-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, lSP7vCExp9ug3c2qrT1vWVYyy+nTEdk3+J7lAk4OtW8L4cvsUBXtxbQ2IcV985wg I1M7HF1oJq2LbuDpbibdTw== 0000892569-94-000097.txt : 19940331 0000892569-94-000097.hdr.sgml : 19940331 ACCESSION NUMBER: 0000892569-94-000097 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940328 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WYNNS INTERNATIONAL INC CENTRAL INDEX KEY: 0000108721 STANDARD INDUSTRIAL CLASSIFICATION: 3585 IRS NUMBER: 952854312 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-07200 FILM NUMBER: 94518360 BUSINESS ADDRESS: STREET 1: 500 NORTH STATE COLLEGE BLVD CITY: ORANGE STATE: CA ZIP: 92668 BUSINESS PHONE: 7149383700 MAIL ADDRESS: STREET 1: 500 NORTH STATE COLLEGE BLVD CITY: ORANGE STATE: CA ZIP: 92668 10-K 1 FORM 10-K 1 ================================================================================ 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 [Fee Required] for the Fiscal Year Ended DECEMBER 31, 1993; or [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 [No Fee Required] for the transition period from __________________________ to __________________________ COMMISSION FILE NUMBER 1-7200 WYNN'S INTERNATIONAL, INC. (Exact Name of Registrant as Specified in Its Charter) DELAWARE 95-2854312 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification Number) 500 NORTH STATE COLLEGE BOULEVARD SUITE 700 ORANGE, CALIFORNIA 92668 (Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (714) 938-3700 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: Title of Each Class Name of Each Exchange on Which Registered Common Stock, par value $1 per share New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: None 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 ( ) The aggregate market value of voting stock held by non-affiliates of the Registrant was $109,518,085 as of March 21, 1994. All outstanding shares of voting stock, except for shares held by executive officers and members of the Board of Directors of Registrant, are deemed to be held by non-affiliates. On March 21, 1994, Registrant had 5,548,117 shares of common stock outstanding. Parts I and II incorporate information by reference from the Annual Report to Stockholders for the year ended December 31, 1993. Part III incorporates information by reference from the Proxy Statement for the Annual Meeting of Stockholders to be held on May 11, 1994. 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. ( ) ================================================================================ 2 PART I ITEM 1. BUSINESS Wynn's International, Inc., through its subsidiaries, is engaged primarily in the automotive parts and accessories business and the petrochemical specialties business. The Company designs, produces and sells O-rings and other seals and molded rubber and thermoplastic products and automotive air conditioning systems, components and related parts. The Company also formulates, produces and sells petrochemical specialty products and automotive service equipment and distributes, primarily in southern California, locks and hardware products manufactured by others. O-rings and other molded rubber products are marketed under the trademark "Wynn's-Precision." Air conditioning units for the automotive aftermarket are marketed by the Company under the trademark "Frostemp(R)," and wholesale parts are marketed and installation centers are operated under the trademark "Maxair(R)." Petrochemical specialty products are marketed under various trademarks, including "Wynn's(R)," "Friction Proofing(R)," "X-Tend(R)," "Spit Fire(R)," "Classic(R)," "Mark X(R)" and "Du-All(TM)." The Company's executive offices are located at 500 North State College Boulevard, Suite 700, Orange, California 92668. Its telephone number is (714) 938-3700. The terms "Wynn's International, Inc.," "Wynn's," "Company" and "Registrant" herein refer to Wynn's International, Inc. and its subsidiaries unless the context indicates otherwise. FINANCIAL INFORMATION BY BUSINESS SEGMENT AND GEOGRAPHIC DATA The Company's operations are conducted in three industry segments: Automotive Parts and Accessories; Petrochemical Specialties; and Builders Hardware. Financial information relating to the Company's business segments for the five years ended December 31, 1993 is incorporated by reference from Note 15 of "Notes to Consolidated Financial Statements" on pages 29 through 31 of the Company's Annual Report to Stockholders for the year ended December 31, 1993 (the "1993 Annual Report"). AUTOMOTIVE PARTS AND ACCESSORIES The Automotive Parts and Accessories Division consists of Wynn's-Precision, Inc. ("Precision") and Wynn's Climate Systems, Inc. ("Wynn's Climate Systems"). During 1993, sales of the Automotive Parts and Accessories Division were $181,478,000 or 64% of the Company's total net sales as compared with $185,947,000 and 64% in 1992. The operating profit of this division in 1993 was $16,643,000, or 70% of the Company's total operating profit as compared with $15,265,000 and 68% in 1992. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business Segment and Geographical Information" on pages 14 through 17 and 29 through 31, respectively, of the 1993 Annual Report, which are hereby incorporated by reference. See also "Other Factors Affecting the Business." 3 WYNN'S-PRECISION, INC. (O-RINGS, SEALS AND MOLDED RUBBER AND THERMOPLASTIC PRODUCTS) PRODUCTS Precision and its affiliated companies manufacture and sell a variety of static and dynamic sealing products. The principal users of the Precision products are automotive manufacturers, heavy vehicle manufacturers, industrial component manufacturers, hydraulic and pneumatic cylinder manufacturers, aerospace and defense contractors and the oil service industry. The principal products of Precision are O-rings, rack and pinion and front wheel drive seals, composite gaskets, hydraulic cylinder seals and various engineered molded rubber and plastic parts. These products are made from synthetic elastomers and thermoplastic materials. DISTRIBUTION Precision sells its products primarily through a direct sales force to original equipment manufacturer ("OEM") customers. Precision also markets its products throughout the United States through independent distributors and through Company-operated regional service centers located in Rancho Cucamonga, California; Elgin, Illinois; Grand Rapids, Michigan; Golden Valley, Minnesota; Charlotte, North Carolina; Buffalo, New York; Dayton, Ohio; Bensalem, Pennsylvania; Indianapolis, Indiana; Fort Worth, Texas; and Lenexa, Kansas. Precision's Canadian operation distributes products principally through a direct sales force to OEM customers, through independent distributors and through Precision-operated service centers in Canada and England. PRODUCTION Precision's manufacturing facilities are located in Lebanon and Livingston, Tennessee; Tempe, Arizona; Lynchburg, Virginia; Houston, Texas; and Orillia, Ontario, Canada. In 1993, Precision closed its 5,000 square-foot leased manufacturing facility located in Alexandria, Scotland due to certain start-up problems. Precision's corporate headquarters are located at the site of its main manufacturing facility in Lebanon, Tennessee. Precision also operates its own tool production facility in Lebanon, Tennessee. Over the past several years, Precision has made significant investments in modern computerized production equipment and facilities. Precision has a facility in Lebanon, Tennessee dedicated exclusively to injection molding. Using internally generated funds, Precision plans to spend approximately $10 million for capital expenditures in 1994 to increase its production capacity. The principal raw materials used by Precision are elastomeric and thermoplastic materials. These raw materials generally have been available from numerous sources in sufficient quantities to meet Precision's requirements. Adequate supplies of raw materials were available in 1993 and are expected to continue to be available in 1994. 2 4 WYNN'S CLIMATE SYSTEMS, INC. (AUTOMOTIVE AIR CONDITIONING PRODUCTS) Wynn's Climate Systems sells its products to OEM customers and to independent distributors who resell units principally to car dealers. Wynn's Climate Systems also distributes wholesale parts manufactured by others and sells refrigerant recovery and recycling machines. In addition, Wynn's Climate Systems operates installation centers in the Denver, Colorado area and in Colorado Springs, Colorado, Phoenix, Arizona and Mesa, Arizona that perform installation services for car dealers and retail customers. PRODUCTS Wynn's Climate Systems designs, engineers and produces automotive air conditioning systems for the OEM market and the automotive aftermarket. Systems are manufactured for many current year models of domestic and imported automobiles, trucks and vans. Wynn's Climate Systems also manufactures and sells units for a wide range of automobiles, trucks and vans from prior model years. In addition, Wynn's Climate Systems manufactures and sells a variety of air conditioning components, including condensers, evaporator coils and adapter kits, and distributes air conditioning components and accessories manufactured by others. Wynn's Climate Systems also manufactures and sells refrigerant recovery and recycling equipment. DISTRIBUTION The products of Wynn's Climate Systems are distributed in several different ways. First, Wynn's Climate Systems manufactures air conditioners for sale to OEM customers and their distributors and dealers. Sales to Mazda, the largest customer of Wynn's Climate Systems, were approximately $35.1 million in 1993 or approximately 28% less than in 1992. In 1993, Wynn's Climate Systems supplied air conditioning kits to Mazda principally for its 323 automobile and light trucks. As previously reported, in approximately April 1993, Mazda began purchasing light trucks from Ford in lieu of importing them from Japan. Wynn's Climate Systems also supplies certain components to Mazda's Flat Rock, Michigan facility. Mazda assembles its own air conditioning kits in the United States for the MX-6, 626 and Miata model automobiles and the MPV. Mazda has informed Wynn's Climate Systems that Mazda will assemble air conditioning kits for the 323 automobile commencing in model year 1995, but Wynn's Climate Systems will continue to supply air conditioning kits for the 323 automobile through model year 1994. In 1991, Wynn's Climate Systems began supplying front units for Land and Range Rover four-wheel drive vehicles. This supply arrangement with Rover terminated in February 1994. In early 1993, Wynn's Climate Systems began supplying a newly-designed rear air conditioning unit for certain Rover models. Wynn's Climate Systems also sells its products to Chrysler Corporation, which purchases products for its Dodge vans and Jeep vehicles and for export. Wynn's Climate Systems supplies units to the General Motors Truck and Bus Division. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Other Factors Affecting the Business." 3 5 Second, Wynn's Climate Systems manufactures and sells products under the trademark "Frostemp(R)" in the United States and Canada to approximately 75 active independent distributors. Sales to independent distributors decreased approximately 8% in 1993 compared to 1992 due primarily to the impact on aftermarket sales of the continuing trend of increased factory installed air conditioning systems. See "Other Factors Affecting the Business." Wynn's Climate Systems also distributes component parts and accessories purchased from other manufacturers to independent distributors. Third, Wynn's Climate Systems manufactures and sells refrigerant recovery and recycling equipment to end users and to distributors. Wynn's Climate Systems offers a line of equipment that recovers and recycles R-12 and R-134a refrigerants used in automotive air conditioning systems. Finally, Wynn's Climate Systems manufactures and distributes parts and components to OEM customers and distributors. Wynn's Climate Systems also sells "Frostemp(R)" brand air conditioning systems and products manufactured by others through five company-operated service centers which perform installation services for dealers and sell directly to retail customers. PRODUCTION The manufacturing facilities of Wynn's Climate Systems are located in Fort Worth, Texas. Air conditioning kits are assembled and produced in a 210,000 square foot facility which also serves as the corporate headquarters of Wynn's Climate Systems. In 1993, Wynn's Climate Systems consolidated three satellite manufacturing facilities into the main facility. The production facilities of Wynn's Climate Systems include an environmental test and calibration chamber used for evaluating the performance of air conditioning units. The test chamber has computer controlled environmental test conditions and data collection and can handle both front-wheel and rear-wheel drive vehicles over a variety of simulated speeds, temperatures and levels of humidity. Wynn's Climate Systems manufactures condensers and evaporator coils, injection-molded and vacuum-formed plastic parts, adapter kits, steel brackets and hose and tube assemblies. Wynn's Climate Systems uses these components in the production of its air conditioning units and sells them to outside customers. Outside vendors supply certain finished components such as accumulators, receiver/dryers and compressors. An adequate supply of these materials is available at present and is expected to continue to be available for the foreseeable future. Wynn's Climate Systems generally experienced only modest price increases for raw materials in 1993. In 1993, Wynn's Climate Systems installed a technologically advanced nitrogen brazing oven, which will be used to produce high efficiency heat exchangers. Wynn's Climate Systems also acquired in 1993 equipment to enable it to produce high quality hose assemblies in house. This equipment was purchased in connection with the efforts of Wynn's Climate Systems to enhance its production and technological capabilities. PHASE-OUT OF R-12 REFRIGERANT Most automotive air conditioning systems manufactured by Wynn's Climate Systems and others prior to 1994 utilized R-12 as a refrigerant. R-12 is a chlorofluorocarbon ("CFC") which has been linked 4 6 to the destruction of ozone molecules in the Earth's upper atmosphere. Under the Montreal Protocol, CFC production in the United States is being phased out and will cease after December 31, 1995. Wynn's Climate Systems has developed air conditioning systems which use R-134a refrigerant, a hydrofluorocarbon which is a permissible alternative to CFC refrigerants. Sales of R-134a systems are expected to increase as sales of traditional CFC systems are phased out. Wynn's Climate Systems also has begun the development of retrofit kits that will permit automotive air conditioning systems designed for R-12 use to be converted to use R-134a. R-134a is not compatible with an R-12-based system without certain necessary changes. Other optional changes will enhance the performance of R-134a in an R-12-based air conditioning system. The sales volume of these retrofit kits will depend upon the future availability and price of R-12 refrigerant. PETROCHEMICAL SPECIALTIES The Petrochemical Specialties Division consists of Wynn Oil Company and its subsidiaries ("Wynn Oil"). During 1993, net sales at Wynn Oil were $98,318,000 or 34% of the Company's total net sales as compared to $99,622,000 and 34% for 1992. The operating profit of the division during 1993 was $7,046,000, or 29% of the Company's total operating profit compared with $6,636,000 and 30% for 1992. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business Segment and Geographical Information" on pages 14 through 17 and 29 through 31, respectively, of the 1993 Annual Report, which are hereby incorporated by reference. See also "Other Factors Affecting the Business." PRODUCTS The principal business of Wynn Oil is the production and marketing of a wide variety of petrochemical specialty car care products under the "Wynn's(R)" and "X-Tend(R)" trademarks. Wynn Oil's car care products are designed to provide preventive or corrective maintenance for automotive engines, transmissions, differentials, engine cooling systems and other automotive mechanical parts. Wynn Oil also manufactures industrial specialty chemical products, including forging compounds, lubricants, cutting fluids and multipurpose coolants for precision metal forming and machining operations. In addition, the Company sells the GM-approved and patented "Mark X(R)" power-flush machine which, when combined with proprietary cooling system products, flushes a vehicle's engine cooling system, removes contaminants from the used antifreeze and returns the rejuvenated antifreeze to the engine cooling system. Wynn Oil also sells the new GM-approved "Du-All(TM)" bulk antifreeze recycling machine which, when combined with proprietary cooling system products, drains the used antifreeze, removes contaminants from the antifreeze and rejuvenates the antifreeze for reuse. Wynn Oil also sells its Emission Control product, a patented organic fuel combustion catalyst for spark ignition and diesel engines which helps reduce exhaust emissions and improve fuel economy. Wynn Oil also produces and markets a line of automotive appearance products under the "Classic(R)" and "Wynn's Classic(R)" trademarks. Wynn Oil is a principal U.S. automotive distributor of AirSept(TM) odor-removing chemical spray, used principally in automotive air conditioning systems. 5 7 Wynn Oil also markets the Wynn's Product Warranty(R) program, which, in general, are kits containing a specially formulated line of automotive additive products, accompanied by a special product warranty. The warranty kits are sold, through distributors and automobile dealers, primarily to purchasers of used automobiles. The Wynn's Product Warranty(R) program provides reimbursement of certain parts and labor expenses and, in some instances, the costs of towing and a rental car incurred by vehicle owners who used the special products to treat their vehicles in accordance with the terms and conditions of the warranty and who experience certain types of damage which the special products were designed to help prevent. See "Other Factors Affecting the Business." DISTRIBUTION Wynn Oil's car care products are sold in the United States and in approximately 80 foreign countries. See "Foreign Operations." Wynn Oil distributes its products through a wide range of distribution channels. Domestically, Wynn Oil distributes its products through independent distributors, warehouse distributors, mass merchandisers and chain stores. The Company also uses an internal sales force and manufacturers' representative organizations in the sale and distribution of its products. Foreign sales are made principally through wholly-owned subsidiaries, which sell either through an internal sales force or to independent distributors. The Company also engages in direct export sales to independent distributors, primarily in Asia and Latin America. See "Other Factors Affecting the Business." PRODUCTION Wynn Oil has manufacturing facilities in Azusa, California; St. Niklaas, Belgium; and Arganda del Rey, Spain. Other foreign subsidiaries either purchase products directly from the manufacturing facilities in the United States or Belgium or have the products manufactured locally by outside suppliers according to Wynn Oil's specifications and formulae. Several years ago, Wynn Oil transferred some of its production requirements to its foreign subsidiaries due to the strength of the United States dollar at that time and its impact on prices to Wynn Oil's foreign customers. With fluctuating foreign currency rates, Wynn Oil periodically reviews its production and sourcing locations. Wynn Oil utilizes a large number of chemicals in the production of its various petrochemical specialty products. Primary raw materials necessary for the production of these products, as well as the finished products, generally have been available from several sources. An adequate supply of materials was available in 1993 and is expected to continue to be available for the foreseeable future. BUILDERS HARDWARE The Builders Hardware Division consists of Robert Skeels & Company ("Skeels"), a wholesale distributor of builders hardware products, including locksets and locksmith supplies. During 1993, Skeels' net sales were $5,161,000 or 2% of the Company's total net sales as compared with $6,219,000 and 2% for 1992. The operating profit of this division during 1993 was $193,000, or 1% of the Company's total operating profit compared with $422,000 and 2% for 1992. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business Segment and 6 8 Geographical Information" on pages 14 through 17 and 29 through 31, respectively, of the 1993 Annual Report, which are hereby incorporated by reference. Skeels' main facility is located in Compton, California. In addition, Skeels also has leased satellite facilities located in Fullerton and Los Angeles, California. Skeels supplies approximately 35,000 items to retail hardware, locksmith and lumberyard outlets in southern California, Arizona, and Nevada. Skeels also sells directly to school districts, municipalities, industrial firms and building contractors. Skeels has been a distributor of Schlage lock products since 1931. Skeels also distributes other well-known brands such as Lawrence, Kwikset and Master. All of Skeels' distributorship arrangements generally are cancelable by the manufacturers without cause. Most of Skeels' sales are derived from replacement items used by industry, institutions and in-home remodeling and repair. OTHER FACTORS AFFECTING THE BUSINESS COMPETITION All phases of the Company's business have been and remain highly competitive. The Company's products and services compete with those of numerous companies, some of which have financial resources greater than those of the Company. Sales by the Automotive Parts and Accessories Division are in part related to the sales of vehicles by its OEM customers. Precision has a large number of competitors in the market for static and dynamic sealing products, some of which competitors are substantially larger than Precision. The markets in which Precision competes are also sensitive to changes in price. Requests for price reductions are not uncommon. Precision attempts to work with its customers to identify ways to lower costs and prices. Precision focuses on high technology, high quality sealing devices and has made significant investments in advanced equipment and other means to raise productivity. Precision's major focus is to be the low cost producer of superior quality products within its industry. Precision believes it must expand into additional areas of sealing technology in order to continue to be an effective competitor. In 1993, Precision invested approximately $4.4 million in new equipment and facilities to improve overall performance to its customers. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." Historically, the largest part of Wynn's Climate Systems' sales have been to OEM customers. Following the opening of its Flat Rock, Michigan facility, Mazda has gradually taken over production of its requirements for air conditioning kits in the United States. Sales to Mazda decreased approximately 28% in 1993 compared to 1992 due to the phase-out of the air conditioning supply agreement for light trucks and a decline in sales by Mazda of its 323 cars. The Company anticipates that commencing in the third quarter of 1994, Wynn's Climate Systems will no longer furnish 323 kits to Mazda, as Mazda has elected to assemble these kits at its Flat Rock, Michigan facility. Sales of kits for Mazda 323 cars were 7 9 approximately $29.9 million in 1993. In 1993, Wynn's Climate Systems' sales to the Rover Group in the U.K were approximately $14.5 million, of which approximately $12.8 million was for units for the Range Rover and Discovery vehicles, pursuant to a supply agreement in effect through the end of model year 1993. In 1994, this customer began purchasing air conditioning systems for these vehicles from a foreign competitor of Wynn's Climate Systems. Although the expiration of this supply agreement is not expected to have a material adverse effect on the Company's consolidated results of operation in 1994, it is expected to cause a decline in the operating profit of Wynn's Climate Systems in 1994. Over time there has been a gradual increase in the number of air conditioning systems installed on the factory line. An increase in the number of factory-installed units reduces the size of the market for aftermarket sales. See "Wynn's Climate Systems, Inc." Competition with respect to the Company's petrochemical specialty products consists principally of other automotive aftermarket chemical and industrial fluid companies. Some major oil companies also market their own additive products through retail service stations, independent dealers and garages. Certain national retailers market private label brands of petrochemical specialty products. The Company's "Mark X(R)" power flush system and "Du-All(TM)" antifreeze recycling equipment and chemicals compete against other antifreeze recycling processes, some of which also have been approved by General Motors. The principal methods of competition vary by geographic locale and by the relative market share held by the Company compared to other competitors. Skeels continues to face intense price competition from numerous cash-and-carry discount retailers. Skeels also has observed some manufacturers selling directly to retailers to increase volume. Skeels' revenues declined 17% in 1993 compared to 1992 in part due to this competition. KEY CUSTOMERS Sales to Mazda constituted 42% of the total net sales of Wynn's Climate Systems and 12.3% of the total net sales of the Company in 1993. As noted above, sales to Mazda related to kits for the 323 model are expected to continue until the third quarter of 1994, when Mazda will take over production of kits for the 1995 model 323 automobile. Due to the previous actions taken by the Company to restructure the business of Wynn's Climate Systems and the relatively low margins associated with the Mazda business, the loss of Mazda as a key customer of the Company is not expected to have a material adverse effect on the consolidated results of operations of the Company. See "Wynn's Climate Systems, Inc." and "Management's Discussion and Analysis of Financial Condition and Results of Operations." Sales to General Motors constituted approximately 9.2% of the total net sales of the Company in 1993. GOVERNMENT REGULATIONS The number of governmental rules and regulations affecting the Company's business and products continues to increase. Wynn Oil markets the Wynn's Product Warranty(R) program in approximately thirty-five states and two foreign countries. Questions have been raised by certain state insurance regulators as to whether the product warranty that accompanies the kit is in the nature of insurance. Wynn Oil attempts to 8 10 resolve these questions to the satisfaction of each state insurance regulator. At times, it has elected to withdraw the Wynn's Product Warranty(R) from certain states. No assurance can be given that governmental regulations will not significantly affect the marketing of the Wynn's Product Warranty(R) in the United States or other countries in the future. ENVIRONMENTAL MATTERS The Company has used various substances in its past and present manufacturing operations which have been or may be deemed to be hazardous, and the extent of its potential liability, if any, under environmental statutes, rules, regulations and case law is unclear. Under the Comprehensive Environmental Response, Compensation and Liability Act, as amended ("CERCLA"), a responsible party may be jointly liable for the entire cost of remediating contaminated property even if it contributed only a small portion of the total contamination. The nature of environmental investigation and cleanup activities creates difficulties in determining the impact of such activities on the Company's financial position. The effect of resolution of environmental matters on results of operation cannot be predicted due to the uncertainty concerning both the amount and timing of future expenditures and future results of operations. See Note 12 of "Notes to Consolidated Financial Statements" on page 28 of the 1993 Annual Report, which is hereby incorporated by reference. All potentially significant environmental matters presently known to the Company are described below. In January 1984, Wynn Oil received a letter from the United States Environmental Protection Agency (the "EPA") regarding an investigation of groundwater contamination in the San Gabriel Valley, California. The letter from the EPA requested Wynn Oil to furnish certain information relating to its manufacturing facility in Azusa, California (the "Azusa Facility"). Wynn Oil complied with the request. In March 1988, Wynn Oil received a letter from the EPA requesting additional information with respect to its Azusa Facility. Wynn Oil submitted its response at the end of May 1988. In July 1990, Wynn Oil received a general notice letter from the EPA stating that it may be a potentially responsible party ("PRP") with respect to the Azusa/Irwindale Study Area in the San Gabriel Valley, California Superfund Sites (the "AISA"). The EPA letter included an information request pursuant to Section 104(e) of CERCLA. The EPA letter stated that the EPA contemplated using the Special Notice procedures of Section 122(e) of CERCLA to formally negotiate the terms of a consent agreement with PRPs to conduct a Remedial Investigation/Feasibility Study for the AISA. Wynn Oil Company responded to the EPA information request within the specified time period. In September 1990, Wynn Oil received a letter from the EPA stating that it did not expect to send a Special Notice letter to Wynn Oil for the AISA, but that it still considered Wynn Oil, as well as a large number of other companies, to be PRPs for basinwide groundwater activities in the San Gabriel Valley. In May 1993, the EPA made available for public comment its Operable Unit Feasibility Study for the Baldwin Park Operable Unit ("BPOU") of the San Gabriel Valley Superfund Sites. The Azusa Facility is located within the BPOU. In its Operable Unit Feasibility Study for the BPOU, the EPA has proposed construction of extraction and treatment facilities with an estimated initial capital cost of $47 million and estimated annual operating and maintenance costs of $4 to $5 million. Wynn Oil has been cooperating with other companies located in the BPOU, as well as state and local government and water supply officials, who are working to develop a substantially less costly alternative which would accomplish the desired remedial goals. 9 11 In March 1988, a representative of the Los Angeles County Department of Health Services (the "LADHS") inspected the Azusa Facility and observed oil-stained surface soils. Based on these observations, LADHS directed Wynn Oil to conduct a site assessment and implement remedial measures if contaminated soils were identified. In February 1989, Wynn Oil received a Subsurface Investigation Report from the consulting firm retained by Wynn Oil to perform the site assessment and submitted the report to the LADHS. In April 1989, regulatory jurisdiction over this matter was transferred from the LADHS to the California Regional Water Quality Control Board-Los Angeles Region (the "RWQCB"). Since October 1989, Wynn Oil and its consultants have been working with representatives of the RWQCB to conduct a comprehensive site assessment of the Azusa Facility. In January 1992, at the request of the EPA and the RWQCB, Wynn Oil agreed to expand the scope of its investigation of the Azusa Facility to include three soil gas monitoring wells and one groundwater monitoring well. The monitoring wells were installed in 1992, and the results of ongoing sampling have been reported to the RWQCB. In the summer of 1993, RWQCB requested Wynn Oil to install an upgradient groundwater monitoring well at the Azusa Facility. The RWQCB subsequently requested two other companies located upgradient of Wynn Oil to install downgradient soil gas and groundwater monitoring wells. Wynn Oil and one of these companies have entered into an agreement to share the cost of one groundwater and one soil gas monitoring well which will operate as an upgradient monitoring well for Wynn Oil and a downgradient monitoring well for the other company. In May 1989, Wynn's Climate Systems received notice that it had been identified as a generator of hazardous waste that had been shipped to the Chemical Recycling, Inc. ("CRI") site in Wylie, Texas (the "CRI Site") for treatment. CRI was engaged in the business of recycling and reclaiming spent solvents and other hazardous wastes at the CRI Site until it ceased operations in February 1989. Wynn's Climate Systems is one of approximately 100 hazardous waste generators who have been identified as potentially responsible parties for the CRI Site. A PRP Steering Committee (the "Committee") was formed to negotiate with the EPA on behalf of its members an agreement to take remedial measures voluntarily at the CRI Site. As of March 15, 1994, approximately 88 PRPs, including Wynn's Climate Systems, have agreed to participate in the Committee for the CRI Site. PRPs who have agreed to participate in the Committee have signed Consent Agreements with the EPA with respect to the CRI Site. Remediation efforts have begun at the CRI Site under the guidance of the Committee. As of March 15, 1994, Wynn's Climate Systems' proportionate share of the total volume of waste contributed to the CRI Site by Committee members was less than one percent (1%). In January 1991, Wynn's Climate Systems received a letter from the Texas Water Commission (the "TWC") that soil adjacent to one of its leased manufacturing facilities was contaminated with hazardous substances. The TWC directed Wynn's Climate Systems to determine the extent of such contamination and then take appropriate remedial measures. Wynn's Climate Systems retained environmental consultants to conduct soil sampling and otherwise comply with the directive of the TWC. Performance of this work was completed in late 1991. Wynn's Climate Systems submitted a copy of the report of its consultants to the TWC in January 1992. In 1994, Wynn's Climate Systems received a letter from the TWC requesting additional information. Wynn's Climate Systems is cooperating with the requests of the TWC. In January 1990, Precision received a letter from the EPA regarding the Saad Site in Nashville, Tennessee. The owner of the Saad Site engaged in reclamation and recycling activities at the Site, which 10 12 resulted in soil and groundwater contamination. The letter stated that Precision may be a PRP for the Saad Site. The EPA subsequently requested Precision to furnish information about its involvement with the Saad Site. Precision has provided the information requested. Precision's records indicated that a predecessor entity sent wastes to the Saad Site in the mid-1970s. Based on that information, Precision joined the Saad Site Steering Committee as a Limited Member. In February 1992, the Company received a letter stating that the Allocation Committee had concluded that Precision should become a Full Member of the Steering Committee and thus share proportionately in the liability for the cleanup. Precision responded by letter that there was no legal basis to hold it responsible for the activities of the predecessor entity. As of March 15, 1994, the Allocation Committee has not responded to Precision's letter. In 1992, Precision identified an area at its Lebanon, Tennessee facility which contained oil stained soils. Precision retained outside environmental consultants to investigate the nature and extent of the contamination. The remedial investigation is underway and Precision intends to take any necessary remedial actions. In March 1992, an inactive subsidiary of the Company received a letter from the then lessee ("Lessee") of a parcel of real property in Compton, California formerly leased by this subsidiary. The letter stated that the Lessee had discovered soil contamination at the site and asserted that the Company's subsidiary may be liable for the cost of cleanup. The letter stated that the Lessee was investigating the nature and extent of the soil contamination. In July 1993, the Company received a letter from the owner of the real property stating that the owner had asserted a claim against the Lessee to pay the cost of remediation and that the owner may assert a claim against the Company. The Company has determined that the Lessee has filed for voluntary reorganization under the federal bankruptcy laws. The Company does not know the extent of the contamination or the estimated cost of cleanup at this site. FOREIGN CURRENCY FLUCTUATIONS In 1993, the United States dollar generally appreciated in value compared to 1992 in the currencies of most countries in which the Company does business. This appreciation caused sales and operating profit to be lower than what would have been reported if exchange rates had remained constant during 1993. In 1993, the Equity Adjustment from Foreign Currency Translation account on the Consolidated Balance Sheet declined by $2.1 million, which caused a corresponding reduction in Total Stockholders' Equity. See "Foreign Operations." PATENTS, TRADEMARKS AND LICENSE AGREEMENTS The Company holds a number of patents and trademarks which are used in the operation of its businesses. There is no known challenge to the Company's rights under any material patents or material trademarks. In 1989, Wynn Oil filed a lawsuit in the federal district court in Detroit, Michigan against another company and its principal stockholder for infringement of Wynn Oil's X- Tend(R) trademark. In February 1994, the court awarded Wynn Oil $2.0 million in damages. The court also indicated it would award prejudgment interest and attorneys' fees to Wynn Oil. Following the entry of a final judgment, the defendants are expected to appeal the trial court's decision. See "Legal Proceedings." 11 13 SEASONALITY OF THE BUSINESS Although sales at the Company's divisions are somewhat seasonal, the consolidated results of operations generally do not reflect seasonality. RESEARCH AND DEVELOPMENT Wynn Oil maintains research and product performance centers in Azusa, California; St. Niklaas, Belgium; Paris, France; and Edenvale, South Africa. The main activities of the research staff are the development of new specialty chemicals and other products, improvement of existing products, including finding new applications for their use, evaluation of competitive products and performance of quality control procedures. Precision maintains research and engineering facilities in Lebanon, Tennessee; Lynchburg, Virginia; and Orillia, Ontario, Canada. Research and development is an important aspect of Precision's business as Precision has developed and continues to develop numerous specialized compounds to meet the specific needs of its various customers. Precision also has technical centers at its Lebanon, Tennessee, Lynchburg, Virginia, and Orillia, Ontario, Canada facilities to construct prototype products and to perform comprehensive testing of materials and products. Precision maintains extensive research, development and engineering facilities to provide outstanding service to its customers. FOREIGN OPERATIONS The following table shows sales to foreign customers for 1993, 1992 and 1991:
1993 1992 1991 ------------ ------------ ----------- Total Sales Outside the United States: $102,907,000 $103,962,000 $93,927,000 Percent of Net Sales 36.1% 35.6% 34.3% Sales by Foreign Subsidiaries $92,911,000 $93,866,000 $81,383,000 Percent of Net Sales 32.6% 32.2% 29.7% Export Sales by Domestic Subsidiaries $9,996,000 $10,096,000 $12,544,000 Percent of Net Sales 3.5% 3.4% 4.6%
Consolidated operating results are reported in United States dollars. Because the Company's foreign subsidiaries conduct operations in the currencies of the countries in which they are based, all financial statements of the foreign subsidiaries must be translated into United States dollars. As the value of the United States dollar increases or decreases relative to these foreign currencies, the United States dollar value of items on the financial statements of the foreign subsidiaries is reduced or increased, respectively. Therefore, changes in dollar sales of the foreign subsidiaries from year to year are not necessarily indicative of changes in actual sales recorded in local currency. See Note 4 and Note 15 of "Notes to Consolidated Financial Statements" on pages 25 and 29 through 31, respectively, of the 1993 Annual Report, which are hereby incorporated by reference. 12 14 The value of any foreign currency relative to the United States dollar is affected by a variety of factors. It is exceedingly difficult to predict what such value may be at any time in the future. Consequently, the ability of the Company to control the impact of foreign currency fluctuations is limited. A material portion of the Company's business is conducted outside the United States. Therefore, the Company's ability to continue such operations or maintain their profitability is to some extent subject to control and regulation by the United States government and foreign governments. EMPLOYEES At December 31, 1993, the Company had 1,978 employees. A majority of the production and maintenance employees at the Lebanon, Tennessee plant of Precision are represented by a local lodge of the International Association of Machinists and Aerospace Workers. The collective bargaining agreement for this facility will expire in April 1995. The production and maintenance employees at the Orillia, Ontario, Canada plant of Precision are represented by a local unit of the United Rubber, Cork, Linoleum and Plastic Workers of America. The collective bargaining agreement for the unit will expire in February 1997. A majority of the production and maintenance employees at the Lynchburg, Virginia plant of Dynamic Seals, Inc., an affiliate of Precision, are represented by a local of the International Chemical Workers Union. The collective bargaining agreement for this facility expires in February 1996. The Company considers its relations with its employees to be good. EXECUTIVE OFFICERS OF THE REGISTRANT The executive officers of the Company, who are appointed annually, are as follows:
Executive Officer Since Age --------------- ----- James Carroll President and Chief Executive Officer 1988 64 Seymour A. Schlosser Vice President-Finance and Chief Financial 1989 48 Officer Gregg M. Gibbons Vice President-Corporate Affairs, General 1986 41 Counsel and Secretary
The principal occupations of Mr. Carroll and Mr. Gibbons for the past five years have been their current respective positions with the Company. Prior to his employment with the Company in July 1989, Mr. Schlosser was Vice President-Finance of EECO Incorporated (electronic components) from 13 15 August 1987 to June 1989 and Controller of Baker Hughes Incorporated and its predecessor, Baker International Corporation (oil field services and process technologies) from July 1984 to August 1987. There is no arrangement or understanding between any executive officer and any other person pursuant to which he was selected as an officer. There is no family relationship between any executive officers of the Company. ITEM 2. PROPERTIES The following is a summary description of the Company's facilities, all of which the Company believes to be of adequate construction:
If Lease, Held in Fee Square Year of Location or by Lease Footage Termination Present Use -------- ----------- ------- ----------- ----------- WYNN'S INTERNATIONAL, INC. Orange, California Lease 6,894 1996 Administrative AUTOMOTIVE PARTS AND ACCESSORIES: WYNN'S-PRECISION, INC. Domestic -------- Lebanon, Tennessee Fee 140,000 -- Manufacturing, Warehouse, Administrative Lebanon, Tennessee Fee 52,000 -- Manufacturing Lebanon, Tennessee Fee 35,000 -- Manufacturing Livingston, Tennessee Fee 33,000 -- Manufacturing, Warehouse Tempe, Arizona Fee 32,572 -- Manufacturing, Warehouse Rancho Cucamonga, California Lease 2,880 1996 Warehouse Elgin, Illinois Lease 1,100 1995 Warehouse Farmington Hills, Michigan Lease 1,963 1998 Administrative Grand Rapids, Michigan Lease 2,000 1997 Warehouse Golden Valley, Minnesota Lease 3,800 1996 Warehouse
14 16
If Lease, Held in Fee Square Year of Location or by Lease Footage Termination Present Use -------- ----------- ------- ----------- ----------- Charlotte, North Carolina Lease 1,838 1996 Warehouse Buffalo, New York Lease 2,340 1995 Warehouse Dayton, Ohio Lease 4,295 1995 Warehouse Bensalem, Pennsylvania Lease 2,326 1994 Warehouse Indianapolis, Indiana Lease 1,800 1996 Warehouse Fort Worth, Texas Lease 3,600 1995 Warehouse Lenexa, Kansas Lease 2,089 1994 Warehouse Foreign ------- Orillia, Ontario, Canada Fee 48,000 -- Manufacturing, Warehouse, Administrative Concord, Ontario, Canada Lease 3,455 1994 Warehouse Edmonton, Alberta, Canada Lease 2,700 1996 Warehouse Calgary, Alberta, Canada Lease 1,600 Month-to-Month Warehouse Aldershot, England Lease 2,300 1995 Warehouse DYNAMIC SEALS, INC. Lynchburg, Virginia Fee 80,000 -- Manufacturing, Warehouse, Administrative Houston, Texas Lease 14,000 1995 Manufacturing, Warehouse, Administrative Houston, Texas Lease 14,000 1995 Warehouse
15 17
If Lease, Held in Fee Square Year of Location or by Lease Footage Termination Present Use -------- ----------- ------- ----------- ----------- WYNN'S CLIMATE SYSTEMS, INC. Domestic -------- Fort Worth, Texas Fee 210,000 -- Manufacturing, Warehouse, Administrative Fort Worth, Texas Lease 112,724 1994 Warehouse, Administrative Fort Worth, Texas Lease 49,000 1994 Warehouse, Administrative Paramount, California Lease 11,055 1994 Warehouse, Administrative Cranbury, New Jersey Lease 6,942 1994 Warehouse Madison Heights, Michigan Lease 1,100 1994 Administrative Littleton, Colorado Lease 4,839 1995 Service Center Northglenn, Colorado Lease 3,840 1995 Service Center Colorado Springs, Colorado Lease 6,600 1997 Service Center Phoenix, Arizona Lease 15,000 1994 Service Center Mesa, Arizona Lease 4,400 1996 Service Center Foreign ------- Tamworth, Staffordshire, England Lease 14,000 Month-to-Month Manufacturing, Warehouse, Administrative PETROCHEMICAL SPECIALTIES: WYNN OIL COMPANY Domestic -------- Azusa, California Fee 122,630 -- Manufacturing, Warehouse, Administrative
16 18
If Lease, Held in Fee Square Year of Location or by Lease Footage Termination Present Use -------- ----------- ------- ----------- ----------- Foreign ------- Frenchs Forest, Lease 24,224 1995 Warehouse, New South Wales, Australia Administrative Carrington, New South Wales, Lease 13,175 1996 Warehouse, Australia Administrative Malaga, Western Australia, Australia Lease 8,363 1994 Warehouse, Administrative St. Niklaas, Belgium Fee 82,600 -- Manufacturing, Warehouse, Administrative Mississauga, Ontario, Canada Lease 16,894 1995 Warehouse, Administrative Mississauga, Ontario, Canada Lease 2,536 1997 Service Center Vancouver, British Columbia, Canada Lease 2,582 1997 Service Center Reading, Berkshire, England Lease 6,692 1994 Warehouse, Administrative Strasbourg, France Lease 557 1997 Administrative Paris, France Lease 8,853 1997 Administrative Cestas, France Lease 11,405 1999 Warehouse, Administrative Cestas, France Lease 2,034 1994 Warehouse Lyon, France Lease 465 1998 Administrative Vitrolles, France Lease 715 1994 Administrative Rungis-Cedex, France Lease 8,264 Month-to-Month Warehouse, Administrative St. Etienne, France Lease 929 1996 Administrative Abbeville, France Lease 929 Month-to-Month Administrative Thiers, France Lease 465 1994 Administrative Toulouse, France Lease 485 1995 Administrative
17 19
If Lease, Held in Fee Square Year of Location or by Lease Footage Termination Present Use -------- ----------- ------- ----------- ----------- Celle, Germany Lease 7,209 2002 Warehouse, Administrative Mexico City, Mexico Lease 3,766 1996 Warehouse, Administrative Wynberg, Transvaal, South Africa Fee 32,280 -- Warehouse, Administrative Edenvale, Transvaal, South Africa Fee 10,921 -- Leased to Third Party Arganda del Rey, Madrid, Spain Lease 11,840 Month-to-Month Manufacturing, Warehouse Caracas, Venezuela Lease 1,615 Month-to-Month Administrative BUILDERS HARDWARE: ROBERT SKEELS & COMPANY Compton, California Fee 59,019 -- Warehouse, Administrative Fullerton, California Lease 1,600 1994 Warehouse, Administrative Los Angeles, California Lease 10,000 1994 Warehouse, Administrative
