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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
(Mark One)
[ X ] Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [Fee Required] for the Fiscal Year Ended DECEMBER 31,
1993; or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required] for the transition period from
__________________________ to __________________________
COMMISSION FILE NUMBER 1-7200
WYNN'S INTERNATIONAL, INC.
(Exact Name of Registrant as Specified in Its Charter)
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DELAWARE 95-2854312
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
500 NORTH STATE COLLEGE BOULEVARD
SUITE 700
ORANGE, CALIFORNIA 92668
(Address of Principal Executive Offices) (Zip Code)
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Registrant's Telephone Number, Including Area Code: (714) 938-3700
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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Title of Each Class Name of Each Exchange on Which Registered
Common Stock, par value $1 per share New York Stock Exchange
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SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: None
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes (X) No ( )
The aggregate market value of voting stock held by non-affiliates of the
Registrant was $109,518,085 as of March 21, 1994. All outstanding shares of
voting stock, except for shares held by executive officers and members of the
Board of Directors of Registrant, are deemed to be held by non-affiliates.
On March 21, 1994, Registrant had 5,548,117 shares of common stock
outstanding.
Parts I and II incorporate information by reference from the Annual Report
to Stockholders for the year ended December 31, 1993. Part III incorporates
information by reference from the Proxy Statement for the Annual Meeting of
Stockholders to be held on May 11, 1994.
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. ( )
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PART I
ITEM 1. BUSINESS
Wynn's International, Inc., through its subsidiaries, is engaged
primarily in the automotive parts and accessories business and the
petrochemical specialties business. The Company designs, produces and sells
O-rings and other seals and molded rubber and thermoplastic products and
automotive air conditioning systems, components and related parts. The Company
also formulates, produces and sells petrochemical specialty products and
automotive service equipment and distributes, primarily in southern California,
locks and hardware products manufactured by others.
O-rings and other molded rubber products are marketed under the
trademark "Wynn's-Precision." Air conditioning units for the automotive
aftermarket are marketed by the Company under the trademark "Frostemp(R)," and
wholesale parts are marketed and installation centers are operated under the
trademark "Maxair(R)." Petrochemical specialty products are marketed under
various trademarks, including "Wynn's(R)," "Friction Proofing(R)," "X-Tend(R),"
"Spit Fire(R)," "Classic(R)," "Mark X(R)" and "Du-All(TM)."
The Company's executive offices are located at 500 North State College
Boulevard, Suite 700, Orange, California 92668. Its telephone number is (714)
938-3700. The terms "Wynn's International, Inc.," "Wynn's," "Company" and
"Registrant" herein refer to Wynn's International, Inc. and its subsidiaries
unless the context indicates otherwise.
FINANCIAL INFORMATION BY BUSINESS SEGMENT AND GEOGRAPHIC DATA
The Company's operations are conducted in three industry segments:
Automotive Parts and Accessories; Petrochemical Specialties; and Builders
Hardware. Financial information relating to the Company's business segments
for the five years ended December 31, 1993 is incorporated by reference from
Note 15 of "Notes to Consolidated Financial Statements" on pages 29 through 31
of the Company's Annual Report to Stockholders for the year ended December 31,
1993 (the "1993 Annual Report").
AUTOMOTIVE PARTS AND ACCESSORIES
The Automotive Parts and Accessories Division consists of
Wynn's-Precision, Inc. ("Precision") and Wynn's Climate Systems, Inc. ("Wynn's
Climate Systems"). During 1993, sales of the Automotive Parts and Accessories
Division were $181,478,000 or 64% of the Company's total net sales as compared
with $185,947,000 and 64% in 1992. The operating profit of this division in
1993 was $16,643,000, or 70% of the Company's total operating profit as
compared with $15,265,000 and 68% in 1992. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business
Segment and Geographical Information" on pages 14 through 17 and 29 through 31,
respectively, of the 1993 Annual Report, which are hereby incorporated by
reference. See also "Other Factors Affecting the Business."
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WYNN'S-PRECISION, INC.
(O-RINGS, SEALS AND MOLDED RUBBER AND THERMOPLASTIC PRODUCTS)
PRODUCTS
Precision and its affiliated companies manufacture and sell a variety
of static and dynamic sealing products. The principal users of the Precision
products are automotive manufacturers, heavy vehicle manufacturers, industrial
component manufacturers, hydraulic and pneumatic cylinder manufacturers,
aerospace and defense contractors and the oil service industry. The principal
products of Precision are O-rings, rack and pinion and front wheel drive seals,
composite gaskets, hydraulic cylinder seals and various engineered molded
rubber and plastic parts. These products are made from synthetic elastomers
and thermoplastic materials.
DISTRIBUTION
Precision sells its products primarily through a direct sales force to
original equipment manufacturer ("OEM") customers. Precision also markets its
products throughout the United States through independent distributors and
through Company-operated regional service centers located in Rancho Cucamonga,
California; Elgin, Illinois; Grand Rapids, Michigan; Golden Valley, Minnesota;
Charlotte, North Carolina; Buffalo, New York; Dayton, Ohio; Bensalem,
Pennsylvania; Indianapolis, Indiana; Fort Worth, Texas; and Lenexa, Kansas.
Precision's Canadian operation distributes products principally through a
direct sales force to OEM customers, through independent distributors and
through Precision-operated service centers in Canada and England.
PRODUCTION
Precision's manufacturing facilities are located in Lebanon and
Livingston, Tennessee; Tempe, Arizona; Lynchburg, Virginia; Houston, Texas; and
Orillia, Ontario, Canada. In 1993, Precision closed its 5,000 square-foot
leased manufacturing facility located in Alexandria, Scotland due to certain
start-up problems. Precision's corporate headquarters are located at the site
of its main manufacturing facility in Lebanon, Tennessee. Precision also
operates its own tool production facility in Lebanon, Tennessee. Over the past
several years, Precision has made significant investments in modern
computerized production equipment and facilities. Precision has a facility in
Lebanon, Tennessee dedicated exclusively to injection molding. Using
internally generated funds, Precision plans to spend approximately $10 million
for capital expenditures in 1994 to increase its production capacity.
The principal raw materials used by Precision are elastomeric and
thermoplastic materials. These raw materials generally have been available
from numerous sources in sufficient quantities to meet Precision's
requirements. Adequate supplies of raw materials were available in 1993 and
are expected to continue to be available in 1994.
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WYNN'S CLIMATE SYSTEMS, INC.
(AUTOMOTIVE AIR CONDITIONING PRODUCTS)
Wynn's Climate Systems sells its products to OEM customers and to
independent distributors who resell units principally to car dealers. Wynn's
Climate Systems also distributes wholesale parts manufactured by others and
sells refrigerant recovery and recycling machines. In addition, Wynn's Climate
Systems operates installation centers in the Denver, Colorado area and in
Colorado Springs, Colorado, Phoenix, Arizona and Mesa, Arizona that perform
installation services for car dealers and retail customers.
PRODUCTS
Wynn's Climate Systems designs, engineers and produces automotive air
conditioning systems for the OEM market and the automotive aftermarket.
Systems are manufactured for many current year models of domestic and imported
automobiles, trucks and vans. Wynn's Climate Systems also manufactures and
sells units for a wide range of automobiles, trucks and vans from prior model
years. In addition, Wynn's Climate Systems manufactures and sells a variety of
air conditioning components, including condensers, evaporator coils and adapter
kits, and distributes air conditioning components and accessories manufactured
by others. Wynn's Climate Systems also manufactures and sells refrigerant
recovery and recycling equipment.
DISTRIBUTION
The products of Wynn's Climate Systems are distributed in several
different ways.
First, Wynn's Climate Systems manufactures air conditioners for sale to
OEM customers and their distributors and dealers. Sales to Mazda, the largest
customer of Wynn's Climate Systems, were approximately $35.1 million in 1993 or
approximately 28% less than in 1992. In 1993, Wynn's Climate Systems supplied
air conditioning kits to Mazda principally for its 323 automobile and light
trucks. As previously reported, in approximately April 1993, Mazda began
purchasing light trucks from Ford in lieu of importing them from Japan. Wynn's
Climate Systems also supplies certain components to Mazda's Flat Rock, Michigan
facility. Mazda assembles its own air conditioning kits in the United States
for the MX-6, 626 and Miata model automobiles and the MPV. Mazda has informed
Wynn's Climate Systems that Mazda will assemble air conditioning kits for the
323 automobile commencing in model year 1995, but Wynn's Climate Systems will
continue to supply air conditioning kits for the 323 automobile through model
year 1994. In 1991, Wynn's Climate Systems began supplying front units for
Land and Range Rover four-wheel drive vehicles. This supply arrangement with
Rover terminated in February 1994. In early 1993, Wynn's Climate Systems began
supplying a newly-designed rear air conditioning unit for certain Rover models.
Wynn's Climate Systems also sells its products to Chrysler Corporation, which
purchases products for its Dodge vans and Jeep vehicles and for export. Wynn's
Climate Systems supplies units to the General Motors Truck and Bus Division.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Other Factors Affecting the Business."
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Second, Wynn's Climate Systems manufactures and sells products under
the trademark "Frostemp(R)" in the United States and Canada to approximately 75
active independent distributors. Sales to independent distributors decreased
approximately 8% in 1993 compared to 1992 due primarily to the impact on
aftermarket sales of the continuing trend of increased factory installed air
conditioning systems. See "Other Factors Affecting the Business." Wynn's
Climate Systems also distributes component parts and accessories purchased from
other manufacturers to independent distributors.
Third, Wynn's Climate Systems manufactures and sells refrigerant
recovery and recycling equipment to end users and to distributors. Wynn's
Climate Systems offers a line of equipment that recovers and recycles R-12 and
R-134a refrigerants used in automotive air conditioning systems.
Finally, Wynn's Climate Systems manufactures and distributes parts and
components to OEM customers and distributors. Wynn's Climate Systems also
sells "Frostemp(R)" brand air conditioning systems and products manufactured by
others through five company-operated service centers which perform
installation services for dealers and sell directly to retail customers.
PRODUCTION
The manufacturing facilities of Wynn's Climate Systems are located in
Fort Worth, Texas. Air conditioning kits are assembled and produced in a
210,000 square foot facility which also serves as the corporate headquarters of
Wynn's Climate Systems. In 1993, Wynn's Climate Systems consolidated three
satellite manufacturing facilities into the main facility. The production
facilities of Wynn's Climate Systems include an environmental test and
calibration chamber used for evaluating the performance of air conditioning
units. The test chamber has computer controlled environmental test conditions
and data collection and can handle both front-wheel and rear-wheel drive
vehicles over a variety of simulated speeds, temperatures and levels of
humidity.
Wynn's Climate Systems manufactures condensers and evaporator coils,
injection-molded and vacuum-formed plastic parts, adapter kits, steel brackets
and hose and tube assemblies. Wynn's Climate Systems uses these components in
the production of its air conditioning units and sells them to outside
customers. Outside vendors supply certain finished components such as
accumulators, receiver/dryers and compressors. An adequate supply of these
materials is available at present and is expected to continue to be available
for the foreseeable future. Wynn's Climate Systems generally experienced only
modest price increases for raw materials in 1993.
In 1993, Wynn's Climate Systems installed a technologically advanced
nitrogen brazing oven, which will be used to produce high efficiency heat
exchangers. Wynn's Climate Systems also acquired in 1993 equipment to enable
it to produce high quality hose assemblies in house. This equipment was
purchased in connection with the efforts of Wynn's Climate Systems to enhance
its production and technological capabilities.
PHASE-OUT OF R-12 REFRIGERANT
Most automotive air conditioning systems manufactured by Wynn's Climate
Systems and others prior to 1994 utilized R-12 as a refrigerant. R-12 is a
chlorofluorocarbon ("CFC") which has been linked
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to the destruction of ozone molecules in the Earth's upper atmosphere. Under
the Montreal Protocol, CFC production in the United States is being phased out
and will cease after December 31, 1995. Wynn's Climate Systems has developed
air conditioning systems which use R-134a refrigerant, a hydrofluorocarbon
which is a permissible alternative to CFC refrigerants. Sales of R-134a
systems are expected to increase as sales of traditional CFC systems are phased
out. Wynn's Climate Systems also has begun the development of retrofit kits
that will permit automotive air conditioning systems designed for R-12 use to
be converted to use R-134a. R-134a is not compatible with an R-12-based system
without certain necessary changes. Other optional changes will enhance the
performance of R-134a in an R-12-based air conditioning system. The sales
volume of these retrofit kits will depend upon the future availability and
price of R-12 refrigerant.
PETROCHEMICAL SPECIALTIES
The Petrochemical Specialties Division consists of Wynn Oil Company and
its subsidiaries ("Wynn Oil").
During 1993, net sales at Wynn Oil were $98,318,000 or 34% of the
Company's total net sales as compared to $99,622,000 and 34% for 1992. The
operating profit of the division during 1993 was $7,046,000, or 29% of the
Company's total operating profit compared with $6,636,000 and 30% for 1992.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business Segment and Geographical Information" on pages 14
through 17 and 29 through 31, respectively, of the 1993 Annual Report, which
are hereby incorporated by reference. See also "Other Factors Affecting the
Business."
PRODUCTS
The principal business of Wynn Oil is the production and marketing of a
wide variety of petrochemical specialty car care products under the "Wynn's(R)"
and "X-Tend(R)" trademarks. Wynn Oil's car care products are designed to
provide preventive or corrective maintenance for automotive engines,
transmissions, differentials, engine cooling systems and other automotive
mechanical parts. Wynn Oil also manufactures industrial specialty chemical
products, including forging compounds, lubricants, cutting fluids and
multipurpose coolants for precision metal forming and machining operations. In
addition, the Company sells the GM-approved and patented "Mark X(R)"
power-flush machine which, when combined with proprietary cooling system
products, flushes a vehicle's engine cooling system, removes contaminants from
the used antifreeze and returns the rejuvenated antifreeze to the engine
cooling system. Wynn Oil also sells the new GM-approved "Du-All(TM)" bulk
antifreeze recycling machine which, when combined with proprietary cooling
system products, drains the used antifreeze, removes contaminants from the
antifreeze and rejuvenates the antifreeze for reuse. Wynn Oil also sells its
Emission Control product, a patented organic fuel combustion catalyst for spark
ignition and diesel engines which helps reduce exhaust emissions and improve
fuel economy. Wynn Oil also produces and markets a line of automotive
appearance products under the "Classic(R)" and "Wynn's Classic(R)" trademarks.
Wynn Oil is a principal U.S. automotive distributor of AirSept(TM)
odor-removing chemical spray, used principally in automotive air conditioning
systems.
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Wynn Oil also markets the Wynn's Product Warranty(R) program, which, in
general, are kits containing a specially formulated line of automotive additive
products, accompanied by a special product warranty. The warranty kits are
sold, through distributors and automobile dealers, primarily to purchasers of
used automobiles. The Wynn's Product Warranty(R) program provides
reimbursement of certain parts and labor expenses and, in some instances, the
costs of towing and a rental car incurred by vehicle owners who used the
special products to treat their vehicles in accordance with the terms and
conditions of the warranty and who experience certain types of damage which the
special products were designed to help prevent. See "Other Factors Affecting
the Business."
DISTRIBUTION
Wynn Oil's car care products are sold in the United States and in
approximately 80 foreign countries. See "Foreign Operations."
Wynn Oil distributes its products through a wide range of distribution
channels. Domestically, Wynn Oil distributes its products through independent
distributors, warehouse distributors, mass merchandisers and chain stores. The
Company also uses an internal sales force and manufacturers' representative
organizations in the sale and distribution of its products. Foreign sales are
made principally through wholly-owned subsidiaries, which sell either through
an internal sales force or to independent distributors. The Company also
engages in direct export sales to independent distributors, primarily in Asia
and Latin America. See "Other Factors Affecting the Business."
PRODUCTION
Wynn Oil has manufacturing facilities in Azusa, California; St.
Niklaas, Belgium; and Arganda del Rey, Spain. Other foreign subsidiaries
either purchase products directly from the manufacturing facilities in the
United States or Belgium or have the products manufactured locally by outside
suppliers according to Wynn Oil's specifications and formulae. Several years
ago, Wynn Oil transferred some of its production requirements to its foreign
subsidiaries due to the strength of the United States dollar at that time and
its impact on prices to Wynn Oil's foreign customers. With fluctuating foreign
currency rates, Wynn Oil periodically reviews its production and sourcing
locations.
Wynn Oil utilizes a large number of chemicals in the production of its
various petrochemical specialty products. Primary raw materials necessary for
the production of these products, as well as the finished products, generally
have been available from several sources. An adequate supply of materials was
available in 1993 and is expected to continue to be available for the
foreseeable future.
BUILDERS HARDWARE
The Builders Hardware Division consists of Robert Skeels & Company
("Skeels"), a wholesale distributor of builders hardware products, including
locksets and locksmith supplies. During 1993, Skeels' net sales were
$5,161,000 or 2% of the Company's total net sales as compared with $6,219,000
and 2% for 1992. The operating profit of this division during 1993 was
$193,000, or 1% of the Company's total operating profit compared with $422,000
and 2% for 1992. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business Segment and
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Geographical Information" on pages 14 through 17 and 29 through 31,
respectively, of the 1993 Annual Report, which are hereby incorporated by
reference.
Skeels' main facility is located in Compton, California. In addition,
Skeels also has leased satellite facilities located in Fullerton and Los
Angeles, California.
Skeels supplies approximately 35,000 items to retail hardware,
locksmith and lumberyard outlets in southern California, Arizona, and Nevada.
Skeels also sells directly to school districts, municipalities, industrial
firms and building contractors.
Skeels has been a distributor of Schlage lock products since 1931.
Skeels also distributes other well-known brands such as Lawrence, Kwikset and
Master. All of Skeels' distributorship arrangements generally are cancelable
by the manufacturers without cause.
Most of Skeels' sales are derived from replacement items used by
industry, institutions and in-home remodeling and repair.
OTHER FACTORS AFFECTING THE BUSINESS
COMPETITION
All phases of the Company's business have been and remain highly
competitive. The Company's products and services compete with those of
numerous companies, some of which have financial resources greater than those
of the Company. Sales by the Automotive Parts and Accessories Division are in
part related to the sales of vehicles by its OEM customers.
Precision has a large number of competitors in the market for static
and dynamic sealing products, some of which competitors are substantially
larger than Precision. The markets in which Precision competes are also
sensitive to changes in price. Requests for price reductions are not uncommon.
Precision attempts to work with its customers to identify ways to lower costs
and prices. Precision focuses on high technology, high quality sealing devices
and has made significant investments in advanced equipment and other means to
raise productivity. Precision's major focus is to be the low cost producer of
superior quality products within its industry. Precision believes it must
expand into additional areas of sealing technology in order to continue to be
an effective competitor. In 1993, Precision invested approximately $4.4
million in new equipment and facilities to improve overall performance to its
customers. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
Historically, the largest part of Wynn's Climate Systems' sales have
been to OEM customers. Following the opening of its Flat Rock, Michigan
facility, Mazda has gradually taken over production of its requirements for air
conditioning kits in the United States. Sales to Mazda decreased approximately
28% in 1993 compared to 1992 due to the phase-out of the air conditioning
supply agreement for light trucks and a decline in sales by Mazda of its 323
cars. The Company anticipates that commencing in the third quarter of 1994,
Wynn's Climate Systems will no longer furnish 323 kits to Mazda, as Mazda has
elected to assemble these kits at its Flat Rock, Michigan facility. Sales of
kits for Mazda 323 cars were
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approximately $29.9 million in 1993. In 1993, Wynn's Climate Systems' sales to
the Rover Group in the U.K were approximately $14.5 million, of which
approximately $12.8 million was for units for the Range Rover and Discovery
vehicles, pursuant to a supply agreement in effect through the end of model
year 1993. In 1994, this customer began purchasing air conditioning systems
for these vehicles from a foreign competitor of Wynn's Climate Systems.
Although the expiration of this supply agreement is not expected to have a
material adverse effect on the Company's consolidated results of operation in
1994, it is expected to cause a decline in the operating profit of Wynn's
Climate Systems in 1994.
Over time there has been a gradual increase in the number of air
conditioning systems installed on the factory line. An increase in the number
of factory-installed units reduces the size of the market for aftermarket
sales. See "Wynn's Climate Systems, Inc."
Competition with respect to the Company's petrochemical specialty
products consists principally of other automotive aftermarket chemical and
industrial fluid companies. Some major oil companies also market their own
additive products through retail service stations, independent dealers and
garages. Certain national retailers market private label brands of
petrochemical specialty products. The Company's "Mark X(R)" power flush system
and "Du-All(TM)" antifreeze recycling equipment and chemicals compete against
other antifreeze recycling processes, some of which also have been approved by
General Motors. The principal methods of competition vary by geographic locale
and by the relative market share held by the Company compared to other
competitors.
Skeels continues to face intense price competition from numerous
cash-and-carry discount retailers. Skeels also has observed some manufacturers
selling directly to retailers to increase volume. Skeels' revenues declined
17% in 1993 compared to 1992 in part due to this competition.
KEY CUSTOMERS
Sales to Mazda constituted 42% of the total net sales of Wynn's Climate
Systems and 12.3% of the total net sales of the Company in 1993. As noted
above, sales to Mazda related to kits for the 323 model are expected to
continue until the third quarter of 1994, when Mazda will take over production
of kits for the 1995 model 323 automobile. Due to the previous actions taken
by the Company to restructure the business of Wynn's Climate Systems and the
relatively low margins associated with the Mazda business, the loss of Mazda as
a key customer of the Company is not expected to have a material adverse effect
on the consolidated results of operations of the Company. See "Wynn's Climate
Systems, Inc." and "Management's Discussion and Analysis of Financial Condition
and Results of Operations." Sales to General Motors constituted approximately
9.2% of the total net sales of the Company in 1993.
GOVERNMENT REGULATIONS
The number of governmental rules and regulations affecting the
Company's business and products continues to increase.
Wynn Oil markets the Wynn's Product Warranty(R) program in
approximately thirty-five states and two foreign countries. Questions have
been raised by certain state insurance regulators as to whether the product
warranty that accompanies the kit is in the nature of insurance. Wynn Oil
attempts to
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resolve these questions to the satisfaction of each state insurance regulator.
