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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
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Commission File Number 0-28174
The Lamaur Corporation
(Exact name of registrant as specified in its charter)
Delaware 68-0301547
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
5601 East River Road, Fridley, MN 55432
(Address of principal executive offices) (Zip Code)
(763) 571-1234
(Registrant's telephone number, including area code)
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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 May 1, 2000, there were 7,422,571 shares of the Registrant's $.01 par value
Common Stock outstanding.
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<PAGE>
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Safe Harbor Cautionary Statement
This quarterly report on Form 10-Q contains historical information and
forward-looking statements including but not limited to those regarding future
performance of the retail brands, the Company's ability to attain any particular
level of sales or to be profitable in the future, the Company's ability to meet
working capital requirements, and the Company's ability to be in compliance with
its loan agreement. Such forward looking statements are made pursuant to the
"safe harbor" provision of the Private Securities Litigation Reform Act of 1995.
These statements involve known and unknown risks and uncertainties that may
cause the Company's actual results in future periods to be materially different
from any future performance suggested herein. Actual results are particularly
dependent upon management's ability to continue to work with creditors until
they are paid in full. Further, the Company operates in an industry sector where
securities values may be volatile and may be influenced by economic and other
factors beyond the Company's control. In the context of the forward-looking
information provided in this Form 10-Q and in other reports, please refer to the
discussions of risk factors and investment considerations detailed in, as well
as the other information contained in, the Company's filings with the Securities
and Exchange Commission.
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2
<PAGE>
THE LAMAUR CORPORATION
Index to Form 10-Q
March 31, 2000
Page
Part I - Financial Information
Item 1. Condensed Financial Statements (Unaudited)
Balance Sheets as of March 31, 2000 and December 31, 1999 4
Statements of Operations for the Three Months Ended
March 31, 2000 and 1999 5
Statements of Cash Flows for the Three Months Ended
March 31, 2000 and 1999 6
Notes to Condensed Financial Statements for the Three
Months Ended March 31, 2000 and 1999 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations for the Three
Months Ended March 31, 2000 and 1999 9
Part II - Other Information
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
Signature 12
3
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. CONDENSED FINANCIAL STATEMENTS
THE LAMAUR CORPORATION
CONDENSED BALANCE SHEETS
(In thousands, except share and per share data)
(Unaudited)
March 31, December 31,
2000 1999
--------------- ---------------
ASSETS
Current Assets:
Cash and cash equivalents $ 1,107 $ 360
Accounts receivable, net 4,832 5,974
Inventories 4,337 5,286
Prepaid expenses and other current assets 205 258
--------------- ---------------
Total Current Assets 10,481 11,878
Property, Plant and Equipment, net 597 663
Other Assets 206 230
--------------- ---------------
Total Assets $ 11,284 $ 12,771
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 7,906 $ 8,020
Accrued expenses 964 1,844
Accrued salaries, wages and employee-related
expenses 1,200 1,230
Dividends payable 1,100 1,000
--------------- ---------------
Total Current Liabilities 11,170 12,094
Stockholders' Equity
Preferred stock, $.01 par value, 4,000,000
shares authorized:
Series A Preferred stock, $.01 par value,
1,000,000 shares issued and outstanding
at March 31, 2000 and December 31, 1999.
($10.0 million liquidation preference) 8,500 8,500
Series B Preferred stock, $.01 par value,
763,500 shares issued and outstanding
at March 31, 2000 and December 31, 1999.
($5.0 million liquidation preference) 5,000 5,000
Common stock, $.01 par value, 12,000,000
shares authorized, 7,422,571 shares
issued and outstanding at March 31, 2000
and December 31,1999 74 74
Additional paid-in-capital 20,027 20,127
Stock subscriptions receivable (50) (50)
Accumulated deficit (33,437) (32,974)
--------------- ---------------
Total Stockholders' Equity 114 677
--------------- ---------------
Total Liabilities and Stockholders' Equity $ 11,284 $ 12,771
=============== ===============
See notes to financial statements.
