UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 11-K
(Mark One)
| x | ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT 0F 1934 |
For the fiscal year ended December 31, 2004
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number 333-70067
| A. | Full title of the plan and the address of the plan, if different from that of the issuer named below: |
| Sally Beauty 401(k) Savings Plan |
Alberto-Culver 401(k) Savings Plan | |
| 3900 Morse Street |
||
| Denton, TX 76205 |
| B. | Name of issuer of the securities held pursuant to the plan and the address of its principal executive office: |
Alberto-Culver Company
2525 Armitage Ave.
Melrose Park, IL 60160
ALBERTO-CULVER
401(k) SAVINGS PLAN
Financial Statements and Supplemental Schedule
December 31, 2004 and 2003
(With Report of Independent Registered Public Accounting Firm Thereon)
ALBERTO-CULVER
401(k) SAVINGS PLAN
| Page | ||
| 1 | ||
| 2 | ||
| 3 | ||
| 4 | ||
| Supplemental Schedule |
||
| Schedule H, Line 4i — Schedule of Assets (Held at End of Year) |
10 | |
Report of Independent Registered Public Accounting Firm
To the Plan Administrator of the
Alberto-Culver 401(k) Savings Plan:
We have audited the accompanying statements of net assets available for benefits of the Alberto-Culver 401(k) Savings Plan (the Plan) as of December 31, 2004 and 2003, and the related statements of changes in net assets available for benefits for the years then ended. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2004 and 2003, and the changes in net assets available for benefits for the years then ended in conformity with accounting principles generally accepted in the United States of America.
Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule of assets (held at end of year) as of December 31, 2004 is presented for the purpose of additional analysis and is not a required part of the basic financial statements but is supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplemental schedule is the responsibility of the Plan’s management. The supplemental schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
/s/ KPMG LLP
June 24, 2005
401(k) SAVINGS PLAN
Statements of Net Assets Available for Benefits
December 31, 2004 and 2003
| 2004 |
2003 | ||||
| Assets: |
|||||
| Investments |
$ | 42,196,178 | 35,344,126 | ||
| Employer contribution receivable |
1,202,937 | 970,053 | |||
| Net assets available for benefits |
$ | 43,399,115 | 36,314,179 | ||
See accompanying notes to financial statements.
2
401(k) SAVINGS PLAN
Statements of Changes in Net Assets Available for Benefits
December 31, 2004 and 2003
| 2004 |
2003 |
||||||
| Additions to net assets attributed to: |
|||||||
| Investment income: |
|||||||
| Net appreciation in fair value of investments |
$ | 2,757,434 | 4,803,010 | ||||
| Dividend and interest income |
351,265 | 241,232 | |||||
| Interest on participant loans |
54,917 | 62,574 | |||||
| Total investment income |
3,163,616 | 5,106,816 | |||||
| Contributions: |
|||||||
| Employer |
1,202,937 | 970,053 | |||||
| Employee |
5,210,704 | 4,451,052 | |||||
| Total contributions |
6,413,641 | 5,421,105 | |||||
| Total additions |
9,577,257 | 10,527,921 | |||||
| Deductions from net assets attributed to: |
|||||||
| Benefits paid to participants |
(2,475,176 | ) | (1,861,878 | ) | |||
| Administrative fees |
(17,145 | ) | (15,728 | ) | |||
| Total deductions |
(2,492,321 | ) | (1,877,606 | ) | |||
| Net increase |
7,084,936 | 8,650,315 | |||||
| Net assets available for benefits at beginning of year |
36,314,179 | 27,663,864 | |||||
| Net assets available for benefits at end of year |
$ | 43,399,115 | 36,314,179 | ||||
See accompanying notes to financial statements.
3
401(K) SAVINGS PLAN
Notes to Financial Statements
December 31, 2004 and 2003
| (1) | Description of the Plan |
| (a) | General |
The Alberto-Culver 401(k) Savings Plan (the Plan), established on January 1, 1994, is a defined contribution plan available to eligible employees of Alberto-Culver Company (the Company), and certain subsidiaries of the Company.
The Plan is administered by the Company with the assistance of Prudential Retirement Insurance and Annuity Company (PRIAC), a company of Prudential Financial, Inc. Prudential Bank & Trust Company, F.S.B. (the Trustee) holds the investment assets of the Plan.
The following description of the Plan provides only general information. Information about the Plan’s provisions is contained in the plan document, which may be obtained from the Company.
| (b) | Participation |
Employees who are at least 21 years of age may participate in the Plan. On December 31, 2004, there were 1,184 participants in or beneficiaries of the Plan.
| (c) | Contributions |
Participants may elect to contribute any amount from 1% to 50% of their eligible compensation, in whole percentage points, subject to the limitations of the Internal Revenue Code. Highly compensated participants, as defined by the Internal Revenue Code, are subject to more restrictive maximum annual contribution limits. The percentage of compensation contributed may be increased or decreased at the election of the participant any time during the year. All eligible participant contributions are tax-deferred contributions pursuant to a qualified cash or deferral arrangement subject to the limitations of the Internal Revenue Code. Annual participant contribution amounts were limited to $13,000 for the year ended December 31, 2004, as determined by the Internal Revenue Code. The Economic Growth and Tax Relief Reconciliation Act of 2001 includes a provision that allows participants who have attained age 50 during the Plan year to make additional contributions above otherwise permissible limits. These additional contributions, known as catch-up contributions, were limited to $3,000 for the year ended December 31, 2004. Company matching contributions are not be made on catch-up contributions.
