-----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, Jh7Mi1soofIv5ZGAFEGzOY4V8eKhhg+rLFXR5LLFZkqVMKGAVpwucajul3mTyt/u gzJqr42odd44RAM4hB2o1w== 0000003327-99-000011.txt : 19990517 0000003327-99-000011.hdr.sgml : 19990517 ACCESSION NUMBER: 0000003327-99-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990514 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALBERTO CULVER CO CENTRAL INDEX KEY: 0000003327 STANDARD INDUSTRIAL CLASSIFICATION: PERFUMES, COSMETICS & OTHER TOILET PREPARATIONS [2844] IRS NUMBER: 362257936 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-05050 FILM NUMBER: 99621708 BUSINESS ADDRESS: STREET 1: 2525 ARMITAGE AVE CITY: MELROSE PARK STATE: IL ZIP: 60160 BUSINESS PHONE: 7084503039 MAIL ADDRESS: STREET 1: 2525 ARMITAGE AVENUE CITY: MELROSE PARK STATE: IL ZIP: 60160 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED: March 31, 1999 -OR- [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No. 1-5050 ALBERTO-CULVER COMPANY (Exact name of registrant as specified in its charter) Delaware 36-2257936 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2525 Armitage Avenue Melrose Park, Illinois 60160 Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: (708) 450-3000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. YES X NO At March 31, 1999, there were 23,371,447 shares of Class A common stock outstanding and 32,957,471 shares of Class B common stock outstanding. 7 PART I ITEM 1. FINANCIAL STATEMENTS
ALBERTO-CULVER COMPANY AND SUBSIDIARIES Consolidated Statements of Earnings Three Months Ended March 31, 1999 and 1998 (dollar amounts in thousands, except per share figures) (Unaudited) 1999 1998 Net sales $487,396 455,195 Costs and expenses: Cost of products sold 237,801 225,770 Advertising, promotion, selling and administrative 214,977 196,054 Interest expense, net of interest income of $710 in 1999 and $619 in 1998 2,917 2,163 -------- -------- Total costs and expenses 455,695 423,987 -------- -------- Earnings before provision for income taxes 31,701 31,208 Provision for income taxes 11,651 11,625 --------- -------- Net earnings(Note 3) $ 20,050 19,583 ======== ========= Net earnings per share (Note 2) Basic $ .35 .34 ======= =========== Diluted $ .35 .32 ======= =========== Cash dividends paid per share $ .065 .06 ======= =========== See notes to consolidated financial statements.
ALBERTO-CULVER COMPANY AND SUBSIDIARIES Consolidated Statements of Earnings Six Months Ended March 31, 1999 and 1998 (dollar amounts in thousands, except per share figures) (Unaudited) 1999 1998 Net sales $951,947 900,595 Costs and expenses: Cost of products sold 466,558 443,810 Advertising, promotion, selling and administrative 418,807 389,951 Interest expense, net of interest income of $1,436 in 1999 and $1,382 in 1998 5,443 4,244 -------- -------- Total costs and expenses 890,808 838,005 -------- -------- Earnings before provision for income taxes 61,139 62,590 Provision for income taxes 22,469 23,315 --------- -------- Net earnings (Note 3) $ 38,670 39,275 ======== ========= Net earnings per share (Note 2) Basic $ .68 .69 ======= ========= Diluted $ .67 .64 ======= ========= Cash dividends paid per share $ .125 .11 ======= ========= See notes to consolidated financial statements.
