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, 1997
-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 organizatio Identification No.)
2525 Armitage Avenue
Melrose Park, Illinois 60160
---------------------- -----
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (708) 450-3000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
At March 31, 1997, there were 22,509,267 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 March 31, 1997 and 1996
(dollar amounts in thousands, except per share figures)
(Unaudited)
1997 1996
---- ----
Net sales $439,577 396,146
Costs and expenses:
Cost of products sold 218,057 200,459
Advertising, promotion, selling and administrative 191,118 170,123
Interest expense, net of interest income of $857
in 1997 and $786 in 1996 2,067 2,506
Total costs and expenses 411,242 373,088
------- -------
Earnings before provision for income taxes 28,335 23,058
Provision for income taxes 10,554 8,589
------ -----
Net earnings $17,781 14,469
======= ======
Net earnings per share of common stock (Notes 2 and 3)
Primary $ . 31 .25
======= ===
Fully-diluted $ .29 .24
======= ===
Cash dividends paid per share (Note 2) $ .05 .045
======= ====
See notes to consolidated financial statements.
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<PAGE>
ALBERTO-CULVER COMPANY AND SUBSIDIARIES
Consolidated Statements of Earnings
Six Months Ended March 31, 1997 and 1996
(dollar amounts in thousands, except per share figures)
(Unaudited)
1997 1996
---- ----
Net sales $865,682 743,784
Costs and expenses:
Cost of products sold 433,445 378,802
Advertising, promotion, selling and administrative 372,705 316,798
Interest expense, net of interest income of $1,644
in 1997 and $2,415 in 1996 4,459 4,608
Total costs and expenses 810,609 700,208
------- -------
Earnings before non-recurring gain
and provision for income taxes 55,073 43,576
Non-recurring gain (Note 5 ) 15,634 --
------ ------
Earnings before provision for income taxes (Note 5 ) 70,707 43,576
Provision for income taxes (Note 5 ) 26,338 16,232
------ ------
Net earnings (Note 5) $44,369 27,344
======= ======
Net earnings per share (Notes 2, 3 and 5)
Primary $ .78 .48
======= ===
Fully-diluted $ .73 .46
======= ===
Cash dividends paid per share (Note 2) $ . 095 .085
======= ====
See notes to consolidated financial statements.
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<PAGE>
ALBERTO-CULVER COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
March 31, 1997 and September 30, 1996
(dollar amounts in thousands, except per share figures)
(Unaudited)
March 31, September 30,
ASSETS 1997 1996
---- ----
Current assets:
Cash and cash equivalents $ 85,437 66,211
Short-term investments 7,500 5,346
Receivables, less allowance for doubtful
accounts ($8,708 at 3/31/97 and $8,208
at 9/30/96) 126,045 125,718
Inventories (Note 4) 310,929 288,525
Other current assets 31,112 26,918
------ ------
Total current assets 561,023 512,718
------- -------
Property, plant and equipment at cost,
less accumulated depreciation ($145,258
at 3/31/97 and $143,946 at 9/30/96) 181,899 175,920
Goodwill, net 114,574 107,603
Trade names and other intangible assets, net 71,840 76,877
Other assets 38,926 36,148
------ ------
Total assets $968,262 909,266
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt
and short-term borrowings $ 5,874 3,650
Accounts payable 167,659 154,634
Accrued expenses 114,679 115,139
Income taxes 16,373 13,172
------ ------
Total current liabilities 304,585 286,595
------- -------
Long-term debt 57,125 61,548
Convertible subordinated debentures 100,000 100,000
Deferred income taxes 23,560 16,582
Other liabilities 18,000 19,445
Stockholders' equity:
Common stock, par value $.22 per share:
Class A authorized 75,000,000 shares;
issued 24,443,931 shares 5,349 2,918
at 3/31/97 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 92,556 88,955
Retained earnings 423,478 390,526
Foreign currency translation (18,021) (13,428)
------- -------
511,658 473,579
Less treasury stock at cost (Class A common
shares: 1,934,664 at 3/31/97 and 2,214,024
at 9/30/96; Class B common shares:
4,178,184 at 3/31/97 and at 9/30/96) (46,666) (48,483)
------- -------
Total stockholders' equity 464,992 425,096
------- -------
Total liabilities and stockholders'equity $968,262 909,266
======== =======
See notes to consolidated financial statements.
