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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 for the fiscal year ended DECEMBER 31, 1999; or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _______________________
to __________________________
COMMISSION FILE NUMBER 1-7200
WYNN'S INTERNATIONAL, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 95-2854312
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
500 NORTH STATE COLLEGE BOULEVARD
SUITE 700
ORANGE, CALIFORNIA 92868
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (714) 938-3700
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
<TABLE>
<CAPTION>
Title of Each Class Name of Each Exchange on Which Registered
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<S> <C>
Common Stock, par value $.01 per share New York Stock Exchange
</TABLE>
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 $236,751,924 as of March 15, 2000. 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 15, 2000, Registrant had 18,650,810 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, 1999. Part III incorporates
information by reference from the Proxy Statement for the Annual Meeting of
Stockholders to be held on May 10, 2000.
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. [X]
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PART I
ITEM 1. BUSINESS
Wynn's International, Inc., through its subsidiaries, is engaged
primarily in the automotive and industrial components business and the specialty
chemicals business. The Company designs, produces and sells O-rings and other
seals and molded elastomeric and thermoplastic polymer products. The Company
also formulates, produces and sells specialty chemical products, vehicle service
contract programs and automotive service equipment and distributes, primarily in
southern California, locks and hardware products manufactured by others. Prior
to the sale in May 1996 of the principal operating assets of its wholly-owned
subsidiary, Wynn's Climate Systems, Inc. ("Wynn's Climate Systems"), the Company
designed, produced and sold automotive air conditioning systems and components.
In 1998, the Company began selling vehicle service contract programs for new and
used automobiles and light trucks. In December 1999, the Company acquired all of
the outstanding capital stock of Goshen Rubber Companies, Inc., an Indiana-based
developer, manufacturer and marketer of O-rings, Tetraseals(R), gaskets and
other rubber, plastic and urethane products.
The Company markets its O-rings and other molded polymer products under
the trade name "Wynn's-Precision" and under the trademark TETRASEALS(R). The
Company markets its specialty chemical products, automotive service equipment,
and vehicle service contract programs under various trademarks, including
WYNN'S(R), FRICTION PROOFING(R), X-TEND(R), SPIT FIRE(R), CHARGE(R), DU-ALL(R),
TRANSERVE(R), POWERFLUSH(R), WYNN'S PRODUCT WARRANTY(R), WYNN'S EXTENDED
CARE(TM) and WYNN'S PLUS(TM).
The Company's executive offices are located at 500 North State College
Boulevard, Suite 700, Orange, California 92868. Its telephone number is (714)
938-3700. The terms "Wynn's International, Inc.," "Wynn's," "Company" and
"Registrant" as used in this report 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 two industry segments:
Automotive and Industrial Components, and Specialty Chemicals. Financial
information relating to the Company's business segments for the three years
ended December 31, 1999 is incorporated by reference from Note 15 of "Notes to
Consolidated Financial Statements" on pages 40 and 41 of the Company's Annual
Report to Stockholders for the year ended December 31, 1999 (the "1999 Annual
Report").
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AUTOMOTIVE AND INDUSTRIAL COMPONENTS
The Automotive and Industrial Components Division consists of
Wynn's-Precision, Inc. ("Precision"), Goshen Rubber Companies, Inc. ("Goshen")
and Robert Skeels & Company ("Skeels"). On December 17, 1999, the Company
acquired all of the outstanding capital stock of Goshen. The acquisition has
been accounted for as a purchase, and Goshen's assets and liabilities are
included in the Company's balance sheet as of December 31, 1999. In accordance
with the terms of the acquisition agreement, Goshen's results of operations will
be consolidated with the Company beginning January 1, 2000. The Automotive and
Industrial Components Division also included Wynn's Climate Systems prior to the
sale of its principal operating assets in May 1996. During 1999, sales from
continuing operations of the Automotive and Industrial Components Division were
$186,802,000, or 52% of the Company's total net sales, as compared with
$175,823,000 and 52% in 1998. The pretax profit from continuing operations of
the division in 1999 was $31,722,000, as compared with $29,234,000 in 1998. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Operating Segments and Related Information" on pages 19 through
24 and 40 through 41, respectively, of the 1999 Annual Report, which are hereby
incorporated by reference. See also "Other Factors Affecting the Business" on
pages 6 through 13 below.
WYNN'S-PRECISION, INC.
(O-RINGS, ENGINEERED SEALS AND OTHER MOLDED ELASTOMERIC
AND THERMOPLASTIC POLYMER PRODUCTS)
PRODUCTS
Precision and its affiliated companies design, manufacture and market a
variety of static and dynamic sealing products. Precision's principal products
are O-rings, composite gaskets and seals, engineered seals, and convoluted
boots, bellows and seals that are reinforced with plastic, metal and fabric.
These products are made from elastomeric and thermoplastic polymers. The
products are used for a variety of sealing applications that include engines,
transmissions, steering pumps and assemblies, fuel handling, suspension/brake
systems, refrigeration and electronics. Precision's primary customers are
manufacturers of automobiles, trucks, off-highway vehicles, fluid handling
equipment, aircraft/aerospace components, and the military.
DISTRIBUTION
Precision sells its products primarily through a direct sales force to
original equipment manufacturer ("OEM") customers and component suppliers to
OEMs. Precision also markets its products throughout the United States through
independent distributors and through Company-operated regional service centers
located in California, Illinois, Indiana, Michigan, Minnesota, New York, North
Carolina, Ohio, Texas and Wisconsin. 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.
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PRODUCTION
Precision's manufacturing facilities are located in Arizona, Kentucky,
Tennessee, Texas, Virginia and Ontario, Canada. Precision added a manufacturing
facility in China after entering into a joint venture with a Chinese company in
the fourth quarter of 1998. Precision's administrative headquarters are located
at the site of its main manufacturing facility in Lebanon, Tennessee. Also
located in Lebanon, Tennessee are Precision's own tool production facility and a
facility dedicated exclusively to injection molding. Precision's Plastics
Division maintains a 76,375 square foot facility in Springfield, Kentucky
dedicated to injection molding, injection blow molding and extrusion blow
molding of various thermoplastic polymers. Over the past several years,
Precision has made significant investments in modern computerized production
equipment and facilities. In 1999, Precision continued to invest in new
production equipment to expand production capacity primarily in its Tennessee,
Virginia, and Kentucky facilities. In 1999, Precision also commenced building a
technologically advanced rubber mixing facility at its Lebanon, Tennessee
production center scheduled to be completed in the second quarter of 2000.
The principal raw materials used by Precision are elastomeric and
thermoplastic polymers. These raw materials generally have been available from
numerous suppliers in sufficient quantities to meet Precision's requirements.
Adequate supplies of raw materials were available in 1999 and are expected to
continue to be available in 2000.
GOSHEN RUBBER COMPANIES, INC.
(O-RINGS, ENGINEERED SEALS AND OTHER MOLDED ELASTOMERIC
AND THERMOPLASTIC POLYMER PRODUCTS)
PRODUCTS
Goshen develops, manufactures and markets a variety of rubber, plastic
and urethane products. Goshen's principal rubber products are O-rings and
Tetraseals(R), precision-molded products such as specialized seals, gaskets and
diaphragms, and elastomeric balls, boots and drive belts. These products are
used in a variety of hydraulic, pneumatic and fluid handling systems to seal
air, oil or water. Goshen's principal thermoplastic products are exterior trim
components for automobiles and disposable diagnostic medical and consumer
products. Goshen also manufactures urethane, PTFE and silicone products such as
energy absorbing automotive parts. Goshen's primary customers are OEMs,
component suppliers to OEMs, customers in the automotive aftermarket and
manufacturers of fluid handling equipment.
DISTRIBUTION
Goshen sells its products through a variety of distribution channels,
including a direct sales force, independent sales representatives and
distributors, and telemarketers. Goshen supports its sales and marketing efforts
with inside sales personnel and engineers.
PRODUCTION
Goshen operates 22 manufacturing facilities located in Indiana, Ohio,
Illinois, Nebraska, Florida, South Carolina, North Carolina, Wisconsin and
Ontario, Canada. Of the 22 manufacturing facilities,
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13 are operated by the Rubber Division and nine are operated by the
Thermoplastics Division.
The principal raw materials used by Goshen are elastomeric and
thermoplastic polymers. These raw materials generally have been available from
suppliers in sufficient quantities to meet Goshen's requirements. Adequate
supplies of raw materials were available in 1999 and are expected to continue to
be available in 2000.
ROBERT SKEELS & COMPANY
Skeels is a wholesale distributor of builders hardware products,
including lock sets and locksmith supplies.
Skeels' main facility is located in Compton, California. In addition,
Skeels has a leased satellite sales facility located in Fullerton, 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 large institutional customers. Most of Skeels'
sales are derived from replacement items used by industry, institutions and
in-home remodeling and repair.
Skeels has been a distributor of Schlage lock products since 1931.
Skeels also distributes other well-known brands such as Lawrence, Kwikset and
Master. Skeels' distributorship arrangements generally are cancelable by the
manufacturers without cause.
SPECIALTY CHEMICALS
The Specialty Chemicals Division consists of Wynn Oil Company and its
subsidiaries ("Wynn Oil"). During 1999, net sales at Wynn Oil were $173,497,000,
or 48% of the Company's total net sales, as compared to $161,052,000 and 48% for
1998. The pretax profit of the division during 1999 was $17,449,000, compared
with $17,736,000 for 1998. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Operating Segments and
Related Information" on pages 19 through 24 and 40 through 41, respectively, of
the 1999 Annual Report, which are hereby incorporated by reference. See also
"Other Factors Affecting the Business" on pages 6 through 13 below.
PRODUCTS
Wynn Oil develops, manufactures and markets a wide variety of specialty
chemical car care and industrial products and related service programs. These
products include professional chemical products, programs and equipment for
automobile service technicians and automobile chemical products for consumers.
Wynn Oil's premium automotive chemical product line is the Wynn's Product
Warranty program. Wynn Oil also sells chemical products for metalworking and
machining operations.
Wynn Oil formulates its products to provide preventive or corrective
maintenance for various parts of an automobile, including the engine,
transmission, steering system, fuel system, differential,
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cooling system and certain other parts. Wynn Oil also manufactures equipment
designed to work with Wynn Oil chemical products to assist automobile service
technicians with routine tasks, such as flushing cooling and transmission
systems. For example, the patented DU-ALL machine is a portable machine used
with Wynn's chemicals to flush and refill antifreeze in a vehicle and to recycle
the used antifreeze. The DU-ALL system has been approved by General Motors,
Ford, DaimlerChrysler, Nissan, Mitsubishi, Isuzu and Hyundai. The TRANSERVE II+
automatic transmission flush equipment consists of portable machines used with
Wynn's chemicals to flush, refill and treat the transmission fluid in a vehicle.
The TRANSERVE II+ equipment has been approved by General Motors, Ford,
DaimlerChrysler, Nissan, Mitsubishi and Isuzu.
Wynn Oil's industrial specialty chemical products include forging
compounds, cleaners, release agents, lubricants, cutting and drawing fluids and
multipurpose coolants. These chemical products are used in precision metal
forming and machining operations. They are a mix of full synthetic,
semi-synthetic and petroleum-based fluids that address specific functions and
levels of operation severity.
Wynn Oil also markets the Wynn's Product Warranty program. The Wynn's
Product Warranty program consists of kits of a premium line of automotive
treatment products that are accompanied by a special product warranty. The kits
are typically sold through car dealers to purchasers of used automobiles and
light trucks. The kits contain proprietary treatment products that have been
specially formulated to help prevent damage to various internally lubricated
parts and systems of the automobile. The products include an engine oil
treatment, a fuel system conditioner, a transmission fluid treatment, a power
steering supplement, a differential treatment, a cooling system conditioner and
an air conditioning system treatment. The product warranty accompanying the
products states, in effect, that if the vehicle owner (i) treats the vehicle as
directed, (ii) specified components of the vehicle are damaged during the
warranty period, and (iii) the damage is the type of damage that the products
are designed to help prevent, then Wynn Oil will provide reimbursement for the
damage, up to the limits of liability and subject to certain conditions and
exceptions. The items reimbursed include the costs of certain parts and labor
and, in some instances, the costs of towing and a rental car. See "Other Factors
Affecting the Business" on pages 6 through 13 below.
In 1998, Wynn's Extended Care, Inc. ("Wynn's Extended Care"), a
wholly-owned subsidiary of Wynn Oil, launched the Wynn's Extended Care vehicle
service contract program. The program features vehicle service contracts that
cover virtually every major system of a car. In 1999, Wynn's Extended Care
introduced additional service contract programs, including the Wynn's Plus
vehicle service contract program, which provides more limited coverage for used
vehicles. Wynn's Extended Care sells its vehicle service contracts primarily
through a network of independent distributors and sales representatives to new
and used car dealers who, in turn, sell to purchasers of new and used cars. The
Wynn's Extended Care program is backed by a contractual liability insurance
policy.
DISTRIBUTION
Wynn Oil's car care products are sold in the United States and in
approximately 100 foreign countries. See "Foreign Operations" on pages 12 and 13
below.
Wynn Oil distributes its products through a wide range of distribution
channels. Domestically, Wynn Oil distributes its products primarily through
independent distributors and sales representatives.
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Wynn Oil also uses internal sales management personnel to sell and distribute
its products. In addition, Wynn Oil distributes the Wynn's Product Warranty
program through new and used car dealers and, on a limited basis, certain auto
auctions. Wynn Oil also markets the Wynn's Product Warranty program in the
United States and Canada through cooperative arrangements with national and
regional automobile finance companies. Although these automobile finance
companies have played an increasing role in the marketing of the Wynn's Product
Warranty program in recent years, in 1998 and 1999 Wynn Oil experienced a
decline in revenue generated by these arrangements. No assurance can be given
that such finance companies will continue to market the Wynn's Product Warranty
program. Wynn's Extended Care markets its service contract programs in the
United States primarily through new and used car dealers, auto auctions and
national and regional finance companies. Foreign sales of Wynn Oil products are
made principally through wholly-owned subsidiaries, which sell primarily through
independent distributors, warehouse distributors or manufacturers'
representative organizations, with a direct sales force in France and the
Netherlands. Wynn Oil also engages in direct export sales from the U.S. to
independent distributors in Asia and Latin America, and from Belgium to
independent distributors in certain European countries, North Africa, the Middle
East and the former republics of the USSR. See "Other Factors Affecting the
Business" on pages 6 through 13 below.
PRODUCTION
Wynn Oil has manufacturing facilities in California and Belgium. Other
foreign subsidiaries either purchase products directly from the Company's
manufacturing facilities in the United States and/or Belgium or have the
products manufactured locally by outside contract suppliers according to Wynn
Oil's specifications and formulae. Wynn Oil periodically reviews its production
and sourcing locations in light of fluctuating foreign currency rates in order
to ensure the best product cost and quality.
Wynn Oil uses a large number of chemicals to produce its various
specialty chemical 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
1999 and is expected to continue to be available for the foreseeable future.
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 and Industrial Components Division are in part
related to the sales of vehicles by its OEM customers.
Precision and Goshen have a large number of competitors in the market
for static and dynamic sealing products, some of which competitors are
substantially larger than Precision and Goshen. The markets in which Precision
and Goshen compete are also sensitive to price changes. Requests for price
reductions are not uncommon. Precision and Goshen both attempt to work with
their customers to identify ways to lower costs and prices. Precision focuses on
high technology, high quality sealing
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devices and has made significant investments in advanced equipment and other
means to raise productivity. In 1999, Precision invested approximately $14.1
million in new production equipment and facilities to expand its production
capacity primarily at its Tennessee, Virginia and Kentucky facilities.
Precision's major focus is to be the low cost producer of superior quality
products within its industry. Goshen emphasizes the superior quality of its
products and its customer service. Goshen's multi-plant capacity and ability to
manufacture a range of diverse products enable it to meet a wide array of
customer needs, especially when a customer is considering new products.
Precision and Goshen both believe that they must expand into additional areas of
sealing technology in order to continue to be effective competitors.
Competition with respect to Wynn Oil's specialty chemical and equipment
products consists principally of other automotive aftermarket chemical, service
equipment 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 and car manufacturers market private
label brands of specialty chemical products. Wynn Oil's DU-ALL antifreeze
recycling equipment and chemicals compete against other antifreeze recycling
processes, some of which also have received OEM approval. Similarly, Wynn Oil's
TRANSERVE II+ transmission fluid flush and fill equipment and chemicals compete
against other transmission flush equipment. The Wynn's Product Warranty program
and Wynn's Extended Care compete with service contract and extended warranty
programs offered by other service contract providers and insurance companies.
