UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): July 9, 2014
HELEN OF TROY LIMITED
(Exact name of registrant as specified in its charter)
Commission File Number: 001-14669
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Bermuda |
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74-2692550 |
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(State or other jurisdiction of |
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(I.R.S. Employer |
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incorporation or organization) |
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Identification No.) |
CLARENDON HOUSE
2 CHURCH STREET
HAMILTON, BERMUDA
(Business address of registrant)
ONE HELEN OF TROY PLAZA
EL PASO, TEXAS 79912
(United States mailing address of registrant and zip code)
915-225-8000
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operation and Financial Condition.
On July 9, 2014, Helen of Troy Limited (the “Company”) issued a press release announcing its results for its first fiscal quarter ended May 31, 2014. Additionally, on July 9, 2014, the Company held a conference call discussing its results for the same period mentioned above. With this Form 8-K, we are furnishing copies of the press release (attached hereto as Exhibit 99.1) and the text of the conference call (attached hereto as Exhibit 99.2). The press release and copy of the text of this conference call are also provided on the Investor Relations Page of our website at: http://www.hotus.com. The information contained on this website is not included as a part of, or incorporated by reference into, this report.
The Company desires to avail itself of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 (the “Act”) and is including this cautionary statement for the express purpose of availing itself of the protection afforded by the Act. The accompanying press release and conference call transcript contain certain forward-looking statements, which are subject to change. 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 the accompanying press release and conference call transcripts 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, 2014 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., Euro zone, Venezuelan and other international credit markets, risks associated with weather conditions, the Company’s dependence on foreign sources of supply and foreign manufacturing, 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, 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 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.
The press release and copy of the text of this conference call include or refer to certain information that the Company believes is non-GAAP Financial Information as contemplated by SEC Regulation G, Rule 100. The press release contains tables that reconcile these measures to their corresponding GAAP based measures presented in the Company’s Consolidated Statements of Income. The material limitation associated with the use of the non-GAAP financial 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.
The information in this Item 2.02 of this Form 8-K and Exhibits 99.1 and 99.2 attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or any proxy statement or report or other document we may file with the SEC, regardless of any general incorporation language in any such filing, except as shall be expressly set forth by specific reference in such filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
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Exhibit Number |
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Description |
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99.1 |
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Press Release, dated July 9, 2014 |
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99.2 |
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Text of conference call held July 9, 2014 |
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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HELEN OF TROY LIMITED |
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Date: July 15, 2014 |
/s/ Brian L. Grass |
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Brian L. Grass |
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Chief Financial Officer |
EXHIBIT 99.1
Helen of Troy Limited Reports Results
For the First Quarter Fiscal Year 2015
· Delivers Record Revenues of $311 Million, up 2.4%,
· Diluted Earnings Per Share (EPS) of $0.55; Adjusted Diluted EPS of $0.83
· Reaffirms Fiscal Year 2015 Outlook, Excluding the Acquisition of Healthy Directions
EL PASO, Texas, July 9, 2014 — Helen of Troy Limited (NASDAQ, NM: HELE), designer, developer and worldwide marketer of brand-name housewares, healthcare/home environment and personal care consumer products, today reported results for the three month period ended May 31, 2014.
“We are off to a solid start in fiscal year 2015. During the quarter, we increased our net sales revenue by 2.4% and managed expenses well to deliver adjusted EBITDA of $41.9 million and adjusted diluted EPS of $0.83,” stated Julien R. Mininberg, Chief Executive Officer. “During the quarter, we continued our efforts to transform our organization and reinvigorate our culture. We also advanced our goal of accelerating and sustaining organic growth by investing prudently in our strongest businesses. We saw a double digit increase in our Healthcare/Home Environment segment revenues and a solid increase in our Housewares segment revenues on top of strong gains in the prior year in both of these segments. We further engaged in shareholder friendly capital allocation policies through the repurchase of 4.2 million shares and the completion of the acquisition of Healthy Directions at the end of June, adding a growing business that is accretive to our gross margin, adjusted EBITDA and adjusted diluted EPS. Our Personal Care segment continued to deliver strong cash flow; however as anticipated, sales trailed the prior year quarter. To unlock more of this segment’s cash flow generation capability and achieve organic growth, we are focused on increasing product innovation, adding additional talent and redirecting our existing resources to the strongest opportunities. I believe we are well positioned to achieve the objectives we have set for ourselves this year. We are keenly focused on our goals and priorities for the future as we work to drive sustainable sales and earnings growth for many years to come.”
First Quarter of Fiscal Year 2015 Consolidated Operating Results
· Net sales revenue grew to a record $311.8 million compared to $304.5 million in the first quarter of fiscal year 2014.
· Gross profit margin was 38.3% compared to 39.5% for the same period last year. This decrease reflects increased promotional program costs, a revenue increase in the lower margin Healthcare/Home Environment segment, a lower margin sales mix within the Housewares and Healthcare/Home Environment segments, and general product cost increases.
· SG&A was 28.0% of net sales compared to 28.7% of net sales for the same period last year. The decrease is primarily due to lower incentive compensation costs partially offset by higher media advertising costs.
· Operating income was $23.1 million, and includes $9.0 million in non-cash asset impairment charges related to certain trademarks in the Company’s Personal Care segment. This is compared to operating income of $20.6 million in the same period last year, 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.
· Net income was $16.4 million, or $0.55 per fully diluted share on 29.6 million weighted average shares outstanding. This compares to net income in the first quarter of fiscal year 2014 of $14.4 million, or $0.45 per fully diluted share on 32.2 million weighted average shares outstanding.
· Adjusted EBITDA (EBITDA excluding non-cash asset impairment charges and non-cash share-based compensation) was $41.9 million compared to $44.6 million in the same period last year.
On an adjusted basis for the first quarter of fiscal 2015, excluding the non-cash asset impairment charges in both periods:
· Adjusted operating income was $32.1 million compared to $32.7 million for the first quarter of fiscal year 2014.
· Adjusted income was $24.6 million, or $0.83 per fully diluted share, compared to $26.4 million, or $0.82 per fully diluted share, for the first quarter of fiscal year 2014.
Balance Sheet Highlights
· Cash and cash equivalents totaled $29.2 million at May 31, 2014, compared to $12.1 million at May 31, 2013.
· Total short and long-term debt increased to $425.7 million at May 31, 2014, compared to $224.8 million at May 31, 2013. The increase primarily reflects an increase in the Company’s revolving line of credit in conjunction with the repurchase of shares as described below.
