-----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, Ud0ZYaWvp1y8CRuUqJ1+rx2rqzb7SBFzD9UMPZffpwHH3o6zPnaRvzAiQRVpC0cP e7Uh8eCiKyCdfM1VNhGaXw== /in/edgar/work/0000950123-00-010886/0000950123-00-010886.txt : 20001121 0000950123-00-010886.hdr.sgml : 20001121 ACCESSION NUMBER: 0000950123-00-010886 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001120 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WYANT CORP CENTRAL INDEX KEY: 0000048569 STANDARD INDUSTRIAL CLASSIFICATION: [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: 773459 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 m08101e10-q.txt 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 September 30, 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 November 15, 2000 - -------------------------------------------------------------------------------- Common stock, $.01 par value 2,270,617 1 2 WYANT CORPORATION AND SUBSIDIARIES FORM 10-Q QUARTER ENDED SEPTEMBER 30, 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 7-13 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 2 3 PART 1. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS WYANT CORPORATION CONSOLIDATED BALANCE SHEET (UNAUDITED) (IN THOUSANDS OF DOLLARS)
September 30 December 31 2000 1999 ------------ ----------- Restated (Note 10) ASSETS CURRENT Cash and cash equivalents $ 195 $ 1,204 Accounts receivable 12,839 12,685 Inventories (note 3) 6,966 8,887 Deferred income taxes 1,288 1,419 Prepaid expenses 267 373 -------- -------- TOTAL CURRENT ASSETS 21,555 24,568 Property, plant and equipment, net of accumulated amortization of $13,111 (December 31, 1999 - $13,020) 10,573 11,014 Goodwill, net of accumulated amortization of $212 (December 31, 1999 - $159) 4,137 4,365 Other assets 1,280 1,301 -------- -------- TOTAL ASSETS $ 37,545 $ 41,248 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT Revolving line of credit $ 4,605 $ 2,078 Accounts payable 5,496 5,589 Accrued expenses 3,496 4,093 Accrued restructuring expenses 432 976 Income taxes payable 218 1,035 Current portion of long-term debt (note 4) 1,307 3,182 Current portion of preferred stock of subsidiary 947 545 -------- -------- TOTAL CURRENT LIABILITIES 16,501 17,498 Long-term debt, excluding current portion (note 4) 1,480 2,391 Other long-term liabilities 1,399 1,514 Preferred stock of subsidiary (note 12) 4,029 5,483 Deferred income taxes 1,757 1,918 STOCKHOLDERS' EQUITY Common stock, par value $0.01 per share 27 27 Additional paid-in capital 6,813 6,813 Retained earnings 5,982 5,649 Cumulative translation adjustment (443) (45) -------- -------- TOTAL STOCKHOLDERS' EQUITY 12,379 12,444 -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 37,545 $ 41,248 ======== ========
See accompanying notes 3 4 WYANT CORPORATION CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) (IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
Three months ended Nine months ended September 30 September 30 ------------------ -------------------- 2000 1999 2000 1999 ---- ---- ---- ---- Restated (Note 10) Net sales $ 20,267 $ 20,514 $ 59,803 $ 59,340 Cost of sales 13,432 13,455 39,005 39,289 -------- -------- -------- -------- Gross profit 6,835 7,059 20,798 20,051 Expenses Selling 3,763 4,180 11,386 11,752 General and administration 2,623 2,165 7,177 6,737 Amortization 208 193 610 484 Interest expense 184 224 538 870 Other income (66) (69) (206) (219) -------- -------- -------- -------- 6,712 6,693 19,505 19,624 -------- -------- -------- -------- Income from continuing operations before income taxes 123 366 1,293 427 Income tax expense Current 286 102 666 128 Deferred (146) 23 26 66 -------- -------- -------- -------- 140 125 692 194 -------- -------- -------- -------- Income (loss) from continuing operations (17) 241 601 233 Discontinued operations, net of income taxes (note 2) (1) -- (224) -- 750 -------- -------- -------- -------- Net income (loss) (17) 17 601 983 Dividends and accretion of mandatorily redeemable preferred stock 90 93 268 279 -------- -------- -------- -------- Net income (loss) attributable to common shares $ (107) $ (76) $ 333 $ 704 ======== ======== ======== ======== Per common share (note 6) BASIC Income (loss) from continuing operations $ (0.03) $ 0.04 $ 0.09 $ (0.01) Discontinued operations -- (0.06) -- 0.21 Net income (loss) (0.03) (0.02) 0.09 0.20 DILUTED Income (loss) from continuing operations (0.03) 0.04 0.09 (0.01) Discontinued operations -- (0.06) -- 0.19 Net income (loss) (0.03) (0.02) 0.09 0.20
(1) Income tax (recovery) of discontinued operations amounted to $(17,000) in the three months ended September 30, 1999 and $ 500,000 in the nine months ended September 30, 1999. See accompanying notes 4 5 WYANT CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) (IN THOUSANDS OF DOLLARS)
