-----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, V/2WkBP1WYObGRHHN/pbw41fb9iWSzTUuhuxf1BVNIjMUN8do9XjUofrjXO2FzQZ JRmvys1nOmv9V9jJ9nD4lQ== 0000950123-00-004917.txt : 20000515 0000950123-00-004917.hdr.sgml : 20000515 ACCESSION NUMBER: 0000950123-00-004917 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000512 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-Q SEC ACT: SEC FILE NUMBER: 000-08410 FILM NUMBER: 627816 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-Q 1 WYANT CORPORATION 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (MARK ONE) ( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2000 --------------------------------------- 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) 1170 U.S. Highway 22 East, Suite 203, Bridgewater, New Jersey 08807 - ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number including area code 514-636-9926 - ------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report.) 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 requirement for the past 90 days. Yes X No ------- ----------- APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the close of the latest practicable date. Class Outstanding at May 10, 2000 - -------------------------------------------------------------------------------- Common stock, $.01 par value 2,270,617 1 2 WYANT CORPORATION AND SUBSIDIARIES FORM 10-Q QUARTER ENDED MARCH 31, 2000 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS The attached unaudited consolidated financial statements of Wyant Corporation and Subsidiaries reflect all adjustments which are, in the opinion of management, necessary to present a fair statement of the operating results for the interim periods. Consolidated balance sheet 3 Consolidated statement of operations 4 Consolidated statement of cash flows 5 Consolidated statement of stockholders' equity 6 Notes to consolidated financial statements 7-11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 2 3 PART 1. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS WYANT CORPORATION CONSOLIDATED BALANCE SHEET (UNAUDITED) (IN THOUSANDS OF DOLLARS)
MARCH 31 DECEMBER 31 2000 1999 -------- ----------- ASSETS CURRENT Cash and cash equivalents $ 417 $ 1,204 Accounts receivable 12,023 12,685 Inventories (note 3) 8,788 8,887 Deferred income taxes 1,307 1,419 Income taxes recoverable 378 -- Prepaid expenses 355 373 ------- ------- TOTAL CURRENT ASSETS 23,268 24,568 Property, plant and equipment, net of accumulated amortization of $13,318 (December 31, 1999 - $13,020) 11,120 11,014 Goodwill, net of accumulated amortization of $180 (1999- $159) 4,333 4,365 Other assets 1,290 1,301 ------- ------- TOTAL ASSETS $40,011 $41,248 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT Revolving line of credit $ 6,330 $ 2,078 Accounts payable 4,478 4,855 Accrued expenses 3,533 4,093 Accrued restructuring expenses 679 976 Income taxes payable -- 1,285 Current portion of long-term debt (note 4) 768 3,182 Current portion of preferred stock of subsidiary 543 545 ------ ------ TOTAL CURRENT LIABILITIES 16,331 17,014 Long-term debt, excluding current portion (note 4) 2,189 2,391 Other long-term liabilities 1,476 1,514 Preferred stock of subsidiary 4,969 5,483 Deferred income taxes 1,931 1,918 STOCKHOLDERS' EQUITY Common stock, par value $0.01 per share 27 27 Additional paid-in capital 6,813 6,813 Retained earnings 6,356 6,133 Cumulative translation adjustment (81) (45) ------- ------ TOTAL STOCKHOLDERS' EQUITY 13,115 12,928 ------- ------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $40,011 $41,248 ======= =======
See accompanying notes 3 4 WYANT CORPORATION CONSOLIDATED STATEMENT OF OPERATIONS THREE MONTHS ENDED MARCH 31, 2000 AND 1999 (UNAUDITED) (IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
2000 1999 ---- ---- Restated [Note 9] Net sales $18,785 $18,525 Cost of sales 11,950 12,368 ------- ------- Gross profit 6,835 6,157 Expenses Selling 3,768 3,589 General and administration 2,216 2,186 Amortization 195 144 Interest expense 176 310 Other income (81) (123) ------- -------- 6,274 6,106 ------- -------- Income from continuing operations before income taxes 561 51 Income tax expense Current 116 18 Deferred 132 21 ------- -------- 248 39 ------- -------- Income from continuing operations 313 12 Discontinued operations, net of income taxes of $212 in 1999 -- 407 ------- -------- Net income 313 419 Dividends and accretion of mandatorily redeemable preferred stock 90 95 ------- -------- Net income attributable to common shares $ 223 $ 324 ======= ======== Per common share (note 5) BASIC Income from continuing operations $ 0.06 $ (0.02) Discontinued operations -- 0.11 Net income 0.06 0.09 DILUTED Income from continuing operations 0.06 (0.02) Discontinued operations -- 0.10 Net income 0.06 0.08