· Accounts receivable turnover was 63.2 days at May 31, 2014, compared to 61 days at May 31, 2013.
· Inventory was $298.5 million at May 31, 2014, compared to $288.4 million at May 31, 2013.
Share Repurchases
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 total cost of $247.8 million, including the fees and expenses related to the tender offer. The total cost of the repurchase was funded with cash on hand and borrowings under the Company’s revolving credit facility. The shares repurchased represented approximately 11.5% of the Company’s issued and outstanding shares of common stock at February 5, 2014.
During the fiscal quarter ended May 31, 2014, the Company repurchased an additional 408,327 shares of outstanding common stock on the open market at a total cost of $25.8 million, primarily funded with borrowings under its revolving credit facility. The Company also repurchased 70,079 shares in connection with share-based compensation. Share repurchases during the quarters ended May 31, 2014 and 2013 reduced weighted average shares outstanding used in computing basic and diluted earnings per share by 3,266,571 and 7,529 shares, respectively.
Subsequent Events
On June 11, 2014, the Company entered into a definitive purchase agreement to acquire Healthy Directions, LLC, a leader in the premium doctor-branded vitamin, mineral and supplement market. The transaction was completed on June 30, 2014 for a cash purchase price of approximately $195.28 million funded from cash on hand and borrowings under the Company’s revolving credit facility.
On June 11, 2014, in connection with the acquisition of Healthy Directions, the Company entered into an amendment of its credit agreement with Bank of America, N.A. and other lenders. The amendment, among other things, increased the unsecured revolving commitment of the credit agreement from $375 million to $570 million.
Additionally, a strategic licensing agreement between Helen of Troy and The Cookware Company (“TCC”) to bring to market high quality cookware under the OXO Good Grips® brand name was announced on June 20, 2014. Under the arrangement, TCC has collaborated with OXO to develop 3 initial collections using an innovative new “smart shapes” concept built with premium materials: two lines of hard-anodized aluminum cookware and one line of stainless steel cookware. These will be marketed by TCC into OXO’s normal channels of distribution. The licensing agreement will extend OXO’s brand into a new housewares category.
Fiscal Year 2015 Annual Outlook
For fiscal year 2015, the Company continues to expect net sales revenue in the range of $1.325 to $1.375 billion, and diluted EPS in the range of $4.02 to $4.12, which includes the non-cash asset impairment charges of $0.28 per share recorded in the first quarter of fiscal year 2015. Consistent with the Company’s previous outlook, adjusted diluted EPS is expected to be in the range of $4.30 to $4.40, which excludes non-cash asset impairment charges and the impact of the Healthy Directions acquisition.
On-going fiscal year 2015 results and outlook relating to adjusted diluted EPS will exclude non-cash asset impairment charges, intangible asset amortization expense, non-cash share-based compensation expense and the impact of the Healthy Directions acquisition, which we expect to be in the range of $5.15 to $5.25 for the full fiscal year 2015. The diluted EPS outlook is based on an estimated weighted average shares outstanding of 29.5 million for the full fiscal year 2015, which includes the impact of the “Dutch auction” tender offer completed on March 14, 2014. Further information concerning the fiscal year 2015 outlook, including a reconciliation of fiscal year 2015 reported diluted EPS to adjusted (non-GAAP) diluted EPS, is furnished in an accompanying table to this press release.
The likelihood and potential impact of any additional fiscal 2015 acquisitions, asset impairment charges or 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 4:45 pm Eastern Time today, Wednesday, July 9, 2014. Institutional investors and analysts interested in participating in the call are invited to dial (888) 539-3696 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 July 9, 2014 until 11:59 p.m. Eastern Time on July 16, 2014 and can be accessed by dialing (877) 870-5176 and entering replay pin number 1155593. A replay of the webcast will remain available on the website for 60 days.
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 Company recently acquired 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 in-depth information about Helen of Troy, please visit www.hotus.com.
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 earnings per share, EBITDA and adjusted EBITDA, which are presented in an accompanying table 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.
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, 2014 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, 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, 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 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.
HELEN OF TROY LIMITED AND SUBSIDIARIES
Consolidated Condensed Statements of Income and Reconciliation of Non-GAAP Financial Measures
Adjusted Operating Income, Adjusted Income and Adjusted Diluted Earnings per Share (EPS) (Unaudited)
(in thousands, except per share data)
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Three Months Ended May 31, 2014 |
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As Reported (GAAP) |
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Adjustments |
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Adjusted (non-GAAP)(1) |
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Sales revenue, net |
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$ |
311,778 |
|
100.0 |
% |
$ |
— |
|
$ |
311,778 |
|
100.0 |
% |
|
Cost of goods sold |
|
192,258 |
|
61.7 |
% |
— |
|
192,258 |
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61.7 |
% | |||
|
Gross profit |
|
119,520 |
|
38.3 |
% |
— |
|
119,520 |
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38.3 |
% | |||
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|
|
|
|
|
|
|
|
|
|
|
| |||
|
Selling, general, and administrative expense |
|
87,397 |
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28.0 |
% |
— |
|
87,397 |
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28.0 |
% | |||
|
Asset impairment charges |
|
9,000 |
|
2.9 |
% |
(9,000) |
(2) |
— |
|
0.0 |
% | |||
|
Operating income |
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23,123 |
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7.4 |
% |
9,000 |
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32,123 |
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10.3 |
% | |||
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Other income (expense): |
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Nonoperating income (expense), net |
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50 |
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0.0 |
