<PAGE>
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, 1999
-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, 1999, there were 22,777,770 shares of Class A common stock and
32,957,471 shares of Class B common stock outstanding.
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS
- -----------------------------
ALBERTO-CULVER COMPANY AND SUBSIDIARIES
Consolidated Statements of Earnings
Three Months Ended December 31, 1999 and 1998
(in thousands, except per share data)
<TABLE>
<CAPTION>
(Unaudited)
------------------------------------------
1999 1998
-------- --------
<S> <C> <C>
Net sales $525,799 464,551
Costs and expenses:
Cost of products sold 257,370 228,757
Advertising, promotion, selling and administrative 233,933 203,830
Interest expense, net of interest income of $745 in 1999
and $726 in 1998 3,427 2,526
Non-recurring gain (Note 7) (9,257) --
-------- -------
Total costs and expenses 485,473 435,113
-------- -------
Earnings before provision for income taxes 40,326 29,438
Provision for income taxes (Note 7) 13,493 10,818
-------- -------
Net earnings (Notes 4 and 7) $ 26,833 18,620
======== =======
Net earnings per share (Notes 3 and 7):
Basic $ .48 .33
======== =======
Diluted $ .48 .32
======== =======
Cash dividends paid per share (Note 2) $ .065 .060
======== =======
</TABLE>
See notes to consolidated financial statements.
2
<PAGE>
ALBERTO-CULVER COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1999 and September 30, 1999
(in thousands, except share data)
<TABLE>
<CAPTION>
(Unaudited)
December 31, September 30,
ASSETS 1999 1999
- ------ ----------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 52,954 55,931
Short-term investments 489 1,885
Receivables, less allowance for doubtful
accounts ($9,508 at 12/31/99 and $8,441 at 9/30/99) 146,024 144,075
Inventories (Note 5) 439,256 421,888
Other current assets 22,063 21,775
----------- ---------
Total current assets 660,786 645,554
----------- ---------
Property, plant and equipment at cost, less accumulated
depreciation ($192,851 at 12/31/99 and $190,808 at 9/30/99) 236,267 238,753
Goodwill, net 179,182 172,109
Trade names and other intangible assets, net 71,385 72,975
Other assets 54,990 55,143
----------- ---------
Total assets $1,202,610 1,184,534
=========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Short-term borrowings and current maturities of long-term debt $ 5,358 3,719
Accounts payable 188,561 198,887
Accrued expenses 99,995 114,382
Income taxes 31,088 19,413
---------- ---------
Total current liabilities 325,002 336,401
---------- ---------
Long-term debt 235,613 225,173
Deferred income taxes 33,568 33,833
Other liabilities 21,672 20,307
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 37,710,655 shares 8,296 8,296
Additional paid-in capital 190,078 191,063
Retained earnings 623,845 600,629
Accumulated other comprehensive income -
foreign currency translation (Note 4) (35,872) (31,160)
---------- ---------
793,082 775,563
Less treasury stock at cost (Class A common shares: 7,835,028
at 12/31/99 and 7,844,756 at 9/30/99; Class B common shares:
4,753,184 at 12/31/99 and 9/30/99) (206,327) (206,743)
---------- ---------
Total stockholders' equity 586,755 568,820
---------- ---------
Total liabilities and stockholders' equity $1,202,610 1,184,534
========== =========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
ALBERTO-CULVER COMPANY AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Three Months Ended December 31, 1999 and 1998
(in thousands)
<TABLE>
<CAPTION>
(Unaudited)
------------------
1999 1998
------ ------
<S> <C> <C>
Cash Flows from Operating Activities:
- ------------------------------------
Net earnings $26,833 18,620
Adjustments to reconcile
net earnings to net cash
used by operating activities:
Depreciation and amortization 11,279 10,275
Non-recurring gain (9,257) --
Other, net 438 1,274
Cash effects of changes in
(exclusive of acquisitions):
Receivables, net (4,516) (397)
Inventories (12,670) (7,312)
Other current assets (494) (1,274)
Accounts payable and accrued expenses (24,044) (28,526)
Income taxes 11,626 3,363
------- -------
Net cash used by operating activities (805) (3,977)
------- -------
Cash Flows from Investing Activities:
- ------------------------------------