4
<PAGE>
THE LAMAUR CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended
March 31,
--------------------------------------
2000 1999
------------------- ------------------
Net Sales $ 7,974 $ 13,047
Cost of Goods Sold 5,262 8,774
------------------- ------------------
Gross Margin 2,712 4,273
Selling, General and Administrative
Expenses 3,175 5,279
------------------- ------------------
Operating Loss (463) (1,006)
Interest Expense (25) (321)
Other Income 25 47
------------------- ------------------
Net Loss (463) (1,280)
Dividends on Series B Preferred Stock (100) (100)
------------------- ------------------
Net Loss Available to Common
Shareholders $ (563) $ (1,380)
=================== ==================
Basic Loss per Common Share $ (0.08) $ (0.21)
=================== ==================
Weighted Average Common Shares
Outstanding - Basic 7,423 6,686
=================== ==================
Diluted Loss per Common Share $ (0.08) $ (0.21)
=================== ==================
Weighted Average Common Shares
Outstanding - Diluted 7,423 6,686
=================== ==================
See notes to financial statements.
5
<PAGE>
THE LAMAUR CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended
March 31,
------------------------------
2000 1999
-------------- --------------
Cash Flows From Operating Activities:
Net loss $ (463) $ (1,280)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Loss on disposal of assets - 2
Non-cash compensation expense - 168
Depreciation and amortization 90 506
Effect of changes in:
Receivables 1,142 1,835
Inventories 949 (997)
Prepaid expenses and other assets 53 (485)
Payables (114) 776
Accrued expenses and other (910) 4
------------- --------------
Net cash provided by operating
activities 747 529
Cash Flows From Investing Activities:
Additions to property, plant and equipment - (19)
------------- --------------
Cash Flows From Financing Activities:
Repayments under revolving credit agreement,
net - (664)
Repayments of long-term debt - (55)
-------------- --------------
Net cash used in financing activities - (719)
-------------- --------------
Net Increase (Decrease) in Cash and Cash
Equivalents 747 (209)
Cash and Cash Equivalents at Beginning of Period 360 568
-------------- --------------
Cash and Cash Equivalents at End of Period $ 1,107 $ 359
============== ==============
See notes to financial statements.
6
<PAGE>
THE LAMAUR CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
1. ORGANIZATION AND OPERATIONS
The Lamaur Corporation (the "Company") develops, formulates, and markets
personal hair care products, consisting of shampoos, conditioners, hair sprays,
and other styling aids, for the consumer market, and until December 22, 1999,
also manufactured these products. In addition, until December 22, 1999, the
Company's Custom Manufacturing Group developed, formulated, and manufactured for
third parties a variety of aerosol and other liquid products, consisting of hair
care, personal care, and household products.
On December 22, 1999, the Company completed the sale of its manufacturing
facility in Fridley, Minnesota, including real and personal property, to Tiro
Industries, Inc. ("Tiro") for net proceeds of $13.1 million and the assumption
of approximately $765,000 in lease obligations, thus achieving the Company's
planned strategy to improve asset liquidity. During the first quarter, the
Company closed its Mill Valley corporate office and consolidated it with its
sales and marketing operations in Fridley, Minnesota. The Company is continuing
its sales and marketing operations in a portion of the Fridley facility as a
tenant of Tiro for a term of two years pursuant to a lease agreement. The
Company retained ownership of personal property necessary for its sales and
marketing operations. Tiro will manufacture products for the Company for three
years from the closing date pursuant to a manufacturing agreement.
2. SIGNIFICANT ACCOUNTING POLICIES
The accompanying condensed financial statements are unaudited and include
all adjustments, consisting of only normal recurring accruals, that management
considers necessary to fairly present the results for such periods. These
financial statements should be read in conjunction with the financial statements
and notes contained in the Company's Annual Report on Form 10-K for the year
ended December 31, 1999. Results for interim periods are not necessarily
indicative of results for the full year.
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Significant accounting estimates reflected in the
Company's financial statements include the allowances for doubtful accounts,
sales returns and cash discounts, lower of cost or market write-down on
inventory, accrued coupon redemption reserve, accrued market development
reserve, and accrued employee benefits. Actual results could differ from those
estimates.
Reclassifications - Certain prior year amounts have been reclassified in
the accompanying financial statements in order to conform with the 2000
presentation. These reclassifications have no effect on net income or
stockholders' equity as previously reported.
