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:
December 31, 1998
-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 December 31, 1998, there were 23,873,087 shares of Class A common stock
outstanding and 33,147,471 shares of Class B common stock outstanding.
1
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PART I
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
ALBERTO-CULVER COMPANY AND SUBSIDIARIES
Consolidated Statements of Earnings
Three Months Ended December 31, 1998 and 1997
(dollar amounts in thousands, except per share figures)
(Unaudited)
1998 1997
<S> <C> <C>
Net sales $464,551 445,400
Costs and expenses:
Cost of products sold 228,757 218,040
Advertising, promotion, selling and administrative 203,830 193,897
Interest expense, net of interest income of $726
in 1998 and $763 in 1997 2,526 2,081
-------- --------
Total costs and expenses 435,113 414,018
-------- --------
Earnings before provision for income taxes 29,438 31,382
Provision for income taxes 10,818 11,690
-------- --------
Net earnings (Note 4) $ 18,620 19,692
======== ========
Net earnings per share (Note 3)
Basic $ .33 .35
============ ============
Diluted $ .32 .32
============ ============
Cash dividends paid per share (Note 2) $ .06 .05
============ ============
See notes to consolidated financial statements.
</TABLE>
2
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<TABLE>
<CAPTION>
ALBERTO-CULVER COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1998 and September 30, 1998
(dollar amounts in thousands, except per share data)
(Unaudited)
December 31, September 30,
ASSETS 1998 1998
- ------ ----------------- -------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 45,720 72,395
Short-term investments 909 910
Receivables, less allowance for doubtful
accounts ($9,848 at 12/31/98 and $10,868 at 9/30/98) 128,485 129,063
Inventories (Note 5) 375,694 369,204
Other current assets 19,824 19,993
----------- -----------
Total current assets 570,632 591,565
----------- -----------
Property, plant and equipment at cost, less accumulated
depreciation ($189,397 at 12/31/98 and $184,932 at 9/30/98) 223,437 223,476
Goodwill, net 136,670 137,599
Trade names and other intangible assets, net 65,953 67,158
Other assets 52,213 48,386
----------- -----------
Total assets $1,048,905 1,068,184
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt and short-term borrowings $ 3,521 3,238
Accounts payable 163,010 177,564
Accrued expenses 96,791 112,015
Income taxes 24,114 20,808
----------- -----------
Total current liabilities 287,436 313,625
----------- -----------
Long-term debt 170,544 171,760
Deferred income taxes 27,576 28,260
Other liabilities 19,600 20,548
Stockholders' equity (Note 3): Common stock, par value $.22 per share:
Class A authorized 75,000,000 shares; issued 30,612,798 shares 6,735 6,735
Class B authorized 75,000,000 shares; issued 37,710,665 shares 8,296 8,296
Additional paid-in capital 192,250 192,610
Retained earnings 543,923 528,733
Foreign currency translation (28,499) (28,131)
----------- -----------
722,705 708,243
Less treasury stock at cost (Class A common shares: 6,739,711 at
12/31/98 and 6,549,947 at 9/30/98; Class B common shares:
4,563,184 at 12/31/98 and 9/30/98) (178,956) (174,252)
----------- -----------
Total stockholders' equity 543,749 533,991
----------- -----------
Total liabilities and stockholders' equity $1,048,905 1,068,184
=========== ===========
See notes to consolidated financial statements.
</TABLE>
3
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<TABLE>
<CAPTION>
ALBERTO-CULVER COMPANY AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Three Months Ended December 31, 1998 and 1997
(dollar amounts in thousands)
(Unaudited)
1998 1997
Cash Flows from Operating Activities:
<S> <C> <C>
Net earnings $18,620 19,692
Adjustments to reconcile net earnings to net cash provided
(used) by operating activities:
Depreciation and amortization 10,275 10,035
Other, net 1,274 5,316
Cash effects of changes in (exclusive of acquisitions):
Receivables, net (397) (1,184)
Inventories (7,312) (17,286)
Other current assets (1,274) 306
Accounts payable and accrued expenses (28,526) (22,230)
Income taxes 3,363 7,562
-------- ---------
Net cash provided (used) by operating activities (3,977) 2,211
-------- ---------
Cash Flows from Investing Activities:
Short-term investments 1 5,262
Capital expenditures (9,640) (16,076)
Payments for purchased businesses, net of acquired companies' cash (3,750) (7,001)
Other, net 677 604
-------- ---------
Net cash used by investing activities (12,712) (17,211)
-------- ---------
Cash Flows from Financing Activities:
Short-term borrowings 978 (106)
Proceeds from long-term debt 378 464
Repayments of long-term debt (1,039) (311)
Cash dividends paid (3,429) (2,808)
Cash proceeds from exercise of stock options 1,573 8,884
Stock purchased for treasury (7,948) (8,015)
------- ---------
Net cash used by financing activities (9,487) (1,892)
------- ---------
Effect of foreign exchange rate changes on cash (499) (2,256)
-------- ---------
Net decrease in cash and cash equivalents (26,675) (19,148)
Cash and cash equivalents at beginning of period 72,395 76,040
-------- ---------
Cash and cash equivalents at end of period $45,720 56,892
======== =========
See notes to consolidated financial statements.
