Helen of Troy Limited Reports Third Quarter Fiscal Year 2016 Results
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Delivers Third Quarter Revenue of $445.5 Million; GAAP Diluted
Earnings Per Share (EPS) of $1.63, including $0.16 per diluted share
of Succession Costs Related to its Former CEO - Third Quarter Non-GAAP Adjusted Diluted EPS of $2.07
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Company Expects Fiscal Year 2016 GAAP Diluted EPS in a Range of
$4.18 to $4.48, Including CEO Succession Costs and Asset Impairment
Charges -
Company Maintains Fiscal Year 2016 Non-GAAP Adjusted Diluted EPS in
a Range of $5.50 to $5.85
EL PASO, Texas–(BUSINESS WIRE)–Helen of Troy Limited (NASDAQ, NM:HELE), designer, developer and
worldwide marketer of consumer brand-name housewares, health and home,
nutritional supplement and beauty products, today reported results for
the three-month period ended November 30, 2015.
Julien R. Mininberg, Chief Executive Officer, stated: “We are pleased
with our third quarter performance, which we believe has us solidly on
track to achieve our annual goals. Sales grew 2.3% despite a foreign
currency drag of 2.0% and we made further progress toward our seven key
strategic priorities that are guiding our multi-year transformation. We
are seeing improved organic growth from our efforts to improve
innovation, which led to strong growth in the Health & Home segment
despite foreign currency exposure and the comparison to a strong
performance in the third quarter last year. In our Beauty segment, we
are seeing a favorable response to new product introductions and
improved branding in appliances. Our Housewares segment’s growth
included its first foray into kitchen electronics and metal bakeware.
Nutritional Supplements saw a decline in the quarter, as it continues to
shift emphasis from its direct mail and print newsletter subscription
business to online and auto delivery. We are pleased to deliver adjusted
diluted EPS of $2.07, overcoming foreign currency headwinds that have
been greater than expected. Based on our performance to date and the
continued progress we are making on our key initiatives, we are
maintaining our full year outlook even as we have experienced a slow
start to the cold and flu season, experience more significant foreign
exchange pressures, and see considerable variability in the retail
environment.”
As previously disclosed, the Company resolved a lawsuit brought by its
former CEO, which resulted in the settlement of severance compensation
due under his employment and separation agreements. The severance
compensation was previously accrued and disclosed in fiscal year 2014
and was settled through the issuance of common shares of the Company on
November 17, 2015. The Company also transferred ownership of a life
insurance policy on the lives of its former CEO and his spouse as part
of the settlement. As a result of the transfer of the policy and other
expenses incurred in connection with the settlement, the Company
recorded CEO succession costs of $6.71 million ($4.64 million after
tax), or $0.16 per fully diluted share, in the third quarter of fiscal
year 2016.
Key Highlights for the Third Quarter of Fiscal
Year 2016 Compared to the Third Quarter of Fiscal Year 2015
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Net sales revenue increased $9.8 million, or 2.3%, which includes a
1.6% increase in core business net sales revenue (excluding
incremental sales from VapoSteam). The increase in net sales revenue
includes a negative impact of 2.0% from foreign currency fluctuations.-
Health & Home (formerly referred to as the “Healthcare/Home
Environment” segment) rose 5.3%, driven by successful new product
introductions and the VapoSteam acquisition, partially offset by
lower heater sales as a result of warmer fall and early winter
temperatures, lower water and air filtration sales, and a negative
impact of $4.9 million, or 2.8% from foreign currency fluctuations. -
Housewares increased 2.1%, primarily due to successful new product
introductions and increases in internet retail sales, partially
offset by higher promotional spending in support of new product
launches, certain promotional placement that did not repeat, a
decrease in the club channel and inventory reductions at a key
retailer. The Company expects year-over-year growth to return to
more normalized levels in the mid-single digits for the full
fiscal year. -
Beauty decreased 0.3% including a negative impact of $3.5 million,
or 2.6%, from foreign currency fluctuations. Gains in sales of
pedicure appliances and curling, straightening and specialty
styling irons were partially offset by a decline in the personal
care category due to competitive pressures and some lost
distribution at retail. Net sales revenue includes year-over-year
growth of $3.4 million from operations in Venezuela, which is a
highly inflationary economy. -
Nutritional Supplements decreased 2.5%, reflecting a decline in
average order values, promotional discounting to grow the
segment’s new buyer file, and de-emphasis of the legacy print
newsletter subscription business. The Company continues to expect
flat to low-single digit growth during the comparable eight month
year-over-year period in fiscal year 2016.
