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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended MARCH 31, 1994 Commission File No. 1-7200
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _________________
to _________________
WYNN'S INTERNATIONAL, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 95-2854312
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
500 NORTH STATE COLLEGE BLVD., ORANGE, CA. 92668
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: (714)938-3700
Former name, former address & former fiscal year, if changed since last report.
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes (X) No ( )
At May 5, 1994, Registrant had 5,548,117 shares of common stock outstanding.
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WYNN'S INTERNATIONAL, INC.
I N D E X
----------
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Part I - Financial Information
Item 1 - Financial Statements:
Consolidated Condensed Balance Sheets -
March 31, 1994 (unaudited) and
December 31, 1993 2
Unaudited Consolidated Condensed Statements
of Income - Three Months Ended March 31,
1994 and 1993 3
Unaudited Consolidated Condensed Statements
of Cash Flows - Three Months Ended March 31
1994 and 1993 4-5
Notes to Unaudited Consolidated Condensed
Financial Statements 6
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-9
Part II - Other Information
Item 1 - Legal Proceedings 10
Item 6 - Exhibits and Reports on Form 8-K 11
Exhibit 11 - Computation of Net Income Per 12
Common Share - Primary
Exhibit 11 - Computation of Net Income Per 12
Common Share - Assuming Full Dilution
Signatures 13
</TABLE>
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WYNN'S INTERNATIONAL, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
March 31
1994 December 31
ASSETS (unaudited) 1993
----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 10,071 $ 21,397
Accounts receivable, less $1,963 allowance for
doubtful accounts ($1,848 at December 31, 1993) 53,833 46,631
Inventories:
Finished goods 19,770 19,929
Raw materials and work in process 20,875 18,895
-------- --------
40,645 38,824
Prepaid expenses and other current assets
(including prepaid taxes based on income
of $4,382 at March 31, 1994 and $3,176
at December 31, 1993) 11,846 10,772
-------- --------
Total current assets 116,395 117,624
Property, plant and equipment, at cost less
accumulated depreciation and amortization 42,199 40,912
Other assets 9,000 9,263
-------- --------
$167,594 $167,799
======== ========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Notes payable $ 1,050 $ 809
Accounts payable 24,459 19,564
Dividends payable 615 610
Taxes based on income 2,685 2,494
Accrued liabilities 24,123 24,636
Long-term debt due within one year 8,240 8,180
-------- --------
Total current liabilities 61,172 56,293
Long-term debt due after one year 15,141 23,389
Deferred taxes based on income 4,262 3,675
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, 5,895,367
shares issued (5,877,322 at December 31, 1993) 5,895 5,877
Capital in excess of par value 9,520 9,275
Retained earnings 78,964 76,873
Equity adjustment from foreign currency
translation (2,693) (2,814)
Unearned compensation (1,086) (1,188)
Common stock held in treasury 347,250 shares,
at cost (347,250 at December 31, 1993) (3,581) (3,581)
-------- --------
Total stockholders' equity 87,019 84,442
-------- --------
$167,594 $167,799
======== ========
</TABLE>
See accompanying notes
2
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WYNN'S INTERNATIONAL, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Dollars in Thousands Except Per Share amounts)
<TABLE>
<CAPTION>
Three Months Ended
---------------------
March 31
---------------------
1994 1993
-------- --------
<S> <C> <C>
Revenues:
Net sales $ 76,783 $ 70,508
Interest income 181 209
-------- --------
76,964 70,717
-------- --------
Cost and expenses:
Cost of sales 51,044 46,909
Selling, general & administrative 20,436 19,391
Interest expense 867 1,084
-------- --------
72,347 67,384
-------- --------
Income before taxes based on income 4,617 3,333
Provision for taxes based on income 1,916 1,466
-------- --------
Net income $ 2,701 $ 1,867
======== ========
Income per share of common stock:
Primary $ .48 $ .34
======== ========
Fully diluted $ .46 $ .33
======== ========
Cash dividend per common share $ .11 $ .10
======== ========
</TABLE>
See accompanying notes
3
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WYNN'S INTERNATIONAL, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31
-----------------------
1994 1993
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers $ 69,391 $ 63,737
Cash paid to suppliers and employees (64,406) (57,481)
Cash paid on warranty kit claims (1,670) (1,642)
Interest received 231 241
Interest paid (1,635) (2,137)
Income taxes paid (2,378) (840)
Other cash disbursements - net (7) -
-------- --------
Net cash provided by (used in)
operating activities (474) 1,878
-------- --------
Cash flows from investing activities:
Additions to property, plant and equipment (2,967) (1,901)
Proceeds from sale of property, plant & equip. 267 206
Other cash receipts - net 16 3
-------- --------
Net cash used in investing activities (2,684) (1,692)
