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 May 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 July 7, 1995.
Title of Each Class of Common Stock Number of Shares Outstanding
Common Stock, $0.10 par value 6,576,986 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 11 sequentially
numbered pages
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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 7-8
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BEAUTICONTROL COSMETICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
May 31, November 30,
1995 1994
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 3,036,157 $3,275,303
Short-term investments 1,103,730 2,526,808
Accounts receivable-net of
allowance for doubtful accounts
of $269,100 and $291,100 at
May 31, 1995 and
November 30, 1994, respectively 328,548 308,414
Inventories
Raw materials 5,500,610 5,538,426
Finished goods 5,561,965 4,613,823
11,062,575 10,152,249
Deferred income taxes 903,770 903,770
Other current assets 633,459 834,290
Total current assets 17,068,239 18,000,834
PROPERTY AND EQUIPMENT, AT COST 19,483,455 18,906,585
LESS ACCUMULATED DEPRECIATION
AND AMORTIZATION 9,521,820 8,653,705
9,961,635 10,252,880
OTHER ASSETS
Cost in excess of net tangible
assets, acquired, net of
amortization of $662,800 and
$629,700 at May 31, 1995 and
November 30, 1994, respectively 1,988,487 2,021,629
Investments in bonds (at cost) 3,759,798 4,227,254
Other, net of amortization of
$460,400 and $449,100 at May
31, 1995 and November 30, 1994,
respectively 424,388 432,174
Total assets $33,202,547 $34,934,771
The accompanying notes are an integral part of these financial
statements.
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BEAUTICONTROL COSMETICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
May 31, November 30,
1995 1994
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable - trade $2,904,563 $3,825,867
Sales tax payable 935,914 833,262
Accrued commissions 1,531,131 1,446,265
Accrued compensation 418,171 1,240,693
Accrued awards 287,537 441,268
Accrued liabilities 1,185,368 1,631,379
Deferred income 987,392 1,434,775
Income taxes payable 183,169 -
Total current liabilities 8,433,245 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 - 9,474,411 and
9,466,616 shares at May
31, 1995 and November 30, 1994,
respectively 947,441 946,662
Capital in excess of par value 12,471,754 12,471,754
Retained earnings 33,422,508 31,657,996
46,841,703 45,076,412
Less cost of 2,890,075 and
2,805,175 common shares held in
treasury at May 31, 1995 and
November 30, 1994 22,366,075 21,288,824
24,475,628 23,787,588
Total liabilities and
stockholders' equity $33,202,547 $34,934,771
The accompanying notes are an integral part of these statements.
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BEAUTICONTROL COSMETICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Six Months Ended
May 31, May 31, May 31, May 31,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Sales $19,363,117 $18,017,534 $37,646,295 $34,842,872
Cost of goods sold 4,788,322 4,276,861 9,008,127 8,585,624
Gross profit 14,574,795 13,740,673 28,638,168 26,257,248
Selling expenses 8,281,010 6,955,475 15,839,096 13,502,948
General and
administrative expenses 4,219,272 4,079,931 8,168,991 7,755,118
12,500,282 11,035,406 24,008,087 21,258,066
Income from operations 2,074,513 2,705,267 4,630,081 4,999,182
Other income and expenses
Interest income 77,191 63,451 157,917 118,233
Other, net 73,616 29,162 123,941 50,441
150,807 92,613 281,858 168,674
Income before income
taxes 2,225,320 2,797,880 4,911,939 5,167,856
Income taxes 798,114 973,601 1,753,071 1,801,743
Income before cumulative
effect of change in
accounting principle $1,427,206 $1,824,279 $3,158,868 $3,366,113
Cumulative effect of
change in accounting
principle* - - - 172,053
Net income $ 1,427,206 $ 1,824,279 $ 3,158,868 $ 3,538,166
Earnings per common and
common equivalent share:
Before cumulative
effect of change in
accounting principle $ 0.21 $ 0.26 $0.45 $0.48
Cumulative effect of
change in accounting
principle* - - - 0.02
Net income $ 0.21 $ 0.26 $0.45 $0.50
Weighted average common
and common equivalent shares 6,919,347 7,012,942 6,964,229 7,007,132
* 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.
