-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, Q044uvRqrilWYlt5Q1wAyKgCq1XVR2tYirH5vwkRrPyXjFgD7bY65mPWukrchw7K 4hq/CVrbepyarR5CQyKjXw== 0000797975-94-000002.txt : 19940131 0000797975-94-000002.hdr.sgml : 19940131 ACCESSION NUMBER: 0000797975-94-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940128 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ARMOR ALL PRODUCTS CORP CENTRAL INDEX KEY: 0000797975 STANDARD INDUSTRIAL CLASSIFICATION: 2842 IRS NUMBER: 330178217 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 34 SEC FILE NUMBER: 000-14946 FILM NUMBER: 94503389 BUSINESS ADDRESS: STREET 1: 6 LIBERTY DR CITY: ALISO VIEJO STATE: CA ZIP: 92656 BUSINESS PHONE: 7143620600 10-Q 1 3QTR-10Q-ARMORALL SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For quarter ended December 31, 1993 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ---------------- ----------------- Commission file number 0-14946 - ------------------------------ ARMOR ALL PRODUCTS CORPORATION - ----------------------------------------------------------------- (Exact Name of Registrant as specified in its charter) DELAWARE 33-0178217 - ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 6 Liberty, Aliso Viejo, California 92656 - ----------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (714) 362-0600 - ----------------------------------------------------------------- (Registrant's telephone number, including area code) 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 the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at December 31, 1993 - ----------------------------- -------------------------------- Common stock, $0.01 par value 21,125,921 Shares TABLE OF CONTENTS PART I. FINANCIAL INFORMATION ============================== Pages ----- Consolidated Balance Sheets December 31, 1993 and March 31, 1993 3 Consolidated Statements of Income Three and nine months ended December 31, 1993 and 1992 4 Consolidated Statements of Cash Flows Nine months ended December 31, 1993 and 1992 5 Financial Notes 6 - 7 Financial Review 8 - 9 PART II. OTHER INFORMATION =========================== Item - ---- 6 Exhibits and Reports on Form 8-K 10 - 2 - PART 1. FINANCIAL INFORMATION ============================== ARMOR ALL PRODUCTS CORPORATION CONSOLIDATED BALANCE SHEETS (unaudited) December 31 March 31 1993 1993 -------- -------- (in thousands) ASSETS - ------ Current Assets Cash and cash equivalents $ 53,157 $ 33,858 Accounts receivable 26,456 54,074 Inventories 3,904 4,715 Deferred income taxes 416 129 Prepaid expenses 2,423 653 ------- ------- Total current assets 86,356 93,429 Property - net 8,630 8,451 Goodwill 27,932 28,778 Patents and Trademarks 8,746 9,177 Other Intangibles 53 725 ------- ------- Total assets $131,717 $140,560 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ Current Liabilities Accounts payable $ 6,302 $ 9,433 Payable to McKesson 1,150 5,893 Accrued selling expenses 5,648 9,073 Dividends payable 3,380 2,527 Accrued compensation 2,017 3,131 Other liabilities 2,529 2,999 ------- ------- Total current liabilities 21,026 33,056 ------- ------- Deferred Income Taxes 912 949 ------- ------- Stockholders' Equity Common stock 211 211 Other capital 58,608 57,968 Unearned compensation - restricted stock (712) (664) Retained earnings 52,310 49,333 Cumulative translation adjustment (638) (293) ------- ------- Total stockholders' equity 109,779 106,555 ------- ------- Total liabilities and stockholders' equity $131,717 $140,560 ======= ======= See accompanying financial notes. - 3 - ARMOR ALL PRODUCTS CORPORATION CONSOLIDATED STATEMENTS OF INCOME (unaudited) Three Months Ended Nine Months Ended December 31 December 31 ------------------- ------------------- 1993 1992 1993 1992 -------- -------- -------- -------- (in thousands except per share amounts) REVENUES $33,407 $30,927 $117,361 $108,413 ------- ------- ------- ------- COSTS AND EXPENSES Cost of sales 13,870 12,945 48,095 44,490 Selling, general and administrative 13,087 12,132 45,144 42,734 Amortization of intangibles 494 803 2,102 2,966 ------- ------- ------- ------- Total costs and expenses 27,451 25,880 95,341 90,190 ------- ------- ------- ------- OPERATING INCOME 5,956 5,047 22,020 18,223 INTEREST INCOME 405 360 1,074 920 ------- ------- ------- ------- INCOME BEFORE INCOME TAXES 6,361 5,407 23,094 19,143 INCOME TAXES 2,739 2,266 9,986 8,021 ------- ------- ------- ------- NET INCOME $ 3,622 $ 3,141 $ 13,108 $ 11,122 ======= ======= ======= ======= EARNINGS PER COMMON SHARE $ .17 $ .15 $ .62 $ .53 ======= ======= ======= ======= DIVIDENDS PER COMMON SHARE $ .16 $ .12 $ .48 $ .36 ======= ======= ======= ======= WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 21,123 21,027 21,107 21,011 See accompanying financial notes. - 