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Helen of Troy Limited Reports Second Quarter Fiscal 2020 Results

Helen of Troy Limited (NASDAQ: HELE), designer, developer and worldwide marketer of consumer brand-name housewares, health and home and beauty products, today reported results for the three-month period ended August 31, 2019. Following the divestiture of Healthy Directions on December 20, 2017, the Company no longer consolidates the Nutritional Supplements segment’s operating results. That former segment’s operating results are included in the Company’s financial statements and classified as discontinued operations for all periods presented.

Executive Summary – Second Quarter of Fiscal 2020

  • Consolidated net sales revenue increase of 5.2%, including:
    • An increase in Leadership Brand net sales of 3.8%
    • An increase in online channel net sales of approximately 25%
    • Core business growth of 5.7%
  • GAAP operating income of $54.5 million, or 13.2% of net sales, which includes pre-tax restructuring charges of $0.4 million, compared to GAAP operating income of $50.7 million, or 12.9% of net sales, for the same period last year, which included pre-tax restructuring charges of $0.9 million
  • Non-GAAP adjusted operating income increase of 10.4% to $65.8 million, or 15.9% of net sales, compared to $59.6 million, or 15.1% of net sales, for the same period last year
  • GAAP diluted EPS from continuing operations of $1.83, which includes an after-tax restructuring charge of $0.01 per share, compared to GAAP diluted EPS of $1.66 for the same period last year, which included an after-tax restructuring charge of $0.03 per share
  • Non-GAAP adjusted diluted EPS from continuing operations increase of 13.1% to $2.24, compared to $1.98 for the same period last year

Julien R. Mininberg, Chief Executive Officer, stated: "We are pleased with our second quarter financial performance, which delivered consolidated core business sales growth of 5.7% and adjusted diluted EPS growth of 13.1%, both ahead of our expectations. During the quarter, we improved our consolidated operating margin, while simultaneously increasing our growth investments compared to our original outlook at the beginning of the year. These growth investments are generating healthy results and our digital initiatives continue to pay dividends, illustrated by online sales growth of 25%, which now represents 24% of total sales in the quarter. Consolidated sales growth was led by our Housewares segment as we expanded distribution and introduced new products that resonated well with both customers and consumers. Our Beauty segment continued to grow, driven by strong demand in the appliance category. Our Health & Home segment faced a particularly difficult comparison to the high base that included strong sales of seasonal products, distribution gains and significant international growth in the same period last year. Overall, a strong quarter and first half of our fiscal year.”

Mr. Mininberg continued: “Based on this performance and our expectations for the remainder of the fiscal year, we are pleased to raise our net sales and adjusted diluted EPS outlook for the full fiscal year 2020. We believe we are well positioned to continue driving meaningful long-term shareholder value as we execute our Phase II Transformation plan."

Three Months Ended August 31,

Housewares

Health & Home

Beauty

Total

Fiscal 2019 sales revenue, net

$

137,498

$

175,783

$

80,267

$

393,548

Core business growth (decline)

30,837

(15,943

)

7,494

22,388

Impact of foreign currency

(471

)

(1,050

)

(420

)

(1,941

)

Change in sales revenue, net

30,366

(16,993

)

7,074

20,447

Fiscal 2020 sales revenue, net

$

167,864

$

158,790

$

87,341

$

413,995

Total net sales revenue growth (decline)

22.1

%

(9.7

)%

8.8

%

5.2

%

Core business growth (decline)

22.4

%

(9.1

)%

9.3

%

5.7

%

Impact of foreign currency

(0.3

)%

(0.6

)%

(0.5

)%

(0.5

)%

Operating margin (GAAP)

Fiscal 2020

21.3

%

7.8

%

7.3

%

13.2

%

Fiscal 2019

20.6

%

7.8

%

10.8

%

12.9

%

Adjusted operating margin (non-GAAP)

Fiscal 2020

22.4

%

11.2

%

11.9

%

15.9

%

Fiscal 2019

22.4

%

10.5

%

12.8

%

15.1

%

Consolidated Operating Results - Second Quarter Fiscal 2020 Compared to Second Quarter Fiscal 2019

  • Consolidated net sales revenue increased 5.2% to $414.0 million compared to $393.5 million, driven by a core business increase of $22.4 million, or 5.7%, primarily reflecting an increase in brick and mortar sales in the Housewares segment, growth in consolidated online sales, and an increase in sales in the appliance category in the Beauty segment. These factors were partially offset by lower sales in the Health & Home segment, the unfavorable impact from foreign currency fluctuations of approximately $1.9 million, or 0.5%, and a decline in the personal care category within the Beauty segment.
  • Consolidated gross profit margin increased 3.6 percentage points to 43.0%, compared to 39.4%. The increase is primarily due to a higher mix of Housewares revenue at a higher overall gross profit margin, tariff exclusion refunds received for certain duties expensed in the second half of fiscal 2019 and the first quarter of 2020, and a lower mix of shipments made on a direct import basis. These factors were partially offset by the net margin dilutive impact from tariffs and related pricing actions, unfavorable foreign currency fluctuations, a lower mix of personal care sales, and higher inbound freight expense.
  • Consolidated SG&A as a percentage of sales increased by 3.5 percentage points to 29.8% of net sales compared to 26.3%. The increase is primarily due to higher annual incentive and share-based compensation expense related to short- and long-term performance, the unfavorable impact of a lower mix of shipments made on a direct import basis, higher outbound freight expense, higher advertising and new product development expense, and higher amortization expense. These factors were partially offset by the impact from tariff related pricing actions taken with retail customers, the impact that higher overall sales had on net operating leverage, and the favorable impact from foreign currency exchange and forward contract settlements.
  • Consolidated operating income was $54.5 million, or 13.2% of net sales, compared to $50.7 million, or 12.9% of net sales. The increase in consolidated operating margin primarily reflects tariff exclusion refunds received for certain duties expensed in the second half of fiscal 2019 and the first quarter of 2020, a higher mix of Housewares sales at a higher overall operating margin, the impact of favorable foreign currency exchange contracts and remeasurement on SG&A, the favorable impact that higher overall net sales had on operating expense leverage, and the net favorable comparative impact of pre-tax restructuring charges of $0.4 million. These factors were partially offset by higher annual incentive and share-based compensation expense related to short- and long-term performance, higher advertising and new product development expense, higher amortization expense, higher freight and distribution expense, and the impact of unfavorable foreign currency fluctuations on net sales and operating margin.
  • The effective tax rate was 10.3%, compared to 8.3% for the same period last year. The year-over-year increase in the effective tax rate is primarily due to shifts in the mix of taxable income in the Company's various tax jurisdictions and increases in certain statutory tax rates.
  • Income from continuing operations was $46.1 million, or $1.83 per diluted share on 25.2 million weighted average shares outstanding, compared to $44.0 million, or $1.66 per diluted share on 26.6 million weighted average diluted shares outstanding. Income from continuing operations for the second quarter of fiscal 2020 includes after-tax restructuring charges of $0.4 million or $0.01 per share, compared to $0.8 million or $0.03 per share in the same period last year.
  • Adjusted EBITDA increased 9.7% to $69.8 million compared to $63.6 million.

