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, 1997
-OR-
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1943
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
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(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 require-
ments for the past 90 days. YES X NO
At June 30, 1997, there were 22,582,462 shares of Class A common stock
outstanding and 33,532,480 shares of Class B common stock outstanding.
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<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS
- ------- --------------------
ALBERTO-CULVER COMPANY AND SUBSIDIARIES
Consolidated Statements of Earnings
Three Months Ended June 30, 1997 and 1996
(dollar amounts in thousands, except per share figures)
<TABLE>
<CAPTION>
(Unaudited)
-----------
1997 1996
---- ----
<S> <C> <C>
Net sales ................................................ $456,210 415,554
Costs and expenses:
Cost of products sold ................................ 226,734 208,526
Advertising, promotion, selling and administrative ... 196,797 177,394
Interest expense, net of interest income of $858
in 1997 and $487 in 1996 ........................ 2,066 3,416
----- -----
Total costs and expenses ............................. 425,597 389,336
------- -------
Earnings before provision for income taxes ............... 30,613 26,218
Provision for income taxes ............................... 11,403 9,766
------ -----
Net earnings ............................................. $ 19,210 16,452
======== ======
Net earnings per share of common stock (Notes 2 and 3)
Primary ....................................... $ .33 .29
======= ===
Fully-diluted ................................. $ .32 .28
======= ===
Cash dividends paid per share (Note 2) ................ $ .05 .045
======= ====
See notes to consolidated financial statements.
</TABLE>
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<PAGE>
<TABLE>
ALBERTO-CULVER COMPANY AND SUBSIDIARIES
Consolidated Statements of Earnings
Nine Months Ended June 30, 1997 and 1996
(dollar amounts in thousands, except per share figures)
<CAPTION>
(Unaudited)
-----------
1997 1996
---- ----
<S> <C> <C>
Net sales ....................................................... $1,321,892 1,159,338
Costs and expenses:
Cost of products sold ....................................... 660,179 587,328
Advertising, promotion, selling and administrative .......... 569,502 494,192
Interest expense, net of interest income of $2,502
in 1997 and $2,901 in 1996 ............................. 6,525 8,024
----- -----
Total costs and expenses .................................... 1,236,206 1,089,544
--------- ---------
Earnings before non-recurring gain and provision for income taxes 85,686 69,794
Non-recurring gain (Note 5 ) ............................... 15,634 --
------ ------
Earnings before provision for income taxes (Note 5 ) ............ 101,320 69,794
Provision for income taxes (Note 5 ) ............................ 37,741 25,998
------ ------
Net earnings (Note 5) ........................................... $ 63,579 43,796
========== ======
Net earnings per share (Notes 2, 3 and 5)
Primary ......................... $ 1.11 .77
========= ===
Fully-diluted ................... $ 1.05 .74
========= ===
Cash dividends paid per share (Note 2) $ .145 .13
========= ===
See notes to consolidated financial statements.
</TABLE>
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<PAGE>
<TABLE>
ALBERTO-CULVER COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
June 30, 1997 and September 30, 1996
(dollar amounts in thousands, except per share figures)
<CAPTION>
(Unaudited)
June 30, September 30,
ASSETS 1997 1996
- ------ ---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents ................................................... $ 69,977 66,211
Short-term investments ...................................................... 8,750 5,346
Receivables, less allowance for doubtful
accounts ($9,127 at 6/30/97 and $8,208 at 9/30/96) ....................... 122,614 125,718
Inventories (Note 4) ........................................................ 328,658 288,525
Other current assets ........................................................ 32,158 26,918
------ ------
Total current assets ..................................................... 562,157 512,718
------- -------
Property, plant and equipment at cost, less accumulated
depreciation ($151,080 at 6/30/97 and $143,946 at 9/30/96) ................. 188,471 175,920
Goodwill, net .................................................................. 113,394 107,603
Trade names and other intangible assets, net ................................... 70,314 76,877
Other assets ................................................................... 43,989 36,148
------ ------
Total assets ................................................................ $ 978,325 909,266
========= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Current maturities of long-term debt and short-term borrowings .............. $ 5,223 3,650
Accounts payable ............................................................ 163,641 154,634
Accrued expenses ............................................................ 112,914 115,139
Income taxes ................................................................ 20,488 13,172
------ ------
Total current liabilities ................................................ 302,266 286,595
------- -------
Long-term debt ................................................................. 55,587 61,548
Convertible subordinated debentures ............................................ 100,000 100,000
Deferred income taxes .......................................................... 22,585 16,582
Other liabilitiies ............................................................. 17,267 19,445
Stockholders' equity:
Common stock, par value $.22 per share:
Class A authorized 75,000,000 shares; issued 24,442,931 shares ........... 5,349 2,918
at 6/30/97 and 24,311,224 shares at 9/30/96
Class B authorized 75,000,000 shares; issued 37,710,664 shares ........... 8,296 4,608
Additional paid-in capital .................................................. 92,915 88,955
Retained earnings ........................................................... 439,884 390,526
Foreign currency translation ................................................ (19,662) (13,428)
------- -------
526,782 473,579
Less treasury stock at cost (Class A common shares: 1,860,469 at 6/30/97
and 2,214,024 at 9/30/96; Class B common shares:
4,178,184 at 6/30/97 and at 9/30/96) ..................................... (46,162) (48,483)
------- -------
Total stockholders' equity ............................................ 480,620 425,096
------- -------
Total liabilities and stockholders' equity .................................. $ 978,325 909,266
========= =======
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, 1997 and 1996
(dollar amounts in thousands)
<TABLE>
<CAPTION>
(Unaudited)
-----------
1997 1996
---- ----
Cash Flows from Operating Activities:
- -------------------------------------
<S> <C> <C>
Net earnings ..................................................... $ 63,579 43,796
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization ............................... 27,005 23,711
Non-recurring gain .......................................... (15,634) --
Other, net .................................................. (802) 2,849
Cash effects of changes in:
Receivables, net .......................................... (987) 2,916
Inventories ............................................... (36,529) (3,136)
Other current assets ...................................... (978) (1,041)
Accounts payable and accrued expenses ..................... 2,193 (7,030)
Income taxes .............................................. 8,278 (1,236)
----- ------
Net cash provided by operating activities ................... 46,125 60,829
------ ------
Cash Flows from Investing Activities:
- -------------------------------------
Short-term investments ........................................... (3,404) 400
Capital expenditures ............................................. (43,615) (30,794)
Payments for purchased businesses, net of acquired companies' cash (14,187) (127,864)
Proceeds from insurance settlement ............................... 28,000 --
Other, net ....................................................... (5,162) (4,161)
------ ------
Net cash provided by investing activities ..................... (38,368) (162,419)
------- --------
Cash Flows from Financing Activities:
- -------------------------------------
Short-term borrowings ............................................ 1,734 (791)
Proceeds from long-term debt ..................................... 500 6,923
Repayments of long-term debt ..................................... (1,225) (5,126)
Sale of trade accounts receivable ................................ -- 30,000
Cash dividends paid .............................................. (8,101) (7,221)
Cash proceeds from exercise of stock options ..................... 5,175 1,382
Stock purchased for treasury ..................................... (1,138) (685)
------ ----
Net cash provided by financing activities ..................... (3,055) 24,482
------ ------
Effect of foreign exchange rate changes on cash .................. (936) (440)
---- ----
Net increase (decrease) in cash and cash equivalents ............. 3,766 (77,548)
Cash and cash equivalents at beginning of period ................. 66,211 142,585
------ -------
Cash and cash equivalents at end of period ....................... $ 69,977 65,037
======== ======
See notes to consolidated financial statements.
</TABLE>
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<PAGE>
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, 1996. 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) On January 23, 1997, the company announced a 100% stock dividend on the
company's Class A and Class B outstanding shares. The new shares were
distributed February 20, 1997 to shareholders of record at the close of
business on February 3, 1997. The stock dividend was distributed only on
outstanding shares and not on shares held in the treasury. All share and
per share information in this report, except for treasury shares, has been
restated to reflect the 100% stock dividend.
(3) Primary earnings per share are based on the weighted average shares
outstanding, including common stock equivalents, of 57,455,000 and
56,604,000 for the three months ended June 30, 1997 and 1996,
respectively, and 57,145,000 and 56,372,000 for the nine months ended June
30, 1997 and 1996, respectively, after giving effect to the 100% stock
dividend described in Note 2.
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, 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. Fully-diluted weighted average shares outstanding were
63,632,000 and 63,022,000 for the three months ended June 30, 1997 and
1996, respectively, and 63,447,000 and 62,984,000 for the nine months
ended June 30, 1997 and 1996, respectively, after giving effect to the
100% stock dividend described in Note 2.
(4) Inventories consist of the following:
(in thousands)
--------------
June 30, September 30,
1997 1996
---- ----
Finished goods ................... $279,562 251,617
Work-in-process .................. 7,507 5,622
Raw materials .................... 41,589 31,286
------ ------
$328,658 288,525
======== =======
(5) In the first quarter of fiscal year 1997, the company received a $28.0
million insurance settlement from the loss of its corporate airplane. The
effect on the company's earnings was a non-recurring pre-tax gain of $15.6
million and an increase in net earnings of $9.8 million. Accordingly,
earnings per share increased $0.17 on a primary basis and $0.16 on a
fully-diluted basis.