3. LEGAL PROCEEDINGS
On November 2, 1998, a class action and derivative lawsuit was filed by the
stockholders (on behalf of themselves and the Company) in the Delaware Court of
Chancery in and for New Castle County alleging that the defendant members of the
Board of Directors breached their fiduciary duties to the Company and failed to
disclose certain information in the Company's 1998 Proxy Statement. Plaintiffs
seek injunctive relief, unspecified damages to the stockholders and restitution
of unspecified profits to the Company. Plaintiffs also seek a rescission of all
actions approved by stockholders at the November 2, 1998 Annual Meeting and
demand a revised Proxy Statement. Any monetary judgment resulting from
Plaintiffs' derivative claims would accrue to the benefit of the Company. The
Company believes the lawsuit is without merit and will defend the action in the
best interest of the stockholders.
Certain of the Company's executives have severance agreements that provide
defined severance if the executive is involuntarily terminated (as defined)
within twenty-four months of a change of control (as defined). Three of the
Company's former executives have alleged that they entered into such agreements,
that they were the subject of an involuntary termination within twenty-four
months of a change of control, and that they are therefore entitled to certain
benefits. The total severance claimed is approximately $1.0 million. The Company
intends to vigorously defend these claims. The Company does not believe that the
ultimate resolution of these matters will have a material adverse effect on the
Company's results of operations.
The Company is a party to other legal proceedings in the normal course of
business. It is the opinion of management that any losses in connection with
these matters will not have a material effect on its financial position or
operating results.
7
<PAGE>
THE LAMAUR CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
4. SEGMENT INFORMATION
The Company's operating segments include the Retail Group and, until
the December 1999 sale of the manufacturing facility, the Custom Manufacturing
Group. The Company evaluates performance based on contribution before fixed
expenses. The accounting policies of the segments are the same as those of the
Company.
The Company does not allocate fixed expenses by segment for internal
reporting or decision-making purposes and therefore has not disclosed operating
profit by segment. Until the sale of the manufacturing facility, the majority of
the Company's fixed expenses were shared expenses of both reporting segments and
consisted principally of administration and manufacturing overhead. The
Company's products were manufactured on common production lines and therefore
the Company did not analyze fixed assets or capital expenditures by segment. In
2000, the Company began to account for manufacturing costs from Tiro within cost
of goods sold. These costs were formerly part of fixed expenses.
The Company's reportable segments had separate sales departments, and
although the products are similar, they were sold and marketed differently. The
Retail Group sells hair care products including shampoos, conditioners, hair
sprays, and other styling aids. These products are distributed to consumer
retail outlets. Products sold by the Retail Group require substantial marketing
support to maintain their sales. Until December 1999, the Custom Manufacturing
Group developed and formulated hair care, personal care, and household products
for third parties. This group was service oriented and no significant marketing
was required to support its sales. During the three months ended March 31, 2000,
sales of the Custom Manufacturing Group primarily represent fulfillment of
orders received prior to sale of the manufacturing facility. Sales by the Custom
Manufacturing Group will continue to decline as the Company sells through its
inventory related to the Custom Manufacturing Group.
Following is the financial information related to the Company's
segments at March 31, 2000 and March 31, 1999:
Three Months Ended Three Months Ended
March 31, March 31,
2000 1999
----------------- -----------------
(In thousands)
Net sales
Retail Group $ 6,438 $ 7,823
Custom Manufacturing Group 1,536 5,224
----------------- -----------------
Total net sales 7,974 13,047
Profit before fixed expenses
Retail Group 710 1,651
Custom Manufacturing Group 106 1,305
----------------- -----------------
Total profit before fixed expenses 816 2,956
Fixed expenses 1,279 3,962
----------------- -----------------
Operating loss (463) (1,006)
Interest expense (25) (321)
Other income 25 47
----------------- -----------------
Net loss $ (463) $ (1,280)
================= =================
8
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2000
AND MARCH 31, 1999
Historical Results of Operations
Total net sales for the three months ended March 31, 2000 were $8.0
million, compared with $13.0 million for the same period in 1999, a decrease of
$5.0 million or 38.9%. The decrease in sales is due to a $3.7 million reduction
in sales of the Custom Manufacturing Group and a $1.3 million sales reduction in
the Company's retail brands. On December 22, 1999, the Company sold its
manufacturing facility and no longer operates its Custom Manufacturing Group.
