UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
X ANNUAL 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 the fiscal year ended November 30, 1999 OR 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 number)
incorporation or organization)
2121 Midway, Carrollton, TX 75006
(Address of principal executive offices) (Zip Code)
972/458-0601
(Registrant's telephone number including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.10 par value
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
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K ('229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements incorporated
by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Aggregate market value of the voting stock (which consists solely of
shares of Common Stock) held by non-affiliates of the registrant as of
February 4, 2000, computed by reference to the closing sale price of
the registrant's Common Stock on the NASDAQ National Market System on
such date, was approximately
$15,140,844.
Number of shares of the registrant's Common Stock outstanding as of
February 4, 2000: 7,231,448.
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
1. Certain portions of the registrant's definitive Proxy Statement in
connection with the 1999 Annual Meeting of Stockholders to be held
on April 11, 2000, are incorporated by reference into Part III of
this report.
PART I
Item 1. Business
General
BeautiControl, Inc. is a manufacturer and direct seller of skin care,
cosmetics, nutritional supplements, nail care, toiletries, fragrances,
beauty supplements and related products. The Company sells its
products through independent sales persons called "Consultants" (or
"Distributors"), who purchase the products from BeautiControl and then
sell them directly to consumers in the home or workplace. Products and
image services are provided to clients via an independent sales force
in the United States, Taiwan, Hong Kong, Canada and Puerto Rico. The
Company's three primary geographic operating segments consist of the
following: North America which includes the United States and Canada,
Asia Pacific which includes Taiwan and Hong Kong and Eventus
International which currently operates in the United States.
The Company makes available to its Consultants the option to purchase
image tools to assist them in providing personalized services to
existing and prospective clients. Skin Condition Analysis utilizes the
patented product "Skin Sensors" to assist the Consultant in analyzing
the customer's skin condition. This enables the Consultant to
recommend the specific customized skin care regimen required to meet
the individual needs of each consumer.
Color analysis, an image-enhancing service, allows the matching of
color-coded cosmetics with a customer's natural coloring, helping
customers select the most flattering color choices. A computer-
assisted head-to-toe image analysis referred to as the Personal Image
Profile is used to provide women with specific recommendations on
makeup, fashion and accessory styles to create each individual's best
image.
The Company was organized and incorporated in 1986 under the laws of
the State of Delaware and maintains its principal executive offices at
2121 Midway Road, Carrollton, Texas 75006.
<PAGE>
Products
The Company's products consist of skin care, cosmetics, nutritional
supplements, nail care, toiletries, fragrances, beauty supplements and
related products.
The Company believes that skin care and cosmetic products sold at
retail may generally be grouped in three price categories: the least
expensive are generally sold in drug stores and supermarkets;
moderately priced and premium priced products are generally sold in
leading department stores and specialty shops. Although the Company's
skin care products and cosmetic makeup products are considered by the
Company to be comparable in quality and image to premium priced
products, the Company recommends that Consultants sell the Company's
products at suggested retail prices which the Company believes are
equivalent to those moderately priced products sold in leading
department stores and specialty shops.
The Company's subsidiary Eventus International, Inc. has nutritional
supplement products, including a line of advanced nutritional
supplements known as nutraceuticals, that use formulas designed to
increase total wellness. Certain product lines are believed to enhance
the immune system using a proprietary ingredient called Veraloe[TM]
which is not found in retail outlets or drug stores.
BeautiControl, Inc. also has a health and beauty supplements line,
WITHIN BEAUTY[TM]. This product line includes hair and nail
supplements, skin condition supplements and supplements designed for
the different stages of a woman's life. The Company also provides
SlenderGenics, a weight management system, and PMS Support Complex to
its health and beauty product line. The SlenderGenics system includes
a metabolic booster supplement and appetite satisfying wafers. PMS
Support Complex contains beneficial vitamins, minerals and herbs to
help reduce the negative physical and emotional symptoms of PMS.
During 1999, the Company introduced new products in all geographic
areas. Cell Block-C P.M. Cell Protection, Regeneration Retinol PM Skin
Treatment, Sheer Rain, Spa Collection, and Menswear bath and body
products. In the Asia Pacific and Eventus businesses, the Company
introduced nutritional products that included Veraimmune[TM], an all
natural daily immune stimulator, LeanTrek[TM], a meal replacement diet
product and LipoLock[TM], a fat absorbing product.
Marketing and Distribution
The Company's skin care, cosmetics, nutritional supplements and related
products are sold through Consultants (or Distributors) who are
independent contractors, not employees of the Company. As of November
30, 1999, the total Consultant and Distributor count was 73,229.
Consultants may sell the Company's products one-on-one, to groups of
people or through home demonstrations called Skin Care and Color
Parties or Clinics ("Clinics"). Additionally, Consultants are
encouraged to market the products through personal consultations and
product brochure sales in order to utilize multiple selling
opportunities.
<PAGE>
In order to provide immediate product delivery, Consultants may
maintain a small inventory of products. Consultants make their own
payment arrangements with their customers. The Company processes
credit card payments to Consultants for selected credit cards,
presently MasterCard, Visa, Novus/Discover Card and American Express.
The Company sells its products to its Consultants generally on a
payment-in-advance basis. Consultants pay for the Company's products
by wire transfer, Western Union Quick Collect, money order or credit
card, and selectively by personal check. Additionally, the Company
offers occasional product programs that may allow credit terms of up to
45 days to approved Consultants.
Consultants are offered the Company's products at wholesale discounts
from suggested retail prices for resale to their customers. These
wholesale discounts range from 25% to 55% based upon the timing and
dollar amount of the Consultant's order. Sales taxes are generally
prepaid to the Company by Consultants for transmittal to taxing
authorities.
The Company maintains inventory which generally permits the Company to
ship goods in response to an order within 72 hours of the Company's
receipt of the order.
During 1999 in the U.S., the Company relied primarily upon United
Parcel Service and United States parcel post and mail to ship products
from its distribution facility in Farmers Branch, Texas. The Canadian
subsidiary utilizes United Parcel Service and Canada Post. The Taiwan
and Hong Kong Branch orders are either picked up on-site or delivered
by a local service.
In the U.S. Client Connection Program, direct mailings to consumers are
made by the Company approximately five to six times a year. This
direct mailing program allows the Company to communicate directly with
the consumer and encourages the consumer to contact their Consultant to
reorder the Company's products.
Product orders from the Company can be made by mail, fax, telephone and
on-line services.
In 1999, the Company introduced BeautiNet Plus[TM] in the United
States, an on-line service provided to Consultants. It enables
Consultants to place orders and recruit on-line. In addition, Eventus
International products may be purchased online at www.Eventusnet.com.
The sales efforts of Consultants are also supported through Company-
sponsored seminars and sales conferences held several times each year
in various locations.
Manufacturing
The Company's manufacturing facility is located in Carrollton, Texas
where it manufactures or assembles the majority of products sold.
Of the Company's sales, approximately 21.5% was comprised of items
produced by various unaffiliated manufacturers. Such outside
manufacturers are utilized when the Company believes that such firms
are able to manufacture products according to Company specifications
less expensively than the Company.
<PAGE>
Materials used in the Company's skin care, cosmetic and beauty
supplements products consist primarily of readily available
ingredients, containers and packaging materials. Such raw materials
and components used in goods manufactured and assembled by the Company
are available from a number of sources. To date, the Company has been
able to secure an adequate supply of raw materials and components for
its manufacturing facility. The Company endeavors to maintain
relationships with backup suppliers in an effort to ensure that no
interruptions in the Company's operations are likely to occur.
The Company's manufacturing facility includes microbiology/quality
control and product development laboratories. These laboratories are
intended to facilitate and expedite quality control and to continue the
development of new products for the Company. The Company continually
engages in research and development activities to improve its existing
products and to develop new products. The amount spent on research and
development activities on the formulation and improvement of Company
products was $1,070,000 in 1999, $933,000 in 1998 and $918,000 in 1997.
Expenditures included in these amounts consist of the following direct
costs: materials consumed, depreciation of equipment used in
development activities, labor, and contractual services performed by
outside parties for product testing. Research and development
activities are primarily conducted on product and packaging design for
the Company's skin care, nutritional supplements, cosmetics, fragrance
and beauty supplements.
Employees
At February 1, 2000, the Company employed 320 persons in North America
and the Asia Pacific region of which 38 were engaged in the manufacture
and assembly of the Company's products. None of the Company's employees
are represented by a union and the Company considers its employee
relations to be good. All key employees are required to enter into an
agreement with the Company whereby each employee agrees to maintain the
confidentiality of customer lists and other confidential or proprietary
information.
Trademarks and Patents
The Company has registered all its trademarks and servicemarks in the
United States and has registered or is in the process of registering
its principal trademarks and service marks in Canada, Taiwan, Hong Kong
and many other countries. The Company has the exclusive right to
distribute the Skin Condition Analysis product "Skin Sensors" worldwide
with the option to renew this exclusive right each year. The Company is
licensed to use the following trademarks: "Skinlogics", "Sunlogics" and
"Nailogics". The Company has a patent on the formulas for its
"REGENERATION and REGENERATION5", alpha-hydroxy acid based, products.
<PAGE>
Competition
The cosmetic and nutritional supplement industries are highly
fragmented and competitive markets which are sensitive to changing
consumer preferences and demands. There are many large and well known
companies that manufacture and sell broad lines of skin care, cosmetic
products and nutritional supplements through retail establishments.
The Company competes with a number of direct sales companies who market
skin care and cosmetic products and nutritional supplements. The
Company also competes with other direct sales companies in attracting
new Consultants. Many companies market products which have stronger
brand recognition than the Company's products and many cosmetics
companies are larger and have substantially greater resources than the
Company.
The principal bases of competition in the cosmetic and nutritional
supplement businesses generally are marketing, price, quality and
newness of products. The Company has attempted to differentiate itself
and its products from the industry in general through the use of a
number of value-added services previously described and by being
technologically at the forefront of the industry. There can be no
assurance that similar marketing techniques and products will not be
adopted by competitors in the future.
Regulation
The Company is subject to regulation by the United States Food and Drug
Administration and the Bureau of Alcohol, Tobacco and Firearms of the
Treasury Department, as are other marketers and manufacturers of
cosmetic and nutritional supplement products. The Company's
advertising and sales practices are subject to the jurisdiction of the
Federal Trade Commission. In addition, the Company is subject to
numerous federal, state, and local laws relating to marketing and to
the content, labeling and packaging of its products. The Company's
Asia Pacific businesses are regulated by the respective Departments of
Health, the Fair Trade Commissions and various other governmental
agencies and trade organizations of the countries in the region.
Various governmental agencies regulate direct selling activities, and
the Company has occasionally been requested to supply information
regarding its marketing plan to certain such agencies. Also, the
Company is currently an active member in certain associations unique to
the direct selling industry. These associations require companies to
abide by a specific code of ethics established by the industry.
Although the Company believes that its method of distribution is in
compliance with laws and regulations relating to direct selling
activities, there is no assurance that legislation and regulations
adopted in particular jurisdictions in the future will not affect the
Company's operations.
In connection with its manufacturing processes, the Company is subject
to various governmental regulations governing the discharge of
materials into the environment. Compliance with these regulations has
not had, and is not anticipated to have, any material impact upon the
Company's capital expenditures, earnings or competitive position.
<PAGE>
Item 2. Properties.
The Company's domestic corporate headquarters is located in Carrollton,
Texas, in a building owned by the Company. The manufacturing and
warehouse facility is also located in Carrollton, Texas. The Company
leases this building under a lease that expires in 2004. The Company's
distribution center is housed in a leased building in Farmers Branch,
Texas, under a lease expiring in 2004. Both leases, at the Company's
option, may be extended for an additional five years at the fair market
rental rate in effect at the time for properties of equivalent use and
size in the area. The Company also leased an additional warehouse
facility in 1997 which is located in Carrollton, Texas; this lease
expired in September 1999. The Canadian subsidiary, located in
Burlington, Ontario, leases a combined office and distribution facility
that expires in 2001. The Company's Taiwan branch has a leased
facility in Taipei, Taiwan, that expires in 2000 with first rights to
renew upon expiration. The Company's Hong Kong branch leased a
facility starting in December 1998 and expiring in 2003.
Item 3. Legal Proceedings.
Neither the Company nor its subsidiaries is a party to any pending
proceedings which in Management's opinion, would have a material
adverse effect on the financial position, results of operations or cash
flows of the Company.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of the Company's security holders
during the fourth quarter of the fiscal year covered by this report.
<PAGE>
Part II
Item 5. Market for the Company's Common Stock and Related Stockholder
Matters.
The Common Stock is traded in the over-the-counter market under the
symbol BUTI and is quoted on the NASDAQ National Market System.
The following table sets forth, for the periods indicated, the high and
low closing sale prices for the Company's Common Stock on the NASDAQ
National Market System.
1999 1998
--------------- --------------
High Low High Low
----- ----- ----- -----
First Quarter $6.625 $5.500 $8.625 $7.125
Second Quarter 6.000 4.313 10.250 8.125
Third Quarter 4.875 3.625 10.000 6.125
Fourth Quarter 5.250 2.750 8.000 5.375
As of February 7, 2000, there were approximately 1,789 shareholders of
record of the common stock, including nonobjecting beneficial holders
whose stock is held in nominee or street name by broker.
During 1999, cash dividends were paid at a rate of $.105 per share for
the first and second quarters and $.015 per share for the third
quarter. No cash dividends were declared for the fourth quarter. Cash
dividends were paid in each quarter of 1998 at a rate of $.105. The
Company's ability to pay cash dividends in the future will depend upon
the future earnings and financial position of the Company and such
other factors as the Board of Directors may deem appropriate.
<PAGE>
<TABLE>
Item 6 - Selected Financial Data
(In thousands, except per share data)
BEAUTICONTROL, INC. AND SUBSIDIARIES
Years ended November 30,
1999 1998 1997 1996 1995
------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Net sales $65,349 $72,163 $69,421 $80,108 $74,679
Income (loss) from
operations ($12,911) ($4,723) $424 $8,158 $7,114
Net income (loss) ($11,569) ($3,162) $124 $5,401 $4,702
Net income (loss)
per common share ($1.60) ($0.49) $0.02 $0.93 $0.73
Net income (loss)
per common share-
assuming dilution ($1.60) ($0.49) $0.02 $0.90 $0.70
Dividends per share $0.225 $0.42 $0.42 $0.42 $0.42
BALANCE SHEET DATA:
Total assets $35,196 $42,016 $29,356 $33,910 $29,354
Working capital 803 9,656 7,391 9,436 3,350
Long-term debt 6,443 1,221 1,200 3,900 1,400
Stockholders' equity 8,490 22,439 17,882 19,311 17,318
CONSULTANT DATA:
Number of consultants
at fiscal year end 73,229 63,205 49,413 50,897 45,745(1)
(1) Excludes Consultants from certain test programs.
</TABLE>
<PAGE>
Item 7 - Management's Discussion and Analysis of Financial Condition
and Results of Operations
BeautiControl, Inc. (the Company) is a manufacturer and direct seller
of skin care, cosmetics, nutritional supplements, nail care,
toiletries, fragrances, beauty supplements and related products. The
Company sells its products through independent sales persons called
"Consultants" (or "Distributors"), who purchase the products from
BeautiControl and then sell them directly to consumers in the home or
workplace. Products and image services are provided to clients via an
independent sales force in the United States, Taiwan, Hong Kong, Canada
and Puerto Rico. Sales figures are based on orders shipped less
returns.
1999 SUMMARY OF CHANGES
During the first quarter of 1999, the Company introduced a new earnings
opportunity for BeautiControl in the United States and Taiwan branch
called the Fast Track Plan. The compensation plan provides immediate
earnings opportunities for both existing and new Consultants. The plan
emphasizes recruiting by offering additional entry options and
incorporates a structured training program for Consultants.
