SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For quarter ended September 30, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission file number 0-14946
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ARMOR ALL PRODUCTS CORPORATION
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(Exact Name of Registrant as specified in its charter)
DELAWARE 33-0178217
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6 Liberty, Aliso Viejo, California 92656
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(Address of principal executive offices) (Zip Code)
(714) 362-0600
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(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the Registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
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Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at September 30, 1994
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Common stock, $0.01 par value 21,194,698 shares
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
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Pages
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Consolidated Balance Sheets
September 30, 1994 and March 31, 1994 3
Consolidated Statements of Income
Three and six months ended September 30, 1994 and 1993 4
Consolidated Statements of Cash Flows
Six months ended September 30, 1994 and 1993 5
Financial Notes 6 - 7
Financial Review 8 - 9
PART II. OTHER INFORMATION
===========================
Item
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6 Exhibits and Reports on Form 8-K 10
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PART 1. FINANCIAL INFORMATION
==============================
ARMOR ALL PRODUCTS CORPORATION
CONSOLIDATED BALANCE SHEETS
(unaudited)
September 30, March 31,
1994 1994
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(in thousands)
ASSETS
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Current Assets
Cash and cash equivalents $ 46,788 $ 26,251
Accounts receivable 31,174 67,963
Inventories 8,402 4,182
Deferred taxes 403 765
Prepaid expenses 7,664 64
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Total current assets 94,431 99,225
Property 8,783 8,699
Goodwill 27,086 27,650
Patents and Trademarks 15,624 16,217
Other Intangibles 0 35
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Total assets $145,924 $151,826
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Current Liabilities
Accounts payable $ 8,210 $ 10,923
Payable to McKesson 1,021 1,526
Accrued selling expenses 5,497 8,802
Accrued compensation 2,051 2,669
Income and other taxes payable 1,209 4,282
Dividends payable 3,391 3,386
Other liabilities 2,797 3,288
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Total current liabilities 24,176 34,876
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Deferred Income Taxes 839 921
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Stockholders' Equity
Common stock 212 212
Other capital 59,795 59,323
Unearned compensation
- restricted stock (917) (1,101)
Retained earnings 62,427 58,388
Cumulative translation adjustment (608) (793)
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Total stockholders' equity 120,909 116,029
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Total liabilities and
stockholders' equity $145,924 $151,826
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See accompanying financial notes.
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ARMOR ALL PRODUCTS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Three Months Ended Six Months Ended
September 30 September 30
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1994 1993 1994 1993
------ ------ ------ ------
(in thousands except per share amounts)
REVENUES $41,135 $36,232 $97,703 $83,954
------ ------ ------ ------
COSTS AND EXPENSES
Cost of sales 17,326 14,972 41,327 34,225
Selling, general and
administrative 15,915 13,455 37,031 32,057
Amortization of intangibles 623 804 1,246 1,608
------ ------ ------ ------
Total costs and expenses 33,864 29,231 79,604 67,890
------ ------ ------ ------
OPERATING INCOME 7,271 7,001 18,099 16,064
INTEREST INCOME 511 405 781 669
------ ------ ------ ------
INCOME BEFORE INCOME TAXES 7,782 7,406 18,880 16,733
INCOME TAXES 3,323 3,376 8,062 7,247
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NET INCOME $ 4,459 $ 4,030 $10,818 $ 9,486
====== ====== ====== ======
EARNINGS PER COMMON SHARE $.21 $.19 $.51 $.45
=== === === ===
DIVIDENDS PER COMMON SHARE $.16 $.16 $.32 $.32
=== === === ===
WEIGHTED AVERAGE
COMMON SHARES OUTSTANDING 21,191 21,105 21,181 21,099
See accompanying financial notes.
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ARMOR ALL PRODUCTS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Six Months Ended
September 30
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1994 1993
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(in thousands)
Operating Activities
Net income $10,818 $ 9,486
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization 2,013 2,257
Provision for losses on receivables 274 266
Deferred income taxes 280 (31)
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Total 13,385 11,978
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Effect of changes in
Accounts receivable 36,515 30,021
Inventories (4,220) 1,035
Prepaid expenses (7,600) (4,073)
Accounts payable (2,713) (2,395)
Accrued selling expenses (3,305) (2,477)
Accrued compensation (618) (1,289)
Income and other taxes payable (3,073) (3,545)
Other liabilities (491) (125)
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Total 14,495 17,152
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Net cash provided by
operating activities 27,880 29,130
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Investing Activities
Capital expenditures (667) (735)
Other 129 (277)
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Net cash used by investing activities (538) (1,012)
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Financing Activities
Payable to McKesson (505) 331
Issuance of common stock 472 323
Dividends paid (6,772) (5,902)
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Net cash used by financing activities (6,805) (5,248)
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Net increase in cash and cash equivalents 20,537 22,870
Cash and cash equivalents at
beginning of period 26,251 33,858
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Cash and cash equivalents at end of period $46,788 $56,728
====== ======
See accompanying financial notes.
