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, 1999 Commission File Number 0-14449
BeautiControl, 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)
972/458-0601
(Registrant's telephone number including area code)
BeautiControl Cosmetics, Inc.
(Former name)
Indicated below is the number of shares outstanding of each class of the
registrant's common stock, as of July 5, 1999.
Title of Each Class of Common Stock Number of Shares Outstanding
Common Stock, $0.10 par value 7,231,448 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, Inc. Consolidated Financial Statement
Page
Balance Sheet 3-4
Statements of Income 5
Statements of Cash Flows 6
Notes to Financial Statements 7-11
2
<PAGE>
<TABLE>
BEAUTICONTROL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
ASSETS
May 31, November 30,
1999 1998
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 4,686,702 $ 3,164,573
Short-term investments 2,905,467 6,068,358
Accounts receivable-net of
allowance for doubtful accounts
of $847,700 and $758,900 at
May 31, 1999 and
November 30, 1998, respectively 953,093 738,147
Inventories
Raw materials 4,740,353 4,508,549
Finished goods 8,437,344 7,110,630
13,177,697 11,619,179
Deferred income taxes 2,229,350 2,229,350
Prepaid expenses 671,882 735,080
Income tax receivables 2,440,185 1,980,566
Other current assets 307,886 442,232
Total current assets 27,372,262 26,977,485
PROPERTY AND EQUIPMENT, AT COST 27,533,262 25,683,215
LESS ACCUMULATED DEPRECIATION AND
AMORTIZATION 16,605,242 15,464,683
10,928,020 10,218,532
OTHER ASSETS
Cost in excess of net tangible
assets, acquired, net of
amortization of $928,000 and
$894,800 at May 31, 1999 and
November 30, 1998, respectively 1,723,356 1,756,497
Investments 1,417,737 2,264,381
Other, net of amortization of
$578,300 and $571,800 at May
31, 1999 and November 30, 1998,
respectively 1,838,159 798,933
Total assets $43,279,534 $42,015,828
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
3
<PAGE>
<TABLE>
BEAUTICONTROL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
May 31, November 30,
1999 1998
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable - trade $ 3,379,217 $ 3,668,942
Short term borrowings 3,540,250 7,600,000
Current portion of long term debt 705,526 179,283
Sales tax payable 666,208 601,588
Accrued commissions and awards 2,736,406 2,201,224
Accrued compensation 669,793 373,981
Accrued property taxes 454,635 689,991
Accrued other taxes 166,341 144,033
Other accrued liabilities 847,018 875,417
Deferred income 1,027,687 986,876
Total current liabilities 14,193,081 17,321,335
DEFERRED INCOME TAXES 791,647 791,647
LONG TERM BORROWINGS 9,403,186 1,220,717
OTHER LONG TERM OBLIGATIONS 204,436 243,553
COMMITMENTS & CONTINGENCIES - -
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 - 10,940,248 and
10,928,998 shares at May 31,
1999 and November 30, 1998
respectively 1,094,025 1,092,900
Capital in excess of par value 23,894,758 23,831,555
Retained earnings 24,676,514 28,413,712
Accumulated other comprehensive
income (72,919) 5,603
49,592,378 53,343,770
Less cost of 3,708,800 common
shares held in treasury at
May 31, 1999 and
November 30, 1998 30,905,194 30,905,194
18,687,184 22,438,576
Total liabilities and
stockholders' equity $43,279,534 $42,015,828
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
4
<PAGE>
<TABLE>
BEAUTICONTROL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
May 31, May 31, May 31, May 31,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Sales $17,473,860 $21,603,454 $34,281,995 $38,143,489
Cost of goods sold 3,866,433 6,698,383 7,946,460 10,498,744
Gross profit 13,607,427 14,905,071 26,335,535 27,644,745
Selling expenses 8,839,627 10,248,210 17,519,885 17,377,339
General and
administrative
expenses 6,805,903 4,573,488 12,044,308 8,660,425
15,645,530 14,821,698 29,564,193 26,037,764
Income (loss)
from operations (2,038,103) 83,373 (3,228,658) 1,606,981
Other income and
expenses
Interest income 91,662 35,215 186,914 47,961
Other, net (82,388) (67,818) (253,775) (77,382)
9,274 (32,603) (66,861) (29,421)