4 - ARMOR ALL PRODUCTS CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) Nine Months Ended December 31 ---------------------- 1993 1992 -------- -------- (in thousands) Operating Activities Net income $ 13,108 $ 11,122 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 3,067 3,952 Provision for losses on receivables 364 376 Deferred income taxes (211) (151) ------- ------- Total 16,328 15,299 ------- ------- Effect of changes in Accounts receivable 27,254 25,277 Inventories 811 1,254 Prepaid expenses (1,883) (1,215) Accounts payable (3,131) (2,506) Payable to McKesson (income taxes) (2,689) 0 Accrued selling expenses (3,425) (1,715) Accrued compensation (1,114) 615 Other liabilities (470) 239 ------- ------- Total 15,353 21,949 ------- ------- Net cash provided by operating activities 31,681 37,248 ------- ------- Investing Activities Note receivable from affiliate 0 (2,385) Capital expenditures (974) (449) Other (497) (210) ------- ------- Net cash used by investing activities (1,471) (3,044) ------- ------- Financing Activities Payable to McKesson (other) (2,054) 0 Issuance of common stock 421 1,094 Dividends paid (9,278) (7,556) ------- ------- Net cash used by financing activities (10,911) (6,462) ------- ------- Net increase in cash and cash equivalents 19,299 27,742 Cash and cash equivalents at beginning of period 33,858 15,708 ------- ------- Cash and cash equivalents at end of period $ 53,157 $ 43,450 ======= ======= See accompanying financial notes. - 5 - ARMOR ALL PRODUCTS CORPORATION FINANCIAL NOTES 1. BASIS OF PRESENTATION - -------------------------- The accompanying consolidated financial statements present the financial position and results of operations of Armor All Products Corporation and its subsidiaries (the "Company"). In the opinion of the Company, these unaudited consolidated financial statements include all adjustments necessary for a fair presentation of its financial position as of December 31, 1993 and the results of its operations and its cash flows for the nine-month periods ended December 31, 1993 and 1992. Such adjustments were of a normal recurring nature. The results of operations for the three and nine months ended December 31, 1993 and 1992 are not necessarily indicative of the results for the full years. It is suggested that these consolidated financial statements be read in conjunction with the consolidated financial statements and related notes thereto included in the Company's Annual Report to Shareholders for the year ended March 31, 1993. That report has previously been filed with the Securities and Exchange Commission as an exhibit to the Company's Annual Report on Form 10-K. Certain prior year amounts have been reclassified to conform with the current year presentation. 2. PARENT COMPANY - -------------------- The Company is a subsidiary of McKesson Corporation ("McKesson"). During the nine-month period ended December 31, 1993, McKesson sold 5,175,000 of its shares of the Company's common stock in a registered secondary offering and donated 250,000 shares to the McKesson Foundation. These transactions reduced McKesson's equity interest in the Company from 83% to 57%. 3. CASH MANAGEMENT - -------------------- Pursuant to an agreement with McKesson, the Company's U.S. operations participate daily in a cash management program administered by McKesson. Under this arrangement, the Company invests any excess cash in the cash management program and has unrestricted access to such invested cash to fund disbursements. If the Company needs additional cash above the amount invested, such cash requirements are met through borrowings from McKesson. All amounts invested in the cash management program with McKesson are deposited in a separate bank account in the Company's name, which is used for cash management program transactions. - 6 - ARMOR ALL PRODUCTS CORPORATION FINANCIAL NOTES Included in cash and cash equivalents in the accompanying consolidated balance sheets are the following amounts invested in the cash management program: $48,793,000 at a 3.1% interest rate on December 31, 1993 and $30,025,000 at a 3.1% interest rate on March 31, 1993. 4. PREPAID EXPENSES - --------------------- Prepaid expenses at December 31, 1993 include $2,152,000 of payments related to media advertising. The Company allocates the annual media advertising expense among interim periods in proportion to estimated annual sales volume. 