ALBERTO-CULVER COMPANY AND SUBSIDIARIES Consolidated Balance Sheets March 31, 1999 and September 30, 1998 (dollar amounts in thousands, except per share data) (Unaudited) March 31, September 30, ASSETS 1999 1998 - ------ ----------------- ------------------- Current assets: Cash and cash equivalents $ 50,069 72,395 Short-term investments 529 910 Receivables, less allowance for doubtful accounts ($9,357 at 3/31/99 and $10,868 at 9/30/98) 127,402 129,063 Inventories (Note 4) 386,422 369,204 Other current assets 20,050 19,993 ---------- ---------- Total current assets 584,472 591,565 ---------- ---------- Property, plant and equipment at cost, less accumulated depreciation ($197,418 at 3/31/99 and $184,932 at 9/30/98) 229,222 223,476 Goodwill, net 170,273 137,599 Trade names and other intangible assets, net 64,623 67,158 Other assets 50,458 48,386 ----------- ----------- Total assets $1,099,048 1,068,184 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current maturities of long-term debt and short-term borrowings $ 3,760 3,238 Accounts payable 179,795 177,564 Accrued expenses 101,765 112,015 Income taxes 23,506 20,808 ---------- ---------- Total current liabilities 308,826 313,625 ---------- ---------- Long-term debt 203,900 171,760 Deferred income taxes 26,203 28,260 Other liabilities 21,375 20,548 Stockholders' equity (Note 2): Common stock, par value $.22 per share: Class A authorized 75,000,000 shares; issued 30,612,798 shares 6,735 6,735 Class B authorized 75,000,000 shares; issued 37,710,665 shares 8,296 8,296 Additional paid-in capital 191,742 192,610 Retained earnings 560,271 528,733 Accumulated other comprehensive income- foreign currency translation (Note 3) (33,166) (28,131) ----------- ----------- 733,878 708,243 Less treasury stock at cost (Class A common shares: 7,241,351 at 3/31/99 and 6,549,947 at 9/30/98; Class B common shares: 4,753,184 at 3/31/99 and 4,563,184 at 9/30/98) (195,134) (174,252) ---------- ----------- Total stockholders' equity 538,744 533,991 ---------- ----------- Total liabilities and stockholders' equity $1,099,048 1,068,184 ============ =========== See notes to consolidated financial statements.
ALBERTO-CULVER COMPANY AND SUBSIDIARIES Consolidated Statements of Cash Flows Six Months Ended March 31, 1999 and 1998 (dollar amounts in thousands) (Unaudited) 1999 1998 Cash Flows from Operating Activities: Net earnings $38,670 39,275 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 20,867 19,721 Other, net 2,401 (1,216) Cash effects of changes in (exclusive of acquisitions): Receivables, net 54 5,210 Inventories (9,297) (9,792) Other current assets (3,369) 662 Accounts payable and accrued expenses (16,523) (27,165) Income taxes 5,202 12,038 ----------- ----------- Net cash provided by operating activities 38,005 38,733 ----------- ---------- Cash Flows from Investing Activities: Short-term investments 958 6,551 Capital expenditures (19,608) (26,249) Payments for purchased businesses, net of acquired companies' cash (48,924) (7,050) Other, net 143 622 ---------- ---------- Net cash used by investing activities (67,431) (26,126) ---------- ---------- Cash Flows from Financing Activities: Short-term borrowings 885 (773) Proceeds from long-term debt 34,080 404 Repayments of long-term debt (1,304) (3,540) Proceeds from sale of receivables 5,000 -- Cash dividends paid (7,132) (6,222) Cash proceeds from exercise of stock options 2,487 10,644 Stock purchased for treasury (25,383) (10,650) -------- ----------- Net cash provided (used) by financing activities 8,633 (10,137) -------- ----------- Effect of foreign exchange rate changes on cash (1,533) 301 -------- ----------- Net increase (decrease) in cash and cash equivalents (22,326) 2,771 Cash and cash equivalents at beginning of period 72,395 76,040 -------- ----------- Cash and cash equivalents at end of period $50,069 78,811 ======== ========== See notes to consolidated financial statements.
ALBERTO-CULVER COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements (l) The consolidated financial statements contained in this report have not been examined by independent public accountants, except for balance sheet information presented at September 30, 1998. However, in the opinion of the company, the consolidated financial statements reflect all adjustments, which include only normal adjustments, necessary to present fairly the data contained therein. The results of operations for the periods covered are not necessarily indicative of results for a full year. (2) Basic earnings per share is calculated using the weighted average of actual shares outstanding of 56,764,000 and 56,886,000 for the three months ended March 31, 1999 and 1998, respectively, and 56,953,000 and 56,646,000 for the six months ended March 31, 1999 and 1998, respectively. Diluted earnings per share is determined by dividing net earnings before interest expense (net of tax benefit) on the convertible subordinated debentures by the weighted average shares outstanding, including common stock equivalents, after giving effect to common shares to be issued assuming conversion of the convertible subordinated debentures to Class A common stock. The convertible subordinated debentures were converted in July, 1998. Diluted weighted average shares outstanding were 57,628,000 and 64,124,000 for the three months ended