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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
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[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED MARCH 31, 2000
OR
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _______________ TO _____________
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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 or (I.R.S. Employer
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 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 June 28, 2000 was $33,675,417. 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: 5,567,632 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, 2000.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the Registrant's Proxy Statement relating to the
Registrant's 2000 Annual Meeting of Stockholders are incorporated by reference
into Part III of this Form 10-K.
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PART I
ITEM 1. BUSINESS
GENERAL
We are a leading distributor of prestige brand name fragrances and
cosmetics, and health and beauty aid products in metropolitan New York City, New
Jersey, Connecticut, Philadelphia and Miami. We also manufacture upscale hair
and skin care products for sale under private labels. We distribute
approximately 22,000 SKUs of branded consumer products to over 140 national mass
merchandisers including: Sears Roebuck & Co., Wal-Mart, J.C. Penney, Target,
CVS, and Rite-Aid, and to approximately 4,200 independent retailers. We believe
that products distributed by us are sold in a total of over 15,000 retail
stores. Since our current principal stockholders acquired Allou, we have grown
through internal growth and strategic acquisitions, which have enabled us to
expand our product offerings, enter into new geographic markets, add new
customers and cross-sell existing and new product lines to our diversified
customer base.
PRODUCTS
We distribute four general categories of products:
o fragrances and cosmetics;
o name brand health and beauty aids and health and beauty aids
under our Allou brand;
o prescription pharmaceuticals; and
o non-perishable food items.
In addition, we manufacture upscale hair and skin care products.
Fragrances and Cosmetics
We distribute prestige designer fragrances of many large manufacturers,
which include: Ralph Lauren, Calvin Klein, Lancome and Chanel. See
"Manufacturers and Suppliers." Fragrance and cosmetic sales accounted for
approximately 39% of our revenues during the fiscal year ended March 31, 1998,
40% of our revenues during the fiscal year ended March 31, 1999 and 36% of our
revenues during the fiscal year ended March 31, 2000. Our profit margins on
fragrance and cosmetic sales are typically greater than those on name brand
health and beauty aids and, accordingly, we have sought to increase our sales
and marketing efforts in this area. We have entered into a services and supply
agreement with ibeauty.com to provide fragrances and cosmetics and other
services until October 2000 for sales on the Internet. On April 23, 1999 we sold
69% of our interest in The Fragrance Counter, Inc. our Internet subsidiary to an
investment group for $11,296,584 in cash and $8,900,000 in notes bearing
interest at prime plus .375%.
Some fragrance and cosmetic brands that we distribute are:
o Polo o Revlon
o Eternity o Maybelline
o Hugo o Lancome
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Some fragrance and cosmetic products that we distribute are:
o Perfume o Eyeshadow
o Cologne o Lipstick
o Nail Polish o Mascara
Health and Beauty Aids
We distribute approximately 8,000 brand name health and beauty aid
products by such manufacturers as Colgate-Palmolive, Clairol, Procter & Gamble,
Johnson & Johnson and Gillette. See "Manufacturers and Suppliers." We also
distribute nail polish, toothpaste, petroleum jelly and other health and beauty
aid products manufactured by others and sold under our Allou brand label. Health
& Beauty Aids accounted for approximately 36% of our revenues during the fiscal
year ended March 31, 1998, 37% of our revenues during the fiscal year ended
March 31, 1999 and 30% of our revenues during the fiscal year ended March 31,
2000. Sales of Allou brand are not material.
Some health and beauty aid brands that we distribute are:
o Pantene Pro-V shampoo o Colgate toothpaste
o Johnson's Baby Lotion o Rave hairspray
o Gillette Mach 3 razors o Vaseline Intensive Care lotion
Some health and beauty aid products that we distribute are:
o Antacids o Oral Antiseptics and Sprays
o Baby Care o Deodorants
o Cough and Cold Remedies o Shampoos
Prescription Pharmaceuticals
During fiscal 1994, we acquired the capital stock of M. Sobol, Inc., a
manufacturers' distributor of branded prescription pharmaceuticals. M. Sobol,
Inc. was founded in 1928 and currently distributes pharmaceuticals to
approximately 700 independent pharmacies in the Northeast. We purchase
approximately 4,000 branded pharmaceuticals from such manufacturers as Pfizer,
Eli Lilly, Merck and Glaxo. Additionally, we distribute 3,000 generic
prescription pharmaceutical products which are purchased from manufacturers such
as Schein Pharmaceuticals, Inc., Barre National, Inc., and Sidmak Laboratories,
Inc. During fiscal 2000, we acquired the assets of Tri-State Pharmaceutical
Consultants, Corp., a national distributor of branded and generic
pharmaceuticals. Tri-State was founded in 1995 and currently distributes
pharmaceuticals to national chains such as Rite Aid and wholesalers such as
McKesson. Pharmaceuticals accounted for approximately 15% of our revenues during
the fiscal year ended March 31, 1998, 14% of our revenues during the fiscal year
ended March 31, 1999 and 26% of our revenues during the fiscal year ended March
31, 2000.
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Food
We sell non-perishable packaged food items which we purchase almost
exclusively at discount prices from major food companies. This product line
requires little additional operating costs to us since sales of non-perishable
food are pre-sold and drop-shipped directly to our customers from the vendors.
Non-perishable food items accounted for approximately 9% of our revenues during
the fiscal year ended March 31, 1998, 10% of our revenues during the fiscal year
ended March 31, 1999 and 6.1% of our revenues during the fiscal year ended March
31, 2000.
Hair and Skin Care Product Manufacturing
During fiscal 1996, we purchased selected assets of Russ Kalvin, Inc.
This acquisition has enabled us to manufacture and distribute salon quality hair
and skin care products to national mass merchandisers and independent retailers.
Since 1998, we have manufactured upscale hair and skin care products for J.C.
Penney, Bath and Body Works, Sears Roebuck & Co., and other specialty retailers.
This business generates substantially higher gross profit margins than our
distribution business. Hair and skin care products accounted for approximately
1.7% of our revenues during the fiscal year ended March 31, 2000. Revenues from
pior years were not material.
We acquired a 50% stake in Discreet Medical Solutions, LLC during
fiscal 2000. Discreet Medical d/b/a Ostomey Village.com is a company recently
formed to create an Internet portal which provides on-line delivery of medical
products and content to chronically ill patients suffering for Crohn's disease,
diabetes, respiratory diseases and those patients requiring wound care
treatment. Discreet Medical has a patent pending methodology that allows
Discreet Medical to offer the highest level of personal and professional
attention to this community of patients in complete privacy and with discretion.
Discreet Medical recognizes revenues and profits from the sale of specialty
medical devices. Discreet Medical expects to commence operations during our
second quarter.
MANUFACTURERS AND SUPPLIERS
The products we distribute are manufactured and supplied by independent
foreign and domestic companies. Many of these companies also manufacture and
supply health and beauty aid products, fragrances and cosmetics for many of our
competitors. We purchase approximately 8,000 brand name health and beauty aid
products from such manufacturers as Procter & Gamble, Johnson & Johnson and
Gillette and approximately 7,000 fragrance and cosmetic products directly from
manufacturers such as Coty, a division of Pfizer, and Revlon, as well as from
secondary sources. We purchase approximately 4,000 branded pharmaceuticals and
3,000 generic prescription pharmaceuticals from such manufacturers as Pfizer,
Eli Lilly, Schein Pharmaceuticals, and Barre National. Additionally, we purchase
non-perishable packaged food items which we purchase almost exclusively at
discount prices from manufacturers such as General Mills, General Foods and
Nabisco. We contract with manufacturers to produce the products which carry our
name brand and we manufacture our proprietary line of Russ Kalvin generic brand
hair and skin care products through our wholly-owned subsidiary, Allou Personal
Care.
We typically purchase health and beauty aids and pharmaceuticals from
manufacturers on open accounts which are payable in 30 days and may receive
discounts of up to 2% for early payments. As is customary in the industry, we
prepay certain suppliers for products that we purchase at deep discounts. These
types of purchases are opportunistic and highly dependent upon availability and
price. If the products that we have prepaid for and ordered are not shipped to
us, this could have an adverse effect on our operations. To date, we have not
suffered any such adverse effect. In addition, we may return health
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and beauty aid and prescription pharmaceutical products to our suppliers for
full credit if the products are damaged, their shelf life has expired, or they
are otherwise not saleable.
