UNITED STATES
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, 1998
Commission File Number 0-21703
STYLING TECHNOLOGY CORPORATION
------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 75-2665378
------------------------------ -------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2390 EAST CAMELBACK ROAD, SUITE 435
PHOENIX, ARIZONA 85016
- ---------------------------------------- ----------
(address of principal executive offices) (zip code)
(602) 955-3353
----------------------------------------------------
(registrant's telephone number, including area code)
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 [ ]
The number of shares of the issuer's class of capital stock as of the latest
practicable date, is as follows:
4,034,703 shares of Common Stock, $.0001 par value, as of May 14, 1998.
- -----------------------------------------------------------------------
<PAGE>
STYLING TECHNOLOGY CORPORATION
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1998
TABLE OF CONTENTS
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
December 31, 1997 and March 31, 1998 ......................... 3
Condensed Consolidated Statements of Operations -
Three Months ended March 31, 1997 and March 31, 1998 ......... 4
Condensed Consolidated Statements of Cash Flows -
Three months ended March 31, 1997 and March 31, 1998.......... 5
Notes to Condensed Consolidated Financial Statements.............. 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............................. 7
PART II. OTHER INFORMATION................................................ 12
Item 1. Legal Proceedings................................................. 12
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
2
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
STYLING TECHNOLOGY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 1998 AND DECEMBER 31, 1997
December 31, March 31,
1997 1998
----------- -----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 3,063,000 $ 2,528,000
Accounts receivable, net of allowance for doubtful
accounts of $1,032,000 at December 31, 1997 and
$1,803,000 at March 31, 1998 14,296,000 15,605,000
Inventories, net 10,951,000 10,604,000
Prepaid expenses and other current assets 2,120,000 2,268,000
----------- -----------
Total current assets 30,430,000 31,005,000
PROPERTY AND EQUIPMENT, net 2,640,000 3,010,000
GOODWILL AND OTHER 59,419,000 60,271,000
----------- -----------
Total assets $92,489,000 $94,286,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 7,065,000 $ 4,841,000
Accrued liabilities 3,832,000 4,698,000
Current portion of long-term debt and other 5,647,000 8,228,000
----------- -----------
Total current liabilities 16,544,000 17,767,000
----------- -----------
LONG-TERM DEBT AND OTHER, less current portion 47,377,000 46,462,000
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.0001 par value, 1,000,000 shares
authorized, no shares issued and outstanding -- --
Common stock, $.0001 par value, 10,000,000 shares
authorized, 4,756,554 shares issued and 3,948,703
outstanding at December 31, 1997; and 4,034,703
outstanding at March 31, 1998 1,000 1,000
Additional paid-in capital 27,875,000 27,925,000
Retained earnings 2,492,000 3,931,000
Treasury stock (1,800,000) (1,800,000)
----------- -----------
Total stockholders' equity 28,568,000 30,057,000
----------- -----------
Total liabilities and stockholders' equity $92,489,000 $94,286,000
=========== ===========
The accompanying notes are an integral part of these
condensed consolidated balance sheets.
3
<PAGE>
STYLING TECHNOLOGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997 AND MARCH 31, 1998
Three Months Three Months
Ended Ended
March 31, March 31,
1997 1998
---------- -----------
NET SALES $7,479,000 $16,225,000
COST OF SALES 3,234,000 7,042,000
---------- -----------
Gross profit 4,245,000 9,183,000
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 2,398,000 5,395,000
---------- -----------
Income from operations 1,847,000 3,788,000
INTEREST EXPENSE AND OTHER, NET 60,000 1,264,000
---------- -----------
Income before income taxes 1,787,000 2,524,000
PROVISION FOR INCOME TAXES 733,000 1,085,000
---------- -----------
Net income $1,054,000 $ 1,439,000
========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 3,949,000 3,971,000
========== ===========
Diluted 4,117,000 4,278,000
========== ===========
NET INCOME PER COMMON SHARE:
Basic $ .27 $ .36
========== ===========
Diluted $ .26 $ .34
========== ===========
The accompanying notes are an integral part of these
condensed consolidated financial statements.