Nine months ended September 30 ------------------------------ 2000 1999 ---- ---- Restated (Note 10) CASH FLOWS FROM OPERATING ACTIVITIES Net income from continuing operations $ 601 $ 233 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 1,125 952 Loss on sale of fixed assets -- 3 Deferred income tax expense 26 66 Deferred pension costs (37) (28) Changes in non-cash working capital balances Accounts receivable (154) (4,202) Inventories 1,920 756 Other current assets 106 143 Accounts payable (1,241) 1,357 Income taxes payable (817) 1,093 Cash provided by discontinued operations -- 517 ------ ------- NET CASH PROVIDED BY OPERATING ACTIVITIES 1,529 890 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of businesses, net of cash acquired (7) (1,030) Capital expenditures (1,053) (2,598) Cash proceeds from sale of fixed assets 22 9 Decrease (increase) in other assets 23 (42) Cash used for discontinued operations -- (49) Proceeds of sale of discontinued operations, net of $581 held in escrow and expenses of $3,061 -- 8,551 ------ ------- NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (1,015) 4,841 CASH FLOWS FROM FINANCING ACTIVITIES Increase in committed revolving credit facility -- (4,239) Repayment of long-term debt (4,269) (1,015) Increase in long-term debt 1,666 3,283 Redemption of preferred shares (978) (513) Dividends paid by subsidiary (129) (127) Purchase of common shares for cancellation -- (9) Increase (decrease) in bank indebtedness 2,527 (710) Cash used by discontinued operations (106) -- ------ ------- NET CASH USED IN FINANCING ACTIVITIES (1,289) (3,330) Effect of exchange rate changes on cash (234) 203 ------ ------- Net increase (decrease) in cash and cash equivalents (1,009) 2,604 Cash and cash equivalents, beginning of period 1,204 60 ------ ------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 195 $ 2,664 ====== =======
See accompanying notes 5 6 WYANT CORPORATION CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED) (IN THOUSANDS OF DOLLARS, EXCEPT FOR NUMBER OF SHARES)
Nine months ended September 30 ------------------------------ 2000 1999 ---- ---- Restated (Note 10) COMMON STOCK AT PAR VALUE Balance at beginning of period $ 27 $ 27 Stock purchased for cancellation -- -- ----------- ----------- BALANCE AT END OF PERIOD 27 27 ----------- ----------- ADDITIONAL PAID-IN CAPITAL Balance at beginning of period 6,813 6,822 Stock purchased for cancellation -- (9) ----------- ----------- Balance at end of period 6,813 6,813 ----------- ----------- RETAINED EARNINGS Balance at beginning of period 5,649 5,882 Net income 601 983 Dividends declared by subsidiary (129) (127) Accretion on preferred shares of subsidiary (139) (152) ----------- ----------- BALANCE AT END OF PERIOD 5,982 6,586 ----------- ----------- ACCUMULATED OTHER COMPREHENSIVE INCOME Balance at beginning of period (45) (501) Foreign currency translation adjustments (398) 234 ----------- ----------- BALANCE AT END OF PERIOD (443) (267) ----------- ----------- TOTAL STOCKHOLDERS' EQUITY $ 12,379 $ 13,159 =========== =========== COMPREHENSIVE INCOME Net income $ 601 $ 983 Other - Foreign currency translation adjustments (398) 234 ----------- ----------- COMPREHENSIVE INCOME FOR PERIOD $ 203 $ 1,217 =========== =========== COMMON SHARES NUMBER OF COMMON SHARES ISSUED AT BEGINNING OF PERIOD 2,270,617 2,273,817 SHARES PURCHASED FOR CANCELLATION -- (3,200) ----------- ----------- NUMBER OF COMMON SHARES ISSUED AND OUTSTANDING 2,270,617 2,270,617 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 3,603,950 =========== ===========
See accompanying notes 6 7 WYANT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (INFORMATION AS AT SEPTEMBER 30, 2000 AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 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 September 30, 2000, the results of operations for the nine months and three months ended September 30, 2000 and 1999 and cash flows and changes in stockholders' equity for the nine months ended September 30, 2000 and 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:
Nine months ended September 30, 1999 ------------------ Net sales $22,747 Income before income taxes 1,835
3. INVENTORIES
September 30, December 31, 2000 1999 ---- ---- Raw materials $1,619 $2,780 Finished goods 5,347 6,107 ------ ------ $6,966 $8,887 ====== ======
7 8 4. LONG-TERM DEBT
