UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM 10-K/A
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
for the fiscal year ended May 31, 1999
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission File No. 1-14608
WEIDER NUTRITION INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 48-1188025
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2002 South 5070 West, Salt Lake City, Utah 84104-4726
(Address of principal executive offices and Zip Code)
Registrant's telephone number, including area code: (801) 975-5000
Securities registered pursuant to Section 12(b) of the Act:
Class A Common Stock, par value $.01 per share
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The number of shares outstanding of the Registrant's common stock, as of
September 21, 1999, was 25,042,073, which amount includes 9,354,641 shares of
Class A Common Stock and 15,687,432 shares of Class B Common Stock.
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of September 21, 1999 was approximately $35,547,200 based on
the closing sales price of such stock on such date.
<PAGE>
PART II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The Company amends the last sentence of the third paragraph of the section
titled Management's Discussion and Analysis of Financial Condition and Results
of Operations--Results of Operations (Fiscal 1999 Compared to Fiscal 1998) in
its entirety to read as follows:
"Sales of Pain Free(TM) amounted to approximately $71 million for the year
ended May 31, 1999 Compared to $22.6 million for the year ended May 31, 1998."
PART III
ITEM 10. DIRECTORS OF REGISTRANT
The following persons serve as members of the Board of Directors of Weider
Nutrition International, Inc. (the "Company"):
NAME AGE POSITION
------ ----- -----------
Eric Weider 36 Chairman of the Board
George F. Lengvari 57 Vice Chairman of the Board
Bruce J. Wood 49 Chief Executive Officer, President
and Director
Ronald L. Corey 60 Director
Donald G. Drapkin 51 Director
David J. Gustin 48 Director
Roger H. Kimmel 53 Director
Glenn W. Schaeffer 45 Director
ERIC WEIDER has been a director of the Company since June 1989, Chairman
of the Board of Directors since August 1996 and since June 1, 1997 has been
President and Chief Executive Officer of Weider Health and Fitness, a major
stockholder of the Company. Mr. Weider also serves as a member of the board of
directors of a number of public and private companies in the United States and
Canada, including Weider Health and Fitness, Enutrition, LLC and Weider
Publications, a publisher of health and fitness magazines. Mr. Weider is also
the President of the Joe Weider Foundation.
GEORGE F. LENGVARI has been a director of the Company since August 1996.
Mr. Lengvari has been Vice Chairman of Weider Health and Fitness since June 1995
and Chairman of Weider Publications U.K. since September 1994. Prior to joining
Weider Health and Fitness, Mr. Lengvari was a partner for 22 years in the law
firm Lengvari Braman and is currently of counsel to the law firm LaPointe
Rosenstein.
BRUCE J. WOOD has been Chief Executive Officer, President and a director
of the Company since June 1999. From January 1998 to December 1998, Mr. Wood was
the President and a founder of All Stock Label LLC. From 1973 to December 1997,
Mr. Wood held various management positions with divisions of Nabisco, Inc., a
manufacturer and marketer of packaged food, including President and Chief
Executive Officer of Nabisco, Ltd., President of Planters Lifesavers Company,
and Senior Vice President, Marketing of both Nabisco Biscuit Company and Del
Monte USA. Mr. Wood also serves as a director of Payge International Ltd.,
Montreal, a private company which manufactures injection molded plastic
industrial and advertising products.
RONALD L. COREY has been a director of the Company since August 1996. Mr.
Corey served as President of the Club de Hockey Canadien Inc. (the Montreal
Canadiens) and the Molson Center Inc. from 1982 through July 1999. In addition,
between 1985 and 1989, Mr. Corey held the position of Chairman of the Board and
director of the Montreal Port Corporation. Mr. Cory has served as director of
numerous companies, including Banque Laurentienne, Reno-Depot Inc. and
Transamerica Life Companies, an insurance and financial services company.
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DONALD G. DRAPKIN has been a director of the Company since October 1997.
Mr. Drapkin has been a director and Vice Chairman of MacAndrews & Forbes
Holdings, Inc. and various of its affiliates since March 1987. Prior to joining
MacAndrews & Forbes, Mr. Drapkin was a partner in the law firm of Skadden, Arps,
Slate, Meagher & Flom in New York for more than five years. Mr. Drapkin is also
a director of Algos Pharmaceutical Corporation, a developer of analgesic and
anesthetic drugs, Anthracite Capital, Inc., a financial services company,
BlackRock Asset Investors, Cardio Technologies, Inc., The Molson Companies
Limited, Nexell Therapeutics Inc., a cell therapy company, Playboy Enterprises,
Inc., a publishing and entertainment company, Revlon Consumer Products
Corporation, a developer and marketer of cosmetics, Revlon, Inc. and The Warnaco
Group, Inc., a designer, manufacturer and marketer of women's apparel.
