-----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, MYWeD3W/StAMTASpW2t/EJ6OYMJ0QUnNac5WkSJVarx9ONGMFOrMJ8J/tMh9Cv6i 1HRneLChQbNc8+vF2DWNjg== 0000929624-96-000097.txt : 19960620 0000929624-96-000097.hdr.sgml : 19960620 ACCESSION NUMBER: 0000929624-96-000097 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960619 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-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-14946 FILM NUMBER: 96582739 BUSINESS ADDRESS: STREET 1: 6 LIBERTY DR CITY: ALISO VIEJO STATE: CA ZIP: 92656 BUSINESS PHONE: 7143620600 10-K 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the fiscal year ended March 31, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from to 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 Identification No.) incorporation or organization) 6 Liberty, Aliso Viejo, California 92656 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (714) 362-0600 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.01 Par Value (Title of Class) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] Aggregate market value of voting stock held by nonaffiliates of the Registrant at June 3, 1996: $149,176,759 Number of shares of common stock outstanding at June 3, 1996: 21,331,222 Documents Incorporated by Reference Portions of the Registrant's Annual Report to Stockholders for the fiscal year ended March 31, 1996 are incorporated by reference into Parts II and IV of this report. Portions of the Registrant's Proxy Statement for the Annual Meeting of Stockholders to be held on July 26, 1996 are incorporated by reference into Part III of this report. TABLE OF CONTENTS PART I ------
Item Pages - ---- ----- 1. Business.............................................................1 2. Properties...........................................................5 3. Legal Proceedings....................................................5 4. Submission of Matters to a Vote of Security Holders..................5 Executive Officers of the Registrant.................................6 PART II ------- 5. Market for the Registrant's Common Stock and Related Stockholder Matters.........................................7 6. Selected Financial Data..............................................7 7. Management's Discussion and Analysis of Financial Condition and Results of Operations..........................................7 8. Financial Statements and Supplementary Data..........................7 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...........................................7 PART III -------- 10. Directors and Executive Officers of the Registrant.................8 11. Executive Compensation.............................................8 12. Security Ownership of Certain Beneficial Owners and Management.....8 13. Certain Relationships and Related Transactions.....................8 PART IV ------- 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K...9 Signatures........................................................10
PART I ITEM 1. BUSINESS Substantially all of the Company's operations are currently in one business segment, marketing branded appearance enhancement products targeted primarily for the do-it-yourself automotive and home care markets. The Company also sells certain of its automotive products to car wash operators and other industrial users. The Company's majority shareholder is McKesson Corporation ("McKesson"). Prior to May 1993, McKesson owned approximately 83% of the Company's outstanding shares of common stock. In May 1993, McKesson reduced its ownership level to approximately 57% through a sale of shares to the public. McKesson subsequently reduced its ownership level to approximately 55% through a donation of shares to a charitable foundation. In addition, McKesson has outstanding debentures which are exchangeable into shares of the Company's common stock owned by McKesson at a price of $25.94 per share at any time through February 2004, subject to McKesson's right to pay cash equal to the market price of the stock in lieu of making the exchange. If all such debentures were actually exchanged, McKesson's ownership level would be reduced to approximately 22%. Products The Company develops and markets a broad line of automotive appearance chemicals under four brand names: Armor All/(R)/, Rain Dance/(R)/, Rally/(R)/ and No. 7/(R)/. The Company also markets home care products under the Armor All/(R)/ and E-Z Deck Wash/ (R)/ brand names. Automotive Brands The Company develops and markets protectants, washes and other cleaning aids under the Armor All/(R)/ name. The Company's principal product, Armor All/(R)/ Protectant, is designed to protect and beautify natural and synthetic polymer materials and is primarily used on automobile surfaces made of rubber, vinyl and plastic, such as dashboards, vinyl tops, door panels, tire sidewalls and rubber bumpers. Armor All/(R)/Protectant Low-Gloss Natural Finish is a low-gloss version of Armor All Protectant designed to minimize dashboard glare for consumers who prefer a less shiny appearance. Sales of Armor All Protectant, including the low-gloss version, accounted for 54% and 59% of the Company's revenues in fiscal 1996 and 1995, respectively. Armor All/(R)/ Tire Foam/(R)/ Protectant is designed to clean, shine and protect tire sidewalls without wiping. Armor All/(R)/ FlashBlack/TM /Tire Shine, introduced in December 1995, also has a no-wipe formula and is designed to give tires a wet-look luster. Armor All/(R)/ QuickSilver/TM/ Wheel Cleaner is a spray-on wheel cleaner designed for use on wheels, wheel covers and hubcaps. Armor All/(R)/ Leather Care Protectant is designed primarily to clean and protect leather upholstery. Armor All/(R)/ Armor Plate/(R)/ Paint Protectant, introduced in December 1995, is a spray-on, wipe-off product designed to protect and shine the painted surfaces of cars. Armor All/(R)/ Spot & Wash/TM/ Concentrate is a car wash product designed to remove bugs, tar residue and tree sap from car finishes. The Company also markets another car wash liquid concentrate and a multi-purpose cleaner under the Armor All name. Armor All/(R)/ Express Wash/TM/, introduced in certain International markets in March 1996, is a waterless car wash designed for consumers who live in areas with legal restrictions or other conditions which prevent them from using water to wash their cars. The Company markets polishes, paste and liquid waxes, and car wash products under the Rain Dance brand and paste and liquid waxes under the Rally brand. Under the No. 7 brand, the Company markets a variety of polishing and rubbing compounds and other cleaning aids. -1- Home Care Brands The Company entered the home care market in January 1994 with the acquisition of the E-Z Deck Wash/(R)/ and E-Z D/TM/ brands. The E-Z Deck Wash product is designed to clean and restore wood surfaces, such as patio decks, siding and fences. The acquired E-Z D brand products include a vinyl wash, a paint preparation treatment and a roof wash. The E-Z Deck Wash and E-Z D products are now being marketed under the Armor All name. In February 1995, the Company introduced three new products under the Armor All name. Armor All/(R)/ Deck Protector Waterproofing Sealer is designed to restore the natural luster and sheen of wood and protects against water damage on wood. Armor All/(R)/ Water Proofing Sealer can be used to protect against water damage on most porous surfaces, including wood, brick, concrete, stucco and masonry. Armor All/(R)/ Vinyl Siding Wash is designed to remove stains caused by mold and mildew from vinyl siding without leaving a film. In January 1996, the Company introduced Armor All/(R)/ Painted Wood Wash, designed for cleaning painted wood siding and trim. Also in January 1996, the Company introduced a line of Armor All/(R)/ Pressure Washing formulas in three versions: a deck wash, a siding wash and a car wash. Geographic Markets The Company's products are sold predominantly in the United States and Canada, with additional sales occurring in approximately 70 other countries. In fiscal 1996, 87% of sales were in the United States, 4% in Canada and 9% in other foreign countries, principally Australia, Germany, Japan, Mexico and the United Kingdom. The Company does not have large fixed capital investments in its foreign operations. Foreign currency exchange fluctuations have not had a significant impact on the Company's operating results. Sales and Marketing In the United States and Canadian automotive appearance market, a sales force of 12 employees accounted directly for over 50% of the Company's revenues in fiscal 1996. In addition, the Company's sales force oversees 19 independent manufacturers' representative organizations that also market the Company's products. Primary customers include mass merchandise retailers, auto supply stores, warehouse clubs, hardware stores and other retail outlets. The Company believes that its automotive appearance products are sold at over 100,000 retail outlets. In the United States and Canadian home care market, a sales force of 6 employees oversees 19 manufacturers' representative organizations that market the Company's products. Primary customers include home centers, do-it-yourself warehouses, mass merchandise retailers and hardware stores. The Company's largest customers represent a significant percentage of its revenues. Sales to the Company's 20 largest customers accounted for 64%, 61% and 65% of the Company's consolidated revenues in fiscal 1996, 1995 and 1994, respectively. Sales to the Company's two largest customers, Wal-Mart Stores, Inc. (and its affiliates) and Kmart Corporation (and its affiliates), accounted for the following respective percentages of the Company's revenues: 20% and 10% in fiscal 1996; 17% and 8% in fiscal 1995; and 17% and 8% in fiscal 1994. The Company's direct sales force works closely with the Company's largest customers on joint marketing and promotional activities. The Company also assists its customers with inventory management supported, in certain cases, by electronic data interchange ("EDI") links between the Company and the customer. In addition, EDI provides the Company with valuable marketing information. Among other things, the Company uses EDI point-of-sale statistics to analyze geographic purchase patterns, measure the success of test marketing programs and monitor sales of time-sensitive promotions. The Company provides national advertising and promotional support and retail merchandising management assistance, including product information and sales training. The Company's promotional activities target both trade accounts and retail consumers. Over the past four years, the Company has increased the proportion of marketing funds -2- which are offered to trade customers as fixed sums in return for specific promotional activities, as opposed to more general cooperative advertising arrangements. From time to time, the Company uses various retail sales incentive devices, such as coupons, rebates, "Bonus Packs" (e.g., 10 ounces for the price of 8), merchandise with attached free samples, and other special offers to stimulate retail sales. Retail sales of the Company's products are seasonal and are highest between April and September. However, sales to the Company's trade customers are highest in its fourth fiscal quarter (from January through March). Consistent with industry practice, the Company offers extended payment terms in conjunction with its winter promotional activities. International sales are effected through sales offices in Canada and the United Kingdom, through foreign distributors, and through a marketing and distribution alliance with S. C. Johnson & Son, Inc. Under an agreement between the Company and S.C. Johnson, S. C. Johnson is the exclusive distributor of Armor All Protectant and certain of the Company's other products in Germany, Japan and Mexico, subject to agreement with the Company on annual business and marketing plans for each country. Under the agreement, S. C. Johnson pays virtually all selling and marketing expenses and the Company and S.C. Johnson share in the profits or losses. The S.C. Johnson agreement expires in June 2001, with automatic five-year renewals unless either party provides 12 months' prior notice. The Company has the right to terminate the agreement on a country-by-country basis if S.C. Johnson fails to meet certain revenue objectives over specified periods, subject to S.C. Johnson's right to avoid termination by compensating the Company for any shortfall. Manufacturing and Packaging The Company's products are manufactured in four principal locations in the United States, one location in Canada and one location in Australia. Protectants are manufactured at four of these locations, aerosol products at one location, waxes at one location and home care products at one location. The Company's products are manufactured by contract packagers. Management believes that the existing packagers can accommodate the Company's production needs for the foreseeable future. The Company's relationships with its three most important packagers have lasted for 8, 11 and 23 years. Subject to contractual arrangements, the Company periodically re-evaluates its selection of packagers and believes that other acceptable packagers are readily available. Products which comprise a majority of the Company's sales volume are manufactured and distributed under full-service packaging agreements. In general, the Company's full-service packagers are responsible for purchasing product ingredients and approved component packaging materials. The Company negotiates the raw material supply arrangements on behalf of its packagers. The packagers blend, package and warehouse the finished product. With certain exceptions, the full-service packagers own all the raw materials and finished products in their possession and transfer title to the Company just prior to shipment to the Company's customers. In the case of Armor All Protectant and Armor All Tire Foam Protectant, the Company premixes a concentrate which it sells to the packagers. For most of its other products, the Company purchases finished goods from the contract packagers and warehouses them until shipment to a customer. During the past two years, the Company has reduced the percentage of its volume which is manufactured under full-service arrangements. This reduction resulted primarily from (a) the addition of several new products which must be manufactured by packagers other than those which serve as distribution centers and (b) a change in certain packaging and distribution sites to achieve production and operational efficiencies. As a result, the Company owns a greater percentage of finished goods inventories than in prior years. The Company expects to maintain a mix of full-service and other packaging arrangements in the future based on consideration of production and transportation costs, unique manufacturing requirements and other factors. The Company has alternative sources for the ingredients used in, and packaging components for, all of its products. The Company has contracts with certain suppliers to provide a continued supply of the primary chemical ingredients and packaging components used in producing its products. -3- Trademarks and Patents The Company's principal trademarks are: . Armor All/(R)/ . Symbol of a male Viking figure/(R)/ . Armor Plate/(R)/ . Rain Dance/(R)/ . Rally/(R)/ . No. 7/(R)/ . Tire Foam/(R)/ . Flashblack/TM/ . Quicksilver/TM/ . Spot & Wash/(R)/ . Express Wash /TM/ . Wax Pax/TM/ . E-Z Deck Wash/(R)/ . E-Z D/(R)/ The Company also owns other registered and unregistered trademarks. All of the principal trademarks are registered in the United States and Canada. The Armor All and Viking trademarks are also registered in over 80 other countries. All of the other principal trademarks are also registered in at least several other countries. The Company believes it has taken all necessary steps to preserve the registration of its trademarks. The Company owns a patent on Armor All Armor Plate Paint Protectant, Rain Dance Wax and Armor All Spot & Wash Concentrate, and has applied for patents on Armor All QuickSilver Wheel Cleaner and Armor All Vinyl Siding Wash. The Company also owns a patent on an E-Z Deck Wash product and has other domestic and foreign E-Z Deck Wash patents pending. In addition, the Company has the exclusive right to use a supplier's patented formula to produce Armor All Deck Protector. Management believes that the Company's trademarks are more important assets than its patents and that the termination or invalidity of its patents would not have a material adverse effect on the Company. Competition In the domestic protectant market, the Company has two principal competitors, STP/(R)/ Son-of-a-Gun/(R)/ Protectant and Turtle Wax/(R)/ Formula 2001/(R)/ Protectant. Armor All Tire Foam Protectant has four principal competitors and Armor All QuickSilver Wheel Cleaner has three principal competitors. Armor All brand cleaner competes against many specialty automotive cleaner products. Armor All brand wash products and all of the Rain Dance and Rally brand products compete with numerous wash, wax and polish products in the automotive aftermarket. The No. 7 brand products compete with many wash and specialty cleaning products. Competition in international markets varies by country. In the domestic home care products market, the E-Z Deck Wash brand product has two principal competitors, Thompson's/(R)/ Deck Wash and Olympic/(R)/ Deck Cleaner and several secondary competitors. Armor All Deck Protector and WaterProofing Sealer each primarily compete against products marketed under the Thompson's, Olympic and Behr brand names. Armor All Vinyl Siding Wash and Armor All Painted Wood Wash primarily compete against multi-surface products marketed under the Thompson's and Olympic brand names. The Armor All Power Washing Formulas compete against products marketed by the manufacturers of power washer machines; Coleman and Karcher are the principal brand names. -4- Employees At March 31, 1996, the Company employed 149 persons. None are represented by unions. The Company believes its employee relations are good. ITEM 2. PROPERTIES The Company owns its headquarters facility located in Aliso Viejo, California. The facility, which was built in 1989, comprises 45,000 square feet of office space on a 4.6 acre site. The Company also leases approximately 17,000 square feet of warehouse space in Aliso Viejo, California. The facility is used primarily for warehousing certain components, finished goods and promotional items. The Company also mixes the Armor All Protectant and Armor All Tire Foam Protectant concentrates and performs various special product-packaging functions at this location. The Company utilizes space in various public warehouses in the United States and abroad for temporary inventory storage and shipping. The Company maintains automotive sales offices in Canada and the United Kingdom, each with less than 2,000 square feet. It conducts its principal automotive laboratory research and development activities at a leased facility of approximately 5,000 square feet located near the Company's headquarters in Aliso Viejo, California. The Company conducts its principal home care marketing, sales and research and development activities at two leased facilities in South Carolina which aggregate approximately 14,000 square feet. The Company believes that the aforementioned properties will be sufficient to meet its needs for the next several years. ITEM 3. LEGAL PROCEEDINGS In addition to commitments and obligations which arise in the ordinary course of business, the Company is subject to various claims, investigations, proceedings and legal actions from time to time involving contracts, competitive practices, advertising claims, trademark rights, product liability claims, tax assessments, employment claims and other matters arising out of the conduct of the Company's business. Management believes that, based on current knowledge, the outcome of any such pending matters will not have a material adverse effect on the Company's financial position. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders, through the solicitation of proxies or otherwise, during the quarter ended March 31, 1996. -5- Executive Officers of the Registrant The following table sets forth information concerning the executive officers of the Registrant as of June 3, 1996. There are no family relationships between any of the executive officers or directors of the Registrant. The executive officers are elected annually to serve until the first meeting of the Board of Directors following the next annual meeting of stockholders and until their successors are elected and have qualified, or until death, resignation or removal, whichever is sooner. Name Age Position with Registrant and Business Experience - -------------------------------------------------------------------------------- David E. McDowell 53 Chairman of the Board since April 1992. Senior Adviser to McKesson Corporation since May 1996; formerly President, Chief Operating Officer and a Director of McKesson from January 1992 until May 1996. Vice President and General Manager, Quality and Chief Information Officer of International Business Machines Corporation (IBM) from November 1990 until January 1992; President of IBM's National Service Division from July 1987 until November 1990. Kenneth M. Evans 54 President and Chief Executive Officer and a Director since April 1991. Service with the Company - 5 years. Michael G. McCafferty 57 Executive Vice President and Chief Financial Officer since September 1995; Executive Vice President and Chief Financial Officer of Mattel, Inc. from 1993 to 1995; Senior Vice President and Treasurer of Mattel, Inc. from 1985 to 1993. Service with the Company - 9 months. Michael A. Caron 45 Senior Vice President since October 1991; President of Armor All International, a division of the Company, since August 1993; Senior Vice President-Marketing from October 1991 to August 1993 and Senior Vice President, Marketing/International Operations from April 1989 to October 1991. Service with the Company - 11 years. Gayle F. Metzler 42 Vice President, Human Resources since 1992; Vice President, Personnel and Administration from 1988 to 1992. Service with the Company - 18 years. Donald N. Weinberger 60 Vice President, Operations from 1989 to 1996. Service with the Company - 7 years. -6- PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS (a) Market Information The Company's Common Stock, par value of $0.01 per share, is traded in the over-the-counter market under the symbol ARMR. The high and low closing prices reported by the NASDAQ National Market System appear in financial note 13, "Quarterly Financial Information" (unaudited) on page 23 of the 1996 Annual Report to Stockholders, which information is incorporated by reference. (b) Holders The approximate number of record holders of the Company's common stock as of May 15, 1996 was 300. The estimated number of beneficial holders was 2,800. (c) Dividends Dividend information is included in financial note 13, "Quarterly Financial Information" (unaudited) on page 23 of the 1996 Annual Report to Stockholders, which information is incorporated by reference. ITEM 6. SELECTED FINANCIAL DATA Selected financial data appears on page 1 of the 1996 Annual Report to Stockholders, which information is incorporated by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management's discussion and analysis of financial condition and results of operations appears in the section entitled "Financial Review" on pages 12 to 14 of the 1996 Annual Report to Stockholders, which information is incorporated by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Financial statements appear on pages 15 to 23 of the 1996 Annual Report to Stockholders, which financial statements are incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. -7- PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information with respect to Directors of the Company is incorporated by reference from the Registrant's 1996 Proxy Statement. Certain information relating to Executive Officers of the Company appears on page 6 of this Form 10-K Annual Report. The information with respect to this item required by Item 405 of Regulation S-K is incorporated by reference from the Registrant's 1996 Proxy Statement. ITEM 11. EXECUTIVE COMPENSATION Information with respect to this item is incorporated by reference from the Registrant's 1996 Proxy Statement. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information with respect to this item is incorporated by reference from the Registrant's 1996 Proxy Statement. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information with respect to certain transactions with McKesson and management is incorporated by reference from the Registrant's 1996 Proxy Statement. -8- PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) Exhibits and Financial Statement Schedules The following consolidated financial statements of the Company, other financial information and independent auditors' report are contained in the 1996 Annual Report to Stockholders and are incorporated by reference.