4
<PAGE>
STYLING TECHNOLOGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1997 AND MARCH 31, 1998
Three Months Three Months
Ended Ended
March 31, March 31,
1997 1998
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,054,000 $ 1,439,000
Adjustments to reconcile net income to net
cash used in Operating activities
Depreciation and amortization 252,000 865,000
Interest accretion on note payable 43,000 44,000
Changes in certain assets and liabilities:
Accounts receivable (2,477,000) (1,309,000)
Inventory (520,000) 347,000
Prepaids and other assets (432,000) (448,000)
Accounts payable and accrued liabilities 356,000 (1,411,000)
----------- -----------
Net cash used in operating activities (1,724,000) (473,000)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of acquired businesses (350,000) --
Purchase of property, plant & equipment (102,000) (341,000)
Change in investments, long-term
receivables & other -- (886,000)
----------- -----------
Net cash used in investing activities (452,000) (1,227,000)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from credit facility, net of -- 1,940,000
financing costs
Exercise of stock options -- 50,000
Repayment of notes payable and credit facility (22,000) (825,000)
----------- -----------
Net cash provided by (used in) financing
activities (22,000) 1,165,000
----------- -----------
DECREASE IN CASH AND CASH EQUIVALENTS (2,198,000) (535,000)
CASH AND CASH EQUIVALENTS, beginning of period 4,492,000 3,063,000
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 2,294,000 $ 2,528,000
=========== ===========
The accompanying notes are an integral part of these
condensed consolidated financial statements.
5
<PAGE>
STYLING TECHNOLOGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The consolidated financial statements included herein have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission.
The statements presented do not include all information and footnotes required
to be in conformity with generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring adjustments) considered necessary for a fair presentation
have been included. Results of operations in interim periods are not necessarily
indicative of results for a full year. These consolidated financial statements
and notes thereto should be read in conjunction with Styling Technology
Corporation's (the Company) consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1997. The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions. Such estimates and assumptions affect the reported amounts of
assets and liabilities as well as disclosure of contingent assets and
liabilities at the date of the accompanying consolidated financial statements,
and the reported amounts of the revenues and expenses during the reporting
periods. Actual results could differ from those estimates.
NOTE 2. INVENTORY
Inventories, net, consist of the following at:
March 31, December 31,
1998 1997
---------- ----------
Raw materials & work-in-process $ 2,602,000 $ 2,594,000
Finished goods 8,002,000 8,357,000
----------- -----------
$10,604,000 $10,951,000
=========== ===========
NOTE 3. INTEREST RATE PROTECTION
The Company's credit facility requires the Company to enter into certain
interest rate protection instruments on a portion of its floating rate debt. As
of March 31, 1998, the Company has entered into interest rate swap and interest
rate cap agreements (the Agreements) to reduce the impact of changes in interest
rates on its floating rate long-term debt. The Company is exposed to a risk of
credit loss in the event of nonperformance by financial institutions that are
also party to the Agreements. However, management believes that, based on high
creditworthiness of these counterparties, nonperformance is unlikely. The
following is a summary of the Company's Agreements as of March 31, 1998:
6
<PAGE>
1998
-------------------------------------------------------------------------
Company's Notional Value
Instrument Effective Rate (dollars in thousands)
---------- -------------- ----------------------
Swap 8.50% $12,500
Cap 10.25% 12,500
-------
$25,000
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NOTE 4. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard No. 128, (SFAS No. 128), EARNINGS PER
SHARE, which supersedes Accounting Principles Board Opinion No. 15. SFAS No. 128
modifies calculation of primary and fully diluted earnings per share (EPS) and
replaces them with basic and diluted EPS. SFAS No. 128 is effective for
financial statements for both interim and annual periods presented after
December 15, 1997, and as a result, all prior-period EPS data presented herein
has been restated.