-------- --------
Cash flows from financing activities:
Borrowings under lines of credit - net 241 572
Payments of long-term debt (7,938) (8,215)
Dividends paid (605) (985)
Proceeds from exercise of stock options 13 83
-------- --------
Net cash used in financing activities (8,289) (8,545)
-------- --------
Effect of exchange rate changes 121 (368)
-------- --------
Net decrease in cash and cash equivalents (11,326) (8,727)
-------- --------
Cash and cash equivalents at beginning of year 21,397 14,667
-------- --------
Cash and cash equivalents at March 31 $ 10,071 $ 5,940
======== ========
</TABLE>
See accompanying notes
4
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WYNN'S INTERNATIONAL, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (CONTINUED)
(Dollars in Thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31
-----------------------
1994 1993
-------- --------
<S> <C> <C>
Reconciliation of net income to net cash
provided by (used in) operating activities
- - --------------------------------------------
Net income $ 2,701 $ 1,867
-------- --------
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 1,676 1,644
Provision for uncollectible accounts 140 91
Pension plan expense (income) not funded 14 (43)
Postretirement medical benefits not funded 68 84
Amortization of stock compensation 102 -
Gain on sale of property, plant & equipment (3) -
Provision (benefit) for deferred income taxes (653) 1,408
Decrease (increase) in:
Accounts receivable (net) (7,342) (6,739)
Inventories (1,821) 1,501
Prepaid expenses 132 963
Other assets 112 (86)
Increase (decrease) in:
Accounts payable 4,895 3,258
Warranty kit reserves (75) 88
Taxes based on income 191 (782)
Accrued liabilities (611) (1,376)
-------- --------
Total adjustments (3,175) 11
-------- --------
Net cash provided by (used in) operating
activities $ (474) $ 1,878
======== ========
</TABLE>
Supplemental disclosure of noncash investing
and financing activities
- - --------------------------------------------
In 1994, additional common stock was issued upon
the conversion of $250,000 of long-term debt.
See accompanying notes
5
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WYNN'S INTERNATIONAL, INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1994 AND 1993
1) The accompanying unaudited consolidated condensed financial statements
include all adjustments which in the opinion of management are necessary
to a fair presentation of the information for the interim period herein
reported. These unaudited consolidated condensed financial statements
should be read in conjunction with the consolidated financial statements
included in the 1993 Annual Report to Shareholders.
2) The results of operations for the three months ended March 31, 1994 are
not necessarily indicative of results of operations for the year ending
December 31, 1994. Accounting measurements at interim dates inherently
involve greater imprecision than at year-end, which is due, in part, to
increased reliance on the use of estimates at interim dates.
3) The number of shares used in the calculation of primary and fully diluted
earnings per share information is as follows:
<TABLE>
<CAPTION>
Three months ended March 31
---------------------------
1994 1993
--------- ---------
<S> <C> <C>
Primary 5,671,004 5,523,143
Fully diluted 6,104,904 6,034,298
</TABLE>
As previously reported, on August 4, 1993 the Registrant declared a 3 for
2 stock split effected in the form of a dividend of one share of the
Registrant's common stock for every two shares currently outstanding, to
shareholders of record on August 26, 1993. For 1993, the number of
shares and the related earnings per share data reflect retroactively this
stock split.
6
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WYNN'S INTERNATIONAL, INC.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- - ---------------------
Comparison of the three months ended March 31, 1994 and 1993
- - ------------------------------------------------------------
Net sales for the first quarter of 1994 increased 9% to $76.8 million compared
to $70.5 million in the first quarter of 1993. Sales increased 11% 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's
revenues increased 23% in the first quarter of 1994 compared to the first
quarter of 1993, principally due to higher sales volumes at the Tennessee and
Virginia operations. Precision's revenue growth was due primarily to the
higher U.S. automotive production rates and the general increase in industrial
activity. WCS experienced a 3% decrease in sales during the first quarter of
1994 compared to the first quarter of 1993. The decrease was due primarily to
a reduction in sales to Rover resulting from the previously announced expira-
tion of a supply agreement. Sales to Mazda, an importer of vehicles from
Japan, increased 16% during the most recent quarter compared to the prior year
due to increased kit sales for the 323 model. Sales to the aftermarket, in-
cluding WCS service centers, increased 16% during the quarter. Sales of WCS'
refrigerant recycling machines also increased in the current quarter compared
to the prior year due to the successful introduction of the new Omega machine.
