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:
June 30, 1996
-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 June 30, 1996, there were 11,034,700 shares of Class A common stock
outstanding and 16,766,240 shares of Class B common stock outstanding.
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<PAGE>
PART I
<TABLE>
<CAPTION>
ITEM 1. FINANCIAL STATEMENTS
ALBERTO-CULVER COMPANY AND SUBSIDIARIES
Consolidated Statements of Earnings
Three Months Ended June 30, 1996 and 1995
(dollar amounts in thousands, except per share figures)
(Unaudited)
1996 1995
<S> <C> <C>
Net sales .......................................................... ................................ $415,554 357,678
Costs and expenses:
Cost of products sold .......................................................................... 208,526 180,590
Advertising, promotion, selling and administrative ............................................. 177,394 152,880
Interest expense, net of interest income of $487
in 1996 and $686 in 1995 ................................................................... 3,416 2,393
-------- --------
Total costs and expenses ....................................................................... 389,336 335,863
-------- --------
Earnings before provision for income taxes .......................................................... 26,218 21,815
Provision for income taxes .......................................................................... 9,766 8,181
-------- --------
Net earnings ........................................................................................ $ 16,452 13,634
======== ========
Net earnings per share of common stock:
Primary ........................................................................................ $ .58 .49
======== ========
Fully-diluted .................................................................................. $ .55 .49
======== ========
Cash dividends paid per share ....................................................................... $ .09 .08
======== ========
See notes to consolidated financial statements.
</TABLE>
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<PAGE>
ALBERTO-CULVER COMPANY AND SUBSIDIARIES
Consolidated Statements of Earnings
Nine Months Ended June 30, 1996 and 1995
(dollar amounts in thousands, except per share figures)
<TABLE>
<CAPTION>
(Unaudited)
1996 1995
<S> <C> <C>
Net sales ........................................................................................... $1,159,338 993,360
Costs and expenses:
Cost of products sold ....................................................................... 587,328 497,735
Advertising, promotion, selling and administrative .......................................... 494,192 461,733
Interest expense, net of interest income of $2,901
in 1996 and $1,717 in 1995 ............................................................... 8,024 4,597
---------- ----------
Total costs and expenses .................................................................... 1,089,544 934,065
---------- ----------
Earnings before provision for income taxes .......................................................... 69,794 59,295
Provision for income taxes .......................................................................... 25,998 22,236
---------- ----------
Net earnings ........................................................................................ $ 43,796 37,059
========== ==========
Net earnings per share of common stock:
Primary ..................................................................................... $ 1.55 1.33
========== ==========
Fully-diluted ............................................................................... $ 1.48 1.33
========== ==========
Cash dividends paid per share ....................................................................... $ .26 .23
========== ==========
See notes to consolidated financial statements.
</TABLE>
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<PAGE>
ALBERTO-CULVER COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
June 30, 1996 and September 30, 1995
(dollar amounts in thousands, except per share figures)
<TABLE>
<CAPTION>
(Unaudited)
June 30, September 30,
1996 1995
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ................................................................. $ 65,037 142,585
Short-term investments .................................................................... 4,000 4,400
Receivables, less allowance for doubtful
accounts ($8,167 at 6/30/96 and $5,663 at 9/30/95) ..................................... 120,162 128,482
Inventories (Note 3) ...................................................................... 282,880 248,529
Other current assets ...................................................................... 14,634 12,549
--------- ---------
Total current assets ................................................................... 486,713 536,545
--------- ---------
Property, plant and equipment at cost, less accumulated
depreciation ($140,908 at 6/30/96 and $128,243 at 9/30/95) ................................ 174,228 157,791
Goodwill, net ................................................................................ 104,541 55,225
Trade names and other intangible assets, net ................................................. 77,527 34,198
Other assets ................................................................................. 35,218 31,327
--------- ---------
Total assets .............................................................................. $ 878,227 815,086
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt and short-term borrowings ............................ $ 5,089 1,389
Accounts payable .......................................................................... 134,009 144,253
Accrued expenses .......................................................................... 113,286 76,141
Income taxes .............................................................................. 14,332 13,056
--------- ---------
Total current liabilities .............................................................. 266,716 234,839
--------- ---------
Long-term debt ............................................................................... 84,798 83,094
Convertible subordinated debentures .......................................................... 100,000 100,000
Deferred income taxes ........................................................................ 8,670 15,365
Other liabilities ............................................................................ 11,596 10,885
Stockholders' equity:
Common stock, par value $.22 per share:
Class A authorized 25,000,000 shares; issued 13,262,624 shares ......................... 2,918 2,918
Class B authorized 25,000,000 shares; issued 20,944,424 shares ......................... 4,608 4,608
Additional paid-in capital ................................................................ 88,818 87,896
Retained earnings ......................................................................... 374,080 337,506
Foreign currency translation .............................................................. (15,371) (12,966)
--------- ---------
455,053 419,962
Less treasury stock at cost (Class A common shares: 2,227,924 at 6/30/96 and
2,299,618 at 9/30/95; Class B common shares:
4,178,184 at 6/30/96 and at 9/30/95) ................................................... 48,606 49,059
--------- ---------
Total stockholders' equity .......................................................... 406,447 370,903
--------- ---------
Total liabilities and stockholders' equity .......................................... $ 878,227 815,086
========= =========
See notes to consolidated financial statements.