5. INTEREST INCOME - -------------------- Interest income is comprised of the following: Three Months Nine Months Ended Ended December 31 December 31 ------------ ------------ 1993 1992 1993 1992 ---- ---- ---- ---- (in thousands) Interest income - McKesson $ 357 $ 341 $ 948 $ 808 Interest income - other 48 19 126 112 ----- ----- ----- ----- Interest income $ 405 $ 360 $1,074 $ 920 ===== ===== ===== ===== - 7 - ARMOR ALL PRODUCTS CORPORATION FINANCIAL REVIEW Results of Operations - --------------------- Revenues increased $2.5 million or 8.0% in the quarter ended December 31, 1993 from the corresponding quarter of the prior year. This increase was primarily due to higher revenues in Canada, Asia and Latin America, including certain favorable year-end pricing settlements in connection with the international distribution agreement with S. C. Johnson. Sales in the United States increased moderately from the prior year quarter due to revenues from three new products: Armor All-R Low-Gloss Protectant-TM, Armor All-R QuickSilver-TM Wheel Cleaner and Armor All-R Spot & Wash-TM Concentrate. Revenues increased $8.9 million or 8.3% in the nine months ended December 31, 1993 from the corresponding period of the prior year. Sales in the United States were higher due to revenues from the three new products mentioned above, as well as to the continued strong growth of Armor All-R Tire Foam-TM Protectant and sales of Rain Dance-R Light and Dark Car Formula Polishes. In addition, international sales increased due to higher revenues from all of the Company's principal foreign markets: Canada, Europe, Asia, Latin America and Australia. Cost of sales as a percentage of revenues was 41.5% and 41.9% in the quarters ended December 31,1993 and 1992, respectively, and 41.0% in each of the respective nine-month periods. The decrease in the current quarter was primarily attributable to the effect of the aforementioned pricing settlements in connection with the international distribution agreement with S.C. Johnson. For the nine-month period, these settlements were offset primarily by a lower-margin product mix and increased shipments of certain promotional items. Selling, general and administrative expense as a percentage of revenues was 39.2% in each of the quarters ended December 31, 1993 and 1992, and 38.5% and 39.4% in the respective nine-month periods. The decrease in the nine-month period is primarily due to the absorption of media advertising and fixed administrative expenses over a higher sales volume. Partially offsetting these factors was the implementation of several new consumer promotion programs. Amortization of intangible assets decreased $0.3 million in the quarter ended December 31, 1993 and $0.9 million in the nine-month period as certain intangibles became fully amortized. The effective income tax rate was 43.1% and 41.9% in the quarters ended December 31, 1993 and 1992, respectively, and 43.2% - 8 - ARMOR ALL PRODUCTS CORPORATION FINANCIAL REVIEW and 41.9% in the respective nine-month periods. The higher effective rates in the current year principally reflect the enactment of the Omnibus Budget Reconciliation Act of 1993, which increased the federal corporate income tax rate from 34% to 35% retroactive to January 1993. Financial Resources and Liquidity - --------------------------------- The Company's working capital requirements fluctuate during the year, traditionally peaking in the spring due to extended payment terms offered in connection with winter sales promotional activities. Cash inflow is strongest during the summer months as these receivables are collected. Reflecting these seasonal factors, the Company had cash and cash equivalents of $53.2 million with no outstanding debt at December 31, 1993. This pattern resulted in cash flow from operations of $31.7 million and $37.2 million in the nine-month periods ended December 31, 1993 and 1992, respectively, as accounts receivable were reduced from March 31 levels. Despite higher net income in the current period, operating cash flow was lower primarily due to the timing of payments for income taxes and certain advertising and selling expenses. As long as the Company continues to participate in the McKesson cash management program, McKesson will make available to the Company the amount of cash necessary to provide the Company with sufficient funds to meets its needs as defined in its annual capital and operating plans. The Company does not anticipate borrowing any funds from McKesson during the remainder of this fiscal year. - 9 - PART II. OTHER INFORMATION =========================== Item 6. Exhibits and Reports on Form 8-K (a) Exhibits None (b) Reports on Form 8-K No reports on Form 8-K were filed during the quarter ended December 31, 1993. - 10 - S I G N A T U R E ================= 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. ARMOR ALL PRODUCTS CORPORATION (Registrant) Dated: January 28, 1994 /s/ Mervyn J. McCulloch ------------------------------ Mervyn J. McCulloch Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) - 11 - -----END PRIVACY-ENHANCED MESSAGE-----