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.
KEY CUSTOMERS
No customer represented more than 10% of total net sales of the Company
in 1999.
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 program in 48 states in
the U.S. and also in Canada. Questions have been raised by certain state and
Canadian provincial regulators as to whether the product warranty that
accompanies the kit is in the nature of insurance or a regulated service
contract. Wynn Oil attempts to resolve these questions to the satisfaction of
each such regulator. On occasion, it has elected not to sell the Wynn's Product
Warranty program in certain jurisdictions. No assurance can be given that
governmental regulations will not significantly affect the marketing of the
Wynn's Product Warranty program in the United States or other countries in the
future. Over the past few years, sales of the Wynn's Product Warranty program
have been an important element of Wynn Oil's domestic business.
Wynn's Extended Care markets the Wynn's Extended Care vehicle service
contract programs in 48 states in the U.S. Many states have laws and regulations
that govern the sale of vehicle service
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contracts. These laws and regulations dictate, for example, the types of
disclosures that must be included in the Wynn's Extended Care service contracts,
and in some cases require that Wynn's Extended Care be licensed as a vehicle
service contract provider. Wynn's Extended Care endeavors to comply with these
laws and regulations. No assurance can be given that government laws and
regulations will not significantly affect the marketing of the Wynn's Extended
Care contracts in the future.
ENVIRONMENTAL MATTERS
The Company is involved in certain environmental proceedings and
potential proceedings principally arising out of the past or present use of
various substances that have been or may be deemed to be hazardous. At December
31, 1999, the Company had recorded consolidated accrued reserves of
approximately $10.4 million relating to environmental matters. In establishing
such reserves, the Company evaluates the nature and extent of the underlying
contamination to the extent known for each matter, the estimated cost of the
likely remedy, the number and financial strength of other potentially
responsible parties, and the evidence against the various potentially
responsible parties. During this evaluation process, the Company makes its best
estimate of its likely exposure with respect to each matter based on information
known to the Company at that time. Such estimates may involve a range of
exposures for each matter. The Company provides aggregate reserves for no less
than the minimum amount of the aggregate range of outcomes established by the
Company.
The Company lacks sufficient information at this time to provide an
estimate of its "reasonably possible" (as such term is defined in Statement of
Financial Accounting Standard No. 5) potential liability from all environmental
matters. In establishing reserves for environmental matters, the Company assumes
that it has appropriately evaluated key factors, such as expected remedy costs,
the likely degree of responsibility and ability to pay of other potentially
responsible parties, and the Company's probable allocable share. It is
reasonably possible that regulatory or technical developments or subsequently
developed information could cause the Company to reevaluate its present range of
outcomes and to record additional liabilities for existing environmental
matters. However, based upon information presently known to the Company, the
Company believes that any such additional liabilities should not materially
affect the Company's consolidated financial position, annual results of
operations or cash flow. See Note 12 of "Notes to Consolidated Financial
Statements" on page 38 of the 1999 Annual Report, which is hereby incorporated
by reference.
All potentially significant environmental matters presently known to
the Company are described below.
(a) In July 1990, Wynn Oil received a general notice letter
from the United States Environmental Protection Agency (the "EPA")
stating that it may be a potentially responsible party ("PRP") with
respect to the San Gabriel Valley, California Superfund Sites regional
groundwater problem. In March 1994, the EPA issued its Record of
Decision with respect to the Baldwin Park Operable Unit ("BPOU") of the
San Gabriel Valley Superfund Sites. Wynn Oil's Azusa facility (the
"Azusa Facility") is located within the BPOU. On May 15, 1997, EPA
issued Special Notice letters to nineteen companies and entities,
including Wynn Oil, with respect to the BPOU. The Special Notice
letters initiated an administrative process in which
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the recipients were given sixty days to submit a good faith offer to
undertake the requested work and another sixty days to reach agreement
with the EPA as to the terms of a consent decree. EPA has indicated
that it considered Wynn Oil to be one of the four largest contributors
of volatile organic compounds to the regional groundwater problem in
the BPOU. Wynn Oil disagrees with the views expressed by the EPA.
In early June 1997 pursuant to a newly developed test method,
perchlorates were detected in certain groundwater wells in the BPOU in
excess of the State of California provisional action level of 18 parts
per billion. Perchlorates are ions of ammonium perchlorate or potassium
perchlorate, which are most commonly associated with the manufacturing
of solid rocket fuel, fireworks and explosives. After the discovery of
perchlorate and also using newly-developed test methods,
N-nitrosodimethylamine ("NDMA") was discovered in the groundwater in
the BPOU in quantities in excess of the detection limit of 30 parts per
trillion. NDMA is associated with the manufacture of rocket fuel, among
other processes. As a result of issues arising from the discovery of
perchlorate and NDMA in certain BPOU groundwater wells, EPA extended
the deadline for submission of a good faith offer.
In September 1999, eleven Special Notice recipients, including
Wynn Oil, submitted a good faith offer (the "GFO") to perform the
remedy. EPA accepted the GFO as a basis for entering into negotiations
toward an acceptable consent decree. Shortly thereafter, the GFO
participants entered into internal negotiations whereby one of the GFO
participants would assume responsibility for performance of the Interim
Remedial Action, subject to certain limitations and reopeners, in
exchange for a cash payment from the other ten GFO participants,
including Wynn Oil. As of March 15, 2000, the GFO participants had not
yet concluded an internal settlement. Wynn Oil's ultimate share of the
total remedial costs for the BPOU cannot be estimated with certainty at
this time. In establishing appropriate reserves for this matter, the
Company has assumed that Wynn Oil and nine other GFO participants will
be able to reach a negotiated settlement with the GFO participant that
will perform the Interim Remedial Action.
(b) In late 1999, the California Regional Water Quality
Control Board - Los Angeles Region (the "RWQCB") issued cleanup and
abatement orders (a "CAO") to certain facilities in the BPOU, including
Wynn Oil, requiring the CAO recipients to (i) perform additional
investigation and sampling work at their sites, (ii) enter into cost
recovery agreements with the RWQCB to reimburse the RWQCB for oversight
costs and (iii) develop plans to mitigate impaired groundwater
resources or compensate water purveyors for past and current costs of
replacing impaired water supplies. Wynn Oil believes that elements of
the CAO exceed the legal authority of the RWQCB and, along with other
CAO recipients, has appealed those portions of the CAO to the State
Water Resources Control Board. The Regional Board has scheduled a
hearing to consider the matters raised in the appeals. Wynn Oil is
complying with the vadose zone investigation and groundwater monitoring
aspects of the CAO.
(c) In February 1995, the owner (the "Property Owner") of
certain real property (the "Richter Site") formerly leased by Alkid
Corporation ("Alkid"), an inactive subsidiary of the Company, filed a
lawsuit in federal court against Alkid, Wynn's International, Inc. and
Wynn Oil (collectively the "Wynn Defendants") and another former lessee
and its principal. The complaint
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alleged that the defendants stored solid and hazardous wastes at the
Richter Site and that the storage devices for the wastes leaked,
causing contamination of the soils and groundwater. The complaint
sought relief under CERCLA, the Resource Conservation Recovery Act of
1976 and common law, including an unspecified amount of damages and an
injunction to compel the defendants to clean up the Site. After the
Wynn Defendants were served with the lawsuit in June 1995, the parties
filed various cross-claims and counterclaims against each other.
Subsequent to the filing of the responsive pleadings, all parties to
the litigation agreed to fund portions of additional investigations of
the Richter Site with each party paying roughly one-third of the cost.
During the pendency of these investigations, the litigation, including
all discovery, was stayed. In 1999, the parties entered into an interim
settlement pursuant to which (i) the litigation was dismissed without
prejudice, (ii) the parties agreed to fund equally certain additional
investigation activities at the Richter Site and (iii) the parties
agreed to certain non-binding alternative dispute resolution
mechanisms. At this time, the Company does not have sufficient
information to estimate the cost of cleanup at the Richter Site or its
ultimate liability for the Richter Site.
(d) In January 1991, Wynn's Climate Systems received a letter
from the Texas Natural Resource Conservation Commission (the "TNRCC")
alleging that soil adjacent to one of its leased manufacturing
facilities was contaminated with hazardous substances. The TNRCC
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 TNRCC. Between
1991 and 1997, consultants for Wynn's Climate Systems performed various
investigations of the former facility and submitted certain reports to
the TNRCC, including a proposed remedial action plan for the site. In
1998, the TNRCC approved the proposed remedial action plan and the
remedial work was completed in the first quarter of 1999. Wynn's
Climate Systems submitted a final site closure report to the TNRCC in
the second quarter of 1999 and is awaiting the TNRCC's approval of the
closure report.
(e) Wynn's Climate Systems is one of approximately 100
hazardous waste generators that have been identified as potentially
responsible parties for the Chemical Recycling, Inc. ("CRI") site in
Wylie, Texas (the "CRI Site"). A PRP Steering Committee (the "CRI
Committee") was formed to negotiate with EPA on behalf of its members
an agreement to take remedial measures voluntarily at the CRI Site.
Approximately 85 PRPs, including Wynn's Climate Systems, have agreed to
participate in the CRI Committee and 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 CRI Committee. No
significant developments have occurred in the last three years. Wynn's
Climate Systems' proportionate share of the total volume of waste
contributed to the CRI Site by CRI Committee members was approximately
two-tenths of one percent (0.2%).
The foregoing "Environmental Matters" section and Note 12 of "Notes to
Consolidated Financial Statements" on page 38 of the 1999 Annual Report (which
is incorporated by reference herein) contain various "forward looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended,
which represent the
10
<PAGE> 12
Company's expectations or beliefs concerning future events, including statements
regarding estimates of the Company's liabilities associated with identified
environmental matters and the likelihood that any liability in excess of
reserves for such matters will not materially affect the Company's financial
position or annual results of operations or cash flows. The Company cautions
that these statements are further qualified by important factors that could
cause actual results to differ materially from those in the forward looking
statements, including, without limitation, the following: (i) the actual nature
and extent of the contamination, (ii) the remedial action selected, (iii) the
cleanup level required, (iv) changes in regulatory requirements, (v) the
identification or discovery of new contaminants of concern, (vi) development of
new or additional remedial technologies, (vii) with respect to the San Gabriel
Valley Superfund Sites, whether Wynn Oil and other GFO participants will be able
to reach a settlement with the GFO participant that will implement the Interim
Remedial Action and the nature of reopeners in such a settlement, (viii) the
amount of EPA past costs required to be paid by Wynn Oil with respect to the San
Gabriel Superfund Sites, (ix) the ability of other potentially responsible
parties, if any, to pay their respective shares, and (x) the amount of any
insurance recoveries. Results actually achieved thus may differ materially from
expected results included in these and any other forward looking statements
contained herein.
FOREIGN CURRENCY FLUCTUATIONS
In 1999, the United States dollar generally increased in value compared
to 1998 in the currencies of most countries in which the Company does business.
This increase in the value of the U.S. dollar caused aggregate foreign sales and
pretax profit to be translated into lower dollar values than what would have
been reported if exchange rates had remained the same as in 1998. Accumulated
Other Comprehensive Income on the Consolidated Balance Sheet includes equity
adjustments from foreign currency translation. In 1999, the equity adjustments
from foreign currency translation decreased by $1,873,000, which caused a
corresponding decrease in total Stockholders' Equity. See "Foreign Operations"
on pages 12 and 13 below.
PATENTS AND TRADEMARKS
The majority of the Specialty Chemicals Division's products are sold
under the WYNN'S and WYNN'S PRODUCT WARRANTY trademarks. The Company has
registered these and its other important trademarks in the relevant
jurisdictions. The Company knows of no material pending or threatened challenges
to its trademarks. See "Other Litigation" under "Item 3 - Legal Proceedings" on
page 21 below for a discussion of a lawsuit filed by Wynn Oil against an
infringer on one of its trademarks.
The Company holds a number of patents that are used in the operation of
its businesses. The Company is not aware of any pending or threatened challenges
to any of its patents that could have a material adverse effect on the Company's
business or results of operations.
SEASONALITY OF THE BUSINESS
Although sales at the Company's various businesses are somewhat
seasonal, the consolidated results of operations generally do not reflect
seasonality.
11
<PAGE> 13
RESEARCH AND DEVELOPMENT
Precision maintains research and engineering facilities in Tennessee,
Virginia, Kentucky and 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 in Tennessee, Virginia, Kentucky
and Canada to design sealing solutions, construct prototype products and to
perform comprehensive testing of materials and products. Precision maintains
extensive research, development and engineering facilities to meet the needs of
its customers.
Goshen operates three research and development laboratories at two
facilities in Indiana and one facility in North Carolina. Two of the
laboratories concentrate on long-term material development projects, including
new and experimental materials developed by Goshen's major raw material
suppliers. Goshen's laboratories continue to develop products and refine
technology in order to meet the specific needs of its customers.
Wynn Oil maintains research and product performance centers in
California, Belgium, France and 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.
FOREIGN OPERATIONS
The following table shows sales to foreign customers for the years
1999, 1998 and 1997:
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Total Sales Outside the United States: $128,745,000 $126,366,000 $120,201,000
Percent of Net Sales 35.7% 37.5% 37.5%
Sales by Foreign Subsidiaries $97,643,000 $98,191,000 $96,184,000
Percent of Net Sales 27.1% 29.1% 30.0%
Export Sales by Domestic Subsidiaries $31,102,000 $28,175,000 $24,017,000
Percent of Net Sales 8.6% 8.4% 7.5%
</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. Consequently,
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 15 of "Notes to Consolidated Financial Statements" on pages 40 and 41
of the 1999 Annual Report, which are hereby incorporated by reference.
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.
12
<PAGE> 14
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. Consequently, 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, 1999, the Company had 4,411 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 2001.
The production and maintenance employees at the Orillia, Ontario,
Canada plant of Precision are represented by a local unit of the Amalgamated
Steelworkers of America. The collective bargaining agreement for this facility
will expire in January 2003.
A majority of the production and maintenance employees at the
Lynchburg, Virginia plant of Dynamic Seals, Inc. are represented by a local of
the International Chemical Workers Union. The collective bargaining agreement
for this facility will expire in February 2002.
A majority of the production and maintenance employees at Precision's
Springfield, Kentucky plant are represented by a local unit of the International
United Paperworkers Union. The collective bargaining agreement for this facility
will expire in March 2001.
A majority of the production and maintenance employees at Goshen's
South Tenth Street plants in Goshen, Indiana are represented by a local unit of
the International Steelworkers Union. The collective bargaining agreement for
the facility will expire in June 2002.
A majority of the production and maintenance employees at the Waukesha,
Wisconsin plant of Waukesha Rubber Company, Inc. are represented by a local unit
of the International Association of Machinists and Aerospace Workers. The
collective bargaining agreement for the facility will expire in December 2000.
A majority of the production and maintenance employees at the Ladd,
Illinois plant of Waukesha Rubber Company, Inc. are represented by a local unit
of the United Steel Workers of America. The collective bargaining agreement for
the facility will expire in January 2001.
The Company considers its relations with its employees to be good.
13
<PAGE> 15
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 Chairman of the Board and Chief Executive 1988 70
Officer
John W. Huber President and Chief Operating Officer 1996 56
Seymour A. Schlosser Vice President-Finance and Chief Financial 1989 54
Officer
Gregg M. Gibbons Vice President-Corporate Affairs and General 1986 47
Counsel
</TABLE>
The principal occupations of Messrs. Carroll, Schlosser and Gibbons for
the past five years have been their current respective positions with the
Company. In addition, Mr. Gibbons was Secretary of the Company until December
1997. Mr. Huber was named President and Chief Operating Officer of the Company
in December 1996. For the five years immediately preceding his appointment as
President and Chief Operating Officer of the Company, Mr. Huber was President
and Chief Executive Officer of Wynn's-Precision, Inc., a wholly-owned subsidiary
of the Company. 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.
14
<PAGE> 16
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, as of March 15,
2000:
<TABLE>
<CAPTION>
Square If Lease,
Held in Fee Footage Year of
Location or by Lease (Approximate) Termination Present Use
-------- ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
WYNN'S INTERNATIONAL, INC.
Orange, California Lease 6,894 2003 Administrative
AUTOMOTIVE AND INDUSTRIAL COMPONENTS:
WYNN'S-PRECISION, INC.