At times, it has elected to withdraw the Wynn's Product Warranty(R) from
certain states. No assurance can be given that governmental regulations will
not significantly affect the marketing of the Wynn's Product Warranty(R) in the
United States or other countries in the future.
ENVIRONMENTAL MATTERS
The Company has used various substances in its past and present
manufacturing operations which have been or may be deemed to be hazardous, and
the extent of its potential liability, if any, under environmental statutes,
rules, regulations and case law is unclear. Under the Comprehensive
Environmental Response, Compensation and Liability Act, as amended ("CERCLA"),
a responsible party may be jointly liable for the entire cost of remediating
contaminated property even if it contributed only a small portion of the total
contamination. The nature of environmental investigation and cleanup
activities creates difficulties in determining the impact of such activities on
the Company's financial position. The effect of resolution of environmental
matters on results of operation cannot be predicted due to the uncertainty
concerning both the amount and timing of future expenditures and future results
of operations. See Note 12 of "Notes to Consolidated Financial Statements" on
page 28 of the 1993 Annual Report, which is hereby incorporated by reference.
All potentially significant environmental matters presently known to the
Company are described below.
In January 1984, Wynn Oil received a letter from the United States
Environmental Protection Agency (the "EPA") regarding an investigation of
groundwater contamination in the San Gabriel Valley, California. The letter
from the EPA requested Wynn Oil to furnish certain information relating to its
manufacturing facility in Azusa, California (the "Azusa Facility"). Wynn Oil
complied with the request. In March 1988, Wynn Oil received a letter from the
EPA requesting additional information with respect to its Azusa Facility. Wynn
Oil submitted its response at the end of May 1988. In July 1990, Wynn Oil
received a general notice letter from the EPA stating that it may be a
potentially responsible party ("PRP") with respect to the Azusa/Irwindale Study
Area in the San Gabriel Valley, California Superfund Sites (the "AISA"). The
EPA letter included an information request pursuant to Section 104(e) of
CERCLA. The EPA letter stated that the EPA contemplated using the Special
Notice procedures of Section 122(e) of CERCLA to formally negotiate the terms
of a consent agreement with PRPs to conduct a Remedial
Investigation/Feasibility Study for the AISA. Wynn Oil Company responded to
the EPA information request within the specified time period. In September
1990, Wynn Oil received a letter from the EPA stating that it did not expect to
send a Special Notice letter to Wynn Oil for the AISA, but that it still
considered Wynn Oil, as well as a large number of other companies, to be PRPs
for basinwide groundwater activities in the San Gabriel Valley. In May 1993,
the EPA made available for public comment its Operable Unit Feasibility Study
for the Baldwin Park Operable Unit ("BPOU") of the San Gabriel Valley Superfund
Sites. The Azusa Facility is located within the BPOU. In its Operable Unit
Feasibility Study for the BPOU, the EPA has proposed construction of extraction
and treatment facilities with an estimated initial capital cost of $47 million
and estimated annual operating and maintenance costs of $4 to $5 million. Wynn
Oil has been cooperating with other companies located in the BPOU, as well as
state and local government and water supply officials, who are working to
develop a substantially less costly alternative which would accomplish the
desired remedial goals.
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In March 1988, a representative of the Los Angeles County Department of
Health Services (the "LADHS") inspected the Azusa Facility and observed
oil-stained surface soils. Based on these observations, LADHS directed Wynn
Oil to conduct a site assessment and implement remedial measures if
contaminated soils were identified. In February 1989, Wynn Oil received a
Subsurface Investigation Report from the consulting firm retained by Wynn Oil
to perform the site assessment and submitted the report to the LADHS. In April
1989, regulatory jurisdiction over this matter was transferred from the LADHS
to the California Regional Water Quality Control Board-Los Angeles Region (the
"RWQCB"). Since October 1989, Wynn Oil and its consultants have been working
with representatives of the RWQCB to conduct a comprehensive site assessment of
the Azusa Facility. In January 1992, at the request of the EPA and the RWQCB,
Wynn Oil agreed to expand the scope of its investigation of the Azusa Facility
to include three soil gas monitoring wells and one groundwater monitoring well.
The monitoring wells were installed in 1992, and the results of ongoing
sampling have been reported to the RWQCB. In the summer of 1993, RWQCB
requested Wynn Oil to install an upgradient groundwater monitoring well at the
Azusa Facility. The RWQCB subsequently requested two other companies located
upgradient of Wynn Oil to install downgradient soil gas and groundwater
monitoring wells. Wynn Oil and one of these companies have entered into an
agreement to share the cost of one groundwater and one soil gas monitoring well
which will operate as an upgradient monitoring well for Wynn Oil and a
downgradient monitoring well for the other company.
In May 1989, Wynn's Climate Systems received notice that it had been
identified as a generator of hazardous waste that had been shipped to the
Chemical Recycling, Inc. ("CRI") site in Wylie, Texas (the "CRI Site") for
treatment. CRI was engaged in the business of recycling and reclaiming spent
solvents and other hazardous wastes at the CRI Site until it ceased operations
in February 1989. Wynn's Climate Systems is one of approximately 100 hazardous
waste generators who have been identified as potentially responsible parties
for the CRI Site. A PRP Steering Committee (the "Committee") was formed to
negotiate with the EPA on behalf of its members an agreement to take remedial
measures voluntarily at the CRI Site. As of March 15, 1994, approximately 88
PRPs, including Wynn's Climate Systems, have agreed to participate in the
Committee for the CRI Site. PRPs who have agreed to participate in the
Committee have signed Consent Agreements with the EPA with respect to the CRI
Site. Remediation efforts have begun at the CRI Site under the guidance of the
Committee. As of March 15, 1994, Wynn's Climate Systems' proportionate share
of the total volume of waste contributed to the CRI Site by Committee members
was less than one percent (1%).
In January 1991, Wynn's Climate Systems received a letter from the
Texas Water Commission (the "TWC") that soil adjacent to one of its leased
manufacturing facilities was contaminated with hazardous substances. The TWC
directed Wynn's Climate Systems to determine the extent of such contamination
and then take appropriate remedial measures. Wynn's Climate Systems retained
environmental consultants to conduct soil sampling and otherwise comply with
the directive of the TWC. Performance of this work was completed in late 1991.
Wynn's Climate Systems submitted a copy of the report of its consultants to the
TWC in January 1992. In 1994, Wynn's Climate Systems received a letter from
the TWC requesting additional information. Wynn's Climate Systems is
cooperating with the requests of the TWC.
In January 1990, Precision received a letter from the EPA regarding the
Saad Site in Nashville, Tennessee. The owner of the Saad Site engaged in
reclamation and recycling activities at the Site, which
10
<PAGE> 12
resulted in soil and groundwater contamination. The letter stated that
Precision may be a PRP for the Saad Site. The EPA subsequently requested
Precision to furnish information about its involvement with the Saad Site.
Precision has provided the information requested. Precision's records
indicated that a predecessor entity sent wastes to the Saad Site in the
mid-1970s. Based on that information, Precision joined the Saad Site Steering
Committee as a Limited Member. In February 1992, the Company received a letter
stating that the Allocation Committee had concluded that Precision should
become a Full Member of the Steering Committee and thus share proportionately
in the liability for the cleanup. Precision responded by letter that there was
no legal basis to hold it responsible for the activities of the predecessor
entity. As of March 15, 1994, the Allocation Committee has not responded to
Precision's letter.
In 1992, Precision identified an area at its Lebanon, Tennessee
facility which contained oil stained soils. Precision retained outside
environmental consultants to investigate the nature and extent of the
contamination. The remedial investigation is underway and Precision intends to
take any necessary remedial actions.
In March 1992, an inactive subsidiary of the Company received a letter
from the then lessee ("Lessee") of a parcel of real property in Compton,
California formerly leased by this subsidiary. The letter stated that the
Lessee had discovered soil contamination at the site and asserted that the
Company's subsidiary may be liable for the cost of cleanup. The letter stated
that the Lessee was investigating the nature and extent of the soil
contamination. In July 1993, the Company received a letter from the owner of
the real property stating that the owner had asserted a claim against the
Lessee to pay the cost of remediation and that the owner may assert a claim
against the Company. The Company has determined that the Lessee has filed for
voluntary reorganization under the federal bankruptcy laws. The Company does
not know the extent of the contamination or the estimated cost of cleanup at
this site.
FOREIGN CURRENCY FLUCTUATIONS
In 1993, the United States dollar generally appreciated in value
compared to 1992 in the currencies of most countries in which the Company does
business. This appreciation caused sales and operating profit to be lower than
what would have been reported if exchange rates had remained constant during
1993. In 1993, the Equity Adjustment from Foreign Currency Translation account
on the Consolidated Balance Sheet declined by $2.1 million, which caused a
corresponding reduction in Total Stockholders' Equity. See "Foreign
Operations."
PATENTS, TRADEMARKS AND LICENSE AGREEMENTS
The Company holds a number of patents and trademarks which are used in
the operation of its businesses. There is no known challenge to the Company's
rights under any material patents or material trademarks. In 1989, Wynn Oil
filed a lawsuit in the federal district court in Detroit, Michigan against
another company and its principal stockholder for infringement of Wynn Oil's X-
Tend(R) trademark. In February 1994, the court awarded Wynn Oil $2.0 million
in damages. The court also indicated it would award prejudgment interest and
attorneys' fees to Wynn Oil. Following the entry of a final judgment, the
defendants are expected to appeal the trial court's decision. See "Legal
Proceedings."
11
<PAGE> 13
SEASONALITY OF THE BUSINESS
Although sales at the Company's divisions are somewhat seasonal, the
consolidated results of operations generally do not reflect seasonality.
RESEARCH AND DEVELOPMENT
Wynn Oil maintains research and product performance centers in Azusa,
California; St. Niklaas, Belgium; Paris, France; and Edenvale, South Africa.
The main activities of the research staff are the development of new specialty
chemicals and other products, improvement of existing products, including
finding new applications for their use, evaluation of competitive products and
performance of quality control procedures.
Precision maintains research and engineering facilities in Lebanon,
Tennessee; Lynchburg, Virginia; and Orillia, Ontario, Canada. Research and
development is an important aspect of Precision's business as Precision has
developed and continues to develop numerous specialized compounds to meet the
specific needs of its various customers. Precision also has technical centers
at its Lebanon, Tennessee, Lynchburg, Virginia, and Orillia, Ontario, Canada
facilities to construct prototype products and to perform comprehensive testing
of materials and products. Precision maintains extensive research, development
and engineering facilities to provide outstanding service to its customers.
FOREIGN OPERATIONS
The following table shows sales to foreign customers for 1993, 1992 and
1991:
<TABLE>
<CAPTION>
1993 1992 1991
------------ ------------ -----------
<S> <C> <C> <C>
Total Sales Outside the United States: $102,907,000 $103,962,000 $93,927,000
Percent of Net Sales 36.1% 35.6% 34.3%
Sales by Foreign Subsidiaries $92,911,000 $93,866,000 $81,383,000
Percent of Net Sales 32.6% 32.2% 29.7%
Export Sales by Domestic Subsidiaries $9,996,000 $10,096,000 $12,544,000
Percent of Net Sales 3.5% 3.4% 4.6%
</TABLE>
Consolidated operating results are reported in United States dollars.
Because the Company's foreign subsidiaries conduct operations in the currencies
of the countries in which they are based, all financial statements of the
foreign subsidiaries must be translated into United States dollars. As the
value of the United States dollar increases or decreases relative to these
foreign currencies, the United States dollar value of items on the financial
statements of the foreign subsidiaries is reduced or increased, respectively.
Therefore, changes in dollar sales of the foreign subsidiaries from year to
year are not necessarily indicative of changes in actual sales recorded in
local currency. See Note 4 and Note 15 of "Notes to Consolidated Financial
Statements" on pages 25 and 29 through 31, respectively, of the 1993 Annual
Report, which are hereby incorporated by reference.
12
<PAGE> 14
The value of any foreign currency relative to the United States dollar
is affected by a variety of factors. It is exceedingly difficult to predict
what such value may be at any time in the future. Consequently, the ability of
the Company to control the impact of foreign currency fluctuations is limited.
A material portion of the Company's business is conducted outside the
United States. Therefore, the Company's ability to continue such operations or
maintain their profitability is to some extent subject to control and
regulation by the United States government and foreign governments.
EMPLOYEES
At December 31, 1993, the Company had 1,978 employees.
A majority of the production and maintenance employees at the Lebanon,
Tennessee plant of Precision are represented by a local lodge of the
International Association of Machinists and Aerospace Workers. The collective
bargaining agreement for this facility will expire in April 1995. The
production and maintenance employees at the Orillia, Ontario, Canada plant of
Precision are represented by a local unit of the United Rubber, Cork, Linoleum
and Plastic Workers of America. The collective bargaining agreement for the
unit will expire in February 1997.
A majority of the production and maintenance employees at the
Lynchburg, Virginia plant of Dynamic Seals, Inc., an affiliate of Precision,
are represented by a local of the International Chemical Workers Union. The
collective bargaining agreement for this facility expires in February 1996.
The Company considers its relations with its employees to be good.
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company, who are appointed annually, are
as follows:
<TABLE>
<CAPTION>
Executive
Officer Since Age
--------------- -----
<S> <C> <C> <C>
James Carroll President and Chief Executive Officer 1988 64
Seymour A. Schlosser Vice President-Finance and Chief Financial 1989 48
Officer
Gregg M. Gibbons Vice President-Corporate Affairs, General 1986 41
Counsel and Secretary
</TABLE>
The principal occupations of Mr. Carroll and Mr. Gibbons for the past
five years have been their current respective positions with the Company.
Prior to his employment with the Company in July 1989, Mr. Schlosser was Vice
President-Finance of EECO Incorporated (electronic components) from
13
<PAGE> 15
August 1987 to June 1989 and Controller of Baker Hughes Incorporated and its
predecessor, Baker International Corporation (oil field services and process
technologies) from July 1984 to August 1987. There is no arrangement or
understanding between any executive officer and any other person pursuant to
which he was selected as an officer. There is no family relationship between
any executive officers of the Company.
ITEM 2. PROPERTIES
The following is a summary description of the Company's facilities, all
of which the Company believes to be of adequate construction:
<TABLE>
<CAPTION>
If Lease,
Held in Fee Square Year of
Location or by Lease Footage Termination Present Use
-------- ----------- ------- ----------- -----------
<S> <C> <C> <C> <C>
WYNN'S INTERNATIONAL, INC.
Orange, California Lease 6,894 1996 Administrative
AUTOMOTIVE PARTS AND ACCESSORIES:
WYNN'S-PRECISION, INC.
Domestic
--------
Lebanon, Tennessee Fee 140,000 -- Manufacturing,
Warehouse,
Administrative
Lebanon, Tennessee Fee 52,000 -- Manufacturing
Lebanon, Tennessee Fee 35,000 -- Manufacturing
Livingston, Tennessee Fee 33,000 -- Manufacturing,
Warehouse
Tempe, Arizona Fee 32,572 -- Manufacturing,
Warehouse
Rancho Cucamonga, California Lease 2,880 1996 Warehouse
Elgin, Illinois Lease 1,100 1995 Warehouse
Farmington Hills, Michigan Lease 1,963 1998 Administrative
Grand Rapids, Michigan Lease 2,000 1997 Warehouse
Golden Valley, Minnesota Lease 3,800 1996 Warehouse
</TABLE>
14
<PAGE> 16
<TABLE>
<CAPTION>
If Lease,
Held in Fee Square Year of
Location or by Lease Footage Termination Present Use
-------- ----------- ------- ----------- -----------
<S> <C> <C> <C> <C>
Charlotte, North Carolina Lease 1,838 1996 Warehouse
Buffalo, New York Lease 2,340 1995 Warehouse
Dayton, Ohio Lease 4,295 1995 Warehouse
Bensalem, Pennsylvania Lease 2,326 1994 Warehouse
Indianapolis, Indiana Lease 1,800 1996 Warehouse
Fort Worth, Texas Lease 3,600 1995 Warehouse
Lenexa, Kansas Lease 2,089 1994 Warehouse
Foreign
-------
Orillia, Ontario, Canada Fee 48,000 -- Manufacturing,
Warehouse,
Administrative
Concord, Ontario, Canada Lease 3,455 1994 Warehouse
Edmonton, Alberta, Canada Lease 2,700 1996 Warehouse
Calgary, Alberta, Canada Lease 1,600 Month-to-Month Warehouse
Aldershot, England Lease 2,300 1995 Warehouse
DYNAMIC SEALS, INC.
Lynchburg, Virginia Fee 80,000 -- Manufacturing,
Warehouse,
Administrative
Houston, Texas Lease 14,000 1995 Manufacturing,
Warehouse,
Administrative
Houston, Texas Lease 14,000 1995 Warehouse
</TABLE>
15
<PAGE> 17
<TABLE>
<CAPTION>
If Lease,
Held in Fee Square Year of
Location or by Lease Footage Termination Present Use
-------- ----------- ------- ----------- -----------
<S> <C> <C> <C> <C>
WYNN'S CLIMATE SYSTEMS, INC.
Domestic
--------
Fort Worth, Texas Fee 210,000 -- Manufacturing,
Warehouse,
Administrative
Fort Worth, Texas Lease 112,724 1994 Warehouse,
Administrative
Fort Worth, Texas Lease 49,000 1994 Warehouse,
Administrative
Paramount, California Lease 11,055 1994 Warehouse,
Administrative
Cranbury, New Jersey Lease 6,942 1994 Warehouse
Madison Heights, Michigan Lease 1,100 1994 Administrative
Littleton, Colorado Lease 4,839 1995 Service Center
Northglenn, Colorado Lease 3,840 1995 Service Center
Colorado Springs, Colorado Lease 6,600 1997 Service Center
Phoenix, Arizona Lease 15,000 1994 Service Center
Mesa, Arizona Lease 4,400 1996 Service Center
Foreign
-------
Tamworth, Staffordshire, England Lease 14,000 Month-to-Month Manufacturing,
Warehouse,
Administrative
PETROCHEMICAL SPECIALTIES:
WYNN OIL COMPANY
Domestic
--------
Azusa, California Fee 122,630 -- Manufacturing,
Warehouse,
Administrative
</TABLE>
16
<PAGE> 18
<TABLE>
<CAPTION>
If Lease,
Held in Fee Square Year of
Location or by Lease Footage Termination Present Use
-------- ----------- ------- ----------- -----------
<S> <C> <C> <C> <C>
Foreign
-------
Frenchs Forest, Lease 24,224 1995 Warehouse,
New South Wales, Australia Administrative
Carrington, New South Wales, Lease 13,175 1996 Warehouse,
Australia Administrative
Malaga, Western Australia,
Australia Lease 8,363 1994 Warehouse,
Administrative
St. Niklaas, Belgium Fee 82,600 -- Manufacturing,
Warehouse,
Administrative
Mississauga, Ontario, Canada Lease 16,894 1995 Warehouse,
Administrative
Mississauga, Ontario, Canada Lease 2,536 1997 Service Center
Vancouver, British Columbia, Canada Lease 2,582 1997 Service Center
Reading, Berkshire, England Lease 6,692 1994 Warehouse,
Administrative
Strasbourg, France Lease 557 1997 Administrative
Paris, France Lease 8,853 1997 Administrative
Cestas, France Lease 11,405 1999 Warehouse,
Administrative
Cestas, France Lease 2,034 1994 Warehouse
Lyon, France Lease 465 1998 Administrative
Vitrolles, France Lease 715 1994 Administrative
Rungis-Cedex, France Lease 8,264 Month-to-Month Warehouse,
Administrative
St. Etienne, France Lease 929 1996 Administrative
Abbeville, France Lease 929 Month-to-Month Administrative
Thiers, France Lease 465 1994 Administrative
Toulouse, France Lease 485 1995 Administrative
</TABLE>
17
<PAGE> 19
<TABLE>
<CAPTION>
If Lease,
Held in Fee Square Year of
Location or by Lease Footage Termination Present Use
-------- ----------- ------- ----------- -----------
<S> <C> <C> <C> <C>
Celle, Germany Lease 7,209 2002 Warehouse,
Administrative
Mexico City, Mexico Lease 3,766 1996 Warehouse,
Administrative
Wynberg, Transvaal, South Africa Fee 32,280 -- Warehouse,
Administrative
Edenvale, Transvaal, South Africa Fee 10,921 -- Leased to Third Party
Arganda del Rey, Madrid, Spain Lease 11,840 Month-to-Month Manufacturing,
Warehouse
Caracas, Venezuela Lease 1,615 Month-to-Month Administrative
BUILDERS HARDWARE:
ROBERT SKEELS & COMPANY
Compton, California Fee 59,019 -- Warehouse,
Administrative
Fullerton, California Lease 1,600 1994 Warehouse,
Administrative
Los Angeles, California Lease 10,000 1994 Warehouse,
Administrative
</TABLE>
The Company believes that all of its operating properties are
adequately maintained, fully utilized and suitable for the purposes for which
they are used. With respect to those leases expiring in 1994 and 1995, the
Company believes it will be able to renew such leases on acceptable terms or
find suitable, alternative facilities.
ITEM 3. LEGAL PROCEEDINGS
Various claims and actions, considered normal to Registrant's business,
have been asserted and are pending against Registrant and its subsidiaries.
Registrant believes that such claims and actions should not have any material
adverse effect upon the results of operations or the financial position of
Registrant based on information presently known to Registrant.
In February 1994, the United States District Court for the Eastern
District of Michigan, Southern Division, in the case of Wynn Oil Company v.