Sales for the Custom Manufacturing Group during the three months ended March 31,
2000, primarily represent fulfillment of orders received prior to the sale of
the facility. Sales of WILLOW LAKE(R), STYLE(R), STYLE NATURAL RELECTIONS(R) and
PERMA SOFT(R) (retail brands) declined approximately $1.8 million as compared
with the same period in 1999.
Sales of STYLE(R) and PERMA SOFT(R) have declined since the Company began
its turnaround efforts in the first quarter of 1996. WILLOW LAKE(R) has declined
since the third quarter of 1998. The decline in sales of WILLOW LAKE(R) is in
part attributable to the reduction in marketing support for WILLOW LAKE(R). The
Company reduced its marketing support as a result of limited working capital.
Management is aggressively pursuing marketing and sales strategies to turn these
brands around. However, there can be no assurances that these efforts will be
successful and that the brands will not continue to decline. Partially
offsetting these sales declines were increases from DESIGN ELEMENTS(R) by SALON
STYLE(R), a product line of hair styling aids, introduced early in 1999.
Gross margin as a percentage of net sales was 34.0% for the three months
ended March 31, 2000, as compared with 32.8% for the same period in 1999. The
increase in gross margin as a percentage of sales is due to retail brands, which
are higher margin sales than the Custom Manufacturing Group products,
representing a greater percentage of net sales. Although the combined gross
margin percentage increased during the quarter ended March 31, 2000, as compared
with the same period in 1999, the Company did experience a reduction in gross
margin as a percentage of sales in both its Retail and Custom Manufacturing
Group as compared with the same period in 1999. The reduction in the gross
margin percentage in the Retail Group was principally due to change in product
mix, sale of excess and closeout inventory at a lower margin, and a higher per
unit fill fee. Management believes that beginning in the third quarter of 2000
and continuing through the end of the year, it will realize a favorable per unit
fill fee as compared with the same periods in 1999.
Selling, general and administrative expenses ("SG&A") were $3.2 million or
39.8% of sales for the three months ended March 31, 2000, as compared with $5.3
million or 40.5% of sales for the same period last year, a decrease of $2.1
million. The decrease is principally attributed to an overall reduction in
general and administrative and materials management costs of approximately $1.2
million related to the downsizing of the Company from a sales and manufacturing
company to a sales and marketing company. The majority of this reduction related
to personnel expenses as a result of reduction in support staff. In addition,
the decrease in SG&A during the three months ended March 31, 2000 is also due to
a reduction in marketing expenses of $.7 million and reduced freight and
brokerage costs as a result of the decrease in sales. The decrease in marketing
is in part due to limited working capital. Because of the Company's limited
working capital and the competitive environment of hair care products, there can
be no assurance concerning the future performance of WILLOW LAKE(R), DESIGN
ELEMENTS(R) by SALON STYLE(R), STYLE(R) and other brands or the Company's
ability to attain any particular level of sales or to be profitable in the
future with the lower level of marketing support.
Interest expense decreased to $25,000 for the three months ended March 31,
2000, as compared with $321,000 in the same period last year, a decrease of
$296,000. The decrease in interest expense during the three months ended March
31, 2000 is principally due to no borrowings under the Company's credit facility
with Congress Financial Corporation.
As a result of the foregoing factors, the net loss for the three months
ended March 31, 2000 was $463,000 as compared to a net loss of $1.3 million for
the same period in 1999.
9
<PAGE>
Liquidity and Capital Resources
Cash and cash equivalents increased by $.7 million from December 31, 1999.
Inventory and accounts receivable decreased by $1.0 million and $1.1 million
respectively, from December 31, 1999 levels.