March 31, 1999 and 1998, respectively, and 57,814,000 and 63,884,000 for the six months ended March 31, 1999 and 1998, respectively. The following table provides a reconciliation of basic and diluted earnings per share (in thousands): Three Months Six Months Ended March 31 Ended March 31 --------------- -------------- 1999 1998 1999 1998 ---- ---- ---- ---- Net earnings $20,050 19,583 38,670 39,275 Interest expense on convertible subordinated debentures, net of tax benefit -- 910 -- 1,820 ------- ------ ------ ------ Diluted net earnings $20,050 20,493 38,670 41,095 ======= ====== ====== ====== Weighted average shares outstanding--basic 56,764 56,886 56,953 56,646 Effect of dilutive securities: Assumed conversion of subordinated debentures -- 6,178 -- 6,178 Assumed exercise of stock options 789 1,060 786 1,060 Other 75 -- 75 -- ---------- --------- ------ ------ Weighted average shares outstanding--diluted 57,628 64,124 57,814 63,884 ========= ======= ====== ======
ALBERTO-CULVER COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) (3) Effective the first quarter of fiscal year 1999, the company adopted Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income", which establishes rules for the reporting of comprehensive income and its components. Comprehensive income consists of net earnings and foreign currency translation adjustments as follows (in thousands): Three Months Six Months Ended March 31 Ended March 31 -------------- -------------- 1999 1998 1999 1998 ---- ---- ---- ---- Net earnings $20,050 19,583 38,670 39,275 Other comprehensive income adjustments - foreign currency translation (4,667) (2,049) (5,035) (5,028) Comprehensive income $15,383 17,534 33,635 34,247 ======== ======== ====== ====== (4) Inventories consist of the following (in thousands): March 31, September 30, 1999 1998 Finished goods $345,774 325,769 Work-in-process 4,967 6,119 Raw materials 35,681 37,316 --------------- --------------- $386,422 369,204 ============= ============== (5) During fiscal 1998, the Board of Directors authorized the company to purchase up to 6.0 million shares of its Class A common stock. This authorization was increased to 9.0 million shares in October, 1998. As of March 31, 1999, the company had purchased 6,490,700 Class A common shares under this program at a total cost of $146.5 million. In addition, the Board of Directors authorized the purchase of 190,000 Class B common shares from a related party in January, 1999, at a total cost of $5.0 million, which was equal to fair market value on the date of purchase. 13 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS Second Quarter and Six Months Ended March 31, 1999 vs. Second Quarter and Six Months Ended March 31, 1998 The company achieved record second quarter net sales of $487.4 million in fiscal year 1999, up $32.2 million or 7.1% over the comparable period of fiscal year 1998. For the six month period ending March 31, 1999, net sales reached a new high of $951.9 million, representing a 5.7% increase compared to last year's six month period. Net earnings for the three months ended March 31, 1999 were a record $20.1 million or 2.4% higher than the same period of the prior year. Basic earnings per share were 35 cents in 1999 and 34 cents in 1998. Diluted earnings per share increased 9.4% to 35 cents from 32 cents in 1998. Net earnings for the six months ended March 31, 1999 were $38.7 million or 1.5% lower than 1998. Basic earnings per share were 68 cents in 1999 and 69 cents in 1998. Diluted earnings per share increased 4.7% to 67 cents for the first six months of 1999 from 64 cents in 1998. Diluted earnings per share for both the second quarter and first half were favorably affected by a decrease in diluted weighted average shares outstanding, primarily due to the company's common stock purchases described in Note 5. The following table presents net sales information by business segment for the second quarter and first six months of fiscal years 1999 and 1998 (dollars in millions): SECOND QUARTER Fiscal Year Dollar Percent Net sales: 1999 1998 Change Change - ---------- ------ ------ ------ ------ Alberto-Culver North America $111.0 115.9 (4.9) (4.2)% Alberto-Culver International 108.3 101.5 6.8 6.7 Specialty distribution - Sally 273.1 241.6 31.5 13.1 Eliminations (5.0) (3.8) (1.2) (31.9) -------- -------- --------- $487.4 455.2 32.2 7.1% ====== ====== ======= SIX MONTHS Fiscal Year Dollar Percent Net sales: 1999 1998 Change Change - --------- ---- ---- ------ ------ Alberto-Culver North America $222.4 231.8 (9.4) (4.1)% Alberto-Culver International 209.7 204.3 5.4 2.7 Specialty distribution - Sally 528.4 472.4 56.0 11.9 Eliminations (8.6) (7.9) (0.7) (8.5) ------ ------ ---- $951.9 900.6 51.3 5.7% ====== ===== ==== Compared to the same periods of the prior year, sales for Alberto-Culver North America ("North America") decreased 4.2% and 4.1% for the second quarter and first six months of fiscal year 1999, respectively. The decreases were primarily due to lower sales for custom label filling operations and sales declines for the Cortexx and VO Fine hair care lines. Sales of Alberto-Culver International ("International") increased 6.7% in the second quarter and 2.7% in the first half of fiscal 1999 compared to last year. The fiscal year 1999 results were negatively impacted by the effect