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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
ON
FORM 10-K/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED MARCH 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
FROM _______________ TO _____________
Commission file no. 1-10340
ALLOU HEALTH & BEAUTY CARE, INC.
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(Exact Name of Registrant as Specified in its Charter)
DELAWARE 11-2953972
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(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
50 EMJAY BOULEVARD, BRENTWOOD, NEW YORK 11717
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(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (516) 273-4000
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class On Which Registered
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Class A Common Stock, par value $.001 per share American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 11-2953972 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 is not contained herein, and will not be contained,
to the best of the 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. / /
The aggregate market value of the Common Stock of the Registrant held
by non-affiliates of the Registrant on May 12, 1999 was $47,988,365. Such
aggregate market value is computed by reference to the closing sales price of
the Class A common stock on such date. For purposes of this calculation, the
Registrant has excluded the Class B common stock, which is held primarily by
affiliates and is not publicly-traded.
The number of shares outstanding of each of the Registrant's classes of
common stock, as of the latest practicable date: 5,433,360 shares of Class A
common stock and 1,200,000 shares of Class B common stock as of the close of
business on June 28, 1999.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the Registrant's Proxy Statement relating to the
Registrant's 1999 Annual Meeting of Stockholders are incorporated by reference
into Part III of this Form 10-K.
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This amendment to the Allou Health and Beauty Care, Inc. (the "Registrant") on
Form 10-K/a is being filed to include the following information that was either
inadvertently omitted or incorrect:
(i) on the cover: on May 12, 1999 the aggregate market value of the
Common Stock of the Registrant held by non-affiliates of the
Registrant was $47,988,365. Please see amended cover attached.
(ii) on the cover: on June 28, 1999, the number of Class A common
shares outstanding was 5,433,360 and the number of Class B common
shares outstanding was 1,200,000.
Please see amended cover attached.
(iii) Item 6, Net income per common share, basic and diluted: the
figures for the columns pertaining to the fiscal years 1995,
1996, 1998, 1999 have been amended. Please see amended page 3
attached.
(iv) Item 7, Financial Condition, Liquidity and Capital Resources, the
Registrant's working capital increased $8.2 million to $52.2
million. Please see amended p. 5 attached.
(v) Schedule VIII: the March 31, 1999 Allowance for Doubtful Accounts
figures were inadvertently omitted. Please see the amended
Schedule VIII attached.
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ITEM 6. SELECTED FINANCIAL DATA
ALLOU HEALTH & BEAUTY CARE, INC.
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
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1995 1996 1997 1998 1999
---- ---- ---- ----
(DOLLARS IN THOUSANDS)
INCOME STATEMENT DATA:
<S> <C> <C> <C> <C> <C>
Revenues......................................... $237,542 $273,322 $285,311 $301,756 $337,389
Costs of revenues................................ 208,906 241,734 250,843 262,601 291,681
------- ------- ------- ------- -------
Gross profit..................................... 28,636 31,588 34,468 39,155 45,708
Warehouse and delivery expense................... 6,864 8,063 8,592 9,317 10,525
Selling, general and administrative expense...... 10,250 11,894 12,766 14,458 25,767
------ ------ ------ ------ ------
Income from operations........................... 11,522 11,637 13,110 15,380 9,416
Interest and other............................... 3,956 5,513 6,567 8,470 7,167
------- ------- ------- ------- -------
Income before income taxes....................... 7,566 6,118 6,543 6,910 2,249
------- ------- ------- ------- -------
Net income....................................... $4,681 $3,757 $ 4,059 $ 4,280 $1,348
====== ====== ======== ======== ======
Net income per common share1
Basic.................................. $ .84 $ .66 $ .71 $ .74 $ .22
======== ======== ======== ========== ========
Diluted................................ $ .80 $ .65 $ .70 $ .72 $ .20
======== ======== ======== ========== ========
OTHER DATA:
Depreciation and amortization.................... 413 525 667 688 833
EBITDA........................................... 11,956 12,167 13,824 16,081 13,258
Capital expenditures............................. 1,452 1,483 626 553 891
Ratio of earnings to fixed charges............... 2.90 2.10 1.99 1.81 1.22
BALANCE SHEET DATA (AT END OF PERIOD):
Cash and cash equivalents........................ 126 144 77 47 400
Total assets..................................... 106,214 126,185 161,348 178,384 219,907
Total long-term liabilities, including current
maturities.................................... 1,059 782 2,382 2,000 1,432
Stockholders' equity............................. 40,176 44,168 48,227 52,613 60,336
</TABLE>
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<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
FISCAL 1999 COMPARED TO FISCAL 1998
REVENUES. Revenues for the fiscal year ended March 31, 1999 increased
$35.6 million or 12% to $337.3 million, as compared to $301.8 million for the
fiscal year ended March 31, 1998, which resulted from increased revenues from
certain segments of our business as described below. The increased demand for
our products resulted from an expanded customer base and increases in same store
sales.