During the second quarter, the Company launched the opening of its two
new subsidiaries. On March 1, 1999, the Company opened its second Asia
Pacific branch in Hong Kong. In Hong Kong, products are sold through
independent Distributors. The product line includes skin care,
cosmetics, toiletry products, image accessories and nutritional
supplements. In April 1999, the Company officially began operations in
the United States of its wholly owned subsidiary Eventus International,
Inc. This business operates in the network marketing segment of the
direct selling industry and its products are sold through independent
Distributors. Eventus offers leading edge nutraceutical products that
include more than 20 varieties of nutritional supplement products.
During the third quarter, the Company introduced BeautiNet Plus in the
United States, an online service available to its Consultants. This
innovative service allows Sales Consultants to place orders and recruit
online. This internet site also allows Consultants to easily obtain the
latest information on new products, promotions, programs and events.
BeautiNet Plus helps Consultants manage their business by tracking the
activity of Consultants in their downlines, maintaining customized
information on their clients and providing access to personal sales,
earnings and recruiting history. Starting March 1, 2000, the Company
will also provide its Consultants with the ability to set up personal
web pages, where their clients can shop online 24 hours a day, seven
days a week on their own personal web sites.
In the fourth quarter, the Company announced that it had hired Sheila
O'Connell Cooper as President and Chief Operating Officer. Shortly
after her arrival, she was elected as a member of the Board of
Directors. Prior to joining the Company, Ms. Cooper was most recently
Executive Vice President of Mary Kay Inc., a member of the Board of
Directors and a member of its Executive Committee. Since Ms. Cooper's
arrival, she has led the reorganization of the Company's operations
which include changes in the internal management of the business,
strategy and staffing in addition to reducing various other overhead
costs for each of the operating entities.
<PAGE>
RESULTS OF OPERATIONS OF THE COMPANY
Fiscal 1999 compared to 1998
Consolidated net sales for 1999 were $65,349,000 compared with
$72,163,000 in 1998. This was due to a decrease in sales in North
America primarily resulting from soft sales in the direct sales
industry. The overall decrease was partially offset by the opening of
the Hong Kong branch in the Asia Pacific region and Eventus
International, Inc. Also impacting sales were increased product
returns in the Company's North America segment which experienced the
maturation of its inventory buy back policy initiated in 1997 and as
new business operations became more established.
Gross profit margins were 72.5% in 1999 compared with 70.0% in 1998.
North America experienced improved margins primarily as a result of a
1998 recruiting incentive that was not repeated in 1999. The promotion
offered a reduced entry cost on low margin demonstration kits sold to
new Consultants. Partially offsetting improved margins in 1999 were
the effects of inventory reserves related to the Asia Pacific and
Eventus segments. Inventory reserves established for new business
segments during 1999 were $2,049,000 for excess inventory quantities
and product line changes.
Selling, general and administrative expenses as a percent of sales
increased to 92.3% in 1999 from 76.6% in 1998 resulting from a decline
in sales and an increase in costs. New business operating and
expansion costs increased by $5,723,000 due to the opening of the
Company's Eventus and Hong Kong subsidiaries. In addition, $1,262,000
in severance costs were incurred as a result of the Company's plan to
improve operations.
Other income and expense decreased to ($684,000) in 1999 from
($146,000) in 1998. This was due primarily to an increase in interest
expense for 1999 compared to 1998.
Income tax benefit increased to ($2,026,000) in 1999 from ($1,707,000)
in 1998. Offsetting tax benefits for 1999 was a valuation reserve
against net deferred tax assets in the amount of $3,164,000.
Fiscal 1998 compared to Fiscal 1997
Net sales for 1998 were $72,163,000 compared with $69,421,000 in 1997.
The year's consolidated sales growth was attributed to the added
Taiwan business that opened in January 1998. Sales in North America
were down in 1998 due to an adverse impact on sales and recruiting
activity believed to be caused by a favorable economy of low
unemployment which creates a challenging environment for new
recruiting opportunities.
<PAGE>
Gross profit margins were 70.0% in 1998 compared with 72.6% in 1997.
The change in margins was primarily a result of increases to obsolete
inventory reserves. In 1998, the Company provided for non-cash write-
downs of $2,140,000 for inventory. This was due to excess supply of
dated inventory for a product line introduced in 1996. In addition,
new developments planned for the North American business in early 1999
made certain products obsolete which required additional inventory
write-downs. Also affecting profit margins in 1998 was the spring
recruiting drive during the second quarter. The promotion offered a
reduced entry cost on low margin demonstration kits sold to new
Consultants.
Selling, general and administrative expenses as a percent of sales
increased to 76.6% in 1998 compared with 72.0% in 1997. The increase
in costs was largely due to higher commission expense resulting from
the addition of the Taiwan business. Total Company commissions as a
percent of sales were 3.2% higher in 1998 versus 1997. Promotion
costs increased $887,000 or 1.2% of net sales in 1998 compared with
1997 as a result of the Company's spring recruiting drive which
occurred in the second quarter of 1998. Expansion and development
costs also increased during 1998 due to the opening and continued
development of the Taiwan branch, expansion into Hong Kong and the
establishment of a new Company in the U.S., Eventus[TM] International,
Inc. Total expansion costs for 1998, affecting selling, general and
administrative costs, were $3,829,000 compared with $3,056,000 in
1997.
Primarily as a result of business expansion and inventory write-downs,
net losses were ($3,162,000) or ($.49) per common share in 1998
compared with net income of $124,000 or $.02 per common share in 1997.
The income tax benefit for 1998 was ($1,707,000) compared to a
provision of $274,000 in 1997. The effective tax rate was affected by
state franchise tax partially offset by a foreign operations net loss.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company's funding needs have been for normal
operating expenses, capital expenditures and business expansion.
Funding has primarily been supported through cash flow from operations
borrowings and, when needed, through the sale of investments. During
1999, primarily as a result of continued business expansion costs, net
losses were $11,569,000 and net cash used in operating activities was
$3,235,000. Additionally, at November 30, 1999, cash and cash
equivalents and investments decreased to $5,126,000 from $11,497,000
at November 30, 1998. During 1999, the Company entered into various
credit arrangements in order to retire existing unsecured borrowings
and obtain long-term credit availability. Additionally, during the
fourth quarter of 1999, the Company implemented certain organizational
changes and cost reductions expected to improve operations in fiscal
2000. The Company's position on future cash needs in the year 2000 is
expected to lessen as a result of these changes in addition to
decreased cash usage in new business initiatives and related start
up costs as the Company reaches the conclusion of its current
geographical business expansion. Even though the Company believes
its existing liquidity condition and credit arrangements will be adequate
to cover cash requirements in fiscal 2000, it can provide no assurance
that net losses and a decrease in its liquidity position might not
occur in fiscal 2000. If this occurred, the Company could be
required to further liquidate cash equivalents and investments,
to attempt to obtain additional financing through new or existing
credit arrangements, to make additional organization changes to
further reduce costs and expenses or to liquidate assets to obtain
operating cash.
Working Capital at November 30, 1999, was $803,000 compared with
$9,656,000 at November 30, 1998. Combined cash and short-term
investments decreased by $4,107,000 in 1999 due to a decrease in
revenues and the sale of investments to fund operations and new
business developments. Cash and short-term investments in 1998 were
higher as a result of $9,912,000 in cash received through a private
equity placement during the third quarter of 1998. Net inventory
levels decreased by $1,079,000 due to obsolete inventory reserves that
were created during 1999 for the Company's new subsidiaries. Accrued
liabilities increased by $2,556,000 in 1999 primarily as a result of
expensed severance costs and reserves for product returns. Deferred
income increased by $901,000 in 1999 caused by a change in orders not
yet shipped and unearned revenues on future training for Consultants
and Distributors.
The Company had a secured term loan outstanding with balances of
$2,907,600 and $1,400,000 at November 30, 1999, and at November 30,
1998, respectively. The term loan had a maximum borrowing amount of
$3,120,000 at November 30, 1999. A specific asset of the Company was
used to secure the term loan. The loan had a fixed rate of interest
of 7.72% and had monthly principal payments of $21,689. The term loan
required compliance to amended covenants that had obligated the
Company to meet certain financial ratios. The Company had consented
to accelerate the maturity date of the term loan to April 5, 2000, as
part of an agreed upon arrangement between the Company and the Lender.
On February 14, 2000, the Company sold the asset securing the term
loan. A portion of the proceeds were used to extinguish the balance
of the loan at February 14, 2000 for the amount of $2,873,600
including principal and interest. In connection with the asset sale,
the Company will record a gain of approximately $2,000,000 in fiscal
2000.
<PAGE>
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% (9.5% at November 30, 1999). The
agreement provides for a maximum credit availability of $7,000,000
dependent upon the value of the Company's inventory. At November 30,
1999, the maximum available credit was $4,693,000. At November 30,
1999, the outstanding principal under the note and security agreement
was $4,146,900. The outstanding principal includes a $1,110,500
balance on a three-year note with a four- year amortization and
monthly principal payments of $26,749 and a $3,036,400 balance on a
revolving loan agreement. The weighted average interest rate through
November 30, 1999 was 8.58%. The note and security agreement subjects
the Company to certain amended financial and informational covenants
with which the Company was in compliance at November 30, 1999 and
expects to be in compliance with through fiscal 2000 and beyond. The
revolving loan agreement expires in May 2002. Amounts outstanding
under the revolving loan agreement are classified as current due to a
requirement of the Company to maintain a blocked account in favor of
the lender.
On May 24, 1999, the Company obtained asset financing in the amount of
$5,800,000 secured by certain real estate. The asset financing is a
ten-year note amortized over a twenty-two year period bearing a fixed
interest rate of 8.33% with monthly payments of principal and interest
of $47,988. A balloon payment of $4,378,000 is due June 1, 2009.
At November 30, 1999, the outstanding balance on the asset financing
was $5,752,900. As part of this arrangement, the Company is required
to hold a restricted escrow balance of $850,000. The escrow balance
is classified in Other Assets on the Consolidated Balance Sheet.
Effective May 26, 1999, the Company used proceeds received from other
borrowings to extinguish its unsecured line of credit. Prior to that,
the balance at May 26, 1999 was $1,000,000 compared with $7,600,000 at
November 30, 1998.
Even though the Company did not repurchase any of its common stock in
1999, it remains approved by the Board of Directors to purchase up to
1,000,000 additional shares of its common stock.
The Company's capital expenditures for 1999 totaled $3,131,000
compared with $1,970,000 in 1998. The majority of capital
improvements were for the new Hong Kong and Eventus businesses,
manufacturing and transportation equipment. The Company anticipates
that its 2000 capital purchases will be significantly less than 1999
levels of spending as the Company reaches its final stages of business
expansion. Capital expenditures are expected to be funded through
operating cash flows, additional financing or working capital.
<PAGE>
Year 2000 Issues
The Company had initiated a task force committee to address Year 2000
issues. The committee's purpose was to direct the project for
assessment, remediation and implementation of solutions and
contingency plans related to Year 2000 issues. The project plan
addressed information technology systems (IT systems) such as computer
software and hardware and non-information technology systems (Non-IT
systems) such as manufacturing and distribution equipment, utilities
and facilities. In addition, the plan addressed Year 2000 issues
relating to third parties with which the Company has a material
relationship. Although not all third party suppliers and service
providers responded on anticipated compliance prior to January 1,
2000, the Company has not experienced, and does not anticipate any
material problems with its major vendors in the future.
The Company will continue to monitor for potential risks that have not
yet been detected from key suppliers and vendors, as well as,
information technology and non-information technology areas. The
Company, as a part of its normal operating plan, continues to contract
with a third party for backup computer hardware service in the event
of a failure or serious interruptions of its on-site operations.
Additionally, the Company continues to test manual procedures for
order processing during scheduled system downtime to ensure that they
are current.
Costs for implementing the Year 2000 project were $234,900 over the
two- year fiscal period of 1998 and 1999 and did not materially affect
results of operations, liquidity, or the financial position of the
Company. Expenditures relating to Year 2000 were primarily for
software remediation, and were funded through operating cash flows.
Other IT projects and initiatives were not adversely affected by the
Company's resources allocation to the Year 2000 project. Although the
Company has addressed the Year 2000 issue and plans to monitor its
progress through the year 2000, there can be no assurance that total
compliance internally as well as with third party vendors and
suppliers has been achieved.
Item 7A - Quantitative and Qualitative Disclosure About Market Risk
The Company may be exposed to certain market risk as it relates to
interest rate changes and foreign currency fluctuations. The Company
may periodically use foreign exchange derivatives, when appropriate to
manage exchange rate risks. At present, the Company is not engaged in
the use of financial derivative instruments.
<PAGE>
Interest Rate Risk
The Company has market risk exposure to interest rate fluctuations on
its investments and debt. The Company's investment strategy is to
invest in primarily low risk, secure investments with a maturity
structure that varies over time. Currently, the Company invests
excess cash until needed for business operations. Investments are not
held for trading purposes. At November 30, 1999, the Company held
high grade, government securities that are laddered in maturity from
14 months to 24 months. Total investments at November 30, 1999, were
$3,327,000, all of which were classified as short-term. The Company
believes that market interest rate changes would not impose a high
level of risk to investment principal. If interest rates were to
increase one percentage point, total value of investments in
government securities might result in a decline in value by $57,000.
At November 30, 1998, the Company had short-term municipal bonds
of which $6,068,000 were short-term. In addition the Company had
$2,215,000 in bond investments that were laddered in maturity from 13
to 29 months. Due to the short-term nature of bonds classified as
short-term, the Company believes the impact on market value would not
have been material. For the long-term bonds a one percentage point
increase in market interest rate might have resulted in a reduction in
value by $36,000.
The Company's debt is structured using a combination of fixed and
floating interest rates. At November 30, 1999, the Company had
$4,146,900 outstanding under a three-year note and security agreement
that has an interest rate of prime plus .5%. The weighted average
interest rate for 1999 was 8.58% If the weighted average interest
rate for fiscal 2000 were to increase by one percentage point to 9.58%
with the balance of outstanding debt remaining at $4,146,900,
incremental interest expense would be $41,500. The Company also has a
secured term loan and asset financing that have fixed rates of
interest and are thus not subject to interest rate volatility. The
fair value of the term loan and asset financing is subject to market
risk volatility. If interest rates were to change by 1.0%, the
Company believes the impact on fair value would not be material. At
November 30, 1998 the Company had $6,000,000 outstanding under a line
of credit which had an interest rate based on a LIBOR rate plus a
spread that adjusted with the debt ratio. The weighted average
interest rate for 1998 was 6.99%. If the interest rate were to have
increased by 10% to 7.69% during 1999 with the balance remaining
constant at $6,000,000, incremental interest expense would have been
$42,000 in fiscal 1999. The Company also had a five-year bank loan of
$2,900,000 with a fixed interest rate and thus not subject to interest
rate volatility. If interest rates were to have changed by 1.0%, the
Company believes the impact on fair value would not have been
material.
<PAGE>
Exchange Rate Risk
The Company engages in intercompany transactions that primarily
consist of the sale of inventory to its subsidiaries in Canada, Taiwan
and Hong Kong. As a result, the Company is exposed to movements in
foreign currency exchange rates. The accounts receivable associated
with intercompany sales transactions are U.S. dollar denominated. The
corresponding accounts payable on the subsidiary financial statements
are recorded at the functional currency of each respective country.
At the end of each month, the subsidiary translates the accounts
payable balance at the exchange rate on the balance sheet date.
Adjustments resulting from these translations are recorded through
income.
At November 30, 1999 and 1998, the Company had current accounts
receivable balances due from its subsidiaries. If aggregate exchange
rates of subsidiary foreign currencies were to all decrease 10%, the
translation adjustment might result in a decrease to subsidiaries
earnings by $264,100 and $89,900 for fiscal 2000 and 1999
respectively.