Sales for the Petrochemical Specialties Division, principally car care
products, increased 6% in the most recent quarter compared to the first quarter
of 1993. Sales increased 26% in the United States compared to the prior year
primarily due to higher export sales and sales of product warranty kits. Sales
from outside the United States decreased slightly from the prior year primarily
due to sluggish economic conditions in Europe. Excluding the effect of foreign
exchange rate fluctuations, worldwide net sales increased 9% in the most recent
quarter compared to the comparable quarter in 1993.
Sales of the Builders Hardware Division, the relatively small regional builders
hardware products wholesale distributor, decreased 1% in the first quarter
compared to the first quarter of 1993, due to the continued recessionary
conditions in the southern California economy and the continued depressed level
of commercial building activity.
The consolidated cost of sales for the first quarter of 1994 was 66.5% of
sales, the same as in the first quarter of 1993. The gross margin percentage
increased at Precision due to the higher production and sales volume, while the
margin percentage decreased at WCS and the Petrochemical Specialties Division
due to a change in the sales mix at each entity. The gross margin percentage
improved slightly at the Builders Hardware Division.
Selling, general and administrative expenses in the first quarter of 1994 were
$20.4 million (26.6% of sales) compared to $19.4 million (27.5% of sales) for
the first quarter of 1993. The increase in total selling, general and admin-
istrative expenses
7
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
- - -------------------------------------------------
is primarily attributable to higher severance and incentive compensation costs.
The decrease in selling, general and administrative expenses as a percentage of
sales is due to the higher sales volumes at Precision and the Petrochemical
Specialties Division. During the quarter ended March 31, 1994, the Company
adopted Statement of Financial Accounting Standards No. 112, Employers'
Accounting for Postemployment Benefits. The cumulative effect of the account-
ing change was not material. Interest expense declined due primarily to the
reduction of the Company's 10.75% long-term debt resulting from principal
payments of $7.9 million each in March 1993 and 1994.
Income before taxes based on income increased 39% to $4.6 million in 1994 from
$3.3 million in the first quarter of 1993. In the Automotive Parts &
Accessories Division, Precision had a substantial increase in operating profit
compared to the first quarter of 1993 principally as a result of higher sales
and production volumes and the related higher gross profit. WCS experienced a
37% decrease in operating profit in the first quarter compared to the same
period in 1993, principally due to the previously described expiration of the
supply agreement with Rover. The Petrochemical Specialties Division experi-
enced a 39% increase in operating profit due primarily to improved results at
its U.S. based operations. Operating profit increased at the Builders Hardware
Division due to the improved gross margin and lower operating costs.
The effective tax rate in the first quarter of 1994 was 41.5% compared to 44%
in the first quarter of 1993. The decrease reflects the anticipated reduction
in the 1994 full year rate to 41.5%, which is lower than the 43.2% full year
rate in 1993. The decline in the full year's rate is due to the expected high-
er proportion of United States income in 1994 compared to 1993. United States
corporate income is taxed at a rate of 34% to 35%, which is lower than most of
the corporate income tax rates applicable in the foreign jurisdictions in which
the Company operates.
Net income increased 45% to $2.7 million in the first quarter of 1994 compared
to $1.9 million in the first quarter of 1993, reflecting the increase in pretax
income and the lower effective income tax rate. Primary income per share
increased to $.48 from $.34 in the first quarter of 1993 due to the higher net
income. (The 1993 share and per share amounts have been adjusted retroactively
to reflect the 3 for 2 stock split effected in September 1993.) The number of
shares used in the calculation of earnings per share increased 3% in 1994
primarily due to the restricted stock award to a key executive in December 1993
and the conversion of convertible notes in 1993 and 1994. In the first quarter
of 1994, the holder of the Company's 9% Convertible Subordinated Debentures
converted $250,000 of the outstanding amount into 17,045 shares of common stock
of the Company. Fully diluted earnings per share increased in 1994 compared to
1993 primarily due to the increased net income.
FINANCIAL CONDITION
- - -------------------
Working capital at the end of the first quarter was $55.2 million compared to
$61.3 million at December 31, 1993. The current ratio was 1.90 to 1 at the end
of the first quarter of this year compared to 2.09 to 1 at December 31, 1993.