</TABLE>
4
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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, 1998. 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 28, 1999, the company announced an increase in the cash
dividend on Class A and Class B common stock, raising the quarterly
dividend 8.3% to 6.5 cents per share or 26 cents annually. The cash
dividend is payable February 20, 1999 to stockholders of record on
February 8, 1999.
(3) Basic earnings per share is calculated using the weighted average of act-
ual shares outstanding of 57,082,000 and 56,354,000 for the three months
ended December 31, 1998 and 1997, respectively.
Diluted earnings per share are determined by dividing net earnings before
interest expense (net of tax benefit) on the convertible subordinated
debentures 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. The convertible subordinated debentures were converted in
July, 1998. Diluted weighted average shares outstanding were 57,969,000
and 63,656,000 for the three months ended December 31, 1998 and 1997,
respectively.
The following table provides a reconciliation of basic and diluted
earnings per share (in thousands):
Three Month Ended December 31
1998 1997
Net earnings $18,620 19,692
Interest expense on convertible
subordinated debentures,
net of tax benefit -- 910
------- ------
Diluted net earnings $18,620 20,602
======= ======
Weighted average shares 57,082 56,354
outstanding--basic
Effect of dilutive securities:
Assumed conversion of
subordinated debentures -- 6,178
Assumed exercise of
stock options 812 1,124
Other 75 --
Weighted average shares
------- ------
outstanding--diluted 57,969 63,656
======= ======
5
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ALBERTO-CULVER COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(4) Effective the first quarter of fiscal year 1999, the company adopted
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income", which establishes rules for the reporting of
comprehensive income and its components. Comprehensive income consists of
net earnings and foreign currency translation adjustments as follows (in
thousands):
Three Months Ended December 31
1998 1997
Net earnings $18,620 19,692
Other comprehensive income
adjustments:
Foreign currency translation (368) (2,979)
---- ------
Comprehensive income $18,252 16,713
======== =======
(5) Inventories consist of the following:
(in thousands)
December 31, September 30,
1998 1998
-------------- --------------
Finished goods $329,399 325,769
Work-in-process 6,753 6,119
Raw materials 39,542 37,316
------------- --------------
$375,694 369,204
============= ==============
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AN
FINANCIAL CONDITION
RESULTS OF OPERATIONS
First Quarter Ended December 31, 1998 v.s. First Quarter Ended December 31, 1997
The company achieved record first quarter net sales of $464.6 million in fiscal
year 1999, up $19.2 million or 4.3% over the comparable period of fiscal year
1998. Net earnings for the three months ended December 31, 1998 were $18.6
million or 5.4% lower than the same period of the prior year. Basic earnings per
share were 33 cents and 32 cents on a diluted basis.
The following table presents net sales information by business segment for the
first quarter of fiscal years 1999 and 1998:
FIRST QUARTER
(dollars in millions)
Fiscal Year Dollar Percent
Net sales: 1999 1998 Change Change
- ---------- ------ ------ ------ ------
Alberto-Culver North America $111.4 115.9 (4.5) (3.9)%
Alberto-Culver International 101.5 102.8 (1.3) (1.3)
Specialty distribution - Sally 255.3 230.8 24.5 10.6
Eliminations (3.6) (4.1) 0.5 13.2
------ ------ ------
$464.6 445.4 19.2 4.3%
====== ====== ======
Compared to the same period of the prior year, sales of Alberto-Culver North
America ("North America") decreased $4.5 million or 3.9% for the first quarter
of fiscal year 1999. The decrease was primarily due to lower sales for custom
label filling operations and lower sales of the TRESemme and Cortexx hair care
lines.