DAVID J. GUSTIN has been a director of the Company since March 1999. From
March 1999 until June 1999, Mr. Gustin served as Chief Executive Officer and
President of the Company. From 1992 to June 1998, Mr. Gustin held various senior
management positions within ConAgra, Inc., including President of ConAgra
Grocery Products Companies, Hunt-Wesson Grocery Products Companies,
LaChoy/Rosarita Company and Orville Redenbacher/Swiss Miss Company. Prior to
joining ConAgra, Inc., Mr. Gustin held various management positions with
Frito-Lay, Inc. and General Foods Corporation.
ROGER H. KIMMEL has been a director of the Company since August 1996. Mr.
Kimmel has been a partner at the law firm of Latham & Watkins for more than five
years. Mr. Kimmel is also a director of Algos Pharmaceutical Corporation, TSR
Wireless, LLC, a provider of wireless messaging products and services, and U.S.
Dermatologics, Inc., a pharmaceutical research company.
GLENN W. SCHAEFFER has been a director of the Company since October 1997.
Mr. Schaeffer has been President, Chief Financial Officer and Treasurer of
Circus Circus Enterprises, Inc. ("Circus Circus"), an owner and operator of
casino-hotel properties, since April 1, 1995 and a member of the Board of
Directors of Circus Circus since March 4, 1996. Prior to joining Circus Circus,
Mr. Schaeffer was involved in an executive capacity in the management and
operation of Gold Strike Resorts.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires directors, officers and persons
who beneficially own more than 10% of a registered class of stock of the Company
to file initial reports of ownership (Form 3) and reports of changes in
beneficial ownership (Forms 4 and 5) with the Securities Exchange Commission
("COMMISSION") and The New York Stock Exchange. Such persons are also required
under the rules and regulations promulgated by the Commission to furnish the
Company with copies of all Section 16(a) forms they file.
Based solely on a review of the copies of such forms furnished to the
Company, the Company believes that during the fiscal year ended May 31, 1999 the
Company's directors, officers and greater than 10% beneficial owners complied
with all applicable Section 16(a) filing requirements, except that (i) Messrs.
Reynolds and Blair filed Forms 5 late (reporting two transactions) and (ii) Mr.
Lengvari reported two transactions (one Form 4 and one Form 5) late.
ITEM 11. EXECUTIVE COMPENSATION.
The following table sets forth certain information regarding the annual
and long-term compensation for services in all capacities to the Company for the
fiscal years ended May 31, 1999, 1998, and 1997 of those persons who were
either:
(a) the chief executive officer during the last completed fiscal year; or
(b) each of the Company's other most highly compensated executive officers
as of the end of the last completed fiscal year whose annual salary
and bonuses exceeded $100,000 (collectively, the "NAMED OFFICERS").
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SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
-------------------------------------- -------------------------------------------
OTHER AWARDS
ANNUAL RESTRICTED OF STOCK ALL OTHER
COMPEN- STOCK OPTIONS COMPEN-
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS SATION(1) AWARDS(2) (SHARES) SATION(3)
- ---------------------------- ------ -------- -------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
David J. Gustin (4) ............ 1999 $120,000 $120,000 $ 0 $ 0 750,000 $ 0
Chief Executive Officer
and President
Richard B. Bizzaro (5) ......... 1999 123,956 0 0 0 7,000 310,417
Chief Executive Officer 1998 325,000 140,000 0 0 0 4,000
and President 1997 300,000 356,146 1,363,000 5,452,092 220,000 4,000
Robert K. Reynolds (6) ......... 1999 275,000 0 0 0 90,000 4,000
Chief Operating Officer, 1998 250,000 125,000 0 0 0 4,000
Executive Vice President 1997 230,000 237,430 909,000 3,634,730 120,000 4,000
and Secretary
Richard A. Blair (7) ........... 1999 225,000 25,000 0 0 60,000 4,000
Executive Vice President-Sales 1998 210,000 55,000 0 0 0 4,000
1997 175,000 118,715 172,000 904,442 80,000 4,000
Stephen D. Young ............... 1999 185,000 0 0 0 20,000 4,000
Executive Vice President- 1998 165,000 45,000 0 0 0 4,000
Operations and Chief 1997 133,333 106,844 172,000 904,442 80,000 4,000
Financial Officer
</TABLE>
- ----------------
(1) Represents cash payments made pursuant to management incentive agreements
(the "MANAGEMENT INCENTIVE AGREEMENTS") existing at the time of the
Company's initial public offering in 1997 (the "IPO"). Pursuant to the
terms of the Management Incentive Agreements, certain employees of the
Company were granted performance units ("PERFORMANCE UNITS") as incentive
compensation, which entitled the recipients to a cash payment or, at the
option of the Company, shares of Class A Common Stock upon the conversion
of the vested Performance Units upon consummation of the IPO. The unvested
Performance Units at the time of the Company's IPO were converted into
Class A Restricted Stock (See footnote 2).
(2) At May 31, 1999, Mr. Young held 27,407 shares of unvested Class A
Restricted Stock, valued at approximately $143,887. The Class A Restricted
Stock was issued at the time of the Company's IPO upon conversion of
unvested Performance Units pursuant to the Management Incentive Agreements,
and vests 20% per year. See footnote 1 above and "CERTAIN RELATIONSHIPS AND
RELATED PARTY TRANSACTIONS--MANAGEMENT INCENTIVE AGREEMENTS."