The Company also has accounts payable balances due to its subsidiaries
which are denominated in the functional currency of the subsidiary.
The balances and short-term nature of these payables significantly
reduce the exposure to changes in foreign currency rates. The Company
believes that any foreign currency risk on these balances is not
material.
Certain statements in this Management's Discussion and Analysis
section contain forward-looking information. These statements are
based on current expectations, and actual results could differ
materially. Important factors that could cause actual results to
differ materially from those projected in forward-looking statements
include, but are not limited to the following: Consultants' (or
Distributors') sales activity levels, recruiting of new Consultants
and Distributors, services of or changes in certain members of senior
management, new product introductions, protection of intellectual
property rights and third party infringement, changes in U.S. or
international economic conditions, results of international operations
including governmental, regulatory, political and foreign exchange
rate impacts, results of operations in new markets, global and
domestic expansion efforts, capital resources and ability to obtain
necessary financing, market risk, and risks and costs related to the
Year 2000.
<PAGE>
Item 8 - Financial Statements and Supplementary Data
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
BeautiControl, Inc.
We have audited the accompanying consolidated balance sheets of
BeautiControl, Inc. and Subsidiaries as of November 30, 1999 and 1998,
and the related statements of operations, stockholders' equity and
cash flows for each of the three years in the period ended November
30, 1999. Our audits also included the financial statement schedule
listed in the Index at Item 14(a). These financial statements and
schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements
and schedule based on our audits. In 1998, we did not audit the
financial statements of BeautiControl Taiwan, Inc., Taiwan Branch, a
wholly-owned branch, which statements reflect total assets
constituting 6.7% at November 30, 1998 and total revenues constituting
6.9% for the year ended November 30, 1998, of the related consolidated
totals. Those statements were audited by other auditors whose report
has been furnished to us, and our opinion, insofar as it relates to
data included for BeautiControl Taiwan, Inc., Taiwan Branch as of
November 30, 1998 and for the year then ended, is based solely on the
report of the other auditors.
We conducted our audits in accordance with auditing standards
generally accepted in the United States. Those standards require that
we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits and the
report of other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and, for 1998, the report of other
auditors, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of BeautiControl, Inc. and Subsidiaries at November 30, 1999
and 1998, and the consolidated results of their operations and their
cash flows for each of the three years in the period ended November
30, 1999, in conformity with accounting principles generally accepted
in the United States. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects
the information set forth therein.
Ernst & Young LLP
Dallas, Texas
December 30, 1999
except for Note G, as to which the date is
February 14, 2000
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of BeautiControl Taiwan, Inc.
We have audited the balance sheets of BeautiControl Taiwan, Inc.,
Taiwan Branch as of November 30, 1998 and 1997, and the related
statements of operations and changes in accumulated deficit and of
cash flows for the year ended November 30, 1998 and for the period
from inception on August 15, 1997 to November 30, 1997 as derived from
the accounts and records maintained by the Branch. The financial
statements are the responsibility of the Branch's management. Our
responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States of America. Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements audited by us present fairly,
in all material respects, the financial position of BeautiControl
Taiwan, Inc., Taiwan Branch at November 30, 1998 and 1997, and the
results of its operations and cash flows for the year ended November
30, 1998 and for the period from inception on August 15, 1997 to
November 30, 1997, in conformity with accounting principles generally
accepted in the United States of America.
PricewaterhouseCoopers
Taipei, Taiwan, Republic of China
December 15, 1998
<PAGE>
<TABLE>
BEAUTICONTROL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands Except Per Share Amounts)
YEARS ENDED NOVEMBER 30,
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Net sales $65,349 $72,163 $69,421
Cost of goods sold 17,943 21,633 19,005
------ ------ ------
Gross profit 47,406 50,530 50,416
Selling expenses 33,735 35,793 31,755
General and administrative expenses 26,582 19,460 18,237
------ ------ ------
60,317 55,253 49,992
------ ------ ------
Income (loss) from operations (12,911) (4,723) 424
Other income and expenses
Interest income 341 149 146
Interest expense (877) (430) (302)
Other, net (148) 135 130
------ ------ ------
(684) (146) (26)
------ ------ ------
Income (loss) before income taxes (13,595) (4,869) 398
Income taxes (benefit) (2,026) (1,707) 274
------ ------ ------
Net income (loss) ($11,569) ($3,162) $124
====== ====== ======
Net income (loss) per common
share - basic ($1.60) ($0.49) $0.02
Weighted average common shares - basic 7,231 6,395 5,906
Net income (loss) per common
share-assuming dilution ($1.60) ($0.49) $0.02
Weighted average common shares -
assuming dilution 7,231 6,395 6,154
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
BEAUTICONTROL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands Except Shares Information)
November 30,
1999 1998
------ ------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 1,799 $ 3,165
Investments 3,327 6,068
Accounts receivable-trade net of allowances
of $723 in 1999 and $759 in 1998 602 738
Inventories 10,540 11,619
Deferred income taxes 3,296 2,229
Income tax receivable 222 1,981
Other current assets 944 1,177
------ ------
Total current assets 20,730 26,977
PROPERTY AND EQUIPMENT, AT COST
Land 766 766
Office building 4,433 4,301
Office furniture and equipment 10,700 9,324
Machinery and equipment 7,719 7,040
Leasehold improvements 1,924 1,535
Transportation equipment 3,273 2,718
------ ------
28,815 25,684
Less accumulated depreciation
and amortization 17,866 15,465
------ ------
Property and equipment, net 10,949 10,219
OTHER ASSETS
Cost in excess of net tangible assets
acquired, net of amortization of
$961 in 1999 and $894 in 1998 1,690 1,757
Investments - 2,264
Other, net of amortization of
$585 in 1999 and $572 in 1998 1,827 799
------ ------
Total assets $35,196 $42,016
====== ======
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
BEAUTICONTROL, INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands Except Shares Information)
NOVEMBER 30,
1999 1998
------ ------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable-trade $ 4,205 $ 3,669
Current maturities of long-term debt 6,365 7,779
Accrued commissions and awards 2,126 2,198
Accrued other taxes 1,590 1,491
Accrued liabilities 3,753 1,197
Deferred income 1,888 987
------ ------
Total current liabilities 19,927 17,321
DEFERRED INCOME TAXES 193 791
LONG-TERM DEBT 6,443 1,221
OTHER LONG-TERM OBLIGATIONS 143 244
COMMITMENTS AND 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 in 1999 and
10,928,998 in 1998 1,094 1,093
Capital in excess of par value 23,913 23,832
Retained earnings 14,457 28,412
Accumulated other comprehensive (69) 7
------ ------
39,395 53,344
Less treasury stock, at cost
(3,708,800 shares in 1999 and 1998) 30,905 30,905
------ ------
Total stockholders' equity 8,490 22,439
------ ------
Total liabilities and stockholders' equity $35,196 $42,016
====== ======
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
BEAUTICONTROL, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In Thousands)
1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
Common Stock-beginning balance $ 1,093 $ 964 $ 952
Issuance of common stock - 120 -
Issuance of common stock
under stock option plans 1 9 12
----- ----- -----
Ending Balance $ 1,094 $ 1,093 $ 964
Paid in Capital-beginning balance $23,832 $13,585 $12,720
Issuance of common stock - 9,792 -
Issuance of common stock
under stock option plans 54 301 753
Tax benefit 3 154 112
Stock option awards 24 - -
------ ------ ------
Ending Balance $23,913 $23,832 $13,585
Retained earnings-beginning
balance $28,412 $34,218 $36,577
Net income (loss) (11,569) (3,162) 124
Dividends (2,386) (2,644) (2,483)
------ ------ ------
Ending Balance $14,457 $28,412 $34,218
Accumulated other comprehensive
income- beginning balance $7 $20 ($34)
Translation adjustment (35) (13) 20
Net unrealized gains
(losses) on investments (41) - 34
------ ------ ------
Ending Balance ($69) $7 $20
Treasury Stock ($30,905) ($30,905) ($30,905)
------ ------ ------
Total Stockholders' Equity $ 8,490 $22,439 $17,882
====== ====== ======
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
BEAUTICONTROL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
<CAPTION>
YEARS ENDED NOVEMBER 30,
1999 1998 1997
------ ------ -----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) ($11,569) ($3,162) $ 124
Adjustments to reconcile net income
(loss) to net cash provided by (used in)
operating activities
Depreciation and amortization 2,546 1,839 1,757
Deferred income tax (1,665) (348) 29
Provision for losses on trade accounts
receivable 169 198 369
Provision for obsolete inventory 2,391 2,703 1,327
Changes in assets and liabilities:
Accounts receivable (33) (234) 33
Inventories (1,312) (1,523) 711
Income tax receivable 1,759 (1,254) (727)
Other current assets 288 (430) (67)
Accounts payable 536 (267) 1,010
Accrued other taxes 99 (410) (1,099)
Other accrued liabilities and obligations 2,520 369 (757)
Deferred income 901 (76) 713
Other 135 56 5
------ ------ -----
Net cash provided by (used in) operating
activities (3,235) (2,539) 3,428
Cash flows from investing activities:
Proceeds from sale of investments 11,494 - 2,843
Purchase of investments (6,632) (8,358) -
Purchase of property and equipment (3,131) (1,970) (1,895)
Purchase of other assets (131) (33) (122)
------ ------ -----
Net cash provided by (used in)
investing activities 1,600 (10,361) 826
<PAGE>
Cash flows from financing activities:
Proceeds from issuance of common stock 55 10,222 764
Increase (decrease) in borrowings 10,738 7,800 (2,700)
Payment on long-term debt (8,020) - -
Principal payments under capital lease
obligations (114) (18) -
Dividends paid (2,386) (2,644) (2,483)
------ ------ -----
Net cash provided by (used in) financing
activities 273 15,360 (4,419)
Effect of exchange rate on cash and cash
equivalents (4) (15) 1
------ ------ -----
Net increase (decrease) in cash and cash
equivalents (1,366) 2,445 (164)
Cash and cash equivalents at beginning
of period 3,165 720 884
------ ------ -----
Cash and cash equivalents at end of
period $1,799 $3,165 $720
====== ====== =====
Supplemental cash flow information:
Income taxes ($2,085) ($69) $1,569
Interest 913 321 298
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
BEAUTICONTROL, INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1999, 1998 AND 1997
NOTE A - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
BeautiControl, Inc. is a manufacturer and direct seller of skin care,
cosmetics, nutritional supplements, nail care, toiletries, fragrances,
beauty supplements and related products. The Company sells its
products through independent sales persons called "Consultants" (or
"Distributors"), who purchase the products from BeautiControl and then
sell them directly to consumers in the home or workplace. Products and
image services are provided to clients via an independent sales force
in the United States, Taiwan, Hong Kong, Canada and Puerto Rico. The
Company's three primary geographic operating segments consist of the
following: North America which includes the United States and Canada,
Asia Pacific which includes Taiwan and Hong Kong and Eventus
International which currently operates in the United States.
Principles of Consolidation - The consolidated financial statements
include the accounts of the Company and its majority-owned
subsidiaries. All intercompany accounts and transactions have been
eliminated.
Reclassifications - Certain amounts for the prior years have been
reclassified to conform to the current year presentation.
Fair Value of Financial Instruments - The carrying amounts reported in
the accompanying consolidated balance sheets for cash and cash
equivalents, investments, accounts receivable, accounts payable and
accrued liabilities approximate fair value because of their short-term
maturities. The carrying amounts reported in the accompanying
consolidated balance sheets of long-term debt approximates fair value,
as estimated using discounted cash flow analysis, based on the
Company's current incremental borrowing rates for similar
arrangements.
Property and Equipment - Depreciation and amortization is provided for
property and equipment by the straight-line method over the following
estimated useful lives of the assets:
Office building..............................30 years
Office furniture and equipment..............3-5 years
Machinery and equipment.................... 5-8 years
Transportation equipment.................. 5-15 years
Property under capital leases.................3 years
Leasehold improvements are amortized over the lives of the respective
leases or the service life of the improvements, whichever is shorter.
Cost in Excess of Net Tangible Assets Acquired - Costs in excess of
net tangible assets acquired and other intangible assets are being
amortized on a straight-line basis over 40 years. Other intangible
assets are included in Other Assets on the Consolidated Balance Sheet.
<PAGE>
Long-Lived Assets - The Company, whenever changes in circumstances
indicate that the carrying amount of long-lived assets including
property and equipment and costs in excess of net tangible assets
acquired may not be recoverable, evaluates the existence of impairment
on the basis of whether the related long-lived assets are fully
recoverable from projected, undiscounted cash flows of the related
business unit.
Cash Equivalents - Investments that are short-term (generally with
original maturities of three months or less) and highly liquid are
considered to be cash equivalents.
Deferred Income Taxes - Deferred income taxes are provided under the
provisions of Financial Accounting Standards Board Statement No. 109.
Foreign Currency - Balance sheet accounts of foreign operations are
translated at the exchange rate at the balance sheet date. Resulting
translation adjustments on short-term intercompany accounts are
included in income. All other adjustments are made to accumulated
other comprehensive income. Revenues and expenses are translated at
average exchange rates during the year.
Revenue Recognition - Revenue is recognized when orders are shipped.
Included in deferred income are orders which are paid for but not
shipped, prepaid registration fees for future meetings and prepaid
training fees for future training classes.
Product Returns - The Company guarantees the quality of its
merchandise and will replace the product or refund the purchase price
if products are returned by unsatisfied consumers. The Company will
repurchase at cost, less a 10% restocking fee, any currently
marketable merchandise purchased in the previous 12 months from any
Consultant who chooses to leave the business.
Consolidated product returns as a percent of net sales for 1999, 1998
and 1997 were 1.2% .1% and .2%, respectively. The Company provides
reserves for product returns based upon historical percentages. In
1999 and 1998 inventory bought back was 0.09% and 0.07% of net sales,
respectively.
Research and Development - The Company's policy is to expense as
incurred all activities engaged in the research and development of
products. The amount spent on research and development activities on
the formulation and improvement of Company products was $1,070,000 in
1999, $933,000 in 1998, and $918,000 in 1997. Expenditures included
in these amounts consist of the following direct costs: materials
consumed, depreciation of equipment used in development activities,
labor, and contractual services performed by outside parties for
product testing.
Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Actual
results could differ from those estimates.
<PAGE>
Recently Issued Accounting Statements - In June 1999, the Financial
Accounting Standards Board issued Statement of Financial Accounting
Standards (SFAS), No. 137, Accounting for Derivative Instruments and
Hedging Activities-Deferral of the effective date of FASB Statement
No. 133. SFAS 137 defers the effective date of SFAS 133 Accounting
for Derivative Instruments and Hedging Activities to fiscal years
beginning after June 15, 2000. SFAS 133 requires that all derivatives
be recognized on the balance sheet at fair value. Derivatives that do
not qualify as hedges must be adjusted to fair value through income.
Depending on the nature of the hedge transaction, changes in the fair
value of derivatives will either be offset against the change in fair
value of the hedged assets, liabilities, or firm commitments through
earnings or recognized in other comprehensive income until the hedged
item is recognized in earnings. The ineffective portion of a
derivative's change in fair value will be recognized in current period
earnings. At the present time, the Company is not engaged in any
significant derivative activity and does not currently believe that
the adoption of SFAS 133 will have a material impact on its financial
position, or results of operations or cash flows.
NOTE B - NET INCOME (LOSS) PER COMMON SHARE
The Company computes earning per share in accordance with SFAS No.