Income (loss)
before income
taxes (2,028,829) 50,770 (3,295,519) 1,577,560
Income taxes
(benefit) (677,845) 41,741 (1,095,014) 574,736
Net income (loss) ($1,350,984) $9,209 ($2,200,505) $1,002,824
Net income
(loss) per
common share -
basic ($0.19) $0.00 ($0.30) $0.17
Weighted average
common shares 7,231,448 6,019,298 7,230,459 5,980,405
Net income
(loss) per
common
share -
assuming
dilution ($0.19) $0.00 ($0.30) $0.16
Weighted average
common and common 7,231,448 6,138,043 7,230,459 6,077,950
equivalent shares
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
5
<PAGE>
<TABLE>
BEAUTICONTROL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
(Unaudited)
<CAPTION>
Six Months Ended
May 31, May 31,
1999 1998
<S> <C> <C>
Net cash provided by (used in)
operating activities ($2,435,196) $1,618,578
Cash flows from investing
activities:
Proceeds from sale of investments 4,570,000 -
Purchase of property and equipment (1,850,047) (832,550)
Purchase of investments (699,921) -
Purchase in other assets (130,082) (234,860)
Net cash provided by (used in)
investing activities 1,889,950 (1,067,410)
Cash flows from financing
activities:
Proceeds from issuance of common
stock 55,001 464,085
Borrowings 11,269,550 1,000,000
Payment on debt (7,682,287) -
Principal payments under capital
lease obligation (56,284) -
Dividends paid (1,518,605) (1,254,415)
Net cash provided by (used in)
financing activities 2,067,375 209,670
Net increase (decrease) in cash and
cash equivalents 1,522,129 760,838
Cash and cash equivalents at the
beginning of the period 3,164,573 720,087
Cash and cash equivalents at the end
of the period 4,686,702 1,480,925
Supplemental cash flow information:
Income tax refund ($690,000) ($709,000)
Interest paid 347,000 126,000
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
6
<PAGE>
BEAUTICONTROL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTERS ENDED May 31, 1999 AND May 31, 1998
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, 1999 and November 30, 1998 and
the results of operations and cash flows for the six months ended
May 31, 1999 and May 31, 1998. The results for the six months
ended May 31, 1999 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, 1998.
Note 2 - Earnings Per Share
Net income per share is accounted for under the provisions of
Financial Accounting Standards No. 128 which requires companies
to present basic earnings per share including weighted average
number of common shares outstanding and, if applicable, diluted
earnings per share which includes common equivalent shares
outstanding. The following table sets forth the computation of
basic and diluted earnings (loss) per share (in thousands, except
per share data):
7
<PAGE>
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
May 31, May 31, May 31, May 31,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Numerator:
Net income (loss) -
Numerator for basic
and diluted earnings
(loss) per share --
income available to
common stockholders ($1,351) $9 ($2,201) $1,003
Denominator:
Denominator for
basic earnings (loss)
per share --
weighted-average
shares 7,231 6,019 7,230 5,980
Effect of dilutive
securities:
Employee stock
options - 119 - 98
Denominator for diluted
earnings (loss) per
share -- adjusted
weighted-average shares
and assumed conversions 7,231 6,138 7,230 6,078
Basic earnings (loss) per
share ($0.19) $0.00 ($0.30) $0.17
Diluted earnings (loss)
per share ($0.19) $0.00 ($0.30) $0.16
</TABLE>
8
<PAGE>
Note 3 - Debt
The Company has a secured term note with outstanding balances of
$3,037,700 and $1,400,000 at May 31, 1999 and November 30, 1998,
respectively. On April 30, 1999, the Company funded $220,000
under this note. The note has a maximum amount of $3,120,000
that may be funded and has a five-year duration bearing a fixed
rate of interest of 7.72% with a twelve year amortization. A
balloon payment of $1,865,200 is due on November 30, 2003. This
note has two covenants related to certain financial ratios
calculated on a quarterly basis. Certain assets of the Company
secure this note.