% |
— |
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50 |
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0.0 |
% | |||
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Interest expense |
|
(3,417 |
) |
-1.1 |
% |
— |
|
(3,417 |
) |
-1.1 |
% | |||
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Total other expense |
|
(3,367 |
) |
-1.1 |
% |
— |
|
(3,367 |
) |
-1.1 |
% | |||
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Income before income taxes |
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19,756 |
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6.3 |
% |
9,000 |
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28,756 |
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9.2 |
% | |||
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Income tax expense |
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3,358 |
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1.1 |
% |
845 |
(2) |
4,203 |
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1.3 |
% | |||
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Net income |
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$ |
16,398 |
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5.3 |
% |
$ |
8,155 |
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$ |
24,553 |
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7.9 |
% |
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Diluted earnings per share |
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$ |
0.55 |
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$ |
0.28 |
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$ |
0.83 |
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Weighted average shares of common stock used in computing diluted earnings per share |
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29,616 |
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|
|
— |
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29,616 |
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| |||
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|
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Three Months Ended May 31, 2013 |
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As Reported (GAAP) |
|
Adjustments |
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Adjusted (non-GAAP)(1) |
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| |||
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Sales revenue, net |
|
$ |
304,516 |
|
100.0 |
% |
$ |
— |
|
$ |
304,516 |
|
100.0 |
% |
|
Cost of goods sold |
|
184,351 |
|
60.5 |
% |
— |
|
184,351 |
|
60.5 |
% | |||
|
Gross profit |
|
120,165 |
|
39.5 |
% |
— |
|
120,165 |
|
39.5 |
% | |||
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
Selling, general, and administrative expense |
|
87,490 |
|
28.7 |
% |
— |
|
87,490 |
|
28.7 |
% | |||
|
Asset impairment charges |
|
12,049 |
|
4.0 |
% |
(12,049) |
(2) |
— |
|
0.0 |
% | |||
|
Operating income |
|
20,626 |
|
6.8 |
% |
12,049 |
|
32,675 |
|
10.7 |
% | |||
|
|
|
|
|
|
|
|
|
|
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|
| |||
|
Other income (expense): |
|
|
|
|
|
|
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|
|
|
| |||
|
Nonoperating income (expense), net |
|
84 |
|
0.0 |
% |
— |
|
84 |
|
0.0 |
% | |||
|
Interest expense |
|
(2,942 |
) |
-1.0 |
% |
— |
|
(2,942 |
) |
-1.0 |
% | |||
|
Total other expense |
|
(2,858 |
) |
-0.9 |
% |
— |
|
(2,858 |
) |
-0.9 |
% | |||
|
Income before income taxes |
|
17,768 |
|
5.8 |
% |
12,049 |
|
29,817 |
|
9.8 |
% | |||
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
Income tax expense |
|
3,376 |
|
1.1 |
% |
15 |
(2) |
3,391 |
|
1.1 |
% | |||
|
Net income |
|
$ |
14,392 |
|
4.7 |
% |
$ |
12,034 |
|
$ |
26,426 |
|
8.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
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Diluted earnings per share |
|
$ |
0.45 |
|
|
|
$ |
0.37 |
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$ |
0.82 |
|
|
|
|
|
|
|
|
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|
|
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| |||
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Weighted average shares of common stock used in computing diluted earnings per share |
|
32,180 |
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|
|
— |
|
32,180 |
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|
| |||
HELEN OF TROY LIMITED AND SUBSIDIARIES
Net Sales Revenue by Segment
(Unaudited)
(in thousands)
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Three Months Ended May 31, 2014 |
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% of Sales Revenue, net |
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2014 |
|
2013 |
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$ Change |
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% Change |
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2014 |
|
2013 |
| |||
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Sales revenue by segment, net |
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Housewares |
|
$ |
66,756 |
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$ |
63,530 |
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$ |
3,226 |
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5.1 |
% |
21.4 |
% |
20.9 |
% |
|
Healthcare / Home Environment |
|
142,489 |
|
125,602 |
|
16,887 |
|
13.4 |
% |
45.7 |
% |
41.2 |
% | |||
|
Personal Care |
|
102,533 |
|
115,384 |
|
(12,851 |
) |
-11.1 |
% |
32.9 |
% |
37.9 |
% | |||
|
Total sales revenue, net |
|
$ |
311,778 |
|
$ |
304,516 |
|
$ |
7,262 |
|
2.4 |
% |
100.0 |
% |
100.0 |
% |
HELEN OF TROY LIMITED AND SUBSIDIARIES
Selected Consolidated Balance Sheet Information
(Unaudited)
(in thousands)
|
|
|
May 31, |
| ||||
|
|
|
2014 |
|
2013 |
| ||
|
|
|
|
|
|
| ||
|
Cash and cash equivalents |
|
$ |
29,170 |
|
$ |
12,130 |
|
|
Receivables |
|
217,415 |
|
206,021 |
| ||
|
Inventory |
|
298,450 |
|
288,382 |
| ||
|
Total assets, current |
|
586,294 |
|
539,547 |
| ||
|
Total assets |
|
1,487,655 |
|
1,460,561 |
| ||
|
Total liabilities, current |
|
541,471 |
|
270,863 |
| ||
|
Total long-term liabilities |
|
166,381 |
|
245,376 |
| ||
|
Stockholders’ equity |
|
779,803 |
|
944,322 |
| ||
SELECTED OTHER DATA
Reconciliation of Non-GAAP Financial Measures - EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization)
and Adjusted EBITDA
(Unaudited)
(in thousands)
|
|
|
Three Months Ended May 31, |
| ||||
|
|
|
2014 |
|
2013 |
| ||
|
|
|
|
|
|
| ||
|
Net income |
|
$ |
16,398 |
|
$ |
14,392 |
|
|
Interest expense, net |
|
3,396 |
|
2,920 |
| ||
|
Income tax expense |
|
3,358 |
|
3,376 |
| ||
|
Depreciation and amortization, excluding amortized interest |
|
8,500 |
|
8,447 |
| ||
|
EBITDA (Earnings before interest, taxes, depreciation and amortization) (1) |
|
$ |
31,652 |
|
$ |
29,135 |
|
|
|
|
|
|
|
| ||
|
Adjusted EBITDA: |
|
|
|
|
| ||
|
|
|
|
|
|
| ||
|
EBITDA, as calculated above (1) |
|
$ |
31,652 |
|
$ |
29,135 |
|
|
Add: Non-cash asset impairment charges (2) |
|
9,000 |
|
12,049 |