</TABLE>
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<PAGE>
ALBERTO-CULVER COMPANY AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Nine Months Ended June 30, 1996 and 1995
(dollar amounts in thousands)
<TABLE>
<CAPTION>
(Unaudited)
1996 1995
Cash Flows from Operating Activities:
<S> <C> <C>
Net earnings ............................................................................................. $ 43,796 37,059
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization ....................................................................... 23,711 17,828
Other, net .......................................................................................... 2,849 2,181
Cash effects of changes in:
Receivables, net .................................................................................. 2,916 (13,597)
Inventories ....................................................................................... (3,136) (22,357)
Other current assets .............................................................................. (1,041) (3,239)
Accounts payable and accrued expenses ............................................................. (7,030) 23,183
Income taxes ...................................................................................... (1,236) 2,776
--------- ---------
Net cash provided by operating activities ........................................................... 60,829 43,834
--------- ---------
Cash Flows from Investing Activities:
Short-term investments ................................................................................... 400 (1,656)
Capital expenditures ..................................................................................... (30,794) (17,939)
Payments for purchased businesses, net of acquired companies' cash ....................................... (127,864) (41,859)
Other, net ............................................................................................... (4,161) (5,509)
--------- ---------
Net cash used by investing activities ................................................................. (162,419) (66,963)
--------- ---------
Cash Flows from Financing Activities:
Short-term borrowings .................................................................................... (791) 40
Proceeds from long-term debt ............................................................................. 6,923 43,552
Repayments of long-term debt ............................................................................. (5,126) (625)
Sale of trade accounts receivable ........................................................................ 30,000 --
Cash dividends paid ...................................................................................... (7,221) (6,372)
Cash proceeds from exercise of stock options ............................................................. 1,382 611
Stock purchased for treasury ............................................................................. (685) --
--------- ---------
Net cash provided by financing activities ................................................................. 24,482 37,206
--------- ---------
Effect of foreign exchange rate changes on cash .......................................................... (440) (913)
--------- ---------
Net increase (decrease) in cash and cash equivalents ..................................................... (77,548) 13,164
Cash and cash equivalents at beginning of period ......................................................... 142,585 41,833
--------- ---------
Cash and cash equivalents at end of period ............................................................... $ 65,037 54,997
========= =========
See notes to consolidated financial statements.
</TABLE>
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<PAGE>
ALBERTO-CULVER COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) The consolidated financial statements in this report have not been
examined by independent public accountants, except for balance sheet
information presented at September 30, 1995. However, in the opinion of
the company, the consolidated financial statments reflect all adjustments,
which include only normal adjustments, necessary to present fairly the
data contained therein. The results of operations for the periods not
covered are not necessarily indicative of results for a full year.
(2) Primary earnings per share are based on the weighted average shares
outstanding, including common stock equivalents, of 28,302,000 and
27,915,000 for the three months ended June 30,1996 and 1995, respectively,
and 28,186,000 and 27,839,000 for the nine months ended June 30, 1996 and
1995, respectively.
Fully diluted earnings per share are determined by dividing net earnings
before interest expense on the convertible subordinated debentures (net of
tax benefit) by the weighted average shares outstanding after giving
effect to common shares to be issued assuming conversion of the
convertible subordinated debentures to Class A common stock. Fully-
diluted weighted average shares outstanding were 31,511,000 and 27,915,000
for the three months ended June 30, 1996 and 1995, respectively, and
31,492,000 and 27,870,000 for the nine months ended June 30, 1996 and
1995, respectively.
(3) Inventories consist of the following:
(in thousands)
June 30, September 30,
1996 1995
Finished goods $245,756 211,224
Work-in-process 5,465 4,897
Raw materials 31,659 32,408
---------- ---------
$282,880 248,529
========== =========
(4) In prior years, the Consumer Products Division of Alberto-Culver USA
recorded certain promotional allowances that were shown as a deduction
from the list price reported on customer invoices as promotion expenses.