The decrease in inventory is primarily attributable to the reduction in the
Contract Manufacturing Group's inventory and raw materials, principally
chemicals. As a result of the sale of the Company's manufacturing facility to
Tiro Industries, Inc. ("Tiro") in December 1999, the Company no longer operates
its Custom Manufacturing Group. The Company will continue to sell its inventory
related to the Custom Manufacturing Group, but is not replenishing it. Tiro is
and will manufacture products for the Company for three years pursuant to a
manufacturing agreement. As part of the agreement, Tiro purchases the chemicals
used in the production of the Company's products and the Company will continue
to purchase packaging components.
The Company currently has a revolving loan facility with Congress Financial
Corporation ("Congress") for $13.3 million that is payable in full in May 2002.
The interest rate on the revolving loan with Congress is prime (8.75% at March
31, 2000) plus 0.75%.
The revolving loan with Congress is secured by virtually all of the assets
of the Company. Additionally, the loan agreement restricts the payment of
dividends other than on the Company's Series B Preferred Stock, restricts the
Company's ability to incur additional indebtedness and requires the Company to
comply with certain financial loan covenants. As of March 31, 2000, the Company
was not in compliance with the net worth covenant in its credit facility and
will not comply with such covenant in 2000. The Company has obtained a waiver
from the lender through March 31, 2000, and plans to negotiate new financial
covenants with Congress.
As of March 31, 2000, there were no amounts outstanding under the Company's
credit facility with Congress; however, the Company believes it will need to
utilize its loan facility for working capital and to meet its obligations to the
creditors who signed the forbearance agreement described below.
Because of financial difficulty in prior years, the Company was unable to
pay its vendors within their normal terms. In January 2000, the Company assisted
certain key creditors in forming a creditors committee to negotiate a payment
plan for the Company's payables to its unsecured creditors. In the first quarter
of 2000, the creditors committee signed a forbearance agreement on behalf of all
general unsecured creditors of the Company whereby the committee agreed until
December 31, 2001 to forbear from exercising any remedies they may have against
the Company as a result of their status as unsecured creditors. Although the
creditors committee has entered into the forbearance agreement, there can be no
assurance that all of the creditors will sign the agreement. The committee has
agreed to use good-faith efforts to contact any creditor who engages in
collection efforts against the Company and solicit such creditor to be bound by
the terms of the forbearance agreement. The forbearance agreement provides for a
100% payment plan through December 31, 2001 to the creditors who sign the
forbearance agreement.
As of April 30, 2000 the Company entered into forbearance agreements or
settled the payables with creditors in the aggregate amount of approximately
$4.8 million and has made payments to these creditors according to the
forbearance agreement in the amount of approximately $1.9 million.
The Company estimates the original total payables exceeding normal terms
before payments noted above was approximately $7.0 million. There can be no
assurance that the remaining creditors will sign the forbearance agreement or
that payments can continue to be made under the payment plan to creditors or
that creditor actions will not cause production interruptions, which would have
a material adverse effect on the Company.
As of March 31, 2000, the Company was $1,100,000 in arrears on the payment
of dividends on its Series B Preferred Stock. The Preferred Stock provides for
an annual dividend of $400,000, payable in quarterly installments.
The Company's ability to continue operations is dependent on its ability to
generate sufficient cash flow to meet its current obligations as they become
due, to comply with the payment terms of the forbearance agreement, to comply
with the terms and conditions of the loan facility, maintain adequate gross
margins, and attain sales and profitable operating levels.
10
<PAGE>
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
On November 2, 1998, a class action and derivative lawsuit was filed by the
stockholders (on behalf of themselves and the Company) in the Delaware Court of
Chancery in and for New Castle County alleging that the defendant members of the
Board of Directors breached their fiduciary duties to the Company and failed to
disclose certain information in the Company's 1998 Proxy Statement. Plaintiffs
seek injunctive relief, unspecified damages to the shareholders and restitution
of unspecified profits to the Company. Plaintiffs also seek a rescission of all
actions approved by stockholders at the November 2, 1998 Annual Meeting and
demand a revised Proxy Statement. Any monetary judgment resulting from
Plaintiffs' derivative claims would accrue to the benefit of the Company. The
Company believes the lawsuit is without merit and will defend the action in the
best interest of the stockholders.