American Way Service Corporation and Thomas A. Warmus, Case No. 89-CV-71777-DT,
awarded Wynn Oil the sum of $2,023,645 in damages in an action brought by Wynn
Oil in 1989 asserting trademark infringement by the defendants. The trial
court also
18
<PAGE> 20
indicated that it would award prejudgment interest and attorneys' fees to Wynn
Oil upon application to the court. Wynn Oil is seeking prejudgment interest
and attorneys' fees in an aggregate amount of between approximately $1.2
million and $1.5 million. Following the entry of a final judgment by the trial
court, the defendants are expected to appeal the trial court's decision to the
United States Court of Appeals for the Sixth Circuit. No portion of this
judgment has been included in the results of operations of the Company and all
of Registrant's costs relating to this case have been expensed as incurred.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during
the fourth quarter of 1993.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The information appearing under "Common Stock Price and Cash Dividends
Per Share: 1993-1992" on page 13 of the 1993 Annual Report and "Number of
Stockholders" and "Stock Exchange Listing" on page 33 of the 1993 Annual Report
is hereby incorporated by reference.
On February 7, 1994, the Board of Directors of Registrant declared a
cash dividend of $0.11 per share payable March 31, 1994 to stockholders of
record on March 14, 1994.
Under a long-term loan agreement with an insurance company,
Registrant's ability to pay dividends may be restricted under certain
circumstances. At the present time, Registrant believes that these
restrictions will not have an impact on the declaration of future dividends.
It is expected that Registrant will continue to pay dividends in the
future.
ITEM 6. SELECTED FINANCIAL DATA
Incorporated by reference from page 13 of the 1993 Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Incorporated by reference from the 1993 Annual Report, pages 14 through
17.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Consolidated financial statements of Registrant at December 31, 1993
and 1992 and for each of the three years in the period ended December 31, 1993
(including unaudited supplementary data) and the report of independent auditors
thereon are incorporated by reference from the 1993 Annual Report, pages 13 and
18 through 32.
19
<PAGE> 21
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information appearing under "Election of Directors" and "Compliance
with Section 16(a) of the Securities Exchange Act of 1934" on pages 4, 5 and 21
of Registrant's definitive proxy statement for the Annual Meeting of
Stockholders to be held on May 11, 1994 ("Registrant's 1994 Proxy Statement")
is hereby incorporated by reference. A list of executive officers of
Registrant is provided in Part I of this report.
ITEM 11. EXECUTIVE COMPENSATION
The information appearing under "Compensation of Directors,"
"Compensation Committee Interlocks and Insider Participation" and "Executive
Compensation" on pages 6 through 10 of Registrant's 1994 Proxy Statement is
hereby incorporated by reference. The Report of the Compensation Committee on
pages 10 through 12 of Registrant's 1994 Proxy Statement shall not be deemed to
be incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information appearing under "Security Ownership of Certain
Beneficial Owners and Management" on pages 2 through 4 of Registrant's 1994
Proxy Statement is hereby incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information appearing under "Certain Relationships and Related
Transactions" on page 21 of Registrant's 1994 Proxy Statement is hereby
incorporated by reference.
20
<PAGE> 22
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. See Index to Financial Statements and Financial Statement
Schedules Covered By Report of Independent Auditors.
2. See Index to Financial Statements and Financial Statement
Schedules Covered By Report of Independent Auditors.
3. See Index to Exhibits.
(b) No Reports on Form 8-K were filed by Registrant during the last
quarter of 1993.
21
<PAGE> 23
WYNN'S INTERNATIONAL, INC.
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
SCHEDULES COVERED BY REPORT OF INDEPENDENT AUDITORS
(ITEM 14(A))
<TABLE>
<CAPTION>
Page References
-------------------------------------
Form 10-K 1993 Annual Report
--------- ------------------
<S> <C> <C>
Consolidated Statements of Operations for each of the
three years in the period ended December 31, 1993 . . . . . . . . . 19
Consolidated Balance Sheets at December 31, 1993 and 1992 . . . . . . . . 20
Consolidated Statements of Stockholders' Equity for each
of the three years in the period ended December 31, 1993 . . . . . . 21
Consolidated Statements of Cash Flows for each of
the three years in the period ended December 31, 1993 . . . . . . . 22 - 23
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . 24 - 32
Consolidated schedules for each of the three years in
the period ended December 31, 1993:
VIII - Valuation and qualifying accounts . . . . . . . . . . . 23
IX - Short-term borrowings . . . . . . . . . . . . . . . . . 24
X - Supplementary income statement information . . . . . . . 25
</TABLE>
All other schedules are omitted since the required information is not
present or is not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the consolidated
financial statements, including the notes thereto.
The consolidated financial statements listed in the above index, which
are included in the 1993 Annual Report, are hereby incorporated by reference.
With the exceptions of the pages listed in the above index and the items
referred to in Items 1, 5, 6, 7 and 8, the 1993 Annual Report is not deemed to
be filed as part of this report.
22
<PAGE> 24
WYNN'S INTERNATIONAL, INC.
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
THREE YEARS ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
Allowance for
doubtful accounts
deducted from Balance at Charged to
accounts beginning costs and Deductions Balance at
receivable of year expenses (1) end of year
------------------ ---------- ---------- -------------- -----------
<S> <C> <C> <C> <C>
1993 $2,644,000 $ (39,000) $ (757,000) $1,848,000
========== ========== ============= ==========
1992 $3,206,000 $1,028,000 $(1,590,000) $2,644,000
========== ========== ============ ==========
1991 $1,884,000 $2,027,000 $ (705,000) $3,206,000
========== ========== ============= ==========
</TABLE>
____________________
(1) Represents accounts written off against the reserve.
23
<PAGE> 25
WYNN'S INTERNATIONAL, INC.
SCHEDULE IX - SHORT-TERM BORROWINGS
THREE YEARS ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
Maximum amount Weighted
Year end outstanding at Average amount average
weighted any month end outstanding interest rate
Notes payable Balance at average during the during the during the
to banks end of year interest rate year year year
-------------- ----------- ------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
1993 $ 809,000 7.7% $1,512,000 $1,177,000 10.5%
=========== ====== ========== ========== =====
1992 $ 940,000 12.5% $4,354,000 $1,744,000 10.3%
=========== ===== ========== ========== =====
1991 $ 696,000 11.1% $8,337,000 $4,976,000 8.0%
=========== ===== ========== ========== =====
</TABLE>
Notes payable represent obligations payable under several credit
agreements to various banks. Borrowings are arranged on an as-needed basis at
various terms and at the banks' most advantageous prevailing rates (see Note 7
of "Notes to Consolidated Financial Statements" on page 26 of the 1993 Annual
Report).
The average amount outstanding during the year was computed by
averaging the month-end balances during the year. The weighted average
interest rate was computed by dividing interest expense by the average amount
outstanding. In 1993, the majority of the average outstanding borrowings were
incurred by foreign subsidiaries in countries with interest rates above
prevailing rates in the United States.
24
<PAGE> 26
WYNN'S INTERNATIONAL, INC.
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
THREE YEARS ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
Charged to costs and expenses
---------------------------------------------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Advertising costs $4,120,000 $4,311,000 $4,241,000
========== ========== ==========
Repairs and Maintenance $3,499,000 $3,382,000 $3,104,000
========== ========== ==========
</TABLE>
All other information has been omitted since the required information
is not present in amounts sufficient to require inclusion in this schedule or
because the information required is included in the consolidated financial
statements, including the notes thereto.
25
<PAGE> 27
POWER OF ATTORNEY
Each person whose signature appears below hereby authorizes each of James
Carroll, Seymour A. Schlosser and Gregg M. Gibbons as attorney-in-fact to sign
on his behalf, individually and in each capacity stated below, and to file all
amendments and/or supplements to this Annual Report on Form 10-K.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, on March 25, 1994.
WYNN'S INTERNATIONAL, INC.
By JAMES CARROLL
------------------------------------
James Carroll
President
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Date
----
March 25, 1994 By WESLEY E. BELLWOOD
------------------------------------
Wesley E. Bellwood
Chairman of the Board
March 25, 1994 By JAMES CARROLL
------------------------------------
James Carroll
President
Chief Executive Officer
Director
26
<PAGE> 28
Date
----
March 25, 1994 By SEYMOUR A. SCHLOSSER
----------------------------------
Seymour A. Schlosser
Vice President-Finance
(Principal Financial and
Accounting Officer)
March 25, 1994 By BARTON BEEK
----------------------------------
Barton Beek
Director
March 25, 1994 By JOHN D. BORIE
----------------------------------
John D. Borie
Director
March 25, 1994 By BRYAN L. HERRMANN
----------------------------------
Bryan L. Herrmann
Director
March 25, 1994 By ROBERT H. HOOD, JR.
----------------------------------
Robert H. Hood, Jr.
Director
March 25, 1994 By RICHARD L. NELSON
----------------------------------
Richard L. Nelson
Director
March 25, 1994 By JAMES D. WOODS
----------------------------------
James D. Woods
Director
27
<PAGE> 29
WYNN'S INTERNATIONAL, INC.
INDEX TO EXHIBITS
(Item 14(a))
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
3.1 Certificate of Incorporation, as amended, of Registrant (incorporated herein by
reference to Exhibit 3.1 to Registrant's Report on Form 10-K for the fiscal year ended
December 31, 1987)
3.2 Certificate of Designations of Junior Participating Preferred Stock (incorporated
herein by reference to Exhibit 4.2 to Registrant's Report on Form 8-K dated March 3,
1989)
3.3 By-Laws, as amended, of Registrant
4.1 Note Agreement, dated March 5, 1986, between Registrant and Metropolitan Life
Insurance Company (incorporated herein by reference to Exhibit 4.1 to Registrant's
Report on Form 8-K dated March 5, 1986)
4.2 Shareholder Rights Agreement, dated as of March 3, 1989, between Registrant and First
Interstate Bank of California, as Rights Agent (incorporated by reference to Exhibit
4.1 to Registrant's Report on Form 8-K dated March 3, 1989)
4.3 Amendment No. 1 to Shareholder Rights Agreement, dated June 11, 1990 (incorporated by
reference to Exhibit 28.2 to Registrant's Report on Form 8-K dated June 11, 1990)
10.1 Employment Agreement, dated December 8, 1992, between Registrant and James Carroll
(incorporated herein by reference to Exhibit 10.1 to Registrant's Report on Form 10-K
for the fiscal year ended December 31, 1992)
10.2 Employment Agreement, dated December 16, 1992, between Registrant and Gregg M. Gibbons
(incorporated herein by reference to Exhibit 10.2 to Registrant's Report on Form 10-K
for the fiscal year ended December 31, 1992)
</TABLE>
28
<PAGE> 30
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
10.3 Employment Agreement, dated December 16, 1992, between Registrant and Seymour A.
Schlosser (incorporated herein by reference to Exhibit 10.3 to Registrant's Report on
Form 10-K for the fiscal year ended December 31, 1992)
10.4 Wynn's International, Inc. Amended and Restated 1980 Stock Option and Appreciation
Rights Plan (incorporated herein by reference to Exhibit 4.1 to Registrant's
Registration Statement on Form S-8, Registration No. 2-68157)
10.5 Wynn's International, Inc. Amended and Restated 1982 Incentive Stock Option Plan
(incorporated herein by reference to Exhibit 4.2 to Registrant's Registration
Statement on Form S-8, Registration No. 2-68157)
10.6 Wynn's International, Inc. Stock-Based Incentive Award Plan (incorporated herein by
reference to Exhibit 28.1 to Registrant's Registration Statement on Form S-8,
Registration No. 33-30296 and Exhibit 28.2 to Registrant's Registration Statement on
Form S-8, Registration No. 33-64090)
10.7 Wynn's International, Inc. 1994 Corporate Management Incentive Plan
10.8 Deferred Compensation Agreement, dated November 30, 1990, between Registrant and James
Carroll (incorporated herein by reference to Exhibit 10.9 to Registrant's Report on
Form 10-K for the fiscal year ended December 31, 1990)
10.9 Deferred Compensation Agreement, dated February 15, 1993, between Registrant and James
Carroll (incorporated herein by reference to Exhibit 10.11 to Registrant's Report on
Form 10-K for the fiscal year ended December 31, 1992)
10.10 Deferred Compensation Agreement, dated April 23, 1993, between Registrant and James
Carroll
10.11 Form of Indemnification Agreement between Registrant and a director of Registrant
11 Computation of net income per common share - primary and assuming full dilution
</TABLE>
29
<PAGE> 31
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
13 Portions of Registrant's Annual Report to Stockholders for the fiscal year ended
December 31, 1993 which have been expressly incorporated by reference as a part of
this Annual Report on Form 10-K
22 Subsidiaries of Registrant
23 Consent of Independent Auditors
</TABLE>
30
<PAGE> 1
EXHIBIT 3.3
BY-LAWS
OF
WYNN'S INTERNATIONAL, INC.
AS AMENDED ON AUGUST 4, 1993
ARTICLE I
OFFICES
Section 1. The registered office shall be in the City of Wilmington,
County of New Castle, State of Delaware.
Section 2. The corporation may also have offices at such other places
both within and without the State of Delaware as the board of directors may
from time to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of
directors shall be held in the City of Fullerton, State of California, at such
place as may be fixed from time to time by the board of directors, or at such
other place either within or without the State of Delaware as shall be
designated from time to time by the board of directors and stated in the notice
of the meeting. Meetings of stockholders for any other purpose may be held at
such time and place, within or without the State of Delaware, as shall be
stated in the notice of the meeting or in a duly executed waiver of notice
thereof.
Section 2. Annual meetings of stockholders, commencing with the year
1977, shall be held on the fourth Wednesday of April if not a legal holiday,
and if a legal holiday, then on the next secular day following, at 10:00 A.M.,
or at such other date and time as shall be designated from time to time by the
board of directors and stated in the notice of the meeting, at which they shall
elect by a plurality vote by written ballot the successors to the class of
directors whose terms shall expire in that year, and transact such other
business as may properly be brought before the meeting.
Section 3. Written notice of the annual meeting stating the place, date
and hour of the meeting shall be given to each stockholder entitled to vote at
such meeting not less than ten nor more than sixty days before the date of the
meeting.
Section 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, or cause to be prepared and made, at least
ten days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at
<PAGE> 2
the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting, either at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of the meeting or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place
of the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the Certificate of
Incorporation, may be called by the President and shall be called by the
President or Secretary at the request in writing of a majority of the board of
directors.
Section 6. Written notice of a special meeting stating the place, date
and hour of the meeting and the purpose or purposes for which the meeting is
called, shall be given not less than ten nor more than sixty days before the
date of the meeting, to each stockholder entitled to vote at such meeting.
Section 7. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
Certificate of Incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement
at the meeting, until a quorum shall be present or represented. At such
adjourned meeting at which a quorum shall be present or represented any
business may be transacted which might have been transacted at the meeting as
originally notified. If the adjournment is for more than thirty days, or if
after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote at the meeting.
Section 9. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which, by express provision of the statutes or
of the Certificate of Incorporation, a different vote is required, in which
case such express provision shall govern and control the decision of such
question.
2
<PAGE> 3
Section 10. Unless otherwise provided in the Certificate of
Incorporation, each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder, but no proxy shall be voted on
after three years from its date, unless the proxy provides for a longer period.
Section 11. Unless otherwise provided in the Certificate of
Incorporation, any action required to be taken at any annual or special meeting
of stockholders of the corporation, or any action which may be taken at any
annual or special meeting of such stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted. Prompt notice of the taking of the corporate action
without a meeting by less than unanimous written consent shall be given to
those stockholders who have not consented in writing.
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole
board shall be eight (8) and shall be classified with respect to the time for
which they shall severally hold office by dividing them into three (3) classes,
Class I and Class III each shall consist of three (3) directors and Class II
shall consist of two (2) directors. All directors of the corporation shall
hold office until their successors are duly elected and qualified. The
directors of Class I shall hold office until the annual meeting of stockholders
of the corporation to be held in 1974 and until their successors are duly
elected and qualified; the directors of Class II shall hold office until the
annual meeting of stockholders of the corporation to be held in 1975 and until
their successors are duly elected and qualified; and the directors of Class III
shall hold office until the annual meeting of stockholders of the corporation
to be held in 1976 and until their successors are duly elected and qualified.
In the event of any increase or decrease in the authorized number of directors
(i) each director then serving as such shall nevertheless continue as a
director of the class of which he or she is a member until the expiration of
his or her current term, or his or her death, retirement, resignation, or
removal, and (ii) the newly-created or eliminated directorships resulting from
such increase or decrease shall be apportioned by the Board among the three
classes of directors so as to maintain the number of directorships in such
classes as nearly equal as possible. At each annual meeting of the
stockholders of the corporation, the successors to the class of directors whose
terms shall expire in that year shall be elected to hold office for a term of
three (3) years, so that the term of office of one class of directors shall
expire in each year.
3
<PAGE> 4
Section 2. Vacancies in the board of directors may be filled by a
majority of the directors then in office, though less than a quorum, or by a
sole remaining director, and any director so chosen shall hold office for the
remainder of the full term of the director whose place he has been elected to
fill and until his successor is duly elected and shall qualify. If there are
no directors in office, then an election of directors may be held in the manner
provided by statute.
A vacancy or vacancies in the board of directors shall be deemed to
exist in case of the death, resignation or removal of any director, or if the
stockholders fail at any annual or special meeting of stockholders at which any
director or directors are elected to elect the full authorized number of
directors to be voted for at that meeting, or if there are newly created
directorships resulting from any increase in the authorized number of
directors.
If, at the time of filling any vacancy, the directors then in office
shall constitute less than a majority of the whole board (as constituted
immediately prior to any such increase), the Court of Chancery may, upon
application of any stockholder or stockholders holding at least ten percent of
the total number of the shares at the time outstanding having the right to vote
for such directors, summarily order an election to be held to fill any such
vacancies or newly created directorships, or to replace the directors chosen by
the directors then in office.
Section 3. The business of the corporation shall be managed by its
board of directors which may exercise all such powers of the corporation and do
all such lawful acts and things as are not by statute or by the Certificate of
Incorporation or by these By-Laws directed or required to be exercised or done
by the stockholders. The Chairman of the board of directors shall preside at
all meetings of the stockholders and of the board of directors.
MEETING OF THE BOARD OF DIRECTORS
Section 4. The board of directors of the corporation may hold meetings,
both regular and special, either within or without the State of Delaware.
Section 5. Immediately following each annual meeting of stockholders
and at the place thereof, or at such other time and place as shall be fixed by
resolution of the board of directors prior to the annual meeting of the
stockholders, the board of directors shall hold a meeting for the purpose of
organization, election of officers, and the transaction of such other business
as they deem necessary. Notice of such meetings is hereby dispensed with. In
the event a meeting of the board of directors is not held immediately after the
annual meeting of the stockholders, or in the event the board of directors
fails to fix the time and place for such meeting, the meeting may be held at
such time and place as shall be specified in a notice given
4
<PAGE> 5
as hereinafter provided for special meetings of the board of directors, or as
shall be specified in a written waiver signed by all of the directors.
Section 6. Regular meetings of the board of directors may be held
without notice at such time and at such place as shall from time to time be
determined by the board.
Section 7. Special meetings of the board may be called by the President
on two (2) days' notice to each director, either personally or by mail or by
telegram; special meetings shall be called by the President or Secretary in
like manner and on like notice on the written request of two directors.
Section 8. At all meetings of the board a majority of directors shall
constitute a quorum for the transaction of business and the act of a majority
of the directors present at any meeting at which there is a quorum shall be the
act of the board of directors, except as may be otherwise specifically provided
by statute or by the Certificate of Incorporation. If a quorum shall not be
present at any meeting of the board of directors the directors present thereat
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 9. Unless otherwise restricted by the Certificate of
Incorporation or these By-Laws, any action required or permitted to be taken at
any meeting of the board of directors or of any committee thereof may be taken
without a meeting, if all members of the board or committee, as the case may
be, consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the board or committee.
Section 10. Unless otherwise restricted by the Certificate of
Incorporation or these By-Laws, members of the board of directors or any
committee thereof may participate in a meeting of such board or committee by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and
participation in a meeting pursuant to this section shall constitute presence
in person at such meeting.
COMMITTEES OF DIRECTORS
Section 11. The board of directors may, by resolution passed by a
majority of the whole board, designate one or more committees, each committee
to consist of one or more of the directors of the corporation. The board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. In
the absence or disqualification of a member of a committee, the member or
members thereof present at any meeting and not disqualified from voting,
whether or not he or they
5
<PAGE> 6
constitute a quorum, may unanimously appoint another member of the board of
directors to act at the meeting in the place of any such absent or disqualified
member. Any such committee, to the extent provided in the resolution of the
board of directors, shall have and may exercise all the powers and authority of
the board of directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to amending the Certificate of Incorporation, adopting
an agreement of merger or consolidation, recommending to the stockholders the
sale, lease or exchange of all or substantially all of the corporation's
property and assets, recommending to the stockholders a dissolution of the
corporation or a revocation of a dissolution, or amending the By-Laws of the
corporation; and, unless the resolution or the Certificate of Incorporation
expressly so provide, no such committee shall have the power or authority to
declare a dividend or to authorize the issuance of stock. Such committee or
committees shall have such name or names as may be determined from time to time
by resolution adopted by the board of directors.
Section 12. Each committee shall keep regular minutes of its meetings
and report the same to the board of directors when required.
COMPENSATION OF DIRECTORS
Section 13. Unless otherwise restricted by the Certificate of
Incorporation, the board of directors shall have the authority to fix the
compensation of directors. The directors may be paid their expenses, if any,
of attendance at each meeting of the board of directors and may be paid a fixed
sum for attendance at each meeting of the board of directors or a stated salary
as director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for
attending committee meetings.
ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the
Certificate of Incorporation or of these By-Laws, notice is required to be
given to any director or stockholder, it shall not be construed to mean
personal notice, but such notice may be given in writing, by mail, addressed to
such director or stockholder, at his address as it appears on the records of
the corporation, with postage thereon prepaid, and such notice shall be deemed
to be given at the time when the same shall be deposited in the United States
mail. Notice to directors may also be given by telegram.
6
<PAGE> 7
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the Certificate of Incorporation or of these
By-Laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be
deemed equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by the board
of directors and shall be a President, one or more Vice Presidents, a Secretary
and a Treasurer. The board of directors shall select and appoint a Chairman of
the board of directors from among the directors of the corporation, but such
person shall not be considered an officer or employee of the corporation unless
so specified by the board of directors. The board of directors may also choose
one or more Assistant Secretaries and Assistant Treasurers. Any number of
offices may be held by the same person, unless the Certificate of Incorporation
or these By-Laws otherwise provide.