Short-term investments 1,396 1
Capital expenditures (8,112) (9,640)
Payments for purchased businesses,
net of acquired companies' cash (15,115) (3,750)
Proceeds from sale of trademark 10,000 --
Other, net 3,673 677
------- -------
Net cash used by investing activities (8,158) (12,712)
------- -------
Cash Flows from Financing Activities:
- ------------------------------------
Short-term borrowings 1,587 978
Proceeds from long-term debt 18,000 378
Repayments of long-term debt (6,500) (1,039)
Cash dividends paid (3,618) (3,429)
Cash proceeds from exercise of stock options 951 1,573
Stock purchased for treasury (3,460) (7,948)
------- -------
Net cash provided (used) by financing activities 6,960 (9,487)
------- -------
Effect of foreign exchange rate changes on cash (974) (499)
------- -------
Net decrease in cash and cash equivalents (2,977) (26,675)
Cash and cash equivalents at beginning of period 55,931 72,395
------- -------
Cash and cash equivalents at end of period $52,954 45,720
======= =======
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
ALBERTO-CULVER COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(l) The consolidated financial statements contained in this report have not
been audited by independent public accountants, except for balance sheet
information presented at September 30, 1999. 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 27, 2000, the company announced an increase in the cash dividend
on Class A and Class B common stock, raising the quarterly dividend 15.4%
to 7.5 cents per share or 30 cents annually. The cash dividend is payable
February 21, 2000 to stockholders of record on February 7, 2000.
(3) Basic earnings per share is calculated using the weighted average of actual
shares outstanding of 55,708,000 and 57,082,000 for the three months ended
December 31, 1999 and 1998, respectively.
Diluted earnings per share is determined by dividing net earnings by the
weighted average shares outstanding, including common stock equivalents.
Diluted weighted average shares outstanding were 56,432,000 and 57,969,000
for the three months ended December 31, 1999 and 1998, respectively.
The following table provides a reconciliation of diluted weighted average
shares outstanding (in thousands):
<TABLE>
<CAPTION>
Three Months Ended December 31
------------------------------
1999 1998
---- ----
<S> <C> <C>
Weighted average shares
outstanding-basic 55,708 57,082
Effect of dilutive securities:
Assumed exercise of
stock options 649 812
Other 75 75
------ ------
Weighted average shares
outstanding-diluted 56,432 57,969
====== ======
</TABLE>
(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):
<TABLE>
<CAPTION>
Three Months Ended December 31
------------------------------
1999 1998
---- ----
<S> <C> <C>
Net earnings $26,833 18,620
Other comprehensive income
adjustments-
foreign currency translation (4,712) (368)
------- ------
Comprehensive income $22,121 18,252
======= ======
</TABLE>
5
<PAGE>
ALBERTO-CULVER COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(5) Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
December 31, September 30,
1999 1999
------------ -------------
<S> <C> <C>
Finished goods $388,251 373,907
Work-in-process 5,454 4,582
Raw materials 45,551 43,399
--------- ---------
$439,256 421,888
========= =========
</TABLE>
(6) During fiscal year 1998, the Board of Directors authorized the company to
purchase up to 6.0 million shares of its Class A common stock. This
authorization was increased to 9.0 million shares in fiscal year 1999. As
of December 31, 1999, the company had purchased 7,290,400 Class A common
shares under this program at a total cost of $162.9 million. In addition,
during fiscal year 1999, the Board of Directors authorized the purchase of
190,000 Class B common shares from a related party at a total cost of $5.0
million, which was equal to fair market value of the shares on the date of
purchase.
(7) In the first quarter of fiscal year 2000, the company sold a European
trademark owned by its Indola professional business for $10.0 million. The
transaction resulted in a non-recurring pre-tax gain of $9.3 million and an
increase in net earnings of $6.0 million. The non-recurring gain added 11
cents to the company's basic and diluted earnings per share.