Domestic
--------
Lebanon, Tennessee Fee 140,000 -- Manufacturing,
Warehouse,
Administrative
Lebanon, Tennessee Fee 31,500 -- Manufacturing
Lebanon, Tennessee Fee 78,000 -- Manufacturing
Lebanon, Tennessee Fee 35,000 -- Manufacturing
Lebanon, Tennessee Fee 2,650 -- Manufacturing
Livingston, Tennessee Fee 40,200 -- Manufacturing,
Warehouse
Tempe, Arizona Fee 32,572 -- Manufacturing,
Warehouse
Springfield, Kentucky Fee 76,375 -- Manufacturing,
Warehouse,
Administrative
Rancho Cucamonga, California Lease 2,880 2004 Warehouse
Huntley, Illinois Lease 4,400 2001 Warehouse
Peoria, Illinois Lease 10,000 2000 Warehouse
Indianapolis, Indiana Lease 1,800 2001 Warehouse
Bloomfield Hills, Michigan Lease 3,050 2003 Administrative
</TABLE>
15
<PAGE> 17
<TABLE>
<CAPTION>
Square If Lease,
Held in Fee Footage Year of
Location or by Lease (Approximate) Termination Present Use
-------- ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
Grand Rapids, Michigan Lease 2,000 2000 Warehouse
Maple Grove, Minnesota Lease 3,600 2004 Warehouse
West Seneca, New York Lease 2,934 2000 Warehouse
Charlotte, North Carolina Lease 3,675 2002 Warehouse
Dayton, Ohio Lease 6,193 2004 Warehouse
Arlington, Texas Lease 2,400 2002 Warehouse
Milwaukee, Wisconsin Lease 2,700 2002 Warehouse
Foreign
-------
Orillia, Ontario, Canada Fee 48,000 -- Manufacturing,
Warehouse,
Administrative
Concord, Ontario, Canada Lease 3,455 2000 Warehouse
Edmonton, Alberta, Canada Lease 2,700 2000 Warehouse
Calgary, Alberta, Canada Lease 3,200 2001 Warehouse
Boucherville, Quebec, Canada Lease 3,403 2000 Warehouse
Aldershot, Hampshire, U.K. Lease 2,300 2000 Warehouse,
Administrative
DYNAMIC SEALS, INC.
Lynchburg, Virginia Fee 129,000 -- Manufacturing,
Warehouse,
Administrative
Houston, Texas Lease 14,000 2000 Manufacturing,
Warehouse,
Administrative
Houston, Texas Lease 14,000 2000 Warehouse
</TABLE>
16
<PAGE> 18
<TABLE>
<CAPTION>
Square If Lease,
Held in Fee Footage Year of
Location or by Lease (Approximate) Termination Present Use
-------- ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
GOSHEN RUBBER COMPANIES, INC.
Domestic
--------
Goshen, Indiana Lease 31,780 2008 Administrative
Goshen, Indiana Lease 6,400 2021 Hangar
Goshen, Indiana Fee 165,372 -- Manufacturing,
Administrative
Goshen, Indiana Lease 144,169 2008 Manufacturing
Goshen, Indiana Lease 5,000 Month-to-Month Administrative
Goshen, Indiana Lease 15,000 2008 Manufacturing,
Warehouse
Goshen, Indiana Lease 21,864 2008 Manufacturing
Goshen, Indiana Lease 40,000 2008 Manufacturing,
Administrative
Syracuse, Indiana Fee 114,709 -- Manufacturing,
Administrative
Laketon, Indiana Fee 14,463 -- Manufacturing
Columbia City, Indiana Fee 11,862 -- Manufacturing
Englewood, Ohio Lease 15,000 2008 Manufacturing
Englewood, Ohio Lease 27,000 2000 Manufacturing,
Administrative
Englewood, Ohio Lease 15,000 2008 Manufacturing
Englewood, Ohio Lease 6,000 2004 Administrative
Dayton, Ohio Lease 52,550 2007 Manufacturing
Lewiston, Ohio Lease 57,600 2000 Manufacturing,
Administrative
Ladd, Illinois Fee 40,780 -- Manufacturing
Gothenburg, Nebraska Fee 55,000 -- Manufacturing
</TABLE>
17
<PAGE> 19
<TABLE>
<CAPTION>
Square If Lease,
Held in Fee Footage Year of
Location or by Lease (Approximate) Termination Present Use
-------- ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
Largo, Florida Lease 5,331 Month-to-Month Manufacturing
Wilson, North Carolina Fee 74,000 -- Manufacturing
Snow Hill, North Carolina Fee 40,278 -- Manufacturing
Bishopville, South Carolina Lease 27,500 2010 Manufacturing,
Administrative
Waukesha, Wisconsin Fee 50,000 -- Manufacturing,
Administrative
Waukesha, Wisconsin Lease 3,000 Month-to-Month Warehouse
Foreign
-------
Brampton, Ontario, Canada Lease 15,592 Month-to-Month Manufacturing,
Administrative
Mt. Forest, Ontario, Canada Fee 19,956 -- Manufacturing
ROBERT SKEELS & COMPANY
Compton, California Fee 59,019 -- Warehouse,
Administrative
Fullerton, California Lease 1,600 Month-to-Month Warehouse,
Administrative
SPECIALTY CHEMICALS:
WYNN OIL COMPANY
Domestic
--------
Azusa, California Fee 122,630 -- Manufacturing,
Warehouse,
Administrative
Foreign
-------
Frenchs Forest, Lease 24,224 2004 Warehouse,
New South Wales, Australia Administrative
</TABLE>
18
<PAGE> 20
<TABLE>
<CAPTION>
Square If Lease,
Held in Fee Footage Year of
Location or by Lease (Approximate) Termination Present Use
-------- ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
Carrington, New South Wales, Lease 13,175 2004 Warehouse,
Australia Administrative
St. Niklaas, Belgium Fee 82,600 -- Manufacturing,
Warehouse,
Administrative
Mississauga, Ontario, Canada Lease 32,798 2001 Warehouse,
Administrative
Mississauga, Ontario, Canada Lease 2,536 2002 Service Center
Reading, Berkshire, U.K. Lease 3,154 2004 Administrative
Strasbourg, France Lease 557 2000 Administrative
Paris, France Lease 9,513 2001 Administrative
Pessac, France Lease 7,424 2002 Administrative
Lyon, France Lease 465 2000 Administrative
Abbeville, France Lease 660 2000 Administrative
Thiers, France Lease 465 2000 Administrative
Toulouse, France Lease 485 2000 Administrative
Zoeterwoude, Netherlands Lease 4,917 2003 Administrative
Ratingen, Germany Lease 1,808 2000 Administrative
Chennai, India Lease 6,456 Month-to Month Manufacturing,
Warehouse,
Administrative
Mexico City, Mexico Lease 2,500 2000 Warehouse,
Administrative
Wynberg, Sandton, South Africa Fee 32,280 -- Warehouse,
Administrative
Edenvale, Transvaal, South Africa Fee 10,921 -- Leased to Third Party
Caracas, Venezuela Lease 1,615 Month-to-Month Administrative
Parnell, New Zealand Lease 7,725 2002 Administrative,
Warehouse
</TABLE>
19
<PAGE> 21
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 2000 and 2001, the
Company believes it will be able to renew such leases on acceptable terms or
find suitable alternate 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 consolidated results of operations, cash flows or the
financial position of Registrant based on information presently known to
Registrant. See also "Environmental Matters" at pages 8 through 11 above, and
Note 12 of "Notes to Consolidated Financial Statements" on page 38 of the 1999
Annual Report, which is hereby incorporated by reference.
Toxic Tort Litigation
Since late July 1997, eight toxic tort lawsuits have been filed against
certain local water producers and industrial companies (including Wynn Oil)
located in San Gabriel Valley, California. The lawsuits are captioned (i)
Santamaria, et al. v. Suburban Water Systems, et al. (Superior Court of
California for the County of Los Angeles, Case No. KC 025-995), (ii) Adler, et
al. v. Southern California Water Company, et al. (Superior Court of the State of
California for the County of Los Angeles, Case No. BC 169892), (iii) Boswell,
et al. v. Suburban Water Systems, et al. (Superior Court of the State of
California for the County of Los Angeles, Case No. KC 027318), (iv) Celi, et al.
v. San Gabriel Valley Water Company, et al. (Superior Court of the State of
California for the County of Los Angeles, Case No. GC 020622), (v) Criner, et
al. v. San Gabriel Valley Water Company, et al. (Superior Court of the State of
California for the County of Los Angeles, Case No. GC 021658), (vi) Demciuc, et
al. v. Suburban Water Systems, et al. (Superior Court of the State of California
for the County of Los Angeles, Case No. KC 028732), (vii) Dominguez, et al. v.
Southern California Water Company, et al. (Superior Court of the State of
California for the County of Los Angeles, Case No. GC 021657, and (viii)
Anderson, et al. v. Suburban Water Systems, et al. (Superior Court of the State
of California for the County of Los Angeles, Case No. KC O2854).
The lawsuits, which collectively include hundreds of plaintiffs, allege
that the plaintiffs received contaminated drinking water and suffered personal
injury and property damage as a consequence thereof. The plaintiffs are seeking
an unspecified amount of compensatory and punitive damages and other relief.
Several defendants moved to stay or dismiss these cases on the grounds that
either primary or exclusive jurisdiction for these matters rests with the
California Public Utilities Commission ("PUC"). The issue was first argued in
the Boswell case and the court stayed the case pending the outcome of the PUC
investigation described below. The plaintiffs sought appellate court review of
the trial court's decision in Boswell. In the Santamaria case, the court
dismissed the plaintiffs' complaint as to the regulated water utilities only but
not as to the non-regulated defendants such as Wynn Oil. The plaintiffs and the
non-regulated defendants appealed that decision. The Court of Appeals ruled in
1999 that the cases should be dismissed as to the regulated water utilities
only, but could proceed against the non-regulated water company defendants and
the industrial company defendants. The plaintiffs and the
20
<PAGE> 22
defendants, other than the regulated water companies, appealed the Court of
Appeals decision to the California Supreme Court, which agreed to hear the
appeal. Initial briefs were filed in early 2000, but no schedule has been
established for oral argument. All of the cases are now stayed pending the
hearing before and the ruling of the California Supreme Court.
As a result of these cases and other toxic tort cases filed elsewhere
in the State of California, on March 12, 1998, the PUC announced an Order
Initiating Investigation into drinking water quality in California. Four
industrial companies, including Wynn Oil, intervened and participated in the
PUC's proceedings. The PUC's investigation is not yet completed. The PUC
Commissioner has issued a preliminary decision and has invited all intervening
parties to comment on that decision.
The Company has reported these cases to its insurers and intends to
defend the litigation identified in the first paragraph above vigorously.
Proposition 65 Claims
In 1999, the Company received two 60-day notices under California's
Proposition 65 (California Health & Safety Code ss. 25249.5 et seq.) related to
the above-described toxic tort litigation. Both 60-day notices allege that Wynn
Oil violated the provisions of Proposition 65 in connection with the alleged
discharge of listed chemicals to the groundwater. These notices were sent by one
of the law firms involved in certain of the toxic tort cases described above. No
Proposition 65 lawsuit has yet been filed against Wynn Oil. If a lawsuit is
filed, the Company intends to defend the claims vigorously.
Other Litigation
In 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 approximately $3.2 million in damages and attorneys' fees in an action
brought by Wynn Oil in 1989 asserting trademark infringement by the defendants.
Subsequently, the defendants filed a timely appeal to the United States Court of
Appeals for the Sixth Circuit, but did not file a bond to stay execution of the
judgment. Between May and December 1994, Wynn Oil sought out assets of the
defendants to satisfy the judgment. Prior to Wynn Oil executing upon the
defendants' assets, the defendants filed bankruptcy petitions in late 1994 in
Florida. The bankruptcy filings resulted in an automatic stay of all pending
collection efforts. In July 1995, the Court of Appeals upheld the District
Court's finding of liability, but held that the District Court erred in the
calculation of certain portions of the damages award and remanded the case to
the District Court for a final determination of the damage award. On remand, the
District Court awarded Wynn Oil total damages and attorneys' fees of
approximately $2,400,000. The defendants did not appeal the revised judgment of
the District Court. To date, Wynn Oil has received from the trustees for the
bankruptcy estates interim distributions of approximately $1,250,000, which
reduced the balance of the uncollected judgment to approximately $1,150,000.
Wynn Oil and its counsel are continuing to work through the bankruptcy
proceedings in Florida to maximize Wynn Oil's ultimate recovery against the
defendants. No portion of the balance of the uncollected judgment has been
included in the results of operations of the Company and all of the Company's
costs relating to this case have been expensed as incurred.
21
<PAGE> 23
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 1999.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information appearing under "Common Stock Prices and Cash Dividends
Per Share: 1999-1998" on page 45 of the 1999 Annual Report and "Number of
Stockholders" and "Stock Exchange Listing" on page 45 of the 1999 Annual Report
is hereby incorporated by reference.
On February 16, 2000, the Board of Directors of Registrant declared a
cash dividend of $0.07 per share payable March 31, 2000 to stockholders of
record on March 15, 2000.
Registrant currently expects that it will continue to pay dividends in
the future, in amounts per share at least comparable to dividends paid during
the past two years.
Registrant has not sold any unregistered securities during the past
three years.
ITEM 6. SELECTED FINANCIAL DATA
Incorporated by reference from page 18 of the 1999 Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Incorporated by reference from pages 19 through 24 of the 1999 Annual
Report.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Incorporated by reference from page 22 of the 1999 Annual Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Consolidated financial statements of Registrant at December 31, 1999
and 1998 and for each of the three years in the period ended December 31, 1999
(including unaudited supplementary data) and the report of independent auditors
thereon are incorporated by reference from pages 25 through 43 of the 1999
Annual Report.
22
<PAGE> 24
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 on Registrant's directors appearing on pages 4 and 5,
and the information appearing under "Stock Ownership of Directors and Executive
Officers" on page 8 of Registrant's definitive proxy statement for the Annual
Meeting of Stockholders to be held on May 10, 2000 ("Registrant's 2000 Proxy
Statement") is hereby incorporated by reference. Information regarding
Registrant's executive officers is provided on page 14 of this report.
ITEM 11. EXECUTIVE COMPENSATION
The information appearing under "Board of Directors and Committees of
the Board--Compensation of Directors" on page 6 and "Executive Compensation" on
pages 9 through 12 of Registrant's 2000 Proxy Statement is hereby 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 7 and 8 of Registrant's 2000 Proxy
Statement is hereby incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information appearing under "Board of Directors and Committees of
the Board--Certain Relationships and Related Transactions" on page 6 of
Registrant's 2000 Proxy Statement is hereby incorporated by reference.
23
<PAGE> 25
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) See Index to Financial Statements and Financial
Statement Schedule Covered By Report of Independent
Auditors.
(2) See Index to Financial Statements and Financial
Statement Schedule Covered By Report of Independent
Auditors.
(3) See Index to Exhibits.
(b) On December 30, 1999, Registrant filed a Report on Form 8-K
disclosing its acquisition of the outstanding capital stock of
Goshen on December 17, 1999. As of the date Registrant filed
the Form 8-K, it was impracticable for Registrant to provide
the financial statements and the financial information
required by Items 7(a) and 7(b) of Form 8-K. Accordingly, on
February 25, 2000, Registrant filed a Form 8-K/A with the
following financial statements: (1) audited consolidated
financial statements of Goshen for the years ended June 30,
1999 and 1998; (2) unaudited consolidated balance sheet of
Goshen at September 30, 1999; (3) unaudited consolidated
statements of income of Goshen for the three months ended
September 30, 1999 and 1998; (4) unaudited consolidated
statements of cash flows of Goshen for the three months ended
September 30, 1999 and 1998; (5) audited financial statements
of Waukesha Rubber Company, Inc. ("Waukesha") for the years
ended October 31, 1998 and 1997; (6) unaudited balance sheet
of Waukesha at July 31, 1999; (7) unaudited statements of
income of Waukesha for the nine months ended July 31, 1999 and
1998; and (8) unaudited statements of cash flows of Waukesha
for the nine months ended July 31, 1999 and 1998.
24
<PAGE> 26
WYNN'S INTERNATIONAL, INC.