September 30, 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 September 30, 2000 - 7.5%), maturing October 1, 2001. Principal amount Cdn. $ 1,263 (December 31, 1999 - Cdn. $1,447) $ 840 $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. $1,708 (December 31, 1999 - Cdn. $2,083) 1,136 1,443 Revolving credit facility (Cdn. $1,219 - December 31, 1999 - Cdn. $1,034) 811 716 ------ ------ 2,787 5,573 Current portion 1,307 3,182 ------ ------ $1,480 $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 (7.5% at September 30, 2000). The maximum available under this line of credit was increased on February 22, 2000 from Cdn. $7,500,000 (U.S. $4,988,000) to Cdn. $10,000,000 (U.S. $6,651,000), 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. $2,209,000) 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. $1,995,000) 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. $1,330,000). As a consequence of the accounting irregularities referred to in Note 10, IFC Disposables is in default of certain of the loan covenants relating to the secured revolving line of credit. The balance outstanding under the revolving line of credit at September 30, 2000 of $365,000 has since been fully repaid. The Company expects to renegotiate the terms of the facility and to restore normal operating practices during the fourth quarter of 2000. 8 9 5. PREFERRED STOCK OF SUBSIDIARY
September 30, 2000 December 31, 1999 ---------------------------- ---------------------------- No. of No. of shares $ shares $ ------------ ------------ ------------ ----------- WOOD WYANT INC. 4% Cumulative Redeemable Class A Preferred Stock - Cdn. $1,674 (December 31, 1999 - Cdn. $2,433) 1,708,266 $1,114 2,495,161 $1,685 3.999999% Cumulative Redeemable Class B Preferred Stock - Cdn. $3,387 (December 31, 1999 - Cdn. $3,325) 3,800,000 2,252 3,800,000 2,304 Class F Preferred Stock - Cdn. $2,420 (December 31,1999 - Cdn. $2,943) 226,488 1,610 283,111 2,039 ------------ ----------- 4,976 6,028 Current portion 947 545 ------------ ----------- $4,029 $5,483 ============ ===========
During July 2000, holders of the 283,111 outstanding Class F Preferred shares of Wood Wyant Inc. exercised an option to redeem those shares at a price of Cdn. $11.250028 ($7.60) per share. As a consequence, the shares are being redeemed in five equal annual installments commencing August 3, 2000. In addition, dividends on the outstanding shares are being paid at a rate of 3.5% per annum commencing July l, 2000. 9 10 6. EARNINGS PER SHARE
Three months ended Nine months ended September 30 September 30 -------------------------------- --------------------------------- 2000 1999 2000 1999 ---- ---- ---- ---- Restated Note 10) Numerator Income (loss) from continuing operations $(17) $ 241 $ 601 $ 233 Preferred stock dividends and accretion 90 93 268 279 -------- --------- --------- ---------- Numerator for basic earnings per share - Income (loss) from continuing operations available to common stockholders (107) 148 333 (46) Accretion on convertible preferred shares 10 29 72 86 -------- --------- --------- --------- Numerator for diluted earnings per share - Income (loss) from continuing operations available to common stockholders $(97) $ 177 $ 405 $ 40 ======== ========= ========= ========= Denominator Denominator for basic earnings per share - Weighted-average shares issued, issuable and outstanding 3,603,950 3,607,080 3,603,950 3,607,127 Effect of dilutive securities Convertible securities 95,396 283,111 220,083 283,111 Stock options 32,029 -- 4,977 -- -------- --------- --------- --------- Denominator for diluted earnings per share - Adjusted weighted-average shares 3,731,375 3,890,191 3,829,010 3,890,238 ========= ========= ========= ========= Basic earnings per share from continuing operations $(0.03) $ 0.04 $ 0.09 $(0.01) Diluted earnings per share from continuing operations $(0.03) $ 0.04 $ 0.09 $(0.01)
The effect of the convertible preferred shares has not been included in computing the diluted earnings per share from continuing operations for the three months and nine months ended September 30, 1999 and for the nine months ended September 30, 2000, since to do so would be anti-dilutive. 10 11 7. SEGMENT INFORMATION FROM CONTINUING OPERATIONS
Sanitation Wiping Products Products Corporate Total ---------- -------- --------- ----- Three months ended September 30 2000 ---- Revenues from external customers $14,753 $ 5,514 $20,267 Intersegment revenues 1,275 83 1,358 Segment income (loss) before taxes 1,050 (541) (386) 123 Segment assets 29,344 6,555 1,646 37,545 1999 ---- Revenues from external customers 15,193 5,321 20,514 Intersegment revenues 966 72 1,038 Segment income (loss) before taxes 391 71 (96) 366 Nine months ended September 30 2000 ---- Revenues from external customers $45,048 $14,755 $59,803 Intersegment revenues 3,206 274 3,480 Segment income (loss) before taxes 2,702 (872) (537) 1,293 1999 (Restated - Note 10) ---- Revenues from external customers 45,207 14,133 59,340 Intersegment revenues 2,941 254 3,195 Segment income (loss) before taxes 857 6 (436) 427
