SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended September 30, 1996 Commission File No. 1-4436
THE STEPHAN CO.
(Exact Name of Registrant as Specified in its Charter)
Florida 59-0676812
(State or Other Jurisdiction of (I.R.S Employer
Incorporation or Organization) Identification No.)
1850 West McNab Road, Fort Lauderdale, Florida 33309
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (954) 971-0600
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
the filing requirements for at least the past 90 days.
YES X
NO
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the Registrant has filed all documents and
reports required to be filed by Section 12, 13 and 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a
plan confirmed by a court.
YES
NO
(APPLICABLE ONLY TO CORPORATE ISSUERS)
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the close of the period covered by this report.
Common Shares outstanding as of September 30, 1996
4,153,966
THE STEPHAN CO. AND SUBSIDIARIES
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
SEPTEMBER 30, 1996
INDEX
PAGE NO.
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Balance Sheets
September 30, 1996 and December 31, 1995 3-4
Consolidated Statements of Operations
Nine months ended September 30, 1996 and 1995 5
Consolidated Statements of Operations
Quarter ended September 30, 1996 and 1995 6
Consolidated Statements of Cash Flows
Nine months ended September 30, 1996 and 1995 7-9
Notes to Consolidated Financial Statements 10-13
ITEM 2. Management's Discussion and Analysis
of Financial Condition and
Results of Operations. 14-15
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
CAUTIONARY STATEMENT FOR PURPOSES OF THE SAFE HARBOR
PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This report contains certain "forward-looking" statements. The
Company desires to take advantage of the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995 and is including this
statement for the express purpose of availing itself of the protections of
such safe harbor with respect to all such forward-looking statements.
Examples of forward-looking statements contained herein include statements
with respect to (i) anticipated debt retirement, and (ii) anticipated sales
level for 1996. The Company's ability to predict any such occurrences or
the effect of other events on the Company's operations is inherently
uncertain. Therefore, the Company wishes to caution each reader of this
report to carefully consider the specific factors discussed with such
forward-looking statements, as such factors could affect the ability of the
Company to achieve its objectives and may cause actual results to differ
materially from those expressed herein.
2
THE STEPHAN CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
September 30, December 31,
1996 1995
____________ ____________
CURRENT ASSETS
Cash and cash equivalents $ 6,804,485 $ 7,711,239
Accounts receivable, net 4,948,040 5,414,530
Inventories, net 9,077,976 7,059,536
Prepaid expenses and other
current assets 275,459 252,205
___________ ____________
TOTAL CURRENT ASSETS 21,105,960 20,437,510
PROPERTY, PLANT AND EQUIPMENT, net 2,148,056 2,097,757
INTANGIBLE ASSETS, net 23,312,996 18,948,428
NOTE RECEIVABLE - 500,000
OTHER ASSETS 301,537 478,848
___________ ___________
TOTAL ASSETS $46,868,549 $42,462,543
=========== ===========
See Notes to Consolidated Financial Statements
(UNAUDITED)
3
THE STEPHAN CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
September 30, December 31,
1996 1995
____________ ____________
CURRENT LIABILITIES
Initial payment-Colgate/Palmolive $ - $ 2,000,000
Current portion of
long-term debt 1,469,375 612,757
Accounts payable and
accrued expenses 2,375,137 1,661,654
Note payable to bank 400,000 400,000
Credit line payable to bank 1,000,000 -
Income taxes payable 751,993 -
____________ ____________
TOTAL CURRENT LIABILITIES 5,996,505 4,674,411
DEFERRED INCOME TAXES 220,729 120,121
LONG-TERM DEBT 7,802,524 9,112,129
____________ ____________
TOTAL LIABILITIES 14,019,758 13,906,661
____________ ____________
STOCKHOLDERS' EQUITY
Common stock, $.01 par value 41,619 41,225
Additional paid in capital 13,230,144 12,583,995
Retained earnings 19,685,971 15,930,662
____________ ____________
32,957,734 28,555,882
LESS:TREASURY STOCK(7,900 SHARES) (108,943) -
____________ ____________
TOTAL STOCKHOLDERS' EQUITY 32,848,791 28,555,882
____________ ____________
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 46,868,549 $ 42,462,543
============ ============
See Notes to Consolidated Financial Statements
(UNAUDITED)
4
THE STEPHAN CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Nine Months Ended September 30,
==============================
1996 1995
___________ ___________
NET SALES $20,218,629 $21,321,963
COST OF GOODS SOLD 8,059,473 9,276,664