128. The following table sets forth the computation of basic and
diluted earnings (loss) per share:
1999 1998 1997
---- ---- ----
Numerator:
Numerator for basic and
diluted earnings per share-
income (loss) available to
common stockholders ($11,569) ($3,162) $124
Denominator:
Denominator for basic
earnings per share-weighted-
average shares 7,231 6,395 5,906
Effect of dilutive securities:
Employee stock options - - 248
Denominator for diluted
earnings per share-adjusted
weighted-average shares and
assumed conversions 7,231 6,395 6,154
Basic earnings (loss) per share $(1.60) $(0.49) $0.02
Diluted earnings (loss) per share $(1.60) $(0.49) $0.02
During 1999 and 1998, employee stock options to purchase 1,858,000 and
1,197,000 shares of the Company's common stock, respectively, were
excluded from the computation of earnings per share as their effect
would have been antidilutive.
<PAGE>
NOTE C - 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 (in
thousands) are as follows:
1999 1998 1997
------ ----- -----
Net income (loss) ($11,569) ($3,162) $124
Other comprehensive income (loss)
Cumulative translation adjustment (35) (13) 20
Unrealized gains and
losses on investments in
debt securities (41) - 34
------ ----- -----
Comprehensive income (loss) ($11,645) ($3,175) $178
====== ===== =====
NOTE D - INVESTMENTS
Investments - The Company accounts for its investments in accordance
with Statement of Financial Accounting Standards No. 115, Accounting
for Certain Investments in Debt and Equity Securities (SFAS 115). SFAS
115 requires companies to classify their investments as either held-
to-maturity or available-for-sale. Held-to-maturity securities
represent those securities that the Company has both the positive
intent and ability to hold to maturity and are carried at amortized
cost. Available-for-sale securities represent those securities that do
not meet the classification of held-to-maturity, are not actively
traded and are carried at fair value. Unrealized gains and losses on
these securities are excluded from earnings and are reported as a
separate component of stockholders' equity, net of applicable taxes,
until realized.
<PAGE>
The market value and scheduled maturities of investments at November
30, 1999 and November 30, 1998 are as follows:
Market Market
Value Value
--------- ---------
1999 1998
Available-for-sale Available-for-sale
Due in 1 year or Due in 1 year or
less: less:
U.S. Government $ - U.S. Government $ 280,000
and Agencies Bonds - and Agencies 5,788,358
Municipal Bonds Bonds
Municipal Bonds
Due in 1-5 years: Due in 1-5 years:
Municipal Bonds - Municipal Bonds 2,264,381
U.S. Government
Securities 3,326,704
--------- ---------
Total $3,326,704 Total $8,332,739
========= =========
At November 30, 1999, the Company classified all investments as
current and available for sale. The gross unrealized loss in
investments was $41,160 at November 30, 1999.
In November of 1998, the Company purchased investments in debt
securities. These investments were classified as available-for-sale
and were, therefore, carried at fair value. Due to the timing of the
purchase of these investments, there were no gross unrealized gains
and losses.
NOTE E - INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out
method) or market.
Inventories (in thousands) consist of the following:
November 30,
1999 1998
------ ------
Finished Goods $10,407 $10,282
Raw Materials 5,118 5,263
Reserve for
Obsolescence (4,985) (3,926)
------ ------
Total $10,540 $11,619
====== ======
<PAGE>
NOTE F - INCOME TAXES
The Company has net operating losses available for carryforward
of approximately $9,563,000, which begin to expire in 2019.
Additionally, the Company has recorded a valuation allowance for a
portion of its net deferred tax asset position at November 30, 1999
and 1998, due to uncertainty with respect to the future recoverability
of such amounts.
The components of deferred income taxes (in thousands) are as follows:
November 30,
1999 1998
----- -----
Deferred tax assets:
Net operating loss $3,574 $ -
Inventories 2,048 1,453
Allowance for doubtful accounts 255 288
Accrued expenses 712 453
Foreign subsidiary net operating loss
carryforward 404 240
Other 276 50
----- -----
7,269 2,484
Less valuation allowance: (3,404) (240)
----- -----
3,865 2,244
Deferred tax liabilities:
Property and equipment ($741) ($791)
Other (21) (15)
----- -----
(762) (806)
----- -----
$3,103 $1,438
===== =====
Deferred tax assets and liabilities
Current deferred tax assets $3,296 $2,229
Noncurrent deferred tax liability (193) (791)
----- -----
$3,103 $1,438
===== =====
Income taxes (benefit) (in thousands) is comprised of the following:
Year Ended November 30,
1999 1998 1997
----- ----- ----
Current
Federal ($362) ($1,173) $212
State - (186) 33
Deferred
Federal (1,373) (86) 29
State (291) (262) -
----- ----- ----
($2,026) ($1,707) $274
===== ===== ====
<PAGE>
Reconciliation of income taxes (benefit) computed at the Federal
statutory rate and income taxes (benefit) is as follows:
Year End November 30,
1999 1998 1997
---- ---- ----
Federal statutory rate (34.0%) (34.0%) 34.0%
State (3.2) (3.7) 5.5
Unbenefitted foreign losses 1.2 2.1 28.9
Valuation allowance 22.1 - -
Other (1.0) 0.5 0.5%
---- ---- ----
Effective tax rate (14.9%) (35.1%) 68.9%
==== ==== ====
NOTE G - LONG-TERM DEBT
Historically, the Company's funding needs have been for normal
operating expenses, capital expenditures and business expansion.
Funding has primarily been supported through cash flow from operations
borrowings and, when needed, through the sale of investments. During
1999, primarily as a result of continued business expansion costs, net
losses were $11,569,000 and net cash used in operating activities was
$3,235,000. Additionally, at November 30, 1999, cash and cash
equivalents and investments decreased to $5,126,000 from $11,497,000
at November 30, 1998. During 1999, the Company entered into various
credit arrangements in order to retire existing unsecured borrowings
and obtain long-term credit availability. Additionally, during the
fourth quarter of 1999, the Company implemented certain organizational
changes and cost reductions expected to improve operations in fiscal
2000. The Company's position on future cash needs in the year 2000 is
expected to lessen as a result of these changes in addition to
decreased cash usage in new business initiatives and related
start up costs as the Company reaches the conclusion of its current
geographical business expansion. Even though the Company believes
its existing liquidity condition and credit arrangements will be
adequate to cover cash requirements in fiscal 2000, it can provide no
assurance that net losses and a decrease in its liquidity position
might not occur in fiscal 2000. If this occurred, the Company could
be required to further liquidate cash equivalents and investments,
to attempt to obtain additional financing through new or existing
credit arrangements, to make additional organization changes to
further reduce costs and expenses or to liquidate assets to obtain
operating cash.
<PAGE>
The Company had a secured term loan outstanding with balances of
$2,907,600 and $1,400,000 at November 30, 1999, and at November 30,
1998, respectively. The term loan had a maximum borrowing amount of
$3,120,000 at November 30, 1999. A specific asset of the Company was
used to secure the term loan. The loan had a fixed rate of interest
of 7.72% and had monthly principal payments of $21,689. The term loan
required compliance with amended covenants that had obligated the
Company to meet certain financial ratios. The Company had consented
to accelerate the maturity date of the term loan to April 5, 2000, as
part of an agreed upon arrangement between the Company and the Lender.
On February 14, 2000 the Company sold the asset securing the term
loan. A portion of the proceeds were used to extinguish the balance
of the loan at February 14, 2000 for the amount of $2,873,600
including principal and interest. In connection with the asset sale,
the Company will record a gain of approximately $2,000,000 in fiscal
2000.
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% (9.5% at November 30, 1999). The
agreement provides for a maximum credit availability of $7,000,000
dependent upon the value of the Company's inventory. At November 30,
1999, the maximum available credit was $4,693,000. At November 30,
1999, the outstanding principal under the note and security agreement
was $4,146,900. The outstanding principal includes a $1,110,500
balance on a three-year note with a four-year amortization and monthly
principal payments of $26,749 and a $3,036,400 balance on a revolving
loan agreement. The weighted average interest rate through November
30, 1999, was 8.58%. The note and security agreement subjects the
Company to certain amended financial and informational covenants with
which the Company was in compliance at November 30, 1999 and expects
to be in compliance with through fiscal 2000 and beyond. Scheduled
principal maturities on the term note are $321,000 in 2000, $321,000
in 2001 and $468,500 in 2002. The revolving loan agreement expires in
May 2002. Amounts outstanding under the revolving loan agreement are
classified as current due to a requirement of the Company to maintain
a blocked account in favor of the lender.
On May 24, 1999, the Company obtained asset financing in the amount of
$5,800,000 secured by certain real estate. The asset financing is a
ten-year note amortized over a twenty-two year period bearing a fixed
interest rate of 8.33% with monthly payments of principal and interest
of $47,988. A balloon payment of $4,378,000 is due June 1, 2009. At
November 30, 1999, the outstanding balance on the asset financing was
$5,752,900. As part of this arrangement, the Company is required to
hold a restricted escrow balance of $850,000. The escrow balance is
classified in Other Assets on the Consolidated Balance Sheet.
Scheduled principal maturities on the real estate note are $99,700 in
2000, $108,300 in 2001, $117,700 in 2002, $127,900 in 2003, $139,000
in 2004 and $5,160,300 in 2005 and thereafter.
Effective May 26, 1999, the Company used proceeds received from other
borrowings to extinguish its unsecured line of credit. Prior to that,
the balance at May 26, 1999 was $1,000,000 compared with $7,600,000 at
November 30, 1998.
<PAGE>
In 1998, the Company committed to a three year non-cancelable capital
lease for computer related hardware and software. Assets under
capital leases are capitalized using interest rates appropriate at the
inception of the lease.
NOTE H - COMMITMENTS AND CONTINGENCIES
At November 30, 1999, the Company and subsidiaries were committed
under non-cancelable operating leases, principally for five buildings,
equipment and automobiles. U. S. building leases expire in 2004 and
may be extended for five years, at the Company's option, at the fair
market rental rate in effect at that time. Building leases in Taiwan,
Canada and Hong Kong expire in 2000, 2001 and 2003, respectively. In
1998, the Company also committed to a three- year non-cancelable
capital lease for a computer system upgrade which consists of hardware
and software.
The following is a schedule by year of future minimum lease payments
at November 30, 1999 (in thousands):
Fiscal Year Capital Operating
Leases Leases
----------- ------ ------
2000 $ 151 $3,382
2001 126 2,071
2002 1,280
2003 899
2004 533
------ ------
Total minimum lease payments 277 $8,165
Less: Amount representing estimated ======
taxes and maintenance costs included
in total minimum lease payments 45
------
Net minimum lease payments 232
Less: Amount representing interest 10
------
Present value of net minimum lease payments 222
Current portion 119
------
Long-term capitalized lease obligations $ 103
======
Assets recorded under capital leases are included in property, plant,
and equipment, as follows (in thousands):
November 30,
1999 1998
---- ----
Office furniture and equipment $355 $355
Less accumulated amortization 138 20
---- ----
Net capital lease assets $217 $335
==== ====
<PAGE>
Rent expense (in thousands) for operating leases is as follows:
Year Ending November 30,
1999 $3,681
1998 2,741
1997 1,918
In December 1998, a subsidiary of the Company signed a five-year
contract to buy Manapol[R], a nutraceutical raw material, from
Caraloe, Inc., a consumer products subsidiary of Carrington
Laboratories, Inc., of Irving, Texas. The contract for the
nutraceutical Manapol[R] requires total minimum raw material purchase
and royalty payments of $4.5 million during the five years. At
November 30, 1999, the Company had made total raw material and royalty
payments of $247,700.
NOTE I - CAPITAL STOCK
The Company is authorized to issue 1,000,000 shares of $.10 par value
preferred stock with voting powers and other special rights or
restrictions, if any, to be determined by the Board of Directors at
the time of issuance.
The Company has 1,858,000 shares of common stock reserved for future
issuance under its stock option plans.
On August 3, 1998, the Company completed a private equity placement
where 1,200,000 shares of common stock were issued in exchange for
$9,912,000 in cash. The shares were sold to Jim Sowell Construction
Company, Inc., an affiliate of Sowell & Company, a Dallas based firm
with real estate operations and investment holdings.
As of November 30, 1999, the Company had purchased a total of
3,708,800 shares of its common stock pursuant to a plan approved by
the Board of Directors to acquire up to 4,708,800 shares.
During 1999, quarterly dividends were paid for the first three
quarters. During 1998 and 1997 four quarterly dividends were paid.
The aggregate totals and per share amounts for each year respectively
were $2,386,000 or $.225, $2,644,000 or $.42, and $2,483,000 or $.42.
NOTE J - STOCK OPTIONS AND EMPLOYEE BENEFIT PLANS
The Company has three stock option plans covering key employees and
non-employee directors.
The 1996 Incentive Stock Option Plan permits the issuance of incentive
stock options to employees of the Company to purchase up to 130,000
common shares of the Company. Specific terms of the options will be
determined by the Compensation Committee of the Board of Directors;
however, no options may be granted for less than the fair market value
of the common stock nor for terms exceeding ten years. The options
vest 20% each year beginning one year after the grant date and expire
ten years from the date of grant.
<PAGE>
The 1996 Non-Qualified Stock Option Plan permits the issuance of non-
qualified stock options to key persons of the Company to purchase up
to 1,240,000 common shares of the Company. Pursuant to this plan,
options may be granted at prices to be determined by the Compensation
Committee of the Board of Directors of the Company. The option period
may not terminate later than ten years from the date the option is
granted; the option vesting period begins after one year from the date
of grant to any time up to five years from date of grant. The options
vest 20% per year beginning one year after the grant date and expire
ten years from the date of grant.
The 1998 Special Stock Option Plan provides for issuance of stock
options to nonemployee directors of the Company to purchase up to
59,000 common shares of the Company. The number of options to be
granted under this plan is determined by a formula specified within
the plan and the exercise price must be at least equal to the fair
market value of the common shares of the Company on the date of grant
of the option. All options will expire ten years from the date of
grant, and no option is exercisable until one year from the date of
grant.
<PAGE>
The following tables summarize the related activity and status of the
Company's three stock option plans including options outstanding under
previous plans as of November 30, 1997, 1998 and 1999:
INCENTIVE PLAN
Weighted
Shares Under Average
Option Option Price Exercise
(000's) Range Price
------- ----- -----
Outstanding at
November 30, 1996 289 $3.28-$9.50* $8.56
Granted 5 $9.75 $9.75
Exercised (45) $3.28-$9.50 $7.84
Canceled (23) $8.00-$9.50 $8.86
Outstanding at
November 30, 1997 226 $4.89-$9.75 $8.70
Exercisable at
November 30, 1997 132 $8.68
Granted 55 $5.75-$8.13 $8.03
Exercised (2) $5.00 $5.00
Canceled (12) $6.11-$9.25 $8.09
Outstanding at
November 30, 1998 267 $5.75** $5.75
Exercisable at
November 30, 1998 156 $5.75
Granted 6 $4.50-$5.75 $5.13
Exercised - - -
Canceled (47) $5.75 $5.75
Outstanding at
November 30, 1999 226 $4.50-$5.75 $5.73
Exercisable at
November 30, 1999 148 $5.75
Available to Grant at
November 30, 1999 20
Weighted Average Remaining
Contractual Life of
Options Outstanding at
November 30, 1999 5
<PAGE>
NON-QUALIFIED PLAN
Shares Under Weighted
Option Option Price Average
(000's) Range Exercise Price
------- ----- -----
Outstanding at
November 30, 1996 505 $3.56-$17.50* $10.64
Granted - - -
Exercised (8) $7.75-$9.25 $8.38
Canceled (5) $7.75-$8.50 $8.21
Outstanding at
November 30, 1997 492 $3.56-$17.50 $10.70
Exercisable at
November 30, 1997 439 $10.96
Granted 318 $5.75-$8.75 $7.35
Exercised (23) $3.56 $3.56
Canceled (3) $8.13-$9.25 $8.61
Outstanding at
November 30, 1998 784 $5.75** $5.75
Exercisable at
November 30, 1998 550 $5.75
Granted 832 $3.63-$6.13 $3.85
Exercised - - -
Canceled (95) $3.63-$5.75 $4.52
Outstanding at
November 30, 1999 1,521 $3.63-$6.13 $4.76
Exercisable at
November 30, 1999 575 $5.75
Available to Grant
at November 30, 1999 180
Weighted Average Remaining
Contractual Life of
Options Outstanding
at November 30, 1999 8
<PAGE>
SPECIAL PLAN
Shares Under Weighted
Option Option Price Average
(000's) Range Exercise Price
------ ----- --------------
Outstanding at
November 30, 1996 276 $3.28-$14.25 $7.18
Granted 6 $14.63 $14.63
Exercised (63) $3.28-$10.67 $5.46
Canceled (7) $13.00-$14.25 $13.89
Outstanding at
November 30, 1997 212 $3.28-$14.63 $7.68
Exercisable at
November 30, 1997 206 $7.47
Granted - - -
Exercised (67) $3.28 $3.28
Canceled - - -
Outstanding at
November 30,1998 145 $4.89-$14.63 $9.73
Exercisable at
November 30, 1998 145 $9.73
Granted - - -
Exercised (11) $4.89 $4.89
Canceled (23) $4.89 $4.89
Outstanding at
November 30, 1999 111 $7.75-$14.63 $11.22
Exercisable at
November 30, 1999 106 $11.22
Available to Grant
at November 30, 1999 59
Weighted Average Remaining
Contractual Life of
Options Outstanding
at November 30, 1999 3
* In January 1996, 204,070 stock options with a price range of $10.00
to $17.50 were repriced to the current fair market value price of
$9.25.