The following table provides pro-forma earnings information for the first
nine months excluding the non-recurring gain (in thousands, except per
share data):
1997 1996
---- ----
Pre-tax earnings ...... $ 85,686 69,794
========== ======
Net earnings .......... $ 53,768 43,796
========== ======
Net earnings per share:
Primary ............ $ .94 .77
============= ===
Fully-diluted ...... $ .89 .74
============= ===
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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, 1997 VS. QUARTER AND NINE MONTHS ENDED
JUNE 30, 1996
The company achieved record net sales of $456.2 million in the third quarter of
fiscal year 1997, up $40.7 million or 9.8% over the comparable quarter of fiscal
year 1996. For the nine month period ending June 30, 1997, net sales reached a
new high of $1.32 billion, representing a 14.0 % increase compared to last
year's nine month period.
As described in Note 5, during the first quarter of fiscal year 1997, the
company received a $28.0 million insurance settlement from the loss of its
corporate airplane. As a result, the company recognized a non-recurring, pre-tax
gain of $15.6 million and an increase to net earnings of $9.8 million.
Accordingly, earnings per share for the first nine months of fiscal year 1997
increased 17 cents on a primary basis and 16 cents on a fully-diluted basis.
Net earnings for the three months ended June 30, 1997 were also a record for the
third quarter at $19.2 million or 16.8% higher than the same period of the prior
year. Primary earnings per share of 33 cents were 4 cents or 13.8 % higher than
the same period last year. Fully-diluted earnings per share were 32 cents, up 4
cents or 14.3 % from the prior year.
On a pro-forma basis for the nine months ended June 30, 1997, net earnings
before the non-recurring gain were a record at $53.8 million or 22.8 % higher
than the same period of the prior year. Pro-forma earnings per share on a
primary basis were 94 cents, representing an increase of 17 cents or 22.1 % over
last year. Pro-forma fully-diluted earnings per share increased 15 cents or
20.3% to 89 cents.
The following table presents net sales information by business segment for the
third quarter and first nine months of fiscal years 1997 and 1996 (dollars in
millions):
THIRD QUARTER
Fiscal Year Dollar Percent
Net sales: 1997 1996 Change Change
- ---------- ---- ---- ------ ------
Consumer products:
Alberto-Culver USA $107.6 100.5 7.1 7.1%
Alberto-Culver International 123.9 119.0 4.9 4.1
----- ----- ---
Total consumer products 231.5 219.5 12.0 5.5
Specialty distribution - Sally 229.1 199.0 30.1 15.1
Eliminations (4.4) (3.0) (1.4) (45.1)
---- ---- ----
$456.2 415.5 40.7 9.8%
====== ===== ====
NINE MONTHS
Fiscal Year Dollar Percent
Net sales: 1997 1996 Change Change
- ---------- ---- ---- ------ ------
Consumer products:
Alberto-Culver USA $332.4 263.1 69.3 26.3%
Alberto-Culver International 347.0 332.3 14.7 4.4
----- ----- ----
Total consumer products 679.4 595.4 84.0 14.1
Specialty distribution - Sally 653.4 572.1 81.2 14.2
Eliminations (10.9) (8.2) 2.7 (33.2)
----- ---- ---
$1,321.9 1,159.3 162.6 14.0%
======== ======= =====
Compared to the same periods of the prior year, sales of Alberto-Culver USA
consumer products increased 7.1 % and 26.3 % for the current quarter and first
nine months of fiscal 1997, respectively. The 1997 increases primarily resulted
from higher sales of St. Ives products which accounted for $3.8 million of the
sales increase for the quarter and $53.3 million of the sales increase for the
first nine months. St. Ives Laboratories, Inc. was acquired in February, 1996.
In addition, sales were higher due to increases for TRESemme, TCB, Mrs. Dash,
the Alberto VO5 hair care product line and the introduction of new products.
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<PAGE>
Sales of Alberto-Culver International consumer products increased 4.1 % in the
third quarter and 4.4% for the first nine months compared to last year. Fiscal
year 1997 sales increased mainly due to higher sales of St. Ives products,
offset in part by the effect of unfavorable foreign exchange rates. Had foreign
exchange rates this year been the same as the third quarter and first nine
months of fiscal 1996, Alberto-Culver International sales would have increased
10.2% in the third quarter and 8.2% for the first nine months.
The "Specialty distribution-Sally" business segment experienced sales increases
of $30.1 million or 15.1% for the third quarter of fiscal year 1997 and $81.2
million or 14.2% for the first nine months. The gains were attributable to Sally
Beauty Company's sales growth for established stores and the addition of 201 new
outlets since June 30, 1996. At June 30, 1997 Sally Beauty Company had 1,798
stores offering a full range of professional beauty supplies.