Manufacturers of prestige fragrances have historically restricted
direct sales of their products in the United States primarily to prestige
department stores and specialty stores. As a result, mass-market retailers have
traditionally obtained prestige products from secondary sources. Historically,
the secondary sources available to the mass market have been limited to:
o direct distributors like us which receive products directly from
fragrance manufacturers, and
o distributors of prestige products manufactured by, or distributed to,
foreign sources for foreign distribution, which are diverted to the United
States.
Under existing court decisions, there are variations in the extent to which
trademark laws, copyright laws and customs regulations may restrict the
importation of trademarked or copyright fragrance products through those
distributors who divert the prestige products to the United States without the
consent of the trademark or copyright owner. As is customary in the industry, we
purchase a substantial portion of our fragrance products from secondary sources.
In addition, from time to time, we may take advantage of favorable buying
opportunities and purchase limited amounts of health and beauty aid products
from secondary sources. There can be no assurance that these sources of product
will be available in the future or that may not become the subject of legal
action arising from its buying activities with respect to these products. To
date, we have not been the subject of any such legal action.
We have had long-term relationships with most of our suppliers. As is
customary in our industry, we have not entered into written agreements with most
of our suppliers. However, we believe that our relationships with our suppliers
are good. We have not experienced any interruptions in the supply of products
which have had a material adverse effect on our operations.
MARKETING AND SALES
Sales are made by our in-house sales staff of telemarketing
professionals. We pay in-house sales persons a base salary plus a commission
based on sales and gross margins. Sales are also made by sales account
representatives who make on-site visits to our customers.
We publish a monthly health and beauty aid catalogue and a quarterly
fragrance catalogue containing order forms, product descriptions, the
manufacturer's suggested retail price and net cost per unit or per dozen. The
catalogues are mailed to each of our active customers. The catalogues also help
serve the advertising needs of the manufacturers which provide us with rebates
which have historically paid for the full cost of preparing, printing and
mailing the catalogues. In addition to the catalogues, we frequently supply our
customers with flyers advising them of items being sold at a discount. The sale
of fragrances nationally to independent stores is handled exclusively by mail
order through the catalogues.
OPERATIONS
We maintain an approximately 157,000 square foot warehouse facility
with sales and administrative offices in Brentwood, New York. The warehouse
typically contains on a blended basis inventory for approximately four months of
distribution to customers. We use a computerized data base system which enables
management to monitor sales, purchases and inventory status. Historically, we
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have not experienced problems with product shelf lives, as most products we sell
are not perishable. Those products that are perishable generally can be returned
to the manufacturer if they are not sold by the expiration date. We also lease
an approximately 105,000 square foot facility in Saugus, California and a 10,000
square foot facility in Miami, Florida.
We contract with local carriers and independent trucking agents to make
deliveries to our customers. From the time it is placed, a customer order will
generally be shipped within 48 hours.
Work in the warehouse is cyclical and workers are trained in several
tasks so that they can be rotated to fill the jobs where they are most needed.
Since we acquired selected assets of Russ Kalvin, Inc. in October 1995,
we have consolidated operations and reduced overhead, and positioned ourself to
market and manufacture quality hair and skin care products to major retailers
such as J.C. Penney, Bath and Body Works, Sears Roebuck, & Co., and other
specialty retailers. We have consolidated all administrative functions of Russ
Kalvin into our Brentwood, New York facility. In addition, we have 80,000 square
feet of leased space in Saugus, California which is used to manufacture and
distribute upscale private label hair and skin care products for major
retailers.
MANAGEMENT INFORMATION AND CONTROL SYSTEM
We use a proprietary, computerized database management system which
collects, integrates and analyzes data concerning sales, order processing,
shipping, purchases, receiving, inventories and financial reporting. At any
given time, we are able to determine the quantity of each item in inventory by
brand, style, cost, list price and other characteristics. Our system also
provides our telemarketing professionals with immediate product availability and
gross margin information on-screen when receiving customer orders. This system
allows us to provide our customers with real-time inventory and pricing
information and to ship orders within 48 hours of receipt, which allows our
customers to better manage their inventory.
The computerized system enables us to better manage our inventories. It
keeps a running inventory of goods on hand for each item we distribute. When the
inventory of any item drops to a certain pre-set level, a purchase order for a
set number of additional units of the item is automatically written and, after
being reviewed by management, is sent directly to the manufacturer.
COMPETITION
The distribution of health and beauty aid products is extremely
competitive. We compete with pharmaceutical wholesalers that carry health and
beauty aid products as an accommodation for their customers. Many of these
wholesalers have greater financial and other resources than we do. However, to
our knowledge, there is no significant competitor which distributes to its
customers the assortment of fragrances, cosmetics and health and beauty aid
products that we distribute. We believe that we compete on the basis of the
services we provide to our customers which include quick delivery and low
minimum order requirements.
The distribution of fragrance and high priced cosmetic items is also
very competitive. We compete to obtain our fragrances and cosmetics from
manufacturers and importers who also supply competing distributors and sell
directly to retailers. We compete on the basis of price and the services we
provide to our customers, which include quick delivery and low minimum order
requirements.
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In addition, we face intensive competition with respect to marketing
our own brand of health and beauty aid products and the Russ Kalvin generic
brand of hair and skin care products. We compete with major health and beauty
aid companies, as well as hair and skin care companies who have well-established
product lines, spend large sums for advertising and marketing and have far
greater financial and other resources than we do. We also compete with these
companies for shelf space and product placement in various retail outlets.
EMPLOYEES
As of March 31, 2000, we employed approximately 307 persons on a full
time basis, including 8 in executive positions, 15 in purchasing, 42 in
marketing and sales, 38 in administration and accounting, and 204 in warehouse
and receiving. Some of our sales personnel are partially paid on a commission
basis. During peak selling seasons we also employ part-time personnel.
We are a party to a collective bargaining agreement expiring December
14, 2000 with the National Organization of Industrial Trade Unions covering 85
of our warehouse and receiving employees. We have not experienced any work
stoppages. We believe our relations with our employees are satisfactory.
TRADENAMES AND TRADEMARKS
We use the unregistered tradename for our brand "Allou Brand" on
generic products that we distribute. With the introduction of additional generic
products, we may adopt other unregistered tradenames and trademarks. During
fiscal 1996, we acquired the patents, trademarks and all other intellectual
property of Russ Kalvin, Inc. We believe that no single trademark, tradename or
servicemark is material to our business as a whole.
GOVERNMENT REGULATION
The United States Food, Drug and Cosmetic Act and the Fair Packaging
and Labelling Act regulate the purity and packaging of health and beauty aid
products and fragrances and cosmetic products. Similar statutes are in effect in
various states. Manufacturers and distributors of health and beauty aid products
are also subject to the jurisdiction of the Federal Trade Commission with
respect to matters such as advertising content and other trade practices. To our
knowledge, we only distribute products produced by manufacturers who comply with
those regulations and who periodically submit their products to independent
laboratories for testing. However, the failure by our manufacturers or suppliers
to comply with applicable government regulations could result in product recalls
that could adversely affect our relationships with our customers. In addition,
the extent of potentially adverse government regulations which might arise from
future legislation or administrative action cannot be predicted.
Some of the products that we manufacture contain alcohol and certain
active ingredients which are regulated by the Bureau of Alcohol, Tobacco and
Firearms and the Food and Drug Administration. We have obtained the appropriate
licenses from these agencies in order to comply with applicable regulations.
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ITEM 2. PROPERTIES
We lease approximately 157,000 square feet of space for our principal
executive offices, warehouse and distribution facilities and sales headquarters
in the Brentwood Industrial Park, 50 Emjay Boulevard, Brentwood, New York 11717.
We have a ten-year lease which expires on May 31, 2005, and includes a five-year
option for renewal. The base annual rental of the property is approximately
$500,000 with additional charges for insurance, fuel and taxes and increases
during the initial term of the lease. We also lease 105,000 square feet of space
in Saugus, California to manufacture and distribute hair and skin care products.
The lease expires September 30, 2000 with a five-year option for renewal at a
base annual rental of approximately $414,000 with additional charges for
insurance, fuel, taxes and increases during the initial term of the lease. We
also lease 10,000 square feet of space in Miami, Florida, which expires on April
30, 2003 at a base annual rent of approximately $156,000 for warehousing and
distribution purposes.