of foreign exchange rates. Had foreign exchange rates this year been the same as the second quarter and first half of fiscal 1998, Alberto-Culver International sales would have increased 8.1% for the second quarter and 4.9% for the first half. The growth was principally due to acquisitions in Latin America. The "Specialty distribution-Sally" business segment achieved sales increases of $31.5 million or 13.1% for the second quarter and $56.0 million or 11.9% for the first half of fiscal year 1999. The gains were attributable to higher sales for established Sally Beauty Company outlets, the opening of new stores during the year and the expansion of Sally's full service and foreign operations. At March 31, 1999, Sally Beauty Company had 2,124 stores offering a full-range of professional beauty supplies. Cost of products sold as a percent of net sales for the second quarter was 48.8% as compared to 49.6% for the prior year and 49.0% for the first half versus 49.3% for the first six months of 1998. The decreases were primarily due to cost savings and brand restages for North America. Compared to the prior year, advertising, promotion, selling and administrative expenses rose $18.9 million or 9.7% for the second quarter and $28.9 million or 7.4% for the first half. The increases resulted from higher selling and administrative costs associated with the increase in the number of Sally Beauty Company stores along with additional advertising, promotion and market research expenditures. Advertising, promotion and market research expenditures totaled $65.8 million for the second quarter of 1999, an increase of 4.0% versus the prior year. For the first half of fiscal year 1999, advertising, promotion and market research expenditures were $130.8 million, an increase of 4.3% over last year. Net interest expense increased $754,000 for the second quarter and $1.2 million for the first half compared to the same periods of the prior year. The increases were primarily attributable to the $120 million of 6.375% debentures issued in June, 1998 partially offset by the elimination of interest expense on the $100 million of 5.5% convertible subordinated debentures which were converted into Class A common shares in July, 1998. Interest expense was also higher due to $30 million borrowed under the company's revolving credit facility during the second quarter of 1999, primarily to fund acquisitions. The provision for income taxes as a percentage of earnings before income taxes was 36.75% for the second quarter and first half of fiscal years 1999 and 37.25% for the same periods in the prior year. FINANCIAL CONDITION March 31, 1999 v.s. September 30, 1998 The ratio of current assets to current liabilities was 1.89 to 1.00 at March 31, 1999 and September 30, 1998. Working capital of $275.7 million was $2.2 million lower than the September 30, 1998 balance of $277.9 million. Total borrowings increased $32.7 during the first six months of fiscal year 1999 to $207.7 million, primarily due to $30 million borrowed under the company's revolving credit facility to fund the acquisitions of La Farmaco, an Argentina-based manufacturer and marketer of branded personal care products, and two full-service distributors by Sally Beauty. At March 31, 1999, the company had $170 million available under its revolving credit facility. YEAR 2000 READINESS DISCLOSURES Many computer systems use only two digits to represent the year and they may be unable to process accurately information that contains dates before, during or after the year 2000. As a result, organizations that depend on computers are at risk for possible date-based computation errors which could result in erroneous information or system failures that may disrupt their business operations. This is commonly known as the Year 2000 ("Y2K") problem. Most of the software purchased by the company within the last five years is either Y2K compliant or the vendor has certified that Y2K compliant upgrades will be available sufficiently in advance of December 31, 1999. In late 1995, the company inventoried and assessed key financial and operational information systems and prepared a prioritized plan for Y2K systems modifications or replacements. The plan is revised periodically and progress against the plan is monitored and periodically reported to management and the Audit Committee of the Board of Directors. Implementation of required changes to the company's critical systems is currently scheduled to be completed by October, 1999. Certification of critical systems, which includes testing by technicians and key users, is expected to be completed before December 31, 1999. The company's assessment of non-information technology systems (e.g., manufacturing equipment) is expected to be completed by July, 1999, and an action plan will be prepared based on the results. The company is developing a contingency plan to be followed in the event of a Y2K-related failure of a business-critical system. This plan should be complete by September, 1999 and is expected to include, for example, identification of alternate suppliers and possible increases in inventory levels, including raw materials and packaging. Once developed, contingency plans and related cost estimates will be refined as additional information becomes available. Incremental costs, which include