On an adjusted basis for the second quarters of fiscal 2020 and 2019, excluding restructuring charges, non‐cash share-based compensation, and non-cash amortization of intangible assets, as applicable:

  • Adjusted operating income increased $6.2 million, or 10.4%, to $65.8 million, or 15.9% of net sales, compared to $59.6 million, or 15.1% of net sales. The 0.8 percentage point increase in adjusted operating margin primarily reflects tariff exclusion refunds received for certain duties expensed in the second half of fiscal 2019 and the first quarter of 2020, a higher mix of Housewares sales at a higher overall operating margin, the impact of favorable foreign currency exchange contracts and remeasurement on SG&A, and the favorable impact that higher overall net sales had on operating expense leverage. These factors were partially offset by higher annual incentive compensation expense, higher advertising and new product development expense, higher freight and distribution expense, and the impact of unfavorable foreign currency fluctuations on net sales and operating margin.
  • Adjusted income from continuing operations increased $4.0 million, or 7.6%, to $56.5 million, or $2.24 per diluted share, compared to $52.5 million, or $1.98 per diluted share. The 13.1% increase in adjusted diluted EPS from continuing operations was primarily due to higher adjusted operating income from the Housewares segment and the impact of lower weighted average diluted shares outstanding compared to the same period last year. This was partially offset by lower adjusted operating income from the Health & Home and Beauty segments, higher interest expense, and higher income tax expense.

Segment Operating Results - Second Quarter Fiscal 2020 Compared to Second Quarter Fiscal 2019

Housewares net sales increased by 22.1%, or $30.4 million, primarily due to point of sale growth and incremental distribution with existing domestic brick and mortar customers, an increase in online sales, an increase in international sales, and new product introductions. These factors were partially offset by the unfavorable impact of net foreign currency fluctuations of approximately $0.5 million, or 0.3%. Operating margin was 21.3% compared to 20.6%. The 0.7 percentage point increase was primarily due to the margin impact of a more favorable product and channel mix and the impact that higher sales had on operating leverage. These factors were partially offset by higher annual incentive and share-based compensation expense related to short- and long-term performance, higher new product development expense, and higher freight and distribution center expense to support increased volume and integration activity. Housewares adjusted operating income increased 22.1% to $37.6 million, compared to $30.8 million. Housewares adjusted operating margin was 22.4% for both periods.

Health & Home net sales decreased 9.7% or $17.0 million, reflecting the unfavorable comparison to core business growth of 20.3% in the same period last year. The decline this quarter included the timing of seasonal shipments, less wildfire activity in the current year, and net distribution changes year-over-year. Segment operating margin was flat to the prior year period due to the unfavorable impacts from higher media advertising expense, unfavorable operating leverage from the decline in sales, higher share-based compensation expense, the margin impact of a less favorable channel mix, and the impact of unfavorable foreign currency exchange fluctuations on net sales and operating margin. These factors were offset by tariff exclusion refunds received for certain duties expensed in the second half of fiscal 2019 and the first quarter of fiscal 2020, and the impact of favorable foreign currency exchange contracts and remeasurement on SG&A. Health & Home adjusted operating income decreased 4.1% to $17.7 million, or 11.2% of segment net sales, compared to $18.5 million, or 10.5% of segment net sales, in the same period last year.

Beauty net sales increased 8.8%, or $7.1 million, primarily due to strong demand and new product introductions in the appliance category, growth in the online channel, and an increase in international sales. These factors were partially offset by a decrease in brick and mortar sales, a decline in the personal care category, and the unfavorable impact of net foreign currency fluctuations of approximately $0.4 million, or 0.5%. Operating margin was 7.3% compared to 10.8%. The decrease is primarily due to the impact of higher freight expense to meet strong demand in the appliance category, higher annual incentive and share-based compensation expense related to short- and long-term performance, higher amortization expense, the margin impact of a less favorable product and channel mix, and the impact of unfavorable foreign currency fluctuations on net sales and operating margin. These factors were partially offset by lower advertising expense and the net favorable comparative impact of pre-tax restructuring charges of $0.4 million. Beauty adjusted operating income increased 1.3% to $10.4 million, or 11.9% of segment net sales, compared to $10.3 million, or 12.8% of segment net sales, in the same period last year.