| ||
|
Non-cash share-based compensation (3) |
|
1,295 |
|
3,378 |
| ||
|
Adjusted EBITDA (1) |
|
$ |
41,947 |
|
$ |
44,562 |
|
SELECTED OTHER DATA
Reconciliation of Non-GAAP Financial Measures - EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization)
And Adjusted EBITDA By Segment
(Unaudited)
(in thousands)
|
|
|
Three Months Ended May 31, 2014 |
| ||||||||||
|
|
|
Housewares |
|
Healthcare / Home |
|
Personal Care |
|
Total |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Operating income |
|
$ |
13,035 |
|
$ |
8,717 |
|
$ |
1,371 |
|
$ |
23,123 |
|
|
Depreciation and amortization, excluding amortized interest |
|
888 |
|
5,232 |
|
2,380 |
|
8,500 |
| ||||
|
Other income/(expense) |
|
— |
|
— |
|
29 |
|
29 |
| ||||
|
EBITDA (Earnings before interest, taxes, depreciation and amortization) (1) |
|
$ |
13,923 |
|
$ |
13,949 |
|
$ |
3,780 |
|
$ |
31,652 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Adjusted EBITDA: |
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
EBITDA, as calculated above (1) |
|
$ |
13,923 |
|
$ |
13,949 |
|
$ |
3,780 |
|
$ |
31,652 |
|
|
Add: Non-cash asset impairment charges (2) |
|
— |
|
— |
|
9,000 |
|
9,000 |
| ||||
|
Non-cash share-based compensation (3) |
|
274 |
|
581 |
|
440 |
|
1,295 |
| ||||
|
Adjusted EBITDA (1) |
|
$ |
14,197 |
|
$ |
14,530 |
|
$ |
13,220 |
|
$ |
41,947 |
|
|
|
|
Three Months Ended May 31, 2013 |
| ||||||||||
|
|
|
Housewares |
|
Healthcare / Home |
|
Personal Care |
|
Total |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Operating income |
|
$ |
12,456 |
|
$ |
6,536 |
|
$ |
1,634 |
|
$ |
20,626 |
|
|
Depreciation and amortization, excluding amortized interest |
|
1,019 |
|
4,781 |
|
2,647 |
|
8,447 |
| ||||
|
Other income/(expense) |
|
— |
|
— |
|
62 |
|
62 |
| ||||
|
EBITDA (Earnings before interest, taxes, depreciation and amortization) (1) |
|
$ |
13,475 |
|
$ |
11,317 |
|
$ |
4,343 |
|
$ |
29,135 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Adjusted EBITDA: |
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
EBITDA, as calculated above (1) |
|
$ |
13,475 |
|
$ |
11,317 |
|
$ |
4,343 |
|
$ |
29,135 |
|
|
Add: Non-cash asset impairment charges (2) |
|
— |
|
— |
|
12,049 |
|
12,049 |
| ||||
|
Non-cash share-based compensation (3) |
|
675 |
|
1,467 |
|
1,236 |
|
3,378 |
| ||||
|
Adjusted EBITDA (1) |
|
$ |
14,150 |
|
$ |
12,784 |
|
$ |
17,628 |
|
$ |
44,562 |
|
Reconciliation of Fiscal Year 2015 Reported Diluted Earnings Per Share (EPS) to Adjusted Diluted EPS
(Unaudited)
|
|
|
|
|
Outlook for the |
|
Outlook for the |
| |
|
|
|
Quarter Ended |
|
Nine Months Ended |
|
Fiscal Year Ended |
| |
|
|
|
May 31, 2014 |
|
February 28, 2015 |
|
February 28, 2015 |
| |
|
|
|
(Three Months) |
|
(Nine Months)(5) |
|
(Twelve Months)(5) |
| |
|
|
|
|
|
|
|
|
| |
|
Diluted EPS, as reported (GAAP) |
|
$ |
0.55 |
|
$3.47 - $3.57 |
|
$4.02 - $4.12 | |
|
Non-cash asset impairment charges, net of tax (2) |
|
0.28 |
|
— |
|
0.28 | ||
|
Previous adjusted diluted EPS (non-GAAP)(1) |
|
0.83 |
|
$3.47 - $3.57 |
|
$4.30 - $4.40 | ||
|
Intangible asset amortization expense, net of tax (4) |
|
0.17 |
|
0.50 |
|
0.67 | ||
|
Non-cash share-based compensation expense, net of tax (4) |
|
0.04 |
|
0.14 |
|
0.18 | ||
|
Revised adjusted diluted EPS (non-GAAP) (1) |
|
$ |
1.04 |
|
$4.11 - $4.21 |
|
$5.15 - $5.25 | |
HELEN OF TROY LIMITED AND SUBSIDIARIES
Notes to Press Release
(1) This press release contains non-GAAP financial measures. Adjusted operating income, 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 are considered non-GAAP financial information as contemplated by SEC Regulation G, Rule 100. Accordingly, we are providing the preceding tables that reconcile these measures to their corresponding GAAP based measures presented in our Consolidated Condensed 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 measures, in combination with the Company’s financial results calculated in accordance with GAAP, provides investors with additional perspective. The Company further believes that the items excluded from certain non-GAAP measures do not accurately reflect the underlying performance of its continuing operations for the period in which they are incurred, even though some of these excluded items may be incurred and reflected in the Company’s GAAP financial results in the foreseeable future. The material limitation associated with the use of the non-GAAP financial 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) Adjustments consist of non-cash asset impairment charges of $9.0 million ($8.16 million after tax) and $12.05 million ($12.03 million after tax) for the three months ended May 31, 2014 and 2013, respectively, as a result of our annual evaluation of goodwill and indefinite-lived intangible assets for impairment during each of the periods. The non-cash charges relate to certain trademarks in our Personal Care segment, which were written down to their estimated fair value, determined on the basis of future discounted cash flows using the relief from royalty valuation method.
(3) Adjustments consist of non-cash share-based compensation expense associated with share-based awards outstanding under two expired and three active share-based compensation plans. These awards consist of stock options granted to certain officers, employees and new hires, restricted stock grants to certain members of the Company’s Board of Directors, and performance based restricted stock awards granted to management.
(4) For the three month period ended May 31, 2014, adjustments consist of after tax non-cash intangible asset amortization expense of $4.96 million ($0.17 per fully diluted share) and after tax non-cash share-based compensation expense of $1.17 million ($0.04 per fully diluted share). For the nine month period ended February 28, 2015, adjustments consist of after tax non-cash intangible asset amortization expense of $14.89 million ($0.50 per fully diluted share) and after tax non-cash share-based compensation expense of $4.28 million ($0.14 per fully diluted share).
(5) The diluted EPS outlook is based on an estimated weighted average shares outstanding of 29.5 million for the full fiscal year 2015, which includes the impact of the “Dutch auction” tender offer completed on March 14, 2014.
|
SOURCE: Helen of Troy Limited |
|
|
|
Investor Contacts: |
|
|
ICR, Inc. |
|
|
Allison Malkin / Anne Rakunas |
|
|
(203) 682-8200 / (310) 954-1113 |
EXHIBIT 99.2
CORPORATE PARTICIPANTS
Anne Rakunas Helen of Troy Limited - IR
Julien Mininberg Helen of Troy Limited - CEO
Brian Grass Helen of Troy Limited - CFO
Tom Benson, Helen of Troy Limited - COO
CONFERENCE CALL PARTICIPANTS
Bob Labick CJS Securities - Analyst
Jason Gere KeyBanc Capital Markets - Analyst
Mark Cooper Pacific Ridge Capital - Analyst
Steve Friedman Wells Fargo Securities, LLC - Analyst
PRESENTATION
Operator
Good day and welcome to the Helen of Troy Limited first-quarter 2015 earnings call. Today’s conference is being recorded. At this time, I would like to turn the conference over to over to Anne Rakunas of ICR. You may begin.