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
SCHEDULE COVERED BY REPORT OF INDEPENDENT AUDITORS
(ITEM 14(a))
<TABLE>
<CAPTION>
Page References
-------------------------
1999 Annual
Form 10-K Report
--------- -----------
<S> <C> <C>
Consolidated Statements of Income for each of the
three years in the period ended December 31, 1999......................... 25
Consolidated Balance Sheets at December 31, 1999 and 1998...................... 26
Consolidated Statements of Stockholders' Equity for each
of the three years in the period ended December 31, 1999.................. 27
Consolidated Statements of Cash Flows for each of
the three years in the period ended December 31, 1999..................... 28
Notes to Consolidated Financial Statements..................................... 29-42
Consolidated schedule for each of the three years in the period ended
December 31, 1999:
II - Valuation and Qualifying Accounts............................ F-2
</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 1999 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 1999 Annual Report is not deemed to
be filed as part of this report.
F-1
<PAGE> 27
WYNN'S INTERNATIONAL, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
THREE YEARS ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
Allowance for
doubtful accounts
deducted from Balance at Additions
accounts beginning charged to Deductions Other Balance at
receivable of year income (1) (2) end of year
----------------- ---------- ---------- ---------- ----- -----------
<S> <C> <C> <C> <C> <C>
1999 $904,000 $559,000 $(299,000) $112,000 $1,276,000
======== ======== ========= ======== ==========
1998 $959,000 $281,000 $(336,000) $ -- $ 904,000
======== ======== ========= ======== ==========
1997 $870,000 $307,000 $(218,000) $ -- $ 959,000
======== ======== ========= ======== ==========
</TABLE>
- --------------------
(1) Represents accounts written off against the reserve and translation
adjustments.
(2) Acquisition of business.
F-2
<PAGE> 28
POWER OF ATTORNEY
Each person whose signature appears below hereby authorizes each of James
Carroll, John W. Huber, 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 27, 2000.
WYNN'S INTERNATIONAL, INC.
By: /s/ JAMES CARROLL
----------------------------------------
James Carroll
Chairman of the Board and
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 27, 2000 By: /s/ JAMES CARROLL
----------------------------------------
James Carroll
Chairman of the Board
Chief Executive Officer
Director
March 27, 2000 By: /s/ SEYMOUR A. SCHLOSSER
----------------------------------------
Seymour A. Schlosser
Vice President-Finance
(Principal Financial and Accounting Officer)
II-1
<PAGE> 29
Date
----
March 27, 2000 By: /s/ BARTON BEEK
--------------------------------------------
Barton Beek
Director
March 27, 2000 By: /s/ BRYAN L. HERRMANN
--------------------------------------------
Bryan L. Herrmann
Director
March 27, 2000 By: /s/ ROBERT H. HOOD, JR.
--------------------------------------------
Robert H. Hood, Jr.
Director
March 27, 2000 By: /s/ RICHARD L. NELSON
--------------------------------------------
Richard L. Nelson
Director
March 27, 2000 By: /s/ DONALD C. TRAUSCHT
--------------------------------------------
Donald C. Trauscht
Director
March 27, 2000 By: /s/ JAMES D. WOODS
--------------------------------------------
James D. Woods
Director
II-2
<PAGE> 30
WYNN'S INTERNATIONAL, INC.
INDEX TO EXHIBITS
(Item 14(a))
Exhibit
Number Description
- ------ -----------
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, 1997)
3.2 Certificate of Amendment to Certificate of Incorporation of
Registrant, dated April 30, 1998 (incorporated herein by reference to
Exhibit 3.2 to Registrant's Report on Form 10-K for the fiscal year
ended December 31, 1998)
3.3 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)
3.4 By-Laws, as amended, of Registrant (incorporated herein by reference
to Exhibit 3.3 to Registrant's Report on Form 10-K for the fiscal year
ended December 31, 1996)
4.1 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)
4.2 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)
4.3 Letter Agreement, dated March 24, 1997, between Registrant and
ChaseMellon Shareholder Services, L.L.C. as successor Rights Agent,
amending the Shareholder Rights Agreement (incorporated herein by
reference to Exhibit 4.3 to Registrant's Report on Form 10-K for the
fiscal year ended December 31, 1997)
4.4 Second Amended Rights Agreement, dated as of October 22, 1998, by and
between Registrant and ChaseMellon Shareholder Services, L.L.C., as
Rights Agent (incorporated herein by reference to Exhibit 2.1 to
Amendment No. 2 on Form 8-A/A dated November 5, 1998)
II-3
<PAGE> 31
Exhibit
Number Description
- ------ -----------
10.1 Employment Agreement, dated January 1, 1999, 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, 1998)
10.2 Employment Agreement, dated January 1, 1999, between Registrant and
John W. Huber (incorporated herein by reference to Exhibit 10.3 to
Registrant's Report on Form 10-K for the fiscal year ended December
31, 1998)
10.3 Employment Agreement, dated January 1, 1999, between Registrant and
Seymour A. Schlosser (incorporated herein by reference to Exhibit 10.5
to Registrant's Report on Form 10-K for the fiscal year ended December
31, 1998)
10.4 Employment Agreement, dated January 1, 1999, between Registrant and
Gregg M. Gibbons (incorporated herein by reference to Exhibit 10.7 to
Registrant's Report on Form 10-K for the fiscal year ended December
31, 1998)
10.5 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)
10.6 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)
10.7 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)
10.8 Amendment No. 1 to Wynn's International, Inc. Stock-Based Incentive
Award Plan (incorporated herein by reference to Exhibit 28.2 to
Registrant's Registration Statement on Form S-8, Registration No.
33-64090)
10.9 Amendment 1996-1 to Wynn's International, Inc. Stock-Based Incentive
Award Plan (incorporated herein by reference to Exhibit 10.8 to
Registrant's Report on Form 10-K for the fiscal year ended December
31, 1996)
II-4
<PAGE> 32
Exhibit
Number Description
- ------ -----------
10.10 Amendment 1997-1 to Wynn's International, Inc. Stock-Based Incentive
Award Plan (incorporated herein by reference to Exhibit 4.4 to
Registrant's Registration Statement on Form S-8, Registration No.
333-39045)
10.11 Wynn's International, Inc. 2000 Corporate Management Incentive Plan
10.12 Executive Deferred Compensation Agreement, dated February 18, 1997,
between Registrant and James Carroll (incorporated herein by reference
to Exhibit 10.10 to Registrant's Report on Form 10-K for the fiscal
year ended December 31, 1996)
10.13 First Amendment to Executive Deferred Compensation Agreement, dated
December 1, 1997, between Registrant and James Carroll (incorporated
herein by reference to Exhibit 10.13 to Registrant's Report on Form
10-K for the fiscal year ended December 31, 1997)
10.14 Second Amendment to Executive Deferred Compensation Agreement, dated
February 26, 1998, between Registrant and James Carroll (incorporated
herein by reference to Exhibit 10.14 to Registrant's Report on Form
10-K for the fiscal year ended December 31, 1997)
10.15 Third Amendment to Executive Deferred Compensation Agreement, dated
January 6, 1999, between Registrant and James Carroll (incorporated
herein by reference to Exhibit 10.19 to Registrant's Report on Form
10-K for the fiscal year ended December 31, 1998)
10.16 Form of Indemnification Agreement between Registrant and a director of
Registrant (incorporated herein by reference to Exhibit 10.11 to
Registrant's Report on Form 10-K for the fiscal year ended December
31, 1993)
10.17 Form of Indemnification Agreement between Registrant and an officer of
Registrant (incorporated herein by reference to Exhibit 10.12 to
Registrant's Report on Form 10-K for the fiscal year ended December
31, 1996)
10.18 Wynn's International, Inc. Non-Employee Directors' Stock Option Plan
(incorporated herein by reference to Exhibit C of Registrant's
Definitive Proxy Statement relating to its Annual Meeting of
Stockholders held on May 11, 1994, filed with the Commission on March
25, 1994)
II-5
<PAGE> 33
Exhibit
Number Description
- ------ -----------
10.19 1998 Supplemental Retirement Income Plan of Wynn's International, Inc.
and Subsidiaries (incorporated herein by reference to Exhibit 10.23 to
Registrant's Report on Form 10-K for the fiscal year ended December
31, 1998)
10.20 The CORPORATEplan for Retirement Select Plan Deferred Compensation
Plan of Wynn's International, Inc. (incorporated herein by reference
to Exhibit 10.24 to Registrant's Report on Form 10-K for the fiscal
year ended December 31, 1998)
10.21 Amendment No. 1 to The CORPORATEplan for Retirement Select Plan
Deferred Compensation Plan of Wynn's International, Inc. (incorporated
herein by reference to Exhibit 10.25 to Registrant's Report on Form
10-K for the fiscal year ended December 31, 1998)
10.22 Amendment 1996-1 to Wynn's International, Inc. Non-Employee Directors'
Stock Option Plan (incorporated herein by reference to Exhibit 10.14
to Registrant's Report on Form 10-K for the fiscal year ended December
31, 1996)
10.23 Wynn's International, Inc. 1999 Stock Awards Plan (incorporated herein
by reference to Exhibit A to Registrant's Proxy Statement to
stockholders regarding the Annual Meeting of Stockholders held on
April 28, 1999)
10.24 Amendment No. 1 to Wynn's International, Inc. 1999 Stock Awards Plan
10.25 Stock Purchase Agreement, dated October 20, 1999, among Wynn's
International, Inc., Goshen Rubber Companies, Inc. and the
shareholders of Goshen, and Amendment No. 1 to Stock Purchase
Agreement, dated as of December 17, 1999 (incorporated herein by
reference to Exhibit 2.1 to Registrant's Current Report on Form 8-K
dated December 30, 1999)
13 Portions of Registrant's Annual Report to Stockholders for the fiscal
year ended December 31, 1999 that have been expressly incorporated by
reference as a part of this Annual Report on Form 10-K
21 Subsidiaries of Registrant
23 Consent of Independent Auditors
27 Financial Data Schedule for Fiscal Year ended December 31, 1999
II-6
<PAGE> 1
EXHIBIT 10.11
WYNN'S INTERNATIONAL, INC.
2000 CORPORATE MANAGEMENT INCENTIVE PLAN
Section 1. The purpose of this 2000 Corporate Management Incentive Plan
(the "2000 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 2000 (the
"Corporate Bonus Pool") with a corresponding charge to income for the year 2000
in an amount which the independent public accountants of the Company verify and
report to be equal to ten percent (10%) of the amount by which the Consolidated
Pretax Earnings of the Company exceed a twenty percent (20%) return on Beginning
Equity, provided, however, that (i) the maximum amount of the Corporate Bonus
Pool shall be Two Million One Hundred Thousand Dollars ($2,100,000), and (ii) no
amounts shall be earned hereunder if the Consolidated Pretax Earnings of the
Company for the year ended December 31, 2000 are less than Forty One Million
Four Hundred Forty Thousand Dollars ($41,440,000).
(b) Before the payment of bonus awards for the year 2000, 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. Bonus awards to be paid shall not exceed the Corporate Bonus Pool as
verified and reported by the independent public accountants. Bonus awards under
the 2000 Plan shall be charged to income for 2000.
Section 3.
(a) The term "Consolidated Pretax Earnings" as used in the 2000 Plan
shall mean, for calendar year 2000, the Company's income before taxes based on
income as shown on the Consolidated Statements of Income section of the
Company's 2000 Consolidated Financial Statements after making adequate provision
for the Corporate Bonus Pool in the 2000 Consolidated Financial Statements,
subject to Section 3(e) below.
(b) The term "Beginning Equity" shall mean the total stockholders'
equity of the Company and subsidiaries at December 31, 1999, as reported in the
Consolidated Balance Sheets section of the Company's 2000 Consolidated Financial
Statements, subject to Section 3(e) below.
<PAGE> 2
(c) The term "2000 Consolidated Financial Statements" as used in the
2000 Plan shall mean those financial statements of the Company and its
subsidiaries contained in the Company's annual report to stockholders for the
year ended December 31, 2000 and upon which an opinion has been expressed by the
independent public accountants of the Company, subject to Section 3(e) below.
(d) The term "Corporate Management Employee" shall mean any person
employed as Chairman of the Board and Chief Executive Officer, President and
Chief Operating Officer, Vice President-Finance and Chief Financial Officer,
Vice President-Corporate Affairs and General Counsel, Secretary and Assistant
General Counsel, Treasurer and Controller, Assistant Secretary, Tax Manager,
Employee Benefits and Risk Manager, Corporate Counsel and any other management
employees of the Company designated by the Chief Executive Officer.
(e) For purposes of the 2000 Plan, the terms "Consolidated Pretax
Earnings" and "Consolidated Beginning Equity" shall exclude the results of
operations of, and acquisition charges relating to, Goshen Rubber Companies,
Inc. and subsidiaries in calendar years 1999 and 2000.
Section 4. Full power and authority to construe, interpret, and
administer the 2000 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 Equity 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. The total
Corporate Bonus Pool shall be distributed to the 2000 Plan participants, subject
to the following two limitations. First, the total Corporate Bonus Pool shall
not be distributed if such distribution would cause the limits on the maximum
amounts payable to executive officers set forth Section 6 to be exceeded.
Second, regardless of whether such limits on bonus awards to executive officers
are reached, the balance of the Corporate Bonus Pool need not be distributed to
Corporate Management Employees
2
<PAGE> 3
who are not executive officers. The recommendations for bonus awards under the
2000 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 any bonus award or to a bonus
award for any specific amount, as a matter of right, for services rendered in
2000.
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 2000, 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 2000.
Section 7. Bonus awards under the 2000 Plan will be paid to each
recipient no later than March 31, 2001 in one installment in cash, restricted
stock of the Company, or any combination thereof. Any award of the Company's
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 2000 other than by death, such participant
shall not be entitled as a matter of right to any bonus award for services
rendered in 2000, 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 2000.
Section 10. Upon the death of a Corporate Management Employee during
2000, 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
3
<PAGE> 4
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, 2000. 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 2000
Plan.
Section 11. The 2000 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 2000 Plan is effective as of January 1, 2000.
4
<PAGE> 1
EXHIBIT 10.24
AMENDMENT NO. 1
TO
WYNN'S INTERNATIONAL, INC.
1999 STOCK AWARDS PLAN
WHEREAS, Wynn's International, Inc. (the "Company") maintains the Wynn's
International, Inc. 1999 Stock Awards Plan (the "Plan"); and
WHEREAS, pursuant to Section 6.5(a) of the Plan, the Board of Directors
of the Company (the "Board") has the authority to amend the Plan; and
WHEREAS, the Company desires to amend the Plan to reflect recent
resolutions adopted by the Board of Directors;
NOW, THEREFORE, the Plan is hereby amended, effective as of April 28,
1999, as follows:
1. Section 4.1 of the Plan is deleted in its entirety and replaced with
the following new Section 4.1:
"4.1 GRANTS.
"The Committee may, in its discretion, grant one or more
Restricted Stock Awards to any Eligible Employee. Each Restricted Stock
Award Agreement shall specify the number of Shares to be issued to the
Participant, the date of such issuance, the consideration for such
Shares to be paid by the Participant (which consideration shall be an
amount that is not less than the par value of the Shares), the extent
(if any) to which and the time (if ever) at which the Participant shall
be entitled to dividends, voting and other rights in respect of the
Shares prior to vesting, and the restrictions (which may
<PAGE> 2
be based on performance criteria, passage of time or other factors or
any combination thereof) imposed on such Shares and the conditions of
release or lapse of such restrictions. Except as permitted by Section
4.4, such restrictions shall not lapse earlier than (i) three (3) years
after the Award Date in the case of Restricted Stock Awards that have
restrictions based solely on the passage of time, and (ii) one (1) year
after the Award Date in the case of Restricted Stock Awards that have
restrictions based on performance criteria. Stock certificates
evidencing Restricted Shares shall bear a legend making appropriate
reference to the restrictions imposed hereunder and shall be held by the
Corporation or by a third party designated by the Committee until the
restrictions on such Shares shall have lapsed and the Shares shall have
vested in accordance with the provisions of the Award and Section 1.7.
Upon issuance of the Restricted Stock Award, the Participant may be
required to provide such further assurance and documents as the
Committee may require to enforce the restrictions."
2. There shall be added to the Plan a new Section 4.4 as follows:
"4.4 CERTAIN RESTRICTED STOCK AWARDS.