See accompanying notes 4 5 WYANT CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS THREE MONTHS ENDED MARCH 31, 2000 AND 1999 (UNAUDITED) (IN THOUSANDS OF DOLLARS)
2000 1999 ---- ---- Restated [Note 9] CASH FLOWS FROM OPERATING ACTIVITIES Net income from continuing operations $ 313 $ 12 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 318 305 Deferred income tax expense 132 12 Deferred pension costs (11) (9) Changes in non-cash working capital balances Accounts receivable 663 (1,494) Inventories 99 99 Other current assets 17 251 Accounts payable (1,237) (449) Income taxes payable (1,662) 225 Cash provided by discontinued operations -- 167 -------- -------- NET CASH USED IN OPERATING ACTIVITIES (1,368) (881) CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (458) (1,777) Cash proceeds from sale of fixed assets 6 9 Decrease in other assets 18 -- Cash used for discontinued operations -- (19) -------- -------- NET CASH USED IN INVESTING ACTIVITIES (434) (1,787) CASH FLOWS FROM FINANCING ACTIVITIES Increase (decrease) in committed revolving credit facility -- (449) Increase in long-term debt 1,376 1,654 Repayment of long-term debt (3,962) (297) Redemption of preferred shares (545) (513) Dividends paid by subsidiary (38) (42) Increase in bank indebtedness 4,252 2,169 Cash used for discontinued operations (35) -- -------- -------- NET CASH PROVIDED BY FINANCING ACTIVITIES 1,048 2,522 Effect of exchange rate changes on cash (33) 86 -------- -------- Net decrease in cash and cash equivalents (787) (60) Cash and cash equivalents, beginning of period 1,204 60 -------- -------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 417 $ -- ======== ========
See accompanying notes 5 6 WYANT CORPORATION CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY THREE MONTHS ENDED MARCH 31, 2000 AND 1999 (UNAUDITED) (IN THOUSANDS OF DOLLARS, EXCEPT FOR NUMBER OF SHARES)
2000 1999 ---- ---- Restated [Note 9] COMMON STOCK AT PAR VALUE $ 27 $ 27 --------- --------- ADDITIONAL PAID-IN CAPITAL 6,813 6,822 --------- --------- RETAINED EARNINGS Balance at beginning of period 6,133 6,326 Net income 313 419 Dividends declared (38) (42) Accretion on preferred shares of subsidiary (52) (53) --------- --------- BALANCE AT END OF PERIOD 6,356 6,650 --------- --------- ACCUMULATED OTHER COMPREHENSIVE INCOME Balance at beginning of period (45) (501) Foreign currency translation adjustments (36) 107 --------- --------- BALANCE AT END OF PERIOD (81) (394) --------- --------- TOTAL STOCKHOLDERS' EQUITY $ 13,115 $ 13,105 ========= ========= COMPREHENSIVE INCOME Net income $ 313 $ 419 Other - Foreign currency translation adjustments (36) 107 --------- --------- COMPREHENSIVE INCOME FOR PERIOD $ 277 $ 526 ========= ========= NUMBER OF COMMON SHARES ISSUED AND OUTSTANDING 2,270,617 2,273,817 COMMON SHARES ISSUABLE UPON CONVERSION OF EXCHANGEABLE SHARES 1,333,333 1,333,333 --------- --------- NUMBER OF COMMON SHARES ISSUED, ISSUABLE AND OUTSTANDING 3,603,950 3,607,150 ========= =========
See accompanying notes 6 7 WYANT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (INFORMATION AS AT MARCH 31, 2000 AND FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999 ARE UNAUDITED) (IN THOUSANDS OF DOLLARS, UNLESS OTHERWISE STATED) 1. GENERAL The accompanying unaudited consolidated financial statements include the accounts of Wyant Corporation and its wholly-owned subsidiaries, IFC Disposables, Inc. and Wood Wyant Inc. They have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the accompanying consolidated financial statements contain all adjustments, consisting only of normal recurring accruals considered necessary to present fairly the financial position as of March 31, 2000, the results of operations, cash flows and changes in stockholders' equity for the three months ended March 31, 2000 and 1999. For further information, refer to the financial statements and notes thereto included in the Company's annual report for the year ended December 31, 1999. 2. DISCONTINUED OPERATIONS The sale of the Company's Wyant Health Care Division ("Division") was completed on July 21, 1999 for cash proceeds of $12,193,000, of which an amount of $581,000 is to be held in escrow for a period of 24 months from the date of sale. Consequently, the results of the Division are reported in these financial statements as discontinued operations. The operating results of the Division were as follows:
Three months ended March 31, 1999 ------------------- Net sales $10,286 Income before income taxes 619
7 8 3. INVENTORIES
March 31, December 31, 2000 1999 -------- ----------- Raw materials $2,459 $2,780 Finished goods 6,329 6,107 ------ ------ $8,788 $8,887 ====== ======
4. LONG-TERM DEBT