Cost of products sold as a percent of net sales for the third quarter and first
nine months decreased to 49.7% and 49.9%, respectively, compared to 50.2% and
50.7%, respectively, for the same periods of the prior year. The decreases were
primarily due to cost efficiencies and changes in product mix.
Compared to fiscal year 1996, advertising, promotion, selling and administrative
expenses rose 10.9% or $19.4 million for the current quarter and 15.2% or $75.3
million for the nine months ended June 30, 1997. The increases resulted from the
acquisition of St. Ives in February, 1996 along with higher selling and
administrative costs associated with the increase in the number of Sally Beauty
Company stores and higher advertising, promotion and market research expenses
for Alberto-Culver USA.
Advertising, promotion and market research expenditures totaled $69.5 million in
the third quarter of 1997, an increase of 21.3% versus the prior year.
Advertising, promotion and market research expenditures for the first nine
months of fiscal year 1997 were $188.9 million, an increase of 23.8% over last
year. The increases were primarily due to the acquisition of St. Ives in
February, 1996 and the introduction of new products by Alberto-Culver USA.
Interest expense decreased $979,000 or 25.1% for the third quarter and $1.9
million or 17.4% for the first nine months versus the comparable periods of last
year. The decreases were primarily attributable to the prepayment of $20.0
million of 9.73% term notes in August, 1996. The increase in interest income of
$371,000 for the third quarter of 1997 was attributable to higher investment
balances, which were primarily the result of the insurance proceeds described in
Note 5. The decrease in interest income of $399,000 for the first nine months of
1997 was primarily attributed to higher investment balances in fiscal 1996 due
to the proceeds from the issuance of $100 million of subordinated convertible
debentures, which were subsequently used to purchase St. Ives Laboratories, Inc.
in February, 1996.
The provision for income taxes as a percentage of earnings before income taxes
was 37.25% for the third quarter and first nine months of both fiscal years 1997
and 1996.
FINANCIAL CONDITION
JUNE 30, 1997 VS. SEPTEMBER 30, 1996
Working capital of $259.9 million increased $33.8 million since September 30,
1996. The ratio of current assets to current liabilities was 1.86 to 1.00 at
June 30, 1997 compared to 1.79 to 1.00 at September 30, 1996. Both working
capital and the current ratio increased primarily as a result of the receipt of
the $28.0 million insurance settlement described in Note 5.
Total borrowings decreased $4.4 million during the first nine months of fiscal
year 1997. At June 30, 1997, the company had unused lines of credit with various
banks of approximately $123 million.
Cash dividends paid on Class A and Class B common stock totaled $8.1 million or
14.5 cents per share for the first nine months of fiscal 1997 versus $7.2
million or 13 cents per share for the same period of the prior year.
- 8 -
<PAGE>
Impact of New Accounting Standard
Effective December 31, 1997, the company will be required to adopt Statement of
Financial Accounting Standards No. 128 ("Statement 128"),"Earnings Per Share".
The adoption of Statement 128 will require the company to change its method of
calculating earnings per share (EPS) by replacing the reporting of primary EPS
with the presentation of basic EPS. Statement 128 will continue to require the
presentation of diluted EPS on the face of the income statement and will also
require a reconciliation of the numerator and denominator used in the basic EPS
computation with those used in the diluted EPS computation. Early implementation
of Statement 128 is not permitted and the company estimates that its adoption
will not have a material effect on earnings per share.
PART II
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 June 30, 1997.
- 9 -
<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 11, 1997
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<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet as of June 30, 1997 and the consolidated statement
of earnings for the nine months ended June 30, 1997 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000003327
<NAME> ALBERTO-CULVER COMPANY AND SUBSIDIARIES
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> JUN-30-1997
<CASH> 69,977
<SECURITIES> 8,750
<RECEIVABLES> 131,741
<ALLOWANCES> 9,127
<INVENTORY> 328,658
<CURRENT-ASSETS> 562,157
<PP&E> 339,551
<DEPRECIATION> 151,080
<TOTAL-ASSETS> 978,325
<CURRENT-LIABILITIES> 302,266
<BONDS> 155,587
0
0
<COMMON> 13,645
<OTHER-SE> 466,975
<TOTAL-LIABILITY-AND-EQUITY> 978,325
<SALES> 1,321,892
<TOTAL-REVENUES> 1,321,892
<CGS> 660,179
<TOTAL-COSTS> 660,179
<OTHER-EXPENSES> 576,027
<LOSS-PROVISION> 4,554
<INTEREST-EXPENSE> 9,027
<INCOME-PRETAX> 101,320
<INCOME-TAX> 37,741
<INCOME-CONTINUING> 63,579
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 63,579
<EPS-PRIMARY> 1.11
<EPS-DILUTED> 1.05
</TABLE>
