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, 1996 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 8, 1996.
Title of Each Class of Common Stock Number of Shares Outstanding
Common Stock, $0.10 par value 5,778,011 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>
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
2
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BEAUTICONTROL COSMETICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<CAPTION>
ASSETS
May 31, November 30,
1996 1995
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $780,030 $855,856
Short-term investments 600,593 844,680
Accounts receivable-net of
allowance for doubtful accounts
of $358,500 and $324,500 at
May 31, 1996 and
November 30, 1995, respectively 1,941,685 358,671
Inventories
Raw materials 4,525,042 4,932,131
Finished goods 5,639,972 4,547,889
10,165,014 9,480,020
Deferred income taxes 1,139,682 1,139,682
Other current assets 763,809 1,008,341
Total current assets 15,390,813 13,687,250
PROPERTY AND EQUIPMENT, AT COST 21,006,948 20,521,226
LESS ACCUMULATED DEPRECIATION
AND AMORTIZATION 11,360,751 10,471,727
9,646,197 10,049,499
OTHER ASSETS
Cost in excess of net tangible
assets, acquired, net of
amortization of $762,000 and
$707,800 at May 31, 1996 and
November 30, 1995, respectively 2,117,875 2,129,074
Investments in bonds (at cost) 3,047,253 3,058,593
Other, net of amortization of
$494,400 and $474,100 at May
31, 1996 and November 30, 1995,
respectively 557,269 429,289
Total assets $30,759,407 $29,353,705
<FN>
The accompanying notes are an integral part of these statements.
3
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<TABLE>
BEAUTICONTROL COSMETICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
May 31, November 30,
1996 1995
<S> <C> <C>
CURRENT LIABILITIES
Short-term borrowings $2,100,000 $1,400,000
Accounts payable - trade 3,202,106 2,842,701
Sales tax payable 1,129,520 906,013
Accrued commissions and awards 2,627,971 1,762,683
Accrued compensation 797,422 573,722
Accrued liabilities 2,030,746 1,878,673
Deferred income 1,839,917 1,593,951
Income taxes payable 161,532 772,222
Total current liabilities 13,889,214 11,729,965
DEFERRED INCOME TAXES 298,366 298,366
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 - 9,484,781 and
9,478,986 at May 31, 1996
and November 30, 1995,
respectively 948,478 947,899
Capital in excess of par value 12,538,147 12,522,145
Unrealized losses on investment,
net of taxes (52,800) (52,800)
Retained earnings 34,043,196 33,625,163
47,477,021 47,042,407
Less cost of 3,708,800 and
3,578,000 common shares held in
treasury at May 31, 1996 and
November 30, 1995 30,905,194 29,717,033
16,571,827 17,325,374
Total liabilities and
stockholders' equity $30,759,407 $29,353,705
<FN>
The accompanying notes are an integral part of these statements.
4
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<TABLE>
BEAUTICONTROL COSMETICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
May 31, May 31, May 31, May 31,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Sales $21,477,763 $19,363,117 $37,782,549 $37,646,295
Cost of goods sold 5,733,245 4,788,322 9,435,255 9,008,127
Gross profit 15,744,518 14,574,795 28,347,294 28,638,168
Selling expenses 9,479,554 8,281,010 16,606,382 15,839,096
General and
administrative expenses 4,760,796 4,219,272 9,176,125 8,168,991
14,240,350 12,500,282 25,782,507 24,008,087
Income from operations 1,504,168 2,074,513 2,564,787 4,630,081
Other income and expenses
Interest income 42,590 77,191 83,793 157,917
Other, net 77,322 73,616 148,179 123,941
119,912 150,807 231,972 281,858
Income before income
taxes 1,624,080 2,225,320 2,796,759 4,911,939
Income taxes 650,280 798,114 1,155,457 1,753,071
Net income $973,800 $1,427,206 $1,641,302 $3,158,868
Net income per common and
common equivalent share $0.16 $0.21 $0.27 $0.45
Weighted average common
and common equivalent
shares 6,000,440 6,919,347 6,028,910 6,964,229
<FN>
The accompanying notes are an integral part of these statements.
5
</TABLE>
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<TABLE>
BEAUTICONTROL COSMETICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
(Unaudited)
<CAPTION>
Six Months Ended
May 31, May 31,
1996 1995
<S> <C> <C>
Net cash provided by (used in)
operating activities $2,766,995 $954,739
Cash flows from investing activities:
Proceeds from sale of investments 240,000 2,868,000
Purchase of investments - (976,972)
Purchase of property and equipment (485,722) (576,868)
Purchase of other assets (202,564) (37,217)
Net cash provided by (used in)
investing activities (448,286) 1,276,943
Cash flows from financing activities:
Proceeds from issuance of common
stock 16,581 779
Purchase of common stock for
treasury (1,188,161) (1,077,251)
Dividends paid (1,222,955) (1,394,356)
Net cash provided by (used in)
financing activities (2,394,535) (2,470,828)
Net increase (decrease) in cash and
cash equivalents (75,826) (239,146)
Cash and cash equivalents at the
beginning of the period 855,856 3,275,303
Cash and cash equivalents at the end
of the period $780,030 $3,036,157
Supplemental Cash Flow Information
Income Taxes $1,091,000 $1,510,300
Interest 73,042 911
<FN>
The accompanying notes are an integral part of these statements.
6
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BEAUTICONTROL COSMETICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTERS ENDED May 31, 1996 AND May 31, 1995
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, 1996 and November 30, 1995 and
the results of operations and cash flows for the six months ended
May 31, 1996 and May 31, 1995. The results for the six months
ended May 31, 1996 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, 1995.
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
Results of Operation
Quarters ended May 31, 1996 and May 31, 1995. Net sales
increased 11% from $19,363,000 in 1995 to $21,478,000 in 1996.