In June 1997, the FASB issued SFAS No. 130, REPORTING COMPREHENSIVE INCOME. SFAS
No. 130 establishes standards for reporting and display of comprehensive income
and its components (revenues, gains, and losses) in a full set of
general-purpose financial statements. This statement is effective for financial
statement periods beginning after December 15, 1997. The adoption of SFAS No.
130 did not have a material impact on the Company's financial position or
results of operations.
In June 1997, the FASB issued SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF AN
ENTERPRISE AND RELATED INFORMATION, which supersedes SFAS No. 14, FINANCIAL
REPORTING FOR SEGMENTS OF A BUSINESS ENTERPRISE. SFAS No. 131 establishes
standards for the way that public business enterprises report information about
operating segments in annual financial statements and requires that those
enterprises report selected information about operating segments in interim
financial reports issued to stockholders. It also establishes standards for
related disclosures about products and services, geographic areas, and major
customers. This statement is effective for financial statement periods beginning
after December 15, 1997. However, SFAS No. 131 need not be applied to interim
financial statements in the initial year of adoption.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
INTRODUCTION
Styling Technology Corporation (the Company) develops, produces, and markets
high-end professional salon products, including hair care, nail care, and skin
and body care products as well as salon appliances and salonwear. The Company
sells its products primarily to beauty and tanning supply distributors and, to a
lesser extent, directly to spas, resorts, health and country clubs, beauty salon
chains, and hair, nail and tanning salons throughout the United States as well
as in Canada, Europe, Argentina, Australia, and New Zealand. The Company offers
a diversified line of well-established, brand-name professional salon products
that have been popular in the professional salon products industry for more than
10 years.
7
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The Company was founded in June 1995 and commenced operations on November 26,
1996. On that date, simultaneous with the consummation of an initial public
offering, the Company acquired four professional salon products businesses (the
Acquired Businesses) that, on a combined basis, have a diversified line of
well-established, brand-name salon products. In March 1997, the Company acquired
the Utopia line of premium tanning products from Creative Laboratories, Inc.
Effective June 26, 1997, the Company acquired U.K. ABBA Products, Inc. (ABBA), a
producer and marketer of an aromatherapy-based line of hair products, for
$20,000,000. Effective December 1, 1997, the Company acquired the Clean + Easy
and One Touch (Clean + Easy / One Touch) product lines of Inverness Corporation
and Inverness (UK) Limited, consisting of salon and retail hair removal
apparatus and products marketed under the "Clean + Easy" and "One Touch" brand
names for $20,000,000.
Except for the historical information contained herein, the discussion in this
Quarterly Report contains or may contain forward-looking statements that involve
risks and uncertainties. The Company's actual results could differ materially
from those discussed here. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed herein, as well as
those factors discussed under "Special Considerations" contained in Item 1 of
the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1997. Historical results are not necessarily indicative of operating results for
any future period.
RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 1998
The Company earned net income of $1.4 million, or $0.34 per share, for the three
months ended March 31, 1998 as compared to net income of $1.1 million, or $0.26
per share, for the corresponding period during 1997. The Company attributes the
improvement in net income during the three months ended March 31, 1998 primarily
to the contributions of ABBA and Clean + Easy / One Touch, both of which were
acquired during 1997, as well as to growth in the Company's existing operations.
NET SALES
Net sales amounted to $16.2 million for the three months ended March 31, 1998,
compared to net sales of $7.5 million for the three months ended March 31, 1997.
The $8.7 million, or 117%, increase in sales was due primarily to the additions
of ABBA and Clean + Easy / One Touch, acquired in June and December, 1997,
respectively. Sales growth was also attributable to increased sales in the
Company's existing brands, which was in excess of 10% on a consolidated basis.