11 12 8. 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 $1,998,620 for all known and quantifiable liabilities arising at the time of the sale of the Division. The balance of this provision at September 30, 2000 was $1,920,446. 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. 12 13 9. 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 nine months ended September 30, 2000, $858,000 of this amount was paid and charged against the amount accrued, leaving a balance of $227,000 remaining to be paid as at September 30, 2000. All of the above employees had been terminated by June 30, 2000. 10. RESTATEMENTS A) Results for the nine months ended September 30, 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, income from continuing operations and net income for the nine months ended September 30, 1999 by $299,000, $173,000 and $173,000 or $0.05 per common share, respectively. B) Results for the nine months ended September 30, 1999 have also been restated to reflect the correction of accounting irregularities discovered at the Company's subsidiary, IFC Disposables, Inc. This had the effect of reducing gross profit, income from continuing operations and net income for the nine months ended September 30, 1999 by $149,000, $98,000 and $98,000 or $0.02 per common share, respectively. Also, results for the nine months ended September 30, 2000 reflect the restatement of the results for the six months ended June 30, 2000 resulting from the above accounting irregularities. The restatement for the six months period reduced gross profit, income from continuing operations and net income by $427,000, $282,000 and $282,000 or $0.08 per common share, respectively. The balance of retained earnings at September 30, 2000 has been reduced by a total of $766,000 as a result of these accounting irregularities, which commenced in 1997, as follows: Year 1997 $135,000 Year 1998 309,000 Year 1999 40,000 Six months ended June 30, 2000 282,000
As a result of the above restatements, the balance of retained earnings at September 30, 1999 has been reduced by $715,000. 11. ACCOUNTING DEVELOPMENTS The Financial Accounting Standards Board has issued Statement of Financial Accounting Standards No. 133 "Accounting for Derivative Instruments and Hedging Activities." SFAS 133 will be effective for the Company's December 31, 2001 year-end and interim periods. The Company has not determined the impact, if any, on its consolidated financial statements arising from the eventual application of SFAS 133. 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. 13 14 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. RESULTS OF OPERATIONS RESTATEMENT OF RESULTS OF PRIOR PERIODS - --------------------------------------- Accounting irregularities discovered at the Company's wholly-owned subsidiary, IFC Disposables, Inc. have resulted in earnings for the period from January 1, 1997 to June 30, 2000 being overstated by a total of $766,000 on an after-tax basis, as follows: Year 1997 $135,000 Year 1998 309,000 Year 1999 40,000 Six months ended June 30, 2000 282,000
The resulting restatement of results for the nine months ended September 30, 1999 has reduced net income for that period by $98,000 or $0.02 per common share. Net income for the six months ended June 30, 2000 had been overstated by $282,000 or $0.08 per common share and the results for the nine months ended September 30, 2000 reflect this restatement. In addition to the above, results for the nine months ended September 30, 1999 have been restated to reflect accounting adjustments made during the 1999 year-end financial close. The effect of these adjustments was to reduce net income for the nine months by a further $173,000 or $0.05 per common share. THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED WITH THE THREE MONTHS ENDED SEPTEMBER 30, 1999. SALES - ----- Sales of continuing operations for the third quarter of 2000 decreased by $247,000 or 1.2% to $20,267,000 from $20,514,000 in the same quarter last year, after eliminating inter-segment sales of $1,358,000 in the current quarter and $1,038,000 in the third quarter of 1999. Sales of the sanitation products segment were $16,028,000 in the current quarter, a decrease of $131,000 or 0.8% from the corresponding quarter last year. Sales of the wiping products segment at $5,597,000 were $204,000 or 3.6% higher than in the third quarter of 1999. COST OF SALES AND GROSS PROFIT - ------------------------------ Gross profit of the sanitation products segment improved to 40.2% of sales, from 38.1% of sales in the third 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 6.9% of sales in the current quarter, down from 16.7% of sales in the same quarter last year, primarily due to an increase in the quarter in the reserve for obsolete inventories of $300,000 and to competitive pricing pressures. 