SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For quarter ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------------- ------------
Commission file number 0-14946
-------
ARMOR ALL PRODUCTS CORPORATION
- ------------------------------------------------------------------
(Exact Name of Registrant as specified in its charter)
DELAWARE 33-0178217
- ------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
6 Liberty, Aliso Viejo, California 92656
- ------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(714) 362-0600
- ------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the Registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at December 31, 1995
- ----------------------------- --------------------------------
Common stock, $0.01 par value 21,300,215 shares
<PAGE>
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
==============================
Pages
-----
Consolidated Balance Sheets
December 31, 1995 and March 31, 1995 3
Consolidated Statements of Income
Three and Nine months ended December 31, 1995 and 1994 4
Consolidated Statements of Cash Flows
Nine months ended December 31, 1995 and 1994 5
Financial Notes 6 - 7
Financial Review 8
PART II. OTHER INFORMATION
===========================
Item
- ----
6 Exhibits and Reports on Form 8-K 10
<PAGE>
PART 1. FINANCIAL INFORMATION
==============================
ARMOR ALL PRODUCTS CORPORATION
CONSOLIDATED BALANCE SHEETS
(unaudited)
December 31, March 31,
1995 1995
------ ------
(in thousands)
ASSETS
- ------
Current Assets
Cash and cash equivalents $ 38,545 $ 22,249
Accounts receivable 34,532 84,865
Inventories 14,637 12,695
Deferred taxes 790 956
Prepaid expenses 8,418 801
------- -------
Total current assets 96,922 121,566
Property 8,854 9,373
Goodwill 25,676 26,522
Patents and Trademarks 14,514 15,389
------- -------
Total assets $145,966 $172,850
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities
Accounts payable $ 7,591 $ 17,385
Payable to McKesson 1,058 2,595
Accrued selling expenses 2,263 8,590
Accrued compensation 1,315 2,513
Dividends payable 3,408 3,404
Taxes payable and other liabilities 2,776 8,897
------- -------
Total current liabilities 18,411 43,384
------- -------
Deferred Income Taxes 582 481
------- -------
Stockholders' Equity
Common stock 213 213
Other capital 61,533 61,157
Unearned compensation - restricted stock (1,281) (980)
Retained earnings 67,136 69,338
Cumulative translation adjustment (628) (743)
------- -------
Total stockholders' equity 126,973 128,985
------- -------
Total liabilities and
stockholders' equity $145,966 $172,850
======= =======
See accompanying financial notes.
- 3 -
<PAGE>
ARMOR ALL PRODUCTS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Three Months Ended Nine Months Ended
December 31, December 31,
--------------- ---------------
1995 1994 1995 1994
------ ------ ------ ------
(in thousands except per share amounts)
REVENUES $34,637 $39,244 $124,633 $136,947
------ ------ ------- -------
COSTS AND EXPENSES 15,622 17,100 58,241 58,427
Selling, general
and administrative 15,718 15,133 51,962 52,164
Amortization of intangibles 614 606 1,841 1,852
------ ------ ------- -------
Total costs and expenses 31,954 32,839 112,044 112,443
------ ------ ------- -------
OPERATING INCOME 2,683 6,405 12,589 24,504
INTEREST INCOME 510 576 1,232 1,357
------ ------ ------- -------
INCOME BEFORE INCOME TAXES 3,193 6,981 13,821 25,861
INCOME TAXES 1,341 2,981 5,805 11,043
------ ------ ------ ------
NET INCOME $ 1,852 $ 4,000 $ 8,016 $14,818
====== ====== ====== ======
EARNINGS PER COMMON SHARE $.09 $.19 $.38 $.70
=== === === ===
DIVIDENDS PER COMMON SHARE $.16 $.16 $.48 $.48
=== === === ===
WEIGHTED AVERAGE
COMMON SHARES OUTSTANDING 21,299 21,222 21,288 21,195
See accompanying financial notes.