Third Quarter of Fiscal Year 2016 Consolidated
Operating Results-
Net sales revenue increased 2.3% to $445.5 million compared to $435.7
million in the third quarter of fiscal year 2015. Net sales revenue
includes the operating results of VapoSteam, which was acquired on
March 31, 2015, with no comparable results in our prior year period.
Core business net sales revenue increased $6.9 million, or 1.6%.
Foreign currency fluctuations negatively impacted consolidated U.S.
Dollar reported net sales revenue by $8.8 million, or 2.0%,
year-over-year. -
Gross profit margin decreased 0.6 percentage points to 41.0% compared
to 41.6% for the same period last year. The decrease in consolidated
gross profit margin is primarily due to the unfavorable impact of
foreign currency fluctuations. -
SG&A was 28.5% of net sales compared to 26.7% of net sales for the
same period last year. The increase is primarily due to CEO succession
costs, which increased the SG&A ratio for the third quarter of fiscal
year 2016 by 1.5 percentage points, and the comparative impact of a
gain from the amendment of a license agreement and a decrease in
product liability estimates, which decreased the SG&A ratio for the
same period last year by 2.1 percentage points. These factors were
partially offset by lower year-over-year foreign currency revaluation
losses, lower outbound freight costs, and operating leverage on higher
net sales revenue. -
Operating income was $55.6 million compared to $65.0 million for the
same period last year primarily reflecting the negative impact of
foreign currency fluctuations, CEO succession costs of $6.7 million
and the comparative impact of a $7 million gain from a license
amendment recorded in the same period last year. -
Income tax expense as a percentage of pretax income was 11.8% compared
to 9.2% for the same period last year. The year-over-year comparison
of the Company’s effective tax rate was primarily impacted by shifts
in the mix of taxable income in our various tax jurisdictions and the
comparative impact of a 1.2 percentage point reduction in the same
period last year related to a $7.0 million pre-tax gain from the
amendment of a license agreement. Income tax expense for the fiscal
quarter ended November 30, 2015 includes a tax benefit of $2.4 million
due to the finalization of certain tax returns, mostly offset by tax
expense of $2.0 million related to the provision for an uncertain tax
position in a foreign jurisdiction. -
Net income was $46.8 million, or $1.63 per diluted share on 28.6
million weighted average diluted shares outstanding, and includes
after tax CEO succession costs of $4.6 million, or $0.16 per diluted
share related to the settlement of a lawsuit with the Company’s former
CEO. This compares to net income in the third quarter of fiscal year
2015 of $55.4 million, or $1.92 per diluted share on 28.8 million
weighted average diluted shares outstanding, which included: (i) an
after-tax gain of $0.24 per diluted share from the amendment of a
license agreement; and (ii) an after-tax decrease in product liability
estimates of $0.05 per diluted share. -
Adjusted EBITDA (EBITDA excluding non-cash asset impairment charges,
CEO succession costs, acquisition-related expenses, and non-cash
share-based compensation, as applicable) was $75.4 million compared to
$77.0 million in the same period last year. The decline was primarily
due to the negative impact of foreign currency fluctuations and the
comparative impact of a pre-tax gain of $7 million from the amendment
of a license agreement recorded in the same period last year.
On an adjusted basis for the third quarter of fiscal years 2016 and
2015, excluding non-cash asset impairment charges, CEO succession costs,
non-cash amortization of intangible assets, acquisition-related
expenses, non‐cash share based compensation, as applicable:-
Adjusted operating income was $71.4 million compared to $73.2 million
for the third quarter of fiscal year 2015. -
Adjusted income was $59.2 million, or $2.07 per diluted share,
compared to $62.6 million, or $2.17 per diluted share, for the third
quarter of fiscal year 2015, primarily reflecting the negative impact
of foreign currency fluctuations and the comparative impacts of a $6.9
million after tax gain from the amendment of a license agreement and a
reduction in product liability estimates of $1.4 million, after tax,
recorded in the same period last year. The fiscal quarters ended
November 30, 2015 and 2014 include net income from our operations in
Venezuela of $2.9 and $1.0 million, respectively, or diluted EPS of
$0.10 and $0.03, respectively.