Annual Report Page ----------- Consolidated Financial Statements Consolidated Balance Sheets at March 31, 1996 and 1995 15 Consolidated Statements of Income for the years ended March 31, 1996, 1995 and 1994 16 Consolidated Statements of Stockholders' Equity for the years ended March 31, 1996, 1995 and 1994 17 Consolidated Statements of Cash Flows for the years ended March 31, 1996, 1995 and 1994 18 Notes to Consolidated Financial Statements 19 Independent Auditors' Report 24 The following are included herein: 10-K Page ----------- Independent Auditors' Report 11 Consolidated Supplementary Financial Schedules for the years ended March 31, 1996, 1995 and 1994 II. Valuation and Qualifying Accounts and Reserves 12
Financial statements and schedules not included or incorporated by reference herein have been omitted because of the absence of conditions under which they are required or because the required information, where material, is shown in the financial statements, financial notes or supplementary financial information. See Exhibit Index on pages 13 and 14. The following exhibits listed on the Exhibit Index are included herein: (10)J Armor All Products Corporation 1988 Restricted Stock Plan as amended through November 16, 1995. (10)R Settlement Agreement and Mutual General Release dated April 1, 1996 between the Company and its former Senior Vice President Consumer Products. (10)S Armor All Products Corporation Incentive Plan for Business Managers - Fiscal 1997 adopted on March 19, 1996. (13) Portions of the Company's Annual Report to Stockholders for the fiscal year ended March 31, 1996. (21) Subsidiaries of the Registrant. (23) Independent Auditors' Consent. (27) Financial Data Schedule. (b) Reports on Form 8-K There were no reports filed on Form 8-K during the quarter ended March 31, 1996. -9- SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ARMOR ALL PRODUCTS CORPORATION Dated: May 21, 1996 ------------ By /s/Kenneth M. Evans ----------------------------- Kenneth M. Evans President and Chief Executive Officer By /s/Michael G. McCafferty ----------------------------- Michael G. McCafferty Executive Vice President and Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on May 21, 1996 by the following persons on behalf of the Registrant and in the capacities indicated. /s/William A. Armstrong /s/David E. McDowell - ----------------------------- ----------------------------- William A. Armstrong, Director David E. McDowell, Chairman of the Board and Director /s/Jon S. Cartwright /s/Karen Gordon Mills - ----------------------------- ----------------------------- Jon S. Cartwright, Director Karen Gordon Mills, Director /s/Kenneth M. Evans - ----------------------------- ----------------------------- Kenneth M. Evans, President Alan Seelenfreund, Director and Chief Executive Officer and Director /s/David L. Mahoney - ----------------------------- David L. Mahoney, Director -10- INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders of Armor All Products Corporation: We have audited the consolidated financial statements of Armor All Products Corporation and subsidiaries as of March 31, 1996 and 1995, and for each of the three years in the period ended March 31, 1996 and have issued our report thereon dated April 25, 1996; such consolidated financial statements and report are included in your 1996 Annual Report to Stockholders and are incorporated herein by reference. Our audits also included the consolidated financial schedule of Armor All Products Corporation, listed in Item 14(a). This consolidated financial schedule is the responsibility of the Corporation's management. Our responsibility is to express an opinion based on our audits. In our opinion, such consolidated financial schedule, when considered in relation to the basic consolidated financial statements, taken as a whole, presents fairly, in all material respects, the information set forth therein. /s/ Deloitte & Touche LLP DELOITTE & TOUCHE LLP Costa Mesa, California April 25, 1996 -11- Schedule II ARMOR ALL PRODUCTS CORPORATION VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE YEARS ENDED MARCH 31, 1996, 1995 AND 1994 (in thousands)
- ---------------------------------------------------------------------------------------------------------------------------------- Column A Column B Column C Column D Column E - ---------------------------------------------------------------------------------------------------------------------------------- Additions Reductions --------- ---------- Balance at Charged to Accounts Balance Beginning Revenues Written Off, at End Description of Year and Expenses Net of Recoveries of Year - --------------------------- ---------- ------------ ----------------- ------- Year Ended March 31, 1996 - --------------------------- Reserves for: Doubtful accounts and cash discounts* $2,341 $3,663 $(3,306) $2,698 Year Ended March 31, 1995 - ------------------------- Reserves for: Doubtful accounts and cash discounts* 2,625 3,555 (3,839) 2,341 Year Ended March 31, 1994 - ------------------------- Reserves for: Doubtful accounts and cash discounts* 1,860 3,558 (2,793) 2,625
* Included as a reduction of Accounts Receivable in the consolidated balance sheets. -12- EXHIBIT INDEX Exhibit Number Description ------- ---------------------------------------------------------------- (3)A* Certificate of Incorporation of the Company. (Exhibit 3.1 to Form S-1 Registration Statement No. 33-07506). (3)B* By-Laws of the Company as amended through July 22, 1994. (Exhibit (3)B to Form 10-K Report for the fiscal year ended March 31,1995). (10)A* Services Agreement dated as of July 1, 1986 between the Company and McKesson, as amended through March 23, 1993. (Exhibit (10)A to Form 10-K Report for the fiscal year ended March 31, 1994). (10)B* Tax Allocation Agreement dated as of July 1, 1986 between the Company and McKesson. (Exhibit 10.2 to Form S-1 Registration Statement No. 33-07506). (10)C* Indemnity Agreement with Directors of the Company. (Exhibit 10.3 to Form S-1 Registration Statement No. 33-07506). (10)D* Form of Termination Agreement dated as of May 15, 1994 between the Company and certain corporate officers. (Exhibit (10)E to Form 10-K Report for the fiscal year ended March 31, 1994). (10)E* Form of Termination Agreement between the Company and its President and Chief Executive Officer. (Exhibit (10)F to Form 10-K Report for the fiscal year ended March 31, 1991). (10)F* Supply Contract for Raw Materials (portions of which are not disclosed pursuant to the Company's request for confidential treatment). (Exhibit (10)G to Form 10-K Report for the fiscal year ended March 31, 1992). (10)G* Contract Packaging Agreement (portions of which are not disclosed pursuant to the Company's request for confidential treatment). (Exhibit (10)H to Form 10-K Report for the fiscal year ended March 31, 1993). (10)H* Armor All Products Corporation 1986 Stock Option Plan as amended through January 21, 1993. (Exhibit (10)I to Form 10-K Report for the fiscal year ended March 31, 1993). (10)I* Armor All Products Corporation Deferred Compensation Administration Plan. (Exhibit (19)C to Form 10-Q Report for the quarter ended December 31, 1987). (10)J Armor All Products Corporation 1988 Restricted Stock Plan as amended through November 16, 1995. * Document has heretofore been filed with the Commission and is incorporated by reference and made a part hereof. -13- EXHIBIT INDEX Exhibit Number Description ------- ---------------------------------------------------------------- (10)K* Armor All Products Corporation 1988 Long-Term Incentive Plan as amended through December 1, 1994. (Exhibit (10)L to Form 10-K Report for the fiscal year ended March 31, 1995). (10)L* Armor All Products Corporation 1989 Short-Term Incentive Plan. (Exhibit (10)P to Form 10-K Report for the fiscal year ended March 31, 1989). (10)M* Armor All Products Corporation Supplemental Profit-Sharing Investment Plan adopted August 1, 1989. (Exhibit (10)N to Form 10-K Report for the fiscal year ended March 31, 1994). (10)N* Distribution Agreement between S.C. Johnson & Son, Inc. and Armor All Products Corporation dated April 1, 1991 (portions of which are not disclosed pursuant to the Company's request for confidential treatment). (Exhibit (10)N to Form 10-K Report for the fiscal year ended March 31, 1992). (10)O* Letter Agreement dated November 4, 1993 amending the Distribution Agreement between S. C. Johnson & Son, Inc. and the Company (portions of which are not disclosed pursuant to the Company's request for confidential treatment). (Exhibit (10)P to Form 10-K Report for the fiscal year ended March 31, 1994) . (10)P* Asset Purchase and Sale Agreement dated January 26, 1994 between Agri-Products Special Markets, Inc. and the Company (portions of which are not disclosed pursuant to the Company's request for confidential treatment). (Exhibit (10)Q to Form 10-K Report for the fiscal year ended March 31, 1994). (10)Q* Separation Agreement dated February 13, 1995 between the Company and its former Executive Vice President and Chief Financial Officer. (Exhibit (10)R to Form 10-K Report for the fiscal year ended March 31, 1995). (10)R Settlement Agreement and Mutual General Release dated April 1, 1996 between the Company and its former Senior Vice President Consumer Products. (10)S Armor All Products Corporation Incentive Plan for Business Managers -Fiscal 1997 adopted on March 19, 1996. (13) Portions of the Company's Annual Report to Stockholders for the fiscal year ended March 31, 1996. (21) Subsidiaries of the Registrant. (23) Independent Auditors' Consent. (27) Financial Data Schedule. * Document has heretofore been filed with the Commission and is incorporated by reference and made a part hereof. -14- EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS --------------------------------------------- 1. Armor All Products Corporation 1986 Stock Option Plan as amended through January 21, 1993. 2. Armor All Products Corporation Deferred Compensation Administration Plan. 3. Armor All Products Corporation 1988 Restricted Stock Plan as amended through November 16, 1995. 4. Armor All Products Corporation 1988 Long-Term Incentive Plan as amended through December 1, 1994. 5. Armor All Products Corporation 1989 Short-Term Incentive Plan. 6. Armor All Products Corporation Supplemental Profit-Sharing Investment Plan. 7. Form of Termination Agreement between the Company and its President and Chief Executive Officer. 8. Form of Termination Agreement between the Company and certain executive officers. 9. Separation Agreement dated February 13, 1995 between the Company and its former Executive Vice President and Chief Financial Officer. 10. Settlement Agreement and Mutual Release dated April 1, 1996 between the Company and its former Senior Vice President Consumer Products. 11. Armor All Products Corporation Incentive Plan for Business Managers - Fiscal 1997 adopted on March 19, 1996. -15- EX-10.J 2 1988 RESTRICTED STOCK PLAN EXHIBIT (10)J ARMOR ALL PRODUCTS CORPORATION 1988 RESTRICTED STOCK PLAN -------------------------- (As Amended through November 16, 1995) I. GENERAL 1. DEFINITIONS. Whenever used herein, the following terms shall have the meanings set forth below: (a) "Approved Retirement" shall mean any termination of employment with the Corporation after attainment of age 65 (except termination for cause) or any retirement before age 65 with the approval of the Board. (b) "Board" means the Board of Directors of the Corporation. (c) "Committee" means the Compensation Committee of the Board, which shall consist of not less than three members of the Board who shall be appointed by and serve at the pleasure of the Board and who shall be "disinterested" within the meaning of Rule 16b-3 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). No person who is a Participant may be a member of said Committee, and any person who is appointed a member of said Committee and who accepts such appointment shall, by virtue thereof, be ineligible thereafter to be granted a Restricted Stock Grant under the Plan. (d) "Corporation" means Armor All Products Corporation, a Delaware corporation. (e) "Disability" or "Disabled" shall mean (1) a physical or mental condition which, in the judgment of the Committee based on competent medical evidence satisfactory to the Committee, including, if required by the Committee, medical evidence obtained by an examination conducted by a physician selected by the Committee, renders an individual unable to engage in any substantial gainful activity for the Corporation and which impairment is likely to result in death or to be of long continued and indefinite duration, or (2) a judicial declaration of incompetence. (f) "Eligible Employee" means any employee of the Corporation or any Subsidiary (including employees who are directors and/or officers) who, as determined by the Committee in its sole discretion, has and exercises management functions and responsibilities. 2 (g) "Participant" means an individual to whom a Restricted Stock Grant is granted under the Plan. (h) "Plan" means the 1988 Restricted Stock Plan of the Corporation as described herein. (i) "Restricted Stock Grant" or "Grant" means a grant described in Part II of the Plan which is made by the Corporation and approved by the Committee under and pursuant to the Plan. (j) "Stock" means the Common Stock, $0.01 par value, of the Corporation. (k) "Subsidiary" means a subsidiary of the Corporation or an unincorporated organization controlled, directly or indirectly, by either voting or equity control, by the Corporation, including subsidiaries or unincorporated organizations which may be created or acquired while the Plan is in effect. 2. PURPOSE. The purpose of the Plan is to aid the Corporation and its Subsidiaries in attracting, retaining and motivating management employees with outstanding ability, competence and potential. The Plan provides such employees with a proprietary interest in the Corporation's success and progress by granting to them shares of Stock in accordance with the terms and conditions set forth below. 3. ADMINISTRATION. The Plan shall be administered by the Committee. Subject to all the applicable provisions of the Plan, the Committee is authorized to approve Restricted Stock Grants in accordance with the Plan, to construe and interpret the Plan, to prescribe, amend, and rescind rules and regulations relating to the Plan, and to make all determinations and to take all actions necessary or advisable for the Plan's administration. The Committee shall act by vote or written consent of a majority of its members. Whenever the Plan authorizes or requires the Committee to take any action, make any determination or decision, or form any opinion, then any such action, determination, decision or opinion by or of the Committee shall be in the absolute discretion of the Committee and shall be final and binding upon all persons in interest, including the Corporation, its shareholders, and all Eligible Employees. 4. SHARES OF STOCK UNDER THE PLAN. There may be granted under the Plan an aggregate of not more than 220,000 shares of 3 Stock, subject to adjustment as provided in Section 3 of Part III of the Plan. Shares of Stock granted under the Plan may be either treasury shares or authorized and unissued shares, or any combination thereof. If, on or before termination of the Plan, any shares of Stock shall be reacquired by the Corporation pursuant to the termination provisions described in Section 1 of Part II of the Plan or in the instruments evidencing the making of Restricted Stock Grants, such shares may again be granted under the Plan. Prior to the making of Restricted Stock Grants, the Corporation shall be under no obligation to reserve or retain in its treasury any particular number of shares of Stock at any time, and no particular shares of Stock, whether issued or held as treasury Stock, shall be identified as being available for future Restricted Stock Grants under the Plan. 5. PARTICIPANTS. From time to time the Committee shall, in its sole discretion, but subject to all of the provisions of the Plan, determine which Eligible Employees will be granted Restricted Stock Grants under the Plan and the number of shares of Stock to be granted to each Participant and the terms, conditions and restrictions of each such Restricted Stock Grant. In making such determinations, the Committee shall take into account the nature of services rendered and to be rendered by the respective recipients, their present and potential contribution to the Corporation's success and such other factors as the Committee in its discretion deems relevant to the accomplishment of the purposes of the Plan. In any year, the Committee may approve the grant to any Eligible Employee of Restricted Stock Grants subject to differing terms and conditions. The Committee's decision to approve the grant of a Restricted Stock Grant to an employee in any year shall not require the Committee to approve the grant of a Restricted Stock Grant to that employee in any other year or to any other employee in any year; nor shall the Committee's decision with respect to the number of shares of Stock or the terms, conditions and restrictions applicable to any Restricted Stock Grant to be made to an employee in any year, require the Committee to approve the grant of the same number of shares of Stock or of Restricted Stock Grants with the same terms, conditions and restrictions to that employee in any other year or to any other employee in any year. The Committee shall not be precluded from approving the grant of a Restricted Stock Grant to any Eligible Employee solely because such employee previously may have been granted a Restricted Stock Grant under the Plan. 4 6. RIGHTS WITH RESPECT TO SHARES OF STOCK. An Employee to whom a Restricted Stock Grant has been made shall be notified of the Grant. Upon written acceptance of the Grant by the Eligible Employee, including the restrictions and other terms and conditions described in the Plan and in the instrument evidencing such Grant, the Corporation shall cause to be issued or transferred to the name of the Eligible Employee a certificate or certificates for the number of shares of Stock granted, subject to the provisions of Part II hereof (including those related to custody arrangements that may be established). The date of issue or transfer of such shares of Stock on the books of the Corporation shall be deemed to be the date of grant (hereinafter, "date of grant") of the Restricted Stock Grant for all purposes of the Plan. From and after the date of grant, the Eligible Employee shall be a Participant and shall have absolute ownership of such shares of Stock, including the right to vote and to receive dividends thereon, subject to the terms, conditions and restrictions described in the Plan and in the instrument evidencing the grant of such Restricted Stock Grant. 