(3) Represents matching contributions by the Company under Company's 401(k)
plan in fiscal 1999 in the amounts of $4,000 for each of Messrs. Bizzaro,
Reynolds, Blair and Young. Also includes separation payments in the
aggregate amount of $306,417 for Mr. Bizzaro. Excludes separation payments
of $654,750, $931,000 and $300,000 for Messrs. Bizzaro, Reynolds and
Gustin, which are payable in future fiscal years.
(4) Mr. Gustin became President and Chief Executive Officer of the Company
effective March 1, 1999 and resigned from the employ of the Company
effective June 2, 1999. Includes all compensation paid to Mr. Gustin from
March 1, 1999 through May 31, 1999. In connection with his resignation, Mr.
Gustin and the Company entered into an agreement pursuant to which Mr.
Gustin is entitled to a payment of $300,000. Mr. Gustin remains a member of
the Board of Directors of the Company. All 750,000 options granted to Mr.
Gustin were cancelled in connection with his resignation.
(5) Mr. Bizzaro resigned from the employ of the Company effective October 5,
1998. His compensation for fiscal 1999 includes compensation paid to him
through such date.
(6) Mr. Reynolds resigned from the employ of the Company effective July 15,
1999.
(7) As of July 1999, Mr. Blair no longer serves as an executive officer of the
Company.
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The following table sets forth certain information with respect to grants
of options to purchase shares of Class A Common Stock under the Equity Plan to
the Named Officers during fiscal year 1999.
<TABLE>
<CAPTION>
OPTION GRANTS IN FISCAL YEAR 1999(1)
PERCENTAGE POTENTIAL REALIZABLE VALUE
OF TOTAL AT ASSUMED ANNUAL RATES
OPTIONS OF STOCK PRICE
GRANTED TO EXECERCISE OR APPRECIATION
OPTIONS EMPLOYEES BASE FOR OPTION TERMS(2)
GRANTED IN FISCAL PRICE PER EXPIRATION -------------------------------
NAME (SHARES) YEAR SHARE DATE 5% 10%
- ---- ---------- -------------- --------------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
David J. Gustin(3) ............ 750,000 54.9% $ 6.375 2/10/07 $1,036,231 $3,659,131
Richard B. Bizzaro ............ 7,000 * $ 5.0625 10/29/06 18,859 43,339
Robert K. Reynolds ............ 50,000 3.7 $ 4.9375 11/2/06 140,957 315,817
40,000 2.9 $ 5.750 12/11/06 80,266 220,154
Richard A. Blair .............. 20,000 1.5 $ 4.9375 11/2/06 56,383 126,327
40,000 2.9 $ 5.750 12/11/06 80,266 220,154
Stephen D. Young .............. 20,000 1.5 $ 5.750 12/11/06 40,133 110,077
</TABLE>
- ---------------------------------
* Represents less than 1%
(1) All options were granted under the Equity Plan and become exercisable in
five equal annual installments beginning on the first anniversary date of
grant, except that Mr. Gustin's options become exercisable in three equal
annual installments. Under the terms of the Equity Plan, the Compensation
Committee retains discretion, subject to certain restrictions, to modify
the terms of outstanding options and to reprice outstanding options.
Options are granted for a term of eight years, subject to earlier
termination in certain events. The exercise price is equal to the closing
price of the Common Stock on The New York Stock Exchange on the date of
grant.
(2) Potential gains are net of the exercise price, but before taxes associated
with the exercise. Amounts represent hypothetical gains that could be
achieved for the respective options if exercised at the end of the option
term. The assumed 5% and 10% rates of stock price appreciation are provided
in accordance with the rules of the Securities and Exchange Commission and
do not represent the Company's estimate or projection of the future Common
Stock price. Actual gains, if any, on stock option exercises are dependent
upon the future financial performance of the Company, overall market
conditions and the option holders' continued employment through the vesting
period. This table does not take into account any appreciation in the price
of the Common Stock from the date of grant to the date of this Form 10-K/A
other than the columns reflecting assumed rates of appreciation of 5% and
10%.
(3) Each of the options awarded to Mr. Gustin by the Company were cancelled in
connection with his resignation.
The table below sets forth certain information with respect to the
unexercised options to purchase shares of Common Stock held by the Named
Officers as of May 31, 1999. No Named Officer exercised any options during
fiscal 1999.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AS OF IN-THE-MONEY OPTIONS AS OF
MAY 31, 1999 MAY 31, 1999(1)
------------------------------- ----------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
David J. Gustin.......... 0 0 0 0
Richard B. Bizzaro....... 2,333 0 438 0
Robert K. Reynolds....... 58,000 152,000 0 0
Richard A. Blair......... 4,000 56,000 1,250 0
Stephen D. Young......... 0 100,000 0 0
</TABLE>
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<PAGE>
- ---------------------
(1) Based on the closing price of the Class A Common Stock on the New York
Stock Exchange on May 28, 1999 ($5.25), the last trading day of the Class A
Common Stock in fiscal 1999, minus the exercise price of the option.