Section 2. The board of directors at its first meeting after each
annual meeting of stockholders shall choose a Chairman of the Board, a
President, one or more Vice Presidents, a Secretary and a Treasurer.
Section 3. The board of directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the board.
Section 4. The salaries of all officers and agents of the corporation
shall be fixed by the board of directors.
Section 5. The officers of the corporation shall hold office until
their successors are chosen and qualify. Any officer elected or appointed by
the board of directors may be removed at any time by the affirmative vote of a
majority of the board of directors. Any vacancy occurring in any office of the
corporation shall be filled by the board of directors.
THE PRESIDENT
Section 6. The President shall be the Chief Executive Officer of the
corporation, and, in the absence of the Chairman of the Board, shall preside at
all meetings of the stockholders, and at all meetings of the board of directors
and shall have general and active management of the business of the corporation
and shall
7
<PAGE> 8
perform such other duties as may be assigned to him from time to time by the
board of directors or the By-Laws.
Section 7. He shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the board of
directors to some other officer or agent of the corporation.
THE VICE PRESIDENTS
Section 8. In the absence of the President or in the event of his
inability or refusal to act, the Vice Presidents in the order determined by the
board of directors (or if there be no such determination, then in the order of
their election) shall perform the duties of the President, and when so acting,
shall have all the powers of and subject to all the restrictions upon the
President. The Vice Presidents shall perform such other duties and have such
other powers as the board of directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARY
Section 9. The Secretary shall attend all meetings of the board of
directors and all meetings of the stockholders and record all the proceedings
of the meetings of the corporation and of the board of directors in a book to
be kept for that purpose and shall perform like duties for the standing
committees when required. He shall give, or cause to be given, notice of all
meetings of the stockholders and special meetings of the board of directors,
and shall perform such other duties as may be prescribed by the board of
directors or President, under whose supervision he shall be. He shall have
custody of the corporate seal of the corporation and he, or an Assistant
Secretary, shall have authority to affix the same to any instrument requiring
it and when so affixed, it may be attested by his signature or by the signature
of such Assistant Secretary. The board of directors may give general authority
to any other officer to affix the seal of the corporation and to attest the
affixing by his signature.
Section 10. The Assistant Secretary, or if there be more than one, the
Assistant Secretaries in the order determined by the board of directors (or if
there be no such determination, then in the order of their election) shall, in
the absence of the Secretary or in the event of his inability or refusal to
act, perform the duties and exercise the powers of the Secretary and shall
perform such other duties and have such other powers as the board of directors
may from time to time prescribe.
8
<PAGE> 9
THE TREASURER AND ASSISTANT TREASURERS
Section 11. The Treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all
moneys and other valuable effects in the name and to the credit of the
corporation in such depositories as may be designated by the board of
directors.
Section 12. He shall disburse the funds of the corporation as may be
ordered by the board of directors, taking proper vouchers for such
disbursements, and shall render to the President and the board of directors, at
its regular meetings, or when the board of directors so requires, an account of
all his transactions as Treasurer and of the financial condition of the
corporation.
Section 13. If required by the board of directors, he shall give the
corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the board of directors for the faithful performance of the
duties of his office and for the restoration to the corporation, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the corporation.
Section 14. The Assistant Treasurer, or if there shall be more than
one, the Assistant Treasurers in the order determined by the board of directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the Treasurer or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the Treasurer and
shall perform such other duties and have such other powers as the board of
directors may from time to time prescribe.
ARTICLE VI
CERTIFICATES OF STOCK
Section 1. Every holder of stock in the corporation shall be entitled
to have a certificate, signed by, or in the name of the corporation by, the
Chairman or Vice Chairman of the board of directors, or the President or a Vice
President and the Treasurer or an Assistant Treasurer, or the Secretary or an
Assistant Secretary of the corporation, certifying the number of shares owned
by him in the corporation. If the corporation shall be authorized to issue
more than one class of stock or more than one series of any class, the powers,
designations, preferences and relative, participating, optional or other
special rights of each class of stock or series thereof and the qualification,
limitations or restrictions of such preferences and/or rights shall be set
forth in full or summarized on the face or back of the certificate which the
corporation shall issue to represent such class or series of stock, provided
that, except as otherwise provided in Section 202 of the General Corporation
Law of Delaware, in lieu of the foregoing requirements, there may be set forth
on the face
9
<PAGE> 10
or back of the certificate which the corporation shall issue to represent such
class or series of stock, a statement that the corporation will furnish without
charge to each stockholder who so requests the powers, designations,
preferences and relative, participating, optional or other special rights or
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights.
Section 2. Any of or all the signatures on the certificate may be
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issue.
LOST CERTIFICATES
Section 3. The board of directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing
such issue of a new certificate or certificates, the board of directors may, in
its discretion and as a condition precedent to the issuance thereof, require
the owner of such lost, stolen or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it shall require
and/or to give the corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the corporation with respect to the
certificate alleged to have been lost, stolen, or destroyed.
TRANSFERS OF STOCK
Section 4. Upon surrender to the corporation or the transfer agent of
the corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignation or authority to transfer, it shall
be the duty of the corporation to issue a new certificate to the person
entitled thereto, cancel the old certificate and record the transaction upon
its books.
FIXING RECORD DATE
Section 5. In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or
10
<PAGE> 11
exchange of stock or for the purpose of any other lawful action, the board of
directors may fix, in advance, a record date, which shall not be more than
sixty nor less than ten days before the date of such meeting, nor more than
sixty days prior to any other action. A determination of stockholders of
record entitled to notice of or to vote at a meeting of stockholders shall
apply to any adjournment of the meeting; provided, however, that the board of
directors may fix a new record date for the adjourned meeting.
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation, subject
to the provisions of the Certificate of Incorporation, if any, may be declared
by the board of directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the Certificate of Incorporation.
Section 2. Before payment of any dividend, there may be set aside out
of any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meeting contingencies, or for equalizing dividends, or
for repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
CHECKS
Section 3. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons as
the board of directors may from time to time designate.
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<PAGE> 12
FISCAL YEAR
Section 4. The fiscal year of the corporation shall be fixed by
resolution of the board of directors.
SEAL
Section 5. The corporate seal shall have inscribed thereon the name of
the corporation, the year of its organization and the words "Corporate Seal,
Delaware." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
REPRESENTATION OF SHARES OF OTHER CORPORATIONS
Section 6. The President or any Vice President and the Secretary or
Assistant Secretary of this corporation are authorized to vote, represent and
exercise on behalf of this corporation all rights incident to any and all
shares of any other corporation or corporations standing in the name of this
corporation. The authority herein granted to said officers to vote or
represent on behalf of this corporation any and all shares held by this
corporation in any other corporation or corporations may be exercised either by
such officers in person or by any person authorized so to do by proxy or power
of attorney duly executed by said officers.
INDEMNIFICATION
Section 7.1 Policy. It is the policy and intention of the corporation
to provide to its officers and directors broad and comprehensive
indemnification from liability to the full extent permitted by law.
Section 7.2 Right to Indemnification. Each person who was or is a
party or is threatened to be made a party to or is involved in any action, suit
or proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is or was a director or officer
of the corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, including service with
respect to employee benefit plans, whether the basis of such proceeding is an
alleged action or inaction in an official capacity or in any other capacity
while serving as a director, officer, employee or agent, shall be indemnified
and held harmless by the corporation to the fullest extent permitted by the
laws of Delaware, as the same exists or may hereafter be amended, against all
costs, charges, expenses, liabilities and losses (including attorneys' fees,
judgments, fines, ERISA
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<PAGE> 13
excise taxes or penalties and amounts paid or to be paid in settlement)
reasonably incurred or suffered by such person in connection therewith and such
indemnification shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of his or her heirs,
executors and administrators; provided, however, that except as provided in
Section 7.3 hereof, the corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof) initiated by
such person only if such proceeding (or part thereof) was authorized by the
Board of Directors of the corporation. The right to indemnification conferred
in this Article shall be a contract right and shall include the right to be
paid by the corporation the expenses incurred in defending any such proceeding
in advance of its final disposition; provided, however, that, if the Delaware
General Corporation Law requires, the payment of such expenses incurred by a
director or officer in his or her capacity as a director or officer (and not in
any other capacity in which service was or is rendered by such person while a
director or officer, including, without limitation, service to an employee
benefit plan) in advance of the final disposition of a proceeding, shall be
made only upon delivery to the corporation of an undertaking, by or on behalf
of such director or officer, to repay all amounts so advanced if it shall
ultimately be determined that such director of officer is not entitled to be
indemnified under this Article or otherwise. The corporation may, by action of
its Board of Directors, provide indemnification to employees and agents of the
corporation with the same scope and effect as the foregoing indemnification of
directors and officers.
Section 7.3 Right of Claimant to Bring Suit. If a claim under this
Article is not paid in full by the corporation within thirty days after a
written claim has been received by the corporation, the claimant may at any
time thereafter bring suit against the corporation to recover the unpaid amount
of the claim and, if successful in whole or in part, the claimant shall be
entitled to be paid also the expense of prosecuting such claim. It shall be a
defense to any such action (other than an action brought to enforce a claim for
expenses incurred in defending any proceeding in advance of its final
disposition where the required undertaking, if any, is required, has been
tendered to the corporation) that the claimant has failed to meet a standard of
conduct which makes it permissible under Delaware law for the corporation to
indemnify the claimant for the amount claimed. Neither the failure of the
corporation (including its Board of Directors, independent legal counsel, or
its stockholders) to have made a determination prior to the commencement of
such action that indemnification of the claimant is permissible in the
circumstances because he or she has met such standard of conduct, nor an actual
determination by the corporation (including its Board of Directors, independent
legal counsel or its stockholders) that the claimant has not met such standard
of conduct, shall be a defense to the action or create a presumption that the
claimant has failed to meet such standard of conduct.
Section 7.4 Non-Exclusivity of Rights. The right to indemnification and
the payment of expenses incurred in defending a proceeding in advance of its
final
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disposition conferred in this Article shall not be exclusive of any other right
which any person may have or hereafter acquire under any statute, provision of
the Certificate of Incorporation, bylaw, agreement, vote of stockholders or
disinterested directors or otherwise.
Section 7.5 Insurance. The corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
corporation or another corporation, partnership, joint venture, trust or other
enterprise against any such expense, liability or loss, whether or not the
corporation would have the power to indemnify such person against such
expenses, liability or loss under Delaware law.
Section 7.6 Expenses as a Witness. To the extent that any director,
officer, employee or agent of the corporation is by reason of such position, or
a position with another entity at the request of the corporation, a witness in
any action, suit or proceeding, he or she shall be indemnified against all
costs and expenses actually and reasonably incurred by him or her or on his or
her behalf in connection therewith.
Section 7.7 Indemnity Agreement. The corporation may enter into
agreements with any director, officer, employee or agent of the corporation to
the fullest extent permitted by Delaware law.
Section 7.8 Effect of Repeal or Modification. Any repeal or
modification of this Section 7 shall not result in any liability for a director
with respect to any action or omission occurring prior to such repeal or
modification.
ARTICLE VIII
AMENDMENTS
Section 1. These By-Laws may be altered, amended or repealed or new
by-laws may be adopted by the stockholders or by the board of directors at any
regular meeting of the stockholders or of the board of directors or at any
special meeting of the stockholders or of the board of directors if notice of
such alteration, amendment, repeal or adoption of new by-laws be contained in
the notice of such special meeting.
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<PAGE> 1
EXHIBIT 10.7
WYNN'S INTERNATIONAL, INC.
1994 CORPORATE MANAGEMENT INCENTIVE PLAN
Section 1. The purpose of this 1994 Corporate Management
Incentive Plan (the "1994 Plan") is to provide a reward for performance and an
incentive for the future endeavors of the Corporate Management Employees who
contribute to the success of the enterprise by their ability, industry,
loyalty, or exceptional service, through making them participants in that
success.
Section 2.
(a) Wynn's International, Inc. (the "Company") shall establish a
reserve for bonus payments for Corporate Management Employees for the year 1994
(the "Corporate Bonus Pool") with a corresponding charge to income for the year
1994 in an amount which the independent public accountants of the Company
verify and report to be equal to ten percent of the amount by which the
Consolidated Pretax Earnings of the Company exceed a ten percent (10%) return
on Beginning Net Operating Assets, provided, however, that (i) the maximum
amount of the Corporate Bonus Pool shall be Eight Hundred Seventy Five Thousand
Dollars ($875,000), and (ii) no amounts shall be earned hereunder if the
Consolidated Pretax Earnings of the Company for the year ended December 31,
1994 are less than Thirteen Million Nine Hundred Six Thousand Dollars
($13,906,000).
(b) Before the payment of bonus awards for the year 1994, the
independent accountants of the Company shall verify and report to the Board of
Directors of the Company (the "Board") the total amount of the Corporate Bonus
Pool and bonus awards to be paid therefrom shall not exceed the Corporate Bonus
Pool as verified and reported by the independent public accountants. Bonus
awards under the 1994 Plan shall be charged to income for 1994.
Section 3.
(a) The term "Consolidated Pretax Earnings" as used in the 1994
Plan shall mean, for calendar year 1994, the Company's income before taxes
based on income as shown on the Consolidated Statement of Operations section of
the Company's 1994 Consolidated Financial Statements after making adequate
provision for the Corporate Bonus Pool in the 1994 Consolidated Financial
Statements.
(b) The term "Beginning Net Operating Assets" shall mean the
consolidated net operating assets of the Company and subsidiaries at December
31, 1993, as calculated in a manner consistent with the Company's Corporate
Policy No. 1014.
(c) The term "1994 Consolidated Financial Statements" as used in
the 1994 Plan shall mean those financial statements of the Company and its
subsidiaries contained in
<PAGE> 2
the Company's annual report to stockholders for the year ended December 31,
1994 and upon which an opinion has been expressed by the independent public
accountants of the Company.
(d) The term "Corporate Management Employee" shall mean any person
employed as President and Chief Executive Officer, Vice President-Finance and
Chief Financial Officer, Vice President-Corporate Affairs, General Counsel and
Secretary, Assistant Secretary, Senior Counsel, Tax Manager, Controller,
Employee Benefits and Risk Manager, and any other management employees of the
Company designated by the President.
Section 4. Full power and authority to construe, interpret, and
administer the 1994 Plan shall be vested in the Board as from time to time
constituted pursuant to the By-Laws of the Company. Decisions of the Board
shall be final, conclusive, and binding. The Board shall rely upon and be
bound by the amount of Consolidated Pretax Earnings, Beginning Net Operating
Assets and the Corporate Bonus Pool, all as verified and reported by the
independent public accountants of the Company. The foregoing shall include,
but shall not be limited to, all determinations by the Board as to (i) the
eligibility of a Corporate Management Employee for consideration for a bonus,
and (ii) the amount, if any, of the bonus award paid to a Corporate Management
Employee. Any person who accepts any benefit hereunder agrees to accept as
final, conclusive, and binding, the determinations of the Board.
Section 5. The Board shall have discretion with respect to the
determination of individual bonus awards to the executive officers of the
Company. Individual bonus awards to other Corporate Management Employees shall
be at the discretion of the Chief Executive Officer of the Company. However,
the total Corporate Bonus Pool shall be distributed to the 1994 Plan
participants. The recommendations for bonus awards under the 1994 Plan for
executive officers of the Company shall be made to the Compensation Committee
of the Board (the "Committee") by the Chief Executive Officer under such
procedure as may from time to time be approved by the Board, except that no
such recommendations shall be made with respect to the Chief Executive Officer,
but such bonus shall be dealt with exclusively by the Committee under such
procedures as it may determine. Nothing contained herein shall entitle any
Corporate Management Employee to a bonus award, as a matter of right, for
services rendered in 1994.
Section 6. Notwithstanding the provisions of Sections 2 and 5,
the Committee shall have the authority to recommend to the Board, and the Board
shall have the power to authorize in accordance with the recommendations of the
Committee the payment of additional bonus awards to any or all executive
officers for outstanding performance in 1994, provided, however, that the
amount of any such additional bonus award, together with any amounts paid
pursuant to Sections 2 and 5, shall not exceed one hundred percent (100%) of
such executive officer's base salary in 1994.
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<PAGE> 3
Section 7. Bonus awards under the 1994 Plan will be paid to each
recipient no later than March 15, 1995 in one installment in cash, restricted
stock of the Company, or any combination thereof. Any award of WII restricted
stock is subject to the approval of the Committee.
Section 8. Upon termination of a Corporate Management Employee's
employment during the calendar year 1994 other than by death, such participant
shall not be entitled as a matter of right to any bonus award for services
rendered in 1994, provided, however, the Board may award a bonus as a matter of
discretion pursuant to Section 9 below.
Section 9. Notwithstanding Section 8 above, a Corporate
Management Employee whose employment terminates during the year or who is
granted a leave of absence during the year, and who at the time of such
termination of employment or granting of leave is eligible for consideration of
a bonus, may, at the discretion of the Board, and under such rules as the Board
may from time to time approve, be awarded a bonus with respect to the period of
his/her services during the year 1994.
Section 10. Upon the death of a Corporate Management Employee
during 1994, there shall be paid (as a death benefit and in lieu of any payment
pursuant to Section 5 which would otherwise have been payable after the death
of such Corporate Management Employee) to such beneficiaries as the Corporate
Management Employee shall have designated in writing and on forms prescribed by
and filed with the Board, or, if no such designation of beneficiaries has been
made, to such Corporate Management Employee's legal representatives or to the
persons entitled thereto as determined by a court of competent jurisdiction, an
amount equal to the bonus award, if any, that would have been paid to the
deceased Corporate Management Employee had such participant remained employed
by the Company through December 31, 1994. Any bonus which may be awarded to
such deceased participant shall be paid at the time awards are paid to other
participants pursuant to the 1994 Plan.
Section 11. The 1994 Plan and all determinations made and actions
taken pursuant hereto shall be governed by the laws of the State of Delaware
and construed accordingly.
Section 12. The 1994 Plan is effective as of January 1, 1994.
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<PAGE> 1
EXHIBIT 10.10
STANDARD DEFERRED COMPENSATION AGREEMENT
THIS AGREEMENT, is made the 23rd day of April, 1993, at Lebanon,
Tennessee, by and between Wynn's-Precision, Inc., a Delaware Corporation,
hereinafter sometimes referred to as "Employer," and James Carroll, hereinafter
sometimes referred to as "Employee."
W I T N E S S E T H :
WHEREAS, Employer has offered to defer payment of Employee's incentive
award, if any earned for services to be rendered in 1993 and to be paid in
1994; and
WHEREAS, Employee desires to receive said incentive award for 1993, if
earned, as deferred compensation; and
WHEREAS, the parties hereto have agreed to certain terms and
conditions in connection therewith and desire to reduce their agreement in
writing;
NOW, THEREFORE, for a valuable consideration, the receipt and
sufficiency of which is acknowledged, the parties agree as follows:
1. Amount
Employer shall defer payment of, and Employee shall defer receipt of
the incentive award, if any, earned by Employee for services rendered for
calendar year 1993 ("Deferred Compensation"). Said Deferred Compensation
<PAGE> 2
shall bear interest from the date that said Deferred Compensation would
otherwise be payable to Employee to the date of payment at the lesser of (a)
the rate of fifteen percent (15%) per annum, or (b) the prime rate as quoted by
Third National Bank, Nashville, Tennessee, on the last business day of each
calendar quarter.
2. Date Of Payment
Payment of Deferred Compensation shall be made five (5) business days
after the earliest of the following events:
(a) Employee terminates his employment with Employer;
(b) Employee becomes permanently disabled;
(c) Employee retires; or
(d) A change in control of Wynn's International, Inc. (WII), the
ultimate parent corporation of Employer, occurs.
3. Method Of Payment
Upon the occurrence of the earlier of any of the events specified in
Paragraph 2 hereof, Employer agrees to pay to Employee by Employer check the
total sum deferred in accordance with Paragraph 1, including principal and
interest, payable in one lump sum, less any required withholdings.
4. Death Benefit
In the event that Employee shall die while employed by Employer, or
while on an agreed leave of absence from said employment, then this Agreement
shall be terminated, and Employer shall pay to the person(s) designated by
Employee, the total amount of Deferred Compensation hereunder, including
principal and interest, payable in one (1) installment,
2
<PAGE> 3
commencing no later than sixty (60) days following the death of said Employee.
If Employee shall not have filed a designation of beneficiary in writing with
Employer at the time of his death, then Employer shall pay said total benefit
to Employee's spouse, if living, and if not, to Employee's estate. Employer
shall have the right to make any required withholdings from such payments.
5. Change In Control Of WII
For purposes of this Agreement, a "change in control of WII" shall
mean a change in control of a nature that would be required to be reported in
response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the
Securities Exchange Act of 1934, as amended ("Exchange Act"); provided that,
without limitation, such a change in control shall be deemed to have occurred
if (i) any "person" (as such term is used in Sections 13(d) and 14(d)(2) of the
Exchange Act) is or becomes the beneficial owner, directly or indirectly, of
securities of WII representing 40% or more of the combined voting power of
WII's then outstanding securities; or (ii) during any period of two consecutive
years, individuals who at the beginning of such period constitute the Board of
Directors of WII cease for any reason to constitute at least a majority thereof
unless the election of each new director was approved by a vote of at least
two-thirds of the directors then still in office who were directors at the
beginning of the period.
6. Funding Of Benefit
Employee understands and acknowledges that all Deferred Compensation
under Paragraph 1 of this Agreement shall be general unsecured obligations of
Employer and that Employer shall have no
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<PAGE> 4
obligation to set aside any amounts, principal or interest, for the benefit of
Employee in order to meet Employer's obligations under this Agreement, until
said amounts become due and payable under this Agreement. Employer shall be
entitled to set up such reserves as are required in order for Employer's
financial statements to be in accordance with generally accepted accounting
principles.
