-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OsOqCM1mNVf75RcjMgAxf7wz3VanSCUAzdTlyZdsszWUFsx61nw9CrrxdHO8Ka1H 6AcGPj4IK31kRNPp3qtBJg== 0000912057-96-005424.txt : 19960329 0000912057-96-005424.hdr.sgml : 19960329 ACCESSION NUMBER: 0000912057-96-005424 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960328 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: WYNNS INTERNATIONAL INC CENTRAL INDEX KEY: 0000108721 STANDARD INDUSTRIAL CLASSIFICATION: GASKETS, PACKAGING AND SEALING DEVICES & RUBBER & PLASTIC HOSE [3050] IRS NUMBER: 952854312 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-07200 FILM NUMBER: 96540055 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-K405 1 10-K405 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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, 1995; 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 $198,501,267 as of March 13, 1996. 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 13, 1996, Registrant had 9,082,398 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, 1995. Part III incorporates information by reference from the Proxy Statement for the Annual Meeting of Stockholders to be held on May 8, 1996. 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. [ X ] - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PART I ITEM 1. BUSINESS Wynn's International, Inc., through its subsidiaries, is engaged primarily in the automotive components business and the specialty chemicals business. The Company designs, produces and sells O-rings and other seals and molded elastomeric and thermoplastic polymer products and automotive air conditioning systems and components. The Company also formulates, produces and sells specialty chemical products and automotive service equipment and distributes, primarily in southern California, locks and hardware products manufactured by others. O-rings and other molded polymer products are marketed under the trade name "Wynn's-Precision." Air conditioning systems for the automotive aftermarket are marketed by the Company under the trademark FROSTEMP-Registered Trademark- and installation centers are operated under the trademarks MAXAIR-Registered Trademark- and FROSTEMP-Registered Trademark-. Specialty chemical products and automotive service equipment are marketed under various trademarks, including WYNN'S-Registered Trademark-, FRICTION PROOFING-Registered Trademark-, X-TEND-Registered Trademark-, SPIT FIRE-Registered Trademark-, DU-ALL-Registered Trademark- and TRANSERVE-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 Components; Specialty Chemicals; and Builders Hardware. Financial information relating to the Company's business segments for the five years ended December 31, 1995 is incorporated by reference from Note 14 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, 1995 (the "1995 Annual Report"). AUTOMOTIVE COMPONENTS The Automotive Components Division consists of Wynn's-Precision, Inc. ("Precision") and Wynn's Climate Systems, Inc. ("Wynn's Climate Systems"). During 1995, sales of the Automotive Components Division were $166,012,000, or 55% of the Company's total net sales, as compared with $176,346,000 and 60% in 1994. The operating profit of the division in 1995 was $19,872,000, or 61% of the Company's total operating profit, as compared with $18,566,000 and 65% in 1994. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business Segment and Geographical Information" on pages 16 through 19 and 29 through 31, respectively, of the 1995 Annual Report, which are hereby incorporated by reference. See also "Other Factors Affecting the Business." WYNN'S-PRECISION, INC. (O-RINGS, SEALS AND OTHER MOLDED ELASTOMERIC AND THERMOPLASTIC POLYMER PRODUCTS) PRODUCTS Precision and its affiliated companies design, manufacture and market a variety of static and dynamic sealing products. The principal products of Precision are O-rings, composite gaskets, engineered seals and convoluted boots and seals that are reinforced with plastic, metal and fabric. These products are made from elastomeric and thermoplastic polymers. The products are used for a variety of sealing applications that include engines, transmissions, steering pumps and assemblies, fuel handling, suspension/brake systems, refrigeration and electronics. Precision's primary customers are manufacturers of automobiles, trucks, off-highway vehicles, fluid handling equipment, aircraft/aerospace components, and the military. 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 California, Illinois, Indiana, Kansas, Michigan, Minnesota, New York, North Carolina, Ohio, Pennsylvania and Texas. 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 Arizona, Tennessee, Texas, Virginia and Ontario, Canada. Precision's administrative headquarters are located at the site of its main manufacturing facility in Lebanon, Tennessee. Also located in Lebanon, Tennessee are Precision's own tool production facility and a facility dedicated exclusively to injection molding. Over the past several years, Precision has made significant investments in modern computerized production equipment and facilities. In 1995, Precision continued to invest in new production equipment, which expanded production capacity primarily at Precision's Lebanon, Tennessee and Virginia facilities. The principal raw materials used by Precision are elastomeric and thermoplastic polymers. 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 1995 and are expected to continue to be available in 1996. 2 WYNN'S CLIMATE SYSTEMS, INC. (AUTOMOTIVE AIR CONDITIONING SYSTEMS AND COMPONENTS) PRODUCTS AND SERVICES Wynn's Climate Systems designs, manufactures and markets automotive air conditioning systems and components for both automotive OEMs and the automotive aftermarket. The components include condensers, evaporator coils, injection-molded and vacuum-formed plastic parts, steel brackets, adapter kits and hose and tube assemblies. In 1994, Wynn's Climate Systems also manufactured and sold refrigerant recovery and recycling equipment ("A/C-R Equipment"). In January 1995, Wynn's Climate Systems sold substantially all of its inventory of A/C-R Equipment and discontinued the manufacture of such equipment in April 1995. Wynn's Climate Systems also operates ten installation centers in Arizona, California, Colorado and North Carolina that install air conditioners and accessories for automobile dealers and retail customers. DISTRIBUTION Wynn's Climate Systems sells its air conditioning components to OEM customers and distributors. It sells its air conditioning systems to OEM customers and their distributors and dealers, and to distributors in the automotive aftermarket. In addition, through its installation centers, Wynn's Climate Systems sells air conditioning systems and accessories to automobile dealers and retail customers. PRODUCTION Wynn's Climate Systems manufactures its products in its 185,000 square foot facility located in Fort Worth, Texas. Wynn's Climate Systems manufactures many of the components that it uses in the production of its air conditioning systems. Outside vendors supply certain finished components such as compressors, accumulators and receiver/dryers. Adequate supplies of raw materials and components provided by outside vendors are available at present and are expected to continue to be available for the foreseeable future. SPECIALTY CHEMICALS The Specialty Chemicals Division consists of Wynn Oil Company and its subsidiaries ("Wynn Oil"). During 1995, net sales at Wynn Oil were $132,173,000, or 43% of the Company's total net sales, as compared to $110,867,000 and 38% for 1994. The operating profit of the division during 1995 was $12,426,000, or 38% of the Company's total operating profit, compared with $9,564,000 and 34% for 1994. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business Segment and Geographical Information" on pages 16 through 19 and 29 through 31, respectively, of the 1995 Annual Report, which are hereby incorporated by reference. See also "Other Factors Affecting the Business." 3 PRODUCTS The principal business of Wynn Oil is the development, manufacture and marketing of a wide variety of specialty chemical car care products and related service programs under the WYNN'S-Registered Trademark- and X-TEND-Registered Trademark- trademarks. Wynn Oil's car care products are formulated to provide preventive or corrective maintenance for automotive engines, transmissions, steering systems, fuel delivery systems, 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. Wynn Oil also manufactures the patented DU-ALL-Registered Trademark- antifreeze power drain and fill and recycling system, which is a portable machine used in conjunction with proprietary chemicals to service a vehicle's cooling system and recycle the used antifreeze. The DU-ALL-Registered Trademark- system has been approved by General Motors and Chrysler. In December 1995, Wynn Oil launched the sale of its TRANSERVE-TM- transmission flush and fill system, which is a portable machine used in conjunction with proprietary chemicals to flush and refill the transmission fluid in a vehicle. Wynn Oil also sells its WYNN'S EMISSION CONTROL-Registered Trademark- 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 markets the WYNN'S PRODUCT WARRANTY-Registered Trademark- program, which, in general, consists of kits containing a specially formulated line of automotive additive products, accompanied by a special product warranty. The warranty kits are sold through distributors, sales representatives and automobile dealers primarily to purchasers of used automobiles. The Wynn's Product Warranty program provides reimbursement of the costs of certain parts and labor and, in some instances, the costs of towing and a rental car, incurred by vehicle owners who use 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 are 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 90 foreign countries. See "Foreign Operations." Wynn Oil distributes its products through a wide range of distribution channels. Domestically, Wynn Oil distributes its products primarily through independent distributors, sales representatives and warehouse distributors, and also through mass merchandisers and chain stores. Wynn Oil also uses internal sales management in the sale and distribution of its products. Foreign sales are made principally through wholly-owned subsidiaries, which sell primarily through independent distributors or manufacturers' representative organizations, with a direct sales force in France. Wynn Oil also engages in direct export sales from the U.S. to independent distributors in Asia and Latin America, and from Belgium to independent distributors in Scandinavia, Europe, North Africa, the Middle East and former republics of the USSR. See "Other Factors Affecting the Business." 4 PRODUCTION Wynn Oil has manufacturing facilities in California and Belgium. 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 contract suppliers according to Wynn Oil's specifications and formulae. Wynn Oil periodically reviews its production and sourcing locations in light of fluctuating foreign currency rates. Wynn Oil utilizes a large number of chemicals in the production of its various specialty chemical 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 1995 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 lock sets and locksmith supplies. During 1995, Skeels' net sales were $5,602,000, or 2% of the Company's total net sales, as compared with $5,438,000 and 2% for 1994. The operating profit of the division during 1995 was $297,000, or 1% of the Company's total operating profit, compared with $392,000 and 1% for 1994. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business Segment and Geographical Information" on pages 16 through 19 and 29 through 31, respectively, of the 1995 Annual Report, which are hereby incorporated by reference. Skeels' main facility is located in Compton, California. In addition, Skeels has a leased satellite sales facility located in Fullerton, 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 large institutional customers. Most of Skeels' sales are derived from replacement items used by industry, institutions and in-home remodeling and repair. Skeels has been a distributor of Schlage lock products since 1931. Skeels also distributes other well-known brands such as Lawrence, Kwikset and Master. Skeels' distributorship arrangements generally are cancelable by the manufacturers without cause. 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 5 resources greater than those of the Company. Sales by the Automotive Components 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. In 1995, Precision invested approximately $5 million in new production equipment, which expanded its production capacity primarily at its Lebanon, Tennessee and Virginia facilities. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." 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. Wynn's Climate Systems has a number of competitors that manufacture air conditioning systems and components, some of which competitors are substantially larger than Wynn's Climate Systems. Automotive air conditioning manufacturers compete in the areas of price, service, warranty and product performance. Wynn's Climate Systems' focus is to manufacture high quality products. Over time there has been a gradual increase in the number of air conditioning systems installed on the automotive factory line. The increase in the number of factory-installed systems has reduced the size of the market for aftermarket sales. Competition with respect to Wynn Oil's specialty chemical 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 and car manufacturers market private label brands of specialty chemical products. Wynn Oil's DU-ALL-Registered Trademark- antifreeze recycling equipment and chemicals compete against other antifreeze recycling processes, some of which also have been approved by General Motors and Chrysler. Similarly, Wynn Oil's TRANSERVE-TM- transmission fluid flush and fill equipment and chemicals compete against other transmission flush equipment. 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. KEY CUSTOMERS Sales to General Motors constituted approximately 10.1% of the total net sales of the Company in 1995. No other customer represented more than 10% of total net sales of the Company in 1995. GOVERNMENT REGULATIONS The number of governmental rules and regulations affecting the Company's business and products continues to increase. 6 Wynn Oil markets the Wynn's Product Warranty program in approximately forty-four states in the U.S. and also in Canada. 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 resolve these questions to the satisfaction of each state insurance regulator. At times, it has elected to withdraw the Wynn's Product Warranty program from certain states. No assurance can be given that governmental regulations will not significantly affect the marketing of the Wynn's Product Warranty in the United States or other countries in the future. Over the past few years, sales of the Wynn's Product Warranty have become an increasingly important element of Wynn Oil's domestic business. 