Balance Sheet and Cash Flow Highlights - Second Quarter Fiscal 2020 Compared to Second Quarter Fiscal 2019

  • Cash and cash equivalents totaled $17.0 million, compared to $19.9 million
  • Total short- and long-term debt was $301.2 million, compared to $301.1 million, a net increase of $0.1 million
  • Accounts receivable turnover was 68.4 days, compared to 65.4 days
  • Inventory was $370.9 million, compared to $284.8 million. Trailing twelve-month inventory turnover was 2.9 times compared to 3.3 times.
  • Net cash provided by operating activities from continuing operations for the first six months of the fiscal year increased $0.9 million to $38.2 million.

Fiscal 2020 Annual Outlook

For fiscal 2020, the Company has updated its outlook and now expects consolidated net sales revenue to be in the range of $1.610 to $1.640 billion, which implies consolidated sales growth of 2.9% to 4.8% compared to the prior expectation of 1.7% to 3.6%. By segment, the outlook reflects:

  • Housewares net sales growth of 13% to 15%, compared to the prior expectation of 6% to 8%;
  • Health & Home net sales decline in the low-single digits, compared to the prior expectation of net sales growth of 2% to 3%; and
  • Beauty net sales growth in the low-single digits, compared to the prior expectation of a net sales decline in the low-single digits.

The Company now expects consolidated GAAP diluted EPS from continuing operations of $6.84 to $7.04, and non-GAAP adjusted diluted EPS from continuing operations in the range of $8.50 to $8.75, which excludes any asset impairment charges, restructuring charges, share-based compensation expense and intangible asset amortization expense.

The Company’s net sales and EPS outlook assumes the severity of the upcoming cough/cold/flu season will be in line with historical averages. The Company’s net sales and EPS outlook also assumes that September 2019 foreign currency exchange rates will remain constant for the remainder of the fiscal year. The Company now expects the year-over-year comparison of adjusted diluted EPS from continuing operations to be impacted by an expected increase in growth investments of 13% to 18% in fiscal 2020. The diluted EPS outlook is based on an estimated weighted average diluted shares outstanding of 25.3 million.

The increase in the adjusted diluted EPS outlook for fiscal 2020 reflects the Company's strong performance in the second quarter, partially offset by an expected increase in growth investments, higher expected annual incentive compensation expense, and higher expected freight and distribution costs. These costs support strong demand in our Housewares segment and Beauty appliances business, as well as integration activity and increases in capacity and throughput for future growth.

The Company now expects a reported GAAP effective tax rate range of 9.6% to 10.7%, and an adjusted effective tax rate range of 9.0% to 10.0% for the full fiscal year 2020. Please refer to the schedule entitled “Effective Tax Rate (GAAP) and Adjusted Effective Tax Rate (Non-GAAP)” in the accompanying tables to this press release.

The likelihood and potential impact of any fiscal 2020 acquisitions and divestitures, future asset impairment charges, future foreign currency fluctuations, further tariff increases, or future share repurchases are unknown and cannot be reasonably estimated; therefore, they are not included in the Company’s sales and earnings outlook.

Conference Call and Webcast

The Company will conduct a teleconference in conjunction with today’s earnings release. The teleconference begins at 9:00 a.m. Eastern Time today, Tuesday, October 8, 2019. Investors and analysts interested in participating in the call are invited to dial (877) 407-3982 approximately ten minutes prior to the start of the call. The conference call will also be webcast live at: http://investor.hotus.com/. A telephone replay of this call will be available at 12:00 p.m. Eastern Time on October 8, 2019 until 11:59 p.m. Eastern Time on October 15, 2019 and can be accessed by dialing (844) 512-2921 and entering replay pin number 13694424. A replay of the webcast will remain available on the website for one year.

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 such as adjusted operating income, adjusted operating margin, adjusted effective tax rate, adjusted income, adjusted diluted earnings per share, 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 condensed consolidated statements of income. All references to the Company's continuing operations exclude the Nutritional Supplements segment.

About Helen of Troy Limited

Helen of Troy Limited (NASDAQ: HELE) 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 OXO, Hydro Flask, Vicks, Braun, Honeywell, PUR, and Hot Tools. All trademarks herein belong to Helen of Troy Limited (or its affiliates) and/or are used under license from their respective licensors.

For more information about Helen of Troy, please visit http://investor.hotus.com/

