Helen of Troy announces Q4 net earnings of US$11M, compared to year-ago earnings of US$31.5M, as net sales revenue falls 4.1% to US$312.5M

Nevin Barich

EL PASO, Texas , April 28, 2014 (press release) – Fourth Quarter Diluted EPS of $0.34; Adjusted Diluted EPS of $0.84

Fiscal Year 2014 Diluted EPS of $2.66; Adjusted Diluted EPS of $3.54

Expects Fiscal Year 2015 Diluted EPS in a Range of $4.30 to $4.40

Helen of Troy Limited (NASDAQ: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 twelve month periods ended February 28, 2014.

Julien R. Mininberg, Chief Executive Officer, stated: “Fiscal 2014 was a year of good financial performance highlighted by net revenue growth of 2.2%, diluted earnings per share of $2.66 and adjusted diluted earnings per share of $3.54. Helen of Troy is a company with compelling brands and businesses. I am delighted and honored to be able to build upon this foundation with our plans to accelerate and sustain growth. Three key priorities in my first year as CEO are to focus on transforming our organization, reinvigorating our culture, and investing in our brands. A first step in that direction is our new global shared services management structure, announced today, which we expect to drive increased collaboration, sharing of best practices and additional operating efficiencies. Beyond the investments we are making in talent in fiscal 2015, we plan to invest in marketing and innovation on many of our brands, with a goal of accelerating growth and profitability in fiscal 2016 and beyond. In parallel, we will focus on evaluating acquisitions that complement our business, and continue shareholder-friendly policies that optimize our capital structure. The most recent example being the completion of our $246 million share repurchase in March. I am pleased to announce that even with our planned investments, the mid-point of our outlook range is expected to deliver 23% growth in diluted earnings per share in fiscal year 2015, compared to adjusted diluted earnings per share in fiscal year 2014. We expect fiscal year 2015 revenues of $1.325-$1.375 billion dollars. Our guidance does not include any acquisitions, asset impairment charges or additional share repurchase activity.”

Fourth Quarter of Fiscal Year 2014 Consolidated Operating Results

Net sales revenue was $312.5 million compared to $326.0 million in the fourth quarter of fiscal year 2013.

Gross profit margin was 40.2% compared to 40.4% for the same period last year, reflecting the combined effects of increased promotional program costs, the effect of foreign currency exchange rate fluctuations on net sales revenue, general product cost increases and product mix.

SG&A was 34.8% of net sales and included a pre-tax charge of $18.2 million (largely non-cash) in connection with the former CEO’s separation from service (“CEO succession costs”), which were allocated to all three business segments. This compared to 28.2% of net sales for the same period last year. The increase primarily reflects the CEO succession costs, higher incentive compensation expense and transitional distribution costs, partially offset by lower outbound freight costs and lower advertising expense.

Operating income was $16.7 million compared to operating income of $39.7 million in the same period last year.

Net income was $11.0 million, or $0.34 per fully diluted share on 32.6 million weighted average shares outstanding, which compares to net income in the fourth quarter of fiscal year 2013 of $31.5 million, or $0.98 per fully diluted share on 32.1 million weighted average shares outstanding.

Adjusted EBITDA (EBITDA without non-cash asset impairment charges and non-cash share-based compensation) was $47.9 million compared to $50.0 million in the same period last year.

On an adjusted basis for the fourth quarter of fiscal 2014, excluding CEO succession costs (largely non-cash):

Adjusted operating income was $35.0 million compared to $39.7 million for the fourth quarter of fiscal year 2013.

Adjusted income was $27.3 million, or $0.84 per fully diluted share, compared to $31.5 million, or $0.98 per fully diluted share, for the fourth quarter of fiscal 2013.

Fiscal Year 2014 Consolidated Operating Results

Net sales revenue increased 2.2% to a record $1,317.2 million compared to $1,288.3 million in fiscal year 2013.

Gross profit margin was 39.2% compared to 40.2% for the same period last year, reflecting increased promotional program costs, the effect of foreign currency exchange rate
fluctuations, product cost increases and product mix.

SG&A was 29.4% of net sales compared to 28.7% for the same period last year, primarily reflecting CEO succession costs in the fourth quarter of fiscal 2014 and higher incentive compensation expense, partially offset by reduced media advertising costs, lower outbound freight costs, the favorable comparative impact arising from a product packaging litigation expense recorded in the prior year, and the favorable comparative impact of certain transition services charges relating to our acquisition of PUR that ceased being incurred after the first half of fiscal year 2013.

Operating income was $117.1 million, which includes the impact of $12.0 million in non-cash asset impairment charges and $18.2 million of CEO succession costs, compared to operating income of $148.8 million in the same period last year.

Net income was $86.3 million, or $2.66 per fully diluted share on 32.4 million weighted average shares outstanding, which compares to net income in fiscal year 2013 of $115.7 million, or $3.62 per fully diluted share on 31.9 million weighted average shares outstanding.

Adjusted EBITDA increased 2.5% to $194.8 million compared to $190.0 million in the same period last year.

On an adjusted basis for fiscal 2014, excluding non-cash asset impairment charges and CEO succession costs (largely non-cash):

Adjusted operating income was $147.4 million compared to $148.8 million for the same period last year.

Adjusted income was $114.6 million, or $3.54 per fully diluted share, compared to $115.7 million, or $3.62 per fully diluted share, in the same period last year.

Balance Sheet Highlights

Cash and cash equivalents totaled $70.0 million at February 28, 2014, compared to $12.8 million at February 28, 2013.

Total short and long-term debt declined by $64.4 million to $192.6 million at February 28, 2014, compared to $257.0 million at February 28, 2013.

Accounts receivables turnover was 63.7 days at February 28, 2014, compared to 60.6 days at February 28, 2013.

Inventory was $289.3 million at February 28, 2014, compared to $280.9 million at February 28, 2013.

Subsequent Events

On March 14, 2014, the Company completed its previously announced modified “Dutch auction” tender offer resulting in the repurchase of 3,693,816 shares of its common stock outstanding at a cost per share of $66.50, not including the fees and expenses related to the tender offer. The total cost of the repurchase of $245.6 million was funded with $45.6 million of cash on hand and $200 million of borrowings under the Company’s credit facility. The shares repurchased represented approximately 11.5% of the Company’s issued and outstanding shares of common stock at February 5, 2014.

Fiscal Year 2015 Annual Outlook

For fiscal year 2015, the Company expects net sales revenue in the range of $1.325 billion to $1.375 billion, and diluted earnings per share in the range of $4.30 to $4.40. The likelihood and potential impact of any fiscal 2015 acquisitions, asset impairment charges or additional share repurchases are unknown and cannot be reasonably estimated, therefore they are not included in the Company’s sales and earnings outlook. The Company expects capital expenditures for fiscal year 2015 to be in the range of $8 million to $10 million.

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, Monday, April 28, 2014. Institutional investors and analysts interested in participating in the call are invited to dial (888) 572-7033 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 April 28, 2014 until 11:59 p.m. Eastern Time on May 5, 2014 and can be accessed by dialing (877) 870-5176 and entering replay pin number 9781958. A replay of the webcast will remain available on the website for 60 days.

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®, TONI&GUY®, Sure®, Pert®, Infusium23®, Brut®, Ammens®, Hot Tools®, Bed Head®, Karina®, Sea Breeze® 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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