In particular, the Company's Body Drench brand experienced strong sales growth
as compared to the same period in 1997 primarily as a result of strong demand
for the Company's full line of tanning products, which was introduced in new
packaging in the fourth quarter of 1997. The Company's ABBA brand also
experienced significant sales growth as compared to 1997 due to favorable
changes in its exclusive distribution network, which resulted in a shift to
larger distributors with higher sales volume.
COST OF SALES
Cost of sales amounted to $7.0 million, or 43% as a percentage of net sales, for
the three months ended March 31, 1998, compared to $3.2 million, or 43% as a
percentage of the net sales, for the three months ended March 31, 1997. As a
result of the foregoing, the Company realized gross profit for the three months
ended March 31, 1998 of $9.2 million, or 57%, compared to $4.2 million, or 57%,
realized by the Company during the corresponding period in 1997. The Company's
ability to sustain this favorable gross margin percentage is attributable
primarily to maintaining the cost of goods levels negotiated with third-party
8
<PAGE>
suppliers during 1997. In addition, gross margins associated with the ABBA and
Clean + Easy / One Touch brands, after renegotiation of pricing with third-party
manufacturers at ABBA and cost savings from the shift from domestic to offshore
manufacturing for the Clean + Easy / One Touch hair removal appliances, were
generally consistent with the consolidated gross margin of the Company's
existing brands.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES
Selling, general, and administrative expenses were $5.4 million for the three
months ended March 31, 1998 compared to $2.4 million for the three months ended
March 31, 1997. The increase in selling, general, and administrative expenses
was primarily due to expenses added as result of the ABBA and Clean + Easy / One
Touch acquisitions as well as increased selling, general, and administrative
expenses incurred to strengthen the Company's infrastructure to support its
acquisition and growth strategy. Selling, general, and administrative expenses,
as a percentage of net sales, remained relatively consistent at 33% of net sales
for the three months ended March 31, 1998 compared to 32% of net sales for the
three months ended March 31, 1997 as the Company controlled increases in
selling, general, and administrative expenses at levels commensurate with
increases in sales.
PROVISION FOR INCOME TAXES
The provision for income taxes for the three months ended March 31, 1998
amounted to $1.1 million, which represents an effective tax rate of
approximately 43%, compared with a provision of $733,000, which represents an
effective tax rate of approximately 41% for the three months ended March 31,
1997. The higher effective tax rate for the quarter ended March 31, 1998 is
attributable primarily to the income tax effect of goodwill, which is not
deductible for income tax purposes, associated with the ABBA acquisition.
INCOME FROM OPERATIONS AND EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION &
AMORTIZATION (EBITDA)
Income from operations was $3.8 million for the three months ended March 31,
1998, compared to $1.8 million for the three months ended March 31, 1997.
Earnings before interest, taxes, depreciation, and amortization (EBITDA) was
$4,569,000 for the three months ended March 31, 1998, compared to $2,100,000 for
the three months ended March 31, 1997. EBITDA is not intended to represent net
cash provided by operating activities as defined by generally accepted
accounting principles and should not be considered as an alternative to net
income as an indicator of operating performance or to net cash provided by
operating activities as a measure of liquidity. The Company believes EBITDA is a
measure commonly reported and widely used by analysts, investors, and other
interested parties who monitor business performance. Accordingly, this
information has been disclosed herein to permit a more complete comparative
analysis of the Company's operating performance.
SEASONALITY
The Company has experienced moderate seasonality in quarterly operating results
due mainly to the effect of the seasonality of the indoor tanning season on the
operating result of the Body Drench and Suntopia product lines. The Company
expects the seasonal effect of Body Drench and Suntopia sales to lessen over
time as the Company continues to pursue its acquisition strategy.