Company contributions to the Plan are based on a discretionary match on an annual basis. For the Plan years 2004 and 2003, the Company matched $0.50 of each dollar contributed up to 5% of non-collectively bargained eligible participant compensation and $0.50 of each dollar contributed up to 4% of non-collectively bargained eligible participant compensation, respectively.
Effective April 1, 2004, the Company agreed to match $0.10 of each dollar contributed up to 6% of eligible participant compensation for collectively bargained employees of the Company belonging to the United States Steelworkers of America — Local 9777 Chapter.
4
ALBERTO-CULVER
401(K) SAVINGS PLAN
Notes to Financial Statements
December 31, 2004 and 2003
| (d) | Investment Options |
Participants may elect to invest their contributions and any Company matching contributions in twenty investment options within seven different asset classes as well as the Company’s common stock. The asset classes include: (i) stable value, (ii) balanced, (iii) large capitalization equity, (iv) mid capitalization equity, (v) small capitalization equity, (vi) global equity, and (vii) international equity. These investment options are exposed to various risks, such as interest rate, market, and credit risks. Due to the level of risks associated with certain investment securities, it is possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the amounts reported in the statement of net assets available for benefits.
None of the investment funds other than the Principal Preservation Separate Account guarantee a fixed return to the participant. The Principal Preservation Separate Account provides stable returns as well as a full guarantee of principal and interest from PRIAC. The guaranteed interest rate is announced semi-annually and is guaranteed against change for six-month periods (January-June, July-December).
Account balances may be invested in 1% increments in any of the Plan’s available investment options. Participants may reallocate their investments among the available investment options any time during the year. Dividend and interest income received on investments are reinvested in the same funds.
Effective January 1, 2004, the Oppenheimer Global Fund (Class A Shares) replaced the Janus Worldwide Fund due to the Janus Worldwide Fund’s inability to meet certain performance criteria established by the Plan’s Investment Policy Statement.
On January 21, 2004, the Company’s board of directors approved a 3-for-2 stock split in the form of a 50% stock dividend on the Company’s outstanding shares. The additional shares were distributed February 20, 2004 to shareholders of record at the close of business on February 2, 2004.
Effective June 1, 2004, the International Equity/Julius Baer Fund replaced the Credit Suisse International Focus Account due to the Credit Suisse International Focus Account’s inability to meet certain performance criteria established by the Plan’s Investment Policy Statement.
| (e) | Vesting |
Participants are fully vested in the current value of their contributions and earnings and losses thereon, and become fully vested in the Company matching contributions and related earnings and losses
5
ALBERTO-CULVER
401(K) SAVINGS PLAN
Notes to Financial Statements
December 31, 2004 and 2003
credited to their accounts based upon their years of vesting service as shown in the following table:
| Years of vesting service |
Vested percentage |
||
| Less than 1 |
0 | % | |
| 1 but less than 2 |
20 | ||
| 2 but less than 3 |
40 | ||
| 3 but less than 4 |
60 | ||
| 4 but less than 5 |
80 | ||
| 5 or more |
100 |
Participants who are age 65 or over, die, or become permanently disabled are automatically 100% vested in the value of Company matching contributions and related earnings and losses credited to their account.
| (f) | Distribution Options |
Upon severance from employment (e.g. termination of employment, retirement, disability or death), participants may elect to receive a distribution of the total value of their account, which is the accumulation of to their contributions and related earnings and losses credited to their account, as well as the vested balance of Company matching contributions and related earnings and losses credited to their account. Distributions may be in the form of cash, periodic installments, Company common stock, or a direct rollover according to the provisions of the Plan. Alternatively, terminated participants may elect to defer the distribution of their account balance until age 70 1/2, at which time minimum required distributions will commence according to Section 401(a)(9) of the Internal Revenue Code. Such deferred benefits remain in the Plan and participate in the earnings and losses from the investments.
| (g) | Participant Loans |
Participants may borrow against their account balances for periods of one to five years. In the event the loan is used to purchase a primary residence, an extended period of time for repayment is allowed. Participant loans are limited to the lesser of $50,000 or 50% of the participants’ vested account balance and bear interest at the prime rate plus 1% at the time the loan is made. Outstanding participant loans are considered investments of the Plan and repayments of principal and interest are credited to the borrowing participants’ account using his or her current investment election. At December 31, 2004 and 2003, interest rates on outstanding loans ranged from 5.00% to 10.50%. At December 31, 2004 and 2003, the number of participants with outstanding loans were 212 and 234, respectively.