The Company believes that all of its operating properties are adequately maintained, fully utilized and suitable for the purposes for which they are used. With respect to those leases expiring in 1994 and 1995, the Company believes it will be able to renew such leases on acceptable terms or find suitable, alternative facilities. ITEM 3. LEGAL PROCEEDINGS Various claims and actions, considered normal to Registrant's business, have been asserted and are pending against Registrant and its subsidiaries. Registrant believes that such claims and actions should not have any material adverse effect upon the results of operations or the financial position of Registrant based on information presently known to Registrant. In February 1994, the United States District Court for the Eastern District of Michigan, Southern Division, in the case of Wynn Oil Company v. American Way Service Corporation and Thomas A. Warmus, Case No. 89-CV-71777-DT, awarded Wynn Oil the sum of $2,023,645 in damages in an action brought by Wynn Oil in 1989 asserting trademark infringement by the defendants. The trial court also 18 20 indicated that it would award prejudgment interest and attorneys' fees to Wynn Oil upon application to the court. Wynn Oil is seeking prejudgment interest and attorneys' fees in an aggregate amount of between approximately $1.2 million and $1.5 million. Following the entry of a final judgment by the trial court, the defendants are expected to appeal the trial court's decision to the United States Court of Appeals for the Sixth Circuit. No portion of this judgment has been included in the results of operations of the Company and all of Registrant's costs relating to this case have been expensed as incurred. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted to a vote of security holders during the fourth quarter of 1993. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The information appearing under "Common Stock Price and Cash Dividends Per Share: 1993-1992" on page 13 of the 1993 Annual Report and "Number of Stockholders" and "Stock Exchange Listing" on page 33 of the 1993 Annual Report is hereby incorporated by reference. On February 7, 1994, the Board of Directors of Registrant declared a cash dividend of $0.11 per share payable March 31, 1994 to stockholders of record on March 14, 1994. Under a long-term loan agreement with an insurance company, Registrant's ability to pay dividends may be restricted under certain circumstances. At the present time, Registrant believes that these restrictions will not have an impact on the declaration of future dividends. It is expected that Registrant will continue to pay dividends in the future. ITEM 6. SELECTED FINANCIAL DATA Incorporated by reference from page 13 of the 1993 Annual Report. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Incorporated by reference from the 1993 Annual Report, pages 14 through 17. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Consolidated financial statements of Registrant at December 31, 1993 and 1992 and for each of the three years in the period ended December 31, 1993 (including unaudited supplementary data) and the report of independent auditors thereon are incorporated by reference from the 1993 Annual Report, pages 13 and 18 through 32. 19 21 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information appearing under "Election of Directors" and "Compliance with Section 16(a) of the Securities Exchange Act of 1934" on pages 4, 5 and 21 of Registrant's definitive proxy statement for the Annual Meeting of Stockholders to be held on May 11, 1994 ("Registrant's 1994 Proxy Statement") is hereby incorporated by reference. A list of executive officers of Registrant is provided in Part I of this report. ITEM 11. EXECUTIVE COMPENSATION The information appearing under "Compensation of Directors," "Compensation Committee Interlocks and Insider Participation" and "Executive Compensation" on pages 6 through 10 of Registrant's 1994 Proxy Statement is hereby incorporated by reference. The Report of the Compensation Committee on pages 10 through 12 of Registrant's 1994 Proxy Statement shall not be deemed to be incorporated by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information appearing under "Security Ownership of Certain Beneficial Owners and Management" on pages 2 through 4 of Registrant's 1994 Proxy Statement is hereby incorporated by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information appearing under "Certain Relationships and Related Transactions" on page 21 of Registrant's 1994 Proxy Statement is hereby incorporated by reference. 20 22 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) 1. See Index to Financial Statements and Financial Statement Schedules Covered By Report of Independent Auditors. 2. See Index to Financial Statements and Financial Statement Schedules Covered By Report of Independent Auditors. 3. See Index to Exhibits. (b) No Reports on Form 8-K were filed by Registrant during the last quarter of 1993. 21 23 WYNN'S INTERNATIONAL, INC. INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES COVERED BY REPORT OF INDEPENDENT AUDITORS (ITEM 14(A))
Page References ------------------------------------- Form 10-K 1993 Annual Report --------- ------------------ Consolidated Statements of Operations for each of the three years in the period ended December 31, 1993 . . . . . . . . . 19 Consolidated Balance Sheets at December 31, 1993 and 1992 . . . . . . . . 20 Consolidated Statements of Stockholders' Equity for each of the three years in the period ended December 31, 1993 . . . . . . 21 Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 1993 . . . . . . . 22 - 23 Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . 24 - 32 Consolidated schedules for each of the three years in the period ended December 31, 1993: VIII - Valuation and qualifying accounts . . . . . . . . . . . 23 IX - Short-term borrowings . . . . . . . . . . . . . . . . . 24 X - Supplementary income statement information . . . . . . . 25
All other schedules are omitted since the required information is not present or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements, including the notes thereto. The consolidated financial statements listed in the above index, which are included in the 1993 Annual Report, are hereby incorporated by reference. With the exceptions of the pages listed in the above index and the items referred to in Items 1, 5, 6, 7 and 8, the 1993 Annual Report is not deemed to be filed as part of this report. 22 24 WYNN'S INTERNATIONAL, INC. SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS THREE YEARS ENDED DECEMBER 31, 1993
Allowance for doubtful accounts deducted from Balance at Charged to accounts beginning costs and Deductions Balance at receivable of year expenses (1) end of year ------------------ ---------- ---------- -------------- ----------- 1993 $2,644,000 $ (39,000) $ (757,000) $1,848,000 ========== ========== ============= ========== 1992 $3,206,000 $1,028,000 $(1,590,000) $2,644,000 ========== ========== ============ ========== 1991 $1,884,000 $2,027,000 $ (705,000) $3,206,000 ========== ========== ============= ==========
____________________ (1) Represents accounts written off against the reserve. 23 25 WYNN'S INTERNATIONAL, INC. SCHEDULE IX - SHORT-TERM BORROWINGS THREE YEARS ENDED DECEMBER 31, 1993
Maximum amount Weighted Year end outstanding at Average amount average weighted any month end outstanding interest rate Notes payable Balance at average during the during the during the to banks end of year interest rate year year year -------------- ----------- ------------- ------------- -------------- ------------- 1993 $ 809,000 7.7% $1,512,000 $1,177,000 10.5% =========== ====== ========== ========== ===== 1992 $ 940,000 12.5% $4,354,000 $1,744,000 10.3% =========== ===== ========== ========== ===== 1991 $ 696,000 11.1% $8,337,000 $4,976,000 8.0% =========== ===== ========== ========== =====
Notes payable represent obligations payable under several credit agreements to various banks. Borrowings are arranged on an as-needed basis at various terms and at the banks' most advantageous prevailing rates (see Note 7 of "Notes to Consolidated Financial Statements" on page 26 of the 1993 Annual Report). The average amount outstanding during the year was computed by averaging the month-end balances during the year. The weighted average interest rate was computed by dividing interest expense by the average amount outstanding. In 1993, the majority of the average outstanding borrowings were incurred by foreign subsidiaries in countries with interest rates above prevailing rates in the United States. 24 26 WYNN'S INTERNATIONAL, INC. SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION THREE YEARS ENDED DECEMBER 31, 1993
Charged to costs and expenses --------------------------------------------------- 1993 1992 1991 ---- ---- ---- Advertising costs $4,120,000 $4,311,000 $4,241,000 ========== ========== ========== Repairs and Maintenance $3,499,000 $3,382,000 $3,104,000 ========== ========== ==========
All other information has been omitted since the required information is not present in amounts sufficient to require inclusion in this schedule or because the information required is included in the consolidated financial statements, including the notes thereto. 25 27 POWER OF ATTORNEY Each person whose signature appears below hereby authorizes each of James Carroll, Seymour A. Schlosser and Gregg M. Gibbons as attorney-in-fact to sign on his behalf, individually and in each capacity stated below, and to file all amendments and/or supplements to this Annual Report on Form 10-K. 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, on March 25, 1994. WYNN'S INTERNATIONAL, INC. By JAMES CARROLL ------------------------------------ James Carroll President Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Date ---- March 25, 1994 By WESLEY E. BELLWOOD ------------------------------------ Wesley E. Bellwood Chairman of the Board March 25, 1994 By JAMES CARROLL ------------------------------------ James Carroll President Chief Executive Officer Director 26 28 Date ---- March 25, 1994 By SEYMOUR A. SCHLOSSER ---------------------------------- Seymour A. Schlosser Vice President-Finance (Principal Financial and Accounting Officer) March 25, 1994 By BARTON BEEK ---------------------------------- Barton Beek Director March 25, 1994 By JOHN D. BORIE ---------------------------------- John D. Borie Director March 25, 1994 By BRYAN L. HERRMANN ---------------------------------- Bryan L. Herrmann Director March 25, 1994 By ROBERT H. HOOD, JR. ---------------------------------- Robert H. Hood, Jr. Director March 25, 1994 By RICHARD L. NELSON ---------------------------------- Richard L. Nelson Director March 25, 1994 By JAMES D. WOODS ---------------------------------- James D. Woods Director 27 29 WYNN'S INTERNATIONAL, INC. INDEX TO EXHIBITS (Item 14(a))
Exhibit Number Description ------ ----------- 3.1 Certificate of Incorporation, as amended, of Registrant (incorporated herein by reference to Exhibit 3.1 to Registrant's Report on Form 10-K for the fiscal year ended December 31, 1987) 3.2 Certificate of Designations of Junior Participating Preferred Stock (incorporated herein by reference to Exhibit 4.2 to Registrant's Report on Form 8-K dated March 3, 1989) 3.3 By-Laws, as amended, of Registrant 4.1 Note Agreement, dated March 5, 1986, between Registrant and Metropolitan Life Insurance Company (incorporated herein by reference to Exhibit 4.1 to Registrant's Report on Form 8-K dated March 5, 1986) 4.2 Shareholder Rights Agreement, dated as of March 3, 1989, between Registrant and First Interstate Bank of California, as Rights Agent (incorporated by reference to Exhibit 4.1 to Registrant's Report on Form 8-K dated March 3, 1989) 4.3 Amendment No. 1 to Shareholder Rights Agreement, dated June 11, 1990 (incorporated by reference to Exhibit 28.2 to Registrant's Report on Form 8-K dated June 11, 1990) 10.1 Employment Agreement, dated December 8, 1992, between Registrant and James Carroll (incorporated herein by reference to Exhibit 10.1 to Registrant's Report on Form 10-K for the fiscal year ended December 31, 1992) 10.2 Employment Agreement, dated December 16, 1992, between Registrant and Gregg M. Gibbons (incorporated herein by reference to Exhibit 10.2 to Registrant's Report on Form 10-K for the fiscal year ended December 31, 1992)
28 30
Exhibit Number Description ------ ----------- 10.3 Employment Agreement, dated December 16, 1992, between Registrant and Seymour A. Schlosser (incorporated herein by reference to Exhibit 10.3 to Registrant's Report on Form 10-K for the fiscal year ended December 31, 1992) 10.4 Wynn's International, Inc. Amended and Restated 1980 Stock Option and Appreciation Rights Plan (incorporated herein by reference to Exhibit 4.1 to Registrant's Registration Statement on Form S-8, Registration No. 2-68157) 10.5 Wynn's International, Inc. Amended and Restated 1982 Incentive Stock Option Plan (incorporated herein by reference to Exhibit 4.2 to Registrant's Registration Statement on Form S-8, Registration No. 2-68157) 10.6 Wynn's International, Inc. Stock-Based Incentive Award Plan (incorporated herein by reference to Exhibit 28.1 to Registrant's Registration Statement on Form S-8, Registration No. 33-30296 and Exhibit 28.2 to Registrant's Registration Statement on Form S-8, Registration No. 33-64090) 10.7 Wynn's International, Inc. 1994 Corporate Management Incentive Plan 10.8 Deferred Compensation Agreement, dated November 30, 1990, between Registrant and James Carroll (incorporated herein by reference to Exhibit 10.9 to Registrant's Report on Form 10-K for the fiscal year ended December 31, 1990) 10.9 Deferred Compensation Agreement, dated February 15, 1993, between Registrant and James Carroll (incorporated herein by reference to Exhibit 10.11 to Registrant's Report on Form 10-K for the fiscal year ended December 31, 1992) 10.10 Deferred Compensation Agreement, dated April 23, 1993, between Registrant and James Carroll 10.11 Form of Indemnification Agreement between Registrant and a director of Registrant 11 Computation of net income per common share - primary and assuming full dilution
29 31
Exhibit Number Description ------ ----------- 13 Portions of Registrant's Annual Report to Stockholders for the fiscal year ended December 31, 1993 which have been expressly incorporated by reference as a part of this Annual Report on Form 10-K 22 Subsidiaries of Registrant 23 Consent of Independent Auditors
30 EX-3.3 2 BY-LAWS 1 EXHIBIT 3.3 BY-LAWS OF WYNN'S INTERNATIONAL, INC. AS AMENDED ON AUGUST 4, 1993 ARTICLE I OFFICES Section 1. The registered office shall be in the City of Wilmington, County of New Castle, State of Delaware. Section 2. The corporation may also have offices at such other places both within and without the State of Delaware as the board of directors may from time to time determine or the business of the corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS Section 1. All meetings of the stockholders for the election of directors shall be held in the City of Fullerton, State of California, at such place as may be fixed from time to time by the board of directors, or at such other place either within or without the State of Delaware as shall be designated from time to time by the board of directors and stated in the notice of the meeting. Meetings of stockholders for any other purpose may be held at such time and place, within or without the State of Delaware, as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof. Section 2. Annual meetings of stockholders, commencing with the year 1977, shall be held on the fourth Wednesday of April if not a legal holiday, and if a legal holiday, then on the next secular day following, at 10:00 A.M., or at such other date and time as shall be designated from time to time by the board of directors and stated in the notice of the meeting, at which they shall elect by a plurality vote by written ballot the successors to the class of directors whose terms shall expire in that year, and transact such other business as may properly be brought before the meeting. Section 3. Written notice of the annual meeting stating the place, date and hour of the meeting shall be given to each stockholder entitled to vote at such meeting not less than ten nor more than sixty days before the date of the meeting. Section 4. The officer who has charge of the stock ledger of the corporation shall prepare and make, or cause to be prepared and made, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at 2 the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. Section 5. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute or by the Certificate of Incorporation, may be called by the President and shall be called by the President or Secretary at the request in writing of a majority of the board of directors. Section 6. Written notice of a special meeting stating the place, date and hour of the meeting and the purpose or purposes for which the meeting is called, shall be given not less than ten nor more than sixty days before the date of the meeting, to each stockholder entitled to vote at such meeting. Section 7. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice. Section 8. The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the Certificate of Incorporation. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally notified. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. Section 9. When a quorum is present at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which, by express provision of the statutes or of the Certificate of Incorporation, a different vote is required, in which case such express provision shall govern and control the decision of such question. 2 3 Section 10. Unless otherwise provided in the Certificate of Incorporation, each stockholder shall at every meeting of the stockholders be entitled to one vote in person or by proxy for each share of the capital stock having voting power held by such stockholder, but no proxy shall be voted on after three years from its date, unless the proxy provides for a longer period. Section 11. Unless otherwise provided in the Certificate of Incorporation, any action required to be taken at any annual or special meeting of stockholders of the corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. ARTICLE III DIRECTORS Section 1. The number of directors which shall constitute the whole board shall be eight (8) and shall be classified with respect to the time for which they shall severally hold office by dividing them into three (3) classes, Class I and Class III each shall consist of three (3) directors and Class II shall consist of two (2) directors. All directors of the corporation shall hold office until their successors are duly elected and qualified. The directors of Class I shall hold office until the annual meeting of stockholders of the corporation to be held in 1974 and until their successors are duly elected and qualified; the directors of Class II shall hold office until the annual meeting of stockholders of the corporation to be held in 1975 and until their successors are duly elected and qualified; and the directors of Class III shall hold office until the annual meeting of stockholders of the corporation to be held in 1976 and until their successors are duly elected and qualified. In the event of any increase or decrease in the authorized number of directors (i) each director then serving as such shall nevertheless continue as a director of the class of which he or she is a member until the expiration of his or her current term, or his or her death, retirement, resignation, or removal, and (ii) the newly-created or eliminated directorships resulting from such increase or decrease shall be apportioned by the Board among the three classes of directors so as to maintain the number of directorships in such classes as nearly equal as possible. At each annual meeting of the stockholders of the corporation, the successors to the class of directors whose terms shall expire in that year shall be elected to hold office for a term of three (3) years, so that the term of office of one class of directors shall expire in each year. 3 4 Section 2. Vacancies in the board of directors may be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director, and any director so chosen shall hold office for the remainder of the full term of the director whose place he has been elected to fill and until his successor is duly elected and shall qualify. If there are no directors in office, then an election of directors may be held in the manner provided by statute. A vacancy or vacancies in the board of directors shall be deemed to exist in case of the death, resignation or removal of any director, or if the stockholders fail at any annual or special meeting of stockholders at which any director or directors are elected to elect the full authorized number of directors to be voted for at that meeting, or if there are newly created directorships resulting from any increase in the authorized number of directors. If, at the time of filling any vacancy, the directors then in office shall constitute less than a majority of the whole board (as constituted immediately prior to any such increase), the Court of Chancery may, upon application of any stockholder or stockholders holding at least ten percent of the total number of the shares at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office. Section 3. The business of the corporation shall be managed by its board of directors which may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the Certificate of Incorporation or by these By-Laws directed or required to be exercised or done by the stockholders. The Chairman of the board of directors shall preside at all meetings of the stockholders and of the board of directors. MEETING OF THE BOARD OF DIRECTORS Section 4. The board of directors of the corporation may hold meetings, both regular and special, either within or without the State of Delaware. Section 5. Immediately following each annual meeting of stockholders and at the place thereof, or at such other time and place as shall be fixed by resolution of the board of directors prior to the annual meeting of the stockholders, the board of directors shall hold a meeting for the purpose of organization, election of officers, and the transaction of such other business as they deem necessary. Notice of such meetings is hereby dispensed with. In the event a meeting of the board of directors is not held immediately after the annual meeting of the stockholders, or in the event the board of directors fails to fix the time and place for such meeting, the meeting may be held at such time and place as shall be specified in a notice given 4 5 as hereinafter provided for special meetings of the board of directors, or as shall be specified in a written waiver signed by all of the directors. Section 6. Regular meetings of the board of directors may be held without notice at such time and at such place as shall from time to time be determined by the board. Section 7. Special meetings of the board may be called by the President on two (2) days' notice to each director, either personally or by mail or by telegram; special meetings shall be called by the President or Secretary in like manner and on like notice on the written request of two directors. Section 8. At all meetings of the board a majority of directors shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the board of directors, except as may be otherwise specifically provided by statute or by the Certificate of Incorporation. If a quorum shall not be present at any meeting of the board of directors the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Section 9. Unless otherwise restricted by the Certificate of Incorporation or these By-Laws, any action required or permitted to be taken at any meeting of the board of directors or of any committee thereof may be taken without a meeting, if all members of the board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the board or committee. Section 10. Unless otherwise restricted by the Certificate of Incorporation or these By-Laws, members of the board of directors or any committee thereof may participate in a meeting of such board or committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this section shall constitute presence in person at such meeting. COMMITTEES OF DIRECTORS Section 11. The board of directors may, by resolution passed by a majority of the whole board, designate one or more committees, each committee to consist of one or more of the directors of the corporation. The board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they 5 6 constitute a quorum, may unanimously appoint another member of the board of directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the board of directors, shall have and may exercise all the powers and authority of the board of directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the Certificate of Incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the corporation's property and assets, recommending to the stockholders a dissolution of the corporation or a revocation of a dissolution, or amending the By-Laws of the corporation; and, unless the resolution or the Certificate of Incorporation expressly so provide, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the board of directors. Section 12. Each committee shall keep regular minutes of its meetings and report the same to the board of directors when required. COMPENSATION OF DIRECTORS Section 13. Unless otherwise restricted by the Certificate of Incorporation, the board of directors shall have the authority to fix the compensation of directors. The directors may be paid their expenses, if any, of attendance at each meeting of the board of directors and may be paid a fixed sum for attendance at each meeting of the board of directors or a stated salary as director. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings. ARTICLE IV NOTICES Section 1. Whenever, under the provisions of the statutes or of the Certificate of Incorporation or of these By-Laws, notice is required to be given to any director or stockholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, addressed to such director or stockholder, at his address as it appears on the records of the corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Notice to directors may also be given by telegram. 6 7 Section 2. Whenever any notice is required to be given under the provisions of the statutes or of the Certificate of Incorporation or of these By-Laws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. ARTICLE V OFFICERS Section 1. The officers of the corporation shall be chosen by the board of directors and shall be a President, one or more Vice Presidents, a Secretary and a Treasurer. The board of directors shall select and appoint a Chairman of the board of directors from among the directors of the corporation, but such person shall not be considered an officer or employee of the corporation unless so specified by the board of directors. The board of directors may also choose one or more Assistant Secretaries and Assistant Treasurers. Any number of offices may be held by the same person, unless the Certificate of Incorporation or these By-Laws otherwise provide. Section 2. The board of directors at its first meeting after each annual meeting of stockholders shall choose a Chairman of the Board, a President, one or more Vice Presidents, a Secretary and a Treasurer. Section 3. The board of directors may appoint such other officers and agents as it shall deem necessary who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the board. Section 4. The salaries of all officers and agents of the corporation shall be fixed by the board of directors. Section 5. The officers of the corporation shall hold office until their successors are chosen and qualify. Any officer elected or appointed by the board of directors may be removed at any time by the affirmative vote of a majority of the board of directors. Any vacancy occurring in any office of the corporation shall be filled by the board of directors. THE PRESIDENT Section 6. The President shall be the Chief Executive Officer of the corporation, and, in the absence of the Chairman of the Board, shall preside at all meetings of the stockholders, and at all meetings of the board of directors and shall have general and active management of the business of the corporation and shall 7 8 perform such other duties as may be assigned to him from time to time by the board of directors or the By-Laws. Section 7. He shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the board of directors to some other officer or agent of the corporation. THE VICE PRESIDENTS Section 8. In the absence of the President or in the event of his inability or refusal to act, the Vice Presidents in the order determined by the board of directors (or if there be no such determination, then in the order of their election) shall perform the duties of the President, and when so acting, shall have all the powers of and subject to all the restrictions upon the President. The Vice Presidents shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. THE SECRETARY AND ASSISTANT SECRETARY Section 9. The Secretary shall attend all meetings of the board of directors and all meetings of the stockholders and record all the proceedings of the meetings of the corporation and of the board of directors in a book to be kept for that purpose and shall perform like duties for the standing committees when required. He shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the board of directors, and shall perform such other duties as may be prescribed by the board of directors or President, under whose supervision he shall be. He shall have custody of the corporate seal of the corporation and he, or an Assistant Secretary, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by his signature or by the signature of such Assistant Secretary. The board of directors may give general authority to any other officer to affix the seal of the corporation and to attest the affixing by his signature. Section 10. The Assistant Secretary, or if there be more than one, the Assistant Secretaries in the order determined by the board of directors (or if there be no such determination, then in the order of their election) shall, in the absence of the Secretary or in the event of his inability or refusal to act, perform the duties and exercise the powers of the Secretary and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. 8 9 THE TREASURER AND ASSISTANT TREASURERS Section 11. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the board of directors. Section 12. He shall disburse the funds of the corporation as may be ordered by the board of directors, taking proper vouchers for such disbursements, and shall render to the President and the board of directors, at its regular meetings, or when the board of directors so requires, an account of all his transactions as Treasurer and of the financial condition of the corporation. Section 13. If required by the board of directors, he shall give the corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the board of directors for the faithful performance of the duties of his office and for the restoration to the corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the corporation. Section 14. The Assistant Treasurer, or if there shall be more than one, the Assistant Treasurers in the order determined by the board of directors (or if there be no such determination, then in the order of their election) shall, in the absence of the Treasurer or in the event of his inability or refusal to act, perform the duties and exercise the powers of the Treasurer and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. ARTICLE VI CERTIFICATES OF STOCK Section 1. Every holder of stock in the corporation shall be entitled to have a certificate, signed by, or in the name of the corporation by, the Chairman or Vice Chairman of the board of directors, or the President or a Vice President and the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the corporation, certifying the number of shares owned by him in the corporation. If the corporation shall be authorized to issue more than one class of stock or more than one series of any class, the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualification, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate which the corporation shall issue to represent such class or series of stock, provided that, except as otherwise provided in Section 202 of the General Corporation Law of Delaware, in lieu of the foregoing requirements, there may be set forth on the face 9 10 or back of the certificate which the corporation shall issue to represent such class or series of stock, a statement that the corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights or each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Section 2. Any of or all the signatures on the certificate may be facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. LOST CERTIFICATES Section 3. The board of directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates, the board of directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or to give the corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost, stolen, or destroyed. TRANSFERS OF STOCK Section 4. Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. FIXING RECORD DATE Section 5. In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or 10 11 exchange of stock or for the purpose of any other lawful action, the board of directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the board of directors may fix a new record date for the adjourned meeting. REGISTERED STOCKHOLDERS Section 6. The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware. ARTICLE VII GENERAL PROVISIONS DIVIDENDS Section 1. Dividends upon the capital stock of the corporation, subject to the provisions of the Certificate of Incorporation, if any, may be declared by the board of directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the Certificate of Incorporation. Section 2. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meeting contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the directors shall think conducive to the interest of the corporation, and the directors may modify or abolish any such reserve in the manner in which it was created. CHECKS Section 3. All checks or demands for money and notes of the corporation shall be signed by such officer or officers or such other person or persons as the board of directors may from time to time designate. 11 12 FISCAL YEAR Section 4. The fiscal year of the corporation shall be fixed by resolution of the board of directors. SEAL Section 5. The corporate seal shall have inscribed thereon the name of the corporation, the year of its organization and the words "Corporate Seal, Delaware." The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. REPRESENTATION OF SHARES OF OTHER CORPORATIONS Section 6. The President or any Vice President and the Secretary or Assistant Secretary of this corporation are authorized to vote, represent and exercise on behalf of this corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of this corporation. The authority herein granted to said officers to vote or represent on behalf of this corporation any and all shares held by this corporation in any other corporation or corporations may be exercised either by such officers in person or by any person authorized so to do by proxy or power of attorney duly executed by said officers. INDEMNIFICATION Section 7.1 Policy. It is the policy and intention of the corporation to provide to its officers and directors broad and comprehensive indemnification from liability to the full extent permitted by law. Section 7.2 Right to Indemnification. Each person who was or is a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is an alleged action or inaction in an official capacity or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the corporation to the fullest extent permitted by the laws of Delaware, as the same exists or may hereafter be amended, against all costs, charges, expenses, liabilities and losses (including attorneys' fees, judgments, fines, ERISA 12 13 excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that except as provided in Section 7.3 hereof, the corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board of Directors of the corporation. The right to indemnification conferred in this Article shall be a contract right and shall include the right to be paid by the corporation the expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that, if the Delaware General Corporation Law requires, the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding, shall be made only upon delivery to the corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director of officer is not entitled to be indemnified under this Article or otherwise. The corporation may, by action of its Board of Directors, provide indemnification to employees and agents of the corporation with the same scope and effect as the foregoing indemnification of directors and officers. Section 7.3 Right of Claimant to Bring Suit. If a claim under this Article is not paid in full by the corporation within thirty days after a written claim has been received by the corporation, the claimant may at any time thereafter bring suit against the corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any, is required, has been tendered to the corporation) that the claimant has failed to meet a standard of conduct which makes it permissible under Delaware law for the corporation to indemnify the claimant for the amount claimed. Neither the failure of the corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is permissible in the circumstances because he or she has met such standard of conduct, nor an actual determination by the corporation (including its Board of Directors, independent legal counsel or its stockholders) that the claimant has not met such standard of conduct, shall be a defense to the action or create a presumption that the claimant has failed to meet such standard of conduct. Section 7.4 Non-Exclusivity of Rights. The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final 13 14 disposition conferred in this Article shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, bylaw, agreement, vote of stockholders or disinterested directors or otherwise. Section 7.5 Insurance. The corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the corporation or another corporation, partnership, joint venture, trust or other enterprise against any such expense, liability or loss, whether or not the corporation would have the power to indemnify such person against such expenses, liability or loss under Delaware law. Section 7.6 Expenses as a Witness. To the extent that any director, officer, employee or agent of the corporation is by reason of such position, or a position with another entity at the request of the corporation, a witness in any action, suit or proceeding, he or she shall be indemnified against all costs and expenses actually and reasonably incurred by him or her or on his or her behalf in connection therewith. Section 7.7 Indemnity Agreement. The corporation may enter into agreements with any director, officer, employee or agent of the corporation to the fullest extent permitted by Delaware law. Section 7.8 Effect of Repeal or Modification. Any repeal or modification of this Section 7 shall not result in any liability for a director with respect to any action or omission occurring prior to such repeal or modification. ARTICLE VIII AMENDMENTS Section 1. These By-Laws may be altered, amended or repealed or new by-laws may be adopted by the stockholders or by the board of directors at any regular meeting of the stockholders or of the board of directors or at any special meeting of the stockholders or of the board of directors if notice of such alteration, amendment, repeal or adoption of new by-laws be contained in the notice of such special meeting. 14 EX-10.7 3 CORPORATE MANAGEMENT INCENTIVE PLAN 1 EXHIBIT 10.7 WYNN'S INTERNATIONAL, INC. 1994 CORPORATE MANAGEMENT INCENTIVE PLAN Section 1. The purpose of this 1994 Corporate Management Incentive Plan (the "1994 Plan") is to provide a reward for performance and an incentive for the future endeavors of the Corporate Management Employees who contribute to the success of the enterprise by their ability, industry, loyalty, or exceptional service, through making them participants in that success. Section 2. (a) Wynn's International, Inc. (the "Company") shall establish a reserve for bonus payments for Corporate Management Employees for the year 1994 (the "Corporate Bonus Pool") with a corresponding charge to income for the year 1994 in an amount which the independent public accountants of the Company verify and report to be equal to ten percent of the amount by which the Consolidated Pretax Earnings of the Company exceed a ten percent (10%) return on Beginning Net Operating Assets, provided, however, that (i) the maximum amount of the Corporate Bonus Pool shall be Eight Hundred Seventy Five Thousand Dollars ($875,000), and (ii) no amounts shall be earned hereunder if the Consolidated Pretax Earnings of the Company for the year ended December 31, 1994 are less than Thirteen Million Nine Hundred Six Thousand Dollars ($13,906,000). (b) Before the payment of bonus awards for the year 1994, the independent accountants of the Company shall verify and report to the Board of Directors of the Company (the "Board") the total amount of the Corporate Bonus Pool and bonus awards to be paid therefrom shall not exceed the Corporate Bonus Pool as verified and reported by the independent public accountants. Bonus awards under the 1994 Plan shall be charged to income for 1994. Section 3. (a) The term "Consolidated Pretax Earnings" as used in the 1994 Plan shall mean, for calendar year 1994, the Company's income before taxes based on income as shown on the Consolidated Statement of Operations section of the Company's 1994 Consolidated Financial Statements after making adequate provision for the Corporate Bonus Pool in the 1994 Consolidated Financial Statements. (b) The term "Beginning Net Operating Assets" shall mean the consolidated net operating assets of the Company and subsidiaries at December 31, 1993, as calculated in a manner consistent with the Company's Corporate Policy No. 1014. (c) The term "1994 Consolidated Financial Statements" as used in the 1994 Plan shall mean those financial statements of the Company and its subsidiaries contained in 2 the Company's annual report to stockholders for the year ended December 31, 1994 and upon which an opinion has been expressed by the independent public accountants of the Company. (d) The term "Corporate Management Employee" shall mean any person employed as President and Chief Executive Officer, Vice President-Finance and Chief Financial Officer, Vice President-Corporate Affairs, General Counsel and Secretary, Assistant Secretary, Senior Counsel, Tax Manager, Controller, Employee Benefits and Risk Manager, and any other management employees of the Company designated by the President. Section 4. Full power and authority to construe, interpret, and administer the 1994 Plan shall be vested in the Board as from time to time constituted pursuant to the By-Laws of the Company. Decisions of the Board shall be final, conclusive, and binding. The Board shall rely upon and be bound by the amount of Consolidated Pretax Earnings, Beginning Net Operating Assets and the Corporate Bonus Pool, all as verified and reported by the independent public accountants of the Company. The foregoing shall include, but shall not be limited to, all determinations by the Board as to (i) the eligibility of a Corporate Management Employee for consideration for a bonus, and (ii) the amount, if any, of the bonus award paid to a Corporate Management Employee. Any person who accepts any benefit hereunder agrees to accept as final, conclusive, and binding, the determinations of the Board. Section 5. The Board shall have discretion with respect to the determination of individual bonus awards to the executive officers of the Company. Individual bonus awards to other Corporate Management Employees shall be at the discretion of the Chief Executive Officer of the Company. However, the total Corporate Bonus Pool shall be distributed to the 1994 Plan participants. The recommendations for bonus awards under the 1994 Plan for executive officers of the Company shall be made to the Compensation Committee of the Board (the "Committee") by the Chief Executive Officer under such procedure as may from time to time be approved by the Board, except that no such recommendations shall be made with respect to the Chief Executive Officer, but such bonus shall be dealt with exclusively by the Committee under such procedures as it may determine. Nothing contained herein shall entitle any Corporate Management Employee to a bonus award, as a matter of right, for services rendered in 1994. Section 6. Notwithstanding the provisions of Sections 2 and 5, the Committee shall have the authority to recommend to the Board, and the Board shall have the power to authorize in accordance with the recommendations of the Committee the payment of additional bonus awards to any or all executive officers for outstanding performance in 1994, provided, however, that the amount of any such additional bonus award, together with any amounts paid pursuant to Sections 2 and 5, shall not exceed one hundred percent (100%) of such executive officer's base salary in 1994. 2 3 Section 7. Bonus awards under the 1994 Plan will be paid to each recipient no later than March 15, 1995 in one installment in cash, restricted stock of the Company, or any combination thereof. Any award of WII restricted stock is subject to the approval of the Committee. Section 8. Upon termination of a Corporate Management Employee's employment during the calendar year 1994 other than by death, such participant shall not be entitled as a matter of right to any bonus award for services rendered in 1994, provided, however, the Board may award a bonus as a matter of discretion pursuant to Section 9 below. Section 9. Notwithstanding Section 8 above, a Corporate Management Employee whose employment terminates during the year or who is granted a leave of absence during the year, and who at the time of such termination of employment or granting of leave is eligible for consideration of a bonus, may, at the discretion of the Board, and under such rules as the Board may from time to time approve, be awarded a bonus with respect to the period of his/her services during the year 1994. Section 10. Upon the death of a Corporate Management Employee during 1994, there shall be paid (as a death benefit and in lieu of any payment pursuant to Section 5 which would otherwise have been payable after the death of such Corporate Management Employee) to such beneficiaries as the Corporate Management Employee shall have designated in writing and on forms prescribed by and filed with the Board, or, if no such designation of beneficiaries has been made, to such Corporate Management Employee's legal representatives or to the persons entitled thereto as determined by a court of competent jurisdiction, an amount equal to the bonus award, if any, that would have been paid to the deceased Corporate Management Employee had such participant remained employed by the Company through December 31, 1994. Any bonus which may be awarded to such deceased participant shall be paid at the time awards are paid to other participants pursuant to the 1994 Plan. Section 11. The 1994 Plan and all determinations made and actions taken pursuant hereto shall be governed by the laws of the State of Delaware and construed accordingly. Section 12. The 1994 Plan is effective as of January 1, 1994. 3 EX-10.10 4 STANDARD DEFERED COMPENSATION AGREEMENT 1 EXHIBIT 10.10 STANDARD DEFERRED COMPENSATION AGREEMENT THIS AGREEMENT, is made the 23rd day of April, 1993, at Lebanon, Tennessee, by and between Wynn's-Precision, Inc., a Delaware Corporation, hereinafter sometimes referred to as "Employer," and James Carroll, hereinafter sometimes referred to as "Employee." W I T N E S S E T H : WHEREAS, Employer has offered to defer payment of Employee's incentive award, if any earned for services to be rendered in 1993 and to be paid in 1994; and WHEREAS, Employee desires to receive said incentive award for 1993, if earned, as deferred compensation; and WHEREAS, the parties hereto have agreed to certain terms and conditions in connection therewith and desire to reduce their agreement in writing; NOW, THEREFORE, for a valuable consideration, the receipt and sufficiency of which is acknowledged, the parties agree as follows: 1. Amount Employer shall defer payment of, and Employee shall defer receipt of the incentive award, if any, earned by Employee for services rendered for calendar year 1993 ("Deferred Compensation"). Said Deferred Compensation 2 shall bear interest from the date that said Deferred Compensation would otherwise be payable to Employee to the date of payment at the lesser of (a) the rate of fifteen percent (15%) per annum, or (b) the prime rate as quoted by Third National Bank, Nashville, Tennessee, on the last business day of each calendar quarter. 2. Date Of Payment Payment of Deferred Compensation shall be made five (5) business days after the earliest of the following events: (a) Employee terminates his employment with Employer; (b) Employee becomes permanently disabled; (c) Employee retires; or (d) A change in control of Wynn's International, Inc. (WII), the ultimate parent corporation of Employer, occurs. 3. Method Of Payment Upon the occurrence of the earlier of any of the events specified in Paragraph 2 hereof, Employer agrees to pay to Employee by Employer check the total sum deferred in accordance with Paragraph 1, including principal and interest, payable in one lump sum, less any required withholdings. 