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 applicable 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. At December 31, 1995, the Company had consolidated accrued reserves of approximately $4.8 million relating to environmental matters. Although the effect of resolution of environmental matters on results of operations cannot be predicted, the Company believes, based on information presently known to the Company, that any liability that may result from environmental matters in excess of accrued reserves should not materially affect the Company's financial position or annual results of operations or cash flows. See Note 11 of "Notes to Consolidated Financial Statements" on page 28 of the 1995 Annual Report, which is hereby incorporated by reference. All potentially significant environmental matters presently known to the Company are described below. (a) In 1988, the Los Angeles County Department of Health Services (the "LADHS") directed Wynn Oil to conduct a site assessment of the Wynn Oil manufacturing facility in Azusa, California (the "Azusa Facility"). 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"). In July 1990, Wynn Oil received a general notice letter from the United States Environmental Protection Agency (the "EPA") stating that it may be a potentially responsible party ("PRP") with respect to the San Gabriel Valley, California Superfund Sites regional groundwater problem. The EPA letter included an information request pursuant to Section 104(e) of CERCLA to which Wynn Oil responded within the specified time period. 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 fall of 1993, the 7 RWQCB requested Wynn Oil to install a groundwater monitoring well located upgradient of the existing Azusa Facility well. Wynn Oil reached agreement with another PRP located on an approximately upgradient property. The agreement provided for this PRP to install the groundwater monitoring well on its property and for Wynn Oil to share the costs of installation. The well was installed, and the RWQCB has accepted this well as meeting its request for Wynn Oil to install a well upgradient of the Azusa Facility. Wynn Oil continues to monitor the well located at the Azusa Facility in accordance with RWQCB requirements. During 1995, the RWQCB sent letters to Wynn Oil and certain other facilities in the general area asking them to submit remedial action plans for vadose zone remediation at their respective facilities. In December 1995, Wynn Oil's consultants responded to the RWQCB stating that such remediation was neither warranted nor cost effective at the Azusa Facility. Wynn Oil may at some later date elect or be required to take specific remedial actions with respect to soils conditions at the Azusa Facility. In March 1994, the EPA issued its Record of Decision ("ROD") with respect to the Baldwin Park Operable Unit ("BPOU") of the San Gabriel Valley Superfund Sites. The Azusa Facility is located within the BPOU. In the ROD, the EPA selected an interim groundwater remedial action (the "Interim Remedial Action") for the BPOU that is estimated to cost in the range of $100 to $120 million. Wynn Oil has joined with approximately ten other companies, each of which has been identified as a PRP in EPA General Notice letters, to form the BPOU Steering Committee ("Steering Committee"). The Steering Committee has been negotiating with several local, state and federal entities regarding implementation of the ROD with partial funding from the Metropolitan Water District Groundwater Recovery Program and funds from the federal Bureau of Reclamation available for conjunctive use projects in the San Gabriel Basin. This approach is generally known as the "Consensus Plan." If agreement is reached among these entities, the PRP costs of implementing the ROD reportedly could be reduced to approximately $35 million, excluding any of EPA's past costs. However, no assurance can be given that such agreements will be reached or the Consensus Plan will be implemented. In January 1995, the EPA issued "pre-Special Notice" letters to sixteen companies, including Wynn Oil, requesting them to install up to ten regional monitoring wells and complete other pre-design work needed before the remedy can be implemented (the "Pre-Design Work"). The Steering Committee members have funded the costs of the Pre-Design Work on an interim basis subject to reallocation among all of the PRPs which ultimately share the costs of implementing the ROD. The cost of the Pre-Design Work paid by the Steering Committee members was approximately $2 million. In recognition of the Steering Committee's commitment to perform the Pre-Design Work, the EPA has deferred issuance of Special Notice letters for implementation of the ROD. The EPA has indicated that it considers Wynn Oil to be one of the four largest contributors to the regional groundwater problem in the BPOU. Wynn Oil disagrees with the views expressed by the EPA. The Steering Committee has begun the process of allocating among its members the cost for implementing the ROD. There is no assurance that a negotiated allocation of responsibility will be reached. Wynn Oil's ultimate share of the total remedial costs cannot be estimated with certainty at this time. In establishing appropriate reserves for this matter, Registrant has assumed 8 that the total PRP costs of implementing the ROD plus the Steering Committee's share of EPA's past costs, if any, will be in the range of $30 to $40 million. (b) In February 1992, an inactive subsidiary of the Company received a letter from the then lessee (the "Lessee") of a parcel of real property in Compton, California formerly leased by the subsidiary. The letter stated that the Lessee had discovered soil contamination at the site and asserted that the subsidiary may be liable for the cost of clean-up. 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 (the "Property Owner") stating that the Property Owner had asserted a claim against the Lessee to pay the cost of remediation and that the Property Owner may assert a claim against the Company. In February 1995, the Property Owner filed a lawsuit in federal court against the Lessee and its principal, the inactive subsidiary, Wynn's International, Inc. and Wynn Oil. The complaint alleges that the defendants stored solid and hazardous wastes at the site and that the storage devices for the wastes leaked, causing contamination of the soils and groundwater. The complaint seeks relief under CERCLA, the Resource Conservation Recovery Act of 1976 and common law, including an unspecified amount of damages and an injunction to compel the defendants to clean up the property. After the Wynn's parties were served with the lawsuit in June 1995, the parties filed various cross claims and counter claims against each other. In September 1995, all parties met to review the possibility of an early settlement. As a result of this meeting, the Wynn's parties and the Property Owner agreed to fund equally a joint investigation of the site, with each party being responsible for half of the cost of the investigation. In exchange, the Property Owner stayed the litigation pending completion of the joint investigation. As of March 13, 1996, the Company had not received the results of the investigation. The Company does not know the extent of the contamination or the estimated cost of cleanup at this site. (c) In January 1991, Wynn's Climate Systems received a letter from the Texas Natural Resources Conservation Commission (the "TNRCC") alleging that soil adjacent to one of its leased manufacturing facilities was contaminated with hazardous substances. The TNRCC 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 TNRCC. Performance of this work was completed in late 1991. Wynn's Climate Systems submitted a copy of the report of its consultants to the TNRCC in February 1992. In 1994, Wynn's Climate Systems received a request from the TNRCC for additional information. Wynn's Climate Systems furnished the requested information to the TNRCC. Wynn's Climate Systems also voluntarily conducted additional investigation activities at this facility. Wynn's Climate Systems ceased leasing this facility at the end of 1994. Since the expiration of the lease, Wynn's Climate Systems has been attempting to obtain written consent from the property owner to gain access to the facility for purposes of continuing the additional investigation. As of March 13, 1996, Wynn's Climate Systems had not yet obtained such consent and had so informed the TNRCC. (d) 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 9 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 that 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 1996, approximately 85 PRPs, including Wynn's Climate Systems, had agreed to participate in the Committee for the CRI Site. PRPs that 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. No significant developments occurred in 1995. As of March 1996, Wynn's Climate Systems' proportionate share of the total volume of waste contributed to the CRI Site by Committee members was approximately two-tenths of one percent (0.2%). The foregoing "Environmental Matters" section and Note 11 of "Notes to Consolidated Financial Statements" on page 28 of the 1995 Annual Report (which is incorporated by reference herein) contain various "forward looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which represent the Company's expectations or beliefs concerning future events, including statements regarding estimates of the Company's liabilities associated with identified environmental matters and the likelihood that any liability in excess of reserves for such matters will not materially affect the Company's financial position or annual results of operations or cash flows. The Company cautions that these statements are further qualified by important factors that could cause actual results to differ materially from those in the forward looking statements, including, without limitation, the following: (i) the actual nature and extent of the contamination, (ii) the remedial action selected, (iii) the cleanup level required, (iv) changes in regulatory requirements, (v) with respect to the San Gabriel Valley Superfund Sites, the PRP costs of implementing the ROD and the amount of EPA past costs required to be paid by the PRPs, (vi) the ability of other responsible parties, if any, to pay their respective shares, and (vii) any insurance recoveries. Results actually achieved thus may differ materially from expected results included in these and any other forward looking statements contained herein. FOREIGN CURRENCY FLUCTUATIONS In 1995, the United States dollar generally decreased in value compared to 1994 in the currencies of most countries in which the Company does business. This decrease in the value of the U.S. dollar caused aggregate foreign sales and operating profit to be translated into higher dollar values than what would have been reported if exchange rates had remained the same as in 1994. In 1995, the Equity Adjustment from Foreign Currency Translation account on the Consolidated Balance Sheet increased by $1,068,000, which caused a corresponding increase in Total Stockholders' Equity. See "Foreign Operations." 10 PATENTS AND TRADEMARKS 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-Registered Trademark- trademark. In February 1994, the court awarded Wynn Oil $2.0 million in damages. Additionally, in May 1994, the court awarded Wynn Oil approximately $1.2 million in prejudgment interest and attorneys' fees. Defendants filed a timely appeal of the District Court ruling to the United States Court of Appeals for the Sixth Circuit, but did not file the required bond to stay execution of the judgment. Prior to Wynn Oil executing upon the defendants' assets, the defendants filed Chapter 11 bankruptcy proceedings in late 1994 in Florida. The bankruptcy filing resulted in an automatic stay of all pending collection efforts. In 1995, the Court of Appeals determined that the District Court had erred in part in determining the damage award and remanded the case to the District Court for a final determination of the damage award. The District Court subsequently awarded Wynn Oil damages and attorneys' fees of approximately $1.8 million. Wynn Oil and its counsel are working through the bankruptcy process to maximize Wynn Oil's ultimate recovery against the defendants. See "Legal Proceedings." 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 Precision maintains research and engineering facilities in Tennessee, Virginia and 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 in Tennessee, Virginia and Canada to design sealing solutions, 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. Wynn Oil maintains research and product performance centers in California, Belgium, France and 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. 11 FOREIGN OPERATIONS The following table shows sales to foreign customers for the years 1995, 1994 and 1993:
1995 1994 1993 ------------ ----------- ------------ Total Sales Outside the United States: $110,629,000 $99,133,000 $102,907,000 Percent of Net Sales 36.4% 33.9% 36.1% Sales by Foreign Subsidiaries $98,444,000 $85,945,000 $92,911,000 Percent of Net Sales 32.4% 29.4% 32.6% Export sales by Domestic Subsidiaries $12,185,000 $13,188,000 $9,996,000 Percent of Net Sales 4.0% 4.5% 3.5%
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. Consequently, 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 3 and Note 14 of "Notes to Consolidated Financial Statements" on page 25 and 29 through 31, respectively, of the 1995 Annual Report, which are hereby incorporated by reference. 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. Consequently, 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, 1995, the Company had 2,023 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 1998. 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. 12 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 1999. 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 66 Seymour A. Schlosser Vice President-Finance and Chief 1989 50 Financial Officer Gregg M. Gibbons Vice President-Corporate Affairs, 1986 43 General Counsel and Secretary
The principal occupations of Messrs. Carroll, Schlosser and Gibbons for the past five years have been their current respective positions with the Company. 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. 13 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, as of March 13, 1996:
SQUARE IF LEASE, HELD IN FEE FOOTAGE YEAR OF LOCATION OR BY LEASE (APPROXIMATE) TERMINATION PRESENT USE - -------------------------------------------------- ----------- ------------- ------------ ------------------ WYNN'S INTERNATIONAL, INC. Orange, California Lease 6,894 1998 Administrative AUTOMOTIVE COMPONENTS: WYNN'S-PRECISION, INC. DOMESTIC Lebanon, Tennessee Fee 140,000 -- Manufacturing, Warehouse, Administrative Lebanon, Tennessee Fee 78,000 -- 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 4,762 1998 Warehouse Peoria, Illinois Lease 10,000 2000 Warehouse Farmington Hills, Michigan Lease 1,963 1998 Administrative Wyoming, Michigan Lease 2,000 1997 Warehouse Golden Valley, Minnesota Lease 3,800 1996 Warehouse Charlotte, North Carolina Lease 3,675 1999 Warehouse West Seneca, New York Lease 2,934 2000 Warehouse Dayton, Ohio Lease 6,193 1998 Warehouse
