-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GZDvnXsJ8Ffi3GZ+NVZCY2+QGKTS9oKm6IUEhVVyKKBlUYkhO6SqDxi4Ltuu9zU+ lBfZUnnaBKoIhl5EoTxYsw== 0000797975-96-000001.txt : 19960216 0000797975-96-000001.hdr.sgml : 19960216 ACCESSION NUMBER: 0000797975-96-000001 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960213 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ARMOR ALL PRODUCTS CORP CENTRAL INDEX KEY: 0000797975 STANDARD INDUSTRIAL CLASSIFICATION: SPECIALTY CLEANING, POLISHING AND SANITATION PREPARATIONS [2842] IRS NUMBER: 330178217 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-14946 FILM NUMBER: 96517307 BUSINESS ADDRESS: STREET 1: 6 LIBERTY DR CITY: ALISO VIEJO STATE: CA ZIP: 92656 BUSINESS PHONE: 7143620600 10-Q 1 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, 1995 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, 1995 - ----------------------------- -------------------------------- Common stock, $0.01 par value 21,300,215 shares TABLE OF CONTENTS PART I. FINANCIAL INFORMATION ============================== Pages ----- Consolidated Balance Sheets December 31, 1995 and March 31, 1995 3 Consolidated Statements of Income Three and Nine months ended December 31, 1995 and 1994 4 Consolidated Statements of Cash Flows Nine months ended December 31, 1995 and 1994 5 Financial Notes 6 - 7 Financial Review 8 PART II. OTHER INFORMATION =========================== Item - ---- 6 Exhibits and Reports on Form 8-K 10 PART 1. FINANCIAL INFORMATION ============================== ARMOR ALL PRODUCTS CORPORATION CONSOLIDATED BALANCE SHEETS (unaudited) December 31, March 31, 1995 1995 ------ ------ (in thousands) ASSETS - ------ Current Assets Cash and cash equivalents $ 38,545 $ 22,249 Accounts receivable 34,532 84,865 Inventories 14,637 12,695 Deferred taxes 790 956 Prepaid expenses 8,418 801 ------- ------- Total current assets 96,922 121,566 Property 8,854 9,373 Goodwill 25,676 26,522 Patents and Trademarks 14,514 15,389 ------- ------- Total assets $145,966 $172,850 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ Current Liabilities Accounts payable $ 7,591 $ 17,385 Payable to McKesson 1,058 2,595 Accrued selling expenses 2,263 8,590 Accrued compensation 1,315 2,513 Dividends payable 3,408 3,404 Taxes payable and other liabilities 2,776 8,897 ------- ------- Total current liabilities 18,411 43,384 ------- ------- Deferred Income Taxes 582 481 ------- ------- Stockholders' Equity Common stock 213 213 Other capital 61,533 61,157 Unearned compensation - restricted stock (1,281) (980) Retained earnings 67,136 69,338 Cumulative translation adjustment (628) (743) ------- ------- Total stockholders' equity 126,973 128,985 ------- ------- Total liabilities and stockholders' equity $145,966 $172,850 ======= ======= See accompanying financial notes. - 3 - ARMOR ALL PRODUCTS CORPORATION CONSOLIDATED STATEMENTS OF INCOME (unaudited) Three Months Ended Nine Months Ended December 31, December 31, --------------- --------------- 1995 1994 1995 1994 ------ ------ ------ ------ (in thousands except per share amounts) REVENUES $34,637 $39,244 $124,633 $136,947 ------ ------ ------- ------- COSTS AND EXPENSES 15,622 17,100 58,241 58,427 Selling, general and administrative 15,718 15,133 51,962 52,164 Amortization of intangibles 614 606 1,841 1,852 ------ ------ ------- ------- Total costs and expenses 31,954 32,839 112,044 112,443 ------ ------ ------- ------- OPERATING INCOME 2,683 6,405 12,589 24,504 INTEREST INCOME 510 576 1,232 1,357 ------ ------ ------- ------- INCOME BEFORE INCOME TAXES 3,193 6,981 13,821 25,861 INCOME TAXES 1,341 2,981 5,805 11,043 ------ ------ ------ ------ NET INCOME $ 1,852 $ 4,000 $ 8,016 $14,818 ====== ====== ====== ====== EARNINGS PER COMMON SHARE $.09 $.19 $.38 $.70 === === === === DIVIDENDS PER COMMON SHARE $.16 $.16 $.48 $.48 === === === === WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 21,299 21,222 21,288 21,195 See accompanying financial notes. - 4 - ARMOR ALL PRODUCTS CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) Nine Months Ended December 31, ---------------- 1995 1994 ------ ------ (in thousands) Operating Activities Net income $ 8,016 $14,818 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 