7. Statement Of Account
Employer shall furnish to Employee an annual statement showing the
amount of Deferred Compensation, including principal and interest, held for the
account of Employee.
8. Non-Assignability
The rights and benefits of Employee hereunder and the rights and
benefits of the person(s) who may be designated by Employee pursuant to the
provisions of Paragraph 4 hereof, shall be personal to Employee and to such
person(s), and no right or benefit hereunder shall be subject to voluntary or
involuntary alienation, assignment, pledge, hypothecation or transfer, or
become an asset in bankruptcy of such Employee or such person(s), or of any
person claiming through or under them; and no such right or benefit shall be
available or subject to the claims of any creditor of such Employee or such
person(s), or any person claiming through or under them.
9. Governing Law
This Agreement shall be governed by and construed according to the
laws of the State of Tennessee.
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<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
WYNN'S-PRECISION, INC.
By JERRY L. McFADDEN
---------------------------------
Jerry L. McFadden
Vice President-Finance
ATTEST:
LYNN WINFREE
- -------------------
Lynn Winfree
Assistant Secretary
By JAMES CARROLL
---------------------------------
James Carroll
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<PAGE> 1
EXHIBIT 10.11
INDEMNIFICATION AGREEMENT
This Indemnification Agreement (the "Agreement") is made as of
__________, 199__, by and between Wynn's International, Inc., a Delaware
corporation (the "Company"), and ______________ (the "Indemnitee"), a director
of the Company.
R E C I T A L S
A. The Indemnitee is currently serving or has agreed to
serve as a director of the Company and in such capacity has rendered or will
render valuable services to the Company.
B. The Company has investigated the availability and
sufficiency of liability insurance and Delaware statutory indemnification
provisions to provide its directors and officers with adequate protection
against various legal risks and potential liabilities to which such individuals
are subject due to their position with the Company and has concluded that such
insurance and statutory provisions may provide inadequate and unacceptable
protection to certain individuals requested to serve as its directors and
officers.
C. In order to induce and encourage highly experienced and
capable persons such as the Indemnitee to continue to serve as a director of
the Company, the Board of Directors has determined, after due consideration and
investigation of the terms and provisions of this Agreement and the various
other options available to the Company and the Indemnitee in lieu hereof, that
this Agreement is reasonable and prudent and in the best interests of the
Company and its stockholders.
A G R E E M E N T
NOW, THEREFORE, in consideration of the continued services of
the Indemnitee and in order to induce the Indemnitee to serve as a director,
the Company and the Indemnitee do hereby agree as follows:
1. Definitions. As used in this Agreement:
(a) The term "Proceeding" shall include any threatened,
pending or completed action, suit or proceeding, whether brought in
the name of the Company or otherwise and whether of a civil, criminal
or administrative or investigative nature, by reason of the fact that
the Indemnitee is or was a director of the Company, or is or was
serving at the request of the Company as a director, officer, employee
or agent of another enterprise, whether or not he is serving in such
capacity at the time any liability or expense is incurred for which
indemnification or reimbursement is to be provided under this
Agreement.
<PAGE> 2
(b) The term "Expenses" includes, without limitation,
attorneys' fees, disbursements and retainers, accounting and witness
fees, travel and deposition costs, expenses of investigations, judicial
or administrative proceedings or appeals, amounts paid in settlement by
or on behalf of the Indemnitee, and any expenses of establishing a right
to indemnification pursuant to this Agreement or otherwise including
reasonable compensation for time spent by the Indemnitee in connection
with the investigation, defense or appeal of a Proceeding or action for
indemnification for which he is not otherwise compensated by the Company
or any third party. The term "Expenses" does not include the amount of
judgments, fines, penalties or ERISA excise taxes actually levied
against the Indemnitee.
2. Agreement to Serve. The Indemnitee agrees to continue
to serve as a director of the Company at the will of the Company for so long as
he is duly elected or appointed or until such time as he tenders his
resignation in writing.
3. Indemnification in Third Party Actions. The Company
shall indemnify the Indemnitee in accordance with the provisions of this
section if the Indemnitee is a party to or threatened to be made a party to or
otherwise involved in any Proceeding (other than a Proceeding by or in the name
of the Company to procure a judgment in its favor), by reason of the fact that
the Indemnitee is or was a director of the Company, or is or was serving at the
request of the Company as a director, officer, employee or agent of another
enterprise against all Expenses, judgments, fines, penalties and ERISA excise
taxes actually and reasonably incurred by the Indemnitee in connection with the
defense or settlement of such Proceeding, to the fullest extent permitted by
Delaware law; provided that any settlement be approved in writing by the
Company.
4. Indemnification in Proceedings by or in the Name of the
Company. The Company shall indemnify the Indemnitee in accordance with the
provisions of this section if the Indemnitee is a party to or threatened to be
made a party to or otherwise involved in any Proceeding by or in the name of
the Company to procure a judgment in its favor by reason of the fact that the
Indemnitee was or is a director of the Company, or is or was serving at the
request of the Company as a director, officer, employee or agent of another
enterprise, against all Expenses actually and reasonably incurred by the
Indemnitee in connection with the defense or settlement of such Proceeding, to
the fullest extent permitted by Delaware law.
5. Conclusive Presumption Regarding Standard of Conduct.
The Indemnitee shall be conclusively presumed to have met the relevant
standards of conduct as defined by Delaware law for indemnification pursuant to
this Agreement, unless a final determination is made by a court of competent
jurisdiction that the Indemnitee has not met such standards.
6. Indemnification of Expenses of Successful Party.
Notwithstanding any other provisions of this Agreement, to the extent that the
Indemnitee has been successful in defense of any Proceeding or in defense of
any claim, issue or matter
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<PAGE> 3
therein, on the merits or otherwise, including the dismissal of a Proceeding
without prejudice, the Indemnitee shall be indemnified against all Expenses
incurred in connection therewith to the fullest extent permitted by Delaware
law.
7. Advances of Expenses. The Expenses incurred by the
Indemnitee in any Proceeding shall be paid promptly by the Company in advance
of the final disposition of the Proceeding at the written request of the
Indemnitee to the fullest extent permitted by Delaware law; provided that as
long as Delaware law requires such an undertaking, the Indemnitee shall
undertake in writing to repay such amount to the extent that it is ultimately
determined that the Indemnitee is not entitled to indemnification.
8. Partial Indemnification. If the Indemnitee is entitled
under any provision of this Agreement to indemnification by the Company for
some or a portion of the Expenses, judgments, fines, penalties or ERISA excise
taxes actually and reasonably incurred by him in the investigation, defense,
appeal or settlement of any Proceeding but not, however, for the total amount
thereof, the Company shall nevertheless indemnify the Indemnitee for the
portion of such Expenses, judgments, fines, penalties or ERISA excise taxes to
which the Indemnitee is entitled.
9. Indemnification Procedure; Determination of Right to
Indemnification.
(a) Promptly after receipt by the Indemnitee of notice of
the commencement of any Proceeding, the Indemnitee will, if a claim in
respect thereof is to be made against the Company under this
Agreement, notify the Company of the commencement thereof. The
omission so to notify the Company will not relieve it from any
liability which it may have to the Indemnitee otherwise than under
this Agreement.
(b) If a claim under this Agreement is not paid by the
Company within thirty (30) days of receipt of written notice, the
right to indemnification as provided by this Agreement shall be
enforceable by the Indemnitee in any court of competent jurisdiction.
The burden of proving by clear and convincing evidence that
indemnification or advances are not appropriate shall be on the
Company. Neither the failure of the directors or stockholders of the
Company or its independent legal counsel to have made a determination
prior to the commencement of such action that indemnification or
advances are proper in the circumstances because the Indemnitee has
met the applicable standard of conduct, nor an actual determination by
the directors or stockholders of the Company or its independent legal
counsel that the Indemnitee has not met such applicable standard of
conduct, shall be a defense to the action or create a presumption that
the Indemnitee has not met the applicable standard of conduct.
(c) The Indemnitee's Expenses incurred in connection with
any proceeding concerning his right to indemnification or advances in
whole or in part
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<PAGE> 4
pursuant to this Agreement shall also be indemnified by the
Company regardless of the outcome of such proceeding, unless a court
of competent jurisdiction determines that each of the material
assertions made by the Indemnitee in such proceeding was not made in
good faith or was frivolous.
(d) With respect to any Proceeding for which
indemnification is requested, the Company will be entitled to
participate therein at its own expense and, except as otherwise
provided below, to the extent that it may wish, the Company may assume
the defense thereof, with counsel satisfactory to the Indemnitee.
After notice from the Company to the Indemnitee of its election to
assume the defense of a Proceeding, the Company will not be liable to
the Indemnitee under this Agreement for any legal or other expenses
subsequently incurred by the Indemnitee in connection with the defense
thereof, other than reasonable costs of investigation or as otherwise
provided below. The Company shall not settle any Proceeding in any
manner which would impose any penalty or limitation on the Indemnitee
without the Indemnitee's written consent. The Indemnitee shall have
the right to employ his own counsel in any Proceeding but the fees and
expenses of such counsel incurred after notice from the Company of its
assumption of the defense thereof shall be at the expense of the
Indemnitee, unless (i) the employment of counsel by the Indemnitee has
been authorized by the Company, (ii) the Indemnitee shall have
reasonably concluded that there may be a conflict of interest between
the Company and the Indemnitee in the conduct of the defense of a
Proceeding, or (iii) the Company shall not in fact have employed
counsel to assume the defense of a Proceeding, in each of which cases
the fees and expenses of the Indemnitee's counsel shall be at the
expense of the Company. The Company shall not be entitled to assume
the defense of any Proceeding brought by or on behalf of the Company
or as to which the Indemnitee has made the conclusion that there may
be a conflict of interest between the Company and the Indemnitee.
10. Limitations on Indemnification. No payments pursuant
to this Agreement shall be made by the Company:
(a) To indemnify or advance Expenses to the Indemnitee with
respect to Proceedings initiated or brought voluntarily by the
Indemnitee and not by way of defense, except with respect to
Proceedings brought to establish or enforce a right to indemnification
under this Agreement or any other statute or law or otherwise as
required under Delaware law, but such indemnification or advancement
of Expenses may be provided by the Company in specific cases if the
Board of Directors finds it to be appropriate;
(b) To indemnify the Indemnitee for any Expenses,
judgments, fines, penalties or ERISA excise taxes for which payment is
actually made to the Indemnitee under a valid and collectible
insurance policy, except in respect of any excess beyond the amount of
payment under such policy;
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<PAGE> 5
(c) To indemnify the Indemnitee for any Expenses,
judgments, fines or penalties sustained in any Proceeding for an
accounting of profits made from the purchase or sale by the Indemnitee
of securities of the Company pursuant to the provisions of Section
16(b) of the Securities Exchange Act of 1934, the rules and
regulations promulgated thereunder and amendments thereto or similar
provisions of any Federal, state or local statutory law;
(d) To indemnify the Indemnitee for any Expenses,
judgments, fines, penalties or ERISA excise taxes resulting from the
Indemnitee's conduct which is finally adjudged to have been willful
misconduct, knowingly fraudulent or deliberately dishonest; or
(e) If a court of competent jurisdiction shall finally
determine that any indemnification hereunder is unlawful.
11. Maintenance of Liability Insurance.
(a) The Company hereby covenants and agrees that, as long
as the Indemnitee shall continue to serve as a director of the Company
and thereafter so long as the Indemnitee shall be subject to any
possible Proceeding, the Company, subject to subsection (c), shall
promptly obtain and maintain in full force and effect directors' and
officers' liability insurance ("D&O Insurance") in reasonable amounts
from established and reputable insurers.
(b) In all D&O Insurance policies, the Indemnitee shall be
named as an insured in such a manner as to provide the Indemnitee the
same rights and benefits as are accorded any other director of the
Company.
(c) Notwithstanding the foregoing, the Company shall have
no obligation to obtain or maintain D&O Insurance if the Company
determines in good faith that such insurance is not reasonably
available, the premium costs for such insurance are, in the opinion of
the Company, disproportionate to the amount of coverage provided, the
coverage provided by such insurance is so limited by exclusions that
it provides an insufficient benefit, or the Indemnitee is covered by
similar insurance maintained by a subsidiary of the Company.
12. Indemnification Hereunder Not Exclusive. The
indemnification provided by this Agreement shall not be deemed exclusive of any
other rights to which the Indemnitee may be entitled under the Certificate of
Incorporation, the Bylaws, any other agreement, any vote of stockholders or
disinterested directors, Delaware law, or otherwise, both as to action in his
official capacity and as to action in another capacity on behalf of the Company
while holding such office.
13. Successors and Assigns. This Agreement shall be
binding upon, and
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shall inure to the benefit of the Indemnitee and his heirs, personal
representatives and assigns, and the Company and its successors and assigns.
14. Separability. Each provision of this Agreement is a
separate and distinct agreement and independent of the others, so that if any
provision hereof shall be held to be invalid or unenforceable for any reason,
such invalidity or unenforceability shall not affect the validity or
enforceability of any other provision hereof. To the extent required, any
provision of this Agreement may be modified by a court of competent
jurisdiction to preserve its validity and to provide the Indemnitee with the
broadest possible indemnification permitted under Delaware law.
15. Savings Clause. If this Agreement or any portion
hereof shall be invalidated on any ground by any court of competent
jurisdiction, then the Company shall nevertheless indemnify the Indemnitee as
to Expenses, judgments, fines, penalties or ERISA excise taxes with respect to
any Proceeding to the full extent permitted by any applicable portion of this
Agreement that shall not have been invalidated or by any applicable provision
of Delaware law.
16. Interpretation; Governing Law. This Agreement shall be
construed as a whole and in accordance with its fair meaning. Headings are for
convenience only and shall not be used in interpreting the provisions
hereunder. This Agreement shall be governed by and interpreted in accordance
with the laws of the State of Delaware.
17. Amendments. No amendment, waiver, modification,
termination or cancellation of this Agreement shall be effective unless in
writing signed by the party against whom enforcement is sought. The
indemnification rights afforded to the Indemnitee hereby are contract rights
and may not be diminished, eliminated or otherwise affected by amendments to
the Company's Certificate of Incorporation, Bylaws or other agreements,
including D&O Insurance policies.
18. Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed by
each party and delivered to the other.
19. Notices. Any notice required to be given under this
Agreement shall be directed to Wynn's International, Inc., 500 North State
College Boulevard, Suite 700, Orange, California 92668, Attention: General
Counsel, and to Indemnitee at_________________________________________________
or to such other address as either shall designate in writing.
6
<PAGE> 7
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first written above.
INDEMNITEE
_______________________________________
WYNN'S INTERNATIONAL, INC.
By:____________________________________
President
7
<PAGE> 1
EXHIBIT 11
WYNN'S INTERNATIONAL, INC.
COMPUTATION OF NET INCOME PER COMMON SHARE - PRIMARY
<TABLE>
<CAPTION>
Year ended December 31
------------------------------------------------------------
1993 1992 1991
---------- ---------- ------------
<S> <C> <C> <C>
Net income . . . . . . . . . . . . . . . . $8,981,000 $7,253,000 $(11,200,000)
Weighted average number of shares
outstanding . . . . . . . . . . . . . . . 5,439,042 5,395,809 5,438,480
Net shares assumed issued using the
treasury stock method for stock options
outstanding during each period based on
average market price. . . . . . . . . . . 108,384 (1) (1)
--------- --------- ------------
Common and common equivalent
shares . . . . . . . . . . . . . . . . . 5,547,426 5,395,809 5,438,480
---------- ---------- -----------
Net income per common share . . . . . . . . $1.62 $1.34 $(2.06)
========== ========== ============
</TABLE>
______________________________________________________
(1) The effect of outstanding stock options on the primary earnings per share
computation for 1992 and 1991 is immaterial.
COMPUTATION OF NET INCOME PER COMMON SHARE -
ASSUMING FULL DILUTION
<TABLE>
<CAPTION>
Year ended December 31
------------------------------------------------------------
1993 1992 1991
---------- ---------- ------------
<S> <C> <C> <C>
Net income . . . . . . . . . . . . . . . . $8,981,000 $7,253,000 $(11,200,000)
Net interest expense from convertible
bonds . . . . . . . . . . . . . . . . . . 406,000 425,000 (1)
---------- ---------- ------------
Net earnings for purposes of dilution . . . $9,387,000 $7,678,000 $(11,200,000)
========== ========== ============
Weighted average number of shares
outstanding . . . . . . . . . . . . . . . 5,439,042 5,395,809 5,438,480
Net shares assumed issued using the
treasury stock method for stock options
outstanding during each period based on
average or ending market price, whichever is
higher . . . . . . . . . . . . . . . . . 119,762 84,641 5,983
Dilutive effect of assumed
conversion of bonds outstanding . . . . . 473,360 494,317 (1)
---------- ---------- ------------
Fully diluted shares . . . . . . . . . . . 6,032,164 5,974,767 5,444,463
---------- ---------- ------------
Net income per common share . . . . . . . . $1.56 $1.29 $(2.06)
========== ========== ============
</TABLE>
______________________________________________________
(1) The effect of outstanding convertible bonds for 1991 would be antidilutive
or immaterial.
Note: The above calculations reflect for all periods the three-for-two stock
split effected by the Company in September 1993.
<PAGE> 1
EXHIBIT 13
This exhibit consists of the following portions of the 1993 Annual Report
to Stockholders of Wynn's International, Inc.: the Report of Independent
Auditors on page 18, the consolidated financial statements of Registrant on
pages 19 through 32, the Selected Financial Data section on page 13, the
Management's Discussion and Analysis of Financial Condition and Results of
Operations section on pages 14 through 17, and the information appearing under
"Common Stock Price and Cash Dividends Per Share: 1993-1992" on page 13 and
"Number of Stockholders" and "Stock Exchange Listing" on page 33.
<PAGE> 2
Wynn's International, Inc.
SELECTED FINANCIAL DATA
Five years ended December 31, 1993
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
-------- -------- -------- -------- --------
(Dollar amounts in thousands-except per share amounts)
<S> <C>
Net sales $284,957 $291,788 $273,963 $285,123 $283,885
Income (loss) before taxes based on income 15,811 13,334 (13,918)(a) 12,966 12,983
Provision (benefit) for taxes based on income 6,830 6,081 (2,718) 6,612 5,428
-------- -------- -------- -------- --------
Net income (loss) $ 8,981 $ 7,253 $(11,200) $ 6,354 $ 7,555
Earnings (loss) per share of common stock (b) $1.62 $1.34 $(2.06) $1.10 $1.31
Weighted average common shares outstanding 5,547,426 5,395,809 5,438,480 5,767,284 5,759,003
Cash dividends per common share $.42 $.40 $.40 $.40 $.40
Selected balance sheet items:
Current assets $117,624 $124,897 $118,014 $127,754 $128,804
Current liabilities 56,293 54,378 44,732 50,224 53,511
Working capital 61,331 70,519 73,282 77,530 75,293
Current ratio 2.09 to 1 2.30 to 1 2.64 to 1 2.54 to 1 2.41 to 1
Total assets $167,799 $170,716 $165,622 $187,765 $188,556
Long-term debt due after one year 23,389 32,518 40,696 41,191 41,226
Stockholders' equity 84,442 78,853 75,611 89,784 87,875
Book value per common share $15.27 $14.59 $14.03 $16.43 $15.15
</TABLE>
Notes:
(a) 1991 loss includes $20.7 million restructuring charge. See Note 2 of Notes
to Consolidated Financial Statements.
(b) See Note 14 of Notes to Consolidated Financial Statements for certain per
share information. All per share amounts have been adjusted to reflect the
three for two stock split effected in 1993.
The above Selected Financial Data for the five years ended December 31, 1993 is
not reported upon herein by independent auditors.
See Management's Discussion and Analysis of Financial Condition and Results of
Operations.
COMMON STOCK PRICE AND CASH DIVIDENDS PER SHARE: 1993-1992
The high and low sales prices of the Company's common stock and the cash
dividends for the past two years are shown in the following table and reflect
the 3 for 2 stock split effected in 1993:
<TABLE>
<CAPTION>
Sales Price Dividends Per Share
----------- -------------------
1993 1992 1993 1992
High Low High Low
----------------------- ----------------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
First Quarter $21 7/8 $17 3/8 $13 3/8 $10 3/4 $.10 $.10
Second Quarter 23 3/4 16 5/8 15 1/4 11 1/4 .10 .10
Third Quarter 22 1/4 18 1/4 15 3/4 13 .11 .10
Fourth Quarter 22 1/2 17 3/4 18 13 1/8 .11 .10
</TABLE>
13
<PAGE> 3
Wynn's International, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Results of Operations
1993 COMPARED TO 1992
Net sales in 1993 were $285.0 million compared to $291.8 million in 1992, a
decrease of 2 percent. Sales were down 2 percent for the Automotive Parts &
Accessories Division, which is comprised of Wynn's-Precision, Inc.
("Precision"), a Lebanon, Tennessee-based supplier of O-rings, seals and molded
rubber products, and Wynn's Climate Systems, Inc. ("WCS"), a Fort Worth,
Texas-based supplier of automotive air conditioning products.
Precision recorded a 15 percent increase in sales in 1993, attributable to
growth at all of its major operations except its Arizona aerospace operation.
Higher revenues were derived from sales of O-rings, composite gaskets and
engineered thermoplastics. Precision's Arizona operation is refocusing on new
commercial product applications for non-aerospace customers to help offset the
decline in revenues from aerospace customers. Precision continued to receive
requests in 1993 for price freezes or reductions from customers in a broad
array of markets. Precision expects this trend to continue in 1994 as customers
strive to lower costs through increased supplier competition. Increases in
revenue at Precision generally indicate an increase in the number of units
sold.
WCS experienced a 17 percent decrease in revenues in 1993 compared to 1992
due to decreased sales in its original equipment manufacturers ("OEM")
division. The OEM revenue decrease was principally due to decreased sales to
Mazda and Chrysler, partially offset by increased sales to the Rover Group.