Anne Rakunas - Helen of Troy Limited - IR
Thank you. Good afternoon, everyone, and welcome to Helen of Troy’s first-quarter FY15 earnings conference call.
The agenda for the call this afternoon is as follows. I will begin with a brief discussion of forward-looking statements. Mr. Julien Mininberg, the Company’s CEO, will comment on the financial performance during the quarter and progress on key priorities for FY15. Then Brian Grass, the Company’s CFO, will review the financials in more detail and update you on the Company’s outlook for FY15. Following this, Mr. Mininberg, Mr. Grass and Tom Benson, our Chief Operations Officer, will take the questions you have for us today.
This conference call may contain certain forward-looking statements that are based on management’s current expectations with respect to future events or financial performance. Generally, the words anticipate, believe, expect and other similar words identify forward-looking statements. Forward-looking statements are subject to a number of risks and uncertainties that could cause anticipated results to differ materially from actual results.
This call may also include information that can be considered non-GAAP financial information. These non-GAAP measures are not an alternative to GAAP financial information and may be calculated differently than the non-GAAP financial information disclosed by other companies. The Company cautions listeners to not place undue reliance on forward-looking statements or non-GAAP information.
Before I turn the conference call over to Mr. Mininberg, I’d like to inform all interested parties that a copy of today’s earnings release has been posted to the Company’s website at www.Hotus.com. The earnings release contains tables that can reconcile non-GAAP financial measures to their corresponding GAAP-based measures. The release can be accessed by selecting the Investor Relations tab on the Company’s homepage and in the News tab. I will now turn the conference over to Mr. Mininberg
Julien Mininberg - Helen of Troy Limited - CEO
Thank you, Anne. Good afternoon, everyone, and welcome to our first-quarter FY15 earnings conference call.
We are off to a solid start for the year. During the quarter, we increased our net sales revenue by 2.4% to a record $311 million and managed expenses well to deliver adjusted EBITDA of $41.9 million. We generated adjusted diluted EPS of $0.83, which is in line with our internal expectations.
Growth in the quarter was led by our Healthcare and Home Environment segment, which consist of the Kaz and PUR businesses. Segment sales increased 13.4% with our fan and air purifier categories both growing close to 20% year over year, due to new products and strong seasonal demand. Sales gains in thermometry and associated consumables, in pharmacy sales of humidifiers and growth in sales of our water filtration systems also contributed to sales growth. Innovative new products and new distribution coupled with increased advertising and promotional activity helped drive consumer demand.
Our Housewares segment, which consists of the OXO business, grew 5.1% in the quarter. We are particularly pleased to achieve this increase as we faced a difficult comparison to the prior year period that benefited from filling in new shelf placements. Growth was driven by line extensions in our infant and toddler category, which grew in excess of 40% when compared to the same period last year.
OXO continues to grow by entering adjacent categories. In June, it was announced that the OXO brand will enter the cookware category through a licensing agreement with a cookware company. The segment also had gains in the gadget, bath, food storage and hydration categories and experienced growth internationally. OXO has now expanded its line to well over 800 items, and growth continues to be driven by expanded shelf space and assortments at certain key traditional and internet retailers.
Our Personal Care segment continued to deliver strong cash flow. However, as we anticipated, sales trailed the prior year period, declining by 11.1%, as the retail environment for all categories in this segment remains difficult and highly promotional. In addition, our European Personal Care business faced a difficult comparison against the same quarter last year, as an opportunistic product distribution agreement expired at the end of FY14.
Personal Care remains a key focus for us this year, as its strong EBITDA — adjusted EBITDA continues to be a critical component of the Company’s overall cash flow. Therefore, we are prudently investing in our most powerful brands, our pipeline of innovation, and the addition of new talent, while redirecting our existing talent to the strongest business opportunities.
Stepping back from the numbers for Q1, I’m pleased with the progress we’re making on the three key priorities we have set for ourselves for FY15. I’d like to take a moment and update you on those. The first is building a winning organization and culture. During the first quarter, we implemented a global shared services organization, which fosters collaboration and best practices across all areas of our business. As part of this initiative, we recently hired a Senior Vice President for China operations. This new position, which is on the ground in the Far East and oversees more than 200 employees, in our Asia sourcing operations, is important as a step forward unifying our global sourcing across all of the Company’s business segments.
The second is to accelerate and sustain organic growth. We are making prudent investments behind our strongest brands and businesses. For example, we are investing in Braun thermometers, in PUR water filters and in Honeywell air purifiers, all of which are core to the Company, and all have introduced new products this year. In Personal Care, we are investing in deeper consumer understanding that will lead to new product innovation. We are also selectively advertising behind this year’s product launches and behind our strongest Personal Care brands.
The third is to continue to engage in shareholder-friendly policies to drive shareholder value. In line with this priority, we used our strong cash flow and our historically under leveraged balance sheet to make two major capital allocation moves. During the first quarter, we purchased 4.2 million shares of our stock, and in June we completed the acquisition of Healthy Directions. Healthy Directions is expected to be accretive to our gross profit margin, adjusted EBITDA and adjusted EPS.
Healthy Directions is a great next step for our health and wellness business, bringing that part of Helen of Troy from 25% of our overall company sales, now to over 30%. Healthy Directions is a US market leader in premium doctor branded vitamins, minerals and supplements as well as other health products sold directly to consumers. This direct-to-consumer marketing platform also serves to diversify our go-to-market channels by providing us with a new capability to reach consumers directly through the internet, phone and direct mail.
We believe we are well positioned to achieve the objectives we have set for ourselves this year. We are keenly focused on our priorities for the future, as we work to drive sustainable sales and earnings growth for many years to come. With that, I’d like to turn the call over to Brian Grass.
Brian Grass - Helen of Troy Limited - CFO
Thank you, Julien. Good afternoon, everyone. I’d like to start my discussion by reviewing our first-quarter FY15 financial results from this afternoon’s press release, then update our outlook for the full FY15. Consolidated sales revenue was up a solid 2.4% during the quarter. As Julien mentioned, growth was driven by the Healthcare/Home Environment and Housewares segments partially offset by a difficult environment for our Personal Care segment.