The following table provides pro-forma information for the first quarter of
the fiscal year excluding the non-recurring gain (in thousands, except per
share data):
<TABLE>
<CAPTION>
Three Months Ended December 31
------------------------------
1999 1998
---- ----
<S> <C> <C>
Pre-tax earnings $31,069 29,438
======= ======
Net earnings $20,816 18,620
======= ======
Net earnings per share:
Basic $ 0.37 0.33
======= ======
Diluted $ 0.37 0.32
======= ======
</TABLE>
6
<PAGE>
ALBERTO-CULVER COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(8) Effective September 30, 1999, the company adopted SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information,"
which establishes standards for reporting information about operating
segments, products and services, geographic areas and major customers.
Segment data for the three months ended December 31, 1999 and 1998 is as
follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended December 31
------------------------------
1999 1998
---- ----
<S> <C> <C>
Net sales:
Consumer products:
Alberto-Culver North America $121,825 111,377
Alberto-Culver International 113,120 101,458
-------- -------
Total consumer products 234,945 212,835
Specialty distribution - Sally 295,874 255,258
Eliminations (5,020) (3,542)
-------- -------
$525,799 464,551
======== =======
Earnings before provision for income taxes:
Consumer products:
Alberto-Culver North America $ 6,708 5,971
Alberto-Culver International 1,213 2,258
-------- -------
Total consumer products 7,921 8,229
Specialty distribution -Sally 29,791 26,594
-------- -------
Segment operating profit 37,712 34,823
Non-recurring gain (Note 7) 9,257 --
Unallocated expenses, net (3,216) (2,859)
Interest expense, net of interest income (3,427) (2,526)
-------- -------
$ 40,326 29,438
======== =======
</TABLE>
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
- --------------------------------------------------------------------------
FINANCIAL CONDITION
- -------------------
RESULTS OF OPERATIONS
- ---------------------
First Quarter Ended December 31, 1999 versus First Quarter Ended December 31,
- -----------------------------------------------------------------------------
1998
- ----
The company achieved record first quarter net sales of $525.8 million in fiscal
year 2000, up $61.2 million or 13.2% over the comparable period of fiscal year
1999.
Net earnings for the three months ended December 31, 1999 were $26.8 million,
including the non-recurring gain, or 44.1% higher than the same period of the
prior year. Basic and diluted earnings per share were 48 cents in fiscal year
2000.
As described in Note 7, the company sold a European trademark owned by its
Indola professional business in the first quarter of fiscal year 2000. As a
result, the company recognized a non-recurring pre-tax gain of $9.3 million and
an increase in net earnings of $6.0 million. Accordingly, basic and diluted
earnings per share increased 11 cents as a result of the gain.
Net earnings before the non-recurring gain for the three months ended December
31, 1999 were $20.8 million or 11.8% higher than the same period of the prior
year. Basic earnings per share before the non-recurring gain were 37 cents in
fiscal year 2000 compared to 33 cents in fiscal year 1999. Diluted earnings per
share before the non-recurring gain increased 15.6% to 37 cents from 32 cents in
fiscal year 1999.
Compared to the same period of the prior year, sales for Alberto-Culver North
America ("North America") increased 9.4% in the first quarter of fiscal year
2000. The increase was primarily due to higher sales of the Alberto VO5 Herbals
line of shampoos and conditioners, St. Ives Swiss Formula facial products and
the Motions line of hair care products.
Sales of Alberto-Culver International ("International") were $113.1 million for
the current quarter, up 11.5% compared to last year. Sales for the first quarter
of fiscal year 2000 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 year 1999, Alberto-Culver International sales would have increased
16.5%. The growth in International sales was principally due to the launch of
Advanced Alberto VO5 hair care products in certain international markets and
acquisitions in Latin America.
The "Specialty distribution-Sally" business segment achieved a sales increase of
$40.6 million or 15.9% for the quarter ended December 31, 1999. The increase 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, 1999, Sally Beauty Company had 2,203 stores
offering a full range of professional beauty supplies.