Dominic LaRosa, the Company's former President and CEO - Lamaur Division,
commenced an arbitration action against the Company in January of 2000,
asserting a claim for severance payments. Mr. LaRosa's employment with the
Company terminated on April 15, 1999. Mr. LaRosa alleges that he entered into a
severance agreement with the Company on July 7, 1997 and that this severance
agreement provided for certain payments in the event of an Involuntary
Termination (as defined in the severance agreement) of his employment within 24
months of a Change of Control (as defined in the severance agreement) of the
Company. Mr. LaRosa alleges that he was the subject of an Involuntary
Termination within 24 months of a Change of Control and that he is entitled to
receive severance payments from the Company. He is seeking an award of: one and
one-half times his most recent annual full-time base compensation at the
Company; medical, dental and basic life insurance benefits for the shorter of
eighteen months from his termination or when new insurance is obtained from a
new employer; moving expenses of up to 25% of his most recent annual full-time
base compensation at the Company; a low interest rate loan of up to one and
one-half times his most recent annual full-time base compensation at the
Company; and unspecified attorney's fees and costs. The Company has answered the
arbitration demand and has denied that it is liable to LaRosa for severance
payments. Among other things, the Company has denied that there was a Change of
Control as defined in the severance agreement. The arbitration proceeding is at
an early stage and no discovery has been taken. The Company intends to
vigorously defend this claim.
Ronald Williams, the Company's former Executive Vice President - Lamaur
Division, commenced an arbitration action against the Company on March 17, 2000.
Mr. Williams' arbitration demand does not specify the details of his claim.
Prior to instituting the arbitration action, however, Mr. Williams sent
correspondence to the Company, in which he demanded payment of severance
benefits under a severance agreement that he entered into with the Company on
July 1, 1997. Mr. Williams resigned his employment with the Company on February
29, 2000. The severance agreement entered into between Mr. Williams and the
Company provided for certain payments in the event of an Involuntary Termination
(as defined in the severance agreement) of his employment within 24 months of a
Change of Control (as defined in the severance agreement) of the Company. Mr.
Williams alleges that he was the subject of an Involuntary Termination within 24
months of a Change in Control and that he is entitled to receive severance
payments from the Company. He is seeking an award of: one and one-half times his
most recent annual full-time base compensation at the Company; medical, dental
and basic life insurance benefits for the shorter of eighteen months from his
termination or when new insurance is obtained from a new employer; moving
expenses of up to 25% of his most recent annual full-time base compensation at
the Company; a low interest rate loan of up to one and one-half times his most
recent annual full-time base compensation at the Company; and unspecified
attorneys' fees and costs. The Company intends to vigorously defend this claim.
This arbitration proceeding is at an early stage. No answer has yet been filed,
no discovery has been taken, and no dates have been established.
On February 3, 2000, Donald E. Porter, the Company's former Vice President
- - Corporate Development, filed a Demand for Arbitration with the American
Arbitration Association alleging that the Company failed to pay him severance
pay in accordance with the Employee Severance Agreement ("Agreement"), executed
on July 1, 1997. Mr. Porter also alleges that the Company failed to reimburse
him for approved expenses. Mr. Porter is seeking $237,878.96 in damages for
breach of the severance agreement, $4,273.38 for unreimbursed and approved
expenses, since paid, $6,250.00 for repurchase of stock and unspecified amounts
for costs of arbitration, attorneys fees and interest on the above. The Company
has responded to Mr. Porter's Demand for Arbitration and intends to vigorously
defend this claim.
11
<PAGE>
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
Item 3. DEFAULTS UPON SENIOR SECURITIES
On March 31, 2000, the Company failed to pay a dividend of $100,000 on
its Series B Preferred Stock and is in arrears in the aggregate amount of
$1,100,000.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
Item 5. OTHER INFORMATION
None.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
27 Financial Data Schedule
(b) Reports on Form 8-K:
None
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.
THE LAMAUR CORPORATION
(Registrant)
/s/ John D. Hellmann
DATE: May 12, 2000 JOHN D. HELLMANN
Vice President - Chief Financial Officer
(Principal Financial and Accounting Officer)
12
<PAGE>
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<PERIOD-START> Jan-01-2000
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