The retail environment remains highly promotional due to reduced consumer demand and a focus on lower price-point merchandise. The segment experienced a year-over-year decline of approximately $3.5 million due to a European product distribution agreement that was in place during FY14, but did not continue into FY15. Foreign currency also adversely impacted our Personal Care segment sales by approximately $710,000 for the quarter.
Consolidated gross profit was 38.3% of net sales, compared to 39.5% of net sales in the first quarter of FY14. This decrease reflects the increased promotional program costs, a 13.4% revenue increase in the lower margin Healthcare/Home Environment segment, a lower margin sales mix within the Housewares and Healthcare/Home Environment segment, growth in direct import sales, and general product cost increases.
SG&A was 28% of net sales, compared to 28.7% of net sales in the first quarter of FY14. The decrease was primarily due to lower incentive compensation costs, partially offset by higher media advertising costs.
Operating income was $23.1 million, and includes $9 million in non-cash asset impairment charges in the Company’s Personal Care segment. This is compared to operating income of $20.6 million in the same period last year, which includes the impact of $12 million in non-cash asset impairment charges in the Company’s Personal Care segment. Adjusted operating income was $32.1 million, compared to $32.7 million in the same period last year. The decrease is due to the gross profit factors mentioned previously.
Income tax expense as a percentage of income before taxes was 17%, compared to 19% in the first quarter of FY14. We continue to expect our effective tax rate for the full FY15 to range between 15% and 17%.
Net income was $16.4 million, or $0.55 per fully diluted share on 29.6 million weighted average diluted shares outstanding. This compares to net income in the first quarter of FY14 of $14.4 million, or $0.45 per fully diluted share, on 32.2 million weighted average diluted shares outstanding.
During the quarter, we completed our previously announced tender offer resulting in the repurchase of 3.7 million shares at a total cost of $247.8 million. This was funded with cash on hand and borrowings under our revolving credit facility. We repurchased an additional 408,000 shares of common stock on the open market, at a total cost of $25.8 million, primarily funded with borrowings under our revolving credit facility. We also repurchased 70,000 shares in connection with share-based compensation.
In total, share repurchases made during the quarter reduced weighted average diluted shares outstanding by 3.26 million shares. Total share repurchases made during the quarter also resulted in an increase in interest expense of approximately $500,000. Adjusted income was $24.6 million, or $0.83 per fully diluted share, compared to $26.4 million or $0.82 per fully diluted share for the first quarter of FY14.
Now, moving onto our financial position. At May 31, 2014, accounts receivable was $217.4 million, compared to $206 million at the same time last year. Receivables turnover was 63 days compared to 61 days at the same time last year. The increase in turnover is the result of normal fluctuations and changes in our geographic sales mix. Inventory increased 3.5%, to $298.5 million compared to $288.4 million. Inventory turnover was flat at 2.7 times.
Total short- and long-term debt increased to $425.7 million at May 31, 2014, compared to $224.8 million at the same time last year. The increase primarily reflects an increase in our revolving line of credit, in conjunction with the repurchase of shares mentioned previously. We ended the quarter with a debt-to-adjusted-EBITDA ratio of 2.2 times. Our debt-to-adjusted-EBITDA ratio after accounting for the acquisition of Healthy Directions is approximately 2.8 times.
Now, turning to our outlook for the current fiscal year. For FY15, we continue to expect net sales revenue in the range of $1.325 billion to $1.375 billion and GAAP-based diluted earnings per share in the range of $4.02 to $4.12, which includes the non-cash asset impairment charges of $0.28 per share recorded in the first quarter of FY15.
Consistent with our previous outlook, adjusted diluted EPS, excluding non-cash impairment charges, is expected to be in the range of $4.30 to $4.40 per share, not including the impact of the Healthy Directions acquisition. Ongoing FY15 results and outlook for adjusted diluted EPS will exclude non-cash asset impairment charges, intangible asset amortization expense, and non-cash share-based compensation expense, as well as the impact of the Healthy Directions acquisition, which we expect to be in the range of $5.15 to $5.25 for the full FY15.
The diluted EPS outlook is based on an estimated weighted average shares outstanding of 29.5 million for the full FY15, which includes the impact of the tender offer completed on March 14, 2014. Please refer to the last table in our press release for a reconciliation of FY15 reported diluted EPS to adjusted non-GAAP diluted EPS. The likelihood of potential impact of any additional FY15 acquisitions, asset impairment charges or share repurchases are unknown and cannot be reasonably estimated. Therefore, they are not included in the Company’s sales and earnings outlook. Now, I’d like to turn the call back over to Julien for some closing remarks.
Julien Mininberg - Helen of Troy Limited - CEO
Thank you, Brian. Good start to FY15. I’m pleased with our progress as we transform our company for improved future results through changes to our business priorities, processes, culture and organization.
The strong cash flow generation of our company, coupled with the strength and flexibility of our balance sheet, allow us to continue prudent investments and our shareholder friendly policies. We look forward to updating you on our progress as we move through the year. With that, I’d like to turn the call over to the operator to begin the question and answer session.
QUESTION AND ANSWER
Operator
(Operator Instructions)
Bob Labick, CJS Securities.
Bob Labick - CJS Securities - Analyst
I wanted to start on personal care. I know you mentioned that it was in line with your internal expectations. It is a little off from what I was looking for; particularly last quarter, I think we discussed you have some planogram wins at retailers.
So, maybe you could just help explain — elaborate a little more on the softness in the sales, and more importantly, help us get a sense of your outlook for the year. Are you expecting it down 10% for the year? Or, should it rebound?
Is it going to be worse than that? Give us some sense of expectations for personal care, please.
Julien Mininberg - Helen of Troy Limited - CEO
Thanks, Bob. On personal care, we did have some distribution wins, and we continue to enjoy the benefits of some new products that have been put in the marketplace. That said, I don’t think any surprise in the tough retail environment that shelf offtake across the category, not being uniquely for us, is generally down.
For us, there are some challenges in our total amount of consumption. And that did impact us negatively. We began those advertising investments very late in the quarter. I’m talking about well into May, and so we will see the benefits of those, now. Some customers, one particularly large one, is engaged in some inventory adjustments, and there’s a couple that are just struggling on a total macro basis.