Forward Looking Statements

Certain written and oral statements made by the Company and subsidiaries of the Company may constitute “forward-looking statements” as defined under the Private Securities Litigation Reform Act of 1995. This includes statements made in this press release. Generally, the words “anticipates”, “believes”, “expects”, “plans”, “may”, “will”, “should”, “seeks”, “estimates”, “project”, “predict”, “potential”, “continue”, “intends”, and other similar words identify forward-looking statements. All statements that address operating results, events or developments that the Company expects or anticipates will occur in the future, including statements related to sales, earnings per share results, and statements expressing general expectations about future operating results, are forward-looking statements and are based upon its current expectations and various assumptions. The Company believes there is a reasonable basis for these expectations and assumptions, but there can be no assurance that the Company will realize these expectations or that these assumptions will prove correct. Forward-looking statements are subject to risks that could cause them to differ materially from actual results. Accordingly, the Company cautions readers not to place undue reliance on forward-looking statements. 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, 2019, and in the Company's 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 Company's ability to deliver products to its customers in a timely manner and according to their fulfillment standards, the costs of complying with the business demands and requirements of large sophisticated customers, the Company's relationships with key customers and licensors, its dependence on the strength of retail economies and vulnerabilities to any prolonged economic downturn, its dependence on sales to several large customers and the risks associated with any loss or substantial decline in sales to top customers, expectations regarding any proposed restructurings, its recent and future acquisitions or divestitures, including its ability to realize anticipated cost savings, synergies and other benefits along with its ability to effectively integrate acquired businesses or separate divested businesses, circumstances which may contribute to future impairment of goodwill, intangible or other long-lived assets, the retention and recruitment of key personnel, foreign currency exchange rate fluctuations, risks associated with weather conditions, the duration and severity of the cold and flu season and other related factors, its dependence on foreign sources of supply and foreign manufacturing, and associated operational risks including, but not limited to, long lead times, consistent local labor availability and capacity, and timely availability of sufficient shipping carrier capacity, labor and energy on cost of goods sold and certain operating expenses, the risks associated with significant tariffs or other restrictions on imports from China or any retaliatory trade measures taken by China, the geographic concentration and peak season capacity of certain U.S. distribution facilities increases its exposure to significant shipping disruptions and added shipping and storage costs, its projections of product demand, sales and net income are highly subjective in nature and future sales and net income could vary in a material amount from such projections, the risks associated with the use of trademarks licensed from and to third parties, its ability to develop and introduce a continuing stream of new products to meet changing consumer preferences, trade barriers, exchange controls, expropriations, and other risks associated with U.S. and foreign operations, the risks to its liquidity as a result of changes to capital and credit market conditions, limitations under its financing arrangements and other constraints or events that impose constraints on its cash resources and ability to operate its business, the costs, complexity and challenges of upgrading and managing its global information systems, the risks associated with cybersecurity and information security breaches, the risks associated with global legal developments regarding privacy and data security could result in changes to our business practices, penalties, increased cost of operations, or otherwise harm our business, the risks associated with product recalls, product liability, other claims, and related litigation against us, the risks associated with accounting for tax positions, tax audits and related disputes with taxing authorities, the risks of potential changes in laws in the U.S. or abroad, including tax laws, regulations or treaties, employment and health insurance laws and regulations, and laws relating to environmental policy, personal data, financial regulation, transportation policy and infrastructure policy along with the costs and complexities of compliance with such laws, its ability to continue to avoid classification as a controlled foreign corporation, and legislation enacted in Bermuda and Barbados in response to the European Union’s review of harmful tax competition could adversely affect our operations. The Company undertakes no obligation to publicly update or revise any forward-looking statements as a result of new information, future events or otherwise.

HELEN OF TROY LIMITED AND SUBSIDIARIES

Condensed Consolidated Statements of Income

(Unaudited)

(in thousands, except per share data)

 

Three Months Ended August 31,

2019

2018

Sales revenue, net

$

413,995

100.0

%

$

393,548

100.0

%

Cost of goods sold

235,844

57.0

%

238,375

60.6

%

Gross profit

178,151

43.0

%

155,173

39.4

%

Selling, general and administrative expense ("SG&A")

123,201

29.8

%

103,654

26.3

%

Restructuring charges

430

0.1

%

859

0.2

%

Operating income

54,520

13.2

%

50,660

12.9

%

Nonoperating income, net

89

%

85

%

Interest expense

(3,216

)

(0.8

)%

(2,755

)

(0.7

)%

Income before income tax

51,393

12.4

%

47,990

12.2

%

Income tax expense

5,298

1.3

%

3,973

1.0

%

Income from continuing operations

46,095

11.1

%

44,017

11.2

%

Loss from discontinued operations, net of tax

%

%

Net income

$

46,095

11.1

%

$

44,017

11.2

%

Earnings per share - diluted:

Continuing operations

$

1.83

$

1.66

Discontinued operations

Total earnings per share - diluted

$

1.83

$

1.66

Weighted average shares of common stock used in computing diluted earnings per share

25,245

26,557

Six Months Ended August 31,

2019

2018

Sales revenue, net

$

790,330

100.0

%

$

748,227

100.0

%

Cost of goods sold

458,452

58.0

%

446,496

59.7

%

Gross profit

331,878

42.0

%

301,731

40.3

%

SG&A

229,102

29.0

%

205,160

27.4

%

Restructuring charges

1,049

0.1

%

2,584

0.3

%

Operating income

101,727

12.9

%

93,987

12.6

%

Nonoperating income, net

221

%

160

%

Interest expense

(6,524

)

(0.8

)%

(5,442

)

(0.7

)%

Income before income tax

95,424

12.1

%

88,705

11.9

%

Income tax expense

8,635

1.1

%

6,515

0.9

%

Income from continuing operations

86,789

11.0

%

82,190

11.0

%

Loss from discontinued operations, net of tax

%

(381

)

(0.1

)%

Net income

$

86,789

11.0

%

$

81,809

10.9

%

Earnings (loss) per share - diluted:

Continuing operations

$

3.44

$

3.09

Discontinued operations

(0.01

)

Total earnings per share - diluted

$

3.44

$

3.07

Weighted average shares of common stock used in computing diluted earnings per share

25,245

26,612

Condensed Consolidated Statements of Income and Reconciliation of Non-GAAP Financial

Measures – Adjusted Operating Income, Adjusted Income from Continuing Operations and

Adjusted Diluted Earnings Per Share (“EPS”) from Continuing Operations (1)

(Unaudited)

(in thousands, except per share data)

 

Three Months Ended August 31, 2019

As Reported

(GAAP)

Adjustments

Adjusted

(Non-GAAP)

Sales revenue, net

$

413,995

100.0

%

$

$

413,995

100.0

%

Cost of goods sold

235,844

57.0

%

235,844

57.0

%

Gross profit

178,151

43.0

%

178,151

43.0

%

SG&A

123,201

29.8

%

(4,463

)

