SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For quarter ended December 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-14946
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 (IRS 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 December 31, 1994
- ----------------------------- --------------------------------
Common stock, $0.01 par value 21,234,785 Shares
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
==============================
Pages
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Consolidated Balance Sheets
December 31, 1994 and March 31, 1994 3
Consolidated Statements of Income
Three and nine months ended December 31, 1994 and 1993 4
Consolidated Statements of Cash Flows
Nine months ended December 31, 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
PART 1. FINANCIAL INFORMATION
==============================
ARMOR ALL PRODUCTS CORPORATION
CONSOLIDATED BALANCE SHEETS
(unaudited)
December 31, March 31,
1994 1994
-------- --------
(in thousands)
ASSETS
- ------
Current Assets
Cash and cash equivalents $ 44,383 $ 26,251
Accounts receivable 36,248 67,963
Inventories 9,548 4,182
Deferred taxes 347 765
Prepaid expenses 5,621 64
------- -------
Total current assets 96,147 99,225
Property 8,840 8,699
Goodwill 26,804 27,650
Patents and Trademarks 15,308 16,217
Other Intangibles 0 35
------- -------
Total assets $147,099 $151,826
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities
Accounts payable $ 8,378 $ 10,923
Payable to McKesson 1,010 1,526
Accrued selling expenses 4,501 8,802
Accrued compensation 3,396 2,669
Income and other taxes payable 2,468 4,282
Dividends payable 2,152 3,386
Other liabilities 2,401 3,288
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Total current liabilities 24,306 34,876
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Deferred Income Taxes 728 921
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Stockholders' Equity
Common stock 212 212
Other capital 60,459 59,323
Unearned compensation - restricted stock (825) (1,101)
Retained earnings 63,031 58,388
Cumulative translation adjustment (812) (793)
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Total stockholders' equity 122,065 116,029
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Total liabilities
and stockholders' equity $147,099 $151,826
======= =======
See accompanying financial notes.
-3-
ARMOR ALL PRODUCTS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Quarter Ended Nine Months Ended
December 31, December 31,
-------------- ---------------
1994 1993 1994 1993
---- ---- ---- ----
(in thousands except
per share amounts)
REVENUES $39,244 $33,407 $136,947 $117,361
COSTS AND EXPENSES
Cost of sales 17,100 13,870 58,427 48,095
Selling, general
and administrative 15,133 13,087 52,164 45,144
Amortization of intangibles 606 494 1,852 2,102
------ ------ ------- -------
Total costs and expenses 32,839 27,451 112,443 95,341
------ ------ ------- -------
OPERATING INCOME 6,405 5,956 24,504 22,020
INTEREST INCOME 576 405 1,357 1,074
------ ------ ------- -------
INCOME BEFORE INCOME TAXES 6,981 6,361 25,861 23,094
INCOME TAXES 2,981 2,739 11,043 9,986
------ ------ ------- -------
NET INCOME $ 4,000 $ 3,622 $ 14,818 $ 13,108
====== ====== ======= =======
EARNINGS PER COMMON SHARE $.19 $.17 $.70 $.62
=== === === ===
DIVIDENDS PER COMMON SHARE $.16 $.16 $.48 $.48
=== === === ===
WEIGHTED AVERAGE
COMMON SHARES OUTSTANDING 21,222 21,123 21,195 21,107
See accompanying financial notes.
-4-
ARMOR ALL PRODUCTS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Nine Months Ended
December 31,
-----------------
1994 1993
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(in thousands)
Operating Activities
Net income $14,818 $13,108
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization 3,070 3,067
Provision for losses on receivables 185 364
Deferred income taxes 225 (211)
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Total 18,298 16,328
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Effect of changes in
Accounts receivable 31,530 27,254
Inventories (5,366) 811
Prepaid expenses (5,557) (1,883)
Accounts payable (2,545) (3,131)
Taxes payable (2,130) (2,689)
Accrued selling expenses (4,301) (3,425)
Accrued compensation (201) (1,114)
Other liabilities (887) (470)
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Total 10,543 15,353
------ ------
Net cash provided by operating activities 28,841 31,681
------ ------
Investing Activities
Capital expenditures (1,083) (974)
Other (81) (497)
------ ------
Net cash used by investing activities (1,164) (1,471)
------ ------
Financing Activities
Payable to McKesson (516) (2,054)
Issuance of common stock 1,136 421
Dividends paid (10,165) (9,278)
------ ------
Net cash used by financing activities (9,545) (10,911)
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Net increase in cash and cash equivalents 18,132 19,299
Cash and cash equivalents
at beginning of period 26,251 33,858
------ ------
Cash and cash equivalents
at end of period $44,383 $53,157
====== ======
See accompanying financial notes.