"For so long as the Committee is comprised solely of `outside
directors' under Section 162(m) of the Code and `non-employee directors'
within the meaning of Rule 16b-3, the Committee shall be authorized to:
(i) Notwithstanding Section 4.1, grant Restricted Stock
Awards that have restrictions that lapse earlier than three (3)
years after the Award Date in the case of Restricted Stock Awards
that have restrictions based solely on the passage of time, and
earlier than one (1) year after the Award Date in the case of
Restricted Stock Awards that have restrictions based on
performance criteria, or
(ii) Notwithstanding Section 6.5(c), waive any condition of
or limitation on any Restricted Stock Award,
provided that the aggregate number of Shares subject to such Restricted
Stock Awards as to which the Committee exercises such authority does not
exceed 10% of the total number of Shares authorized to be issued under
the Plan as of the date the Committee exercises such authority."
3. Section 6.5(b) is deleted in its entirety and replaced with the
following new Section 6.5(b):
2
<PAGE> 3
"(b) STOCKHOLDER APPROVAL. To the extent then required under
Sections 162, 422 or 424 of the Code or any other applicable law, or
deemed necessary or advisable by the Board, any amendment to this Plan
shall be subject to stockholder approval. In addition, stockholder
approval shall be required for any and all amendments to the Plan that
would (i) materially increase the benefits to Participants under the
Plan, (ii) increase the aggregate number of Shares issuable under the
Plan, or (iii) modify the requirements as to eligibility to participate
in the Plan."
4. Section 6.5(c) is deleted in its entirety and replaced with the
following new Section 6.5(c):
"(c) AMENDMENTS TO AWARDS. Without limiting any other express
authority of the Committee under (but subject to) the express limits of
this Plan, the Committee by agreement or resolution may waive conditions
of or limitations on Awards to Participants that the Committee in the
prior exercise of its discretion has imposed, without the consent of a
Participant, and may make other changes to the terms and conditions of
Awards that do not affect in any manner materially adverse to the
Participant, the Participant's rights and benefits under an Award.
Notwithstanding the foregoing, neither the Committee nor the Board shall
be authorized to waive any condition of or limitation on any Restricted
Stock Award, except as permitted by Section 4.4."
IN WITNESS WHEREOF, the Company has caused its duly authorized officer
to execute this Amendment No. 1 as of April 28, 1999.
WYNN'S INTERNATIONAL, INC.
By: /s/ WENDY K. NISHIKAWA
--------------------------------
Secretary
3
<PAGE> 1
EXHIBIT 13
This exhibit consists of the following portions of the 1999 Annual
Report to Stockholders of Wynn's International, Inc.: the Report of Independent
Auditors on page 43, the consolidated financial statements of Registrant on
pages 25 through 42, the Selected Financial Data section on page 18, the
Management's Discussion and Analysis of Financial Condition and Results of
Operations section on pages 19 through 24, and the information appearing under
"Common Stock Prices and Cash Dividends Per Share: 1999-1998" on page 45 and
"Number of Stockholders" and "Stock Exchange Listing" on page 45.
<PAGE> 2
Selected Financial Data
- --------------------------------------------------------------------------------
Wynn's International, Inc.
<TABLE>
<CAPTION>
Five years ended December 31, 1999
-----------------------------------------------------------------------------
(Dollars in thousands, except per share amounts) 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CONTINUING Net sales $360,299 $336,875 $320,953 $288,531 $262,584
OPERATIONS -------------------------------------------------------------------------------------------------------------
Income before taxes based
on income 43,313 42,641 41,233 33,918 26,500
Provision for taxes based
on income 15,549 15,351 15,339 12,617 9,799
-------------------------------------------------------------------------------------------------------------
Income from continuing
operations 27,764 27,290 25,894 21,301 16,701
- ---------------------------------------------------------------------------------------------------------------------------------
DISCONTINUED Income (loss) from
OPERATIONS discontinued operations,
net of income tax -- -- -- 16 (1,258)
Income (loss) on disposal of
discontinued operations,
net of income tax -- -- 319 (879) --
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 27,764 $ 27,290 $ 26,213 $ 20,438 $ 15,443
=================================================================================================================================
DILUTED EARNINGS From continuing operations $1.46 $1.39 $1.28 $1.01 $.81
PER SHARE OF Discontinued operations:
COMMON STOCK Income (loss) from
operations -- -- -- -- (.06)
Income (loss) on disposal -- -- .01 (.04) --
-------------------------------------------------------------------------------------------------------------
$1.46 $1.39 $1.29 $ .97 $.75
=================================================================================================================================
WEIGHTED AVERAGE 19,057,726 19,678,498 20,304,933 21,116,739 20,735,385
COMMON SHARES
OUTSTANDING
(DILUTED)
=================================================================================================================================
CASH DIVIDENDS $.28 $.24 $.2133 $.1778 $.1541
PER COMMON SHARE
=================================================================================================================================
SELECTED BALANCE Current assets $209,149 $163,882 $147,883 $149,552 $128,565
SHEET ITEMS Current liabilities 111,849 66,425 61,386 56,942 47,837
Working capital 97,300 97,457 86,497 92,610 80,728
Current ratio 1.87 to 1 2.47 to 1 2.41 to 1 2.63 to 1 2.69 to 1
Total assets $358,972 $225,596 $207,091 $205,105 $177,822
Long-term debt due
after one year 48,287 -- -- -- 75
Stockholders' equity 155,181 140,850 127,523 132,952 116,233
Book value per
common share $8.33 $7.49 $6.63 $6.48 $5.71
- ---------------------------------------------------------------------------------------------------------------------------------
NUMBER OF Continuing operations 4,411 2,121 2,073 1,962 1,769
EMPLOYEES
=================================================================================================================================
</TABLE>
All share and per share amounts have been adjusted to reflect the 3 for 2 stock
splits effected in 1997, 1996 and 1995.
The above Selected Financial Data for the five years ended December 31, 1999 is
not reported upon herein by independent auditors. See Management's Discussion
and Analysis of Financial Condition and Results of Operations.
18
<PAGE> 3
Management's Discussion and Analysis
of Financial Condition and Results of Operations
- --------------------------------------------------------------------------------
Wynn's International, Inc.
GOSHEN ACQUISITION
- --------------------------------------------------------------------------------
On December 17, 1999, the Company acquired all of the outstanding capital
stock of Goshen Rubber Companies, Inc. ("Goshen"). Goshen is an Indiana-based
developer, manufacturer and marketer of O-rings, tetraseals(R), gaskets and
other rubber, plastic and urethane products. The total purchase price for the
shares of Goshen was approximately $46 million, subject to certain future
adjustments. In addition, the Company paid off approximately $42 million of
indebtedness of Goshen at the closing. The acquisition has been accounted for as
a purchase, and in accordance with the terms of the agreement, assets and
liabilities of Goshen are included in the Company's balance sheet as of December
31, 1999. Goshen's results of operations will be consolidated with the Company
beginning January 1, 2000.
RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
1999 COMPARED TO 1998
The Company's net sales in 1999 were $360.3 million compared to $336.9
million in 1998, an increase of 7 percent. Sales increased 8 percent at the
Specialty Chemicals Division in 1999 compared to 1998. Sales increased 6 percent
at the Automotive and Industrial Components Division, which is comprised of
Wynn's-Precision, Inc. ("Precision"), a Lebanon, Tennessee-based supplier of
O-rings, seals and molded rubber products, and Robert Skeels & Company
("Skeels"), a small regional wholesale distributor of builders hardware
products.
Precision recorded a 7 percent increase in sales in 1999. Precision's
growth in sales was due primarily to higher sales to the U.S. automotive
original equipment manufacturers ("OEMs") and to off-road vehicle manufacturers,
and the introduction of new products. Precision's composite gaskets product line
posted another increase in 1999 compared to the prior year, and Precision
expects this trend to continue with the next generation of "push-in-place"
gaskets. In 1998, Precision's sales were negatively impacted by a three-week
labor strike at two of its major plants in Tennessee during the second quarter
and by the eight-week labor strike at General Motors in the summer of 1998. In
1999, Precision continued to receive requests for price freezes or price
reductions from customers in many markets that it serves. Precision expects this
trend to continue in 2000. Higher revenues at Precision generally resulted from
an increase in the number of units sold as opposed to price increases. Skeels'
sales in 1999 were slightly less than the prior year.
Sales at the Specialty Chemicals Division, consisting principally of car
care products, increased 8 percent on a worldwide basis in 1999 compared to
1998. Reported sales were adversely affected by changes in foreign exchange
rates in 1999 compared to 1998. Excluding the impact of foreign exchange rate
fluctuations, total revenues in 1999 would have increased 10 percent compared to
1998. The revenue increase was due principally to increased sales in the U.S.,
Australia and New Zealand. In the U.S., revenues in 1999 increased 17 percent
compared to 1998, mainly due to growth in sales from the Division's recently
launched vehicle service contract programs and growth in sales to the U.S.
professional market. Revenue from vehicle service contracts is deferred and
recognized in proportion to the expected claims incurred under the contracts.
Deferred revenues, to be recognized in future years, were $39.3 million at
December 31, 1999 and $3.3 million at December 31, 1998. Export sales from the
U.S. to Asian distributors increased substantially in 1999 compared to 1998, but
sales to Latin American distributors decreased during the same period. Foreign
subsidiary sales decreased 1 percent in 1999 over 1998, but would have increased
3 percent if foreign exchange rates in 1999 had remained unchanged from 1998
rates. Sales increased in Australia, New Zealand and Germany, but sales declined
in France, Belgium, South Africa and Venezuela.
Interest income in 1999 was $3.0 million compared to $2.4 million in 1998.
The increase was due to higher average cash and cash equivalent balances in 1999
than in the prior year, partially offset by lower average interest yields.
Interest income in 2000 is expected to decline significantly compared to 1999
due to the use of cash balances in December 1999 to fund the acquisition of
Goshen.
On a consolidated basis, total cost of sales in 1999 was 61.9 percent of
sales compared to 61.5 percent in 1998. Precision achieved higher gross margins
due to the higher sales volumes and a
19
<PAGE> 4
Management's Discussion and Analysis
of Financial Condition and Results of Operations
- --------------------------------------------------------------------------------
Wynn's International, Inc.
change in sales mix, but gross margins declined at the Specialty Chemicals
Division. Precision's gross margin increased due to higher sales at its
Tennessee operation, which manufactures and sells primarily O-rings, and to
improved production efficiencies at its Kentucky operation, which produces
plastic boots and bellows for the automotive industry. Partially offsetting
these margin increases were higher labor costs in 1999, mainly in the fourth
quarter, at Precision's Lynchburg, Virginia gasket operation due principally to
some inefficiencies experienced in connection with the introduction of certain
new products. The decrease in gross margin at the Specialty Chemicals Division
was due primarily to the growth in sales of the new vehicle service contract
programs, introduced in 1998, which have a lower gross margin than the
Division's other products.
Selling, general and administrative ("SG&A") expenses increased in 1999 to
$96.6 million, or 26.8 percent of sales, compared to $89.3 million, or 26.5
percent of sales. The increase during 1999 in SG&A expenses was mainly due to
higher selling costs associated with vehicle service contracts at the Specialty
Chemicals Division and the higher sales at Precision. As a percentage of sales,
SG&A expenses increased at Precision, but decreased at the Specialty Chemicals
Division. The increase at Precision was due to higher selling and research and
development costs, primarily due to increased personnel and related expenses.
The decrease in SG&A expenses as a percentage of sales at the Specialty
Chemicals Division was due to a change in sales mix. Corporate expenses
increased in 1999 compared to 1998 due primarily to higher salary and incentive
compensation costs, pension expenses, consulting fees, intercompany interest
expense and other Corporate items. In 1999, environmental-related expenses
included in total SG&A increased slightly compared to 1998. The Company closely
monitors legal and factual developments in the environmental area to evaluate
the adequacy of present reserves.
Income before taxes from continuing operations was $43.3 million in 1999
compared to $42.6 million in 1998. In the Automotive and Industrial Components
Division, pretax profit increased 9 percent in 1999 due to Precision's higher
revenue levels. Precision's profitability is sensitive to changes in volume.
Pretax profit decreased slightly at Skeels in 1999 compared to 1998 due to the
lower revenues. Pretax profit of the Specialty Chemicals Division decreased 2
percent in 1999 compared to 1998 due to weak results in Europe, South Africa and
Canada, partially offset by improvements in the U.S. and the Pacific Rim. Within
the U.S., pretax profit at this division's product warranty and vehicle service
contract business increased 17 percent compared to the prior year.
The effective tax rate in 1999 was 35.9 percent, down slightly from the
36.0 percent tax rate in the prior year. The effective tax rate for the year
ending December 31, 2000 is expected to increase to approximately 37.5 percent
due primarily to the anticipated nondeductible amortization of goodwill related
to the acquisition of Goshen.
Basic earnings per share in 1999 was $1.48 compared to $1.43 in 1998.
Diluted earnings per share from continuing operations in 1999 was $1.46 compared
to $1.39 in 1998. The increase in per share results in 1999 was due to the
increase in net income and a decrease in shares outstanding. The number of
shares used in the calculation of basic earnings per share decreased 2 percent
in 1999 compared to 1998, primarily as a result of repurchases of the Company's
outstanding stock during 1999 pursuant to the Company's share repurchase
program. This decrease in outstanding shares was partially offset by the
exercise of stock options to purchase 420,183 shares of common stock. The number
of shares used in the calculation of diluted earnings per share decreased 3
percent in 1999 compared to 1998 due to the share repurchases and fewer
outstanding stock options required to be included in the diluted shares
calculation.
FINANCIAL CONDITION
Working capital at December 31, 1999 was $97.3 million, slightly less than
$97.5 million working capital at December 31, 1998. The current ratio was 1.87
to 1 at December 31, 1999 compared to 2.47 to 1 at December 31, 1998. The
decline in the current ratio was due to the use of approximately $37.5 million
of cash toward the acquisition of Goshen.
Cash and cash equivalents were $12.1 million at December 31, 1999 compared
to $44.3 million at December 31, 1998. The decrease in cash and cash equivalents
was primarily due to cash provided
20
<PAGE> 5
Management's Discussion and Analysis
of Financial Condition and Results of Operations
- --------------------------------------------------------------------------------
Wynn's International, Inc.
by all operating activities of $37.1 million, $40.0 million of borrowings from
long-term debt and $2.5 million of proceeds from the exercise of stock options,
offset by the acquisition of Goshen of $77.5 million, capital expenditures of
$17.0 million, dividends paid of $5.1 million and $10.5 million used for
repurchases of the Company's common stock.
Cash and cash equivalents restricted for vehicle service contract
obligations increased $23.6 million to $25.8 million at December 31, 1999 from
$2.2 million at December 31, 1998. This increase was due to the growth in sales
of vehicle service contracts during 1999.
Accounts receivable increased $28.0 million to $92.9 million at December
31, 1999 from $64.9 million at December 31, 1998. This increase was due
principally to the inclusion at December 31, 1999 of Goshen's accounts
receivable and higher sales at Precision in the fourth quarter of 1999 compared
to the quarter ended December 31, 1998. Inventories were $49.7 million at the
end of 1999, an increase of $15.4 million from $34.3 million at December 31,
1998. The increase in inventories was due to the inclusion of Goshen's inventory
at December 31, 1999, partially offset by a decline in inventory levels at the
Specialty Chemicals Division.
Total current liabilities increased $45.4 million to $111.8 million at
December 31, 1999 from $66.4 million at December 31, 1998. The increase was due
primarily to the inclusion of Goshen's current liabilities. Also affecting
current liabilities at December 31, 1999 were an increase in a note payable of
$6.2 million, an increase in deferred vehicle service contract revenue and
product warranty program reserves of $13.7 million and an increase in other
accrued liabilities. Income taxes paid in 1999 were $11.7 million, a decrease of
$4.7 million compared to 1998.
Net property, plant and equipment increased $48.7 million to $98.9 million
in 1999, consisting of $40.2 million from the acquisition of Goshen, $17.0
million in additions (principally at Precision and the Specialty Chemicals
Division), offset by an annual depreciation charge of $8.2 million, as well as
retirements and foreign exchange adjustments. Costs in excess of fair value of
net assets of businesses acquired increased $31.7 million to $34.6 million at
December 31, 1999 from $2.9 million at December 31, 1998 due to the acquisition
of Goshen.
Other liabilities were $34.5 million at December 31, 1999 compared to $10.7
million at December 31, 1998. The increase in other liabilities of $23.8 million
was primarily due to an increase in noncurrent deferred vehicle service contract
revenue of $20.4 million and the inclusion at December 31, 1999 of Goshen's
noncurrent other liabilities.