(3)

112,357

27.1

%

(6,381

)

(4)

Restructuring charges

430

0.1

%

(430

)

%

Operating income

54,520

13.2

%

11,274

65,794

15.9

%

Nonoperating income, net

89

%

89

%

Interest expense

(3,216

)

(0.8

)%

(3,216

)

(0.8

)%

Income before income tax

51,393

12.4

%

11,274

62,667

15.1

%

Income tax expense

5,298

1.3

%

829

6,127

1.5

%

Income from continuing operations

46,095

11.1

%

10,445

56,540

13.7

%

Diluted EPS from continuing operations

$

1.83

$

0.41

$

2.24

Weighted average shares of common stock used in computing diluted EPS

25,245

25,245

Three Months Ended August 31, 2018

As Reported

(GAAP)

Adjustments

Adjusted

(Non-GAAP)

Sales revenue, net

$

393,548

100.0

%

$

$

393,548

100.0

%

Cost of goods sold

238,375

60.6

%

238,375

60.6

%

Gross profit

155,173

39.4

%

155,173

39.4

%

SG&A

103,654

26.3

%

(3,401

)

(3)

95,563

24.3

%

(4,689

)

(4)

Restructuring charges

859

0.2

%

(859

)

%

Operating income

50,660

12.9

%

8,949

59,610

15.1

%

Nonoperating income, net

85

%

85

%

Interest expense

(2,755

)

(0.7

)%

(2,755

)

(0.7

)%

Income before income tax

47,990

12.2

%

8,949

56,940

14.5

%

Income tax expense

3,973

1.0

%

434

4,407

1.1

%

Income from continuing operations

44,017

11.2

%

8,515

52,533

13.3

%

Diluted EPS from continuing operations

$

1.66

$

0.32

$

1.98

Weighted average shares of common stock used in computing diluted EPS

26,557

26,557

 

Condensed Consolidated Statements of Income and Reconciliation of Non-GAAP Financial

Measures – Adjusted Operating Income, Adjusted Income from Continuing Operations and

Adjusted Diluted Earnings Per Share (“EPS”) from Continuing Operations (1)

(Unaudited)

(in thousands, except per share data)

 

Six Months Ended August 31, 2019

As Reported

(GAAP)

Adjustments

Adjusted

(Non-GAAP)

Sales revenue, net

$

790,330

100.0

%

$

$

790,330

100.0

%

Cost of goods sold

458,452

58.0

%

458,452

58.0

%

Gross profit

331,878

42.0

%

331,878

42.0

%

SG&A

229,102

29.0

%

(8,339

)

(3)

206,778

26.2

%

(13,985

)

(4)

Restructuring charges

1,049

0.1

%

(1,049

)

%

Operating income

101,727

12.9

%

23,373

125,100

15.8

%

Nonoperating income, net

221

%

221

%

Interest expense

(6,524

)

(0.8

)%

(6,524

)

(0.8

)%

Income before income tax

95,424

12.1

%

23,373

118,797

15.0

%

Income tax expense

8,635

1.1

%

1,528

10,163

1.3

%

Income from continuing operations

86,789

11.0

%

21,845

108,634

13.7

%

Diluted EPS from continuing operations

$

3.44

$

0.87

$

4.30

Weighted average shares of common stock used in computing diluted EPS

25,245

25,245

Six Months Ended August 31, 2018

As Reported

(GAAP)

Adjustments

Adjusted

(Non-GAAP)

Sales revenue, net

$

748,227

100.0

%

$

$

748,227

100.0

%

Cost of goods sold

446,496

59.7

%

446,496

59.7

%

Gross profit

301,731

40.3

%

301,731

40.3

%

SG&A

205,160

27.4

%

(7,522

)

(3)

186,625

24.9

%

(11,013

)

(4)

Restructuring charges

2,584

0.3

%

(2,584

)

%

Operating income

93,987

12.6

%

21,119

115,106

15.4

%

Nonoperating income, net

160

%

160

%

Interest expense

(5,442

)

(0.7

)%

(5,442

)

(0.7

)%

Income before income tax

88,705

11.9

%

21,119

109,824

14.7

%

Income tax expense

6,515

0.9

%

979

7,494

1.0

%

Income from continuing operations

82,190

11.0

%

20,140

102,330

13.7

%

Diluted EPS from continuing operations

$

3.09

$

0.76

$

3.85

Weighted average shares of common stock used in computing diluted EPS

26,612

26,612

Consolidated and Segment Net Sales, Operating Margin and Adjusted Operating Margin (non-GAAP) (1)

(Unaudited)

(in thousands)

 

Three Months Ended August 31,

Housewares

Health & Home

Beauty

Total

Fiscal 2019 sales revenue, net

$

137,498

$

175,783

$

80,267

$

393,548

Core business growth (decline)

30,837

(15,943

)

7,494

22,388

Impact of foreign currency

(471

)

(1,050

)

(420

)

(1,941

)

Change in sales revenue, net

30,366

(16,993

)

7,074

20,447

Fiscal 2020 sales revenue, net

$

167,864

$

158,790

$

87,341

$

413,995

Total net sales revenue growth (decline)

22.1

%

(9.7

)%

8.8

%

5.2

%

Core business growth (decline)

22.4

%

(9.1

)%

9.3

%

5.7

%

Impact of foreign currency

(0.3

)%

(0.6

)%

(0.5

)%

(0.5

)%

Operating margin (GAAP)

Fiscal 2020

21.3

%

7.8

%

7.3

%

13.2

%

Fiscal 2019

20.6

%

7.8

%

10.8

%

12.9

%

Adjusted operating margin (non-GAAP)