7. EMPLOYMENT. In the absence of any specific agreement to the contrary, no grant of a Restricted Stock Grant to a Participant under the Plan shall affect any right of the Corporation or any Subsidiary to terminate, with or without cause, the Participant's employment at any time. II. RESTRICTED STOCK Each Restricted Stock Grant made under the Plan shall contain the following terms, conditions and restrictions and such additional terms, conditions and restrictions as may be determined by the Committee; provided, however, that no Restricted Stock Grant shall be subject to additional terms, conditions and restrictions which are more favorable to a Participant than the terms, conditions and restrictions set forth elsewhere in this Plan. 1. RESTRICTIONS. Until the restrictions imposed on any Restricted Stock Grant shall lapse, shares of Stock granted to a Participant pursuant to a Restricted Stock Grant: (a) shall not be sold, assigned, transferred, pledged, hypothecated, or otherwise disposed of, and (b) shall, if the Participant's continuous employment 5 with the Corporation or any Subsidiary shall terminate for any reason, except as provided in Section 3 of this Part II, be returned to the Corporation forthwith, and all the rights of the Participant to such shares shall immediately terminate; provided, that if the Committee, in its sole discretion, shall within ninety (90) days of such termination of employment, notify the Participant in writing of its decision not to terminate the Participant's rights in such shares, then the Participant shall continue to be the owner of shares of Stock subject to such continuing restrictions as the Committee may prescribe in such notice. If the Participant's interests in the shares of Stock granted pursuant to a Restricted Stock Grant shall be terminated, such Participant shall forthwith deliver or cause to be delivered to the Secretary or any Assistant Secretary of the Corporation the certificate(s), if any, previously delivered to the Participant for such shares of Stock, accompanied by such endorsement(s) and/or instrument(s) of transfer as may be required by the Secretary or any Assistant Secretary of the Corporation. 2. LAPSE OF RESTRICTIONS. Subject to the provisions of this Plan and the award agreements, the restrictions imposed on any Restricted Stock Grant shall commence with the date of grant and continue during a period set by the Committee. Within these limits, the Committee may provide for the lapse of such restrictions in installments where deemed appropriate. 3. TERMINATION OF EMPLOYMENT BY REASON OF DEATH, DISABILITY OR APPROVED RETIREMENT. Any provisions of Section 1 of this Part II to the contrary notwithstanding, if a Participant who has been in the continuous employment of the Corporation or a Subsidiary since the date of grant of a Restricted Stock Grant to such Participant shall, while in such employment, be terminated as a result of death, Disability or Approved Retirement, then the restrictions imposed on any Restricted Stock Grant shall lapse as to all shares of Stock granted to such Participant pursuant to such Restricted Stock Grant on the date of such event. 4. CHANGE IN CONTROL. In the event of a Change in Control of the Corporation, or of its parent, McKesson Corporation (each of which is referred to herein as "Corporation"), all restrictions on outstanding Restricted Stock Grants shall immediately lapse. 6 For purposes of this Plan, a Change in Control shall occur if any of the following occurs: (a) any "person" (as defined in Sections 13(d) and 14(d) of the Exchange Act shall become the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing 30% or more of the combined voting power of the Corporation's then outstanding securities; (b) there shall be consummated: (i) any consolidation or merger of the Corporation in which the Corporation is not the continuing or surviving corporation or pursuant to which shares of the Corporation's Stock would be converted into cash, securities or other property, other than a merger of the Corporation in which the holders of the Corporation's Stock immediately prior to the merger have the same proportionate ownership of common stock of the surviving corporation immediately after the merger, or (ii) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Corporation; (c) the stockholders of the Corporation approve a plan or proposal for the liquidation or dissolution of the Corporation; or (d) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board and any new director whose election by the Board or nomination for election by the Corporation's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof. Provided, however, that none of the foregoing events shall be deemed to be a Change in Control if the event or events shall have been determined by the affirmative vote of at least a majority of the members of the Board in office immediately prior to such event or events not to be a Change in Control for purposes of the Plan. 7 5. AGREEMENT BY PARTICIPANT REGARDING WITHHOLDING TAXES. Each Participant granted a Restricted Stock Grant shall be subject to the following rules (as modified by the provisions of Section 6 of this Part II): (a) No later than the date as to which the restrictions imposed on any Restricted Stock Grant shall lapse, such Participant must pay to the Corporation, or make arrangements satisfactory to the Committee regarding payment of any federal, state or local taxes of any kind required by law to be withheld with respect to the shares of Stock subject to the Restricted Stock Grant. (b) The Corporation and its Subsidiaries shall, to the extent permitted by law, have the right to deduct from any payment of any kind otherwise due to the Participant any federal, state or local taxes of any kind required by law to be withheld with respect to the shares of Stock subject to the Restricted Stock Grant. (c) A Participant may make an election to have the Corporation retain some portion of the Restricted Stock Grant to satisfy tax withholding requirements. The election must be made in accordance with the following conditions: (i) The election is made prior to the date on which the amount to be withheld is determined; (ii) The election is subject to the approval of the Committee; (iii) The election is made on or after August 1, 1992; (iv) If the Participant is an officer of the Corporation within the meaning of Section 16 of the Securities Exchange Act of 1934, the election is made during the ten-day period beginning on the third business day following the date of release of the Corporation's quarterly and annual summary statements of sales and earnings. If a qualifying election is made, then upon the lapse of restrictions, the Corporation will retain the number of shares of stock having a value equal to the amount necessary to satisfy any withholding requirements. Calculation of the number of shares to be withheld shall be made based on the fair market value of the Corporation's common Stock. Such fair market value shall be the mean between the lowest reported bid price and the highest reported asked price of the Stock in the over-the-counter market 8 on the date the restrictions lapse, as reported by any publication of general circulation selected by the Corporation which regularly reports the market price of the Stock in such market. In no event, however, shall the Corporation be required to issue fractional shares of Stock. The Committee shall be authorized to establish such rules, forms and procedures as it deems necessary to implement the foregoing. 6. ELECTION TO RECOGNIZE GROSS INCOME IN THE YEAR OF GRANT. If any Participant properly elects within thirty (30) days of the date of grant, to include in gross income for federal income tax purposes an amount equal to the fair market value of the shares of Stock granted on the date of grant, such Participant shall pay to the Corporation, or make arrangements satisfactory to the Committee to pay to the Corporation in the year of such grant, any federal, state or local taxes required to be withheld with respect to such shares. If such Participant shall fail to make such payments, the Corporation and its Subsidiaries shall, to the extent permitted by law, have the right to deduct from any payment of any kind otherwise due to the Participant any federal, state or local taxes of any kind required by law to be withheld with respect to such shares of Stock. 7. RESTRICTIVE LEGEND; CERTIFICATES MAY BE HELD IN CUSTODY. Each certificate evidencing shares of Stock granted pursuant to a Restricted Stock Grant may bear an appropriate legend referring to the terms, conditions and restrictions described in the Plan and in the instrument evidencing the Restricted Stock Grant. Any attempt to dispose of such shares of Stock in contravention of such terms, conditions and restrictions shall be invalid. As provided in Section 6 of Part I, the Committee may enact rules which provide that the certificates evidencing such shares may be held in custody by a bank or other institution, or that the Corporation may itself hold such shares in custody, until restrictions thereon shall have lapsed. 8. ASSIGNABILITY. Except as provided in Section 9 of this Part II, no benefit payable under or interest in the Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge, and any such attempted action shall be void and no such benefit or interest shall be in any manner liable for or subject to debts, contracts, liabilities, engagements, or torts of any Participant or 9 beneficiary. If any Participant or beneficiary shall become bankrupt or shall attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber or charge any benefit payable under or interest in the Plan, then the Committee in its discretion may hold or apply such benefit or interests or any part thereof to or for the benefit of such Participant or his beneficiary, his spouse, children, blood relatives, or other dependents, or any of them, in such manner and in such proportions as the Committee may consider proper. 9. DESIGNATION OF BENEFICIARY. Each Participant who shall be granted a Restricted Stock Grant under the Plan may designate a beneficiary or beneficiaries and may change such designation from time to time by filing a written designation of beneficiaries with the Committee on a form to be prescribed by it; provided, that no such designation shall be effective unless received prior to the death of such Participant. 10. RESTRICTIONS UPON MAKING OF RESTRICTED STOCK GRANTS. The registration or qualification under any federal or state law of any shares of Stock to be granted pursuant to Restricted Stock Grants or the resale or other disposition of any such shares of Stock by or on behalf of the Participants receiving such shares may be necessary or desirable as a condition of or in connection with such Restricted Stock Grants, and, in any such event, if the Committee in its sole discretion so determines, delivery of the certificates for such shares of Stock shall not be made until such registration or qualification shall have been completed. 11. RESTRICTIONS UPON RESALE OF STOCK. If the shares of Stock that have been granted to a Participant pursuant to the terms of the Plan are not registered under the Securities Act of 1933, as amended ("Securities Act"), pursuant to an effective registration statement, such Participant, if the Committee shall deem it advisable, may be required to represent and agree in writing (i) that any shares of Stock acquired by such Participant pursuant to the Plan will not be sold except pursuant to an effective registration statement under the Securities Act, or pursuant to an exemption from registration under said Act and (ii) that such Participant is acquiring such shares of Stock for his or her own account and not with a view to the distribution thereof. 10 III. MISCELLANEOUS 1. EFFECTIVE DATE OF THE PLAN. The Plan shall become effective upon its adoption by the Board, subject to the approval thereof by the stockholders of the Corporation having at least a majority of the voting power of all stock of the Corporation present in person or represented by proxy and entitled to be voted thereon at the Annual Meeting of Stockholders of the Corporation to be held on July 29, 1988 or any reconvened sessions thereof. Notwithstanding the provisions of Section 6 of Part I, Participants shall not have the right to vote or receive dividends on shares of Stock granted pursuant to Restricted Stock Grants until the stockholders of the Corporation have approved the Plan. Should the stockholders of the Corporation fail to approve the Plan, the Plan and all outstanding Restricted Stock Grants thereunder shall be null and void. 2. DURATION OF PLAN. The Plan shall remain in effect from the effective date until terminated by the Board of Directors of the Corporation. Termination of the Plan shall not affect any Restricted Stock Grants previously granted pursuant thereto, which shall remain in effect until their restrictions shall have lapsed, all in accordance with their terms. 3. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. If there shall be any change in the Stock subject to the Plan or the Stock subject to any Restricted Stock Grant granted hereunder, through merger, consolidation, reorganization, recapitalization, reincorporation, stock split, stock dividend (in excess of 2%), or other change in the corporate structure of the Corporation, appropriate adjustments shall be made by the Committee in the aggregate number of shares subject to the Plan and the number of shares subject to outstanding Restricted Stock Grants in order to preserve, but not to increase, the benefits of the Participant. If the Corporation shall not be the surviving corporation in any merger, consolidation, or reorganization, shares of Stock which are converted into common stock or other securities of the surviving corporation shall be subject to the same terms, conditions and restrictions as applicable to such shares of Stock immediately prior to conversion, unless such terms, conditions and restrictions have lapsed pursuant to Section 3 of Part II hereof. For purposes of the foregoing, a change in the Stock subject to the Plan or the Common Stock subject to any Restricted Stock Grant granted hereunder shall include an extraordinary dividend 11 or other extraordinary distribution (whether in cash, property, securities or any combination thereof) with respect to such Stock. Notwithstanding the first sentence of this Section 3, if the Committee determines that a change (as hereinabove described) shall have occurred in the Stock subject to the Plan or the Stock subject to any Restricted Stock Grant granted hereunder, and that adjustments in the aggregate number of shares subject to the Plan and in the number of shares subject to outstanding Restricted Stock Grants will not adequately preserve the benefits of the Participant, then the Committee shall make such other adjustments or arrangements (including providing for the issuance of cash, property and/or securities in addition to or in lieu of shares of Stock following such change) as in its sole judgment will be adequate for such purpose. 4. EXPENSES OF PLAN. The expenses of the Plan shall be borne by the Corporation. 5. AMENDMENT OR TERMINATION. The Board may, by resolution, amend or terminate the Plan at any time; provided, however, that, subject to the provisions of Section 3 of this Part III, the Board may not, without approval by the holders of a majority of the shares of Stock represented at a meeting of stockholders called for that purpose, increase the number of shares of Stock which may be granted under the Plan, change the class of management employees eligible to participate in the Plan, or otherwise materially increase the benefits accruing to Participants under the Plan or materially modify the requirements with respect to eligibility for participation in the Plan. In the event that a Restricted Stock Grant has been made to a Participant, then no amendment of the Plan after the date as of which such Restricted Stock Grant was made, shall adversely affect any right of such Participant with respect to such Restricted Stock Grant without the written consent of such Participant. IV. RESTRICTED INCENTIVE STOCK The Committee is authorized to approve Restricted Incentive Stock Grants ("RIS Grants") to Eligible Employees with respect to nonqualified stock options granted to them by the Corporation on or after the date the stockholders of the Corporation have approved the Plan ("Stock Options"). The Committee, in its discretion, shall grant RIS Grants to optionees in order to encourage them to hold shares of Stock following exercise of 12 Stock Options. RIS Grants shall be issued in accordance with the provisions of the Plan applicable to Restricted Stock Grants and shall have the same terms, conditions and restrictions as Restricted Stock Grants (except for the provisions of Section 2 of Part II of the Plan). In addition, RIS Grants shall have the following terms, conditions and restrictions: 1. On the date of exercise of a Stock Option (the "Exercise Date"), the optionee who is the recipient of an RIS Grant shall designate to the Secretary or Assistant Secretary of the Corporation the number of Stock Option shares (the "Option Shares") with respect to which he or she desires to receive shares of Stock pursuant to the RIS Grant. 2. On the Exercise Date, an optionee shall be awarded, pursuant to a RIS Grant, one share of Stock for every eight Option Shares. 3. The Corporation shall hold certificates evidencing shares of Stock granted pursuant to an RIS Grant and the related Option Shares. 