EMPLOYMENT AND SEPARATION AGREEMENTS
The Company entered into employment agreements with each of Messrs. Blair
and Young in June 1994. Mr. Blair's employment agreement was subsequently
amended. Messrs. Blair and Young are entitled to annual bonuses in an amount
based upon the annual performance and profitability of the Company. In addition,
under their employment agreements, Messrs. Blair and Young are entitled to
certain severance benefits in the event they are terminated by the Company. In
the event Mr. Blair's employment is terminated by the Company without cause or
by Mr. Blair upon a breach of the employment agreement by the Company, he is
entitled to a severance payment in an amount equal to 100% of the base salary
and bonus he received during the 24 months immediately preceding his
termination. In the event Mr. Young is terminated, or his employment ceases, for
any reason other than cause, death, incapacity or resignation, he is entitled to
a severance payment in an amount equal to a minimum of 100% of the base salary
he received during the 9 months immediately preceding his termination, and a
maximum of 100% of the base salary he received during the 12 months immediately
preceding his termination. If Mr. Young is terminated due to incapacity, he is
entitled to 50% of the total compensation he received during nine months
immediately preceding his termination.
In connection with their resignation of employment with the Company, the
Company entered into a separation agreement with each of Messrs. Bizzaro and
Reynolds on October 8, 1998 and July 15, 1999, respectively. Under their
separation agreements, Messrs. Bizzaro and Reynolds were entitled to separation
payments in an aggregate amount of $965,167 and $931,000, respectively. Of the
227,000 stock options granted to Mr. Bizzaro, 2,333 were exercised and the
remaining options were cancelled. Mr. Reynolds has the right to exercise 210,000
stock options granted to him during his employment for a limited period of time
following his resignation. The separation agreements supplement the employment
agreements with these executives and contain customary general release and
confidentiality provisions. Mr. Reynolds' employment agreement provides that a
portion of certain loans made to him by the Company in connection with his
purchase of Class A Restricted Stock may be forgiven by the Company depending
upon the performance of the Class A Common Stock. See "CERTAIN RELATIONSHIPS AND
RELATED PARTY TRANSACTIONS--MANAGEMENT INCENTIVE AGREEMENTS." In addition, so
long as he is indebted to the Company for at least $100,000, Mr. Reynolds has
the right to cause the Company to repurchase some or all of the Class A Common
Stock held by him at a purchase price equal to the then market price of the
Class A Common Stock.
DIRECTOR COMPENSATION
Members of the Board of Directors who are not employees of the Company or
any subsidiary or parent corporation of the Company (the "INDEPENDENT
DIRECTORS") receive an annual fee of $12,000. In addition to the annual fee,
effective July 26, 1999, each Independent Director is entitled to receive $1,500
for each Board meeting attended and $500 for each committee meeting attended on
a day the Board is not otherwise meeting. The Company will also reimburse all
directors for their reasonable expenses incurred in connection with their
activities as directors of the Company. Each Independent Director receives
options to purchase 20,000 shares of Class A Common Stock
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upon appointment or election to the Board of Directors and options to purchase
7,000 shares of Class A Common Stock upon each annual meeting of the Company's
stockholders following the first anniversary of the date of appointment or
election to the Board of Directors, provided the Independent Director is still
serving as a director of the Company. Messrs. Corey, Drapkin, Gustin, Kimmel and
Schaeffer are currently Independent Directors of the Company. Directors who are
not Independent Directors receive no compensation for serving on the Board of
Directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
From June 1, 1998 to August 14, 1999, Eric Weider, Roger H. Kimmel and
George F. Lengvari were members of the Compensation Committee of the Board of
Directors. Effective August 15, 1999, Glenn W. Schaeffer and Ronald L. Corey
were appointed as the entire membership of the Compensation Committee. Messrs.
Schaeffer and Corey are not employees of, or otherwise affiliated with (other
than in their capacity as director), the Company.
Pursuant to a sublicense agreement dated December 1, 1996 with Mariz
Gestao E Investimentos Limitada ("Mariz"), the Company obtained the exclusive
worldwide right to use the Weider name and trademarks, except in the following
countries: the United States, Canada, Mexico, Spain, Australia, New Zealand,
Japan and South Africa. Mariz is a company incorporated under the laws of
Portugal and owned by a trust of which the family members of George F. Lengvari,
a director of the Company, are included among the beneficiaries. Mariz obtained
its exclusive international rights to use the Weider name and trademarks
pursuant to a license agreement, effective June 1, 1994, among Mariz and Joe
Weider, Ben Weider, Weider Sports Equipment and Weider Health and Fitness.
Pursuant to the license agreement with Mariz, the Company is required to make
annual royalty payments to Mariz commencing on December 1, 1998 on sales of the
Company's brands in existence on December 1, 1996 in countries covered by the
agreement. In addition, the sublicense agreement with Mariz includes an
irrevocable buy-out option exercisable by the Company after May 31, 2002 for a
purchase price equal to the greater of $7.0 million or 6.5 times the aggregate
royalties paid by the Company in the fiscal year immediately preceding the date
of the exercise of the option. In fiscal 1999, the Company made royalty payments
to Mariz totaling approximately $196,000.