Fiscal 2020

22.4

%

11.2

%

11.9

%

15.9

%

Fiscal 2019

22.4

%

10.5

%

12.8

%

15.1

%

Six Months Ended August 31,

Housewares

Health & Home

Beauty

Total

Fiscal 2019 sales revenue, net

$

254,801

$

339,214

$

154,212

$

748,227

Core business growth (decline)

58,767

(22,536

)

10,334

46,565

Impact of foreign currency

(762

)

(2,945

)

(755

)

(4,462

)

Change in sales revenue, net

58,005

(25,481

)

9,579

42,103

Fiscal 2020 sales revenue, net

$

312,806

$

313,733

$

163,791

$

790,330

Total net sales revenue growth (decline)

22.8

%

(7.5

)%

6.2

%

5.6

%

Core business growth (decline)

23.1

%

(6.6

)%

6.7

%

6.2

%

Impact of foreign currency

(0.3

)%

(0.9

)%

(0.5

)%

(0.6

)%

Operating margin (GAAP)

Fiscal 2020

21.4

%

8.8

%

4.5

%

12.9

%

Fiscal 2019

19.8

%

9.8

%

6.6

%

12.6

%

Adjusted operating margin (non-GAAP)

Fiscal 2020

23.0

%

12.4

%

8.6

%

15.8

%

Fiscal 2019

22.1

%

12.8

%

9.9

%

15.4

%

Leadership Brand Net Sales Revenue (2)

(Unaudited)

(in thousands)

 

Three Months Ended August 31,

Six Months Ended August 31,

2019

2018

2019

2018

Leadership Brand sales revenue, net

$

331,183

$

319,045

$

632,742

$

599,804

All other sales revenue, net

82,812

74,503

157,588

148,423

Total sales revenue, net

$

413,995

$

393,548

$

790,330

$

748,227

SELECTED OTHER DATA

Reconciliation of Non-GAAP Financial Measures – GAAP Operating Income

to Adjusted Operating Income (non-GAAP) (1)

(Unaudited)

(in thousands)

 

Three Months Ended August 31, 2019

Housewares

Health & Home

Beauty

Total

Operating income, as reported (GAAP)

$

35,698

21.3

%

$

12,408

7.8

%

$

6,414

7.3

%

$

54,520

13.2

%

Restructuring charges

2

428

0.5

%

430

0.1

%

Subtotal

35,700

21.3

%

12,408

7.8

%

6,842

7.8

%

54,950

13.3

%

Amortization of intangible assets

179

0.1

%

2,798

1.8

%

1,486

1.7

%

4,463

1.1

%

Non-cash share-based compensation

1,769

1.1

%

2,519

1.6

%

2,093

2.4

%

6,381

1.5

%

Adjusted operating income (non-GAAP)

$

37,648

22.4

%

$

17,725

11.2

%

$

10,421

11.9

%

$

65,794

15.9

%

Three Months Ended August 31, 2018

Housewares

Health & Home

Beauty

Total

Operating income, as reported (GAAP)

$

28,329

20.6

%

$

13,631

7.8

%

$

8,700

10.8

%

$

50,660

12.9

%

Restructuring charges

%

%

859

1.1

%

859

0.2

%

Subtotal

28,329

20.6

%

13,631

7.8

%

9,559

11.9

%

51,519

13.1

%

Amortization of intangible assets

511

0.4

%

2,704

1.5

%

186

0.2

%

3,401

0.9

%

Non-cash share-based compensation

1,994

1.5

%

2,156

1.2

%

539

0.7

%

4,689

1.2

%

Adjusted operating income (non-GAAP)

$

30,834

22.4

%

$

18,491

10.5

%

$

10,284

12.8

%

$

59,609

15.1

%

Six Months Ended August 31, 2019

Housewares

Health & Home

Beauty

Total

Operating income, as reported (GAAP)

$

66,898

21.4

%

$

27,464

8.8

%

$

7,365

4.5

%

$

101,727

12.9

%

Restructuring charges

90

%

%

959

0.6

%

1,049

0.1

%

Subtotal

66,988

21.4

%

27,464

8.8

%

8,324

5.1

%

102,776

13.0

%

Amortization of intangible assets

697

0.2

%

5,596

1.8

%

2,046

1.2

%

8,339

1.1

%

Non-cash share-based compensation

4,343

1.4

%

5,893

1.9

%

3,749

2.3

%

13,985

1.8

%

Adjusted operating income (non-GAAP)

$

72,028

23.0

%

$

38,953

12.4

%

$

14,119

8.6

%

$

125,100

15.8

%

Six Months Ended August 31, 2018

Housewares

Health & Home

Beauty

Total

Operating income, as reported (GAAP)

$

50,512

19.8

%

$

33,288

9.8

%

$

10,187

6.6

%

$

93,987

12.6

%

Restructuring charges

760

0.3

%

358

0.1

%

1,466

1.0

%

2,584

0.3

%

Subtotal

51,272

20.1

%

33,646

9.9

%

11,653

7.6

%

96,571

12.9

%

Amortization of intangible assets

985

0.4

%

5,408

1.6

%

1,129

0.7

%

7,522

1.0

%

Non-cash share-based compensation

3,980

1.6

%

4,482

1.3

%

2,551

1.7

%

11,013

1.5

%

Adjusted operating income (non-GAAP)

$

56,237

22.1

%

$

43,536

12.8

%

$

15,333

9.9

%

$

115,106

15.4

%

SELECTED OTHER DATA

Reconciliation of Non-GAAP Financial Measures - EBITDA

(Earnings Before Interest, Taxes, Depreciation and Amortization) and Adjusted EBITDA by Segment (1)

(Unaudited)

(in thousands)

