MELROSE PARK, Ill., July 26 /PRNewswire-FirstCall/ -- Alberto Culver Company (NYSE: ACV), a leading manufacturer and marketer of beauty care brands including TRESemme, Alberto VO5, Nexxus, St. Ives, Simple and Noxzema, today announced strong results for its fiscal year 2010 third quarter ended June 30, 2010.

Alberto Culver President and Chief Executive Officer V. James Marino said, "I am very pleased to report an exceptionally strong quarter of sales and earnings growth in both our U.S. and international segments.  Despite challenging economic conditions and soft category growth rates, we continue to outperform the hair care category and gain market share.  Double-digit organic sales growth was broad based across our core beauty care brands."

Third Quarter

• Net sales for the third quarter increased 18.8% to $417.6 million compared to $351.6 million in the prior year quarter.  On an organic basis, which excludes the effect of foreign currency fluctuations and acquisitions and divestitures, sales increased 10.7% in the current quarter.

• Diluted earnings per share from continuing operations increased to 47 cents in the third quarter compared to 28 cents in the prior year quarter.  Excluding restructuring and discrete items, diluted earnings per share from continuing operations increased 30.0% to 39 cents compared to 30 cents in the prior year quarter.

Nine Months

• Net sales for the nine month period increased 11.1% to $1.17 billion compared to $1.05 billion in the prior year period.  On an organic basis, which excludes the effect of foreign currency fluctuations and acquisitions and divestitures, sales increased 4.0% in the nine month period.

• Diluted earnings per share from continuing operations increased to $1.14 in the nine month period compared to 87 cents in the prior year period.  Excluding restructuring and discrete items, diluted earnings per share from continuing operations increased 17.2% to $1.16 compared to 99 cents in the prior year period.  Growth in the nine month period was tempered by a charge of approximately 4 cents per share related to the voluntary withdrawal of select SKU's in the Company's relaxer kit business.

In the U.S., sales increased 12.7% in the third quarter due to strong growth in several of the Company's core beauty care brands behind effective marketing and promotional activity and replenishment of retailer inventory levels as customer service levels were restored to levels that existed prior to the Company's supply chain, manufacturing and systems disruptions.  International sales on a reported basis increased 29.0% (the net effect of foreign currency fluctuations, acquisitions and divestitures accounted for approximately 21.6% of the growth), primarily behind strong TRESemme growth.

The Company's gross profit margin was 51.5% in the third quarter compared to 50.8% in the prior year quarter.  The improvement in gross margin was primarily a result of lower commodity costs, partially offset by higher costs resulting from the Company's supply chain, manufacturing and systems disruptions.

Advertising and other marketing investments in the third quarter increased 20.1% to $67.7 million compared to $56.3 million in the prior year quarter, primarily due to double-digit increases on TRESemme and St. Ives and the acquisition of Simple.  For the nine month period, advertising and other marketing investments increased 14.6% compared to the prior year.  Mr. Marino added, "We continue to drive our business by investing behind our brands to build consumer equity."

Selling and administrative expenses as a percentage of net sales decreased 320 basis points to 19.4% in the third quarter compared to 22.6% in the prior year quarter.  The current quarter includes approximately $8.5 million of discrete income related to the resolution of a supplier dispute while the prior year quarter includes approximately $2.7 million of discrete expenses related to the same supplier dispute.  Together these items resulted in 270 basis points of the decrease in selling and administrative expenses as a percentage of net sales in the quarter.

Carol Lavin Bernick, Executive Chairman of the Company, said, "As evidenced by our strong third quarter results, we were able to successfully overcome a difficult economic environment, resolve our U.S. service issues that plagued us earlier in the year and deliver growth for our shareholders.  Our balanced portfolio of strong beauty care brands and our dedicated team continue to be the primary drivers of our success."

Ms. Bernick also announced the Company's board of directors approved the regular 8.5 cents quarterly cash dividend.  The dividend will be paid on August 20, 2010 to shareholders of record on August 5, 2010.