4. The restrictions imposed on any RIS Grant shall lapse on the third anniversary of the Exercise Date provided that the related Option Shares have not been sold, assigned, transferred, pledged, hypothecated, or otherwise disposed of prior to such third anniversary. If the related Option Shares have been so disposed of, then all rights to the shares granted pursuant to the RIS Grant shall immediately terminate. EX-10.R 3 SETTLEMENT AGREEMENT COMPANY & EX. V.P. EXHIBIT (10)R SETTLEMENT AGREEMENT AND MUTUAL GENERAL RELEASE This Settlement Agreement and Mutual General Release ("Agreement") is entered into as of April 1, 1996, by and between STEVEN L. KLIFF ("KLIFF"), an individual, and ARMOR ALL PRODUCTS CORPORATION, a Delaware corporation ("ARMOR ALL"), and is intended to effect a full release of all claims held by the respective parties, except as limited below. WHEREAS, KLIFF was employed by ARMOR ALL from September of 1991 until January 12, 1996, most recently in the position of Senior Vice President of Consumer Products; WHEREAS, on or about January 12, 1996, ARMOR ALL notified KLIFF that it had decided to terminate his employment due to a desire to make a change in management structure, effective immediately; WHEREAS, a dispute arose between KLIFF and ARMOR ALL concerning his employment relationship, the cessation thereof, the reasons for that cessation and the statements allegedly made about KLIFF by certain employees and agents of ARMOR ALL; WHEREAS, KLIFF has asserted various employment claims against ARMOR ALL and others, including claims for "breach of employment contract," "wrongful termination in violation of public policy," "violation of Labor Code Section 970," "fraudulent inducement," "interference with contractual relations" and "defamation"; WHEREAS, KLIFF has demanded general, compensatory and punitive damages, including damages for the emotional distress and other personal injuries he allegedly suffered as a conse- quence of said defendants' allegedly wrongful conduct; WHEREAS, ARMOR ALL has denied any and all liability or wrongdoing to KLIFF based on these or any other claims he has or could have asserted; WHEREAS, the parties to this Agreement desire to settle and dispose of fully and completely any and all existing or potential disputes, claims and demands arising out of or attributable to the limited employment of KLIFF or the termination thereof; 1 In consideration of the covenants undertaken and the releases contained in this Agreement, KLIFF and ARMOR ALL agree as follows: 1. Non-Admission of Liability: ARMOR ALL expressly denies any violation of any of its policies, procedures, state or federal laws or regulations. Accordingly, while this Agreement resolves all issues between KLIFF and ARMOR ALL relating to any alleged violation of ARMOR ALL's policies or procedures or any state or federal law or regulation, this Agreement does not constitute an adjudication or finding on the merits and it is not (and shall not be construed as) an admission by ARMOR ALL of any violation of its policies, procedures, state or federal laws or regulations. Moreover, neither this Agreement nor anything in this Agreement shall be construed to be or shall be admissible in any proceeding as evidence of or an admission by ARMOR ALL of any violation of its policies, procedures, state or federal laws or regulations. This Agreement may be introduced, however, in any proceeding to enforce the Agreement. Such introduction shall be pursuant to an order protecting its confidentiality. 2. Contract Damages Consideration: In consideration of the covenants and releases set forth herein, ARMOR ALL agrees to pay KLIFF the lump sum of Fifty Thousand Dollars and No Cents ($50,000.00). The parties agree that this sum represents a fair and reasonable settlement of KLIFF's alleged claims for damages for breach of contract. This payment shall be paid in the form of a certified cashier's check made payable to KLIFF as follows: "STEVEN L. KLIFF." Said sum is paid in settlement of all wage, bonus and contract claims KLIFF may possess, and is not intended to represent any alleged tort claims or personal injury damages, which are to be satisfied by the payment of consideration in Paragraph 3 below. KLIFF acknowledges and agrees that this consideration will be subject to taxation and shall be reported to the taxing authorities by the issuance of a Form 1099 at year end. This consideration shall be delivered to KLIFF's attorney within three (3) business days after a copy of this Agreement signed by KLIFF has been delivered to counsel for ARMOR ALL. 3. Personal Injury Damages Consideration: As additional consideration for the covenants and releases set forth herein, ARMOR ALL agrees to pay KLIFF the sum of Three Hundred Thousand Dollars ($300,000.00) (hereinafter, the "Payment"). The Payment shall be paid in the form of a certified cashier's check made payable to KLIFF through his counsel as follows: "Barry B. Kaufman Client Trust Account." While ARMOR ALL expressly denies any wrongdoing or liability to KLIFF, the parties agree that the Payment represents a fair and reasonable settlement of KLIFF's alleged claims for damages for personal injuries, humiliation, personal embarrassment, physical or psychological injury, and loss of personal self-esteem. The Payment is in settlement of KLIFF's alleged wrongful termination, interference with contract, 2 defamation and any other tort claims he may possess, and does not represent payment for any alleged contract losses (which are intended to be settled by the consideration set forth in Paragraph 2 above). Accordingly, the parties regard the Payment as one to be excluded from income pursuant to Section 104(a)(2) of the Internal Revenue Code, and ARMOR ALL agrees that the Payment will be paid in gross without withholding or deductions (and shall not be reported to the taxing authorities as if it were "wages" or "income" by the filing of a Form W-2 or Form 1099). ARMOR ALL shall deliver the Payment to KLIFF's attorney within three (3) business days after a copy of this Agreement signed by KLIFF has been delivered to counsel for ARMOR ALL. 4. Continuation of Health Insurance: As further consideration for the covenants set forth herein, ARMOR ALL agrees to pay KLIFF the sum of Five Thousand Five Hundred Sixty Three Dollars and Eight Cents ($5,563.08) as reimbursement for the cost of six months premiums on the HMO medical/group health insurance policy through which KLIFF currently receives benefits under COBRA. This payment shall be paid in the form of a certified cashier's check made payable to KLIFF as follows: "STEVEN L. KLIFF." KLIFF agrees to provide ARMOR ALL with proof of enrollment in the HMO in which he is currently participating. 5. Stock Options: KLIFF presently holds options to purchase shares of ARMOR ALL common stock under ARMOR ALL's 1986 Stock Option Plan. A complete and accurate summary of the options currently held by KLIFF is attached hereto and designated as Attachment "1." Under the terms of the Stock Option Plan, KLIFF has until June 30, 1996, to exercise those options that are vested as of January 31, 1996, the date of his separation. 6. Restricted Stock: KLIFF presently holds shares of restricted stock granted to him under the 1988 Restricted Stock Plan. A complete and accurate summary of KLIFF's Restricted Stock Grants is attached hereto and designated as Attachment "2." The restrictions on the Restricted Stock Grant made to KLIFF on January 21, 1992, have been lifted. To the extent that KLIFF has not received possession of the stock certificates memorializing his ownership of said shares, he may do so at such time as he forwards to ARMOR ALL the monies necessary to pay all appropriate taxes. 7. Repayment of Indebtedness: By his signature below, KLIFF agrees that within three (3) days after the cashier's checks referred to in Paragraphs 2, 3 and 4 of this Agreement have been delivered to his counsel, KLIFF agrees to pay in full any and all indebtedness owed to ARMOR ALL arising out of his employment with ARMOR ALL including, without limitation, the loan made to him documented by KLIFF's Promissory Note in favor of ARMOR ALL dated September 22, l995 (excluding any accrued but unpaid interest charges, which ARMOR ALL agrees to waive and/or 3 forgive). A summary of all such indebtedness is attached hereto and designated as Attachment "3." With respect to repayment of the above-mentioned Promissory Note, ARMOR ALL agrees to deliver to KLIFF's counsel the original of said Promissory Note marked "Paid In Full" and both dated and initialed by an authorized representative of ARMOR ALL. By his signature to this Agreement, KLIFF stipulates to the immediate entry of a Right to Attach Order and Writ of Attachment in the event he defaults on this repayment obligation (and waives any defenses thereto). 8. Litigation Cooperation: KLIFF agrees to make himself reasonably available to cooperate in any actual or anticipated litigation or arbitration matter or any federal or state government agency investigation in which ARMOR ALL reasonably requests his assistance based upon his duties with ARMOR ALL. ARMOR ALL shall reimburse KLIFF for his reasonable out-of-pocket expenses in connection with any such assistance. 9. Limited Rights Against Defendants: KLIFF agrees that he will not seek, in any way, any payments or benefits based upon his employment with ARMOR ALL, his separation from employ- ment and/or conduct prior to the execution of this Agreement other than as expressly set forth in this Agreement. KLIFF waives any and all right or entitlement to any such payments or benefits. KLIFF further agrees that he will not file any charge or action, whether based on tort, express or implied contract, or any federal, state or local law, statute or regulation relating to his employment, his eligibility for benefits, or the termination or terms and conditions of his employment. KLIFF agrees that this Agreement may be pleaded as a complete bar to any action or suit before any court or administrative body with respect to any claim relating to his employment with ARMOR ALL or the termination thereof. 10. Protection of "Proprietary Information": KLIFF acknowledges that, in the course of his work as an employee of ARMOR ALL, he has had access to Proprietary Information (as defined below) concerning ARMOR ALL, its products, customers and methods of doing business. KLIFF acknowledges that ARMOR ALL has developed, compiled and otherwise obtained, often at great expense, this information, which has great value to ARMOR ALL's business. KLIFF agrees to hold in strict confidence and not disclose any Proprietary Information, directly or indirectly, to anyone outside of ARMOR ALL, or use, copy, publish or summarize such information. KLIFF agrees to deliver promptly to ARMOR ALL all tangible Proprietary Information which remains in his possession or under his control. 11. "Proprietary Information" Defined: For purposes of this Agreement, the reference to "proprietary information" means all information and any idea in whatever form, tangible or intangible, whether disclosed to or learned or developed by 4 KLIFF, pertaining to or affecting the business of ARMOR ALL or their parent or other affiliated companies or their clients, consultants, or business associates unless: (a) the information is or becomes publicly known through lawful means not requiring the permission or license of ARMOR ALL; (b) the information was rightfully in KLIFF's possession or part of his general knowledge prior to his employment by ARMOR ALL or by virtue of his activities not related to his employment by ARMOR ALL; (c) the information is disclosed to KLIFF without confidential or proprietary restriction by a third party who rightfully possesses the information (without confidential or proprietary restriction for the benefit of ARMOR ALL) and did not learn it, directly or indirectly, from ARMOR ALL on a confidential basis. KLIFF and ARMOR ALL further agree that the following information is included, without limitation, in the definition of Proprietary Information if the same is encompassed by the preceding sentence: (i) processes, trade secrets, electronic codes, computer software, source codes, proprietary techniques, inventions, improvements and research projects; (ii) information about costs, budgets, profits, markets, employees, sales and lists of customers or vendors; (iii) plans for future development and new product concepts and marketing; and (iv) all documents, books, papers, drawings, models, sketches, studies, consultant's reports and other data of any kind and description, including electronic data recorded or retrieved by any means, that have been or will be given to KLIFF by ARMOR ALL or its parent or other affiliated companies, as well as written or oral instructions or comments. 12. No Disparagement: KLIFF covenants and agrees that he will in no way disparage ARMOR ALL or their products, services, employees, or business reputation to any person or entity whether or not said person or entity is a current or prospective supplier, customer or employee of ARMOR ALL. KLIFF further covenants and agrees that he will not otherwise engage in conduct which is not in good faith which disrupts, damages, impairs or interferes with the business, reputation or employees of ARMOR ALL. ARMOR ALL agrees not to make or publish, either orally or in writing, any disparaging statement concerning KLIFF, including his termination with ARMOR ALL, his services with ARMOR ALL and matters relating to his employment. 13. Forum Selection: Any and all litigation relating to state law causes of action arising out of this Separation Agreement shall be heard exclusively in California state courts. To that end, the parties to this Separation Agreement consent to jurisdiction in California state courts and waive any defense of lack of personal jurisdiction. Any and all litigation relating to federal law causes of action arising out of this Separation Agreement shall be heard exclusively in California federal courts. The parties also consent to jurisdiction in California federal courts and waive any defense of lack of personal jurisdiction. 5 14. Waiver of Future Employment: By his signature below, KLIFF waives any rights to any continuing or future relationship with ARMOR ALL, or any of them, and their parents, subsidiaries and affiliates, past and resent, and agrees not to knowingly seek a position as an employee with ARMOR ALL in the future. Moreover, KLIFF agrees that ARMOR ALL have no obligation to hire him as an employee in the future and further agrees that he will not challenge, by administrative action, civil litigation or otherwise, any future decision by ARMOR ALL not to hire him. Nothing in this paragraph shall preclude KLIFF and ARMOR ALL, or any of them, from agreeing between themselves to enter into some contractual relationship in the future, whether as an employee, independent contractor, agent or some other type of relationship. 15. Release of the Company: Except for those obliga- tions created by or arising out of this Agreement for which receipt or satisfaction has not been acknowledged herein, KLIFF on behalf of himself, his descendants, ancestors, dependents, heirs, executors, administrators, assigns, and successors, and each of them, hereby covenants not to sue and fully releases and discharges ARMOR ALL, and its parents, subsidiaries and affiliates, past and present, and each of them, as well as its and their trustees, directors, officers, agents, attorneys, insurers, employees, stockholders, representatives, assigns, and successors, past and present, and each of them, (hereinafter together and collectively referred to as "Releasees"), with respect to and from any and all claims, wages, demands, rights, liens, agreements, contracts, covenants, damages, judgments, liabilities, debts, controversies, costs, expenses, attorneys' fees, causes of action or suits of any kind or nature whatsoever, in law, equity or otherwise, whether now known or unknown, sus- pected or unsuspected, or whether or not concealed or hidden, arising out of, relating to, or in connection with, his employ- ment relationship with ARMOR ALL and/or its affiliates or agents, or any other transactions, occurrences, acts or omissions or any loss, damage or injury whatsoever, which KLIFF now has, own or hold, based upon, related to, or by reason of any contract (express, implied-in-fact or implied-in-law), judgment, lien, liability, claim, assignment, matter, cause, fact, thing, act or omission whatsoever occurring or existing with any of the Releasees at any time prior to and including the date hereof. The release of claims contained herein specifically includes, but is not limited to, any and all claims for wrongful discharge, any and all forms of employment discrimination in violation of any federal, state or local statute, ordinance or executive order (including but not limited to, claims for dis- crimination on the basis of race, color, religion, sex, national origin, age, and/or mental or physical disability), and any and all suits in tort (including, but not limited to, any claims for fraud, misrepresentation, breach of fiduciary duty, defamation, interference with contract or with prospective economic advan- 6 tage, intentional infliction of emotional distress and/or negligence), as well as any and all additional claims for damages of any kind whatsoever arising out of, relating to or in connection with KLIFF employment relationship with and/or termination of employment by ARMOR ALL and/or its affiliates or agents. 16. Release of Kliff: Except for those obligations created by or arising out of this Agreement or as provided below, ARMOR ALL and its parents, subsidiaries and affiliates, past and present, and each of them, as well as its and their trustees, directors, officers, agents, attorneys, insurers, employees, stockholders, representatives, assigns, and successors, past and present, and each of them, hereby covenants not to sue and fully releases and discharges KLIFF from and with respect to any and all claims, agreements, obligations, losses, damages, injuries, demands and causes of action, known or unknown, suspected or unsuspected, arising out of or in any way connected with KLIFF's employment, independent contractor or other relationship with ARMOR ALL, or any other occurrences, actions, omissions or claims whatever, known or unknown, suspected or unsuspected, prior to the date of this Agreement, which ARMOR ALL now owns or holds or has at any time heretofore owned or held as against KLIFF. 