14
SQUARE IF LEASE, HELD IN FEE FOOTAGE YEAR OF LOCATION OR BY LEASE (APPROXIMATE) TERMINATION PRESENT USE - -------------------------------------------------- ----------- ------------- ------------ ------------------ Bensalem, Pennsylvania Lease 2,326 1998 Warehouse Indianapolis, Indiana Lease 1,800 1996 Warehouse Fort Worth, Texas Lease 3,600 1998 Warehouse Lenexa, Kansas Lease 2,089 1997 Warehouse FOREIGN Orillia, Ontario, Canada Fee 48,000 -- Manufacturing, Warehouse, Administrative Concord, Ontario, Canada Lease 3,455 Month-to- Warehouse Month Edmonton, Alberta, Canada Lease 2,700 1996 Warehouse Richmond, British Columbia, Canada Lease 3,047 1996 Warehouse Calgary, Alberta, Canada Lease 1,600 1998 Warehouse Aldershot, England Lease 2,300 1996 Warehouse, Administrative DYNAMIC SEALS, INC. Lynchburg, Virginia Fee 101,000 -- Manufacturing, Warehouse, Administrative Houston, Texas Lease 14,000 1997 Manufacturing, Warehouse, Administrative Houston, Texas Lease 14,000 1997 Warehouse, Administrative
15
SQUARE IF LEASE, HELD IN FEE FOOTAGE YEAR OF LOCATION OR BY LEASE (APPROXIMATE) TERMINATION PRESENT USE - -------------------------------------------------- ----------- ------------- ------------ ------------------ WYNN'S CLIMATE SYSTEMS, INC. DOMESTIC Fort Worth, Texas Fee 185,375 -- Manufacturing, Warehouse, Administrative Madison Heights, Michigan Lease 1,000 Month-to- Administrative Month Bensenville, Illinois Lease 4,165 1997 Warehouse Englewood, Colorado Lease 12,000 2000 Service Center Northglenn, Colorado Lease 7,680 2000 Service Center Colorado Springs, Colorado Lease 6,600 1997 Service Center Phoenix, Arizona Lease 17,000 1997 Service Center Mesa, Arizona Lease 4,400 Month-to- Service Center Month Glendale, Arizona Lease 3,600 1997 Service Center Yuma, Arizona Lease 4,800 1999 Service Center Scottsdale, Arizona Lease 3,881 1996 Service Center Charlotte, North Carolina Lease 3,000 2000 Service Center Rancho Cucamonga, California Lease 10,000 Month-to- Service Center Month FOREIGN Tamworth, Staffordshire, England Lease 14,000 1998 Manufacturing, Warehouse, Administrative
16
SQUARE IF LEASE, HELD IN FEE FOOTAGE YEAR OF LOCATION OR BY LEASE (APPROXIMATE) TERMINATION PRESENT USE - -------------------------------------------------- ----------- ------------- ------------ ------------------ SPECIALTY CHEMICALS: WYNN OIL COMPANY DOMESTIC Azusa, California Fee 122,630 -- Manufacturing, Warehouse, Administrative FOREIGN Frenchs Forest, New South Wales, Australia Lease 24,224 2000 Warehouse, Administrative Carrington, New South Wales, Australia Lease 13,175 1996 Warehouse, Administrative St. Niklaas, Belgium Fee 82,600 -- Manufacturing, Warehouse, Administrative Mississauga, Ontario, Canada Lease 32,798 2001 Warehouse, Administrative Mississauga, Ontario, Canada Lease 16,894 1996 Warehouse, Administrative Mississauga, Ontario, Canada Lease 2,536 1997 Service Center Mississauga, Ontario, Canada Lease 2,689 1996 Warehouse, Administrative Reading, Berkshire, England Lease 3,154 2004 Administrative Strasbourg, France Lease 557 1997 Administrative Paris, France Lease 8,853 1997 Administrative Cestas, France Lease 18,669 1996 Warehouse, Administrative Lyon, France Lease 465 1998 Administrative St. Etienne, France Lease 929 1996 Administrative Abbeville, France Lease 929 Month-to- Administrative Month
17
SQUARE IF LEASE, HELD IN FEE FOOTAGE YEAR OF LOCATION OR BY LEASE (APPROXIMATE) TERMINATION PRESENT USE - -------------------------------------------------- ----------- ------------- ------------ ------------------ Thiers, France Lease 465 1996 Administrative Toulouse, France Lease 485 1996 Administrative Celle, Germany Lease 7,209 2002 Warehouse, Administrative Mexico City, Mexico Lease 2,500 1996 Warehouse, Administrative Wynberg, Transvaal, South Africa Fee 32,280 -- Warehouse, Administrative Edenvale, Transvaal, South Africa Fee 10,921 -- Leased to Third Party Madrid, Spain Lease 430 1996 Administrative Caracas, Venezuela Lease 1,615 Month-to- Administrative Month BUILDERS HARDWARE: ROBERT SKEELS & COMPANY Compton, California Fee 59,019 -- Warehouse, Administrative Fullerton, California Lease 1,600 1996 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 1996 and 1997, 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. 18 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 approximately $2.0 million in damages in an action brought by Wynn Oil in 1989 asserting trademark infringement by the defendants. In May 1994, the court awarded Wynn Oil approximately $1.2 million in prejudgment interest and attorneys' fees. Subsequently, the defendants filed a timely appeal to the United States Court of Appeals for the Sixth Circuit, but did not file a bond to stay execution of the judgment. Between May and December 1994, Wynn Oil sought out assets of the defendants to satisfy the judgment. Prior to Wynn Oil executing upon the defendants' assets, the defendants filed Chapter 11 bankruptcy proceedings in late 1994 in Florida. The bankruptcy filing resulted in an automatic stay of all pending collection efforts. In July 1995, the Court of Appeals upheld the District Court's award of damages and attorneys' fees, but held that the District Court erred when it awarded (i) both investment income and prejudgment interest and (ii) reasonable investment income instead of actual investment income. The Court of Appeals remanded the case to the District Court for a final determination of the damage award. In November 1995, the District Court awarded Wynn Oil damages and attorneys' fees of $1.8 million. The District Court also ordered the defendants to show the investment income earned by them during the period in question, which, if any, the court indicated it would award to Wynn Oil. The bankruptcy court has lifted the automatic stay for purposes of determining the applicable investment income and finalizing Wynn Oil's judgment. In 1995, the bankruptcy court appointed separate trustees to take control of the assets of both defendants. The bankruptcy court also affirmed that Wynn Oil had a liquidated claim in the amount of approximately $1.8 million. Wynn Oil and its counsel are continuing to work through the bankruptcy process to maximize Wynn Oil's ultimate recovery against the defendants. No portion of the 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 1995. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The information appearing under "Cash Dividends and Common Stock Price Per Share: 1994-1995" on page 32 of the 1995 Annual Report and "Number of Stockholders" and "Stock Exchange Listing" on page 33 of the 1995 Annual Report is hereby incorporated by reference. On February 14, 1996, the Board of Directors of Registrant declared a cash dividend of $0.10 per share payable March 29, 1996 to stockholders of record on March 13, 1996. 19 Registrant currently expects that it will continue to pay dividends in the future, in amounts per share at least comparable to dividends paid during the past two years. ITEM 6. SELECTED FINANCIAL DATA Incorporated by reference from page 15 of the 1995 Annual Report. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Incorporated by reference from the 1995 Annual Report, pages 16 through 19. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Consolidated financial statements of Registrant at December 31, 1995 and 1994 and for each of the three years in the period ended December 31, 1995 (including unaudited supplementary data) and the report of independent auditors thereon are incorporated by reference from the 1995 Annual Report, pages 20 through 32. 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" on pages 4 and 5 of Registrant's definitive proxy statement for the Annual Meeting of Stockholders to be held on May 8, 1996 ("Registrant's 1996 Proxy Statement") is hereby incorporated by reference. A list of executive officers of Registrant is provided in Item 1 of Part I of this report. ITEM 11. EXECUTIVE COMPENSATION The information appearing under "Board of Directors and Committees of the Board--Compensation of Directors" and "--Compensation Committee Interlocks and Insider Participation," and "Executive Compensation" on pages 6 through 10 of Registrant's 1996 Proxy 20 Statement is hereby incorporated by reference. The Report of the Compensation Committee on pages 11 and 12 of Registrant's 1996 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 and 3 of Registrant's 1996 Proxy Statement is hereby incorporated by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information appearing under "Election of Directors--Certain Relationships and Related Transactions" on page 5 of Registrant's 1996 Proxy Statement is hereby incorporated by reference. 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 1995. 21 WYNN'S INTERNATIONAL, INC. INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES COVERED BY REPORT OF INDEPENDENT AUDITORS (ITEM 14(a))
Page References ------------------------------------- 1995 Annual Form 10-K Report ------------ ---------------- Consolidated Statements of Income for each of the three years in the period ended December 31, 1995 . . . . . . . . 20 Consolidated Balance Sheets at December 31, 1995 and 1994. . . . . . 21 Consolidated Statements of Stockholders' Equity for each of the three years in the period ended December 31, 1995. . . . . 22 Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 1995 . . . . . . 23 Notes to Consolidated Financial Statements . . . . . . . . . . . . . 24 - 32 Consolidated schedule for each of the three years in the period ended December 31, 1995: VIII - Valuation and Qualifying Accounts . . . . . . . . . . . 23
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 1995 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 1995 Annual Report is not deemed to be filed as part of this report. 22 WYNN'S INTERNATIONAL, INC. SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS THREE YEARS ENDED DECEMBER 31, 1995
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 ----------------- ---------- ---------- ---------- ----------- 1995 $1,835,000 $ 104,000 $ (595,000) $ 1,344,000 ---------- ---------- ---------- ----------- 1994 $1,848,000 $ 208,000 $ (221,000) $ 1,835,000 ---------- ---------- ---------- ----------- 1993 $2,644,000 $ (39,000) $ (757,000) $ 1,848,000 ---------- ---------- ---------- -----------
____________________ (1) Represents accounts written off against the reserve. 23 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, 1996. WYNN'S INTERNATIONAL, INC. By /S/ 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, 1996 By /S/ WESLEY E. BELLWOOD ------------------------------------------- Wesley E. Bellwood Chairman of the Board March 25, 1996 By /S/ JAMES CARROLL ------------------------------------------- James Carroll President Chief Executive Officer Director 24 DATE March 25, 1996 By /S/ SEYMOUR A. SCHLOSSER ------------------------------------------- Seymour A. Schlosser Vice President-Finance (Principal Financial and Accounting Officer) March 25, 1996 By /S/ BARTON BEEK ------------------------------------------- Barton Beek Director March 25, 1996 By /S/ JOHN D. BORIE ------------------------------------------- John D. Borie Director March 25, 1996 By /S/ BRYAN L. HERRMANN ------------------------------------------- Bryan L. Herrmann Director March 25, 1996 By /S/ ROBERT H. HOOD, JR. ------------------------------------------- Robert H. Hood, Jr. Director March 25, 1996 By /S/ RICHARD L. NELSON ------------------------------------------- Richard L. Nelson Director March 25, 1996 By /S/ JAMES D. WOODS ------------------------------------------- James D. Woods Director 25 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 (incorporated herein by reference to Exhibit 3.3 to Registrant's Report on Form 10-K for the fiscal year ended December 31, 1993) 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 February 15, 1995, between Registrant and James Carroll (incorporated by reference to Exhibit 10.1 to Registrant's Report on Form 10-K for the fiscal year ended December 31, 1994) 10.2 Employment Agreement, dated January 1, 1995, between Registrant and Gregg M. Gibbons (incorporated by reference to Exhibit 10.3 to Registrant's Report on Form 10-K for the fiscal year ended December 31, 1994) 26 Exhibit Number Description - ------- ----------- 10.3 Employment Agreement, dated January 1, 1995, between Registrant and Seymour A. Schlosser (incorporated by reference to Exhibit 10.3 to Registrant's Report on Form 10-K for the fiscal year ended December 31, 1994) 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. 1996 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 (incorporated herein by reference to Exhibit 10.10 to Registrant's Report on Form 10-K for the fiscal year ended December 31, 1993) 10.11 Deferred Compensation Agreement, dated August 5, 1994, 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, 1994) 27 Exhibit Number Description - ------- ----------- 10.12 Deferred Compensation Agreement, dated November 21, 1995, between Registrant and James Carroll 10.13 Deferred Compensation Agreement, dated November 28, 1995, between Registrant and James Carroll 10.14 Form of Indemnification Agreement between Registrant and a director of Registrant (incorporated herein by reference to Exhibit 10.11 to Registrant's Report on Form 10-K for the fiscal year ended December 31, 1993) 10.15 Wynn's International, Inc. Non-Employee Directors' Stock Option Plan (incorporated herein by reference to Exhibit C of Registrant's Definitive Proxy Statement relating to its Annual Meeting of Stockholders held on May 11, 1994, filed with the Commission on March 25, 1994) 11 Computation of Net Income Per Common Share -- Primary and Assuming Full Dilution 13 Portions of Registrant's Annual Report to Stockholders for the fiscal year ended December 31, 1995 that have been expressly incorporated by reference as a part of this Annual Report on Form 10-K 21 Subsidiaries of Registrant 23 Consent of Independent Auditors 27 Financial Data Schedule 28 EX-10.7 2 EXHIBIT 10.7 INCENTIVE PLAN Exhibit 10.7 WYNN'S INTERNATIONAL, INC. 1996 CORPORATE MANAGEMENT INCENTIVE PLAN SECTION 1. The purpose of this 1996 Corporate Management Incentive Plan (the "1996 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 1996 (the "Corporate Bonus Pool") with a corresponding charge to income for the year 1996 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 fifteen percent (15%) return on Beginning Net Operating Assets, provided, however, that (i) the maximum amount of the Corporate Bonus Pool shall be One Million Two Hundred Fifty Thousand Dollars ($1,250,000), and (ii) no amounts shall be earned hereunder if the Consolidated Pretax Earnings of the Company for the year ended December 31, 1996 are less than Twenty-Three Million Six Hundred Twenty-Two Thousand Dollars ($23,622,000). (b) Before the payment of bonus awards for the year 1996, 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 1996 Plan shall be charged to income for 1996. SECTION 3. (a) The term "Consolidated Pretax Earnings" as used in the 1996 Plan shall mean, for calendar year 1996, the Company's income before taxes based on income as shown on the Consolidated Statement of Operations section of the Company's 1996 Consolidated Financial Statements after making adequate provision for the Corporate Bonus Pool in the 1996 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, 1995, as calculated in a manner consistent with the Company's Corporate Policy No. 1014. (c) The term "1996 Consolidated Financial Statements" as used in the 1996 Plan shall mean those financial statements of the Company and its subsidiaries contained in the Company's annual report to stockholders for the year ended December 31, 1996 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 1996 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. The total Corporate Bonus Pool shall be distributed to the 1996 Plan participants, subject to the following two limitations. First, the total Corporate Bonus Pool shall not be distributed if such distribution would cause the limits on the maximum amounts payable to executive officers set forth Section 6 to be exceeded. Second, regardless of whether such limits on bonus awards to executive officers are reached, the balance of the Corporate Bonus Pool need not be distributed to Corporate Management Employees who are not executive officers. The recommendations for bonus awards under the 1996 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 any bonus award or to a bonus award for any specific amount, as a matter of right, for services rendered in 1996. 