Sales of Alberto-Culver International ("International") were $101.5 million for
the current quarter, down 1.3% compared to last year. Sales for the first
quarter of fiscal year 1999 were negatively impacted by the effect of foreign
exchange rates. Had foreign exchange rates this year been the same as the first
quarter of fiscal 1998, Alberto-Culver International sales would have increased
1.6% driven by strong results in Latin America and Asia Pacific.
The "Specialty distribution-Sally" business segment achieved a sales increase of
$24.5 million or 10.6%, reaching $255.3 million in sales for the quarter ended
December 31, 1998. The gain was attributable to higher sales for established
Sally Beauty Company outlets, the addition of stores during the year and the
expansion of Sally's full service and foreign operations. At December 31, 1998,
Sally Beauty Company had 2,045 stores offering a full range of professional
beauty supplies.
Cost of products sold as a percent of net sales for the three month period ended
December 31, 1998 was 49.2% as compared to 49.0% for the first quarter of the
prior year. The increase was primarily due to the growth of Sally Beauty
Company, which has a relatively higher cost of goods sold percentage.
Advertising, promotion, selling and administrative expenses for the first
quarter of fiscal year 1999 rose 5.1% or $9.9 million versus the comparable
period of the prior year. The increase resulted from higher selling and
administrative costs associated with the increase in the number of Sally Beauty
Company stores along with additional advertising, promotion and market research
expenditures for North America and International. Advertising, promotion and
market research expenditures totaled $65.0 million for the current period versus
$62.1 million for the comparable period of the prior year.
Interest expense was $3.3 million for the first quarter of fiscal year 1999
versus $2.8 million for the comparable prior period. The higher interest expense
was primarily attributable to the $120 million of 6.375% debentures issued in
June, 1998 partially offset by the elimination of interest expense on the $100
million of 5.5% convertible subordinated debentures which were converted into
Class A common shares in July, 1998. Interest income was $726,000 for the
quarter ended December 31, 1998 versus $763,000 in the prior year.
The provision for income taxes as a percentage of earnings before income taxes
was 36.75% for the first quarter of fiscal years 1999 and 37.25% for the same
period in the prior year.
7
<PAGE>
FINANCIAL CONDITION
December 31, 1998 v.s. September 30, 1998
The ratio of current assets to current liabilities was 1.98 to 1.00 at the end
of the first quarter of fiscal year 1999 compared to 1.89 to 1.00 at September
30, 1998. Working capital of $282.9 million was $5.0 million higher than the
September 30, 1998 balance of $277.9 million.
Total borrowings decreased $933,000 during the first three months of fiscal year
1999 to $174.1 million. At December 31, 1998, the company had $200 million
available under its revolving credit facility. Subsequent to the quarter end,
the company borrowed $25 million under the revolving credit facility to fund the
acquisition of La Farmaco, an Argentina-based manufacturer and marketer of
branded personal care products.
YEAR 2000 READINESS DISCLOSURES
Many computer systems use only two digits to represent the year and they may be
unable to process accurately information that contains dates before, during or
after the year 2000. As a result, organizations that depend on computers are at
risk for possible date-based computation errors which could result in erroneous
information or system failures that may disrupt their business operations. This
is commonly known as the Year 2000 ("Y2K") problem.
Most of the software purchased by the company within the last five years is
either Y2K compliant or the vendor has certified that Y2K compliant upgrades
will be available sufficiently in advance of December 31, 1999. In late 1995,
the company inventoried and assessed key financial and operational information
systems and prepared a prioritized plan for Y2K systems modifications or
replacements. The plan is revised periodically and progress against the plan is
monitored and periodically reported to management and the Audit Committee of the
Board of Directors. Implementation of required changes to the company's critical
systems is currently scheduled to be completed by August, 1999. Certification of
critical systems, which includes testing by technicians and key users, is
expected to be completed before December 31, 1999. The company's assessment of
non-information technology systems (e.g., manufacturing equipment) is expected
to be completed by April, 1999, and an action plan will be prepared based on the
results.
The company is developing a contingency plan to be followed in the event of a
Y2K-related failure of a business-critical system. This plan should be complete
by June, 1999 and is expected to include, for example, identification of
alternate suppliers and possible increases in inventory levels, including raw
materials and packaging. Once developed, contingency plans and related cost
estimates will be refined as additional information becomes available.
Incremental costs, which include contractor costs to modify existing systems and
costs of internal resources dedicated to achieving Y2K compliance, are charged
to expense as incurred. These costs are currently expected to total
approximately $2.3 million, of which approximately 43% has been spent to date.