On December 18, 2009, the Company completed the acquisition of all of the issued and outstanding shares of Simple Health & Beauty Group Limited.  Simple is a leading skin care company based in the United Kingdom that was owned primarily by Duke Street, a mid-market private equity fund.  The total purchase price was approximately $385 million, and the transaction was funded from the Company's existing cash.

On July 31, 2008, the Company sold its Cederroth International subsidiary to a company owned by two funds controlled by CapMan, a Nordic based private equity firm, for 159.5 million Euros.  As a result of the transaction, the results of operations of Cederroth are reported as discontinued operations.

On November 16, 2006, the Company closed a transaction that separated its consumer products business from its beauty supply distribution business and resulted in the formation of two separate and independent publicly-traded companies:  new Alberto Culver and Sally Beauty Holdings, Inc.  As a result of the transaction, the results of operations of the beauty supply distribution business are reported as discontinued operations.

Due to the disclosure of organic sales growth and financial results excluding restructuring and discrete items, this press release contains certain non-GAAP financial measures as defined by Regulation G of the Securities and Exchange Commission.  A description of the Company's restructuring activities and discrete items, as well as a reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures, are included as a schedule to this release and can also be found on the Company's web site at www.alberto.com.

The Company will discuss its third quarter and nine month fiscal year 2010 results with investors in a call to be held later today (Monday, July 26, 2010) at 11:00 a.m. Eastern Time.  The dial-in numbers for the call are 866-742-2281 or 660-422-4763 (international callers) and the conference ID is 84951323.  The numbers for a replay of the conference call are 800-642-1687 or 706-645-9291 and will be available through Saturday, August 28, 2010.  The conference ID is 84951323.    The call and a replay will also be available on the internet for 30 days at www.alberto.com in the Investing Section, and at www.earnings.com.

Alberto Culver Company manufactures, distributes and markets leading beauty care and other personal care brands including TRESemme, Alberto VO5, Nexxus, St. Ives, Simple and Noxzema in the United States and internationally. It is also the second largest producer in the U.S. of products for the ethnic hair care market with leading brands including Motions and Soft & Beautiful.  Several of its household/grocery brands such as Mrs. Dash and Static Guard are niche category leaders in the U.S.

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  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; competition within the relevant product markets; loss of one or more key customers; inability of efficiency initiatives to improve the company's margins; loss of one or more key suppliers or copackers; inability of the company to protect its intellectual property; the disruption of normal business activities due to the company's implementation of a new worldwide ERP system; manufacturing and supply chain disruptions; adverse changes in currency exchange rates; special demands by key customers; risks inherent in acquisitions, divestitures and strategic alliances, including, without limitation, undisclosed liabilities and obligations for which the company may have limited or no recourse; loss of one or more key employees; risks inherent in expanding in existing geographic locations and entering new geographic locations; the risk that the expected cost savings related to the reorganizations and restructurings may not be realized; the effects of a prolonged United States or global economic downturn or recession; health epidemics; unavailability of raw materials or finished products; increases in costs of raw materials and inflation rates; events that negatively affect the intended tax free nature of the distribution of shares of Alberto Culver Company in connection with the separation of the consumer products business from the beauty supply distribution business on November 16, 2006; changes in costs; the unanticipated costs and effects of legal or administrative proceedings; adverse weather conditions; and variations in political, economic or other factors such as interest rates, availability of credit, tax changes, legal and regulatory changes or other external factors over which the company has no control.  These forward-looking statements speak only as of the date of this press release, and there is no undertaking to update or revise them as more information becomes available.  Additional factors that could cause Alberto Culver's results to differ materially from those described in the forward-looking statements can be found in the Company's 2009 Annual Report on Form 10-K filed on November 24, 2009 with the SEC and available at the SEC's internet site (http://www.sec.gov).