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 2 additional bonus awards to any or all executive officers for outstanding performance in 1996, 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 1996. SECTION 7. Bonus awards under the 1996 Plan will be paid to each recipient no later than March 15, 1997 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 1996 other than by death, such participant shall not be entitled as a matter of right to any bonus award for services rendered in 1996, 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 1996. SECTION 10. Upon the death of a Corporate Management Employee during 1996, 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, 1996. 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 1996 Plan. SECTION 11. The 1996 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 1996 Plan is effective as of January 1, 1996. 3 EX-10.12 3 EXHIBIT 10.12 COMPENSATION AGREEMENT EXHIBIT 10.12 STANDARD DEFERRED COMPENSATION AGREEMENT THIS AGREEMENT, is made the 21st day of November, 1995, 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 a part of Employee's base salary to be paid in 1995 for services yet to be rendered; and WHEREAS, Employee desires to receive a part of said base salary in 1995, 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 base monthly salary paid to Employee for services rendered between December 1, 1995 and December 31, 1995 ("Deferred Compensation"). Said Deferred Compensation shall not bear interest from the date that said Deferred Compensation would otherwise be payable to Employee to the date of payment. 2. DATE OF PAYMENT Payment of Deferred Compensation shall be made on January 5, 1996. 3. METHOD OF PAYMENT On the due date specified in Paragraph 2, 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, payable in one (1) installment, 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. FUNDING OF BENEFIT Employee understands and acknowledges that all Deferred Compensation under Paragraph 1 of this Agreement shall be general 2 unsecured obligations of Employer and that Employer shall have no obligation to set aside any amounts 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. 6. 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. 7. GOVERNING LAW This Agreement shall be governed by and construed according to the laws of the State of Tennessee. 3 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. WYNN'S-PRECISION, INC. By /s/ JERRY L. MCFADDEN ----------------- Jerry L. McFadden Vice President-Finance ATTEST: /s/ LYNN WINFREE - ------------------- Lynn Winfree Assistant Secretary /s/ JAMES CARROLL --------------------- James Carroll 4 EX-10.13 4 EXHIBIT 10.13 COMPENSATION AGREEMENT EXHIBIT 10.13 STANDARD DEFERRED COMPENSATION AGREEMENT THIS AGREEMENT, is made the 28th day of November, 1995, at Orange, California, by and between Wynn's International, 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 a portion of Employee's incentive award, if any, earned for services rendered in 1995 and to be paid in 1996; and WHEREAS, Employee desires to receive a portion of said incentive award for 1995, 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 seventy-five percent (75%) of the incentive award, if any, earned by Employee for services rendered for calendar year 1995 ("Deferred Compensation"). Said Deferred Compensation 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 First Interstate Bank of California, Los Angeles, California, 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 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, commencing no later than sixty (60) days following the death of said 2 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 EMPLOYER For purposes of this Agreement, a "change in control of Employer" 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 Employer representing 40% or more of the combined voting power of Employer'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 Employer 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 obligation to set aside any amounts, principal or interest, for the benefit of 3 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 California. 4 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. WYNN'S INTERNATIONAL, INC. By /S/ SEYMOUR A. SCHLOSSER ------------------------------ Seymour A. Schlosser Vice President-Finance ATTEST: /S/ JEAN MELTON - ------------------------ Jean Melton Assistant Secretary By /S/ JAMES CARROLL ---------------------------- James Carroll 5 EX-11 5 EXHIBIT 11 NET INCOME PER COMMON SHARE EXHIBIT 11 WYNN'S INTERNATIONAL, INC. COMPUTATION OF NET INCOME PER COMMON SHARE - PRIMARY
Year ended December 31 ---------------------------------------------- 1995 1994 1993 ----------- ----------- ---------- Net income.............................. $15,443,000 $11,821,000 $8,981,000 ----------- ----------- ---------- Weighted average number of shares outstanding............................ 8,915,443 8,329,698 8,158,470 Net shares assumed issued using the treasury stock method for stock options outstanding during each period based on average market price................ 271,595 211,575 162,576 ----------- ----------- ---------- Common and common equivalent shares................................. 9,187,038 8,541,273 8,321,046 ----------- ----------- ---------- Net income per common share............. $1.68 $1.38 $1.08 ----------- ----------- ----------
COMPUTATION OF NET INCOME PER COMMON SHARE - ASSUMING FULL DILUTION
Year ended December 31 ---------------------------------------------- 1995 1994 1993 ----------- ------------ ---------- Net income.............................. $15,443,000 $11,821,000 $8,981,000 Net interest expense from convertible bonds.................................. 59,000 367,000 406,000 ----------- ----------- ---------- Net earnings for purposes of dilution... $15,502,000 $12,188,000 $9,387,000 ----------- ----------- ---------- Weighted average number of shares outstanding............................ 8,915,443 8,329,698 8,158,470 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.................... 348,992 221,330 179,643 Dilutive effect of assumed conversion of bonds outstanding....... 104,758 642,114 710,040 ----------- ------------ ---------- Fully diluted shares.................... 9,369,193 9,193,142 9,048,153 ----------- ------------ ---------- Net income per common share............. $1.65 $1.33 $1.04 ----------- ------------ ----------
Note: The above calculations reflect for all periods the three-for-two stock splits to stockholders of record in August 1993 and December 1995. EX-13 6 EXHIBIT 13 ANNUAL REPORT EXHIBIT 13 This exhibit consists of the following portions of the 1995 Annual Report to Stockholders of Wynn's International, Inc.: the Report of Independent Auditors on page 20, the consolidated financial statements of Registrant on pages 20 through 32, the Selected Financial Data section on page 15, the Management's Discussion and Analysis of Financial Condition and Results of Operations section on pages 16 through 19, and the information appearing under "Cash Dividends and Common Stock Price Per Share: 1994-1995" on page 32 and "Number of Stockholders" and "Stock Exchange Listing" on page 33. WYNN'S INTERNATIONAL, INC. SELECTED FINANCIAL DATA
FIVE YEARS ENDED DECEMBER 31, 1995 -------------------------------------------------------------------------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1995 1994 1993 1992 1991 - ------------------------------------------------------------------------------------------------------------------------------ Net sales $303,787 $292,651 $284,957 $291,788 $273,963 - ------------------------------------------------------------------------------------------------------------------------------ Income (loss) before taxes based on income 24,551 19,379 15,811 13,334 (13,918)(a) Provision (benefit) for taxes based on income 9,108 7,558 6,830 6,081 (2,718) - ------------------------------------------------------------------------------------------------------------------------------ Net income (loss) $ 15,443 $ 11,821 $8,981 $7,253 $(11,200) - ------------------------------------------------------------------------------------------------------------------------------ Earnings (loss) per share of common stock (b) $1.68 $1.38 $1.08 $.90 $(1.37) - ------------------------------------------------------------------------------------------------------------------------------ Weighted average common shares outstanding 9,187,038 8,541,273 8,321,046 8,093,621 8,157,627 - ------------------------------------------------------------------------------------------------------------------------------ Cash dividends per common share $.34 2/3 $.29 1/3 $.28 $.26 2/3 $.26 2/3 - ------------------------------------------------------------------------------------------------------------------------------ Selected balance sheet items: Current assets $126,702 $120,000 $117,624 $124,897 $118,014 Current liabilities 58,538 59,167 56,293 54,378 44,732 Working capital 68,164 60,833 61,331 70,519 73,282 Current ratio 2.16 to 1 2.03 to 1 2.09 to 1 2.30 to 1 2.64 to 1 Total assets $181,765 $176,472 $167,799 $170,716 $165,622 Long-term debt due after one year 75 14,948 23,389 32,518 40,696 Stockholders' equity 116,233 95,440 84,442 78,853 75,611 Book value per common share $12.85 $11.42 $10.18 $9.73 $9.35 - ------------------------------------------------------------------------------------------------------------------------------ Number of employees 2,023 2,052 1,978 1,945 1,924 - ------------------------------------------------------------------------------------------------------------------------------
NOTES: (a) 1991 loss includes $20.7 million restructuring charge ($14.9 million after tax or $1.83 per share). (b) See Note 12 of Notes to Consolidated Financial Statements for certain per share information. All per share amounts have been adjusted to reflect the 3 for 2 stock splits effected in 1995 and 1993. The above Selected Financial Data for the five years ended December 31, 1995 is not reported upon herein by independent auditors. See Management's Discussion and Analysis of Financial Condition and Results of Operations. 15 WYNN'S INTERNATIONAL, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS 1995 compared to 1994--Net sales in 1995 were $303.8 million compared to $292.7 million in 1994, an increase of 4 percent. Sales increased 19 percent at the Specialty Chemicals Division, but sales decreased 6 percent for the Automotive Components 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 5 percent increase in sales in 1995. Precision's growth was primarily due to the relatively high U.S. automotive and off-road construction vehicle rates, the introduction of new products and the continued higher level of industrial activity in the U.S. Higher revenues were derived from sales of O-rings and composite gaskets. Precision continued to receive requests in 1995 for price freezes or price reductions from customers in a broad array of markets. Precision expects this trend to continue in 1996. Higher revenues at Precision generally resulted from an increase in the number of units sold as opposed to price increases. WCS experienced a 29 percent decrease in revenues in 1995 compared to 1994 due to decreased sales in its original equipment manufacturers ("OEM") division. Sales to Mazda in 1995 decreased $14.1 million compared to 1994 due to the previously announced completion of a kit assembly contract in July 1994. Sales to Chrysler and General Motors also declined in 1995 compared to 1994, but sales increased to WCS' European OEM customers. Sales to aftermarket distributors decreased 16 percent in 1995 compared to 1994, while sales through the company-owned installation centers remained approximately the same in 1995 compared to 1994. In January 1995, WCS sold substantially all of the assets comprising the operations of its refrigerant recovery and recycling machine product line, including all related inventory. Included in 1995 revenues are $2.1 million attributable to the sale of the inventory of these discontinued products. Sales at the Specialty Chemicals Division, principally car care products, increased 19 percent on a worldwide basis compared to 1994. Excluding the impact of foreign exchange rate fluctuations, total revenues in 1995 would have increased 15 percent compared to 1994. The sales increase was due principally to increased sales in the U.S., France and Belgium. In the U.S., revenues in 1995 increased 34 percent compared to 1994, mainly due to strong sales of the division's product warranty programs, higher sales to the U.S. professional market and growth in export sales from the U.S. to Latin American and Asian distributors. The Wynn's product warranty division experienced strong revenue growth in 1995 principally because of the development of new marketing alliances and the general growth in sales of used cars in the U.S. during the year. Foreign subsidiary sales increased 11 percent in 1995 over 1994. Foreign subsidiary sales would have increased 4 percent in 1995 if foreign exchange rates had remained unchanged from 1994 rates. Sales increased in France, Belgium, Canada and South Africa, but decreased in Australia, Germany, Mexico and the United Kingdom. Sales of the relatively small Builders Hardware Division, comprised of Robert Skeels & Company ("Skeels"), a regional builders hardware products wholesale distributor, increased 3 percent in 1995 compared to 1994, principally due to continued efforts to implement new sales and marketing programs. On a consolidated basis, total cost of sales in 1995 was 64.0 percent of sales compared to 65.1 percent in 1994. The increase in the consolidated gross margin was