Latharn & Watkins, of which Roger H. Kimmel, a director of the Company, is
a partner, performed legal services for the Company during the fiscal year ended
May 31, 1999.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
From June 1, 1998 to August 14, 1999, the Compensation Committee of the
Board of Directors (the "COMPENSATION COMMITTEE") was comprised of Eric Weider,
Roger H. Kimmel and George F. Lengvari. Effective August 15, 1999, Glenn W.
Schaeffer and Ronald L. Corey comprise the entire membership of the Compensation
Committee. The Committee provides guidance and overview for all executive
compensation and benefit programs, including basic strategies and policies. The
Committee evaluates the performance of the executive officers and determines
their compensation levels in terms of salary, bonuses, stock options and other
benefits, all subject to approval of the Board of Directors. In accordance with
rules established by the Commission, the Company is required to provide certain
data and information in regard to the compensation provided to the Company's
Chief Executive Officer and the Named Officers. The Compensation Committee has
prepared the following report for inclusion herein.
COMPENSATION POLICY AND COMPANY PERFORMANCE. The executive compensation
program's overall objective is to reward and retain executives with the level of
talent and ability required to prudently guide the Company's growth, maximize
the link between executive and stockholder interests through a stock option
plan, recognize individual contributions as well as overall business results and
maintain the Company's position as a leader in the nutritional supplements
market. To achieve these objectives, the Company has developed an overall
compensation strategy and specific compensation plans that tie a substantial
portion of an executive's compensation to performance.
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The key elements of the Company's compensation program consist of fixed
compensation in the form of base salary and variable compensation in the forms
of bonus payments and stock option awards under the Equity Plan. An executive's
annual base salary represents the fixed component of such executive's total
compensation and variable compensation is intended to comprise a substantial
portion of an executive's total annual compensation. The Compensation
Committee's policies with respect to each of these elements, including the bases
for the compensation awarded to the Company's Chief Executive Officer, are
discussed below. In addition, while the elements of compensation described below
are considered separately, the Compensation Committee takes into account the
full compensation package afforded by the Company to the individual, including
pension benefits, insurance and other benefits, as well as the programs
described below.
BASE SALARIES. A competitive base salary is necessary to the development
and retention of capable management and is consistent with the Company's
long-term goals. Base salaries for executives are determined based upon the
Compensation Committee's evaluation of the responsibilities of the position held
and the experience of the individual, and by reference to historical levels of
salary paid by the Company and general economic conditions.
BONUS PAYMENTS. Targeted cash bonus payments are awarded to executives in
recognition of contributions to the business during the prior year. An
executive's contributions to the business are measured, in part, by his or her
success in meeting certain goals established by such executive and the
Compensation Committee in consultation with the Chief Executive Officer. The
aggregate amount of the bonuses awarded in any calendar year is determined by
reference to the terms of the executive employment agreements, the Company's
competitive position, assessment of progress in attaining long-term goals and
business performance considerations.
The specific cash bonus an executive receives is dependent on individual
performance and level of responsibility. Assessment of an individual's relative
performance is made annually based on a number of factors, including initiative,
business judgment, knowledge of the industry and management skills.
AWARDS UNDER THE EQUITY PLAN. The other principal component of executives'
compensation is stock options, which are intended as a tool to attract, provide
incentive and retain those executives who make the greatest contribution to the
business, and who can have the greatest effect on the long-term profitability of
the Company. The exercise price of the stock options is set at a price equal to
the market price of the Class A Common Stock at the time of the grant. The
options therefore do not have any value to the executive unless the market price
of the Class A Common Stock rises. The Compensation Committee believes that
these stock options more closely align the executives' interests with those of
its stockholders, and focus management on building profitability and long-term
stockholder value.
POLICY ON THE DEDUCTIBILITY OF COMPENSATION. Section 162(m) of the
Internal Revenue Code of 1986 as amended (the "Code"), limits a public company's
federal income tax deduction for compensation paid in excess of $1,000,000 to
any of its five most highly compensated executive officers. However, certain
performance-based compensation, including awards of stock options, is excluded
from the $1,000,000 limit if specific requirements are met.
While the tax impact of any compensation arrangement is one factor which
is considered by the Compensation Committee, such impact is evaluated in light
of the compensation policies discussed above. The Compensation Committee's
compensation determinations have generally been designed to maximize the
Company's federal income tax deduction for possible application in future years.
However, from time to time compensation may be awarded which is not fully
deductible if it is determined that such award is consistent with the overall
design of the compensation program and in the best interests of the Company and
its stockholders.
CHIEF EXECUTIVE OFFICER COMPENSATION. The salaries of Messrs. Bizzaro and
Gustin were determined based upon their respective employment agreements and the
competitive salary framework described under "-BASE SALARIES" above. The minimum
base salary and annual increases set forth in Messrs. Bizzaro's and Gustin's
employment agreements were determined based on the Board of Directors' judgment
concerning their individual contributions to the business, level of
responsibility and career experience. Although none of these factors were
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given a specific weight, primary consideration was given, in the case of Mr.
