SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended March 31, 2000
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
such filing requirements for the past 90 days.
YES X 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 latest practicable date.
Shares of Common Stock outstanding as of May 15, 2000
4,554,757
THE STEPHAN CO. AND SUBSIDIARIES
QUARTERLY REPORT PURSUANT TO SECTION 13
OF THE SECURITIES EXCHANGE ACT OF 1934
MARCH 31, 2000
INDEX
PAGE NO.
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Balance Sheets as of
March 31, 2000 (unaudited) and December 31, 1999 4-5
Unaudited Consolidated Statements of Operations
for the Quarters Ended March 31, 2000 and 1999 6
Unaudited Consolidated Statements of Cash Flows
for the Quarters Ended March 31, 2000 and 1999 7-8
Notes to Unaudited Consolidated Financial
Statements 9-13
ITEM 2. Management's Discussion and Analysis
of Financial Condition and
Results of Operations. 14-15
ITEM 3. Quantitative and Qualitative
Disclosure About Market Risk 15
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 16
ITEM 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
2
THE STEPHAN CO. AND SUBSIDIARIES
QUARTERLY REPORT PURSUANT TO SECTION 13
OF THE SECURITIES EXCHANGE ACT OF 1934
MARCH 31, 2000
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
Stephan Co. (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. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors which may cause the actual results,
condition (financial or otherwise), performance or achievements of The
Stephan Co. and its subsidiaries to be materially different from any future
results, performance, condition or achievements projected, anticipated or
implied by such forward-looking statements.
Such factors include, but are not limited to, the following: general
economic and business conditions; competition; success of operating
initiatives; development and operating costs; advertising and promotional
efforts; brand awareness; the existence or absence of adverse publicity;
acceptance of new product offerings; changing trends in customer tastes;
the success of multi-branding; changes in business strategy or development
plans; quality of management; availability, terms and deployment of
capital; business abilities and judgment of personnel; availability of
qualified personnel; labor and employee benefit costs; availability and
cost of raw materials and supplies; changes in, or failure to comply with,
law; the ability to successfully integrate newly-acquired businesses and
the ability to reduce costs; the final outcome of litigation commenced
against the Company in respect of its overstatement of operating results
for 1998 interim periods and any risks, uncertainties and problems inherent
in such litigation; and other factors or events referenced in this Form 10-
Q. The Stephan Co. does not undertake and specifically declines any
obligation to publicly release the results of any revisions which may be
made to any forward-looking statements to reflect events or circumstances
after the date of such statements or to reflect the occurrence of
anticipated or unanticipated events.
Therefore, the Company cautions each reader of this report to
carefully consider the specific factors and qualifications discussed herein
with respect to 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 projected or anticipated
herein.
3
THE STEPHAN CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, December 31,
2000 1999
(UNAUDITED)
____________ ____________
CURRENT ASSETS
Cash and cash equivalents $ 12,288,189 $ 12,079,204
Accounts receivable 4,827,825 4,371,833
Inventories 12,100,958 11,954,191
Prepaid expenses and other
current assets 345,618 291,010
____________ ____________
TOTAL CURRENT ASSETS 29,562,590 28,696,238
PROPERTY, PLANT AND EQUIPMENT, net 2,921,508 2,984,260
INTANGIBLE ASSETS, net 25,569,160 25,855,739
OTHER ASSETS 2,577,726 3,148,827
____________ ____________
TOTAL ASSETS $ 60,630,984 $ 60,685,064
============ ============
See notes to unaudited Consolidated Financial Statements
4
THE STEPHAN CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, December 31,
2000 1999
(UNAUDITED)
___________ ____________
CURRENT LIABILITIES
Accounts payable and
accrued expenses $ 1,827,212 $ 1,856,669
Note payable to bank 400,000 400,000
Current portion of
long-term debt 1,441,541 1,468,596
Income taxes payable 170,016 302,097
____________ ____________
TOTAL CURRENT LIABILITIES 3,838,769 4,027,362
DEFERRED INCOME TAXES 1,504,513 1,442,950
LONG-TERM DEBT 10,053,162 10,418,320
____________ ____________
TOTAL LIABILITIES 15,396,444 15,888,632
____________ ____________
STOCKHOLDERS' EQUITY
Common stock, $.01 par value 45,674 46,610
Additional paid in capital 19,042,769 19,404,559
Retained earnings 27,497,660 27,023,560