Contributions to this increase in revenues by product segment is as
follows: health and beauty aids increased 17% in fiscal 1999 compared to fiscal
1998 due to increases in same store sales. Prestige designer fragrances grew 19%
in fiscal 1999 compared to fiscal 1998 due to an increase in same store sales
and an expanded customer base, thus increasing the volume of products sold.
Nationally advertised branded non-perishable food products decreased 33% in
fiscal 1999, when compared to fiscal 1998. This segment of our business is
categorized by our ability to purchase off-price, non-perishable branded foods.
During fiscal 1999 demand outpaced supply resulting in an increase in the price
that we would have to pay for merchandise which we would distribute. We decided
to limit sales in this segment of our business to a level which would result in
improved profit margins. Sales of prescription pharmaceuticals remained
relatively constant in fiscal 1999 when compared to the prior year.
COST OF GOODS SOLD. Cost of goods sold for the fiscal year ended March
31, 1999 decreased as a percentage of revenues to 86.4% from 87.0% for the
fiscal year ended March 31, 1998. This decrease in the cost of goods sold
resulted primarily from improved profit margins associated with the distribution
of fragrance products.
WAREHOUSE, DELIVERY, SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.
Warehouse, Delivery, Selling, General and Administrative expenses for the fiscal
year ended March 31, 1999 increased $12.5 million or 52.6% to $36.3 million, as
compared to $23.8 million for the fiscal year ended March 31, 1998. This
increase was due to increased marketing expenses associated with our
wholly-owned internet subsidiary, The Fragrance Counter, Inc. which amounted to
approximately $10.0 million. On April 23, 1999 we sold a controlling interest of
The Fragrance Counter to private investors lead by the Sudbury Group. We
received $11,296,584 in cash and $8.9 million in interest bearing notes. As a
result of this transaction we retain a 13% interest in The Fragrance Counter.
Through a supply and service agreement we will continue to act as a vendor and
fulfillment center to The Fragrance Counter. We realized an approximate profit
of $10.0 million as a result of the sale which will be reflected in our
financial statements for the quarter ending June 30, 1999.
INTEREST EXPENSE. Interest expense for the fiscal year ended March 31,
1999 increased $1.7 million or 20% to $10.2 million, as compared to $8.5 million
for the fiscal year ended March 31, 1998 due to increased borrowings at a higher
rate.
NET INCOME. As a result of the foregoing, our net income for the fiscal
year ended March 31, 1999 decreased $2.9 million or 68.5% to $1.3 million, as
compared to $4.3 million for the fiscal year ended March 31, 1998 due primarily
to the factors discussed above.
FISCAL 1998 COMPARED TO FISCAL 1997
REVENUES. Revenues for the fiscal year ended March 31, 1998 were $301.8
million representing a 5.8% increase over revenues of $285.3 million for the
fiscal year ended March 31, 1997, which resulted from increased revenues from
certain segments of our business as described below. The increased demand for
our products resulted from an expanded customer base and increases in same store
sales.
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<PAGE>
Contributions to this increase in revenues by product segment is as
follows: health and beauty aids increased 12.8% in fiscal 1998 compared to
fiscal 1997 due to increases in same store sales. Prestige designer fragrances
grew 14% in fiscal 1998 compared to fiscal 1997 due to an increase in same store
sales and an expanded customer base, thus increasing the volume of products
sold. Nationally advertised branded non-perishable food products decreased 22%
in fiscal 1998 as compared to fiscal 1997. This segment of our business is
categorized by our ability to purchase off-price, non-perishable branded foods.
During fiscal 1998 demand outpaced supply resulting in an increase in the price
that we would have to pay for merchandise which we would distribute. We decided
to limit sales in this segment of our business to a level which would result in
improved profit margins. Sales of prescription pharmaceuticals remained
relatively constant in fiscal 1998 compared to the prior year.
COST OF GOODS SOLD. Cost of goods sold decreased as a percentage of
revenues to 87.0% for fiscal 1998 from 87.9% for fiscal 1997. This decrease in
the cost of goods sold resulted primarily from improved profit margins
associated with the distribution of fragrance products.
WAREHOUSE, DELIVERY, SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.
Warehouse, Delivery, Selling, General and Administrative expenses increased as a
percentage of revenues to 7.9% for fiscal 1998 from 7.5% for fiscal 1997. This
increase was due, in part, to increased expenses associated with our
manufacturing operations and advertising expenditures relating to The Fragrance
Counter.