ITEM 3. LEGAL PROCEEDINGS
We are a party to a number of legal proceedings, all of which are
routine litigation incidental to our business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of the fiscal year covered by this Report, no
matters were submitted to a vote of security holders through the solicitation of
proxies or otherwise.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
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Our Class A common stock is listed on the American Stock Exchange under
the symbol "ALU". There is no established public trading market for our Class B
common Stock.
The following table sets forth the quarterly high and low sales price
of the Class A common stock during our last two fiscal years:
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HIGH LOW
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FISCAL YEAR ENDING MARCH 31, 1999:
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Quarter ending June 30, 1998......................................... $16.00 $7.938
Quarter ending September 30, 1998.................................... 11.25 4.313
Quarter ending December 31, 1998..................................... 12.25 3.375
Quarter ending March 31, 1999........................................ 12.875 7.625
FISCAL YEAR ENDING MARCH 31, 2000:
Quarter ending June 30, 1999......................................... $14.25 $7.625
Quarter ending September 30, 1999.................................... 7.375 5.375
Quarter ending December 31, 1999..................................... 8.75 5.375
Quarter ending March 31, 2000........................................ 9.50 6.312
Quarter ending June 30, 2000
(through June 6, 2000)..................................... $ 8.00 $5.625
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Holders
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As of June 26, 2000, there were 93 holders of record of our Class A
common stock and 4 holders of record of our Class B common stock. Based upon
conversations with brokers, management believes that there are in excess of
1,000 beneficial owners of the Class A common stock.
Dividends
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We have not paid a dividend on our shares of Class A common stock or
Class B common stock and have no present expectation of doing so in the
foreseeable future.
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ITEM 6. SELECTED FINANCIAL DATA .
ALLOU HEALTH & BEAUTY CARE INC.
INCOME STATEMENT DATA:
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Years Ended March 31,
2000 1999(1) 1998(1) 1997 1996
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(In thousands, except for per share data)
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Revenues $421,047 $334,175 $301,092 $285,311 $273,322
Costs of revenues 367,964 289,637 262,237 250,843 241,734
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Gross profit 53,083 44,538 38,855 34,468 31,588
Warehouse and delivery expense 12,307 10,279 9,288 8,592 8,063
Selling, general and
administrative expense 18,520 14,707 13,264 12,766 11,894
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Income from operations 22,256 19,552 16,303 13,110 11,631
Interest and other 10,874 9,647 8,470 6,567 5,513
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Income from operations
before income taxes 11,382 9,905 7,833 6,543 6,118
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Discontinued operations, net
of income taxes 7,916 4,599 576
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Net income $14,959 $ 1,348 $ 4,280 $ 4,059 $ 3,757
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Net income per common share (2)
Basic:
Operations $ 1.05 $ .98 $ .84
Discontinued operations 1.17 ( .76) ( .10)
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$ 2.22 $ .22 $ .74 $ .71 $ .66
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Diluted:
Operations $ .97 $ .87 $ .81
Discontinued operations 1.08 ( .67) ( .09)
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$ 2.05 $ .20 $ .72 $ .70 $ .65
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Balance Sheet Data:
As of March 31,
2000 1999 1998 1997 1996
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Cash $ 51 $ 400 $ 47 $ 77 $ 144
Working capital 64,725 52,192 43,959 42,052 37,557
Total assets 259,955 219,907 178,384 161,348 126,185
Total long-term liabilities 1,640 724 1,354 1,841 560
Total liabilities 183,799 159,571 125,771 113,121 82,016
Stockholders' equity 76,157 60,336 52,613 48,227 44,168
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(1) As a result of the sale at the Company of its majority interest in The
Fragrance Counter Inc., the statement of income for the prior years have been
restated to segregate the net results of continued and discontinued operations.
(2) Net income per common share for fiscal 1997 and prior periods have been
restated in accordance with Financial Accounting Standards No. 128, 'Earnings
Per Share, which requires presentation of basic earnings per share and diluted
earnings per share.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
FISCAL 2000 COMPARED TO FISCAL 1999
Revenues. Revenues for the fiscal year ended March 31, 2000 increased
$86.9 million or 26% to $421.0 million, as compared to restated revenues of
$334.2 million for the fiscal year ended March 31, 1999, which resulted from
increased revenues from all segments of our business as described below. The
increased demand for our products resulted from an expanded customer base,
increases in same store sales and through revenues generated as a result of our
acquisition of Tri-State Pharmaceutical Consultants, Corp., consummated during
the fourth quarter of fiscal 2000.
Contributions to this increase in revenues by product segment is as
follows: health and beauty aids increased 19% in fiscal 2000 compared to fiscal
1999 due to increases in same store sales and expanded customer base. Prestige
designer fragrances grew 20% in fiscal 2000 compared to fiscal 1999 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 increased 38% in fiscal 2000, when compared to fiscal 1999, Because of
greater quantities of promotionally priced non-perishable food items were
available to us from our vendors during fiscal 2000. Sales of prescription
pharmaceuticals increased 135% in fiscal 2000 when compared to prior year.
Cost of Goods Sold. Cost of goods sold for the fiscal year ended March
31, 2000 increased as a percentage of revenues to 87.4% from 86.7% for the
restated fiscal year ended March 31, 1999. This increase in the cost of goods
sold resulted primarily from decreased profit margins associated with the
distribution of pharmaceutical products.
Warehouse, Delivery, Selling, General and Administrative Expenses.
Warehouse, Delivery, Selling, General and Administrative expenses for the fiscal
year ended March 31, 2000 increased $5.3 million or 7.3% of sales to $30.8
million, as compared to restated expenses of $24.9 million or 7.5% of sales for
the fiscal year ended March 31, 1999. This increase was largely due to
marketing, delivery and warehouse expenses associated with our wholly-owned
manufacturing subsidiary, Allou Personal Care.
Interest Expense. Interest expense for the fiscal year ended March 31,
2000 increased $1.2 million or 2.6% as a percentage of sales to $10.9 million
as compared to $9.6 million or 2.9% restated for the fiscal year ended March 31,
1999 due to increased borrowings at a higher rate.
Net Income. Our net income for the fiscal year ended March 31, 2000
increased $13.6 million or 901% to $14.9 million as compared to $1.3 million for
the fiscal year ended March 31, 1999. This increase in net income is due in part
to the sale of a majority interest in our Internet subsidiary during the first
quarter of fiscal 2000. Our independent auditors in accordance with generally
accepted accounting standards restated the financial statements of fiscal 1999,
to reflect the gains and losses resulting from the sale of our majority interest
in our Internet subsidiary. Therefore, net income from continuing operations
restated for fiscal 2000 is $7,043,548 or 97 cents per share when compared to a
restated income from continuing operations for fiscal year ended March 31, 1999
of $5,946,878. Net income due to gains and losses from discontinued operations
for fiscal 2000 is $14,959,185 or $2.05 per share, when compared to $1,347,855
or 20 cents per share for the same period a year-earlier.
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FISCAL 1999 COMPARED TO FISCAL 1998
Revenues. Revenues for the fiscal year ended March 31, 1999 increased
$33.1 million or 12% to $334.2 million, as compared to $301.1 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 & 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 product 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 remain 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 86.7 % from 87.1% 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 & Administrative Expenses. Warehouse,
Delivery, Selling, General & Administrative Expenses for the fiscal year ended
March 31, 1999 increased $2.4 million or 10.8% to $24.9 million. This increase
was due largely to increases in expenses associated with our manufacturing
subsidiary expenses for fiscal 1999 were restated for reasons discussed above.
Interest Expense. Interest expense for the fiscal year ended March 31, 1999
increased $1.2 million or 14% to $9.6 million as compared to $8.5 for the fiscal
year ended March 31, 1998, due to increased borrowings at a higher rate.
Net Income. Net income from continuing operations restated for reasons as
discussed above increased $1.1 million or 22.4% to $5.9 million as compared to
$4.8 million for the fiscal year ended March 31, 1998, due primarily to factors
discussed above.
LIQUIDITY AND CAPITAL RESOURCES
Cash decreased $348,800 to $51,311 at March 31, 2000 from $400,090 at
the beginning of the fiscal year.
Our working capital increased $12.5 million to $64.7 million at March
31, 2000 from $52.2 million at March 31, 1999, primarily due to an increase in
accounts receivable and inventories less an increased amount due the bank,
accounts payable and accrued expenses.