6
ALBERTO-CULVER
401(K) SAVINGS PLAN
Notes to Financial Statements
December 31, 2004 and 2003
| (h) | Forfeitures |
Company matching contributions and earnings and losses thereon forfeited by terminated employees are used to reduce future Company matching contributions to the Plan. The Company will reinstate forfeited account balances to the accounts of terminated participants who rejoin the Company before incurring five consecutive one year breaks in service. For the Plan years ended December 31, 2004 and 2003, Company matching contributions were reduced by forfeiture amounts of $76,460 and $30,000, respectively.
| (i) | Administrative Expenses |
Administrative fees are paid by the Plan. All other Plan-related expenses are paid by the Company. Investment management fees are included in the investment fund yield.
| (2) | Summary of Significant Accounting Policies |
| (a) | Basis of Accounting |
The Company maintains the accounts of the Plan on an accrual basis.
| (b) | Asset Valuation |
The investment assets in the Plan are valued at the quoted closing sale price on the last business day of the year. Participant loans are stated at contract value which approximates fair value.
| (c) | Security Transactions and Investment Income |
Purchases and sales of investments in the Plan are recorded on a trade-date basis. When investments are sold, the difference between the carrying value original cost (computed on an average cost basis) and the proceeds received is recorded as a realized gain or loss. Interest and dividend income are recorded when earned.
| (d) | Payment of Benefits |
Benefits are recorded when paid.
| (e) | Use of Estimates |
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the use of estimates and assumptions that affect the reported amounts of net assets available for benefits at the date of the financial statements and the changes in net assets available for benefits during the reporting period and related disclosures. Actual results could differ from these estimates.
| (3) | Related-Party Transactions |
PRIAC provides certain accounting and administrative services to the Plan for which $17,145 and $15,728 of expenses were charged for the years ended December 31, 2004 and 2003, respectively.
7
ALBERTO-CULVER
401(K) SAVINGS PLAN
Notes to Financial Statements
December 31, 2004 and 2003
| (4) | Termination of the Plan |
It is the intent of the Company that the Plan continues into the future; however, the Company reserves the right to terminate the Plan. In the event the Plan is terminated, participants would become fully vested in their accounts and the assets of the Plan would be distributed to the participants in proportion to their respective interests in the Plan.
| (5) | Tax Status |
The Company adopted a Prototype Standardized Profit Sharing Plan with a cash or deferral arrangement which received a favorable determination letter from the Internal Revenue Service, dated July 28, 2004 which stated that the form of the Plan and related trust are designed in accordance with applicable sections of the Internal Revenue Code. The Company believes that the Plan currently is designed and being operated in compliance with the applicable requirements of the Internal Revenue Code and, therefore, the Plan qualifies under Section 401(a) of the Internal Revenue Code and is exempt from tax under Section 501(a) of the Internal Revenue Code. The Plan administrator is not aware of any activity or transaction that may adversely affect the qualified status of the Plan.
| (6) | Other Investment Information |
The fair values of investment fund balances which represent 5% or more of the Plan’s net assets as of December 31, 2004 and 2003 are as follows:
| 2004 |
2003 | ||||
| Principal Preservation Separate Account |
$ | 11,151,618 | 10,741,593 | ||
| Company Common Stock Fund |
4,809,190 | 3,029,196 | |||
| Dryden S&P 500 Index Fund |
4,785,357 | 4,273,385 | |||
| Fidelity Advisor Equity Growth Account |
3,605,870 | 3,468,174 | |||
| Large Cap Growth/Turner Investment Partners Fund |
2,798,001 | 2,545,298 | |||
| Fidelity Advisor Balanced Account |
2,555,562 | 2,307,823 | |||
During the Plan years ended December 31, 2004 and 2003, the Plan’s investments (including investments bought, sold, and held during the year) appreciated in value as follows:
| 2004 |
2003 | ||||
| Pooled Separate Accounts |
$ | 2,210,480 | 4,193,340 | ||
| Company Common Stock |
546,954 | 609,670 | |||
| Net appreciation in fair value |
$ | 2,757,434 | 4,803,010 | ||
8
ALBERTO-CULVER
401(K) SAVINGS PLAN
Notes to Financial Statements
December 31, 2004 and 2003
| (7) | Subsequent Events |
Effective January 1, 2005, annual participant contributions and catch-up contributions will be limited to $14,000 and $4,000, respectively.