4. Death Benefit In the event that Employee shall die while employed by Employer, or while on an agreed leave of absence from said employment, then this Agreement shall be terminated, and Employer shall pay to the person(s) designated by Employee, the total amount of Deferred Compensation hereunder, including principal and interest, payable in one (1) installment, 2 3 commencing no later than sixty (60) days following the death of said Employee. If Employee shall not have filed a designation of beneficiary in writing with Employer at the time of his death, then Employer shall pay said total benefit to Employee's spouse, if living, and if not, to Employee's estate. Employer shall have the right to make any required withholdings from such payments. 5. Change In Control Of WII For purposes of this Agreement, a "change in control of WII" shall mean a change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended ("Exchange Act"); provided that, without limitation, such a change in control shall be deemed to have occurred if (i) any "person" (as such term is used in Sections 13(d) and 14(d)(2) of the Exchange Act) is or becomes the beneficial owner, directly or indirectly, of securities of WII representing 40% or more of the combined voting power of WII's then outstanding securities; or (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of WII cease for any reason to constitute at least a majority thereof unless the election of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period. 6. Funding Of Benefit Employee understands and acknowledges that all Deferred Compensation under Paragraph 1 of this Agreement shall be general unsecured obligations of Employer and that Employer shall have no 3 4 obligation to set aside any amounts, principal or interest, for the benefit of Employee in order to meet Employer's obligations under this Agreement, until said amounts become due and payable under this Agreement. Employer shall be entitled to set up such reserves as are required in order for Employer's financial statements to be in accordance with generally accepted accounting principles. 7. Statement Of Account Employer shall furnish to Employee an annual statement showing the amount of Deferred Compensation, including principal and interest, held for the account of Employee. 8. Non-Assignability The rights and benefits of Employee hereunder and the rights and benefits of the person(s) who may be designated by Employee pursuant to the provisions of Paragraph 4 hereof, shall be personal to Employee and to such person(s), and no right or benefit hereunder shall be subject to voluntary or involuntary alienation, assignment, pledge, hypothecation or transfer, or become an asset in bankruptcy of such Employee or such person(s), or of any person claiming through or under them; and no such right or benefit shall be available or subject to the claims of any creditor of such Employee or such person(s), or any person claiming through or under them. 9. Governing Law This Agreement shall be governed by and construed according to the laws of the State of Tennessee. 4 5 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. WYNN'S-PRECISION, INC. By JERRY L. McFADDEN --------------------------------- Jerry L. McFadden Vice President-Finance ATTEST: LYNN WINFREE - ------------------- Lynn Winfree Assistant Secretary By JAMES CARROLL --------------------------------- James Carroll 5 EX-10.11 5 INDEMNIFICATION AGREEMENT 1 EXHIBIT 10.11 INDEMNIFICATION AGREEMENT This Indemnification Agreement (the "Agreement") is made as of __________, 199__, by and between Wynn's International, Inc., a Delaware corporation (the "Company"), and ______________ (the "Indemnitee"), a director of the Company. R E C I T A L S A. The Indemnitee is currently serving or has agreed to serve as a director of the Company and in such capacity has rendered or will render valuable services to the Company. B. The Company has investigated the availability and sufficiency of liability insurance and Delaware statutory indemnification provisions to provide its directors and officers with adequate protection against various legal risks and potential liabilities to which such individuals are subject due to their position with the Company and has concluded that such insurance and statutory provisions may provide inadequate and unacceptable protection to certain individuals requested to serve as its directors and officers. C. In order to induce and encourage highly experienced and capable persons such as the Indemnitee to continue to serve as a director of the Company, the Board of Directors has determined, after due consideration and investigation of the terms and provisions of this Agreement and the various other options available to the Company and the Indemnitee in lieu hereof, that this Agreement is reasonable and prudent and in the best interests of the Company and its stockholders. A G R E E M E N T NOW, THEREFORE, in consideration of the continued services of the Indemnitee and in order to induce the Indemnitee to serve as a director, the Company and the Indemnitee do hereby agree as follows: 1. Definitions. As used in this Agreement: (a) The term "Proceeding" shall include any threatened, pending or completed action, suit or proceeding, whether brought in the name of the Company or otherwise and whether of a civil, criminal or administrative or investigative nature, by reason of the fact that the Indemnitee is or was a director of the Company, or is or was serving at the request of the Company as a director, officer, employee or agent of another enterprise, whether or not he is serving in such capacity at the time any liability or expense is incurred for which indemnification or reimbursement is to be provided under this Agreement. 2 (b) The term "Expenses" includes, without limitation, attorneys' fees, disbursements and retainers, accounting and witness fees, travel and deposition costs, expenses of investigations, judicial or administrative proceedings or appeals, amounts paid in settlement by or on behalf of the Indemnitee, and any expenses of establishing a right to indemnification pursuant to this Agreement or otherwise including reasonable compensation for time spent by the Indemnitee in connection with the investigation, defense or appeal of a Proceeding or action for indemnification for which he is not otherwise compensated by the Company or any third party. The term "Expenses" does not include the amount of judgments, fines, penalties or ERISA excise taxes actually levied against the Indemnitee. 2. Agreement to Serve. The Indemnitee agrees to continue to serve as a director of the Company at the will of the Company for so long as he is duly elected or appointed or until such time as he tenders his resignation in writing. 3. Indemnification in Third Party Actions. The Company shall indemnify the Indemnitee in accordance with the provisions of this section if the Indemnitee is a party to or threatened to be made a party to or otherwise involved in any Proceeding (other than a Proceeding by or in the name of the Company to procure a judgment in its favor), by reason of the fact that the Indemnitee is or was a director of the Company, or is or was serving at the request of the Company as a director, officer, employee or agent of another enterprise against all Expenses, judgments, fines, penalties and ERISA excise taxes actually and reasonably incurred by the Indemnitee in connection with the defense or settlement of such Proceeding, to the fullest extent permitted by Delaware law; provided that any settlement be approved in writing by the Company. 4. Indemnification in Proceedings by or in the Name of the Company. The Company shall indemnify the Indemnitee in accordance with the provisions of this section if the Indemnitee is a party to or threatened to be made a party to or otherwise involved in any Proceeding by or in the name of the Company to procure a judgment in its favor by reason of the fact that the Indemnitee was or is a director of the Company, or is or was serving at the request of the Company as a director, officer, employee or agent of another enterprise, against all Expenses actually and reasonably incurred by the Indemnitee in connection with the defense or settlement of such Proceeding, to the fullest extent permitted by Delaware law. 5. Conclusive Presumption Regarding Standard of Conduct. The Indemnitee shall be conclusively presumed to have met the relevant standards of conduct as defined by Delaware law for indemnification pursuant to this Agreement, unless a final determination is made by a court of competent jurisdiction that the Indemnitee has not met such standards. 6. Indemnification of Expenses of Successful Party. Notwithstanding any other provisions of this Agreement, to the extent that the Indemnitee has been successful in defense of any Proceeding or in defense of any claim, issue or matter 2 3 therein, on the merits or otherwise, including the dismissal of a Proceeding without prejudice, the Indemnitee shall be indemnified against all Expenses incurred in connection therewith to the fullest extent permitted by Delaware law. 7. Advances of Expenses. The Expenses incurred by the Indemnitee in any Proceeding shall be paid promptly by the Company in advance of the final disposition of the Proceeding at the written request of the Indemnitee to the fullest extent permitted by Delaware law; provided that as long as Delaware law requires such an undertaking, the Indemnitee shall undertake in writing to repay such amount to the extent that it is ultimately determined that the Indemnitee is not entitled to indemnification. 8. Partial Indemnification. If the Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of the Expenses, judgments, fines, penalties or ERISA excise taxes actually and reasonably incurred by him in the investigation, defense, appeal or settlement of any Proceeding but not, however, for the total amount thereof, the Company shall nevertheless indemnify the Indemnitee for the portion of such Expenses, judgments, fines, penalties or ERISA excise taxes to which the Indemnitee is entitled. 9. Indemnification Procedure; Determination of Right to Indemnification. (a) Promptly after receipt by the Indemnitee of notice of the commencement of any Proceeding, the Indemnitee will, if a claim in respect thereof is to be made against the Company under this Agreement, notify the Company of the commencement thereof. The omission so to notify the Company will not relieve it from any liability which it may have to the Indemnitee otherwise than under this Agreement. (b) If a claim under this Agreement is not paid by the Company within thirty (30) days of receipt of written notice, the right to indemnification as provided by this Agreement shall be enforceable by the Indemnitee in any court of competent jurisdiction. The burden of proving by clear and convincing evidence that indemnification or advances are not appropriate shall be on the Company. Neither the failure of the directors or stockholders of the Company or its independent legal counsel to have made a determination prior to the commencement of such action that indemnification or advances are proper in the circumstances because the Indemnitee has met the applicable standard of conduct, nor an actual determination by the directors or stockholders of the Company or its independent legal counsel that the Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the Indemnitee has not met the applicable standard of conduct. (c) The Indemnitee's Expenses incurred in connection with any proceeding concerning his right to indemnification or advances in whole or in part 3 4 pursuant to this Agreement shall also be indemnified by the Company regardless of the outcome of such proceeding, unless a court of competent jurisdiction determines that each of the material assertions made by the Indemnitee in such proceeding was not made in good faith or was frivolous. (d) With respect to any Proceeding for which indemnification is requested, the Company will be entitled to participate therein at its own expense and, except as otherwise provided below, to the extent that it may wish, the Company may assume the defense thereof, with counsel satisfactory to the Indemnitee. After notice from the Company to the Indemnitee of its election to assume the defense of a Proceeding, the Company will not be liable to the Indemnitee under this Agreement for any legal or other expenses subsequently incurred by the Indemnitee in connection with the defense thereof, other than reasonable costs of investigation or as otherwise provided below. The Company shall not settle any Proceeding in any manner which would impose any penalty or limitation on the Indemnitee without the Indemnitee's written consent. The Indemnitee shall have the right to employ his own counsel in any Proceeding but the fees and expenses of such counsel incurred after notice from the Company of its assumption of the defense thereof shall be at the expense of the Indemnitee, unless (i) the employment of counsel by the Indemnitee has been authorized by the Company, (ii) the Indemnitee shall have reasonably concluded that there may be a conflict of interest between the Company and the Indemnitee in the conduct of the defense of a Proceeding, or (iii) the Company shall not in fact have employed counsel to assume the defense of a Proceeding, in each of which cases the fees and expenses of the Indemnitee's counsel shall be at the expense of the Company. The Company shall not be entitled to assume the defense of any Proceeding brought by or on behalf of the Company or as to which the Indemnitee has made the conclusion that there may be a conflict of interest between the Company and the Indemnitee. 10. Limitations on Indemnification. No payments pursuant to this Agreement shall be made by the Company: (a) To indemnify or advance Expenses to the Indemnitee with respect to Proceedings initiated or brought voluntarily by the Indemnitee and not by way of defense, except with respect to Proceedings brought to establish or enforce a right to indemnification under this Agreement or any other statute or law or otherwise as required under Delaware law, but such indemnification or advancement of Expenses may be provided by the Company in specific cases if the Board of Directors finds it to be appropriate; (b) To indemnify the Indemnitee for any Expenses, judgments, fines, penalties or ERISA excise taxes for which payment is actually made to the Indemnitee under a valid and collectible insurance policy, except in respect of any excess beyond the amount of payment under such policy; 4 5 (c) To indemnify the Indemnitee for any Expenses, judgments, fines or penalties sustained in any Proceeding for an accounting of profits made from the purchase or sale by the Indemnitee of securities of the Company pursuant to the provisions of Section 16(b) of the Securities Exchange Act of 1934, the rules and regulations promulgated thereunder and amendments thereto or similar provisions of any Federal, state or local statutory law; (d) To indemnify the Indemnitee for any Expenses, judgments, fines, penalties or ERISA excise taxes resulting from the Indemnitee's conduct which is finally adjudged to have been willful misconduct, knowingly fraudulent or deliberately dishonest; or (e) If a court of competent jurisdiction shall finally determine that any indemnification hereunder is unlawful. 11. Maintenance of Liability Insurance. (a) The Company hereby covenants and agrees that, as long as the Indemnitee shall continue to serve as a director of the Company and thereafter so long as the Indemnitee shall be subject to any possible Proceeding, the Company, subject to subsection (c), shall promptly obtain and maintain in full force and effect directors' and officers' liability insurance ("D&O Insurance") in reasonable amounts from established and reputable insurers. (b) In all D&O Insurance policies, the Indemnitee shall be named as an insured in such a manner as to provide the Indemnitee the same rights and benefits as are accorded any other director of the Company. (c) Notwithstanding the foregoing, the Company shall have no obligation to obtain or maintain D&O Insurance if the Company determines in good faith that such insurance is not reasonably available, the premium costs for such insurance are, in the opinion of the Company, disproportionate to the amount of coverage provided, the coverage provided by such insurance is so limited by exclusions that it provides an insufficient benefit, or the Indemnitee is covered by similar insurance maintained by a subsidiary of the Company. 12. Indemnification Hereunder Not Exclusive. The indemnification provided by this Agreement shall not be deemed exclusive of any other rights to which the Indemnitee may be entitled under the Certificate of Incorporation, the Bylaws, any other agreement, any vote of stockholders or disinterested directors, Delaware law, or otherwise, both as to action in his official capacity and as to action in another capacity on behalf of the Company while holding such office. 13. Successors and Assigns. This Agreement shall be binding upon, and 5 6 shall inure to the benefit of the Indemnitee and his heirs, personal representatives and assigns, and the Company and its successors and assigns. 14. Separability. Each provision of this Agreement is a separate and distinct agreement and independent of the others, so that if any provision hereof shall be held to be invalid or unenforceable for any reason, such invalidity or unenforceability shall not affect the validity or enforceability of any other provision hereof. To the extent required, any provision of this Agreement may be modified by a court of competent jurisdiction to preserve its validity and to provide the Indemnitee with the broadest possible indemnification permitted under Delaware law. 15. Savings Clause. If this Agreement or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Company shall nevertheless indemnify the Indemnitee as to Expenses, judgments, fines, penalties or ERISA excise taxes with respect to any Proceeding to the full extent permitted by any applicable portion of this Agreement that shall not have been invalidated or by any applicable provision of Delaware law. 16. Interpretation; Governing Law. This Agreement shall be construed as a whole and in accordance with its fair meaning. Headings are for convenience only and shall not be used in interpreting the provisions hereunder. This Agreement shall be governed by and interpreted in accordance with the laws of the State of Delaware. 17. Amendments. No amendment, waiver, modification, termination or cancellation of this Agreement shall be effective unless in writing signed by the party against whom enforcement is sought. The indemnification rights afforded to the Indemnitee hereby are contract rights and may not be diminished, eliminated or otherwise affected by amendments to the Company's Certificate of Incorporation, Bylaws or other agreements, including D&O Insurance policies. 18. Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each party and delivered to the other. 19. Notices. Any notice required to be given under this Agreement shall be directed to Wynn's International, Inc., 500 North State College Boulevard, Suite 700, Orange, California 92668, Attention: General Counsel, and to Indemnitee at_________________________________________________ or to such other address as either shall designate in writing. 6 7 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. INDEMNITEE _______________________________________ WYNN'S INTERNATIONAL, INC. By:____________________________________ President 7 EX-11 6 COMPUTATION OF NET INCOME PER COMMON SHARE 1 EXHIBIT 11 WYNN'S INTERNATIONAL, INC. COMPUTATION OF NET INCOME PER COMMON SHARE - PRIMARY
Year ended December 31 ------------------------------------------------------------ 1993 1992 1991 ---------- ---------- ------------ Net income . . . . . . . . . . . . . . . . $8,981,000 $7,253,000 $(11,200,000) Weighted average number of shares outstanding . . . . . . . . . . . . . . . 5,439,042 5,395,809 5,438,480 Net shares assumed issued using the treasury stock method for stock options outstanding during each period based on average market price. . . . . . . . . . . 108,384 (1) (1) --------- --------- ------------ Common and common equivalent shares . . . . . . . . . . . . . . . . . 5,547,426 5,395,809 5,438,480 ---------- ---------- ----------- Net income per common share . . . . . . . . $1.62 $1.34 $(2.06) ========== ========== ============
______________________________________________________ (1) The effect of outstanding stock options on the primary earnings per share computation for 1992 and 1991 is immaterial. COMPUTATION OF NET INCOME PER COMMON SHARE - ASSUMING FULL DILUTION
Year ended December 31 ------------------------------------------------------------ 1993 1992 1991 ---------- ---------- ------------ Net income . . . . . . . . . . . . . . . . $8,981,000 $7,253,000 $(11,200,000) Net interest expense from convertible bonds . . . . . . . . . . . . . . . . . . 406,000 425,000 (1) ---------- ---------- ------------ Net earnings for purposes of dilution . . . $9,387,000 $7,678,000 $(11,200,000) ========== ========== ============ Weighted average number of shares outstanding . . . . . . . . . . . . . . . 5,439,042 5,395,809 5,438,480 Net shares assumed issued using the treasury stock method for stock options outstanding during each period based on average or ending market price, whichever is higher . . . . . . . . . . . . . . . . . 119,762 84,641 5,983 Dilutive effect of assumed conversion of bonds outstanding . . . . . 473,360 494,317 (1) ---------- ---------- ------------ Fully diluted shares . . . . . . . . . . . 6,032,164 5,974,767 5,444,463 ---------- ---------- ------------ Net income per common share . . . . . . . . $1.56 $1.29 $(2.06) ========== ========== ============
______________________________________________________ (1) The effect of outstanding convertible bonds for 1991 would be antidilutive or immaterial. Note: The above calculations reflect for all periods the three-for-two stock split effected by the Company in September 1993. EX-13 7 PORTIONS OF THE 1993 ANNUAL REPORT 1 EXHIBIT 13 This exhibit consists of the following portions of the 1993 Annual Report to Stockholders of Wynn's International, Inc.: the Report of Independent Auditors on page 18, the consolidated financial statements of Registrant on pages 19 through 32, the Selected Financial Data section on page 13, the Management's Discussion and Analysis of Financial Condition and Results of Operations section on pages 14 through 17, and the information appearing under "Common Stock Price and Cash Dividends Per Share: 1993-1992" on page 13 and "Number of Stockholders" and "Stock Exchange Listing" on page 33. 2 Wynn's International, Inc. SELECTED FINANCIAL DATA Five years ended December 31, 1993
1993 1992 1991 1990 1989 -------- -------- -------- -------- -------- (Dollar amounts in thousands-except per share amounts) Net sales $284,957 $291,788 $273,963 $285,123 $283,885 Income (loss) before taxes based on income 15,811 13,334 (13,918)(a) 12,966 12,983 Provision (benefit) for taxes based on income 6,830 6,081 (2,718) 6,612 5,428 -------- -------- -------- -------- -------- Net income (loss) $ 8,981 $ 7,253 $(11,200) $ 6,354 $ 7,555 Earnings (loss) per share of common stock (b) $1.62 $1.34 $(2.06) $1.10 $1.31 Weighted average common shares outstanding 5,547,426 5,395,809 5,438,480 5,767,284 5,759,003 Cash dividends per common share $.42 $.40 $.40 $.40 $.40 Selected balance sheet items: Current assets $117,624 $124,897 $118,014 $127,754 $128,804 Current liabilities 56,293 54,378 44,732 50,224 53,511 Working capital 61,331 70,519 73,282 77,530 75,293 Current ratio 2.09 to 1 2.30 to 1 2.64 to 1 2.54 to 1 2.41 to 1 Total assets $167,799 $170,716 $165,622 $187,765 $188,556 Long-term debt due after one year 23,389 32,518 40,696 41,191 41,226 Stockholders' equity 84,442 78,853 75,611 89,784 87,875 Book value per common share $15.27 $14.59 $14.03 $16.43 $15.15
Notes: (a) 1991 loss includes $20.7 million restructuring charge. See Note 2 of Notes to Consolidated Financial Statements. (b) See Note 14 of Notes to Consolidated Financial Statements for certain per share information. All per share amounts have been adjusted to reflect the three for two stock split effected in 1993. The above Selected Financial Data for the five years ended December 31, 1993 is not reported upon herein by independent auditors. See Management's Discussion and Analysis of Financial Condition and Results of Operations. COMMON STOCK PRICE AND CASH DIVIDENDS PER SHARE: 1993-1992 The high and low sales prices of the Company's common stock and the cash dividends for the past two years are shown in the following table and reflect the 3 for 2 stock split effected in 1993:
Sales Price Dividends Per Share ----------- ------------------- 1993 1992 1993 1992 High Low High Low ----------------------- ----------------------- -------------------- First Quarter $21 7/8 $17 3/8 $13 3/8 $10 3/4 $.10 $.10 Second Quarter 23 3/4 16 5/8 15 1/4 11 1/4 .10 .10 Third Quarter 22 1/4 18 1/4 15 3/4 13 .11 .10 Fourth Quarter 22 1/2 17 3/4 18 13 1/8 .11 .10