** In October 1998, 920,425 stock options with a price range of $6.67
to $9.75 were repriced to the current fair market value price of
$5.75.
<PAGE>
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123 (SFAS 123),
Accounting for Stock Based Compensation. This statement defines a
fair value based method of accounting for an employee stock option.
On December 1, 1996, the Company adopted the disclosures provision of
SFAS 123. Under this provision, the Company will disclose pro forma
net income (loss) and pro forma earnings (loss) per share for employee
stock options using a fair value based method. As allowed by SFAS
123, the Company has also elected to follow Accounting Principles
Board Opinion No. 25 (APB 25), Accounting for Stock Issued to
Employees, and related interpretations in accounting for its employee
stock option plans.
As required by SFAS 123, pro forma net income (loss) and earnings
(loss) per share impact from granted options have been determined for
disclosure purposes. The amounts reported do not necessarily reflect
the effects of this statement on future net income (loss) or earnings
(loss) per share. The fair value of employee stock options have been
estimated using the Black-Scholes option pricing model. The following
table summarizes the weighted average assumptions used for 1999, 1998
and 1997:
1999 1998 1997
---- ---- ----
Volatility 40.8% 42.1% 36.0%
Risk Free Rate 6.2% 4.7-4.9% 5.9%-6.1%
Dividend Yield 1.3%-2.0% 7.0% 3.8%
Expected Life in Years 7 5 5
Weighted Average Grant Date $1.73 $1.23 $3.48
Fair Value
Net Income (Loss):
As Reported ($11,569) ($3,162) $124
Pro Forma ($11,754) ($3,659) $66
Net Income (Loss) per Common Share:
As Reported ($1.60) ($.49) $.02
Pro Forma ($1.63) ($.57) $.01
The BeautiControl, Inc. 401(k) Plan is a qualified defined
contribution plan that allows eligible employees to make deferral
contributions up to 15% of their annual compensation for investment in
managed funds. Eligible employees include those over 21 years of age
who have been employed with the Company a minimum of six months. The
Company matches 50% of the first five percent of the participants'
contributions to the plan. The Company may also elect to make a
discretionary contribution in addition to the matching contribution
with the approval of the Board of Directors. The Company's
contribution expense for the years ended November 30, 1999, 1998 and
1997 was $165,000, $181,000 and $150,000, respectively.
<PAGE>
NOTE K - Segment Reporting
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 establishes 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 on December 1, 1998.
The Company's operating segments are based primarily on geographic
areas with the exception of the Company's subsidiary Eventus
International, Inc. Geographic areas include North America and Asia
Pacific. The Company's North America and Asia Pacific segments sell
skin care, cosmetic products, image accessories and health and beauty
supplements. The Eventus segment sells only nutritional and drink
supplements. Products are sold to customers through independent
sales Consultants or Distributors. The Company evaluates segment
performance based on operating profit or loss with all intersegment
transactions eliminated. Total assets reported are those used
directly by each individual segment. The accounting policies of the
reportable segments are the same as those described in Note A of the
Notes to Consolidated Financial Statements. The following table
summarizes financial information related to the Company's segments as
of November 30:
1999 1998 1997
------ ------ ------
Net Sales:
North America $59,902 $67,808 $70,266
Asia Pacific(1) 5,120 4,969 0
Eventus 1,420 0 0
Eliminations - intersegment sales (1,093) (615) (845)
------ ------ ------
Consolidated Net Sales $65,349 $72,163 $69,421
Income (Loss) from Operations:
North America ($2,154) ($617) $2,421
Asia Pacific(1) (4,026) (1,123) (451)
Eventus (4,586) 0 0
Corporate(2)(3) (2,145) (2,983) (1,546)
------ ------ ------
Consolidated Income (Loss) from Operations ($12,911) ($4,723) $ 424
Total Assets:
North America $44,961 $43,952 $30,472
Asia Pacific 3,250 2,804 576
Eventus 1,289 0 0
Eliminations (4) (14,304) (4,740) (1,692)
------ ------ ------
Consolidated Assets $35,196 $42,016 $29,356
<PAGE>
Inventory:
North America $8,514 $10,758 $12,800
Asia Pacific (1) 649 910 0
Eventus 608 0 0
Corporate(3) 758
Eliminations - Gross Profit 11 (49) 0
------ ------ ------
Consolidated Inventory $10,540 $11,619 $12,800
Capital Expenditures:
North America $1,760 $1,795 $1,610
Asia Pacific 625 529 285
Eventus 746 0 0
------ ------ ------
Consolidated Capital Expenditures $3,131 $2,324 $1,895
(1) Includes corporate allocations for additional sales returns and
inventory reserves.
(2) Includes corporate expensed expansion costs.
(3) Includes inventory reserves for inventory in the U.S. held for
subsidiaries.
(4) Includes intersegment receivables and investments in subsidiaries.
The following table presents the percentage of consolidated net sales
by product groups for the periods set forth below:
Year ended November 30,
1999 1998 1997
---- ---- ----
Skin care products 51% 49% 46%
Cosmetic makeup products 29 32 32
Cosmetics, color an image
analysis accessories 11 13 13
Nutritional and Beauty
supplements 7 4 6
Fragrance, toiletry and nail
care products 2 2 3
---- ---- ----
Total sales 100% 100% 100%
<PAGE>
NOTE L - UNAUDITED QUARTERLY OPERATING RESULTS
OPERATING RESULTS
Unaudited quarterly operating results for the years ended November 30,
1999 and 1998 (in thousands) are as follows:
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
1999:
Net sales $16,808 $17,474 $16,411 $14,656
Gross profit 12,728 13,607 12,428 8,643
Net loss (850) (1,351) (1,686) (7,682)
Net loss per common-basic ($0.12) ($0.19) ($0.23) ($1.06)
Net loss per common
share-assuming dilution ($0.12) ($0.19) ($0.23) ($1.06)
1998:
Net sales $16,540 $21,603 $16,611 $17,409
Gross profit 12,739 14,905 11,054 11,832
Net income (loss) 994 9 (2,498) (1,666)
Net income (loss) per
common share-basic $0.17 $0.00 ($0.39) ($0.23)
Net income (loss) per
common share-assuming dilution $0.17 $0.00 ($0.39) ($0.23)
During 1999, fourth quarter operating results were primarily affected
by a valuation reserve against net deferred tax assets, inventory
reserves for the Asia Pacific region and Eventus International,
severance costs and reserves for product returns.
During 1998, third and fourth quarter operating losses were
predominantly caused by an increase in inventory reserves and costs
related to business expansion.
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
Not applicable.
<PAGE>
Part III
Item 10. Directors and Executive Officers of the Registrant.
The information relating to the Company's directors, nominees for
directors, and executive officers set forth under the headings
"Election of Directors" and "Directors and Executive Officers" on
pages 3 through 4 of the Company's definitive Proxy Statement filed in
connection with the 2000 Annual Meeting of Stockholders is
incorporated herein by reference.
Item 11. Executive Compensation
The information relating to executive compensation set forth under the
heading "Executive Compensation" on pages 6 through 7 of the Company's
definitive Proxy Statement filed in connection with the 2000 Annual
Meeting of Stockholders is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
Information concerning the security ownership of certain beneficial
owners and management set forth under the heading "Security Ownership
of Principal Stockholders and Management" on pages 1 through 3 of the
Company's definitive Proxy Statement filed in connection with the 2000
Annual Meeting of Stockholders is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions.
On October 13, 1998, M. Douglas Tucker, the Company's Senior Vice
President - Finance, Secretary, and Chief Financial and Accounting
Officer, borrowed $50,000 from the Company. Thereafter, Mr. Tucker
borrowed additional amounts from the Company from time to time, with
the last borrowing occurring October 26, 1999. The largest aggregate
principal amount outstanding on these loans during fiscal 1999 was
$84,500. Promissory notes with interest at the then-effective prime
rates evidence the indebtedness. As of February 15, 2000, the
aggregate principal amount outstanding on these loans was $59,500.00.
<PAGE>
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K.
(a) (1) and (2) Financial Statement and Schedules
The following consolidated financial statements of BeautiControl,
Inc.and Subsidiaries are filed herewith:
Consolidated Statements of Operations for the years ended
November 30, 1999, 1998 and 1997.
Consolidated Balance Sheets as of November 30, 1999 and 1998.
Consolidated Statement of Changes in Stockholders' Equity
for the three years ended November 30, 1999.
Consolidated Statements of Cash Flows for the years ended
November 30, 1999, 1998 and 1997.
Notes to Consolidated Financial Statements
Report of Independent Auditors
Schedule II - Valuation and Qualifying Accounts and Reserves for
the years ended November 30, 1997, 1998 and 1999.
Except for Schedule II listed above, all schedules for which provision
is made in the applicable accounting regulations of the Securities and
Exchange Commission are not required under related instructions, are
not applicable or not material or the information required therein is
included elsewhere in the financial statements.
(3) Exhibits.
The exhibits listed on the accompanying Exhibit Index are filed or
incorporated by reference as a part of this report and such Exhibit
Index is hereby incorporated by reference.
(b)Reports on Form 8-K
The Company has filed no reports on Form 8-K during the fourth quarter
of the year ended November 30, 1999.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
February 22, 2000 BeautiControl, Inc.
(Registrant)
By: /S/ RICHARD W. HEATH
Chairman of the Executive Committee, and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
/S/ RICHARD W. HEATH Chairman of the Executive Committee February 22, 2000
Richard W. Heath and Chief Executive Officer
/S/ JINGER L. HEATH Chairman of the Board and February 22, 2000
Jinger L. Heath Director
/S/ SHEILA O'CONNELL COOPER President and February 22, 2000
Sheila O'Connell Cooper and Chief Operating Officer
/S/ KRISTI L. HUBBARD Senior Vice President/Controller February 22, 2000
Kristi L. Hubbard
/S/ CHARLES M. DIKER Director February 22, 2000
Charles M. Diker
/S/ ROBERT S. FOLSOM Director February 22, 2000
Robert S. Folsom
/S/ JOSEPH M. HAGGAR, III Director February 22, 2000
Joseph M. Haggar, III
/S/ A. STARKE TAYLOR, JR. Director February 22, 2000
A. Starke Taylor, Jr.
/S/ JOEL T. WILLIAMS, JR. Director February 22, 2000
Joel T. Williams, Jr.
<PAGE>
BEAUTICONTROL, INC. AND SUBSIDIARIES
INDEX TO EXHIBITS
Exhibit
Number Exhibit
------ -------
3.1 Restated Certificate of Incorporation
dated February 22, 1986 (Filed with
the Securities and Exchange Commission
as Exhibit 3.1 to the Company's
Registration Statement on Form S-8,
Registration No. 333-17479, and
incorporated herein by reference).
3.2 Certificate of Amendment to Restated
Certificate of Incorporation dated
April 7, 1987 (Filed with the Securities
and Exchange Commission as Exhibit 3.2
to the Company's Registration Statement
on Form S-8, Registration No. 333-17479,
and incorporated herein by reference).
3.3 Certificate of Amendment to Restated
Certificate of Incorporation dated
April 3, 1992. (Filed with the Securities
and Exchange Commission as Exhibit 3.3 to
the Company's Registration Statement on
Form S-8, Registration No. 333-17479, and
incorporated herein by reference).
3.4 By-laws of the Registrant as amended on
March 21, 1991. (Filed with the Securities
and Exchange Commission as Exhibit 3.4 to
the Company's Registration Statement on
Form S-8, Registration No. 333-17479, and
incorporated herein by reference).
4.1 Specimen stock certificate for Common
Stock of the Registrant. (Filed with
the Securities and Exchange Commission
as Exhibit 4.1 to the Company's
Registration Statement on Form S-1,
Registration No. 33-2795 and
incorporated herein by reference.)
10.1 BeautiControl Cosmetics, Inc. Incentive
Stock Option Plan as amended on
April 7, 1994. (Filed with the Securities
and Exchange Commission on September 1, 1994
with the Company's Registration Statement on
Form S-8, Registration No.33-83500 and
incorporated herein by reference.)
<PAGE>
10.2 Lease Agreement by and between
Crow-Southland Joint Venture No. 1
and BeautiControl Cosmetics, Inc.
dated May 7,1990. (Filed with the
Securities and Exchange Commission,
Exhibit 10.2 to the Company's Annual
Report on Form 10-K for the year ended
November 30, 1996 and incorporated
herein by reference.)
10.3 Lease Agreement by and between Crow
Deansbank No. 7 and BeautiControl
Cosmetics, Inc. dated June 6, 1996.
(Filed with the Securities and Exchange
Commission as Exhibit 10.3 to the
Company's Annual Report on Form 10-K
for the year ended November 30, 1990
and incorporated herein by reference.)
10.8 BeautiControl Cosmetics, Inc.
Non-Qualified Stock Option Plan as
amended on April 7, 1994. (Filed
with the Securities and Exchange
Commission on September 1, 1994
with the Company's Registration
Statement on Form S-8, Registration
No. 33-83500 and incorporated herein
by reference.)
10.11 BeautiControl Cosmetics, Inc. Special
Stock Option Plan as amended on
April 7, 1994. (Filed with the
Securities and Exchange Commission on
September 1, 1994 with the Company's
Registration Statement on Form S-8,
Registration No. 33-83500 and
incorporated herein by reference.)
10.14 Amendment to Lease Agreement by and
between Crow-Southland Joint Venture
No. 1 and BeautiControl Cosmetics, Inc.
dated December 17, 1991. (Filed with
the Securities and Exchange Commission
as Exhibit 10.14 to the Company's
Annual Report on Form 10-K for the
year ended November 30, 1997 and
incorporated herein by reference.)
10.15 Amendment to Lease Agreement between
Crow-Southland No. 1 and BeautiControl
Cosmetics, Inc. dated May 7, 1990.
(Filed with the Securities and Exchange
Commission, Exhibit 10.2 to the Company's
Annual Report on Form 10-K for the year
ended November 30, 1990 and incorporated
herein by reference.)
<PAGE>
10.16 Amendment to Lease Agreement by and between
Crow Deansbank No. 7 and BeautiControl
Cosmetics, Inc. dated June 6, 1990. (Filed
with the Securities and Exchange Commission
as Exhibit 10.3 to the Company's Annual Report
on Form 10-K for the year ended November 30,
1990 and incorporated herein by reference.)
10.17 BeautiControl Cosmetics, Inc. 1996 Incentive
Stock Option Plan. (Filed with the Securities and
Exchange Commission on December 9, 1996 with the
Company's Registration Statement on Form S-8,
Registration No. 333-17479 and incorporated herein by
reference.)