Incremental costs are presently being funded through operating cash flow. The
amounts do not include any costs associated with the implementation of
contingency plans, which are in the process of being developed, as discussed
above. The costs associated with replacement of computerized systems, hardware
and related equipment (currently estimated to be approximately $6.8 million),
substantially all of which will be capitalized, are not included in the above
estimates.
The company's Y2K readiness program is an evolving and ongoing process.
Accordingly, current conclusions as to what constitutes areas of the company's
greatest Y2K exposure and the estimates of costs and completion dates, as
described above, are subject to change. The Y2K problem has many aspects and
potential consequences, some of which are not reasonably foreseeable, and there
can be no assurance that unforeseen consequences will not arise.
8
<PAGE>
FORWARD - LOOKING STATEMENTS
This Quarterly Report on Form 10-Q and the documents incorporated by reference
herein, if any, may contain forward- looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended and Section 21E of the
Security Exchange Act of 1934, as amended. Such statements are based on
management's current expectations and assessments of risks and uncertainties and
reflect various assumptions concerning anticipated results, which may or may not
prove to be correct. Some of the factors that could cause actual results to
differ materially from estimates or projections contained in such
forward-looking statements include the pattern of brand sales, including
variations in sales volume within periods; competition within the relevant
product markets, including pricing, promotional activities, continuing customer
acceptance of existing products and the ability to develop and successfully
introduce new products; risks inherent in acquisitions and stategic alliances;
changes in costs including changes in labor costs, raw material prices or
pormotional expenses; the costs and effects of unanticipated legal or
administrative proceedings; variations in political, economic or other factors
such as currency exchange rates, inflation rates, recessionary or expansive
trends, tax changes, legal and regulatory changes or other external factors
over which the company has no control. The company disclaims any
obligation to update any forward-looking statement in this Quarterly Report
on Form 10-Q or any document incorporated herein by reference.
9
<PAGE>
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
27 Financial Data Schedule
10 (i) Copy of the Alberto-Culver Company Executive Deferred
Compensation Plan dated January 1, 1999.*
* This exhibit is a management contract or compensatory plan
or arrangement of the registrant.
(b) Reports on Form 8-K:
No report on Form 8-K was filed by the registrant during the quarter
ended December 31, 1998.
10
<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
(Principal Financial Officer)
February 11, 1999
Exhibit 10 (i)
Alberto-Culver Company
Executive Deferred Compensation Plan
Plan Document Exhibit
January 1, 1999
Table of Contents
I. Establishment, Definitions and Purpose
Preamble............................................................1
Definitions.........................................................1
Purpose.............................................................2
II. Participation
Participation, Notification and Election............................2
Deferral Procedure..................................................3
Deferral Agreement Termination......................................3
Establishment of Accounts...........................................3
Account Valuation and Earnings......................................3
Benefit Payments....................................................4
III. General Provisions
Funding.............................................................4
Vesting.............................................................4
In-Service Withdrawals..............................................4
Beneficiary Designation.............................................5
Death Benefits......................................................5
Administration......................................................5
Administrative Fees and Expenses....................................6
Claims Procedure....................................................6
Tax Liability.......................................................6
IV. Exempt Status...................................................6
V. Indemnification..................................................6
VI. Amendment and Termination.......................................6
VII. Miscellaneous
Nonassignability....................................................7
No Contract of Employment...........................................7
Participant Litigation..............................................7
Participant and Beneficiary Duties..................................7
Governing Law.......................................................8
Validity............................................................8
Notices.............................................................8
Successors..........................................................8
I. Establishment, Definitions and Purpose
1.1 Preamble
Pursuant to this plan document, Alberto-Culver Company will maintain an unfunded
deferred compensation plan, to be established as of January 1, 1999, and to be
known as the Alberto-Culver Company Executive Deferred Compensation Plan
("Plan"). Under the terms of the Plan, eligible employees of the Alberto-Culver
Company and certain of its domestic subsidiaries are allowed to defer a portion
of their Compensation. Participants and their beneficiaries shall have no
interest in any Company assets as a source of funds to satisfy the benefit
obligations under the Plan. The Plan constitutes an unsecured promise by the
Company to make benefit payments in the future and Participants shall have the
status of general unsecured creditors of the Company.