Revenues in WCS' aftermarket division, including revenues from company owned
service centers, were virtually the same in 1993 as in 1992. WCS' revenues in
1993 from sales of its refrigerant recycling machine were slightly higher than
in 1992. WCS expects sales by its OEM division to decline further in 1994
compared to 1993 due to Mazda's previously announced decision to change its
supply agreement when the new production platform for the 323 vehicle is
introduced in model year 1995 and due to the expiration of WCS' existing supply
agreement with the Rover Group. In response to the loss of such supply
agreements, and the concurrent worldwide environmental limitations on the
production of R-12 (the refrigerant used in most automotive air conditioning
systems) and the transition to the more environmentally friendly R-134a
refrigerant, WCS is repositioning itself to focus on producing components with
a higher value-added content. Accordingly, in 1993 and 1994 WCS has devoted
substantial resources to develop the capability to produce more efficient
aluminum condensers and evaporators which improve performance of R-134a-based
systems. Additionally, WCS is negotiating with major OEM customers to supply
retrofit kits for converting vehicles with R-12 air conditioning systems to
R-134a systems. Due to this restructuring process, WCS expects its total
revenues in 1994 to be below 1993 levels.
Sales for the Petrochemical Specialties Division, principally car care
products, decreased 1 percent on a worldwide basis compared to 1992 due to the
adverse effect of foreign exchange rate fluctuations. Excluding the impact of
these foreign exchange rate fluctuations, total revenues in 1993 would have
increased 5 percent compared to 1992. In the United States, domestic revenues
in 1993 increased 11 percent compared to 1992. Direct exports from the United
States to Latin American and Asian distributors increased slightly over 1992.
Foreign subsidiary sales decreased 6 percent in 1993 due to the lingering
worldwide recession and the adverse effect of exchange rate fluctuations.
Foreign subsidiary sales would have increased 2 percent in 1993 if foreign
exchange rates had remained constant in 1993. Sales declined in France, Spain,
Belgium, the United Kingdom and South Africa, but increased in Australia and
Canada.
Sales of the relatively small Builders Hardware Division (Skeels), a
regional builders hardware products wholesale distributor, decreased 17 percent
from 1992, principally due to the general downturn in the southern California
economy and the more severe reduction in the area's construction activity
during 1993. It is not known whether reconstruction activities following the
major earthquake in southern California in January 1994 will have an impact on
this Division's revenues in 1994.
On a consolidated basis, total cost of sales in 1993 was 66.7 percent of
sales compared to 66.9 percent in 1992. This slight increase in gross margin
was due primarily to higher sales and production volumes at Precision. The
Petrochemical Specialties Division's gross margin declined because of a change
in product mix to lower margin items. Gross margins at WCS and Skeels were
approximately the same in both years.
Selling, general and administrative expenses decreased to $76.0 million in
1993, or 26.7 percent of sales, from $78.8 million in 1992, or 27.0 percent of
sales. The reduction was principally attributable to decreased expenses of the
Petrochemical Specialties Division and WCS, partially offset by a
volume-related increase at Precision. The decreases in such expenses at the
Petrochemical Specialties Division reflect the nonrecurrence in 1993 of the
Division's 1992 costs of converting its direct Brazilian branch into
independent distributor operations and a general reduction in spending in many
categories of operating expenses. The decrease at WCS occurred because of its
revenue decline and management's further control of operating costs.
Precision's operating expenses in absolute dollars increased over 1992 levels
due to the higher revenues, but remained the same as a percentage of
Precision's revenues. During 1993, corporate expenses increased over 1992
levels primarily because of increased expenses for lease termination costs and
general environmental matters. The Company closely monitors legal and factual
developments in the environmental area to evaluate the adequacy of present
reserves. Interest expense in 1993 was $3.9 million, which was less than the
$5.1 million of interest expense in 1992. The decrease is primarily due to the
reduction of outstanding indebtedness. In
14
<PAGE> 4
Wynn's International, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
March 1993, a $7.9 million installment of 10.75 percent long-term debt was
repaid. During 1993, the holder of 9 percent convertible notes converted
$750,000 principal amount of such notes into 51,134 shares of the Company's
common stock.
Income before taxes was $15.8 million in 1993, compared to $13.3 million in
1992. In the Automotive Parts & Accessories Division, operating profits of
Precision increased 20 percent in 1993 due to higher revenue levels.
Precision's profitability is sensitive to changes in volume. Operating profits
of WCS decreased 14 percent in 1993 compared to 1992 due to WCS' lower
revenues. Operating profits of the Petrochemical Specialties Division increased
6 percent in 1993 due to the significant decline in operating expenses,
including the nonrecurrence of the Brazilian costs described above. Excluding
the effect of foreign exchange rate fluctuations, operating profit would have
increased 11 percent in 1993. Operating profits of the Builders Hardware
Division decreased $229,000 in 1993 because of the Division's 17 percent
decline in sales revenues.
The effective tax rate in 1993 was 43.2 percent compared to the effective
tax rate of 45.6 percent in 1992. The decline in 1993 is due to the higher
level of profitability in the U.S. which has a lower corporate income tax rate
than many of the international jurisdictions in which the Company operates. In
1993, the Company adopted Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes. Such adoption had no material effect on the
financial results or position of the Company.
Net income in 1993 was $9.0 million compared to $7.3 million in 1992. The
improvement in 1993 compared to 1992 was attributable to the higher operating
profit at Precision and the Petrochemical Specialties Division, the decrease in
interest expense and the lower effective tax rate.
Primary earnings per share in 1993 was $1.62 compared to $1.34 in 1992.
Fully diluted earnings per share in 1993 was $1.56 compared to $1.29 in 1992.
(See Note 3 of Notes to Consolidated Financial Statements for a discussion of
the 3 for 2 stock split in 1993.) The increase in per share results in 1993 was
due to the increase in net income, but reduced by additional shares
outstanding. The number of shares outstanding increased primarily as a result
of the conversion in 1993 of $750,000 principal amount of the Company's 9
percent convertible notes into 51,134 shares of common stock, the grant of
60,000 shares of restricted stock in December 1993 and the assumed exercise of
outstanding stock options. Prior to 1993, the effect on primary earnings per
share of the assumed exercise of outstanding stock options was not included
since the effect was immaterial.
In November 1992, the Financial Accounting Standards Board issued new rules
that require accrual accounting for other postemployment benefits, such as
disability benefits, instead of recognizing an expense for those benefits when
paid. The Company will be required to comply with the new rules beginning in
1994. The effect of adopting the new rules is not expected to be material to
the Company's financial position or results of operations.
FINANCIAL CONDITION
Working capital at December 31, 1993 was $61.3 million compared to $70.5
million at the end of 1992. The current ratio was 2.09 to 1 at December 31,
1993, compared to 2.30 to 1 at the prior year end. The decrease in working
capital and the current ratio compared to December 31, 1992 was attributable to
the decline in inventory, accounts receivable and prepaid expenses and other
current assets and the absence of a corresponding decline in current
liabilities. Cash and cash equivalents increased $6.7 million to $21.4 million
at December 31, 1993 compared to December 31 of the prior year. The inventory
decrease of $9.5 million was the result of continued efforts to reduce the
Company's investment in inventory at all divisions. Inventory at WCS declined
$6.2 million compared to December 31, 1992 as a result of management's efforts
to further reduce its net investment in light of that subsidiary's lower
revenue levels. Inventory also decreased at all other operating divisions.
Accounts receivable declined $1.6 million to $46.6 million at December 31,
1993 from $48.2 million at the prior year end primarily as a result of the
lower revenues at WCS and Skeels, partially offset by higher receivables at
Precision and the Petrochemical Specialties Division. Prepaid expenses and
other current assets decreased to $10.8 million at December 31, 1993 from $13.7
million at the prior year end primarily due to lower prepaid income taxes
resulting from the utilization during 1993 of previously deferred tax benefits.
Total current liabilities increased $1.9 million to $56.3 million at December
31, 1993 from $54.4 million at December 31, 1992. The increase was primarily
the result of increased accruals for salaries and other compensation, taxes
based on income and other accrued liabilities.
Property, plant and equipment increased $3.3 million in 1993, consisting of
$10.0 million in additions (principally at Precision and WCS) offset by the
annual depreciation charge of $5.8 million as well as retirements and foreign
exchange adjustment.
At December 31, 1993, the Company had two separate $15.0 million unsecured
domestic committed bank lines of credit and one uncommitted line of credit. No
borrowings were outstanding under any of these lines. The Company also has a
committed $4.0 million unsecured multicurrency and trade finance line of credit
and various other foreign uncommitted credit lines. At December 31, 1993, $.8
million in borrowings under these lines were outstanding. These borrowings were
made by foreign subsidiaries for working capital needs. By borrowing locally,
the Company's exposure to fluctuations in foreign exchange rates is reduced due
to the balancing of assets and liabilities in the local currencies.
The Company believes that additional lines of credit could be obtained if
necessary. Under present circumstances, neither additional lines of credit nor
additional long-term financing is required to supplement working capital
requirements, including the next scheduled payment of $7.9 million of long-term
debt in March 1994.
15
<PAGE> 5
Wynn's International, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
Stockholders' equity at the end of 1993 was $84.4 million, compared to $78.9
million at the end of 1992. The increase resulted primarily from net income of
$9.0 million and the conversion of $.8 million of convertible notes, reduced by
dividends of $2.3 million and further reduced by $2.1 million in the equity
adjustment from foreign currency translation. Under the Company's stock-based
incentive award plan, 60,000 shares of restricted stock were issued in December
1993 to the Company's Chief Executive Officer. The restricted stock will vest
on the anniversary of the date of grant over the next three years in equal
installments of 20,000 shares per year. The market value of the restricted
stock at the time of grant has been recorded as unearned compensation in a
separate component of stockholders' equity and is being amortized to expense
ratably over the next three years. One month's amortization in the amount of
approximately $34,000 was recognized in 1993.
In February 1994, the Board of Directors of the Company adopted, subject to
stockholder approval, an employee stock purchase plan, which will allow
eligible employees to purchase shares of the Company's common stock at a price
of 85 percent of the market price at the beginning or end of the plan year,
whichever is lower. A maximum of 400,000 shares will be available for issuance
over the life of the plan. If approved by the stockholders, the plan will
become effective on January 1, 1995.
In 1994, total capital expenditures are expected to be approximately $14.0
million, and are expected to be funded from current operations. As previously
announced, the Company will continue to explore possible niche acquisitions.
IMPACT OF CHANGING PRICES ON SALES AND INCOME
The Company attempts to minimize the impact of inflation on production and
operating costs through cost control programs and productivity improvements.
Over the past three years the inflation rate has been relatively low.
Nonetheless, the Company has continued to face increases in the cost of labor
and some materials, despite requests for price reductions from many customers.
Due to intense competition, the Company in 1993 generally was not able to raise
prices to its customers to pass along the cost increases experienced.
RESULTS OF OPERATIONS
1992 COMPARED TO 1991
Net sales in 1992 were $291.8 million compared to $274.0 million in 1991, an
increase of 7 percent. Sales were up 8 percent for the Automotive Parts &
Accessories Division, which is comprised of Precision and WCS.
Precision recorded an 11 percent increase in sales in 1992, attributable to
increases at its Tennessee and Virginia operations. Higher revenues were
derived from sales of O-rings, composite gaskets and engineered thermoplastics.
Precision's relatively small aerospace operation experienced a slight decline
in revenue. In all products and markets, Precision continued to experience
requests for price freezes or reductions. Precision expected those price
pressures to continue into 1993 as customers strove to lower costs through
increased supplier competition. Increases in revenue at Precision generally
indicated an increase in the number of units sold.
WCS experienced a 5 percent increase in revenues in 1992 compared to 1991
due to increased sales in its OEM division, which more than offset the decline
in its aftermarket and parts divisions. The OEM revenue increase was
principally due to increased sales to the Rover Group, Chrysler and Mazda. The
Rover Group was a customer of WCS for a full year in 1992, but only part of
1991. WCS' traditional aftermarket division experienced a 33 percent revenue
decline in 1992 compared to 1991 due to several factors. First, as previously
announced, in 1992 WCS stopped selling "Mopar" factory authorized air
conditioning units to independent distributors. Second, in contrast to the
fourth quarter of 1991, WCS did not offer extended financing to its
distributors in the fourth quarter of 1992. Extended financing has been a
traditional means to stimulate sales of air conditioning systems in the
off-season. Additionally, the U.S. auto industry continued to increase the
number of vehicles produced with factory installed air conditioning systems,
which reduced the number of vehicles eligible for aftermarket installations.
WCS' revenues in 1992 from sales of its refrigerant recycling machine were 18%
less than in 1991. Although unit sales were approximately the same in each
year, pricing became extremely competitive as customers awaited the next
generation of equipment which was expected in 1993. WCS expected sales of OEM
kits to Mazda to decline in 1993 compared to 1992 due to Mazda's previously
announced decision to cease importing light trucks from Japan and instead
purchase U.S. built trucks from another manufacturer. WCS was negotiating with
major OEM customers to supply retrofit kits for converting R-12 air
conditioning systems to R-134a systems.
Sales for the Petrochemical Specialties Division, principally sales of car
care products, increased 5 percent on a worldwide basis compared to 1991. In
1992, the Petrochemical Specialties Division discontinued the direct sale to
its customers of refrigerant recycling units purchased from WCS; WCS now sells
this product via its own marketing operations. Excluding the impact of these
nonrecurring sales in 1991, the Petrochemical Specialties Division's worldwide
sales increased 8 percent in 1992 over 1991. In the United States, domestic
revenues in 1992 were 2 percent less than 1991, but increased 6 percent in 1992
if 1991 sales of refrigerant recycling products are excluded. Direct exports
from the United States to Latin American and Asian distributors declined 16
percent from 1991. Foreign subsidiary sales increased 8 percent in 1992 due to
new marketing subsidiaries in Germany and Mexico and sales increases in France
and South Africa. Also, early in 1992 the division began marketing its products
in Brazil through a newly created wholly-owned subsidiary. However, because of
the political and economic uncertainty in Brazil, the direct operations were
curtailed significantly in the latter part of 1992, and the Company began
searching for a Brazilian distributor to replace the direct operation.
16
<PAGE> 6
Wynn's International, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
Sales of the relatively small Builders Hardware Division, a regional
builders hardware products wholesale distributor, decreased 26 percent from
1991, principally due to the general downturn in the southern California
economy and the more severe reduction in the area's construction activity
during 1992.
Total cost of sales in 1992 was 66.9 percent of sales compared to 69.3
percent in 1991. The increase in gross margin occurred at WCS and the
Petrochemical Specialties Division. At WCS, the improvement occurred because of
a change in product mix and the reduction in fixed costs resulting from the
1991 restructuring charge discussed below. At the Petrochemical Specialties
Division, gross margin improved because of improved manufacturing efficiencies
and management's decision during 1991 to discontinue sales of lower margin
items.
Selling, general and administrative expenses increased to $78.8 million in
1992 from $72.9 million in 1991, with the increase principally attributable to
increased expenses of the Petrochemical Specialities Division and Precision,
partially offset by reductions at WCS and the Builders Hardware Division. The
increase at the Petrochemical Specialties Division reflected that division's
increased revenues and relatively higher level of selling expenses than the
other divisions. Precision's operating expenses in absolute dollars were above
their 1991 level due to the higher revenue level, but decreased as a percentage
of Precision's revenues. The decrease at WCS occurred because of management's
further control of all operating costs. Operating expenses for the Builders
Hardware Division decreased in 1992 compared to 1991 because of management's
continued control of spending levels relative to the revenue decline. During
1992, corporate expenses were above the 1991 level primarily because of
increases in incentive compensation and corporate severance costs.
During the fourth quarter of 1991, the Company recorded a $20.7 million
restructuring charge related to WCS. There was no corresponding expense in
1992. Prior to the fourth quarter of 1991, WCS had been operating at or below
breakeven for several quarters due to the severe decline in the U.S. automotive
industry. Although product diversification programs and multiple cost reduction
measures had been implemented at WCS over the past several years, management
concluded that WCS needed to undergo further downsizing and reduction of
capacity due to the uncertain outlook for the automotive industry. Accordingly,
in 1991 the restructuring reserve was established for excess inventory and
plant capacity, employee severance costs, impairment of goodwill and
miscellaneous other accruals as follows:
<TABLE>
<S> <C>
Excess inventory $ 8.0 million
Goodwill 4.9 million
Property, plant and equipment 4.0 million
Accrued severance costs and other
charges 3.8 million
-------------
$20.7 million
=============
</TABLE>
Interest expense in 1992 was $5.1 million, slightly less than the $5.2
million in 1991.
Income before taxes was $13.3 million in 1992, compared to the loss before
taxes of $13.9 million in 1991. The 1992 improvement was due to the non-
recurrence of the prior year's $20.7 million restructuring charge and improved
operating profits in the Automotive Parts & Accessories Division. In the Auto-
motive Parts & Accessories Division, WCS had an operating profit in 1992
compared to an operating loss in 1991 (excluding the effects of the
restructuring charge) due to the higher revenues and the lower cost base.
Precision had a 15 percent increase in operating profit in 1992 due to higher
revenue levels. The Petrochemical Specialties Division had a 5 percent decrease
in operating profit in 1992, notwithstanding the revenue increase, due to
operating losses in the United Kingdom, Germany and Mexico, a decline in sales
to a key European distributor and the scaling back of operations in Brazil.
These losses more than offset improvements in the U.S., France and South
Africa. The Builders Hardware Division had a 17 percent decrease in operating
profit in 1992, despite significant cost reductions, because of the 26 percent
revenue decline.
The effective tax rate in 1992 was 45.6 percent compared to the relatively
low effective tax rate benefit of 19.5 percent in 1991. The 1992 rate was
comparable to the effective rate for 1991, excluding the impact of that year's
restructuring charge. The 1991 tax benefit was affected by the writedown of
$4.9 million of nondeductible goodwill associated with the restructuring of
WCS, and the limited state tax benefit anticipated for the remaining portion of
the restructuring charge.
Net income in 1992 was $7.3 million compared to a net loss of $11.2 million
in 1991. The significant improvement in 1992 compared to 1991 was attributable
to higher operating profit at WCS and Precision, the absence of the 1991
restructuring charge and an effective tax rate in 1992 comparable to the
Company's historical rate.
Primary earnings per share in 1992 was $1.34 compared to a loss of $2.06 in
1991. Fully diluted earnings per share in 1992 was $1.29 due to the dilutive
effect of the Company's outstanding convertible notes. In 1991 there was no
dilutive effect because the conversion price of the notes was above the trading
price of the Company's common stock.
17
<PAGE> 7
REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS AND STOCKHOLDERS
WYNN'S INTERNATIONAL, INC.
We have audited the accompanying consolidated balance sheets of Wynn's
International, Inc. as of December 31, 1993 and 1992, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 1993. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Wynn's
International, Inc. at December 31, 1993 and 1992, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended December 31, 1993, in conformity with generally accepted accounting
principles.
ERNST & YOUNG
Los Angeles, California
January 26, 1994
18
<PAGE> 8
Wynn's International, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three years ended December 31, 1993
1993 1992 1991
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Net sales $284,957,000 $291,788,000 $273,963,000
Interest income 719,000 755,000 667,000
------------ ------------ ------------
285,676,000 292,543,000 274,630,000
------------ ------------ ------------
Costs and expenses:
Cost of sales 190,026,000 195,346,000 189,728,000
Selling, general and administrative 75,977,000 78,790,000 72,941,000
Interest expense 3,862,000 5,073,000 5,179,000
Restructuring costs -- -- 20,700,000
------------ ------------ ------------
269,865,000 279,209,000 288,548,000
------------ ------------ ------------
Income (loss) before taxes based on income 15,811,000 13,334,000 (13,918,000)
Provision (benefit) for taxes based on income 6,830,000 6,081,000 (2,718,000)
------------ ------------ ------------
Net income (loss) $ 8,981,000 $ 7,253,000 $(11,200,000)
============ ============ ============
Earnings (loss) per share of common stock:
Primary $1.62 $1.34 $(2.06)
Fully diluted $1.56 $1.29 $(2.06)
</TABLE>
See accompanying notes.
19
<PAGE> 9
Wynn's International, Inc.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, 1993 and 1992
ASSETS 1993 1992
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 21,397,000 $ 14,667,000
Accounts receivable, less $1,848,000 allowance for doubtful accounts ($2,644,000 in 1992) 46,631,000 48,239,000
Inventories 38,824,000 48,308,000
Prepaid expenses and other current assets (including prepaid taxes based
on income of $3,176,000 in 1993 and $5,478,000 in 1992) 10,772,000 13,683,000
------------ ------------
Total current assets 117,624,000 124,897,000
Property, plant and equipment, at cost less accumulated depreciation and amortization 40,912,000 37,603,000
Costs in excess of fair value of net assets of businesses acquired, less
accumulated amortization of $3,695,000 ($3,536,000 in 1992) 3,309,000 3,467,000
Other assets 5,954,000 4,749,000
------------ ------------
$167,799,000 $170,716,000
============ ============
</TABLE>
<PAGE> 10
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Notes payable $ 809,000 $ 940,000
Accounts payable 19,564,000 19,668,000
Dividends payable 610,000 544,000
Taxes based on income 2,494,000 2,059,000
Accrued liabilities:
Warranty kit programs 3,626,000 3,332,000
Salaries and other compensation 7,979,000 7,169,000
Other 13,031,000 12,332,000
Long-term debt due within one year 8,180,000 8,334,000
------------ ------------
Total current liabilities 56,293,000 54,378,000
Long-term debt due after one year 23,389,000 32,518,000
Deferred taxes based on income 3,675,000 4,967,000
Commitments and contingencies
Stockholders' equity:
Preferred stock, $1 par value;
500,000 shares authorized, none issued -- --
Common stock, $1 par value;
10,000,000 shares authorized, 5,877,322 shares issued
(5,812,788 in 1992) 5,877,000 5,813,000
Capital in excess of par value 9,275,000 7,761,000
Retained earnings 76,873,000 70,185,000
Equity adjustment from foreign currency translation (2,814,000) (706,000)
Unearned compensation (1,188,000) --
Common stock held in treasury 347,250 shares, at
cost (407,250 in 1992) (3,581,000) (4,200,000)
------------ ------------
Total stockholders' equity 84,442,000 78,853,000
------------ ------------
$167,799,000 $170,716,000
============ ============
</TABLE>
See accompanying notes.