due primarily to the growth in sales at the Specialty Chemicals Division and Precision, which have relatively higher margins than WCS. Precision's gross margin increased in 1995 due to the higher sales volumes compared to the prior year. The Specialty Chemicals Division's gross profit increased in absolute dollars due to higher sales, but the gross margin percentage declined compared to 1994 due to a change in the product mix within the Division. WCS' gross margin decreased in 1995 due to lower sales. Selling, general and administrative ("SG&A") expenses increased to $84.2 million in 1995, or 27.7 percent of sales, from $80.3 million in 1994, or 27.4 percent of sales. The increase in SG&A expenses was principally attributable to the higher sales at the Specialty Chemicals Division and Precision, and higher corporate expenses, partially offset by lower operating expenses at WCS. While total expenses at the Specialty Chemicals Division increased due to this Division's growth in revenues, operating expenses declined as a percentage of sales due to improved cost controls and the change in revenue mix. Precision's operating expenses in absolute dollars also increased over 1994 levels due to the higher revenues, but remained approximately the same as a percentage of Precision's revenues. Operating expenses declined significantly at WCS due to the lower revenues. Operating expenses declined slightly at Skeels. During 1995, corporate expenses increased over 1994 levels primarily because of increased expenses for incentive compensation and environmental matters. The Company closely monitors legal and factual developments in the environmental area to evaluate the adequacy of present reserves. Interest expense in 1995 was $1.6 million, which was less than the $3.0 million of interest expense in 1994. The decrease is primarily due to the reduction of outstanding indebtedness. In March 1995, the Company paid 16 WYNN'S INTERNATIONAL, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS a $7.9 million installment on its 10.75 percent senior notes. Also in March 1995, the holder of the Company's 9 percent convertible notes converted the remaining $6,250,000 principal amount of such notes into 639,203 shares of the Company's Common Stock. Income before taxes was $24.6 million in 1995 compared to $19.4 million in 1994. In the Automotive Components Division, operating profits of Precision increased 11 percent in 1995 due to higher revenue levels. Precision's profitability is sensitive to changes in volume. Due to lower revenues, WCS recorded an operating loss in 1995 approximately $800,000 greater than its 1994 operating loss. Operating profits of the Specialty Chemicals Division increased 30 percent in 1995 due to increased revenues. Excluding the impact of foreign exchange rate changes, operating profit would have increased 22 percent in 1995. Operating profits of the Builders Hardware Division decreased in 1995. The effective tax rate in 1995 was 37.1 percent compared to the effective tax rate of 39.0 percent in 1994. The lower effective tax rate in 1995 was principally due to a reduction in the provision for unremitted foreign earnings. Net income in 1995 was $15.4 million compared to $11.8 million in 1994. The improvement in 1995 compared to 1994 was primarily attributable to the higher operating profit at Precision and the Specialty Chemicals Division, the decrease in interest expense and the lower effective tax rate. Primary earnings per share in 1995 was $1.68 compared to $1.38 in 1994. Fully diluted earnings per share in 1995 was $1.65 compared to $1.33 in 1994. (See Note 2 of Notes to Consolidated Financial Statements for a discussion of the 3 for 2 stock split in 1995.) The increase in per share results in 1995 was due to the increase in net income, partially offset by an increase in shares outstanding. The number of shares outstanding increased primarily as a result of the conversion in March 1995 of $6,250,000 principal amount of the Company's 9 percent convertible notes into 639,203 shares of Common Stock, the exercise of stock options to purchase 47,850 shares of Common Stock and an increase in the number of outstanding stock options required to be included in the outstanding shares calculation. FINANCIAL CONDITION Working capital at December 31, 1995 was $68.2 million compared to $60.8 million at the end of 1994. The current ratio was 2.16 to 1 at December 31, 1995 compared to 2.03 to 1 at the prior year end. The increase in current assets was attributable to an increase in cash and cash equivalents and accounts receivable, partially offset by a decrease in inventory. The decrease in current liabilities was attributable to a decrease in long-term debt due within one year, partially offset by an increase in accrued liabilities. Cash and cash equivalents increased $6.7 million to $23.1 million at December 31, 1995 from $16.4 million at December 31, 1994, primarily due to an increase in cash provided by operating activities, partially offset by a reduction in the Company's outstanding debt during 1995. Consolidated inventories decreased $4.9 million primarily due to a decrease of $5.6 million at WCS. The decline in inventory at WCS was a result of the lower revenue levels, the previously mentioned sale of the refrigerant recovery and recycling machine product line, and the introduction of new manufacturing technologies and material handling techniques. Inventories increased slightly during 1995 at Precision and the Specialty Chemicals Division. Accounts receivable increased $3.1 million to $50.6 million at December 31, 1995 from $47.5 million at the prior year end. This increase was primarily the result of the higher revenues at the Specialty Chemicals Division. Total current liabilities decreased $.6 million to $58.5 million at December 31, 1995 from $59.2 million at December 31, 1994. The decrease was primarily due to the reduction in long-term debt due within one year, partially offset by increased accruals for product warranty programs, salaries and other compensation and the amount payable for taxes based on income. Property, plant and equipment increased $.4 million to $48.5 million in 1995, consisting of $7.5 million in additions (principally at Precision and the Specialty Chemicals Division) offset by the annual depreciation charge of $7.3 million, as well as retirements and foreign exchange adjustments. At December 31, 1995, the Company had two separate $15.0 million unsecured domestic committed bank lines of credit, which permit borrowings through June 1997, and one uncommitted line of credit. At December 31, 1995, the Company had no outstanding borrowings under any of these lines of credit. 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, 1995, no borrowings were outstanding under any of these lines. 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. Effective March 1, 1995, the holder of the Company's 9 percent Subordinated Convertible Notes due March 6, 1996 elected to convert the entire remaining $6,250,000 principal balance of the Notes into 639,203 shares of the Company's Common Stock. Stockholders' equity at the end of 1995 was $116.2 17 WYNN'S INTERNATIONAL, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS million compared to $95.4 million at the end of 1994. The increase resulted from net income of $15.4 million, the conversion of $6.3 million of convertible notes, an equity adjustment of $1.1 million from foreign currency translation, the amortization of $.4 million of unearned compensation, $.6 million from the exercise of stock options and $.1 million of tax benefits related to stock option exercises and stock awards, reduced by dividends of $3.1 million. Under the Company's Stock-Based Incentive Award Plan, 90,000 shares of restricted stock were issued in December 1993 to the Company's Chief Executive Officer. The market value of the restricted stock at the time of grant was recorded as unearned compensation in a separate component of stockholders' equity and is being amortized to expense ratably over the three-year vesting period. Amortization in the amount of $408,000 was recognized in 1995. In 1994, the stockholders approved an Employee Stock Purchase Plan, which allows eligible employees to purchase shares of the Company's Common Stock at a price equal to 85 percent of the market price at the beginning or end of the plan year, whichever is lower. A maximum of 600,000 shares are available for issuance over the term of the plan. For the plan's initial year, which ended December 31, 1995, 21,708 shares were issued in January 1996. The Company expects total capital expenditures in 1996 to be approximately $11 million, funded from current operations. As previously announced, the Company is continuing 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 1995 generally was not able to raise prices to its customers to pass along the cost increases experienced. FORWARD LOOKING STATEMENTS Certain statements contained in the above "Management's Discussion and Analysis" are forward looking statements under Section 21E of the Securities Exchange Act of 1934. The Company cautions that such statements are further qualified by important factors that could cause actual results to differ materially from the forward looking statements, including, but not limited to, sales of new and used cars in the U.S., automotive and off-road construction vehicle production rates in North America (including installation rates of air conditioning systems in new vehicles), currency exchange rates relative to the U.S. dollar, the impact of competitive products and pricing, the ultimate resolution of environmental contingencies, and general economic conditions especially in North America and Western Europe. Results actually achieved thus may differ materially from projected results. RESULTS OF OPERATIONS 1994 compared to 1993--Net sales in 1994 were $292.7 million compared to $285.0 million in 1993, an increase of 3 percent. Sales were up 13 percent for the Specialty Chemicals Division, but sales were down 3 percent for the Automotive Components Division, which is comprised of Precision and WCS. The Automotive Components Division was formerly referred to as the Automotive Parts and Accessories Division. Precision recorded a 21 percent increase in sales in 1994, attributable to growth in all of its major operations. Precision's growth was primarily due to the higher level of economic activity in the U.S. during 1994, including U.S. automotive production rates. Higher revenues were derived from sales of O-rings, composite gaskets and engineered thermoplastics. Precision continued to receive requests in 1994 for price freezes or price reductions from customers in a broad array of markets. Precision expected this trend to continue in 1995. Higher revenues at Precision generally resulted from an increase in the number of units sold as opposed to price increases. WCS experienced a 30 percent decrease in revenues in 1994 compared to 1993 due to decreased sales in its OEM division. The OEM revenue decrease was principally due to the previously announced conclusion of a substantial part of WCS' Mazda kit assembly business and a reduction in sales to the Rover Group resulting from the previously announced expiration of a supply agreement. Revenues in WCS' aftermarket division, including revenues from company-owned service centers, increased 25 percent in 1994 compared to 1993. In response to the phase-out of its lower margin assembly operations, WCS is continuing to reposition itself to focus on producing and marketing components with a higher value-added content. WCS expected its total revenues in 1995 to be approximately the same as in 1994. In January 1995, WCS sold substantially all of the assets comprising the operations of its refrigerant recovery and recycling machine product line, including all related inventory. The sale was made on an installment-payment basis to an unrelated third party. Sales at the Specialty Chemicals Division, principally car care products, increased 13 percent on a worldwide 18 WYNN'S INTERNATIONAL, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS basis compared to 1993. (This Division was formerly referred to as the Petrochemical Specialties Division.) Excluding the impact of foreign exchange rate fluctuations, total revenues in 1994 would have increased 12 percent compared to 1993. The sales increase was due principally to increased sales in the U.S. and France. In the U.S., domestic revenues in 1994 increased 28 percent compared to 1993 led by strong sales of the division's product warranty program and growth in export sales from the U.S. to Latin American and Asian distributors. Foreign subsidiary sales increased 6 percent in 1994 over 1993. (The increase would have been 5 percent in 1994 if foreign exchange rates had remained constant with 1993 rates.) Sales increased in France, Canada, South Africa and Mexico, but decreased in Germany and the United Kingdom. Sales of the relatively small Builders Hardware Division increased 5 percent from 1993, principally due to revitalized sales and marketing programs and a general improvement in the southern California economy. On a consolidated basis, total cost of sales in 1994 was 65.1 percent of sales compared to 66.7 percent in 1993. The resulting increase in gross margin was due primarily to higher sales and production volumes at Precision. The Specialty Chemicals Division's gross margin declined in 1994 compared to 1993 because of a change in product mix. WCS' gross margin decreased in 1994 due to the lower sales. The gross margin at Skeels increased slightly in 1994 compared to 1993. Selling, general and administrative expenses increased to $80.3 million in 1994, or 27.4 percent of sales, from $76.0 million in 1993, or 26.7 percent of sales. The increase in amount was principally attributable to higher sales at the Specialty Chemicals Division and Precision, and higher corporate expenses. The increase in operating expenses at the Specialty Chemicals Division reflects this Division's growth in revenues. However, as a percentage of sales, its operating expenses dropped significantly due to the change in revenue mix and cost controls. Precision's operating expenses in absolute dollars increased over 1993 levels due to the higher revenues, but decreased as a percentage of Precision's revenues. Operating expenses declined slightly at Skeels. During 1994, corporate expenses increased over 1993 levels primarily because of increased expenses for incentive compensation, the adoption of a new accounting standard for postemployment benefits, corporate severance 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 1994 was $3.0 million, which was less than the $3.9 million of interest expense in 1993. The decrease is primarily due to the reduction of outstanding indebtedness. In March 1994, the Company paid a $7.9 million installment on its 10.75 percent senior notes. During 1994, the holder of the Company's 9 percent convertible notes converted $250,000 principal amount of such notes into 25,568 shares of the Company's Common Stock. Income before taxes was $19.4 million in 1994 compared to $15.8 million in 1993. In the Automotive Components Division, operating profits of Precision increased substantially in 1994 due to higher revenue levels. Precision's profitability is sensitive to changes in volume. WCS recorded an operating loss in 1994, compared to an operating profit in 1993, due to WCS' lower revenues. Operating profits of the Specialty Chemicals Division increased 36 percent in 1994 due to increased revenues. (Operating profit would have increased 35 percent in 1994 if exchange rates had remained constant with 1993 rates.) Operating profits of the Builders Hardware Division also increased in 1994 because of the Division's higher sales revenues and lower operating costs. The effective tax rate in 1994 was 39.0 percent compared to the effective tax rate of 43.2 percent in 1993. The decline in 1994 was 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 1994, the Company adopted Statement of Financial Accounting Standards No. 112, Employers' Accounting for Postemployment Benefits. Such adoption had no material effect on the financial results or position of the Company. Net income in 1994 was $11.8 million compared to $9.0 million in 1993. The improvement in 1994 compared to 1993 was primarily attributable to the higher operating profit at Precision and the Specialty Chemicals Division, the decrease in interest expense and the lower effective tax rate. Primary earnings per share in 1994 was $1.38 compared to $1.08 in 1993. Fully diluted earnings per share in 1994 was $1.33 compared to $1.04 in 1993. The increase in per share results in 1994 was due to the increase in net income, partially offset by an increase in shares outstanding. The number of shares outstanding increased primarily as a result of the conversion in 1994 of $250,000 principal amount of the Company's 9 percent convertible notes into 25,568 shares of Common Stock, the exercise of stock options to purchase 36,487 shares of Common Stock and an increase in the outstanding stock options assumed exercised. 