year.
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May
August
November
February
Total
$
127,392
$
130,389
$
197,458
$
134,508
$
589,747
58,692
60,218
86,044
61,604
266,558
10,547
9,452
22,666
6,645
49,310
0.35
0.32
0.76
0.22
1.65
0.33
0.30
0.72
0.21
1.56
$
107,021
$
141,229
$
205,682
$
127,617
$
581,549
50,240
66,913
98,651
58,700
274,504
14,705
18,848
31,135
11,984
76,672
(222
)
(222
)
14,483
18,848
31,135
11,984
76,450
0.50
0.63
1.04
0.41
2.58
(0.01
)
(0.01
)
0.49
0.63
1.04
0.41
2.57
0.45
0.57
0.97
0.37
2.36
(0.01
)
(0.01
)
0.44
0.57
0.97
0.37
2.35
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(in thousands)
Personal
Discontinued
2006
Care
Housewares (3)
Segment
Total
$
461,947
$
127,800
$
$
589,747
37,260
34,118
71,378
512,594
345,150
857,744
29,979
22,388
52,367
9,020
3,407
12,427
Personal
Discontinued
2005
Care (1)
Housewares (2)
Segment (1)
Total
$
501,406
$
80,143
$
$
581,549
76,993
25,031
102,024
506,957
304,492
811,449
21,738
264,525
286,263
7,556
2,152
9,708
Personal
Discontinued
2004
Care
Housewares
Segment (1)
Total
$
474,868
$
$
$
474,868
85,774
85,774
466,424
23,185
489,609
65,119
65,119
6,128
6,128
(1)
Segment information from prior periods has been restated due to the classification of
Tactica as discontinued operations and a change in our segments effective March 1, 2004.
(2)
Includes only operations from June 1, 2004 through February 28, 2005.
(3)
Capital expenditures and identifiable assets for the Housewares segment includes a $20,746
allocation for the portion of the new Mississippi distribution facility costs incurred
directly and indirectly for the benefit of this segment.
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2006
2005
2004
$
487,620
$
475,212
$
397,856
102,127
106,337
77,012
$
589,747
$
581,549
$
474,868
$
507,478
$
497,135
$
221,647
39,092
28,153
24,222
$
546,570
$
525,288
$
245,869
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February 28, 2006
Weighted
Weighted
Average
Market
Value of the
Contract
Currency
Notional
Contract
Range of Maturities
Spot Rate at
Contract
Spot Rate at
February
28,
Average
Forward Rate
Forward Rate
at February
Contract in
U.S. Dollars
Type
to Deliver
Amount
Date
From
To
Date
2006
at Inception
28, 2006
(Thousands)
Pounds
£
10,000,000
1/26/2005
12/11/2006
2/9/2007
1.8700
1.7540
1.8228
1.7644
$
584
February 28, 2005
Weighted
Weighted
Average
Market
Value of the
Contract
Currency
Notional
Contract
Range of Maturities
Spot Rate at
Contract
Spot Rate at
February
28,
Average
Forward Rate
Forward Rate
at February
Contract in
U.S. Dollars
Type
to Deliver
Amount
Date
From
To
Date
2006
at Inception
28, 2006
(Thousands)
Pounds
£
5,000,000
2/13/2004
11/10/2005
2/17/2006
1.8800
1.9231
1.7854
1.8949
($547
)
Pounds
£
5,000,000
5/21/2004
12/14/2005
2/17/2006
1.7900
1.9231
1.7131
1.8913
(891
)
Pounds
£
10,000,000
1/26/2005
12/11/2006
2/9/2007
1.8700
1.9231
1.8228
1.8776
(548
)
Euros
3,000,000
5/21/2004
2/10/2006
1.2000
1.3241
1.2002
1.3344
(403
)
($2,389
)
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(in thousands)
$
2,908
3,030
2,255
$
8,193
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(in thousands)
$
2,908
463
250
3,621
(1,800
)
$
1,821
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(in thousands)
$
15,728
2,907
75,200
165,388
17,990
277,213
(4,040
)
$
273,173
(in thousands, except per share data)
Years Ended The Last Day of February,
2006
2005
2004
$
589,747
$
602,804
$
561,374
49,310
79,924
83,337
$
1.56
$
2.45
$
2.67
31,605
32,589
31,261
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Additions | ||||||||||||||||||||
Balance at | Charged to | Write-off of | ||||||||||||||||||
Beginning | cost and | uncollectible | Balance at | |||||||||||||||||
Description | of Year | expenses | Recoveries | accounts | End of Year | |||||||||||||||
|
||||||||||||||||||||
Year ended February
28, 2006
|
||||||||||||||||||||
Allowance for
accounts receivable
|
$ | 2,167 | $ | 648 | $ | 142 | $ | 2,107 | $ | 850 | ||||||||||
|
||||||||||||||||||||
Year ended February
28, 2005
|
||||||||||||||||||||
Allowance for
accounts receivable
|
$ | 1,100 | $ | 1,728 | $ | 17 | $ | 678 | $ | 2,167 | ||||||||||
|
||||||||||||||||||||
Year ended February
29, 2004
|
||||||||||||||||||||
Allowance for
accounts receivable
|
1,089 | 1,004 | 31 | 1,024 | 1,100 |
94
95
96
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
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Table of Contents
98
ITEM 10.