1.2 Definitions
Capitalized terms are generally defined in the Section where used. The following
terms appear in several Sections and are defined below for convenient reference:
a) "Beneficiary" - An individual or individuals or trust who are designated in
the most recent writing by the Participant to receive his/her benefit in the
event of the Participant's death. If more than one Beneficiary survives the
Participant, such benefit payments shall be made equally to all such
Beneficiaries, unless otherwise indicated by the Participant on the beneficiary
form.
b) "Code" - The Internal Revenue Code of 1986, as amended.
c) "Compensation" - The salary and commissions, where applicable, of an employee
as set by the Company for a Plan Year, exclusive of any amounts payable under
bonus and incentive plans, severance plans, option plans, and any other benefit
or welfare plan of the Company now or hereafter existing.
d) "Company" - Alberto-Culver Company and any direct or indirect domestic
subsidiaries which, with the consent of Alberto-Culver Company, adopts this Plan
by resolution of its board of directors. On the date hereof, Sally Beauty
Company, Inc., Alberto-Culver USA, Inc., St. Ives Laboratories, Inc., and
Alberto- Culver International, Inc. have adopted this Plan with the consent of
Alberto-Culver Company.
e) "ERISA" - The Employee Retirement Income Security Act of 1974, as amended.
f) "Highly Compensated Employee" - an employee of the Company who is determined
to be a Highly Compensated Employee within the meaning of Code section 414(q)
(or any successor provision), as adjusted by the Internal Revenue Service from
time to time.
g) "Participant" - A Highly Compensated Employee who meets the participation
requirements set forth in Section 2.1 and elects to participate in the Plan
in accordance herewith.
h) "Plan Administrator" - An individual selected from time to time by the
Compensation Committee of the Board of Directors of the Alberto-Culver Company
(the "Compensation Committee") to administer the Plan and perform all accounting
and administrative functions in connection therewith.
i) "Plan Year" - Each 12 consecutive month period commencing on January 1 and
ending on December 31.
j) "Deferral Agreement Form" - A written agreement between a Participant and the
Company to defer receipt of future Compensation. The Plan Administrator may
amend this form from time to time.
1.3 Purpose
Alberto-Culver Company and certain of its domestic subsidiaries sponsor 401(k)
plans known as the Alberto-Culver 401(k) Savings Plan and the Sally Beauty
401(k) Savings Plan (collectively, the "401(k) Plans") for the benefit of their
U.S. employees and their beneficiaries. Each of the 401(k) Plans operate as a
"qualified plan", as defined under the Code, and therefore are subject to
deferral limitations contained therein. The Plan is established to mitigate the
effect of these limitations by allowing Participants to defer a greater portion
of their Compensation and the earnings thereon than is permitted solely under
the 401(k) Plans.
II. Participation
2.1 Participation, Notification and Election
The Plan Administrator shall provide notification to the Highly Compensated
Employees of their eligibility to participate in the Plan. The determination of
whether an employee is a Highly Compensated Employee will be calculated based
upon such employee's applicable compensation earned in the preceding calendar
year. The determination of whether a new hire is a Highly Compensated Employee
will be calculated based upon such new hire's initial annual salary (without
regard to commissions, if any) at the time of hire. The Plan Administrator shall
further provide eligible employees with a Deferral Agreement Form. Eligible
employees shall elect on the Deferral Agreement Form for the applicable Plan
Year, the (i) percentage of Compensation to be deferred in that Plan Year, (ii)
commencement date of distributions with respect to deferrals made in such Plan
Year, (iii) method of distribution which may be either a single-sum distribution
or equal annual distribution installments which can be no more than five, (iv)
any other elections required by the Plan Administrator and set forth on the
Deferral Agreement Form. A Participant is not permitted to (i) defer
Compensation for a pay period which has commenced prior to the date on which the
Deferral Agreement Form is signed by the Participant and delivered to the Plan
Administrator and (ii) with the exception of the Participant's termination of
employment with the Company, defer Compensation for a period of time less than
three years from the commencement date of such deferrals. Deferrals with respect
to future Compensation may be terminated pursuant to Section 2.3.
2.2 Deferral Procedure
Upon receipt of a properly completed and timely executed Deferral Agreement
Form, the Company will withhold from each paycheck, the designated percentage of
the Participant's Compensation. Changes in salary during the Plan Year shall be
subject to the same Compensation deferral percentage as previously elected and
indicated on the Deferral Agreement Form. The deferral amount shall not be
included as wages subject to federal income tax on the Participant's federal
income tax withholding statement.
Participant deferrals shall be subject to employment taxes, including Federal
Insurance Contributions Act contributions, and any state or local taxes as
required. The Participant must elect to defer not less than 1% and not more than
100% of his/her Compensation. Such deferral percentages must be in 1%
increments.