Cost of products sold as a percentage of net sales for the first quarter was
48.9% as compared to 49.2% for the first quarter of the prior year. The decrease
in the cost of goods sold percentage was primarily due to improvements for
International from the launch of the higher margin Advanced Alberto VO5 hair
care products along with higher margin sales from the acquired operations in
Argentina and Chile. In addition, Sally's cost of goods sold percentage
decreased principally due to an increase in higher margin retail sales and
volume purchase discounts.
Advertising, promotion, selling and administrative expenses increased 14.8% in
the first quarter of fiscal year 2000. The increase primarily resulted from the
higher selling and administration costs associated with the growth of the Sally
Beauty Company business and higher expenditures for advertising, promotion and
market research.
Advertising, promotion and market research expenditures totaled $73.2 million
for the current period versus $65.0 million for the comparable period of the
prior year. The higher expenses in fiscal year 2000 were mainly attributable to
increased advertising and promotion expenditures for International as a result
of the launch of Advanced Alberto VO5 and acquisitions in Latin America.
Net interest expense increased $901,000 for the first quarter compared to the
same period of the prior year. The increase was primarily due to additional
borrowings under the company's revolving credit facility.
8
<PAGE>
The provision for income taxes as a percentage of earnings before income taxes
and before the non-recurring gain was 33.00% for the first quarter of fiscal
year 2000 and 36.75% for the same period in the prior year. The lower tax rate
in 2000 was mainly due to the realization of certain tax benefits and the
favorable closing of certain tax years.
FINANCIAL CONDITION
- -------------------
December 31, 1999 versus September 30, 1999
- -------------------------------------------
The ratio of current assets to current liabilities was 2.03 to 1.00 at December
31, 1999 and 1.92 to 1.00 at September 30, 1999. Working capital of $335.8
million was $26.6 million higher than the September 30, 1999 balance of $309.2
million.
Total borrowings increased $12.1 million to $241.0 million during the first
three months of fiscal year 2000. The increase was principally due to additional
borrowings under the company's revolving credit facility primarily to fund
acquisitions. At December 31, 1999, the company had $126.0 million available
under its revolving credit facility.
YEAR 2000 READINESS DISCLOSURES
- -------------------------------
As of the date hereof, the company has not experienced any significant business
interruptions as a result of Year 2000 ("Y2K") issues. However, Y2K problems
could occur during the Year 2000, but as time passes the likelihood of
encountering problems will diminish. If Y2K problems develop, every effort will
be made to correct the problems before the business is impacted in any
significant manner. A Y2K rapid response team at each business unit is being
maintained to address Y2K problems efficiently and to communicate the problems
to the company's Y2K coordinators.
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 and Section 21E of the Securities
Exchange Act of 1934. 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, loss of distributorship rights and the ability to develop and
successfully introduce new products; uncertainties pertaining to Y2K computer
exposures; risks inherent in acquisitions and strategic alliances; changes in
costs, including changes in labor costs, raw material prices or promotional
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. Alberto-Culver 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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- ------------------------------------------------------------------
There have been no material changes in the company's market risk during the
three months ended December 31, 1999.
9
<PAGE>
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ----------------------------------------
(a) Exhibits:
10(c) Copy of Alberto-Culver Company 1994 Shareholder Value Incentive
Plan, as amended* (filed as Annex A and incorporated herein by
reference from the company's Definitive Proxy Statement on Form 14A
for the year ended September 30, 1999).
10(i) Copy of the Alberto-Culver Company Executive Deferred Compensation
Plan dated September 23, 1999, as amended.*
27 Financial Data Schedule
*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, 1999.
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, 2000
<PAGE>
Exhibit 10(i)
Alberto-Culver Company
Executive Deferred Compensation Plan
(As amended and restated through September 23, 1999)
<PAGE>
Table of Contents
-----------------
<TABLE>
<CAPTION>
Exhibit 10(i)
I. Establishment, Definitions and Purpose
<S> <C>
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
Conditional Matching Contributions....................................... 4
III. General Provisions
Funding.................................................................. 5
Vesting.................................................................. 5
In-Service Withdrawals................................................... 5
Beneficiary Designation.................................................. 6
Death Benefits........................................................... 6
Administration........................................................... 6
Administrative Fees and Expenses......................................... 6
Claims Procedure......................................................... 7
Tax Liability............................................................ 7
IV. Exempt Status....................................................... 7
V. Indemnification....................................................... 7
VI. Amendment and Termination............................................ 7
VII. Miscellaneous
Nonassignability......................................................... 8
No Contract of Employment................................................ 8
Participant Litigation................................................... 8
Participant and Beneficiary Duties....................................... 8
Governing Law............................................................ 8
Validity................................................................. 9
Notices.................................................................. 9
Successors............................................................... 9
</TABLE>
<PAGE>
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.