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information about our Directors who are standing for reelection is set forth under
Election of Directors;
Information about our executive officers is set forth under Executive Officers;
Information about our Audit Committee, including members of the committee, and our
designated audit committee financial experts is set forth under Corporate Governance,
The Board, Board Committees and Meetings; and
Information about Section 16(a) beneficial ownership reporting compliance is set
forth under Section 16(a) Beneficial Ownership Reporting Compliance.
ITEM 11.
EXECUTIVE COMPENSATION
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER
MATTERS
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
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99
100
101
(a)
1. Financial Statements: See Index to Consolidated Financial Statements under
Item 8 on page 51 of this Annual Report.
2.
Financial Statement Schedule: See Schedule II on page 91 of this Annual Report
3.
Exhibits
The exhibit numbers preceded by an asterisk (*) indicate exhibits physically
filed with this 2006 Form 10-K. All other exhibit numbers indicate exhibits
filed by incorporation by reference. Exhibits preceded by cross () are
management contracts or compensatory plans or arrangements.
Table of Contents
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 Corporations Annual Report
on Form 10-K for the period ending February 28, 1993 (the 1993 10-K)).
First Amendment to RCPC North America Comb and Brush License Agreement,
dated September 30, 1992 (incorporated by reference to Exhibit 10.27 to
the 1993 10-K).
First Amendment to RCPC International Appliance License Agreement,
dated September 30, 1992 (incorporated by reference to Exhibit 10.28 to
the 1993 10-K).
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 Limiteds Quarterly Report on Form
10-Q for the period ending November 30, 1996).
Helen of Troy Limited 1998 Employee Stock Purchase Plan
(incorporated by reference to Exhibit 4.3 to Helen of Troy Limiteds
Registration Statement on Form S-8, File Number 333-67369, filed with
the Securities and Exchange Commission on November 17, 1998).
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 Limiteds Quarterly Report
on Form 10-Q for the period ending August 31, 1999 (the August 1999
10-Q)).
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).
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).
Acquisition Agreement, 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 Registrants Current Report on Form
8-K, filed with the Securities and Exchange Commission on October 14,
2003).
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 Limiteds Quarterly Report on Form 10-Q for the period
ended August 31, 2003 (the August 2003 10-Q)).
Credit Agreement, dated as of June 1, 2004, among Helen of Troy L.P.,
Helen of Troy Limited, Bank of America, N.A. and the other lenders
party thereto (incorporated by reference to Exhibit 10.1 to the
Companys Current Report on Form 8-K, filed on June 3, 2004).
Guaranty, dated as of June 1, 2004, made by Helen of Troy Limited
(Bermuda), Helen of Troy Limited (Barbados), Hot Nevada, Inc., Helen of
Troy Nevada Corporation, Helen of Troy Texas Corporation, Idelle Labs
Ltd. and OXO International Ltd., in favor of Bank of America, N.A. and
other lenders, pursuant to the Credit Agreement, dated June 1, 2004
(incorporated by reference to Exhibit 10.3 to the Companys Current
Report on Form 8-K, filed on June 3, 2004).