-5-
ARMOR ALL PRODUCTS CORPORATION
FINANCIAL NOTES
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements present the
financial position and results of operations of Armor All Products
Corporation and its subsidiaries (the "Company"). In the opinion
of the Company, these unaudited consolidated financial statements
include all adjustments necessary for a fair presentation of its
financial position as of December 31, 1994 and the results of its
operations and its cash flows for the nine-month periods ended
December 31, 1994 and 1993. Such adjustments were of a normal
recurring nature.
The results of operations for the three and nine months ended
December 31, 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 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: $40,741,000 at 5.6% on December 31,
1994 and $22,076,000 at 3.4% on March 31, 1994.
3. INVENTORIES
Inventories are comprised of the following:
December 31, March 31,
1994 1994
------ ------
(in thousands)
Finished Goods $8,017 $3,514
Raw Materials 1,531 668
----- -----
Total $9,548 $4,182
===== =====
-6-
ARMOR ALL PRODUCTS CORPORATION
FINANCIAL NOTES
4. PREPAID EXPENSES
Prepaid expenses at December 31, 1994 include $5,529,000 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:
Quarter Ended Nine Months Ended
December 31 December 31
----------- ------------
1994 1993 1994 1993
---- ---- ---- ----
(in thousands)
Interest income - McKesson $526 $357 $1,232 $ 948
Interest income - other 50 48 125 126
--- --- ----- -----
Interest income $576 $405 $1,357 $1,074
=== === ===== =====
6. SUBSEQUENT EVENT
On February 13, 1995, the Company announced that it has
initiated a program to replace retailers' inventory of certain
aerosol cans of Armor All(R) QuickSilver(TM) Wheel Cleaner with new
cans containing an improved spray actuator. As a result, the
Company expects to incur a one-time charge of about $.05 per share
against fourth quarter earnings.
-7-
ARMOR ALL PRODUCTS CORPORATION
FINANCIAL REVIEW
Results of Operations
- ---------------------
Revenues increased $5.8 million or 17.5% in the third quarter
ended December 31, 1994 in comparison with the third quarter of the
prior year. This increase was primarily due to higher shipments in
the United States of the Company's line of protectant products --
Armor All(R) Protectant, Armor All(R) Low-Gloss Natural Finish
Protectant and Armor All(R) Tire Foam Protectant -- in connection
with a new promotional program launched in November 1994. Sales of
Armor All(R) QuickSilver(TM) Wheel Cleaner were also higher. In
addition, the Company commenced shipments in December 1994 of
WaxPax(TM) Instant Car Wax. Sales of Armor All(R) E-Z Deck Wash(R)
Cleaner and the Company's other home care products, which were
acquired in January 1994, made a small contribution to the third
quarter revenue growth. International revenues declined slightly
from the prior year due to changes in the timing of shipments to
certain major customers and distributors.
Revenues increased $19.6 million or 16.7% in the nine months
ended December 31, 1994 in comparison with the corresponding period
of the prior year. This increase was primarily attributable to
sales in the United States of Armor All QuickSilver Wheel Cleaner,
Armor All E-Z Deck Wash Cleaner and the Company's other home care
products. Domestic revenues of the Company's line of protectants,
waxes, washes and other car care products were slightly lower than
in the year-ago period. International sales increased due to the
Company's expansion into new markets as well as to the shipment of
new products into existing markets.
Cost of sales as a percentage of revenues was 43.6% and
41.5% in the quarters ended December 31, 1994 and 1993,
respectively, and 42.7% and 41.0% in the respective nine-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, and from certain
promotional programs. Also, the prior year's third quarter gross
margin was favorably impacted by unusually large year-end
settlements received by Company under its international
distribution agreement with S.C. Johnson.
Selling, general and administrative expense as a percentage of
revenues was 38.6% and 39.2% in the quarters ended December 31,
1994 and 1993, respectively, and 38.1% and 38.5% in the respective
nine-month periods. The decreases are primarily due to the
absorption of fixed administrative costs over a higher sales
volume. The percentage of promotional spending remained relatively
constant, as the cost of the new automotive promotional program and
the introductory costs associated with the new home care product
line were offset by a reduction in certain automotive coupon
programs from a year ago.
-8-
ARMOR ALL PRODUCTS CORPORATION
FINANCIAL REVIEW
The Company's estimated effective income tax rates were 42.7%
and 43.1% in the quarters ended December 31, 1994 and 1993,
respectively, and 42.7% and 43.2% in the respective nine-month
periods. The higher rates in the prior year principally reflect
the enactment of the Omnibus Budget Reconciliation Act, 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 the Company's winter sales
promotional activities. Cash inflow is strongest during the summer
months as these receivables are collected. This pattern resulted
in cash flow from operations of $28.8 million and $31.7 million in
the nine-month periods ended December 31, 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 an increase in inventory levels due
to (1) a purchase of remaining inventory from one of the Company's
independent packagers in connection with a transition of certain
production activities to another location and (2) the advance
production of certain promotional items scheduled for shipment
during the peak January-March selling season. In addition, prepaid
expenses increased over the prior year due to higher media
advertising expenditures to support the introduction of the new
automotive and home care products discussed above; as explained in
financial note 4, media advertising expense is allocated among
interim periods based on estimated annual sales volume.