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ARMOR ALL PRODUCTS CORPORATION
FINANCIAL NOTES
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements present the
financial position and results of operations of Armor All
Products Corporation and its subsidiaries (the "Company"). In
the opinion of the Company, these unaudited consolidated
financial statements include all adjustments necessary for a
fair presentation of its financial position as of September 30,
1994 and the results of its operations and its cash flows for
the six-month periods ended September 30, 1994 and 1993. Such
adjustments were of a normal recurring nature.
The results of operations for the six-month periods ended
September 30, 1994 and 1993 are not necessarily indicative of
the results for the full years. It is suggested that these
consolidated financial statements be read in conjunction with
the consolidated financial statements and related notes thereto
included in the Company's Annual Report to Shareholders for the
year ended March 31, 1994. That report has previously been
filed with the Securities and Exchange Commission as an exhibit
to the Annual Report on Form 10-K.
2. CASH MANAGEMENT
Pursuant to an agreement with McKesson, the Company's U.S.
operations participate daily in a cash management program
administered by McKesson. Under this arrangement, the Company
invests any excess cash in the cash management program and has
unrestricted access to such invested cash to fund its operating
disbursements. If the Company needs additional cash above the
amount invested, such cash requirements are met through
borrowings from McKesson. All amounts invested in the cash
management program with McKesson are deposited in a separate
bank account in the Company's name, which is used for cash
management program transactions.
Included in cash and cash equivalents in the accompanying
consolidated balance sheets are the following amounts invested
in the cash management program: $39,040,000 at 4.8% on
September 30, 1994 and $22,076,000 at 3.4% on March 31, 1994.
3. INVENTORIES
Inventories are comprised of the following:
September 30, March 31,
1994 1994
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Finished Goods $ 7,098 $ 3,514
Raw Materials 1,304 668
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Total $ 8,402 $ 4,182
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ARMOR ALL PRODUCTS CORPORATION
FINANCIAL NOTES
4. PREPAID EXPENSES
Prepaid expenses at September 30, 1994 include $7,527,000 of
payments related to media advertising. The Company allocates
the annual media advertising expense among interim periods in
proportion to estimated annual sales volume.
5. INTEREST INCOME
Interest income is comprised of the following:
Three Months Six Months Ended
September 30 September 30
--------------- ---------------
1994 1993 1994 1993
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(in thousands)
Interest income - McKesson $475 $359 $706 $591
Interest income - other 36 46 75 78
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Interest income $511 $405 $781 $669
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ARMOR ALL PRODUCTS CORPORATION
FINANCIAL REVIEW
Results of Operations
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Revenues increased $4.9 million or 13.5% in the second quarter and
increased $13.7 million or 16.4% in the six-month period. The
increases were primarily attributable to sales in the United States
of Armor All(R) QuickSilver(TM) Wheel Cleaner, which was developed
internally by the Company and introduced in December 1993, and to
sales of Armor All(R) E-Z Deck Wash(R) Cleaner and the other home
care product lines acquired by the Company in January 1994. United
States revenues from the Company's line of protectants, waxes,
washes and other car care products were slightly lower than in the
year-ago periods because of softer industry-wide consumer
purchases and competitive pressures in these categories.
International sales increased due to the Company's expansion into
new markets and the shipment of new products into existing markets.
Cost of sales as a percentage of revenues was 42.1% and 41.3% in
the quarters ended September 30, 1994 and 1993, respectively, and
42.3% and 40.8% in the respective six-month periods. The higher
cost percentages in the current year were primarily due to a shift
in the product mix, with a greater proportion of sales coming from
the new products, which have lower margins initially due to
start-up costs.
Selling, general and administrative expense as a percentage of
revenues was 38.7% and 37.1% in the quarters ended September 30,
1994 and 1993, respectively, and 37.9% and 38.2% in the respective
six-month periods. The increase in the current quarter is
primarily due to a higher level of promotional spending and
start-up expenses associated with the new home care division. The
small decrease in the current six-month period occurred because the
aforementioned costs were more than offset by a reduction in
automotive consumer promotion expenses from a heavy first quarter
promotional period a year ago. In addition, fixed administrative
costs were absorbed over a higher sales volume in the current year.
Operating income increased $0.3 million or 3.9% in the second
quarter and $2.0 million or 12.7% in the six-month period. Net
income increased $0.4 million or 10.6% in the second quarter and
$l.3 million or 14.0% in the six-month period.