- 4 -
<PAGE>
ARMOR ALL PRODUCTS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Nine Months Ended
December 31,
----------------
1995 1994
------ ------
(in thousands)
Operating Activities
Net income $ 8,016 $14,818
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation and amortization 2,950 2,794
Deferred income taxes 267 225
Other (301) 276
------ ------
Total 10,932 18,113
------ ------
Effect of changes in
Accounts receivable 50,333 31,715
Inventories (1,942) (5,366)
Prepaid expenses (7,617) (5,557)
Accounts payable (9,794) (2,545)
Accrued selling expenses (6,327) (4,301)
Accrued compensation (1,198) (201)
Taxes payable and other liabilities (6,121) (3,017)
------ ------
Total 17,334 10,728
------ ------
Net cash provided by
operating activities 28,266 28,841
------ ------
Investing Activities
Capital expenditures (590) (1,083)
Other (5) (81)
------ ------
Net cash used by
investing activities (595) (1,164)
------ ------
Financing Activities
Payable to McKesson (1,537) (516)
Issuance of common stock 376 1,136
Dividends paid (10,214) (10,165)
------ ------
Net cash used by
financing activities (11,375) (9,545)
------ ------
Net increase in cash
and cash equivalents 16,296 18,132
Cash and cash equivalents
at beginning of period 22,249 26,251
------ ------
Cash and cash equivalents at end of period $38,545 $44,383
====== ======
See accompanying financial notes.
- 5 -
<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 December 31, 1995 and the results of its
operations and its cash flows for the nine months ended December
31, 1995 and 1994. Such adjustments were of a normal recurring
nature.
The results of operations for the nine months ended December
31, 1995 and 1994 are not necessarily indicative of the results for
the full years. It is suggested that these consolidated financial
statements be read in conjunction with the consolidated financial
statements and related notes thereto included in the Company's
Annual Report to Shareholders for the year ended March 31, 1995.
That report has previously been filed with the Securities and
Exchange Commission as an exhibit to the Annual Report on Form
10-K.
2. CASH MANAGEMENT
- --------------------
Pursuant to an agreement with McKesson Corporation
("McKesson"), the Company's U.S. operations participate daily in a
cash management program administered by McKesson. Under this
arrangement, the Company invests any excess cash in the cash
management program and has unrestricted access to such invested
cash to fund its operating disbursements. If the Company needs
additional cash above the amount invested, such cash requirements
are met through borrowings from McKesson. All amounts invested in
the cash management program with McKesson are deposited in a
separate bank account in the Company's name, which is used for cash
management program transactions.
Included in cash and cash equivalents in the accompanying
consolidated balance sheets are the following amounts invested in
the cash management program: $33,728,000 at 5.7% on December 31,
1995 and $18,182,000 at 6.0% on March 31, 1995.
3. INVENTORIES
- ----------------
Inventories are comprised of the following:
December 31, March 31,
1995 1995
------ ------
Finished Goods $12,398 $10,338
Raw Materials 2,239 2,357
------ ------
Total $14,637 $12,695
====== ======
- 6 -
<PAGE>
ARMOR ALL PRODUCTS CORPORATION
FINANCIAL NOTES
4. PREPAID EXPENSES
- ---------------------
Prepaid expenses at December 31, 1995 includes approximately
$7,950,000 of payments related to fiscal year 1996 media
advertising. The Company allocates the annual media advertising
expense among interim periods in proportion to estimated annual
sales volume. In addition, prepaid expenses at December 31, 1995
includes approximately $1,500,000 of media advertising purchased on
a forward buying basis for airing in early fiscal year 1997.
5. INTEREST INCOME
- --------------------
Interest income is comprised of the following:
Three Months Nine Months
Ended Ended
December 31, December 31,
------------ ------------
1995 1994 1995 1994
---- ---- ---- ----
(in thousands)
Interest income - McKesson $489 $526 $1,142 $1,232
Interest income - other 21 50 90 125
--- --- ----- -----
Interest income $510 $576 $1,232 $1,357
=== === ===== =====
- 7 -
<PAGE>
ARMOR ALL PRODUCTS CORPORATION
FINANCIAL REVIEW
Results of Operations
- ---------------------
Revenues decreased $4.6 million or 11.7% in the third quarter
and decreased $12.3 million or 9.0% in the nine months ended
December 31, 1995. The decreases were primarily attributable to
lower shipments of automotive division products in the United
States and Canada. A weakness in consumer purchasing activity
affecting the automotive appearance industry has resulted in lower
reorder levels from retailers; management expects that this trend
will continue into the Company's fourth fiscal quarter. In
addition, the prior year's third quarter automotive revenues were
higher than historical levels because of heavy shipping of
promotional merchandise in support of a strategic marketing program
to increase the market share of Armor All(R) Protectant. This
year, promotional merchandise is being shipped later in order to
meet just-in-time inventory objectives of retailers, contributing
to an adverse comparison with prior year sales. Initial shipments
in December 1995 of two new automotive products -- Armor All(R)
Armor Plate(R) Paint Protectant and Armor All(R) FlashBlack(TM)
Tire Shine -- made a small contribution to the current year's third
quarter revenues. Home care division revenues were higher than the
prior year third quarter and nine-month period due to the launch in
February 1995 of Armor All(R) Vinyl Siding Wash, Armor All Deck
Protector Waterproofing Sealer and Armor All WaterProofing Sealer,
and the launch in December 1995 of Armor All(R) Painted Wood Wash.
