FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended August 31, 1995 Commission File Number 0-14449
BeautiControl Cosmetics, Inc.
(Exact name of registrant as specified in its charter)
Delaware 75-2036343
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization number)
2121 Midway, Carrollton, TX 75006
(Address including zip code of principal executive offices)
214/458-0601
(Registrant's telephone number including area code)
Indicated below is the number of shares outstanding of each class of the
registrant's common stock, as of October 11, 1995.
Title of Each Class of Common Stock Number of Shares Outstanding
Common Stock, $0.10 par value 6,263,761 shares
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
Page 1 of 8 sequentially
numbered pages
<PAGE>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statement
Index to BeautiControl Cosmetics, Inc. Consolidated Financial
Statement
Page
Balance Sheet 3-4
Statements of Income 5
Statements of Cash Flows 6
Notes to Financial Statements 7
<PAGE>
<TABLE>
BEAUTICONTROL COSMETICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<CAPTION>
ASSETS
August 31, November 30,
1995 1994
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 490,885 $3,275,303
Short-term investments 947,250 2,526,808
Accounts receivable-net of
allowance for doubtful accounts
of $318,700 and $291,100 at
August 31, 1995 and
November 30, 1994, respectively 515,633 308,414
Inventories
Raw materials 5,245,715 5,538,426
Finished goods 5,725,063 4,613,823
10,970,778 10,152,249
Deferred income taxes 903,770 903,770
Other current assets 671,123 834,290
Total current assets 14,499,439 18,000,834
PROPERTY AND EQUIPMENT, AT COST 20,056,991 18,906,585
LESS ACCUMULATED DEPRECIATION
AND AMORTIZATION 10,023,286 8,653,705
10,033,705 10,252,880
OTHER ASSETS
Cost in excess of net tangible
assets, acquired, net of
amortization of $679,400 and
$629,700 at August 31, 1995 and
November 30, 1994, respectively 1,971,917 2,021,629
Investments in bonds (at cost) 3,145,342 4,227,254
Other, net of amortization of
$467,200 and $449,100 at August
31, 1995 and November 30, 1994,
respectively 594,047 432,174
Total assets $30,244,450 $34,934,771
<FN>
The accompanying notes are an integral part of these financial
statements.
2
</TABLE>
<PAGE>
<TABLE>
BEAUTICONTROL COSMETICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
UNAUDITED)
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
August 31, November 30
1995 1994
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable - trade $2,732,416 $3,825,867
Sales tax payable 973,909 833,262
Accrued commissions 1,707,328 1,446,265
Accrued compensation 483,456 1,240,693
Accrued awards 228,376 441,268
Accrued liabilities 1,687,851 1,631,379
Deferred income 677,864 1,434,775
Income taxes payable 149,795 -
8,640,995 10,853,509
DEFERRED INCOME TAXES 293,674 293,674
STOCKHOLDERS' EQUITY
Preferred stock
Authorized - 1,000,000 shares,
$.10 par value
Issued and outstanding - none
Common stock
Authorized - 20,000,000 shares,
$.10 par value
Issued - 9,476,761 and 9,466,616
shares at August 31, 1995 and
November 30, 1994, respectively 947,676 946,662
Capital in excess of par value 12,471,754 12,471,754
Retained earnings 33,630,349 31,657,996
47,049,779 45,076,412
Less cost of 3,184,775 and 2,805,175
common shares held in treasury at
August 31, 1995 and November 30, 1994 25,739,998 21,288,824
21,309,781 23,787,588
Total liabilities and stockholders'
equity $30,244,450 $34,934,771
<FN>
The accompanying notes are an integral part of these statements.
3
</TABLE>
<PAGE>
<TABLE>
BEAUTICONTROL COSMETICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
August 31, August 31, August 31, August 31,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Sales $17,905,604 $17,306,469 $55,551,899 $52,149,341
Cost of goods sold 4,708,219 4,171,460 13,716,346 12,757,084
Gross profit 13,197,385 13,135,009 41,835,553 39,392,257
Selling expenses 7,856,756 7,134,257 23,695,852 20,637,205
General and
administrative expenses 3,989,949 3,835,341 12,158,940 11,590,459
11,846,705 10,969,598 35,854,792 32,227,664
Income from
operations 1,350,680 2,165,411 5,980,761 7,164,593
Other income/expenses 61,610 66,130 219,527 184,363
Interest income 76,828 44,282 200,769 94,723
Other, net 138,438 110,412 420,296 279,086
Income before income
taxes 1,489,118 2,275,823 6,401,057 7,443,679
Income taxes 582,302 809,158 2,335,373 2,610,901
Income before
cumulative effect of
change in accounting
principle 906,816 1,466,665 4,065,684 4,832,778
Cumulative effect of
change in accounting
principle - - - 172,053
Net income $ 906,816 $ 1,466,665 $ 4,065,684 $ 5,004,831
Earnings per common and
common equivalent
share:
Before cumulative
effect of change in
accounting principle $ .13 $ .21 $ .59 $ .69
Cumulative effect of
change in accounting
principle* - - - .02
Net income $ .13 $ .21 $ .59 $ .71
Weighted average common and
common equivalent 6,752,384 7,029,443 6,893,001 7,007,962
<FN>
* Cumulative effect of change in accounting principle reflects the impact
of the adoption of Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes" which supersedes Statement of Financial
Accounting Standards No. 96.