On May 5, 1999, the Company entered into a three-year note and
security agreement secured by certain assets of the Company
bearing interest at the prime rate plus .5%. The agreement
provides for a maximum availability of $7,000,000 dependent upon
the value of the Company s inventory. At May 31,1999, the
maximum available credit was $5,087,000. At May 31, 1999, the
outstanding principal under the note and security agreement was
$4,811,300. This amount includes a $1,271,000 balance on a fixed
note with a four year amortization and a $3,540,300 balance on a
revolving loan agreement. The weighted average interest rate
through May 31, 1999 was 8.25%.
On May 24, 1999, the Company obtained asset financing in the
amount of $5,800,000 secured by certain real estate. The note is
a ten-year note amortized over a twenty-two year period bearing a
fixed interest rate of 8.33%. At May 31, 1999, the outstanding
balance was $5,800,000. As part of this arrangement, the Company
is required to hold a restricted escrow balance of $850,000.
Effective May 26, 1999, the Company's existing unsecured line of
credit was paid off. The amount of credit available under the
line of credit through May 26, 1999 had been $6,000,000. The
weighted average interest rate thru May 26, 1999 was 6.55% and
for 1998 was 6.99%.
Long term debt (thousands) consists of the following:
May 31, 1999 November 30,1998
Secured term note 3,038 1,400
Three year note and
security agreement 1,271 -
Mortgage financing 5,800 -
_____ _____
less current portion 706 179
_____ _____
Total Long term debt 9,403 1,221
9
<PAGE>
Note 4 - Reclassifications
Certain amounts for prior periods may have been reclassified to
conform to current period presentation.
Note 5 - Inventories
<TABLE>
Inventories (in thousands) consist of the following:
<CAPTION>
May 31, November 30,
1999 1998
<S> <C> <C>
Finished Goods $11,366 $10,282
Raw Materials 5,011 5,263
Reserve for
Obsolescence (3,199) (3,926)
Total $13,178 $11,619
</TABLE>
Note 6 - Comprehensive Income
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 130, Reporting
Comprehensive Income (SFAS 130). SFAS 130 established standards
for the reporting and display of comprehensive income and its
components in a full set of general purpose financial statements.
Under existing accounting standards, other comprehensive income
shall be classified separately into foreign currency items,
minimum pension liability adjustments, and unrealized gains and
losses on certain investments in debt and equity securities.
Comprehensive income is defined as the change in equity (net
assets) of a business enterprise during a period from
transactions and other events and circumstances from nonowner
sources. It includes all changes in equity during a period
except those resulting from investments by owners and
distributions to owners. The Company adopted SFAS 130 on
December 1, 1998. The components of comprehensive income and
related tax effect (thousands) for the months ended May 31, 1999
and 1998 are as follows:
10
<PAGE>
<TABLE>
<CAPTION>
Three months Six months ended
ended May 31, May 31,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Net income (loss) ($1,351) $9 ($2,201) $1,003
Other comprehensive
income (loss)
Change in cumulative
translation
adjustment (22) (17) (53) (110)
* Change in
unrealized gains and
losses on investments
in debt securities (3) - (43) -
Related tax effect 8 6 18 37
Comprehensive
income (loss) ($1,368) ($2) ($2,279) 930
<FN>
* The Company's investment holdings include tax exempt debt
securities, therefore there is no tax effect computed on
related gains and losses.