9
ALBERTO-CULVER
401(k) SAVINGS PLAN
Schedule H, Line 4i – Schedule of Assets (Held at End of Year)
December 31, 2004
| Identity of issuer, borrower, |
Description of investment |
Number of shares/units |
Current value | ||||
| * Prudential Retirement Insurance and Annuity Company |
Principal Preservation Separate Account | 1,074,222 Units | $ | 11,151,618 | |||
| * Alberto-Culver Company |
Alberto-Culver Company Common Stock Fund | 99,016 Shares | 4,809,190 | ||||
| * Prudential Retirement Insurance and Annuity Company |
Dryden S&P 500 Index Fund | 69,155 Units | 4,785,357 | ||||
| * Prudential Retirement Insurance and Annuity Company |
Fidelity Advisor Equity Growth Account | 46,493 Units | 3,605,870 | ||||
| * Prudential Retirement Insurance and Annuity Company |
Large Cap Growth/Turner Investment Partners Fund | 259,902 Units | 2,798,001 | ||||
| * Prudential Retirement Insurance and Annuity Company |
Fidelity Advisor Balanced Account | 73,264 Units | 2,555,562 | ||||
| * Prudential Retirement Insurance and Annuity Company |
Oppenheimer Global Fund (Class A Shares) | 31,494 Units | 1,937,846 | ||||
| * Prudential Retirement Insurance and Annuity Company |
Small Cap Value/Perkins, Wolf, McDonnell Fund | 63,978 Units | 1,501,801 | ||||
| * Prudential Retirement Insurance and Annuity Company |
Small Cap Growth/TimesSquare Fund | 62,612 Units | 1,200,609 | ||||
| * Prudential Retirement Insurance and Annuity Company |
Lifetime 40 | 72,754 Units | 1,025,342 | ||||
| * Prudential Retirement Insurance and Annuity Company |
International Equity/Julius Baer Fund | 60,665 Units | 1,011,909 | ||||
| * Prudential Retirement Insurance and Annuity Company |
Mid Cap Blend/New Amsterdam Partners Fund | 73,627 Units | 1,003,714 | ||||
| * Prudential Retirement Insurance and Annuity Company |
Lifetime 30 | 48,881 Units | 697,922 | ||||
| * Prudential Retirement Insurance and Annuity Company |
Large Cap Value/John A. Levin & Co. Fund | 39,698 Units | 649,385 | ||||
| * Prudential Retirement Insurance and Annuity Company |
Lifetime 20 | 40,318 Units | 570,804 | ||||
| * Prudential Retirement Insurance and Annuity Company |
Lifetime 50 | 31,929 Units | 454,535 | ||||
| * Prudential Retirement Insurance and Annuity Company |
Balanced I Fund/(Sub-advised by Wellington Management) | 12,828 Units | 539,872 | ||||
| * Prudential Retirement Insurance and Annuity Company |
Mid Cap Value/(Sub-advised by Wellington Management) | 23,495 Units | 397,160 | ||||
| * Prudential Retirement Insurance and Annuity Company |
Mid Cap Growth/Artisan Partners Fund | 30,829 Units | 316,462 | ||||
| * Prudential Retirement Insurance and Annuity Company |
Lifetime 60 | 13,133 Units | 189,531 | ||||
| * Participant Loans |
Loans to participants, bearing interest from 5.00% to 10.50% with | — | 993,688 | ||||
| varying maturities through 2014 | $ | 42,196,178 | |||||
| * | Represents a party-in-interest. |
See accompanying report of independent registered public accounting firm.
10
Consent of Independent Registered Public Accounting Firm
The Board of Directors
Alberto-Culver Company:
We consent to the incorporation by reference in the registration statement (No. 333-70067) on Form S-8 of Alberto-Culver Company of our report dated June 24, 2005, with respect to the Statements of Net Assets Available for Benefits of the Alberto-Culver 401(k) Savings Plan as of December 31, 2004 and 2003, and the related Statements of Changes in Net Assets Available for Benefits for the years then ended, and the related supplemental schedule, which report appears in the December 31, 2004 annual report on Form 11-K of Alberto-Culver Company.
/s/ KPMG LLP
Chicago, Illinois
June 28, 2005
SALLY BEAUTY
401(k) SAVINGS PLAN
Financial Statements and Supplemental Schedule
December 31, 2004 and 2003
(With Report of Independent Registered Public Accounting Firm Thereon)
SALLY BEAUTY
401(k) SAVINGS PLAN
| Page | ||
| 1 | ||
| 2 | ||
| 3 | ||
| 4 | ||
| Supplemental Schedule |
||
| Schedule H, Line 4i — Schedule of Assets (Held at End of Year) | 11 | |
Report of Independent Registered Public Accounting Firm
To the Plan Administrator of the
Sally Beauty 401(k) Savings Plan:
We have audited the accompanying statements of net assets available for benefits of the Sally Beauty 401(k) Savings Plan (the Plan) as of December 31, 2004 and 2003, and the related statements of changes in net assets available for benefits for the years then ended. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2004 and 2003, and the changes in net assets available for benefits for the years then ended in conformity with accounting principles generally accepted in the United States of America.
Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule of assets (held at end of year) as of December 31, 2004 is presented for the purpose of additional analysis and is not a required part of the basic financial statements but is supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplemental schedule is the responsibility of the Plan’s management. The supplemental schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
/s/ KPMG LLP
June 24, 2005
401(k) SAVINGS PLAN
Statements of Net Assets Available for Benefits
December 31, 2004 and 2003
| 2004 |
2003 | ||||
| Assets: |
|||||
| Cash |
$ | 236,584 | 133,271 | ||
| Investments |
60,637,106 | 39,643,676 | |||
| Total assets held for investment |
60,873,690 | 39,776,947 | |||
| Employer contribution receivable |
2,359,553 | 1,704,385 | |||
| Net assets available for benefits |
$ | 63,233,243 | 41,481,332 | ||
See accompanying notes to financial statements.
2
401(k) SAVINGS PLAN
Statements of Changes in Net Assets Available for Benefits
Years ended December 31, 2004 and 2003
| 2004 |
2003 |
||||||
| Additions to net assets attributed to: |
|||||||
| Investment income: |
|||||||
| Net appreciation in fair value of investments |
$ | 4,109,710 | 5,697,064 | ||||
| Dividend and interest income |
413,493 | 225,898 | |||||
| Interest on participant loans |
105,088 | 74,213 | |||||
| Total investment income |
4,628,291 | 5,997,175 | |||||
| Contributions: |
|||||||
| Employer |
2,359,553 | 1,704,385 | |||||
| Employee |
7,786,452 | 5,957,878 | |||||
| Transfer in - plan merger |
10,592,225 | — | |||||
| Total contributions |
20,738,230 | 7,662,263 | |||||
| Total additions |
25,366,521 | 13,659,438 | |||||
| Deductions from net assets attributed to: |
|||||||
| Benefits paid to participants |
(3,570,517 | ) | (3,430,032 | ) | |||
| Administrative fees |
(44,093 | ) | (34,620 | ) | |||
| Total deductions |
(3,614,610 | ) | (3,464,652 | ) | |||
| Net increase |
21,751,911 | 10,194,786 | |||||
| Net assets available for benefits at beginning of year |
41,481,332 | 31,286,546 | |||||
| Net assets available for benefits at end of year |
$ | 63,233,243 | 41,481,332 | ||||
See accompanying notes to financial statements.
3
401(k) SAVINGS PLAN
Notes to Financial Statements
December 31, 2004 and 2003
| (1) | Description of the Plan |
| (a) | General |
The Sally Beauty 401(k) Savings Plan (the Plan), established on January 1, 1994, is a defined contribution plan available to eligible employees of Sally Beauty Company (the Company). The Company is a wholly owned subsidiary of the Alberto-Culver Company (Alberto-Culver).
The Plan is administered by the Company with the assistance of Prudential Retirement Insurance and Annuity Company (PRIAC), a company of Prudential Financial, Inc. Prudential Bank & Trust Company, F.S.B.(the Trustee) holds the investment assets of the Plan.
The following description of the Plan provides only general information. Information about the Plan’s provisions is contained in the plan document, which may be obtained from the Company.
| (b) | Participation |
All eligible employees whose customary employment is for at least 1,000 hours within 12 consecutive months, who are not members of a collective bargaining unit, and who are at least 21 years of age may participate in the Plan upon the completion of 12 months of service. On December 31, 2004, there were 3,243 participants in or beneficiaries of the Plan.
| (c) | Contributions |
Participants may elect to contribute any amount from 1% to 50% of their eligible compensation, in whole percentage points, subject to the limitations of the Internal Revenue Code. Highly compensated participants, as defined by the Internal Revenue Code, are subject to more restrictive maximum annual contribution limits. The percentage of compensation contributed may be increased or decreased at the election of the participant any time during the year. All eligible participant contributions are tax-deferred contributions pursuant to a qualified cash or deferral arrangement subject to the limitations of the Internal Revenue Code. Annual participant contribution amounts were limited to $13,000 for the year ended December 31, 2004, as determined by the Internal Revenue Code. The Economic Growth and Tax Relief Reconciliation Act of 2001 includes a provision that allows participants who have attained age 50 during the Plan year to make additional contributions above otherwise permissible limits. These additional contributions, known as catch-up contributions, were limited to $3,000 for the year ended December 31, 2004. Company matching contributions are not be made on catch-up contributions.
Company contributions to the Plan are based on a discretionary match on an annual basis. For the Plan years 2004 and 2003, the Company matched $0.50 of each dollar contributed up to 5% of eligible participant compensation and $0.50 of each dollar contributed up to 4% of eligible participant compensation, respectively.
| (d) | Investment Options |
Participants may elect to invest their contributions and any Company matching contributions in twenty investment options within seven different asset classes as well as the Alberto-Culver Company common stock. The asset classes include: (i) stable value, (ii) balanced, (iii) large
(Continued)
4
SALLY BEAUTY
401(k) SAVINGS PLAN
Notes to Financial Statements
December 31, 2004 and 2003
capitalization equity, (iv) mid capitalization equity, (v) small capitalization equity, (vi) global equity, and (vii) international equity. These investment options are exposed to various risks, such as interest rate, market, and credit risks. Due to the level of risks associated with certain investment securities, it is possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the amounts reported in the statement of net assets available for benefits.