Sales for the second quarter of 1996 were positively impacted by
a recruiting promotion in March and April and several successful
product introductions during the quarter. The Consultant
recruiting promotion was the most successful two month recruiting
period in the Company s history. New product introductions for
the second quarter of 1996 included What A Pear! TM Shampoo and
Conditioner, Skin Hydrator Anti-Ash Creme and Sheer Rain TM skin,
body and bath scents. Additionally, the Company continued to
target expansions in the Hispanic market in the U.S. and
broadened its international presence by establishing
distributorships in Turkey and Indonesia.
Cost of goods sold increased from 24.7% of sales in 1995 to 26.7%
in 1996 as a direct result of the high sales of low margin
demonstration kits sold to new Consultants during the recruiting
promotion.
Selling, general and administrative expenses as a percent of
sales increased from 64.6% in 1995 to 66.3% in 1996 primarily as
a result of the costs of the recruiting promotion coupled with
the costs of a program to test improvements in the way
Consultants are recruited, trained and developed in certain
geographic areas.
Other income and expenses (net) decreased $31,000 from $151,000
in 1995 to $120,000 in 1996 due to a decrease in the level of
short and long-term investments used to repurchase shares of the
Company's common stock.
Net income decreased from $1,427,000 in 1995 to $974,000 in 1996
as a result of the recruiting promotion, test programs and market
expansions previously discussed.
Six months ended May 31, 1996 and May 31, 1995. The first quarter
of 1995 was a strong quarter for the Company with several
successful new product introductions including three extension
products to the Regeneration TM line. In the first quarter of
1996, the Company chose to focus its attention on the new
programs previously discussed. The second quarter of 1996 was
especially strong as compared to 1995 with the success of the two
month recruiting promotion and product introductions.
Cost of goods sold as a percent of sales increased for the six
month period from 23.9% in 1995 to 25.0% in 1996 due to a larger
number of recruits purchasing demonstration kits which carry a
low margin.
Selling, general and administrative costs increased from 63.8% in
the first six months of 1995 to 68.2% in 1996 due to investments
in the development of new programs, market expansions and in
building a larger Consultant sales force for the future.
Other income and expenses (net) decreased from $282,000 in 1995
to $232,000 in 1996 due to the decrease in investments as
previously discussed.
As a result of the factors discussed above, net income decreased
for the first half of 1996 to $1,641,000 from $3,159,000 in 1995.
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.
7
<PAGE>
The Company's cash position decreased by $76,000 from $856,000 at
November 30, 1995 to $780,000 at May 31, 1996 . Under a plan
previously authorized by the Board of Directors, the Company can
repurchase shares of its common stock in the open market when
they are believed to be undervalued. In the second quarter of
1996, the Company repurchased 130,800 shares of common stock for
$1,188,000.
The Company has a $15,000,000 line of credit available to use
primarily for share repurchase in the event that the Company
believes its stock is undervalued and operating cash is needed
for the business. The outstanding borrowing balance at May 31,
1996 was $2,100,000. This line of credit reduces to $12,000,000
on November 30, 1997 and decreases by $3,000,000 per year
thereafter, if unused.
8
<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.
(b) Reports on Form 8-K
None
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: 7/10/96 /s/ RICHARD W. HEATH
Richard W. Heath
President, Chief Executive
Officer
Date: 7/10/96 /s/ M. DOUGLAS TUCKER
M. Douglas Tucker
Senior Vice President-Finance
Principle Financial Officer
9
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-END> MAY-31-1996
<CASH> 780,030
<SECURITIES> 600,593
<RECEIVABLES> 2,300,142
<ALLOWANCES> 358,457
<INVENTORY> 10,165,014
<CURRENT-ASSETS> 15,390,813
<PP&E> 21,006,948
<DEPRECIATION> 11,360,751
<TOTAL-ASSETS> 30,759,407
<CURRENT-LIABILITIES> 14,187,580
<BONDS> 0
0
0
<COMMON> 948,478
<OTHER-SE> 15,623,349
<TOTAL-LIABILITY-AND-EQUITY> 30,759,407
<SALES> 21,477,763
<TOTAL-REVENUES> 21,477,763
<CGS> 5,733,245
<TOTAL-COSTS> 19,973,595
<OTHER-EXPENSES> (119,912)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 31,466
<INCOME-PRETAX> 1,624,080
<INCOME-TAX> 650,280
<INCOME-CONTINUING> 973,800
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 973,800
<EPS-PRIMARY> .16
<EPS-DILUTED> .16
</TABLE>
<TABLE>
EXHIBIT 11
BEAUTICONTROL COSMETICS, INC. AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER COMMON SHARE
<CAPTION>
Three Months Ended Six Months Ended
May 31, May 31, May 31, May 31,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net income applicable to
common stock $ 973,800 $1,427,206 $1,641,302 $3,158,868
Common and common equivalent
share:
Weighted average common
shares outstanding 5,854,319 6,661,778 5,868,458 6,630,117
Net effect of dilutive
stock options based on the
treasury stock method
using average market price 146,121 307,569 160,452 334,112
Weighted average common and
common equivalent shares 6,000,440 6,919,347 6,028,910 6,964,229
Net income per common and
common equivalent share $0.16 $0.21 $0.27 $0.45
Common share - assuming full
dilution:
Weighted average common
shares outstanding 5,854,319 6,611,778 5,868,458 6,630,117
Net effect of dilutive
stock options based on the
treasury stock method
using the greater of the
average or ending market
price 191,109 307,739 191,483 334,955
Weighted average common
shares - assuming full
dilution 6,045,428 6,919,517 6,059,941 6,965,072
Net income per common share
- assuming full dilution $0.16 $0.21 $0.27 $0.50
</TABLE>