19 WYNN'S INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31 ---------------------------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1995 1994 1993 - -------------------------------------------------------------------------------- Revenues: Net sales $303,787 $292,651 $284,957 Interest income 996 626 719 - -------------------------------------------------------------------------------- 304,783 293,277 285,676 - -------------------------------------------------------------------------------- Costs and expenses: Cost of sales 194,440 190,582 190,026 Selling, general and administrative 84,152 80,328 75,977 Interest expense 1,640 2,988 3,862 - -------------------------------------------------------------------------------- 280,232 273,898 269,865 - -------------------------------------------------------------------------------- Income before taxes based on income 24,551 19,379 15,811 Provision for taxes based on income 9,108 7,558 6,830 - -------------------------------------------------------------------------------- Net income $ 15,443 $ 11,821 $ 8,981 - -------------------------------------------------------------------------------- Earnings per share of common stock: Primary $1.68 $1.38 $1.08 - -------------------------------------------------------------------------------- Fully diluted $1.65 $1.33 $1.04 - --------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES. REPORT OF 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, 1995 and 1994, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 1995. 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, 1995 and 1994, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. /s/ Ernst & Young LLP Los Angeles, California January 29, 1996 20 WYNN'S INTERNATIONAL, INC. CONSOLIDATED BALANCE SHEETS
DECEMBER 31 ---------------------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1995 1994 - -------------------------------------------------------------------------------------------------------- ASSETS Current assets: Cash and cash equivalents $ 23,127 $ 16,446 Accounts receivable, less $1,344 allowance for doubtful accounts ($1,835 in 1994) 50,590 47,500 Inventories 37,845 42,752 Prepaid expenses and other current assets (including deferred tax assets of $7,442 in 1995 and $6,080 in 1994) 15,140 13,302 - -------------------------------------------------------------------------------------------------------- Total current assets 126,702 120,000 Property, plant and equipment, at cost less accumulated depreciation and amortization 48,549 48,192 Costs in excess of fair value of net assets of businesses acquired, less accumulated amortization of $3,962 ($3,833 in 1994) 3,041 3,170 Other assets 3,473 5,110 - -------------------------------------------------------------------------------------------------------- $181,765 $176,472 - -------------------------------------------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable $ -- $ 239 Accounts payable 20,640 19,708 Dividends payable 789 614 Taxes based on income 2,289 1,211 Accrued liabilities: Product warranty programs 9,175 5,411 Salaries and other compensation 10,507 8,620 Other 15,047 15,203 Long-term debt due within one year 91 8,161 - -------------------------------------------------------------------------------------------------------- Total current liabilities 58,538 59,167 Long-term debt due after one year 75 14,948 Deferred taxes based on income 6,919 6,917 Commitments and contingencies Stockholders' equity: Preferred stock, $1 par value; 500,000 shares authorized, none issued -- -- Common stock, $1 par value; 20,000,000 shares authorized, 9,564,998 shares issued (8,877,945 issued in 1994) 9,565 8,878 Capital in excess of par value 13,173 6,912 Retained earnings 98,619 86,250 Equity adjustment from foreign currency translation (1,170) (2,238) Unearned compensation (373) (781) Common stock held in treasury 520,875 shares, at cost (3,581) (3,581) - -------------------------------------------------------------------------------------------------------- Total stockholders' equity 116,233 95,440 - -------------------------------------------------------------------------------------------------------- $181,765 $176,472 - --------------------------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES. 21 WYNN'S INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
THREE YEARS ENDED DECEMBER 31, 1995 - ----------------------------------------------------------------------------------------------------------------------------------- EQUITY ADJUSTMENT COMMON COMMON STOCK CAPITAL IN FROM FOREIGN STOCK (DOLLARS IN THOUSANDS, ------------------- EXCESS OF RETAINED CURRENCY UNEARNED HELD IN EXCEPT PER SHARE AMOUNTS) SHARES AMOUNT PAR VALUE EARNINGS TRANSLATION COMPENSATION TREASURY TOTAL - ----------------------------------------------------------------------------------------------------------------------------------- Balance at January 1, 1993 8,719,089 $8,719 $ 4,855 $70,185 $ (706) $ -- $(4,200) $ 78,853 Net income -- -- -- 8,981 -- -- -- 8,981 Cash dividends of $.28 per common share -- -- -- (2,293) -- -- -- (2,293) Cash paid for fractional shares at time of split -- -- (1) -- -- -- -- (1) Stock options exercised 20,100 20 191 -- -- -- -- 211 Restricted stock issued to employee -- -- 603 -- -- -- 619 1,222 Tax benefits related to stock option exercises -- -- 15 -- -- -- -- 15 Conversion of $750 convertible notes 76,701 77 673 -- -- -- -- 750 Adjustments from foreign currency translation, net -- -- -- -- (2,108) -- -- (2,108) Unearned compensation -- -- -- -- -- (1,188) -- (1,188) - ----------------------------------------------------------------------------------------------------------------------------------- Balance at December 31, 1993 8,815,890 8,816 6,336 76,873 (2,814) (1,188) (3,581) 84,442 Net income -- -- -- 11,821 -- -- -- 11,821 Cash dividends of $.29 1/3 per common share -- -- -- (2,444) -- -- -- (2,444) Stock options exercised 36,487 36 312 -- -- -- -- 348 Tax benefits related to stock option exercises -- -- 40 -- -- -- -- 40 Conversion of $250 convertible notes 25,568 26 224 -- -- -- -- 250 Adjustments from foreign currency translation, net -- -- -- -- 576 -- -- 576 Amortization of unearned compensation -- -- -- -- -- 407 -- 407 - ----------------------------------------------------------------------------------------------------------------------------------- Balance at December 31, 1994 8,877,945 8,878 6,912 86,250 (2,238) (781) (3,581) 95,440 Net income -- -- -- 15,443 -- -- -- 15,443 Cash dividends of $.34 2/3 per common share -- -- -- (3,074) -- -- -- (3,074) Cash paid for fractional shares at time of split -- -- (1) -- -- -- -- (1) Stock options exercised 47,850 48 505 -- -- -- -- 553 Tax benefits related to stock option exercises and stock awards -- -- 146 -- -- -- -- 146 Conversion of $6,250 convertible notes 639,203 639 5,611 -- -- -- -- 6,250 Adjustments from foreign currency translation, net -- -- -- -- 1,068 -- -- 1,068 Amortization of unearned compensation -- -- -- -- -- 408 -- 408 - ----------------------------------------------------------------------------------------------------------------------------------- Balance at December 31, 1995 9,564,998 $9,565 $13,173 $98,619 $(1,170) $ (373) $(3,581) $116,233 - -----------------------------------------------------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES. 22 WYNN'S INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31 ---------------------------------------- (DOLLARS IN THOUSANDS) 1995 1994 1993 - ------------------------------------------------------------------------------------------------------------------------ Operating Activities: Cash received from customers $300,517 $291,806 $285,021 Cash paid to suppliers and employees (245,826) (254,867) (241,061) Cash paid on product warranty program claims (13,181) (8,114) (6,706) Interest received 1,060 690 612 Interest paid (2,484) (3,020) (4,071) Income taxes paid (9,235) (8,623) (5,339) - ------------------------------------------------------------------------------------------------------------------------ Net cash provided by operating activities 30,851 17,872 28,456 - ------------------------------------------------------------------------------------------------------------------------ Investing Activities: Additions to property, plant and equipment (7,472) (13,786) (10,008) Proceeds from sale of property, plant and equipment 409 806 553 Other cash receipts--net 1,319 112 172 - ------------------------------------------------------------------------------------------------------------------------ Net cash used in investing activities (5,744) (12,868) (9,283) - ------------------------------------------------------------------------------------------------------------------------ Financing Activities: Borrowings under lines of credit--net (239) (570) (131) Payments on long-term debt (16,693) (8,210) (8,533) Dividends paid (2,899) (2,440) (2,227) Proceeds from exercise of stock options 553 348 211 Other cash disbursements--net (1) -- (1) - ------------------------------------------------------------------------------------------------------------------------ Net cash used in financing activities (19,279) (10,872) (10,681) - ------------------------------------------------------------------------------------------------------------------------ Effect of exchange rate changes 853 917 (1,762) - ------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in cash and cash equivalents 6,681 (4,951) 6,730 Cash and cash equivalents at beginning of year 16,446 21,397 14,667 - ------------------------------------------------------------------------------------------------------------------------ Cash and cash equivalents at end of year $ 23,127 $ 16,446 $ 21,397 - ------------------------------------------------------------------------------------------------------------------------ Reconciliation of net income to net cash provided by operating activities: - ------------------------------------------------------------------------------------------------------------------------ Net Income $15,443 $11,821 $ 8,981 - ------------------------------------------------------------------------------------------------------------------------ Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 8,160 6,811 6,662 Provision for uncollectible accounts 104 208 (39) Amortization of stock compensation 408 407 34 (Gain) loss on fixed asset disposals (118) 14 (4) (Benefit) provision for deferred income taxes (1,351) 178 1,041 Decrease (increase) in: Accounts receivable--net (3,206) (1,106) (43) Inventories 4,603 (4,163) 9,484 Prepaid expenses and other current assets (476) 374 609 Other assets (367) (21) (418) Increase (decrease) in: Accounts payable 932 144 (104) Product warranty program reserves 3,764 1,785 294 Income taxes payable 1,224 (1,243) 450 Accrued liabilities 1,731 2,663 1,509 - ------------------------------------------------------------------------------------------------------------------------ Total adjustments 15,408 6,051 19,475 - ------------------------------------------------------------------------------------------------------------------------ Net cash provided by operating activities $30,851 $17,872 $28,456 - ------------------------------------------------------------------------------------------------------------------------