-12-
<PAGE>
At March 31, 2000 we had $148.5 million in borrowings and approximately
$15.0 million of unused credit under our $163.5 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
$2.0 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 led by the
Fleet Capital, Corp. for financing our accounts receivable and inventory under
our $163.5 million 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, 2000 was 8.06%
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
financing agreement. During the first quarter of fiscal 2001 we were approved
for an increase to our revolving line of credit to $200 million of which $185
million was funded during May 2000. This financing agreement is with a
consortium of banks led by Fleet Capital, Corp. The loan is collateralized by
our inventory and accounts receivable. Interest on the loan balance is .75%
above the prime rate or 2.5% above the Eurodollar rate at our option.
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 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, 2000, excluding non-cash
charges for depreciation and amortization and deferred income taxes, provided
cash of $7.3 million. Other changes in assets and liabilities resulting from
operating activities for the year ended March 31, 2000 used cash of $42.8
million, resulting in net cash used in operating activities of $35.6 million.
Investing activities, which principally consisted of acquisitions of property,
plant and equipment, resulted in a use of cash of $712,090 for the year ended
March 31, 2000. For the year ended March 31, 2000, financing activities provided
cash of $28.0 million, principally consisting of increased borrowing and
issuance of common stock.
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.
-13-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this time is set forth in the Financial
Statements, commencing on page F-1 included herein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
The information called for by Part III (Items 10,11,12 and 13) is
incorporated by reference to such information as it will be included in our
definitive Proxy Statement with respect to our 2000 Annual Meeting of
Stockholders to be filed pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended.
-14-
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) Documents filed as part of this Report.
<TABLE>
<CAPTION>
<S> <C> <C>
1. Financial Statements Page
----
Report of Independent Auditor........................................................F-1
Consolidated Balance Sheets -- March 31, 2000 and 1999...............................F-2
Consolidated Statements of Income -- Years ended March 31, 2000,
1999 and 1998........................................................................F-3
Consolidated Statements of Stockholders' Equity -- Years ended March
31, 2000, 1999 and 1998..............................................................F-4
Consolidated Statement of Cash Flows -- Years ended March 31, 2000,
1999 and 1998........................................................................F-5
Selected Financial Data .............................................................F-6
Notes to Consolidated Financial Statements...........................................F-7
2. Financial Statement Schedules
Schedule VIII- Valuation and Qualifying Accounts and Reserve S-1
</TABLE>
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by the Registrant during the last
fiscal quarter of the period covered by this Report.
(c) Exhibits.
The following Exhibits are filed as a part of this Report:
Exhibit No. Description
3.1 Restated Certificate of Incorporation of the Registrant (filed as
Exhibit 3.1 to Registrant's Quarterly Report on Form 10-Q for the
fiscal quarter ended September 30, 1996 Commission File No. 1-10340 and
incorporated herein by reference).
3.2 By-Laws of the Registrant (filed as Exhibit 3b to Registration
Statement No. 33-26981 on Form S-1 ("Registrant's Form S-1"), and
incorporated herein by reference).
-15-
<PAGE>
10.4 Employment Contract dated as of June 30, 1996 between the Registrant
and Ramon Montes (filed as Exhibit 10.3 to Registrant's Quarterly
Report on Form 10-Q for the fiscal quarter ended June 30, 1996
Commission File No. 1-10340 and incorporated herein by reference).
10.5 Amended and Restated 1989 Incentive Stock Option Plan (filed as Exhibit
10(e) to Registrant's Annual Report on From 10-K for the fiscal year
ended March 31, 1990 Commission File No. 1-10340 and incorporated
herein by reference).
10.6 1991 Stock Option Plan (filed as Exhibit 10(e)(1) to Registrant's
Post-Effective Amendment No. 1 to Registrant's Form S-1 and
incorporated herein by reference).
10.7 1992 Stock Option Plan (filed as Exhibit 10(e)(2) to Registrant's
Annual Report on From 10-K for the fiscal year ended March 31, 1993
Commission File No. 1-10340 and incorporated herein by reference).
10.8 1995 Nonqualified Stock Option Plan (filed as Exhibit A to Registrant's
1996 Definitive Proxy Statement on Schedule 14A Commission File No.
1-10340 and incorporated herein by reference).
10.9 1996 Stock Option Plan (filed as Exhibit B to Registrant's 1996
Definitive Proxy Statement on Schedule 14A Commission File No. 1-10340
and incorporated herein by reference).
10.10 Lease Agreement dated December 8, 1993 between Allou Distributors, Inc.
and Brentwood Distribution Co. (filed as Exhibit 10(f) to Registrant's
Annual Report on Form 10-K for the fiscal year ended March 31, 1995
Commission File No. 1-10340 ("1995 Form 10-K") and incorporated herein
by reference).
10.11 Lease Agreement dated March 4, 1980 between Registrant and Pueblo
Supermarkets, Inc. (filed as Exhibit 10g to Registrant's Form S-1 and
incorporated herein by reference).
10.12 Lease Agreement dated January 1, 1993 between M. Sobol, Inc. and Simon
and Barbara J. Mandell (filed as Exhibit 10(g) to Registrant's Annual
Report on Form 10-K for the fiscal year ended March 31, 1994 Commission
File No. 1-10340 ("1994 Form 10-K") and incorporated herein by
reference).
10.13 Agreement dated December 13, 1994 between Allou Distributors, Inc. and
the National Organization of Industrial Trade Unions (filed as Exhibit
10(i) to the Registrant's 1995 Form 10-K and incorporated herein by
reference).
10.14 Agreement dated December 15, 1997 between Allou Distributors, Inc. and
Local No. 1. (titled as Exhibit 10.14 to the Registrant's 1998 10-K and
incorporated herein by reference).
10.15 Third Restated and Amended Revolving Credit and Security Agreement
dated October 22, 1997 among BankBoston, N.A., IBJ Schroder Bank &
Trust Company, Sanwa Business Credit Corporation, LaSalle Business
Credit, Inc., Bank Leumi Trust Company of New York, The Dime Savings
Bank of New York, FSB, The First National Bank of Maryland, Key
Corporate Capital, Inc. (titled as Exhibit 10.15 to the Registrant's
1998 10-K and incorporated herein by reference).
10.16 Master Lease Finance Agreement dated as of April 24, 1996 between
BankBoston Leasing Inc. and Allou Distributors, Inc. (filed as Exhibit
10.14 to Registrant's 1996 10-K and incorporated herein by reference).
-16-
<PAGE>
21 Subsidiaries of the Registrant (filed as Exhibit 21 to Registrant's
1996 10-K and incorporated herein by reference).
*23 Consent of Mayer Rispler & Company, P.C.
*27 Financial Data Schedule
----------------
* Filed herewith
-17-
<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
---------------------------
Victor Jacobs
Chairman of the Board and
Chief Executive Officer
Dated: June 29, 2000
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.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C>
Chairman of the Board, and Chief June 29, 2000
/s/ Victor Jacobs Executive Officer
-------------------------------------------
Victor Jacobs
/s/ Herman Jacobs President and Director June 29, 2000
-------------------------------------------
Herman Jacobs
Chief Financial Officer, Chief
/s/ David Shamilzadeh Accounting Officer and June 29, 2000
------------------------------------------- Director
David Shamilzadeh
/s/ Jack Jacobs Director June 29, 2000
-------------------------------------------
Jack Jacobs
/s/ Sol Naimark Director June 29, 2000
-------------------------------------------
Sol Naimark
/s/ Jeffrey Berg Director June 29, 2000
-------------------------------------------
Jeffrey Berg
/s/ Stuart Glasser Director June 29, 2000
--------------------------------------
Stuart Glasser
</TABLE>
II-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
Board of Directors & Stockholders:
Allou Health & Beauty Care, Inc.
Brentwood, New York
We have audited the accompanying consolidated balance sheets of Allou
Health & Beauty Care, Inc. as of March 31, 2000 and 1999 and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the years in the three-year period ended March 31, 2000. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Allou Health
and Beauty Care, Inc. at March 31, 2000 and 1999, and the results of its
operations and its cash flows for each of the years in the three-year period
ended March 31, 2000, in conformity with generally accepted accounting
principles.
