Back to GetFilings.com

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

SEPTEMBER 30, 2003

-OR-

Commission File No. 1-5050

ALBERTO-CULVER COMPANY

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (708) 450-3000

Securities registered pursuant to Section 12(b) of the Act:

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 registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act.) YES x NO ¨

The aggregate market value of common stock held by non-affiliates (assuming for this purpose only that all directors and executive officers are affiliates) on March 31, 2003, the last business day of the registrant’s most recently completed second fiscal quarter, was $2.25 billion.

At November 17, 2003, there were 59,935,300 shares of Class B Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K and the documents incorporated by reference herein include certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such statements are based on management’s current expectations and assessments of risks and uncertainties and reflect various assumptions concerning anticipated results, which may or may not prove to be correct. Some of the factors that could cause actual results to differ materially from estimates or projections contained in such forward-looking statements include: the pattern of brand sales, including variations in sales volume within periods; competition within the relevant product markets, including the ability to develop and successfully introduce new products, ensuring product quality, pricing, promotional activities, introduction of competing products and continuing customer acceptance of existing products; loss of distributorship rights; risks inherent in acquisitions and strategic alliances; the loss of one or more key employees; the effects of a prolonged United States or global economic downturn or recession; changes in costs, including changes in labor costs, raw material prices or advertising and marketing expenses; the costs and effects of unanticipated legal or administrative proceedings; unanticipated effects of the conversion to a single class of common stock; health epidemics; and variations in political, economic or other factors such as currency exchange rates, inflation rates, tax changes, legal and regulatory changes or other external factors over which Alberto-Culver Company has no control. Alberto-Culver Company has no obligation to update any forward-looking statement in this Annual Report on Form 10-K or any incorporated document.

PART I

BUSINESS SEGMENTS AND GEOGRAPHIC AREA INFORMATION

Effective October 1, 2002, the company’s consumer products business was reorganized into two divisions. A new division, Alberto-Culver Consumer Products Worldwide, includes the former Alberto-Culver North America business segment and the former Alberto-Culver International segment excluding the operations of Cederroth. The second division is Cederroth International, which manufactures, markets and distributes beauty and health care products throughout Scandinavia and in Europe. Beginning in fiscal year 2003, Alberto-Culver Company and its consolidated subsidiaries (herein referred to collectively as the “company,” unless indicated otherwise) have two segments for external financial reporting purposes. Global Consumer Products, which includes the two aforementioned consumer products divisions, and Specialty distribution – Sally, which is the same segment as previously reported. Prior year information has been reclassified to conform to the new segment presentation.

The company’s Global Consumer Products segment develops, manufactures, distributes and markets branded consumer products to the United States, Canada and more than 120 other countries. These branded consumer products consist of beauty and health care products and food and household products. Beauty and health care products accounted for approximately 34%, 34% and 35% of the company’s consolidated net sales for the years ended September 30, 2003, 2002 and 2001, respectively. Food and household products accounted for approximately 4%, 4% and 5% of the company’s consolidated net sales for the years ended September 30, 2003, 2002 and 2001, respectively.

The company’s “Specialty distribution – Sally” segment consists of Sally Beauty Company which is comprised of two operations: (1) Sally Beauty Supply, a domestic and international chain of cash-and-carry outlets offering professional beauty supplies to both salon professionals and retail consumers and (2) Beauty Systems Group (BSG), a full-service beauty products distributor offering professional brands directly to salons and through professional-only stores in exclusive geographical territories. Sales of the Specialty distribution—Sally business segment accounted for approximately 62%, 62% and 60% of the company’s consolidated net sales for the years ended September 30, 2003, 2002 and 2001, respectively.

- 2 -

Financial information about business segments and geographic area information is incorporated herein by reference to the “Business Segments and Geographic Area Information” note of the “Notes to Consolidated Financial Statements” in the company’s annual report to stockholders for the year ended September 30, 2003.

Global Consumer Products

The company’s major beauty and health care products marketed in the United States include the Alberto V05, TRESemmé and Consort lines of hair care products, the St. Ives Swiss Formula line of hair and skin care products, FDS feminine deodorant sprays and the Soft & Beautiful, Just For Me, Comb-Thru, Motions and TCB lines of ethnic hair care products. Food and household products sold in the United States include Mrs. Dash salt-free seasoning blends, Molly McButter butter flavored sprinkles, SugarTwin sugar substitute and Static Guard anti-static spray.

