-----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, VTcnzXfp0gS1ej4Bg8Z0qf4RAOb5UXOF7TBtMvwnZoBTHMiVKyunzJtqlEcoP5Dp vzSEC1l5MAdf8hm15UfsiA== 0000950123-99-003942.txt : 19990503 0000950123-99-003942.hdr.sgml : 19990503 ACCESSION NUMBER: 0000950123-99-003942 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990430 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WYANT CORP CENTRAL INDEX KEY: 0000048569 STANDARD INDUSTRIAL CLASSIFICATION: CONVERTED PAPER & PAPERBOARD PRODS (NO CONTAINERS/BOXES) [2670] IRS NUMBER: 112236837 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: SEC FILE NUMBER: 000-08410 FILM NUMBER: 99605851 BUSINESS ADDRESS: STREET 1: 100 READINGTON ROAD STREET 2: P O BOX 8609 CITY: SOMERVILLE STATE: NJ ZIP: 08876 BUSINESS PHONE: 9087071800 MAIL ADDRESS: STREET 1: 100 READINGTON ROAD STREET 2: P O BOX 8609 CITY: SOMERVILLE STATE: NJ ZIP: 08876 FORMER COMPANY: FORMER CONFORMED NAME: HOSPOSABLE PRODUCTS INC DATE OF NAME CHANGE: 19920703 10-K/A 1 AMENDMENT #1 TO FORM 10-K 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K/A (AMENDMENT NO. 1) FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (MARK ONE) (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1998 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to __________ Commission file number: 0-8410 WYANT CORPORATION (Exact name of registrant as specified in its charter) New York 11-2236837 ------------------------------- ----------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization)
100 Readington Road, Somerville, New Jersey 08876 ------------------------------------------------------ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 908-707-1800 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12 (g) of the Act: Title of Each Class - --------------------------------------- Common Stock, par value $.01 per share 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 ================================================================================ 2 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/A or any amendment to this Form 10-K/A. ( ) The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of April 22, 1999, was $2,497,323. As of April 22, 1999, there were 2,273,817 shares of common stock of the registrant outstanding. DOCUMENTS INCORPORATED BY REFERENCE 1. The Exhibits identified in Item 14 (a) 3. ii 3 TABLE OF CONTENTS
Item Page PART I. 1. Business.................................................................. 1 2. Properties................................................................ 8 3. Legal Proceedings......................................................... 9 4. Submission of Matters to a Vote of Security Holders....................... 9 PART II. 5. Market for Registrant's Common Equity and Related Stockholder Matters..... 9 6. Selected Financial Data................................................... 11 7. Management's Discussion and Analysis of Financial Condition and Results of Operations................................................................ 12 7A. Quantitative and Qualitative Disclosures about Market Risk................ 21 8. Financial Statements and Supplementary Data............................... 22 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...................................................... 22 PART III. 10. Directors and Executive Officers of the Registrant....................... 22 11. Executive Compensation................................................... 24 12. Security Ownership of Certain Beneficial Owners and Wyant Management..... 29 13. Certain Relationships and Related Transactions........................... 31 PART IV. 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.......... 32
iii 4 PART 1 ITEM 1. BUSINESS A. GENERAL Wyant Corporation (formerly Hosposable Products, Inc.), a New York corporation incorporated in 1971 (hereinafter "Wyant"), has three wholly-owned subsidiaries, Bridgewater Manufacturing Corp., a New Jersey corporation ("Bridgewater"), IFC Disposables, Inc., a Tennessee corporation ("IFC") and Wood Wyant Inc. (formerly 3290441 Canada Inc.), a Canadian corporation ("Wood Wyant"). Through its Wyant Health Care Division (the "Division" or "Wyant Health Care Division"), it manufactures and distributes adult incontinent products, including disposable underpads and adult briefs. IFC manufactures and distributes disposable wipers and sanitary paper products and systems. Wyant Health Care and IFC products are sold primarily in domestic markets. Wood Wyant manufactures and distributes sanitation products and systems to commercial and institutional markets in Canada. (The "Company" is used herein to make general references, without distinction among Wyant, Wyant Health Care Division, Bridgewater, IFC and Wood Wyant). WYANT HEALTH CARE DIVISION The majority of the sales of the Wyant Health Care Division's branded products are to distributors for eventual use by hospitals, nursing homes and other health care institutions, and to government agencies. Disposable underpads and adult briefs are the Division's principal products. Their end-use is for protection against incontinence. A portion of the Division's revenue is derived through the sale of finished products as private label brands for major customers. The Division's airlaid fabrics (AirlayTM) are used as components of wiping products manufactured by IFC, and also are sold in roll good form to converters and manufacturers who produce a wide range of health care, consumer and industrial products. In late 1996 the Division purchased a high speed adult brief converting line. Both branded and private label adult briefs were introduced in 1997 to further expand the Division's line of incontinent care products in this growth market. The Division's products are manufactured on a number of continuous production lines that automatically assemble the various layers of product materials, bond them with various fixative means, cut the materials to specific lengths and fold, count, stack and bag/box the completed products. During 1998, the Division produced the vast majority of its products with its own equipment, at leased facilities in Fresno, California and at its principal manufacturing facility in Branchburg, New Jersey purchased by Wyant in December 1993. The Division's products are sold by a direct sales organization supported by a customer service department located at the Branchburg facility. SALE OF WYANT HEALTH CARE DIVISION On February 23, 1999, Wyant's Board of Directors, pursuant to an Asset Purchase Agreement (the "Asset Purchase Agreement") dated as of such date, approved the sale of its Wyant Health Care Division to Paper-Pak Products, Inc. ("PaperPak") of LaVerne, California, for total consideration of approximately $15,500,000 including the assumption of certain debt of $3,500,000. The transaction is subject to PaperPak's completion of financing, customary regulatory approvals and the approval of Wyant shareholders and is expected to close during the second quarter of 1999. As stated above, the operations of the Division comprise the company-owned facility in Branchburg, New Jersey and the leased facility in Fresno, California and incorporate the adult incontinent products manufacturing activities undertaken directly by Wyant and Bridgewater. All assets related to these operations (including equipment) will be sold to Paper-Pak subject to the terms of the Asset Purchase Agreement. The lease covering the Fresno, California facility will be assigned to Paper-Pak. 1 5 Following completion of the sale, the Company will cease the manufacture of adult incontinent products and the sale of the Division is not expected to materially affect the operations of the Company's other operating units as each is autonomous and separately managed. The Company will be precluded from re-entering the adult incontinent products business for a period of five years following the sale. The Division supplies airlaid non-woven fabric and incontinent products to IFC which will be subject to a three-year supply agreement upon completion of the sale. IFC will supply PaperPak with QuickableTM absorbent washcloths at an agreed upon price, which will be renegotiated every twelve months, and at a volume which will be predetermined. In reaching its decision to sell the Division , the Board of Directors considered the following principal factors: 1. Strategic review of business During 1998, the Company completed a strategic review of its business. The major conclusion of this review was that the Company was operating in three uncomplementary industry sectors. After evaluating each segment, management found that the industry dynamics and market position and prospects of Wood Wyant and IFC were critical to the future results of Wyant, and that the Division's branded product sales had fallen in recent years. The Board of Directors, in this context, also considered the increase in income from operations in 1998 against cumulative operating losses of approximately $2,000,000 in 1997 and 1996. 2. Significant capital investment could not be provided. The industry in which the Division operates has already experienced significant consolidation. Accordingly, the Division would require significant additional capital investment to experience future growth. Management concluded that the Company would not be able to provide the necessary capital to the Division for it to be successful. 3. Debt reduction The sale of the Division will provide the opportunity to reduce the Company's debt while, at the same time, achieving significant value for the business and assets related to the Division. 4. Future uncertainties related to the Division The Division faces several significant uncertainties in the near term that could have a material affect on the Company if the Division is not sold. (See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Significant factors and known trends with regard to Discontinued Operations"). 5. Business risks associated with disposition of the Division As a result of the sale of the Division, the Company's results of operations will be significantly dependent on, and materially affected by, the results of operations of its two remaining business segments. The Board of Directors viewed these as acceptable risks in light of the anticipated benefits of the sale of the Division, the Company's roots in the janitorial and sanitation business dating back to 1922 and management's strategic review and assessment of the Company's business segments. 6. Fairness opinion The Board of Directors retained the services of outside financial advisors to assist in evaluating the financial elements of the sale of the Division. On March 16, 1999, these advisors provided the Board of Directors with the opinion that the transaction was fair from a financial point of view. 2 6 WOOD WYANT Wood Wyant is a manufacturer and national distributor, in Canada, of a broad range of industrial and institutional sanitation products, including paper hand towels, bathroom tissue, related sanitary paper products, janitorial chemicals, waste receptacles and cleaning equipment and systems. Wood Wyant is one of two national distributors of a full line of sanitary paper products, janitorial chemicals and equipment, and sanitation supplies to institutional markets in Canada and is the only distributor focused solely on janitorial and sanitation supply products. Wood Wyant, headquartered in Montreal, employs approximately 440 people and operates a paper converting plant and two chemical manufacturing facilities in Ontario and British Columbia. Wood Wyant services some 20,000 customers through a direct sales organization supported by customer service centers located across Canada. Wood Wyant's manufacturing operations include the conversion of base paper and the manufacture of janitorial chemicals. Base paper is converted into paper hand towels and bathroom tissue at a plant owned by Wood Wyant in Pickering, Ontario. Specialized machinery in this plant cuts, folds or winds the paper into finished products that are packaged and placed in shipping containers. Wood Wyant develops and manufactures janitorial chemicals from raw materials produced by major base chemical suppliers. The chemicals are blended in large tanks and packed into shipping containers for sale by Wood Wyant's distribution network. Wood Wyant's distribution operations are conducted primarily from leased facilities throughout Canada, thereby providing flexibility in meeting market requirements and eliminating the need to make capital expenditures for real estate. In 1998, the Company, through Wood Wyant, acquired several businesses engaged in the distribution of sanitation products and manufacture of janitorial chemicals. On April 30, 1998, Wood Wyant acquired all of the issued and outstanding shares of H.A. Perigord Company Limited, a distributor of sanitation products. On June 26, 1998, Wood Wyant acquired all of the issued and outstanding shares of Professional Sanitation Products Ltd., a distributor of sanitation products. The total consideration for these acquisitions amounted to $3,070,806, which was comprised of cash of $2,107,645 and 146,666 Class F Preferred shares of Wood Wyant. On June 30, 1998, Wood Wyant acquired all of the issued and outstanding shares of four related businesses based in British Columbia for $2,644,228, comprised of cash of $1,760,696 and 136,445 Class F Preferred shares of Wood Wyant. The companies acquired are Midway Supply Ltd., Purnel Distributors Ltd. and Midway Purnel Sanitary Supply Ltd., all of which are distributors of sanitation products, and Fraser Valley Industrial Chemicals Inc., a manufacturer of janitorial chemicals. For further information with respect to these acquisitions, please see Note 3 to the Company's consolidated financial statements. IFC IFC's operations are conducted at a newly established location in Brownsville, Tennessee. IFC's manufacturing operations include the conversion of various materials into wiping products. Specialized machinery cuts, folds or winds various materials into finished products which are packaged and placed into shipping containers. IFC's products are sold to some 683 distributors and brokers located in 44 states by a direct sales organization and independent brokers supported by customer service located at the Brownsville facility. B. INDUSTRY SEGMENTS The Company operates in three industry segments, including the health care products segment. The assets, revenues and income before taxes of the two continuing segments are shown in the "Notes to Consolidated Financial Statements" (Part IV, Item 14). 3 7 C. SUPPLY OF RAW MATERIALS The Company purchases raw materials necessary for the manufacture of its products from several unaffiliated suppliers. These raw materials are readily available from numerous sources. The Company is not dependent upon any one major source of supply, and is not limited by any supply contracts. As of January 1, 1999, the Company signed a five-year supply agreement to purchase a minimum of 16,200 short tons of paper towelling and tissue annually at market prices. This supplier provides 100% of the Company's requirements for these products. D. MARKETING AND SALES WOOD WYANT Wood Wyant's products are sold by a field sales organization of approximately 110. Sales (other than inter-company transactions with IFC) are made primarily to end users, with a minor percentage made to distributors. STRATEGY AND MARKETING Wood Wyant's marketing strategy was established in the fall of 1994 following an extensive study of its sales organization by Wood Wyant and Tandem Consulting Group, Canada's leading sales and marketing consulting group. This study, which was undertaken over a period of several months, led to the corporate strategy of building a business with superior return based upon a consultative approach of developing comprehensive cost effective solutions to customers' sanitation needs. In pursuing this strategy, Wood Wyant's primary focus was on washroom and floor care programs within the health care, education, industrial and office channels of distribution. This strategy has required increased investment in sales training activities to increase product knowledge and improve sales and account management capabilities. In addition, a broad cross-section of managers participated under the direction of a task force in the development of a strategic sales plan designed to ensure growth consistent with Wood Wyant's objective. Wood Wyant's direction in marketing calls for profitable growth based upon a consultative selling approach where skilled and highly trained account managers provide customers with cost effective solutions to sanitation problems. Wood Wyant's marketing activities are consolidated in Montreal and have been strengthened by the appointment of a Director of Marketing reporting to the Vice President, Sales and Marketing and by the appointment of Product Line Managers responsible for the planning and profitability of Wood Wyant's product lines. The marketing group of Wood Wyant is responsible for the strategic direction and growth and development of Wyant's various product lines. SERVICE AND LOGISTICS Wood Wyant operates fourteen full service customer service centers located strategically across Canada in Dartmouth (Halifax), Lachine (Montreal), Hull (Ottawa), Pickering (Toronto), Sudbury, Sault Ste-Marie, Thunder Bay, Winnipeg, Edmonton, Castlegar, Kelowna and Vancouver (3). Responsibility for logistics is centralized to provide greater control over essential operations of the business in the areas of forecasting, production planning, inventory control and management and purchasing. Service level standards are established and performance is monitored on a continuous basis. Wood Wyant maintains a policy of next day delivery of all core stocking products from its major service centers. Such deliveries are made via courier companies, transportation companies, local cartage or company - operated vehicles in selected locations. As a result of these service levels and short lead times for replenishment, there are no material backlogs. 4 8 Wood Wyant's principal customer channels are in the health care and education (including schools, universities and colleges) segments, but also include industrial entities and distributors. Most of its customers are located in Canada, with customers in the United States accounting for less than 8% of sales, including sales to IFC. Wood Wyant has no single customer that accounts for more than 1% of sales, except for IFC, which accounts for 6.5% of sales. WYANT HEALTH CARE DIVISION The Division's products are sold by 13 salaried sales and marketing personnel and by several independent sales organizations that work on a commission basis. Most of the Division's sales (other than inter-company transactions with IFC) are made to distributors that, in turn, sell the Company's products to institutional users such as hospitals and nursing homes, and to industrial users. Other sales are made to private labellers that sell to retail individual/chain stores. The retail chains usually sell the products under private label. The following table shows, for the years indicated, percentage information in respect of the Division's net sales.