First Nine Months of Fiscal Year 2016
Consolidated Operating Results-
Net sales revenue increased 8.7% to $1,160.0 million compared to
$1,067.4 million in the first nine months of fiscal year 2015. Net
sales revenue includes four additional months of Nutritional
Supplements results compared to the same period last year and eight
months of results from VapoSteam, which was acquired on March 31,
2015, with no comparable results in the same period last year. Core
business net sales revenue increased $35.3 million, or 3.3%. Foreign
currency fluctuations negatively impacted consolidated U.S. Dollar
reported net sales revenue by $25.1 million, or 2.4%, year-over-year. -
Gross profit margin increased 0.1 percentage points to 40.8% compared
to 40.7% for the same period last year. The increase in consolidated
gross profit margin is primarily due to the favorable incremental
impact of the Nutritional Supplements segment, partially offset by the
unfavorable impact of foreign currency fluctuations and a lower margin
product and channel sales mix. -
SG&A was 30.7% of net sales compared to 29.3% for the same period last
year. The increase is primarily due to: (i) CEO succession costs,
which increased the SG&A ratio by 0.6 percentage points for the nine
months ended November 30, 2015; (ii) the comparative impact of a gain
from the amendment of a license agreement, which decreased the SG&A
ratio for the same period last year by 0.7 percentage points; (iii) an
additional four months of operating results from the Nutritional
Supplements segment, which operates at higher relative SG&A ratio; and
(iv) higher investments in advertising, marketing and product
development. These factors were partially offset by lower
year-over-year foreign currency revaluation losses, lower outbound
freight costs, and operating leverage on higher net sales revenue. -
Operating income was $114.6 million compared to $112.8 million for the
same period last year. Operating income for the first nine months of
fiscal year 2016 includes non-cash asset impairment charges of $3.0
million, compared to $9.0 million for the same period last year.
Operating income for the first nine months of fiscal year 2016
includes $6.7 million of CEO succession costs with no comparable
expense in the same period last year. Operating income for the first
nine months of fiscal year 2015 includes $3.6 million of
acquisition-related expenses, with no comparable expense in the same
period this year. -
Income tax expense as a percentage of pretax income was 14.1% compared
to 10.7% for the same period last year. The year-over-year comparison
of our effective tax rate was primarily impacted by shifts in the mix
of taxable income in our various tax jurisdictions and the comparative
impact of a tax benefit of $2.1 million recorded in the same period
last year related to the resolution of an uncertain tax position.
Additionally, the $7.0 million gain from the amendment of a trademark
license agreement decreased the effective tax rate in the comparative
period by 0.8 percentage points. Income tax expense for the nine
months ended November 30, 2015 includes a tax benefit of $2.4 million
due to the finalization of certain tax returns, mostly offset by tax
expense of $2.0 million related to the provision for an uncertain tax
position in a foreign jurisdiction. -
Net income was $91.6 million, or $3.17 per diluted share on 28.9
million weighted average diluted shares outstanding. -
Adjusted EBITDA (EBITDA excluding non-cash asset impairment charges,
CEO succession costs, acquisition-related expenses, and non-cash
share-based compensation, as applicable) was $162.6 million compared
to $159.2 million in the same period last year. Adjusted EBITDA for
the nine months ended November 30, 2014 includes a pre-tax gain of $7
million from the amendment of a license agreement and a pre-tax
decrease in product liability estimates of $2.2 million.
On an adjusted basis for the first nine months of fiscal years 2016 and
2015, excluding non-cash asset impairment charges, CEO succession costs,
non-cash amortization of intangible assets, acquisition-related
expenses, and non‐cash share based compensation, as applicable:-
Adjusted operating income was $151.3 million compared to $148.3
million for the first nine months of fiscal year 2015. -
Adjusted income was $122.2 million, or $4.23 per diluted share,
compared to $121.9 million, or $4.19 per diluted share, for the first
nine months of fiscal year 2015. The nine months ended November 30,
2015 and 2014 include net income from our operations in Venezuela of
$5.5 and $2.0 million, respectively, or diluted EPS of $0.19 and
$0.07, respectively.