____________ ____________
46,586,103 46,474,729
LESS: 125,000 CONTINGENTLY
RETURNABLE SHARES (1,351,563) (1,351,563)
TREASURY STOCK (84,600 shares) - (326,734)
____________ ____________
TOTAL STOCKHOLDERS' EQUITY 45,234,540 44,796,432
____________ ____________
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 60,630,984 $ 60,685,064
============ ============
See notes to unaudited Consolidated Financial Statements
5
THE STEPHAN CO. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended March 31,
============================
2000 1999
___________ ___________
NET SALES $ 8,202,562 $ 8,587,870
COST OF GOODS SOLD 4,537,157 4,771,112
___________ ___________
GROSS PROFIT 3,665,405 3,816,758
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 2,724,662 2,998,336
___________ ____________
OPERATING INCOME 940,743 818,422
OTHER INCOME(EXPENSE)
Interest income 148,353 86,801
Interest expense (226,452) (204,606)
Other 43,750 40,000
___________ ___________
INCOME BEFORE TAXES 906,394 740,617
INCOME TAXES 340,947 273,060
___________ ___________
NET INCOME $ 565,447 $ 467,557
=========== ===========
BASIC AND DILUTED EARNINGS PER SHARE $ .13 $ .10
=========== ===========
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 4,442,745 4,600,858
=========== ===========
See notes to unaudited Consolidated Financial Statements
6
THE STEPHAN CO. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31,
============================
2000 1999
__________ __________
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 565,447 $ 467,557
__________ __________
Adjustments to reconcile net income to
cash flows used in
operating activities:
Depreciation 132,941 124,672
Amortization 295,800 294,448
Deferred income taxes 61,563 39,821
Provision for doubtful accounts 6,050 32,041
Changes in operating assets and
liabilities, net of effects of
acquisitions:
Accounts receivable (462,042) (71,067)
Inventory (146,767) 733,861
Income taxes receivable - 25,963
Prepaid expenses
and other current assets (54,608) (38,563)
Other assets 571,101 212,508
Accounts payable
and accrued expenses (29,457) (823,966)
Income taxes payable (132,081) -
___________ ___________
Total adjustments 242,500 (529,718)
___________ ___________
Net cash flows provided
by operating activities 807,947 997,275
___________ ___________
7
THE STEPHAN CO. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31,
============================
2000 1999
___________ ___________
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant
and equipment (70,189) (100,177)
Other (9,221) 13,646
___________ ___________
Net cash flows used in
investing activities (79,410) (86,531)
___________ ___________
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt (392,213) (363,858)
Acquisition of treasury stock (35,992) -
Dividends paid (91,347) (94,517)
___________ ___________
Net cash flows (used in)/provided by
financing activities (519,552) 458,375
___________ ___________
NET CHANGE IN CASH AND
CASH EQUIVALENTS 208,985 452,369
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 12,079,204 8,081,762
___________ ___________
CASH AND CASH EQUIVALENTS,
END OF PERIOD $12,288,189 $ 8,534,131
=========== ===========
Supplemental Disclosures of Cash Flow Information:
Interest Paid $ 247,718 $ 246,330
=========== ===========
Income Taxes Paid $ 685,000 $ 317,440
=========== ===========
For the quarter ended March 31, 2000, 93,600 shares of treasury stock, with
a cost of $362,726, were retired.
See notes to unaudited Consolidated Financial Statements
8
THE STEPHAN CO. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
QUARTERS ENDED MARCH 31, 2000 AND 1999
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION: 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 Supply Corp., Stephan & Co., Scientific Research Products, Inc. of
Delaware, Trevor Sorbie of America, Inc., Stephan Distributing, Inc. and
Morris Flamingo-Stephan, Inc. (collectively, the "Company"). All
significant intercompany balances and transactions have been eliminated in
consolidation.
NATURE OF OPERATIONS: The Company is engaged in the manufacture,
sale, and distribution of hair and personal care grooming products
throughout the United States. Statement of Financial Accounting Standards
No. 131, "Disclosures About Segments of an Enterprise and Related
Information" requires the reporting of segment information using a
"management approach" as it relates to the operating segments of a
business. The Company has allocated substantially all of its business into
three segments, which include professional hair care products and
distribution, retail personal care products and manufacturing.
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 disclosure 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.