Effective October 1, 1995, the company changed its method of reporting to
a net sales basis thereby reducing sales and promotion expense by
$3,234,000 and $9,368,000 for the three and nine month periods ended June
30, 1996, respectively. This change had no effect on net income and prior
periods have not been restated due to immateriality. The change is in
conformity with industry practice and also provides management with
financial information that is consistent across other divisions of
Alberto-Culver USA and Alberto-Culver International.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS
QUARTER AND NINE MONTHS ENDED JUNE 30, 1996 VS. QUARTER AND NINE MONTHS
ENDED JUNE 30, 1995
The company achieved record net sales of $415.6 million in the third quarter of
fiscal year 1996, up $57.9 million or 16.2% over the comparable quarter of
fiscal year 1995. For the nine month period ending June 30, 1996, net sales
reached a new high of $1.16 billion, representing a 16.7% increase compared to
last year's nine month period.
Net earnings for the three months ended June 30, 1996 were also a record for the
third quarter at $16.5 million or 20.7% higher than the same period of the prior
year. Primary earnings per share of 58 cents were 9 cents or 18.4% higher than
the same period last year. Fully-diluted earnings per share were 55 cents, up 6
cents or 12.2% from the prior year. For the nine months ended June 30, 1996,
record net earnings of $43.8 million represented an increase of 16.5% from the
same period of the prior year. Primary earnings per share for the nine month
period were $1.55, 16.5% higher than the same period last year. Fully-diluted
earnings per share were $1.48 for nine months, an 11.3% increase from fiscal
1995.
The following table presents net sales information by business segment for the
third quarter and first nine months of fiscal years 1996 and 1995 (dollars in
millions):
THIRD QUARTER
Fiscal Year Dollar Percent
Net sales: ......................... 1996 1995 Change Change
Consumer products:
Alberto-Culver USA ............. $100.5 74.2 26.3 35.4%
Alberto-Culver International ... 119.0 107.4 11.6 10.8
------ ------ ----- ----
Total consumer products ........ 219.5 181.6 37.9 20.9
Specialty distribution - Sally ..... 199.0 178.2 20.8 11.7
Eliminations ....................... (2.9) (2.1) (0.8) (38.1)
------ ------ ----- ----
$415.6 357.7 57.9 16.2
====== ====== ===== ====
NINE MONTHS
Fiscal Year Dollar Percent
Net sales: ......................... 1996 1995 Change Change
Consumer products:
Alberto-Culver USA ............. $263.1 224.4 38.7 17.2%
Alberto-Culver International ... 332.3 259.5 72.8 28.1
-------- ------ ----- ----
Total consumer products ........ 595.4 483.9 111.5 23.0
Specialty distribution - Sally ..... 572.1 516.4 55.7 10.8
Eliminations ....................... (8.2) (6.9) (1.3) (18.8)
-------- ------ ----- ----
$1,159.3 993.4 165.9 16.7
======== ====== ===== ====
Compared to the same periods of the prior year, sales of Alberto-Culver USA
consumer products increased 35.4% and 17.2% for the current quarter and first
nine months of fiscal 1996, respectively. The increases primarily resulted from
the acquisition of St. Ives Laboratories, Inc. in February, 1996 which added
$30.6 million of sales to the third quarter and $51.1 million of sales to the
first nine months. These increases were partially offset by lower sales due to
the change in classification of certain off-invoice promotional allowances, as
discussed in Note 4 to the consolidated financial statements, amounting to $3.2
million for the third quarter and $9.4 million for the first nine months.
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<PAGE>
Sales of Alberto-Culver International consumer products increased 10.8% in the
third quarter and 28.1% in the first nine months compared to last year. The
fiscal 1996 increases primarily resulted from the acquisitions of the Toiletries
Division of Sweden-based Molnlycke AB in April, 1995 and St. Ives in February,
1996.
The "Specialty distribution-Sally" business segment experienced sales increases
of $20.8 million or 11.7% for the third quarter and $55.7 million or 10.8% for
the first nine months. The gains were attributable to Sally Beauty Company's
sales growth for established stores and the addition of 147 new stores since
June 30, 1995. Sally Beauty Company operates 1,597 beauty supply stores offering
a full range of salon care products.
Cost of products sold as a percent of net sales for the third quarter decreased
slightly to 50.2% from 50.5% last year. For the nine month period, cost of goods
sold as a percentage of sales increased to 50.7% for the nine month period from
50.1% in the same period of the prior year. Changes in product mix, the addition
of St. Ives' custom label business and higher raw material costs, along with the
reclassification of off-invoice promotional allowances as discussed in Note 4 to
the consolidated financial statements, contributed to the increase in the cost
of products sold percentage for the nine month period.
