THE STEPHAN CO. - FORM SC 13D/A

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OtbnXsb7q1gfWNa1HNAPEl1vF5BtChW0L0OouSCVg+vEa5sn3ci13uHluN/si1er gOX3pHqaozyn0G+8jPK8fA== 0000950144-03-013433.txt : 20031204 0000950144-03-013433.hdr.sgml : 20031204 20031204155745 ACCESSION NUMBER: 0000950144-03-013433 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 20031204 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: SCOTT RICHARD L CENTRAL INDEX KEY: 0000915477 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: KY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 201 WEST MAIN ST CITY: LOUISVILLE STATE: KY ZIP: 40202 BUSINESS PHONE: 5025722104 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: STEPHAN CO CENTRAL INDEX KEY: 0000094056 STANDARD INDUSTRIAL CLASSIFICATION: PERFUMES, COSMETICS & OTHER TOILET PREPARATIONS [2844] IRS NUMBER: 590676812 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-32479 FILM NUMBER: 031038089 BUSINESS ADDRESS: STREET 1: 1850 W MCNAB RD CITY: FORT LAUDERDALE STATE: FL ZIP: 33309 BUSINESS PHONE: 9549710600 MAIL ADDRESS: STREET 1: 1850 WEST MCNAB ROAD CITY: FORT LAUDERDALE STATE: FL ZIP: 33309 SC 13D/A 1 g86208a3sc13dza.htm THE STEPHAN CO. - FORM SC 13D/A THE STEPHAN CO. - FORM SC 13D/A

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

SCHEDULE 13D

Under the Securities Exchange Act of 1934
(Amendment No. 3)

THE STEPHAN CO.

(Name of Issuer)

Common Stock, $.01 par value
(Title of Class of Securities)

858603103
(CUSIP Number)

Stephen T. Braun, Esq.
Boult Cummings Conners & Berry, PLC
414 Union Street, Suite 1600
Nashville, Tennessee 37219
(615) 252-2300
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)

December 3, 2003
(Date of Event Which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box o.

NOTE: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7(b) for other parties to whom copies are to be sent.

* The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter the disclosures provided in a prior cover page.

The information required in the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act.


CUSIP NO. 858603103	13D


(1)	NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY):
	RICHARD L. SCOTT


(2)	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP			(a) o
	N/A			(b) o



(3)	SEC USE ONLY



(4)	SOURCE OF FUNDS:
	PF


(5)	CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS			o
	IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)



(6)	CITIZENSHIP OR PLACE OF ORGANIZATION:
	UNITED STATES

		(7)	SOLE VOTING POWER: 396,700
NUMBER OF
SHARES
BENEFICIALLY		(8)	SHARED VOTING POWER: -0-
OWNED BY
EACH
REPORTING		(9)	SOLE DISPOSITIVE POWER: 396,700
PERSON

		(10)	SHARED DISPOSITIVE POWER: -0-



(11)	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:
	396,700


(12)	CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES:			o



(13)	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11):
	9.0%


(14)	TYPE OF REPORTING PERSON:
	IN

This Amendment No. 3 amends the Schedule 13D filed by Richard L. Scott (the “Reporting Person”) on November 3, 2003 (the “Schedule 13D”), as amended November 10, 2003 and November 25, 2003, with respect to shares of Common Stock, $.01 par value (“Common Stock”), of The Stephan Co., a Florida corporation (the “Issuer”). Capitalized terms used but not defined herein shall have the same meanings ascribed to such terms in the Schedule 13D.

The following Items are hereby amended and restated in their entirety as follows:

Item 3. Source and Amount of Funds or Other Consideration

The Reporting Person has used personal funds of approximately $1,657,000 to acquire 396,700 shares of Common Stock in open market transactions. The Common Stock was purchased by three different entities controlled by the Reporting Person.

Item 4. Purpose of Transaction

On December 3, 2003, the Reporting Person sent a letter to the Issuer which letter is attached hereto as Exhibit 99.1 and is incorporated herein in its entirety. The Reporting Person will continue to monitor developments at the Issuer on a continuing basis and may communicate with members of management, the Board of Directors of the Issuer, and the Special Committee of the Board of Directors of the Issuer, concerning matters related to the Issuer. The Reporting Person may, in the future, communicate with other stockholders of the Issuer.