 

Three Months Ended August 31, 2019

Housewares

Health & Home

Beauty

Total

Operating income, as reported (GAAP)

$

35,698

$

12,408

$

6,414

$

54,520

Depreciation and amortization, excluding amortized interest

1,416

4,269

2,664

8,349

Nonoperating income, net

89

89

EBITDA (non-GAAP)

37,114

16,677

9,167

62,958

Add: Restructuring charges

2

428

430

Non-cash share-based compensation

1,769

2,519

2,093

6,381

Adjusted EBITDA (non-GAAP)

$

38,885

$

19,196

$

11,688

$

69,769

Three Months Ended August 31, 2018

Housewares

Health & Home

Beauty

Total

Operating income, as reported (GAAP)

$

28,329

$

13,631

$

8,700

$

50,660

Depreciation and amortization, excluding amortized interest

1,522

4,229

1,562

7,313

Nonoperating income, net

85

85

EBITDA (non-GAAP)

29,851

17,860

10,347

58,058

Add: Restructuring charges

859

859

Non-cash share-based compensation

1,994

2,156

539

4,689

Adjusted EBITDA (non-GAAP)

$

31,845

$

20,016

$

11,745

$

63,606

Six Months Ended August 31, 2019

Housewares

Health & Home

Beauty

Total

Operating income, as reported (GAAP)

$

66,898

$

27,464

$

7,365

$

101,727

Depreciation and amortization, excluding amortized interest

3,029

8,582

4,505

16,116

Nonoperating income, net

221

221

EBITDA (non-GAAP)

69,927

36,046

12,091

118,064

Add: Restructuring charges

90

959

1,049

Non-cash share-based compensation

4,343

5,893

3,749

13,985

Adjusted EBITDA (non-GAAP)

$

74,360

$

41,939

$

16,799

$

133,098

Six Months Ended August 31, 2018

Housewares

Health & Home

Beauty

Total

Operating income, as reported (GAAP)

$

50,512

$

33,288

$

10,187

$

93,987

Depreciation and amortization, excluding amortized interest

3,006

8,377

3,912

15,295

Nonoperating income, net

160

160

EBITDA (non-GAAP)

53,518

41,665

14,259

109,442

Add: Restructuring charges

760

358

1,466

2,584

Non-cash share-based compensation

3,980

4,482

2,551

11,013

Adjusted EBITDA (non-GAAP)

$

58,258

$

46,505

$

18,276

$

123,039

Reconciliation of GAAP Income and Diluted Earnings Per Share (“EPS”) from Continuing

Operations to Adjusted Income and Adjusted Diluted EPS from Continuing Operations (non-
GAAP) (1) (Unaudited)

(dollars in thousands, except per share data)

 

Three Months Ended August 31, 2019

Income from Continuing Operations

Diluted EPS from Continuing Operations

Before Tax

Tax

Net of Tax

Before Tax

Tax

Net of Tax

As reported (GAAP)

$

51,393

$

5,298

$

46,095

$

2.04

$

0.21

$

1.83

Restructuring charges

430

66

364

0.02

0.01

Subtotal

51,823

5,364

46,459

2.05

0.21

1.84

Amortization of intangible assets

4,463

248

4,215

0.18

0.01

0.17

Non-cash share-based compensation

6,381

515

5,866

0.25

0.02

0.23

Adjusted (non-GAAP)

$

62,667

$

6,127

$

56,540

$

2.48

$

0.24

$

2.24

Weighted average shares of common stock used in computing diluted EPS

25,245

Three Months Ended August 31, 2018

Income from Continuing Operations

Diluted EPS from Continuing Operations

Before Tax

Tax

Net of Tax

Before Tax

Tax

Net of Tax

As reported (GAAP)

$

47,990

$

3,973

$

44,017

$

1.81

$

0.15

$

1.66

Restructuring charges

859

41

818

0.03

0.03

Subtotal

48,849

4,014

44,835

1.84

0.15

1.69

Amortization of intangible assets

3,402

56

3,346

0.13

0.13

Non-cash share-based compensation

4,689

337

4,352

0.18

0.01

0.16

Adjusted (non-GAAP)

$

56,940

$

4,407

$

52,533

$

2.14

$

0.17

$

1.98

Weighted average shares of common stock used in computing diluted EPS

26,557

Six Months Ended August 31, 2019

Income from Continuing Operations

Diluted EPS from Continuing Operations

Before Tax

Tax

Net of Tax

Before Tax

Tax

Net of Tax

As reported (GAAP)

$

95,424

$

8,635

$

86,789

$

3.78

$

0.34

$

3.44

Restructuring charges

1,049

68

981

0.04

0.04

Subtotal

96,473

8,703

87,770

3.82

0.34

3.48

Amortization of intangible assets

8,339

369

7,970

0.33

0.01

0.32

Non-cash share-based compensation

13,985

1,091

12,894

0.55

0.04

0.51

Adjusted (non-GAAP)

$

118,797

$

10,163

$

108,634

$

4.71

$

0.40

$

4.30

Weighted average shares of common stock used in computing diluted EPS

25,245

Six Months Ended August 31, 2018

Income from Continuing Operations

Diluted EPS from Continuing Operations

Before Tax

Tax

Net of Tax

Before Tax

Tax

Net of Tax

As reported (GAAP)

$

88,705

$

6,515

$

82,190

$

3.33

$

0.24

$

3.09

Restructuring charges

2,584

183

2,401

0.10

0.01

0.09

Subtotal

91,289

6,698

84,591

3.43

0.25

3.18

Amortization of intangible assets

7,522

190

7,332

0.28

0.01

0.28

Non-cash share-based compensation

11,013

606

10,407

0.41

0.02

0.39

Adjusted (non-GAAP)