At December 31, 1999, the Company has a $60.0 million unsecured domestic
committed bank line of credit. Under the terms of the line of credit agreement,
the Company may borrow up to an aggregate principal amount not to exceed $60
million from the date of the agreement through October 31, 2002; $50 million
from November 1, 2002 through October 31, 2003; and $40 million from November 1,
2003 through October 31, 2004, the expiration date of the agreement. At December
31, 1999, $40 million was borrowed under this line of credit. The Company also
has one domestic uncommitted credit line and various foreign uncommitted lines.
At December 31, 1999, no borrowings were outstanding under these uncommitted
lines.
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 are required to supplement working capital
requirements.
Stockholders' equity at the end of 1999 was $155.2 million compared to
$140.9 million at the end of 1998. The increase of $14.3 million is attributable
primarily to net income of $27.8 million, $3.8 million from the exercise of
stock options, including the related tax benefits, and $.3 million from the
issuance of restricted stock, reduced by $10.5 million of total repurchases of
the Company's common stock (including stock received as part of the exercise
price of certain employee stock options), dividends declared of $5.2 million and
a $1.9 million decrease in accumulated other comprehensive income.
During 1999 the Company purchased $9.0 million of its outstanding common
stock pursuant to a three-year, $15 million share purchase agreement authorized
by the Board of Directors in December 1998. At December 31, 1999, pursuant to
such authorization, an additional $6 million of common stock can be purchased by
the Company.
The Company expects total capital expenditures in 2000 to be approximately
$23 million,
21
<PAGE> 6
Management's Discussion and Analysis
of Financial Condition and Results of Operations
- --------------------------------------------------------------------------------
Wynn's International, Inc.
which will be funded from current operations. As previously announced, the
Company is continuing 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 1999 generally was not able to raise
prices to its customers to pass along the cost increases experienced.
MARKET RISKS
The Company conducts a significant portion of its operations in foreign
jurisdictions. 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 U.S. dollars. As
a result, the Company's reported financial results could be significantly
affected by changes in foreign currency exchange rates. The Company's financial
results could also be affected by other factors including weak economic
conditions in the foreign markets in which the Company operates. The Company's
future operating results are exposed primarily to changes in the Euro currency
("Euro"), a common currency shared by 11 European nations, the Australian
dollar, the South African rand, the Canadian dollar and the British pound. The
Company currently does not hedge any significant amounts related to its foreign
subsidiaries' budgeted sales, results of operations or net investments.
The Company's interest income is most sensitive to changes in the general
level of U.S. short-term interest rates and to some extent foreign short-term
interest rates, especially in France, Belgium and Australia. Changes in U.S. and
foreign interest rates affect the interest earned on the Company's cash and cash
equivalents. The Company generally maintains its investments in short-term
securities, which have maturities of three months or less, and does not hedge
the potential effect from changes in interest rates. The Company's policy is to
maintain and ultimately use its cash in excess of operating requirements for
planned expansions, potential acquisitions, debt repayments, dividends and share
repurchases.
EURO CURRENCY CONVERSION
The Euro was introduced on January 1, 1999, and the 11 participating
European Monetary Union member countries established irrevocable fixed
conversion rates between their local currencies and the Euro. However, the local
currencies in those countries will continue to be used as legal tender through
January 1, 2002. Thereafter, the local currencies will be canceled and Euro
bills and coins will be used for cash transactions in the participating
countries. From January 1, 1999 to December 31, 2001, companies will be allowed
to transact noncash transactions in either Euro or the local currency.
The Company and certain of its European subsidiaries are currently
evaluating the Euro conversion and the potential impact on their operations. At
the present time, the Company believes the necessary changes and costs incurred
thus far, and expected to be incurred in the future, are not significant.
YEAR 2000 MATTERS
In prior years, the Company discussed the nature and progress of its plans
to become Year 2000 ready. As a result of the Year 2000 date change, the Company
did not experience any significant disruptions to its business operations, nor
has any customer or vendor of the Company reported any significant effects
related to the date change. Management will continue to monitor its own systems
and its customers' and vendors' reports regarding Year 2000 issues. The costs
incurred by the Company thus far, and expected to be incurred in the future, are
not significant. Management does not expect any future significant effects on
its customers or vendors or disruptions to the Company's business operations
resulting from Year 2000 issues.
22
<PAGE> 7
Management's Discussion and Analysis
of Financial Condition and Results of Operations
- --------------------------------------------------------------------------------
Wynn's International, Inc.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this Annual Report may be "forward-looking
statements" within the meaning of Section 27A of the Securities Exchange Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, in that they express the Company's expectations or beliefs concerning
future events. The statements include the following: the expected continued
growth in sales of Precision's composite gasket product line; the demand by
Precision's customers for price freezes or price reductions; the expected
increase in the effective tax rate; the sufficiency of working capital; the
availability of new lines of credit if needed by the Company; the anticipated
level of capital expenditures; the lack of impact of the Year 2000 problem on
the Company's customers, vendors or its business operations; the lack of impact
of the Euro conversion on the Company's business operations; and the effect of
potential changes in market risks.
The Company cautions that these statements are further qualified by
important factors that could cause actual results to differ materially from
those in the forward-looking statements, including the following: the impact of
the December 1999 acquisition of Goshen on the Company's future results of
operations and cash flows; sales of new and used cars in the U.S.; automotive
and off-road construction vehicle production rates in North America; currency
exchange rates relative to the U.S. dollar; short-term domestic and
international interest rates; the impact of competitive products and pricing;
attempts by state governments to regulate the product warranty program or change
existing regulation of vehicle service contract programs; termination of one or
more of the warranty division's alliances with automobile finance companies or a
significant slowdown in the business of these companies; regulatory or technical
developments or subsequently developed information causing an increase in the
Company's estimated liability for environmental matters and related litigation;
the ability of the Company's vendors and customers to successfully resolve any
Euro currency conversion issues in their respective businesses; and general
economic conditions, especially in North America, Western Europe and the
Asia/Pacific area.
The Company's actual results thus may differ materially from the expected
results expressed or implied by the forward-looking statements.
RESULTS OF CONTINUING OPERATIONS
- --------------------------------------------------------------------------------
1998 COMPARED TO 1997
Net sales in 1998 were $336.9 million compared to $321.0 million in 1997,
an increase of 5 percent. Sales increased 5 percent at the Specialty Chemicals
Division and increased 4 percent at the Automotive and Industrial Components
Division in 1998 compared to 1997.
Precision recorded a 5 percent increase in sales in 1998. Precision's
growth in sales was due primarily to higher sales to the U.S. automotive OEMs
and the introduction of new products. Precision's composite gaskets product line
posted another strong increase in 1998 compared to the prior year, and Precision
expected this trend to continue. Precision's sales growth in 1998 was negatively
impacted by a three-week labor strike at two of its major plants in Tennessee
during the second quarter of 1998. Precision's sales were also impacted by the
eight-week labor strike at General Motors, Precision's largest customer, in the
summer of 1998. Precision continued to receive requests in 1998 for price
freezes or price reductions from customers in many markets that it serves.
Precision expected this trend to continue in 1999. Higher revenues at Precision
generally resulted from an increase in the number of units sold as opposed to
price increases. Skeels' sales increased 2 percent in 1998 compared to 1997.
Sales at the Specialty Chemicals Division, consisting principally of car
care products, increased 5 percent on a worldwide basis in 1998 compared to
1997. Reported sales were adversely affected by changes in foreign exchange
rates in 1998 compared to 1997. Excluding the impact of foreign exchange rate
fluctuations, total revenues in 1998 would have increased 8 percent compared to
1997. The revenue increase was due principally to increased sales in the U.S.,
France, Belgium and U.K. In the U.S., revenues in 1998 increased 9 percent
compared to 1997, mainly due to growth in sales to the U.S. professional market
and higher sales from the division's product warranty and newly launched vehicle
service contract programs. Export sales from the U.S. to Latin American
distributors increased slightly in 1998 compared to 1997, but sales to Asian
distributors decreased substantially during the same period. Foreign subsidiary
sales increased 3 percent in 1998 over 1997, but would have increased 7 percent
if foreign
23
<PAGE> 8
Management's Discussion and Analysis
of Financial Condition and Results of Operations
- --------------------------------------------------------------------------------
Wynn's International, Inc.
exchange rates in 1998 had remained unchanged from 1997 rates. Sales increased
in France, Belgium, U.K., Canada and Mexico, but sales declined in Australia,
New Zealand, South Africa, Germany and Venezuela.
Interest income in 1998 was $2.4 million compared to $2.1 million in 1997.
The increase was due to higher average cash and cash equivalent balances in 1998
than in the prior year, partially offset by lower average interest yields.
On a consolidated basis, total cost of sales in 1998 was 61.5 percent of
sales compared to 62.3 percent in 1997. The Specialty Chemicals Division and
Precision achieved higher gross margins due to the higher sales volumes and a
change in sales mix. Precision's gross margin increased principally due to
higher sales at its Tennessee operation, which manufactures and sells primarily
O-rings. The increase in gross margin at the Specialty Chemicals Division was
due primarily to the growth in sales of product warranty and new vehicle service
contract programs.
Selling, general and administrative expenses increased in 1998 to $89.3
million, or 26.5 percent of sales, compared to $81.5 million, or 25.4 percent of
sales. The increase during 1998 in SG&A expenses was mainly due to higher
selling costs associated with product warranty programs and vehicle service
contracts at the Specialty Chemicals Division and the higher sales at Precision,
partially offset by lower corporate expenses. As a percentage of sales, SG&A
expenses increased at the Specialty Chemicals Division due primarily to a change
in sales mix, but remained approximately the same at Precision. Corporate
expenses decreased in 1998 compared to 1997 due primarily to lower executive
incentive compensation expenses. In 1998, environmental-related expenses
included in total SG&A decreased compared to 1997. The Company closely monitors
legal and factual developments in the environmental area to evaluate the
adequacy of present reserves.
Income before taxes from continuing operations was $42.6 million in 1998
compared to $41.2 million in 1997. In the Automotive and Industrial Components
Division, pretax profit increased 11 percent in 1998 due to Precision's higher
revenue levels. Precision's profitability is sensitive to changes in volume.
Pretax profit increased slightly at Skeels in 1998 compared to 1997 due to the
higher revenues and improved gross margins. Pretax profit of the Specialty
Chemicals Division decreased 12 percent in 1998 compared to 1997 due to weak
results in the U.S., Asia/Pacific area, France, Belgium and Latin America,
partially offset by improvements in the U.K., South Africa and Canada. Despite
the revenue growth, pretax profit in the U.S. declined 13 percent due to the
higher level of SG&A expenses. Excluding the impact of foreign exchange rate
changes, the Specialty Chemicals Division's pretax profit would have decreased
only 8 percent in 1998.
The effective tax rate in 1998 was 36.0 percent, down from the 37.2 percent
tax rate in the prior year. The decline in the effective tax rate was due
primarily to changes in estimated provisions for the repatriation of foreign
earnings.
Income from continuing operations in 1998 was $27.3 million compared to
$25.9 million in 1997. The improvement in 1998 compared to 1997 was attributable
primarily to the higher pretax profit at Precision and lower corporate expenses,
partially offset by the lower pretax profit at the Specialty Chemicals Division.
Basic earnings per share from continuing operations in 1998 was $1.43
compared to $1.32 in 1997. Diluted earnings per share from continuing operations
in 1998 was $1.39 compared to $1.28 in 1997. The increase in per share results
in 1998 was due to the increase in net income and a 3 percent decrease in shares
outstanding. The number of shares outstanding decreased primarily as a result of
the repurchase in April 1997 of 1,650,000 shares of the Company's outstanding
stock pursuant to a Dutch Auction self-tender offer and repurchases of the
Company's outstanding stock during 1998 pursuant to the Company's share
repurchase program. This decrease in outstanding shares was partially offset by
the exercise of stock options to purchase 136,152 shares of common stock.
RESULTS OF DISCONTINUED OPERATIONS
- --------------------------------------------------------------------------------
On May 23, 1996, the Company sold the principal operating assets of Wynn's
Climate Systems, Inc., the automotive air conditioning subsidiary, which was
formerly part of the Automotive and Industrial Components Division. In 1997,
income on disposal of discontinued operations was attributable to adjustments to
certain estimated reserves arising from the May 1996 sale.
24
<PAGE> 9
Consolidated Statements of Income
- ---------------------------------------------------------------------
Wynn's International, Inc.
<TABLE>
<CAPTION>
Year ended December 31
----------------------------------
(Dollars in thousands, except per share amounts) 1999 1998 1997
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES Net sales $360,299 $336,875 $320,953
Interest income 2,994 2,356 2,106
-----------------------------------------------------------------------------
363,293 339,231 323,059
- -------------------------------------------------------------------------------------------------
COSTS AND Cost of sales 223,132 207,088 200,069
EXPENSES Selling, general and administrative 96,638 89,252 81,520
Interest expense 210 250 237
-----------------------------------------------------------------------------
319,980 296,590 281,826
- -------------------------------------------------------------------------------------------------
INCOME FROM Income from continuing operations
CONTINUING before taxes based on income 43,313 42,641 41,233
OPERATIONS Provision for taxes based on income 15,549 15,351 15,339
-----------------------------------------------------------------------------
Income from continuing operations 27,764 27,290 25,894
- -------------------------------------------------------------------------------------------------
DISCONTINUED Discontinued operations, net of income
OPERATIONS taxes of $195 -- -- 319
- -------------------------------------------------------------------------------------------------
NET INCOME $ 27,764 $ 27,290 $ 26,213
=================================================================================================
EARNINGS Basic:
PER SHARE OF Continuing operations $1.48 $1.43 $1.32
COMMON STOCK Discontinued operations -- -- .01
-----------------------------------------------------------------------------
Total $1.48 $1.43 $1.33
=============================================================================
Diluted:
Continuing operations $1.46 $1.39 $1.28
Discontinued operations -- -- .01
-----------------------------------------------------------------------------
Total $1.46 $1.39 $1.29
=================================================================================================
</TABLE>
See accompanying notes.
25
<PAGE> 10
Consolidated Balance Sheets
- ---------------------------------------------------------------------
Wynn's International, Inc.
<TABLE>
<CAPTION>
December 31
------------------------
(Dollars in thousands, except per share amounts) 1999 1998
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS Current assets:
Cash and cash equivalents $ 12,134 $ 44,329
Cash and cash equivalents restricted for
vehicle service contract obligations 25,820 2,182
Accounts receivable, less $1,276 allowance
for doubtful accounts ($904 in 1998) 92,879 64,880
Refundable income taxes 2,267 --
Inventories 49,704 34,347
Prepaid expenses and other current assets
(including deferred tax assets of $10,078 in
1999 and $12,162 in 1998) 26,345 18,144
------------------------------------------------------------------------------
Total current assets 209,149 163,882
Property, plant and equipment, at cost less
accumulated depreciation and amortization 98,931 50,197
Costs in excess of fair value of net assets of
businesses acquired, less accumulated
amortization of $2,266 ($2,121 in 1998) 34,570 2,902
Other assets 16,322 8,615
- --------------------------------------------------------------------------------------------------
$358,972 $225,596
==================================================================================================
LIABILITIES Current liabilities:
AND Note payable $ 6,200 $ --
STOCKHOLDERS' Accounts payable 36,280 23,360
EQUITY Dividends payable 1,303 1,129
Taxes based on income -- 100
Deferred vehicle service contract revenue and
product warranty program reserves 33,683 19,994
Accrued liabilities:
Salaries and other compensation 14,479 9,719
Other 19,558 12,123
Long-term debt due within one year 346 --
------------------------------------------------------------------------------
Total current liabilities 111,849 66,425
Long-term debt due after one year 48,287 --
Deferred taxes based on income 9,182 7,607
Other liabilities 34,473 10,714
Commitments and contingencies
Stockholders' equity:
Preferred stock, $1 par value; 500,000 shares
authorized, none issued -- --
Common stock, $0.01 par value; 40,000,000
shares authorized, 21,898,335 shares issued 219 219
Capital in excess of par value 22,732 24,286
Retained earnings 182,692 160,170
Accumulated other comprehensive income (6,973) (5,100)
Unearned compensation (48) (56)
Common stock held in treasury 3,265,577 shares,
at cost (3,095,809 in 1998) (43,441) (38,669)
------------------------------------------------------------------------------
Total stockholders' equity 155,181 140,850
------------------------------------------------------------------------------
$358,972 $225,596
==================================================================================================
</TABLE>
See accompanying notes.
26
<PAGE> 11
Consolidated Statements of Stockholders' Equity
- --------------------------------------------------------------------------------
Wynn's International, Inc.