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<PAGE>
ALBERTO-CULVER COMPANY AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Six Months Ended March 31, 1997 and 1996
(dollar amounts in thousands)
(Unaudited)
-----------
1997 1996
---- ----
Cash Flows from Operating Activities:
Net earnings $ 44,369 27,344
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 17,888 15,143
Non-recurring gain (15,634) --
Other, net (2,114) 295
Cash effects of changes in:
Receivables, net (2,949) 3,310
Inventories (18,422) (10,794)
Other current assets (3,172) (2,618)
Accounts payable and accrued expenses 6,713 2,051
Income taxes 9,134 (1,266)
----- ------
Net cash provided by operating activities 35,813 33,465
------ ------
Cash Flows from Investing Activities:
Short-term investments (2,154) 1,803
Capital expenditures (30,074) (22,649)
Payments for purchased businesses,
net of acquired companies'cash (13,670) (126,414)
Proceeds from insurance settlement 28,000 --
Other, net 1,621 (689)
----- ----
Net cash provided by investing activities (16,277) (147,949)
------- --------
Cash Flows from Financing Activities:
Short-term borrowings 2,527 736
Proceeds from long-term debt 927 5,640
Repayments of long-term debt (826) (5,333)
Sale of trade accounts receivable -- 30,000
Cash dividends paid (5,298) (4,719)
Cash proceeds from exercise of stock options 4,314 1,229
Stock purchased for treasury (1,138) (685)
------ ----
Net cash provided by financing activities 506 26,868
--- ------
Effect of foreign exchange rate changes on cash (816) (1,372)
---- ------
Net increase (decrease) in cash and cash equivalents 19,226 (88,988)
Cash and cash equivalents at beginning of period 66,211 142,585
------ -------
Cash and cash equivalents at end of period $ 85,437 53,597
======== ======
See notes to consolidated financial statements.
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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 infor-
mation 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 com-
pany's Class A and Class B outstanding shares. The new shares were distri-
buted 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 in-
formation 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 out-
standing, including common stock equivalents, of 57,316,000 and 56,472,000
for the three months ended March 31,1997 and 1996, respectively, and
57,052,000 and 56,241,000 for the six months ended March 31, 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
63,494,000 and 62,776,000 for the three months ended March 31, 1997 and
1996, respectively, and 63,338,000 and 62,742,000 for the six months ended
March 31, 1997 and 1996, respectively, after giving effect to the 100% stock
dividend described in Note 2.
(4) Inventories consist of the following:
(in thousands)
--------------
March 31, September 30,
1997 1996
---- ----
Finished goods $268,561 251,617
Work-in-process 6,226 5,622
Raw materials 36,142 31,286
------ ------
$310,929 288,525
======== =======
(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 information for the first six months
excluding the non-recurring gain (in thousands, except per share data):
1997 1996
---- ----
Pre-tax earnings $55,073 43,576
======= ======
Net earnings $34,558 27,344
======= ======
Net earnings per share:
Primary $ .61 .48
======= ===
Fully-diluted $ .57 .46
======= ===
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS
QUARTER AND SIX MONTHS ENDED MARCH 31, 1997 VS. QUARTER AND SIX MONTHS ENDED
MARCH 31, 1996
The company achieved record net sales of $439.6 million in the second quarter of
fiscal year 1997, up $43.4 million or 11.0% over the comparable quarter of fis-
cal year 1996. For the six month period ending March 31, 1997, net sales reached
a new high of $865.7 million, representing a 16.4% increase compared to last
year's six month period.
As described in Note 5, during the first quarter of fiscal year 1997, the com-
pany received a $28.0 million insurance settlement from the loss of its cor-
porate 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 half 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 March 31, 1997 were also a record for
the second quarter at $17.8 million or 22.9% higher than the same period of the
prior year. Primary earnings per share of 31 cents were 6 cents or 24.0%
higher than the same period last year. Fully-diluted earnings per share were 29
cents, up 5 cents or 20.8% from the prior year. On a pro-forma basis for the
six months ended March 31, 1997, net earnings before the non-recurring gain were
a record at $34.6 million or 26.4% higher than the same period of the prior
year. Pro-forma earnings per share on a primary basis were 61 cents,
representing a 13 cent or 27.1% increase over last year. Pro-forma fully-
diluted earnings per share increased 11 cents or 23.9% to 57 cents.
