Helen of Troy Q2 '97
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Helen of Troy Q2 '97
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(FOOL CONFERENCE CALL SYNOPSIS)* By Debora Tidwell (MF Debit)
Helen of Troy Ltd. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: HELE)") else Response.Write("(NASDAQ: HELE)") end if %> UNION CITY, Ca, October 9, 1996/FOOLWIRE/--- Helen of Troy reported record Q2 and 6-month results yesterday morning. The earnings for Q2 rose 22% to $4,095,000 or $0.30 per share, in line with analyst estimates. Q2 sales increased 18% to $50,491,000. Earnings per share have been restated to reflect a 2-for-1 stock split which was paid on July 31st.
For the 6-month period, earnings were up 29% and sales rose 24%.
Their increases were across the board. The Vidal Sassoon and Revlon hair care appliances, the brush and comb division, and their professional business did very well. They are still introducing their hair care accessories line.
The company announced on Monday that they have acquired two personal care lines from the Dazey Corporation in Kansas City. They have been in business for about 30 years and decided that they would like to not be in the business. Helen of Troy purchased two product lines, all the equipment to manufacture the product, the tooling, the license rights, and the trademarks for the marks they own -- Dazey, Carel, and Dr. Scholl's are the well known names, although there are about 25 different trademarks. Dr. Scholl's is a license from Schering-Plough, similar to the arrangements that Helen of Troy has with Revlon and Procter & Gamble with their Revlon and Vidal Sassoon lines.
But, the Dazey company only had foot baths, which they were selling in the market place. Schering Plough has agreed and signed with Helen of Troy giving them the rights to the foot baths, foot massagers, and all types of body massagers. This should increase Schering's business and give Helen of Troy a nice new division. Dazey was also selling a "hard hat" salon hair dryer which fits in well with Helen of Troy's existing line of Vidal Sassoon and Revlon line of hair dryers. They also had a line of turbo spa products for the bath which they sold under the Dazey and Lady Dazey names. Helen of Troy is very happy with the acquisition and feel that, minimum, a year from now when they increase the product line, that they will have at least $25-30 million more in sales in this particular category.
Dr. Scholl's is certainly a worldwide name that is recognized in the massage and comfort area and that is where Helen of Troy is going to concentrate -- having more products under the Dr. Scholl's name in the massage and comfort area.
ANSWERS TO ANALYST QUESTIONS
The gross profit for the quarter was $18,686,000 or 37%. Total operating expenses were $13,157,000 or 26%. Operating income was 10.95%, after interest it was 10.47%. The margins were down from last year because last year was a very unusual quarter. The year only ended up at about 38.5% and Q2 last year was 40% and was unusually high due to new product introductions. The product mix had a lot to do with the margin decrease this quarter, but the company feels that the average for the year will be between 38.5% and 39%.
September was a very good month. October looks very good too.
Helen of Troy acquired Dazey for less than $15 million. There is no upfront payment to Schering for the license on Dr. Scholl's because Dazey had a license agreement that Helen of Troy took over and Schering just expanded the categories. There was no money paid to Schering Plough. They think the margins they will achieve on these product lines should be the same as their current appliance division. One of the good things from the deal is that Helen of Troy did not acquire Dazey's overhead. They had a lot of people and real estate in Kansas City which Helen of Troy didn't need, so they didn't acquire the company, they only bought the assets.
Their sales on the brush, comb, and accessories are up approximately 50% for the first 6 months of this year. They just started with their national rollout of the accessories this March. Prior to that, they only sold Wal-Mart the year before.
The company's sales projections are that they will exceed $200 million for the year without the acquisition they just made. They are comfortable with current analyst estimates.
The company was asked if they were still evaluating a move to the New York Stock Exchange. They said they were looking into it and think they will probably do it. No date yet. * A Fool conference call synopsis represents an effort to highlight the salient points of a conference call and should not be taken as an authoritative accounting or transcription of the entire event. |
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Copyright 1996, The Motley Fool |