All elections shall be made before the beginning of the Plan Year in which the
services are to be performed with the exception of a new hire. A new hire will
be allowed to participate in the Plan provided such employee submits a Deferral
Agreement Form within 30 days of the date of hire. In such an event, the new
employee shall become a Participant on the first day of the first payroll period
beginning in the next calender quarter following the date on which the Deferral
Agreement Form is submitted to the Plan Administrator. If a new employee fails
to submit a Deferred Agreement Form within such 30 day period, the new employee
will not be allowed to participate in the Plan until the beginning of the next
Plan Year. A Participant's Deferral Agreement Form shall continue to remain in
effect for that Plan Year unless terminated, as provided in Section 2.3. Each
Plan Year, Participants will be required to complete a new Deferral Agreement
Form prior to the commencement of such Plan Year if they wish to defer income
for that Plan Year.
2.3 Deferral Agreement Termination
The Participant shall have the right to terminate his/her deferral upon written
notice to the Plan Administrator. The deferral termination shall not apply to
Compensation already earned. Such termination shall be effective on the first
day of the first payroll period beginning in the next calendar quarter following
the date on which the termination request is received by the Plan Administrator.
Once a termination request has been submitted for a Plan Year, the Participant
may not re-elect to defer any amounts under the Plan until the next Plan Year.
2.4 Establishment of Accounts
Each Participant shall have an account established by the Plan Administrator and
Participant statements will be distributed to Participants in the Plan on a
quarterly basis. The Company will maintain an accrual for the aggregate amount
of deferred benefits under the Plan on the Company's accounting records.
2.5 Account Valuation and Earnings
The account established for each Participant under Section 2.4 will be valued on
a quarterly basis. The deferred benefit account for each Participant shall be
adjusted quarterly to reflect a reasonable fixed annual rate of interest as
determined by the Compensation Committee. This rate may be prospectively
adjusted on an annual or more frequent basis as deemed appropriate by the
Compensation Committee. The rate chosen by the Compensation Committee from time
to time shall apply to the entire balance of all Participants' accounts.
2.6 Benefit Payments
The account established for each Participant under Section 2.4 shall be payable
to the Participant as provided in the Deferral Agreement Form. In the event of
any of the following occurrences, the account established for each Participant
under Section 2.4 shall be payable to the Participant or Beneficiary no later
than 90 days after the last day of the month in which the Plan Administrator
receives notification that:
(a) the Participant terminates employment with the Company and has not elected
a future deferral payment date; or
(b) the Plan is terminated (unless a successor plan is instituted).
III. General Provisions
3.1 Funding
All amounts paid under the Plan shall be paid in cash from the general assets of
the Company. Such amounts shall be reflected on the accounting records of the
Company, but shall not be construed to create or require the creation of a
trust, custodial account or escrow account. No Participant shall have any right,
title, or interest in any assets, accounts or funds that the Company may
establish to aid in providing benefits under the Plan or otherwise. The Plan
does not create a trust or establish any fiduciary relationships between the
Company and the Participant or Beneficiary of the Plan, nor will any interest
other than that of an unsecured creditor exist.
3.2 Vesting
A Participant is always 100% vested in such Participant's own contributions and
the earnings thereon.
3.3 In-Service Withdrawals
Except as described in this Section 3.3, the date upon which deferral
distributions commence and the number of equal annual installments payable
starting on such commencement date shall be irrevocable. The Participant may
request to receive an early distribution of all or a portion of the balance of
the account owed to the Participant. A single-sum payment will be paid to
Participants who request such distribution. An early distribution paid to a
Participant shall result in a penalty equal to 10% of such early distribution.
The Participant will forfeit all right, title and interest to an amount equal to
such penalty. The early distribution shall be paid to the Participant net of the
10% penalty and any required withholding taxes pursuant to Section 3.9.
Notwithstanding the preceding paragraph, any request for an early distribution
on account of an "Unforeseeable Emergency" shall not bear the 10% early
distribution penalty. For purposes of this Section 3.3, an Unforeseeable
Emergency is a severe financial hardship to the Participant resulting from a
sudden and unexpected illness or accident of the Participant or of a dependent
(as defined in Section 152(a) of the Code) of the Participant, loss of the
Participant's property due to casualty, or other similar extraordinary and
unforeseeable circumstances beyond the control of the Participant. The
determination of whether a request for an early distribution is on account of an
Unforeseeable Emergency shall be made by the sole discretion of the Plan
Administrator who shall apply the standards prescribed under Section 457 of the
Code.