13 3 Wynn's International, Inc. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations 1993 COMPARED TO 1992 Net sales in 1993 were $285.0 million compared to $291.8 million in 1992, a decrease of 2 percent. Sales were down 2 percent for the Automotive Parts & Accessories Division, which is comprised of Wynn's-Precision, Inc. ("Precision"), a Lebanon, Tennessee-based supplier of O-rings, seals and molded rubber products, and Wynn's Climate Systems, Inc. ("WCS"), a Fort Worth, Texas-based supplier of automotive air conditioning products. Precision recorded a 15 percent increase in sales in 1993, attributable to growth at all of its major operations except its Arizona aerospace operation. Higher revenues were derived from sales of O-rings, composite gaskets and engineered thermoplastics. Precision's Arizona operation is refocusing on new commercial product applications for non-aerospace customers to help offset the decline in revenues from aerospace customers. Precision continued to receive requests in 1993 for price freezes or reductions from customers in a broad array of markets. Precision expects this trend to continue in 1994 as customers strive to lower costs through increased supplier competition. Increases in revenue at Precision generally indicate an increase in the number of units sold. WCS experienced a 17 percent decrease in revenues in 1993 compared to 1992 due to decreased sales in its original equipment manufacturers ("OEM") division. The OEM revenue decrease was principally due to decreased sales to Mazda and Chrysler, partially offset by increased sales to the Rover Group. Revenues in WCS' aftermarket division, including revenues from company owned service centers, were virtually the same in 1993 as in 1992. WCS' revenues in 1993 from sales of its refrigerant recycling machine were slightly higher than in 1992. WCS expects sales by its OEM division to decline further in 1994 compared to 1993 due to Mazda's previously announced decision to change its supply agreement when the new production platform for the 323 vehicle is introduced in model year 1995 and due to the expiration of WCS' existing supply agreement with the Rover Group. In response to the loss of such supply agreements, and the concurrent worldwide environmental limitations on the production of R-12 (the refrigerant used in most automotive air conditioning systems) and the transition to the more environmentally friendly R-134a refrigerant, WCS is repositioning itself to focus on producing components with a higher value-added content. Accordingly, in 1993 and 1994 WCS has devoted substantial resources to develop the capability to produce more efficient aluminum condensers and evaporators which improve performance of R-134a-based systems. Additionally, WCS is negotiating with major OEM customers to supply retrofit kits for converting vehicles with R-12 air conditioning systems to R-134a systems. Due to this restructuring process, WCS expects its total revenues in 1994 to be below 1993 levels. Sales for the Petrochemical Specialties Division, principally car care products, decreased 1 percent on a worldwide basis compared to 1992 due to the adverse effect of foreign exchange rate fluctuations. Excluding the impact of these foreign exchange rate fluctuations, total revenues in 1993 would have increased 5 percent compared to 1992. In the United States, domestic revenues in 1993 increased 11 percent compared to 1992. Direct exports from the United States to Latin American and Asian distributors increased slightly over 1992. Foreign subsidiary sales decreased 6 percent in 1993 due to the lingering worldwide recession and the adverse effect of exchange rate fluctuations. Foreign subsidiary sales would have increased 2 percent in 1993 if foreign exchange rates had remained constant in 1993. Sales declined in France, Spain, Belgium, the United Kingdom and South Africa, but increased in Australia and Canada. Sales of the relatively small Builders Hardware Division (Skeels), a regional builders hardware products wholesale distributor, decreased 17 percent from 1992, principally due to the general downturn in the southern California economy and the more severe reduction in the area's construction activity during 1993. It is not known whether reconstruction activities following the major earthquake in southern California in January 1994 will have an impact on this Division's revenues in 1994. On a consolidated basis, total cost of sales in 1993 was 66.7 percent of sales compared to 66.9 percent in 1992. This slight increase in gross margin was due primarily to higher sales and production volumes at Precision. The Petrochemical Specialties Division's gross margin declined because of a change in product mix to lower margin items. Gross margins at WCS and Skeels were approximately the same in both years. Selling, general and administrative expenses decreased to $76.0 million in 1993, or 26.7 percent of sales, from $78.8 million in 1992, or 27.0 percent of sales. The reduction was principally attributable to decreased expenses of the Petrochemical Specialties Division and WCS, partially offset by a volume-related increase at Precision. The decreases in such expenses at the Petrochemical Specialties Division reflect the nonrecurrence in 1993 of the Division's 1992 costs of converting its direct Brazilian branch into independent distributor operations and a general reduction in spending in many categories of operating expenses. The decrease at WCS occurred because of its revenue decline and management's further control of operating costs. Precision's operating expenses in absolute dollars increased over 1992 levels due to the higher revenues, but remained the same as a percentage of Precision's revenues. During 1993, corporate expenses increased over 1992 levels primarily because of increased expenses for lease termination costs and general environmental matters. The Company closely monitors legal and factual developments in the environmental area to evaluate the adequacy of present reserves. Interest expense in 1993 was $3.9 million, which was less than the $5.1 million of interest expense in 1992. The decrease is primarily due to the reduction of outstanding indebtedness. In 14 4 Wynn's International, Inc. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) March 1993, a $7.9 million installment of 10.75 percent long-term debt was repaid. During 1993, the holder of 9 percent convertible notes converted $750,000 principal amount of such notes into 51,134 shares of the Company's common stock. Income before taxes was $15.8 million in 1993, compared to $13.3 million in 1992. In the Automotive Parts & Accessories Division, operating profits of Precision increased 20 percent in 1993 due to higher revenue levels. Precision's profitability is sensitive to changes in volume. Operating profits of WCS decreased 14 percent in 1993 compared to 1992 due to WCS' lower revenues. Operating profits of the Petrochemical Specialties Division increased 6 percent in 1993 due to the significant decline in operating expenses, including the nonrecurrence of the Brazilian costs described above. Excluding the effect of foreign exchange rate fluctuations, operating profit would have increased 11 percent in 1993. Operating profits of the Builders Hardware Division decreased $229,000 in 1993 because of the Division's 17 percent decline in sales revenues. The effective tax rate in 1993 was 43.2 percent compared to the effective tax rate of 45.6 percent in 1992. The decline in 1993 is due to the higher level of profitability in the U.S. which has a lower corporate income tax rate than many of the international jurisdictions in which the Company operates. In 1993, the Company adopted Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes. Such adoption had no material effect on the financial results or position of the Company. Net income in 1993 was $9.0 million compared to $7.3 million in 1992. The improvement in 1993 compared to 1992 was attributable to the higher operating profit at Precision and the Petrochemical Specialties Division, the decrease in interest expense and the lower effective tax rate. Primary earnings per share in 1993 was $1.62 compared to $1.34 in 1992. Fully diluted earnings per share in 1993 was $1.56 compared to $1.29 in 1992. (See Note 3 of Notes to Consolidated Financial Statements for a discussion of the 3 for 2 stock split in 1993.) The increase in per share results in 1993 was due to the increase in net income, but reduced by additional shares outstanding. The number of shares outstanding increased primarily as a result of the conversion in 1993 of $750,000 principal amount of the Company's 9 percent convertible notes into 51,134 shares of common stock, the grant of 60,000 shares of restricted stock in December 1993 and the assumed exercise of outstanding stock options. Prior to 1993, the effect on primary earnings per share of the assumed exercise of outstanding stock options was not included since the effect was immaterial. In November 1992, the Financial Accounting Standards Board issued new rules that require accrual accounting for other postemployment benefits, such as disability benefits, instead of recognizing an expense for those benefits when paid. The Company will be required to comply with the new rules beginning in 1994. The effect of adopting the new rules is not expected to be material to the Company's financial position or results of operations. FINANCIAL CONDITION Working capital at December 31, 1993 was $61.3 million compared to $70.5 million at the end of 1992. The current ratio was 2.09 to 1 at December 31, 1993, compared to 2.30 to 1 at the prior year end. The decrease in working capital and the current ratio compared to December 31, 1992 was attributable to the decline in inventory, accounts receivable and prepaid expenses and other current assets and the absence of a corresponding decline in current liabilities. Cash and cash equivalents increased $6.7 million to $21.4 million at December 31, 1993 compared to December 31 of the prior year. The inventory decrease of $9.5 million was the result of continued efforts to reduce the Company's investment in inventory at all divisions. Inventory at WCS declined $6.2 million compared to December 31, 1992 as a result of management's efforts to further reduce its net investment in light of that subsidiary's lower revenue levels. Inventory also decreased at all other operating divisions. Accounts receivable declined $1.6 million to $46.6 million at December 31, 1993 from $48.2 million at the prior year end primarily as a result of the lower revenues at WCS and Skeels, partially offset by higher receivables at Precision and the Petrochemical Specialties Division. Prepaid expenses and other current assets decreased to $10.8 million at December 31, 1993 from $13.7 million at the prior year end primarily due to lower prepaid income taxes resulting from the utilization during 1993 of previously deferred tax benefits. Total current liabilities increased $1.9 million to $56.3 million at December 31, 1993 from $54.4 million at December 31, 1992. The increase was primarily the result of increased accruals for salaries and other compensation, taxes based on income and other accrued liabilities. Property, plant and equipment increased $3.3 million in 1993, consisting of $10.0 million in additions (principally at Precision and WCS) offset by the annual depreciation charge of $5.8 million as well as retirements and foreign exchange adjustment. At December 31, 1993, the Company had two separate $15.0 million unsecured domestic committed bank lines of credit and one uncommitted line of credit. No borrowings were outstanding under any of these lines. The Company also has a committed $4.0 million unsecured multicurrency and trade finance line of credit and various other foreign uncommitted credit lines. At December 31, 1993, $.8 million in borrowings under these lines were outstanding. These borrowings were made by foreign subsidiaries for working capital needs. By borrowing locally, the Company's exposure to fluctuations in foreign exchange rates is reduced due to the balancing of assets and liabilities in the local currencies. The Company believes that additional lines of credit could be obtained if necessary. Under present circumstances, neither additional lines of credit nor additional long-term financing is required to supplement working capital requirements, including the next scheduled payment of $7.9 million of long-term debt in March 1994. 15 5 Wynn's International, Inc. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Stockholders' equity at the end of 1993 was $84.4 million, compared to $78.9 million at the end of 1992. The increase resulted primarily from net income of $9.0 million and the conversion of $.8 million of convertible notes, reduced by dividends of $2.3 million and further reduced by $2.1 million in the equity adjustment from foreign currency translation. Under the Company's stock-based incentive award plan, 60,000 shares of restricted stock were issued in December 1993 to the Company's Chief Executive Officer. The restricted stock will vest on the anniversary of the date of grant over the next three years in equal installments of 20,000 shares per year. The market value of the restricted stock at the time of grant has been recorded as unearned compensation in a separate component of stockholders' equity and is being amortized to expense ratably over the next three years. One month's amortization in the amount of approximately $34,000 was recognized in 1993. In February 1994, the Board of Directors of the Company adopted, subject to stockholder approval, an employee stock purchase plan, which will allow eligible employees to purchase shares of the Company's common stock at a price of 85 percent of the market price at the beginning or end of the plan year, whichever is lower. A maximum of 400,000 shares will be available for issuance over the life of the plan. If approved by the stockholders, the plan will become effective on January 1, 1995. In 1994, total capital expenditures are expected to be approximately $14.0 million, and are expected to be funded from current operations. As previously announced, the Company will continue to explore possible niche acquisitions. IMPACT OF CHANGING PRICES ON SALES AND INCOME The Company attempts to minimize the impact of inflation on production and operating costs through cost control programs and productivity improvements. Over the past three years the inflation rate has been relatively low. Nonetheless, the Company has continued to face increases in the cost of labor and some materials, despite requests for price reductions from many customers. Due to intense competition, the Company in 1993 generally was not able to raise prices to its customers to pass along the cost increases experienced. RESULTS OF OPERATIONS 1992 COMPARED TO 1991 Net sales in 1992 were $291.8 million compared to $274.0 million in 1991, an increase of 7 percent. Sales were up 8 percent for the Automotive Parts & Accessories Division, which is comprised of Precision and WCS. Precision recorded an 11 percent increase in sales in 1992, attributable to increases at its Tennessee and Virginia operations. Higher revenues were derived from sales of O-rings, composite gaskets and engineered thermoplastics. Precision's relatively small aerospace operation experienced a slight decline in revenue. In all products and markets, Precision continued to experience requests for price freezes or reductions. Precision expected those price pressures to continue into 1993 as customers strove to lower costs through increased supplier competition. Increases in revenue at Precision generally indicated an increase in the number of units sold. WCS experienced a 5 percent increase in revenues in 1992 compared to 1991 due to increased sales in its OEM division, which more than offset the decline in its aftermarket and parts divisions. The OEM revenue increase was principally due to increased sales to the Rover Group, Chrysler and Mazda. The Rover Group was a customer of WCS for a full year in 1992, but only part of 1991. WCS' traditional aftermarket division experienced a 33 percent revenue decline in 1992 compared to 1991 due to several factors. First, as previously announced, in 1992 WCS stopped selling "Mopar" factory authorized air conditioning units to independent distributors. Second, in contrast to the fourth quarter of 1991, WCS did not offer extended financing to its distributors in the fourth quarter of 1992. Extended financing has been a traditional means to stimulate sales of air conditioning systems in the off-season. Additionally, the U.S. auto industry continued to increase the number of vehicles produced with factory installed air conditioning systems, which reduced the number of vehicles eligible for aftermarket installations. WCS' revenues in 1992 from sales of its refrigerant recycling machine were 18% less than in 1991. Although unit sales were approximately the same in each year, pricing became extremely competitive as customers awaited the next generation of equipment which was expected in 1993. WCS expected sales of OEM kits to Mazda to decline in 1993 compared to 1992 due to Mazda's previously announced decision to cease importing light trucks from Japan and instead purchase U.S. built trucks from another manufacturer. WCS was negotiating with major OEM customers to supply retrofit kits for converting R-12 air conditioning systems to R-134a systems. Sales for the Petrochemical Specialties Division, principally sales of car care products, increased 5 percent on a worldwide basis compared to 1991. In 1992, the Petrochemical Specialties Division discontinued the direct sale to its customers of refrigerant recycling units purchased from WCS; WCS now sells this product via its own marketing operations. Excluding the impact of these nonrecurring sales in 1991, the Petrochemical Specialties Division's worldwide sales increased 8 percent in 1992 over 1991. In the United States, domestic revenues in 1992 were 2 percent less than 1991, but increased 6 percent in 1992 if 1991 sales of refrigerant recycling products are excluded. Direct exports from the United States to Latin American and Asian distributors declined 16 percent from 1991. Foreign subsidiary sales increased 8 percent in 1992 due to new marketing subsidiaries in Germany and Mexico and sales increases in France and South Africa. Also, early in 1992 the division began marketing its products in Brazil through a newly created wholly-owned subsidiary. However, because of the political and economic uncertainty in Brazil, the direct operations were curtailed significantly in the latter part of 1992, and the Company began searching for a Brazilian distributor to replace the direct operation. 16 6 Wynn's International, Inc. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Sales of the relatively small Builders Hardware Division, a regional builders hardware products wholesale distributor, decreased 26 percent from 1991, principally due to the general downturn in the southern California economy and the more severe reduction in the area's construction activity during 1992. Total cost of sales in 1992 was 66.9 percent of sales compared to 69.3 percent in 1991. The increase in gross margin occurred at WCS and the Petrochemical Specialties Division. At WCS, the improvement occurred because of a change in product mix and the reduction in fixed costs resulting from the 1991 restructuring charge discussed below. At the Petrochemical Specialties Division, gross margin improved because of improved manufacturing efficiencies and management's decision during 1991 to discontinue sales of lower margin items. Selling, general and administrative expenses increased to $78.8 million in 1992 from $72.9 million in 1991, with the increase principally attributable to increased expenses of the Petrochemical Specialities Division and Precision, partially offset by reductions at WCS and the Builders Hardware Division. The increase at the Petrochemical Specialties Division reflected that division's increased revenues and relatively higher level of selling expenses than the other divisions. Precision's operating expenses in absolute dollars were above their 1991 level due to the higher revenue level, but decreased as a percentage of Precision's revenues. The decrease at WCS occurred because of management's further control of all operating costs. Operating expenses for the Builders Hardware Division decreased in 1992 compared to 1991 because of management's continued control of spending levels relative to the revenue decline. During 1992, corporate expenses were above the 1991 level primarily because of increases in incentive compensation and corporate severance costs. During the fourth quarter of 1991, the Company recorded a $20.7 million restructuring charge related to WCS. There was no corresponding expense in 1992. Prior to the fourth quarter of 1991, WCS had been operating at or below breakeven for several quarters due to the severe decline in the U.S. automotive industry. Although product diversification programs and multiple cost reduction measures had been implemented at WCS over the past several years, management concluded that WCS needed to undergo further downsizing and reduction of capacity due to the uncertain outlook for the automotive industry. Accordingly, in 1991 the restructuring reserve was established for excess inventory and plant capacity, employee severance costs, impairment of goodwill and miscellaneous other accruals as follows: Excess inventory $ 8.0 million Goodwill 4.9 million Property, plant and equipment 4.0 million Accrued severance costs and other charges 3.8 million ------------- $20.7 million =============
Interest expense in 1992 was $5.1 million, slightly less than the $5.2 million in 1991. Income before taxes was $13.3 million in 1992, compared to the loss before taxes of $13.9 million in 1991. The 1992 improvement was due to the non- recurrence of the prior year's $20.7 million restructuring charge and improved operating profits in the Automotive Parts & Accessories Division. In the Auto- motive Parts & Accessories Division, WCS had an operating profit in 1992 compared to an operating loss in 1991 (excluding the effects of the restructuring charge) due to the higher revenues and the lower cost base. Precision had a 15 percent increase in operating profit in 1992 due to higher revenue levels. The Petrochemical Specialties Division had a 5 percent decrease in operating profit in 1992, notwithstanding the revenue increase, due to operating losses in the United Kingdom, Germany and Mexico, a decline in sales to a key European distributor and the scaling back of operations in Brazil. These losses more than offset improvements in the U.S., France and South Africa. The Builders Hardware Division had a 17 percent decrease in operating profit in 1992, despite significant cost reductions, because of the 26 percent revenue decline. The effective tax rate in 1992 was 45.6 percent compared to the relatively low effective tax rate benefit of 19.5 percent in 1991. The 1992 rate was comparable to the effective rate for 1991, excluding the impact of that year's restructuring charge. The 1991 tax benefit was affected by the writedown of $4.9 million of nondeductible goodwill associated with the restructuring of WCS, and the limited state tax benefit anticipated for the remaining portion of the restructuring charge. Net income in 1992 was $7.3 million compared to a net loss of $11.2 million in 1991. The significant improvement in 1992 compared to 1991 was attributable to higher operating profit at WCS and Precision, the absence of the 1991 restructuring charge and an effective tax rate in 1992 comparable to the Company's historical rate. Primary earnings per share in 1992 was $1.34 compared to a loss of $2.06 in 1991. Fully diluted earnings per share in 1992 was $1.29 due to the dilutive effect of the Company's outstanding convertible notes. In 1991 there was no dilutive effect because the conversion price of the notes was above the trading price of the Company's common stock. 17 7 REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS THE BOARD OF DIRECTORS AND STOCKHOLDERS WYNN'S INTERNATIONAL, INC. We have audited the accompanying consolidated balance sheets of Wynn's International, Inc. as of December 31, 1993 and 1992, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 1993. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these 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, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Wynn's International, Inc. at December 31, 1993 and 1992, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1993, in conformity with generally accepted accounting principles. ERNST & YOUNG Los Angeles, California January 26, 1994 18 8 Wynn's International, Inc. CONSOLIDATED STATEMENTS OF OPERATIONS