New York, New York
June 19, 2000
F-1
<PAGE>
ALLOU HEALTH AND BEAUTY CARE, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
------
<TABLE>
<CAPTION>
March 31, March 31,
2000 1999
---- ----
Current Assets
--------------
<S> <C> <C>
Cash $ 51,311 $ 400,090
Accounts Receivable (net of allowance
for doubtful accounts of $1,285,000
and $1,615,965, respectively) 75,853,958 50,162,450
Inventories 163,752,266 122,917,911
Prepaid Purchases 2,942,409 24,682,481
Other Current Assets 4,283,598 12,876,642
------------ ------------
Total Current Assets $246,883,542 $211,039,574
Property and Equipment, Net 3,924,543 3,839,906
Other Assets 9,147,367 5,027,901
------------ ------------
TOTAL ASSETS $259,955,452 $219,907,381
============ ============
LIABILITIES & STOCKHOLDERS' EQUITY
----------------------------------
Current Liabilities
-------------------
Amounts Due Bank $148,470,692 $123,371,228
Current Portion of Long-Term Debt 1,831,547 707,652
Accounts Payable and Accrued Expenses 29,289,177 33,936,223
Income Taxes Payable 2,566,969 832,000
------------ ------------
Total Current Liabilities $182,158,385 $158,847,103
------------
Long Term Liabilities
---------------------
Long-Term Debt 1,640,222 724,234
------------ ------------
Total Long Term Liabilities 1,640,222 724,234
------------ ------------
TOTAL LIABILITIES $183,798,607 $159,571,337
------------ ------------
Commitments and Contingencies
Stockholders' Equity
--------------------
Preferred Stock, $.001 par value, 1,000,000
shares authorized, none issued and outstanding.
Class A Common Stock, $.001 par value;
15,000,000 shares authorized; 5,566,273 and
5,339,122 shares issued and outstanding, respectively $ 5,566 $ 5,339
Class B Common Stock, $.001 par value;
2,200,000 shares authorized;
1,200,000 shares issued and outstanding 1,200 1,200
Additional Paid-In Capital 30,818,158 29,956,769
Retained Earnings 45,331,921 30,372,736
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 76,156,845 60,336,044
------------ ------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $259,955,452 $219,907,381
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-2
<PAGE>
ALLOU HEALTH AND BEAUTY CARE, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Years Ended March 31,
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Revenues $421,046,773 $334,175,150 $301,092,217
Costs of Revenues 367,963,675 289,637,296 262,236,856
------------ ------------ ------------
Gross Profit 53,083,098 44,537,854 38,855,361
------------ ------------ ------------
Operating Expenses
------------------
Warehouse and Delivery 12,306,859 10,279,515 9,288,146
Selling, General and Administrative 18,519,681 14,706,612 13,264,610
------------ ------------ ------------
Total Operating Expenses 30,826,540 24,986,127 22,552,756
------------ ------------ ------------
Income From Operations 22,256,558 19,551,727 16,302,605
------------ ------------ ------------
Other (Expense) Income
----------------------
Interest Expense ( 10,902,244) ( 9,655,427) ( 8,482,859)
Other 28,234 9,098 13,168
------------ ------------ ------------
Total ( 10,874,010) ( 9,646,329) ( 8,469,691)
------------ ------------ ------------
Income Before Income Taxes 11,382,548 9,905,398 7,832,914
Provision for Income Taxes 4,339,000 3,958,520 2,976,507
------------ ------------ ------------
Income From Continuing Operations 7,043,548 5,946,878 4,856,407
------------ ------------ ------------
Discontinued Operations:
Loss From Discontinued Operations
Net of Income Taxes ( 516,764) ( 6,399,023) ( 576,197)
Gain on Disposal of Segment
Net of Income Taxes 8,432,401 1,800,000 - 0 -
------------ ------------ ------------
Gain (Loss) on Discontinued Operations 7,915,637 ( 4,599,023) ( 576,197)
------------ ------------ ------------
NET INCOME $ 14,959,185 $ 1,347,855 $ 4,280,210
============ ============ ============
Earnings (Loss) Per Common Share - Basic
----------------------------------------
Continuing Operations $1.05 $.98 $.84
Discontinued Operations 1.17 (.76) (.10)
---- ---- ----
Net Earnings Per Share $2.22 $.22 $.74
===== ==== ====
Earnings (Loss) Per Common Share - Diluted
------------------------------------------
Continuing Operations $ .97 $.87 $.81
Discontinued Operations 1.08 (.67) (.09)
---- ---- ----
Net Earnings Per Share $2.05 $.20 $.72
===== ==== ====
Shares Used in Computing Earnings Per Common Share
--------------------------------------------------
Basic 6,673,617 6,061,431 5,757,328
============ ============ ============
Diluted 7,296,884 6,800,143 5,972,392
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
ALLOU HEALTH AND BEAUTY CARE, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED MARCH 31, 2000, 1999 AND 1998
<TABLE>
<CAPTION>
Common Additional Retained
Stock Paid In Capital Earnings Total
----- --------------- -------- -----
<S> <C> <C> <C> <C>
Balance, March 31, 1997 $5,752 $23,476,508 $24,744,671 $48,226,931
Net Proceeds From Exercise
of Options 18 105,732 - 0 - 105,750
Net Income - 0 - - 0 - 4,280,210 4,280,210
----- ----- ---------- ----------
Balance, March 31, 1998 $5,770 $23,582,240 $29,024,881 $52,612,891
Net Proceeds From Exercise
of Options 102 701,852 - 0 - 701,954
Issuance of Common Stock 667 5,672,677 - 0 - 5,673,344
Net Income - 0 - - 0 - 1,347,855 1,347,855
----- ----- ---------- ----------
Balance, March 31, 1999 $6,539 $29,956,769 $30,372,736 $60,336,044
Net Proceeds From Exercise of Options 66 360,696 - 0 - 360,762
Issuance of Common Stock 161 500,693 - 0 - 500,854
Net Income - 0 - - 0 - 14,959,185 14,959,185
----- ----- ---------- ----------
Balance, March 31, 2000 $6,766 $30,818,158 $45,331,921 $76,156,845
====== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
ALLOU HEALTH AND BEAUTY CARE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended March 31,
2000 1999 1998
---- ---- ----
Cash Flows From Operating Activities
------------------------------------
<S> <C> <C> <C>
Net Income From Continuing Operations $ 7,043,548 $ 5,946,878 $ 4,856,407
Adjustments to Reconcile Net Income to Net Cash
Used in Operating Activities:
Income (Loss) From Discontinued Operations 7,915,637 ( 4,599,023) ( 576,197)
Depreciation and Amortization 939,198 832,613 687,604
Deferred Income Taxes ( 725,600) 832,000 - 0 -
Decrease (Increase) In Assets:
Accounts Receivable (25,691,508) ( 6,044,539) 4,306,971
Inventories (40,834,355) (10,387,252) (15,869,556)
Other Assets 26,401,905 (24,679,102) ( 5,638,365)
Increase (Decrease) In Liabilities:
Accounts Payable and Accrued Expenses ( 2,186,477) 20,761,274 ( 823,692)
----------- ----------- -----------
Net Cash Used In Operating Activities (27,137,652) (17,337,151) (13,056,828)
----------- ----------- -----------
Cash Flows From Investing Activities
------------------------------------
Acquisition of Property and Equipment ( 712,090) ( 891,390) ( 553,011)
----------- ----------- -----------
Cash Flows From Financing Activities
------------------------------------
Net Increase in Amounts Due Bank 25,099,464 12,774,467 13,856,508
Borrowings 3,993,256 108,704 215,771
Repayment of Debt ( 1,953,373) ( 676,513) ( 598,046)
Net Proceeds from Exercise of Options
and Issuance of Common Stock 361,616 6,375,298 105,750
----------- ----------- -----------
Net Cash Provided By Financing Activities 27,500,963 18,581,956 13,579,983
----------- ----------- -----------
NET (DECREASE) INCREASE IN CASH ( 348,779) 353,415 ( 29,856)
CASH AT BEGINNING OF YEAR 400,090 46,675 76,531
----------- ----------- -----------
CASH AT END OF YEAR $ 51,311 $ 400,090 $ 46,675
=========== =========== ===========
Supplemental Disclosures of Cash Flow Information:
Cash Paid For:
Interest $10,762,927 $10,162,264 $ 8,364,098
Income Taxes $ 5,279,000 $ 1,474,304 $ 2,773,345
Non-Cash Financing Activities:
Notes Issued $ 2,873,369 $ 108,764 $ 215,771
Common stock issued for business acquisition 500,000 - 0 - - 0 -
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
SELECTED QUARTERLY FINANCIAL DATA
(UNAUDITED)
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
------- ------- ------- ------- -----
March 31, 2000
--------------
<S> <C> <C> <C> <C> <C>
Revenues $78,147,211 $101,011,666 $108,094,099 $133,793,797 $421,046,773
Income from
continuing operations 1,335,745 2,063,686 1,915,933 1,728,184 7,043,548
Income (loss) from
discontinued operations 12,796,461 - 0 - - 0 - (a) ( 4,880,824) 7,915,637
----------- ------------- ------------- ------------- -----------
Net income (loss) $14,132,206 $ 2,063,686 $ 1,915,933 $( 3,152,640) $14,959,185
=========== ============= ============= ============= ===========
Earnings per common share - basic
---------------------------------
Continuing operations $ .20 $ .31 $ .29 $ .25 $1.05
Discontinued operations 1.93 - 0 - - 0 - (.76) 1.17