1996 1997 1998 ---- ---- ---- Major Distributors................... 10.5 12.4 11.1 Other Distributors................... 34.7 19.9 21.0 Government Agencies.................. 1.0 1.1 0.8 Private Label........................ 18.4 28.9 28.7 Converters (airlaid/nonwoven fabrics) 7.0 * 5.2 * 7.7 * Industrial Wiping Products (IFC)..... 28.4 32.5 30.7
[FN] * Does not include inter-company sales of $2,474,815, $2,498,939 and $1,542,772, in 1998, 1997 and 1996, respectively, to IFC. At December 31, 1998 the Division had a backlog of firm orders of approximately $2,120,000, compared to $1,460,000 at December 31, 1997. These firm orders will be filled during the first quarter of 1999. IFC IFC's products are sold by 8 salaried sales personnel and by several independent sales organizations that are paid on a commission basis. IFC sales are comprised of wiping products (60%) and sanitary paper products (40%). All wiper products sold by IFC are manufactured in its Brownsville, Tennessee facility. All of IFC's sanitary paper products and systems are supplied by Wood Wyant with IFC acting as Wood Wyant's master distributor in the continental United States market. IFC's sales are made primarily to distributors that resell IFC's products to institutional users such as manufacturers, utilities, nursing homes and restaurants. 5 9 E. COMPETITION WOOD WYANT Wood Wyant competes in the sanitary paper and janitorial product markets across Canada. The Canadian market for sanitary paper and sanitation products is fragmented and is served by over 200 distribution companies that compete directly with Wood Wyant on a regional basis and that tend to be small to medium sized. Only two companies compete on a national basis, with Wood Wyant being the only national full line distributor focused solely on the institutional sanitation market. Recently, the North American sanitation distribution industry has been experiencing a period of consolidation. Wood Wyant participated in this consolidation process through the acquisition of four distributors in Canada during the second quarter of 1998. Wood Wyant will continue to seek out acquisition opportunities which meet its investment criteria. Wood Wyant's distribution capabilities are enhanced by its vertical integration as a converter of paper products and a manufacturer of a complete line of sanitation chemicals. Wood Wyant's size also permits it to take full advantage of the benefits of bulk pricing and volume discounts offered by its suppliers. However, Wood Wyant's ability to compete successfully is dependent upon its ability to make timely delivery of quality products at competitive prices. With respect to sanitary paper products, Wood Wyant is not fully integrated and competes with fully integrated sanitary paper producers that have substantial financial resources and significant market share relative to Wood Wyant; therefore, Wood Wyant's results of operations could be adversely affected if such fully integrated producers attempt to significantly increase market share. WYANT HEALTH CARE DIVISION The industry in which the Division competes is highly competitive. Among the competitors are such firms as Kendall, PaperPak (the proposed buyer of the Division) and others with substantially greater resources than the Company's, as well as many firms comparable to the Division in size and the primary businesses of which are directly competitive. Although the Division is a leading manufacturer of underpads, it is not a significant factor in the overall adult incontinent market. The Division's ability to compete successfully is dependent upon its ability to make timely deliveries of value added products of a quality similar to or higher than that of its competitors and at competitive prices. IFC IFC competes with major paper mills and smaller converters of towel, tissue and disposable wiping products. The major mill category of competition includes such companies as Kimberly Clark, Fort James and Wisconsin Tissue. The smaller converters are multiple in number and are more regional in their market approach. In order to compete successfully, IFC must supply its customers with quality products at competitive prices. Customer service and sales support programs are necessary to insure that IFC is regarded as a valuable partner by its customers. 6 10 F. EMPLOYEES/UNION CONTRACTS WOOD WYANT Wood Wyant currently has approximately 440 employees, including approximately 320 salaried employees and 120 hourly employees. Wood Wyant's hourly workers are covered under four separate collective bargaining agreements, the largest of which covers 80 workers at Wood Wyant's Pickering plant and expires on October 25, 1999. Wood Wyant has never had a work stoppage in its history, nor has it had any other material labor problems. WYANT HEALTH CARE DIVISION The Division has 187 employees, of whom 145 are employed in New Jersey, and 42 are employed in Fresno, California. The Division is party to collective bargaining agreements with the International Production Service & Sales Employees Union that serves its New Jersey factory-labor employees. The agreements expire in 2001. The Division considers its relations with its employees to be satisfactory, and no labor disputes are anticipated, nor have any affected operations negatively to date. IFC IFC employs 62 personnel at its facility in Brownsville, Tennessee. Employees are not unionized. G. PATENTS AND TRADEMARKS The Company is the owner of 36 patents and 167 trademarks. Of the patents, 35 apply to the Sanitation Products segment and relate to dispensers used with the Company's paper and chemicals products. The remaining patent is for "Tuckables(R)" underpads manufactured by the Health Care Products segment. The Company is not able to assess any economic advantage particularly attributable to any of the above patents. The trademarks relate primarily to the Sanitation Products segment (134 trademarks), with 19 applicable to the Health Care Products segment and 14 to the Wiping Products segment. These trademarks are used to protect the identification of individual products, but the Company is unable to assess any economic advantage particularly attributable to any of them. Moreover, there is no assurance that trademark rights are enforceable as a mere consequence of trademark registration. H. ENVIRONMENTAL The Company has been participating with the New Jersey Department of Environmental Protection ("DEP") in the investigation and potential clean-up of the Company's former site of operation located at 5 and 6 Easy Street, Bridgewater, New Jersey. As a tenant, the Company is potentially responsible to the DEP for environmental contamination based solely upon it having been a tenant at the site where there is contamination. Similarly, the Company is potentially jointly and severally liable with the landlord for both the investigation and clean-up costs. To date, the investigation has established that, in addition to on-site contamination, some of the contamination on the site is or has come from off site. The Company disputes it caused any such contamination and maintains that on-site contamination was a result of prior tenants' acts. Nevertheless, the Company has fully cooperated with the DEP and has presently been directed by the DEP to delineate the ground water contaminant plume, which may result in establishing that the contamination is a regional problem rather than one specific to the former site that the Company leased. 7 11 The Company has entered into a flat fee contract with its environmental consultants for $11,750 for the delineation investigation. Upon determination of the contaminant plume, the Company will petition the DEP for a classification exception area where the remedial action will be natural attenuation. After the investigation is completed, the DEP could require clean-up or remediation of the contamination on site, the cost of which could potentially be in the range of $100,000 to $150,000. However, present technology is such that no remedial action plan could bring the site in conformity with the present DEP regulations, regardless of the funds spent. The Company is unaware of any other environmental or similar matters that would have a material effect on the capital expenditures, earnings or competitive position of the Company. Item 2. PROPERTIES WOOD WYANT Wood Wyant's manufacturing operations include the conversion of base paper and the manufacturing of janitorial chemicals. Base paper is converted into paper hand towels and bathroom tissue at a plant owned by Wood Wyant in Pickering (Toronto), Ontario. Specialized machinery in this plant cuts, folds or winds the paper into finished products that are packaged and placed in shipping containers. The Pickering plant occupies approximately 149,500 square feet. For the year ended December 31, 1998, production at Pickering totalled approximately 1,808,000 cases, which represents approximately 66% of capacity. Wood Wyant develops and blends janitorial chemicals from raw materials produced by major base chemical suppliers. The chemicals are blended in large tanks and packed into shipping containers for sale by the Wood Wyant distribution network. Wood Wyant operates two chemical plants which are located in rented facilities in Scarborough (Toronto), Ontario and Abbotsford (Vancouver), British Columbia. For the year ended December 31, 1998, total production at these plants reached approximately 2,857,000 liters (49% of capacity). Wood Wyant's distribution operations are conducted through leased facilities throughout Canada, thereby providing flexibility in meeting market requirements and eliminating the need to make capital expenditures for real estate. The location of the leased facilities, including square footage and lease expiration dates, are as follows:
AREA IN YEAR OF SQUARE FEET EXPIRATION ----------- ---------- Manufacturing Pickering (Toronto), Ontario (1)...... 78,200 -- Scarborough (Toronto), Ontario........ 22,700 2001 Abbotsford, B.C....................... 4,500 month to month Distribution Dartmouth (Halifax), Nova Scotia...... 12,100 2003 Lachine (Montreal), Quebec............ 91,700 2004 Hull (Ottawa), Quebec (2)............. 7,800 month to month Pickering (Toronto), Ontario (1)...... 71,300 -- Sudbury, Ontario...................... 12,000 2003 Sault Ste-Marie, Ontario.............. 8,100 2003 Thunder Bay, Ontario.................. 4,200 2003 Winnipeg, Manitoba.................... 12,000 2001 Edmonton, Alberta..................... 14,000 2000 Burnaby (Vancouver), B.C.............. 10,400 2000 Coquitlam (Vancouver), B.C............ 25,000 2000 Vancouver, B.C........................ 8,000 2000
(1) Wood Wyant owns this 149,500 sq. ft. facility. (2) A new lease for a term of 5 years is currently being finalized. 8 12 WYANT HEALTH CARE DIVISION Since May 31, 1994 the Division has conducted all New Jersey operations at its Branchburg, New Jersey location. This facility accommodates manufacturing operations, warehousing and administrative activities in a 111,640 square foot building. This facility will be sold to PaperPak pursuant to the Asset Purchase Agreement if the transaction is consummated. The Division leases approximately 80,000 square feet, used for manufacturing and warehousing, in a building at 95 Santa Fe Avenue, Fresno, California, from Len-Sid Realty Co. Leonard Schramm, a former President of the Company is a partner in Len-Sid Realty Co. The terms of the lease agreement, including $110,116 as annual rent, are comparable to terms that might be obtainable from an unaffiliated lessor of like property in the immediate vicinity of the Fresno warehouse. The lease term is for six months, but terminable on 90 days' notice (essentially, because the landowner, The Atchison, Topeka and Santa Fe Railroad, has the right to terminate Len-Sid Realty Co.'s "possession" on 90 days' notice). This lease will be assigned to PaperPak upon completion of the sale of the Division. See "Business - General - Sale of Wyant Health Care Division." IFC During November 1997, IFC relocated its manufacturing operations from leased premises in Jackson, Tennessee to a leased facility in Brownsville, Tennessee. The lease for this 100,000 square foot facility will expire on December 31, 2004. IFC has the option to extend the term by three years to December 31, 2007. Item 3. LEGAL PROCEEDINGS From time to time, the Company may be a party to legal proceedings incidental to its business. At present, there are no legal proceedings that are material to the Company. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No event that would be described in response to this item has occurred. PART II Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Common Stock is traded on The Nasdaq SmallCap Market under the symbol "WYNT". The listing of the Common Stock was transferred to The Nasdaq SmallCap Market from the Nasdaq National Market System, effective with the open of business on April 5, 1999. Wyant has been informed by the Nasdaq Stock Market that it currently satisfies the continued listing requirements of The Nasdaq SmallCap Market. The continued listing of the Common Stock on The Nasdaq SmallCap Market is subject to customary administrative requirements of the Nasdaq Stock Market relating to the listing. On May 21, 1998, the Company effected a four-for-three stock split of the Common Stock (the "Stock Split") in the form of a stock dividend to holders of record on April 28, 1998. The following table sets forth the quarterly high and low prices per share for the Common Stock for the periods indicated, as reported by the Nasdaq National Market System. The prices for the period prior to May 21, 1998 have been retroactively adjusted to reflect the Stock Split. These prices represent prices by dealers, do not include retail markups, markdowns or commissions and do not necessarily represent actual transactions. 9 13
HIGH LOW ----- ----- 1997 1st Quarter 4.312 3.375 2nd Quarter 3.937 3.187 3rd Quarter 4.875 2.625 4th Quarter 5.250 4.125 1998 1st Quarter 7.406 4.594 2nd Quarter 6.750 5.188 3rd Quarter 5.750 3.250 4th Quarter 4.500 3.250
As of the Record Date, there were 2,273,817 shares of Common Stock outstanding and approximately 800 record holders of Common Stock. Wyant has never paid a cash dividend on the Common Stock and does not anticipate paying any cash dividends in the foreseeable future. Wyant's ability to pay dividends is subject to Wyant's income, receipt of cash flow from subsidiaries in the form of dividends or similar distributions, financial condition, capital needs and restrictions contained in various credit agreements. 10 14 ITEM 6. SELECTED FINANCIAL DATA
YEAR ENDED DECEMBER 31 -------------------------------------------------------------------------- 1998 1997 1996 1995 1994 --------- --------- --------- --------- --------- Unaudited (In thousands, except per share amounts) STATEMENT OF OPERATIONS DATA: Sales..................................... $ 67,124 $ 63,560 $ 62,591 $ 60,539 $ 59,456 Cost of sales............................. 43,218 39,691 38,152 37,035 38,167 --------- --------- --------- --------- --------- Gross profit.............................. 23,906 23,869 24,439 23,504 21,289 Selling, general and administration expenses................................ 21,358 21,125 21,325 20,814 22,125 Amortization.............................. 508 429 505 584 653 Non-recurring items....................... -- -- 550 1,808 61 Interest expense.......................... 1,158 745 511 742 724 Other income (expense).................... (244) (230) (185) 191 265 --------- --------- --------- --------- --------- 22,780 22,069 22,706 24,139 23,828 Income (loss) from continuing operations before income taxes and extraordinary gain.................. 1,126 1,800 1,733 (635) (2,539) Income tax expense (benefit).............. 572 801 796 (460) (625) --------- --------- --------- --------- --------- Income (loss) from continuing operations before extraordinary gain............... 554 999 937 (175) (1,914) Income (loss) from discontinued operations, net of income taxes......... 1,021 (581) (793) 269 1,210 --------- --------- --------- --------- --------- Income (loss) before extraordinary gain... 1,575 418 144 94 (704) Extraordinary gain, net of income taxes... -- 92 -- -- -- --------- --------- --------- --------- --------- Net income (loss)......................... 1,575 510 144 94 (704) Dividends and accretion of mandatorily redeemable preferred shares............. 360 191 -- -- -- --------- --------- --------- --------- --------- Net income (loss) attributable to common shares........................... $ 1,215 $ 319 $ 144 $ 94 $ (704) ========= ========= ========= ========= ========= Per common share Basic Income (loss) from continuing operations before extraordinary gain............. $ 0.06 $ 0.22 $ 0.26 $ (0.05) $ (0.53) Discontinued operations................. $ 0.28 $ (0.16) $ (0.22) $ 0.08 $ 0.33 Net income (loss)....................... $ 0.34 $ 0.09 $ 0.04 $ 0.03 $ (0.20) Diluted Income (loss) from continuing operations before extraordinary gain............. $ 0.06 $ 0.22 $ 0.26 $ (0.05) $ (0.53) Discontinued operations................. $ 0.27 $ (0.16) $ (0.22) $ 0.08 $ 0.33 Net income (loss)....................... $ 0.33 $ 0.09 $ 0.04 $ 0.03 $ (0.20) Weighted average number of common shares outstanding...................... 3,606,247 3,597,125 3,589,884 3,589,884 3,589,124
AT DECEMBER 31 --------------------------------------------------------------------------- 1998 1997 1996 1995 1994 --------- --------- --------- --------- --------- Unaudited Unaudited BALANCE SHEET DATA: Working capital of continuing operations.. $ 1,822 $ 82 $ 3,217 $ 8,410 $ 6,783 Total assets.............................. 42,540 37,156 37,593 38,441 39,586 Long-term obligations (excluding current maturities)..................... 3,888 1,998 6,259 5,945 7,718 Redeemable preferred shares............... 5,990 4,930 2,268 2,268 2,268 Cash Dividends declared per common share.. -- -- -- -- --
NOTE: Data for the years 1994 to 1997 inclusive have been restated to reflect the discontinued operations presentation and the stock split which occurred in 1998. 11 15 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS INTRODUCTION The following discussion and analysis of financial condition and results of operations should be read in conjunction with the Company's consolidated financial statements and accompanying notes. (See Item 14). As discussed under "Business - General - Sale of Wyant Health Care Division", pursuant to the Asset Purchase Agreement, Wyant has agreed to sell the Division and substantially all of its operating assets to PaperPak. Accordingly, such consolidated financial statements, as well as the discussion below and analysis of financial condition and operations, reflect the consummation of this transaction by showing the health care business as "discontinued operations" for income statement purposes and as "assets held for divestiture" for balance sheet purposes. The following information and the information included under "Business" includes forward-looking statements (within the meaning of Section 21E of the Securities Exchange Act of 1934) that involve a number of risks and uncertainties that may influence the financial performance and earnings of the Company, and may cause actual results to differ materially from those in the forward-looking statements, including, but not limited to, factors such as the ability of the Company to successfully integrate the business and personnel of various acquired businesses into its operations, the ability to implement its business strategy assuming consummation of the PaperPak transaction, the ability to adequately address Year 2000-related issues, the ability to maintain existing customer relationships and to secure new customers on satisfactory terms, whether by contract or otherwise, unforeseen price pressure on the Company's products or significant cost increases that cannot be recovered through price increases or productivity improvements, the ability to obtain any necessary financing on reasonably satisfactory terms, the effect of exchange rate fluctuations and the effect of competitive, capital market and general economic conditions. Such forward-looking statements, which reflect the Company's current views with respect to certain future events and financial performance, should be considered in light of such factors. RESULTS OF OPERATIONS FOR YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997 SALES: Sales of continuing operations for the year ended December 31, 1998 increased by $3,564,434 or 5.6% to $67,124,137 from the total of $63,559,703 in the year ended December 31, 1997, after eliminating inter-segment sales of $4,083,590 in 1998 and of $4,074,080 in 1997. Sales of the sanitation products segment were $54,490,900 in 1998, up by $1,956,172 or 3.7% over the 1997 sales of $52,534,728. This increase resulted from additional sales from the businesses acquired in the second quarter of 1998, which more than offset a reduction in selling prices of paper products and the adverse effect of a weaker Canadian dollar translation rate. Sales of the wiping products segment increased by $1,617,772 or 10.7% to $16,716,827 in 1998, from $15,099,055 in 1997. The increase resulted primarily from higher sales of paper products and systems. COST OF SALES AND GROSS PROFIT: Gross profit of the sanitation products segment for 1998 was $21,041,150 or 38.6% of sales, compared with $21,169,065 or 40.3% of sales in 1997. The lower margin primarily reflected the continuing competitive pricing environment for paper products, together with slightly reduced margins for chemicals and sanitation products. Gross profit of the wiping products segment in 1998 amounted to $2,864,521 or 17.1% of sales, compared with $2,699,437 or 17.9% of sales in 1997. The reduced margin resulted from increased sales of paper products, which generate relatively lower margins than most of the segment's other product lines. 12 16 SELLING EXPENSES: Selling expenses for 1998 amounted to $12,658,838, an increase of $727,358 or 6.1% over the 1997 level of $11,931,480. Expenses of the sanitation products segment in 1998 at $10,438,946 were $573,953 or 5.8% higher than the 1997 amount of $9,864,993. The increase resulted primarily from the added expenses of the acquired businesses, which more than offset the favorable impact of the weaker Canadian dollar translation rate. In the wiping products segment, selling expenses in 1998 were $2,219,892, an increase of $153,405 or 7.4% over the 1997 total of $2,066,487, due principally to higher outward freight costs resulting from the higher level of sales ($119,934). GENERAL AND ADMINISTRATION EXPENSES: General and administration expenses for 1998 were $8,699,535, a reduction of $494,408 or 5.4% compared with the 1997 expenses of $9,193,943. Expenses of the sanitation products segment for 1998 were $7,811,599, compared with $8,288,049 in 1997. The decrease of $476,450 or 5.7% from 1997 resulted from savings derived primarily from lower staffing levels and the consolidation of warehousing activities at a Company-owned facility which, together with the favorable impact of the weaker Canadian dollar translation rate, more than offset the expenses added from the businesses acquired during the second quarter of 1998 and the special charge of $464,286 incurred in the third quarter of the year for the rationalization of Wood Wyant's operations following the acquisition of those businesses. Expenses of the wiping products segment for 1998 were $572,936, an increase of $114,542 or 25.0% over the 1997 level of $458,394. This resulted primarily from a $50,000 increase to the allowance for doubtful accounts which was required due to slower collection of accounts receivable, together with higher staffing costs. Corporate charges in 1998 were $315,000, a decrease of $132,500 compared with the total of $447,500 in 1997, which included $206,500 of professional fees associated with the purchase of the Canadian sanitation products business in March 1997. AMORTIZATION: Amortization amounted to $507,540 in 1998, an increase of $78,729 over the 1997 level of $428,811, due to the additional amortization from the acquired businesses and from the goodwill resulting from their purchase. INTEREST EXPENSE: Interest expense amounted to $1,158,249 in 1998, an increase of $413,160 over the 1997 expense of $745,089. The increase resulted from higher borrowing costs in the United States ($290,450), together with an increase in Canada of $122,710 which resulted from the financing of the businesses acquired during 1998. Interest expense in the United States for 1998 includes approximately $632,000 of interest on the loan from Congress Financial Corporation. This loan will be repaid from the proceeds from the sale of the discontinued health care operations and consequently the interest expense will be reduced accordingly from the time of the transaction. OTHER INCOME: Other income amounted to $244,067 in 1998, up from $230,790 in 1997. INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND EXTRAORDINARY GAIN: Income from continuing operations before income taxes and extraordinary gain amounted to $1,125,576 in 1998, a reduction of $674,393 from the 1997 level of $1,799,969. The sanitation products and wiping products segments decreased by $414,468 and $149,059 respectively, while corporate expenses were $110,866 higher in 1998. The results for 1998 include the special charge of $464,286 incurred in the third quarter for the rationalization of Wood Wyant's operations following the acquisitions in the second quarter of the year. INCOME TAXES: Income tax expense at $572,000 was $228,597 lower in 1998 than the expense of $800,597 in 1997, reflecting the reduced level of pre-tax income in 1998. 