The Reporting Person purchased the Common Stock based upon the Reporting Person’s belief that the Common Stock, at current market prices, is undervalued and represents an attractive investment opportunity. The Reporting Person believes that the price offered in the Issuer’s proposed going private transaction is not reflective of the current value of the Issuer. The Reporting Person will continue to evaluate the Issuer and his investment therein and may propose that stockholders of the Issuer vote against the Issuer’s proposed merger transaction. The Reporting Person may also purchase additional shares of the Common Stock or sell part or all of his holdings of the Common Stock of the Issuer.

Item 5. Interest in Securities of the Issuer

The 396,700 shares of the Common Stock owned by the Reporting Person constitute 9.0% of the outstanding Common Stock of the Issuer.

The Reporting Person has sole voting and dispositive power with respect to the Common Stock.

The Reporting Person purchased the following shares of the Common Stock of the Issuer in open market transactions during the past 60 days:


Purchase	Number of		Price		Aggregate
Date	Shares		Per Share		Consideration

10/01/03		2,500		4.10		10,240
10/02/03		14,700		4.12		60,594
10/03/03		18,400		4.14		76,191
10/06/03		12,000		4.14		49,695
10/13/03		9,500		4.14		39,345
10/14/03		12,700		4.14		52,593
10/15/03		7,400		4.14		30,651
10/21/03		53,000		4.14		219,435
10/22/03		15,000		4.14		62,115
10/27/03		3,400		4.14		14,091
10/28/03		4,500		4.14		18,645
11/03/03		10,400		4.19		43,575
11/04/03		5,500		4.19		23,060
11/05/03		4,100		4.19		17,194
11/06/03		2,500		4.20		10,490
11/07/03		2,900		4.20		12,166
11/10/03		56,500		4.24		239,519
11/11/03		14,700		4.24		62,343
11/14/03		20,000		4.25		84,975
11/17/03		1,100		4.30		4,734
11/19/03		22,000		4.29		94,395
11/21/03		16,300		4.30		70,022
11/24/03		2,000		4.31		8,615
11/25/03		9,000		4.30		38,715

		320,100			$	1,343,397

The Common Stock was purchased by three different entities controlled by the Reporting Person, including 177,200 shares purchased by the Frances Annette Scott Revocable Trust, of which the Reporting Person’s spouse is the trustee.

Signature

After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.