2,950 2,794 Deferred income taxes 267 225 Other (301) 276 ------ ------ Total 10,932 18,113 ------ ------ Effect of changes in Accounts receivable 50,333 31,715 Inventories (1,942) (5,366) Prepaid expenses (7,617) (5,557) Accounts payable (9,794) (2,545) Accrued selling expenses (6,327) (4,301) Accrued compensation (1,198) (201) Taxes payable and other liabilities (6,121) (3,017) ------ ------ Total 17,334 10,728 ------ ------ Net cash provided by operating activities 28,266 28,841 ------ ------ Investing Activities Capital expenditures (590) (1,083) Other (5) (81) ------ ------ Net cash used by investing activities (595) (1,164) ------ ------ Financing Activities Payable to McKesson (1,537) (516) Issuance of common stock 376 1,136 Dividends paid (10,214) (10,165) ------ ------ Net cash used by financing activities (11,375) (9,545) ------ ------ Net increase in cash and cash equivalents 16,296 18,132 Cash and cash equivalents at beginning of period 22,249 26,251 ------ ------ Cash and cash equivalents at end of period $38,545 $44,383 ====== ====== 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, 1995 and the results of its operations and its cash flows for the nine months ended December 31, 1995 and 1994. Such adjustments were of a normal recurring nature. The results of operations for the nine months ended December 31, 1995 and 1994 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, 1995. That report has previously been filed with the Securities and Exchange Commission as an exhibit to the Annual Report on Form 10-K. 2. CASH MANAGEMENT - -------------------- Pursuant to an agreement with McKesson Corporation ("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 its operating 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. Included in cash and cash equivalents in the accompanying consolidated balance sheets are the following amounts invested in the cash management program: $33,728,000 at 5.7% on December 31, 1995 and $18,182,000 at 6.0% on March 31, 1995. 3. INVENTORIES - ---------------- Inventories are comprised of the following: December 31, March 31, 1995 1995 ------ ------ Finished Goods $12,398 $10,338 Raw Materials 2,239 2,357 ------ ------ Total $14,637 $12,695 ====== ====== - 6 - ARMOR ALL PRODUCTS CORPORATION FINANCIAL NOTES 4. PREPAID EXPENSES - --------------------- Prepaid expenses at December 31, 1995 includes approximately $7,950,000 of payments related to fiscal year 1996 media advertising. The Company allocates the annual media advertising expense among interim periods in proportion to estimated annual sales volume. In addition, prepaid expenses at December 31, 1995 includes approximately $1,500,000 of media advertising purchased on a forward buying basis for airing in early fiscal year 1997. 5. INTEREST INCOME - -------------------- Interest income is comprised of the following: Three Months Nine Months Ended Ended December 31, December 31, ------------ ------------ 1995 1994 1995 1994 ---- ---- ---- ---- (in thousands) Interest income - McKesson $489 $526 $1,142 $1,232 Interest income - other 21 50 90 125 --- --- ----- ----- Interest income $510 $576 $1,232 $1,357 === === ===== ===== - 7 - ARMOR ALL PRODUCTS CORPORATION FINANCIAL REVIEW Results of Operations - --------------------- Revenues decreased $4.6 million or 11.7% in the third quarter and decreased $12.3 million or 9.0% in the nine months ended December 31, 1995. The decreases were primarily attributable to lower shipments of automotive division products in the United States and Canada. A weakness in consumer purchasing activity affecting the automotive appearance industry has resulted in lower reorder levels from retailers; management expects that this trend will continue into the Company's fourth fiscal quarter. In addition, the prior year's third quarter automotive revenues were higher than historical levels because of heavy shipping of promotional merchandise in support of a strategic marketing program to increase the market share of Armor All(R) Protectant. This year, promotional merchandise is being shipped later in order to meet just-in-time inventory objectives of retailers, contributing to an adverse comparison with