<TABLE>
<CAPTION>
Three years ended December 31, 1999
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulated Common
Common stock Capital in other stock
---------------------- excess of Retained comprehensive Unearned held in
(Dollars in thousands) Shares Amount par value earnings income compensation treasury Total
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1997 21,819,615 $218 $24,706 $115,418 $(1,985) $(139) $ (5,266) $132,952
Net income -- -- -- 26,213 -- -- -- 26,213
Adjustments from foreign
currency translation, net -- -- -- -- (3,048) -- -- (3,048)
----------
Comprehensive income -- -- -- -- -- -- -- 23,165
----------
Cash dividends -- -- -- (4,174) -- -- -- (4,174)
Purchase of treasury stock
at cost -- -- -- -- -- -- (28,056) (28,056)
Stock options exercised,
including tax benefits 40,896 1 (741) -- -- (92) 4,295 3,463
Amortization of unearned
compensation -- -- -- -- -- 173 -- 173
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1997 21,860,511 219 23,965 137,457 (5,033) (58) (29,027) 127,523
Net income -- -- -- 27,290 -- -- -- 27,290
Adjustments from foreign
currency translation, net -- -- -- -- (67) -- -- (67)
----------
Comprehensive income -- -- -- -- -- -- -- 27,223
----------
Cash dividends -- -- -- (4,577) -- -- -- (4,577)
Purchase of treasury stock
at cost -- -- -- -- -- -- (10,752) (10,752)
Stock options exercised,
including tax benefits 37,824 -- 321 -- -- (19) 1,110 1,412
Amortization of unearned
compensation -- -- -- -- -- 21 -- 21
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1998 21,898,335 219 24,286 160,170 (5,100) (56) (38,669) 140,850
Net income -- -- -- 27,764 -- -- -- 27,764
Adjustments from foreign
currency translation, net -- -- -- -- (1,873) -- -- (1,873)
----------
Comprehensive income -- -- -- -- -- -- -- 25,891
----------
Cash dividends -- -- -- (5,242) -- -- -- (5,242)
Purchase of treasury stock
at cost -- -- -- -- -- -- (10,530) (10,530)
Stock options exercised,
including tax benefits -- -- (1,539) -- -- (33) 5,423 3,851
Restricted stock issued
in connection with
acquisition of business -- -- (15) -- -- -- 335 320
Amortization of unearned
compensation -- -- -- -- -- 41 -- 41
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1999 21,898,335 $219 $22,732 $182,692 $(6,973) $ (48) $(43,441) $155,181
===================================================================================================================================
</TABLE>
See accompanying notes.
27
<PAGE> 12
Consolidated Statements of Cash Flows
- --------------------------------------------------------------------------------
Wynn's International, Inc.
<TABLE>
<CAPTION>
Year ended December 31
------------------------------------
(Dollars in thousands) 1999 1998 1997
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATING Income from continuing operations $27,764 $27,290 $25,894
ACTIVITIES Adjustments:
Depreciation and amortization 8,812 8,365 8,283
Provision for uncollectible accounts 559 281 307
Amortization of stock compensation 46 21 173
Loss (gain) on fixed asset disposals 15 (31) (1)
Provision (benefit) for deferred income taxes 2,603 (207) 18
Change in operating assets and liabilities, net of the
effect of acquisition:
Cash and cash equivalents restricted for
vehicle service contract obligations (23,638) (2,182) --
Accounts receivable-net (4,093) (8,811) (8,289)
Refundable income taxes (1,092) -- --
Inventories 813 (3,302) (105)
Prepaid expenses and other current assets (8,096) (973) (327)
Other assets (5,788) (1,102) (611)
Accounts payable (1,217) 2,664 2,559
Deferred vehicle service contract revenue and
product warranty program reserves 13,689 4,456 3,793
Taxes based on income 1,237 (879) (848)
Accrued liabilities 4,171 (1,016) 459
Other liabilities 21,359 357 2,886
--------------------------------------------------------------------------------------------------
Net cash provided by continuing operations 37,144 24,931 34,191
--------------------------------------------------------------------------------------------------
Net cash provided by discontinued operations -- -- 319
--------------------------------------------------------------------------------------------------
Net cash provided by all operating activities 37,144 24,931 34,510
- -------------------------------------------------------------------------------------------------------------------
INVESTING Additions to property, plant and equipment (17,011) (9,935) (11,811)
ACTIVITIES Acquisition of business, net of cash acquired (77,508) -- --
Other cash receipts-net 137 78 333
--------------------------------------------------------------------------------------------------
Net cash used in investing activities (94,382) (9,857) (11,478)
- -------------------------------------------------------------------------------------------------------------------
FINANCING Borrowings on long-term debt 40,000 -- --
ACTIVITIES Dividends paid (5,068) (4,478) (4,060)
Proceeds from exercise of stock options 2,509 1,127 1,882
Purchase of treasury stock (10,530) (10,752) (28,056)
Other cash disbursements-net -- -- (73)
--------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 26,911 (14,103) (30,307)
- -------------------------------------------------------------------------------------------------------------------
NET CHANGE Effect of exchange rate changes (1,868) 92 (2,763)
IN CASH --------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (32,195) 1,063 (10,038)
Cash and cash equivalents at beginning of year 44,329 43,266 53,304
--------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $12,134 $44,329 $43,266
===================================================================================================================
</TABLE>
Supplemental disclosure of interest and income taxes paid, and noncash investing
and financing activities:
Interest paid in 1999, 1998 and 1997 was $63,000, $76,000 and $108,000,
respectively. Income taxes paid in 1999, 1998 and 1997 were $11,692,000,
$16,437,000 and $16,364,000, respectively.
Effective December 31, 1999, the Company purchased all of the capital stock
of Goshen Rubber Companies, Inc. for $46,186,000. In connection with the
acquisition, the Company issued restricted common stock with a fair market
value of $320,000 and issued a short-term note payable for $6,200,000 and a
long-term note payable for $4,500,000. The Company also paid $42,342,000 to
retire Goshen Rubber Companies, Inc.'s then outstanding bank debt. In
connection with the acquisition, liabilities were assumed as follows:
<TABLE>
<S> <C>
Fair value of assets acquired $120,819,000
Amount paid for stock, net of cash acquired (46,186,000)
Amount paid to retire bank debt (42,342,000)
-------------------------------------------------------------
Liabilities assumed $ 32,291,000
=============================================================
</TABLE>
See accompanying notes.
28
<PAGE> 13
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Wynn's International, Inc.
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 two majority-owned subsidiaries. All significant intercompany
transactions have been eliminated. Certain reclassifications have been made to
the prior years' amounts to conform with the 1999 presentation. On May 23, 1996,
the Company sold the principal operating assets of Wynn's Climate Systems, Inc.
("WCS"), a manufacturer and marketer of automotive air conditioning systems and
components. Income on disposal of WCS' principal net operating assets has been
classified on the statements of income as discontinued operations.
The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions
that affect the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
EARNINGS PER SHARE
Basic earnings per share is computed by dividing net income by the weighted
average number of shares outstanding during the year. Diluted earnings per share
is calculated by dividing net income by the weighted average number of diluted
shares outstanding during the year and assumes the exercise of stock options.
See Note 3 for a computation of basic and diluted earnings per share for the
three years ended December 31, 1999.
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 $10,726,000 in
1999 and $42,325,000 in 1998 include commercial paper, guaranteed investment
contracts, certificates of deposit, municipal securities and money market
accounts which have maturities of three months or less when purchased and are
stated at cost, which approximates fair market value.
CASH AND CASH EQUIVALENTS RESTRICTED FOR VEHICLE SERVICE CONTRACT OBLIGATIONS
Cash and cash equivalents restricted for vehicle service contract
obligations are funds held in a separate trust account in conjunction with a
vehicle service contract insurance agreement (the "Agreement") between the
Company and a risk retention group that insures the liability of the Company and
its dealers with respect to various vehicle service contract programs marketed
by the Company. Funds in the trust account are to be used primarily for the
benefit of holders of the Company's various vehicle service contracts, and any
residual funds and all investment income or loss accrue to the benefit of the
Company. The funds are managed by the Company under guidelines approved by both
parties to the Agreement and include money market accounts, commercial paper and
municipal securities which have maturities of three months or less when
purchased 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 U.S. 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, 1999 with respect to its temporary cash investments or
accounts receivable.
INVENTORIES
Inventories are stated at the lower of cost (principally first-in,
first-out) or market.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization of property, plant and equipment are
calculated principally using the straight-line method over the estimated useful
lives of the respective assets. See Note 8.
29
<PAGE> 14
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Wynn's International, Inc.
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 using the straight-line method over a period of ten to twenty years
(up to forty years for pre-1997 acquisitions).
LONG-LIVED ASSETS
The Company reviews long-lived assets and certain identifiable intangibles
held and used by the Company for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability is based on estimates of undiscounted future cash
flows. Based upon the Company's analysis, the Company believes that no
impairment of the carrying value of its long-lived assets or intangibles
(including costs in excess of fair value of net assets of businesses acquired)
existed at December 31, 1999.
DEFERRED VEHICLE SERVICE CONTRACT REVENUE AND DEFERRED ACQUISITION COSTS
Revenue from vehicle service contracts is deferred and recognized in income
over the contract period in proportion to expected claims incurred over the life
of the contracts. Costs that are directly related to the acquisition of vehicle
service contracts are deferred and charged to expense in proportion to the
revenue recognized. Total deferred vehicle service contract revenue included in
the Company's Consolidated Balance Sheets at December 31, 1999 and 1998 was
$39.3 million and $3.3 million, respectively. Total deferred acquisition costs
included in the Company's Consolidated Balance Sheet at December 31, 1999 were
$9.1 million.
PRODUCT WARRANTY PROGRAM RESERVES
Product warranty program reserves consist primarily of accrued liabilities
for product warranty claims which are estimated to be payable over the useful
life of the products. Reserves included in the Company's Consolidated Balance
Sheets at December 31, 1999 and 1998 are $14.8 million and $16.7 million,
respectively.
INCOME TAXES
The Company provides for income taxes utilizing the liability method and
provides taxes on the undistributed earnings of foreign subsidiaries, except for
certain subsidiaries where the undistributed earnings are considered by the
Company to be permanently reinvested.
OTHER LIABILITIES
Noncurrent other liabilities consist primarily of deferred vehicle service
contract revenue, accrued reserves for environmental matters, pension
liabilities, deferred compensation and post employment benefits. Total
noncurrent deferred vehicle service contract revenue and reserves for
environmental matters at December 31, 1999 were $20.4 million and $8.5 million,
respectively. (See Note 12 for a discussion of contingencies.)
FOREIGN CURRENCY TRANSLATION
Gains and losses resulting from balance sheet translation of foreign
operations where a foreign currency is the functional currency are included as a
component of comprehensive income in the statements of stockholders' equity and
as accumulated other comprehensive income in stockholders' equity.
FOREIGN EXCHANGE CONTRACTS
The Company enters into foreign exchange contracts to hedge certain
intercompany transactions with its foreign subsidiaries. These contracts reduce
currency risk from exchange rate movements. Gains and losses are deferred and
accounted for as part of the underlying transactions. The contractual amounts
and related deferred gains and losses from these contracts are immaterial.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities. Statement 133 standardizes the accounting for derivative
instruments by requiring that an entity recognize those items as assets or
liabilities in the balance sheet and measure them at fair market value. Under
certain conditions, an entity may elect to designate a derivative instrument as
a hedge of certain commitments, forecasted transactions and net investments in
foreign operations. As amended by Statement 137 issued in June 1999, Statement
133
30
<PAGE> 15
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Wynn's International, Inc.
is effective for quarterly financial statements for fiscal years beginning after
June 15, 2000, and therefore the Company will adopt the new requirements
beginning January 1, 2001. The Company is in the process of evaluating the
impact of Statement 133 on the Company's financial statements.
STOCK-BASED COMPENSATION
The Company accounts for stock-based compensation using the intrinsic value
method. Accordingly, compensation cost for stock options is measured as the
excess, if any, of the quoted market price of the Company's stock at the date of
the grant over the amount an employee must pay to acquire the stock.
Compensation cost for performance shares is recorded over the vesting period
from the date the underlying stock options are exercised based on the fair
market value of the Company's stock.
COMPREHENSIVE INCOME
Accumulated other comprehensive income reported on the Company's
Consolidated Balance Sheets consists of cumulative equity adjustments from
foreign currency translation. The Company reports comprehensive income in its
Consolidated Statements of Stockholders' Equity. The reported amounts for total
comprehensive income differ from net income due to foreign currency translation
adjustments. The tax effect related to foreign currency translation adjustments
is immaterial and has not been recognized as part of comprehensive income or in
accumulated other comprehensive income.
2. ACQUISITION AND STOCK SPLIT
- --------------------------------------------------------------------------------
ACQUISITION
On December 17, 1999, the Company purchased all of the outstanding stock of
Goshen Rubber Companies, Inc. ("Goshen"), a privately owned company. Goshen
develops, manufactures and markets O-rings, tetraseals(R), gaskets and other
rubber, plastic and urethane products for the North American automotive industry
and other industrial markets. The acquisition is being accounted for as a
purchase. The total purchase price for the shares of Goshen was equal to $24
million plus the net book value of Goshen, subject to certain adjustments, as of
December 31, 1999 (the "Cut-Off Date"). In addition, the Company paid off
approximately $42 million of bank indebtedness of Goshen at the closing and
issued restricted stock with a fair market value of approximately $320,000 to
certain Goshen employees. The aggregate estimated purchase price at closing,
including the Goshen debt repaid at closing and estimated transaction costs, was
approximately $89 million. Results of operations for Goshen will be included in
the Company's consolidated results of operations beginning after the Cut-Off
Date. Any costs in excess of fair value of net assets acquired will be amortized
using the straight-line method over a period of 20 years.
Under the terms of the stock purchase agreement, $34.9 million of the
purchase price, net of $.3 million cash acquired, was paid in cash to the Goshen
Shareholders at the closing; $42.3 million was used to repay outstanding Goshen
indebtedness; $6.2 million consisted of a promissory note of the Company
delivered at the closing and payable on January 3, 2000; and the balance of the
purchase price (approximately $4.5 million) was deferred. The deferred amount
will be paid out over a five-year period, subject to offset based on
indemnification claims, if any, made during the five-year period. Transaction
costs paid were approximately $.3 million. The Company funded the purchase by
utilizing its existing working capital and new borrowings of $40.0 million to
pay the purchase price at the closing to the Goshen shareholders and to pay off
the outstanding bank debt of Goshen.
The estimated fair value of assets acquired and liabilities assumed
relating to the Goshen acquisition, subject to certain adjustments, is
summarized below (in thousands):
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------
Current assets $46,355
Property, plant and equipment 40,229
Costs in excess of fair value of net assets of
business acquired 31,813
Other assets 2,422
Liabilities assumed (32,291)
- -------------------------------------------------------------------------------
$88,528
===============================================================================
</TABLE>
31
<PAGE> 16
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Wynn's International, Inc.
Unaudited pro forma operating results for the Company, assuming the
acquisition of Goshen occurred on January 1, 1999 and 1998, respectively, are as
follows:
<TABLE>
<CAPTION>
(In thousands, except per share amounts) 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
Net sales $545,659 $517,432
Net income $25,665 $25,836
Basic earnings per share $1.37 $1.35
Diluted earnings per share $1.34 $1.31
================================================================================
</TABLE>
STOCK SPLIT
On December 10, 1997, 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 December 22, 1997. All references in the consolidated financial statements to
average number of shares outstanding and related prices, per share amounts and
stock option plan data have been restated retroactively to reflect the stock
split.
3. COMPUTATION OF NET INCOME PER COMMON SHARE
- --------------------------------------------------------------------------------
Basic and diluted earnings per share for the three years ended December 31,
1999 are calculated as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income from continuing operations $27,764,000 $27,290,000 $25,894,000
Income from discontinued operations -- -- 319,000
- --------------------------------------------------------------------------------------------------------------------------
Net income $27,764,000 $27,290,000 $26,213,000
==========================================================================================================================
Weighted average number of shares outstanding 18,725,222 19,109,308 19,649,234
Net shares assumed issued using the treasury stock method for stock
options outstanding during each period based on average market price 325,558 562,258 648,065
Net shares assumed issued for performance shares pending issuance
based on satisfaction of vesting requirements 6,946 6,932 7,634
- --------------------------------------------------------------------------------------------------------------------------
Diluted shares 19,057,726 19,678,498 20,304,933
==========================================================================================================================
Income per common share:
Basic:
Continuing operations $1.48 $1.43 $1.32
Discontinued operations -- -- .01
- --------------------------------------------------------------------------------------------------------------------------
Total $1.48 $1.43 $1.33
==========================================================================================================================
Diluted:
Continuing operations $1.46 $1.39 $1.28
Discontinued operations -- -- .01
- --------------------------------------------------------------------------------------------------------------------------
Total $1.46 $1.39 $1.29
==========================================================================================================================
</TABLE>
32
<PAGE> 17
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Wynn's International, Inc.