$

109,824

$

7,494

$

102,330

$

4.13

$

0.28

$

3.85

Weighted average shares of common stock used in computing diluted EPS

26,612

Selected Consolidated Balance Sheet, Cash Flow and Liquidity Information (5)

(Unaudited)

(in thousands)

 

August 31,

2019

2018

Balance Sheet:

Cash and cash equivalents

$

17,031

$

19,915

Receivables, net

310,377

313,615

Inventory, net

370,915

284,828

Total assets, current

711,371

636,367

Total assets

1,775,953

1,694,588

Total liabilities, current

317,857

298,007

Total long-term liabilities

370,721

320,841

Total debt

301,193

301,076

Consolidated stockholders' equity

1,087,375

1,075,740

Liquidity:

Working capital

$

393,514

$

338,360

Six Months Ended August 31,

2019

2018

Cash Flow from continuing operations:

Depreciation and amortization

$

16,116

$

15,295

Net cash provided by operating activities

38,211

37,311

Capital and intangible asset expenditures

8,861

13,061

Net debt proceeds (repayments)

(20,100

)

10,700

Payments for repurchases of common stock

9,131

42,240

Fiscal 2020 Updated Outlook for Net Sales Revenue

(Unaudited)

(in thousands)

 

Fiscal 2019

Updated Outlook for Fiscal 2020

Net sales revenue

$

1,564,151

$

1,610,000

$

1,640,000

2.9

%

4.8

%

Reconciliation of Fiscal 2020 Updated Outlook for GAAP Diluted Earnings Per Share

(“EPS”) from Continuing Operations to Adjusted Diluted EPS from Continuing Operations

(non-GAAP) (1) (Unaudited)

 

Six
Months
Ended
August
31, 2019

Outlook for the
Balance of the
Fiscal Year
(Six Months)

Updated Outlook
Fiscal 2020

Diluted EPS from continuing operations, as reported (GAAP)

$

3.44

$

3.40

$

3.60

$

6.84

$

7.04

Restructuring charges, net of tax

0.04

0.01

0.02

0.05

0.06

Subtotal

3.48

3.41

3.62

6.89

7.10

Amortization of intangible assets, net of tax

0.32

0.36

0.38

0.68

0.70

Non-cash share-based compensation, net of tax

0.51

0.43

0.45

0.94

0.96

Adjusted diluted EPS from continuing operations (non-GAAP)

$

4.30

$

4.20

$

4.45

$

8.50

$

8.75

Updated Effective Tax Rate (GAAP) and Adjusted Effective Tax Rate (Non-GAAP) (1)

(Unaudited)

 

Six Months
Ended August
31, 2019

Outlook for the
Balance of the
Fiscal Year
(Six Months)

Updated Outlook
Fiscal 2020

Effective tax rate, as reported (GAAP)

9.0

%

10.3

%

12.1

%

9.6

%

10.7

%

Restructuring charges

%

%

%

%

%

Subtotal

9.0

%

10.3

%

12.1

%

9.6

%

10.7

%

Amortization of intangible assets

(0.4

)%

(0.5

)%

(0.7

)%

(0.4

)%

(0.5

)%

Non-cash share based compensation

(0.1

)%

(0.2

)%

(0.3

)%

(0.2

)%

(0.2

)%

Adjusted effective tax rate

8.6

%

9.5

%

11.1

%

9.0

%

10.0

%

HELEN OF TROY LIMITED AND SUBSIDIARIES

Notes to Press Release

(1)

 This press release contains non-GAAP financial measures. Adjusted operating income, adjusted operating margin, adjusted effective tax rate, adjusted income, adjusted diluted EPS, EBITDA, and adjusted EBITDA (“Non-GAAP measures”) that are discussed in the accompanying press release or in the preceding tables may be considered non-GAAP financial information as contemplated by SEC Regulation G, Rule 100. Accordingly, the Company is providing the preceding tables that reconcile these measures to their corresponding GAAP-based measures presented in the Company's Condensed Consolidated Statements of Income in the accompanying tables to the press release. The Company believes that these non-GAAP measures provide useful information to management and investors regarding financial and business trends relating to its financial condition and results of operations. The Company believes that these non-GAAP financial measures, in combination with the Company’s financial results calculated in accordance with GAAP, provide investors with additional perspective regarding the impact of certain charges on applicable income, margin and earnings per share measures. The Company also believes that these non-GAAP measures facilitate a more direct comparison of the Company’s performance with its competitors. The Company further believes that including the excluded charges would not accurately reflect the underlying performance of the Company’s continuing operations for the period in which the charges are incurred, even though such charges may be incurred and reflected in the Company’s GAAP financial results in the near future. Additionally, the non-GAAP measures are used by management for measuring and evaluating the Company’s performance. The material limitation associated with the use of the non-GAAP measures is that the non-GAAP measures do not reflect the full economic impact of the Company’s activities. These non-GAAP measures are not prepared in accordance with GAAP, are not an alternative to GAAP financial information, and may be calculated differently than non-GAAP financial information disclosed by other companies. Accordingly, undue reliance should not be placed on non-GAAP information.
  

(2)

 Leadership Brand net sales consists of revenue from the OXO, Honeywell, Braun, PUR, Hydro Flask, Vicks and Hot Tools brands.
  

(3)

 Amortization of intangible assets.
  

(4)

 Non-cash share-based compensation.
  

(5)

 Amounts presented are from continuing operations with the exception of stockholders’ equity, which is presented on a consolidated basis and includes discontinued operations.

Contacts:

Investors:
Helen of Troy Limited
Anne Rakunas, Director, External Communications
(915) 225-4841

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