None of the investment funds, other than the Principal Preservation Separate Account, guarantee a fixed return to the participant. The Principal Preservation Separate Account provides stable returns as well as a full guarantee of principal and interest from PRIAC. The guaranteed interest rate is announced semi-annually and is guaranteed against change for six-month periods (January-June, July-December).
Account balances may be invested in 1% increments in any of the Plan’s available investment options. Participants may reallocate their investments among the available investment options any time during the year. Dividend and interest income received on investments are reinvested in the same funds.
Effective January 1, 2004, the Oppenheimer Global Fund (Class A Shares) replaced the Janus Worldwide Fund due to the Janus Worldwide Fund’s inability to meet certain performance criteria established by the Plan’s Investment Policy Statement.
On January 21, 2004, Alberto-Culver Company’s board of directors approved a 3-for-2 stock split in the form of a 50% stock dividend on Alberto-Culver Company’s outstanding shares. The additional shares were distributed February 20, 2004 to shareholders of record at the close of business on February 2, 2004.
Effective June 1, 2004, the International Equity/Julius Baer Fund replaced the Credit Suisse International Focus Account due to the Credit Suisse International Focus Account’s inability to meet certain performance criteria established by the Plan’s Investment Policy Statement.
| (e) | Vesting |
Participants are fully vested in the current value of their contributions and earnings and losses thereon, and become fully vested in the Company matching contributions and related earnings and losses
(Continued)
5
SALLY BEAUTY
401(k) SAVINGS PLAN
Notes to Financial Statements
December 31, 2004 and 2003
credited to their accounts based upon their years of vesting service as shown in the following table:
| Years of vesting service |
Vested percentage |
||
| Less than 1 |
0 | % | |
| 1 but less than 2 |
20 | ||
| 2 but less than 3 |
40 | ||
| 3 but less than 4 |
60 | ||
| 4 but less than 5 |
80 | ||
| 5 or more |
100 |
Participants who are age 65 or over, die, or become permanently disabled are automatically 100% vested in the value of Company matching contributions and related earnings or losses credited to their account.
| (f) | Distribution Options |
Upon severance from employment (e.g. termination of employment, retirement, disability or death, participants may elect to receive a distribution of the total value of their account, which is the accumulation of their contributions and related earnings and losses credited to their account, as well as the vested balance of their Company matching contributions and related earnings and losses credited to their account. Distributions may be in the form of cash, periodic installments, Alberto-Culver Company common stock, or a direct rollover according to the provisions of the Plan. Alternatively, terminated participants may elect to defer the distribution of their account balance until age 70 1/2, at which time minimum required distributions will commence according to Section 401(a)(9) of the Internal Revenue Code. Such deferred benefits remain in the Plan and participate in the earnings and losses from the investments.
| (g) | Corrective Distributions |
As required under Sections 401(k) and 401(m) of the Internal Revenue Code, the Plan is required to pass compliance tests as they relate to both participant and Company matching contributions to the Plan. If the Plan does not pass these tests, the Plan must make corrective distributions to certain highly compensated employees. For the Plan years ended December 31, 2004 and 2003, corrective distributions were required in the amounts of $113,225 and $120,509, respectively. Corrective distributions are processed in the Plan year subsequent to which the participant and Company matching contributions were initially contributed.
(Continued)
6
SALLY BEAUTY
401(k) SAVINGS PLAN
Notes to Financial Statements
December 31, 2004 and 2003
| (h) | Participant Loans |
Participants may borrow against their account balances for periods of one to five years. In the event the loan is used to purchase a primary residence, an extended period of time for repayment is allowed. Participant loans are limited to the lesser of $50,000 or 50% of the participants’ vested account balance and bear interest at the prime rate plus 1% at the time the loan is made. Outstanding participant loans are considered investments of the Plan and repayments of principal and interest are credited to the borrowing participants’ account using his or her current investment election. At December 31, 2004 and 2003, interest rates on outstanding loans ranged from 5.00% to 10.50%. For the Plan years ending December 31, 2004 and 2003, the numbers of participants with outstanding loans were 638 and 468, respectively.
| (i) | Forfeitures |
Company matching contributions, and earnings thereon, forfeited by terminated employees are used to reduce future Company matching contributions to the Plan. The Company will reinstate forfeited balances to the accounts of employees who rejoin the Company within five years of their termination. In 2004 and 2003, Company matching contributions were reduced by forfeiture amounts of $35,000.
| (j) | Plan Merger |
During 2004, participants’ balances in the West Coast Beauty Supply Company Retirement Savings Plan totaling $10,592,225 were transferred into the Plan due to the Company’s acquisition of the West Coast Beauty Supply Company.
| (k) | Administrative Expenses |
Administrative fees are paid by the Plan. All other Plan-related expenses are paid by the Company. Investment management fees are included in the investment fund yields.
| (2) | Summary of Significant Accounting Policies |
| (a) | Basis of Accounting |
The Company maintains the accounts of the Plan on an accrual basis.
| (b) | Asset Valuation |
The investment assets in the Plan are valued at the quoted closing sale price on the last business day of the year. Participant loans are stated at contract value which approximates fair value.
| (c) | Security Transactions and Investment Income |
Purchases and sales of investments in the Plan are recorded on a trade-date basis. When investments are sold, the difference between the carrying value original cost (computed on an average cost basis) and the proceeds received are recorded as a realized gain or loss. Interest and dividend income are recorded when earned.