Supplemental disclosure of noncash investing and financing activities: In 1995 and 1994, additional common stock was issued upon the conversion of $6,250,000 and $250,000, respectively, of long-term debt. SEE ACCOMPANYING NOTES. 23 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 1995 presentation. The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. STOCK SPLITS--The Company effected a 3 for 2 stock split in the fourth quarter of 1995 and a similar 3 for 2 stock split in the third quarter of 1993. All share and per share amounts have been adjusted retroactively for both stock splits (see Note 2). 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 $20,574,000 in 1995 and $13,566,000 in 1994 include guaranteed investment contracts, commercial paper, certificates of deposit and money market accounts which have maturities of three months or less when purchased 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 U.S. 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, 1995 with respect to its temporary cash investments or accounts receivable. 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 using the straight-line method 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 using the straight-line method over a period of ten to forty years. INCOME TAXES--The Company provides for income taxes in accordance with Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes. The statement requires the use of an asset and liability approach for reporting income taxes. The Company provides taxes on the undistributed earnings of all foreign subsidiaries. FOREIGN CURRENCY TRANSLATION--Gains and losses resulting from balance sheet translation of foreign operations where a foreign currency is the functional currency are included as a separate component of stockholders' equity. Gains and losses resulting from balance sheet translation of foreign operations where the U.S. dollar is the functional currency are included in the determination of net income. FOREIGN EXCHANGE CONTRACTS--The Company enters into foreign exchange contracts to hedge certain intercompany transactions with its foreign subsidiaries. These contracts reduce currency risk from exchange rate movements. Gains and losses are deferred and accounted for as part of the underlying transactions. The contractual amounts and related deferred gains and losses from these contracts are immaterial. 2. STOCK SPLITS; SHAREHOLDER RIGHTS PLAN On November 29, 1995, 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 December 15, 1995. Previously, on August 4, 1993, the Board of Directors authorized a 3 for 2 stock split also 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 both of the 3 for 2 splits. In March 1989, the Board of Directors adopted a Shareholder Rights Plan. The plan provides for a dividend distribution of rights (the "Rights") with respect to outstanding shares of Common Stock of the Company issued prior to the earliest of March 3, 1999, the redemption date of the Rights or certain takeover events. In the event the Company is acquired under certain circumstances in a merger in which the Company is not the surviving corporation, the Rights become rights to purchase the acquiring company's common stock at a 50% discount (the "flip-over feature"). In the event of certain acquisitions of 25% or more of the Company's Common Stock, the Rights become rights to purchase the Company's Common Stock at a 50% discount (the "flip-in feature"). The flip-in feature does not apply to tender or exchange offers for all outstanding Common Stock determined by nonmanagement directors of the Company to be fair and in the best interests of the Company and its stockholders (a "Qualified Offer"). The flip-over feature does not apply to a merger following a Qualified Offer which provided the same or a higher value to the remaining stockholders. The Rights 24 WYNN'S INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS may be redeemed by the Company at a nominal price under certain circumstances. 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. 3. 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, 1995 and 1994 and for the three years ended December 31, 1995 before eliminations of intercompany balances and profits and any provision for taxes on repatriation of foreign earnings, is as follows:
(IN THOUSANDS) 1995 1994 - ------------------------------------------------------------------------------ Assets: Current assets $46,186 $40,432 Property, plant and equipment 5,504 5,446 Other noncurrent assets 3,152 3,277 - ------------------------------------------------------------------------------ $54,842 $49,155 - ------------------------------------------------------------------------------ Liabilities and stockholders' equity: Current liabilities $23,964 $22,361 Long-term debt and deferred taxes based on income 1,524 1,147 Stockholders' equity 29,354 25,647 - ------------------------------------------------------------------------------ $54,842 $49,155 - ------------------------------------------------------------------------------
(IN THOUSANDS) 1995 1994 1993 - ------------------------------------------------------------------------------ Net sales $98,444 $85,945 $92,911 - ------------------------------------------------------------------------------ Net income $ 5,306 $ 4,135 $ 3,784 - ------------------------------------------------------------------------------
Transaction gains and losses resulting from changes in foreign currency exchange rates have been charged to operations and are immaterial. 4. INVENTORIES Inventories consist of the following at December 31, 1995 and 1994:
(IN THOUSANDS) 1995 1994 - ------------------------------------------------------------------------------ Finished goods $22,074 $22,781 Raw materials and work in process 15,771 19,971 - ------------------------------------------------------------------------------ $37,845 $42,752 - ------------------------------------------------------------------------------
5. TAXES BASED ON INCOME The provision for taxes based on income consists of the following elements for the three years ended December 31, 1995:
(IN THOUSANDS) 1995 1994 1993 - ------------------------------------------------------------------------------ Current: Federal $ 4,999 $2,486 $1,943 State 1,387 1,104 940 Foreign 4,073 3,790 2,906 - ------------------------------------------------------------------------------ Total current 10,459 7,380 5,789 - ------------------------------------------------------------------------------ Deferred: Federal (374) 377 190 State (501) 183 290 Foreign (476) (382) 561 - ------------------------------------------------------------------------------ Total deferred (1,351) 178 1,041 - ------------------------------------------------------------------------------ Total $ 9,108 $7,558 $6,830 - ------------------------------------------------------------------------------
Pretax income from domestic and foreign operations for the three years ended December 31, 1995 is as follows:
(IN THOUSANDS) 1995 1994 1993 - ----------------------------------------------------------------------------- Domestic $15,961 $13,341 $ 9,053 Foreign 8,590 6,038 6,758 - ----------------------------------------------------------------------------- $24,551 $19,379 $15,811 - -----------------------------------------------------------------------------
A reconciliation of the statutory federal income tax rate to the effective tax rate, as a percentage of income before taxes based on income for the three years ended December 31, 1995, follows:
1995 1994 1993 - ------------------------------------------------------------------------------ Statutory federal income tax rate 35.0% 35.0% 34.0% State taxes, net of federal tax benefit 2.3 2.5 5.1 Other--net (0.2) 1.5 4.1 - ------------------------------------------------------------------------------ 37.1% 39.0% 43.2% - ------------------------------------------------------------------------------
At December 31, 1995, the Company had the following carryforwards for tax purposes available for future utilization with the indicated expiration periods (in thousands):
FOREIGN NET TAX YEAR OPERATING LOSS CREDITS - --------------------------------------------------------------------------- 1999 $ 34 $238 2002 61 -- 2003 39 -- 2004 37 -- 2005 74 -- Unlimited 1,028 -- - ----------------------------------------------------------------------------- $1,273 $238 - -----------------------------------------------------------------------------
25 WYNN'S INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 5. TAXES BASED ON INCOME (CONTINUED) A valuation allowance of $1,725,000 has been recognized to offset these and other deferred tax assets. The valuation allowance against deferred tax assets increased by $74,000 during 1995 due to a net increase in tax attribute carryovers. Significant components of the Company's deferred tax assets and liabilities as of December 31, 1995 and 1994 are as follows:
(IN THOUSANDS) 1995 1994 - ------------------------------------------------------------------------------ Deferred tax liabilities: Foreign earnings $ 3,011 $3,289 Accelerated depreciation and amortization 2,646 2,081 Pension plan 968 979 Other 2,938 3,530 - ------------------------------------------------------------------------------ Total deferred tax liabilities 9,563 9,879 - ------------------------------------------------------------------------------ Deferred tax assets: Accrued expenses 8,774 6,918 Inventory valuation 1,526 2,393 Tax attribute carryovers 1,511 1,382 - ------------------------------------------------------------------------------ Subtotal 11,811 10,693 Valuation allowances (1,725) (1,651) - ------------------------------------------------------------------------------ Total deferred tax assets 10,086 9,042 - ------------------------------------------------------------------------------ Net deferred taxes $ (523) $ 837 - ------------------------------------------------------------------------------
6. LINES OF CREDIT The Company has two domestic committed unsecured lines of credit for $15.0 million each and various domestic and foreign uncommitted credit lines. The lines provide for borrowings at interest rates of prime (8.5% at December 31, 1995) and/or various other prevailing rates. At December 31, 1995, the Company had no outstanding borrowing under these lines of credit. The Company also has a $4.0 million unsecured multicurrency and trade finance line of credit which provides for standby and commercial letters of credit. At December 31, 1995, Wynn's had one standby letter of credit outstanding under this facility for $186,000. In 1995, 1994 and 1993, the average amount of notes payable outstanding during the year was $1,205,000, $602,000 and $1,177,000, respectively, and the related average interest rate was 6.9%, 10.4% and 10.5%, respectively. The weighted average interest rate on notes payable outstanding at December 31, 1994 was 6.8%. Short-term borrowings are stated at their fair market value. 7. LONG-TERM DEBT Long-term debt consists of the following obligations at December 31, 1995 and 1994:
(IN THOUSANDS) 1995 1994 - ------------------------------------------------------------------------------ To insurance company, due in annual installments of $7,938 each beginning in 1993 through 1996, plus interest at 10.75%, payable semi-annually $ -- $15,876 To insurance company, due in annual installments of $3,125 in 1995 and 1996, plus interest at 9%, payable semi-annually -- 6,250 Other 166 983 - ------------------------------------------------------------------------------ 166 23,109 Less amount classified as current 91 8,161 - ------------------------------------------------------------------------------ $ 75 $14,948 - ------------------------------------------------------------------------------
The 10.75% note due to insurance company was retired in 1995. The $6,250,000 note due to insurance company was converted into 639,203 shares of the Company's Common Stock in March 1995. Interest expense for long-term debt amounted to $1,265,000 for 1995 ($2,564,000 for 1994 and $3,524,000 for 1993). 8. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consists of the following at December 31, 1995 and 1994:
(IN THOUSANDS) 1995 1994 - ------------------------------------------------------------------------------ Land and land improvements $ 2,512 $ 2,487 Buildings 24,873 24,440 Leasehold improvements 794 905 Equipment, furniture and fixtures 77,658 74,032 - ------------------------------------------------------------------------------ 105,837 101,864 Less accumulated depreciation and amortization (57,288) (53,672) - ------------------------------------------------------------------------------ $48,549 $48,192 - ------------------------------------------------------------------------------
9. 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 26 WYNN'S INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 three years ended December 31, 1995 included the following components:
(IN THOUSANDS) 1995 1994 1993 - ------------------------------------------------------------------------------ Service cost-benefits earned during the period $ 707 $ 859 $ 732 Interest cost on projected benefit obligation 1,310 1,286 1,200 Actual return on assets (4,496) (262) (1,489) Net amortization and deferral 2,609 (1,659) (442) - ------------------------------------------------------------------------------ $ 130 $ 224 $ 1 - ------------------------------------------------------------------------------
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, 1995 and 1994 for its U.S. pension plans:
(IN THOUSANDS) 1995 1994 - ------------------------------------------------------------------------------ Actuarial present value of benefit obligations: Vested benefit obligation $(16,586) $(12,812) - ------------------------------------------------------------------------------ Accumulated benefit obligation $(17,250) $(13,333) - ------------------------------------------------------------------------------ Projected benefit obligation $(20,253) $(15,907) Plan assets at fair market value 22,544 19,075 - ------------------------------------------------------------------------------ Plan assets in excess of projected benefit obligation 2,291 3,168 Unrecognized transition assets being amortized over various periods of time (1,387) (1,673) Unrecognized prior service cost 1,575 1,294 Unrecognized net gain (180) (429) - ------------------------------------------------------------------------------ Prepaid pension cost $ 2,299 $ 2,360 - ------------------------------------------------------------------------------
Assumptions used as of December 31, 1995, 1994 and 1993 were:
1995 1994 1993 - ------------------------------------------------------------------------------ Discount or settlement rate 7.5% 8.5% 7.5% Rate of increase in compensation level 5.0% 5.5% 5.0% 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 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 contributions into this plan for 1995, 1994 and 1993 were $483,000, $488,000 and $352,000, respectively. 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. 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 costs were $153,000, $281,000 and $426,000 in 1995, 1994 and 1993, respectively. The Company does not prefund this benefit program. The following table sets forth the program's status and amounts 27 WYNN'S INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 9. RETIREMENT PLANS (CONTINUED) recognized in the Company's consolidated balance sheets at December 31, 1995 and 1994:
(IN THOUSANDS) 1995 1994 - ------------------------------------------------------------------------------ Unfunded accumulated post- retirement benefit obligation $(1,548) $(1,663) Unrecognized net gain (resulting from reduction in estimated health care cost trend rates) (1,651) (1,661) Unrecognized net transition obligation 2,719 2,879 - ------------------------------------------------------------------------------ Accrued postretirement benefit cost $ (480) $ (445) - ------------------------------------------------------------------------------
10. 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) - ----------------------------------------------------------------------------- 1996 $2,224 1997 1,616 1998 789 1999 655 2000 394 2001 and after 282 - ----------------------------------------------------------------------------- Total $5,960 - -----------------------------------------------------------------------------
Rental expenses for all operating leases were $3,025,000 in 1995 ($3,451,000 in 1994 and $3,977,000 in 1993). 11. 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, 1995, the Company had consolidated accrued reserves of approximately $4.8 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, annual results of operations or cash flows. 12. EARNINGS PER SHARE Primary earnings per share is computed by dividing net income by the weighted average number of shares outstanding during the year and assumes the exercise of stock options. 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 (see Note 2 for a discussion of the stock splits effected in 1995 and 1993).