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.
Subsequent Event
- ----------------
On February 13, 1995, the Company announced that it has
initiated a program to replace retailers' inventory of certain
aerosol cans of Armor All QuickSilver Wheel Cleaner with new
cans containing an improved spray actuator. As a result, the
Company expects to incur a one-time charge of about $.05 per share
against fourth quarter earnings.
-9-
PART II. OTHER INFORMATION
===========================
Item 6. Exhibits and Reports on Form 8-K
- ---------------------------------------------
(a) Exhibits
None
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the
quarter ended December 31, 1994.
-10-
S I G N A T U R E
=================
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
ARMOR ALL PRODUCTS CORPORATION
(Registrant)
Dated: February 13, 1995 /s/ Kenneth M. Evans
--------------------------------
Kenneth M. Evans, President
and Chief Executive Officer
/s/ Mark Krikorian
--------------------------------
Mark Krikorian, Controller
(Principal Accounting Officer)
-11-
INDEX TO EXHIBITS
Exhibit
Number
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(27) Financial Data Schedule
-12-
Exhibit (27)
ARMOR ALL PRODUCTS CORPORATION
FINANCIAL DATA SCHEDULE
December 31, 1994
(in millions except per share amounts)
This schedule contains summary financial information extracted from
the Armor All Products Corporation Consolidated Financial
Statements as of December 31, 1994 and March 31, 1994 and for the
nine months ended December 31, 1994 and 1993 and is qualified in
its entirety by reference to such financial statements.
<TABLE>
<CAPTION>
REGULATION
NUMBER STATEMENT CAPTION FY95 FY94
- ---------- ----------------- ------ ------
<S> <C> <C> <C>
5-02(1) Cash and cash items $ 44.4 $ 26.3
5-02(2) Marketable securities - -
5-02(3)(a)(1) Accounts receivable - trade 37.6 69.3
5-02(4) Allowance for doubtful accounts (1.4) (1.3)
5-02(6) Inventory 9.5 4.2
5-02(9) Total current assets 96.1 99.2
5-02(13) Property, plant and equipment 13.9 12.9
5-02(14) Accumulated depreciation (5.1) (4.2)
5-02(18) Total assets 147.1 151.8
5-02(21) Total current liabilities 24.3 34.9
5-02(22) Bonds, mortgages and similar debt - -
5-02(28) Preferred stock - mandatory redemption - -
5-02(29) Preferred stock - no mandatory redemption - -
5-02(30) Common stock 0.2 0.2
5-02(31) Other stockholders' equity 121.9 115.8
5-02(32) Total liabilities & stockholders' equity 147.1 151.8
5-03(b)(1)(a) Net sales of tangible products 136.9 117.4
5-03(b)(1) Total revenues 136.9 117.4
5-03(b)(2) Total costs & exp. appl. to sales & revenues 58.4 48.1
5-03(b)(3) Other costs and expenses - -
5-03(b)(5) Provision for doubtful accounts & notes 0.2 0.4
5-03(b)(8) Interest & amortization of debt discount - -
5-03(b)(10) Income before taxes & other items 25.9 23.1
5-03(b)(11) Income tax expense 11.0 10.0
5-03(b)(14) Income/loss from continuing operations - -
5-03(b)(15) Discontinued operations - -
5-03(b)(17) Extraordinary items - -
5-03(b)(18) Cumulative effect-chngs. in acctg. prin. - -
5-03(b)(19) Net income or loss 14.8 13.1
5-03(b)(20) Earnings per share - primary 0.70 0.62
5-03(b)(20) Earnings per share - fully diluted - -
</TABLE>
February 13, 1995
Securities and Exchange Commission
File Desk, Room 1004
450 Fifth Street, NW
Washington, DC 20549
RE: Armor All Products Corporation - Direct Transmission
Quarterly Report on Form 10-Q -
Quarter Ended December 31, 1994
SEC File No. 1-13252
- -----------------------------------------------
Gentlemen/Ladies:
On behalf of Armor All Products Corporation (the "Company"), we
submit for filing via direct transmission the Company's Quarterly
Report on Form 10-Q for the quarter ended December 31, 1994,
together with exhibit 27.
Should you have any questions regarding this filing, please
telephone me collect at (415)983-8367
Very truly yours,
/s/ Dana T. Iaipica
DANA T. IAIPICA
Assistant Secretary
cc: The Nasdaq Stock Market, Inc.
1735 K Street, NW
Washington, DC 20006-1500
Attn: Perry Peregoy
Managing Director
Nasdaq Market Services
(w/3 conformed copies)