</TABLE>
Note 7 - New Accounting Standards
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards, No. 131, Disclosures
about Segments of an Enterprise and Related Information (SFAS
131). SFAS 131 established standards for the way that public
business enterprises report information about operating segments
in annual financial statements and requires that those
enterprises report selected information about operating segments
in interim financial reports. It also establishes standards for
related disclosures about products and services, geographic
areas, and major customers. The Company adopted SFAS 131
effective December 1, 1998. Currently, the Company anticipates
that only the results of its international operations and
subsidiaries, in the event they become material, may be required
to be separately disclosed from U.S. base operations under the
reporting guidelines of SFAS 131.
11
<PAGE>
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
Results of Operation
During the second quarter, the Company successfully completed the
opening of two new businesses. March 1, 1999 marked the official
opening of the Hong Kong branch, the Company's second business
unit located in the Asia/Pacific region. The Hong Kong branch is
in a region that is experiencing a weak economy and high
unemployment. Because of the current economic conditions, the
Company believes that favorable opportunities exist for the
direct selling industry. Eventus International, Inc., the
Company's new network marketing business in the U.S. held its
national roll out convention in Dallas, Texas on April 23-25.
This new subsidiary which began minimal operations in late
January, will enable the Company to diversify its U.S. business
into the network marketing segment of the direct selling industry.
Eventus International, Inc.'s product line offers high quality
unique products that the Company believes will improve the
quality of life and longevity for the consumer. This Company is
still in its initial stages of development, where recruiting and
building a team of distributors will be the Company's primary
focus.
Quarters Ended May 31, 1999 and May 31, 1998. Net sales for the
second quarter decreased 19% to $17,473,860 in 1999 compared with
$21,603,454 in 1998. The majority of this sales decline was in
domestic sales as a result of a two-month recruiting promotion
that occurred during the second quarter of 1998. In 1999 a
similar promotion was held that is expected to impact third
quarter sales in 1999.
Gross profit margins for the second quarter of 1999 were 77.9%
compared with 69.0% in 1998. The positive change in profit
margins was due to a 10% increase in domestic margins. 1998
profit margins were abnormally low due to the March and April
recruiting promotion. The combined effect of discounted sales
and higher product costs of demonstration kits impacted gross
margin results by 3.6% of sales in 1998. During the second
quarter of 1999, there were no significant sales discounts
offered.
Selling, general and administrative expenses as a percent of
sales increased to 89.5% in 1999 from 68.6% in 1998. The
increase in costs as a percent of sales was largely due to a
decrease in total sales during the second quarter of 1999 compared
to 1998 as discussed above. Also, nearly $2,500,000 in costs were
incurred during 1999 for continued development and grand opening
events held for promoting the Company's two new businesses.
12
<PAGE>
Other income and expense increased to $9,274 from ($32,603) in
1998 primarily due to net gains in favorable foreign currency
translations from the Canada and Taiwan subsidiaries.
Net income decreased to ($1,350,984) in 1999 from $9,029 in 1998.
This was caused from the decrease in sales combined with the
increase in selling, general and administrative costs related to
new business expansion.
Six months ended May 31, 1999 and May 31, 1998. Sales decreased
10% for the first six months of 1999 to $34,281,995 from
$38,143,489. This is mostly attributable to a decline in
domestic sales as a result of the March and April recruiting
drive, which occurred during the second quarter of 1998.
Gross profit margins increased to 76.8% in 1999 from 72.5% in
1998. This was due to improved domestic profit margins. In
1998, the March and April recruiting drive had an impact on
profit margins due to the discounted cost of entry on low margin
demonstration kits and additional product discounts that were
offered during the promotion.
Selling, general and administrative costs increased for the first
six months of 1999 to 86.2% from 68.3% in 1998 resulting from a
decrease in sales and an increase in expansion costs related to
the opening of the Company's two new businesses, Eventus
International, Inc. and BeautiControl Hong Kong.
Other income and expense decreased to ($66,861) in 1999 from
($29,421) in 1998 due to additional interest expense.
As a result of the above, net financial results during the first
six months of 1999 were ($2,200,505) or ($.30) per common share
compared with net income of $1,002,824 or $.17 per common share
in 1998.