March 31, December 31, 2000 1999 -------- ----------- Wood Wyant Inc. Term loan repayable in monthly installments of Cdn. $20 plus interest at prime plus 3/4% (prime at March 31, 2000 - 7%), maturing October 1, 2001. Principal amount Cdn. $1,386 (December 31, 1999 - Cdn. $1,447) $ 956 $1,003 Term loan repayable in monthly installments of Cdn. $35 plus interest at prime plus 3/4%, maturing April 30, 2003. (Principal amount - December 31, 1999 - Cdn. $1,400) -- 970 Term loan repayable in monthly installments of Cdn. $50 plus interest at prime plus 3/4%, maturing June 30, 2003. (Principal amount - December 31, 1999 - Cdn. $2,080) -- 1,441 Term loan repayable in monthly installments of Cdn. $42 plus interest at prime plus 3/4%, maturing March 15, 2004. Principal amount - Cdn. $1,958 (December 31, 1999 - Cdn. $2,083) 1,351 1,443 Revolving credit facility (Cdn. $942 - December 31, 1999 - Cdn. $1,034) 650 716 ------ ------ 2,957 5,573 Current portion 768 3,182 ------ ------ $2,189 $2,391 ====== ======
Wood Wyant also has a collateralized revolving line of credit with the Bank of Nova Scotia bearing interest at the prime rate in Canada (7% at March 31, 2000). The maximum available under this line of credit was increased on February 22, 2000 from Cdn. $7,500,000 (U.S. $5,175,000) to Cdn. $10,000,000 (U.S. $6,899,000), and the line of credit was then used, on March 8, 2000, to repay the outstanding balance on two term loans totalling Cdn. $3,321,000 (U.S. $2,291,000) which had been obtained in the second quarter of 1998 to finance business acquisitions. Also on February 22, 2000, the collateralized revolving credit facility of Cdn. $3,000,000 (U.S. $2,070,000) was renegotiated, with the maturity date changing from September 30, 2000 to September 30, 2001 and the maximum availability reducing to Cdn. $2,000,000 (U.S. $1,380,000). 8 9 5. EARNINGS PER SHARE
THREE MONTHS ENDED MARCH 31 2000 1999 ---- ---- Restated [Note 9] Numerator Income from continuing operations $ 313 $ 12 Preferred stock dividends and accretion 90 95 ---------- ---------- Numerator for basic earnings per share - Income (loss) from continuing operations available to common stockholders 223 (83) Accretion on convertible preferred shares 31 29 ---------- ---------- Numerator for diluted earnings per share - Income (loss) from continuing operations available to common stockholders $ 254 $ (54) ========== ========== Denominator Denominator for basic earnings per share - Weighted-average shares issued, issuable and outstanding 3,603,950 3,607,150 Effect of dilutive securities Convertible securities 283,111 283,111 Stock options 8,526 540 ---------- ---------- Denominator for diluted earnings per share - Adjusted weighted-average shares 3,895,587 3,890,801 ========== ========== Basic earnings per share from continuing operations $ 0.06 $ (0.02) Diluted earnings per share from continuing operations $ 0.06 $ ( 0.02)
6. SEGMENT INFORMATION FROM CONTINUING OPERATIONS
Three months ended March 31 Sanitation Wiping Products Products Corporate Total ---------- -------- --------- ----- 2000 ---- Revenues from external customers $14,559 $4,226 $18,785 Intersegment revenues 930 99 1,029 Segment income (loss) before taxes 536 28 (3) 561 Segment assets 31,335 6,901 1,775 40,011 1999 [Restated - Note 9] ---- Revenues from external customers $14,406 $4,119 $18,525 Intersegment revenues 813 85 898 Segment income (loss) before taxes 213 23 (185) 51
9 10 7. CONTINGENCIES PENSION PLAN ------------ Certain employees of the Wyant Health Care Division were 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. As a result of the sale of the Division, the Company incurred a withdrawal liability and recorded a provision in the amount of $1,996,620 for all known and quantifiable liabilities arising at the time of the sale of the Division. The balance of this provision at March 31, 2000 was $1,992,093. If the remaining members were to withdraw from the Plan, a mass withdrawal liability could be triggered which could result in an additional liability to the Company in excess of $700,000 if such a mass withdrawal were to occur within three years of the Company withdrawing from the Pension Plan. The actual amount of any such withdrawal liability can only be determined at the time of any such mass withdrawal. 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. Upon final 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 reach $200,000. 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. 10 11 8. RESTRUCTURING CHARGE During the fourth quarter of 1999 Wood Wyant incurred a special charge of $1,085,000, composed entirely of severance costs related to 38 employee terminations. During the first quarter of 2000, $578,000 of this amount was paid and charged against the amount accrued, leaving a balance of $398,000 remaining to be paid as at March 31, 2000. All of the above employees had been terminated by March 31, 2000. 