13 17 DISCONTINUED OPERATIONS: The discontinued health care operations generated after-tax income from operations of $1,021,602 or $0.28 per common share in 1998, compared with an after-tax loss of $580,874 or ($0.16) per common share in 1997. The improvement in 1998 was primarily a result of a 16.4% increase in sales, due to the higher sales of Symphony(R) and private label adult incontinent briefs, which were introduced during the first half of 1997 and of higher margins, at 20% of sales compared with 16% of sales in 1997, due to manufacturing efficiencies and increased sales activity. In addition, general and administration expenses were lower than in 1997, when a non-recurring charge of $427,000 for severance costs and professional fees was incurred. EXTRAORDINARY GAIN: An extraordinary gain of $91,958 or $0.03 per common share, net of tax of $47,372, was realized in 1997 on the refinancing of certain term debt. NET INCOME: Net income for 1998 amounted to $1,575,178, an improvement of $1,064,722 over the 1997 income of $510,456. After deducting dividends and accretion relating to the mandatorily redeemable preferred shares, the earnings amounted to $0.34 per common share in 1998, compared with $0.09 per common share in 1997. RESULTS OF OPERATIONS FOR YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996 SALES: Sales of continuing operations for the year ended December 31, 1997 increased by $968,996 or 1.55% to $63,559,703 from the level of $62,590,707 in the year 1996, after eliminating inter-segment sales, which increased to $4,074,080 in 1997 from $2,299,634 in 1996. Sales of the sanitation products segment were $52,534,728 in 1997, down by $351,618 or 0.7% from the 1996 sales of $52,886,346. This reduction resulted from the negative impact of a weaker Canadian dollar translation rate and lower selling prices for paper products, partially offset by higher sales volume of paper products and increased sales of sanitation products and equipment. Sales of the wiping products segment increased by $3,095,060 or 25.8% to $15,099,055 in 1997, from $12,003,995 in 1996. This improvement was the result of significantly higher sales of paper products and systems. COST OF SALES AND GROSS PROFIT: The sanitation products segment realized gross profit of $21,169,065 or 40.3% of sales in 1997, compared with $21,991,889 or 41.6% of sales in 1996. The margin reduction was primarily caused by the competitive pricing environment for paper products in 1997. Gross profit of the wiping products segment was $2,699,437 or 17.9% of sales in 1997. In 1996 gross profit amounted to $2,447,344 or 20.4% of sales. The lower margin was the result of the significant increase in sales of paper products, which generate lower margins than the segment's other product lines. SELLING EXPENSES: Selling expenses for 1997 totalled $11,931,480, a reduction of $84,284 from the 1996 level of $12,015,764. Expenses of the sanitation products segment for 1997 at $9,864,993 were $468,691 lower than the 1996 amount of $10,333,684. The reduction was due primarily to lower staffing levels in 1997 and the favorable impact of the weaker Canadian dollar translation rate, together with lower marketing and promotion expenses than in 1996, when a new product catalogue was produced. In the wiping products segment, 1997 expenses were $2,066,487, an increase of $384,407 or 22.9% over the 1996 expenses of $1,682,080. This increase resulted primarily from higher outward freight costs associated with the increased sales activity ($180,660) and related selling expense increases. 14 18 GENERAL AND ADMINISTRATION EXPENSES: General and administration expenses for 1997 at $9,193,943 were $114,895 lower than the 1996 total of $9,308,838. In the sanitation products segment, expenses declined by $463,916 in 1997 to $8,288,049, compared with $8,751,965 in 1996 The reduction resulted primarily from lower staffing levels in 1997 and the favorable impact of the weaker Canadian dollar translation rate During 1997, the Company transferred its Ontario Distribution Center from a leased facility in Scarborough, Ontario to the company-owned facility at Pickering, Ontario The Company provided approximately $238,000 at December 31, 1997 for future costs related to the sublease of the Scarborough facility In the wiping products segment, 1997 expenses amounted to $458,394, an increase of $33,521 over the 1996 expenses of $424,873, due primarily to higher staffing costs Corporate charges were $447,500 in 1997, compared with $132,000 in 1996 The increase of $315,500 was primarily a result of professional fees of $206,500 related to the Wood Wyant acquisition in March 1997, together with increased insurance costs. AMORTIZATION: Amortization amounted to $428,811 in 1997, a reduction of $76,534 from the 1996 level due to the relatively low level of capital spending in 1997. NON-RECURRING ITEMS: A charge of $549,805 was recorded in 1996 for expenses incurred in relation to the Wood Wyant acquisition. INTEREST EXPENSE: Interest expense totalled $745,089 for 1997, an increase of $233,836 over the 1996 expense of $511,253, as the additional interest costs related to the debt used to finance the Wood Wyant acquisition more than offset the favorable impact of lower interest rates in 1997. OTHER INCOME: Other income for 1997 of $230,790 was $46,154 higher than in 1996 The increase resulted from foreign exchange gains in Canada. INCOME FROM CONTINUING OPERATIONS BEFORE INCOMES TAXES AND EXTRAORDINARY GAIN: Income from continuing operations before tax and extraordinary gain totalled $1,799,969 in 1997, an improvement of $67,105 over the 1996 amount of $1,732,864 The sanitation products segment improved by $326,224, while the wiping products segment declined by $171,424 Corporate expenses increased by $86,695 in 1997. INCOME TAXES: Income tax expense increased by $4,604 in 1997 to $800,597, reflecting primarily the higher pre-tax income in 1997. DISCONTINUED OPERATIONS: The discontinued health care operations incurred an after-tax loss from operations of $580,874 or $(0.16) per common share in 1997, compared with an after-tax loss of $792,481 or $(0.22) per common share in 1996 The reduction in after-tax loss resulted from higher margins in 1997 due to cost reductions and improved operating efficiencies, together with general and administration expenses which were lower in 1997 as a result of cost reduction programs, despite the inclusion of a non-recurring charge of $427,000 in 1997 for severance costs and professional fees. EXTRAORDINARY GAIN: An extraordinary gain of $91,958 or $0.03 per common share, net of tax of $47,372, was realized in 1997 on the refinancing of certain term debt. NET INCOME: Net income for 1997 amounted to $510,456, an improvement of $366,066 over the 1996 income of $144,390 After deducting dividends and accretion relating to the mandatorily redeemable preferred shares, the earnings amounted to $0.09 per common share in 1997, compared with $0.04 per common share in 1996. LIQUIDITY AND CAPITAL RESOURCES Liquidity and capital resources of the Company's United States operations (IFC Disposables) and Canadian operations (Wood Wyant) are discussed separately, as each is self-financing and has separate banking facilities. 15 19 CANADIAN OPERATIONS Cash utilized during 1998 amounted to $941,045. Cash generated from operations, net of a working capital increase of $167,032, amounted to $1,912,769. The higher working capital resulted primarily from decreases in accounts payable ($428,079) and income taxes payable ($595,130) which, together with an increase in prepaid expenses ($176,753), more than offset a reduction in accounts receivable of $1,098,925. The lower receivables resulted from the return to more normal levels following a postal strike in Canada in late - 1997, together with the impact of a weaker Canadian dollar translation rate. The reduction in payables was primarily due to the weaker Canadian dollar translation rate. The decrease in income taxes payable resulted from the payment of 1997 income tax liabilities and a higher level of instalment payments in 1998. Capital expenditures amounted to $679,331 in 1998. Repayments of long-term debt during the year totalled $1,001,944, while an amount of $197,671 was borrowed from an existing facility to finance certain of the capital expenditures. In addition, $550,122 of outstanding Class A Preferred shares were redeemed in January 1998 and dividends of $190,955 have been paid on the Class A and Class B Preferred shares. During the second quarter of 1998, Wood Wyant acquired four businesses for total consideration of $5,715,034. These acquisitions were financed by term bank loans, under which an amount of $3,525,440 was drawn down, and by the issue of 283,111 Class F Preferred shares of Wood Wyant with a fair value of $1,861,876. The Class F Preferred shares of Wood Wyant were issued to the former owners of the businesses acquired during the second quarter of 1998. The significant conditions of the Class F Preferred shares of Wood Wyant are: Prior to July 1, 2000 and subject to the priorities of the other classes of preferred stock of Wood Wyant Inc., the shares: 1. are exchangeable for Wyant Corporation common stock on a share for share basis and are entitled to dividends equivalent on a per share basis, to any dividends paid on Wyant Corporation common stock; and 2. have a liquidation preference per share of one share of Wyant Corporation common stock. Holders of the shares have an option, which may be exercised between July 1, 2000 and July 31, 2000, to cause Wood Wyant Inc. to redeem the shares in five equal annual instalments at a price of Cdn $11.250028 ($7.3371) per share plus any accrued and unpaid dividends. If the redemption option is exercised, dividends of 3.5% per annum will be payable commencing July 1, 2000. On June 25, 1998 the Company increased its secured revolving line of credit from Cdn. $6,000,000 to Cdn. $7,500,000 ($4,891,411) and on March 10, 1999 increased it by an additional Cdn. $2,000,000 to Cdn. $9,500,000 ($6,195,787). These increases were required to assist in refinancing the operating cash requirements of the newly-acquired companies and to meet increased working capital requirements. At December 31, 1998, approximately $1,190,000 was available under the Cdn. $7,500,000 facility. In addition, approximately $721,000 was available to finance future capital expenditures under a revolving credit facility of $1,956,564 (Cdn. $3,000,000). 16 20 All borrowings of the Canadian Operations are with the Bank of Nova Scotia. Long-term debt outstanding at December 31, 1998 amounted to $4,948,925, including $1,061,332 due within one year. All of the loans were at the commercial prime rate in Canada (6.75% at December 31, 1998) plus 0.75%. The secured revolving line of credit bears interest at the prime rate in Canada. Under the terms of the loan agreements, covenants exist which require Wood Wyant to meet certain ratios relating to debt to tangible net worth, current assets to current liabilities and cash flow to debt service, as well as maintaining a minimum level of tangible net worth. Also, borrowings under the revolving credit facility must not exceed a given proportion of accounts receivable. The Company was in compliance with all of the covenants at December 31, 1998. The Company has no commitments for material capital expenditures and has no plans for major capital expenditures for existing businesses during the next five years. Payments on long-term debt obligations existing at December 31, 1998 average less than $1,000,000 over the next five years with a maximum of $1,496,000 in 2000. Amounts required to redeem Class A and Class B Preferred shares approximate $550,000 per annum during that period, while redemption of the Class F Preferred shares in the event that the option to redeem is exercised by the holders of those shares would require an additional annual amount of approximately $425,000 for five years commencing in 2000. Management believes that operating cash flows from the continuing businesses and amounts available under existing credit facilities will be sufficient to meet ongoing operating cash requirements and amounts required for capital asset additions, as well as meet the cash requirements for debt and Preferred shares redemptions discussed above. U.S. OPERATIONS Cash of $2,524,213 was utilized by continuing operations in the United States during 1998. Working capital increased $344,847, primarily due to higher inventories ($509,741) and lower payables ($234,987), partially offset by an increase of $347,435 in income taxes payable. The higher inventory levels were at IFC and resulted primarily from a build-up of inventories to counter temporary raw material supply shortages. Capital expenditures of continuing operations in 1998 amounted to $174,361. A total of $1,642,028 of the committed revolving credit facility with Congress Financial Corporation was repaid during 1998. Borrowings of the U.S. Operations consist of a committed revolving credit facility of $13,000,000 with Congress Financial Corporation which bears interest at commercial prime rate plus 1% (prime at December 31, 1998 was 7.75%). Unused availability was approximately $2,841,000 at December 31, 1998. Maximum borrowing under the facility is determined by certain advance formulas applicable to the level of accounts receivable and inventories and the value of property, plant and equipment, net of guarantees. Management believes that future operating cash flows and the unused balance available under the existing credit facility will be sufficient to enable the Company to meet its ongoing operating cash requirements and to finance capital asset additions until the sale of the Wyant Health Care Division and to meet its ongoing cash requirements if the sale of the Wyant Health Care Division is not consummated. Thereafter, following the repayment of the balance outstanding under the secured line of credit with Congress Financial Corporation, management believes that future operating cash flows and excess cash on hand will be sufficient to meet operating cash requirements and to finance capital asset additions. 17 21 DISCONTINUED OPERATIONS On February 23, 1999, the Board of Directors approved the sale of the Company's Wyant Health Care Division, subject to completion of buyer financing, customary regulatory approvals and the approval of the Company's shareholders, for cash on closing of $11,500,000 and $550,000 which will be held in escrow for twenty-four months. These cash proceeds are subject to adjustment on closing, which is expected to occur in the second quarter of 1999. Results of operations between the measurement date of December 17, 1998 and the closing date are expected to contribute positively to the Company's overall results. Cash received on closing will be utilized to pay off the balance under the secured line of credit with Congress Financial Corporation ($4,238,720 as at December 31, 1998), and to pay the withdrawal liability and income taxes generated by the transaction. The Company is in the process of evaluating possible alternative uses of the balance of the net cash proceeds from the sale, including the acquisition of assets or businesses in North America that are consistent with its overall strategy of growing as a North American janitorial and sanitation products manufacturer and distributor. Although the Company is evaluating several opportunities, currently, there are no significant acquisitions of assets or businesses that would be considered probable. To the extent that it acquires any such assets or businesses, whether related to its overall strategy or otherwise, there can be no assurance that such acquisitions will be successfully integrated with its operations or that such acquisitions will ultimately be profitable for the Company. Pending the application of such proceeds, the Company intends to use such proceeds to repay certain short-term debt of its subsidiaries. Following completion of the sale, the Company will cease the manufacture of adult incontinent products and the sale of the Division is not expected to materially affect the operations of the Company's other operating units as each is autonomous and separately managed. The Company will be precluded from re-entering the adult incontinent products business for a period of five years following the sale. The Division supplies airlaid non-woven fabric and incontinent products to IFC which will be subject to a three-year supply agreement upon completion of the sale. IFC will supply PaperPak with Quickabletrademark absorbent washcloths at an agreed upon price, which will be renegotiated every twelve months, and at a volume which will be predetermined. For more information with respect to the sale of the Division, including the principal factors considered by the Board of Directors in approving the sale, see "Business - General - Sale of the Wyant Health Care Division." SIGNIFICANT FACTORS AND KNOWN TRENDS WITH REGARD TO DISCONTINUED OPERATIONS PENSION PLAN Certain employees of the Wyant Health Care Division are members of a multi-employer defined benefit Pension Plan (the "Plan" or "Pension Plan"). The Company was informed by the Pension Plan administrators that the Plan had failed to meet minimum legal funding requirements and that the Company's pro-rata share of the minimum funding deficiency was $370,000. The Plan has applied to the IRS for a waiver from the minimum funding requirements and awaits a response. If the waiver is obtained, the employers contributing to the Plan would be required to fund and charge to earnings the funding deficiency, and corresponding interest charges, over a 15 year period. If the waiver is not obtained, an excise tax may be imposed on the Plan and such excise tax could be as much as 100% of the funding deficiency. 18 22 The sale of the Wyant Health Care Division will trigger a withdrawal liability as PaperPak, the acquirer of the Division, will not assume the Company's obligation under the Plan. This withdrawal liability will be funded through the proceeds from the sale of the Division. In addition to the withdrawal liability, the Plan may also seek to collect the Division's pro-rata share of the funding deficiency discussed above. After taking into account these Pension Plan liabilities, the Company estimates that it will realize a gain on the sale of the Division. AIRLAY II MACHINE In 1992, the Division purchased a machine ("Airlay II") for the production of airlaid products. During 1993, the machine was redesigned for commercial use. Although Airlay II was installed in the Branchburg, New Jersey manufacturing facility in the fourth quarter of 1994, only a small quantity of commercially acceptable product has been manufactured to date. During the second quarter of 1998, a complete engineering evaluation of the machine was performed. The Division implemented the majority of the recommended changes included in the engineering evaluation. In December 1998 the Division developed a business plan that included, as an objective, full commercial operation of Airlay II by the end of 1999. Airlay II is part of the assets of the Division that Wyant has agreed to sell to PaperPak. As of December 31, 1998 the net book value of Airlay II was approximately $2.2 million. In the event that the sale of the Division is not consummated, there can be no assurance that Airlay II will achieve full commercial operation or produce saleable product for the Division. Accordingly, failure to achieve full commercial operation in the near future could result in a significant write-down of the Company's investment in Airlay II, which write-down would have a material adverse effect on the results of operations of the Company. ENVIRONMENTAL The Company has been participating with the New Jersey Department of Environmental Protection ("DEP") in the investigation and potential clean-up of the Company's former site of operation located at 5 and 6 Easy Street, Bridgewater, New Jersey. As a tenant, the Company is potentially responsible to the DEP for environmental contamination based solely upon it having been a tenant at the site where there is contamination. Similarly, the Company is potentially jointly and severally liable with the landlord for both the investigation and clean-up costs. To date, the investigation has established that, in addition to on-site contamination, some of the contamination on the site is or has come from off site. The Company disputes it caused any such contamination and maintains that on-site contamination was a result of prior tenants' acts. Nevertheless, the Company has fully cooperated with the DEP and has presently been directed by the DEP to delineate the ground water contaminant plume, which may result in establishing that the contamination is a regional problem rather than one specific to the former site that the Company leased. The Company has entered into a flat fee contract with its environmental consultants for $11,750 for the delineation investigation. Upon determination of the contaminant plume, the Company will petition the DEP for a classification exception area where the remedial action will be natural attenuation. After the investigation is completed, the DEP could require clean-up or remediation of the contamination on site, the cost of which could potentially be in the range of $100,000 to $150,000. However, present technology is such that no remedial action plan could bring the site in conformity with the present DEP regulations, regardless of the funds spent. The Company is unaware of any other environmental or similar matters that would have a material effect on the capital expenditures, earnings or competitive position of the Company. 