Any early distribution on account of an Unforeseeable Emergency may not be made
to the extent such hardship is or may be relieved by (i) reimbursement or
compensation by insurance or otherwise, (ii) liquidation of the Participant's
assets, to the extent the liquidation of such assets would not itself cause
severe financial hardship, (iii) obtaining a loan either within the provisions
of the 401(k) Plans or from a
third party lender or (iv) cessation of deferrals under the Plan. Early
distributions because of an Unforeseeable Emergency will only be permitted to
the extent reasonably needed to satisfy the emergency need in addition to any
amounts necessary to pay any federal, state or local income taxes reasonably
anticipated to result from the early distribution.
3.4 Beneficiary Designation
Each Participant shall have the right to designate a Beneficiary to receive
death benefits under the Plan. If no Beneficiary designation is made or if no
such designated Beneficiary survives the Participant, the Plan Administrator
shall direct benefit payments to be made to the Participant's spouse or to the
Participant's estate if no spouse is living.
3.5 Death Benefits
Death benefits shall be paid as a single-sum to the Participant's Beneficiary
within 90 days after the last day of the month in which the later event occurs
(i) written notice is given to the Plan Administrator of Participant's death and
(ii) a proper Beneficiary has been determined by the Plan Administrator.
3.6 Administration
The Plan shall be administered by the Plan Administrator, subject to the
oversight of the Compensation Committee. The Plan Administrator shall have full
power to construe, administer and interpret the Plan and full power to adopt
such rules and regulations as he/she may deem necessary or desirable to
administer the Plan. Subject to Compensation Committee review, which decision to
review shall be in the sole discretion of the Compensation Committee, the Plan
Administrator's decisions are final and binding on all parties.
3.7 Administrative Fees and Expenses
All fees and expenses incurred by the Plan in connection with the administration
of the Plan shall be paid by the Company.
3.8 Claims Procedure
If a claim for benefits by a Participant or his/her Beneficiary (the
"Applicant") is denied, the Plan Administrator shall furnish the Applicant
within 90 days after receipt of such claim (or within 180 days after receipt if
the Plan Administrator notifies the Applicant prior to the end of the 90 day
period that special circumstances require an extension of time), a written
notice which specifies the reason for the denial, refers to the pertinent
provisions of the Plan on which the denial is based, describes any additional
material or information necessary for properly completing the claim and explains
why such material or information is necessary, and explains the claim review
procedures of this Section 3.8. If, within 60 days after receipt of such notice,
the Applicant so requests in writing, the Plan Administrator shall review such
decision. The Plan Administrator's decision on review shall be in writing, and
shall include specific reasons for the decision, written in a manner calculated
to be understood by the Applicant, and shall include specific references to the
pertinent provisions of the Plan on which the decision is based. It shall be
delivered to the Applicant within 60 days after the request for review is
received, unless extraordinary
circumstances require a longer period, but in no event more than 120 days after
the request for review is received.
3.9 Tax Liability
The Company will withhold all required taxes from any payment of benefits.
IV. Exempt Status
The Plan constitutes an unfunded supplemental retirement plan and is fully
exempt from Parts 2, 3, and 4 of Title I of ERISA. The Plan shall be governed
and construed in accordance with Title I of ERISA.
V. Indemnification
The Plan Administrator, employees, officers and directors of the Company shall
not be held liable for, and shall be indemnified and held harmless by the
Company against, any loss, expense or liability relating to the Plan which
arises from any action or determination made in good faith.
VI. Amendment and Termination
The Company has established the Plan with the intention and expectation to
maintain the Plan for an indefinite period of time. However, Alberto-Culver
Company, through action by either the Compensation Committee or the Board of
Directors of the Alberto-Culver Company, reserves the right to amend or to
terminate the Plan at any time without Participant or Beneficiary consent. No
amendment, however, may reduce the balance in a Participant's account.
Participants and Beneficiaries shall be notified of such amendment or
termination as soon as reasonably practical, but any delay in giving such notice
shall not affect the effectiveness of the amendment or termination. The Company
shall have the absolute right to pay each Participant his/her entire interest in
the Plan in a single-sum upon termination of the Plan.