9. RESTATEMENT Results for the first quarter of 1999 have been restated to reflect accounting adjustments made during the 1999 year-end financial close. The effect of the adjustments was to reduce gross profit by $122,000 and income from continuing operations and net income by $71,000 or $0.02 per common share. The balance of retained earnings was similarly reduced by $71,000. 10. ACCOUNTING DEVELOPMENTS In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements (SAB 101), which among other guidance clarifies certain conditions to be met in order to recognize revenue. The Company has reviewed the provisions of SAB 101 and has determined that it is in compliance. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following information should be read in conjunction with the accompanying unaudited financial statements and the notes thereto included in Item I of this quarterly report, and the financial statements and the notes thereto and management's discussion and analysis of financial condition and results of operations contained in the Company's Annual Report on Form 10-K for the year ended December 31, 1999. As indicated in Note 2 to the consolidated financial statements, the Company has sold its Wyant Health Care Division and substantially all of its operating assets. Accordingly, such consolidated financial statements, as well as the discussion below, reflect the consummation of this transaction by showing the health care business as "discontinued operations" for income statement purposes. The following information 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 implement its business strategy following consummation of the sale of the Wyant Health Care Division, 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. 11 12 RESULTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 2000 COMPARED WITH THE THREE MONTHS ENDED MARCH 31, 1999 SALES - ----- Sales of continuing operations for the first quarter of 2000 increased by $260,000 or 1.4% to $18,785,000 from the total of $18,525,000 in the same quarter last year, after eliminating inter-segment sales of $1,029,000 in the current quarter and $898,000 in the first quarter of 1999. Sales of the sanitation products segment were $15,489,000 in the current quarter, an increase of $270,000 or 1.8% over the same quarter last year. The increase resulted primarily from sales of a business acquired in mid-1999 and the favorable impact of a stronger Canadian dollar translation rate, which more than offset a reduction in direct sales of paper products from the Company's paper converting operation. Sales of the wiping products segment at $4,325,000 were $121,000 or 2.9% higher than in the first quarter of 1999. COST OF SALES AND GROSS PROFIT - ------------------------------ Gross profit of the sanitation products segment improved to 39.2% of sales in the first quarter of 2000 from 35.6% in the same quarter last year, due primarily to increased selling prices for paper products and an improved product mix. Gross profit of the wiping products segment was virtually unchanged at 17.6% of sales compared with 17.7% in the first quarter of 1999. SELLING EXPENSES - ---------------- Selling expenses for the first quarter of 2000 amounted to $3,768,000, an increase of $179,000 or 5.0% over the same quarter last year. In the sanitation products segment, selling expenses at $3,176,000 were $149,000 or 4.9% higher than in the corresponding quarter last year. The increase was primarily due to the unfavorable impact of the stronger Canadian dollar translation rate and higher outward freight costs, which more than offset the reduction in other selling and marketing expenses which resulted for the most part from the restructuring of operations in the fourth quarter of 1999. In the wiping products segment, selling expenses increased by $29,000 or 5.2% to $592,000 in the current quarter, reflecting primarily higher outward freight costs. GENERAL AND ADMINISTRATION EXPENSES - ----------------------------------- General and administration expenses increased by $30,000 or 1.4% to $2,216,000 in the current quarter. Expenses of the sanitation products segment at $2,099,000 were $114,000 or 5.7% higher than in the first quarter of 1999. The increase was primarily due to the negative impact of the stronger Canadian dollar translation rate. General and administration expenses of the wiping products segment were $126,000 in the current quarter, a reduction of $6,000 or 4.5% from the same quarter last year. Corporate charges in the current quarter at ($9,000) were $78,000 lower than in the first quarter of 1999, when expenses were $69,000. A reduction of $66,000 in the allowance for doubtful accounts receivable during the current quarter was the principal reason for the change. AMORTIZATION - ------------ Amortization amounted to $195,000 in the first quarter of 2000, an increase of $51,000 over the same quarter last year. The increase resulted primarily from the amortization of the Company's new information systems hardware and software. 