17. General Release: Except as limited hereinabove, it is the intention of KLIFF and ARMOR ALL in executing this instrument that the same shall be effective as a bar to each and every claim, demand and cause of action hereinabove specified. In furtherance of this intention, the parties hereby expressly waive any and all rights and benefits conferred upon them by the provisions of SECTION 1542 OF THE CALIFORNIA CIVIL CODE and expressly consent that this Agreement shall be given full force and effect according to each and all of its express terms and provisions, including those related to unknown and unsuspected claims, demands and causes of action, if any, as well as those relating to any other claims, demands and causes of action hereinabove specified. SECTION 1542 provides: "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR." KLIFF and ARMOR ALL each acknowledges that each may hereafter discover claims or facts in addition to or different from those which each now knows or believes to exist with respect to the subject matter of this Agreement and which, if known or suspected at the time of executing this Agreement, may have materially affected this settlement. Each hereby waives any right, claim or 7 cause of action that might arise as a result of such different or additional claims or facts. KLIFF and ARMOR ALL each acknowl- edges that each understands the significance and consequence of such release and such specific waiver of SECTION 1542, which have been explained to them by their respective counsel. 18. Indemnification re: Claims: ARMOR ALL agrees to defend and indemnify and hold harmless KLIFF of any and all claims, causes of action or complaints made or filed by any party regarding acts performed by KLIFF in the course and scope of his employment with ARMOR ALL (to the extent permitted by Section 317 of the California Corporations Code, by Section 2802 of the California Labor Code or any other applicable law or contractual provision). 19. Confidentiality of Settlement Agreement: KLIFF and ARMOR ALL, and each of them, each agree that the terms and conditions of this Agreement shall remain confidential as between the parties and each shall not disclose them to any other person, except to KLIFF's spouse and to KLIFF or ARMOR ALL' professional advisors, attorneys, board members or accountants. Without limiting the generality of the foregoing, neither KLIFF nor ARMOR ALL will respond to or in any way participate in or contribute to any public discussion, notice or other publicity concerning, or in any way relating to; execution of this Agreement or the events (including any negotiations) which led to its execution; provided, however, that nothing herein shall prevent disclosure of the terms of this Agreement (a) by any officer of ARMOR ALL to any other officer, director or employee of ARMOR ALL with a need to know or (b) unless such disclosure is required by law (including, without limitation, future S.E.C. filings of ARMOR ALL). If asked about the resolution of the dispute between the parties, KLIFF, his immediate family, attorneys, agents and representatives may respond only that "My dispute with Armor All has been resolved." 20. References: The parties agree that, if a prospective employer of KLIFF requests a reference from an officer of ARMOR ALL, KLIFF may direct that person to ARMOR ALL's Chief Executive Officer, Kenneth M. Evans- ARMOR ALL agrees to provide KLIFF with a letter of recommendation on the business stationery of ARMOR ALL in the form attached hereto as Exhibit "A." ARMOR ALL shall advise its employees and third parties that KLIFF's employment ended as a result of his desire to pursue other ventures. 21. Non-Assignment: KLIFF and ARMOR ALL each warrants and represents that neither has heretofore assigned or transferred to any person not a party to this Agreement any released matter or any part or portion thereof, and each shall defend, indemnify and hold harmless the other from and against any claim (including the payment of attorneys' fees and costs 8 actually incurred, whether or not litigation is commenced) based on, in connection with or arising out of any such assignment or transfer made. 22. Indemnification for Tax Liability: Although the parties contemplate and intend that the consideration payable under Paragraph 3 of this Agreement is in settlement of KLIFF's personal injury damages and, therefore, should be non-taxable under Section 104(a)(2) of the Internal Revenue Code, the parties acknowledge that ARMOR ALL is not (and cannot be held to be) a "guarantor" of the taxable status of the monies paid hereunder. Accordingly, should such consideration ever be treated by any taxing authority as if it were "taxable," KLIFF agrees that he shall be exclusively liable for the payment of all federal and state taxes (if any) which may be due as the result of the Payment made to him pursuant to Paragraph 3 herein, and KLIFF hereby represents that he shall make payments on such taxes (if any) at the time and in the amount required of him. In addition, KLIFF hereby agrees fully to defend, indemnify and hold harmless ARMOR ALL from payment of any taxes, interest or penalties that are required by any government agency at any time as the result of the Payment. However, KLIFF shall have no liability for indemnity or the payment of any such taxes, interest, penalties, assessments or any other monies referred to herein in the event that ARMOR ALL breaches the non-disclosure obligations set forth in Paragraphs 3 or 19 of this Agreement by reporting the Payment to any state or federal taxing authority as if it were "wages" or "income," whether through the issuance of a Form W-2 or 1099, or by some other means. 23. Warranty re Prior Representations: KLIFF and ARMOR ALL warrant that in agreeing to the terms of this Agreement, they have not relied upon any representations or statements of the other regarding the subject matter hereof or the basis or effect of this Agreement, other than those representations or statements contained herein. 24. Counterparts/Facsimile Execution: This Agreement may be executed in counterparts, and each counterpart, when executed, shall have the efficacy of a signed original. Execution and delivery of this Agreement by facsimile shall be deemed to be equivalent to the execution and delivery of an original. 25. Construction: If any provision of this Agreement or the application thereof is held invalid, the invalidity shall not affect other provisions or applications of the Agreement, which can be given effect without the invalid provisions or applications. To this end, the provisions of this Agreement are declared to be severable. This Agreement shall be deemed to have been executed and delivered within the State of California, and the rights and obligations of the parties hereunder shall be construed and enforced in accordance with, and governed by, the 9 laws of the State of California without regard to principles of conflict of laws. Each party has cooperated in the drafting and preparation of this Agreement. Hence, in any construction to be made of this Agreement, the same shall not be construed against any party on the basis that the party was the drafter. No waiver of any breach of any term or provision of this Agreement shall be construed to be, nor shall be, a waiver of any other breach of this Agreement. No waiver shall be binding unless in writing and signed by the party waiving the breach. All representations and warranties contained in this Agreement shall survive its execution, effectiveness and delivery. 26. Modification of Personnel File: ARMOR ALL agrees to modify KLIFF's personnel file to remove any non-benefits related documents (including, without limitation, any "Employment Separation Notice") that state or reflect that KLIFF's employment was involuntarilY terminated. 27. Costs and Expenses of this Dispute: Except as specifically provided in Paragraph 22 above, each of the parties hereto shall bear his/its own costs and expenses incurred in connection with the disputes settled by this Agreement (and the negotiation, drafting and consummation of this Agreement), including all attorneys' fees. 28. Cooperation in Effecting Settlement: All parties agree to cooperate fully and to execute any and all supplementary documents and to take all additional actions that may be necessary or appropriate to give full force to the basic terms and intent of this Agreement and which are not inconsistent with its terms. Subject to the provisions of Paragraph 22 above, KLIFF agrees to assume full responsibility for contesting any claim or assertion that the Payment (or any portion thereof) should be treated as "taxable income," and to cooperate fully in the defense of any such claim regarding the alleged taxability of the Payment which is brought against ARMOR ALL. 29. Competency of Parties: Each of the parties acknowledges, warrants, represents and agrees that in executing and delivering this Agreement, they do so freely, knowingly and voluntarily, that they had an opportunity to and did discuss its terms and the implications thereof with legal counsel of their choice, that they are fully aware of the contents and effect thereof and that such execution and delivery is not the result of any fraud, duress, mistake or undue influence whatsoever. 30. Warranty of Authority/No Other Claims: KLIFF and ARMOR ALL each represents that they have the power and authority to execute, deliver and perform this Agreement and to release the claims that are purported to be released herein and that the person executing this Agreement on behalf of each has the full right and authority fully to commit and to bind each such party. 10 KLIFF and ARMOR ALL represent that none of the claims purported to be released herein has previously been assigned or otherwise transferred to any other person or entity, by operation of law or otherwise. 31. Entire Agreement: This Agreement constitutes and contains the entire agreement and understanding concerning the other subject matters addressed herein between the parties, and supersedes and replaces all prior negotiations and all agreements proposed or otherwise, whether written or oral, concerning the subject matters hereof. This is a fully integrated document. This Agreement may be amended only by a written instrument designated an amendment to the Agreement and executed by the parties hereto. 32. Headings: The various headings in the Agreement are inserted for convenience only and shall not be deemed a part of or in any manner affect this Agreement or any provision hereof. 33. Limited Admissibility of Settlement Agreement: Notwithstanding the confidentiality obligations set forth in Paragraph 19 of this Agreement and/or Evidence Code Section 1152, the parties acknowledge and agree that a fully executed copy of the Agreement (whether an original or in counterparts) shall be admissible as evidence in any proceeding to enforce its terms. I have read the foregoing Agreement and I accept and agree to the provisions it contains and hereby execute it voluntarily with full understanding of its consequences. EXECUTED this 17th day of April, 1996, at Aliso Viejo, California. ARMOR ALL PRODUCTS CORPORATION By: /s/ Kenneth M. Evans ---------------------------- Kenneth M. Evans, President I have read the foregoing Agreement and I accept and agree to the provisions it contains and hereby execute it voluntarily with full understanding of its consequences. EXECUTED this 11th day of April, 1996, at Laguna Hills, California. /s/ STEVEN L. KLIFF ----------------------------- Steven L. Kliff 11 EX-10.S 4 ARMOR ALL INCENTIVE PLAN EXHIBIT 10(S) ARMOR ALL PRODUCTS CORPORATION INCENTIVE PLAN FOR BUSINESS MANAGERS ------------------------------------ FISCAL 1997 ----------- The name of this plan shall be the Armor All Products Corporation Incentive Plan for Business Managers - Fiscal 1997 (the "Plan"). The Plan is offered in addition to existing incentive plans during fiscal 1997. A. PURPOSE The purpose of this Plan is to provide key business managers of Armor All Products Corporation (the "Company") with an extraordinary incentive to significantly improve business results in the Company's fiscal year 1997 (the "Plan Year"). The Plan is designed to link managers' interests more closely with the interests of the Company's stockholders. B. ADMINISTRATION The Compensation Committee of the Company's Board of Directors (the "Committee") shall have full power and authority, subject to the provisions of the Plan, to designate Participants and to promulgate such rules and regulations as it deems necessary for the proper administration of the Plan, to interpret the provisions and supervise the administration of the Plan, and to take all action in connection therewith or in relation to the Plan as it deems necessary or advisable. Decisions and selections of the Committee shall be made by a majority of its members and, if made pursuant to the provisions of the Plan, shall be final. Any decision reduced to writing and signed by all of the members of the Committee shall be fully effective as if it had been made at a meeting duly held. C. PARTICIPATION Those key business managers of the Company designated by the Committee for this purpose shall be the Participants in the Plan. As soon as reasonably practicable after the designation of a key business manager as a Participant by the Committee, that person will be notified of his or her designation as a Participant. -1- D. INDIVIDUAL TARGET AWARDS FOR PARTICIPANTS The Individual Target Award for each Participant shall be determined by the Committee at the time it designates a key business manager as a Participant in the Plan. The amount of any actual award paid to any Participant may be greater or less than the Individual Target Award. Neither the designation of an employee as a Participant nor the establishment of an Individual Target Award for a Participant shall affect the right of the Company, its subsidiaries or affiliates to terminate the employment of such employee at any time and for any reason, which right is hereby reserved. E. BASIS OF AWARDS Awards will be a percentage of each Participant's Individual Target Amount, based on the Company's earnings per share for fiscal 1997, in accordance with measures determined by the Committee. Awards will be based on performance against objectives. F. AWARD DETERMINATION The Committee shall be responsible for making the final determination of the amount, if any, to be paid to the Participant for fiscal year 1997. All awards will be subject to the sole discretion of the Committee. G. TIME OF PAYMENT OF AWARD One-half of any award payable under this Plan shall be paid in a single sum to the Participant during the Company's fiscal year 1998 as soon as reasonably practicable after the amount of the award is determined. The balance of the award shall be paid at the end of the Company's fiscal year 1998. H. NO FUND Awards paid under this Plan shall not be based on or payable from a "pool" or any other separate fund. I. EMPLOYMENT AT YEAR-END GENERALLY REQUIRED FOR AWARD No award shall be made to any Participant who is not an active, full-time employee of the Company or one of its subsidiaries or affiliates at the end of the Plan Year and on the date each portion of the award is paid, except those Participants whose active employment ended during such year because of death or retirement under one of the Company's retirement plans, or other termination with the express approval of the Company's Board of Directors. -2- J. NONASSIGNMENT; PARTICIPANTS AS GENERAL CREDITORS The interest of any Participant under the Plan shall not be assignable either by voluntary or involuntary assignment or by operation of law, except by designation of a beneficiary or beneficiaries to the extent allowed under the Company's DCAP. K. AMENDMENT The Company reserves the right in its Board of Directors to amend the Plan at any time; provided, however, that no such amendment adopted after the end of the Company's fiscal year 1997 shall adversely affect the payment of any award. In case any one or more of the provisions contained in the Plan shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of the Plan, but the Plan shall be construed as if such invalid, illegal or unenforceable provisions had never been contained herein. -3- EX-13 5 ANNUAL REPORT EXHIBIT 13 Selected Financial Data Armor All Products Corporation
Years Ended March 31 (in thousands except per share amounts) 1996 1995 1994 1993 1992 1991 - ----------------------------------------------------------------------------------------------------------- Income Statement Data Revenues $186,326 $216,789 $182,257 $168,400 $145,910 $133,804 --------------------------------------------------------------- Increase (decrease) from prior year (14.1)% 18.9% 8.2% 15.4% 9.0% (19.1)% Costs and expenses Cost of sales 89,261 93,103 74,360 68,841 59,709 57,980 Selling, general and administrative 83,579 80,960 66,950 63,670 60,465 58,133 Amortization of intangibles 2,455 2,457 2,684 3,768 4,314 4,315 --------------------------------------------------------------- Total costs and expenses 175,295 176,520 143,994 136,279 124,488 120,428 --------------------------------------------------------------- Increase (decrease) from prior year (0.7)% 22.6% 5.7% 9.5% 3.4% (9.5)% Operating income 11,031 40,269 38,263 32,121 21,422 13,376 Interest income (expense) - net 1,601 1,803 1,377 1,245 1,080 (704) --------------------------------------------------------------- Income before income taxes 12,632 42,072 39,640 33,366 22,502 12,672 Income taxes 5,470 17,544 17,067 14,214 9,638 5,829 --------------------------------------------------------------- Net income $ 7,162 $ 24,528 $ 22,573 $ 19,152 $ 12,864 $ 6,843 =============================================================== Increase (decrease) from prior year (70.8)% 8.7% 17.9% 48.9% 88.0% (63.6)% Earnings per common share $ .34 $ 1.16 $ 1.07 $ .91 $ .61 $ .33 =============================================================== Increase (decrease) from prior year (70.7)% 8.4% 17.6% 49.2% 84.8% (63.3)% Return on average stockholders' equity1 5.6% 20.6% 21.0% 19.3% 13.9% 7.1% =============================================================== Cash dividends per common share $ .64 $ .64 $ .64 $ .48 $ .48 $ .64 =============================================================== March 31 (in thousands) 1996 1995 1994 1993 1992 1991 =========================================================================================================== Balance Sheet Data Working capital $ 74,442 $ 78,182 $ 64,349 $ 60,373 $ 46,149 $ 38,825 Current assets 109,778 121,566 99,225 93,429 68,485 65,788 Total assets 158,883 172,850 151,826 140,560 119,823 121,731 Total debt 0 0 0 0 0 6,549 Stockholders' equity 122,975 128,985 116,029 106,555 96,326 93,307