In Canada, the company sells most of the products marketed in the United States along with the Alberto European and Alberto Balsam lines of hair care products.

In the United Kingdom and Europe, the company sells products such as the Alberto V05, Advanced Alberto V05 and Alberto Balsam lines of hair care products and the St. Ives Swiss Formula line of hair and skin care products. Indola professional hair colors, shampoos, conditioners and styling products are marketed throughout Europe and other international markets.

In Latin America, the significant products sold by the company include the Alberto V05, Alberto Get Set, Antiall and Folicure lines of hair care products, the St. Ives Swiss Formula line of hair and skin care products, Veritas soap and deodorant body powder products and Farmaco soap products. The company’s principal markets in Latin America are Mexico, Puerto Rico and the Caribbean, Argentina and Chile.

The company manufactures, markets and distributes beauty and health care products throughout Scandinavia and Europe through its Cederroth International subsidiary headquartered in Sweden. Such products include Salve adhesive bandages, Samarin antacids, Seltin salt substitute, Topz cotton buds, Savette wet wipes, Bliw liquid soaps, Date anti-perspirants and cologne for women, Alberto Family Fresh shampoo and shower products, Suketter artificial sweetener, Alberto V05 hair care products, the St. Ives Swiss Formula line of hair and skin care products, HTH and L300 skin care products, Grumme Tvattsapa detergents and Pharbio natural pharmaceuticals. The company also distributes Jordan toothbrushes in Scandinavia. Soraya skin care products are sold in Poland and Eastern Europe.

The company’s products are also sold in Australia, Asia and Africa.

The Global Consumer Products segment also includes the custom label manufacturing of other companies’ personal care products in the United States.

Specialty Distribution – Sally

Sally Beauty Company operates a network of cash-and-carry professional beauty supply stores under the name Sally Beauty Supply and also sells professional beauty products to salon owners, salon professionals and franchises through its Beauty Systems Group full-service distribution business.

As of September 30, 2003, Sally Beauty Company, including its Beauty Systems Group, had 2,815 stores, including 139 franchise stores, in the United States, Puerto Rico, the United Kingdom, Canada, Japan, Germany and Mexico.

Sally Beauty Supply stores provide salon owners, hairdressers and consumers with an extensive selection of hair care products, cosmetics, styling appliances and other beauty items, including brands such as Wella, Clairol, Revlon and L’Oreal. Sally Beauty Supply stores’ professional customers purchase salon supplies at a discount, while its retail customers purchase professional products at a higher price. As of September 30, 2003,

- 3 -

there were 2,272 Sally Beauty Supply stores in the United States, Puerto Rico, the United Kingdom, Japan, Germany and Mexico.

Beauty Systems Group distributes professional beauty products to salons in exclusive, licensed territories in the Northeast, East, Southeast, Midwest, Midsouth and Southwest United States and portions of Canada and Mexico. Beauty Systems Group operates 543 stores, including 139 franchise stores, as of September 30, 2003 that sell exclusively to the salon professional and maintains a sales force that consists of over 980 professional distributor sales consultants who call on the salons directly. In addition to selling professional beauty products, these sales consultants educate salon professionals and owners on new styles, techniques and business practices. The brands sold in the Beauty Systems Group stores and through professional distributor sales consultants, such as Matrix, Paul Mitchell, Graham Webb, Redken, TIGI and Sebastian, are sold to consumers exclusively through salons and are not available at Sally Beauty Supply stores.

In September 2003, the company announced its plans to acquire West Coast Beauty Supply, with an expected closing in December, 2003. This acquisition will expand the geographic reach of Beauty Systems Group throughout the western half of the United States and will increase Beauty Systems Group’s store count to over 650 outlets and bring the total number of professional distributor sales consultants to approximately 1,225.

PRODUCT DEVELOPMENT AND MARKETING

Many of the company’s consumer products are developed in the company’s laboratories. The company has established global structures for operations and research and development, which are designed to enable the company to implement cost-savings initiatives more quickly on a broad scale and to shorten the time that it takes to develop an idea into a market-ready product. New products introduced by the company are assigned product managers, who guide the products from development to the consumer. The product managers are responsible for the overall marketing plans for the products and coordinate advertising and marketing activities.

The company allocates a large portion of its revenues to the advertising and marketing of consumer beauty products. Net earnings are materially affected by these expenditures, which are charged against income in the period incurred. Advertising and marketing expenditures were $212.4 million, $189.1 million and $179.0 million in fiscal years 2003, 2002 and 2001, respectively.