14 15 SELLING EXPENSES - ---------------- Selling expenses for the third quarter of 2000 totalled $3,763,000, a reduction of $417,000 or 10.0% from the same quarter in 1999. In the sanitation products segment, selling expenses at $3,133,000 were $360,000 or 10.3% lower than in the third quarter of 1999. The improvement was primarily the result of lower outward freight costs and savings derived from the restructuring of operations in the fourth quarter of 1999. In the wiping products segment, selling expenses at $630,000 were $57,000 or 8.3% lower than in the corresponding quarter last year. The reduction was primarily due to lower outward freight costs in the current quarter. GENERAL AND ADMINISTRATION EXPENSES - ----------------------------------- General and administration expenses amounted to $2,623,000 in the third quarter, an increase of $458,000 or 21.2% over the same quarter last year. Expenses of the sanitation products segment at $1,967,000 were $11,000 or 0.6% higher than in the third quarter of 1999. In the wiping products segment, expenses increased by $152,000 to $276,000 in the current quarter, resulting primarily from an increase of $145,000 to the allowance for doubtful accounts. Corporate charges in the current quarter amounted to $380,000, an increase of $295,000 over the corresponding quarter of 1999, due primarily to a higher level of professional fees. AMORTIZATION - ------------ Amortization expense was $208,000 in the third quarter of 2000, an increase of $15,000 over the same quarter last year. The increase was primarily the result of amortization of the Company's new information systems hardware and software. INTEREST EXPENSE - ---------------- Interest expense declined to $184,000 in the third quarter from $224,000 in the same quarter of 1999. The decrease was primarily due to a lower level of borrowing in Canada, reflecting the utilization of part of an investment in 1999 by Wyant Corporation of $4,500,000 in additional common shares of Wood Wyant Inc. to reduce the Company's bank borrowing. OTHER INCOME - ------------ Other income at $66,000 was $3,000 lower than in the third quarter of 1999. INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES - ----------------------------------------------------- Income from continuing operations before income taxes amounted to $123,000 in the current quarter, a decrease of $243,000 from the level of $366,000 earned in the corresponding quarter last year. The sanitation products segment improved by $659,000 over the third quarter of 1999, while the wiping products segment declined by $612,000 and corporate expenses increased by $290,000. INCOME TAXES - ------------ Income tax expense amounted to $140,000 in the third quarter of 2000, compared with $125,000 in the same quarter last year. The higher expense in the current quarter, despite the significantly lower pre-tax earnings, resulted from the earnings in Canada being taxed at a higher rate than that applicable to the tax losses incurred in the United States. DISCONTINUED OPERATIONS - ----------------------- There were no discontinued operations in the current quarter, while in the third quarter of 1999 the discontinued health care operations incurred a loss of $224,000 or $0.06 per common share. 15 16 NET INCOME - ---------- The third quarter of 2000 recorded a loss of $17,000, compared with net income of $17,000 in the same quarter last year. After deducting dividends and accretion relating to the mandatorily redeemable preferred shares, this represented a loss of $0.03 per common share in the current quarter and a loss of $0.02 in the same quarter last year. NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED WITH THE NINE MONTHS ENDED SEPTEMBER 30,1999. SALES - ----- Sales of continuing operations for the nine months ended September 30, 2000 were $59,803,000, an increase of $463,000 or 0.8% over the total of $59,340,000 in the same period last year, after eliminating inter-segment sales of $3,480,000 in the current period and $3,195,000 in the corresponding period in 1999. Sales of the sanitation products segment amounted to $48,254,000 