1
<PAGE>
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
<PAGE>
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
3
<PAGE>
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).
2.7 Conditional Matching Contributions
If the following conditions have been satisfied, Participants may be entitled to
a matching contribution from the Company:
(a) Participant, in the applicable Plan Year, defers in either the Alberto-
Culver 401(k) Savings Plan or the Sally Beauty 401(k) Savings Plan a
percentage of his or her 401(k) Compensation which is greater than or equal
to the percentage which will maximize the Company's match under such 401(k)
Plan; and
(b) The Company is required to and does refund all or a portion of a
Participant's deferred 401(k) Compensation ("Refund") so that the
Participant does not receive the maximum matching contribution to which such
Participant would have otherwise been entitled had no Refund been made;
and
(c) Participant executed a Deferral Agreement Form prior to the beginning of the
applicable Plan Year in which he or she elected to defer in this Plan the
difference between the percentage of his or her 401(k) Compensation that
would have maximized his or her matching contribution paid by the Company
under the applicable 401(k) Plan and the percentage of his or her 401(k)
Compensation that has actually been deferred under such Plan after taking
into account any Refund (the "Difference").
If all of the foregoing conditions have been satisfied, pursuant to an election
made by the Participant on the Deferral Agreement Form, such Participant will
contribute into this Plan, in no more than four substantially equal installments
deducted from his or her paychecks immediately following the date of the Refund,
the Difference. Within 60 days after the Difference has been fully credited
into the Plan by payroll deductions, the Participant shall be credited a
matching
4
<PAGE>
contribution into his or her account maintained hereunder equal to the
difference between the maximum match such Participant would have been entitled
under the applicable 401(k) Plan had no Refund been made and the matching
contribution actually given to the Participant under such 401(k) Plan. Matching
contributions credited pursuant to this Section 2.7 shall be 100% vested upon
receipt of such contribution by the Participant. Matching contributions and the
Difference must be deferred until the earlier of (i) the Participant's
termination of employment with the Company, (ii) the Participant's death or
(iii) the Plan's termination (unless a successor plan is instituted).
For purposes of this Section 2.7, the term "401(k) Compensation" shall be
defined as the term "Compensation" is defined in the applicable 401(k) Plan.
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 and any matching contributions and 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
5
<PAGE>
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.
6
<PAGE>
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
7
<PAGE>
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.
8
<PAGE>
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.
9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1999 AND THE CONSOLIDATED
STATEMENT OF EARNINGS FOR THE THREE MONTHS ENDED DECEMBER 31, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-START> OCT-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 52,954
<SECURITIES> 489
<RECEIVABLES> 155,532
<ALLOWANCES> 9,508
<INVENTORY> 439,256
<CURRENT-ASSETS> 660,786
<PP&E> 429,118
<DEPRECIATION> 192,851
<TOTAL-ASSETS> 1,202,610
<CURRENT-LIABILITIES> 325,002
<BONDS> 235,613
0
0
<COMMON> 15,031
<OTHER-SE> 571,724
<TOTAL-LIABILITY-AND-EQUITY> 1,202,610
<SALES> 525,799
<TOTAL-REVENUES> 525,799
<CGS> 257,370
<TOTAL-COSTS> 257,370
<OTHER-EXPENSES> 233,933
<LOSS-PROVISION> 1,547
<INTEREST-EXPENSE> 4,172
<INCOME-PRETAX> 40,326
<INCOME-TAX> 13,493
<INCOME-CONTINUING> 26,833
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,833
<EPS-BASIC> 0.48
<EPS-DILUTED> 0.48
</TABLE>