19 23 BACKLOG, IMPACT OF INFLATION, SEASONALITY The Company attempts to maintain sufficient inventory levels for all products to allow shipment against most orders for wiping products within a one week period and next day for core stocking items of the Company's sanitation products. To some extent, however, certain components must be inventoried further in advance of actual orders to ensure availability. For the most part, purchases are based upon quarterly requirements as projected after calculating sales indications from the sales and marketing departments. The Company's products are not subject to significant seasonal influences. Because its products are sold primarily to distributors throughout the United States and to distributors and end-users in Canada, the Company is affected by general economic conditions. Accordingly, any adverse change in the economic climate may have an adverse impact on the Company's sales and financial condition. YEAR 2000 The Year 2000 problem arises because many computer systems and software products currently in use are coded to accept only two digit entries in the date code field. Four digit entries will be required to identify 21st century dates. Consequently, the use of software and computer systems that are not Year 2000 compliant could result in the disruption of operations. As a result, many companies' computer systems and software may need to be upgraded or replaced to conform with Year 2000 requirements. In order to properly address the Year 2000 Issue, the Company has appointed the Vice President, Information Technology of Wood Wyant as Year 2000 Project Director to direct a project team which will coordinate the implementation of a Year 2000 Plan by identifying Year 2000 issues and coordinating solutions. The project team is currently being assembled. Its role will be to conduct Year 2000 readiness assessment audits at all of the Company's facilities, encompassing all equipment and processes deemed important to the facility's operation. Wood Wyant has installed new applications software for which it has obtained written confirmation from the vendor that it is Year 2000 compliant. This software has become operational in the first quarter of 1999. The software currently in use at IFC is not Year 2000 compliant and will be replaced by hardware and applications software which will be Year 2000 compliant by mid-1999. As an additional precaution, the technical infrastructure of all the Company's businesses will be audited and tested to ensure Year 2000 compliance under normal business conditions. The total cost of purchasing and installing the new Wood Wyant software is estimated to be $1,630,000 (Cdn. $2,500,000), and is being financed through lease facilities established with the Bank of Nova Scotia. The cost to replace computer hardware and applications software at IFC has not yet been determined but is not expected to be material. The Company is also preparing to issue Year 2000 compliance letters requesting confirmation of suppliers' readiness and follow-up discussions will take place for all business-critical suppliers. Major customers will also be contacted to confirm their Year 2000 readiness. To date, the Company has not incurred significant incremental costs in order to comply with Year 2000 requirements and does not believe it will incur significant incremental costs in the foreseeable future. However, there can be no assurance that Year 2000 errors or defects will not be discovered in the Company's software systems and, if errors or defects are discovered, there is no assurance that this would not result in a material financial risk to the Company. 20 24 In addition, the Company purchases goods and services from third party vendors that may not be Year 2000 compliant. While the Company intends to obtain confirmation of vendors' state of readiness during the second quarter of 1999, their failure to operate properly with regard to Year 2000 requirements could require the Company to incur material expenses to rectify the impact on the Company of such failure. However, all of the Company's raw materials are widely available and the Company is not dependent on any one supplier or group of suppliers. The Company does not know the state of preparedness for Year 2000 issues of all of its customers. However, no single customer exceeds 2% of consolidated sales and therefore the risk the Company faces is broad based if many customers are unable to use information systems necessary to place orders for Company products. The Company's Year 2000 Issue involves significant risks. There can be no assurance that the Company will succeed in implementing its Year 2000 Plan. The following describes the Company's most reasonably likely worst-case scenario, given current uncertainties. If the Company's replaced internal information technology systems fail the Company will experience significant difficulties in supplying customers and such a failure could hamper the Company's ability to manage the orderly replenishment of inventories. If the Company's vendors or suppliers of its required power, telecommunications, transportation and financial services, fail to provide the Company with products and services, it will be unable to provide services to its customers. If any of these uncertainties were to occur, the Company's business, financial condition and results of operations would be adversely affected. The Company is unable to assess the likelihood of such events occurring or the extent of the effect on the Company. Although the Company has not yet developed a comprehensive contingency plan to address situations that may result if the Company or any of the third parties upon which the Company is dependent is unable to achieve Year 2000 readiness, the Company's Year 2000 compliance program is ongoing and its ultimate scope, as well as the consideration of contingency plans, will continue to be evaluated as new information becomes available. The Company plans to achieve Year 2000 compliance by mid-1999. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is subject to market risk principally in two areas, interest rate risk and foreign currency exchange rate risk. INTEREST RATE RISK The Company's lines of credit and long-term debt are all at rates of interest which fluctuate with changes to bank prime rates in either the United States or Canada. Consequently, increases in interest rates could have an adverse effect on the Company's future results. 21 25 FOREIGN CURRENCY EXCHANGE RATE RISK The Company's results of operations are significantly dependent on, and materially affected by, the results of operations of Wood Wyant and the attendant business risks that are associated with the operation of Wood Wyant as a going concern. These material risks include the following: - A significant portion of the Company's earnings, on a consolidated basis, will come from Wood Wyant, a Canadian corporation. As a result, the Company's results of operations and earnings may be adversely affected by the fluctuation in the currency exchange rate between US and Canadian dollars. - Since Wood Wyant conducts its business using Canadian dollars as its operational currency, to the extent the Canadian dollar strengthens against the US dollar, United States competitors in the institutional sanitation business may become more active in the Canadian market. As a result, the Company's results of operations and earnings may be adversely affected in light of potential greater competition in times of a stronger Canadian dollar. Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA See Item 14. Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE On April 21, 1997, the firm of Arthur Andersen LLP (the "Former Auditors") was notified that it was being dismissed as Wyant's independent certified public accountants as of such date and that the firm of Ernst & Young LLP (the "Auditors") had been engaged as of such date as Wyant's independent certified public accountants. The decision to dismiss the Former Auditors and to engage the Auditors was approved by the Board of Directors at the time. The Former Auditors served as independent certified public accountants for Wyant since 1990. The Report of Independent Public Accountants of the Former Auditors on the consolidated financial statements of Wyant and subsidiaries as of December 31, 1996 and 1995 and for each of the three years in the period ended December 31, 1996 expressed an unqualified opinion. There were no reportable events (as defined in Commission Regulation S-K, Item 304(a)(1)(v)) or disagreements with the Former Auditors on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure that were not resolved to the satisfaction of the Former Auditors during the 1995 and 1996 fiscal years and through April 21, 1997. PART III Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT DIRECTORS ROBERT E. BRIGGS, AGE 54, a director since 1997, has been President of the Division since May 1997. He joined Wyant as Vice President of Operations in August 1996. Prior to that, Mr. Briggs was the Director of Operations for American White Cross from 1993 to 1996. He started his career with Johnson & Johnson, spending 26 years in increasingly important roles and held a number of positions including Director of Operations for the Johnson & Johnson Film and Finishing Operations. 22 26 RICHARD J. CHARLES, AGE 68, a director since 1997, was a director of Wyant & Company, an affiliate of Wyant, from 1995 to March 1997. He has been Vice President - Customer Service and Subsidiaries of the Paper Converting Machine Company of Green Bay, Wisconsin for 17 years. THOMAS R.M. DAVIS, AGE 51, a director since 1996, was counsel to Wyant & Company from 1987 to March 1997 and to Wood Wyant, Wyant's wholly owned Canadian subsidiary, since March 1997 and has been a partner in the Canadian law firm of McCarthy T#trault since 1980. NICHOLAS A. GALLOPO, AGE 66, a director since 1996, is a consultant and Certified Public Accountant. He retired as a partner of Arthur Andersen LLP in 1995 after 31 years with the firm. He also served as a director of Neuman Drug Company in 1995 and 1996. DONALD C. MACMARTIN, AGE 56, a director since 1995, was President of Wyant & Company from 1994 until March 1997 and became Chairman, President and Chief Executive Officer of Wood Wyant in March 1997. Prior to that, he was President of Canstar Sports Inc. of Montreal, Quebec from 1992 to 1994 and President of Corby Distilleries Ltd. of Montreal, Quebec from 1989 to 1992. Since 1996, Mr. MacMartin has served as Wyant's Chief Executive Officer and the Chairman of the Board of Directors and, in addition since 1997, as its President. JOHN B. WIGHT, AGE 73, a director since 1995, is a Canadian Chartered Accountant. He was a director of Wyant & Company from 1988 until March 1997. JAMES A. WYANT, AGE 46, a director since 1990, has served as Vice Chairman of the Board of Directors since 1995 and was appointed Corporate Secretary of Wyant in March 1997. He was President and a director of Wyant & Company from 1986 until 1994, subsequently served as Vice Chairman of the Board of Directors until March 1997 and became President and Secretary of Wyant & Company in March 1997. Mr. Wyant has also been a director and Vice Chairman of the Board of Directors of Wood Wyant since March 1997. Each director of the Company is elected yearly to serve by the shareholders of the Company at its annual meeting. EXECUTIVE OFFICERS MARC A. D'AMOUR, AGE 41, was Vice President, Finance and Chief Financial Officer of Wyant & Company from 1994 until March 1997 and became Vice President, Finance and Chief Financial Officer of Wood Wyant in March 1997. Mr. D'Amour has served as Vice President, Chief Financial Officer and Treasurer of Wyant since March 1997. Prior to joining Wyant & Company, Mr. D'Amour held senior financial positions with Domtar Inc. after an eleven-year career with Price Waterhouse. The business experience, current position and related disclosure with respect to Wyant's other executive officers, each of whom is also a director of Wyant, is set forth above under "--Directors." COMPLIANCE WITH SECTION 16 (A) OF THE SECURITIES EXCHANGE ACT OF 1934 Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act") requires executive officers, directors and persons who beneficially own more than 10% of the Common Stock to file within prescribed periods initial statements of beneficial ownership and statements of changes in beneficial ownership of their shares of Common Stock with the Securities and Exchange Commission (the "Commission") and the Nasdaq Stock Market. Such persons are also required to furnish Wyant with copies of all such statements that they file. Based on its review of the copies of such statements received by it, except as described in the next paragraph, Wyant believes that, during 1998, all such filing requirements applicable to such persons were duly complied with. 23 27 Thomas R.M. Davis and Nicholas A. Gallopo each failed to report his initial statement of beneficial ownership and the subsequent acquisition of options to purchase 16,002 shares of Common Stock that were issued to each of them pursuant to the 1997 Stock Incentive Plan on three separate dates between 1996 and 1998. This failure to report was corrected by each of Mr. Davis and Mr. Gallopo by the filing of a Form 3 and 4 with the Commission in March 1999. Item 11. EXECUTIVE COMPENSATION SUMMARY COMPENSATION TABLES The following table summarizes compensation earned in 1998, 1997 and 1996 by the Chief Executive Officer and the only other executive officers whose 1998 salary and bonus exceeded $100,000 (the "named officers"). TABLE I 1998 SUMMARY COMPENSATION TABLE
Number of Shares Covered Name and by Stock Principal Positions Year Salary Bonus Options (1) - ------------------- ---- ------ ----- ----------- Donald C. MacMartin (2) Chairman, President 1998 $269,633 -0- -0- and Chief Executive 1997 245,582 $56,484 73,334 Officer 1996 -0- -0- 62,667 James A. Wyant (2) 1998 147,219 -0- -0- Vice-Chairman and 1997 155,295 19,024 -0- Corporate Secretary 1996 -0- -0- -0- Robert E. Briggs 1998 190,000 45,600 -0- President, Wyant 1997 158,461 25,000 33,335 Health Care Division 1996 47,767 12,500 13,334 Marc A. D'Amour (2) 1998 124,705 -0- -0- Vice-President, Chief 1997 122,791 22,265 33,335 Financial Officer and 1996 -0- -0- 13,334 Treasurer
(1) The number of shares referred to in Table I reflect the Stock Split. (2) Compensation payments to Messrs. Donald C. MacMartin, James A. Wyant and Marc A. D'Amour were made in Canadian dollars and, accordingly, such payments have been converted to United States dollars using an average of the exchange rates in effect during 1998 and 1997 of U.S. $1.00 = Cdn. $1.4835 and U.S. $1.00 = Cdn. $1.3844, respectively. 24 28 On September 23, 1997, the Board of Directors, acting on the recommendation of a Special Subcommittee of the Compensation Committee of the Board of Directors, unanimously approved a Cdn. $300,000 loan from Wood Wyant to Donald C. MacMartin, the Corporation's Chairman, President and Chief Executive Officer. Mr. MacMartin absented himself from the meeting. Interest is payable annually based on Wood Wyant's cost of funds, which is at prevailing commercial market rates (at December 31, 1998, such rate was 6.75%); principal is payable at the rate of $15,000 annually, over a ten year period, with the balance payable at the end of such 10 year period. As of April 22, 1999, there is Cdn. $285,000 outstanding with respect to the loan. TABLE 2 1998 STOCK OPTIONS TABLE
NUMBER OF SHARES COVERED BY VALUE OF UNEXERCISED UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS NAME DECEMBER 31, 1998 (1) AT DECEMBER 31, 1998 (2) - ------------------ -------------------------------- -------------------------------- EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE $ $ Donald C. MacMartin 140,001 6,667 -0- -0- Robert E. Briggs 40,001 6,668 2,500 834 Marc A. D'Amour 41,668 5,001 -0- -0-
____________ (1) The number of shares referred to in Table 2 reflect the Stock Split. (2) Based on the price of $3.25 per share, the closing price of the shares on the Nasdaq National Market System on December 31, 1998. REPORT OF THE COMPENSATION COMMITTEE Wyant's executive compensation program is based upon creating shareholder value. All executive activities including Wyant strategic planning, management initiatives and overall financial performance are focused on increasing shareholder value. The Compensation Committee of the Board of Directors has established a program to: (1) Reward executives for long-term strategic management and the enhancement of shareholder value. (2) Integrate compensation programs with Wyant's annual and long-term strategic planning. (3) Support a performance-oriented environment that rewards performance not only with respect to Wyant goals but also Wyant performance as compared to industry performance levels. 25 29 The total compensation program consists of both cash and equity-based compensation. The Compensation Committee determines the level of salary and bonuses, if any, for key executive officers based upon competitive norms. Actual salary changes are based upon performance. Long-term incentives are provided through the issuance of stock options, pursuant to Wyant's 1991 Stock Option Plan and 1997 Stock Incentive Plan. The 1997 Stock Incentive Plan also permits the granting of other types of stock-based awards. The Board of Directors has the power, subject to the provisions of these plans, and utilizing recommendations received from the Stock Option Committee, to determine the persons to whom and the dates on which awards will be granted, the number of shares subject to each award and the term and other conditions applicable to each award. Compensation Committee James A. Wyant (Chair) Richard J. Charles Thomas R.M. Davis Donald C. MacMartin John B. Wight EMPLOYMENT AND RELATED AGREEMENTS WITH NAMED EXECUTIVE OFFICERS Pursuant to an employment agreement with Wood Wyant, James A. Wyant serves as Vice-Chairman of Wood Wyant and receives a base salary (Cdn. $218,400 in 1998 [U.S. $147,219]), subject to annual increases based on the increase, if any, in the Consumer Price Index of Canada, bonus compensation based upon a specified formula and certain other benefits. Unless it is terminated earlier pursuant to its terms, such employment agreement will expire on December 31, 2001, subject to extension on a year-to-year basis thereafter. Mr. Wyant also serves as Vice-Chairman and Corporate Secretary of Wyant. Effective January 1, 1999, Donald C. MacMartin and Marc D'Amour entered into employment agreements with Wood Wyant and will receive a base salary of Cdn. $410,000 and Cdn. $195,000, respectively. The agreements also provide for bonus compensation at the discretion of the Board of Directors of Wood Wyant and for certain other benefits. Mr. MacMartin serves as Chairman, President and Chief Executive Officer of Wood Wyant and Mr. D'Amour as Vice-President, Finance and Chief Financial Officer. Unless terminated earlier pursuant to their terms, the employment agreements will expire on December 31, 2001, subject to extension on a year-to-year basis thereafter. Mr. MacMartin also serves as Chairman, President and Chief Executive Officer of Wyant and Mr. D'Amour serves as Wyant's Vice-President, Chief Financial Officer and Treasurer. Pursuant to a retirement arrangement agreement dated June 27, 1994, as amended, between Mr. MacMartin and Wood Wyant, Wood Wyant agreed to provide Mr. MacMartin, on retirement or death, with supplementary retirement benefits to the extent that the benefits provided under such retirement arrangement exceed the benefits provided pursuant to Wood Wyant's defined benefit final average pension plan. Pursuant to a severance agreement dated August 14, 1997 between Wyant and Robert E. Briggs, Mr. Briggs will receive one year's salary from Wyant if either (1) within three months after the sale of all or substantially all of the assets of the Division, Mr. Briggs is terminated without cause by the buyer thereof or (2) at the time of such sale, Mr. Briggs declines any offer of employment made by the buyer of the Division. In either situation, the payment to Mr. Briggs of one year's salary will be made on the final date of employment with the buyer or the Division, as the case may be, based on his salary then in effect. Notwithstanding this agreement, no payment will be made to Mr. Briggs should he resign following his acceptance of any such offer of employment from the buyer of the Division. This severance agreement would be applicable to Mr. Briggs if the Paper-Pak Transaction is consummated. Mr. Briggs serves as President of the Division. 26 30 PERFORMANCE GRAPH Set forth below is a line graph comparing cumulative total shareholder return, over five years, upon an investment in the Common Stock with (artificially aggregated) an equivalent investment in (a) Nasdaq Stock Market companies (U.S.), and (b) those in the Paper and Allied Products index of the Nasdaq Stock Market: GRAPH COMPARISON OF FIVE YEAR-CUMULATIVE TOTAL RETURNS PERFORMANCE GRAPH FOR WYANT CORPORATION Prepared by the Center for Research in Security Prices Produced on 03/11/99 including data to 12/31/1998 LOGO LEGEND
SYMBOL CRSP TOTAL RETURNS INDEX FOR: 12/1993 12/1994 12/1995 12/1996 12/1997 12/1998 - ------ ----------------------------- ------- ------- -------- ------- ------- ------- Wyant Corporation 100.0 116.0 110.0 74.0 104.0 69.3 Nasdaq Stock Market (US Companies) 100.0 97.8 138.3 170.0 208.3 293.5 NASDAQ Stocks (SIC 2600-2699 US Companies) Paper and allied products 100.0 107.7 117.5 151.9 202.8 164.9
NOTES: A. The lines represent monthly index levels derived from compounded daily returns that include all dividends. B. The indexes are reweighted daily, using the market capitalization on the previous trading day. C. If the monthly interval, based on the fiscal year-end, is not a trading day, the preceding trading day is used. D. The index level for all series was set to 100.0 on 12/31/93. 27 31 STANDING COMMITTEES OF THE BOARD OF DIRECTORS, COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The Board of Directors has no Nominating Committee, but the Board of Directors as a whole nominates director candidates. The Board of Directors met twelve times in 1998 to review financial information, corporate business strategies and general matters in respect of Wyant's business. The Executive Committee, comprised of Donald C. MacMartin, Thomas R.M. Davis, Nicholas A. Gallopo and James A. Wyant, met once in 1998 to review a strategic business issue. The Audit Committee, comprised of Richard J. Charles, Nicholas A. Gallopo, John B. Wight and James A. Wyant, met three times during 1998 to review financial reporting matters and to discuss audit, internal control, information technology and other matters. The Compensation Committee, comprised of Richard J. Charles, Thomas R.M. Davis, Donald C. MacMartin, John B. Wight and James A. Wyant, met seven times during 1998 to consider compensation principles and practices and the amounts to be paid to officers and senior employees. The Stock Option Committee, comprised of Richard J. Charles, Thomas R.M. Davis and Nicholas A. Gallopo, met once during 1998 to consider the grants of options to employees of Wyant and its subsidiaries. Donald C. MacMartin and James A. Wyant serve on the Compensation Committee and are also executive officers of Wyant. John B. Wight also serves on the Compensation Committee and is an employee of Wood Wyant. Mr. MacMartin does not participate in any decisions of the Compensation Committee concerning his own compensation. The Compensation Committee does not consider the compensation of Mr. Wyant or Mr. Wight. During 1998 all directors of Wyant attended 75% or more of the meetings of the Board of Directors and the committees on which they served. COMPENSATION OF DIRECTORS During 1998, each director of Wyant who was not an employee of the Company received an annual director's fee of $8,000 paid in equal quarterly installments. In addition, under Wyant's 1997 Stock Incentive Plan, options to purchase Common Stock at $5.8125 per share were awarded during 1998 to the following directors: Richard J. Charles (1,334 shares), Thomas R.M. Davis (1,334 shares) and Nicholas A. Gallopo (1,334 shares). Under this plan, each new non-employee director of Wyant receives an option to purchase 13,334 shares of Common Stock upon joining Wyant's Board of Directors and each continuing non-employee director receives an option to purchase 1,334 shares of Common Stock for each year of service on the Board of Directors. The exercise price of each such option is equal to the fair market value of the covered shares at the time the option is granted. Lastly, effective May 28, 1998, Mr. Davis and Mr. Gallopo each received a special fee of $1,000 payable in quarterly installments in respect of their services as chairmen of the Stock Option Committee and the Audit Committee, respectively. 28 32 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND WYANT MANAGEMENT The following table sets forth certain information regarding the ownership of Common Stock as of April 22, 1999 by (1) all of those known by Wyant to be beneficial owners of more than five percent (5%) of the outstanding shares of Common Stock; (2) each director of Wyant, (3) each of the executive officers named in Table I - 1998 Summary Compensation Table under "Executive Compensation # Summary Compensation Tables;" and (4) all executive officers and directors of Wyant as a group.