in the first nine months of 2000, an increase of $106,000 or 0.2% over the same period last year. Sales of the wiping products segment were $15,029,000, an increase of $642,000 or 4.5% over the same period in 1999. COST OF SALES AND GROSS PROFIT - ------------------------------ Gross profit of the sanitation products segment increased to 39.8% of sales from 36.7% of sales in the first nine months of 1999 due primarily to an improved product mix and increased selling prices for paper products. Gross profit of the wiping products segment declined to 10.4% of sales from 16.4% in the same period last year, primarily due to an increase to the reserve for obsolete inventories of $300,000 which was recorded in the third quarter of 2000 and to competitive pricing pressures. SELLING EXPENSES - ---------------- Selling expenses amounted to $11,386,000 in the current period, a decrease of $366,000 or 3.1% from the corresponding period last year. Expenses of the sanitation products segment at $9,530,000 were $332,000 or 3.4% lower than in the same period last year. Selling expenses of the wiping products segment at $1,856,000 were $34,000 or 1.8% lower than in the same period last year. GENERAL AND ADMINISTRATION EXPENSES - ----------------------------------- General and administration expenses at $7,177,000 were $440,000 or 6.5% higher than in the first nine months of 1999. In the sanitation products segment, expenses at $6,156,000 were only $19,000 higher than in the corresponding period last year. In the wiping products segment, expenses increased by $133,000 or 34.2% to $522,000 as a result of the increase of $145,000 to the reserve for doubtful accounts receivable. Corporate charges increased to $499,000 from $211,000 in the same period last year, primarily due to higher professional fees. AMORTIZATION - ------------ Amortization expense was $610,000, an increase of $126,000 over the corresponding period in 1999, primarily due to the amortization of the Company's new information systems hardware and software. INTEREST EXPENSE - ---------------- Interest expense for the current period amounted to $538,000, a decrease of $332,000 from the same period last year due to lower levels of borrowing in both the United States and Canada. OTHER INCOME - ------------ Other income for the current period at $206,000 was $13,000 lower than in the corresponding period last year. 16 17 INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES - ----------------------------------------------------- Income from continuing operations before income taxes for the current period amounted to $1,293,000, an increase of $866,000 over the same period in 1999. The sanitation products segment improved by $1,845,000, while the wiping products segment declined by $878,000 and corporate expenses increased by $101,000. INCOME TAXES - ------------ Income tax expense was $692,000 in the current period, compared with $194,000 in the corresponding period last year, reflecting the higher level of pre-tax earnings in the current period. DISCONTINUED OPERATIONS - ----------------------- The discontinued health care operations generated after-tax income of $750,000 or $0.21 per common share in the first nine months of 1999. There were no discontinued operations in the current period. NET INCOME - ---------- Net income for the nine months ended September 30, 2000 amounted to $601,000, compared with $983,000 in the same period last year. After deducting dividends and accretion of mandatorily redeemable preferred shares, this represented earnings of $0.09 per common share in the current period and $0.20 per common share in the same period in 1999. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- Liquidity and capital resources of the Company's Canadian operations (Wood Wyant Inc.) and United States operations (IFC Disposables) are discussed separately, as each is self-financing and has separate banking facilities. CANADIAN OPERATIONS - ------------------- The Canadian operations utilized $2,162,000 of cash during the first nine months of 2000. Operating activities generated $2,639,000 of cash during the period, despite an increase in working capital of $179,000, as increased receivables ($684,000) and lower payables ($1,984,000) more than offset lower inventories ($1,225,000) and increased income taxes payable ($1,107,000). Capital expenditures during the period totalled $873,000. Long-term debt repaid amounted to $4,269,000, including the renegotiation of a revolving credit facility on February 22, 2000 which changed the maturity date from September 30, 2000 to September 30, 2001 and the maximum availability to