VII. Miscellaneous
7.1 Nonassignability
Neither a Participant nor any other person shall have any right to commute,
sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber,
transfer, hypothecate or convey in advance of actual receipt the amounts, if
any, payable hereunder, or any part thereof, which are, and all rights to which
are, expressly declared to be nonassignable and nontransferable. No part of the
amounts payable shall, prior to actual payment, be subject to garnishment,
seizure or sequestration for the payment of any debts owed by a Participant or
any other person, nor be transferable by operation of law in the event of a
Participant's or any other person's bankruptcy or insolvency. Notwithstanding
the foregoing, the Company shall have the right to offset any amount owed to it
against the amount payable to a Participant or his Beneficiary, or to defer
payment until any dispute with respect to any amount owed has been resolved.
7.2. No Contract of Employment
The terms and conditions of this Plan shall not be deemed to constitute a
contract of employment between the Company and the Participant, and neither the
Participant nor the Participant's Beneficiary shall have any rights against the
Company except as may otherwise be specifically provided herein. Moreover,
nothing in this Plan shall be deemed to give a Participant the right to be
retained in the service
of the Company or to interfere with the right of the Company to discipline or
discharge him/her at any time.
7.3 Participant Litigation
In any action or proceeding regarding the Plan, Participants, employees or
former employees of the Company, their Beneficiaries or any other persons having
or claiming to have an interest in this Plan shall not be necessary parties and
shall not be entitled to any notice or process. Any final judgment which is not
appealed or appealable and may be entered in any such action or proceeding shall
be binding and conclusive on the parties hereto and all persons having or
claiming to have any interest in this Plan.
7.4 Participant and Beneficiary Duties
Persons entitled to benefits under the Plan shall file with the Plan
Administrator from time to time such person's post office address and each
change of post office address. Each such person entitled to benefits under the
Plan also shall furnish the Plan Administrator with all appropriate documents,
evidence, data or information which the Plan Administrator considers necessary
or desirable in administering the Plan.
7.5 Governing Law
The provisions of this Plan shall be construed and interpreted according to the
laws of the State of Illinois to the extent not pre-empted by the laws of the
United States.
7.6 Validity
In case any provision of this Plan shall be held illegal or invalid for any
reason, such illegality or invalidity shall not affect the remaining parts
hereof, but this Plan shall be construed and enforced as if such illegal and
invalid provision had never been inserted herein.
7.7 Notices
Any notice or filing required or permitted to be given to the Plan Administrator
or the Company under the Plan shall be sufficient if in writing and hand
delivered, or sent by registered or certified mail to the Alberto-Culver Company
at its principal executive offices attention Plan Administrator with a copy to
the General Counsel of Alberto-Culver Company. Notices shall be deemed given as
of the date of delivery or, if delivery is made by mail, as of the date shown on
the postmark on the receipt for registration or certification. Any notice
required or permitted to be given to a Participant shall be sufficient if in
writing and hand delivered or sent by first class mail to the Participant at the
last address listed on the records of the Company.
7.8 Successors
The provisions of this Plan shall bind and inure to the benefit of Company and
its successors and assigns. The term successors as used herein shall include any
corporate or other business entity which shall, whether by merger,
consolidation, purchase or otherwise acquire all or substantially all of the
business and assets of the Company, and successors of any such corporation or
other business entity.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
ALBERTO-CULVER COMPANY AND SUBSIDIARIES
Financial Data Schedule
Quarter Ended December 31, 1998
(in thousands)
This schedule contains summary financial information extracted from the
consolidated balance sheet as of December 31, 1998 and the consolidated
statement of earnings for the quarter ended December 31, 1998 and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000003327
<NAME> ALBERTO-CULVER
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-1-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1.00
<CASH> 45,720
<SECURITIES> 909
<RECEIVABLES> 138,333
<ALLOWANCES> 9,848
<INVENTORY> 375,694
<CURRENT-ASSETS> 570,632
<PP&E> 412,834
<DEPRECIATION> 189,397
<TOTAL-ASSETS> 1,048,905
<CURRENT-LIABILITIES> 287,436
<BONDS> 170,544
0
0
<COMMON> 15,031
<OTHER-SE> 528,718
<TOTAL-LIABILITY-AND-EQUITY> 1,048,905
<SALES> 464,551
<TOTAL-REVENUES> 464,551
<CGS> 228,757
<TOTAL-COSTS> 228,757
<OTHER-EXPENSES> 203,830
<LOSS-PROVISION> 1,352
<INTEREST-EXPENSE> 3,252
<INCOME-PRETAX> 29,438
<INCOME-TAX> 10,818
<INCOME-CONTINUING> 18,620
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,620
<EPS-PRIMARY> .33
<EPS-DILUTED> .32
</TABLE>