NUMBER OF SHARES NAME AND ADDRESS BENEFICIALLY PERCENT OF BENEFICIAL OWNER OWNED (1)(2) OF CLASS - ------------------- ------------ -------- The Wyant Voting Trusts 1,250,252 (3) 55.0% c/o Wyant & Company Inc. 1475, 32nd Avenue Lachine, Quebec Wyant & Company Inc. 1,333,333 (4) 37.0% 1475, 32nd Avenue Lachine, Quebec First Wilshire Securities Management, Inc. 194,841 8.6% 600 South Lake Street Pasadena, California Wilen Management Company, Inc. 214,149 9.4% 2360 West Joppa Road Lutherville, Maryland Donald C. MacMartin (Chairman of the Board, President & Chief 178,001 (5) 7.4% Executive Officer) James A. Wyant 0 (3)(4) 0.0% (Vice Chairman of the Board & Corporate Secretary) Marc A. D'Amour 45,335 (6) 2.0% (Vice-President, Chief Financial Officer & Treasurer) Robert E. Briggs 44,001 (7) 1.9% (A Director) Richard J. Charles 14,668 (8) 0.6% (A Director) Thomas R.M. Davis 17,002 (9) 0.7% (A Director) Nicholas A. Gallopo 16,002 (10) 0.7% (A Director) John B. Wight 32,001 (11) 1.4% (A Director) All Directors and Officers as a Group 2,708,373 (12) 73.5% (8 Persons)
29 33 1. In accordance with Rule 13d-3 under the Securities Exchange Act of 1934 (the "Exchange Act"), a person is deemed to be the beneficial owner, for the purposes of this table, of any shares of Wyant if he or she has or shares voting or investment power with respect to such security or has the right to acquire beneficial ownership of any shares of Wyant within 60 days of the Record Date. For purposes of calculating the percentage of outstanding shares held by each person included in the table above, any shares which such person has the right to acquire within 60 days of the Record Date are deemed to be outstanding, but not for the purpose of calculating the percentage ownership of any other person. Unless otherwise noted, the persons as to whom the information is provided have sole voting and investment power over the shares of Wyant shown as beneficially owned. 2. These shares of Common Stock include fractional shares issued pursuant to the Stock Split, rounded to the nearest whole number. 3. These shares of Common Stock are held pursuant to certain trust agreements for the benefit of certain Canadian corporations owned by members of the Wyant family as follows: (i) 420,920 shares held for the benefit of Wyant & Company Inc., a Canadian corporation owned by members of the Wyant family ("Wyant & Company"); (ii) 317,333 shares held for the benefit of 3287858 Canada Inc., a Canadian corporation wholly owned by Lynne Emond ("Lynneco"); (iii) 317,333 shares held for the benefit of Derek Wyant Holdings Inc., a Canadian corporation wholly owned by John Derek Wyant, M.D. ("Derekco"); and (iv) 194,666 shares held for the benefit of 3323986 Canada Inc., a Canadian corporation wholly owned by the Estate of the late Gerald W. Wyant ("Geraldco"). The shares held for the benefit of Wyant & Company, Lynneco and Derekco are subject to a voting trust (the "First Voting Trust"), under which James A. Wyant has sole and absolute discretion to vote and dispose of such shares. After March 18, 2003, Wyant & Company, Lynneco and Derekco shall each have the right to have up to ten percent of their respective shares released from the First Voting Trust each year. The First Voting Trust will terminate as of March 18, 2012, unless terminated earlier pursuant to its terms. The shares held for the benefit of Geraldco are subject to the terms of a separate voting trust (the "Second Voting Trust"), under which James A. Wyant has sole and absolute discretion to vote such shares. The terms of the Second Voting Trust limit the power of James A. Wyant and Geraldco to dispose of the shares directly or indirectly, but provide James A. Wyant with an option to purchase the shares pursuant to terms established thereunder. The Second Voting Trust will terminate as of March 31, 2007, unless terminated earlier pursuant to its terms. James A. Wyant, in his capacity as voting trustee, may be deemed to be the beneficial owner of all the shares held in the First and Second Voting Trusts but he disclaims beneficial ownership of such shares, other than the shares held in the First Voting Trust for the benefit of Wyant & Company. 4. These shares of Common Stock represent record ownership by Wyant & Company of 1,333,333 shares of Class E Exchangeable Preferred Stock of Wood Wyant Inc. ("Wood Wyant"), a wholly owned Canadian subsidiary of Wyant (the "Class E Preferred Stock"), which are exchangeable, on demand and without additional consideration, for shares of Common Stock of Wyant on a one-for-one basis. Although Wyant & Company is the record owner of the Class E Preferred Stock, under the terms of a written agreement among Wyant & Company and certain of its shareholders, and by virtue of Lynneco's and Derekco's respective interests in Wyant & Company, each of Lynneco and Derekco is entitled to cause Wyant & Company to (i) exchange up to 111,111 shares of the Class E Preferred Stock for an equal number of shares of Common Stock and (ii) immediately thereafter, sell such shares of Common Stock and deliver to Derekco and Lynneco the net after-tax proceeds resulting from such sale. Accordingly, Wyant & Company disclaims beneficial ownership of the Class E Preferred Stock with respect to which Lynneco and Derekco retain investment control. 5. Includes 73,334 shares subject to stock options granted under Wyant's 1991 Stock Option Plan and 66,667 shares subject to stock options granted under Wyant's 1997 Stock Incentive Plan. 6. Includes 13,334 shares subject to stock options granted under Wyant's 1991 Stock Option Plan and 30,001 shares subject to stock options granted under Wyant's 1997 Stock Incentive Plan. 30 34 7. Includes 13,334 shares subject to stock options granted under Wyant's 1991 Stock Option Plan and 26,667 shares subject to stock options granted under Wyant's 1997 Stock Incentive Plan. 8. Includes 14,668 shares subject to the Non-Employee Director Options granted to Mr. Charles under Wyant's 1997 Stock Incentive Plan. 9. Includes 16,002 shares subject to the Non-Employee Director Options granted to Mr. Davis under Wyant's 1997 Stock Incentive Plan. 10. Includes 16,002 shares subject to the Non-Employee Director Options granted to Mr. Gallopo under Wyant's 1997 Stock Incentive Plan. 11. Includes 10,667 shares subject to stock options granted under Wyant's 1991 Stock Option Plan and 17,334 shares subject to stock options granted under Wyant's 1997 Stock Incentive Plan. 12. Includes 1,250,252 shares beneficially owned by the Wyant Voting Trusts, 1,111,111 shares of the Class E Preferred Stock beneficially owned by Wyant & Company and 298,010 shares subject to options held by the directors and executive officers of Wyant. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS During 1998, the law firm of McCarthy Tetrault provided legal services to Wyant and Wood Wyant. Thomas R.M. Davis, a director of Wyant, is a member of the law firm of McCarthy Tetrault. In 1998, the fees paid by Wyant and Wood Wyant to McCarthy Tetrault were approximately Cdn. $263,000 (US $177,000). These fees are comparable to the fees that Wyant and Wood Wyant would have paid to an unaffiliated law firm based on the legal services that were provided. 31 35 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a)1. The following Financial Statements are included in Item 8. Reports of Independent Auditors F-1 Consolidated Balance Sheet as at December 31, 1998 and 1997 F-3 Consolidated Statement of Operations for the years ended December 31, 1998, 1997 and 1996 F-4 Consolidated Statement of Stockholders' Equity for the years ended December 31,1998, 1997 and 1996 F-5 Consolidated Statement of Cash Flows for the years ended December 31, 1998, 1997 and 1996 F-7 Notes to Consolidated Financial Statements F-9
2. Financial Statement Schedules. Schedule II - Valuation and Qualifying Accounts. F-32 All other schedules are omitted because they are not applicable or not required, or the applicable information is shown in the Consolidated Financial Statements or in notes thereto. 3. Exhibits The following exhibits have been previously filed or incorporated by reference as indicated. Exhibit numbers refer to Item 601 of Regulation S-K. EXHIBIT NO. DESCRIPTION OF EXHIBIT 2.1 Asset Purchase Agreement dated as of February 23, 1999 between Wyant Corporation and Paper-Pak Products, Inc. (incorporated by reference from the Company's Current Report on Form 8-K dated February 23, 1999). 3.1 Certificate of Incorporation and Amendments thereof (with the exception of Exhibits 3.2 and 3.3 below) and By-Laws are incorporated by reference. They were filed as exhibits with the Company's February 2, 1984 and January 7, 1987 Registration Statements and the Registrant's Proxy Statement filed May 30, 1990. 3.2 Certificate of Amendment of the Certificate of Incorporation dated March 18, 1997 (incorporated by reference from the Company's Annual Report on Form 10-K for the year ended December 31, 1996). 3.3 Certificate of Amendment of the Certificate of Incorporation dated June 3, 1998 (incorporated by reference from the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998). 32 36 EXHIBIT NO. DESCRIPTION OF EXHIBIT 9.1 Voting Trust Agreement dated March 14, 1997 among McCarthy Tetrault, as depository, James A. Wyant, as voting trustee, and 3323986 Canada Inc. (incorporated by reference to Exhibit D of Amendment No. 13 to Schedule 13D filed March 18, 1997). 9.2 Voting Trust Agreement dated March 18, 1997 among Wyant & Company Inc., McCarthy Tetrault, as depository, James A. Wyant, as voting trustee, 3287858 Canada Inc., and Derek Wyant Holdings Inc. (f/k/a 1186020 Ontario Limited) (incorporated by reference to Exhibit C of Amendment No. 12 to Schedule 13D dated December 3, 1996 and filed on December 13, 1996). 10.1 The 1991 Stock Option Plan filed with the Company's 1994 Proxy Statement is incorporated by reference thereto. 10.2 The 1997 Stock Incentive Plan filed with the Company's Form S-8 on March 19, 1997 is incorporated by reference thereto. 10.3 Loan and Security Agreement between Congress Financial Corporation and Wyant Corporation, IFC Disposables, Inc. and Bridgewater Manufacturing Corp. dated November 18, 1997 (incorporated by reference from the Company's Annual Report on Form 10-K for the year ended December 31, 1997). 10.4 Credit facilities agreement between the Bank of Nova Scotia and Wood Wyant Inc. dated June 22, 1998, together with amendments thereto dated February 19, 1999 and March 10, 1999 (previously filed). 10.5 Employment Agreement dated November 11, 1996 between James A. Wyant and Wood Wyant Inc. (successor to G.H. Wood + Wyant Inc.), as amended (incorporated by reference from the Company's Annual Report on Form 10-K for the year ended December 31, 1997). 10.6 Addendum dated March 10, 1998 to the Employment Agreement dated November 11, 1996, as amended, between James A. Wyant and Wood Wyant Inc. (previously filed). 10.7 Retirement Arrangement Agreement dated June 27, 1994 between Wood Wyant Inc. (successor to G.H. Wood + Wyant Inc.) and Donald C. MacMartin (incorporated by reference from the Company's Annual Report on Form 10-K for the year ended December 31, 1997). 10.8 Employment Agreement dated January 1, 1999 between Donald C. MacMartin and Wood Wyant Inc. (previously filed). 10.9 Employment Agreement dated January 1, 1999 between Marc D'Amour and Wood Wyant Inc. (previously filed). 10.10 Letter of Agreement dated August 14, 1997 between Wyant Corporation and Robert E. Briggs (previously filed). 10.11 Indemnification Agreement dated March 11, 1999 between Wyant Corporation and James A. Wyant (previously filed). 16.1 Letters from Arthur Andersen LLP regarding change of certifying independent accountants (incorporated by reference from the Company's Current Report on Form 8-K dated April 21, 1997). 33 37 EXHIBIT NO. DESCRIPTION OF EXHIBIT 21.1 Subsidiaries (previously filed). (b) Reports on Form 8-K No current reports on Form 8-K have been filed during the quarter ended December 31, 1998. Shareholders may obtain a copy of any exhibit not filed herewith by writing to Wyant Corporation, P.O. Box 8609, Somerville, New Jersey 08876. 34 38 SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. WYANT CORPORATION By: /s/M.A. D'Amour -------------------------- M.A. D'Amour Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer) Date: April 28, 1999
35 39 REPORT OF INDEPENDENT AUDITORS The Board of Directors and Stockholders Wyant Corporation [formerly Hosposable Products, Inc.] We have audited the accompanying consolidated balance sheet of Wyant Corporation [formerly Hosposable Products, Inc.] as at December 31, 1998 and 1997, and the related consolidated statements of operations, stockholders' equity, and cash flows for the two years then ended. Our audit also included the financial statement schedule listed in the Index at 14(a). These financial statements and the schedule 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 in the United States. Those standards require that we plan and perform an 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 opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Wyant Corporation at December 31, 1998 and 1997, and the consolidated results of their operations and their cash flows for the years then ended, in conformity with generally accepted accounting principles in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein. We previously audited and reported on the consolidated balance sheet and related consolidated statements of income, stockholders' equity and cash flows of The Canadian Operations of G.H. Wood + Wyant Inc. and Subsidiaries for the year ended December 31, 1996, prior to their restatement for the 1997 transaction more fully described in Note 3. The contribution of G.H. Wood + Wyant Inc. and Subsidiaries to total assets, revenues and expenses represented 46.9%, 68.8% and 57.1% of the respective restated totals for 1996. Financial statements of the other pooled company included in the 1996 restated consolidated statements were audited and reported on separately by other auditors. We also have audited, as to combination only, the accompanying consolidated statements of operations, stockholders' equity, and cash flows for the year ended December 31, 1996, after restatement for the 1997 pooling of interests; in our opinion, such consolidated financial statements have been properly combined on the basis described in Note 3 to the consolidated financial statements. Montreal, Canada, February 16, 1999, except for Note 2 which is as at February 23, 1999. Ernst & Young LLP F-1 40 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors and Stockholders of Hosposable Products, Inc. We have audited the accompanying consolidated balance sheets of Hosposable Products, Inc. (a New York corporation) and subsidiaries as of December 31, 1996 and 1995, and the related consolidated statements of operations, changes in stockholders equity and cash flows for each of the three years in the period ended December 31, 1996. 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 misstatements. 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 financial position of Hosposable Products, Inc. and subsidiaries as of December 31, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. New York, New York Arthur Andersen LLP February 11, 1997 (except with respect to matters discussed in Note 13 as to which the date is March 18, 1997) F-2 41 WYANT CORPORATION [formerly Hosposable Products, Inc.] CONSOLIDATED BALANCE SHEET
As at December 31 ------------------------ 1998 1997 $ $ ---------- --------- [Restated] ASSETS CURRENT ASSETS Cash and cash equivalents 59,985 156,131 Receivables [note 4] 10,215,812 9,298,779 Inventories [note 5] 8,576,960 6,161,254 Net assets held for divestiture [note 2] 9,203,356 9,981,183 Other 1,393,270 1,683,097 ---------- ---------- TOTAL CURRENT ASSETS 29,449,383 27,280,444 ---------- --------- Property, plant and equipment, net of accumulated depreciation and amortization of $11,474,155 [1997- $10,651,878] [notes 6 & 8 8,593,460 8,798,204 Other assets [note 7] 4,496,821 1,077,229 ---------- ---------- TOTAL ASSETS 42,539,664 37,155,877 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Revolving line of credit [note 8] 4,092,128 2,204,719 Committed revolving credit facility [note 8] 4,238,720 5,880,748 Accounts payable 4,856,657 4,951,071 Accrued expenses 3,228,412 1,988,842 Income taxes payable 433,288 1,252,988 Current portion of long-term debt [note 8] 1,061,332 389,035 Current portion of preferred stock of subsidiary [note 3] 513,204 550,084 ---------- ---------- TOTAL CURRENT LIABILITIES 18,423,741 17,217,487 ---------- ---------- Long-term debt, excluding current portion [note 8] 3,887,593 1,998,152 Preferred stock of subsidiary [note 3] 5,477,072 4,379,527 Deferred income taxes [note 9] 2,076,416 1,780,726 Commitments [note 14] STOCKHOLDERS' EQUITY Common stock, par value $.01 per share, authorized 6,000,000 shares; issued and issuable 3,607,150 {3,604,817 in 1997} 27,053 27,037 Additional paid-in capital 6,821,825 6,806,867 Retained earnings 6,326,679 5,112,006 Cumulative translation adjustment (500,715) (165,925) ---------- ---------- TOTAL STOCKHOLDERS' EQUITY 12,674,842 11,779,985 ---------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 42,539,664 37,155,877 ========== ==========
See accompanying notes F-3 42 WYANT CORPORATION [formerly Hosposable Products, Inc.] CONSOLIDATED STATEMENT OF OPERATIONS
Year ended December 31 1998 1997 1996 $ $ $ [Restated] [Restated] NET SALES 67,124,137 63,559,703 62,590,707 COST OF SALES 43,218,466 39,691,201 38,151,474 ---------- ---------- ---------- GROSS PROFIT 23,905,671 23,868,502 24,439,233 ---------- ---------- ---------- EXPENSES Selling 12,658,838 11,931,480 12,015,764 General and administration 8,699,535 9,193,943 9,308,838 Amortization 507,540 428,811 505,345 Non-recurring items [note 11] -- -- 549,805 Interest expense 1,158,249 745,089 511,253 Other income [note 12] (244,067) (230,790) (184,636) ---------- ---------- ---------- 22,780,095 22,068,533 22,706,369 ---------- ---------- ---------- Income from continuing operations before income taxes and extraordinary gain 1,125,576 1,799,969 1,732,864 Income tax expense [note 9] 572,000 800,597 795,993 ---------- ---------- ---------- Income from continuing operations before extraordinary gain 553,576 999,372 936,871 Discontinued operations [note 2] -- Income (loss) from operations (net of income taxes (recoveries) of $545,000, ($289,610) and ($448,358), respectively) 1,021,602 (580,874) (792,481) ---------- ---------- ---------- Income before extraordinary gain 1,575,178 418,498 144,390 Extraordinary gain, net of income taxes [note 13] -- 91,958 -- ---------- ---------- ---------- NET INCOME 1,575,178 510,456 144,390 Dividends and accretion of mandatorily redeemable preferred stock 360,505 191,746 -- ---------- ---------- ---------- NET INCOME ATTRIBUTABLE TO COMMON SHARES 1,214,673 318,710 144,390 ========== ========== ========== Per common share [note 15] BASIC Income from continuing operations before extraordinary gain 0.06 0.22 0.26 Discontinued operations 0.28 (0.16) (0.22) Extraordinary gain -- 0.03 -- Net income 0.34 0.09 0.04 DILUTED Income from continuing operations before extraordinary gain 0.06 0.22 0.26 Discontinued operations 0.27 (0.16) (0.22) Extraordinary gain -- 0.03 -- Net income 0.33 0.09 0.04