prior year sales. Initial shipments in December 1995 of two new automotive products -- Armor All(R) Armor Plate(R) Paint Protectant and Armor All(R) FlashBlack(TM) Tire Shine -- made a small contribution to the current year's third quarter revenues. Home care division revenues were higher than the prior year third quarter and nine-month period due to the launch in February 1995 of Armor All(R) Vinyl Siding Wash, Armor All Deck Protector Waterproofing Sealer and Armor All WaterProofing Sealer, and the launch in December 1995 of Armor All(R) Painted Wood Wash. International revenues increased in the quarter and nine month period as higher revenues in most geographic regions more than offset the lower revenues in Mexico resulting from the economic effects of the peso devaluation. Cost of sales as a percentage of revenues was 45.1% and 43.6% in the quarters ended December 31, 1995 and 1994, respectively, and 46.7% and 42.7% in the respective nine month period. The higher cost percentages in the current year were due to a number of factors, including increased carrying costs associated with higher inventory levels, increased raw material costs, and higher costs of a new formula for Armor All(R) Protectant. The decrease in the cost percentage during the current year's third quarter, in comparison with the first six months of the fiscal year, was primarily attributable to an approximate 5% selling price increase on certain automotive products effective on November 1, 1995. Selling, general and administrative expense as a percentage of revenues was 45.4% and 38.6% in the quarters ended December 31, 1995 and 1994, respectively, and 41.7% and 38.1% in the respective nine month period. These percentage increases were mainly due to the absorption over lower revenues of the fixed marketing and promotional costs related to the Company's strategy of building automotive market share and launching new products. Another factor was the greater mix of home care shipments, which had higher promotional expenses associated with the launch of the aforementioned new products. - 8 - ARMOR ALL PRODUCTS CORPORATION FINANCIAL REVIEW 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 the Company's winter sales promotional activities. Cash inflow is strongest during the summer months as these receivables are collected. This pattern resulted in cash flow from operations of $28.3 million and $28.8 million in the nine months ended December 31, 1995 and 1994, respectively, as accounts receivable were reduced from March 31 levels. The cash inflow from operations in fiscal 1996 was relatively unchanged from fiscal 1995, despite the lower net income, largely as a result of higher collections of accounts receivable due to a higher accounts receivable balance at the beginning of the current year than at the beginning of the prior year. This factor was partially offset by higher payments in the current year for media advertising and certain payables and accrued liabilities. At December 31, 1995, the Company had a total cash balance of $38.5 million, including $33.7 million invested in the McKesson cash management program (see Note 2), and no outstanding debt. 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 meet its needs, as defined in its annual capital and operating plans. - 9 - PART II. OTHER INFORMATION =========================== Item 6. Exhibits and Reports on Form 8-K - ------------------------------------------ (a) Exhibits (27) Financial Data Schedule (b) Reports on Form 8-K No reports on Form 8-K were filed during the quarter ended December 31, 1995. - 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) Date: February 13, 1996 By /s/Michael G. McCafferty --------------------------- Michael G. McCafferty Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) - 11 - INDEX TO EXHIBITS ================= Exhibit Number - ------- 27 Financial Data Schedule - 12 - EX-27 2
5 0000797975 ARMOR-ALL-PRODUCTS 1,000 9-MOS MAR-31-1996 APR-01-1995 DEC-31-1995 38,545 0 36,425 1,893 14,637 96,922 15,278 6,424 145,966 18,411 0 213 0 0 126,760 145,966 124,633 124,633 58,241 58,241 0 2,203 0 13,821 5,805 0 0 0 0 8,016 .38 0
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