___________ ___________
GROSS PROFIT 12,159,156 12,045,299
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 6,106,984 6,599,070
___________ ___________
OPERATING INCOME 6,052,172 5,446,229
OTHER INCOME(EXPENSE)
Interest income 288,551 249,549
Interest expense (204,079) (69,244)
Other income 56,250 600
___________ ___________
INCOME BEFORE TAXES 6,192,894 5,627,134
INCOME TAXES 2,189,529 1,981,685
___________ ___________
NET INCOME $ 4,003,365 $ 3,645,449
=========== ===========
NET INCOME PER COMMON SHARE $ .97 $ .88
=========== ===========
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 4,137,053 4,128,704
=========== ===========
See Notes to Consolidated Financial Statements
(UNAUDITED)
5
THE STEPHAN CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Quarter Ended September 30,
===========================
1996 1995
___________ ___________
NET SALES $ 7,010,887 $ 7,160,477
COST OF GOODS SOLD 2,736,754 2,723,802
___________ ___________
GROSS PROFIT 4,274,133 4,436,675
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 2,101,434 2,310,062
___________ ___________
OPERATING INCOME 2,172,699 2,126,613
OTHER INCOME(EXPENSE)
Interest income 94,508 92,512
Interest expense (143,866) (23,888)
Other income 13,050 524
___________ ___________
INCOME BEFORE TAXES 2,136,391 2,195,761
INCOME TAXES 684,834 809,568
___________ ___________
NET INCOME $ 1,451,557 $ 1,386,193
=========== ===========
NET INCOME PER COMMON SHARE $ .35 $ .34
=========== ===========
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 4,159,703 4,136,980
=========== ===========
See Notes to Consolidated Financial Statements
(UNAUDITED)
6
THE STEPHAN CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30,
==============================
1996 1995
___________ ___________
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,003,365 $ 3,645,449
___________ ___________
Adjustments to reconcile net income to
cash flows provided by operating
operating activities:
Depreciation 151,261 117,110
Amortization 396,970 359,373
Deferred income taxes 100,608 -
Provision for doubtful accounts 36,005 -
Changes in operating assets and
liabilities, net of effects of
acquisitions:
Accounts receivable (1,052,275) (995,461)
Inventory (1,161,216) (1,168,678)
Prepaid expenses
and other current assets (10,774) (162,089)
Accounts payable
and accrued expenses (2,461,503) (1,123,185)
Income taxes payable 751,993 29,944
____________ ____________
Total adjustments (3,248,931) (2,942,986)
____________ ____________
Net cash flows provided by
operating activities 754,434 702,463
____________ ____________
See Notes to Consolidated Financial Statements
(UNAUDITED)
7
THE STEPHAN CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30,
==============================
1996 1995
___________ __________
CASH FLOWS FROM INVESTING ACTIVITIES:
Changes in marketable securities - 313,662
Purchase of property, plant
and equipment (146,009) (144,358)
Net changes in other assets 757,036 (66)
Other investments - 137,700
___________ ___________
Net cash flows provided by/(used in)
investing activities 611,027 306,938
___________ ___________
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from bank loan 7,000,000 -
Repayments of long-term debt (8,965,224) (116,527)
Acquisition of treasury stock (108,943) -
Proceeds from exercise of options 50,009 37,081
Dividends paid (248,057) (82,450)
___________ ___________
Net cash flows used in
financing activities (2,272,215) (161,896)
___________ ___________
NET CHANGE IN CASH AND
CASH EQUIVALENTS (906,754) 847,505
CASH, BEGINNING OF PERIOD 7,711,239 6,292,537
___________ ___________
CASH, END OF PERIOD $ 6,804,485 $ 7,140,042
=========== ===========
See Notes to Consolidated Financial Statements
(UNAUDITED)
8
THE STEPHAN CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Supplemental Disclosures of Cash Flow Information:
Nine Months Ended September 30,
------------------------------
1996 1995
___________ ___________
Interest paid $ 199,041 $ 68,812
=========== ===========
Income taxes paid $ 1,195,000 $ 1,913,598
=========== ===========
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
In connection with the acquisition of Sorbie Acquisition Co. and
Subsidiaries on June 28, 1996, the Company acquired inventory, accounts
receivable, fixed and intangible assets and assumed certain liabilities by
issuance of common stock with an approximate net value of $518,000.
See Notes to Consolidated Financial Statements
(UNAUDITED)
9
THE STEPHAN CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTERS ENDED SEPTEMBER 30, 1996 AND 1995
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION: The accompanying unaudited
consolidated financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments necessary for a
fair presentation of financial position and results of operations are
reflected in the interim financial statements.