10.18 BeautiControl Cosmetics, Inc. 1996 Non-Qualified
Stock Option Plan. (Filed with the Securities and
Exchange Commission on December 9, 1996 with the
Company's Registration Statement on Form S-8,
Registration No. 333-17479 and incorporated herein by
reference.)
10.19 Sublease agreement by and between Chadrach, Inc.
d/b/a Dallas Moving Systems and BeautiControl Cosmetics,
Inc. dated May 30, 1997.
10.20 Lease agreement by and between Te Chan Co.
and BeautiControl Taiwan, Inc. dated August 1,1997.
10.21 Lease agreement by and between Perfect WIN Properties
Limited and BeautiControl Hong Kong, Inc. dated December
1, 1998.
10.22 Supply agreement dated December 3, 1998 by and between
Caraloe, Inc. and Eventus International, Inc.
<PAGE>
10.23 BeautiControl Cosmetics, Inc. 1998 Special Stock Option
Plan. (Filed with the Securities and Exchange Commission
on December 22, 1998 with the Company's Registration
Statement on Form S-8, Registration No. 333-69451 and
incorporated herein by reference.)
10.24* Amendment to Lease Agreement by and between Crow
Deansbank No. 7 and BeautiControl, Inc. dated October 1,
1999.
10.25* Amendment to Lease Agreement by and between Crow-
Southland Joint Venture No. 1 and BeautiControl, Inc.
dated October 1, 1999.
10.26* Employment Agreement dated August 7, 1999 by and between
BeautiControl, Inc. and Sheila O'Connell Cooper.
10.27* Aircraft Purchase Agreement dated January 25, 2000 by and
between BeautiControl, Inc. and O'Gara Aviation L.L.C.
21* Subsidiaries of BeautiControl, Inc.
23.1* Consent of Independent Auditors
23.2* Consent of Independent Auditors
27* Financial Data Schedule
* Filed herewith
<PAGE>
<TABLE>
BEAUTICONTROL,INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEARS ENDED NOVEMBER 30, 1997, 1998 AND 1999
Balance at Additions Balance at
Beginning Charged to End of
Description of Period Costs and Deductions Period
Expenses
----------- --------- -------- ---------- --------
<S> <C> <C> <C> <C>
Allowance for
doubtful accounts
deducted from
accounts receivable
in the balance sheet
November 30, 1997 $487,812 $368,507 $197,926 $658,393
November 30, 1998 658,393 198,093 97,619 758,867
November 30, 1999 758,867 168,891 205,061 722,697
Reserve for
inventory
obsolescence
deducted from
inventories in the
balance sheet
November 30, 1997 $1,266,703 $1,327,118 $ 509,207 $2,084,614
November 30, 1998 2,084,614 2,703,404 861,981 3,926,037
November 30, 1999 3,926,037 2,391,396 1,332,831 4,984,602
Reserve for sales
returns
November 30, 1997 $ - $ - $ - $ -
November 30, 1998 - - - -
November 30, 1999 - 1,406,204 712,834 693,370
</TABLE>
EXHIBIT 10.24
Re: 3311 Boyington
Carrollton. Texas
2ND AMENDMENT TO LEASE AGREEMENT
THIS 2ND LEASE AMENDMENT (this "Amendment") is made this _______ day of
__________________ 1999 by and between GATEWAY CENTRAL PROPERTIES, and
BEAUTICONTROL COSMETICS, INC. ("Lessee").
R E C I T A L S:
A. Crow Deansbank No. 7 ("Prior Lessor") and Lessee entered
into that certain lease (the "lease") dated June 6, 1990 and Norwood
Reunion DFW Industrial Limited, ("Prior Lessor") as amended March 13
1995 and Lessee pursuant to which Lessee leased approximately 102,053
square feet in that certain facility located at 3311 Boyington,
Carrollton, Texas (the "Project").
B. Lessor has succeeded to Prior Lessor's ownership of the
Project and rights as Lessor under the Lease.
C. Lessor and Lessee desire to renew and extend the term of
the Lease subject to the terms set forth in this Amendment.
NOW THEREFORE for and in consideration of the covenants set forth
above and other good and valuable consideration, thc receipt and
sufficiency of which are hereby acknowledged and confessed, the parties
intending to be legally bound do hereby agree as follows:
1. Extensions The term of the Lease is extended for an additional
period of sixty (60) months commencing on October 1, 1999 and
terminating on September 30, 2004. The base rental due during the
extension period will be calculated as follows per square foot, per
annum and must be paid by Lessee to Lessor in monthly installments.
Annual Monthly
Months Base Rent Base Rent
----- --------- ----------
1-12 $4.10NN $34,868.11
13-24 $4.l5NN $35,293.33
25-36 $4.2ONN $35,718.55
37-48 $4.25NN $36,143.77
49-6O $4.30NN $36,568.99
<PAGE>
2. Renewal Option. Provided that the Lessee is not in default of any of
the terms, covenants and conditions hereof and this Lease has not
been assigned or the premises (or part thereof) sublet, Lessee shall
have the right and option to extend the original term of this Lease
for one further term of sixty (60) months. Such extension of the
original term shall be on the same terms, covenants and conditions
as provided for in the original term except for this paragraph and
except that the rental during thc extended term shall be at the fair
market rental then in effect on equivalent properties, of equivalent
size. Lessee shall, deliver written notice to Lessor of Lessee's
intent to exercise the renewal option granted herein not more than
six (6) months nor less than four (4) months prior to the expiration
of the original term of this Lease. In the event Lessee fails to
deliver such written notice within the time period set forth above,
Lessee's right to extend the term hereof shall expire and be of no
further force and effect. In the event Lessor and Lessee fail to
agree in writing upon the fair market rental within thirty (30) days
after exercise by Lessee of this renewal option then Lessee's right
hereunder to extend the term shall become null and void.
3. Section 32. First Right of Refusal. This section shall be deleted in
its entirety
4. Miscellaneous. The Lease is further amended wherever necessary in
order to reflect the amendments set forth in this Amendment. The
Lease, as amended hereby, is hereby ratified, confirmed and deemed in
full force and effect. This Agreement may be executed in multiple
counterparts each of which will be deemed an original, but together
constitute one and the same instrument.
IN WITNESS WHEREOF, this Amendment has been executed as of (but not
necessarily on) the day and year first above written.
LESSOR:
GATEWAY CENTRAL PROPERTIES INC.,
a California Corporation
by: /s/
------------------------
TA Realty Corp. as Agent
Scott I. Oran
Regional Director
LESSEE:
BEAUTICONTROL. COSMETICS, INC.
By: /s/
------------------------
Name:
Title: C.O.O.
EXHIBIT 10.25
Re: 4545-4547 Langland Road
Farmers Branch. Texas
3RD AMENDMENT TO LEASE AGREEMENT
THIS 3RD LEASE AMENDMENT (this "Amendment") is made this _______ day of
__________________ 1999 by and between, THE REALTY ASSOCIATES FUND III,
L.P. ("Lessor") and BEAUTICONTROL COSMETICS, INC. ("Lessee").
R E C I T A L S:
A. Crow-Southland Joint Venture No. 1 Joint Venture (by Trammell
Crow Company No. 68, General Partner), ("Prior Lessor") and Lessee
entered into that certain lease (the "lease") dated May 7, 1990,
as amended December 17, 1991 and The Realty Associates leased
approximately 59,312 square feet in that certain facility located
at 4545-4547 Langland Road, Farmers Branch, Texas (the "Project").
B. Lessor has succeeded to Prior Lessor's ownership of the
Project and rights as Lessor under the Lease.
C. Lessor and Lessee desire to renew and extend the term of
the Lease subject to the terms set forth in this Amendment.
NOW THEREFORE for and in consideration of the covenants set forth
above and other good and valuable consideration, thc receipt and
sufficiency of which are hereby acknowledged and confessed, the parties
intending to be legally bound do hereby agree as follows:
1. Extensions The term of the Lease is extended for an additional
period of sixty (60) months commencing on October 1, 1999 and
terminating on September 30, 2004. The base rental due during the
extension period will be calculated as follows per square foot, per
annum and must be paid by Lessee to Lessor in monthly installments.
Annual Monthly
Months Base Rent Base Rent
----- --------- ----------
1-60 $3.35NN $16,557.93
<PAGE>
2. Renewal Option. Provided that the Lessee is not in default of any of
the terms, covenants and conditions hereof and this Lease has not
been assigned or the premises (or part thereof) sublet, Lessee shall
have the right and option to extend the original term of this Lease
for one further term of sixty (60) months. Such extension of the
original term shall be on the same terms, covenants and conditions
as provided for in the original term except for this paragraph and
except that the rental during thc extended term shall be at the fair
market rental then in effect on equivalent properties, of equivalent
size. Lessee shall, deliver written notice to Lessor of Lessee's
intent to exercise the renewal option granted herein not more than
six (6) months nor less than four (4) months prior to the expiration
of the original term of this Lease. In the event Lessee fails to
deliver such written notice within the time period set forth above,
Lessee's right to extend the term hereof shall expire and be of no
further force and effect. In the event Lessor and Lessee fail to
agree in writing upon the fair market rental within thirty (30) days
after exercise by Lessee of this renewal option then Lessee's right
hereunder to extend the term shall become null and void.
3. Miscellaneous. The Lease is further amended wherever necessary in
order to reflect the amendments set forth in this Amendment. The
Lease, as amended hereby, is hereby ratified, confirmed and deemed in
full force and effect. This Agreement may be executed in multiple
counterparts each of which will be deemed an original, but together
constitute one and the same instrument.
IN WITNESS WHEREOF, this Amendment has been executed as of (but not
necessarily on) the day and year first above written.
LESSOR:
THE REALTY ASSOCIATES FUND III, L.P.
by: Realty Associates Fund III
GP, Limited Partnership
(its general partner)
by: Realty Fund III GP, Inc.
(its general partner)
by: /s/
------------------------
Scott I. Oran
Regional Director
LESSEE:
BEAUTICONTROL. COSMETICS, INC.
By: /s/
------------------------
Name:
Title: C.O.O.
EXHIBIT 10.26
EMPLOYMENT AGREEMENT
This Agreement is made and entered into this 7th day of August 1999, by
and between BeautiControl ("Company") with offices at 2121 Midway Road,
Carrollton Texas 75006 and Sheila O'Connell Cooper ("Employee") who
resides at [ deleted for confidentiality ].
NOW, THEREFORE in consideration of the premises and mutual covenants
contained in this agreement the parties agree as follows:
1. Sheila O'Connell Cooper shall be employed by BeautiControl in the
position of President and Chief Operating Officer effective
September 1, 1999. She will be given the authority consistent with
her position to make decisions and implement those decisions.
2. BeautiControl agrees to pay Employee on or before September 1, 1999
a signing bonus of $200,000.
3. Employee will receive a base salary of $450,000.00 per year.
4. It is agreed that Employee will have an annual bonus Potential of
1OQ% of base salary with 50% of that number as a guaranteed bonus to
be paid on before 30 days following the closing of Company's fiscal
year. The remainder shall be subject to mutually set detailed bonus
parameters based on an expectation of 10% top line growth and
profitability in the core business for fiscal year 2000.
5. BeautiControl agrees to pay Employee on Emp1oyee's last day of
employment with Company an exit guarantee of eighteen (18) months of
base salary of $450,000 or Employee's current salary whichever is
higher should BeautiControl elect not to undertake to employ
Employee after this agreement is signed or to terminate Ernp1oyee's
employment or make continued employment ineffectual unless Employee
is found guilty of fraud or a criminal offense directly related to
her employment.
6. BeautiControl agrees to grant Employee effective September 1, 1999
an initial grant of 500,000 shares of stock options on BeautiControl
stock at current market price on September 1, 1999 with 250,000 of
said options vesting at 33 1/3% each year over three years and
250,000 of said stock options vesting at 20% per year over five
years. Employee will remain eligible for grants of additional stock
options.
7. Should there be a change of control in the Company ("change of
control"), it is agreed that the annual bonus referred to in Item
Four above will be paid at 100% for the fiscal year during which
such change of control or sale of interest occurs. It is also agreed
that the stock options referred to in Item Six above will
immediately become 100% vested and exercisable upon a change of
control in or sale of interest in the Company. The exit guarantee
as set forth in Item Five will be immediately payable to Employee
should either Employee or the new control entity determine that
Employee's employment not continue at the time such change of
control in or sale of interest occurs.
<PAGE>
8. Immediately, upon Employee's employment, the BeautiControl Board of
Directors will convene to vote upon appointment of Employee to the
Board of Directors,
9. A Company automobile will be provided (a Mercedes 400 or equivalent
at Emp1oyee's discretion). Company agree to bear all expenses
related to the lease, insurance, maintenance and operating expenses
of said vehicle.
10. Employee will be immediately eligible to participate in Company's
401k program
11. Employee and Employee's spouse will be immediately eligible to
participate in Company's medical and dental plans with Employee's
coverage to be provided at no cost to Employee.
12. Company agrees to provide Employee with Term Life Insurance in
amount not less that one million dollars; Additional Accidental
Death and Dismemberment coverage of at least $800,000; Business
Travel Accident Insurance coverage of at least $500,000; and
Personal Excess Liability Insurance of at least $5 million with
coverage equal to the attached Exhibit A at no cost to Employee.
Company also agrees to provide Medical Leave in the amount of 100%
of salary for six months paid by Company and Long Term Disability
coverage of at least 60% of salary with a $20,000 monthly maximum
benefit after six months of medical leave paid by Company or such
higher benefit as may be available under current Company benefit
plans.
13. Company will pay monthly dues for membership for Employee in the
country club where Employee currently belongs. Company also agrees
to pay for annual financial planning for Employee.
IN WITNESS WHEREOF, the parties hereto have caused his Agreement to he
executed by their duly authorized representative as of the date above
written.
BeautiControl Employee
/s/ /s/
------------------------------- -----------------------
Richard W. Heath, President/CEO Sheila O'Connell Cooper
/s/
-------------------------
Jinger L. Heath, Chairman
EXHIBIT 10.27
AIRCRAFT PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (the "Agreement"), made this 25th day of
January 2000, by and between BeautiControl, Inc., a Delaware
corporation, having principal offices at 2121 Midway Road, Carrollton,
Texas 75006 ( "Seller"), and O'Gara Aviation L.L.C., a Nevada limited
liability corporation, having principal offices at 1827 Powers Ferry
Road, Bldg 8, Atlanta, Georgia 30339 ( "Buyer").
WHEREAS, Buyer desires to purchase from Seller and Seller desires to
sell to Buyer the Aircraft in accordance with the terms and conditions
contained herein; and
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the parties agree as follows:
SECTION 1 PURCHASE AND SALE OF AIRCRAFT
1.0 Agreement to Buy and Sell. (a) Seller agrees to Sell and the
Buyer agrees to purchase "AS IS" except as expressly stated in
this Agreement, the following described aircraft together with any
and all existing avionics, engine covers, equipment (loose or
installed), instruments, and accessories listed in Exhibit A and
A-1attached hereto, and any and all Aircraft Documents, as defined
in Section 1.0(b) of this Agreement, (collectively, the
"Aircraft"):
AIRCRAFT MAKE AND MODEL: Hawker Siddley HS125-700A
SERIAL NUMBER: NA-207
REGISTRATION NUMBER: N33RH
ENGINE MAKE AND MODEL: Garrett TFE-731-3R
ENGINE SERIAL NUMBERS: 80127 & 80129
(b) For purposes of this Agreement, the term "Aircraft Documents"
shall include, but not be limited to, all logbooks (complete
and original), flight, maintenance and operations records and
manuals, checklists, drawings and wiring diagrams, applicable
FAA Form 337's, STC's, component overhaul documentation, and
any and all other records and paperwork associated with the
Aircraft that are in Seller's possession.