Cdn. $2,000,000 ($1,330,000). The Company also restructured its financing on the same date by increasing the collateralized revolving line of credit by Cdn. $2,500,000 to Cdn. $10,000,000 ($6,651,000) and utilizing this line of credit to repay, on March 8, 2000, the outstanding balance of Cdn. $3,321,000 ($2,209,000) on two term loans which had been obtained in the second quarter of 1998 to finance business acquisitions. On June 8, 2000 Cdn. $430,000 ($286,000) was borrowed, utilizing the existing revolving credit facility, to finance equipment purchases. In January 2000, $545,000 of Class A Preferred shares of Wood Wyant Inc. were redeemed and on August 3, 2000, $433,000 of Class F Preferred shares were redeemed following the exercise in July 2000 by the Class F Preferred shareholders of an option to redeem the 283,111 outstanding shares at a price of Cdn. $11.250028 ($7.60) per share in five equal annual instalments commencing August 3, 2000. Dividends paid on outstanding preferred shares during the first nine months of 2000 totalled $129,000. As at September 30, 2000, approximately $2,426,000 was available under the Company's Cdn. $10,000,000 collateralized revolving line of credit. In addition, approximately $242,000 was available to finance future capital expenditures under the Cdn. $2,000,000 revolving credit facility. 17 18 All borrowings of the Canadian operations are with the Bank of Nova Scotia. Long-term debt outstanding at September 30, 2000 amounted to $2,787,000, including $1,307,000 due within one year. All of the loans were at the commercial prime rate in Canada (7.5% at September 30, 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 September 30, 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 September 30, 2000 average less than $600,000 over the next five years, with a maximum of $1,861,000 in 2001. Amounts required to redeem preferred shares approximate $950,000 per annum during that period. 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. US OPERATIONS - ------------- Cash of $1,264,000 was utilized by continuing operations in the United States during the first nine months of 2000. Operating activities utilized $1,107,000 primarily due to the losses incurred in the period. Working capital increased by $4,000, as a decrease of $1,924,000 in income taxes payable was largely offset by an increase in payables of $1,466,000 and a reduction of inventories of $668,000, while receivables increased by $163,000. Capital expenditures in the current period amounted to $179,000. 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 (9.5% at September 30, 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 September 30, 2000 amounted to $635,000. Maximum borrowing under the facility is determined by advance formulas applicable to the book value of accounts receivable and inventories of IFC. As a consequence of the accounting irregularities previously discussed, IFC Disposables is in default of certain of the loan covenants relating to the secured revolving line of credit. The balance outstanding under the revolving line of credit at September 30, 2000 of $365,000 has since been fully repaid. The Company expects to renegotiate the terms of the facility and to restore normal operating practices during the fourth quarter of 2000. Management believes that future operating cash flows, cash on hand and other sources of cash available 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. 18 19 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 $1,998,620 for all known and quantifiable liabilities arising at the time of the sale of the Division. The balance of this provision at September 30, 2000 was $1,920,446. 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. 19 20 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. 20 21 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 September 30, 2000. 21 22 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: November 16, 2000 SIGNATURE: /s/ Marc D'Amour ----------------- ---------------------- Marc D'Amour Vice President, Chief Financial Officer and Treasurer (For the registrant and as Principal Financial Officer) 22 EX-27 2 m08101ex27.txt FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM WYANT CORPORATION FORM 10-Q RE QUARTER ENDED SEPTEMBER 30, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q FOR QUARTER ENDED SEPTEMBER 30, 2000. 1,000 9-MOS DEC-31-2000 JAN-01-2000 SEP-30-2000 195 0 12,839 0 6,966 21,555 10,573 0 37,545 16,501 1,480 4,029 0 27 12,352 37,545 59,803 59,803 39,005 57,178 (206) 0 538 1,293 692 601 0 0 0 601 0.09 0.09
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