12 13 INTEREST EXPENSE - ---------------- Interest expense declined to $176,000 in the current quarter, from $310,000 in the corresponding quarter last year. The lower expense was due to a reduction of $110,000 in interest costs in the United States, resulting from the repayment of the loan from Congress Financial Corporation from the proceeds of sale of the Company's health care operations in July 1999, together with a decrease of $25,000 in interest expense in Canada, reflecting the utilization of part of an investment in 1999 of $4,500,000 by Wyant Corporation in additional common shares of Wood Wyant Inc. to reduce the Company's bank borrowing. OTHER INCOME - ------------ Other income decreased to $81,000 in the first quarter of 2000 from $123,000 in the same quarter last year. INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES - ----------------------------------------------------- Income from continuing operations before income taxes amounted to $561,000 in the current quarter, an increase of $510,000 over the level of $51,000 in the same quarter last year. The sanitation products and wiping products segments improved by $323,000 and $5,000, respectively, while corporate expenses were $182,000 lower than in the first quarter of 1999. INCOME TAXES - ------------ Income tax expense was $248,000 in the first quarter of 2000, compared with $39,000 in the corresponding quarter last year. The change reflected the higher level of pre-tax earnings in the current quarter. DISCONTINUED OPERATIONS - ----------------------- There were no discontinued operations in the current quarter, while in the first quarter of 1999 the discontinued health care operations generated after-tax income from operations of $407,000 or $0.11 per common share. NET INCOME - ---------- Net income for the first quarter of 2000 amounted to $313,000, compared with $419,000 in the first quarter of 1999. After deducting dividends and accretion relating to the mandatorily redeemable preferred shares, this represented $0.06 per common share in the current quarter and $0.09 per common share in the first quarter of 1999. The 1999 amounts have been restated to reflect accounting adjustments made during the 1999 year-end financial close. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- Liquidity and capital resources of the Company's Canadian operations (Wood Wyant) and United States operations (IFC Disposables) are discussed separately, as each is self-financing and has separate banking facilities. 13 14 CANADIAN OPERATIONS - ------------------- The Canadian operations utilized $3,702,000 of cash during the first quarter of 2000. Operating activities utilized $75,000 as a result of an increase in working capital of $746,000, primarily due to lower payables ($1,272,000) and income taxes payable ($92,000), partially offset by lower receivables ($303,000) and inventories ($291,000). The reduction in payables was in part due to the payment during the quarter of $578,000 relating to the restructuring charge incurred in the fourth quarter of 1999. The lower receivables reflected primarily improved collection performance. Capital expenditures during the quarter amounted to $431,000. Repayments of long-term debt totalled $3,962,000 in the first quarter, including the renegotiation of a revolving credit facility on February 22, 2000, with the maturity date changing from September 30, 2000 to September 30, 2001 and the maximum availability changing to Cdn. $2,000,000 ($1,376,000). In addition, also on February 22, 2000, the Company restructured its financing by increasing the collateralized revolving line of credit by Cdn. $2,500,000 to Cdn. $10,000,000 ($6,899,000) and utilizing this line of credit to repay, on March 8, 2000, the outstanding balance of Cdn. $3,321,000 ($2,291,000) on two term loans which had been obtained in the second quarter of 1998 to finance business acquisitions. In January 2000, $545,000 of Class A Preferred shares of Wood Wyant Inc. were redeemed. Dividends paid in the quarter on the outstanding Class A and Class B Preferred shares amounted to $38,000. As at March 31, 2000, approximately $1,379,000 was available under the Company's Cdn. $10,000,000 collateralized revolving line of credit. In addition, approximately $709,000 was available to finance future capital expenditures under the Cdn. $2,000,000 revolving credit facility. All borrowings of the Canadian operations are with the Bank of Nova Scotia. Long-term debt outstanding at March 31, 2000 amounted to $2,957,000, including $768,000 due within one year. All of the loans were at the commercial prime rate in Canada (7% at March 31, 2000) plus 0.75%. The collateralized 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, borrowing 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 March 31, 2000. 