The accompanying notes are an integral part of these statements.
4
</TABLE>
<PAGE>
<TABLE>
BEAUTICONTROL COSMETICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
(Unaudited)
<CAPTION>
Nine Months Ended
August 31, August 31,
1995 1994
<S> <C> <C>
Net cash provided by (used in)
operating activities $2,407,633 $6,264,791
Cash flows from investing activities:
Proceeds from sale of investments 3,628,000 3,653,372
Purchase of investments
Purchase of property and equipment (976,972) (6,323,705)
Purchase of other assets (1,092,953) (2,416,611)
(214,176) (115,944)
Net cash provided by (used in)
investing activities 1,343,899 (5,202,888)
Cash flows from financing activities:
Proceeds from issuance of common
stock 1,014 852,811
Purchase of common stock for
treasury (4,451,174) (817,188)
Dividends paid (2,085,790) (1,400,324)
Net cash provided by (used in)
financing activities (6,535,950) (1,364,701)
Net increase (decrease) in cash and
cash equivalents (2,784,418) (302,798)
Cash and cash equivalents at the
beginning of the period 3,275,303 4,268,913
Cash and cash equivalents at the end
of the period 490,885 3,966,115
Supplemental Cash Flow Information:
Income Taxes $2,080,400 $1,898,600
Interest - -
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
BEAUTICONTROL COSMETICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTERS ENDED AUGUST 31, 1995 AND AUGUST 31, 1994
Note 1 - Basis of Presentation
In the opinion of the Company, the accompanying consolidated
financial statements contain all adjustments, consisting of only
normal recurring adjustments, necessary to present fairly the
financial position as of August 31, 1995 and November 30, 1994
and the results of operations and cash flows for the three and
nine months ended August 31, 1995 and August 31, 1994. The
results for the three and nine months ended August 31, 1995 are
not necessarily indicative of the results for the year.
While the Company believes that the disclosures presented are
adequate to make the information not misleading, it is suggested
that these financial statements be read in conjunction with the
consolidated financial statements and notes included in the
Company's annual report on Form 10-K for the year ended November
30, 1994.
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
5
Results of Operation
Quarters Ended August 31, 1995 and August 31, 1994. Net sales
were $17,906,000 for the third quarter of 1995, a 3.5% increase
over net sales of $17,306,000 for the same period in 1994.
Special pricing on existing products contributed to the increase
in sales over 1994. Sales growth was low caused to some extent
from greater focus by the Company s Consultants on recruiting
(than on selling) during the Company s current recruiting drive.
Cost of goods sold increased to 25% of sales in 1995 compared to
24% of sales in 1994. With the focus shifting to recruiting,
more sales demonstration kits carrying low margins were sold to
new recruits driving the increase in cost of goods sold.
Selling, general and administrative expenses rose to 66% of sales
in 1995 from 63% of sales in 1994. This increase is primarily
due to the approximate $400,000 spent on the current recruiting
promotion running through September and $84,000 spent on new and
international market development.
Other income, net, was $138,000 compared to $110,000 for the same
period in 1994.
Net income declined to $907,000 in 1995 from $1,467,000 in 1994
due to the factors stated above and the $92,000 in losses from
the Company s recently purchased United Kingdom subsidiary.
<PAGE>
Nine Months ended August 31, 1995 and August 31, 1994. Sales
increased to $55,552,000 for the first nine months of 1995
compared to $52,149,000 for the same period in 1994. Successful
product introductions and skin care sales continue to support
sales.
Cost of goods as a percent of sales increased to 25% in 1995 from
24% in 1994. The increase is due to the third quarter shift in
sales from retail products with higher margins to sales
demonstration kits (with lower margins) purchased by new
recruits. Offsetting this third quarter increase in cost of
goods, is the overall shift in the Company s product mix for the
year from sales aids items carrying low margins to retail
products with higher margins.
Selling, general and administrative costs were 65% of sales or
$35,855,000 in 1995 compared to 62% of sales or $32,228,000 in
1994. The Company has incurred additional costs in 1995 on
improving education and communication with the Company s
Consultants and the items previously stated. Also impacting
selling, general and administrative costs is the increased
commission expense as a result of the change in product mix from
sales aids items to retail products.
Other income, net, increased to $420,000 in 1995 from $279,000 in
1994 primarily due to a premium refund from the Company s health
insurer.