PRINCIPLES OF CONSOLIDATION: The consolidated financial
statements include the accounts of The Stephan Co., and its wholly-owned
subsidiaries, Foxy Products, Inc., Old 97 Company, Williamsport Barber and
Beauty Corp., Stephan and Co. (formerly Heads or Nails, Inc.) Scientific
Research Products of Delaware, Inc. and Sorbie Acquisition Co. and
subsidiaries, acquired June 28, 1996. All significant intercompany
balances and transactions have been eliminated in consolidation.
BUSINESS ACTIVITY: The Stephan Co. is engaged in the
manufacture, sale, and distribution of personal care grooming products
throughout the United States. The Company's business activity constitutes
a single reportable segment for purposes of Statement of Financial
Accounting Standards No 14.
USE OF ESTIMATES: The preparation of consolidated 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 disclosures of contingent
assets and liabilities at the date of the consolidated financial statements
and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS: Statement of Financial
Accounting Standards No. 107, "Disclosure about Fair Value of Financial
Instruments," requires disclosure of the fair value of financial
instruments, both assets and liabilities, recognized and not recognized in
the consolidated balance sheets of the Company, for which it is practicable
to estimate fair value. The estimated fair values of financial instruments
which are presented herein have been determined by the Company using
available market information and appropriate valuation methodologies.
However, considerable judgment is required in interpreting market data to
develop estimates of fair value. Accordingly, the estimates presented
herein are not necessarily indicative of amounts the Company could realize
in a current market exchange.
The following methods and assumptions were used to estimate fair
value:
- the carrying amounts of cash and cash equivalents, receivables and
accounts payable approximate fair value due to their short term nature;
10
THE STEPHAN CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTERS ENDED SEPTEMBER 30, 1996 AND 1995
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (con't)
- discounted cash flows using current interest rates for financial
instruments with similar characteristics and maturity were used to
determine the fair value of short-term and long-term debt.
There were no significant differences in the carrying value and fair market
value of financial instruments.
CASH AND CASH EQUIVALENTS: Cash and cash equivalents include cash,
certificates of deposit, United States Treasury Bills, and municipal bonds
having maturities of two months or less. Also included in cash and cash
equivalents is a $400,000 certificate of deposit pledged as collateral
against a $400,000 note payable to bank. The Company maintains cash
deposits at certain financial institutions in amounts in excess of
federally insured limits of $100,000. Cash and cash equivalents held in
interest-bearing accounts as of September 30, 1996 was approximately
$6,642,000 and $5,342,000 at December 31, 1995.
INVENTORIES: Inventories are stated at the lower of cost
(determined on the first-in, first-out basis) or market.
Inventories were as follows:
September 30, December 31,
1996 1995
____________ ____________
Raw Materials $ 1,073,102 $ 1,078,275
Packaging and components 2,556,075 2,000,850
Work in progress 761,393 596,391
Finished goods 4,687,406 3,384,020
____________ ____________
Total Inventories $ 9,077,976 $ 7,059,536
============ ============
PROPERTY AND EQUIPMENT: Property and equipment are recorded
at cost. Depreciation is provided on a straight line basis over the
estimated useful lives of the assets as follows:
Buildings and improvements 15-30 years
Machinery and equipment 5-7 years
Furniture, fixtures and office equipment 3-5 years
INTANGIBLE ASSETS: Intangible assets are amortized using the
straight-line method based on the following estimated useful lives:
Goodwill 20-40 years
Covenant not to compete 7 years
Trademarks 20-40 years
11
THE STEPHAN CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTERS ENDED SEPTEMBER 30, 1996 AND 1995
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (con't)
The amount of impairment, if any, in unamortized Goodwill is measured
based on projected future results of operations. To the extent future
results of operations of those subsidiaries to which the Goodwill relates
through the period such Goodwill is being amortized are sufficient to
absorb the amortization of Goodwill, the Company has deemed there to be no
impairment of Goodwill.
NET INCOME PER COMMON SHARE: Net income per common share is
computed by dividing net income by the sum of the weighted average number
of shares of common stock and common stock assumed to be outstanding upon
exercise of all stock options, utilizing the treasury stock method. The
weighted average number of shares outstanding was 4,137,053 for the nine
months ended September 30, 1996 and 4,128,704 for the nine months ended
September 30, 1995. Fully diluted earnings per share is not presented as
it is not materially different.
NOTE 2: LONG-TERM DEBT
On June 26, 1996, the Company refinanced the $6,000,000, 8% notes
payable to The Colgate/Mennen Co.'s. by securing a 5 year bank loan in the
amount of $6,000,000, with an interest rate of 7.85%. Interest and
principal of $100,000 is payable monthly under the terms of the loan
agreement.