See accompanying notes F-4 43 WYANT CORPORATION [formerly Hosposable Products, Inc.] CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Year ended December 31 ------------------------------------------ 1998 1997 1996 $ $ $ ---------- ---------- ----------- [Restated] [Restated] COMMON STOCK AT PAR VALUE Balance at beginning of year 27,037 27,037 27,037 Stock issued for options exercised 16 -- -- ---------- ---------- ----------- BALANCE AT END OF YEAR 27,053 27,037 27,037 ---------- ---------- ----------- ADDITIONAL PAID-IN CAPITAL Balance at beginning of year 6,806,867 6,789,397 6,789,397 Stock issued for options exercised 14,958 -- -- Gain on sale of treasury stock -- 17,470 -- ---------- ---------- ---------- BALANCE AT END OF YEAR 6,821,825 6,806,867 6,789,397 ---------- ---------- ---------- RETAINED EARNINGS Balance at beginning of year 5,112,006 4,999,823 5,390,064 Net income 1,575,178 510,456 144,390 Dividends declared by subsidiary (190,955) (125,746) -- Accretion on preferred shares of subsidiary (169,550) (66,000) -- Distribution to minority shareholders -- (206,527) (534,631) ---------- ---------- ---------- BALANCE AT END OF YEAR 6,326,679 5,112,006 4,999,823 ---------- ---------- ---------- ACCUMULATED OTHER COMPREHENSIVE INCOME Balance at beginning of year (165,925) 26,955 72,146 Foreign currency translation adjustments (334,790) (192,880) (45,191) ---------- ---------- ---------- BALANCE AT END OF YEAR (500,715) (165,925) 26,955 ---------- ---------- ---------- TREASURY STOCK Balance at beginning of year -- (31,530) (31,530) Treasury stock sold, at cost -- 31,530 -- ---------- ---------- ---------- BALANCE AT END OF YEAR -- -- (31,530) ---------- ---------- ---------- TOTAL STOCKHOLDERS' EQUITY 12,674,842 11,779,985 11,811,682 ========== ========== ========== COMPREHENSIVE INCOME Net income 1,575,178 510,456 144,390 Other - foreign currency translation adjustments (334,790) (192,880) (45,191) ---------- ---------- ---------- COMPREHENSIVE INCOME FOR YEAR 1,240,388 317,576 99,199 ---------- ---------- ----------
F-5 44 WYANT CORPORATION [formerly Hosposable Products, Inc.] CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY [CONT'D]
Year ended December 31 ----------------------------------------- 1998 1997 1996 $ $ $ --------- --------- --------- [Restated] [Restated] COMMON SHARES Number issued at beginning of year 2,271,484 2,271,484 2,271,484 Shares issued for options exercised 2,333 -- -- NUMBER ISSUED AT END OF YEAR 2,273,817 2,271,484 2,271,484 --------- --------- --------- TREASURY STOCK Held at beginning of year -- (14,933) (14,933) Sold during the year -- 14,933 -- --------- --------- -------- HELD AT END OF YEAR -- -- (14,933) --------- --------- -------- COMMON SHARES ISSUED AND OUTSTANDING 2,273,817 2,271,484 2,256,551 COMMON SHARES ISSUABLE UPON CONVERSION OF EXCHANGEABLE SHARES [NOTE 3] 1,333,333 1,333,333 1,333,333 --------- --------- --------- COMMON SHARES ISSUED, ISSUABLE AND OUTSTANDING 3,607,150 3,604,817 3,589,884 ========= ========= =========
See accompanying notes F-6 45 WYANT CORPORATION [formerly Hosposable Products, Inc.] CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended December 31 --------------------------------------------- 1998 1997 1996 $ $ $ ----------- ----------- ----------- [Restated] [Restated] CASH FLOWS FROM OPERATING ACTIVITIES Net income from continuing operations 553,576 1,091,330 936,871 ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES Depreciation and amortization 1,137,698 990,013 1,060,687 Loss (gain) on sale of fixed assets 11,792 (28,470) (122,810) Deferred income tax expense (benefit) 72,000 (25,823) 814,027 Deferred pension costs (107,014) (92,177) (13,200) Increase in deferred charges (49,480) (320,234) -- Decrease (increase) in working capital (511,879) 752,956 (73,888) Decrease in other liabilities -- -- (100,000) ---------- ---------- ---------- NET CASH PROVIDED BY OPERATING ACTIVITIES 1,106,693 2,367,595 2,501,687 ---------- ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES Purchase of businesses, net of cash acquired [note 3] (3,853,158) -- -- Capital expenditures (853,692) (1,313,246) (970,985) Cash proceeds from sale of fixed assets 15,850 35,628 236,188 Sale of marketable securities -- 446,812 1,488,783 Purchase of marketable securities -- -- (573,362) Decrease in other assets 83,278 -- -- ---------- ---------- ---------- NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (4,607,722) (830,806) 180,624 ---------- ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES Increase (decrease) in committed revolving credit facility (1,642,028) 5,880,748 -- Repayment of long-term debt (1,001,944) (7,820,959) (2,066,431) Increase in long-term debt 3,723,111 5,122,507 2,233,353 Distribution to minority shareholders -- (206,527) (534,631) Issue of common shares 14,974 -- -- Redemption of preferred shares (550,122) -- -- Sale of treasury stock -- 49,000 -- Dividends paid by subsidiary (190,955) (125,746) -- Increase (decrease) in bank indebtedness 1,376,683 911,368 (481,598) Distribution to G.H. Wood + Wyant Inc. shareholders [note 3] -- (3,667,033) -- ---------- ---------- ---------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 1,729,719 143,358 (849,307) ---------- ---------- ---------- Effect of exchange rate changes on cash (317,265) (185,637) (56,268) ---------- ---------- ---------- Net increase (decrease) in cash and cash equivalents from continuing operations (2,088,575) 1,494,510 1,776,736 Cash provided by (used for) discontinued operations 1,992,429 (2,909,004) (3,125,580) ---------- ---------- ---------- Net decrease in cash and cash equivalents (96,146) (1,414,494) (1,348,844) Cash and cash equivalents, beginning of year 156,131 1,570,625 2,919,469 ---------- ---------- ---------- CASH AND CASH EQUIVALENTS, END OF YEAR 59,985 156,131 1,570,625 ========== ========== ==========
F-7 46 WYANT CORPORATION [formerly Hosposable Products, Inc.] CONSOLIDATED STATEMENT OF CASH FLOWS [CONT'D]
Year ended December 31 ------------------------------------------- 1998 1997 1996 $ $ $ --------- --------- --------- [Restated] [Restated] DECREASE (INCREASE) IN WORKING CAPITAL Decrease in accounts receivable 976,667 338,451 376,263 Decrease (increase) in inventories (575,736) 852,005 732,898 Decrease (increase) in other current assets 593,683 29,537 (139,879) Decrease in accounts payable and accrued liabilities (663,066) (1,439,298) (1,323,897) Increase (decrease) in income taxes payable (843,427) 972,261 280,727 --------- ---------- ---------- (511,879) 752,956 (73,888) ========= ========== ========== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid (received) during the year for Interest 1,002,946 530,153 495,767 Income taxes 1,061,716 (216,376) (300,690) ---------- ---------- ---------- Cash provided by (used for) discontinued operations Operating activities 2,727,120 (1,994,643) (57,400) Investing activities (234,590) (564,933) (2,969,853) Financing activities (500,101) (349,428) (98,327) --------- ---------- ---------- 1,992,429 (2,909,004) (3,125,580) ========= ========== ==========
See accompanying notes F-8 47 WYANT CORPORATION [formerly Hosposable Products, Inc.] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1998 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF BUSINESS Wyant Corporation [formerly Hosposable Products, Inc.], a New York corporation incorporated in 1971 [the "Corporation"], operates the following wholly owned subsidiaries: IFC Disposables, Inc., a Tennessee corporation ["IFC"] and Wood Wyant Inc., a Canadian corporation ["Wood Wyant]. IFC manufactures and distributes disposable wipers and sanitary paper products and systems which are sold primarily in domestic markets. Wood Wyant manufactures and distributes sanitation products and systems to commercial and institutional markets in Canada. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of the Corporation and its wholly owned subsidiaries, IFC and Wood Wyant [collectively, the "Company"]. All significant intercompany balances and transactions have been eliminated in consolidation. RECLASSIFICATIONS Certain prior year amounts have been reclassified to conform with the current year's presentation. UTILIZATION OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. CASH EQUIVALENTS The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. EARNINGS PER SHARE Basic earnings per share are calculated using the weighted average number of shares outstanding during the period. Contingently issuable shares are considered outstanding common shares and included in the calculation of basic earnings per share only when there is no circumstance under which these shares would not be issued. Diluted earnings per share are calculated taking into consideration the effect of the potential exercise of stock options and of the exchangeable Class F preferred shares. F-9 48 WYANT CORPORATION [formerly Hosposable Products, Inc.] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1998 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [CONT'D] INVENTORIES Inventories are stated at the lower of cost and net realizable value. Cost is determined on a first-in, first-out basis. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are recorded at cost. Depreciation and amortization of property, plant and equipment in the Wiping Products segment is provided utilizing the straight-line method over the estimated useful lives of the respective assets ranging from 5 to 30 years; in the Sanitation Products segment, the declining balance method is used, with rates ranging from 5% to 20% per year. Leasehold improvements are amortized on a straight-line basis over the term of the related leases or the estimated useful life, whichever is shorter. Patents and trademarks are amortized on a straight-line basis over periods from 5 to 17 years. GOODWILL Goodwill is amortized on a straight-line basis over periods not exceeding 40 years. The Company periodically reviews goodwill for possible impairment, which would be recognized if a permanent decline in value has occurred. STOCK-BASED COMPENSATION Statement of Financial Accounting Standards ["SFAS"] No.123, "Accounting for Stock-Based Compensation," encourages, but does not require companies to record compensation cost for stock-based employee compensation plans at fair value. The Company has chosen to continue to account for stock-based compensation awards to employees and directors using the intrinsic value method prescribed in Accounting Principles Board Opinion ["APB"] No.25, "Accounting for Stock Issued to Employees," and related Interpretations. Accordingly, compensation cost for stock options awarded to employees and directors is measured as the excess, if any, of the quoted market price of the Corporation's stock at the date of grant over the amount an employee or director must pay to acquire the stock. As required, the Company has adopted SFAS No.123 to account for stock-based compensation awards to outside consultants and affiliates. Accordingly, compensation costs for stock option awards to outside consultants and affiliates are measured at the date of grant based on the fair value of the award using the Black-Scholes option pricing model. F-10 49 WYANT CORPORATION [formerly Hosposable Products, Inc.] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1998 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [CONT'D] INCOME TAXES The Company files a consolidated federal income tax return for its United States companies. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which those temporary differences are expected to be recovered or settled. Deferred income taxes result primarily from differences between financial and tax reporting of depreciation. FOREIGN CURRENCY TRANSLATION The Corporation translates the accounts of its foreign subsidiary, Wood Wyant, such that the assets and liabilities of the subsidiary are translated into U.S. dollars at rates of exchange prevailing at the year-end. Exchange gains and losses arising from these translations are deferred and included as a separate component of stockholders' equity on the consolidated balance sheet ["Cumulative Translation Adjustment"]. Revenue and expense items are translated at average rates of exchange prevailing during the year. ACCOUNTING PRONOUNCEMENTS In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities". This statement requires all derivatives to be recorded on the balance sheet at fair value and provides a comprehensive and consistent standard for the recognition and measurement of derivatives and hedging activities. The Company is studying the application of this new standard but has not yet determined its impact. As required, the Company will adopt this statement upon its applicable effective date in fiscal 2000. 2. DISCONTINUED OPERATIONS On December 17, 1998, the Board of Directors authorized management to pursue the sale of the Company's Wyant Health Care Division ("Division"). On February 23, 1999 the Board approved the sale of the Division, subject to completion of buyer financing, customary regulatory approvals and the approval of the Company's shareholders. Consequently, the results of the Division have been reported in these financial statements as discontinued operations. F-11 50 WYANT CORPORATION [formerly Hosposable Products, Inc.] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1998 2. DISCONTINUED OPERATIONS [CONT'D] The Company will receive cash of $11,500,000 on closing and $550,000 will be held in escrow for twenty four months, subject to adjustment on closing. The operating results of the Division are as follows:
1998 1997 1996 $ $ $ ---------- ---------- --------- Net sales 36,462,815 31,324,702 31,829,712 Income (loss) before income taxes 1,566,602 (870,484) (1,240,839) ---------- ---------- ----------
The net assets of the Division are as follows:
1998 1997 $ $ ---------- ---------- Current assets 5,785,245 6,146,234 Property, plant and equipment 9,787,618 10,520,611 Other assets 215,928 332,913 Current liabilities (3,428,034) (3,468,706) Long-term liabilities (3,157,401) (3,549,869) ---------- ---------- Net assets of discontinued operations 9,203,356 9,981,183 ========== ==========
The Company expects the sale of the Division to close in the second quarter of 1999. At the date of disposal, the Company expects to record a small gain. Included in the Company's estimated gain are the estimated costs to satisfy the Division's obligation with respect to a defined benefit multi-employer pension plan which covers certain of the Division's employees. 3. ACQUISITIONS [a] On April 30, 1998, the Company, through its wholly-owned Canadian subsidiary, Wood Wyant Inc., acquired all of the issued and outstanding shares of H.A. Perigord Company Limited, a distributor of sanitation products. On June 26, 1998, Wood Wyant Inc. acquired all of the issued and outstanding shares of Professional Sanitation Products Ltd., a distributor of sanitation products. The total consideration for these acquisitions amounted to $3,070,806, which was comprised of cash of $2,107,645 and 146,666 Class F Preferred shares of Wood Wyant Inc. F-12 51 WYANT CORPORATION [formerly Hosposable Products, Inc.] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1998 3. ACQUISITIONS [CONT'D] On June 30, 1998, Wood Wyant acquired all of the issued and outstanding shares of four related businesses based in British Columbia for $2,644,228, comprised of cash of $1,760,696 and 136,445 Class F Preferred shares of Wood Wyant Inc. The companies acquired are Midway Supply Ltd., Purnel Distributors Ltd. and Midway Purnel Sanitary Supply Ltd., all of which are distributors of sanitation products, and Fraser Valley Industrial Chemicals Inc., a manufacturer of janitorial chemicals. The significant conditions of the Class F Preferred shares of Wood Wyant Inc. are: Prior to July 1, 2000 and subject to the priorities of the other classes of preferred stock of Wood Wyant Inc., the shares: 1) are exchangeable for Wyant Corporation common stock on a share for share basis and are entitled to dividends equivalent on a per share basis, to any dividends paid on Wyant Corporation common stock; and 2) have a liquidation preference per share of one share of Wyant Corporation common stock. Holders of the shares have an option, which may be exercised between July 1, 2000 and July 31, 2000, to cause Wood Wyant Inc. to redeem the shares in five equal annual instalments at a price of Cdn $11.250028 ($7.3371) per share plus any accrued and unpaid dividends. If the redemption option is exercised, dividends of 3.5% per annum will be payable commencing July 1, 2000. Each of the above acquisitions has been accounted for under the purchase method and the results of operations accordingly are included in the consolidated statement of operations from the respective dates of acquisition. The purchase prices have been allocated to assets acquired and liabilities assumed based on fair market value at the dates of acquisitions, as follows: Working capital, other than cash $1,618,307 Property, plant and equipment 386,518 Other assets 60,975 Goodwill 3,831,153 Long-term liabilities (177,491) Deferred income taxes (4,428)
The excess of purchase price over the fair values of the net assets acquired was $3,831,153 and has been recorded as goodwill, which is being amortized on a straight-line basis over 40 years. F-13 52 WYANT CORPORATION [formerly Hosposable Products, Inc.] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1998 3. ACQUISITIONS [CONT'D] The following unaudited pro forma information gives effect to the transactions as if they had occurred at January 1, 1998. This pro forma information does not necessarily reflect the results of operations that would have been achieved if the acquisitions had been consummated as of that time.