The accompanying notes are an integral part of these statements.
</TABLE>
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BEAUTICONTROL COSMETICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
(Unaudited)
Six Months Ended
May 31, May 31,
1995 1994
<S> <C> <C>
Net cash provided by (used in)
operating activities $ 954,739 $4,073,481
Cash flows from investing activities:
Proceeds from sale of investments 2,868,000 3,244,372
Purchase of investments (976,972) (5,305,266)
Purchase of property and equipment (576,868) (2,076,384)
Purchase of other assets (37,217) (115,944)
Net cash provided by (used in)
investing activities 1,276,943 (4,253,222)
Cash flows from financing activities:
Proceeds from issuance of common
stock 779 833,661
Purchase of common stock for
treasury (1,077,251) (678,438)
Dividends paid (1,394,356) (933,773)
Net cash provided by (used in)
financing activities (2,470,828) (778,550)
Net increase (decrease) in cash and
cash equivalents (239,146) (958,291)
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 $3,036,157 $3,310,622
The accompanying notes are an integral part of these statements.
</TABLE>
6
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BEAUTICONTROL COSMETICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTERS ENDED MAY 31, 1995 AND MAY 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 May 31,
1995 and November 30, 1994 and the result of operations and cash flows for the
three and six months ended May 31, 1995 and May 31, 1994. The results for the
three and six months ended May 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
Results of Operation
Quarters Ended May 31, 1995 and May 31, 1994. Net sales increased 7% from
$18,018,000 in 1994 to $19,363,000 in 1995. The major factor contributing to
the increase in sales was the introduction of the Company's revolutionary health
and beauty nutritional supplements, Within Beauty. Although Within Beauty was
extremely well-received by the Company's consultants, the Company did not
experience the incremental sales productivity that was anticipated from this new
category due to partial trade-off of other product sales. This fact coupled
with continuing moderate recruiting of new consultants led to missing the
quarterly sales objective by 6%. The Company will continue to analyze and
address its recruiting challenge, knowing that any long-term changes in this
area of the business must be well thought-out and planned before
implementation.
Cost of goods sold as a percent of sales increased from 24% in 1994 to 25% in
1995 due to the nutritional supplements carrying a slightly lower margin than
the Company's other retail products.
Selling, general and administrative expenses increased as a percent of sales
from 61% in 1994 to 65% in 1995. This increase is primarily attributable to the
onetime costs of $750,000 incurred to educate the consultants on the new product
category, improve communications with the consultant sales force and explore
international opportunities.
Other income, net, increased from $93,000 in 1994 to $151,000 in 1995 due to a
premium refund from the Company's health insurer for favorable claim experience.
Due to the factors stated above, net income of $1,427,000 for the second quarter
of 1995 was down 22% when compared to $1,824,000 for the same period in 1994.
Six Months ended May 31, 1995 and May 31, 1994. Net sales increased 8% from
7
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$34,843,000 in the first six months of 1994 to $37,646,000 in the first six
months of 1995. Continued high sales of skin care products coupled with
successful product introductions contributed to this sales increase. This
year-to-date sales increase was below the Company's planned objective due to the
continuing moderate recruiting of new consultants. The Company will focus
the second half of 1995 on improved recruiting along with new product
introductions.
A 5% of sales shift in product line mix from sales aids with lower margins to
retail products with higher margins decreased cost of goods sold from 25% in
1994 to 24% in 1995 for the first half of the year. This decrease is offset by
higher overall commission expense as a result of higher sales of retail
products. The decrease in cost of goods experienced in the first half of 1995
may not continue for the remainder of the year as the Company focuses on
recruiting, due to the lower gross margins of the demonstration kits purchased
by new recruits.
Selling, general and administrative expenses increased from 61% for the first
six months of 1994 to 64% for the same period in 1995. Directly attributable to
the increase are the increased overall commission expense and the expenses
incurred as stated in the results of operations for the second quarter of 1995.
Other income, net, increased from $169,000 in 1994 to $282,000 due primarily to
the 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 decreased for the first half of
1995 when compared to the first half of 1994 from $3,538,000 to$3,159,000.
Liquidity and Capital Resources
The Company's primary source of liquidity is funds provided by operations.