contractor costs to modify existing systems, and costs of internal resources dedicated to achieving Y2K compliance are charged to expense as incurred. The incremental costs are currently expected to total approximately $2.4 million, of which approximately 61% has been spent to date. Incremental costs are presently being funded through operating cash flow. The amounts do not include any costs associated with the implementation of contingency plans, which are in the process of being developed, as discussed above. The costs associated with replacement of computerized systems, hardware and related equipment (currently estimated to be approximately $8.2 million), substantially all of which will be capitalized, are not included in the above estimates. The company's Y2K readiness program is an evolving and ongoing process. Accordingly, current conclusions as to what constitutes areas of the company's greatest Y2K exposure and the estimates of costs and completion dates, as described above, are subject to change. The Y2K problem has many aspects and potential consequences, some of which are not reasonably foreseeable, and there can be no assurance that unforeseen consequences will not arise. FORWARD - LOOKING STATEMENTS This Quarterly Report on Form 10-Q and the documents incorporated by reference herein, if any, may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Security Exchange Act of 1934, as amended. Such statements are based on management's current expectations and assessments of risks and uncertainties and reflect various assumptions concerning anticipated results, which may or may not prove to be correct. Some of the factors that could cause actual results to differ materially from estimates or projections contained in such forward-looking statements include the pattern of brand sales, including variations in sales volume within periods; competition within the relevant product markets, including pricing, promotional activities, continuing customer acceptance of existing products and the ability to develop and successfully introduce new products; risks inherent in acquisitions and stategic alliances; changes in costs including changes in labor costs, raw material prices or pormotional expenses; the costs and effects of unanticipated legal or administrative proceedings; variations in political, economic or other factors such as currency exchange rates, inflation rates, recessionary or expansive trends, tax changes, legal and regulatory changes or other external factors over which the company has no control. The company disclaims any obligation to update any forward-looking statement in this Quarterly Report on Form 10-Q or any document incorporated herein by reference. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There have been no material changes in the company's market risk during the six months ended March 31, 1999. PART II ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS At the annual meeting of stockholders on January 28, 1999, Howard B. Bernick, Bernice E. Lavin, Harold M. Visotsky and Allan B. Muchin were elected as directors of the Company. Mr. Bernick received a Class A and Class B common stockholder vote of 21,476,751 and 30,777,152 shares "for" and 19,888 and 180,353 shares "withheld", respectively. Mrs. Lavin received a Class A and Class B common stockholder vote of 21,464,583 and 30,764,366 shares "for" and 32,056 and 193,139 shares "withheld", respectively. Dr. Visotsky received a Class A and Class B common stockholder vote of 21,471,063 and 30,759,909 shares "for" and 25,576 and 197,596 shares "withheld", respectively. Mr. Muchin received a Class A and Class B common stockholder vote of 21,472,004 and 30,283,561 shares "for" and 24,635 and 673,944 shares "withheld", respectively. Class A common stock has a one-tenth vote per share and Class B common stock has one vote per share. Stockholders at the annual meeting also voted on amendments to the company=s Management Incentive Plan. The amendments were approved by a Class A and Class B stockholder vote of 20,560,318 and 30,239,628 shares "for"; 918,741 and 606,616 "against"; and 17,576 and 111,261 shares "abstaining", respectively. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: 27 Financial Data Schedule (b) Reports on Form 8-K: No report on Form 8-K was filed by the registrant during the quarter ended March 31, 1999. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ALBERTO-CULVER COMPANY (Registrant) By:/s/ William J. Cernugel William J. Cernugel Senior Vice President, Finance (Principal Financial Officer) May 14, 1999 EX-27 2 FDS
5 Exhibit 27 ALBERTO-CULVER COMPANY AND SUBSIDIARIES Financial Data Schedule Six Months Ended March 31, 1999 (in thousands) This schedule contains summary financial information extracted from the consolidated balance sheet as of March 31, 1999 and the consolidated statement of earnings for the six months ended March 31, 1999 and is qualified in its entirety by reference to such financial statements. 0000003327 Alberto-Culver 1,000 US Dollars 12-mos Sep-30-1999 Oct-1-1998 Mar-31-1999 1.00 50,069 529 136,759 9,357 386,422 584,472 426,640 197,418 1,099,048 308,826 203,900 0 0 15,031 523,713 1,099,048 951,947 951,947 466,558 466,558 418,807 2,279 6,879 61,139 22,469 38,670 0 0 0 38,670 .68 .67
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