MAJOR CUSTOMERS: The Company performs ongoing credit evaluations
of its customers' financial condition and, generally, requires no
collateral. The Company does not believe that credit risk represents a
material risk of loss to the Company. However, the loss of one or more
significant customers could have a material adverse effect on the Company.
LONG-LIVED ASSETS: SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of",
establishes accounting standards for the impairment of long-lived assets,
certain identifiable intangibles, and goodwill related to those assets to
be held and used, and for long-lived assets and certain identifiable
intangibles to be disposed of. SFAS No. 121 did not have a material effect
on the Company's financial position or results of operations.
9
THE STEPHAN CO. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
QUARTERS ENDED MARCH 31, 2000 AND 1999
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
STOCK-BASED COMPENSATION: On January 1, 1996, the Company adopted
SFAS No. 123, "Accounting for Stock-Based Compensation", which permits
entities to recognize as expense over the vesting period the fair value of
all stock-based awards on the date of grant. Alternatively, SFAS No. 123
allows entities to continue to measure compensation cost for stock-based
awards using the intrinsic value based method of accounting prescribed by
APB Opinion No. 25, "Accounting for Stock Issued to Employees", and to
provide pro forma net income and pro forma earnings per share disclosures
as if the fair value method defined in SFAS No. 123 had been applied. The
Company has elected to continue to apply the provisions of APB Opinion No.
25 and provide the pro forma disclosures in accordance with SFAS No. 123.
REVENUE RECOGNITION: Revenue is generally recognized when all
significant contractual obligations have been satisfied, which involves the
manufacture and/or delivery of goods, and collectibility of the resulting
account receivable is reasonably assured.
CASH AND CASH EQUIVALENTS: Cash and cash equivalents include
cash, certificates of deposit, and short-term municipal bonds having
maturities of 90 days 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 March 31, 2000 and December 31, 1999 were approximately
$11,479,000 and $11,264,000, respectively.
INVENTORIES: Inventories are stated at the lower of cost
(determined on a first-in, first-out basis) or market.
Inventories were as follows:
March 31, December 31,
2000 1999
____________ ____________
Raw Materials $ 2,440,717 $ 2,490,406
Packaging and components 3,574,125 4,187,055
Work in progress 826,322 938,698
Finished goods 7,634,725 7,257,713
____________ ____________
$ 14,475,889 $ 14,873,872
Less: Amount included in
other assets (2,374,931) (2,919,681)
____________ ____________
$ 12,100,958 $ 11,954,191
============ ============
10
THE STEPHAN CO. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
QUARTERS ENDED MARCH 31, 2000 AND 1999
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Raw materials include surfactants, chemicals and fragrances used in
the production process. Packaging materials include cartons, inner sleeves
and boxes used in the actual product, as well as outer boxes and cartons
used for shipping purposes. Components are the actual bottles or
containers (plastic or glass), jars, caps, pumps and similar materials that
will be part of the finished product. Finished goods also include hair
dryers, electric clippers, lather machines, scissors and salon furniture.
Included in other assets are raw materials, packaging and components
inventory not anticipated to be utilized in less than one year.
PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment
are recorded at cost. Routine repairs and maintenance are expensed as
incurred. 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 5-10 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
Deferred acquisition costs 10 years
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
over 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.
INCOME TAXES: Income taxes are calculated under the asset and
liability method of accounting. Deferred income taxes are recognized by
applying the enacted statutory rates applicable to future year differences
between the financial statement carrying amounts and the tax basis of
existing assets and liabilities. A valuation allowance is recorded when it
is more likely than not that some portion or all of the deferred tax asset
will not be realized.
11
THE STEPHAN CO. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
QUARTERS ENDED MARCH 31, 2000 AND 1999
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
BASIC AND DILUTED EARNINGS PER SHARE: Basic and diluted earnings
per share are computed by dividing net income by the weighted average
number of shares of common stock outstanding. The weighted average number
of shares outstanding was 4,442,745 for the quarter ended March 31, 2000
and 4,600,858 for the quarter ended March 31, 1999. The assumed exercise
of outstanding stock options would not be dilutive.