1 Net income divided by monthly average equity. 1 Financial Review Armor All Products Corporation Results of Operations The Company's operating results declined significantly in fiscal 1996, as revenues decreased $30.5 million, or 14%, and earnings per share decreased $.82, or 71%, from fiscal 1995. The lower revenues were attributable to a decrease in sales of automotive products in North America, partially offset by growth in home care and international shipments. Profit margins were lower primarily due to the absorption of fixed costs over a lower revenue base and to increases in certain selling, marketing and manufacturing costs. Approximately $.21 of the earnings per share reduction was due to $8.0 million of fiscal 1996 pretax charges related to additional costs of correcting a spray actuator problem with certain aerosol units of Armor All(R) QuickSilver Wheel Cleaner, provisions for discontinued and excess inventory, and reserves for certain other items. In fiscal 1995, the Company's operating results improved for the fourth consecutive year, as revenues increased $34.5 million, or 19%, and earnings per share increased $.09, or 8%, from fiscal 1994. The revenue growth was primarily attributable to shipments of new products and to continued international expansion. Earnings grew at a slower rate than revenues principally because of the additional costs associated with (a) the introduction of new automotive and home care products and (b) a market share building strategy for the Company's flagship protectant product. In addition, fiscal 1995 earnings were reduced by $.03 per share due to a $1.0 million pretax charge in connection with the aforementioned wheel cleaner aerosol packaging problem. Revenues The following table sets forth a summary of revenues by major geographic region:
Years Ended March 31 (in millions) 1996 1995 1994 - ------------------------------------------------------------- United States and Canada $168.4 $199.7 $168.1 International 17.9 17.1 14.2 ------------------------ Total $186.3 $216.8 $182.3 ======================== Percentage change from prior year -14% +19% +8%
The $31.3 million decrease (16%) in the Company's U.S./Canadian revenues in fiscal 1996 was primarily due to weakness in consumer purchases in the automotive appearance industry across almost all product categories. In addition, retailers generally reduced their inventories during the year and remained cautious with reorders during the new selling season. Also, the Company's fiscal 1996 third and fourth quarter seasonal promotion program was less aggressive than in the respective fiscal 1995 quarters, when the Company instituted a market share building strategy for Armor All(R) Protectant; the result of this strategy was that the market share of Armor All Protectant increased. Partially offsetting the aforementioned factors were initial sales of two new automotive products launched in December 1995: Armor All(R) Armor Plate(R) Paint Protectant and Armor All(R) FlashBlack Tire Shine. In addition, an approximate 5% selling price increase on certain automotive products in November 1995 increased fiscal 1996 revenues by approximately $2.0 million. Shipments of the Company's line of home care products increased significantly in fiscal 1996, primarily due to (a) increased sales of three new products introduced in February 1995: Armor All(R) Vinyl Siding Wash, Armor All(R) Deck Protector and Armor All(R) WaterProofing Sealer and (b) initial sales of two new products introduced in January 1996: Armor All(R) Painted Wood Wash and the Armor All(R) Pressure Washer formulas. The $31.6 million increase (19%) in the Company's U.S./Canadian revenues in fiscal 1995 was primarily attributable to higher sales of Armor All QuickSilver Wheel Cleaner, which since its introduction in December 1993 has become the leader in its category. Another significant factor was higher sales of the Company's line of home care products, including the E-Z Deck Wash(R) line acquired in January 1994 and the aforementioned three new products introduced in February 1995. Also contributing to the revenue growth were initial sales of WaxPax(R) Instant Car Wax, introduced in December 1994, and higher sales of Armor All(R) Spot & Wash Concentrate, introduced in December 1993. Sales of the Company's line of protectant products, which includes Armor All Protectant, Armor All(R) Protectant Low-Gloss Natural Finish, and Armor All(R) Tire Foam(R) Protectant, were approximately the same as in the prior year. Sales of the Company's line of waxes and washes were lower than in the prior year, generally consistent with the decline in national wax/wash category consumer purchases. Since there were no price increases during fiscal 1995 or 1994, all of the revenue growth represented higher volume of product shipments. The $0.8 million increase (5%) in international revenues in fiscal 1996 principally reflects strong growth in Europe and Asia, partially offset by lower shipments to Mexico due to the adverse economic effects of the peso devaluation. International growth has been attributable to the introduction of additional products into the Company's existing markets as well as to the expansion of the Company's business into new geographic markets. The $2.9 million increase (20%) in international revenues in fiscal 1995 reflects higher shipments in all of the Company's principal geographic markets, including Asia, Australia, Europe and Latin America. 2 Operating Expenses The following table sets forth the percentage relationships of operating expenses and operating income to revenues for the fiscal years indicated. The percentages have been adjusted to exclude the effects of the pretax charges of $8.0 million and $1.0 million in fiscal 1996 and 1995, respectively. The fiscal 1996 charges affected revenues, cost of sales and selling, general and administrative (SG+A) expenses, while the fiscal 1995 charge affected revenues and cost of sales.
Years Ended March 31 1996 1995 1994 - ------------------------------------------------------------ Revenues 100.0% 100.0% 100.0% Cost of sales 45.5 42.6 40.8 Selling, general and administrative 43.1 37.3 36.7 Amortization of intangibles 1.3 1.2 1.5 ---------------------- Operating income 10.1% 18.9% 21.0% ======================
Cost of sales as a percentage of revenues in fiscal 1996 increased from fiscal 1995 for several principal reasons. Higher costs were incurred for an improved Armor All(R) Protectant formula and for certain key raw materials and components. Fixed costs were absorbed over lower automotive volume and the Company incurred increased carrying costs associated with higher inventory levels. In addition, the higher mix of home care and international products had an adverse impact due to the lower margins associated with these developing businesses. Partially offsetting these factors was the approximate 5% selling price increase on certain automotive products effective in November 1995. Cost of sales as a percentage of revenues in fiscal 1995 increased from fiscal 1994 due to a combination of factors. Sales in fiscal 1995 were comprised of a higher proportion of new automotive and home care products, which initially have lower margins due to start-up costs, and certain promotional items. In addition, the Company experienced higher costs of raw materials and components in connection with a mid-year improvement in the Armor All Protectant formula and inflation in certain chemical and paper markets. SG&A expenses, excluding the aforementioned charges, were approximately the same total dollar amount in fiscal 1996 as in fiscal 1995, but were higher as a percentage of revenues. Reductions in variable selling expenses resulting from lower automotive volume were offset by increases in costs associated with automotive trade programs and new product introductions, expanded distribution and new product launches in the home care and international businesses, increased research and development, and higher legal and bad debt provisions. Although the Company took measures to reduce certain administrative costs and discretionary marketing and selling programs during fiscal 1996, the fixed portions of such expenses were absorbed over the lower revenue base for the year. SG&A expenses as a percentage of revenues in fiscal 1995 increased from fiscal 1994 primarily due to increases in selling and marketing expenses in the United States automotive and home care operations. Automotive promotional expenses increased due to the initiation of a market share building strategy for Armor All Protectant and the launch of several new products. Home Care expenses were higher mainly due to the costs involved in the launch of new products and the promotion of the E-Z Deck Wash(R) business. Partially offsetting these increases were the absorption of fixed administrative expenses over a higher sales volume and a reduction in the provision for bad debts due to a decrease in account write-offs. Amortization expense principally relates to intangible assets associated with the acquisition of the Company by McKesson in 1979, the Company's acquisition of several wax and wash brands in September 1988, and the Company's acquisition of two home care brands in January 1994. Amortization expense remained relatively unchanged in fiscal 1996 and decreased by $0.2 million in fiscal 1995. Interest income decreased by $0.2 million in fiscal 1996 and increased by $0.4 million in fiscal 1995 in comparison with the respective prior years. The decrease in fiscal 1996 was primarily due to lower cash balances, while the increase in fiscal 1995 primarily reflects higher interest rates. The Company's effective income tax rates were 43.3%, 41.7% and 43.1% in fiscal 1996, 1995 and 1994 respectively. The higher tax rate in fiscal 1996 arose primarily because the effect of fixed non-deductible intangible asset amortization was absorbed over lower pretax income. The decrease in the tax rate in fiscal 1995 was mainly due to lower foreign taxes incurred in certain international operations. In addition, the fiscal 1994 tax rate reflected the adverse effect 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 promotional activities. Cash inflow is strongest during the 3 summer months as these receivables are collected. Despite these seasonal factors, at March 31, 1996, the Company had a $20.9 million balance of cash and cash equivalents and no short-term or long-term debt. The Company has historically not had substantial investments in inventory as its contract packagers generally own the raw materials and finished goods in their possession and transfer title to the Company just prior to shipment to the Company's customers. Although this full service arrangement is still used for products which constitute the majority of the Company's sales volume, the Company incurred an $8.5 million increase in its inventories during fiscal 1995 due to a greater number of products which the Company purchases from packagers upon the completion of production. This increase resulted primarily from (a) the addition of several new products which are manufactured by packagers other than those which serve as distribution centers and (b) a change in certain packaging and distribution sites to achieve production and operational efficiencies. During fiscal 1996, a small decrease in the Company's United States automotive inventories was offset by small increases in home care and Canadian inventories. The Company's use of contract packagers permits it to avoid significant investments in machinery and other fixed assets. During fiscal 1996, 1995 and 1994, cash flow from operations was $13.7 million, $9.2 million, and $15.6 million, respectively. The higher cash inflow in fiscal 1996 versus fiscal 1995 was mainly due to higher collections of accounts receivable due to a higher receivables balance at the beginning of fiscal 1996 than at the beginning of fiscal 1995. Partially offsetting this factor were the Company's lower earnings in fiscal 1996 and reductions of certain current liabilities in connection with the lower volume. The decrease in net cash inflow in fiscal 1995 from fiscal 1994 was mainly attributable to the higher receivables balance which arose in connection with growth in the Company's sales volume, as well as to the aforementioned increase in the Company's inventories. Cash flows in fiscal 1994 were affected by the payment of $7.4 million to acquire the E-Z Deck Wash(R) and E-Z D(R) brands, an increase in the dividend rate and a reduction in short-term borrowings from McKesson. The Company's sources of liquidity at March 31, 1996 included a $17.4 million balance under a cash management program administered by McKesson, $3.5 million of other cash balances, and a $3.0 million (Canadian) line of credit with a Canadian bank that is renewable annually. In addition, as long as the Company continues to participate in the cash management program, McKesson will make available the cash necessary to provide the Company with sufficient funds to meet its needs as defined in its annual capital and operating plans. There are no advance notification requirements or other limitations on the Company's access to cash under the program. Participation in the program is provided as part of a Services Agreement with McKesson. Amounts deposited under the cash management program are deposited in a separate bank account in the Company's name. In the event that the Company ceases to participate in the cash management program, the Company believes that it would be able to obtain a line of credit from other sources at competitive terms. The Company believes that its current sources of liquidity, combined with cash flow from operations, will be sufficient to meet its needs for the foreseeable future. In April 1996, the Company announced its intention to repurchase up to one million shares of its common stock. Such repurchases will be made from time to time in open market or privately negotiated transactions with minority shareholders. Prior to making any such repurchases, the Company will consider various applicable factors, including the market price of the Company's stock and the effect on the Company's cash balances. 4
Consolidated Balance Sheets Armor All Products Corporation March 31 (in thousands except share and per share amounts) 1996 1995 - ------------------------------------------------------------------------------------------- Assets Current Assets Cash and cash equivalents $ 20,894 $ 22,249 Accounts receivable (less allowance for doubtful accounts and cash discounts: 1996, $2,698 and 1995, $2,341) 72,009 84,865 Inventories 12,643 12,695 Deferred income taxes 2,770 956 Prepaid expenses 1,462 801 ------------------- Total Current Assets 109,778 121,566 Property - Net 9,414 9,373 Intangible Assets - Net 39,691 41,911 ------------------- Total Assets $158,883 $172,850 =================== Liabilities and Stockholders' Equity Current Liabilities Accounts payable $ 13,654 $ 17,385 Payable to McKesson 2,224 2,595 Accrued selling expenses 9,503 8,590 Accrued compensation 1,495 2,513 Income and other taxes payable 591 5,429 Dividends payable 3,411 3,404 Other liabilities 4,458 3,468 ------------------- Total Current Liabilities 35,336 43,384 ------------------- Deferred Income Taxes 572 481 ------------------- Stockholders' Equity Preferred stock, $0.01 par value; 10,000,000 shares authorized; no shares outstanding Common stock, $0.01 par value; 40,000,000 shares authorized; 21,318,722 and 21,272,035 shares outstanding in 1996 and 1995 213 213 Other capital 61,739 61,157 Unearned compensation - restricted stock (1,230) (980) Retained earnings 62,871 69,338 Cumulative translation adjustment (618) (743) ------------------- Total Stockholders' Equity 122,975 128,985 ------------------- Total Liabilities and Stockholders' Equity $158,883 $172,850 ===================
See accompanying notes to consolidated financial statements. 5 Consolidated Statements of Income Armor All Products Corporation
Years Ended March 31 (in thousands except per share amounts) 1996 1995 1994 - -------------------------------------------------------------------------------------------- Revenues $186,326 $216,789 $182,257 ----------------------------- Costs and expenses Cost of sales 89,261 93,103 74,360 Selling, general and administrative 83,579 80,960 66,950 Amortization of intangibles 2,455 2,457 2,684 ----------------------------- Total costs and expenses 175,295 176,520 143,994 ----------------------------- Operating income 11,031 40,269 38,263 Interest income -- net 1,601 1,803 1,377 ----------------------------- Income before income taxes 12,632 42,072 39,640 Income taxes 5,470 17,544 17,067 ----------------------------- Net income $ 7,162 $ 24,528 $ 22,573 ============================= Earnings per common share $.34 $1.16 $1.07 ============================= Weighted average common shares outstanding 21,296 21,214 21,121 =============================
See accompanying notes to consolidated financial statements. 6 Consolidated Statements of Stockholders' Equity Armor All Products Corporation