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 March 31, 2000 average less than $600,000 over the next five years, with a maximum of $1,634,000 in 2001. Amounts required to redeem Class A and Class B Preferred shares approximate $550,000 per annum during that period. Holders of the Class F Preferred shares have an option to redeem those shares which may be exercised between July 1 and July 31, 2000. Exercise of the option would require an additional annual amount of approximately $440,000 for five years commencing in 2000. Management believes that future operating cash flows and amounts available under existing credit facilities will be sufficient to meet its ongoing operating cash requirements and amounts required for capital asset additions, as well as meet the cash requirements for debt and Preferred share redemptions discussed above. 14 15 U.S. OPERATIONS - --------------- Cash of $1,302,000 was utilized by continuing operations in the United States during the first quarter of 2000. Operating activities utilized $1,293,000 due to an increase of $1,374,000 in working capital. This increase was primarily due to a reduction of $1,571,000 in income taxes payable, reflecting the income tax payments for 1999 made in the current quarter, together with an increase in inventories of $157,000. These were partially offset by a reduction in accounts receivable of $301,000 due for the most part to the settlement of an insurance claim for $239,000 relating to a fire which occurred in 1998. Capital expenditures amounted to $27,000 in the current quarter. IFC Disposables has a secured revolving line of credit of $1,000,000 with Union Planters Bank, National Association which bears interest at bank prime (9% at March 31, 2000) plus 1%. This line of credit, which expires on July 16, 2002, is guaranteed by Wyant Corporation and is available to finance working capital. Unused availability at March 31, 2000 amounted to $450,000. Maximum borrowing under the facility is determined by advance formulas applicable to the book value of accounts receivable and inventories of IFC. Management believes that future operating cash flows, cash on hand and the unused balance available under the credit facility will be sufficient to enable the Company to meet its ongoing operating cash requirements and to finance capital asset additions. 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. SIGNIFICANT FACTORS AND KNOWN TRENDS PENSION PLAN - ------------ Certain employees of the Wyant Health Care Division were 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. As a result of the sale of the Division, the Company incurred a withdrawal liability and recorded a provision in the amount of $1,996,620 for all known and quantifiable liabilities arising at the time of the sale of the Division. The balance of this provision at March 31, 2000 was $1,992,093. If the remaining members were to withdraw from the Plan, a mass withdrawal liability could be triggered which could result in an additional liability to the Company in excess of $700,000 if such a mass withdrawal were to occur within three years of the Company withdrawing from the Pension Plan. The actual amount of any such withdrawal liability can only be determined at the time of any such mass withdrawal. 15 16 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. Upon final 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 reach $200,000. 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 3. 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. 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. 16 17 PART II - OTHER INFORMATION ITEM 1 - LEGAL PROCEEDINGS The Company is not involved in any material legal proceedings. ITEMS 2, 3, 4 & 5 Not applicable ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K a) Not applicable b) Reports on Form 8-K No current reports on Form 8-K have been filed during the quarter ended March 31, 2000. 17 18 WYANT CORPORATION SIGNATURES Pursuant to the requirement of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Wyant Corporation (Registrant) Date: May 11, 2000 SIGNATURE: /s/ Marc D'Amour ------------ ---------------------- Marc D'Amour Vice President, Chief Financial Officer and Treasurer (For the registrant and as Principal Financial Officer) 18 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM WYANT CORPORATION FORM 10-Q RE QUARTER ENDED MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q FOR QUARTER ENDED MARCH 31, 2000. 1,000 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 417 0 12,023 0 8,788 23,268 11,120 0 40,011 16,331 2,189 4,969 0 27 13,088 40,011 18,785 18,785 11,950 18,129 (81) 0 176 561 248 313 0 0 0 313 0.06 0.06
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