NOTE 3: ACQUISITION OF SORBIE ACQUISITION CO.
On June 28, 1996, the Company entered into a Stock Purchase
Agreement with Sorbie Acquisition Co. ("Sorbie") and all the stockholders
of Sorbie, including Charles V. Hall, Sorbie's President and principal
stockholder, as well as related agreements described below with Charles V.
Hall, Trevor Sorbie International, Trevor Sorbie, Sampson Arms, Inc. and
Redken Laboratories, Inc. ("Redken").
Pursuant to such agreements, the Company exchanged 13,733 shares of
restricted common stock, valued at approximately $218,000, and additional
consideration as described below, for all outstanding common and preferred
stock of Sorbie. In addition, the Company issued an additional 18,898
shares of restricted common stock, valued at approximately $300,000, to
terminate an existing royalty agreement between Sampson Arms, Inc. and
Sorbie.
In addition to the above, the Company has replaced a certain Secured
Promissory Note of Sorbie in favor of Redken in the principal amount of
$3,250,000 with a cash payment of $500,000 and a promissory note of the
Company due July 19, 1996 in the principal amount of $2,000,000. The
$2,000,000 note referred to above was paid utilizing $1,000,000 of cash
available through a line of credit in addition to $1,000,000 of working
capital funds.
12
THE STEPHAN CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTERS ENDED SEPTEMBER 30, 1996 AND 1995
NOTE 3: ACQUISITION OF SORBIE ACQUISITION CO.(con't)
In separate agreements made in connection with the acquisition, the
Company amended the existing royalty contract between Trevor Sorbie of
America, Inc. ("TSA"), a wholly owned subsidiary of Sorbie, Trevor Sorbie
International, Sorbie Trading Limited and Trevor Sorbie. In accordance
with the amended agreement, the royalty payment percentage rate payable
upon future sales was restructured and further modifications were made
making the agreement less onerous for TSA.
Sorbie, a major customer of the Company, is the parent company of
TSA, a company engaged in the distribution of professional hair care
products sold in beauty salons nationwide. The Company used the purchase
method of accounting in accordance with Accounting Principles Board Opinion
No. 16 and recorded approximately $4,350,000 as the cost in excess of the
fair market value of the assets acquired, to be amortized over a 25 year
period.
13
THE STEPHAN CO. AND SUBSIDIARIES
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
SEPTEMBER 30, 1996 AND 1995
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
LIQUIDITY AND CAPITAL RESOURCES:
Cash and cash equivalents decreased $900,000 as of September 30, 1996 when
compared to the $7,700,000 on hand at December 31, 1995. This decrease was
due to debt reduction in connection with the Sorbie acquisition as well as
the refinancing of the Colgate/Mennen notes payable. As a result of the
acquisition of Sorbie in June, 1996, $1,500,000 of current cash resources,
in addition to drawing on a line of credit for $1,000,000, were utilized to
retire $3,250,000 of Sorbie-related debt. The $750,000 savings reduced the
total Sorbie debt of $3,250,000 to $2,500,000, therefore goodwill arising
from the Sorbie acquisition was reduced by this amount. Additionally, and
as explained more fully in Note 2, monthly debt service arising from the
Colgate acquisition is approximately $140,000 per month, effective July,
1996, in addition to the initial down payment of $2,000,000 paid January 2,
1996.
Accounts receivable, while lower than the amount outstanding at December
31, 1995, due to the elimination of the Sorbie receivable as an inter-
company amount, increased approximately $1,000,000 from June 30, 1996 due
to extended credit terms on large orders placed by qualifying customers at
the August, 1996 "BBSI" show and amounts due from Colgate as a result of
the expiration of the transition agreement. Inventory levels at September
30, 1996 were consistent with June 30, 1996 levels, but still substantially
higher than December 31, 1995 due to the acquisition of Sorbie.
Current maturities of long-term debt, as well as the credit line payable
have increased significantly due to refinancing and acquisition activity as
explained above and in Notes 2 and 3. On the basis of anticipated fourth
quarter cash flow, the Company expects to reduce the amount outstanding
under the line of credit by approximately $500,000.
Total current assets at September 30, 1996 was $21,106,000, which was an
increase of approximately $670,000 from December 31, 1995. Current
liabilities increased over $1,300,000 from December 31, 1995 to $5,997,000
at September 30, 1996, largely as a result of an increase in current
maturities of long-term debt, however working capital remained strong at
over $15,000,000 which was a ratio of better than 3 1/2 to 1.
The Company has continued to modernize the Tampa facility, in addition to
acquiring machinery and equipment needed for the Colgate lines.