20
<PAGE> 11
Wynn's International, Inc.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Three years ended December 31, 1993
Equity
adjustment
Common stock Capital in from foreign
-------------- excess of Retained currency
Shares Amount par value earnings translation
----------------------- ---------- ------------ --------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1991 5,802,063 $5,802,000 $7,605,000 $78,462,000 $ 1,237,000
Net loss -- -- -- (11,200,000) --
Cash dividends of $.40
per common share -- -- -- (2,171,000) --
Purchase of treasury
stock at cost -- -- -- -- --
Adjustments from foreign
currency translation, net -- -- -- -- 123,000
--------- ---------- ---------- ----------- -----------
Balance at December 31, 1991 5,802,063 5,802,000 7,605,000 65,091,000 1,360,000
Net income -- -- -- 7,253,000 --
Cash dividends of $.40
per common share -- -- -- (2,159,000) --
Stock options exercised 10,725 11,000 136,000 -- --
Restricted stock issued to
employees -- -- 11,000 -- --
Tax benefits related to
employee stock option
exercises -- -- 9,000 -- --
Adjustments from foreign
currency translation, net -- -- -- -- (2,066,000)
--------- ---------- ---------- ----------- ------------
Balance at December 31, 1992 5,812,788 5,813,000 7,761,000 70,185,000 (706,000)
Net income -- -- -- 8,981,000 --
Cash dividends of $.42
per common share -- -- -- (2,293,000) --
Cash paid for fractional
shares at time of split -- -- (1,000) -- --
Stock options exercised 13,400 13,000 198,000 -- --
Restricted stock issued
to employee -- -- 603,000 -- --
Tax benefits related to
employee stock option
exercises -- -- 15,000 -- --
Conversion of $750,000
convertible notes 51,134 51,000 699,000 -- --
Adjustments from foreign
currency translation, net -- -- -- -- (2,108,000)
Unearned compensation -- -- -- -- --
--------- ---------- ---------- ----------- -----------
Balance at December 31, 1993 5,877,322 $5,877,000 $9,275,000 $76,873,000 $(2,814,000)
========= ========== ========== =========== ===========
</TABLE>
<TABLE>
Common
stock
Unearned held in
compensation treasury Total
------------ ----------- ------------
<S> <C> <C> <C>
Balance at January 1, 1991 $ -- $(3,322,000) $ 89,784,000
Net loss -- -- (11,200,000)
Cash dividends of $.40
per common share -- -- (2,171,000)
Purchase of treasury
stock at cost -- (925,000) (925,000)
Adjustments from foreign
currency translation, net -- -- 123,000
------------ ----------- ------------
Balance at December 31, 1991 -- (4,247,000) 75,611,000
Net income -- -- 7,253,000
Cash dividends of $.40
per common share -- -- (2,159,000)
Stock options exercised -- -- 147,000
Restricted stock issued to
employees -- 47,000 58,000
Tax benefits related to
employee stock option
exercises -- -- 9,000
Adjustments from foreign
currency translation, net -- -- (2,066,000)
------------ ----------- ------------
Balance at December 31, 1992 -- (4,200,000) 78,853,000
Net income -- -- 8,981,000
Cash dividends of $.42
per common share -- -- (2,293,000)
Cash paid for fractional
shares at time of split -- -- (1,000)
Stock options exercised -- -- 211,000
Restricted stock issued
to employee -- 619,000 1,222,000
Tax benefits related to
employee stock option
exercises -- -- 15,000
Conversion of $750,000
convertible notes -- -- 750,000
Adjustments from foreign
currency translation, net -- -- (2,108,000)
Unearned compensation (1,188,000) -- (1,188,000)
----------- ----------- ------------
Balance at December 31, 1993 $(1,188,000) $(3,581,000) $ 84,442,000
=========== =========== ============
</TABLE>
See accompanying notes.
21
<PAGE> 12
Wynn's International, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three years ended December 31, 1993
1993 1992 1991
------------- ------------- -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Cash received from customers $ 285,021,000 $ 290,969,000 $ 276,307,000
Cash paid to suppliers and employees (240,902,000) (257,823,000) (252,271,000)
Cash paid on warranty kit claims (6,706,000) (6,543,000) (6,223,000)
Interest received 612,000 996,000 462,000
Interest paid (4,071,000) (4,986,000) (5,943,000)
Income taxes paid (5,339,000) (3,891,000) (4,518,000)
Other cash disbursements--net (159,000) -- --
------------- ------------- -------------
Net cash provided by operating activities 28,456,000 18,722,000 7,814,000
------------- ------------- -------------
Cash flows from investing activities:
Additions to property, plant and equipment (10,008,000) (6,532,000) (4,156,000)
Proceeds from sale of property, plant and equipment 553,000 327,000 277,000
Other cash receipts (disbursements)--net 172,000 (158,000) 94,000
------------- ------------- -------------
Net cash used in investing activities (9,283,000) (6,363,000) (3,785,000)
------------- ------------- -------------
Cash flows from financing activities:
Borrowings under lines of credit--net (131,000) 244,000 (2,060,000)
Payments on long-term debt (8,533,000) (421,000) (570,000)
Dividends paid (2,227,000) (2,157,000) (2,178,000)
Proceeds from exercise of stock options 211,000 147,000 --
Purchase of treasury stock -- -- (925,000)
Other cash disbursements--net (1,000) -- --
------------- ------------- -------------
Net cash used in financing activities (10,681,000) (2,187,000) (5,733,000)
------------- ------------- -------------
Effect of exchange rate changes (1,762,000) (1,644,000) 128,000
------------- ------------- -------------
Net increase (decrease) in cash and cash equivalents 6,730,000 8,528,000 (1,576,000)
Cash and cash equivalents at beginning of year 14,667,000 6,139,000 7,715,000
------------- ------------- -------------
Cash and cash equivalents at end of year $ 21,397,000 $ 14,667,000 $ 6,139,000
============= ============= =============
</TABLE>
See accompanying notes.
22
<PAGE> 13
Wynn's International, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
Three years ended December 31, 1993
1993 1992 1991
----------- ----------- ------------
<S> <C> <C> <C>
Reconciliation of net income (loss) to net cash provided
by operating activities:
Net income (loss) $ 8,981,000 $ 7,253,000 $(11,200,000)
----------- ----------- ------------
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Restructuring costs -- -- 20,700,000
Depreciation and amortization 6,662,000 6,140,000 7,521,000
Provision for uncollectible accounts (39,000) 1,028,000 1,027,000
Pension plan income not funded (158,000) (218,000) (49,000)
Postretirement medical benefits not funded 312,000 -- --
Amortization of stock compensation 34,000 -- --
(Gain) loss on fixed asset disposals (4,000) 158,000 15,000
Provision (benefit) for deferred income taxes 1,041,000 1,737,000 (6,610,000)
Decrease (increase) in:
Accounts receivable--net (43,000) (578,000) 2,139,000
Inventories 9,484,000 3,838,000 1,213,000
Prepaid expenses and other current assets 609,000 (1,541,000) (702,000)
Other assets (67,000) 185,000 344,000
Increase (decrease) in:
Accounts payable (104,000) 546,000 (4,530,000)
Warranty kit reserves 294,000 (305,000) (735,000)
Income taxes payable 450,000 453,000 (786,000)
Accrued liabilities 1,004,000 26,000 (533,000)
----------- ----------- ------------
Total adjustments 19,475,000 11,469,000 19,014,000
----------- ----------- ------------
Net cash provided by operating activities $28,456,000 $18,722,000 $ 7,814,000
=========== =========== ============
</TABLE>
Supplemental disclosure of noncash investing and financing activities:
In 1993, additional common stock was issued upon the conversion of $750,000
of long-term debt.
See accompanying notes.
23
<PAGE> 14
Wynn's International, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES
BASIS OF PRESENTATION--The accompanying consolidated financial statements
include the accounts of Wynn's International, Inc. (Wynn's or the Company) and
its wholly-owned subsidiaries and one majority-owned subsidiary. All
significant intercompany transactions have been eliminated. Certain
reclassifications have been made to the prior years' amounts to conform with
the 1993 presentation.
STOCK SPLIT--The Company effected a 3 for 2 stock split in the third quarter of
1993. All share and per share amounts have been adjusted retroactively (see
Note 3).
CASH AND CASH EQUIVALENTS--The Company's policy is to invest cash in excess of
operating requirements in short-term interest bearing investments. Cash
equivalents of $20,661,000 in 1993 and $10,022,000 in 1992 include guaranteed
investment contracts, commercial paper, certificates of deposit and money
market accounts which have maturities of three months or less and are stated at
cost, which approximates fair market value.
CONCENTRATIONS OF CREDIT RISK--The Company places its temporary cash
investments in high credit quality financial institutions and investment grade
short-term investments and limits the amount of credit exposure to any one
entity. Substantially all of the Company's accounts receivable are due from
customers in the original equipment and aftermarket automotive industries, both
in the United States and internationally. The Company performs periodic credit
evaluations of its customers and generally does not require collateral. The
Company does not believe significant credit risks exist at December 31, 1993.
INVENTORIES--Inventories are stated at the lower of cost (principally first-in,
first-out) or market.
DEPRECIATION--Depreciation and amortization of property, plant and equipment
are calculated principally on a straight-line basis over the estimated useful
lives of the respective assets.
COSTS IN EXCESS OF FAIR VALUE OF NET ASSETS OF BUSINESSES ACQUIRED--Costs in
excess of fair value of net assets of businesses acquired are amortized on a
straight-line basis over a period of ten to forty years (see Note 2).
INCOME TAXES--During 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes. This statement
requires the use of an asset and liability approach for reporting income taxes
(see Note 6). The Company provides taxes on the undistributed earnings of all
foreign subsidiaries for which remittance is anticipated.
2. RESTRUCTURING
During the fourth quarter of 1991, the Company recorded a provision of
$20,700,000 ($14,930,000 after tax benefit or $2.75 per share) for the
restructuring and further downsizing of its subsidiary Wynn's Climate Systems,
Inc., which manufactures automotive air conditioning systems, modules and
replacement parts. The restructuring was initiated because of the United States
automotive industry's severe downturn during 1991 and the industry's uncertain
outlook for 1992 and thereafter. The provision included charges for excess
inventory and facilities, the writedown of all goodwill attributable to the
subsidiary, and accruals for various other costs of downsizing the operations.
The amounts were as follows:
<TABLE>
<S> <C>
Excess inventory $ 8,000,000
Goodwill 4,900,000
Property, plant and equipment 4,000,000
Other 3,800,000
-----------
$20,700,000
===========
</TABLE>
<PAGE> 15
3. STOCK SPLIT; SHAREHOLDER RIGHTS PLAN
On August 4, 1993, the Board of Directors authorized a 3 for 2 stock split
effected in the form of a stock dividend payable to stockholders of record on
August 26, 1993. All references in the financial statements to average number
of shares outstanding and related prices, per share amounts, convertible note
and stock option plan data have been restated retroactively to reflect the 3
for 2 split.
In March 1989, the Board of Directors adopted a Shareholder Rights Plan and
declared a dividend of one preferred stock purchase right (a "Right") for each
outstanding share of Common Stock issued by the Company prior to the earliest
of (i) March 3, 1999, (ii) the date, if any, on which the Rights are redeemed,
(iii) ten business days after a public announcement that a person or group of
affiliated or associated persons (an "Acquiring Person") has acquired, or
obtained the right to acquire, in a transaction or series of transactions not
approved in advance by the Company's Board of Directors, beneficial ownership
of 25 percent or more of the Company's Common Stock (the date of such
announcement being called a "Stock Acquisition Date") and (iv) ten business
days following the commencement of a tender or exchange offer, or the first
public announcement of the intent of a person to commence a tender or exchange
offer, that would result in a person or group beneficially owning 30 percent or
more of the Common Stock (the earlier of items (iii) and (iv) shall be deemed
to be a "Distribution Date"). The Rights are not to be exercisable until after
the Distribution Date and each right then may be exercised to acquire one
one-hundredth of a share of Junior Participating Preferred Stock at an exercise
price of $100, subject to adjustment. Alternatively, upon the occurrence of
certain events (for example, if the Company under certain circumstances is the
surviving corporation in a merger with an Acquiring Person), the Rights entitle
holders, other than the Acquiring Person, upon payment of the exercise price to
acquire Common Stock having a market value of twice the exercise price of the
Rights, or, upon the occurrence of certain other events (for example, if the
Company is acquired under certain circumstances in a merger or other business
combination transaction in which the Company is not the surviving corporation),
to acquire Common Stock of the Acquiring Person having a market value of twice
the
24
<PAGE> 16
Wynn's International, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
exercise price of the Rights. The Rights may be redeemed by the Company
at $.01 per Right at any time until the tenth business day following a Stock
Acquisition Date. The Rights will expire on March 3, 1999 or on such later date
to which the Rights may be extended by the Company, unless earlier redeemed by
the Company. In June 1990 the Company amended the Shareholder Rights Plan to
provide that if a person becomes the beneficial owner of 25 percent or more of
the Company's Common Stock solely as a result of a decrease in the number of
outstanding shares of the Company's stock from a stock repurchase program or
other similar plan, such person shall not be deemed to be an Acquiring Person
so long as such person does not thereafter acquire beneficial ownership of
additional Common Stock equal to one percent or more of the outstanding Common
Stock.
4. FOREIGN OPERATIONS
Condensed combined financial information of Wynn's foreign subsidiaries
(the operations of which are located in Australia, Belgium, Canada, France,
Germany, Mexico, New Zealand, South Africa, Spain, United Kingdom and
Venezuela) at December 31, 1993 and 1992 and for the three years ended December
31, 1993 before eliminations of intercompany balances and profits and any
provision for taxes on repatriation of foreign earnings, is as follows:
<TABLE>
<CAPTION>
1993 1992
------- -------
(in thousands)
<S> <C> <C>
Assets:
Current assets $39,890 $41,109
Property, plant and equipment 5,678 6,064
Other noncurrent assets 3,508 3,724
------- -------
$49,076 $50,897
======= =======
Liabilities and stockholders' equity:
Current liabilities $24,949 $24,030
Long-term debt and deferred taxes
based on income 914 1,386
Stockholders' equity 23,213 25,481
------- -------
$49,076 $50,897
======= =======
</TABLE>
<TABLE>
<CAPTION>
1993 1992 1991
------- ------- -------
(in thousands)
<S> <C> <C> <C>
Net sales $92,911 $93,866 $81,383
Net income $ 3,784 $ 3,518 $ 3,193
</TABLE>
Transaction gains and losses resulting from changes in foreign currency
exchange rates have been charged to operations and are immaterial.
5. INVENTORIES
Inventories consist of the following at December 31, 1993 and 1992:
<TABLE>
<CAPTION>
1993 1992
------- -------
(in thousands)
<S> <C> <C>
Finished goods $19,929 $25,670
Raw materials and work in process 18,895 22,638
------- -------
$38,824 $48,308
======= =======
</TABLE>
<PAGE> 17
6. TAXES BASED ON INCOME
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes, which requires the
use of the liability method of accounting for income taxes rather than the
deferred method previously in effect. Under the liability method, deferred
taxes are recognized for the tax consequences of temporary differences between
financial statement carrying values of existing assets and liabilities and
their related tax bases. As permitted under the new standard, financial
statements for prior years have not been restated. The cumulative effect of the
accounting change was not material.
The provision (benefit) for taxes based on income consists of the following
elements for the three years ended December 31, 1993 (in thousands):
<TABLE>
<CAPTION>
Liability
Method Deferred Method
--------- -------------------
1993 1992 1991
------ ------ -------
<S> <C> <C> <C>
Current:
Federal $1,943 $1,381 $1,048
State 940 842 648
Foreign 2,906 2,121 2,196
------ ------ -------
Total current 5,789 4,344 3,892
------ ------ -------
Deferred:
Federal 190 1,727 (5,586)
State 290 121 (812)
Foreign 561 (111) (212)
------ ------ -------
Total deferred 1,041 1,737 (6,610)
------ ------ -------
Total $6,830 $6,081 $(2,718)
====== ====== =======
</TABLE>
Pretax income (loss) for domestic and foreign operations for the three
years ended December 31, 1993 is as follows:
<TABLE>
<CAPTION>
1993 1992 1991
------- ------- --------
(in thousands)
<S> <C> <C> <C>
Domestic $ 7,260 $ 5,711 $(22,162)
Foreign 8,551 7,623 8,244
------- ------- --------
$15,811 $13,334 $(13,918)
======= ======= ========
</TABLE>
See Note 2 for a discussion of the 1991 restructuring charge.
A reconciliation of the statutory federal income tax rate to the
effective tax rate, as a percentage of income (loss) before
25
<PAGE> 18
Wynn's International, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. TAXES BASED ON INCOME (CONTINUED)
taxes based on income for the three years ended December 31, 1993, follows:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Statutory federal income tax rate 34.0% 34.0% (34.0)%
State taxes, net of federal tax
benefit 5.1 4.5 0.2
Taxes on unremitted foreign
earnings 3.8 1.5 (2.6)
Foreign earnings taxed at
various rates 3.3 4.9 3.8
Foreign tax credits (3.9) (3.4) (3.7)
Expenses not deductible for
income tax purposes:
Goodwill 0.3 0.3 12.7
Other 0.3 1.9 1.7
Other net 0.3 1.9 2.4
---- ---- -----
43.2% 45.6% (19.5)%
==== ==== =====
</TABLE>
At December 31, 1993, the Company had the following carryforwards for tax
purposes available for future utilization with the indicated expiration periods
(in thousands):
<TABLE>
<CAPTION>
Foreign Net Capital Tax
Year Operating Loss Loss Credits
---- -------------- ------- -------
<S> <C> <C> <C>
1997 $ - $ - $ 7
1998 - 51 204
2002 62 - -
2003 40 - -
Unlimited 668 - 617
---- --- ----
$770 $51 $828
==== === ====
</TABLE>
A valuation allowance of $2,178,000 has been recognized to offset these
and other deferred tax assets. The valuation allowance against deferred tax
assets increased by $89,000 during 1993.
Significant components of the Company's deferred tax assets and
liabilities as of December 31, 1993 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1993
(in thousands)
--------------
<S> <C>
Deferred tax liabilities:
Pension plan $ 977
Accelerated depreciation and amortization 1,670
Foreign earnings 2,933
Other 2,217
-------
Total deferred tax liabilities 7,797
Deferred tax assets:
Inventory valuation 2,639
Accrued expenses 5,188
Tax attribute carryovers 1,649
-------
Subtotal 9,476
Valuation allowances (2,178)
-------
Total deferred tax assets 7,298
Net deferred taxes $ 499
=======
</TABLE>
The components of the provision for deferred income taxes for the years
ended December 31, 1992 and 1991 are as follows:
<TABLE>
<CAPTION>
Deferred Method
1992 1991
------ -------
(in thousands)
<S> <C> <C>
Inventory valuation $ 432 $(2,858)
Accelerated depreciation and
amortization 95 (1,501)
Accrued expenses 373 (1,549)
Repatriation of foreign earnings (13) (119)
Other--net 850 (583)
------ -------
$1,737 $(6,610)
====== =======
</TABLE>
7. SHORT-TERM LINES OF CREDIT
The Company has two domestic committed unsecured lines of credit for
$15.0 million each. The lines provide for short-term borrowings at interest
rates of prime (6.0 percent at December 31, 1993) and/or money market interest
rates. At December 31, 1993, the Company had no outstanding borrowing under
these lines of credit.
The Company also has various other uncommitted credit lines at various
prevailing rates. At December 31, 1993, $809,000 was outstanding under these
agreements. Short-term borrowings are stated at their fair market value.
The Company also has a $4.0 million unsecured multicurrency and trade
finance line of credit. The facility provides for up to $1.0 million of
commercial letters of credit and up to $3.0 million of standby letters of
credit. At December 31, 1993, Wynn's had one standby letter of credit
outstanding under this facility for $178,000.
8. Long-term Debt
Long-term debt consists of the following obligations at December 31, 1993
and 1992:
<TABLE>
<CAPTION>
1993 1992
------- -------
(in thousands)
<S> <C> <C>
To insurance company, due in
annual installments of $7,938,000
each beginning in 1993 through
1996, plus interest at 10.75%,
payable semi-annually $23,813 $31,750
To insurance company, due in
annual installments of $3,250,000
in 1995 and 1996, plus interest at
9%, payable semi-annually 6,500 7,250
Other 1,256 1,852
------- -------
31,569 40,852
Less current maturities 8,180 8,334
------- -------
$23,389 $32,518
======= =======
</TABLE>
26
<PAGE> 19
Wynn's International, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The first two of the above obligations are unsecured. The $6,500,000 note
due to insurance company is convertible into shares of common stock at
approximately $14.67 per share.
The notes payable to the insurance company contain a prepayment penalty and
require, among other things, certain working capital and net worth balances and
ratios be maintained. Future declarations of cash dividends will be subject to
these loan requirements. At the present time, Wynn's does not believe that
these requirements will have any impact on the declaration of future dividends.
The Company estimates that at December 31, 1993 the fair market value of
its long-term debt obligations is $34,539,000. The estimation of fair value is
based upon prevailing interest rates for similar maturities, risk factors and
conversion terms of the obligations.
Maturities of long-term debt due after one year are: 1995-$11,454,000;
1996-$11,390,000; 1997-$195,000; and 1998-$350,000. Interest expense for
long-term debt amounted to $3,524,000 for 1993 ($4,289,000 for 1992 and
$4,319,000 for 1991).
9. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following at December 31, 1993
and 1992:
<TABLE>
<CAPTION>
1993 1992
-------- -------
(in thousands)
<S> <C> <C>
Land and land improvements $ 2,442 $ 2,562
Buildings 21,822 22,018
Leasehold improvements 940 1,057
Equipment, furniture and fixtures 65,199 58,371
-------- --------
90,403 84,008
Less accumulated depreciation
and amortization (49,491) (46,405)
-------- --------
$ 40,912 $ 37,603
======== ========
</TABLE>
10. RETIREMENT PLANS
Wynn's and its domestic subsidiaries have four qualified defined benefit
retirement plans, which cover substantially all of their U.S. employees. One
plan is a compulsory noncontributory defined benefit pension plan that covers
the employees of the parent company and three domestic subsidiaries. Another
plan is a contributory defined benefit plan that covers the salaried employees
of one domestic subsidiary. Two other plans, which were collectively bargained
with the unions, cover hourly employees of one domestic subsidiary.
Substantially all domestic employees are eligible to participate in one of the
plans. Benefits under these plans are based on employees' earnings and length
of service with the Company. The funding policy for these plans is to make the
annual contribution required by applicable regulations, which are intended to
provide only for benefits attributed to service-to-date.
Net periodic pension costs for the years ended December 31, 1993, 1992 and
1991 included the following components (in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Service cost--benefits earned
during the period $ 732 $ 625 $ 580
Interest cost on projected
benefit obligation 1,200 1,080 1,001
Actual return on assets (1,489) (1,563) (2,989)
Net amortization and deferral (442) (359) 1,352
------- ------- -------
$ 1 $ (217) $ (56)
======= ======= =======
</TABLE>
The majority of the pension plans have plan assets that exceed accumulated
benefit obligations. Plan assets include government bonds and securities, money
market accounts, mutual funds, corporate bonds and corporate stocks. The
following table sets forth the plans' funded status and amounts recognized in
the Company's consolidated balance sheets at December 31, 1993 and 1992 for its
U.S. pension plans (in thousands):
<TABLE>
<CAPTION>
1993 1992
-------- --------
<S> <C> <C>
Actuarial present value of
benefit obligations:
Vested benefit obligation $(13,977) $(11,421)
Accumulated benefit obligation $(14,538) $(11,892)
Projected benefit obligation $(17,557) $(14,398)
Plan assets at fair market value 19,910 19,114
-------- --------
Plan assets in excess of projected
benefit obligation 2,353 4,716
Unrecognized transition assets being
amortized over various periods of
time (1,995) (2,318)
Unrecognized prior service cost 1,441 1,561
Unrecognized net loss (gain) 638 (1,679)
-------- --------
Prepaid pension cost $ 2,437 $ 2,280
======== ========
Assumptions used as of December 31, 1993, 1992 and 1991 were:
1993 1992 1991
---- ---- ----
Discount or settlement rate 7.5% 8.5% 9.0%
Rate of increase in
compensation level 5.0% 5.5% 6.0%
Expected long-term rate
of return on assets 9.0% 9.0% 9.0%
</TABLE>
Non U.S. employees are generally enrolled in pension plans in their country
of domicile. The effect of the Company's foreign plans is considered to be
immaterial and has not been included in the above tables. Applicable expenses
for these plans have been
27
<PAGE> 20
Wynn's International, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. RETIREMENT PLANS (CONTINUED)
included in consolidated net income. The Company believes that these plans are
adequately funded in accordance with local actuarial principles and laws.
In July 1993, the Company established a defined contribution plan for all
full-time U.S. based employees with at least 12 months of consecutive service.
Eligible employees are entitled to contribute from 1% to 10% of their base pay
into an investment trust, and the Company matches at the rate of $.50 for each
$1.00 contributed, up to 3% of the employee's base pay. In addition, eligible
employees at December 31 each year receive an additional 1% of their base pay
contributed by the Company into the plan. The Company's total contribution into
this plan for 1993 was $352,000.
Prior to July 1993, the Company had a savings and investment plan for
eligible domestic employees of the parent Company and three subsidiaries, who
met certain eligibility requirements as defined in the plan. This plan was
terminated in 1993 and all funds in this investment trust were either
distributed to the employee or rolled over into the new defined contribution
plan. Company contributions amounted to $40,000 in 1993 ($53,000 in 1992 and
$58,000 in 1991).
The Company provides postretirement medical benefits for certain retired
employees at the U.S. operations of Wynn's-Precision, Inc. In 1993, the Company
adopted Statement of Financial Accounting Standards No. 106, Employers'
Accounting for Postretirement Benefits Other Than Pensions. At January 1, 1993,
the accumulated postretirement benefit obligation (before tax benefit) was $3.2
million, which the Company elected to amortize over 20 years as part of the
annual benefit cost. The net periodic postretirement benefit cost for 1993 was
$426,000. In 1992 and 1991, the Company accounted for such costs on a
pay-as-you-go method, and the costs were $120,000 and $158,000, respectively.
The Company does not prefund this benefit program. The following table sets
forth the program's status and amounts recognized in the Company's consolidated
balance sheet at December 31, 1993 (in thousands):
<TABLE>
<S> <C>
Unfunded accumulated postretirement
benefit obligation $(2,513)
Unrecognized net gain (resulting from
reduction in estimated health care
cost trend rates) (811)
Unrecognized net transition obligation 3,039
-------
Accrued postretirement benefit cost $ (285)
=======
</TABLE>
11. COMMITMENTS
Wynn's rents certain facilities and equipment under various noncancellable
operating leases. Rental commitments under these leases, exclusive of property
taxes and insurance, are as follows:
<TABLE>
<CAPTION>
Year (in thousands)
---- --------------
<S> <C>
1994 $2,543
1995 1,236
1996 670
1997 476
1998 153
1999 and after 308
------
Total $5,386
======
</TABLE>
Rental expenses for all operating leases were $3,977,000 in 1993
($4,245,000 in 1992 and $4,219,000 in 1991).
12. CONTINGENCIES
Various claims and actions, considered normal to the Company's business,
have been asserted and are pending against the Company and its subsidiaries.
The Company believes that such claims and actions should not have any material
adverse effect upon the results of operations or the financial position of the
Company based upon information presently known to the Company.
The Company is also involved in certain proceedings and potential
proceedings relating to environmental matters. At December 31, 1993, the
Company had consolidated accrued reserves of approximately $2.2 million
relating to environmental matters. Because of the uncertainties associated with
environmental assessment and remediation activities, it is difficult to
determine the ultimate liability of the Company related to these environmental
matters. However, based upon information presently known to the Company, the
Company believes that any liability that may result from these matters that is
in excess of the accrued reserves should not materially affect the Company's
financial position.
13. EMPLOYEE STOCK PLANS
The Company has one stock option plan and one stock-based incentive award
plan pursuant to which current grants of options to purchase common stock of
Wynn's may be made to officers and other key employees. The Stock-Based
Incentive Award Plan (1989 Plan) authorizes the grant of nonqualified stock
options, incentive stock options, stock appreciation rights, restricted stock
and performance shares. The 1982 Incentive Stock Option Plan (1982 Plan), which
expired in April 1992, authorized the grant of incentive stock options. Under
the 1982 Plan, the aggregate number of options granted could not exceed 300,000
shares. Under the 1989 Plan, the aggregate number of stock related awards may
not exceed 487,500 shares. All options granted under the two plans have been
made at prices not less
28
<PAGE> 21
Wynn's International, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
than 100 percent of the fair market value of the stock at the date of grant.
Options granted under the two plans are exercisable at various dates over a
ten-year period. However, under the two plans, no options may be exercised
until at least one year after the date of grant. During 1993 and 1992, 60,000
and 4,500 shares, respectively, of restricted stock were awarded under the 1989
Plan. The 1993 restricted stock award vests in equal installments at each
anniversary date over a three-year period; the 1992 award vested at the one
year anniversary. Recipients of restricted stock grants are entitled to cash
dividends and voting rights on their respective shares. Restrictions limit the
sale or transfer of shares during the three-year period. Unearned compensation
of $1,221,900 was recorded at the date of the award in 1993 based on the market
value of shares. Unearned compensation, which is shown as a separate component
of stockholders' equity, is being amortized to expense over the three-year
vesting period. During 1993 $34,000 was recorded as expense. No stock
appreciation rights or performance shares were outstanding at December 31,
1993. The following tabulation summarizes certain information related to
options for common stock:
<TABLE>
<CAPTION>
1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Outstanding options
at beginning of year 345,000 360,750 352,500
Granted 68,250 13,500 37,500
Surrendered, forfeited
or expired (3,300) (18,525) (29,250)
Exercised (13,400) (10,725) --
-------- ------- -------
Outstanding options
at end of year 396,550 345,000 360,750
======= ======= =======
Average price of options
exercised during
the year $15.76 $13.74 --
At the end of the year:
Prices of outstanding
options $11.17 $11.17 $11.17
to to to
$20.67 $18.17 $18.17
Average per share $14.67 $13.57 $13.55
Exercisable options 310,075 295,950 268,125
Options available for
future grants 181,575 156,525 168,000
</TABLE>
<PAGE> 22
14. EARNINGS PER SHARE
Primary earnings per share is computed by dividing net income by the
weighted average number of shares outstanding during the year. In 1993 primary
earnings per share assumes the exercise of stock options. In 1992 and 1991
primary earnings per share did not assume the exercise of stock options as the
effect from exercise was immaterial. Fully diluted earnings per share is
calculated by dividing net income adjusted for the interest on the convertible
debt by the weighted average number of fully diluted shares outstanding during
the year, and assumes the conversion of the convertible debt and the exercise
of stock options. In 1991, the conversion of the convertible debt was not
assumed as the conversion would have been antidilutive (see Note 3 for a
discussion of the stock split effected in 1993).
<TABLE>
<CAPTION>
1993 1992 1991
------ ------ --------
(in thousands, except per share amounts)
<S> <C> <C> <C>
Net income (loss) $8,981 $7,253 $(11,200)(a)
Net interest expense from
convertible notes 406 425 --
------ ------ --------
Net earnings (loss) for
purposes of full dilution $9,387 $7,678 $(11,200)(a)
====== ====== ========
Net earnings (loss) per
common share:
Primary $1.62 $1.34 $(2.06)(a)
Assuming full dilution $1.56 $1.29 $(2.06)(a)
Weighted average shares
outstanding:
Primary 5,547 5,396 5,438
Assuming full
dilution 6,032 5,975 5,444
</TABLE>
(a) Includes $14.9 million or $2.75 per share ($2.74 per share assuming full
dilution) loss from restructuring. See Note 2.
15. BUSINESS SEGMENT AND GEOGRAPHICAL INFORMATION
Wynn's operations are principally in three industry segments: Automotive
Parts & Accessories, Petrochemical Specialties and Builders Hardware.
Operations in the Automotive Parts & Accessories industry involve the
manufacturing and marketing of O-rings and other static and dynamic seals
principally for the automotive industry; and the manufacturing and marketing of
automotive air conditioners and related replacement parts, sold for original
equipment and aftermarket installation by manufacturers, distributors and
dealers, on international, national and local levels. Operations in the
Petrochemical Specialties industry involve the development, production and
marketing of a wide variety of car care products, automotive chemicals for the
consumer, specialty chemicals and equipment for professional automotive service
centers and product warranty programs for automotive dealerships, as well as
industrial coolants, specialty fluids and cutting fluids used in metal-working.
Sales of Petrochemical Specialties products are primarily through domestic and
foreign distributors. Operations in the Builders Hardware industry involve the
distribution of builders hardware products, locksmith supplies and security
locks from manufacturers to retail outlets in southern California, Arizona and
Nevada.
Industry segment net sales include sales to unaffiliated customers. There
were no material industry intersegment sales in 1993, 1992 or 1989. In 1991 and
1990, intersegment sales represent sales of refrigerant recovery units from the
Automotive Parts & Accessories division to the Petrochemical Specialties
division. Intercompany sales are recorded at prices mutually agreed upon by the
respective affiliates and approximate fair market value.
29
<PAGE> 23
Wynn's International, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. BUSINESS SEGMENT AND GEOGRAPHICAL INFORMATION (CONTINUED)
Operating profit (loss) from segments represents net sales less operating
expenses before income taxes. Corporate expenses and unallocated gains include
the gains from sales of joint-venture interest and other corporate items.
Identifiable assets are those assets of Wynn's that are used in the
operations of each industry segment. Corporate assets are principally cash and
cash equivalents, prepaid expenses and other receivables. Intercompany loans
and advances and the related accrued interest thereon are excluded from
identifiable assets.
Sales to the largest customer of the Automotive Parts & Accessories segment
were 12.3 percent of consolidated net sales during 1993 (16.7 percent in 1992
and 17.3 percent in 1991).
<TABLE>
<CAPTION>
SUMMARY BY INDUSTRY SEGMENTS Year Ended December 31
1993 1992 1991 1990 1989
-------- -------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C> <C>
NET SALES
Automotive Parts & Accessories $181,478 $185,947 $172,836 $180,444 $198,579
Petrochemical Specialties 98,318 99,622 94,639 99,075 79,364
Builders Hardware 5,161 6,219 8,403 7,551 5,942
Intersegment sales -- -- (1,915) (1,947) --
-------- -------- -------- -------- --------
Total net sales $284,957 $291,788 $273,963 $285,123 $283,885
OPERATING PROFIT (LOSS)
Automotive Parts & Accessories $ 16,643 $ 15,265 $(12,813)(a) $ 10,570 $ 9,435
Petrochemical Specialties 7,046 6,636 6,964 10,330 7,797
Builders Hardware 193 422 507 650 721
-------- -------- -------- -------- --------
Total operating profit (loss) of segments 23,882 22,323 (5,342) 21,550 17,953
Corporate expenses and unallocated gains (4,575) (4,155) (3,591) (3,174) (278)
Corporate interest income 366 239 194 409 492
Interest expense (3,862) (5,073) (5,179) (5,819) (5,184)
-------- -------- -------- -------- --------
Income (loss) before taxes based on income $ 15,811 $ 13,334 $(13,918) $ 12,966 $ 12,983
IDENTIFIABLE ASSETS
Automotive Parts & Accessories $ 95,069 $100,901 $106,135 $124,577 $129,219
Petrochemical Specialties 49,371 53,886 50,477 52,678 42,624
Builders Hardware 2,570 3,340 4,119 4,824 2,840
-------- -------- -------- -------- --------
Identifiable assets of segments 147,010 158,127 160,731 182,079 174,683
Corporate assets 20,789 12,589 4,891 5,686 13,873
-------- -------- -------- -------- --------
Total assets $167,799 $170,716 $165,622 $187,765 $188,556
DEPRECIATION AND AMORTIZATION
Automotive Parts & Accessories $ 4,930 $ 4,380 $ 5,896 $ 6,881 $ 6,306
Petrochemical Specialties 1,656 1,688 1,522 1,501 1,025
Builders Hardware 40 30 58 42 36
Corporate 36 42 45 42 53
-------- -------- -------- -------- --------
Total depreciation and amortization $ 6,662 $ 6,140 $ 7,521 $ 8,466 $ 7,420
CAPITAL EXPENDITURES
Automotive Parts & Accessories $ 9,070 $ 4,829 $ 3,163 $ 4,942 $ 8,073
Petrochemical Specialties 921 1,678 978 3,248 2,555
Builders Hardware -- -- -- 17 63
Corporate 17 25 15 56 19
-------- -------- -------- -------- --------
Total capital expenditures $ 10,008 $ 6,532 $ 4,156 $ 8,263 $ 10,710
</TABLE>
(a) Includes $20.7 million restructuring charge in 1991. See Note 2.
30
<PAGE> 24
Wynn's International, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. BUSINESS SEGMENT AND GEOGRAPHICAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
SUMMARY BY GEOGRAPHICAL AREAS Year Ended December 31
1993 1992 1991 1990 1989
-------- -------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C> <C>
NET SALES
United States:
Sales to unaffiliated customers $192,046 $197,922 $192,580 $206,162 $221,080
Intercompany sales between geographical areas 12,181 10,629 6,907 3,331 3,974
Europe:
Sales to unaffiliated customers 61,276 63,495 51,915 46,844 32,187
Intercompany sales between geographical areas 376 330 199 70 93
Other foreign:
Sales to unaffiliated customers 31,635 30,371 29,468 32,117 30,618
Intercompany sales between geographical areas 832 465 265 300 271
Eliminate intercompany sales (13,389) (11,424) (7,371) (3,701) (4,338)
-------- -------- -------- -------- --------
Total net sales $284,957 $291,788 $273,963 $285,123 $283,885
OPERATING PROFIT (LOSS)
United States $ 14,908 $ 13,982 $(14,255)(a) $ 10,424 $ 7,089
Europe 5,082 5,945 6,377 7,617 6,438
Other foreign 3,799 2,516 2,564 3,509 4,455
Eliminate change during year in
intercompany profit in inventories 93 (120) (28) -- (29)
-------- -------- -------- -------- --------
Total operating profit (loss) of segments 23,882 22,323 (5,342) 21,550 17,953
Corporate expenses and unallocated gains (4,575) (4,155) (3,591) (3,174) (278)
Corporate interest income 366 239 194 409 492
Interest expense (3,862) (5,073) (5,179) (5,819) (5,184)
-------- -------- -------- -------- --------
Income (loss) before taxes based on income $ 15,811 $ 13,334 $(13,918) $ 12,966 $ 12,983
IDENTIFIABLE ASSETS
United States $107,283 $114,306 $121,441 $144,982 $143,340
Europe 31,290 35,115 29,365 25,752 19,516
Other foreign 13,576 13,883 13,391 14,272 14,546
Eliminate intercompany profit in inventory and
intercompany trade accounts receivable (5,139) (5,177) (3,466) (2,927) (2,719)
-------- -------- -------- -------- --------
Identifiable assets of segments 147,010 158,127 160,731 182,079 174,683
Corporate assets 20,789 12,589 4,891 5,686 13,873
-------- -------- -------- -------- --------
Total assets $167,799 $170,716 $165,622 $187,765 $188,556
</TABLE>
(a) Includes $20.7 million restructuring charge in 1991. See Note 2.
31
<PAGE> 25
Wynn's International, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. QUARTERLY INFORMATION (UNAUDITED)
Quarterly information is as follows (in thousands, except per share
amounts):
<TABLE>
<CAPTION>
First Second Third Fourth Total
Quarter Quarter Quarter Quarter Year
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31,
1993
Net sales $70,508 $71,320 $73,193 $69,936 $284,957
Gross profit 23,599 24,161 23,712 23,459 94,931
Net income 1,867 2,409 2,479 2,226 8,981
Earnings per share:
Primary $.34 $.44 $.45 $.40 $1.62
Fully diluted $.33 $.42 $.43 $.38 $1.56
For the year ended December 31,
1992
Net sales $71,499 $76,589 $76,428 $67,272 $291,788
Gross profit 23,271 24,794 24,946 23,431 96,442
Net income 1,526 1,728 1,975 2,024 7,253
Earnings per share:
Primary $.28 $.32 $.37 $.37 $1.34
Fully diluted $.28 $.32 $.36 $.36 $1.29
</TABLE>
The above tables reflect retroactively the 3 for 2 stock split effected in 1993
(see Note 3).
The total of the quarterly per share primary earnings in 1993 and the total of
the quarterly per share fully diluted earnings in 1992 do not equal the total
earnings per share for the respective year because the calculations are based
on the weighted average number of shares outstanding during the periods.
32
<PAGE> 26
NUMBER OF STOCKHOLDERS
There were 439 stockholders of record at February 22, 1994.
STOCK EXCHANGE LISTING
New York Stock Exchange
Ticker Symbol: WN
33
<PAGE> 1
EXHIBIT 22
WYNN'S INTERNATIONAL, INC.
SUBSIDIARIES OF REGISTRANT
<TABLE>
<CAPTION>
State or other
jurisdiction of
Name incorporation
---- ---------------
<S> <C>
Wynn Oil Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . California
Wynn's Sales Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . California
Wynn Marketing Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . California
Wynn's Australia Pty. Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Australia
Wynn's Belgium N.V. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Belgium
Wynn's Canada, Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Canada
Wynn's Deutschland GmbH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Germany
Wynn's Espana, S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Spain
Wynn's France, S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . France
Wynn's Automotive France Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . France
Wynn's Automotive France Professional . . . . . . . . . . . . . . . . . . . . . . . . . . . . France
Wynn's Friction Proofing Mexico S.A. de C.V. . . . . . . . . . . . . . . . . . . . . . . . . . . Mexico
Wynn Oil (N.Z.) Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . New Zealand
Wynn Oil (South Africa) (Pty) Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . South Africa
Wynn Oil (U.K.) Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . England
Wynn Oil Venezuela, S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Venezuela
Wynn's Export, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.S. Virgin Islands
Alkid Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . California
Robert Skeels & Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . California
Wynn's Climate Systems, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Texas
Lone Star Manufacturing Co., Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Texas
Wynn's Climate Equipment Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Texas
Wynn's (UK) Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . England
Wynn's Fluid Power, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
Wynn's-Precision, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
PRPC, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tennessee
Wynn's-Precision Canada Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Canada
Wynn's-Precision (U.K.) Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . England
PRP Seals, Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Canada
Dynamic Seals, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
</TABLE>
Except for Wynn Oil Venezuela, S.A., all of the above-named subsidiaries
are 100% owned by Registrant. Wynn Oil Venezuela, S.A. is 51% owned by
Registrant.
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report
(Form 10-K) of Wynn's International, Inc. of our report dated January 26, 1994,
included in the 1993 Annual Report to Stockholders of Wynn's International,
Inc.
Our audits also included the financial statement schedules of Wynn's
International, Inc. listed in Item 14(a). These schedules are the
responsibility of the Company's management. Our responsibility is to express
an opinion based on our audits. In our opinion, the financial statement
schedules referred to above, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly in all
material respects the information set forth therein.
We also consent to the incorporation by reference in the Registration
Statement (Form S-8 No. 2-68157) pertaining to the Amended and Restated 1980
Stock Option and Appreciation Rights Plan and the 1982 Incentive Stock Option
Plan of Wynn's International, Inc. and the Registration Statements (Form S-8
Nos. 33-30296 and 33-64090) pertaining to the Stock-Based Incentive Award Plan
and in the related Prospectus of our report dated January 26, 1994, with
respect to the consolidated financial statements incorporated herein by
reference, and our report included in the preceding paragraph with respect to
the financial statement schedules included in the Annual Report (Form 10-K) of
Wynn's International, Inc.
ERNST & YOUNG
Los Angeles, California
March 25, 1994