1.1 Purchase Price. Buyer agrees to pay Seller the total purchase
price of Three Million Eight Hundred Fifty Thousand-U.S. Dollars
($3,850,000) (the "Purchase Price") payable as follows:
(a) A deposit of Two Hundred Thousand U.S. Dollars ($200,000)
(the "Deposit") shall be placed in escrow at Insured Aircraft
Title Service, 6449 S. Denning Street, Oklahoma City,
Oklahoma 73159, Phone 405-681-6663, Facsimile: 405-681-9299
(the "Escrow Agent") by Buyer upon execution of this Purchase
Agreement. The Deposit shall be held by the Escrow Agent
pending consummation or termination of this Agreement, and
shall become non-refundable upon Buyer's execution of an
Aircraft Acceptance Certificate in the form of Exhibit B
attached hereto ("Exhibit B"), except as otherwise provided
in this Agreement.
<PAGE>
(b) The balance of the purchase price, Three Million Six Hundred
Fifty Thousand U.S. Dollars ($3,650,000) (the "Balance"), to
be deposited with the Escrow Agent and payable at Closing (as
defined in Section 1.2(a)).
1.2 Delivery and Closing.
(a) Delivery of the Aircraft and closing of the transaction
(collectively the "Closing") shall be the earlier of (i) the
15th day of February, 2000, or (ii) the second business day
after notification from Seller to Buyer that the Aircraft is
ready for delivery.
(b) Buyer shall have the right to conduct a pre-delivery test
flight ("Pre-Delivery Test Flight") of the Aircraft to verify
the Aircraft is in the same condition as inspected. The Pre-
Delivery Test Flight shall be scheduled by mutual agreement
of the parties. Buyer shall also have the right to have its
representative(s) on board to observe operation of the
systems. All fuel, EMS costs, and other out-of-pocket
expenses for such flight shall be at Buyer's expense. Buyer
and Seller agree to negotiate reasonably regarding the
resolution of any maintenance discrepancies identified during
the Pre-Delivery Test Flight.
(C) Prior to the Closing, Seller shall deposit with the Escrow
Agent a FAA Form 8050-2 Aircraft Bill of Sale (the "Bill of
Sale"), undated but otherwise fully completed and any lien
release(s).
(d) Prior to the Closing, Buyer shall deposit with the Escrow
Agent the Balance, and a FAA Form 8050-1 Aircraft
Registration Application (the "Registration Application"),
undated but otherwise fully completed, and the Balance.
(e) On the Closing date, Seller shall deliver the Aircraft to
Buyer, and Buyer shall accept delivery of the Aircraft from
Seller, at Olathe, Kansas, or such other location mutually
agreeable to the parties. Delivery costs shall be at Buyer's
expense for a location other than the Pre-Purchase Inspection
location. At the time of delivery of the Aircraft, and upon
receiving confirmation from the Escrow Agent that Buyer has
deposited the Balance and the Registration Application, and
that Seller has deposited the Bill of Sale, Buyer shall
execute and deliver to Seller a Delivery Receipt in the form
attached hereto as Exhibit C ("Exhibit C"), and the parties
shall each instruct the Escrow Agent to (i) date and file the
Bill of Sale and the Registration Application in the Civil
Aircraft Registry, and (ii) immediately transfer the Purchase
Price, by wire transfer, to an account designated by Seller.
Buyer's execution and delivery of Exhibit C to Seller shall
constitute its acknowledgment that Seller has fulfilled, or
Buyer has waived Seller's obligations set forth in Section
2.1.
<PAGE>
SECTION 2 CONDITION OF AIRCRAFT
2.1 Delivery Conditions. The Aircraft is being sold on an "AS IS"
basis except Buyer's obligation to purchase the Aircraft is
subject to Buyer verifying at the time of delivery the following:
(a) The Aircraft and systems are airworthy, in serviceable
condition according to the manufacturer, ordinary wear & tear
excepted.
(b) All Inspections, time-limited components, Airworthiness
Directives and mandatory Service Bulletins applicable to the
Aircraft are in compliance with the manufacturers' approved
maintenance program and the United States Federal Aviation
Administration (FAA).
(c) The Aircraft shall be delivered with no damage history other
than may be indicated in the logbooks or Aircraft documents
at the time of inspection.
(d) With valid FAA Certificate of Airworthiness, free and clear
of all liens and encumbrances, with good and marketable
title.
(e) The Aircraft engines enrolled in Jet Support Services, Inc.
Engine Program (EMS 100% coverage) fully paid up through the
delivery hours, with the account in good standing and
transferable to Buyer. Transfer fees, if any, shall be at
Buyer's expense.
2.2 Inspection. Buyer shall have the opportunity to conduct a pre-
purchase inspection ("Pre-Purchase Inspection") of the Aircraft
at Garrett Aviation, Houston, Texas or other mutually agreeable
location at Buyer's expense.
(a) The Pre-Purchase Inspection may include, but is not limited
to, a logbook review, engine borescope and five-point run,
systems checks and any other such tests reasonably necessary
to examine the operation and condition of the Aircraft.
Buyer shall have the opportunity during the Pre-Purchase
Inspection to have its representative(s) on board the
Aircraft during a test flight (not to exceed 90 minutes) in
order to observe operation of all systems. All fuel, EMS
costs, and other out-of-pocket expenses for such test flight
("Test Flight Expenses") shall be at Buyer's expense. During
any and all inspections, test flight(s) conducted pursuant to
this Agreement, care, custody, control and risk of loss of
the Aircraft shall remain with Seller.
(b) Seller shall position the Aircraft at Seller's expense at the
Pre-Purchase Inspection location on a mutually agreeable date
on or about January 18, 2000, However, if Buyer rejects the
Aircraft based on the findings of the Pre-Purchase
Inspection, Buyer shall pay for or reimburse Seller for Test
Flight Expenses in section 2.2 (a).
<PAGE>
2.3 Acceptance or rejection of the Aircraft shall be at Buyer's sole
discretion. Within two (2) business days following completion of
the Pre-Purchase Inspection, Buyer will execute and deliver to
Seller the Aircraft Acceptance Certificate in the form shown in
Exhibit "B", which is attached hereto and made a part hereof for
all purposes, to document acceptance or rejection of the Aircraft.
(a) If Buyer accepts the Aircraft in its present condition or
subject to resolution of identified maintenance discrepancies
that Seller agrees to repair, the Deposit specified in
Section 1.1(a) of this Agreement shall become non-refundable
to Buyer upon execution of the Aircraft Acceptance
Certificate, except as otherwise provided in this Agreement.
(b) If the Aircraft is not in the condition required by
Section 2.1 at the time of the Pre-Purchase Inspection, Buyer
shall furnish Seller with a written notice of the maintenance
discrepancies, which notice shall set forth in detail the
Buyer's desired resolution of the discrepancies. Buyer and
Seller agree to negotiate reasonably regarding the resolution
of such maintenance discrepancies. Mutually agreed to
discrepancies shall be corrected at Seller's sole expense.
(c) If Buyer (i) rejects the Aircraft in its present
condition or (ii) if Seller and Buyer do not mutually agree
to the terms on which the identified maintenance
discrepancies are to be resolved within three (3) business
days after Seller's receipt of such notice, the parties shall
instruct the Escrow Agent to deliver to Buyer the deposit,
less the Test Flight Expenses as defined in Section 2.2(a)
above, and the parties shall have no further obligation or
liability to each other whatsoever.
2.4 Warranties by Seller. Seller hereby represents and warrants as
of the date hereof and the Closing date as follows:
(a) Seller is the owner of the Aircraft and is authorized to
convey title to the Aircraft, and that execution and
delivery of the Bill of Sale shall convey to Buyer good and
marketable title to the Aircraft, free of any and all liens
and encumbrances.
(b) To Seller's knowledge, there are no parts, systems, or
components on the Aircraft that are on temporary loan or
exchange.
(c) Seller has paid all taxes, duties, penalties, charges, or
invoices or statements with respect to the Aircraft incurred
on and before the Closing date or, to the extent that it has
not, agrees to pay any and all of the foregoing when due.
<PAGE>
(d) Seller is a corporation organized and validly existing under
the laws of the State of Delaware, possessing perpetual
existence, having the capacity to sue and be sued in its own
name, having full power and legal right to carry on its
business as currently conducted, and to execute, deliver and
perform the provisions of this Agreement.
(e) The execution, delivery, and performance by Seller of this
Agreement has been duly authorized by all necessary action on
behalf of Seller and do not conflict with or result in any
breach of any of the terms or constitute a default under any
document, instrument, or agreement to which Seller is a
party.
(f) This Agreement constitutes the legal, valid, and binding
obligations of Seller enforceable against Seller in
accordance with its terms.
2.5 Warranties by Buyer. Buyer hereby warrants as of the date hereof
and the Closing date as follows:
(a) Buyer is a Nevada limited liability corporation organized and
validly existing under the laws of the State of Nevada,
possessing perpetual existence as a legal entity, having the
capacity to sue and be sued in its own name, having full
power and legal right to carry on its business as currently
conducted, and to execute, deliver and perform the provisions
of this Agreement.
(b) The execution, delivery, and performance by Buyer of this
Agreement has been duly authorized by all necessary action on
behalf of Buyer and do not conflict with or result in any
breach of any of the terms or constitute a default under any
document, instrument, or agreement to which Buyer is a party.
(c) This Agreement constitutes the legal, valid, and binding
obligations of Buyer enforceable against Buyer in accordance
with its terms.
<PAGE>
2.6 DISCLAIMER: THE AIRCRAFT IS BEING SOLD HEREUNDER ON A COMPLETELY
"AS IS" AND "WHERE IS" BASIS. SELLER'S EXPRESS WARRANTIES AND
REPRESENTATIONS SET FORTH IN SECTION 2.4 ARE EXCLUSIVE AND IN LIEU
OF ALL OTHER REPRESENTATIONS OR WARRANTIES WHATSOEVER BY SELLER,
EXPRESS OR IMPLIED OR ARISING BY OPERATION OF LAW OR IN EQUITY,
AND SELLER HAS NOT MADE, AND BUYER HEREBY WAIVES, RELEASES,
DISCLAIMS, AND RENOUNCES ALL EXPECTATION OF OR RELIANCE UPON, ANY
SUCH REPRESENTATIONS OR WARRANTIES WHATSOEVER, WITH RESPECT TO THE
AIRCRAFT OR ANY PART THEREOF, WITHOUT LIMITATION, AS TO THE
AIRWORTHINESS, VALUE, CONDITION, DESIGN, MERCHANTABILITY, FITNESS
FOR A PARTICULAR USE OF THE AIRCRAFT, AND ANY OTHER REPRESENTATION
OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED (INCLUDING, WITHOUT
LIMITATION, ANY IMPLIED WARRANTY ARISING FROM A COURSE OF
PERFORMANCE OR DEALING OR USAGE OF TRADE). BUYER HEREBY WAIVES
ANY AND ALL RIGHTS, CLAIMS, AND REMEDIES OF BUYER AGAINST SELLER,
EXPRESS OR IMPLIED OR ARISING BY OPERATION OF LAW OR IN EQUITY,
ARISING FROM ANY SUCH REPRESENTATION OR WARRANTY OR FOR ANY
LIABILITY, CLAIM, OR REMEDY FOR LOSS OF OR DAMAGE TO THE AIRCRAFT,
FOR LOSS OF USE, REVENUE, OR PROFIT WITH RESPECT TO THE AIRCRAFT,
OR FOR ANY OTHER DIRECT, INCIDENTAL, OR CONSEQUENTIAL DAMAGES
WHATSOEVER.
SECTION 3 MISCELLANEOUS
3.1 Availability. Seller agrees to make the Aircraft available to
Buyer at a reasonable time prior to the scheduled delivery date to
enable Buyer to determine that the Aircraft and all its parts,
components and systems are intact and comply with the terms of
this Agreement.
3.2 Assignment of Warranties. Should any warranties, manufacturers'
or otherwise, still be in effect with respect to the Aircraft
(other than warranties which by their terms are unassignable and
the warranties disclaimed in Section 2.6 above), such warranties
and all rights thereunder will be irrevocably assigned to Buyer at
Closing, and all documents evidencing same shall be included with
the Aircraft Documents.
3.3 Taxes. Neither the Purchase Price nor any other payments to be
made by Buyer under this Agreement includes the amount of any
sales, use, retailer, or other taxes which may be imposed by
governmental authorities as a result of the sale, purchase, and/or
use of the Aircraft. Buyer shall be responsible for, shall
indemnify and hold harmless Seller against, and shall pay promptly
when due any and all taxes of any kind or nature whatsoever
(including, without limitation, any and all sales, use, and retail
taxes), duties, or fees assessed or levied by any federal , state,
county, local, or other governmental authority which may be
imposed on Buyer, Seller, or both, as a result of the sale,
purchase, delivery, registration, ownership, or use of the
Aircraft, in connection with the consummation of the transaction
contemplated by this Agreement, except solely for any taxes
attributed to Seller's income. Buyer shall either provide Seller
a certificate evidencing an exemption from such taxes or fees, if
applicable, or shall remit such taxes or fees to Seller.
<PAGE>
3.4 Entire Agreement. Buyer and Seller warrant that the terms and
conditions of this Agreement including Exhibits attached hereto
were fully read and constitute the entire Agreement between the
parties and supersedes all prior negotiations, letters of intent,
agreements or understandings.
3.5 Severability. If any one or more provisions of this Agreement
shall be found to be illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions
shall not in any way be affected or impaired thereby.
3.6 Benefit and Binding Effect. This Agreement shall be binding upon
and inure to the benefit of each of the parties' hereto and their
respective successors and permitted assigns.
3.7 Applicable Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Texas, without regard to
its choice of law provisions, and venue for any action arising out
of or related to this Agreement shall lie in Dallas County, Texas.
3.8 Amendments. This Agreement shall not be modified or amended
except by an instrument in writing signed by authorized
representatives of the parties.
3.9 Notices. All notices, requests, or other communications hereunder
shall be sent via registered or certified mail, express delivery
service or by facsimile with original to follow by aforementioned
means to the addresses herein above set forth (or to such other
address as may later be designated in writing).
If to Seller: James F. Martin Phone: 972-458-0601
BeautiControl, Inc. Fax: 972-233-4724
2121 Midway Road
Carrollton, Texas 75006
If to Buyer: John B. Foster III
O'Gara Aviation L.L.C. Phone: 770-955-3554
1827 Powers Ferry Road, Bldg 8 Fax: 770-951-2152
Atlanta, Georgia 30339
3.10 Execution in Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall constitute an original
document, and all of which shall constitute a single Agreement.
3.11 Escrow Fees. Buyer and Seller agree to share equally 50/50 any
fees payable to the Escrow Agent related to the sale of the
Aircraft.
3.12 Confidentiality. The terms and conditions of this Agreement
shall remain confidential between the parties except if required
by written request from a United States Governmental entity or
agency.
<PAGE>
3.13 Force Majeure. Seller shall not be liable for any delay of or
failure in delivery of the Aircraft for the period that such
failure or delay is due to acts of God or the public enemy; civil
war, insurrection or riots, fires, explosions or serious
accidents; governmental priorities or allocations; strikes or
labor shortages, lack of equipment or parts from vendors; or any
cause beyond Seller's reasonable control. Seller agrees to notify
Buyer promptly of the occurrence of any such cause. The foregoing
notwithstanding, in the event any such delay or failure in the
delivery of the Aircraft shall continue beyond forty-five (45)
days from the delivery date, for any reason whatsoever, either
party shall have the right to terminate this Agreement by written
notice to the other party, and upon such notice, the Escrow Agent
shall refund the Deposit, less any Test Flight Expenses as defined
in Section 2.2(a), to Buyer.