Three years ended December 31, 1993 1993 1992 1991 ------------ ------------ ------------ Revenues: Net sales $284,957,000 $291,788,000 $273,963,000 Interest income 719,000 755,000 667,000 ------------ ------------ ------------ 285,676,000 292,543,000 274,630,000 ------------ ------------ ------------ Costs and expenses: Cost of sales 190,026,000 195,346,000 189,728,000 Selling, general and administrative 75,977,000 78,790,000 72,941,000 Interest expense 3,862,000 5,073,000 5,179,000 Restructuring costs -- -- 20,700,000 ------------ ------------ ------------ 269,865,000 279,209,000 288,548,000 ------------ ------------ ------------ Income (loss) before taxes based on income 15,811,000 13,334,000 (13,918,000) Provision (benefit) for taxes based on income 6,830,000 6,081,000 (2,718,000) ------------ ------------ ------------ Net income (loss) $ 8,981,000 $ 7,253,000 $(11,200,000) ============ ============ ============ Earnings (loss) per share of common stock: Primary $1.62 $1.34 $(2.06) Fully diluted $1.56 $1.29 $(2.06)
See accompanying notes. 19 9 Wynn's International, Inc. CONSOLIDATED BALANCE SHEETS
December 31, 1993 and 1992 ASSETS 1993 1992 ------------ ------------ Current assets: Cash and cash equivalents $ 21,397,000 $ 14,667,000 Accounts receivable, less $1,848,000 allowance for doubtful accounts ($2,644,000 in 1992) 46,631,000 48,239,000 Inventories 38,824,000 48,308,000 Prepaid expenses and other current assets (including prepaid taxes based on income of $3,176,000 in 1993 and $5,478,000 in 1992) 10,772,000 13,683,000 ------------ ------------ Total current assets 117,624,000 124,897,000 Property, plant and equipment, at cost less accumulated depreciation and amortization 40,912,000 37,603,000 Costs in excess of fair value of net assets of businesses acquired, less accumulated amortization of $3,695,000 ($3,536,000 in 1992) 3,309,000 3,467,000 Other assets 5,954,000 4,749,000 ------------ ------------ $167,799,000 $170,716,000 ============ ============
10
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable $ 809,000 $ 940,000 Accounts payable 19,564,000 19,668,000 Dividends payable 610,000 544,000 Taxes based on income 2,494,000 2,059,000 Accrued liabilities: Warranty kit programs 3,626,000 3,332,000 Salaries and other compensation 7,979,000 7,169,000 Other 13,031,000 12,332,000 Long-term debt due within one year 8,180,000 8,334,000 ------------ ------------ Total current liabilities 56,293,000 54,378,000 Long-term debt due after one year 23,389,000 32,518,000 Deferred taxes based on income 3,675,000 4,967,000 Commitments and contingencies Stockholders' equity: Preferred stock, $1 par value; 500,000 shares authorized, none issued -- -- Common stock, $1 par value; 10,000,000 shares authorized, 5,877,322 shares issued (5,812,788 in 1992) 5,877,000 5,813,000 Capital in excess of par value 9,275,000 7,761,000 Retained earnings 76,873,000 70,185,000 Equity adjustment from foreign currency translation (2,814,000) (706,000) Unearned compensation (1,188,000) -- Common stock held in treasury 347,250 shares, at cost (407,250 in 1992) (3,581,000) (4,200,000) ------------ ------------ Total stockholders' equity 84,442,000 78,853,000 ------------ ------------ $167,799,000 $170,716,000 ============ ============
See accompanying notes. 20 11 Wynn's International, Inc. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Three years ended December 31, 1993 Equity adjustment Common stock Capital in from foreign -------------- excess of Retained currency Shares Amount par value earnings translation ----------------------- ---------- ------------ -------------- Balance at January 1, 1991 5,802,063 $5,802,000 $7,605,000 $78,462,000 $ 1,237,000 Net loss -- -- -- (11,200,000) -- Cash dividends of $.40 per common share -- -- -- (2,171,000) -- Purchase of treasury stock at cost -- -- -- -- -- Adjustments from foreign currency translation, net -- -- -- -- 123,000 --------- ---------- ---------- ----------- ----------- Balance at December 31, 1991 5,802,063 5,802,000 7,605,000 65,091,000 1,360,000 Net income -- -- -- 7,253,000 -- Cash dividends of $.40 per common share -- -- -- (2,159,000) -- Stock options exercised 10,725 11,000 136,000 -- -- Restricted stock issued to employees -- -- 11,000 -- -- Tax benefits related to employee stock option exercises -- -- 9,000 -- -- Adjustments from foreign currency translation, net -- -- -- -- (2,066,000) --------- ---------- ---------- ----------- ------------ Balance at December 31, 1992 5,812,788 5,813,000 7,761,000 70,185,000 (706,000) Net income -- -- -- 8,981,000 -- Cash dividends of $.42 per common share -- -- -- (2,293,000) -- Cash paid for fractional shares at time of split -- -- (1,000) -- -- Stock options exercised 13,400 13,000 198,000 -- -- Restricted stock issued to employee -- -- 603,000 -- -- Tax benefits related to employee stock option exercises -- -- 15,000 -- -- Conversion of $750,000 convertible notes 51,134 51,000 699,000 -- -- Adjustments from foreign currency translation, net -- -- -- -- (2,108,000) Unearned compensation -- -- -- -- -- --------- ---------- ---------- ----------- ----------- Balance at December 31, 1993 5,877,322 $5,877,000 $9,275,000 $76,873,000 $(2,814,000) ========= ========== ========== =========== ===========
Common stock Unearned held in compensation treasury Total ------------ ----------- ------------ Balance at January 1, 1991 $ -- $(3,322,000) $ 89,784,000 Net loss -- -- (11,200,000) Cash dividends of $.40 per common share -- -- (2,171,000) Purchase of treasury stock at cost -- (925,000) (925,000) Adjustments from foreign currency translation, net -- -- 123,000 ------------ ----------- ------------ Balance at December 31, 1991 -- (4,247,000) 75,611,000 Net income -- -- 7,253,000 Cash dividends of $.40 per common share -- -- (2,159,000) Stock options exercised -- -- 147,000 Restricted stock issued to employees -- 47,000 58,000 Tax benefits related to employee stock option exercises -- -- 9,000 Adjustments from foreign currency translation, net -- -- (2,066,000) ------------ ----------- ------------ Balance at December 31, 1992 -- (4,200,000) 78,853,000 Net income -- -- 8,981,000 Cash dividends of $.42 per common share -- -- (2,293,000) Cash paid for fractional shares at time of split -- -- (1,000) Stock options exercised -- -- 211,000 Restricted stock issued to employee -- 619,000 1,222,000 Tax benefits related to employee stock option exercises -- -- 15,000 Conversion of $750,000 convertible notes -- -- 750,000 Adjustments from foreign currency translation, net -- -- (2,108,000) Unearned compensation (1,188,000) -- (1,188,000) ----------- ----------- ------------ Balance at December 31, 1993 $(1,188,000) $(3,581,000) $ 84,442,000 =========== =========== ============
See accompanying notes. 21 12 Wynn's International, Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS
Three years ended December 31, 1993 1993 1992 1991 ------------- ------------- ------------- Cash flows from operating activities: Cash received from customers $ 285,021,000 $ 290,969,000 $ 276,307,000 Cash paid to suppliers and employees (240,902,000) (257,823,000) (252,271,000) Cash paid on warranty kit claims (6,706,000) (6,543,000) (6,223,000) Interest received 612,000 996,000 462,000 Interest paid (4,071,000) (4,986,000) (5,943,000) Income taxes paid (5,339,000) (3,891,000) (4,518,000) Other cash disbursements--net (159,000) -- -- ------------- ------------- ------------- Net cash provided by operating activities 28,456,000 18,722,000 7,814,000 ------------- ------------- ------------- Cash flows from investing activities: Additions to property, plant and equipment (10,008,000) (6,532,000) (4,156,000) Proceeds from sale of property, plant and equipment 553,000 327,000 277,000 Other cash receipts (disbursements)--net 172,000 (158,000) 94,000 ------------- ------------- ------------- Net cash used in investing activities (9,283,000) (6,363,000) (3,785,000) ------------- ------------- ------------- Cash flows from financing activities: Borrowings under lines of credit--net (131,000) 244,000 (2,060,000) Payments on long-term debt (8,533,000) (421,000) (570,000) Dividends paid (2,227,000) (2,157,000) (2,178,000) Proceeds from exercise of stock options 211,000 147,000 -- Purchase of treasury stock -- -- (925,000) Other cash disbursements--net (1,000) -- -- ------------- ------------- ------------- Net cash used in financing activities (10,681,000) (2,187,000) (5,733,000) ------------- ------------- ------------- Effect of exchange rate changes (1,762,000) (1,644,000) 128,000 ------------- ------------- ------------- Net increase (decrease) in cash and cash equivalents 6,730,000 8,528,000 (1,576,000) Cash and cash equivalents at beginning of year 14,667,000 6,139,000 7,715,000 ------------- ------------- ------------- Cash and cash equivalents at end of year $ 21,397,000 $ 14,667,000 $ 6,139,000 ============= ============= =============
See accompanying notes. 22 13 Wynn's International, Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
Three years ended December 31, 1993 1993 1992 1991 ----------- ----------- ------------ Reconciliation of net income (loss) to net cash provided by operating activities: Net income (loss) $ 8,981,000 $ 7,253,000 $(11,200,000) ----------- ----------- ------------ Adjustments to reconcile net income (loss) to net cash provided by operating activities: Restructuring costs -- -- 20,700,000 Depreciation and amortization 6,662,000 6,140,000 7,521,000 Provision for uncollectible accounts (39,000) 1,028,000 1,027,000 Pension plan income not funded (158,000) (218,000) (49,000) Postretirement medical benefits not funded 312,000 -- -- Amortization of stock compensation 34,000 -- -- (Gain) loss on fixed asset disposals (4,000) 158,000 15,000 Provision (benefit) for deferred income taxes 1,041,000 1,737,000 (6,610,000) Decrease (increase) in: Accounts receivable--net (43,000) (578,000) 2,139,000 Inventories 9,484,000 3,838,000 1,213,000 Prepaid expenses and other current assets 609,000 (1,541,000) (702,000) Other assets (67,000) 185,000 344,000 Increase (decrease) in: Accounts payable (104,000) 546,000 (4,530,000) Warranty kit reserves 294,000 (305,000) (735,000) Income taxes payable 450,000 453,000 (786,000) Accrued liabilities 1,004,000 26,000 (533,000) ----------- ----------- ------------ Total adjustments 19,475,000 11,469,000 19,014,000 ----------- ----------- ------------ Net cash provided by operating activities $28,456,000 $18,722,000 $ 7,814,000 =========== =========== ============
Supplemental disclosure of noncash investing and financing activities: In 1993, additional common stock was issued upon the conversion of $750,000 of long-term debt. See accompanying notes. 23 14 Wynn's International, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES BASIS OF PRESENTATION--The accompanying consolidated financial statements include the accounts of Wynn's International, Inc. (Wynn's or the Company) and its wholly-owned subsidiaries and one majority-owned subsidiary. All significant intercompany transactions have been eliminated. Certain reclassifications have been made to the prior years' amounts to conform with the 1993 presentation. STOCK SPLIT--The Company effected a 3 for 2 stock split in the third quarter of 1993. All share and per share amounts have been adjusted retroactively (see Note 3). CASH AND CASH EQUIVALENTS--The Company's policy is to invest cash in excess of operating requirements in short-term interest bearing investments. Cash equivalents of $20,661,000 in 1993 and $10,022,000 in 1992 include guaranteed investment contracts, commercial paper, certificates of deposit and money market accounts which have maturities of three months or less and are stated at cost, which approximates fair market value. CONCENTRATIONS OF CREDIT RISK--The Company places its temporary cash investments in high credit quality financial institutions and investment grade short-term investments and limits the amount of credit exposure to any one entity. Substantially all of the Company's accounts receivable are due from customers in the original equipment and aftermarket automotive industries, both in the United States and internationally. The Company performs periodic credit evaluations of its customers and generally does not require collateral. The Company does not believe significant credit risks exist at December 31, 1993. INVENTORIES--Inventories are stated at the lower of cost (principally first-in, first-out) or market. DEPRECIATION--Depreciation and amortization of property, plant and equipment are calculated principally on a straight-line basis over the estimated useful lives of the respective assets. COSTS IN EXCESS OF FAIR VALUE OF NET ASSETS OF BUSINESSES ACQUIRED--Costs in excess of fair value of net assets of businesses acquired are amortized on a straight-line basis over a period of ten to forty years (see Note 2). INCOME TAXES--During 1993, the Company adopted Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes. This statement requires the use of an asset and liability approach for reporting income taxes (see Note 6). The Company provides taxes on the undistributed earnings of all foreign subsidiaries for which remittance is anticipated. 2. RESTRUCTURING During the fourth quarter of 1991, the Company recorded a provision of $20,700,000 ($14,930,000 after tax benefit or $2.75 per share) for the restructuring and further downsizing of its subsidiary Wynn's Climate Systems, Inc., which manufactures automotive air conditioning systems, modules and replacement parts. The restructuring was initiated because of the United States automotive industry's severe downturn during 1991 and the industry's uncertain outlook for 1992 and thereafter. The provision included charges for excess inventory and facilities, the writedown of all goodwill attributable to the subsidiary, and accruals for various other costs of downsizing the operations. The amounts were as follows: Excess inventory $ 8,000,000 Goodwill 4,900,000 Property, plant and equipment 4,000,000 Other 3,800,000 ----------- $20,700,000 ===========
15 3. STOCK SPLIT; SHAREHOLDER RIGHTS PLAN On August 4, 1993, the Board of Directors authorized a 3 for 2 stock split effected in the form of a stock dividend payable to stockholders of record on August 26, 1993. All references in the financial statements to average number of shares outstanding and related prices, per share amounts, convertible note and stock option plan data have been restated retroactively to reflect the 3 for 2 split. In March 1989, the Board of Directors adopted a Shareholder Rights Plan and declared a dividend of one preferred stock purchase right (a "Right") for each outstanding share of Common Stock issued by the Company prior to the earliest of (i) March 3, 1999, (ii) the date, if any, on which the Rights are redeemed, (iii) ten business days after a public announcement that a person or group of affiliated or associated persons (an "Acquiring Person") has acquired, or obtained the right to acquire, in a transaction or series of transactions not approved in advance by the Company's Board of Directors, beneficial ownership of 25 percent or more of the Company's Common Stock (the date of such announcement being called a "Stock Acquisition Date") and (iv) ten business days following the commencement of a tender or exchange offer, or the first public announcement of the intent of a person to commence a tender or exchange offer, that would result in a person or group beneficially owning 30 percent or more of the Common Stock (the earlier of items (iii) and (iv) shall be deemed to be a "Distribution Date"). The Rights are not to be exercisable until after the Distribution Date and each right then may be exercised to acquire one one-hundredth of a share of Junior Participating Preferred Stock at an exercise price of $100, subject to adjustment. Alternatively, upon the occurrence of certain events (for example, if the Company under certain circumstances is the surviving corporation in a merger with an Acquiring Person), the Rights entitle holders, other than the Acquiring Person, upon payment of the exercise price to acquire Common Stock having a market value of twice the exercise price of the Rights, or, upon the occurrence of certain other events (for example, if the Company is acquired under certain circumstances in a merger or other business combination transaction in which the Company is not the surviving corporation), to acquire Common Stock of the Acquiring Person having a market value of twice the 24 16 Wynn's International, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS exercise price of the Rights. The Rights may be redeemed by the Company at $.01 per Right at any time until the tenth business day following a Stock Acquisition Date. The Rights will expire on March 3, 1999 or on such later date to which the Rights may be extended by the Company, unless earlier redeemed by the Company. In June 1990 the Company amended the Shareholder Rights Plan to provide that if a person becomes the beneficial owner of 25 percent or more of the Company's Common Stock solely as a result of a decrease in the number of outstanding shares of the Company's stock from a stock repurchase program or other similar plan, such person shall not be deemed to be an Acquiring Person so long as such person does not thereafter acquire beneficial ownership of additional Common Stock equal to one percent or more of the outstanding Common Stock. 4. FOREIGN OPERATIONS Condensed combined financial information of Wynn's foreign subsidiaries (the operations of which are located in Australia, Belgium, Canada, France, Germany, Mexico, New Zealand, South Africa, Spain, United Kingdom and Venezuela) at December 31, 1993 and 1992 and for the three years ended December 31, 1993 before eliminations of intercompany balances and profits and any provision for taxes on repatriation of foreign earnings, is as follows:
1993 1992 ------- ------- (in thousands) Assets: Current assets $39,890 $41,109 Property, plant and equipment 5,678 6,064 Other noncurrent assets 3,508 3,724 ------- ------- $49,076 $50,897 ======= ======= Liabilities and stockholders' equity: Current liabilities $24,949 $24,030 Long-term debt and deferred taxes based on income 914 1,386 Stockholders' equity 23,213 25,481 ------- ------- $49,076 $50,897 ======= =======
1993 1992 1991 ------- ------- ------- (in thousands) Net sales $92,911 $93,866 $81,383 Net income $ 3,784 $ 3,518 $ 3,193
Transaction gains and losses resulting from changes in foreign currency exchange rates have been charged to operations and are immaterial. 5. INVENTORIES Inventories consist of the following at December 31, 1993 and 1992:
1993 1992 ------- ------- (in thousands) Finished goods $19,929 $25,670 Raw materials and work in process 18,895 22,638 ------- ------- $38,824 $48,308 ======= =======
17 6. TAXES BASED ON INCOME Effective January 1, 1993, the Company adopted Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes, which requires the use of the liability method of accounting for income taxes rather than the deferred method previously in effect. Under the liability method, deferred taxes are recognized for the tax consequences of temporary differences between financial statement carrying values of existing assets and liabilities and their related tax bases. As permitted under the new standard, financial statements for prior years have not been restated. The cumulative effect of the accounting change was not material. The provision (benefit) for taxes based on income consists of the following elements for the three years ended December 31, 1993 (in thousands):
Liability Method Deferred Method --------- ------------------- 1993 1992 1991 ------ ------ ------- Current: Federal $1,943 $1,381 $1,048 State 940 842 648 Foreign 2,906 2,121 2,196 ------ ------ ------- Total current 5,789 4,344 3,892 ------ ------ ------- Deferred: Federal 190 1,727 (5,586) State 290 121 (812) Foreign 561 (111) (212) ------ ------ ------- Total deferred 1,041 1,737 (6,610) ------ ------ ------- Total $6,830 $6,081 $(2,718) ====== ====== =======
Pretax income (loss) for domestic and foreign operations for the three years ended December 31, 1993 is as follows:
1993 1992 1991 ------- ------- -------- (in thousands) Domestic $ 7,260 $ 5,711 $(22,162) Foreign 8,551 7,623 8,244 ------- ------- -------- $15,811 $13,334 $(13,918) ======= ======= ========
See Note 2 for a discussion of the 1991 restructuring charge. A reconciliation of the statutory federal income tax rate to the effective tax rate, as a percentage of income (loss) before 25 18 Wynn's International, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6. TAXES BASED ON INCOME (CONTINUED) taxes based on income for the three years ended December 31, 1993, follows:
1993 1992 1991 ---- ---- ---- Statutory federal income tax rate 34.0% 34.0% (34.0)% State taxes, net of federal tax benefit 5.1 4.5 0.2 Taxes on unremitted foreign earnings 3.8 1.5 (2.6) Foreign earnings taxed at various rates 3.3 4.9 3.8 Foreign tax credits (3.9) (3.4) (3.7) Expenses not deductible for income tax purposes: Goodwill 0.3 0.3 12.7 Other 0.3 1.9 1.7 Other net 0.3 1.9 2.4 ---- ---- ----- 43.2% 45.6% (19.5)% ==== ==== =====
At December 31, 1993, the Company had the following carryforwards for tax purposes available for future utilization with the indicated expiration periods (in thousands):
Foreign Net Capital Tax Year Operating Loss Loss Credits ---- -------------- ------- ------- 1997 $ - $ - $ 7 1998 - 51 204 2002 62 - - 2003 40 - - Unlimited 668 - 617 ---- --- ---- $770 $51 $828 ==== === ====
A valuation allowance of $2,178,000 has been recognized to offset these and other deferred tax assets. The valuation allowance against deferred tax assets increased by $89,000 during 1993. Significant components of the Company's deferred tax assets and liabilities as of December 31, 1993 are as follows:
DECEMBER 31, 1993 (in thousands) -------------- Deferred tax liabilities: Pension plan $ 977 Accelerated depreciation and amortization 1,670 Foreign earnings 2,933 Other 2,217 ------- Total deferred tax liabilities 7,797 Deferred tax assets: Inventory valuation 2,639 Accrued expenses 5,188 Tax attribute carryovers 1,649 ------- Subtotal 9,476 Valuation allowances (2,178) ------- Total deferred tax assets 7,298 Net deferred taxes $ 499 =======
The components of the provision for deferred income taxes for the years ended December 31, 1992 and 1991 are as follows:
Deferred Method 1992 1991 ------ ------- (in thousands) Inventory valuation $ 432 $(2,858) Accelerated depreciation and amortization 95 (1,501) Accrued expenses 373 (1,549) Repatriation of foreign earnings (13) (119) Other--net 850 (583) ------ ------- $1,737 $(6,610) ====== =======
7. SHORT-TERM LINES OF CREDIT The Company has two domestic committed unsecured lines of credit for $15.0 million each. The lines provide for short-term borrowings at interest rates of prime (6.0 percent at December 31, 1993) and/or money market interest rates. At December 31, 1993, the Company had no outstanding borrowing under these lines of credit. The Company also has various other uncommitted credit lines at various prevailing rates. At December 31, 1993, $809,000 was outstanding under these agreements. Short-term borrowings are stated at their fair market value. The Company also has a $4.0 million unsecured multicurrency and trade finance line of credit. The facility provides for up to $1.0 million of commercial letters of credit and up to $3.0 million of standby letters of credit. At December 31, 1993, Wynn's had one standby letter of credit outstanding under this facility for $178,000. 8. Long-term Debt Long-term debt consists of the following obligations at December 31, 1993 and 1992:
1993 1992 ------- ------- (in thousands) To insurance company, due in annual installments of $7,938,000 each beginning in 1993 through 1996, plus interest at 10.75%, payable semi-annually $23,813 $31,750 To insurance company, due in annual installments of $3,250,000 in 1995 and 1996, plus interest at 9%, payable semi-annually 6,500 7,250 Other 1,256 1,852 ------- ------- 31,569 40,852 Less current maturities 8,180 8,334 ------- ------- $23,389 $32,518 ======= =======