NEW FINANCIAL ACCOUNTING STANDARDS: In June 1998, the Financial
Accounting Standards Board ("FASB") issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities." Among other provisions,
SFAS No. 133 establishes accounting and reporting standards for derivative
instruments and for hedging activities. It also requires that an entity
recognize all derivatives as either assets or liabilities in the statement
of financial position and measure those instruments at fair value. In July
1999, the FASB issued SFAS No. 137, "Accounting for Derivative Instruments
and Hedging Activities-Deferral of the Effective Date of FASB No. 133" for
financial statements for fiscal years beginning after June 15, 2000. This
statement is not expected to have a material impact on the Company's
financial position, results of operations or cash flows.
NOTE 2: SEGMENT INFORMATION
In accordance with the guidelines established by SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information," the
Company has identified three reportable operating segments based upon how
management evaluates its business. These segments are Professional Hair
Care Products and Distribution ("Professional"), Retail Personal Care
Products ("Retail") and Manufacturing. The Professional segment generally
has as a customer base distributors who purchase the Company's hair
products and beauty and barber supplies for sale to salons and barber
shops. The customer base for the Retail segment is mass merchandisers,
chain drug stores and supermarkets who sell products to end users. The
Manufacturing segment manufactures products for different subsidiaries of
the Company, and also manufactures private label brands for customers.
The Company conducts operations primarily in the United States and
sales to international customers are not material to its consolidated
revenues. The following table, in thousands, summarizes Net Sales and
Income Before Income Taxes by reportable segment:
12
THE STEPHAN CO. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
QUARTERS ENDED MARCH 31, 2000 AND 1999
NOTE 2: SEGMENT INFORMATION (continued)
INCOME BEFORE
NET SALES INCOME TAXES
_______________ _______________
Quarter Ended Quarter Ended
March 31, March 31,
2000 1999 2000 1999
_______________ _______________
Professional $ 5,237 $ 5,317 $ 367 $ (153)
Retail 2,263 2,455 324 770
Manufacturing 2,106 2,797 300 301
_______ _______ ______ _______
Total 9,606 10,569 991 918
Intercompany
Manufacturing (1,403) (1,981) (85) (177)
_______ _______ ______ _______
Consolidated $ 8,203 $ 8,588 $ 906 $ 741
======= ======= ====== =======
NOTE 3: COMMITMENTS AND CONTINGENCIES
As more fully described in the Company's annual report as filed on
Form 10-K for the year ended December 31, 1999, the Company, as well as
certain of its officers, were named as defendants in a class action law
suit filed in the United States Federal District Court, Southern District
of Florida. The lawsuit alleged, among other things, certain violations of
Federal securities laws and sought an unspecified amount of damages. On
March 30, 2000, the Court dismissed the class action lawsuit against the
Company and named officers. The dismissal is subject to appeal and other
courses of action. As such, the Company will continue to indemnify its
officers in respect of this matter and believes it has meritorious defenses
against these allegations. However, it is not possible at this time to
predict the outcome of any such appeal process.
13
THE STEPHAN CO. AND SUBSIDIARIES
QUARTERLY REPORT PURSUANT TO SECTION 13
OF THE SECURITIES EXCHANGE ACT OF 1934
MARCH 31, 2000 AND 1999
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
For the quarter ended March 31, 2000, net income increased almost
$100,000 over the comparable first quarter of 1999, increasing to $565,000
from the $468,000 achieved in the prior year's first quarter. Net sales
for the first quarter of 2000 decreased approximately 4%, declining to
$8,203,000, compared to sales of $8,588,000 for the quarter ended March 31,
1999. This decrease was primarily due to a decline in the net sales of the
Sorbie and Image Professional lines. These brands continue to experience a
contraction of the distribution network as the trend in consolidation of
distributors continues. Management, however, is attempting to offset this
decline by getting better penetration of these lines through Morris
Flamingo and Williamsport Barber and Beauty Supply ("Williamsport"). This
also will have a tendency to improve the gross profit margins of these two
divisions, as these lines traditionally carry a higher gross margin than
the "hard goods" that have been their traditional business lines. Earnings
per share increased from the $.10 achieved in the first quarter of 1999 to
$.13 for the first quarter ended March 31, 2000. As a result of the
Company's reacquisition of shares of common stock, the weighted average
number of shares outstanding declined from 4,600,858 at March 31, 1999 to
4,442,745 at March 31, 2000.