9
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LIQUIDITY AND CAPITAL RESOURCES
During the three months ended March 31, 1998, the Company's investment in
accounts receivable increased by $1.3 million as a result of a corresponding
growth in sales for the quarter, as well as significant sales during March in
the Company's ABBA and Body Drench brands resulting from favorable customer
responses to promotional programs. The Company also used cash from operations to
achieve a net reduction in accounts payable and accrued liabilities of $1.4
million. The reduction of accounts payable and accrued liabilities during the
period relates primarily to the payment of liabilities assumed in the Clean +
Easy / One Touch acquisition as well as related accrued acquisition and offering
costs. As a result of these factors, which offset net income of $1.4 million and
noncash expenditures of $865,000, the Company recorded net cash used in
operations of $473,000 for the quarter ended March 31, 1998.
The Company repaid $825,000 of term loan amortization under its credit facility
and utilized net proceeds from its working capital line of credit of $1.9
million during the quarter ended March 31, 1998. As a result, net cash provided
by financing activities for the quarter amounted to $1.2 million and, along with
cash on hand, was utilized to fund net cash used in investing activities of $1.2
million as well as operating cash requirements as discussed above.
As a result of the foregoing, the Company's working capital position decreased
slightly to $13.2 million at March 31, 1998 from $13.9 million at December 31,
1997.
In December 1997, the Company entered into a seven-year, $75.0 million senior
credit facility (the Credit Facility) with a group of banks for whom Credit
Agricole Indosuez acted as agent. $50.0 million of the Credit Facility was
issued to pay for the acquisition, acquisition fees, and the payoff of the
Company's previous credit facility. The Credit Facility consists of four
separate loans: a $25.0 million Term Loan A, a $25.0 million Term Loan B, a
$12.5 million acquisition term loan, and a $12.5 million revolving line of
credit. The principal and interest on the Credit Facility is paid quarterly and
the interest rate is determined by the base rate (the "Base Rate") as defined in
the credit agreement. The Base Rate is equal to the higher of (i) the Federal
Funds Rate plus 0.5%, or (ii) the Credit Agricole Indosuez prime lending rate.
Term Loan A bears interest at the Base Rate plus 1.0%, and matures in December
2002. Term Loan B bears interest at the Base Rate plus 1.5%, and matures in
December 2004. The revolving line of credit bears interest at the Base Rate plus
1.0% and expires in December 2002. The revolving line of credit will be used for
working capital purposes. As of March 31, 1998, there was $2.5 million
outstanding under the revolving line of credit. The Company had, and
consequently exercised, the option after January 9, 1998 to convert the interest
rates relating to any of the loans to a LIBOR rate. Under this option, Term Loan
A bears interest at the LIBOR rate plus 2.5%; Term Loan B bears interest at the
LIBOR rate plus 3.0%; and the revolving line of credit bears interest at the
LIBOR rate plus 2.5%. The Company converted all of Term Loans A and B except the
amount required as principal payment for each due March 31, 1998. The Company
may utilize the acquisition term loan in connection with funding future
acquisitions.
The Company's Credit Facility requires the Company to enter into certain
interest rate protection instruments on a portion of its floating rate debt. As
of March 31, 1998, the Company has entered into interest rate swap and interest
rate cap agreements to reduce the impact of changes in interest rates on its
floating rate long-term debt.
10
<PAGE>
The Company's line of credit, current cash resources, and expected cash flows
from operations are expected to be sufficient to fund the Company's capital
needs during the next twelve months at its current level of operations, apart
from capital needs resulting from acquisitions. However, the Company may be
required to obtain additional capital to fund its planned growth. The Company
plans to pursue strategic acquisitions to capitalize on the substantial
fragmentation and growth potential existing in the professional salon products
industry. The Company intends to fund its future capital needs through a
combination of current cash resources, expected cash flows from operations, bank
financing, seller notes payable, issuance of common stock, and additional public
or private debt or equity financing. The availability of such capital resources
cannot be assured and is dependent upon prevailing market conditions, interest
rates, and the financial condition of the Company.
