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, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission file number 0-14946
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ARMOR ALL PRODUCTS CORPORATION
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(Exact Name of Registrant as specified in its charter
DELAWARE 33-0178217
- ------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
6 Liberty, Aliso Viejo, California 92656
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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
----- -----
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, 1995
- ----------------------------- ---------------------------------
Common stock, $0.01 par value 21,298,185 shares
<PAGE>
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
===============================
Pages
-----
Consolidated Balance Sheets
September 30, 1995 and March 31, 1995 3
Consolidated Statements of Income
Three and six months ended September 30, 1995 and 1994 4
Consolidated Statements of Cash Flows
Six months ended September 30, 1995 and 1994 5
Financial Notes 6 - 7
Financial Review 8
PART II. OTHER INFORMATION
===========================
Item
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6 Exhibits and Reports on Form 8-K 9
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PART 1. FINANCIAL INFORMATION
==============================
ARMOR ALL PRODUCTS CORPORATION
CONSOLIDATED BALANCE SHEETS
(unaudited)
Sept. 30, March 31,
1995 1995
------ ------
(in thousands)
ASSETS
======
Current Assets
Cash and cash equivalents $ 41,656 $ 22,249
Accounts receivable 30,026 84,865
Inventories 13,646 12,695
Deferred taxes 831 956
Prepaid expenses 10,529 801
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Total current assets 96,688 121,566
Property 8,969 9,373
Goodwill 25,958 26,522
Patents and Trademarks 14,799 15,389
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Total assets $146,414 $172,850
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
====================================
Current Liabilities
Accounts payable $ 6,256 $ 17,385
Payable to McKesson 1,438 2,595
Accrued selling expenses 2,664 8,590
Accrued compensation 1,388 2,513
Dividends payable 3,406 3,404
Taxes payable and other liabilities 2,100 8,897
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Total current liabilities 17,252 43,384
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Deferred Income Taxes 603 481
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Stockholders' Equity
Common stock 213 213
Other capital 61,510 61,157
Unearned compensation - restricted stock (1,305) (980)
Retained earnings 68,692 69,338
Cumulative translation adjustment (551) (743)
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Total stockholders' equity 128,559 128,985
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Total liabilities and
stockholders' equity $146,414 $172,850
======= =======
See accompanying financial notes.
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<PAGE>
ARMOR ALL PRODUCTS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Three Months Ended Six Months Ended
September 30, September 30,
--------------- ---------------
1995 1994 1995 1994
------ ------ ------ ------
(in thousands except
per share amounts)
REVENUES $39,772 $41,135 $89,996 $97,703
COSTS AND EXPENSES
Cost of sales 18,225 17,326 42,619 41,327
Selling, general
and administrative 16,736 15,915 36,244 37,031
Amortization of intangibles 614 623 1,227 1,246
------ ------ ------ ------
Total costs and expenses 35,575 33,864 80,090 79,604
------ ------ ------ ------
OPERATING INCOME 4,197 7,271 9,906 18,099
INTEREST INCOME 471 511 722 781
------ ------ ------ ------
INCOME BEFORE INCOME TAXES 4,668 7,782 10,628 18,880
INCOME TAXES 1,961 3,323 4,464 8,062
------ ------ ------ ------
NET INCOME $ 2,707 $ 4,459 $ 6,164 $10,818
====== ====== ====== ======
EARNINGS PER COMMON SHARE $ .13 $ .21 $ .29 $ .51
====== ====== ====== ======
DIVIDENDS PER COMMON SHARE $ .16 $ .16 $ .32 $ .32
====== ====== ====== ======
WEIGHTED AVERAGE
COMMON SHARES OUTSTANDING 21,290 21,191 21,283 21,181
See accompanying financial notes.
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<PAGE>
ARMOR ALL PRODUCTS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Six Months Ended
September 30,
----------------
1995 1994
------ ------
(in thousands)
Operating Activities
Net income $ 6,164 $10,818
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization 1,968 1,829
Deferred income taxes 247 280
Other (325) 184
------ ------
Total 8,054 13,111
------ ------
Effect of changes in
Accounts receivable 54,839 36,789
Inventories (951) (4,220)
Prepaid expenses (9,728) (7,600)
Accounts payable (11,129) (2,713)
Accrued selling expenses (5,926) (3,305)
Accrued compensation (1,125) (618)
Taxes payable and other liabilities (6,797) (3,564)
------ ------
Total 19,183 14,769
------ ------
Net cash provided by operating activities 27,237 27,880
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Investing Activities
Capital expenditures (337) (667)
Other 119 129
------ ------
Net cash used by investing activities (218) (538)
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Financing Activities
Payable to McKesson (1,157) (505)
Issuance of common stock 353 472
Dividends paid (6,808) (6,772)
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Net cash used by financing activities (7,612) (6,805)
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Net increase in cash and cash equivalents 19,407 20,537
Cash and cash equiv. at beginning of period 22,249 26,251
------ ------
Cash and cash equivalents at end of period $41,656 $46,788
====== ======
See accompanying financial notes.
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<PAGE>
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, 1995 and the results of its operations and
its cash flows for the six-month periods ended September 30,
1995 and 1994. Such adjustments were of a normal recurring
nature.
The results of operations for the six-month periods ended
September 30, 1995 and 1994 are not necessarily indicative of
the results for the full years. It is suggested that these
consolidated financial statements be read in conjunction with
the consolidated financial statements and related notes
thereto included in the Company's Annual Report to
Shareholders for the year ended March 31, 1995. That report
has previously been filed with the Securities and Exchange
Commission as an exhibit to the Annual Report on Form 10-K.