3.14 Attorney Fees. If any legal action or proceeding which is brought
for the enforcement of this Agreement or because of an alleged
dispute, breach, default, or misrepresentation in connection with
any provisions of this Agreement, the prevailing party shall be
entitled to recover its reasonable attorney fees and court costs.
3.15 Transaction Fees and Costs. Each party shall bear its own
transaction fees and costs, and legal fees incurred by each party
on their behalf.
3.16 Assignment. Buyer may not assign any of its rights or delegate
any of its obligations hereunder without the prior written consent
of the Seller, which shall not unreasonably be withheld.
3.17 Failure to Perform. Either party may terminate this Agreement in
the event the other party materially defaults on any of the
material terms and conditions contained herein, and fails to
timely cure such default within (10) days of receipt of written
notice from the non-defaulting party. Such termination shall be
effective ten (10) days after receipt by the defaulting party of
written notice of the non-defaulting party's intent to terminate
absent cure, and shall in no way affect the rights or liabilities
of the parties which have accrued as of the date of termination.
3.18 Time is of the Essence. In the event Buyer fails to accept
delivery of the Aircraft under the terms and conditions set forth
in this Agreement, the Seller may terminate this Agreement by
written notice to Seller, retain the Deposit as liquidated damages
and proceed to sell or otherwise dispose of the Aircraft, and the
parties shall have no further obligation or liability to each
other whatsoever.
<PAGE>
3.19 Indemnification. Upon delivery, Buyer will assume all liability
of any nature whatsoever arising out of Buyer's use or possession
of said Aircraft and agrees to indemnify, protect, defend and save
harmless Seller, its officers, directors, representatives,
shareholders, employees, attorneys, agents, successors and assigns
with respect to any claim, suit, action or judgment of any kind
arising out of Buyer's use or possession of the Aircraft. Prior
to delivery, Seller will assume all liability of any nature
whatsoever arising out of Seller's use or possession of said
Aircraft and agrees to indemnify, protect, defend and save
harmless, Buyer, its' officers, directors, representatives,
shareholders, employees, attorneys, agents, successors and assigns
with respect to any claim, suit, action or judgment of any kind
arising out of Seller's use or possession of the Aircraft.
3.20 Non-Waiver. Any failure at any time of either party to enforce
any provision of this Agreement shall not constitute a waiver of
such provision or prejudice the right of such party to enforce
such provision at any subsequent time.
3.21 Brokers. Seller represents and warrants that Jet Aviation, Inc.,
is the only broker that has been retained by Seller in connection
with this transaction and shall be responsible for the fee.
Buyer represents that no broker is or shall be entitled to any
fee, commission or similar compensation for assisting Buyer with
this transaction.
3.22 Headings. The section and paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in
any way the meaning or interpretation of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Purchase
Agreement to be executed by their authorized representatives.
SELLER: BeautiControl, Inc.
Signed: /s/
By: Richard W. Heath
Title: Chief Executive Officer
BUYER:
O'Gara Aviation L.L.C.
Signed: /s/
By: John B Foster III
Title: President
<PAGE>
EXHIBIT "A"
1977 HAWKER 700A
S/N NA-207, N33RH
TOTAL TIME: 8277 HOURS LANDINGS: 5263
RIGHT ENGINE: 8201 TSN LEFT ENGINE: 8201 TSN
S/N P80127 5214 CSN S/N P80129 5214 CSN
On 100% EMS 1609 CORE 209 MPI On 100% EMS 1609 CORE 209 MPI
APU: SOLAR T-39; 1593 HOURS, 3137 Cycles
COMMENTS
Engines on 100% EMS No Damage History
Factory Maintenance Program On Camps
(3) U.S. Owners since New New Exterior Paint
AVIONICS
Dual Collins FD-109Y FLT Directors Dual Collins ADS-80K Air Data
Dual Collins VHF-20A Comm's Dual Sperry C-14 Compass Systems
Dual Collins VIR-30A Nav's Dual Allen 3107 RMI's
Dual Collins DME-40 DME's Encoding Altimeter/Alerter
Dual Collins ADF-60 ADF's Collins APS-80 Autopilot
Dual Collins TDR-90 Transponders Collins ALT-55B Radar Altimeter
Bendix RDR-1300 Color Radar Fairchild GA-100 Cockpit Voice Rec.
Dual Global GNS-XLS FMS/GPS Jet 2" Standby Horizon
Collins SAT/TAS Indicator Dual Wulfsberg Flitefone VI systems
ADDITIONAL FEATURES
Automatic Power Reserve (APR) Dual Davtron 811B Digital Clocks
Hawker 800 Hydraulic Pumps Fuel Totalizer
Devore Logo Lights 2" Standby Altimeter/Airspeed Ind
Grimes Strobe Lights Avionics Master Switch
Dual Baker Audio Systems Fireblocked Interior
Heads Up Checklist Cabin Briefing System
Status as of January 19, 2000
<PAGE>
1977 HAWKER 700A
S/N 207, N33RH
INTERIOR
8-passenger interior with five individual chairs and aft three-place
divan finished in medium beige leather. Beige Berber carpet,
ultrasuede headliner and walnut cabinetry. Large forward baggage area
and coat closet. Three writing tables, aft refreshment center with
microwave oven, hot coffee, two ice drawers, crystal glass storage and
four crystal liquor decanters. Aft enclosed lavatory with infrared
water dispenser and flushing toilet. Other interior features include
Accordia-style window shades, Vista aisle lighting system, Sony AM/FM
stereo with 10 disc CD player, Sony color TV and VHS with infrared
headphone system. Fireblocked. Excellent condition.
Refurbished in 1998.
EXTERIOR
Overall white with blue and gold metallic accent stripes. New July
1999.
INSPECTION STATUS
Type Last Completed Next Due
6 month 9/99 3/00
12 month 9/99 9/00
24 month 9/99 9/01
48 month 9/97 9/01
300 hour 8155 8455
600 hour 7865 8465
1200 hour 7599 8799
2400 hour 7599 9999
4800 hour 4799 9599
SPECIFICATIONS SUBJECT TO VERIFICATION UPON INSPECTION. THE AIRCRAFT
IS OFFERED SUBJECT TO PRIOR SALE AND/OR REMOVAL FROM THE MARKET
<PAGE>
EXHIBIT "B"
AIRCRAFT ACCEPTANCE CERTIFICATE
The undersigned, Buyer, hereby acknowledges that, pursuant to
that certain Aircraft Purchase Agreement dated January 19, 2000,
between Buyer and Seller, Buyer has completed its pre-purchase
inspection of that certain Hawker Siddley Model HS-125-700A aircraft,
Serial Number NA-207, together with its engines installed thereon, all
appliances, parts, instruments, appurtenances, accessories, furnishings
or other equipment or property installed on, part of, or attached to
said aircraft and engines, loose equipment, manuals, wiring diagrams,
complete and accurate log books, and any other documentation or
equipment which are specific to the aircraft ("Aircraft"), and has
determined that:
-------------------------------------------------------------------------
Selection Buyer's Determination
-------------------------------------------------------------------------
The condition of the Aircraft is satisfactory to Buyer
and the deposit(s) are non-refundable.
-------------------------------------------------------------------------
XX Subject to Seller's timely correction and repair at
Seller's sole cost and expense of the discrepancies
listed in the attachment hereto, Buyer hereby accepts the
condition of the Aircraft and the deposit(s) are non-
refundable.
-------------------------------------------------------------------------
The Aircraft is not satisfactory and is hereby rejected
by Buyer. The deposit shall be refunded less the expenses
per Section 2.2 of the Aircraft Purchase Agreement.
-------------------------------------------------------------------------
Reference: Garrett Aviation work order #90695 Pre-Purchase Inspection
Squawk Sheet for Hawker 700A, Serial Number 207, N33RH.
-------------------------------------------------------------------------
IN WITNESS WHEREOF, the undersigned has caused this instrument to be
executed by its duly authorized representative.
SELLER: BUYER:
BeautiControl, Inc. O'Gara Aviation L.L.C.
Signed: /s/ Signed: /s/
By: Richard W. Heath By: John B. Foster III
Title: Chief Executive Officer Title: President
Date: 2/7/00 Date: 2/1/00
<PAGE>
EXHIBIT "C"
DELIVERY RECEIPT
AS DEFINED IN THAT CERTAIN AIRCRAFT PURCHASE AGREEMENT, BY AND BETWEEN
O'GARA AVIATION L.L.C. ("BUYER") AND BEAUTICONTROL, INC. ("SELLER"),
DATED AS OF THE 25th DAY OF January 2000 (THE "AIRCRAFT PURCHASE
AGREEMENT") BUYER HAS INSPECTED THE AIRCRAFT AND ALL AIRCRAFT
DOCUMENTS.
BUYER ACCEPTS DELIVERY OF THE AIRCRAFT DESCRIBED AS: MAKE: HAWKER
SIDDLEY; MODEL: HS125-700A; SERIAL NUMBER: NA-207; UNITED STATES
REGISTRATION NUMBER: N33RH AT INTERCONTINENTAL AIRPORT, CITY OF
HOUSTON, STATE OF TEXAS.
SELLER AGREES THAT THE AIRCRAFT IS FREE AND CLEAR OF ANY LIENS OR
ENCUMBRANCES WHATSOEVER CAUSED BY SELLER, HIS AGENTS OR ASSIGNS OR
OTHERWISE.
THE AIRCRAFT IS ACCEPTED ON THE TERMS AND SUBJECT TO THE AIRCRAFT
PURCHASE AGREEMENT THIS 14th DAY OF February 2000.
Buyer: O'Gara Aviation L.L.C.
By: /s/
Print: John B. Foster, III
Title: President
<PAGE>
AMENDMENT ONE TO AIRCRAFT PURCHASE AGREEMENT
This Amendment One to Aircraft Purchase Agreement
("Agreement One") is made and entered as of February 10, 2000,
by and between BeautiControl, lnc. ("Seller") and O'Gara
Aviation L,L.C. ("Buyer")
WHEREAS, Seller and Buyer executed that certain Aircraft
Purchase Agreement dated .January 26, 2000 ("Agreement"). for
that certain Hawker Siddley Model HS.125-700A aircraft, Serial
Number NA-207; and
WHEREAS. Seller and Buyer desire to amend the Agreement as
set forth below.
NOW, THERFFORE in consideration of the premises and mutual
agreement contained herein, together with other good and
valuable consideration, the~ receipt and sufficiency of which
is hereby acknowledqed, Seller and Buyer agree as follows:
1. Definitions. All capitalized terms used herein and defined
In the Agreement shall have the respective meanings set
forth in the Agreement unless otherwise defined herein.
2. Agreement.
2.1 Section 1.2(a) shall be amended in its entirety to
read as follows:
"(a) Closing of the transaction sha1l be on or before
February 15, 2000. On the closing date, the parties
each shall instruct the Escrow Agent to (i) date and
file the Bill of Sale and file the Registration
Application in the Civil Aircraft Registry, and (ii)
immediately transfer the Purchase Price,, by wire
transfer, to an account designated by Seller."
<PAGE>
2.2 Section 1.2(a) shall be amended in its entirety to
read as follows:
"(e) As soon as practicable after the Seller completes
the correction and repair of the discrepancies listed
in the "Exhibit "B" Aircraft Acceptance Certificate"
signed by Buyer on February 1 2000, and signed by
Seller on February 7. 2000. Seller shall deliver the
Aicraft to Buyer, and Buyer shall accept delivery of
the Aircraft from Seller at Olathe, Kansas. or such
other location mutually agreeable to the parties.
Delivery costs ("Delivery Costs") shall be at Buyer's
expense for a location other than the Pre-Purchase
inspection location. At the time of delivery of the
Aircraft. Buyer shall execute and deliver to Seller a
Delivery Receipt in the form Arrached herein as
Exhibit C ("Exhibit C"). Buyer's execution and
delivery of Exhibit C to Seller shall constitute its
acknowledgement~ that Seller has fulfilled, or Buyer
has waived, Seller's obligations set forth in Section
2.1"
2.3 Section 1.2 shall be amended by adding the following
subsection (f):
"(f) At the time of delivery, and in a manner as
instructed by Buyer, Seller shall pay Buyer (i)
Buyer's actual interest cost (which is calculated at
prime rate. plus one-half percent) on the principal
amount of $3,85O,00O for the period from the closing
date to the delivery date (ii) $250 transaction fee,
and (iii) the Buyer's insurance cost for the period
from the closing date to the delivery date
(collectively "Post-Closing Carrying Costs"). Buyer
agrees that Seller may deduct (i) demonstration flight
expenses, (ii) Test Flight Expenses, (iii) Delivery
Costs, and (iv) Pre-Delivery Test Flight expenses as
defined in section 1.2(b) of the Agreement from the
total Post-Closing Carrying Costs,"
3. Continuation of Agreement. Except to the extent modified
and amended by the terms and conditions of this Amendment
One, this Agreement, as amended by this Amendment One, is
hereby ratified and confirmed and shall continue in full
force, and effect as hereby modified and amended.
IN WHITNESS WHEREOF, the parties hereto execute this Amendment
One as of the dare first written above.
Seller; Buyer;
BeautiControl, Inc. O'Gara Aviation L.L.C.
By: /s/ By: /s/
Richard W. Heath John B. Foster, III
Chief Executive Officer President
EXHIBIT 21
SUBSIDIARIES OF BEAUTICONTROL COSMETICS, INC.
Name of Subsidiary State of incorporation
------------------ ----------------------
JLH Properties, Inc. Texas
BeautiControl International, Inc. Delaware
BeautiControl International Cosmetics
and Image Services, Inc. Delaware
BeautiControl Canada, Ltd. Ontario, Canada
Eventus International, Inc. Delaware
BeautiControl Taiwan Inc.,
Taiwan Branch Taipei, Taiwan
BeautiControl Hong Kong Inc.,
Hong Kong Branch Causeway Bay, Hong Kong
Exhibit 23.1
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration
Statement on Form S-3 No. 333-66075 of BeautiControl, Inc. and in the
related Prospectus and in the Registration Statements on Form S-8
No. 33-12005, 33-24363, 33-48626, 33-83500, 333-17479, and 333-69451 of
our report dated December 30, 1999, except for Note G, as to which the
date is February 14, 2000, with respect to the consolidated financial
statements of BeautiControl, Inc. included in this Form 10-K for the
year ended November 30, 1999.
Dallas, Texas
February 25, 2000
Exhibit 23.2
To the Board of Directors of
BeautiControl, Inc.
Consent of Independent Auditors
We hereby consent to the incorporation by reference in the audit report
of Ernst & Young LLP dated December 30, 1999 on the consolidated
financial statements of BeautiControl, Inc. included in the Form 10K for
the years ended November 30, 1999, 1998 and 1997 of our report dated
December 15, 1998, with respect to the financial statements of
BeautiControl Taiwan Inc., Taiwan Branch for the year ended November 30,
1998 and for the period from inception on August 15, 1997 to November
30, 1997.
/s/ PricewaterhouseCoopers
Taiwan, Republic of China
February 24, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1999
<PERIOD-END> NOV-30-1999
<CASH> 1,799
<SECURITIES> 3,327
<RECEIVABLES> 1,325
<ALLOWANCES> 723
<INVENTORY> 10,540
<CURRENT-ASSETS> 20,730
<PP&E> 28,815
<DEPRECIATION> 17,866
<TOTAL-ASSETS> 35,196
<CURRENT-LIABILITIES> 19,927
<BONDS> 0
0
0
<COMMON> 1,094
<OTHER-SE> 7,396
<TOTAL-LIABILITY-AND-EQUITY> 35,196
<SALES> 65,349
<TOTAL-REVENUES> 65,349
<CGS> 17,943
<TOTAL-COSTS> 78,260
<OTHER-EXPENSES> 684
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<INTEREST-EXPENSE> 877
<INCOME-PRETAX> (13,595)
<INCOME-TAX> (2,026)
<INCOME-CONTINUING> (11,569)
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