(Continued)
7
SALLY BEAUTY
401(k) SAVINGS PLAN
Notes to Financial Statements
December 31, 2004 and 2003
| (d) | Payment of Benefits |
Benefits are recorded when paid.
| (e) | Use of Estimates |
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the use of estimates and assumptions that affect the reported amounts of net assets available for benefits at the date of the financial statements and the changes in net assets available for benefits during the reporting period and related disclosures. Actual results could differ from these estimates.
| (3) | Related-party Transactions |
PRIAC provides certain accounting and administrative services to the Plan for which $44,093 and $34,620 of expenses were charged for the years ended December 31, 2004 and 2003, respectively.
| (4) | Termination of the Plan |
It is the intent of the Company that the Plan continues into the future; however, the Company reserves the right to terminate the Plan. In the event the Plan is terminated, participants would become fully vested in their accounts, and the assets of the Plan would be distributed to the participants in proportion to their respective interests in the Plan.
| (5) | Tax Status |
The Company adopted a Prototype Standardized Profit Sharing Plan with a cash or deferral arrangement which received a favorable determination letter from the Internal Revenue Service, dated July 28, 2004, which stated that the form of the Plan and related trust are designed in accordance with applicable sections of the Internal Revenue Code. The Company believes that the Plan currently is designed and being operated in compliance with the applicable requirements of the Internal Revenue Code and, therefore, the Plan qualifies under Section 401(a) of the Internal Revenue Code and is exempt from tax under Section 501(a) of the Internal Revenue Code. The Plan administrator is not aware of any activity or transaction that may adversely affect the qualified status of the Plan.
(Continued)
8
SALLY BEAUTY
401(k) SAVINGS PLAN
Notes to Financial Statements
December 31, 2004 and 2003
| (6) | Other Investment Information |
The fair values of investment fund balances which represent 5% or more of the Plan’s net assets as of December 31, 2004 and 2003 are as follows:
| 2004 |
2003 | ||||
| Principal Preservation Separate Account |
$ | 13,214,286 | 10,170,300 | ||
| Fidelity Advisor Equity Growth Account |
6,808,784 | 3,986,698 | |||
| Alberto-Culver Company Common Stock |
6,554,021 | 3,891,280 | |||
| Large Cap Growth/Turner Investment Partners Funds |
4,242,471 | 3,924,479 | |||
| Dryden S&P 500 Index Fund |
3,996,534 | 3,261,777 | |||
| Fidelity Advisor Balanced Account |
3,461,708 | 2,461,663 | |||
| Large Cap Value/John A. Levin & Co. Fund |
3,455,226 | * | |||
* Fair value is less than 5% of Plan’s net assets
During the Plan years ended December 31, 2004 and 2003, the Plan’s investments (including investments bought, sold, and held during the year) appreciated in value as follows:
| 2004 |
2003 | ||||
| Pooled Separate Accounts |
$ | 3,323,086 | 5,014,172 | ||
| Alberto-Culver Company Common Stock |
786,624 | 682,892 | |||
| Net appreciation in fair value |
$ | 4,109,710 | 5,697,064 | ||
| (7) | Reconciliation of Financials Statements to Form 5500 |
The following is a reconciliation of net assets available for benefits included in the financial statements at December 31, 2004 to the Form 5500:
| 2004 |
||||
| Net assets available for benefits included in the financial statements |
$ | 63,233,243 | ||
| Amounts payable to withdrawing participants at December 31, 2004 |
(776 | ) | ||
| Net assets available for benefits included in the IRS Form 5500 |
$ | 63,232,467 | ||
(Continued)
9
SALLY BEAUTY
401(k) SAVINGS PLAN
Notes to Financial Statements
December 31, 2004 and 2003
The following is a reconciliation of benefits paid to participants per the financial statements for the Plan years ended December 31, 2004 and 2003 to the Form 5500:
| 2004 |
2003 |
|||||
| Benefits paid to participants per the financial statements |
$ | 3,570,517 | 3,430,032 | |||
| Add amounts payable to withdrawing participants in current year |
776 | — | ||||
| Less amounts payable to withdrawing participants in prior year |
— | (2,274 | ) | |||
| Benefits paid to participants per IRS Form 5500 |
$ | 3,571,293 | 3,427,758 | |||
| (8) | Subsequent Events |
Effective January 1, 2004, annual participant contributions and catch-up contributions will be limited to $14,000 and $4,000, respectively.