Resulting from the factors stated above, (and the onetime
addition of $172,000 to net income in 1994 from the adoption of
Statement of Financial Standards No. 109 Accounting for Income
Taxes ), net income was $4,066,000 for the first nine months of
1995 compared to $5,005,000 for the same period in 1994.
Liquidity and Capital Resources
The Company's primary source of liquidity is funds provided by
operations.
The Company s cash position decreased to $491,000 at August 31,
1995 from $3,275,000 at November 30, 1994. The Company invested
$4,451,000 to repurchase 379,600 shares of its stock, paid
dividends of $2,086,000 and paid $1,093,000 for additional
property and equipment. Under a plan previously authorized by
the Board of Directors, the Company may repurchase shares of its
common stock when they are believed to be undervalued. The
Company has authorized 768,725 remaining shares for repurchase.
<PAGE>
The Company renegotiated its line of credit to reinstate it from
$8,000,000 to $10,000,000. The use of the line of credit is
primarily for share repurchase and operating cash if needed for
the business. This line of credit reduces by $2,000,000 per year
if unused and if not reinstated.
6
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Index to Exhibits
11 BeautiControl Cosmetics, Inc. and Subsidiaries -
Computation of Earnings per Common Share -
filed herewith at page 8.
(b) Reports on Form 8-K
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant had duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
BeautiControl Cosmetics, Inc.
(Registrant)
Date: 10/12/95 /s/ RICHARD W. HEATH
Richard W. Heath
President, Chief Executive
Officer
Date: 10/12/95 /s/ M. DOUGLAS TUCKER
M. Douglas Tucker
Senior Vice President-Finance
Principle Financial Officer
7
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000788330
<NAME> BEAUTICONTROL COSMETICS, INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-END> AUG-31-1995
<CASH> 490,885
<SECURITIES> 947,250
<RECEIVABLES> 515,633
<ALLOWANCES> 318,721
<INVENTORY> 10,970,778
<CURRENT-ASSETS> 14,499,439
<PP&E> 20,056,991
<DEPRECIATION> 10,023,286
<TOTAL-ASSETS> 30,244,450
<CURRENT-LIABILITIES> 8,640,995
<BONDS> 0
<COMMON> 947,676
0
0
<OTHER-SE> 20,362,105
<TOTAL-LIABILITY-AND-EQUITY> 30,244,450
<SALES> 17,905,604
<TOTAL-REVENUES> 17,905,604
<CGS> 4,709,219
<TOTAL-COSTS> 16,554,924
<OTHER-EXPENSES> (138,438)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,489,118
<INCOME-TAX> 582,302
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 906,816
<EPS-PRIMARY> .13
<EPS-DILUTED> .13
</TABLE>
<TABLE>
EXHIBIT 11
BEAUTICONTROL COSMETICS, INC. AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER COMMON SHARE
Three Months Ended Nine Months Ended
August 31, August 31, August 31, August 31,
1995 1994 1995 1995
<S> <C> <C> <C> <C>
Income before cumulative
effect of change in
accounting principle $ 906,816 $1,466,665 $4,065,684 $4,832,778
Cumulative effect of change
in accounting principle* - - - 172,053
Net income applicable to
common stock $ 906,816 $1,466,665 $4,065,684 $5,004,831
Common and common equivalent
share:
Weighted averge common
shares outstanding 6,481,298 6,658,507 6,579,898 6,655,505
Net effect of dilutive
stock options based on the
treasury stock method
using average market price 271,086 370,936 313,103 352,457
Weighted average common
and common equivalent shares 6,752,384 7,029,443 6,893,001 7,007,962
Earnings per common and
common equivalent share:
Before cumulative effect
of change in accounting
principle $ .13 $ .21 $ .59 $ .69
Cumulative effect of
change in accounting
principle* - - - .02
Net income per common and
common equivalent share $ .13 $ .21 $ .59 $ .71
Common share - assuming full
dilution:
Weighted average common
shares outstanding 6,481,298 6,658,507 6,579,898 6,655,505
Net effect of dilutive
stock options based on the
treasury stock method
using the greater of the
average or ending market
price 271,142 385,746 314,908 394,707
Weighted average common
shares - assuming full
dilution 6,752,440 7,044,253 6,894,806 7,050,212
<PAGE>
Earnings per common share -
assuming full dilution:
Before cumulative effect
of change in accounting
principle $ .13 $ .21 $ .59 $ .69
Cumulative effect of
change in accounting - - - .02
principle*
Net income per common share
- assuming full dilution $ .13 $ .21 $ .59 $ .71
8
<FN>
* Cumulative effect of change in accounting principle reflects the impact
of the adoption of Statement of Financial Accounting Standards No.
109 "Accounting for Income Taxes" which supercedes Statement of
Financial Accounting Standards No. 96.
</TABLE>