1998 $ ---------- Net sales 73,391,486 Income from continuing operations 529,740 Net income 1,551,342 Per common share Income from continuing operations 0.03 Net income 0.31
[b] On March 18, 1997 the Corporation, through a wholly owned subsidiary, Wood Wyant Inc., purchased the Canadian operations of G.H. Wood + Wyant Inc. for [i] cash consideration of Cdn $5,000,000 [US$3,667,033], [ii] a promissory note ["the Note"] in the amount of Cdn $4,068,951 [US $2,961,606] having a fair value of US $2,798,794, [iii] 3,800,000 shares of Class B Preferred Stock of Wood Wyant Inc. having a liquidation preference of Cdn $3,800,000 [US $2,765,849] and a fair value of US $2,267,900, and [iv] 1,333,333 shares of Class E Preferred Stock of Wood Wyant Inc. having a liquidation preference per share of one share of Wyant Corporation Common Stock. The fair value of Class E Preferred shares at March 18, 1997 was US $5,000,000. These Class E Preferred shares are recorded at par value of $10,000 in Wyant Corporation Common Stock and $4,990,000 in additional paid-in capital. Each Class E Preferred share is exchangeable by the holder at any time for one share of Wyant Corporation Common Stock. The transaction represents a combination of entities under common control and has been accounted for in a manner similar to a pooling of interests. Accordingly, the comparative figures in these financial statements have been restated to retroactively reflect the financial information of the combined entities. The excess of the fair value of the consideration paid of US $13,733,727 over the book value of the net assets acquired of US $8,638,875 [Cdn $11,868,951] is considered a deemed dividend for accounting purposes, which reduces the additional paid-in capital by US $5,094,852. The Note, which yielded interest at 6% per annum, was exchanged on August 29, 1997 for shares of Class A Preferred Stock of Wood Wyant Inc. on the basis of one share for each Cdn $1.00 of unpaid principal amount of the Note. F-14 53 WYANT CORPORATION [formerly Hosposable Products, Inc.] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1998 3. ACQUISITIONS [CONT'D] The Class A and B Preferred shares entitle holders to fixed cumulative preferential dividends at the rate of 4% and 3.999999%, respectively, of their redemption price of $1.00 Cdn per share and are mandatorily redeemable in ten consecutive annual tranches, each equal to 10% of their combined redemption value, commencing on January 3, 1998. No Class B Preferred shares shall be redeemed until all Class A Preferred shares have been redeemed. The Class E Preferred shares entitle holders to receive dividends on a pro-rata basis equivalent to dividends declared to the Corporation's common stockholders. Included in the consolidated statement of operations for the three years ended December 31, 1998 are the following results of the previously separate companies for periods prior to the transaction date.
CANADIAN OPERATIONS OF G.H. WOOD + HOSPOSABLE WYANT INC. PRODUCTS, INC. CONSOLIDATED $ $ $ ---------- ----------- ----------- UNAUDITED 1997 Revenue from external customers 12,287,019 9,842,579 22,129,598 Inter Company revenues 726,293 116,675 842,968 Net income (loss) 474,869 (651,354) (176,485) ---------- ----------- ----------- UNAUDITED 1996 Revenue from external customers 50,835,445 42,009,735 92,845,180 Inter Company revenues 2,050,901 283,898 2,334,799 Net income (loss) 1,199,580 (1,055,190) 144,390 ---------- ----------- -----------
4. RECEIVABLES
1998 1997 $ $ ----------- ----------- Trade 9,882,672 8,838,881 Less allowance for doubtful accounts 405,424 323,759 ----------- ----------- 9,477,248 8,515,122 Other 738,564 783,657 ----------- ----------- 10,215,812 9,298,779 =========== ===========
F-15 54 WYANT CORPORATION [formerly Hosposable Products, Inc.] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1998 5. INVENTORIES
1998 1997 $ $ --------- --------- Raw materials 2,065,073 1,716,534 Finished goods 6,511,887 4,444,720 --------- --------- 8,576,960 6,161,254 ========= =========
6. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment at December 31 consisted of the following:
ACCUMULATED DEPRECIATION NET BOOK COST AND AMORTIZATION VALUE $ $ $ ---------- ----------------- ---------- 1998 Land 584,410 -- 584,410 Buildings and improvements 3,232,031 1,248,044 1,983,987 Machinery and equipment 9,522,060 5,421,294 4,100,766 Computer equipment 1,901,811 1,651,201 250,610 Furniture, fixtures and equipment 2,896,169 2,323,532 572,637 Leasehold improvements 876,931 493,494 383,437 Patents and trademarks 1,054,203 336,590 717,613 ---------- ---------- --------- 20,067,615 11,474,155 8,593,460 ========== ========== ========= 1997 Land 626,408 -- 626,408 Buildings and improvements 3,358,486 1,231,300 2,127,186 Machinery and equipment 9,654,271 5,392,597 4,261,674 Computer equipment 1,567,487 1,385,706 181,781 Furniture, fixtures and equipment 2,301,585 1,960,191 341,394 Leasehold improvements 871,973 387,910 484,063 Patents and trademarks 1,069,872 294,174 775,698 ---------- ---------- --------- 19,450,082 10,651,878 8,798,204 ========== ========== =========
Depreciation and amortization expense amounted to $851,873, $785,093 and $942,688 in 1998, 1997 and 1996, respectively. F-16 55 WYANT CORPORATION [formerly Hosposable Products, Inc.] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1998 7. OTHER ASSETS
1998 1997 $ $ --------- --------- Goodwill, at cost 4,481,761 916,925 Accumulated amortization 785,168 654,946 --------- --------- Net book value 3,696,593 261,979 Deferred pension costs 551,882 484,586 Deferred financing charges 248,346 330,664 --------- --------- 4,496,821 1,077,229 ========= =========
Amortization expense amounted to $179,978, $135,351 and $137,416 in 1998, 1997 and 1996, respectively. 8. LONG-TERM DEBT Long-term debt at December 31 consisted of the following:
1998 1997 $ $ --------- --------- WOOD WYANT INC. Term loan repayable in monthly instalments of Cdn $20,476 plus interest at the prime rate in Canada plus 0.75% [prime at December 31, 1998 - 6.75%] maturing October 1, 2001. Principal amount Cdn $1,692,856 [December 31, 1997 - Cdn. $1,938,571] 1,104,060 1,355,170 Revolving credit facility - Cdn. $1,401,125 [December 31, 1997 - Cdn $1,476,300] 913,797 1,032,017 Term loan repayable in monthly instalments of Cdn $35,000 plus interest at the prime rate in Canada plus 0.75%, maturing April 30, 2003 [principal amount Cdn. $1,820,000] 1,186,982 -- Term loan repayable in monthly instalments of Cdn $49,523 plus interest at the prime rate in Canada plus 0.75%, maturing June 30, 2003 [principal amount Cdn $2,674,207] 1,744,086 -- --------- --------- 4,948,925 2,387,187 Current port 1,061,332 389,035 --------- --------- 3,887,593 1,998,152 ========= =========
F-17 56 WYANT CORPORATION [formerly Hosposable Products, Inc.] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1998 8. LONG-TERM DEBT [CONT'D] The exchange rate used at December 31, 1998 to translate the long-term debt denominated in Canadian dollars was Cdn $1.5333 = US $1.00 [December 31, 1997 - Cdn $1.4305 = US $1.00]. Principal payments of long-term debt over the next five years are as follows:
$ --------- 1999 1,061,332 2000 1,495,965 2001 1,445,056 2002 661,499 2003 285,073 ---------
In September 1997, Wood Wyant obtained a collateralized revolving credit facility in the amount of Cdn $3,000,000 with the Bank of Nova Scotia which expires on September 30, 2000 and bears interest at prime plus 0.75%. This facility was utilized on September 30, 1997 to repay two existing term loans totalling Cdn $1,554,000 and in March 1998 to finance equipment purchases of Cdn $282,749. These amounts are being repaid by monthly instalments of Cdn $30,612. The balance is available to finance future equipment purchases. Maximum availability under the facility reduces monthly by Cdn $50,000. Unused availability at December 31, 1998 was Cdn $848,876. LINES OF CREDIT On November 18, 1997, the Corporation obtained a committed revolving credit facility with Congress Financial Corporation ["Congress"] in the amount of $13,000,000 which expires on November 18, 2000 and bears interest at prime plus 1% [prime rate at December 31, 1998 - 7.75%]. The maximum amount that the Corporation may borrow at any time is determined by the sum of: i. Amounts based on advance formulas applicable to the book value of accounts receivable and inventories of the Corporation and IFC ["Tranche A"] and ii. Advance formulas applicable to the November 1997 appraised values of property, plant and equipment to a maximum of $5,500,000 less the amounts required to guarantee amounts outstanding under New Jersey Economic Development Authority bonds ($3,560,000 at December 31, 1998), which are included under "Net Assets Held for Divestiture' ["Tranche B"]. Maximum availability under Tranche B reduces monthly by $76,388. F-18 57 WYANT CORPORATION [formerly Hosposable Products, Inc.] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1998 8. LONG-TERM DEBT [CONT'D] The facility is collateralized by substantially all of the assets of the Corporation and IFC, tangible and intangible, except for the Corporation's investment in the shares of Wood Wyant. Unused availability at December 31, 1998 was approximately $2,841,000. Amounts outstanding under the line of credit are classified as a current liability due to the inclusion in the loan agreement of a subjective acceleration clause and a lock box arrangement. The agreement also contains a minimum adjusted net worth requirement. Wood Wyant has available a collateralized revolving line of credit in Canada in the amount of Cdn $7,500,000 with the Bank of Nova Scotia which is subject to periodic review and which bears interest at the prime rate [6.75% at December 31, 1998]. This line of credit and the term loans of Wood Wyant are collateralized by a general assignment of book debts of Wood Wyant, a pledge of inventory under Section 427 of the Bank Act, a hypothec in the amount of Cdn $30,000,000 on all movable property and a general security agreement. 9. INCOME TAXES Details of the income tax provision are as follows:
1998 1997 1996 ------- ------- ------- $ $ $ CURRENT Federal (324,132) (210,559) (179,144) State 46,132 10,291 3,929 Foreign 778,000 945,482 223,673 ------- ------- ------- 500,000 745,214 48,458 ======= ======= ======= DEFERRED Federal (45,000) (26,413) 110,775 State -- -- (95,098) Foreign 117,000 81,796 731,858 ------- ------- ------- 72,000 55,383 747,535 ------- ------- ------- INCOME TAX PROVISION 572,000 800,597 795,993 ======= ======= =======
F-19 58 WYANT CORPORATION [formerly Hosposable Products, Inc.] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1998 9. INCOME TAXES [CONT'D] The reported income tax provision differs from the amount computed by applying the Federal tax rate to income before income taxes. The reasons for this difference and the related tax effects are as follows:
1998 1997 1996 $ $ $ ------- ------- ------- Expected Federal tax rate 34.0% 34.0% 34.0% Expected tax provision 382,696 611,990 589,174 State income tax 46,132 18,219 3,996 Foreign tax rate differences 146,403 66,408 84,464 Non-deductible expenses 65,000 25,377 46,110 Other (68,231) 78,603 72,249 -------- ------- ------- REPORTED INCOME TAX PROVISION 572,000 800,597 795,993 ======== ======= =======
Deferred income taxes result principally from temporary differences in the recognition of certain revenue and expense items for financial and tax reporting purposes. Significant components of the Company's deferred tax assets and liabilities as at December 31, 1998 and December 31, 1997 are as follows:
1998 1997 $ $ --------- --------- Deferred tax assets Reserves and allowances 272,760 236,000 Goodwill 151,784 137,474 Other 177,839 151,821 --------- --------- TOTAL DEFERRED TAX ASSETS 602,383 525,295 Deferred tax liabilities Book and tax differences on property, plant and equipment 1,855,109 1,572,601 Pension 221,307 194,689 Other -- 13,436 --------- --------- TOTAL DEFERRED TAX LIABILITIES 2,076,416 1,780,726 --------- --------- NET DEFERRED INCOME TAX LIABILITY 1,474,033 1,255,431 ========= =========
Income before taxes attributable to all foreign operations was $2,066,867, $2,481,335 and $2,155,111 in each of fiscal 1998, 1997 and 1996, respectively. F-20 59 WYANT CORPORATION [formerly Hosposable Products, Inc.] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1998 10. STOCK-BASED COMPENSATION PLANS The Corporation has two stock option plans, the 1997 Stock Incentive Plan [the "1997 Plan"] and the 1991 Stock Option Plan [the "1991 Plan"]. The Company accounts for options granted to employees and directors under these plans using APB No.25, under which no compensation cost has been recognized for stock options granted. Had compensation cost for these stock options been determined consistent with SFAS No.123, the Company's pro forma earnings per share would have been as follows:
1998 1997 1996 $ $ $ ---------- --------- --------- Net income (loss) available to common stockholders As reported 1,214,673 318,710 144,390 Pro forma 745,270 (248,852) (273,691) Earnings (loss) per share Basic As reported 0.34 0.09 0.04 Pro forma 0.21 (0.07) (0.08) Diluted As reported 0.33 0.09 0.04 Pro forma 0.21 (0.07) (0.08) ---------- --------- ---------
The effects of applying SFAS 123 in this pro forma disclosure are not indicative of future amounts. Additional awards in future years are anticipated. During 1997 and 1991, the stockholders of the Company approved the adoption of the 1997 Plan and the 1991 Plan, respectively. Each plan authorizes the granting of stock options [either non-qualified stock options or incentive stock options], the exercise of which would allow up to an aggregate of 400,000 shares of the Company's common stock under the 1997 Plan and 333,333 shares under the 1991 Plan, to be acquired by the holders of the stock options. The 1997 Plan also permits the granting of other types of stock-based awards. Under the 1997 and 1991 Plans, non-qualified stock options have been granted to directors, employees and consultants for terms of up to ten years at exercise prices of not less than 100% of the fair market value of the shares at the date of grant, exercisable in whole or in part at stated times from the date of grant to up to two years thereafter. At December 31, 1998, options to purchase 319,351 shares and 165,340 shares of common stock were exercisable with respect to the 1997 Plan and the 1991 Plan, respectively. Option activity during 1998, 1997 and 1996 is summarized as follows: F-21 60 WYANT CORPORATION [formerly Hosposable Products, Inc.] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1998 10. STOCK-BASED COMPENSATION PLANS [CONT'D]
WEIGHTED AVERAGE EXERCISE SHARES PRICE $ ------- -------- 1998 OUTSTANDING, BEGINNING OF YEAR 592,048 4.53 Granted 25,335 5.29 Exercised (2,333) 4.19 Expired (33,334) 4.50 Canceled / surrendered (44,340) 4.79 ------- ---- OUTSTANDING, END OF YEAR 537,376 4.55 ------- ---- EXERCISABLE, END OF YEAR 484,691 4.57 ======= ==== Weighted average fair value of options granted 2.34 1997 OUTSTANDING, BEGINNING OF YEAR 332,048 5.41 Granted 416,000 4.01 Canceled / surrendered (156,000) 5.00 ------- ---- OUTSTANDING, END OF YEAR 592,048 4.53 ------- ---- EXERCISABLE, END OF YEAR 342,667 4.66 ======= ==== Weighted average fair value of options granted 1.69 1996 OUTSTANDING, BEGINNING OF YEAR 141,381 5.28 Granted 250,667 5.59 Expired (21,333) 4.33 Canceled / surrendered (38,667) 5.44 ------- ---- OUTSTANDING, END OF YEAR 332,048 5.41 ------- ---- EXERCISABLE, END OF YEAR 216,000 5.32 ======= ==== Weighted average fair value of options granted 2.51
F-22 61 WYANT CORPORATION [formerly Hosposable Products, Inc.] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1998 10. STOCK-BASED COMPENSATION PLANS [CONT'D] The fair value of options at date of grant was estimated using the Black-Scholes pricing model with the following weighted average assumptions.