Bizzaro, to his individual contributions to the business, and, in the case of
Mr. Gustin, to his level of responsibility and career experience. No particular
formulas or measures were used.
The Company entered into an employment agreement with Bruce J. Wood, its
current Chief Executive Officer and President, on June 3, 1999. Pursuant to his
employment agreement, the Company granted Mr. Wood stock options exercisable
for 600,000 shares of Class A Common Stock and agreed to pay Mr. Wood an annual
base salary of $400,000. For the fiscal year ended May 31, 2000, Mr. Wood is
guaranteed a bonus at least equal to his base salary.
CONCLUSION. The Company has had, and continues to have, an appropriate and
competitive compensation program. The balance of a competitive base salary,
bonus payments and significant emphasis on long-term incentives is a foundation
designed to build stability and to support the Company's continued growth. This
report is submitted by the members of the Compensation Committee.
Date: August 14, 1999 The Compensation Committee of the
Board of Directors
Eric Weider
Roger H. Kimmel
George F. Lengvari
THE PRECEDING "REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE
COMPENSATION" AND THE "STOCK PERFORMANCE CHART" THAT APPEARS IMMEDIATELY
HEREAFTER SHALL NOT BE DEEMED TO BE SOLICITING MATERIAL OR TO BE FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, OR INCORPORATED BY REFERENCE
IN ANY DOCUMENTS SO FILED.
8
<PAGE>
STOCK PERFORMANCE CHART
As part of the executive compensation information presented herein, the
Commission requires a comparison of stock performance for the Company with stock
performance of a broad equity market index and an approximate industry index.
The following chart compares cumulative total stockholder return on Class A
Common Stock during the period from May 1, 1997 to May 31, 1999 (the Company's
fiscal year end) with the cumulative total return on The New York Stock Exchange
and a peer group index of nutritional supplement companies. The comparison
assumes $100 was invested on May 1, 1997 (the first day of trading in the Class
A Common Stock) in the Class A Common Stock or in each of the foregoing indices
and assumes reinvestment of dividends, if any. The peer group used in the below
stock performance chart consists of the following companies, Natrol Inc., NBTY
Inc., Nutraceutical International Corp. and Rexall Sundown Inc. The peer group
no longer includes Amrion, Inc. since it is no longer a publicly traded company.
The returns of each of these companies have been weighted according to the
respective company's stock market capitalization at the beginning of each period
for which a return is indicated. The stock performance shown on the following
chart is not necessarily indicative of future performance.
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
Weider Nutrition Intl Inc (WNI)
CUMULATIVE TOTAL RETURN
--------------------------------
5/1/97 5/97 5/98 5/99
WEIDER NUTRITION INTERNATIONAL, INC ..... 100 115 142 49
PEER GROUP .............................. 100 133 321 148
S&P 500 ................................. 100 106 139 168
9
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of September 27, 1999, the amount and
percentage of the outstanding shares of the Common Stock which, according to the
information supplied to the Company, are beneficially owned by:
o each of the directors of the Company (all of whom are nominees for
re-election as directors of the Company):
o each of the Named Officers:
o all current directors and executive officers of the Company as a
group: and
o each person or entity who is known to the Company to be the beneficial
owner of more than 5% of the outstanding Common Stock.
Except to the extent indicated in the footnotes to the following table, each of
the persons or entities listed has sole voting and sole investment power with
respect to the shares which are deemed beneficially owned by such person or
entity.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED (1)
------------------------------------------------- PERCENT OF
NUMBER OF SHARES PERCENT TOTAL
--------------------- --------------------- VOTING
NAME OF BENEFICIAL OWNER CLASS A(2) CLASS B CLASS A CLASS B POWER
- ------------------------ ---------- ------- ------- ------- -----
<S> <C> <C> <C>
DIRECTORS AND NAMED OFFICERS:
Eric Weider (3) ........................ 3,600 0 * 0 *
Bruce J. Wood .......................... 0 0 0% 0 0%
Ronald L. Corey ........................ 63,760 0 * 0 *
Donald G. Drapkin ...................... 10,333 0 * 0 *
David J. Gustin ........................ 0 0 0 0 0
Roger H. Kimmel (4) .................... 12,333 0 * 0 *
George F. Lengvari (5) ................. 0 0 0 0 0
Glenn W. Schaeffer ..................... 12,333 0 * 0 *
Richard B. Bizzaro ..................... 497,978 0 5.3 0 *
Robert K. Reynolds ..................... 540,430 0 5.7 0 *
Richard A. Blair ....................... 49,679 0 * 0 *
Stephen D. Young ....................... 90,815 0 * 0 *
Directors and executive officers as
a group (13 persons) .................. 284,764 0 3.0 0 *
OTHER PRINCIPAL STOCKHOLDERS
- ----------------------------
Weider Health and Fitness (6) 0 15,687,432 0 100% 94.4%
21100 Erwin Street
Woodland Hills, CA 91367
SAFECO Corporation (7) 1,123,200 0 12.0 0 *
601 Union Street, Suite 2500
Seattle, WA 98101
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
-------------------------------------------- PERCENT OF
NUMBER OF SHARES PERCENT TOTAL
------------------- -------------------- VOTING
OTHER PRINCIPAL STOCKHOLDERS CLASS A CLASS B CLASS A CLASS B POWER
- ---------------------------- ------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C>
AMVESCAP PLC (8) ............. 501,800 0 5.4% 0 *
11 Devonshire Square
London EC2M 4YR, England
Wellington Management Company,
LLP (9) ..................... 746,400 0 8.0 0 *
75 State Street
Boston, MA 02109
The TCW Group, Inc.. (10) ..... 581,000 0 6.2 0 *
865 South Figueroa Street
Los Angeles, CA 90017
</TABLE>
- --------------------
* Represents less than 1%.