------ ----- ----- ----- -----
Net income (loss) $2.13 $ .31 $ .29 $(.51) $2.22
===== ===== ===== ===== =====
Earnings per common shares - diluted
------------------------------------
Continuing operations $ .18 $ .29 $ .27 $ .24 $ .98
Discontinued operations 1.69 - 0 - - 0 - (.61) 1.08
------ ----- ----- ----- -----
Net income (loss) $1.87 $ .29 $ .27 $(.37) $2.06
===== ===== ===== ===== =====
a) Reflects an adjustment due to the Company's 100% valuation allowance
against its note receivable net of taxes. (see note 2)
March 31, 1999
--------------
Revenues $68,321,125 $88,985,409 $87,998,697 $88,869,919 $334,175,150
Income from
continuing operations 1,337,114 1,387,100 1,684,738 1,537,926 5,946,878
Loss from
discontinued operations ( 639,962) ( 1,150,356) ( 100,611) ( 2,708,094) ( 4,599,023)
----------- ------------- ------------- ------------- -----------
Net income (loss) $ 697,152 $ 236,744 $ 1,584,127 $( 1,170,168) $ 1,347,855
=========== ============= ============= ============= ===========
Earnings per common share - basic
---------------------------------
Continuing operations $ .23 $ .23 $ .28 $ .24 $ .98
Discontinued operations (.11) (.19) (.01) (.45) (.76)
------ ----- ----- ----- -----
Net income (loss) $ .12 $ .04 $ .27 $(.21) $ .22
===== ===== ===== ===== =====
Earnings per common share - diluted
-----------------------------------
Continuing operations $ .21 $ .23 $ .26 $ .17 $ .87
Discontinued operations (.10) (.19) (.02) (.36) (.67)
------ ----- ----- ----- -----
Net income (loss) $ .11 $ .04 $ .24 $(.19) $ .20
===== ===== ===== ===== =====
</TABLE>
Earnings per common share are computed independently for each of the
quarters presented. Therefore, the sum of the quarterly per common share
information may not equal the annual earnings per common share.
F-6
<PAGE>
ALLOU HEALTH AND BEAUTY CARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
DESCRIPTION OF OPERATIONS - The Company is engaged in the business of
distributing brand name health and beauty aids, cosmetics, fragrances, grocery
products and pharmaceuticals. The Company also distributes generic brand health
and beauty aids and manufactures hair and skin care products. The Company sells
these products primarily to retailers throughout the United States.
PRINCIPLES OF CONSOLIDATION - The accompanying consolidated financial
statements include the accounts of the Company and its subsidiaries. All
significant intercompany transactions and balances have been eliminated.
REVENUE RECOGNITION - The Company recognizes revenue at the time the
products are shipped to the customer.
FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying values of financial
instruments approximate fair value due to the relatively short period of time
between origination of the instruments and their expected realization, or, in
the case of notes payable, because the notes are at interest rates competitive
with those that would be available to the Company in the current market
environment.
CONCENTRATION OF CREDIT RISK - The Company extends credit based on an
evaluation of the customer's financial condition, generally without requiring
collateral. Exposure to losses on receivables is principally dependent on each
customer's financial condition. The Company monitors its exposure for credit
losses and maintains allowances for anticipated losses.
Concentration of credit risk with respect to trade accounts receivable is
limited due to the number of entities and the size of those entities comprising
the Company's customer base. No single customer accounted for more than 10% of
the Company's consolidated net revenues during fiscal years 2000, 1999 and
1998.
INVENTORIES - Inventories, which consist of finished goods, are stated at
the lower of average cost (first-in first-out) method or market.
PROPERTY AND EQUIPMENT - Property and equipment are stated at cost.
Depreciation is provided over the estimated useful lives of the assets by use of
straight-line and accelerated methods.
GOODWILL - Goodwill representing the excess of the purchase price over the
fair value of net assets acquired is being amortized using the straight-line
method, over periods ranging from ten to forty years. The Company periodically
performs reviews to evaluate the recoverability of goodwill and other
intangibles and takes into account events or circumstances that warrant revised
estimates of useful lives or that indicate that an impairment exists.
F-7
<PAGE>
ALLOU HEALTH AND BEAUTY CARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
INCOME TAXES - The provision for income taxes is determined in accordance
with SFAS No. 109, "Accounting for Income Taxes." Deferred tax assets and
liabilities arise from temporary differences between the tax bases of assets and
liabilities and their reported amounts in the consolidated financial statements
that will result in taxable or deductible amounts in future years.
PER SHARE DATA - Basic earnings per share is based on the weighted effect
of all common shares issued and outstanding, and is calculated by dividing net
income available to common stockholders by the weighted average shares
outstanding during the period. Diluted earnings per share is calculated by
dividing net income by the weighted average number of common shares used in the
basic earnings per share calculation plus the number of common shares that would
be issued assuming conversion of all potentially dilutive common shares
outstanding.
STOCK BASED COMPENSATION - The Company accounts for stock options as
prescribed by APB Opinion No. 25 and discloses the pro forma information
required by Statement of Financial Accounting Standards No. 123. Accordingly, no
compensation expense has been recognized in the financial statement for options
granted with an exercise price at least equal to market value at the date of
grant or in connection with the employee stock purchase plans.
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 reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of the revenues and expenses
during the reported period. Actual results could differ from those estimates.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS - In June 1998, the
Financial Accounting Standards Board issued Statement No. 133, Accounting for
Derivative Instruments and Hedging Activities, which is required to be adopted
in years beginning after June 15, 2000. Because the Company does not employ
derivatives, management believes that the adoption of the new Statement will
have no effect on earnings or the financial position of the Company.
RECLASSIFICATIONS - As a result of the sale by the Company of its majority
interest in The Fragrance Counter Inc., (note 2) the statement of income and
cash flows for the prior years and related notes have been restated to segregate
the net results of continued and discontinued operations.
2. ACQUISITIONS AND DISPOSITIONS
On June 23, 1998, the Company purchased certain assets of Direct Fragrance,
Inc., a telemarketer of fragrances located in Florida for $2,761,671. The assets
include inventories, fixed assets and intangibles.
F-8
<PAGE>
ALLOU HEALTH AND BEAUTY CARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
On April 27, 1998, certain officers of the Company advanced cash of
$3,000,000 to The Fragrance Counter Inc., then a wholly owned subsidiary of the
Company, and received a note for $3,000,000 bearing interest of 8.75% per annum
with a maturity date of October 27, 1998. On October 27, 1998 in lieu of
repayment, these officers received a 17.5% equity interest in common stock of
The Fragrance Counter Inc. As a result of this transaction, the Company
recognized a gain, net of taxes, of $1,800,000 in fiscal 1999.
On April 23, 1999, the Company sold a majority interest in The Fragrance
Counter Inc. for net proceeds of $11,296,584 in cash and $8,900,000 in notes,
secured by The Fragrance Counter Inc. common stock, bearing interest at 3/8%
above the prime rate. $400,000 was due and paid in July 1999 and $8,500,000 was
due in April 2000 with accrued interest. The Company retained a minority
interest.
In April 2000, the Company was notified that the makers of the notes would
not honor their obligation. As a result, the Company sent a notice of default
requesting either payment of the notes or a private sale of the collateral which
consists of 1,816,239 shares of ibeauty.com common stock, a privately held
internet company, which is the successor to The Fragrance Counter Inc. The
Company has recorded a valuation allowance of $8,500,000 equal to the face value
of the notes. As a result of the sale, the Company recognized a gain of
$8,432,401 net of taxes in fiscal 2000, after the provision for the valuation
allowance.