DATED: December 4, 2003		/s/ Richard L. Scott Richard L. Scott

5 EX-99.1 3 g86208a3exv99w1.txt EX-99.1 LETTER TO ISSUER RICHARD L. SCOTT INVESTMENTS, LLC Exhibit 99.1 100 FIRST STAMFORD PLACE, STAMFORD, CT 06902 TEL: (203) 602-2290 FAX: (203) 602-7758 December 3, 2003 Frank F. Ferola Chairman, Chief Executive Officer and Board Member Curtis Carlson Board Member Thomas M. D'Ambrosio Board Member John DePinto Board Member Leonard Genovese Board Member Shouky A. Shaheen Board Member The Stephan Co. 1850 West McNab Road Fort Lauderdale, FL 33309 Dear Gentlemen: I currently hold approximately nine percent of the outstanding shares of The Stephan Co. (the "Company"). After a review of publicly available documents and historical filings, including the recent Schedule 14A (Preliminary Proxy Statement) and Schedule 13E-3 filings, it appears the price offered in the going-private transaction is not reflective of the current value of the Company. According to the three most recent SEC Filings through and including the Company's Form 10-Q for the quarter ended September 30, 2003, it is my understanding that the Company has generated approximately $2.2 million in normalized (taking into account the nature of non-recurring events) earnings before interest, taxes, depreciation and amortization ("EBITDA") for the nine months ended September 30, 2003. If it is reasonable to assume that the Company is capable of producing $3.0 million of EBITDA on an annualized basis, and assuming that cash and debt levels remain as reflected on the Company's September 30, 2003 Balance Sheet, then the following would be one way to determine the Enterprise Value (cash plus the assumed value of the Company's outstanding common stock minus indebtedness) of the Company:
----------------------------------------------------------- Common Share Enterprise Value* / EBITDA Multiple Valuation ----------------------------------------------------------- 3 $4.56 ----------------------------------------------------------- 4 $5.24 ----------------------------------------------------------- 5 $5.92 ----------------------------------------------------------- 6 $6.60 ----------------------------------------------------------- 7 $7.28 ----------------------------------------------------------- 8 $7.96 ----------------------------------------------------------- 9 $8.64 ----------------------------------------------------------- 10 $9.32 -----------------------------------------------------------
The Special Committee accepted management's revised $4.50 offer on August 16, 2002. Since then, it appears that the Company's cash position has increased by in excess of $1.1 million and the Company's indebtedness has decreased by in excess of $1.7 million. This $2.8 million change in cash and indebtedness equals approximately $0.65 per share, yet management has not revised its offer. I respectfully request that the Board of Directors request an updated opinion from SunTrust Robinson Humphrey Capital Markets that the proposed transaction remains fair to shareholders. The current fairness opinion is approximately six months old - both market conditions and the overall economy have improved considerably during that time. Considering that the current price of the Company's Common Stock remains undervalued and a review of the Company's three most recent Form 10-Q filings does not indicate significant improvement in operating performance, I would be interested in an explanation of the basis for existing employment agreements. According to the Company's proxy statement dated May 3, 2002, the compensation committee, which determines executive compensation and employment contracts, is comprised of three members. Since two of the three members belong to the management group that is advancing the going-private transaction while one member of that management group serves as committee chairman, I am concerned whether decisions can be objectively arrived at with regard to executive compensation. Based upon a review of the Company's most recent Form 10-K/A filed May 15, 2003, with the Securities and Exchange Commission, it appears that certain executives of the Company are due significant lump-sum payouts if there is a "Change of Control" of the Company. It 2 is difficult to determine the amount of such payments. I would like to gain a better understanding of the value to shareholders of these "Change of Control" provisions and whether these provisions may, in fact, discourage other interested third parties from making offers that might be deemed superior to the existing going-private transaction. Upon further review of the Company's most recent 10-K/A Filing, it appears that, during 2002, the CEO of the Company earned cash compensation in the amount of $747,587. Based upon this same document, such $747,587 in CEO compensation equals approximately 149% of the Company's total net income* (prior to the write-down of goodwill and other intangible assets) during the applicable period. Since that figure represents compensation that is approximately 50% higher than the Company's total adjusted net income of $503,000, I believe that it would be beneficial to gain a better understanding of how the CEO's compensation is determined as well as the CEO's role in achieving revenue and earnings goals. * According to that same filing, the Company actually reported a net loss of $6,259,000 for the year ended December 31, 2002. The Company stated that net income "was adversely impacted by the write-down of goodwill and other intangible assets; an aggregate of approximately $8.4 million was written-off, with a net after tax effect of reducing income by approximately $6.8 million. The net loss for the year ended December 31, 2002, after taking into consideration the goodwill and other intangible assets charge, was $6,259,000." A review of the Company's most recent Form 10-Q filing indicates that it is possible that certain key officers may be due additional "management bonuses on the basis of projected net income for the year ended December 31, 2003." It is estimated that those bonuses could be "in excess of $2,500,000." I would like to understand the basis for such bonuses, and whether these amounts have been accrued. Additionally, I am interested in gaining a better understanding of the Company's efforts to comply with applicable Sarbanes-Oxley and American Stock Exchange requirements. The Company's Board of Directors is comprised of six individuals, four of whom are current employees and one of whom is a partner in a law firm that was paid in excess of $250,000 for legal services rendered to the Company during the last two years. The Company's Audit Committee is comprised of two individuals, one of whom is the aforementioned lawyer. Further, the Company has not submitted any matters to a vote of its shareholders since the Company's September 1, 2000, annual meeting. The Company has stated that the reason for its failure to hold such a meeting is attributable to the length of time for the going-private transaction to be consummated. I would like to understand why a going-private transaction would be reason not to hold shareholders' meetings. Continuing non-compliance with AMEX rules could subject the Company to civil penalties and delisting, which could further diminish the value of the Company's Common Stock. Additionally, I have been informed that Florida corporate law requires that the Company hold annual meetings of its shareholders. I would like to understand whether non-compliance with Florida corporate law might subject the Company to any fines or penalties. It is my understanding that upon the most recent extension of the merger agreement, the Special Committee was entitled to engage, until November 23, 2003, in discussions with 3 third parties who might be interested in acquiring the Company. Such opportunity to express an interest in purchasing the Company was never publicly disclosed. On November 24, 2003, my office was contacted by a member of the Special Committee to determine our interest in making a bid for the Company. This was shortly after the timeframe to express an interest had elapsed and after the preliminary proxy was filed with the Securities and Exchange Commission. I look forward to your response. Sincerely, /s/ Richard L. Scott Richard L. Scott Chairman Richard L. Scott Investments, LLC 4 -----END PRIVACY-ENHANCED MESSAGE-----