Management believes that these funds will be sufficient to meet present and
foreseeable capital needs.
The Company's cash position decreased by $239,000 from $3,275,000 at November
30, 1994 to $3,036,000 at May 31, 1995. Significant uses of cash included
repurchasing 84,900 shares of Company stock at $1,077,000 and the payment of
dividends of $.105 per share or $1,394,000. Additionally, the Company spent
$577,000 on property and equipment. Under a plan previously authorized by the
Board of Directors, the Company can repurchase shares of its common stock in the
open market from time-to-time when they are believed to be undervalued.
Effective June 30th, the Company established an operating company in the United
Kingdom that is an 80% owned subsidiary. The new UK company is called
BeautiControl International Ltd. and was created by purchasing the assets of a
small direct selling company that markets costume jewelry. This investment
will allow the Company to market its skin care and cosmetic products in the UK
through an existing consultant base while continuing to build the jewelry
business. The cash outlay for the balance of 1995 is expected to be
approximately $500,000, with minimal impact on the Company's consolidated sales
and earnings for 1995.
The Company has a $8,000,000 line of credit available to use 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.
8
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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 12.
(b) Reports on Form 8-K
None
9
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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: 7/12/95 /s/ RICHARD W. HEATH
Richard W. Heath
President, Chief Executive Officer
Date: 7/12/95 /s/ VICKI S. MILLER
Vicki S. Miller
Senior Vice President-Finance
Principle Financial Officer
10
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-END> MAY-31-1995
<CASH> 3,036,157
<SECURITIES> 1,103,730
<RECEIVABLES> 597,648
<ALLOWANCES> 269,100
<INVENTORY> 11,062,575
<CURRENT-ASSETS> 17,068,239
<PP&E> 19,483,455
<DEPRECIATION> 9,521,820
<TOTAL-ASSETS> 33,202,547
<CURRENT-LIABILITIES> 8,433,245
<BONDS> 0
<COMMON> 947,441
0
0
<OTHER-SE> 23,528,187
<TOTAL-LIABILITY-AND-EQUITY> 33,202,547
<SALES> 19,363,117
<TOTAL-REVENUES> 19,363,117
<CGS> 4,788,322
<TOTAL-COSTS> 17,288,604
<OTHER-EXPENSES> (150,807)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,225,320
<INCOME-TAX> 1,753,071
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,158,868
<EPS-PRIMARY> .45
<EPS-DILUTED> .45
</TABLE>
<TABLE>
EXHIBIT 11
BEAUTICONTROL COSMETICS, INC. AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER COMMON SHARE
Three Months Ended Six Months Ended
May 31, May 31, May 31, May 31,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Income before cumulative
effect of change in
accounting principle $1,427,206 $1,824,279 $3,158,868 $3,366,113
Cumulative effect of change
in accounting principle* - - - 172,053
Net income applicable to
common stock $1,427,206 1,824,279 3,158,868 $3,538,166
Common and common equivalent
share:
Weighted averge common
shares outstanding 6,611,778 6,685,426 6,360,117 6,663,914
Net effect of dilutive
stock options based on the
treasury stock method
using average market price 307,569 327,516 334,112 343,218
Weighted average common
and common equivalent shares 6,919,347 7,012,942 6,964,229 7,007,132
Earnings per common and
common equivalent share:
Before cumulative effect
of change in accounting
principle* $ .21 $.26 $.45 $ .48
Cumulative effect of
change in accounting
principle* - - - .02
Net income per common and
common equivalent share $ .21 $.26 $.45 $ .50
Common share - assuming full
dilution:
Weighted average common
shares outstanding 6,611,778 6,685,426 6,630,117 6,663,914
Net effect of dilutive
stock options based on the
treasury stock method
using the greater of the
average or ending market
price 307,739 351,254 334,955 362,417
Weighted average common
shares - assuming full
dilution 6,919,517 7,036,680 6,965,072 7,026,331
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Earnings per common share -
assuming full dilution:
Before cumulative effect
of change in accounting
principle $ .21 $.26 $.45 $ .48
Cumulative effect of
change in accounting - - - .02
principle
Net income per common share
- assuming full dilution $ .21 $.26 $.45 $ .50
* 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>