Liquidity and Capital Resources
Working capital increased $3,523,000 to $13,179,000 at May 31,
1999 from $9,656,000 at November 30, 1998. This was partially
due to increases in inventories resulting from the Company's two
new businesses. Also, contributing to the increase in working
capital was a reduction in short term borrowings. During the
second quarter of 1999, the Company repaid the $6,000,000
outstanding under its line of credit. This was primarily funded
through the Company's new credit facilities and financing
arrangements. Offsetting increases to working capital was the
sale of investments. Proceeds from the reduction in short-term
investments were used to fund operating needs and expansion costs
and to build cash reserves.
13
<PAGE>
The Company's cash flows increased $3,206,000 at May 31, 1999
compared with the same period last year. This was due to an
increase in the Company's borrowing activity as well as, the sale
of investments.
The Company has a secured term note with outstanding balances of
$3,037,700 and $1,40l,000 at May 31, 1999 and November 30, 1998,
respectively. On April 30, 1999, the Company funded $220,000
under this secured note. The note has a maximum borrowing amount
of $3,120,000 and is a five year note bearing a fixed rate of
interest of 7.72% with a twelve year amortization. A balloon
payment of $1,865,200 is due on November 30, 2003. This note has
two covenants related to certain financial ratios calculated on a
quarterly basis. Certain assets of the Company secure this note.
On May 5, 1999, the Company entered into a three-year note and
security agreement secured by certain assets of the Company
bearing interest at the prime rate plus .5%. The agreement
provides for a maximum credit availability of $7,000,000
dependent upon the value of the Company's inventory. At May 31,
1999, the maximum available credit was $5,087,000. At May 31,
1999, the outstanding principal under the note and security
agreement was $4,811,300. This amount includes a $1,271,000
balance on a fixed note with a four year amortization and a
$3,540,300 balance on a revolving loan agreement. The weighted
average interest rate through May 31, 1999 was 8.25%. Total
initial note proceeds were used to pay down $5,000,000 of the
Company's unsecured line of credit on May 19, 1999.
On May 24, 1999, the Company obtained asset financing in the
amount of $5,800,000 secured by certain real estate. The note is
a ten-year note amortized over a twenty-two year period bearing a
fixed interest rate of 8.33%. At May 31, 1999, the outstanding
balance was $5,800,000. As part of this arrangement,
the Company is required to hold a restricted escrow balance of
$850,000. On May 26, 1999, $1,000,000 of the proceeds obtained
from the mortgage financing was used to complete repayment of the
amount outstanding under the unsecured line of credit.
Effective May 26, 1999, the Company's existing unsecured line of
credit was paid off. The amount of credit available under the
line of credit through May 26, 1999 had been $6,000,000. The
weighted average interest rate thru May 26, 1999 on this line of
credit was 6.55% and for 1998 was 6.99%.
14
<PAGE>
Year 2000 Issues
The Company defines the Year 2000 issues as those related to the
inability of some computer hardware or software to interpret a
two-digit year expressed as "00" as the Year 2000. When the Year
2000 begins, these computers may interpret "00" as the Year 1900
and either stop processing date-related computations or will
process them incorrectly. All software, computer hardware,
building facilities and equipment utilized by the Company require
assessment to determine that they will continue to operate
accurately when they encounter a Year 2000 date before and after
January 1, 2000.
The Company has initiated a task force committee to address Year
2000 issues. The committee's purpose is to direct the project
for assessment, remediation and implementation of solutions and
contingency plans related to Year 2000 issues. The project plan
addresses information technology systems (IT systems) such as
computer software and hardware and non-information technology
systems (Non-IT systems) such as manufacturing equipment,
utilities and facilities. In addition, the plan addresses Year
2000 issues relating to third parties with which the Company has
a material relationship. The Company has planned readiness prior
to January 1, 2000 due to the possibility of encountering Year
2000 date processing in 1999.