Table of Contents
Note Purchase Agreement, dated June 29, 2004, by and among Helen of
Troy Limited (Bermuda), Helen of Troy L.P., Helen of Troy Limited
(Barbados) and the purchasers listed in Schedule A thereto
(incorporated by reference to Exhibit 10.1 to the Companys Current
Report on Form 8-K, filed on July 2, 2004).
Amendment to Employment Agreement between Helen of Troy Limited
and Gerald J. Rubin, dated March 1, 1999 (incorporated by reference to
Exhibit 10.1 to the Companys Current Report on Form 8-K, filed on
April 26, 2005).
Purchase and Sale Agreement between Helen of Troy L.P. (Purchaser)
and DTC Eastgate 1, LLC (Seller), effective May 2, 2005
(incorporated by reference to Exhibit 10.1 to the Companys Current
Report on Form 8-K, filed on May 6, 2005).
Second Amendment to Credit Agreement, dated as of September 23, 2005,
among Helen of Troy L.P., Helen of Troy Limited, Bank of America, N.A.
and other lenders party thereto (incorporated by reference to Exhibit
10.1 of Helen of Troy Limiteds Quarterly Report on Form 10-Q for the
period ended November 30, 2005 (the November 2006 10-Q)).
Amended and Restated Helen of Troy Limited 1998 Stock Option and
Restricted Stock Plan (incorporated by reference to Appendix A of
Helen of Troy Limiteds Definitive Proxy Statement on Schedule 14A,
File Number 001-14669, filed with the Securities and Exchange
Commission on June 15, 2005).
Form of Helen of Troy Limited Nonstatutory Stock Option Agreement.
Form of Helen of Troy Limited Incentive Stock Option Agreement.
Third Amendment to Credit Agreement, dated as of November 15, 2005,
among Helen of Troy L.P., Helen of Troy Limited, Bank of America, N.A.
and other lenders party thereto (incorporated by reference to Exhibit
10.2 to the November 2006 10-Q).
First Amendment to Guarantee Agreement, dated as of November 15, 2005,
among Helen of Troy Limited (Bermuda), Helen of Troy Limited
(Barbados), HOT Nevada, Inc., Helen of Troy Nevada Corporation, Helen
of Troy Texas Corporation, Idelle Labs Ltd., OXO International Ltd.
and Bank of America, N.A. (as Guaranteed party) (incorporated by
reference to Exhibit 10.3 to the November 2006 10-Q).
Subsidiaries of the Registrant.
Consent of Independent Registered Public Accounting Firm.
Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) or
Rule 15d-14(a) pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) or
Rule 15d-14(a) pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
Certification of the Chief Executive Officer Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
Certification of the Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
Table of Contents
102
HELEN OF TROY LIMITED
By:
/s/ Gerald J. Rubin
Gerald J. Rubin, Chairman,
Chief Executive Officer and Director
May 12, 2006
Gerald J. Rubin
Chairman of the Board, Chief Executive Officer,
President, Director and Principal Executive Officer
May 12, 2006
/s/ Thomas J. Benson
Thomas J. Benson
Senior Vice President, Chief Financial Officer
May 12, 2006
Richard J. Oppenheim
Financial Controller and Principal Accounting
Officer
May 12, 2006
/s/ Stanlee N. Rubin
Stanlee N. Rubin
Director
May 12, 2006
Byron H. Rubin
Director
May 12, 2006
/s/ Gary B. Abromovitz
Gary B. Abromovitz
Director, Deputy Chairman of the Board
May 12, 2006
John B. Butterworth
Director
May 12, 2006
/s/ Christopher L. Carameros
Christopher L. Carameros
Director
May 12, 2006
Adolpho R. Telles
Director
May 12, 2006
/s/ Timothy F. Meeker
Timothy F. Meeker
Director
May 12, 2006
Darren G. Woody
Director
May 12, 2006
Name of Optionee:
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Date of Grant:
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Vest Date I:
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Vest Date II:
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Vest Date III:
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|
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Vest Date IV:
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|
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Vest Date V:
|
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|