The company regards television as the best medium for advertising and uses it to conduct extensive network, spot and cable television advertising campaigns. The company also advertises through other media such as newspapers, magazines and radio, as well as through Sally Beauty Company’s direct mailings to customers.

Extensive advertising and marketing are required to build and protect a branded consumer product’s market position. The company believes there is significant consumer awareness of its major brands and that such awareness is an important factor in the company’s operating results.

COMPETITION

The domestic and international markets for the company’s branded consumer products are highly competitive and sensitive to changes in consumer preferences and demands. The company’s competitors range in size from large, highly diversified companies (some of which have substantially greater financial resources than the company) to small, specialized producers. The company competes primarily on the basis of innovation, product quality and price and believes that brand loyalty and consumer acceptance are also important factors to the company’s success.

Sally Beauty Company experiences domestic and international competition from a wide range of retail outlets, including mass merchandisers, drug stores and supermarkets, carrying a full line of beauty and health care products. In addition, Sally Beauty Company competes with local and regional cash-and-carry beauty supply stores and full-service dealers selling directly to salons through both professional distributor sales consultants and outlets open only to salon professionals. Sally also faces competition from certain manufacturers which use their own sales forces to distribute their professional beauty products directly to salons.

- 4 -

DISTRIBUTION

The company’s sales force and independent brokers sell its retail beauty and health care products and food and household products by calling upon retail outlets such as mass merchandisers, supermarkets, drug stores, dollar stores, wholesalers and variety stores.

The company’s sales representatives and brokers sell its professional hair care products primarily for the ethnic market in the United States to beauty supply outlets and to beauty distributors, who in turn sell to beauty salons, barber shops and beauty schools.

The company’s products are sold internationally in more than 120 countries, primarily through direct sales by its subsidiaries, independent distributors and licensees. The company’s foreign operations are subject to risks inherent in transactions involving foreign currencies and political uncertainties.

Sally Beauty Company, including its Beauty Systems Group, sells professional beauty supplies through its 2,815 stores, including 139 franchises, located in 48 states, Puerto Rico, the United Kingdom, Canada, Japan, Germany and Mexico. Sally Beauty Supply stores are cash-and-carry, primarily located in strip shopping centers. Sally operates the largest domestic chain of cash-and-carry beauty supply stores and, as such, is a major customer of some of the company’s competitors in the personal care products industry. In addition, Beauty Systems Group distributes products in exclusive, licensed territories in the Northeast, East, Southeast, Midwest, Midsouth and Southwest United States and portions of Canada and Mexico to the professional market through its stores and over 980 professional distributor sales consultants. Sally sells Alberto-Culver’s professional hair care products, but these products represent only a small portion of Sally’s selection of salon brands.

EMPLOYEES

In its domestic and foreign operations, the company had approximately 17,000 full-time equivalent employees as of September 30, 2003 consisting of approximately 10,800 hourly personnel and 6,200 salaried employees. At September 30, 2002, the company had approximately 16,900 full-time equivalent employees.

Certain subsidiaries of the company have union contracts covering production, warehouse, shipping and maintenance personnel. The company considers relations with its employees to be satisfactory.

REGULATION

The company is subject to the regulations of a number of governmental agencies in the United States and certain foreign countries, including the Food and Drug Administration and the Federal Trade Commission.

TRADEMARKS AND PATENTS

The company’s trademarks, certain of which are material to its business, are registered or legally protected in the United States, Canada and other countries throughout the world in which products of the company are sold. Although the company owns patents and has other patent applications pending, its business is not materially dependent upon patents or patent protection.

AVAILABILITY OF REPORTS

The company’s annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K are available, without charge, on the company’s website, www.alberto.com, as soon as reasonably possible after they are filed electronically with the SEC. The company will provide copies of such reports to any person, without charge, upon written request to the Vice President, Corporate Development and Investor Relations.

- 5 -

The company’s properties, plants and equipment are maintained in good condition and are suitable and adequate to support the business. The company’s principal properties and their general characteristics are described below:

- 6 -

There are no material legal proceedings pending.

There were no matters submitted to a vote of security holders, through the solicitation of proxies or otherwise, during the fourth quarter of the year ended September 30, 2003.

EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth the names and current positions of the registrant’s executive officers, including their five-year business history and ages. Executive officers of the company and its subsidiaries are elected annually.