The following table presents net sales information by business segment for the
second quarter and first six months of fiscal years 1997 and 1996
(dollars in millions):
SECOND QUARTER
Fiscal Dollar Percent
Net sales: 1997 1996 Change Change
Consumer products:
Alberto-Culver USA $117.2 96.3 20.9 21.7%
Alberto-Culver International 110.2 111.4 (1.2) (1.1)
----- ----- ---- ----
Total consumer products 227.4 207.7 19.7 9.5
Specialty distribution - Sally 215.6 191.6 24.0 12.5
Eliminations (3.4) (3.2) ( .2) (8.4)
---- ---- ----
$439.6 396.1 43.5 11.0%
====== ===== ====
SIX MONTHS
Fiscal Dollar Percent
Net sales: 1997 1996 Change Change
Consumer products:
Alberto-Culver USA $224.8 162.6 62.2 38.3%
Alberto-Culver International 223.1 213.2 9.9 4.6
----- ----- --- ---
Total consumer products 447.9 375.8 72.1 19.2
Specialty distribution - Sally 424.3 373.1 51.2 13.7
Eliminations (6.5) (5.1) ( 1.4) (26.3)
---- ---- -----
$865.7 743.8 121.9 16.4%
====== ===== =====
Compared to the same periods of the prior year, sales of Alberto-Culver USA
consumer products increased 21.7% and 38.3% for the current quarter and first
half of fiscal 1997, respectively. The 1997 increases primarily resulted from
the acquisition of St. Ives Laboratories, Inc. in February, 1996, which added
$12.1 million of sales to the second quarter and $45.5 million to the first
half. In addition, sales were higher due to increases for the TRESemme, TCB and
Alberto VO5 hair care product lines and the introduction of new products.
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<PAGE>
Sales of Alberto-Culver International consumer products decreased 1.1% in the
second quarter and increased 4.6% in the first half compared to last year. The
fiscal 1997 results were negatively impacted by the effect of foreign exchange
rates. Had foreign exchange rates this year been the same as the second quarter
and first half of fiscal 1996, Alberto-Culver International sales would have in-
creased 2.8% in the second quarter and 7.1% for the first half primarily due to
the acquisition of St. Ives in February, 1996.
The "Specialty distribution-Sally" business segment experienced sales increases
of $24.0 million or 12.5% for the second quarter of fiscal 1997 and $51.2
million or 13.7% for the first half. The gains were attributable to Sally
Beauty Company's sales growth for established stores and the addition of 203 new
outlets since March 31, 1996. At March 31, 1997, Sally Beauty Company had 1,765
stores offering a full range of professional beauty supplies.
Cost of products sold as a percent of net sales for the second quarter and first
half decreased to 49.6% and 50.1%, respectively, compared to 50.6% and 50.9%,
respectively, for the same periods of the prior year. The decreases were
primarily due to cost efficiencies and changes in product mix.
Compared to the prior year, advertising, promotion, selling and administrative
expenses rose 12.3% or $21.0 million for the current quarter and 17.6% or $55.9
million for the six months ended March 31, 1997. The increases resulted from the
acquisition of St. Ives in February, 1996 along with higher selling and admin-
istrative 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 $63.4 million in
the second quarter of 1997, an increase of 21.4% versus the prior year.
Advertising, promotion and market research expenditures for the first half of
fiscal year 1997 were $119.4 million, an increase of 25.3% 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 $368,000 or 11.2% for the second quarter and
$920,000 or 13.1% for the first half 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 $71,000
for the second 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 $771,000 for the first half 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 deben-
tures, which were 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 second quarter and first half of both fiscal years 1997
and 1996.
FINANCIAL CONDITION
MARCH 31, 1997 VS. SEPTEMBER 30, 1996
Working capital of $256.4 million increased $30.3 million since September 30,
1996. The ratio of current assets to current liabilities was 1.84 to 1.00 at
March 31, 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 $2.2 million during the first six months of fiscal
year 1997. At March 31, 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 $5.3 million or
9.5 cents per share for the first six months of fiscal 1997 versus $4.7 million
or 8.5 cents per share in the prior year.
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 require a
reconciliation of the numerator and denominator used in the basic EPS compu-
tation 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 impact on earnings per share.
