Helen of Troy reports Q2 net earnings of US$23.3M, up 1.3% from year-ago period, as net sales revenue rises 11.1% to record US$319.4M

Nevin Barich

EL PASO, Texas , October 10, 2013 (press release) – Second Quarter Diluted EPS of $0.72

Core Net Sales Growth of 11.1% Compared to Second Quarter of Prior Fiscal Year

Helen of Troy Limited (NASDAQ, NM:HELE), designer, developer and worldwide marketer of brand-name houseware, healthcare/home environment and personal care consumer products, today reported results for the three and six month periods ended August 31, 2013.

Gerald J. Rubin, Chairman of the Board, Chief Executive Officer and President, commenting on the Company's fiscal year 2014 second quarter results, stated, “We are pleased to report solid performance in the second quarter, highlighted by sales growth across all our operating segments and increased consolidated adjusted EBITDA and net income despite product cost and currency headwinds. The period saw particular strength in our Healthcare/Home Environment segment, which produced a 20.4% increase in revenue benefiting from our refined promotion and marketing strategy and favorable weather conditions in Europe. Innovation in product and design continues to be a positive driver for our Housewares segment leading to increases in shelf space, assortment expansion and new distribution. Finally, our Personal Care segment benefited from a new product distribution arrangement in Europe specific to the current fiscal year and increased sales in our professional appliance business.

In the first week of September 2013, we commenced initial operations at our new 1.3 million square foot distribution facility in Mississippi, on time and within budget, and converted our Healthcare/Home environment segment onto our global ERP system, positioning us well to accommodate anticipated future growth.”

Second Quarter of Fiscal Year 2014 Consolidated Operating Results

Net sales revenue increased 11.1% to a record $319.4 million compared to $287.4 million in the second quarter of fiscal year 2013.

Gross profit margin was 38.6% compared to 40.7% for the same period last year, reflecting the effect of foreign currency exchange rates, product cost increases across all segments and product mix.

Selling, general and administrative expense was 29.1% as a percent of net sales compared to 30.0% for the same period last year, a decrease of 0.9 percentage points. The decrease primarily reflects lower outbound freight and distribution costs, as well as reduced media advertising costs. These expense reductions were partially offset by higher incentive compensation costs and higher cooperative advertising costs.

Operating income was $30.4 million, compared to operating income of $30.8 million in the same period last year.

Net income was $23.3 million, or $0.72 per fully diluted share on 32.3 million weighted average shares outstanding, which compares to net income in the second quarter of fiscal year 2013 of $23.0 million, or $0.72 per fully diluted share on 31.8 million weighted average shares outstanding.

Adjusted EBITDA was $41.8 million compared to $41.1 million in the same period last year.

First Six Months of Fiscal Year 2014 Consolidated Operating Results

Net sales revenue increased 6.2% to a record $623.9 million compared to $587.6 million in the first six months of fiscal year 2013.

Gross profit margin was 39.0% compared to 40.5% for the same period last year, reflecting increased promotional program costs, the effect of foreign currency exchange rates, product cost increases across all segments and product mix.

Selling, general and administrative expense was 28.9% as a percent of net sales compared to 30.0% for the same period last year. The decrease reflects lower outbound freight and distribution costs, reduced media advertising costs and a gain from a litigation settlement. These expense reductions were partially offset by higher incentive compensation costs and higher cooperative advertising costs.

Operating income was $51.0 million, which includes the impact of $12.0 million in non-cash asset impairment charges related to certain trademarks in the Company’s Personal Care segment in the first quarter of fiscal 2014, compared to operating income of $62.0 million in the same period last year.

Net income was $37.7 million, or $1.17 per fully diluted share on 32.2 million weighted average shares outstanding, which compares to net income in the first six months of fiscal year 2013 of $46.4 million, or $1.46 per fully diluted share on 31.8 million weighted average shares outstanding.

Adjusted operating income (operating income without non-cash asset impairment charges) was $63.0 million compared to $62.0 million for the same period last year, an increase of 1.7%.

Adjusted income (net income without non-cash asset impairment charges) was $49.7 million, or $1.54 per fully diluted share, compared to $46.4 million, or $1.46 per fully diluted share, in the first six months of fiscal year 2013. This represents an increase in adjusted income of 7.1% and in adjusted diluted EPS of 5.5%.

Adjusted EBITDA was $86.4 million compared to $82.9 million in the same period last year.

Balance Sheet Highlights

Cash and cash equivalents totaled $10.1 million at August 31, 2013, compared to $21.8 million at August 31, 2012.

Total short and long-term debt declined by $108.4 million to $227.6 million at August 31, 2013, compared to $336.0 million at August 31, 2012.

Accounts receivables turnover was 61.9 days at August 31, 2013, compared to 61.1 days at August 31, 2012.

Inventory was $306.9 million at August 31, 2013, compared to $318.7 million at August 31, 2012.

Fiscal Year 2014 Annual Outlook

For fiscal year 2014, the Company continues to expect net sales revenue in the range of $1.29 billion to $1.32 billion, and GAAP diluted EPS in the range of $3.13 to $3.23, which includes the non-cash asset impairment charges of $0.37 per share recorded in the first quarter of fiscal year 2014. The Company expects adjusted diluted EPS to be in the range of $3.50 to $3.60, which is consistent with the Company’s previous guidance. The earnings guidance reflects the negative impact of the difficult retail environment, a normal cold/cough/flu season, product cost increases across all segments and an increase in non-cash compensation expense for the Company’s CEO. The Company expects capital expenditures for fiscal year 2014 to be in the range of $40 million to $45 million, with approximately $33 million related to the completion of the Company’s new 1.3 million square foot distribution center in Olive Branch, Mississippi.

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, Wednesday, October 9, 2013. Institutional investors and analysts interested in participating in the call are invited to dial (888) 504-7963. The conference call will also be available to interested parties through a live webcast at www.hotus.com. Please visit the website and select the “Investor Relations” link at least 15 minutes prior to the start of the call to register and download any necessary software.

A telephone replay of the call will be available until 11:59 pm Eastern Time on October 16, 2013, by dialing (877) 870-5176 (domestic) or (858) 384-5517 (international) and entering the conference replay number: 3190673. Please note participants must enter the conference identification number in order to access the replay.

About Helen of Troy Limited:

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 Personal Care: 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 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 in-depth information about Helen of Troy, please visit www.hotus.com .

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