- 7 -

PART II

Information required by this Item is incorporated herein by reference to the section entitled “Market Price of Common Stock and Cash Dividends Per Share” and note 4 of the “Notes to Consolidated Financial Statements” in the registrant’s annual report to stockholders for the year ended September 30, 2003 and the section entitled “Equity Compensation Plan Information” in the registrant’s proxy statement for its annual meeting of stockholders on January 22, 2004.

Information required for this Item is incorporated herein by reference to the section entitled “Selected Financial Data” in the registrant’s annual report to stockholders for the year ended September 30, 2003.

Information required for this Item is incorporated herein by reference to the section entitled “Management’s Discussion and Analysis of Results of Operations and Financial Condition” in the registrant’s annual report to stockholders for the year ended September 30, 2003.

Information required for this Item is incorporated herein by reference to the section entitled “Management’s Discussion and Analysis of Results of Operations and Financial Condition” in the registrant’s annual report to stockholders for the year ended September 30, 2003.

Information required for this Item is incorporated herein by reference to the consolidated financial statements and notes and “Independent Auditors’ Report” of KPMG LLP in the registrant’s annual report to stockholders for the year ended September 30, 2003.

None.

- 8 -

PART III

Information required for this Item regarding the directors of the company and regarding delinquent filers pursuant to Item 405 of Regulation S-K is incorporated herein by reference to the sections entitled “Election of Directors” and “Section 16(a) Beneficial Ownership Reporting Compliance”, respectively, in the registrant’s proxy statement for its annual meeting of stockholders on January 22, 2004. Information concerning Executive Officers of the registrant is included in Part I of this report. Information required for this Item regarding the audit committee financial expert pursuant to item 401(h) of Regulation S-K is incorporated herein by reference to the section entitled “Meetings and Committees of the Board of Directors” in the registrant’s proxy statement for its annual meeting of stockholders on January 22, 2004.

The company has adopted a code of ethics that applies to the Chief Executive Officer, Chief Financial Officer and Corporate Controller. The company will provide copies of such code of ethics to any person, without charge, upon written request to the Vice President, Corporate Development and Investor Relations.

Information required for this Item is incorporated herein by reference to the section entitled “Executive Compensation” in the registrant’s proxy statement for its annual meeting of stockholders on January 22, 2004.

Information required for this Item is incorporated herein by reference to the sections entitled “Share Ownership of Directors and Executive Officers” and “Principal Stockholders” in the registrant’s proxy statement for its annual meeting of stockholders on January 22, 2004.

Information required for this Item is incorporated herein by reference to the section entitled “Certain Business Relationships” in the registrant’s proxy statement for its annual meeting of stockholders on January 22, 2004.

Not applicable.

- 9 -

PART IV

The consolidated financial statements and notes required to be included in Part II, Item 8 are incorporated by reference to the registrant’s annual report to stockholders for the year ended September 30, 2003, which is filed as an exhibit to this report.

Schedules I, III, IV, and V are omitted as the information required by these schedules is not applicable.

- 10 -

- 11 -

A Form 8-K was filed on July 24, 2003 under Item 9 furnishing a press release dated July 24, 2003, announcing the company’s results for its third quarter and nine months ended June 30, 2003.

* This exhibit is a management contract or compensatory plan or arrangement of the registrant.

- 12 -

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, on the 12th day of December, 2003.

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.

- 13 -

Independent Auditors’ Report

The Board of Directors and Stockholders

Alberto-Culver Company:

On October 21, 2003, except as to “note 11” to the consolidated financial statements, as to which the date is November 5, 2003, we reported on the consolidated balance sheets of Alberto-Culver Company and Subsidiaries as of September 30, 2003 and 2002 and the related consolidated statements of earnings, cash flows and stockholders’ equity for each of the years in the three-year period ended September 30, 2003, as contained in the 2003 annual report to stockholders. These consolidated financial statements and our report thereon are incorporated by reference in the annual report on Form 10-K for fiscal year 2003. In connection with our audits of the aforementioned consolidated financial statements, we also audited the related financial statement schedule as listed in Item 15(a)2 of the annual report on Form 10-K. That financial statement schedule is the responsibility of the company’s management. Our responsibility is to express an opinion on that financial statement schedule based on our audits.

In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

As discussed in “note 1” to the consolidated financial statements, in the year ended September 30, 2002, the Company changed its method of accounting for goodwill and trade names.

Chicago, Illinois

October 21, 2003

Schedule II

ALBERTO-CULVER COMPANY AND SUBSIDIARIES

Valuation and Qualifying Accounts

(In thousands)