Balance Sheet Highlights
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Cash and cash equivalents totaled $21.1 million at November 30, 2015,
compared to $21.1 million at November 30, 2014. -
Total short- and long-term debt decreased to $474.7 million at
November 30, 2015, compared to $555.7 million at November 30, 2014, a
net reduction of $81.0 million after funding the VapoSteam acquisition
for $42.8 million in March 2015 and share repurchases of $50.0 million
in August 2015. -
Accounts receivable turnover was 58.8 days at November 30, 2015,
compared to 64.4 days at November 30, 2014. -
Inventory was $339.4 million at November 30, 2015, compared to $318.8
million at November 30, 2014.
Subsequent Events
Today, the Company, and certain of its subsidiaries, entered into an
Amended and Restated Employment Agreement with Julien Mininberg, the
Company’s CEO. The new agreement, among other things, extends the term
of Mr. Mininberg’s employment through February 28, 2019. Timothy Meeker,
Chairman of the Board, stated, “We are delighted to have reached an
agreement with Julien Mininberg to extend his tenure with the Company.
The Board is very pleased with the Company’s results under Mr.
Mininberg’s direction. He has embodied the leadership, vision and
strategic thinking that has led to a transformation that we believe has
set up the Company for continued success.”Fiscal Year 2016 Annual Outlook
For fiscal year 2016, the Company expects consolidated net sales revenue
in the range of $1.500 to $1.536 billion and diluted EPS (GAAP) in the
range of $4.18 to $4.48, including after-tax non-cash asset impairment
charges and CEO succession costs of $0.09 and $0.16 per share,
respectively. The Company continues to expect consolidated adjusted
diluted EPS (non-GAAP) to be in the range of $5.50 to $5.85, which
excludes after-tax non-cash asset impairment charges, CEO succession
costs, non-cash share-based compensation expense and intangible asset
amortization expense.The Company’s fiscal year 2016 outlook assumes current foreign currency
exchange rates for the remainder of the fiscal year. The diluted EPS
outlook is based on an estimated weighted average shares outstanding of
28.9 million for the full fiscal year 2016. Further, our outlook now
assumes that the severity of the cold/flu season will likely be below
historical averages, based on cold/flu incidence to date. The likelihood
and potential impact of any fiscal year 2016 acquisitions other than
VapoSteam, future asset impairment charges, future foreign currency
fluctuations, including any potential currency devaluation in Venezuela,
or further share repurchases are unknown and cannot be reasonably
estimated; therefore, they are not included in the Company’s sales and
earnings outlook.As previously disclosed, in fiscal year 2015 the Company benefitted from
an after-tax gain of $0.24 per share from the amendment of a license
agreement, an after-tax decrease in product liability estimates of $0.05
per share and tax benefits of $0.15 per share that are not expected to
repeat in fiscal year 2016. These items negatively impact the
year-over-year comparison of adjusted diluted EPS by a combined $0.44.Conference Call and Webcast
The Company will conduct a teleconference in conjunction with today’s
earnings release. The teleconference begins at 4:45 pm Eastern Time
today, Thursday, January 7, 2016. Institutional investors and analysts
interested in participating in the call are invited to dial (888)
427-9411 approximately ten minutes prior to the start of the call. The
conference call will also be webcast live at: www.hotus.com.
A telephone replay of this call will be available at 7:45 p.m. Eastern
Time on January 7, 2016 until 11:59 p.m. Eastern Time on January 12,
2016 and can be accessed by dialing (877) 870-5176 and entering replay
pin number 3323342. A replay of the webcast will remain available on the
website for 60 days.Non-GAAP Financial Measures:
The Company reports and discusses its operating results using
financial measures consistent with accounting principles generally
accepted in the United States of America (“GAAP”). To supplement
its presentation, the Company discloses certain financial measures that
may be considered non-GAAP financial measures, such as adjusted
operating income, adjusted income, adjusted diluted EPS, EBITDA and
adjusted EBITDA, which are presented in accompanying tables to this
press release along with a reconciliation of these financial measures to
their corresponding GAAP-based measures presented in the Company’s
consolidated statements of income.About Helen of Troy Limited:
Helen of Troy Limited is a leading global consumer products company
offering creative solutions for its customers through a strong portfolio
of well-recognized and widely-trusted brands, including: Housewares:
OXO®, Good Grips®, Soft Works®, OXO tot® and OXO Steel®; Healthcare/Home
Environment: Vicks®, Braun®, Honeywell®, PUR®, Febreze®, Stinger®,
Duracraft® and SoftHeat®; and Beauty: Revlon®, Vidal Sassoon®, Dr.