In terms of the forward-looking, I don’t believe we project the by segments forward-looking projection for the rest of the year. So, it would be hard to say a specific number. That said, you should continue to expect a decline for the year, and remember, there is that European base where we had a nice pop last year that will make for tough comparisons in each of the next three quarters, year over year.
Bob Labick - CJS Securities - Analyst
Okay. Fair enough. I know you don’t give the specific guidance direction. It is helpful. Hopefully, it is better than minus [10], but still down would be my hope, there. Great.
Moving on to OXO. Obviously, things continue to go very well, there. The news you discussed from a few weeks ago was the licensing agreement for cookware.
Could you talk about the decision to do licensing versus go at it fully yourselves? Tell us a little bit more about that category itself, and the opportunities. How it will play out in the P&L over the remainder of this year, or going forward.
Julien Mininberg - Helen of Troy Limited - CEO
Let me take them in reverse order. First, just the category itself. I’m talking about cookware. This is a very large category. In fact, it’s one of the largest in all the whole kitchen world. We are just excited to be entering it.
In the case of doing it via license or doing it via direct entry, just like OXO has some incredible command of its technologies, materials, and a deep understanding of the consumer behavior in the categories that it plays in and The Cookware Company that we would say the same, in the categories that they play in.
When you then combine the power of the OXO brand name with the know-how and the material science, the manufacturing know-how and the uniqueness of capability of The Cookware Company offers, it was our judgement that license of a strong brand name, our design ethos and a few choices about staying at the upper end of the best of the materials with the guy with that kind of know-how was the better bet than to take on the giant in that category with a great name, but not as much initial know how.
So, that was our choice and why we went for licensing, rather than a direct entry. Nonetheless, OXO is going into other categories directly, like you saw a couple of years ago in infant and toddler. You see that continuing to grow, and we did that before in storage containers and that’s been a big win for us. So, we can go both ways, and we are very pleased to that the name has that kind of brand stretch.
Bob Labick - CJS Securities - Analyst
Okay. One thing, in terms of — for the most part — OXO doesn’t have too many licensing deals. So, when we are modeling and looking forward, how should we expect this to impact OXO’s segment of the P&L?
Brian Grass Helen of Troy Limited - CFO
Bob, I would say not to expect a meaningful impact in FY15. It’s just being started.
There are minimum royalty amounts that aren’t significant, but there is an upside to this in the future. But, I would not expect a meaningful impact in FY15.
Bob Labick - CJS Securities - Analyst
Okay. Fair enough. Last one. On Healthy Directions, obviously very exciting opportunity, there. If I understand correctly, so far, that’s not included in the guidance that you’ve reaffirmed today.
Is that because — just the accounting method and the amortization and stuff is still up in the air? When will you have a better sense for the accretion from Healthy Directions?
Brian Grass Helen of Troy Limited - CFO
Bob, that’s correct. The purchase price allocation is not complete. So, we don’t know the amortization expense. We will be providing information when we report on Q2.
Bob Labick - CJS Securities - Analyst
Okay. Great. Any material seasonality in that business that we should be thinking about? I will be putting out numbers before then. (laughter)
Brian Grass Helen of Troy Limited - CFO
No. It’s not a seasonal business at all.
Julien Mininberg - Helen of Troy Limited - CEO
It helps smooth us a bit on a total company basis.
Bob Labick - CJS Securities - Analyst
Okay. Great. I will get back in queue. Thank you very much.
Operator
Jason Gere, KeyBanc.
Jason Gere - KeyBanc Capital Markets - Analyst
Just following up on one of the last questions. Can you talk about the rationale? You guys are talking more about the cash EPS. I know that’s something, Julien, we’ve talked about before in the past.
Now, are you — as you think about that going forward — the reason putting it out there, do you want analysts to start modeling cash EPS, or are you just really trying to show that there’s really —the EPS is still — I guess — somewhat inexpensive from your perspective? Or, there are things that are hindering the GAAP EPS?
I’m just wondering. It’s a change in what we’ve seen, but not something that you haven’t talked about before. Just wondering why the decision to put that out there now?
Brian Grass - Helen of Troy Limited - CFO
Jason, we think it provides a useful measure for analysts and investors. We’ve also received a lot of impact — input from analysts and other investors that our cash generation story is not well understood.
So, we are attempting to respond to that, but we also believe that it’s a useful measure, and we’ve looked at the business similarly in the past. So, we think it makes sense to begin disclosing this measure.
Jason Gere - KeyBanc Capital Markets - Analyst
Okay. Just for now, you want us to keep using the $4.30 to $4.40 until the next quarter when we actually get deal accretion?
Brian Grass - Helen of Troy Limited - CFO
Well, that is something that I think we can discuss. Our concern about releasing the new measure before it could be digested was that people may reach the wrong conclusion. So, I think, to the extent that the analysts could begin using the new measure, then I think we would be comfortable in reporting the new measure and not causing confusion.
Jason Gere - KeyBanc Capital Markets - Analyst
Okay. Hold our horses for a little bit. Okay. That’s fair.
I was just wondering a little bit about the strong growth in the Healthcare/Home Environment. I see the second quarter, you are lapping a very tough comparison. I think it was last quarter where you were talking about you expected the trends to be similar on a full-year basis, for 2015, as they were for 2014, owing to some of the innovations, projects that are out there.
Is that still the case? If that’s the case, would that, then, entail that ex obviously the acquisition, we would expect gross margins to probably be down year over year, just given the lower margin structure?
Julien Mininberg - Helen of Troy Limited - CEO
Let me break that up. We have a couple of things in there. First, we are reaffirming that mid-single digit initial guidance that we gave for that segment when we last talked. That’s probably what you are referring to. So, no change in that regard.
Yes, it was a very strong start to the fiscal year, and I don’t know if you remember last year, the first quarter comparison from the prior year, FY13, was also not only a strong start, but a tough comparison. A very good beginning in each of these two years.
That said, the cost in cold and flu season last year was historically a bit weak. This year, we assume a normal year. As you talk about the tough comparison, it’s yet to come.
Our assumption is that we will have a normal year from a sickness incidence standpoint, and while we don’t like anyone to get sick, when they do at the normal levels, we like that our products are there with leading market shares to help them get better. For that reason, we are not so worried about the middle of the year at this point. In the case of the total year, the mid-single digits is the total expectation.
With regards to the mix, remember that the seasonality in those categories will bring a higher level of total average margin in the Healthcare/Home Environment segment because the products that we sell during that time of year are more like humidifiers, fans, air purifiers — sorry — I said fans, I didn’t mean that. I meant humidifiers, thermometers, air purifiers.