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Total Option Shares Granted:
|
|
|||||
|
||||||
Exercise Price:
|
$
|
|||||
|
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Expiration Date:
|
||||||
|
||||||
|
||||||
Right of Relinquishment
Granted:
|
||||||
|
||||||
|
||||||
Relinquishment Proportion:
|
%
|
|||||
|
||||||
Withholding Right:
|
||||||
|
Helen of Troy Limited | ||||||
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|
By: | |||||
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Name: | |||||
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Title: | |||||
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Dated:
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|
, Optionee |
103
104
105
106
107
108
109
Name of Optionee:
|
||||||
|
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|
||||||
Date of Grant:
|
||||||
|
||||||
|
||||||
Vest Date I:
|
||||||
|
||||||
Vest Date II:
|
||||||
|
||||||
Vest Date III:
|
||||||
|
||||||
Vest Date IV:
|
||||||
|
||||||
Vest Date V:
|
||||||
|
||||||
Total Option Shares Granted:
|
|
|||||
|
||||||
Exercise Price:
|
$
|
|||||
|
||||||
Expiration Date:
|
||||||
|
||||||
|
||||||
Right of Relinquishment
Granted:
|
||||||
|
||||||
|
||||||
Relinquishment Proportion:
|
%
|
|||||
|
||||||
Withholding Right:
|
||||||
|
Helen of Troy Limited | ||||||
|
||||||
|
By: | |||||
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|
Name: | |||||
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Title: | |||||
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Dated:
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||||
|
, Optionee |
110
111
112
113
114
115
116
Doing | ||||
Name
|
Incorporation
|
Business as
|
||
Helen of Troy Limited
|
Barbados | Same Name | ||
HOT International Marketing Limited
|
Barbados | Same Name | ||
Helen of Troy do Brasil Ltda.
|
Brazil | Same Name | ||
H.O.T. Cayman Holding
|
Cayman Islands | Same Name | ||
Helen of Troy (Cayman) Limited
|
Cayman Islands | Same Name | ||
Helen of Troy Chile, S.A.
|
Chile | Same Name | ||
Helen of Troy Consulting (Shenzhen) Company Limited
|
China | Same Name | ||
Helen of Troy Costa Rica, S.A.
|
Costa Rica | Same Name | ||
Helen of Troy SARL
|
France | Same Name | ||
Helen of Troy GmbH
|
Germany | Same Name | ||
Asia Pacific Liaison Services Limited
|
Hong Kong | Same Name | ||
Helen of Troy (Far East) Limited
|
Hong Kong | Same Name | ||
Helen of Troy Manufacturing Limited
|
Hong Kong | Same Name | ||
Helen of Troy Services Limited
|
Hong Kong | Same Name | ||
Helen of Troy Szolgaltato KFT
|
Hungary | Same Name | ||
HOT (Jamaica) Limited
|
Jamaica | Same Name | ||
H.O.T. (Luxembourg) SARL
|
Luxembourg | Same Name | ||
Helen of Troy Comercial Offshore de Macau Limitada
|
Macao | Same Name | ||
Helen of Troy de Mexico S.de R.L. de C.V.
|
Mexico | Same Name | ||
Helen of Troy Servicios S.de R.L. de C.V.
|
Mexico | Same Name | ||
Helen of Troy Canada, Inc.
|
Nevada | Same Name | ||
Helen of Troy Nevada Corporation
|
Nevada | Same Name | ||
Helen of Troy, LLC
|
Nevada | Same Name | ||
HOT Latin America, LLC
|
Nevada | Same Name | ||
HOT Nevada Inc.
|
Nevada | Same Name | ||
Idelle Management Company
|
Nevada | Same Name | ||
OXO International Inc.
|
Nevada | Same Name | ||
Karina, Inc.
|
New Jersey | Same Name | ||
DCNL, Inc.
|
Texas | Same Name | ||
Helen of Troy Texas Corporation
|
Texas | Same Name | ||
Helen of Troy L.P.
|
Texas Limited Partnership | Same Name | ||
Idelle Labs, Ltd.
|
Texas Limited Partnership | Same Name | ||
OXO International Ltd.
|
Texas Limited Partnership | Same Name | ||
Helen of Troy International B.V.
|
The Netherlands | Same Name | ||
HOT (UK) Limited
|
United Kingdom | Same Name | ||
Fontelux Trading, S.A.
|
Uruguay | Same Name |
117
118
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 registrants 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
Date: May 12, 2006
/s/ Gerald J. Rubin
119
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 registrants 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
Date: May 12, 2006
/s/ Thomas J. Benson
120
Date: May 12, 2006
/s/ Gerald J. Rubin
121
Date: May 12, 2006
/s/ Thomas J. Benson
122