Compared to the prior year, advertising, promotion, selling and administrative
expenses rose 16.0% or $24.5 million for the current quarter and 14.5% or $62.5
million for the nine months ended June 30, 1996. The increases resulted from the
acquisitions of Molnlycke Toiletries in April, 1995 and St. Ives in February,
1996 along with higher selling and administrative costs associated with the
increase in the number of Sally Beauty Company stores, partially offset by lower
advertising and promotional expenditures for Alberto-Culver USA.
Advertising, promotion and market research expenditures totaled $57.3 million
and $152.6 million for the third quarter and first nine months of 1996,
respectively, versus $52.4 million and $140.3 million for the comparable periods
of the prior year. Excluding St. Ives, advertising, promotion and market
research expenditures in the current year decreased 1.1% for the third quarter.
Excluding Molnlycke Toiletries and St. Ives, advertising, promotion and market
research expenditures decreased 6.2% for the first nine months of fiscal year
1996. These decreases were primarily due to the reclassification of off-invoice
promotional allowances as discussed in Note 4 to the consolidated financial
statements.
Interest expense increased $823,000 or 26.7% for the third quarter and $4.6
million or 42.2% for the first nine months versus the comparable periods of last
year. The increases were primarily attributable to the $100 million of 5.5%
convertible subordinated debentures issued in July, 1995 and borrowings in
Sweden related to the Molnlycke Toiletries acquisition in April, 1995. The
increases were partially offset by the elimination of interest expense on $30
million of term loans retired in July, 1995. The increase in interest income of
$1.2 million for the nine months of 1996 resulted primarily from investing the
net proceeds of the convertible subordinated debentures.
The provision for income taxes as a percentage of earnings before income taxes
was 37.25% and 37.5% for the third quarter and first nine months of fiscal years
1996 and 1995, respectively.
FINANCIAL CONDITION
JUNE 30, 1996 VS. SEPTEMBER 30, 1995
Working capital of $220.0 million decreased $81.7 million from the September 30,
1995 balance of $301.7 million. The ratio of current assets to current
liabilities was 1.82 to 1.00 at June 30, 1996 compared to 2.28 to 1.00 at
September 30, 1995. Both working capital and the current ratio decreased
primarily as a result of the cash paid for the acquisition of St. Ives exceeding
the net working capital acquired.
Total borrowings increased $5.4 million during the first nine months of fiscal
year 1996. In January, 1996, the company entered into an agreement to sell,
without recourse, up to $30 million of a designated pool of trade receivables on
an ongoing basis. The agreement expires in one year and is renewable annually
upon mutual agreement of both parties. Costs related to this agreement are
included in administration expenses. At June 30, 1996, the company had unused
lines of credit with various banks of approximately $109 million.
Cash dividends paid on Class A and Class B common stock totaled $7.2 million or
26 cents per share for the first nine months of fiscal 1996 versus $6.4 million
or 23 cents per share for the same period of the prior year.
- 8 -
<PAGE>
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
27 Financial Data Schedule
(b) Reports on Form 8-K:
None.
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<PAGE>
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 & Controller
(Principal Financial Officer)
August 12, 1996
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet as of June 30, 1996 and the consolidated statement of
earnings for the nine months ended June 30, 1996 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000003327
<NAME> ALBERTO-CULVER COMPANY AND SUBSIDIARIES
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<EXCHANGE-RATE> 1.00
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> JUN-30-1996
<CASH> $ 65,037
<SECURITIES> 4,000
<RECEIVABLES> 128,329
<ALLOWANCES> 8,167
<INVENTORY> 282,880
<CURRENT-ASSETS> 486,713
<PP&E> 315,136
<DEPRECIATION> 140,908
<TOTAL-ASSETS> 878,227
<CURRENT-LIABILITIES> 266,716
<BONDS> 184,798
0
0
<COMMON> 7,526
<OTHER-SE> 398,921
<TOTAL-LIABILITY-AND-EQUITY> 878,227
<SALES> 1,159,338
<TOTAL-REVENUES> 1,159,338
<CGS> 587,328
<TOTAL-COSTS> 587,328
<OTHER-EXPENSES> 494,192
<LOSS-PROVISION> 4,310
<INTEREST-EXPENSE> 10,925
<INCOME-PRETAX> 69,794
<INCOME-TAX> 25,998
<INCOME-CONTINUING> 43,796
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 43,796
<EPS-PRIMARY> 1.55
<EPS-DILUTED> 1.48
</TABLE>