International revenues increased in the quarter and nine month
period as higher revenues in most geographic regions more than
offset the lower revenues in Mexico resulting from the economic
effects of the peso devaluation.
Cost of sales as a percentage of revenues was 45.1% and 43.6%
in the quarters ended December 31, 1995 and 1994, respectively,
and 46.7% and 42.7% in the respective nine month period. The
higher cost percentages in the current year were due to a number
of factors, including increased carrying costs associated with
higher inventory levels, increased raw material costs, and higher
costs of a new formula for Armor All(R) Protectant. The decrease
in the cost percentage during the current year's third quarter, in
comparison with the first six months of the fiscal year, was
primarily attributable to an approximate 5% selling price increase
on certain automotive products effective on November 1, 1995.
Selling, general and administrative expense as a percentage of
revenues was 45.4% and 38.6% in the quarters ended December 31,
1995 and 1994, respectively, and 41.7% and 38.1% in the respective
nine month period. These percentage increases were mainly due to
the absorption over lower revenues of the fixed marketing and
promotional costs related to the Company's strategy of building
automotive market share and launching new products. Another factor
was the greater mix of home care shipments, which had higher
promotional expenses associated with the launch of the
aforementioned new products.
- 8 -
<PAGE>
ARMOR ALL PRODUCTS CORPORATION
FINANCIAL REVIEW
Financial Resources and Liquidity
- ---------------------------------
The Company's working capital requirements fluctuate during
the year, traditionally peaking in the spring due to extended
payment terms offered in connection with the Company's winter sales
promotional activities. Cash inflow is strongest during the summer
months as these receivables are collected. This pattern resulted
in cash flow from operations of $28.3 million and $28.8 million in
the nine months ended December 31, 1995 and 1994, respectively, as
accounts receivable were reduced from March 31 levels. The cash
inflow from operations in fiscal 1996 was relatively unchanged from
fiscal 1995, despite the lower net income, largely as a result of
higher collections of accounts receivable due to a higher accounts
receivable balance at the beginning of the current year than at the
beginning of the prior year. This factor was partially offset by
higher payments in the current year for media advertising and
certain payables and accrued liabilities.
At December 31, 1995, the Company had a total cash balance of
$38.5 million, including $33.7 million invested in the McKesson
cash management program (see Note 2), and no outstanding debt. As
long as the Company continues to participate in the McKesson cash
management program, McKesson will make available to the Company the
amount of cash necessary to provide the Company with sufficient
funds to meet its needs, as defined in its annual capital and
operating plans.
- 9 -
<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 December 31, 1995.
- 10 -
<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)
Date: February 13, 1996 By /s/Michael G. McCafferty
---------------------------
Michael G. McCafferty
Executive Vice President
and Chief Financial Officer
(Principal Financial
and Accounting Officer)
- 11 -
<PAGE>
INDEX TO EXHIBITS
=================
Exhibit
Number
- -------
27 Financial Data Schedule
- 12 -
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000797975
<NAME> ARMOR-ALL-PRODUCTS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 38,545
<SECURITIES> 0
<RECEIVABLES> 36,425
<ALLOWANCES> 1,893
<INVENTORY> 14,637
<CURRENT-ASSETS> 96,922
<PP&E> 15,278
<DEPRECIATION> 6,424
<TOTAL-ASSETS> 145,966
<CURRENT-LIABILITIES> 18,411
<BONDS> 0
213
0
<COMMON> 0
<OTHER-SE> 126,760
<TOTAL-LIABILITY-AND-EQUITY> 145,966
<SALES> 124,633
<TOTAL-REVENUES> 124,633
<CGS> 58,241
<TOTAL-COSTS> 58,241
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,203
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 13,821
<INCOME-TAX> 5,805
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,016
<EPS-PRIMARY> .38
<EPS-DILUTED> 0
</TABLE>