(1) Except for information based on Schedules 13G, as indicated in the
footnotes hereto, beneficial ownership is stated as of September 27, 1999,
and includes shares exercisable within 60 days of September 27, 1999 held
by each person, as if such shares were outstanding on September 27, 1999.
(2) Includes 6,333, 6,333, 10,333, 10,333, 210,000, 4,000, 36,000 and 85,332
shares of Class A Common Stock which may be purchased upon the exercise of
stock options by Messrs. Corey, Drapkin, Kimmel, Schaeffer, Reynolds,
Blair and Young and all current directors and executive officers as a
group, respectively.
(3) Does not include 15,687,432 shares of Class B Common Stock held by Weider
Health and Fitness. Mr. Weider is President and Chief Executive Officer of
Weider Health and Fitness. Mr. Weider disclaims beneficial ownership of
such shares.
(4) Does not include 2,000 shares of Class A Common Stock held in two trusts
for the benefit of the children of Mr. Kimmel, as to which shares Mr.
Kimmel has neither the power of disposition nor the power to vote. Mr.
Kimmel disclaims beneficial ownership of such shares.
(5) Does not include 222,426 shares of Class A Common Stock held by Bayonne
Settlement, a trust organized under the laws of Jersey (U.K.), of which
family members of George F. Lengvari are included among the beneficiaries.
Bayonne Settlement is administered by an independent trustee and Mr.
Lengvari has neither the power of disposition nor the power to vote the
shares. Mr. Lengvari disclaims beneficial ownership of such shares.
(6) Based on Schedule 13G filed on July 9, 1997 by Weider Health and Fitness.
(7) Based on Schedule 13G/A filed on December 10, 1998 by SAFECO Corp. SAFECO
Common Stock Trust, an entity affiliated with SAFECO Corporation,
beneficially owns 728,200 of these shares of Class A Common Stock. SAFECO
Common Stock Trust has shared power to vote and dispose of such shares.
SAFECO Asset Management Company, a subsidiary of SAFECO Corporation,
beneficially owns 1,123,200 shares of Class A Common Stock as a result of
its affiliation with SAFECO Corporation and certain registered investment
companies for which SAFECO Asset Management Company serves as investment
adviser. SAFECO Asset Management Company has shared power to vote and
dispose of such shares.
(8) Based on Schedule 13G/A filed on October 9, 1998 by AMVESCAP PLC. Each of
AVZ, Inc., AIM Management Group Inc., AMVESCAP Group Services, Inc.,
INVESCO, Inc., INVESCO North American Holdings, Inc., INVESCO Capital
Management, Inc., INVESCO Funds Group, Inc., INVESCO Management &
Research, Inc., INVESCO Realty Advisers, Inc. and INVESCO (NY) Asset
Management, Inc. beneficially own 501,800 shares of Class A Common Stock
and have shared power to vote and dispose of such shares.
(9) Based on Schedule 13G/A filed on February 10, 1999 by Wellington
Management Company, LLP.
11
<PAGE>
(10) Based on Schedule 13G/A filed on February 12, 1999 by The TCW Group, Inc.
Through his affiliation with The TCW Group, Inc., Robert Day beneficially
owns 581,000 shares of Class A Common Stock. Mr. Day has shared power to
vote and dispose these shares.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ADVERTISING AGREEMENT
The Company and Weider Publications, Inc., a subsidiary of Weider Health
and Fitness, are parties to an Advertising Agreement dated December 1, 1996 (the
"Advertising Agreement") under which the Company is obligated (pursuant to an
annually updated notification in connection with the Company's budget) to
purchase a minimum number of advertising pages in certain of the publications of
Weider Publications each month at a price below that charged to unaffiliated
third party advertisers. The Advertising Agreement has a ten-year term and is
subject to termination by either party if certain specified events occur,
including a change of control of Weider Health and Fitness or an initial public
offering of Weider Publications. During fiscal 1999, the Company paid Weider
Publications a total of approximately $1,873,000 for services rendered. Weider
Health and Fitness owns all of the Company's Class B Common Stock. Eric Weider,
the Chairman of the Board of the Company, is a director of Weider Publications
and George Lengvari, a director of the Company, is Chairman of Weider
Publications U.K.