Anticipated outlays for other capital improvements through the balance of
the year is not considered to be material in relation to the approximately
$150,000 already expended.
14
THE STEPHAN CO. AND SUBSIDIARIES
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
SEPTEMBER 30, 1996 AND 1995
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (con't).
RESULTS OF OPERATIONS
NET INCOME: For the nine months ended September 30, 1996, net income
increased almost 10% to $4,003,000, or over $350,000 higher than the nine
months ended September 30, 1995, which was $3,645,000. Earnings per share,
based upon 4,137,053 shares outstanding, was $ .97 for the nine months
ended September 30, 1996 compared to $ .88 for the comparable period in
1995, based on 4,128,704 shares outstanding. For the quarter ended
September 30, 1996, net income was $1,452,000, or $ .35 per share, compared
to $1,386,000, or $ .34 per share for the corresponding period in 1995.
The increase in net income is attributable to continued strong gross profit
margins due to a favorable product mix, as well as continued aggressive
cost containment. Royalty income from the sale of Frances Denney products,
as well as tax benefits from the donation of slow moving inventory also
accounted for the increase in net income.
Interest expense for the quarter ended September 30, 1996 increased
significantly - from $24,000 for the quarter ended September 30, 1995 to
$144,000 as a result of debt arising from the Colgate and Sorbie
acquisitions. The Company has chosen to reduce the outstanding debt by
establishing a rapid amortization of the term loan in addition to
projecting a $500,000 pay down on the credit line by the end of the year,
therefore it is anticipated that interest expenses peaked in this third
quarter and will decline steadily in the future.
Interest income is level for the third quarter of 1996 when compared to
1995, but has increased slightly for the nine months ended September 30,
1996 over the corresponding period in 1995. Interest income is anticipated
to remain constant through the fourth quarter based upon current interest
rates and projected cash balances.
REVENUES: Total revenues for the nine months ended September 30, 1996
decreased $1,100,000 to just over $20,200,000 when compared to sales of
$21,300,000 achieved through the nine months ended September 30, 1996. For
the third quarter of 1996, the decline in sales was $150,000, from
$7,160,000 for the quarter ended September 30, 1995 to just over $7,000,000
for the quarter ended September 30, 1996. This decline, as discussed more
fully in the Company's Form 10-K for the year-ended December 31, 1995 and
Form 10-Q for the quarter ended March 31, 1996, was due to the loss of
sales from the "Gold Bond" brand of medicated talc that was manufactured
for a major customer of the Company. Inasmuch as the majority of the
production of "Gold Bond" ceased in the latter part of 1995, the Company
does not expect any further material erosion of sales. More importantly,
with the acquisition of Sorbie and the Colgate brands, coupled with the
loss of the "Gold Bond" business, the Company no longer has as much
dependency on major customers and the loss of a customer will no longer
have as much effect on the business as had been the case in previous years.
15
THE STEPHAN CO. AND SUBSIDIARIES
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
SEPTEMBER 30, 1996 AND 1995
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27 - Financial Data Schedule
(b) On July 15, 1996, and as amended on August 21, 1996 and September 16,
1996, the Registrant filed a Form 8-K in connection with the acquisition of
Sorbie Acquisition Co. and subsidiaries.
16
SIGNATURES
Pursuant to the requirements 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.
THE STEPHAN CO.
/s/ Frank F. Ferola
___________________________________
Frank F. Ferola
President and Chairman of the Board
November 14, 1996
/s/ David A. Spiegel
___________________________
David A. Spiegel
Principal Financial Officer
November 14, 1996
17
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
FORM 10-Q FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 6,804,485
<SECURITIES> 0
<RECEIVABLES> 5,058,405
<ALLOWANCES> 110,365
<INVENTORY> 9,077,976
<CURRENT-ASSETS> 21,105,960
<PP&E> 3,135,161
<DEPRECIATION> 987,105
<TOTAL-ASSETS> 46,868,549
<CURRENT-LIABILITIES> 5,996,505
<BONDS> 7,802,524
0
0
<COMMON> 41,619
<OTHER-SE> 32,807,172
<TOTAL-LIABILITY-AND-EQUITY> 46,868,549
<SALES> 20,218,629
<TOTAL-REVENUES> 20,563,430
<CGS> 8,059,473
<TOTAL-COSTS> 8,059,473
<OTHER-EXPENSES> 6,311,063
<LOSS-PROVISION> 43,971
<INTEREST-EXPENSE> 204,079
<INCOME-PRETAX> 6,192,894
<INCOME-TAX> 2,189,529
<INCOME-CONTINUING> 4,003,365
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,003,365
<EPS-PRIMARY> .97
<EPS-DILUTED> .97
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