The Company has completed the assessment of IT systems and
software upgrades and non IT systems related to Year 2000
readiness. The overall project is estimated to be about 98%
complete and on target to be complete by October of 1999.
Estimated
Start Date End Date % Complete
IT Systems:
Assessment of Software 04/01/1998 06/30/1998 100%
Remediation/Testing of
Software 06/01/1998 03/31/1999 100%
Assessment of Hardware 07/01/1998 08/15/1998 100%
Remediation/Testing of
Hardware 11/01/1998 06/30/1999 99%
Non-IT Systems:
Assessment 06/01/1998 03/31/1999 100%
Remediation/Testing 11/01/1998 10/31/1999 95%
The Company prepared and mailed a Year 2000 readiness survey to
numerous third party suppliers and service providers upon which
the Company relies for various goods and services. As of May 31,
1999, the Company has received written responses from 49% of
those mailed. Of those responding, 62% stated that they are
either currently compliant or anticipate that they will address
all Year 2000 issues by December, 1998. The committee is
currently evaluating responses to schedule follow-up
correspondence and to address contingency plans for alternate
sources and suppliers.
15
<PAGE>
As a contingency, the Company plans to continue its current
operating policy to maintain 60 to 90 days of finished goods
on-hand of key products as well as on-hand quantities of
components. The Company as a part of its normal operating plan
contracts with a third party for backup computer hardware service
in the event of a failure or serious interruptions of its on-site
operations.
Costs for implementing the Year 2000 project are expected to be
in the range of $350,000 to $400,000 over the two year fiscal
period of 1998 and 1999 and are not expected to materially affect
results of operations or the financial position of the Company.
Expenditures relating to Year 2000 to date are estimated to be
$235,000, due primarily to software remediation, and were funded
through operating cash flows. Other IT projects and initiatives
have not been adversely affected by the Company's resources
allocation to the Year 2000 project. The Company currently
believes that it is addressing Year 2000 issues on a timely and
adequate basis according to suggested methodologies and
procedures. Although the Company is addressing the Year 2000
issue and plans to monitor its progress through completion, there
can be no assurance that total compliance internally as well as
with third party vendors and suppliers will be achieved.
Item 3. Quantitative and Qualitative Disclosures About Market
Risk.
There has not been a material change in the Company's exposure to
interest rate risk on investments and foreign currency rate
changes since November 30, 1998. Changes to market risk as it
relates to interest rate changes on the Company's financing
activities has been minimal. At November 30, 1998, the Company
had a $7,600,000 outstanding balance under a line of credit. The
interest rate was based on a LIBOR rate plus a spread that
adjusted with the debt ratio. During the second quarter of 1999,
the Company repaid its outstanding balance on this line of
credit, therefore any interest rate risk associated with this
debt no longer exists. The Company has a three-year note and
security agreement with an outstanding balance of $4,811,300 at
May 31, 1999 that may be subject to market risk if there were to
be interest rate changes. The initial borrowing under the
facility was at 8.25%. If the rate were to increase to 8.75% and
the amount outstanding remained the same, incremental interest
expense would reduce earnings before taxes by $24,057 annually.
At May 31, 1999 the Company also had a five year term note with
a balance of $3,037,700 and a ten year note with a balance of
$5,800,000; both have a fixed interest rate and are thus not
subject to interest rate volatility.
Financial Instruments
Due to recent expansion into foreign markets, the Company may be
exposed to foreign currency fluctuations and other related market
risks as part of its ongoing business operations. The Company
may periodically use foreign exchange derivatives, when
appropriate, to manage these risks. At present, net exposure and
risk due to foreign currency fluctuations is judged to not
require any derivative activities at this time.
16
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(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, Inc.
(Registrant)
Date: 7/14/99 /s/RICHARD W. HEATH
Richard W. Heath
President, Chief
Executive Officer
Date: 7/14/99 /s/ M. DOUGLAS TUCKER
M. Douglas Tucker
Senior Vice President-
Finance & Principle Financial Officer
17
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