The decrease in working capital and the current ratio compared to December 31,
1993 was caused by the use of internally generated funds to pay the second
installment of $7.9 million of the Company's 10.75% long-term debt in March
1994. The remaining outstanding
8
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
- - -------------------------------------------------
principal balance of the Company's 10.75% senior debt is scheduled to be repaid
in two additional annual installments of $7.9 million each due respectively in
March 1995 and 1996. The Company anticipates funding the March 1995 repayment
from internally generated funds and/or its lines of credit. The Company has
adequate lines of credit to meet forseeable working capital requirements.
Accounts receivable at March 31, 1994 increased $7.2 million from December 31,
1993, principally as a result of Precision's higher sales compared to the
quarter ended December 31, 1993 and WCS's monthly sales pattern in the first
quarter of 1994 compared to the fourth quarter of 1993. Inventories increased
to $40.6 million at the end of the first quarter of this year compared to $38.8
million at December 31, 1993. At the Petrochemical Specialties Division,
inventory increased $1.3 million due to the higher revenue levels and addition-
al orders for coolant recycling equipment. Inventory also increased slightly
at Precision and WCS, but decreased at the Builders Hardware Division.
During the three months ended March 31, 1994, the Company purchased $3.0 mil-
lion of new property, plant and equipment, primarily for the Automotive Parts &
Accessories Division. The Company anticipates that capital expenditures will
be approximately $14 million in 1994 and will be funded by cash flow from
operations.
Stockholders' equity at March 31, 1994 was $87.0 million or $15.68 per share
compared to $84.4 million or $15.27 per share at December 31, 1993. The
increase of $2.6 million is attributable to net income of $2.7 million, $0.3
million from common stock transactions, a $0.1 million increase in the foreign
currency translation account and a $0.1 million reduction in the adjustment for
unearned compensation, reduced by $0.6 million of dividends declared.
9
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PART II - OTHER INFORMATION
WYNN'S INTERNATIONAL, INC.
ITEM 1 - LEGAL PROCEEDINGS
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.
On May 2, 1994, the trial court in the previously reported case of Wynn Oil
Company v. American Way Service Corporation and Thomas A. Warmus awarded Wynn
Oil Company approximately $1,166,000 in prejudgment interest and attorneys'
fees to bring the total judgment to approximately $3,190,000. Defendants are
expected to file a timely appeal to the trial court's decision. 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.
10
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WYNN'S INTERNATIONAL, INC.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit No. 11 - Computation of net income per common share - primary
and assuming full dilution.
(b) Registrant has not filed any reports on Form 8-K during the quarter for
which this report is filed.
11
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Exhibit 11
WYNN'S INTERNATIONAL, INC.
COMPUTATION OF NET INCOME PER COMMON SHARE - PRIMARY
(Dollars in Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31
------------------------
1994 1993
--------- ---------
<S> <C> <C>
Net income $ 2,701 $ 1,867
========= =========
Weighted average number of shares issued 5,540,285 5,410,653
Net shares assumed issued using the treasury
stock method for stock options outstanding
during each period based on average market
price 120,767 112,490
Dilutive effect of assumed issuance of
performance shares 9,952 -
--------- ---------
Common and common equivalent shares 5,671,004 5,523,143
========= =========
Income per common share $ .48 $ .34
========= =========
<CAPTION>
COMPUTATION OF NET INCOME PER COMMON SHARE - ASSUMING FULL DILUTION
(Dollars in Thousands Except Per Share Amounts)
Three Months Ended
March 31
------------------------
1994 1993
--------- ---------
<S> <C> <C>
Net income $ 2,701 $ 1,867
Net interest expense from convertible notes 92 105
--------- ---------
Adjusted net income $ 2,793 $ 1,972
========= =========
Weighted average number of shares issued 5,540,285 5,410,653
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 120,767 129,327
Dilutive effect of assumed issuance of
performance shares 9,952 -
Dilutive effect of assumed conversion of
notes outstanding 433,900 494,318
--------- ---------
Fully diluted shares 6,104,904 6,034,298
========= =========
Income per common share $ .46 $ .33
========= =========
</TABLE>
Note: All 1993 calculations reflect retroactively the 3 for 2 stock
split effected in September 1993.
12
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WYNN'S INTERNATIONAL, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the regis-
trant has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
WYNN'S INTERNATIONAL, INC.
-------------------------------------------
(Registrant)
Date May 10, 1994 JAMES CARROLL
------------------ -------------------------------------------
James Carroll
President and Chief Executive Officer
Date May 10, 1994 SEYMOUR A. SCHLOSSER
------------------ --------------------------------------------
Seymour A. Schlosser
Vice President-Finance
(Principal Financial and Accounting Officer)
13