Net income grew at a faster rate than operating income due to a
higher tax rate in the prior year as a result of the enactment in
August 1993 of the Omnibus Budget Reconciliation Act, which
increased the federal corporate income tax rate from 34% to 35%
retroactive to January 1993. The Company's effective income tax
rates were 42.7% and 45.6% in the quarters ended September 30, 1994
and 1993, respectively, and 42.7% and 43.3% in the respective
six-month periods.
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ARMOR ALL PRODUCTS CORPORATION
FINANCIAL REVIEW
Financial Resources and Liquidity
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The Company's working capital requirements fluctuate during the
year, traditionally peaking in the spring due to extended payment
terms offered in connection with the Company's winter sales
promotional activities. Cash inflow is strongest during the summer
months as these receivables are collected. This pattern resulted
in cash flow from operations of $27.9 million and $29.1 million in
the six-month periods ended September 30, 1994 and 1993,
respectively, as accounts receivable were reduced from March 31
levels. The lower cash inflow in fiscal 1995, despite the higher
net income, is largely due to a one-time purchase of inventory
from one of the Company's independent packagers in connection with
the consolidation of certain production activities at a single
location in order to attain cost savings through economies of
scale. In addition, the Company has incurred higher media
advertising expenditures in the current year to support the
introduction of the new automotive and home care products discussed
above.
At September 30, 1994, the Company had a total cash balance of
$46.8 million, including $39.0 million invested in the McKesson
cash management program, and no outstanding debt. As long as the
Company continues to participate in the McKesson cash management
program, McKesson will make available to the Company the amount of
cash necessary to provide the Company with sufficient funds to meet
its needs, as defined in its annual capital and operating plans.
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PART II. OTHER INFORMATION
===========================
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
(27) Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the
quarter ended September 30, 1994.
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S I G N A T U R E
==================
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
ARMOR ALL PRODUCTS CORPORATION
(Registrant)
Dated: November 10, 1994 By /s/ Mervyn J. McCulloch
---------------------------
Mervyn J. McCulloch
Executive Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
EXHIBIT (27)
DATA STATED IN MILLIONS,
EXCEPT PER SHARE AMOUNTS
<CAPTION>
ARMOR ALL PRODUCTS CORPORATION
FINANCIAL DATA SCHEDULE
SEPTEMBER 30, 1994
This schedule contains summary financial information extracted from the Armor All Products
Corporation Consollidated Financial Statements as of September 30, 1994 and March 31, 1994 and
for the six months ended September 30, 1994 and 1993 and is qualified in its entirety by
reference to such financial statements.
Regulation
Number Statement Caption FY95 FY94
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<S> <C> <C> <C>
5-02-(1) Cash and cash items $ 46.8 $ 26.3
5-02(2) Marketable securities 0 0
5-02(3)(a)(1) Accounts receivable - trade 32.7 69.3
5-02(4) Allowance for doubtful accounts (1.5) (1.3)
5-02(6) Inventory 8.4 4.2
5-02(9) Total current assets 94.4 99.2
5-02(13) Property, plant and equipment 13.6 12.9
5-02(14) Accumulated depreciation (4.8) (4.2)
5-02(18) Total assets 145.9 151.8
5-02(21) Total current liabilities 24.2 34.9
5-02(22) Bonds, mortgages and similar debts 0 0
5-02(28) Preferred stock-mandatory redemption 0 0
5-02(29) Preferred stock-no mandatory redemption 0 0
5-02(30) Common stock 0.2 0.2
5-02(31) Other stockholders' equity 120.7 115.8
5-02(32) Total liabilities and stockholders' equity 145.9 151.8
5-03(b)(1)(a) Net sales of tangible products 97.7 84.0
5-03(b)(1) Total revenues 97.7 84.0
5-03(b)(2) Total costs and expenses applicable to revenues41.3 34.2
5-03(b)(3) Other costs and expenses 0 0
5-03(b)(5) Provision for doubtful accounts and notes 0.3 0.3
5-03(b)(8) Interest and amortization of debt discount 0 0
5-03(b)(10) Income before taxes and other items 18.9 16.7
5-03(b)(11) Income tax expense 8.1 7.2
5-03(b)(14) Income/loss from continuing operations 0 0
5-03(b)(15) Discontinued operations 0 0
5-03(b)(17) Extraordinary items 0 0
5-03(b)(18) Cumulative effect-changes in accounting principles0 0
5-03(b)(19) Net income or loss 10.8 9.5
5-03(b)(20) Earnings per share - primary 0.51 0.45
5-03(b)(20) Earnings per share - fully diluted 0 0
</TABLE>