On January 3, 2000, the Company purchased the intangible assets of
Tri-State Pharmaceutical Consultants Corp., a pharmaceutical wholesaler, for
cash and stock. The Company also entered into an employment contract with
Tri-State's former principal shareholder.
On February 8, 2000, the Company entered into an agreement whereby it
obtained a 50% interest in Discreet Medical Solutions, LLC (DMS), a company
formed to create an internet portal to provide on-line delivery of certain
medical products and content. The terms of the agreement require the Company to
advance up to $5,000,000 for general working capital purposes. Interest is due
from DMS at a rate 3/4% above the prime rate and payments commence once DMS
operates at a positive cash flow level. DMS expects to commence operations
during the Company's second quarter. At March 31, 2000, the outstanding balance
due to the Company was $123,323.
3. OTHER CURRENT ASSETS:
The components of other current assets are:
<TABLE>
<CAPTION>
March 31, March 31,
2000 1999
---- ----
<S> <C> <C>
Interest bearing officers loans $1,743,866 $1,750,000
Insurance reimbursement receivable - 0 - 6,835,812
Prepaid advertising contracts - 0 - 1,393,333
Product rebates receivable 789,809 424,435
Other 1,749,923 2,473,062
--------- ---------
$4,283,598 $12,876,642
========= ==========
</TABLE>
F-9
<PAGE>
ALLOU HEALTH AND BEAUTY CARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. PROPERTY AND EQUIPMENT:
Property and equipment consists of:
<TABLE>
<CAPTION>
March 31, Estimated
2000 1999 Useful Lives
---- ---- ------------
<S> <C> <C> <C>
Machinery and Equipment $2,397,524 $1,989,344 5 years
Furniture, Fixtures and
Office Equipment 3,138,250 3,234,679 5-10 years
Leasehold Improvements 3,166,945 2,861,482 10-33 years
--------- ---------
8,702,719 8,085,505
Less: Accumulated Depreciation 4,778,176 4,245,599
--------- ---------
$3,924,543 $3,839,906
========= =========
</TABLE>
Depreciation expense for the years ended March 31, 2000, 1999 and 1998
amounted to $627,454, $664,706 and $582,546, respectively.
5. OTHER ASSETS:
The components of other assets are:
<TABLE>
<CAPTION>
March 31,
2000 1999
---- ----
<S> <C> <C>
Goodwill, net of amortization $4,844,727 $2,120,040
Interest bearing officers loans - 0 - 2,016,665
Minority interest investment
(under 20% ownership) 3,000,000 - 0 -
Other 1,302,640 891,196
--------- ----------
$9,147,367 $5,027,901
========= =========
</TABLE>
Amortization of goodwill charged to operations amounted to $148,073,
$76,239 and $66,864 for the years ended March 31, 2000, 1999 and 1998,
respectively.
6. AMOUNTS DUE BANK:
The Company has a secured line of credit with a consortium of banks. The
financing agreement provides for advances of up to 85% of eligible receivables
and 60% of eligible inventories with aggregate maximum advances of $163,500,000,
with a $5,000,000 sublimit for overadvances. Interest on the loan balance is
payable monthly at 3/8% above the prime rate or 2% above the Eurodollar rate, at
the option of the Company. The loan is collateralized by the Company's accounts
receivable and inventories and the overadvances are guaranteed by the Company's
principal stockholders. In addition, the Company is required to abide by certain
financial covenants. The effective interest rates charged to the Company at
March 31, 2000 and 1999 were 7.96% and 7.16%, respectively.
Effective May 8, 2000, the Company was approved for a $200,000,000 secured
line of credit with interest payable at 3/4% above the prime rate or 2.5% above
the Eurodollar rate. As of June 19, 2000, the credit line has been funded in the
amount of $185,081,000.
F-10
<PAGE>
ALLOU HEALTH AND BEAUTY CARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. LONG-TERM DEBT:
Long-term debt consists of:
(a) Notes collateralized by certain of the Company's equipment and
leasehold improvements, payable in aggregate monthly installments of
approximately $67,885, which include interest at rates varying from
3/8% above the prime rate to 3.36% above the three year treasury rate.
At March 31, 2000, the principal balance outstanding was $1,639,359.
(b) A loan payable to the previous stockholder of M. Sobol, Inc., with
interest payable on the declining principal balance at 5.45% per
annum, through April 1, 2000. At March 31, 2000, the principal balance
outstanding was $109,042.
(c) Notes payable to previous stockholder of Tri-State Pharmaceutical
Consultants Corp., with interest payable on the declining balance at
6% per annum through July 1, 2002. At March 31, 2000, the principal
balance outstanding was $1,723,368.
The aggregate long-term debt is payable as follows:
Year Ending
March 31,
---------
2001 $1,831,547
2002 717,481
2003 349,560
2004 141,702
2005-2007 431,479
----------
$3,471,769
==========
8. ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
Accounts payable and accrued expenses consist of:
<TABLE>
<CAPTION>
March 31,
2000 1999
---- ----
<S> <C> <C>
Accounts Payable, Purchases $25,527,469 $28,669,375
Selling, General and Administrative Expenses 2,391,120 3,995,110
Accrued Bank Interest 822,490 683,173
Accrued Payroll 548,098 588,565
------------ ------------
$29,289,177 $33,936,223
============ ============
</TABLE>
F-11
<PAGE>
ALLOU HEALTH AND BEAUTY CARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. COMMITMENTS AND CONTINGENCIES:
OPERATING LEASES - The Company is obligated under real property operating
leases expiring through May, 2005. As of March 31, 2000, total minimum annual
rentals, excluding additional payments for real estate taxes and certain
expenses, are as follows:
Year Ending
March 31,
---------
2001 $968,419
2002 855,027
2003 799,457
2004 652,989
2005-2006 730,262
Rent expense for the years ended March 31, 2000, 1999 and 1998 amounted to
$1,157,837, $1,074,675 and $895,879, respectively. Rent expense for the year
ended March 31, 2000 and 1999 includes $190,509 and $144,200, respectively, paid
for the Company's premises in Florida where rent was being paid on a month to
month basis. The Company entered into a three year lease agreement for these
premises commencing May 1, 2000.
UNION CONTRACT - The Company has an agreement with the National
Organization of Industrial Trade Unions which terminates on December 14, 2000.
The agreement covers all warehouse and receiving employees, excluding
supervisory personnel.
DEFINED CONTRIBUTION PLAN - Effective April 1, 1996, the Company
established a defined contribution plan (401k) for substantially all employees
not covered under collective bargaining agreements. All employees over the age
of 21, with at least one year of service to the Company, can contribute from 2%
to 15% of their gross salaries limited to Internal Revenue Service regulations.
Contributions by the Company are optional. For the years ended March 31, 2000,
1999 and 1998, the Company did not contribute to this plan.
EMPLOYMENT AGREEMENTS - The Company has three year employment agreements
with three of its officers, which expire July 31, 2001. These agreements provide
for each officer to receive an annual salary of $300,000 and bonuses based on a
percentage of the Company's earnings. For the years ended March 31, 2000, 1999
and 1998, such bonuses aggregated $1,536,000, $- 0 - and $206,482, respectively.
LEGAL PROCEEDINGS - The Company is a party to a number of legal proceedings
as either plaintiff or defendant, all of which are considered routine litigation
incidental to the business of the Company.
F-12
<PAGE>
ALLOU HEALTH AND BEAUTY CARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. STOCK OPTION PLANS:
The Company has adopted Stock Option Plans, which provide for the granting
of stock options to certain employees and directors. An aggregate of 3,800,000
shares of common stock are reserved for issuance under the Plans. Incentive
stock options are granted at no less than fair market value of the shares on the
date of grant. Options granted to individuals owning more than 10% of the voting
power of the Company's capital stock are granted at 110% of the fair market
value at the date of grant.