YEAR 2000 COMPLIANCE
Many currently installed computer systems and software products are coded to
accept only two-digit entries in the date code field. Beginning in the year
2000, these date code fields will need to accept four-digit entries to
distinguish 21st century dates from 20th century dates. As a result, in fewer
than two years, computer systems and software used by many companies may need to
be upgraded to comply with such "Year 2000" requirements. Significant
uncertainty exists concerning the potential effects associated with such
compliance. The Company has assessed and continues to assess the impact the Year
2000 issue will have on its reporting and operating systems. The Company is
addressing the Year 2000 issue by upgrading to a new release of its key
operating and financial software system, which will be Year 2000 compliant. The
Company will test the new system for Year 2000 compliance when the system is
upgraded. In addition, during 1998 the Company intends to assess the impact any
Year 2000 compliance problems suffered by its customers, third-party contract
manufacturers, and suppliers may have on the Company. Although the Company does
not anticipate that the Year 2000 issue will have a significant impact on its
business, any significant Year 2000 compliance problem of any of the Company,
its customers, or its third-party contract manufacturers or suppliers could have
a material adverse effect on the Company's business, financial condition, and
results of operations.
11
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS.
11.1 Statement regarding computation of basic earnings per share
11.2 Statement regarding computation of diluted earnings per share
27 Financial Data Schedule
- ----------
(b) REPORT ON FORM 8-K.
Pursuant to an Asset Purchase Agreement dated as of December 1, 1997,
the Registrant acquired certain assets and liabilities of Inverness Corporation,
as reported on Form 8-K dated December 10, 1997 and Form 8-K/A dated February
25, 1998.
12
<PAGE>
SIGNATURES
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.
STYLING TECHNOLOGY CORPORATION
Dated: May 14, 1998 By: /s/ Richard R. Ross
-----------------------------------------
Richard R. Ross
Chief Financial Officer, Treasurer, and
Secretary (Duly authorized officer of the
registrant, principal financial and
accounting officer)
13
EXHIBIT 11.1
COMPUTATION OF BASIC EARNINGS PER SHARE
Three Months Three months
Ended Ended
March 31, March 31,
1997 1998
------------ ------------
Weighted average number of common
shares outstanding 3,948,703 3,971,047
Net income $1,054,000 $1,439,000
========== ==========
Basic earnings per share $ 0.27 $ 0.36
========== ==========
EXHIBIT 11.2
COMPUTATION OF DILUTED EARNINGS PER SHARE
Three Months Three months
Ended Ended
March 31, March 31,
1997 1998
------------ ------------
Weighted average number of common
shares outstanding 3,948,703 3,971,047
Additional shares assuming conversion
of stock options and warrants (1) 167,833 307,421
Weighted average shares outstanding 4,116,536 4,278,468
========== ==========
Net income $1,054,000 $1,439,000
========== ==========
Diluted earnings per share $ 0.26 $ 0.34
========== ==========
(1) Calculated using the Treasury Stock method.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 2,528
<SECURITIES> 0
<RECEIVABLES> 15,605
<ALLOWANCES> 1,803
<INVENTORY> 10,604
<CURRENT-ASSETS> 31,005
<PP&E> 3,010
<DEPRECIATION> 0
<TOTAL-ASSETS> 94,286
<CURRENT-LIABILITIES> 17,767
<BONDS> 0
0
0
<COMMON> 1
<OTHER-SE> 30,056
<TOTAL-LIABILITY-AND-EQUITY> 94,286
<SALES> 16,225
<TOTAL-REVENUES> 16,225
<CGS> 7,042
<TOTAL-COSTS> 12,437
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,264
<INCOME-PRETAX> 2,524
<INCOME-TAX> 1,085
<INCOME-CONTINUING> 1,439
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> 1,439
<EPS-PRIMARY> 0.36
<EPS-DILUTED> 0.34
</TABLE>