These products operate at a higher margin, and they’re larger than lower margin categories that were sold in the first quarter that negatively affected our mix like fans. In fact, it’s kind of good news.
We had a very good fan season so far. It’s been hot. It’s been hot in North America. It’s been hot in Europe. As a result, we sold a lot of fans. That did reduce the mix in the first quarter, but it also jumped those sales up. You saw that 13.4% number. As we now normalize into a typical cough and cold season and the sweeter mix of those categories, we should see the appropriate rebalance of gross margin in that segment.
Jason Gere - KeyBanc Capital Markets - Analyst
Okay. Great. Thank you very much. I will hop off this second line.
Operator
Mark Cooper, Pacific Ridge Capital.
Mark Cooper - Pacific Ridge Capital - Analyst
In the vein of your cash flow emphasis, can you give us what your cash flow from operations and CapEx was for the quarter?
Brian Grass - Helen of Troy Limited - CFO
Yes. Hold on one second. Cash flow from operating activities was $3 million for the quarter. That really is due to working capital fluctuations.
The largest fluctuation has to do with the settlement of compensation to our former CEO, which resulted in a $25 million to $30 million change in accrued expenses. That is why the cash provided by operating activities is lower than it was for the same period last year, which was $46 million. The capital asset expenditures for the quarter is $1.8 million.
Mark Cooper - Pacific Ridge Capital - Analyst
$1.8 million, okay. Then, if I may offer just one comment. In that your communications with the analysts — and I appreciate the last analyst comments about what is the expectation they’re setting out there — I think it’s hugely important for you to pay attention to that. Because, the expectations that they are setting directly impact the stock price and then make your stock buyback decisions in light of the information that you have. It’s one way just to test your judgment of the market.
Said another way, the stock is going to be off pretty big tomorrow, I suspect, given the stock price hit, and that’s because the expectations that the analysts have out there. And your business moves slow enough, I suspect, that you probably could’ve brought these numbers down a little earlier and saved some money, at least on the second round of the buyback.
The analysts are the analysts and they have their own view. At this point, they’re going to go in the direction that you give them. I would encourage you to monitor that.
Brian Grass - Helen of Troy Limited - CFO
The only comment I will make, is that this is one quarter. It does not decide what the full fiscal year will end up being, and I will say that the diluted EPS — the adjusted diluted EPS of $0.83, was within the range of our expectations, internally.
Mark Cooper - Pacific Ridge Capital - Analyst
Well, I appreciate that and fully understand that, but stock prices happen over a long period of time. To do a stock buyback in the front of missing published analyst estimates that were revised in June, just is not the wisest thing to be doing. The proof is in the pudding with today’s stock price action upon the announcement of the news.
I’m not offering a harsh criticism. I think it’s something you should pay particular attention to, especially if you are going to start emphasizing things like cash EPS numbers and things like this. The estimates will influence that stock pricing and might affect your decision making on how you pursue stock buybacks and when you do and when you don’t do those.
Julien Mininberg - Helen of Troy Limited - CEO
Mark, thank you for your comment. We do give full-year guidance, and then analysts choose how they break that up quarter by quarter. So, we didn’t set of that expectation.
That said, it is out there. Your comment is understood. Thank you.
Operator
Steve Friedman, Wells Fargo.
Steve Friedman - Wells Fargo Securities, LLC - Analyst
I may have missed — have you mentioned what your general or historical gross margin is on the Healthy Directions acquisition? The gross margin?
Brian Grass - Helen of Troy Limited - CFO
Yes. We have disclosed that previously, and it’s 70%.
Steve Friedman - Wells Fargo Securities, LLC - Analyst
Okay. But, yet, you still are not factoring in anything into your FY15 numbers at this point in time, is that correct?
Brian Grass - Helen of Troy Limited - CFO
That is correct, because we don’t know the amortization expense, yet, until we complete the purchase price allocation. That will be a significant number. So, it would be unwise to project the EPS not knowing that number.
Steve Friedman - Wells Fargo Securities, LLC - Analyst
Okay. I understand. Is 70% pretty much the traditional historical, or what you expect going forward?
Julien Mininberg - Helen of Troy Limited - CEO
Yes to both. That’s been their history, and it is our expectation. There’s all kinds of efforts in any business to continue to expand margins, both in our base business and in Healthy Directions, as well. That’s the number we have, and from a combined basis, obviously, that will sweeten our total company mix as we previously disclosed, by about 3 points at the gross margin level.
Steve Friedman - Wells Fargo Securities, LLC - Analyst
Okay. Thank you. That’s helpful. One question.
In hindsight or retrospect, looking at your share buyback, do you feel that, possibly, it’s done — and I’m sure you’re comfortable with it. But, there’s a number of — a little bit of commentary that feels that possibly you could have benefited the shareholders better by holding the funds available for accretive acquisitions such as the Healthy Directions. Can I have maybe your thinking on that?
Julien Mininberg - Helen of Troy Limited - CEO
Yes. So, a couple of comments, there. One, is that you probably remember, at that time, our balance sheet had very low leverage on it, less than 1 times earnings. Today, even with both share buyback and the Healthy Directions acquisition, the number’s below 3 times earnings.
So, we feel very comfortable with the leverage and comfortable with the decision that we made. We’d make it again, to add leverage to our balance sheet and to buy back stock, but to do so at a quantity that still gives plenty of firepower to make acquisitions.
I think the two capital allocation moves we made in the last four months demonstrate not only intention, but in this particular case, the execution of both of those statements. So, we are feeling comfortable there regarding the ability to pay back, as well. Our cash flow is strong, and as Healthy Directions and the rest of our business throws off cash and we pay down debt, it gives — puts us in a position to go back and continue, both with shareholder friendly policies of potential additional acquisition and potential additional stock buyback.
Steve Friedman - Wells Fargo Securities, LLC - Analyst
Okay. Very good. Thank you for your answers.
Julien Mininberg - Helen of Troy Limited - CEO
You bet. Thank you for your questions.
Operator
Ladies and gentlemen, that is all the time we have for questions. I’d like to turn the conference back to management for additional or closing remarks.
Julien Mininberg - Helen of Troy Limited - CEO
Great. Thank you, operator. Thanks for joining us here today, and thank you for your continued interest and your support for Helen of Troy. We look forward to speaking with you again on our second-quarter call in October, if not before hand. Thanks very much, and have a wonderful evening.
Operator
Ladies and gentlemen, this does conclude today’s conference. We thank you for your participation.