TRANSFER OF INTELLECTUAL PROPERTY
In July 1985, Weider Health and Fitness and Joe Weider entered into an
agreement pursuant to which Weider Health and Fitness was granted all rights,
title and interest in and to a system of weight training known as "The Weider
System" and the exclusive right to use of the name "Joe Weider" within the
continental United States. As consideration for such grants, Weider Health and
Fitness has agreed to pay Joe Weider approximately $450,000 per year for the
rest of his lifetime (of which $250,000 is paid by the Company). Weider Health
and Fitness' right to use the "The Weider System" and "Joe Weider" survives the
death of Joe Weider. Effective September 1, 1996, Weider Health and Fitness
assigned to the Company substantially all such intellectual property. Weider
Health and Fitness retained three trademarks used in both the Company's
nutritional supplements business and Weider Health and Fitness' body building
and exercise equipment divisions; however, Weider Health and Fitness entered
into a Trademark and License Agreement granting to the Company a perpetual,
royalty-free, fully paid license to use such trademarks for its nutritional
supplements business. Weider Health and Fitness owns all of the Company's Class
B Common Stock. Mr. Eric Weider, the Chairman of the Board of Directors of the
Company, is the President, Chief Executive Officer and a director of Weider
Health and Fitness. Mr. Lengvari, a director of the Company, is a director of
Weider Health and Fitness.
For a discussion of an intellectual property licensing agreement in which
Mr. Lengvari has an interest, see "EXECUTIVE COMPENSATION-COMPENSATION COMMITTEE
INTERLOCKS AND INSIDER PARTICIPATIONS."
MANAGEMENT INCENTIVE AGREEMENTS
Prior to the Company's IPO, the Company entered into Management Incentive
Agreements pursuant to which key employees were granted Performance Units as
incentive compensation. The Company's IPO triggered conversion of the vested
Performance Units and, as a result, the Company paid in cash and shares of Class
A Common Stock an aggregate of approximately $2,96 million in cash and 972,247
shares of Class A Common Stock to such employees. The unvested portion of the
Performance Units (represented by 182,716 unvested shares of Class A Common
Stock as of the date of the Company's IPO) were converted to Class A Restricted
Stock that vest, contingent upon continued employment and/or other factors, over
a five-year period at 20% per year from May 31, 1998 through May 2002. In
connection with certain resignations, certain shares of the unvested Class A
Restriced Stock were accelerated and certain shares cancelled. The number of
unvested shares of Class A Restricted Stock at September 27, 1999 were 27,407
shares.
To facilitate the payment of individual income taxes incurred in
connection with the conversion of the Performance Units, the Company makes loans
available to each recipient. The loans bear interest at a rate of 8.0%
12
<PAGE>
per annum, are repayable five years from the borrowing date and are secured by
the recipient's Class A Common Stock received upon conversion. During fiscal
1999, the Company had loans outstanding to Messrs. Bizzaro, Blair, Reynolds and
Young. Messrs. Bizzaro, Blair, Reynolds and Young had outstanding principal loan
and interest balances at August 31, 1999 of approximately $2,389,077, $282,844,
$1,582,658 and $136,318, respectively, which amounts were the largest amounts
owed by these officers during fiscal 1999. Portions of the loans outstanding to
Messrs. Bizzaro and Reynolds may be forgiven over time by the Company and Weider
Health and Fitness. See "EXECUTIVE COMPENSATION -- EMPLOYMENT AND SEPERATION
AGREEMENTS."
SPONSORSHIPS
Effective June 1, 1998, as part of its marketing strategy, the Company
agreed to participate in the sponsorship of certain body builder contracts with
Weider Health and Fitness. The Company paid a total of $200,000 in connection
with its sponsorship in fiscal 1999.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Weider Nutrition International, Inc.
Dated: September 23, 1999 By: /s/ BRUCE J. WOOD
-----------------
Bruce J. Wood
Chief Executive Officer and President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
NAME TITLE DATE SIGNED
--------- --------- ---------------
/s/ ERIC WEIDER Chairman of the Board September 27, 1999
- ------------------- and Director
Eric Weider
/s/ BRUCE J. WOOD Chief Executive Officer September 23, 1999
- ------------------- and Director
Bruce J. Wood (Principal Executive Officer)
/s/ JOSEPH W. BATY Senior Vice President, September 23, 1999
- ------------------- Finance (Principal Financial
Joseph W. Baty and Accounting Officer)
/s/ RONALD L. COREY Director September 27, 1999
- -------------------
Ronald L. Corey
/s/ ROGER H. KIMMEL Director September 27, 1999
- -------------------
Roger H. Kimmel
/s/ GEORGE F. LENGVARI Director September 27, 1999
- ----------------------
George F. Lengvari
/s/ DONALD G. DRAPKIN Director September 27, 1999
- ----------------------
Donald G. Drapkin
/s/ GLENN W. SCHAEFFER Director September 27, 1999
- ----------------------
Glenn W. Schaeffer
/s/ DAVID J. GUSTIN Director September 23, 1999
- -------------------
David J. Gustin
14