Overall, the gross profit margin increased to 44.7% for the quarter
ended March 31, 2000 when compared to the 44.4% achieved in the first
quarter of 1999. Gross profit decreased by approximately $150,000, to
$3,665,000, for the first quarter of 2000 when compared to the first
quarter of 1999 due to a decline in net sales. Efforts and initiatives to
reduce costs of sales continue with periodic line reviews and evaluations
of suppliers in an effort to keep production costs at a minimum, however,
increases in the cost of componentry and transportation as a result of the
protracted upward price pressure experienced with petroleum-based products
will necessitate management to continue to emphasize the importance of cost
reduction strategies.
Selling, general and administrative expenses for the first quarter
ended March 31, 2000 decreased by $273,000, to $2,725,000 when compared to
last year's first quarter total of $2,998,000, due, in part, to a reduction
in payroll and rental expenses. Interest expense, net of interest income,
for the quarter ended March 31, 2000 decreased almost $40,000 when compared
to the quarter ended March 31, 1999. This decline was due to a combination
of factors, including more invested cash, higher interest rates and less
debt outstanding.
14
THE STEPHAN CO. AND SUBSIDIARIES
QUARTERLY REPORT PURSUANT TO SECTION 13
OF THE SECURITIES EXCHANGE ACT OF 1934
MARCH 31, 2000 AND 1999
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued).
LIQUIDITY & CAPITAL RESOURCES
Cash and cash equivalents increased slightly more than $200,000, to
$12,288,000 as of March 31, 2000, when compared to December 31, 1999.
Accounts receivable increased over $462,000 due to an increase in sales in
the latter part of the first quarter. Inventory remained relatively level,
at $12,101,000 at March 31, 2000 when compared to inventory at December 31,
1999.
Total current assets at March 31, 2000 were $29,563,000 compared to
$28,696,000 at December 31, 1999. Working capital increased approximately
$1,055,000 when compared to December 31, 1999. The Company is subject to
various financial covenants with respect to working capital, current
maturity coverage and funded debt ratios under the loan agreements with a
bank. At March 31, 2000, the Company was in compliance with all covenants.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company does not participate in derivative or other financial
instruments for which fair value disclosure would be required under
Statement of Financial Accounting Standards No. 107. In addition, the
Company does not invest in securities that would require disclosure of
market risk, nor does it have floating rate loans or foreign currency
exchange rate risks.
15
THE STEPHAN CO. AND SUBSIDIARIES
QUARTERLY REPORT PURSUANT TO SECTION 13
OF THE SECURITIES EXCHANGE ACT OF 1934
MARCH 31, 2000 AND 1999
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On March 30, 2000, the United States District Court for the Southern
District of Florida dismissed the class action lawsuit against the Company
and named officers. As more fully described in the Company's annual report
as filed on Form 10-K for the year ended December 31, 1999, the Company, as
well as certain of its officers, were named as defendants in this class
action law suit filed in the United States Federal District Court, Southern
District of Florida. The lawsuit alleged, among other things, certain
violations of Federal securities laws and sought an unspecified amount of
damages. The dismissal is subject to appeal and other courses of action.
As such, the Company will continue to indemnify its officers in respect of
this matter and believes it has meritorious defenses against these
allegations. However, it is not possible at this time to predict the
outcome of any such appeal process.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27: Financial Data Schedule
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 Chief Executive Officer
May 15, 2000
/s/ David A. Spiegel
___________________________
David A. Spiegel
Principal Financial and
Accounting Officer
May 15, 2000
17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM
FORM 10-Q FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 12,288,189
<SECURITIES> 0
<RECEIVABLES> 4,959,721
<ALLOWANCES> 131,896
<INVENTORY> 12,100,958
<CURRENT-ASSETS> 29,562,590
<PP&E> 5,140,888
<DEPRECIATION> 2,219,380
<TOTAL-ASSETS> 60,630,984
<CURRENT-LIABILITIES> 3,838,769
<BONDS> 10,053,162
0
0
<COMMON> 45,674
<OTHER-SE> 45,188,866
<TOTAL-LIABILITY-AND-EQUITY> 60,630,984
<SALES> 8,202,562
<TOTAL-REVENUES> 8,394,665
<CGS> 4,537,157
<TOTAL-COSTS> 4,537,157
<OTHER-EXPENSES> 2,951,114
<LOSS-PROVISION> 21,829
<INTEREST-EXPENSE> 226,452
<INCOME-PRETAX> 906,394
<INCOME-TAX> 340,947
<INCOME-CONTINUING> 565,447
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 565,447
<EPS-BASIC> 0.13
<EPS-DILUTED> 0.13
</TABLE>