Option activities for the years ended March 31, 2000, 1999 and 1998 were as
follows:
<TABLE>
<CAPTION>
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Options outstanding
at beginning of year 2,489,420 2,036,025 1,381,150
Granted 388,300 559,750 1,136,100
Exercised ( 66,375) ( 102,605) ( 17,625)
Cancelled ( 36,880) ( 3,750) ( 463,600)
----------- ------------ ---------
Options outstanding
at end of year 2,774,465 2,489,420 2,036,025
=========== ============ ============
Option price range
at end of year $4.00 to $10.00 $4.00 to $7.70 $5.80 to $10.00
==== ===== ==== ==== ==== =====
</TABLE>
The Company has adopted the disclosure only provisions of SFAS No. 123
"Accounting for Stock-Based Compensation." If the Company had elected to
recognize compensation costs based on the fair value at the date of grant for
awards consistent with the provisions of SFAS No. 123, net income per common
share from continuing operations would have been reduced to the following:
<TABLE>
<CAPTION>
Years Ended March 31,
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Net Income - Pro Forma $6,210,756 $5,553,573 $4,636,208
Earnings Per Common Share - Pro Forma $.86 $.81 $.64
</TABLE>
The weighted average fair values at date of grant for options granted
during fiscal 2000, 1999 and 1998 was $3.09, $1.51 and $2.43, respectively, and
were estimated using the Black-Scholes option pricing model utilizing the
following assumptions: No dividend yield; expected volatility rates of 54%, 42%
and 31%; risk free interest rates approximating 6%, 4% and 6%, respectively, and
expected lives of 5 years.
F-13
<PAGE>
ALLOU HEALTH AND BEAUTY CARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. STOCKHOLDERS' EQUITY:
On September 15, 1998, the stockholders of the Company approved an increase
in the number of authorized shares of Class A common stock from 10,000,000 to
15,000,000 shares. The Company is also authorized to issue 1,000,000 shares of
preferred stock. Holders of Class A Common Stock and Class B Common Stock share
pro rata in all dividends declared by the Board of Directors. The holders of
Class A Common Stock and Class B Common Stock are entitled to one and five votes
per share, respectively, for every matter on which the stockholders of the
Company are entitled to vote. Each share of Class B Common Stock is convertible
at the option of the holder into one share of Class A Common Stock. All
outstanding shares of Class A Common Stock and Class B Common Stock are freely
transferable, subject to applicable law. The Company is authorized to issue
2,200,000 shares of Class B Common Stock.
On December 15, 1998, the Company sold 666,667 shares of its Class A Common
Stock at $9 per share in a private placement offering, which were registered on
January 26, 1999. Net proceeds to the Company from the offering after deduction
of associated expenses were $5,673,344. This sale included the sale of Warrants
which were exercisable for variable number of shares of Class A Common Stock if
the market price fell below 115% ($10.35) of the sale price during three
exercise periods which began 30 days after the effective date. As a result of
the market price fluctuations of the Company's stock during these periods,
during fiscal 2000 the Company issued an additional 85,304 shares of its Class A
Common Stock in connection with the private placement.
During fiscal 1999, employees of the Company exercised of stock options for
102,605 shares, which resulted in net proceeds to the Company of $701,954.
During fiscal 2000, employees of the Company exercised stock options for
19,150 shares, which resulted in net proceeds to the Company of $360,762.
On January 4, 2000, the Company issued 75,472 common shares valued at
$500,000, in connection with its purchase of Tri-State Pharmaceutical
Consultants Corp.
12. INCOME TAXES:
The components of income tax expense from continuing operations are
summarized as follows:
<TABLE>
<CAPTION>
Years Ended March 31,
2000 1999 1998
---- ---- ----
Current:
<S> <C> <C> <C>
Federal $3,553,000 $3,364,742 $2,663,191
State 679,600 913,778 313,316
---------- ---------- ----------
4,232,600 4,278,520 2,976,507
--------- --------- ---------
Deferred:
Federal 98,000 ( 272,000) - 0 -
State 8,400 ( 48,000) - 0 -
------------ ----------- --------------
106,400 ( 320,000) - 0 -
---------- ---------- --------------
Total $4,339,000 $3,958,520 $2,976,507
========= ========= =========
</TABLE>
F-14
<PAGE>
ALLOU HEALTH AND BEAUTY CARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following is a reconciliation of the statutory income tax rate to the
total effective tax rates on income from continuing operations:
<TABLE>
<CAPTION>
Years Ended March 31,
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Federal Statutory Income Tax Rate 34.0% 34.0% 34.0%
Increase in Tax Rates Resulting from:
State Income Taxes, Net of Federal Tax
Benefits 4.1% 7.2% 5.3%
Benefit of Net Operating Loss Carryforward (0.0%) (1.2%) (1.2%)
---- ---- ----
Effective Tax Rates For Continuing Operations 38.1% 40.0% 38.1%
===== ===== =====
</TABLE>
Deferred tax assets (liabilities) are comprised of the following:
<TABLE>
<CAPTION>
March 31,
2000 1999
---- ----
<S> <C> <C>
Deferred Gain on Sale of Minority Interest in Subsidiary $ - 0 - $(1,088,000)
Other (106,400) 256,000
------- ----------
Net Deferred Tax Liability $(106,400) $( 832,000)
======= ==========
</TABLE>
13. EARNINGS PER COMMON SHARE:
The following table sets forth a reconciliation of the weighted-average
shares (denominator) used in the computation of basic and diluted EPS for the
statement of operations periods presented herein.
<TABLE>
<CAPTION>
Years Ended March 31,
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Basic 6,673,617 6,061,431 5,757,328
Assumed exercise of stock options 623,267 738,712 215,064
--------- ---------- ---------
Diluted 7,296,884 6,800,143 5,972,392
========= ========= =========
Potentially dilutive securities excluded from
computations because they are anti-dilutive 320,250 - 0 - 415,300
======= ===== =======
</TABLE>
Net income as presented in the consolidated statement of operations is used
as the numerator in the EPS calculation for both the basic and diluted
computations.
14. RELATED PARTY TRANSACTIONS:
The Company purchases inventories from various entities that are controlled
by certain of the Company's officers. For the years ended March 31, 2000, 1999
and 1998, purchases from related parties amounted to $12,229,183, $14,705,794
and $4,443,634, respectively.
F-15
<PAGE>
ALLOU HEALTH AND BEAUTY CARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. SEGMENT DATA:
Operating segments are defined as components of an enterprise about which
separate financial information is available that is evaluated regularly by the
Company's chief operating decision maker, or decision making group, in deciding
how to allocate resources and in assessing performance. The Company's chief
operating decision maker is its Chief Executive Officer. The operating segments
of the Company are managed separately because each segment represents a
strategic business unit that offers different products or a different customer
base.
The Company's reportable operating segments are:
a) Wholesale distribution of cosmetics, fragrances, health and beauty aids
and non-perishable food products.
b) Wholesale distribution of pharmaceuticals.
c) Manufacturing of hair and skin care products.
The accounting policies of the Company's operating segments are the same as
those described in Note 1 - Summary of Significant Accounting Policies. The
Company evaluates the performance of its segments based on segment profit, which
includes the overhead charges directly attributable to the segment and excludes
certain expenses, which are managed outside the reportable segments. Corporate
expenses including interest and income taxes are being allocated to the
wholesale distribution segment only.
Segment data from continuing operations for each of the three years in the
period ended March 31, 2000 was as follows:
<TABLE>
<CAPTION>
Wholesale Pharmaceuticals Intersegment
Distribution Distribution Manufacturing Transactions Consolidated
------------ ------------ ------------- ------------ ------------
Year Ended March 31, 2000
<S> <C> <C> <C> <C> <C>
Revenue $334,797,233 $110,241,393 $7,327,336 $(31,319,189) $421,046,773
Depreciation and Amortization 743,110 53,700 142,388 - 0 - 939,198
Income (Loss) From Operations
Before Taxes 11,250,797 406,067 (274,316) - 0 - 11,382,548
Segment Assets 211,415,018 42,203,513 6,336,921 - 0 - 259,955,452
Year Ended March 31, 1999
Revenue $292,004,548 $46,961,918 $1,867,979 $(6,659,295) $334,175,150
Depreciation and Amortization 712,345 14,189 106,079 - 0 - 832,613
Income (Loss) From Operations
Before Taxes 11,111,721 424,208 (1,630,531) - 0 - 9,905,398
Segment Assets 204,911,125 12,744,061 2,252,195 - 0 - 219,907,381
Year Ended March 31, 1998
Revenue $256,603,011 $45,856,322 $1,661,073 $(3,028,189) $301,092,217
Depreciation and Amortization 569,757 23,329 94,518 - 0 - 687,604
Income (Loss) From Operations
Before Taxes 8,435,344 413,980 (1,016,410) - 0 - 7,832,914
Segment Assets 167,544,969 8,836,726 2,002,601 - 0 - 178,384,296
</TABLE>
F-16