Scholl’s®, Pro Beauty Tools®, Sure®, Pert®, Infusium23®, Brut®, Ammens®,
Hot Tools®, Bed Head®, Karina®, Ogilvie® and Gold ‘N Hot®. The
Nutritional Supplements segment was formed with the acquisition of
Healthy Directions, a U.S. market leader in premium doctor-branded
vitamins, minerals and supplements, as well as other health products
sold directly to consumers. The Honeywell® trademark is used under
license from Honeywell International Inc. The Vicks®, Braun®, Febreze®
and Vidal Sassoon® trademarks are used under license from The Procter &
Gamble Company. The Revlon® trademark is used under license from Revlon
Consumer Products Corporation. The Bed Head® trademark is used under
license from Unilever PLC. The Dr. Scholl’s® trademark is used under
license from MSD Consumer Care, Inc.For more information about Helen of Troy, please visit www.hotus.com.
Forward Looking Statements:
This press release may contain forward-looking statements, which are
subject to change. The forward-looking statements are made pursuant to
the safe harbor provisions of the Private Securities Litigation Reform
Act of 1995. Any or all of the forward-looking statements may turn out
to be wrong. They can be affected by inaccurate assumptions or by known
or unknown risks and uncertainties. Many of these factors will be
important in determining the Company’s actual future results.
Consequently, no forward-looking statement can be guaranteed. Actual
future results may vary materially from those expressed or implied in
any forward-looking statements. The forward-looking statements are
qualified in their entirety by a number of risks that could cause actual
results to differ materially from historical or anticipated results.
Generally, the words “anticipates”, “estimates”, “believes”, “expects”,
“plans”, “may”, “will”, “should”, “seeks”, “project”, “predict”,
“potential”, “continue”, “intends”, and other similar words identify
forward-looking statements. The Company cautions readers not to place
undue reliance on forward-looking statements. The Company intends its
forward-looking statements to speak only as of the time of such
statements, and does not undertake to update or revise them as more
information becomes available. The forward-looking statements contained
in this press release should be read in conjunction with, and are
subject to and qualified by, the risks described in the Company’s Form
10-K for the year ended February 28, 2015 and in our other filings with
the SEC. Investors are urged to refer to the risk factors referred to
above for a description of these risks. Such risks include, among
others, the departure and recruitment of key personnel, the Company’s
ability to deliver products to our customers in a timely manner, the
costs of complying with the business demands and requirements of large
sophisticated customers, the Company’s relationship with key customers
and licensors, our dependence on the strength of retail economies and
vulnerabilities to an economic downturn, expectations regarding
acquisitions and the integration of acquired businesses, exchange rate
risks, disruptions in U.S., European and other international credit
markets, risks associated with weather conditions, the Company’s
dependence on foreign sources of supply and foreign manufacturing, risks
associated with the availability, purity and integrity of materials used
in nutritional supplements, the impact of changing costs of raw
materials and energy on cost of goods sold and certain operating
expenses, the Company’s geographic concentration of certain U.S.
distribution facilities, which increases our exposure to
significant shipping disruptions and added shipping and storage costs,
the Company’s projections of product demand, sales, net income and
earnings per share are highly subjective and our future net sales
revenue and net income could vary in a material amount from such
projections, circumstances that may contribute to future impairment of
goodwill, intangible or other long-lived assets, the risks associated
with the use of trademarks licensed from and to third parties, the
Company’s ability to develop and introduce innovative new products to
meet changing consumer preferences, increased product liability and
reputational risks associated with the formulation and distribution of
nutritional supplements, risks associated with adverse publicity and
negative public perception regarding the use of nutritional supplements,
trade barriers, exchange controls, expropriations, and other risks
associated with foreign operations, the Company’s debt leverage and the
constraints it may impose, the costs, complexity and challenges of
upgrading and managing our global information systems, the risks
associated with information security breaches, the increased complexity
of compliance with a number of new government regulations as a result of
adding nutritional supplements to the Company’s portfolio of products,
the risks associated with tax audits and related disputes with taxing
authorities, potential changes in laws, including tax laws, and the
Company’s ability to continue to avoid classification as a controlled
foreign corporation.Contacts
Investors:
ICR, Inc.
Allison Malkin / Anne Rakunas
203-682-8200
/ 310-954-1113 -
Health & Home (formerly referred to as the “Healthcare/Home