Schedule - Reconciliation of Non-GAAP Financial Measures

The Company's press release announcing results of operations for the three and nine months ended June 30, 2010 includes references to certain of the following "non-GAAP financial measures" as defined by Regulation G of the Securities and Exchange Commission:

• Pre-tax earnings from continuing operations excluding restructuring and discrete items
• Earnings from continuing operations excluding restructuring and discrete items
• Diluted earnings per share from continuing operations excluding restructuring and discrete items
• Organic sales growth

In June 2009, the Company committed to a plan primarily related to the downsizing of its manufacturing facility and the consolidation of its warehouse and office facilities in Chatsworth, California.  During fiscal year 2009, the Company recorded restructuring costs related to this plan of $6.3 million ($4.9 million in the third quarter).  During the first nine months of fiscal year 2010, the Company recorded additional restructuring costs related to this plan of $379,000 ($168,000 in the third quarter).

In November 2009, the Company committed to a plan primarily related to ceasing all manufacturing activities at its facility in Chatsworth, California.  This plan is in addition to the Company's initial plan to downsize the Chatsworth manufacturing facility.  During the first nine months of fiscal year 2010, the company recorded restructuring costs related to this plan of $4.4 million ($103,000 in the third quarter), primarily related to severance.

In addition to these two plans, the Company recorded a restructuring benefit of $83,000 in the first nine months of fiscal year 2010 (a benefit of $163,000 in the third quarter) and $519,000 during fiscal year 2009 ($402,000 in the first nine months and $131,000 in the third quarter) related to previously announced plans.

In total, the company recorded restructuring and other costs during the first nine months of fiscal year 2010 of $4.7 million ($2.9 million after taxes or 3 cents per diluted share from continuing operations) with $108,000 in the third quarter (a benefit of $4,000 after taxes and no effect on diluted earnings per share from continuing operations).  In fiscal year 2009, the company recorded total restructuring and other costs of $6.8 million ($4.2 million after taxes) with $5.3 million in the first nine months ($3.3 million after taxes or 3 cents per diluted share from continuing operations) and $5.0 million in the third quarter ($3.2 million after taxes or 3 cents per diluted share from continuing operations).

In connection with the acquisition of Simple Health & Beauty Group Limited on December 18, 2009, the Company incurred transaction expenses (primarily investment banking, legal and other professional service fees) during the first nine months of fiscal year 2010 of $6.0 million (6 cents per diluted share from continuing operations).  These amounts are not expected to be deductible for income tax purposes.

In fiscal year 2009, the Company incurred costs related to a dispute with a supplier of $2.9 million ($1.9 million after taxes) with $2.7 million in the third quarter ($1.7 million after taxes or 2 cents per diluted share from continuing operations).  In the first nine months of fiscal year 2010, additional costs of $1.1 million were incurred prior to the dispute being settled in the third quarter.  The settlement included the forgiveness of $5.8 million of obligations the Company owed to the supplier and the receipt of $2.9 million in cash from the supplier.  On a net basis, the Company recorded a benefit related to this matter of $7.6 million in the first nine months of fiscal year 2010 ($5.2 million after taxes or 5 cents per diluted share from continuing operations) and $8.5 million in the third quarter ($5.8 million after taxes or 6 cents per diluted share from continuing operations).

The Company's provision for income taxes in the first nine months of fiscal year 2010 included net discrete tax benefit of $2.1 million (2 cents per diluted share from continuing operations).  The provision for income taxes in the third quarter of fiscal year 2010 included net discrete tax benefit of $2.2 million (2 cents per diluted share from continuing operations). The Company's provision for income taxes in the first nine months of fiscal year 2009 included net discrete tax expense of $6.5 million (7 cents per diluted share from continuing operations), primarily related to taxes on a local currency gain on U.S. dollar denominated cash held in Sweden following the Cederroth sale. The provision for income taxes in the third quarter of fiscal year 2009 included net discrete tax benefit of $2.1 million (3 cents per diluted share from continuing operations).  

Reconciliations of these non-GAAP financial measures to their most directly comparable financial measures under GAAP for the three and nine months ended June 30, 2010 and 2009 are as follows (in thousands, except per share data):

Management uses these non-GAAP financial measures to evaluate the performance of the Company and believes the presentation of these amounts provides the reader with information necessary to analyze the Company's normal operations for the periods compared.

SOURCE Alberto Culver

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