Unearned Total Common Stock Compensation- Cumulative Stock- Outstanding Other Restricted Retained Translation holders' Shares Amount Capital Stock Earnings Adjustment Equity (in thousands except per share amounts) - ------------------------------------------------------------------------------------------------------------------------------------ Balances, March 31, 1993 21,085 $ 211 $57,968 $ (664) $49,333 $ (293) $106,555 Exercise of stock options 44 1 647 648 Issuance of restricted stock 36 704 (704) - Redemption of common stock (1) (27) (27) Amortization of restricted stock cost 267 267 Issuance of shares to profit-sharing plan 1 31 31 Net income 22,573 22,573 Dividends declared ($.64 per share) (13,518) (13,518) Translation adjustment (500) (500) ---------------------------------------------------------------------------- Balances, March 31, 1994 21,165 212 59,323 (1,101) 58,388 (793) 116,029 Exercise of stock options 95 1 1,486 1,487 Issuance of restricted stock 16 337 (337) - Cancellation of restricted stock (12) (135) 75 (60) Redemption of common stock (1) (25) (25) Amortization of restricted stock cost 383 383 Issuance of shares to profit-sharing plan 9 171 171 Net income 24,528 24,528 Dividends declared ($.64 per share) (13,578) (13,578) Translation adjustment 50 50 ---------------------------------------------------------------------------- Balances, March 31, 1995 21,272 213 61,157 (980) 69,338 (743) 128,985 Exercise of stock options 53 728 728 Issuance of restricted stock 12 212 (212) - Cancellation of restricted stock (12) (246) 246 - Redemption of common stock ( 6) (112) (112) Restricted stock amortization and adjustment (284) (284) Net income 7,162 7,162 Dividends declared ($.64 per share) (13,629) (13,629) Translation adjustment 125 125 ---------------------------------------------------------------------------- Balances, March 31, 1996 21,319 $ 213 $61,739 $ (1,230) $62,871 $ (618) $122,975 ============================================================================
See accompanying notes to consolidated financial statements. 7 Consolidated Statements of Cash Flows Armor All Products Corporation
Armor All Products Corporation Years Ended March 31 (in thousands) 1996 1995 1994 - ------------------------------------------------------------------------------------------------------------------------- Operating Activities Net income $ 7,162 $ 24,528 $ 22,573 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 3,965 3,745 3,818 Deferred income taxes (1,723) (631) (551) Other (284) 323 267 ------------------------------ Total 9,120 27,965 26,107 ------------------------------ Effect of changes in operating assets, net of the affects of business acquisition: Accounts receivable 12,856 (16,902) (13,889) Inventories 52 (8,513) 595 Prepaid expenses (661) (737) 485 Accounts payable (3,731) 6,462 1,474 Accrued selling expenses 913 (212) (271) Accrued compensation (1,018) (156) (462) Taxes payable and other liabilities (3,848) 1,327 1,537 ------------------------------ Total 4,563 (18,731) (10,531) ------------------------------ Net cash provided by operating activities 13,683 9,234 15,576 ------------------------------ Investing Activities Cash paid for acquisition of E-Z Deck(R) Wash and E-Z D(R) brands - - (7,438) Capital expenditures (1,551) (1,962) (1,377) Other (110) (419) (683) ------------------------------ Net cash used in investing activities (1,661) (2,381) (9,498) ------------------------------ Financing Activities Payable to McKesson (371) 1,069 (1,678) Issuance of common stock 616 1,638 652 Dividends paid (13,622) (13,562) (12,659) ------------------------------ Net cash used in financing activities (13,377) (10,855) (13,685) ------------------------------ Net decrease in cash and cash equivalents (1,355) (4,002) (7,607) Cash and cash equivalents at beginning of year 22,249 26,251 33,858 ------------------------------ Cash and cash equivalents at end of year $ 20,894 $ 22,249 $ 26,251 ==============================
See accompanying notes to consolidated financial statements. 8 Notes to Consolidated Financial Statements Armor All Products Corporation 1. Organization and Significant Accounting Policies Basis of Presentation: The accompanying consolidated financial statements include the accounts of Armor All Products Corporation and all of its subsidiaries ("the Company"). All significant intercompany balances and transactions have been eliminated. Business: Substantially all of the Company's operations are currently in one business segment, marketing branded appearance enhancement products targeted primarily for the do-it-yourself automotive and home care consumer markets. The Company's products are sold under the following principal brand names: Armor All(R), Rain Dance(R), Rally(R), No.7(R) and E-Z Deck Wash(R). The Company sells its products primarily to retailers and distributors. Relationship with McKesson Corporation: McKesson Corporation ("McKesson") owned approximately 55% of the Company's outstanding shares of common stock as of March 31, 1996. McKesson has outstanding debentures which are exchangeable into shares of the Company's common stock owned by McKesson at a price of $25.94 per share at any time through February 2004, subject to McKesson's right to pay cash equal to the market price of the stock in lieu of making the exchange. If all of such debentures were actually exchanged, McKesson's ownership level would be reduced to approximately 22%. Transactions with McKesson: Certain expenses, principally payroll and employee benefits, are paid on behalf of and charged to the Company by McKesson. The Company uses certain resources and administrative staff of McKesson, including financial, treasury, legal, corporate secretary, tax, audit and accounting advice, and employee benefit, personnel and payroll services. The Company is charged a fee for these and other services including insurance premiums at an amount based on actual time or costs incurred. These charges, which are included in selling, general and administrative expenses, were $603,000, $620,000 and $669,000 in fiscal 1996, 1995 and 1994, respectively. The Company believes that these expenses would not have been materially different if the Company operated on a stand-alone basis. The Company also participates in a cash management program administered by McKesson, as described in Note 2, and files certain combined tax returns with McKesson, as described in Note 8. Sales to divisions of McKesson were $578,000, $803,000 and $747,000 in fiscal 1996, 1995 and 1994, respectively. Foreign Currency Translation: Assets and liabilities of the Company's foreign affiliates are translated at current exchange rates, while revenue and expenses are translated at average rates prevailing during the year. Translation adjustments of those affiliates for which the local currency is the functional currency are reported as a component of stockholders' equity. Translation adjustments of affiliates for which the U.S. dollar is the functional currency are included in net income. All gains and losses on foreign currency transactions are also included in net income. Foreign currency exchange fluctuations did not have a material effect on the consolidated financial statements in fiscal 1996, 1995 or 1994. Fair Value of Financial Instruments: Carrying values approximate fair values for financial instruments classified in the balance sheet as current assets and current liabilities. Revenue is recognized when products are shipped to customers. Media advertising production costs are charged to expense in the period in which the advertising first takes place. Total advertising and promotion expense amounted to $57,551,000, $56,730,000 and $43,959,000 in fiscal 1996, 1995 and 1994, respectively. Research and development costs are charged to expense as incurred. Income taxes are accounted for in accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," which requires the liability method of accounting for deferred taxes. Cash equivalents include all highly liquid investments purchased with a maturity of three months or less. Inventories are stated at the lower of first-in, first-out cost or market. Property is stated at cost and depreciated on the straight-line method over estimated useful lives of 3 to 30 years. Intangible assets include (1) goodwill from the excess of McKesson's cost of the Company over the fair value of net assets acquired, which is being amortized over 40 years, (2) patents, trademarks, goodwill and other intangibles arising from the purchase of the Rain Dance(R), Rally(R) and No. 7(R) brand product lines in September 1988, which are being amortized over various periods ranging from 4 to 25 years, (3) patents and trademarks arising from the purchase of the 9 E-Z Deck Wash(R) and E-Z D(R) brand product lines in January 1994 (see Note 12), which are being amortized over 15 years, and (4) other patents and trademarks that are being amortized over various periods ranging from 5 to 20 years. Amortization of intangible assets is recorded on a straight-line basis. Periodically, management assesses whether there has been an impairment in the carrying values of the Company's intangible assets. Based on this assessment, management believes that there was no impairment at March 31, 1996. Accrued selling expenses include media advertising related to new product introductions, cooperative advertising, volume rebates and other trade incentive programs, coupon redemption liabilities and sales commissions. Earnings per common share are computed based on the weighted average number of shares of common stock outstanding during the respective years. The dilutive effect of stock options, which are considered to be common stock equivalents, is immaterial. Use of estimates: The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Recent Accounting Pronouncements: Statement of Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," becomes effective for the Company's fiscal year 1997. SFAS 121 prescribes the impairment evaluation method for long-lived property and intangibles that are either used in operations or held for disposal. The Company believes that adoption of this standard will not have a material effect on the Company's financial position or results of operations. Statement of Accounting Standards No. 123, "Accounting for Stock-Based Compensation," becomes effective for the Company's fiscal year 1997. SFAS 123 establishes new financial accounting and reporting standards for stock-based compensation plans. Entities will be allowed to measure compensation expense for stock-based compensation under SFAS 123 or the existing standard, which is Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." Entities electing to remain with the APBO 25 accounting method will be required to make pro forma disclosures of net income and earnings per share as if the SFAS 123 accounting method had been applied. The Company plans to adopt only the disclosure requirements of SFAS 123; therefore, such adoption will not affect the Company's earnings or cash flows. Reclassifications: Certain prior year amounts have been reclassified to conform with the fiscal 1996 presentation. 2. 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 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 by the Company for cash management program transactions. The Company receives interest under the program through McKesson on funds deposited in the separate bank account, or pays interest to McKesson on funds received, at a rate equal to the monthly Federal Reserve Composite Rate for 7-day commercial paper less 0.1% for funds deposited under the program and plus 0.5% for funds borrowed from McKesson. The agreement provides that McKesson will make available that amount of cash necessary to provide the Company with sufficient funds to meet its needs as defined in its annual capital and operating budget, and that the Company will pay McKesson an annual credit facility fee of $25,000. Included in cash and cash equivalents in the accompanying consolidated balance sheets are the following amounts invested in the cash management program and the interest rates earned thereon: $17,359,000 at 5.3% on March 31, 1996 and $18,182,000 at 6.0% on March 31, 1995. The Payable to McKesson of $2,224,000 and $2,595,000 at March 31, 1996 and 1995, respectively, consist of payroll, freight and other expenses paid by McKesson on behalf of the Company. Such amounts were reimbursed to McKesson in the first quarter of the respective subsequent fiscal years. The Company also has a $3,000,000 (Canadian) line of credit with a Canadian bank that is renewable annually and expires on March 31, 1997. Borrowings under this line of credit bear interest at the Canadian prime rate (6.8% at March 31, 1996). There were no outstanding borrowings under the line of credit at March 31, 1996 or 1995. 10 3. Interest Income - Net Interest income - net, which approximates interest received and paid, is comprised of the following:
Years Ended March 31 (in thousands) 1996 1995 1994 - ------------------------------------------------------------------- Net interest income - McKesson (Note 2) $1,486 $1,656 $1,219 Interest income - other 124 154 163 Interest expense - other (9) (7) (5) ------------------------- Total $1,601 $1,803 $1,377 =========================
4. Accounts Receivable and Concentration of Credit Risk The Company's principal customers are large mass merchandisers, automotive supply stores, warehouse clubs, home centers, hardware stores and wholesalers. The Company offers trade credit to its customers on terms customary to the industry, which includes extended dating during seasonal promotion periods. Sales to the Company's two largest customers accounted for the following percentages of consolidated revenue: 20% and 10% in fiscal 1996; 17% and 8% in fiscal 1995; and 17% and 8% in fiscal 1994. No other customer accounted for 5% or more of consolidated revenues in any of these fiscal years. As of March 31, 1996, three customers accounted for an aggregate of 29% of outstanding trade accounts receivable. Management maintains credit policies and performs ongoing credit evaluations of its customers. Allowances for doubtful receivables are established based on historical trends and factors surrounding the credit risk of specific customers; actual credit losses have historically been within the allowances provided. 5. Inventories Inventories are summarized as follows:
March 31 (in thousands) 1996 1995 - ------------------------------------------------------------------ Finished goods $ 11,714 $ 10,338 Raw materials 929 2,357 ------------------- Total $ 12,643 $ 12,695 ===================
6. Property Property is summarized as follows:
March 31 (in thousands) 1996 1995 - ------------------------------------------------------------------ Land $ 2,439 $ 2,439 Building 3,810 3,810 Furniture and fixtures 2,049 1,786 Machinery and equipment 7,690 6,700 Leasehold improvements 251 78 ------------------- Total 16,239 14,813 Accumulated depreciation (6,825) (5,440) ------------------- Property - net $ 9,414 $ 9,373 ===================
7. Intangible Assets Intangible assets consist of the following:
March 31 (in thousands) 1996 1995 - ------------------------------------------------------------------ Goodwill $ 43,865 $ 43,865 Patents and trademarks 21,091 20,980 Other intangibles 11,090 11,090 ------------------- Total 76,046 75,935 Accumulated amortization (36,355) (34,024) ------------------- Intangible assets - net $ 39,691 $ 41,911 ===================
8. Income Taxes Through May 12, 1993, the Company was included in the consolidated federal income tax returns of McKesson. On that date, as a result of a public stock offering, McKesson's ownership of the Company fell below the 80% level required for the Company to qualify for inclusion in such consolidated tax returns. Accordingly, the Company now files separate federal income tax returns. For the majority of its state income taxes, the Company continues to be included in McKesson's combined tax returns. Such inclusion occurs in the tax returns related to those states where the required ownership percentage is 50% or more. The Company files separate income tax returns in other states and in foreign countries. The Company's aggregate income tax payments, including payments made to McKesson and payments made directly to the applicable government taxing authorities, amounted to $12,655,000, $16,768,000 and $16,970,000 in fiscal 1996, 1995 and 1994, respectively. Accrued income taxes owed to McKesson for the Company's share of taxes reported on the consolidated and combined tax returns amounted to $785,000 and $1,656,000 at March 31, 1996 and 1995, respectively. These liabilities are included in income and other taxes payable on the accompanying consolidated balance sheets. The Company's provisions for income taxes, which have been computed as if the Company filed its tax returns as a separate entity in all periods, consist of the following components:
Years Ended March 31 (in thousands) 1996 1995 1994 - ------------------------------------------------------------------ Current Federal $ 5,882 $14,115 $13,084 State 1,279 3,176 2,988 Foreign 32 884 1,546 --------------------------- Total current 7,193 18,175 17,618 --------------------------- Deferred Federal (1,436) (526) (457) State (287) (105) (94) --------------------------- Total deferred (1,723) (631) (551) --------------------------- Total provision $ 5,470 $17,544 $17,067 ===========================
11 The reconciliations between the Company's effective tax rate and the statutory federal income tax rate follow:
Years Ended March 31 (in thousands) 1996 1995 1994 - ---------------------------------------------------------------------------- Statutory federal income tax rate 35.0% 35.0% 35.0% State income taxes, net of federal benefit 5.2 4.8 4.8 Foreign operations (0.7) 0.8 1.8 Retroactive effect of tax legislation - - 0.3 Amortization of certain intangible assets 3.8 1.1 1.2 --------------------------- Total 43.3% 41.7% 43.1% ===========================
Deferred income taxes in the accompanying consolidated balance sheets are comprised of the following:
March 31 (in thousands) 1996 1995 - ------------------------------------------------------------------------------- Deferred tax assets: Inventory reserves $ 1,818 $ 252 Doubtful receivables 491 314 Employee benefit plans 357 893 Accrued selling expenses 340 487 Legal expense and other 1,119 485 ---------------------------- Total 4,125 2,431 ---------------------------- Deferred tax liabilities: Depreciation and amortization (1,777) (1,800) Other (150) (156) ---------------------------- Total (1,927) (1,956) ---------------------------- Net deferred tax asset $ 2,198 $ 475 ============================ Net current $ 2,770 $ 956 Net non-current (572) (481) ---------------------------- Net deferred tax asset $ 2,198 $ 475 ============================