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<PAGE>
PART II
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the annual meeting of stockholders on January 23, 1997, Carol L. Bernick,
Leonard H. Lavin, A. Robert Abboud and Robert H. Rock were elected as directors
of the Company. Mrs. Bernick received a Class A and Class B common stockholder
vote of 9,029,280 and 15,322,926 shares "for" and 159,450 and 64,492 shares
"withheld", respectively. Mr. Lavin received a Class A and Class B common
stockholder vote of 9,027,210 and 15,322,157 shares "for" and 161,520 and
65,261 shares "withheld", respectively. Mr. Abboud received a Class A and
Class B common stockholder vote of 9,025,340 and 15,315,205 shares "for" and
163,400 and 72,213 "withheld", respectively. Mr. Rock received a Class A and
Class B common stockholder vote of 9,029,050 and 15,323,228 shares "for" and
159,690 and 64,190 shares "withheld", respectively.
Class A common stock has a one-tenth vote per share and Class B common stock has
one vote per share.
In addition, stockholders at the annual meeting voted on an amendment to the
company's Restated Certificate of Incorporation to increase the number of
authorized shares of both Class A and Class B Common Stock of the company from
25,000,000 to 75,000,000 shares. The amendment was approved by a Class A and
Class B stockholder vote of 6,957,790 and 12,360,184 shares "for"; 2,211,920 and
3,011,082 shares "against"; and 19,020 and 16,152 shares "abstaining",
respectively.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
3(i)(cCopy of the amendment to the Restated Certificate of Incorporation
of Alberto-Culver Company.
27 Financial Data Schedule
(b) Reports on Form 8-K:
No report on Form 8-K was filed by the registrant during the quarter ended
March 31, 1997.
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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)
May 9, 1997
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<PAGE>
Exhibit No. 3(i)(c)
ALBERTO-CULVER COMPANY
CERTIFICATE OF AMENDMENT OF
RESTATED CERTIFICATE OF INCORPORATION
The undersigned, being the President of Alberto-Culver Company, a Delaware
corporation, pursuant to Section 242 of the General Corporation Law of the State
of Delaware, does hereby certify as follows:
FIRST: That the Restated Certificate of Incorporation of said corporation
has been amended by amending the first paragraph of Article 4 to read
as follows:
4. The total number of shares which the Corporation shall
have authority to issue is One Hundred Fifty Million (150,000,000), par value
$0.22 per share, Seventy-Five Million (75,000,000) of which shall be "Class A
Common Stock" and Seventy-Five Million (75,000,000) of which shall be "Class
B Common Stock." The Class A Common Stock and the Class B Common Stock are
hereinafter sometimes called collectively the "Common Stock."
SECOND: That such amendment has been duly adopted by resolution of the board
of directors and approved by the vote of a majority of the votes entitled to
be cast, by the vote of a majority of the shares of Class A Common Stock
entitled to be voted, and by the vote of a majority of the shares of Class B
Common Stock entitled to be voted, at the annual meeting of stockholders in
accordance with the provisions of Section 242 of the General Corporation Law
of the State of Delaware.
IN WITNESS WHEREOF, the undersigned has signed this certificate this 23rd day
of January, 1997.
ALBERTO-CULVER COMPANY
/s/H. B. Bernick
----------------
Howard B. Bernick
President
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the consol-
idated balance sheet as of March 31, 1997 and the consolidated statement of
earnings for the six months ended March 31, 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
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1.00
<CASH> $85,437
<SECURITIES> 7,500
<RECEIVABLES> 134,753
<ALLOWANCES> 8,708
<INVENTORY> 310,929
<CURRENT-ASSETS> 561,023
<PP&E> 327,157
<DEPRECIATION> 145,258
<TOTAL-ASSETS> 968,262
<CURRENT-LIABILITIES> 304,585
<BONDS> 157,125
0
0
<COMMON> 13,645
<OTHER-SE> 451,347
<TOTAL-LIABILITY-AND-EQUITY> 968,262
<SALES> 865,682
<TOTAL-REVENUES> 865,682
<CGS> 433,445
<TOTAL-COSTS> 433,445
<OTHER-EXPENSES> 377,164
<LOSS-PROVISION> 2,693
<INTEREST-EXPENSE> 6,103
<INCOME-PRETAX> 70,707
<INCOME-TAX> 26,338
<INCOME-CONTINUING> 44,369
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 44,369
<EPS-PRIMARY> .78
<EPS-DILUTED> .73
</TABLE>