2. CASH MANAGEMENT
---------------
Pursuant to an agreement with McKesson, 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: $37,875,000 at 5.7% on
September 30, 1995 and $18,182,000 at 6.0% on March 31, 1995.
- 6 -
<PAGE>
ARMOR ALL PRODUCTS CORPORATION
FINANCIAL NOTES
3. INVENTORIES
-----------
Inventories are comprised of the following:
Sept. 30, March 31,
1995 1995
------ ------
Finished Goods $11,671 $10,338
Raw Materials 1,975 2,357
------ ------
Total $13,646 $12,695
====== ======
4. PREPAID EXPENSES
----------------
Prepaid expenses at September 30, 1995 includes
approximately $8,700,000 of payments related to fiscal year
1996 media advertising. The Company allocates the annual
media advertising expense among interim periods in proportion
to estimated annual sales volume. In addition, prepaid
expenses at September 30, 1995 includes approximately
$1,500,000 of media advertising purchased on a forward buying
basis for airing in early fiscal year 1997.
5. INTEREST INCOME
---------------
Interest income is comprised of the following:
Three Months Six Months
Ended Ended
September 30, September 30,
------------- -------------
1995 1994 1995 1994
---- ---- ---- ----
(in thousands)
Interest income - McKesson $445 $475 $653 $706
Interest income - other 26 36 69 75
---- ---- ---- ----
Interest income $471 $511 $722 $781
==== ==== ==== ====
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<PAGE>
ARMOR ALL PRODUCTS CORPORATION
FINANCIAL REVIEW
Results of Operations
- ---------------------
Revenues decreased $1.4 million or 3.3% in the second quarter
and decreased $7.7 million or 7.9% in the six-month period ended
September 30, 1995. The decreases were primarily attributable to
lower shipments of automotive division products in the United
States and Canada. The lower shipments reflect a weakness in
orders from the retail sector for the entire automotive appearance
industry, due partially to unfavorable weather conditions. In
addition, a number of key retailers continued to reduce inventory
levels in response to the soft consumer sales, which had a further
adverse impact on the Company's shipments. Partially offsetting
the lower automotive revenues were significantly higher shipments
in the Company's home care division due to the launch of three new
products in February 1995: Armor All(R) Vinyl Siding Wash, Armor
All(R) Deck Protector Waterproofing Sealer and Armor All(R)
WaterProofing Sealer. International revenues were relatively
unchanged from the prior year, as lower revenues from Mexico,
resulting from the economic effects of the peso devaluation, offset
higher revenues from most other regions.
Cost of sales as a percentage of revenues was 45.8% and 42.1%
in the quarters ended September 30, 1995 and 1994, respectively,
and 47.4% and 42.3% in the respective six-month periods. The
higher cost percentages in the current year were due to a number of
factors, including higher costs of a new formula for Armor All(R)
Protectant, increased raw material costs and higher carrying costs
associated with higher inventory levels.
Selling, general and administrative expense as a percentage of
revenues was 42.1% and 38.7% in the quarters ended September 30,
1995 and 1994, respectively, and 40.3% and 37.9% in the respective
six-month periods. These percentage increases were mainly due to
the absorption over lower revenues of the fixed marketing and
promotional costs related to the Company's strategy of building
automotive market share and launching new products. Another factor
was the greater mix of home care shipments, which had higher
promotional expenses associated with the launch of the
aforementioned three new products.
Financial Resources and Liquidity
- ---------------------------------
The Company's working capital requirements fluctuate during
the year, traditionally peaking in the spring due to extended
payment terms offered in connection with the Company's winter sales
promotional activities. Cash inflow is strongest during the summer
months as these receivables are collected. This pattern resulted
in cash flow from operations of $27.2 million and $27.9 million in
the six-month periods ended September 30, 1995 and 1994,
respectively, as accounts receivable were reduced from March 31
levels. The cash inflow from operations in 1996 was relatively
unchanged from fiscal 1995, despite the lower net income, largely
as a result of higher collections of accounts receivable due to a
higher accounts receivable balance at the beginning of the current
year than at the beginning of the prior year. This factor was
partially offset by higher payments in the current year for media
advertising and certain payables and accrued liabilities.
At September 30, 1995, the Company had a total cash balance of
$41.7 million, including $37.9 million invested in the McKesson
cash management program (see Note 2), and no outstanding debt. As
long as the Company continues to participate in the McKesson cash
management program, McKesson will make available to the Company the
amount of cash necessary to provide the Company with sufficient
funds to meet its needs, as defined in its annual capital and
operating plans.
- 8 -
<PAGE>
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, 1995.
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<PAGE>
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 14, 1995 By/s/Michael G. McCafferty
------------------------------
Michael G. McCafferty
Executive Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
- 10 -
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number
- -------
(27) Financial Data Schedule
- 11 -
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000797975
<NAME> ARMOR-ALL-PRODUCTS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 41,656
<SECURITIES> 0
<RECEIVABLES> 31,783
<ALLOWANCES> (1,757)
<INVENTORY> 13,646
<CURRENT-ASSETS> 96,688
<PP&E> 15,031
<DEPRECIATION> (6,062)
<TOTAL-ASSETS> 146,414
<CURRENT-LIABILITIES> 17,252
<BONDS> 0
<COMMON> 213
0
0
<OTHER-SE> 128,346
<TOTAL-LIABILITY-AND-EQUITY> 146,414
<SALES> 39,772
<TOTAL-REVENUES> 39,772
<CGS> 18,225
<TOTAL-COSTS> 18,225
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,478
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,668
<INCOME-TAX> 1,961
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,707
<EPS-PRIMARY> .13
<EPS-DILUTED> 0
</TABLE>