INTEREST EXPENSE. Interest expense as a percentage of revenues
increased to 2.8% for fiscal 1998 from 2.3% for fiscal 1997 due to increased
borrowings at a higher rate.
NET INCOME. Net income for fiscal 1998 was $4.3 million which was a
5.5% increase over the net income for fiscal 1997 of $4.1 million due primarily
to the factors discussed above.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Cash increased $353,415 to $400,090 at March 31, 1999 from $46,675 at
the beginning of the fiscal year. The cash increase reflects accounts receivable
payments received that were not applied to our loan balance of March 31, 1999.
Our working capital increased $8.2 million to $52.2 million at March
31, 1999 from $44.0 million at March 31, 1998, primarily due to an increase in
accounts receivable and inventories less an increased amount due the bank,
accounts payable and accrued expenses.
At March 31, 1999 we had $123,371,228 in borrowings and approximately
$21,628,772 million of unused credit under our $145 million credit facility. Our
new credit facility is secured by a security interest in certain of our assets
and properties including the capital stock of certain of our subsidiaries.
We require capital principally to grow the business through
acquisition, expansion of current operations, to pay off debt, and for general
operating purposes. We currently estimate capital expenditures of approximately
$1.0 million per annum are required to adequately maintain our current
operations.
Our primary sources of liquidity are expected to be cash flows from
operations and our financing agreement with a consortium of banks let by the
First National Bank of Boston for financing our accounts receivable and
inventory under our $145,000,000 bank line of credit. The loan is collaterized
by our inventory and accounts receivable. Interest on the loan balance is
payable monthly at 3/8% above the prime rate or 2% above the Eurodollar rate at
our option. The effective interest rate charged to us at March 31, 1999 was
7.65% which was based on a combination of 2% above the Eurodollar rate and 3/8%
above the prime rate. We utilize cash generated from operations to reduce
short-term borrowings, which in turn acts to increase loan availability
consistent with our
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<PAGE>
financing agreement.
Based upon current levels of operations and anticipated growth, we
expect that sufficient cash flows will be generated from operations so that,
combined with other financing alternatives available, a new credit facility, and
other refinancing opportunities we will be able to meet all of our debt service,
capital expenditure and working capital requirements.
Operations for the year ended March 31, 1999, excluding non-cash
charges for depreciation and amortization and deferred income taxes, provided
cash of $3.0 million. Other changes in assets and liabilities resulting from
operating activities for the year ended March 31, 1999 used cash of $20.3
million, resulting in net cash used in operating activities of $17.3 million.
Investing activities, which principally consisted of acquisitions of property,
plant and equipment, resulted in a use of cash of $891,390 for the year ended
March 31, 1999. For the year ended March 31, 1999, financing activities provided
cash of $18.6 million, principally consisting of increased borrowing and
issuance of common stock.
YEAR 2000
We do not expect that the cost to modify or replace software that we
use, so that our software will properly recognize dates beyond December 31,
1999, will be material. If we are not successful in implementing any necessary
changes to our software, we expect to then develop contingency plans to address
any matters not corrected in a timely manner. We have initiated formal
communications with our significant vendors and customers to determine the
extent that the needs of those parties to modify their software to properly
recognize dates beyond December 31, 1999 may affect us. There can be no
guarantee that the systems of those other companies will be timely converted.
Furthermore, there is no assurance that their conversion will be compatible with
information included in our systems, without a material adverse effect on our
business, financial condition or results of operations. To the extent that
responses to such communications with our vendors are unsatisfactory, we expect
to take steps to ensure that our vendors' have demonstrated that they have made
the necessary modifications to their software.
INFLATION AND SEASONALITY
Inflation has not had any significant adverse effects on our business
and we do not believe it will have any significant effect on our future
business. Our fragrance business is seasonal, with greater sales during the
Christmas season than in other seasons. Our other product lines are not
seasonal.
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<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.
ALLOU HEALTH & BEAUTY CARE, INC.
By: /s/ Victor Jacobs
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Victor Jacobs
Chairman of the Board and
Chief Executive Officer
Dated: July 1, 1999
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<PAGE>
SCHEDULE VIII
ALLOU HEALTH & BEAUTY CARE, INC.
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
-------- -------- Additions Deductions --------
--------- ----------
Balance at Charged to Write off of Balance
Beginning costs and uncollectible at end
Description of period expenses accounts of period
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<S> <C> <C> <C> <C>
March 31, 1997
Allowance for Doubtful Accounts $373,890 $560,000 $378,208 $555,682
March 31, 1998
Allowance for Doubtful Accounts $555,682 $695,225 $879,432 $371,475
March 31, 1999
Allowance for Doubtful Accounts $371,475 $1,465,000 $220,510 $1,615,965
</TABLE>
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