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1995 1994 1993 - ------------------------------------------------------------------------------ Net income $15,443 $11,821 $8,981 Net interest expense from convertible notes 59 367 406 - ------------------------------------------------------------------------------ Net earnings for purposes of full dilution $15,502 $12,188 $9,387 - ------------------------------------------------------------------------------ Net earnings per common share: Primary $1.68 $1.38 $1.08 Assuming full dilution $1.65 $1.33 $1.04 Weighted average shares outstanding: Primary 9,187 8,541 8,321 Assuming full dilution 9,369 9,193 9,048
13. STOCK PLANS The Company has two stock-based plans pursuant to which current grants of options to purchase Common Stock of Wynn's may be made. 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 to officers and key employees of the Company. The Non-Employee Directors' Stock Option Plan ("1994 Plan") provides for the grant of nonqualified stock options to non-employee directors of the Company. In addition, 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 450,000 shares. Under the 1989 and 1994 Plans, the aggregate number of stock related awards may not exceed 806,250 shares. All options granted under the three plans have been made at prices not less than 100 percent of the fair market value of the stock at the date of grant. Options granted under the three plans are exercisable at various dates over a ten-year period. However, under the three plans, no options 28 WYNN'S INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS may be exercised until at least one year after the date of grant. During 1993, 90,000 shares of restricted stock were awarded under the 1989 Plan. The restricted stock award vests in equal installments at each anniversary date over a three-year period. 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 vesting period. Unearned compensation of $1,222,000 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 1995, $408,000 was recorded as expense ($407,000 and $34,000 in 1994 and 1993, respectively). During 1995, 7,800 performance shares were granted under the 1989 Plan in connection with stock options granted to officers and other key employees. At December 31, 1995, 31,650 performance shares were outstanding. No stock appreciation rights were outstanding at December 31, 1995. The following tabulation summarizes certain information related to options for common stock:
1995 1994 1993 - ----------------------------------------------------------------------------- Outstanding options at beginning of year 687,825 594,825 517,500 Granted 43,500 162,750 102,375 Surrendered, forfeited or expired (13,275) (33,262) (4,950) Exercised (47,850) (36,488) (20,100) - ----------------------------------------------------------------------------- Outstanding options at end of year 670,200 687,825 594,825 - ----------------------------------------------------------------------------- Average price of options exercised during the year $11.57 $ 9.54 $ 10.51 At the end of the year: Prices of outstanding options $ 7.45 $ 7.45 $ 7.45 to to to $15.50 $14.17 $13.78 Average per share $10.79 $10.63 $ 9.78 Exercisable options 567,967 500,175 465,113 Options available for future grants 142,500 184,275 272,363
The Company has an Employee Stock Purchase Plan (the "Plan") under which there are authorized and available for sale to employees, at a 15% discount, an aggregate of 600,000 shares of the Company's Common Stock. For the Plan's first year, which ended December 31, 1995, 21,708 shares were issued at $12.47 per share in January 1996. In October 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation, which is effective for the Company on January 1, 1996. This statement permits, but does not require, a fair value based method of accounting for employee stock option plans which results in compensation expense being recognized in the results of operations when stock options are granted. The Company plans to continue to apply the provisions of APB Opinion No. 25, Accounting for Stock Issued to Employees, to its stock-based compensation arrangements in determining its net income. However, as required by this statement, the Company will provide pro forma disclosure of net income and earnings per share in the notes to the consolidated financial statements as if the fair value based method of accounting had been applied. 14. BUSINESS SEGMENT AND GEOGRAPHICAL INFORMATION Wynn's operations are principally in three industry segments: Automotive Components, Specialty Chemicals and Builders Hardware. Operations in the Automotive Components 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 Specialty Chemicals 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. Product sales in the Specialty Chemicals Division are made 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. Operating profit (loss) from segments represents net sales less operating expenses before income taxes. Corporate expenses include normal corporate items and expenses for environmental matters. 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 Components segment were 10.1% of consolidated net sales during 1995 (10.3% in 1994 and 12.3% in 1993). 29 WYNN'S INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 14. BUSINESS SEGMENT AND GEOGRAPHICAL INFORMATION (CONTINUED)
SUMMARY BY INDUSTRY SEGMENTS YEAR ENDED DECEMBER 31 - ----------------------------------------------------------------------------------------------------------------------------- (IN THOUSANDS) 1995 1994 1993 1992 1991 - ----------------------------------------------------------------------------------------------------------------------------- NET SALES Automotive Components $166,012 $176,346 $181,478 $185,947 $172,836 Specialty Chemicals 132,173 110,867 98,318 99,622 94,639 Builders Hardware 5,602 5,438 5,161 6,219 8,403 Intersegment sales -- -- -- -- (1,915) - ----------------------------------------------------------------------------------------------------------------------------- Total net sales $303,787 $292,651 $284,957 $291,788 $273,963 - ----------------------------------------------------------------------------------------------------------------------------- OPERATING PROFIT (LOSS) Automotive Components $ 19,872 $ 18,566 $ 16,643 $ 15,265 $(12,813)(a) Specialty Chemicals 12,426 9,564 7,046 6,636 6,964 Builders Hardware 297 392 193 422 507 - ----------------------------------------------------------------------------------------------------------------------------- Total operating profit (loss) of segments 32,595 28,522 23,882 22,323 (5,342) Corporate expenses (6,896) (6,475) (4,575) (4,155) (3,591) Corporate interest income 492 320 366 239 194 Interest expense (1,640) (2,988) (3,862) (5,073) (5,179) - ----------------------------------------------------------------------------------------------------------------------------- Income (loss) before taxes based on income $ 24,551 $ 19,379 $ 15,811 $ 13,334 $(13,918) - ----------------------------------------------------------------------------------------------------------------------------- IDENTIFIABLE ASSETS Automotive Components $ 98,926 $104,681 $ 95,069 $100,901 $106,135 Specialty Chemicals 62,770 53,837 49,371 53,886 50,477 Builders Hardware 3,103 2,850 2,570 3,340 4,119 - ----------------------------------------------------------------------------------------------------------------------------- Identifiable assets of segments 164,799 161,368 147,010 158,127 160,731 Corporate assets 16,966 15,104 20,789 12,589 4,891 - ----------------------------------------------------------------------------------------------------------------------------- Total assets $181,765 $176,472 $167,799 $170,716 $165,622 - ----------------------------------------------------------------------------------------------------------------------------- DEPRECIATION AND AMORTIZATION Automotive Components $ 6,380 $ 5,064 $ 4,930 $ 4,380 $ 5,896 Specialty Chemicals 1,705 1,679 1,656 1,688 1,522 Builders Hardware 38 37 40 30 58 Corporate 37 31 36 42 45 - ----------------------------------------------------------------------------------------------------------------------------- Total depreciation and amortization $ 8,160 $ 6,811 $ 6,662 $ 6,140 $ 7,521 - ----------------------------------------------------------------------------------------------------------------------------- CAPITAL EXPENDITURES Automotive Components $ 5,985 $ 11,990 $ 9,070 $ 4,829 $ 3,163 Specialty Chemicals 1,409 1,759 921 1,678 978 Builders Hardware 23 -- -- -- -- Corporate 55 37 17 25 15 - ----------------------------------------------------------------------------------------------------------------------------- Total capital expenditures $ 7,472 $ 13,786 $ 10,008 $ 6,532 $ 4,156 - -----------------------------------------------------------------------------------------------------------------------------
(a) INCLUDES $20.7 MILLION RESTRUCTURING CHARGE IN 1991. 30 WYNN'S INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 14. BUSINESS SEGMENT AND GEOGRAPHICAL INFORMATION (CONTINUED)
SUMMARY BY GEOGRAPHICAL AREAS YEAR ENDED DECEMBER 31 - ---------------------------------------------------------------------------------------------------- (IN THOUSANDS) 1995 1994 1993 1992 1991 - ---------------------------------------------------------------------------------------------------- NET SALES United States: Sales to unaffiliated customers $205,343 $206,706 $192,046 $197,922 $192,580 Intercompany sales between geographical areas 5,203 5,236 12,181 10,629 6,907 Europe: Sales to unaffiliated customers 64,483 52,510 61,276 63,495 51,915 Intercompany sales between geographical areas 513 594 376 330 199 Other foreign: Sales to unaffiliated customers 33,961 33,435 31,635 30,371 29,468 Intercompany sales between geographical areas 1,418 1,239 832 465 265 Eliminate intercompany sales (7,134) (7,069) (13,389) (11,424) (7,371) - ---------------------------------------------------------------------------------------------------- Total net sales $303,787 $292,651 $284,957 $291,788 $273,963 - ---------------------------------------------------------------------------------------------------- OPERATING PROFIT (LOSS) United States $ 20,863 $ 20,203 $ 14,908 $ 13,982 $(14,255)(a) Europe 5,967 3,856 5,082 5,945 6,377 Other foreign 5,678 4,511 3,799 2,516 2,564 Eliminate change during year in intercompany profit in inventories 87 (48) 93 (120) (28) - ---------------------------------------------------------------------------------------------------- Total operating profit (loss) of segments 32,595 28,522 23,882 22,323 (5,342) Corporate expenses (6,896) (6,475) (4,575) (4,155) (3,591) Corporate interest income 492 320 366 239 194 Interest expense (1,640) (2,988) (3,862) (5,073) (5,179) - ---------------------------------------------------------------------------------------------------- Income (loss) before taxes based on income $ 24,551 $ 19,379 $ 15,811 $ 13,334 $(13,918) - ---------------------------------------------------------------------------------------------------- IDENTIFIABLE ASSETS United States $113,832 $118,237 $107,283 $114,306 $121,441 Europe 38,149 30,951 31,290 35,115 29,365 Other foreign 15,837 15,214 13,576 13,883 13,391 Eliminate intercompany profit in inventory and intercompany trade accounts receivable (3,019) (3,034) (5,139) (5,177) (3,466) - ---------------------------------------------------------------------------------------------------- Identifiable assets of segments 164,799 161,368 147,010 158,127 160,731 Corporate assets 16,966 15,104 20,789 12,589 4,891 - ---------------------------------------------------------------------------------------------------- Total assets $181,765 $176,472 $167,799 $170,716 $165,622 - ----------------------------------------------------------------------------------------------------
(a) INCLUDES $20.7 MILLION RESTRUCTURING CHARGE IN 1991. 31 WYNN'S INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 15. QUARTERLY INFORMATION (UNAUDITED) Quarterly information is as follows for the two years ended December 31, 1995:
FIRST SECOND THIRD FOURTH TOTAL (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) QUARTER QUARTER QUARTER QUARTER YEAR - --------------------------------------------------------------------------------------------------------- 1995 Net sales $78,074 $78,054 $74,606 $73,053 $303,787 Gross profit 28,243 28,203 26,359 26,542 109,347 Net income 3,645 4,106 3,867 3,825 15,443 Earnings per share: Primary $.42 $.44 $.41 $.41 $1.68 Fully diluted $.40 $.44 $.41 $.41 $1.65 - --------------------------------------------------------------------------------------------------------- 1994 Net sales $76,783 $76,865 $72,216 $66,787 $292,651 Gross profit 25,739 26,117 25,285 24,928 102,069 Net income 2,701 3,358 3,043 2,719 11,821 Earnings per share: Primary $.32 $.39 $.36 $.32 $1.38 Fully diluted $.31 $.38 $.34 $.30 $1.33 - ---------------------------------------------------------------------------------------------------------
The total of the quarterly per share fully diluted earnings in 1995 and the total of the quarterly per share primary earnings in 1994 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. CASH DIVIDENDS AND COMMON STOCK PRICE PER SHARE: 1994-1995 The cash dividends and the high and low sales prices of the Company's Common Stock for the past two years are shown in the following table:
1994 1995 - ------------------------------------------------------------------------------------------------------------------------- 1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER 1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER - ------------------------------------------------------------------------------------------------------------------------- DIVIDENDS PER SHARE - ------------------------------------------------------------------------------------------------------------------------- $.07 1/3 $.07 1/3 $.07 1/3 $.07 1/3 $.08 2/3 $.08 2/3 $.08 2/3 $.08 2/3 - ------------------------------------------------------------------------------------------------------------------------- SALES PRICE - ------------------------------------------------------------------------------------------------------------------------- [A BAR GRAPH DEPICTS THE FOLLOWING SALES PRICES] HIGH $14 7/8 $15 1/8 $15 1/4 $16 $14 3/4 $15 7/8 $18 3/4 $20 1/8 LOW 12 1/8 12 1/4 13 3/8 13 5/8 13 14 1/4 15 1/2 17 3/8
The above tables reflect retroactively the 3 for 2 stock split effected in 1995 (see Note 2). 32 NUMBER OF STOCKHOLDERS There were 625 stockholders of record at February 28, 1996. STOCK EXCHANGE LISTING New York Stock Exchange Ticker Symbol: WN 33 EX-21 7 EXHIBIT 21 SUBSIDIARIES OF REGISTRANT EXHIBIT 21 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 . . . . . . . . . . . . . . . France Wynn's Automotive France Professional. . . . . . . . . France Wynn's Industrie . . . . . . . . . . . . . . . . . . . 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 8 EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS 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 29, 1996, included in the 1995 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., the Registration Statements (Form S-8 Nos. 33-30296 and 33-64090) pertaining to the Wynn's International, Inc. Stock-Based Incentive Award Plan, the Registration Statement (Form S-8 No. 33-53917) pertaining to the Wynn's International, Inc. Non-Employee Directors' Stock Option Plan, the Registration Statement (Form S-8 No. 33-53921) pertaining to the Wynn's International, Inc. Employee Stock Purchase Plan, and in the related Prospectuses of our report dated January 29, 1996, 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 LLP Los Angeles, California March 25, 1996 EX-27 9 EXHIBIT 27 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL STATEMENTS CONTAINED IN FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 12-MOS DEC-31-1995 JAN-01-1995 DEC-31-1995 23,127 0 51,934 1,344 37,845 126,702 105,837 57,288 181,765 58,538 75 0 0 9,565 106,668 181,765 303,787 304,783 194,440 194,440 84,048 104 1,640 24,551 9,108 15,443 0 0 0 15,443 1.68 1.65
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