26 19 Wynn's International, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The first two of the above obligations are unsecured. The $6,500,000 note due to insurance company is convertible into shares of common stock at approximately $14.67 per share. The notes payable to the insurance company contain a prepayment penalty and require, among other things, certain working capital and net worth balances and ratios be maintained. Future declarations of cash dividends will be subject to these loan requirements. At the present time, Wynn's does not believe that these requirements will have any impact on the declaration of future dividends. The Company estimates that at December 31, 1993 the fair market value of its long-term debt obligations is $34,539,000. The estimation of fair value is based upon prevailing interest rates for similar maturities, risk factors and conversion terms of the obligations. Maturities of long-term debt due after one year are: 1995-$11,454,000; 1996-$11,390,000; 1997-$195,000; and 1998-$350,000. Interest expense for long-term debt amounted to $3,524,000 for 1993 ($4,289,000 for 1992 and $4,319,000 for 1991). 9. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consists of the following at December 31, 1993 and 1992:
1993 1992 -------- ------- (in thousands) Land and land improvements $ 2,442 $ 2,562 Buildings 21,822 22,018 Leasehold improvements 940 1,057 Equipment, furniture and fixtures 65,199 58,371 -------- -------- 90,403 84,008 Less accumulated depreciation and amortization (49,491) (46,405) -------- -------- $ 40,912 $ 37,603 ======== ========
10. RETIREMENT PLANS Wynn's and its domestic subsidiaries have four qualified defined benefit retirement plans, which cover substantially all of their U.S. employees. One plan is a compulsory noncontributory defined benefit pension plan that covers the employees of the parent company and three domestic subsidiaries. Another plan is a contributory defined benefit plan that covers the salaried employees of one domestic subsidiary. Two other plans, which were collectively bargained with the unions, cover hourly employees of one domestic subsidiary. Substantially all domestic employees are eligible to participate in one of the plans. Benefits under these plans are based on employees' earnings and length of service with the Company. The funding policy for these plans is to make the annual contribution required by applicable regulations, which are intended to provide only for benefits attributed to service-to-date. Net periodic pension costs for the years ended December 31, 1993, 1992 and 1991 included the following components (in thousands):
1993 1992 1991 ------- ------- ------- Service cost--benefits earned during the period $ 732 $ 625 $ 580 Interest cost on projected benefit obligation 1,200 1,080 1,001 Actual return on assets (1,489) (1,563) (2,989) Net amortization and deferral (442) (359) 1,352 ------- ------- ------- $ 1 $ (217) $ (56) ======= ======= =======
The majority of the pension plans have plan assets that exceed accumulated benefit obligations. Plan assets include government bonds and securities, money market accounts, mutual funds, corporate bonds and corporate stocks. The following table sets forth the plans' funded status and amounts recognized in the Company's consolidated balance sheets at December 31, 1993 and 1992 for its U.S. pension plans (in thousands):
1993 1992 -------- -------- Actuarial present value of benefit obligations: Vested benefit obligation $(13,977) $(11,421) Accumulated benefit obligation $(14,538) $(11,892) Projected benefit obligation $(17,557) $(14,398) Plan assets at fair market value 19,910 19,114 -------- -------- Plan assets in excess of projected benefit obligation 2,353 4,716 Unrecognized transition assets being amortized over various periods of time (1,995) (2,318) Unrecognized prior service cost 1,441 1,561 Unrecognized net loss (gain) 638 (1,679) -------- -------- Prepaid pension cost $ 2,437 $ 2,280 ======== ======== Assumptions used as of December 31, 1993, 1992 and 1991 were: 1993 1992 1991 ---- ---- ---- Discount or settlement rate 7.5% 8.5% 9.0% Rate of increase in compensation level 5.0% 5.5% 6.0% Expected long-term rate of return on assets 9.0% 9.0% 9.0%
Non U.S. employees are generally enrolled in pension plans in their country of domicile. The effect of the Company's foreign plans is considered to be immaterial and has not been included in the above tables. Applicable expenses for these plans have been 27 20 Wynn's International, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 10. RETIREMENT PLANS (CONTINUED) included in consolidated net income. The Company believes that these plans are adequately funded in accordance with local actuarial principles and laws. In July 1993, the Company established a defined contribution plan for all full-time U.S. based employees with at least 12 months of consecutive service. Eligible employees are entitled to contribute from 1% to 10% of their base pay into an investment trust, and the Company matches at the rate of $.50 for each $1.00 contributed, up to 3% of the employee's base pay. In addition, eligible employees at December 31 each year receive an additional 1% of their base pay contributed by the Company into the plan. The Company's total contribution into this plan for 1993 was $352,000. Prior to July 1993, the Company had a savings and investment plan for eligible domestic employees of the parent Company and three subsidiaries, who met certain eligibility requirements as defined in the plan. This plan was terminated in 1993 and all funds in this investment trust were either distributed to the employee or rolled over into the new defined contribution plan. Company contributions amounted to $40,000 in 1993 ($53,000 in 1992 and $58,000 in 1991). The Company provides postretirement medical benefits for certain retired employees at the U.S. operations of Wynn's-Precision, Inc. In 1993, the Company adopted Statement of Financial Accounting Standards No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions. At January 1, 1993, the accumulated postretirement benefit obligation (before tax benefit) was $3.2 million, which the Company elected to amortize over 20 years as part of the annual benefit cost. The net periodic postretirement benefit cost for 1993 was $426,000. In 1992 and 1991, the Company accounted for such costs on a pay-as-you-go method, and the costs were $120,000 and $158,000, respectively. The Company does not prefund this benefit program. The following table sets forth the program's status and amounts recognized in the Company's consolidated balance sheet at December 31, 1993 (in thousands): Unfunded accumulated postretirement benefit obligation $(2,513) Unrecognized net gain (resulting from reduction in estimated health care cost trend rates) (811) Unrecognized net transition obligation 3,039 ------- Accrued postretirement benefit cost $ (285) =======
11. COMMITMENTS Wynn's rents certain facilities and equipment under various noncancellable operating leases. Rental commitments under these leases, exclusive of property taxes and insurance, are as follows:
Year (in thousands) ---- -------------- 1994 $2,543 1995 1,236 1996 670 1997 476 1998 153 1999 and after 308 ------ Total $5,386 ======
Rental expenses for all operating leases were $3,977,000 in 1993 ($4,245,000 in 1992 and $4,219,000 in 1991). 12. CONTINGENCIES Various claims and actions, considered normal to the Company's business, have been asserted and are pending against the Company and its subsidiaries. The Company believes that such claims and actions should not have any material adverse effect upon the results of operations or the financial position of the Company based upon information presently known to the Company. The Company is also involved in certain proceedings and potential proceedings relating to environmental matters. At December 31, 1993, the Company had consolidated accrued reserves of approximately $2.2 million relating to environmental matters. Because of the uncertainties associated with environmental assessment and remediation activities, it is difficult to determine the ultimate liability of the Company related to these environmental matters. However, based upon information presently known to the Company, the Company believes that any liability that may result from these matters that is in excess of the accrued reserves should not materially affect the Company's financial position. 13. EMPLOYEE STOCK PLANS The Company has one stock option plan and one stock-based incentive award plan pursuant to which current grants of options to purchase common stock of Wynn's may be made to officers and other key employees. The Stock-Based Incentive Award Plan (1989 Plan) authorizes the grant of nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock and performance shares. The 1982 Incentive Stock Option Plan (1982 Plan), which expired in April 1992, authorized the grant of incentive stock options. Under the 1982 Plan, the aggregate number of options granted could not exceed 300,000 shares. Under the 1989 Plan, the aggregate number of stock related awards may not exceed 487,500 shares. All options granted under the two plans have been made at prices not less 28 21 Wynn's International, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS than 100 percent of the fair market value of the stock at the date of grant. Options granted under the two plans are exercisable at various dates over a ten-year period. However, under the two plans, no options may be exercised until at least one year after the date of grant. During 1993 and 1992, 60,000 and 4,500 shares, respectively, of restricted stock were awarded under the 1989 Plan. The 1993 restricted stock award vests in equal installments at each anniversary date over a three-year period; the 1992 award vested at the one year anniversary. Recipients of restricted stock grants are entitled to cash dividends and voting rights on their respective shares. Restrictions limit the sale or transfer of shares during the three-year period. Unearned compensation of $1,221,900 was recorded at the date of the award in 1993 based on the market value of shares. Unearned compensation, which is shown as a separate component of stockholders' equity, is being amortized to expense over the three-year vesting period. During 1993 $34,000 was recorded as expense. No stock appreciation rights or performance shares were outstanding at December 31, 1993. The following tabulation summarizes certain information related to options for common stock:
1993 1992 1991 ------- ------- ------- Outstanding options at beginning of year 345,000 360,750 352,500 Granted 68,250 13,500 37,500 Surrendered, forfeited or expired (3,300) (18,525) (29,250) Exercised (13,400) (10,725) -- -------- ------- ------- Outstanding options at end of year 396,550 345,000 360,750 ======= ======= ======= Average price of options exercised during the year $15.76 $13.74 -- At the end of the year: Prices of outstanding options $11.17 $11.17 $11.17 to to to $20.67 $18.17 $18.17 Average per share $14.67 $13.57 $13.55 Exercisable options 310,075 295,950 268,125 Options available for future grants 181,575 156,525 168,000
22 14. EARNINGS PER SHARE Primary earnings per share is computed by dividing net income by the weighted average number of shares outstanding during the year. In 1993 primary earnings per share assumes the exercise of stock options. In 1992 and 1991 primary earnings per share did not assume the exercise of stock options as the effect from exercise was immaterial. Fully diluted earnings per share is calculated by dividing net income adjusted for the interest on the convertible debt by the weighted average number of fully diluted shares outstanding during the year, and assumes the conversion of the convertible debt and the exercise of stock options. In 1991, the conversion of the convertible debt was not assumed as the conversion would have been antidilutive (see Note 3 for a discussion of the stock split effected in 1993).
1993 1992 1991 ------ ------ -------- (in thousands, except per share amounts) Net income (loss) $8,981 $7,253 $(11,200)(a) Net interest expense from convertible notes 406 425 -- ------ ------ -------- Net earnings (loss) for purposes of full dilution $9,387 $7,678 $(11,200)(a) ====== ====== ======== Net earnings (loss) per common share: Primary $1.62 $1.34 $(2.06)(a) Assuming full dilution $1.56 $1.29 $(2.06)(a) Weighted average shares outstanding: Primary 5,547 5,396 5,438 Assuming full dilution 6,032 5,975 5,444
(a) Includes $14.9 million or $2.75 per share ($2.74 per share assuming full dilution) loss from restructuring. See Note 2. 15. BUSINESS SEGMENT AND GEOGRAPHICAL INFORMATION Wynn's operations are principally in three industry segments: Automotive Parts & Accessories, Petrochemical Specialties and Builders Hardware. Operations in the Automotive Parts & Accessories industry involve the manufacturing and marketing of O-rings and other static and dynamic seals principally for the automotive industry; and the manufacturing and marketing of automotive air conditioners and related replacement parts, sold for original equipment and aftermarket installation by manufacturers, distributors and dealers, on international, national and local levels. Operations in the Petrochemical Specialties industry involve the development, production and marketing of a wide variety of car care products, automotive chemicals for the consumer, specialty chemicals and equipment for professional automotive service centers and product warranty programs for automotive dealerships, as well as industrial coolants, specialty fluids and cutting fluids used in metal-working. Sales of Petrochemical Specialties products are primarily through domestic and foreign distributors. Operations in the Builders Hardware industry involve the distribution of builders hardware products, locksmith supplies and security locks from manufacturers to retail outlets in southern California, Arizona and Nevada. Industry segment net sales include sales to unaffiliated customers. There were no material industry intersegment sales in 1993, 1992 or 1989. In 1991 and 1990, intersegment sales represent sales of refrigerant recovery units from the Automotive Parts & Accessories division to the Petrochemical Specialties division. Intercompany sales are recorded at prices mutually agreed upon by the respective affiliates and approximate fair market value. 29 23 Wynn's International, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 15. BUSINESS SEGMENT AND GEOGRAPHICAL INFORMATION (CONTINUED) Operating profit (loss) from segments represents net sales less operating expenses before income taxes. Corporate expenses and unallocated gains include the gains from sales of joint-venture interest and other corporate items. Identifiable assets are those assets of Wynn's that are used in the operations of each industry segment. Corporate assets are principally cash and cash equivalents, prepaid expenses and other receivables. Intercompany loans and advances and the related accrued interest thereon are excluded from identifiable assets. Sales to the largest customer of the Automotive Parts & Accessories segment were 12.3 percent of consolidated net sales during 1993 (16.7 percent in 1992 and 17.3 percent in 1991).
SUMMARY BY INDUSTRY SEGMENTS Year Ended December 31 1993 1992 1991 1990 1989 -------- -------- -------- -------- -------- (in thousands) NET SALES Automotive Parts & Accessories $181,478 $185,947 $172,836 $180,444 $198,579 Petrochemical Specialties 98,318 99,622 94,639 99,075 79,364 Builders Hardware 5,161 6,219 8,403 7,551 5,942 Intersegment sales -- -- (1,915) (1,947) -- -------- -------- -------- -------- -------- Total net sales $284,957 $291,788 $273,963 $285,123 $283,885 OPERATING PROFIT (LOSS) Automotive Parts & Accessories $ 16,643 $ 15,265 $(12,813)(a) $ 10,570 $ 9,435 Petrochemical Specialties 7,046 6,636 6,964 10,330 7,797 Builders Hardware 193 422 507 650 721 -------- -------- -------- -------- -------- Total operating profit (loss) of segments 23,882 22,323 (5,342) 21,550 17,953 Corporate expenses and unallocated gains (4,575) (4,155) (3,591) (3,174) (278) Corporate interest income 366 239 194 409 492 Interest expense (3,862) (5,073) (5,179) (5,819) (5,184) -------- -------- -------- -------- -------- Income (loss) before taxes based on income $ 15,811 $ 13,334 $(13,918) $ 12,966 $ 12,983 IDENTIFIABLE ASSETS Automotive Parts & Accessories $ 95,069 $100,901 $106,135 $124,577 $129,219 Petrochemical Specialties 49,371 53,886 50,477 52,678 42,624 Builders Hardware 2,570 3,340 4,119 4,824 2,840 -------- -------- -------- -------- -------- Identifiable assets of segments 147,010 158,127 160,731 182,079 174,683 Corporate assets 20,789 12,589 4,891 5,686 13,873 -------- -------- -------- -------- -------- Total assets $167,799 $170,716 $165,622 $187,765 $188,556 DEPRECIATION AND AMORTIZATION Automotive Parts & Accessories $ 4,930 $ 4,380 $ 5,896 $ 6,881 $ 6,306 Petrochemical Specialties 1,656 1,688 1,522 1,501 1,025 Builders Hardware 40 30 58 42 36 Corporate 36 42 45 42 53 -------- -------- -------- -------- -------- Total depreciation and amortization $ 6,662 $ 6,140 $ 7,521 $ 8,466 $ 7,420 CAPITAL EXPENDITURES Automotive Parts & Accessories $ 9,070 $ 4,829 $ 3,163 $ 4,942 $ 8,073 Petrochemical Specialties 921 1,678 978 3,248 2,555 Builders Hardware -- -- -- 17 63 Corporate 17 25 15 56 19 -------- -------- -------- -------- -------- Total capital expenditures $ 10,008 $ 6,532 $ 4,156 $ 8,263 $ 10,710
(a) Includes $20.7 million restructuring charge in 1991. See Note 2. 30 24 Wynn's International, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 15. BUSINESS SEGMENT AND GEOGRAPHICAL INFORMATION (CONTINUED)
SUMMARY BY GEOGRAPHICAL AREAS Year Ended December 31 1993 1992 1991 1990 1989 -------- -------- -------- -------- -------- (in thousands) NET SALES United States: Sales to unaffiliated customers $192,046 $197,922 $192,580 $206,162 $221,080 Intercompany sales between geographical areas 12,181 10,629 6,907 3,331 3,974 Europe: Sales to unaffiliated customers 61,276 63,495 51,915 46,844 32,187 Intercompany sales between geographical areas 376 330 199 70 93 Other foreign: Sales to unaffiliated customers 31,635 30,371 29,468 32,117 30,618 Intercompany sales between geographical areas 832 465 265 300 271 Eliminate intercompany sales (13,389) (11,424) (7,371) (3,701) (4,338) -------- -------- -------- -------- -------- Total net sales $284,957 $291,788 $273,963 $285,123 $283,885 OPERATING PROFIT (LOSS) United States $ 14,908 $ 13,982 $(14,255)(a) $ 10,424 $ 7,089 Europe 5,082 5,945 6,377 7,617 6,438 Other foreign 3,799 2,516 2,564 3,509 4,455 Eliminate change during year in intercompany profit in inventories 93 (120) (28) -- (29) -------- -------- -------- -------- -------- Total operating profit (loss) of segments 23,882 22,323 (5,342) 21,550 17,953 Corporate expenses and unallocated gains (4,575) (4,155) (3,591) (3,174) (278) Corporate interest income 366 239 194 409 492 Interest expense (3,862) (5,073) (5,179) (5,819) (5,184) -------- -------- -------- -------- -------- Income (loss) before taxes based on income $ 15,811 $ 13,334 $(13,918) $ 12,966 $ 12,983 IDENTIFIABLE ASSETS United States $107,283 $114,306 $121,441 $144,982 $143,340 Europe 31,290 35,115 29,365 25,752 19,516 Other foreign 13,576 13,883 13,391 14,272 14,546 Eliminate intercompany profit in inventory and intercompany trade accounts receivable (5,139) (5,177) (3,466) (2,927) (2,719) -------- -------- -------- -------- -------- Identifiable assets of segments 147,010 158,127 160,731 182,079 174,683 Corporate assets 20,789 12,589 4,891 5,686 13,873 -------- -------- -------- -------- -------- Total assets $167,799 $170,716 $165,622 $187,765 $188,556
(a) Includes $20.7 million restructuring charge in 1991. See Note 2. 31 25 Wynn's International, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 16. QUARTERLY INFORMATION (UNAUDITED) Quarterly information is as follows (in thousands, except per share amounts):
First Second Third Fourth Total Quarter Quarter Quarter Quarter Year ------- ------- ------- ------- -------- FOR THE YEAR ENDED DECEMBER 31, 1993 Net sales $70,508 $71,320 $73,193 $69,936 $284,957 Gross profit 23,599 24,161 23,712 23,459 94,931 Net income 1,867 2,409 2,479 2,226 8,981 Earnings per share: Primary $.34 $.44 $.45 $.40 $1.62 Fully diluted $.33 $.42 $.43 $.38 $1.56 For the year ended December 31, 1992 Net sales $71,499 $76,589 $76,428 $67,272 $291,788 Gross profit 23,271 24,794 24,946 23,431 96,442 Net income 1,526 1,728 1,975 2,024 7,253 Earnings per share: Primary $.28 $.32 $.37 $.37 $1.34 Fully diluted $.28 $.32 $.36 $.36 $1.29
The above tables reflect retroactively the 3 for 2 stock split effected in 1993 (see Note 3). The total of the quarterly per share primary earnings in 1993 and the total of the quarterly per share fully diluted earnings in 1992 do not equal the total earnings per share for the respective year because the calculations are based on the weighted average number of shares outstanding during the periods. 32 26 NUMBER OF STOCKHOLDERS There were 439 stockholders of record at February 22, 1994. STOCK EXCHANGE LISTING New York Stock Exchange Ticker Symbol: WN 33 EX-22 8 SUBSIDIARIES OF REGISTRANT 1 EXHIBIT 22 WYNN'S INTERNATIONAL, INC. SUBSIDIARIES OF REGISTRANT
State or other jurisdiction of Name incorporation ---- --------------- Wynn Oil Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . California Wynn's Sales Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . California Wynn Marketing Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . California Wynn's Australia Pty. Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Australia Wynn's Belgium N.V. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Belgium Wynn's Canada, Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Canada Wynn's Deutschland GmbH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Germany Wynn's Espana, S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Spain Wynn's France, S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . France Wynn's Automotive France Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . France Wynn's Automotive France Professional . . . . . . . . . . . . . . . . . . . . . . . . . . . . France Wynn's Friction Proofing Mexico S.A. de C.V. . . . . . . . . . . . . . . . . . . . . . . . . . . Mexico Wynn Oil (N.Z.) Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . New Zealand Wynn Oil (South Africa) (Pty) Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . South Africa Wynn Oil (U.K.) Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . England Wynn Oil Venezuela, S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Venezuela Wynn's Export, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.S. Virgin Islands Alkid Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . California Robert Skeels & Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . California Wynn's Climate Systems, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Texas Lone Star Manufacturing Co., Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Texas Wynn's Climate Equipment Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Texas Wynn's (UK) Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . England Wynn's Fluid Power, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware Wynn's-Precision, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware PRPC, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tennessee Wynn's-Precision Canada Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Canada Wynn's-Precision (U.K.) Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . England PRP Seals, Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Canada Dynamic Seals, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
Except for Wynn Oil Venezuela, S.A., all of the above-named subsidiaries are 100% owned by Registrant. Wynn Oil Venezuela, S.A. is 51% owned by Registrant. EX-23 9 CONSENT OF INDEPENDENT AUDITORS 1 EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in this Annual Report (Form 10-K) of Wynn's International, Inc. of our report dated January 26, 1994, included in the 1993 Annual Report to Stockholders of Wynn's International, Inc. Our audits also included the financial statement schedules of Wynn's International, Inc. listed in Item 14(a). These schedules are the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, the financial statement schedules referred to above, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein. We also consent to the incorporation by reference in the Registration Statement (Form S-8 No. 2-68157) pertaining to the Amended and Restated 1980 Stock Option and Appreciation Rights Plan and the 1982 Incentive Stock Option Plan of Wynn's International, Inc. and the Registration Statements (Form S-8 Nos. 33-30296 and 33-64090) pertaining to the Stock-Based Incentive Award Plan and in the related Prospectus of our report dated January 26, 1994, with respect to the consolidated financial statements incorporated herein by reference, and our report included in the preceding paragraph with respect to the financial statement schedules included in the Annual Report (Form 10-K) of Wynn's International, Inc. ERNST & YOUNG Los Angeles, California March 25, 1994 -----END PRIVACY-ENHANCED MESSAGE-----