The Company has not recorded a valuation allowance for the net deferred tax asset at March 31, 1996 because management believes such deferred taxes will be fully recovered through deductions on the fiscal 1997 tax return or through carryback to prior fiscal years. The Company has not provided for U.S. federal income and foreign withholding taxes on $3,071,000 of its Canadian subsidiary's undistributed earnings as of March 31, 1996 because such earnings are intended to be reinvested indefinitely. If these earnings were distributed, foreign tax credits would become available under current U.S. law to reduce the effect on the Company's overall tax liability. 9. Employee Benefit Plans The Company's employees are eligible to participate in McKesson's health care, retirement and certain other employee benefit plans. In addition, substantially all employees are eligible to participate in the Company's profit-sharing investment plan. The Company's contributions to the profit-sharing plan consisted of the following: a cash payment in fiscal 1996, 8,869 shares of its common stock in fiscal 1995 and a cash payment plus 1,637 shares of its common stock in fiscal 1994. Compensation expense related to the McKesson and profit- sharing plans amounted to $913,000, $995,000 and $879,000 in fiscal 1996, 1995 and 1994, respectively. The 1986 Stock Option Plan provides for the granting of non-qualified options to eligible key employees and directors of the Company to purchase up to an aggregate of 1,300,000 shares of common stock. The exercise price of the stock covered by each option may not be less than 85% of the fair market value of such stock on the date the option is granted. Option information is as follows:
Years Ended March 31 1996 1995 1994 - ---------------------------------------------------------------------------------- Option shares: Outstanding at beginning of year 878,812 822,312 802,950 Granted 211,500 183,800 100,950 Exercised (53,425) (94,563) (44,238) Cancelled (88,525) (32,737) (37,350) ----------------------------------- Outstanding at year-end 948,362 878,812 822,312 =================================== Exercisable at year-end 540,419 478,144 422,157 =================================== Available for future grants at year-end 67,612 190,587 341,650 =================================== For outstanding options at year-end: Range of exercise prices $10.19- $10.19- $10.19- $22.63 $22.63 $22.63 Aggregate exercise price $15,848,000 $14,579,000 $12,413,000 Aggregate market value $15,529,000 $18,894,000 $15,830,000
The 1988 Restricted Stock Plan provides for the granting of up to an aggregate of 220,000 shares of the Company's common stock to key employees. As of March 31, 1996, there were 75,150 shares which remained available for future grants. During fiscal 1996, 1995 and 1994, respectively, 12,300, 15,700 and 36,200 common shares were granted. In connection with the granting of these shares, unearned compensation - restricted stock was recorded in the amount of $212,000, $337,000 and $704,000 in fiscal 1996, 1995 and 1994, respectively. These amounts represent the fair market value of the shares on the respective dates of grant. Recipients of restricted shares have all of the rights of common stockholders except that the shares are held in custody by the Company and cannot be disposed of until the restrictions have lapsed, which is generally four years after the grant date. In addition, the majority of the grants made in fiscal 1993 through 1996 provide that the restrictions will lapse only if specified performance goals are met during the four-year period. The fair market value of the shares on the grant date is amortized to compensation expense over the vesting period. Due to the significant decline in the Company's earnings during fiscal 1996, it became unlikely that the specified performance goals for these grants would be met; accordingly, the previously- recorded amortization for such shares was credited to expense. If a plan participant's employment terminates during the vesting period, except under certain specified conditions, the shares are cancelled and any amounts previously amortized are credited to expense. 12 10. Geographic Segments The Company's foreign operations consist of offices and certain other facilities in Canada and Europe. The Company exports products from the United States to other geographic areas, principally Australia, Japan and Mexico. Information for the Company's geographic operations is as follows:
Years Ended March 31 (in thousands) 1996 1995 1994 - ------------------------------------------------------------------- Revenues United States $161,567 $187,868 $156,429 Export 9,752 9,911 8,523 Foreign 15,007 19,010 17,305 ---------------------------- Total $186,326 $216,789 $182,257 ============================ Operating Income United States and export $ 9,192 $ 36,906 $ 35,053 Foreign 1,839 3,363 3,210 ---------------------------- Total $ 11,031 $ 40,269 $ 38,263 ============================ Identifiable Assets at Year-End United States and export $147,851 $160,130 $141,108 Foreign 11,032 12,720 10,718 ---------------------------- Total $158,883 $172,850 $151,826 ============================
11. Commitments In addition to commitments and obligations which arise in the ordinary course of business, the Company is subject to various claims, investigations, proceedings, tax assessments and legal actions from time to time arising out of the conduct of the Company's business. Management believes that, based on current knowledge, the outcome of any such pending matters will not have a material adverse effect on the Company's financial position. The Company leases equipment and certain warehouse, laboratory and office facilities under operating leases that expire on various dates through February 2001. Rent expense included in operations, which primarily consists of contingent rental payments based on the number of cases stored at independent warehouses, was $2,980,000, $1,879,000, and $983,000 in fiscal 1996, 1995, and 1994, respectively. As of March 31, 1996, minimum lease payments under operating leases with remaining noncancelable lease terms in excess of one year were as follows: $379,000 in fiscal 1997; $233,000 in fiscal 1998; $238,000 in fiscal 1999; $204,000 in fiscal 2000 and $152,000 in fiscal 2001. 12. Acquisition of E-Z Deck Wash and E-Z D Brands On January 28, 1994, the Company purchased the E-Z Deck Wash and E-Z D brands of home care products for approximately $7,500,000. This acquisition was accounted for using the purchase method. Substantially all of the cost was allocated to patents and trademarks, with a minor amount assigned to inventory and various other assets and liabilities. Had this business been acquired at the beginning of fiscal 1994, the pro-forma inclusion of its operating results would not have had a significant effect on the reported consolidated revenues and net income in fiscal 1994. 13. Quarterly Financial Information (unaudited)
First Second Third Fourth Years Ended March 31 (in thousands except per share amounts) Quarter Quarter Quarter Quarter Year - -------------------------------------------------------------------------------------------------------------------------- 1996 Revenues $50,224 $39,772 $34,637 $61,693 $186,326 Gross profit 25,830 21,547 19,015 30,673 97,065 Net income(loss) 3,457 2,707 1,852 (854) 7,162 Earnings(loss) per common share $ .16 $ .13 $ .09 $ (.04) $ .34 Cash dividends per common share $ .16 $ .16 $ .16 $ .16 $ .64 Market prices per common share High $22-1/2 $ 18 $19-1/2 $18-1/4 $ 22-1/2 Low 16-1/2 15 15-1/2 14-3/4 14-3/4 ------------------------------------------------- 1995 Revenues $56,568 $41,135 $39,244 $79,842 $216,789 Gross profit 32,567 23,809 22,144 45,166 123,686 Net income 6,359 4,459 4,000 9,710 24,528 Earnings per common share $ .30 $ .21 $ .19 $ .46 $ 1.16 Cash dividends per common share $ .16 $ .16 $ .16 $ .16 $ .64 Market prices per common share High $ 22 $23-1/4 $ 24 $23-3/8 $ 24 Low 18-1/4 20-1/2 18 18-3/4 18
Due to the seasonal nature of the Company's business, revenues, gross profit and net income are not generated evenly by quarter during the year. Sales activity generally peaks in the fourth quarter of the fiscal year. (a) In the fourth quarter of fiscal 1995, earnings per share were reduced by approximately $.03 in connection with a charge for costs of the Company's program to replace retailers' inventories of certain aerosol units of QuickSilver Wheel Cleaner with new cans containing an improved actuator. Earnings per share for that quarter were increased by $.01 due to the retroactive effect of revising the annual effective tax rate from 42.7% to 41.7%. (b) In the fourth quarter of fiscal 1996, earnings per share were reduced by approximately $.21 in connection with charges consisting principally of additional costs related to the QuickSilver aerosol replacement program, provisions for discontinued and excess inventory, and reserves for certain other items. Earnings per share for that quarter were reduced by $.01 due to the retroactive effect of revising the annual effective tax rate from 42.0% to 43.3%. 13 Independent Auditors' Report To the Board of Directors and Stockholders of Armor All Products Corporation: We have audited the accompanying consolidated balance sheets of Armor All Products Corporation and subsidiaries as of March 31, 1996 and 1995, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended March 31, 1996. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. 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, such consolidated financial statements present fairly, in all material respects, the financial position of Armor All Products Corporation and subsidiaries as of March 31, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 1996, in conformity with generally accepted accounting principles. /s/ Deloitte & Touche LLP Deloitte & Touche LLP [LOGO] DELOITTE & TOUCHE LLP Costa Mesa, California April 25, 1996 Management's Responsibility for Financial Statements Armor All Products Corporation is responsible for the preparation and accuracy of the financial statements and other information included in this report. The financial statements have been prepared in conformity with generally accepted accounting principles using, where appropriate, management's best estimates and judgments. In meeting its responsibility for the reliability of the financial statements, management has developed and relies on the Company's system of internal accounting control. The system is designed to provide reasonable assurance that assets are safeguarded and that transactions are executed as authorized and are properly recorded. The system is augmented by written policies and procedures. The Board of Directors reviews the financial statements and reporting practices of the Company through its Audit Committee. The Committee meets regularly with the independent auditors, internal auditors and management to discuss audit scope and results and to consider internal control and financial reporting matters. Both the independent and internal auditors have unrestricted access to the Audit Committee. /s/ Kenneth M. Evans /s/ Michael G. McCafferty Kenneth M. Evans Michael G. McCafferty President and Chief Executive Officer Executive Vice President and Chief Financial Officer 14 CORPORATE DIRECTORY Armor All Products Corporation Executive Officers Kenneth M. Evans President and Chief Executive Officer Michael G. McCafferty Executive Vice President and Chief Financial Officer Michael A. Caron Senior Vice President and President of Armor All International Gayle F. Metzler Vice President, Human Resources Other Officers Jon W. d'Alessio Treasurer Steven D. Booker Vice President, Sales-Automotive Division Walter A. Hadzinsky Vice President, Information Systems Niels F. Hayns Vice President, International-Americas Lawrence R. Kahn Vice President, Marketing-Automotive Division Robert J. Keller Vice President, Sales-Home Care Division Mark D. Krikorian Vice President and Controller Richard A. Loomis Vice President, Marketing-Home Care Division Nancy A. Miller Vice President and Secretary Philip Robinson Vice President and Managing Director - Europe John F. Schueller Vice President, Manufacturing and Corporate Quality Directors David E. McDowell/1,2/ Chairman, Armor All Products Corp. Senior Adviser to McKesson Corp. William A. Armstrong/1/ Vice President, McKesson Corp. Jon S. Cartwright1,/2/ Director Emeritus and Senior Adviser of the Center for Telecommunications Mgt., Graduate School of Business Administration, University of Southern California Kenneth M. Evans President and Chief Executive Officer, Armor All Products Corp. David L. Mahoney Vice President and President, Pharmaceutical Services Group, McKesson Corp. Karen Gordon Mills/2/ President, MMP Group, Inc. Alan Seelenfreund Chairman and Chief Executive Officer, McKesson Corp. 1 Member, Compensation Committee 2 Member, Audit Committee - -------------------------------------------------------- Alan F. Rypinski Chairman Emeritus, Founder Annual Meeting Will be Held July 26 in San Francisco The annual meeting of Armor All Products Corp. shareholders will be held at 10:00 a.m. on Friday, July 26, 1996, in the Lobby Level Conference Room at 44 Montgomery Street, San Francisco. A proxy card and proxy statement will be mailed to all shareholders approximately five weeks before the meeting. Proxy cards should be signed, dated and returned promptly to ensure that all shares are represented at the meeting and voted in accordance with the instructions of their holders. About Your Securities and Records The common stock of Armor All Products is traded in the over-the-counter market. Prices are quoted on the NASDAQ Stock Market and may be found in the daily stock tables carried by most newspapers, listed as "Armor." The ticker symbol for Armor All Products is ARMR. Continental Stock Transfer & Trust Co., Two Broadway, New York, NY 10004, acts as transfer agent for Armor All Products and maintains all shareholder records for the corporation. Shareholders may obtain information relating to their share positions, dividends, transfer requirements, lost certificates and other related matters by telephoning Continental Stock Transfer at (800) 509-5586. Shareholders must provide their tax identification number, the name(s) in which their shares are registered and their record address when they request information. This service is available to all shareholders Monday through Friday 9:00 a.m. to 5:00 p.m. EST. Shareholders may also obtain this information by writing to: Assistant Secretary, Armor All Products Corp., One Post Street, San Francisco, CA 94104. Dividend Payments Mailed Quarterly "Shareholder of record" refers to a shareholder who is entitled to receive a dividend on the "payable date" if he or she was listed as an Armor All shareholder on the "record date" (approximately 3 to 4 weeks prior to the payable date). Quarterly dividends are mailed with the intent of reaching shareholders on the first business day of January, April, July and October. Postal delays may cause actual receipt dates to vary. Tax Reports on Dividend Income Armor All is required to report to the Internal Revenue Service the total amount of dividends paid to each shareholder during the preceding year. Form 1099, which contains the information supplied by the transfer agent to the IRS for each shareholder account, will be mailed to shareholders with the first dividend check payable after the end of each calendar year. Lost Checks and Certificates Delayed delivery or lost dividend checks often result when a shareholder moves and does not notify the transfer agent. Please immediately notify Continental Stock Transfer in writing of any address changes. Lost certificates may be replaced only after the issuance of an indemnity bond, for which a premium of about 2% of the market value of the stock is charged by an insurance company. Shareholders should generally deal directly with their brokers and the transfer agent who maintains shareholder records. However, if a problem arises that they cannot resolve, Armor All's Assistant Secretary is available for assistance. Additional Information Available to Shareholders Questions about activities of the Company and operating results should be directed to: Investor Relations, Armor All Products Corp., 6 Liberty, Aliso Viejo, CA 92656; or call Investor Relations at (714) 362-0600. Form 10-K Available on Request Shareholders may obtain copies of the corporation's Form 10-K annual report to the Securities and Exchange Commission, without charge. Requests for this document should be addressed to: Investor Relations, Armor All Products Corp., 6 Liberty, Aliso Viejo, CA 92656. Armor All Products Corporation 6 Liberty Aliso Viejo, CA 92656 (714) 362-0600 15 EX-21 6 SUBSIDIARIES OF THE REGISTRANT Exhibit (21) SUBSIDIARIES OF THE REGISTRANT The following is a list of the significant subsidiaries of the Company: Jurisdiction of Organization --------------- Armor All Products GmbH .................................... Germany Armor All Products of Canada, Inc........................... Canada EX-23 7 INDEPENDENT AUDITORS CONSENT Exhibit (23) INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statement No. 33- 52075-01 of Armor All Products Corporation on Form S-3 and Registration Statement Nos. 33-16181, 33-33096 and 33-43987 of Armor All Products Corporation on Form S-8 and of our reports dated April 25, 1996, appearing in and incorporated by reference in this Annual Report on Form 10-K of Armor All Products Corporation for the year ended March 31, 1996. /s/Deloitte & Touche LLP DELOITTE & TOUCHE LLP Costa Mesa, California June 14, 1996 EX-27 8 FINANCIAL DATA SCHEDULE
5 0000797975 ARMOR-ALL-PRODUCTS 1,000 YEAR MAR-31-1996 APR-01-1995 MAR-31-1996 20,894 0 74,707 2,698 12,643 109,778 16,239 6,825 158,883 35,336 0 0 0 213 122,762 158,883 186,326 186,326 89,261 89,261 0 3,663 0 12,632 5,470 0 0 0 0 7,162 0.34 0.34
-----END PRIVACY-ENHANCED MESSAGE-----