1998 1997 % % ----- ----- Expected life [years] 5.00 5.00 Risk-free interest rates 5.15 6.22 Volatility 41.20 37.60 Dividend yield 0.00 0.00
The following table summarizes information with respect to stock options outstanding at December 31, 1998:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE ---------------------------------------------------------------- ------------------------------- NUMBER WEIGHTED NUMBER OUTSTANDING AVERAGE EXERCISABLE RANGE AT REMAINING WEIGHTED AT WEIGHTED OF EXERCISE DECEMBER 31, CONTRACTUAL AVERAGE DECEMBER 31, AVERAGE PRICES 1998 LIFE EXERCISE PRICE 1998 EXERCISE PRICE ----------- ----------- ------------ -------------- ------------- --------------- $3.00 - $4.50 346,701 8.32 years $4.01 304,683 $3.99 $4.51 - $5.81 190,675 7.12 years $5.52 180,008 $5.54 ------------- --------- ------------ ----------- --------- ----------
All comparative data have been restated to reflect the four-for-three stock split effected in the form of a stock dividend, which was announced on March 27, 1998 and paid on May 21, 1998. 11. NON-RECURRING ITEMS
1998 1997 1996 $ $ $ ------ ------ ------- Acquisition costs -- -- 549,805 ------ ------- ------- -- -- 549,805 ====== ======= =======
ACQUISITION COSTS During 1996, the Company incurred $549,805 for professional services in connection with the acquisition described in note 3. F-23 62 WYANT CORPORATION [formerly Hosposable Products, Inc.] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1998 12. OTHER INCOME
1998 1997 1996 $ $ $ ------- ------- ------- Interest income 2,492 7,323 11,553 Gain on disposal of assets -- 28,470 122,810 Cash discounts and other 241,575 194,997 50,273 ------- ------- ------- 244,067 230,790 184,636 ======= ======= =======
13. EXTRAORDINARY GAIN In 1997, the Company realized a net gain of $139,330 [$91,958 net of income tax] as a result of the refinancing of certain term debt. 14. COMMITMENTS The Company occupies manufacturing, warehousing and office facilities under operating leases which expire at various dates to December 31, 2004. Future minimum rental commitments relating to continuing operations are as follows:
$ --------- 1999 1,137,841 2000 1,007,522 2001 696,673 2002 599,775 2003 542,239 Thereafter 209,523 ---------
Aggregate rental expense of continuing operations amounted to $1,078,283 [net of sublease income of $177,821] $1,480,409 [net of sublease income of $124,893] and $1,242,186 [net of sublease income of $140,000 and $100,000 previously provided for [note 11]] for the years ended December 31, 1998, 1997 and 1996, respectively. As of January 1, 1999, the Company signed a five-year supply agreement to purchase a minimum of 16,200 short tons of paper towelling and tissue annually at market prices. This supplier provides 100% of the Company's requirements for these products. F-24 63 WYANT CORPORATION [formerly Hosposable Products, Inc.] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1998 14. COMMITMENTS [CONT'D] In September 1997, the Company entered into a lease agreement for a maximum amount of Cdn $2,000,000 for computer equipment. The equipment leases under this agreement will be for a maximum term of five years and will be based on either a floating rate of bank prime plus 0.75%, or a fixed rate of the leasing company's base rate at the commencement date of each lease plus 1.75%. As at December 31, 1998, an amount of Cdn $1,716,732 had been committed under this agreement. A financial institution has registered a second-ranking lien in the amount of $650,000 on the Company's book debts as collateral for letters of guarantee that it may issue from time to time in favour of customers to guarantee the Company's performance under certain contracts. As at December 31, 1998 there were no letters of guarantee outstanding. 15. EARNINGS PER SHARE
1998 1997 1996 $ $ $ --------- --------- ------- Numerator Income from continuing operations before extraordinary gain 553,576 999,372 936,871 Preferred stock dividends and accretion 360,505 191,746 -- --------- --------- ------- Numerator for basic earnings per share -- income from continuing operations available to common stockholders before extraordinary gain 193,071 807,626 936,871 Accretion on convertible preferred shares 61,542 -- -- --------- -------- -------- Numerator for diluted earnings per share -- income from continuing operations available to common stockholders before extraordinary gain 254,613 807,626 936,871 --------- --------- -------- Denominator Denominator for basic earnings per share -- Weighted-average shares issued, issuable and outstanding 3,606,247 3,597,125 3,589,884 Effect of dilutive securities Convertible preferred shares 165,147 -- -- Stock options 62,867 6,668 4,080 --------- --------- -------- Denominator for diluted earnings per share -- adjusted weighted-average shares 3,834,261 3,603,793 3,593,964 ========= ========= ========= Basic earnings per share from continuing operations before extraordinary gain 0.06 0.22 0.26 ========= ========= ========= Diluted earnings per share from continuing operations before extraordinary gain 0.06(1) 0.22 0.26 ========= ========= =========
F-25 64 WYANT CORPORATION [formerly Hosposable Products, Inc.] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1998 15. EARNINGS PER SHARE [CONT'D] (1) For purposes of calculating diluted earnings per share from continuing operations before extraordinary gain for 1998, the effect of the convertible preferred shares has not been considered, as its effect is anti-dilutive. Options to purchase 209,000 shares of common stock at exercise prices ranging from $5.06 to $5.81 per share were outstanding during 1998 but were not included in the computation of diluted earnings per share because the options' exercise prices were greater than the average market price of the common stock and, therefore, the effect would be anti-dilutive. The number of shares and earnings per share for 1997 and 1996 have been restated to reflect a four-for-three stock split effected in the form of a stock dividend, which was announced on March 27, 1998 and paid on May 21, 1998. 16. PENSION PLANS The Company maintains a defined benefit final average pension plan which covers certain of its Canadian employees. The periodic cost of pension benefits is determined using the projected benefit method prorated on service. The pension plan is administered by a major Canadian financial institution. At December 31, 1998, the Company had made or accrued for all required contributions. Net periodic pension expense (income) in 1998, 1997 and 1996 included the following components:
1998 1997 1996 $ $ $ --------- --------- --------- Current service cost 170,745 161,731 182,605 Interest cost on projected benefit obligations 270,711 272,176 274,861 Expected return on plan assets (457,566) (442,936) (409,358) Net amortization and deferral (87,024) (84,875) (61,308) --------- --------- --------- Net periodic pension expense (income) (103,134) (93,904) (13,200) ========= ========= ========= The assumptions used in the Company's plan at December 31, 1998, 1997 and 1996 are as follows: 1998 1997 1996 % % % --------- --------- --------- Weighted average discount rate 7.5 7.5 7.5 Expected long-term rate of return on assets 7.5 7.5 7.5 ========= ========= =========
F-26 65 WYANT CORPORATION [formerly Hosposable Products, Inc.] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1998 16. PENSION PLANS [CONT'D] The changes to the projected benefit obligation and the amount of pension assets were as follows:
1998 1997 $ $ ---------- --------- BENEFIT OBLIGATION Balance at January 1 3,649,283 3,532,540 Current service cost 262,959 262,135 Interest cost 270,711 272,176 Benefit payments (345,062) (260,835) Foreign currency exchange rate component (250,791) (156,733) ---------- ---------- BALANCE AT DECEMBER 31 3,587,100 3,649,283 ========== ========== PENSION PLAN ASSETS Balance at January 1 6,417,616 6,088,428 Contributions 92,214 100,405 Return on pension plan assets 525,177 764,013 Benefit payments (345,062) (260,835) Foreign currency exchange rate component (439,113) (274,395) ---------- ---------- BALANCE AT DECEMBER 31 6,250,832 6,417,616 ========== ==========
The following table sets forth the funded status of the Company's defined benefit plan at December 31, 1998 and 1997:
1998 1997 $ $ ---------- ---------- Actuarial present value of Vested benefit obligation 2,626,296 2,648,165 Non-vested benefit obligation -- -- ---------- ---------- Accumulated benefit obligation 2,626,296 2,648,165 Additional benefits based on salary projection 960,804 1,001,118 ---------- ---------- Projected benefit obligation 3,587,100 3,649,283 Plan assets at fair market value [primarily listed stocks and bonds] 6,250,832 6,417,616 ---------- ---------- Plan assets in excess of projected benefit obligation 2,663,732 2,768,333 Unrecognized net asset at transition (39,457) (46,976) Unrecognized net gain (2,431,814) (2,647,746) Unrecognized prior service cost 359,421 410,975 ---------- ---------- PENSION ASSET INCLUDED IN THE CONSOLIDATED BALANCE SHEET 551,882 484,586 ========== ==========
F-27 66 WYANT CORPORATION [formerly Hosposable Products, Inc.] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1998 16. PENSION PLANS [CONT'D] The Company has a pension plan under Section 401(k) of the INTERNAL REVENUE CODE for certain of its US employees. Under the terms of the 401(k) plan, the Company makes a matching contribution of up to 6% of each eligible employee's earned wages, to a maximum of $1,000 per employee per year. Under this plan employees may also contribute up to 15% of their earned wages. The Company makes monthly contributions to the plan whereby $18,998 was paid in 1998, $25,139 in 1997 and $21,968 in 1996. The Company has a non-contributory defined contribution pension plan for certain of its Canadian employees. Under the terms of the plan, the Company contributed 3% of each eligible employee's earned wages. The Company made monthly contributions to the plan whereby $15,061 was paid in 1997 and $62,527 was paid in 1996. In March 1997 the Company ceased to contribute to this plan and instead contributed the 3% of each eligible employee's earned wages to a group retirement savings plan. The monthly contributions made to this plan in 1998 amounted to $66,851 [1997 - $54,993]. 17. FINANCIAL INSTRUMENTS OFF-BALANCE-SHEET RISK The Company's policy with respect to foreign currency exposure is to manage its financial exposure to certain foreign exchange fluctuations with the objective of neutralizing some of the impact of foreign currency exchange movements. To achieve this objective, the Company enters into foreign exchange forward contracts to hedge certain non-local-currency payables. The Company enters into foreign exchange forward contracts with a major Canadian chartered bank, and therefore does not anticipate non-performance by its counterparty. The amount of the exposure on account of any non-performance is restricted to the unrealized gains in such contracts. As at December 31, 1998, the Company had no significant foreign exchange forward contracts outstanding. FAIR VALUE OF FINANCIAL INSTRUMENTS For certain of the Company's financial instruments, including cash and cash equivalents, short-term investments, accounts receivable, accounts payable and other accrued charges, the carrying amounts approximate the fair value due to their short maturities. The carrying value of long-term debt and preferred stock approximates the fair value. F-28 67 WYANT CORPORATION [formerly Hosposable Products, Inc.] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1998 18. SEGMENT INFORMATION FROM CONTINUING OPERATIONS The Company's reportable segments are strategic business units that offer different products. They are managed separately because each business requires different technology and marketing services and has a different customer base. The Company conducts business in two operating segments: Sanitation Products and Wiping Products. The Sanitation Products segment manufactures and distributes sanitary paper products, cleaning and maintenance chemicals, sanitation products, electro-mechanical and maintenance systems. The Wiping Products segment manufactures and distributes disposable wiping products and sanitary paper products and systems. The Company evaluates performance based on profit or loss from operations before income taxes not including non-recurring gains and losses. The Company accounts for intersegment sales and transfers as if the sales or transfers were to third parties, that is, at current market prices.
SANITATION WIPING PRODUCTS PRODUCTS CORPORATE TOTAL SEGMENT INFORMATION $ $ $ $ ---------- ---------- ---------- ---------- 1998 Revenues from external customers 50,787,121 16,337,016 67,124,137 Intersegment revenues 3,703,779 379,811 4,083,590 Interest revenue 2,343 149 2,492 Interest expense 478,799 47,084 632,366 1,158,249 Depreciation and amortization of property, plant and equipment and goodwill 833,287 196,984 1,030,271 Segment income (loss) before taxes 2,066,867 6,075 (947,366) 1,125,576 Segment assets [1] 28,239,472 6,948,348 1,906,218 33,336,308 Expenditures for segment property, plant and equipment and goodwill 4,510,484 127,361 4,637,845 ---------- ---------- --------- ----------
F-29 68 WYANT CORPORATION [formerly Hosposable Products, Inc.] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1998 18. SEGMENT INFORMATION FROM CONTINUING OPERATIONS [CONT'D]
SANITATION WIPING PRODUCTS PRODUCTS CORPORATE TOTAL SEGMENT INFORMATION $ $ $ $ ------------------- ---------- -------- --------- ----- 1997 Revenues from external customers 48,847,534 14,712,169 63,559,703 Intersegment revenues 3,687,194 386,886 4,074,080 Interest revenue -- 7,323 7,323 Interest expense 356,089 -- 389,000 745,089 Depreciation and amortization of property, plant and equipment and goodwill 748,985 190,876 939,861 Segment income (loss) before taxes 2,481,335 155,134 (836,500) 1,799,969 Segment assets [1] 21,884,327 6,289,975 2,009,049 27,174,694 Expenditures for segment property, plant and equipment and goodwill 991,126 273,834 1,264,960 ---------- ---------- --------- ---------- 1996 Revenues from external customers 50,835,445 11,755,262 62,590,707 Intersegment revenues 2,050,901 248,733 2,299,634 Interest revenue -- 11,553 11,553 Interest expense 444,253 -- 67,000 511,253 Depreciation and amortization of property, plant and equipment and goodwill 856,990 180,863 1,037,853 Segment income (loss) before taxes 2,155,111 326,558 (748,805) 1,732,864 Expenditures for segment property, plant and equipment and goodwill 894,743 40,251 934,994 ---------- ---------- --------- ----------
F-30 69 Wyant Corporation [formerly Hosposable Products, Inc.] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1998 18. SEGMENT INFORMATION FROM CONTINUING OPERATIONS [CONT'D]
PROPERTY, PLANT AND EQUIPMENT GEOGRAPHIC INFORMATION REVENUES[2] AND GOODWILL $ % $ ------------------------- ---------------- ------------ 1998 United States 16,397,707 24.4 1,017,172 Canada 50,092,840 74.6 11,272,881 Other foreign countries 633,590 1.0 -- ---------- ----- ---------- 67,124,137 100.0 12,290,053 ========== ===== ========== 1997 United States 14,598,461 23.0 1,039,795 Canada 48,521,689 76.3 8,020,388 Other foreign countries 439,553 0.7 -- ---------- ----- ---------- 63,559,703 100.0 9,060,183 ========== ===== ========== 1996 United States 11,878,609 19.0 956,837 Canada 50,615,592 80.9 8,146,876 Other foreign countries 96,506 0.1 -- ---------- ----- ---------- 62,590,707 100.0 9,103,713 ========== ===== ==========
Notes [1] Inter segment eliminations at December 31 were $3,757,730 and $3,008,657 in 1998 and 1997 respectively. [2] Revenues are attributed to countries based on location of customers. F-31 70 WYANT CORPORATION AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, 1996
BALANCE AT CHARGED TO BALANCE BEGINNING COSTS AND COMPANIES AT END DESCRIPTION OF YEAR EXPENSES DEDUCTIONS (1) ACQUIRED OF YEAR ----------- ---------- ---------- -------------- --------- ------- ALLOWANCE FOR DOUBTFUL ACCOUNTS: Year ended December 31 - 1998 $323,759 $119,788 $ 64,335 $26,212 $405,424 1997 $325,276 $116,923 $118,440 -- $323,759 1996 $594,489 $(66,826) $202,387 -- $325,276
________________________________________________________________ (1) Represents amounts written off, net of recoveries F-32 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AMENDMENT NO. 1 ON FORM 10-K/A FOR YEAR-ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH AMENDMENT NO. 1 TO FORM 10-K/A FOR YEAR-ENDED DECEMBER 31, 1998. YEAR DEC-31-1998 JAN-01-1998 DEC-31-1998 59,985 0 10,215,812 0 8,576,960 29,449,383 8,593,460 0 42,539,664 18,423,741 3,887,593 5,477,072 0 27,053 12,647,789 42,539,664 67,124,137 67,124,137 43,218,466 65,084,379 (244,067) 0 1,158,249 1,125,576 572,000 553,576 1,021,602 0 0 1,575,178 0.34 0.33
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