(Continued)
10
SALLY BEAUTY
401(k) SAVINGS PLAN
Schedule H, Line 4i – Schedule of Assets (Held at End of Year)
December 31, 2004
| Identity of issuer, borrower, |
Description of investment including |
Number of shares/units |
Current value | ||||
| * Prudential Retirement Insurance and Annuity Company |
Principal Preservation Separate Account | 1,272,916 Units | $ | 13,214,286 | |||
| * Prudential Retirement Insurance and Annuity Company |
Fidelity Advisor Equity Growth Account | 87,790 Units | 6,808,784 | ||||
| * Alberto-Culver Company |
Alberto-Culver Company Common Stock Fund | 134,855 Shares | 6,554,021 | ||||
| * Prudential Retirement Insurance and Annuity Company |
Large Cap Growth/Turner Investment Partners Fund | 394,077 Units | 4,242,471 | ||||
| * Prudential Retirement Insurance and Annuity Company |
Dryden S&P 500 Index Fund | 57,755 Units | 3,996,534 | ||||
| * Prudential Retirement Insurance and Annuity Company |
Fidelity Advisor Balanced Account | 99,242 Units | 3,461,708 | ||||
| * Prudential Retirement Insurance and Annuity Company |
Large Cap Value/John A. Levin & Co. Fund | 211,222 Units | 3,455,226 | ||||
| * Prudential Retirement Insurance and Annuity Company |
International Equity/Julius Baer Fund | 172,907 Units | 2,884,112 | ||||
| * Prudential Retirement Insurance and Annuity Company |
Oppenheimer Global Fund (Class A Shares) | 44,687 Units | 2,749,645 | ||||
| * Prudential Retirement Insurance and Annuity Company |
Balanced I Fund/(Sub-advised by Wellington Management) | 40,092 Units | 1,687,247 | ||||
| * Prudential Retirement Insurance and Annuity Company |
Small Cap Growth/TimesSquare Fund | 85,666 Units | 1,642,672 | ||||
| * Prudential Retirement Insurance and Annuity Company |
Small Cap Value/Perkins, Wolf, McDonnell Fund | 67,010 Units | 1,572,964 | ||||
| * Prudential Retirement Insurance and Annuity Company |
Lifetime 50 | 84,370 Units | 1,201,067 | ||||
| * Prudential Retirement Insurance and Annuity Company |
Lifetime 40 | 80,795 Units | 1,138,668 | ||||
| * Prudential Retirement Insurance and Annuity Company |
Lifetime 30 | 75,393 Units | 1,076,455 | ||||
| * Prudential Retirement Insurance and Annuity Company |
Mid Cap Blend/New Amsterdam Partners Fund | 70,822 Units | 965,464 | ||||
| * Prudential Retirement Insurance and Annuity Company |
Lifetime 20 | 53,123 Units | 752,093 | ||||
| * Prudential Retirement Insurance and Annuity Company |
Mid Cap Value/(Sub-advised by Wellington Management) | 27,961 Units | 472,655 | ||||
| * Prudential Retirement Insurance and Annuity Company |
Mid Cap Growth/Artisan Partners Fund | 44,633 Units | 458,167 | ||||
| * Prudential Retirement Insurance and Annuity Company |
Lifetime 60 | 14,113 Units | 203,670 | ||||
| * Participant Loans |
Loans to participants, bearing interest from 5.00% to 10.50% with | — | 2,099,197 | ||||
| varying maturities through 2014 | $ | 60,637,106 | |||||
| * | Represents a party-in-interest. |
See accompanying report of independent registered public accounting firm.
11
Consent of Independent Registered Public Accounting Firm
The Board of Directors
Alberto-Culver Company:
We consent to the incorporation by reference in the registration statement (No. 333-70067) on Form S-8 of Alberto-Culver Company of our report dated June 24, 2005, with respect to the Statements of Net Assets Available for Benefits of the Sally Beauty 401(k) Savings Plan as of December 31, 2004 and 2003, and the related Statements of Changes in Net Assets Available for Benefits for the years then ended, and the related supplemental schedule, which report appears in the December 31, 2004 annual report on Form 11-K of Alberto-Culver Company.
/s/ KPMG LLP
Chicago, Illinois
June 28, 2005
SIGNATURES
The Plans: Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plans) have duly caused this annual report to be signed on their behalf by the undersigned hereunto duly authorized.
| SALLY BEAUTY 401(k) SAVINGS PLAN | ||
| By: | /s/ William J. Cernugel | |
Sally Beauty Company, Inc., Plan Administrator | ||
| ALBERTO-CULVER 401(k) SAVINGS PLAN | ||
| By: | /s/ William J. Cernugel | |
Alberto-Culver Company, Plan Administrator | ||
Dated: June 29, 2005