4. INVENTORIES
- --------------------------------------------------------------------------------
Inventories consist of the following at December 31, 1999 and 1998:
<TABLE>
<CAPTION>
(In thousands) 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
Finished goods $30,305 $21,922
Raw materials and work in process 19,399 12,425
- --------------------------------------------------------------------------------
$49,704 $34,347
================================================================================
</TABLE>
5. TAXES BASED ON INCOME
- --------------------------------------------------------------------------------
The provision for taxes based on income from continuing operations consists
of the following elements for the three years ended December 31, 1999:
<TABLE>
<CAPTION>
(In thousands) 1999 1998 1997
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 8,921 $10,408 $11,137
State 1,781 2,029 1,714
Foreign 2,534 3,520 3,691
- -------------------------------------------------------------------------------
Total current 13,236 15,957 16,542
- -------------------------------------------------------------------------------
Deferred:
Federal 1,687 (362) (1,133)
State 452 (1) (120)
Foreign 174 (243) 50
- -------------------------------------------------------------------------------
Total deferred 2,313 (606) (1,203)
- -------------------------------------------------------------------------------
Total $15,549 $15,351 $15,339
===============================================================================
</TABLE>
Pretax income from continuing operations for domestic and foreign
operations for the three years ended December 31, 1999 is as follows:
<TABLE>
<CAPTION>
(In thousands) 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic $37,239 $34,830 $32,369
Foreign 6,074 7,811 8,864
- --------------------------------------------------------------------------------
$43,313 $42,641 $41,233
================================================================================
</TABLE>
A reconciliation of the statutory federal income tax rate to the effective
tax rate, as a percentage of income from continuing operations before taxes
based on income for the three years ended December 31, 1999, follows:
<TABLE>
<CAPTION>
1999 1998 1997
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory federal
income tax rate 35.0% 35.0% 35.0%
State taxes, net of
federal tax benefit 3.4 3.1 2.5
Other-net (2.5) (2.1) (0.3)
- ------------------------------------------------------------------------------
Effective tax rate 35.9% 36.0% 37.2%
==============================================================================
</TABLE>
At December 31, 1999, the Company had the following carryforwards for tax
purposes available for future utilization with the indicated expiration periods
(in thousands):
<TABLE>
<CAPTION>
Net Alternative
Operating Minimum Tax
Year Losses Credits
- ------------------------------------------------------------------------------
<S> <C> <C>
2000 $ 67 $ --
2001 78 --
2002 81 --
2003 166 --
2004 and after 1,938 --
Unlimited 1,095 1,454
- ------------------------------------------------------------------------------
$3,425 $1,454
==============================================================================
</TABLE>
A valuation allowance of $4,609,000 has been recognized to offset these and
other deferred tax assets. The valuation allowance against deferred tax assets
increased by $3,013,000 during 1999 due primarily to the stock acquisition of
Goshen Rubber Companies, Inc.
Significant components of the Company's deferred tax assets and liabilities
as of December 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
(In thousands) 1999 1998
- -------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax liabilities:
Foreign earnings $ 1,800 $ 1,906
Accelerated depreciation
and amortization 8,603 3,589
Pension plan 1,965 1,339
Other 4,099 2,933
- -------------------------------------------------------------------------------
Total deferred tax liabilities 16,467 9,767
- -------------------------------------------------------------------------------
Deferred tax assets:
Accrued expenses 11,880 7,392
Inventory valuation 189 629
Deferred revenue 5,024 6,515
Tax attributes carryover 4,879 1,382
- -------------------------------------------------------------------------------
Subtotal 21,972 15,918
Valuation allowances (4,609) (1,596)
- -------------------------------------------------------------------------------
Total deferred tax assets 17,363 14,322
- -------------------------------------------------------------------------------
Net deferred tax assets $ 896 $ 4,555
===============================================================================
</TABLE>
33
<PAGE> 18
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Wynn's International, Inc.
6. LINES OF CREDIT; NOTE PAYABLE
- --------------------------------------------------------------------------------
The Company has one domestic committed unsecured line of credit with a
commercial bank for $60.0 million, and various domestic and foreign uncommitted
credit lines. The domestic committed credit line provides that the Company may
borrow up to an aggregate principal amount not to exceed $60 million through
October 31, 2002, $50 million from November 1, 2002 through October 31, 2003,
and $40 million from November 1, 2003 through October 31, 2004. Amounts borrowed
under the line of credit may be for terms of one to 30 days and bear interest at
the bank's prime rate (8.5% at December 31, 1999) less 0.25% or for terms of one
month to 12 months and bear interest at LIBOR plus 0.60% (6.87% at December 31,
1999) or the bank's money market funds rate (adjusted for reserves) plus an
applicable margin determined on the basis of the Company's leverage ratio. After
October 31, 2000, the line provides for the payment of an annual commitment fee
of 0.10% of the average unused commitment. The domestic committed credit line
also includes a $15.0 million unsecured multicurrency and trade finance facility
which provides for standby and commercial letters of credit. The Company's
policy is to classify borrowings under its revolving credit facility as
long-term debt since the Company has the ability under the credit agreement, and
the intent, to maintain obligations for longer than one year. This facility is
subject to normal banking terms and conditions and does not materially restrict
the Company's activities. At December 31, 1999, the Company had $40.0 million of
borrowings and one standby letter of credit for $300,000 outstanding under the
domestic committed credit line.
At December 31, 1999, the Company has a note payable to the former
shareholders of Goshen Rubber Companies, Inc. ("Goshen") in the amount of
$6,200,000. The note was issued by the Company as part of the acquisition of
Goshen on December 17, 1999. This note is due January 3, 2000 and bears interest
at 6.75%.
7. LONG-TERM DEBT
- --------------------------------------------------------------------------------
Long-term debt consists of the following obligations at December 31, 1999:
<TABLE>
<CAPTION>
(In thousands) 1999
- -------------------------------------------------------------------------------
<S> <C>
To commercial bank, due 2004, plus
interest at 6.87%, payable monthly $40,000
To former shareholders of Goshen Rubber
Companies, Inc., due in annual installments
of $1,500,000 in 2003 and $3,000,000 in
2004, plus interest at 5.5%, payable
semi-annually 4,500
Other 4,133
- -------------------------------------------------------------------------------
48,633
Less current maturities (346)
- -------------------------------------------------------------------------------
$48,287
===============================================================================
</TABLE>
The obligations payable to the commercial bank require, among other things,
certain tangible net worth, leverage and earnings ratios be maintained. Other
long-term debt consists of various obligations for plant and equipment
purchases. The Company estimates that at December 31, 1999 the fair market value
of its long-term debt obligations is $48,287,000. The estimation of fair value
is based upon prevailing interest rates for similar maturities, risk factors and
terms of the obligations.
Maturities of long-term debt due after one year are: 2001-$347,000;
2002-$333,000; 2003-$1,810,000; 2004-$43,325,000; 2005-$352,000 and $2,120,000
after 2005. Interest expense for long-term debt amounted to $125,000 for 1999.
34
<PAGE> 19
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Wynn's International, Inc.
8. PROPERTY, PLANT AND EQUIPMENT
- --------------------------------------------------------------------------------
Property, plant and equipment consists of the following at December 31,
1999 and 1998:
<TABLE>
<CAPTION>
(In thousands) 1999 1998
- -------------------------------------------------------------------------------
<S> <C> <C>
Land and land improvements $ 3,028 $ 1,520
Buildings and improvements 36,741 25,873
Equipment, furniture and fixtures 122,838 79,776
- -------------------------------------------------------------------------------
162,607 107,169
Less accumulated depreciation
and amortization (63,676) (56,972)
- -------------------------------------------------------------------------------
$ 98,931 $ 50,197
===============================================================================
</TABLE>
Estimated useful lives used to calculate depreciation and amortization of
property, plant and equipment are as follows:
<TABLE>
<S> <C>
Land improvements 10 - 20 years
Buildings and improvements 10 - 40 years
Equipment, furniture and fixtures 3 - 10 years
================================================================================
</TABLE>
9. RETIREMENT PLANS
- --------------------------------------------------------------------------------
Wynn's and its domestic subsidiaries have five qualified defined benefit
retirement plans, which cover the majority of their U.S. employees. One plan is
a compulsory noncontributory defined benefit pension plan that covers the
employees of the parent company and two domestic subsidiaries. Another plan is a
contributory defined benefit plan that covers the salaried employees of one
domestic subsidiary. Three other plans, which were collectively bargained with
the unions, cover hourly employees of two domestic subsidiaries. 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.
One domestic subsidiary also participates in two multiemployer defined
contribution pension plans covering its union employees. Contributions to these
plans are based upon hours worked for one plan and days worked for the other
plan. Beginning in 2000, the Company will make contributions to these plans as
required by the union agreements.
During 1998, Wynn's adopted an unfunded non-qualified supplemental
retirement plan for certain key executives of the Company. Benefits under this
plan are based upon the participants' base compensation and years of service
with the Company. Benefits under the supplemental retirement plan are reduced by
employer-provided benefits under Wynn's qualified defined benefit and defined
contribution plans and social security benefits.
Net periodic pension costs (income) for the Company's U.S. pension plans
for the three years ended December 31, 1999 included the following components:
<TABLE>
<CAPTION>
(In thousands) 1999 1998 1997
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 1,228 $ 971 $ 766
Interest cost 1,808 1,632 1,503
Expected return on assets (2,755) (2,631) (2,232)
Amortization of transition
assets (249) (249) (249)
Amortization of prior
service cost 300 211 167
Amortization of gain (4) (164) (89)
- -------------------------------------------------------------------------------
$ 328 $ (230) $ (134)
===============================================================================
</TABLE>
All of the qualified 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 tables set forth the plans' funded status and amounts recognized in
the Company's consolidated balance sheets at December 31, 1999 and 1998 and
provide a reconciliation of the changes in projected benefit obligations
35
<PAGE> 20
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Wynn's International, Inc.
and plan assets for the two years ended December 31, 1999 for the Company's U.S.
pension plans:
<TABLE>
<CAPTION>
(In thousands) 1999 1998
- -------------------------------------------------------------------------------
Funded Status
- -------------------------------------------------------------------------------
<S> <C> <C>
Accumulated benefit
obligation $ 29,383 $(23,146)
===============================================================================
Projected benefit obligation $(32,318) $(26,604)
Plan assets at fair market value 39,280 31,008
- -------------------------------------------------------------------------------
Plan assets in excess of projected
benefit obligation 6,962 4,404
Unrecognized transition assets
amortized over various
periods of time (392) (641)
Unrecognized prior service cost 2,599 2,245
Unrecognized net gain (4,223) (2,730)
- -------------------------------------------------------------------------------
Prepaid pension cost $ 4,946 $ 3,278
===============================================================================
</TABLE>
<TABLE>
<CAPTION>
(In thousands) 1999 1998
- -------------------------------------------------------------------------------
<S> <C> <C>
Change in Projected
Benefit Obligation
- -------------------------------------------------------------------------------
Projected benefit obligation
at January 1 $(26,604) $(22,397)
Service cost (1,124) (928)
Interest cost (1,769) (1,627)
Employee contributions (144) (151)
Plan amendments (749) (1,208)
Assumption change 1,466 (1,057)
Gains (losses) 1,613 (955)
Benefits paid 1,949 1,719
Acquisition of business (6,956) --
- -------------------------------------------------------------------------------
Projected benefit obligation
at December 31 $(32,318) $(26,604)
===============================================================================
</TABLE>
<TABLE>
<CAPTION>
(In thousands) 1999 1998
- -------------------------------------------------------------------------------
<S> <C> <C>
Change in Plan Assets
- -------------------------------------------------------------------------------
Fair market value of plan
assets at January 1 $31,008 $29,542
Actual return on plan assets 1,246 3,140
Employer contributions -- 14
Employee contributions 144 151
Benefits paid (1,949) (1,719)
Plan expenses (121) (120)
Acquisition of business 8,952 --
- -------------------------------------------------------------------------------
Fair market value of plan
assets at December 31 $39,280 $31,008
===============================================================================
</TABLE>
Assumptions used as of December 31, 1999, 1998 and 1997 were:
<TABLE>
<CAPTION>
1999 1998 1997
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Discount or settlement rate 7.75% 6.75% 7.25%
Rate of increase in
compensation level 5.25% 4.5% 5.0%
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 included in consolidated net income. The Company
believes that these plans are adequately funded in accordance with local
actuarial principles and laws.
The Company has two defined contribution plans for eligible U.S. based
employees. One plan covers the employees of the parent company and three
domestic subsidiaries (the "Wynn's Plan"). The other plan covers one domestic
subsidiary (the "Goshen Plan"). Eligible employees in the Wynn's Plan 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 contributions into the Wynn's Plan
for 1999, 1998 and 1997 were $572,000, $504,000 and $443,000, respectively.
Eligible employees in the Goshen Plan may contribute from 1% to 14% of their
base pay into an investment trust, and the Company's contributions are
discretionary. The Company did not contribute any amounts into this plan during
1999.
The Company provides postretirement medical benefits for certain retired
employees at the U.S. operations of Wynn's-Precision, Inc. 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 costs were
$128,000, $119,000 and $145,000 in 1999, 1998 and 1997, respectively. The
Company does not prefund this benefit program. No additional benefits are being
earned with respect to this program by any active employees. The following
tables set forth the program's status and amounts recognized in
36
<PAGE> 21
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Wynn's International, Inc.
the Company's consolidated balance sheets at December 31, 1999 and 1998 and
provide a reconciliation of the changes in accumulated postretirement benefit
obligation for the two years ended December 31, 1999:
<TABLE>
<CAPTION>
(In thousands) 1999 1998
- -------------------------------------------------------------------------------
<S> <C> <C>
Program Status
- -------------------------------------------------------------------------------
Unfunded accumulated post-
retirement benefit obligation $(1,181) $(1,439)
Unrecognized net gain (resulting
from reduction in estimated
health care cost trend rates) (1,366) (1,260)
Unrecognized net transition
obligation 2,080 2,240
- -------------------------------------------------------------------------------
Accrued postretirement benefit cost $ (467) $ (459)
===============================================================================
</TABLE>
<TABLE>
<CAPTION>
(In thousands) 1999 1998
- -------------------------------------------------------------------------------
<S> <C> <C>
Change in Accumulated
Benefit Obligation
- -------------------------------------------------------------------------------
Accumulated benefit obligation
at January 1 $(1,439) $(1,436)
Interest cost (91) (98)
Benefits paid 120 150
Actuarial gain (loss) 229 (55)
- -------------------------------------------------------------------------------
Accumulated benefit obligation
at December 31 $(1,181) $(1,439)
===============================================================================
</TABLE>
The weighted average discount rates used to determine the accumulated
postretirement benefit obligation for 1999 and 1998 were 7.75% and 6.75%,
respectively. The assumed annual health care cost trend rate was 8.5% for 2000,
gradually decreasing to 4.5% in 2008 and remaining at that level thereafter.
If the health care cost trend rate were increased or decreased 1%, the
accumulated postretirement benefit obligation would increase $51,000 or decrease
$47,000, respectively, and the aggregate of the service and interest cost
components of the net periodic postretirement benefit cost would increase $5,000
or decrease $4,000, respectively.
10. 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>
2000 $ 3,276
2001 2,331
2002 1,766
2003 1,284
2004 1,186
2005 and after 2,811
- ------------------------------------------------------------------------
$12,654
========================================================================
</TABLE>
Rental expenses for all operating leases were $2,786,000 in 1999
($2,589,000 in 1998 and $2,296,000 in 1997).
11. RELATED PARTY TRANSACTIONS
- --------------------------------------------------------------------------------
Pursuant to the acquisition of Goshen Rubber Companies, Inc. ("Goshen"),
the Company leases seven buildings and is financing the purchase of two
buildings and related equipment from a Company employee who was a former major
shareholder of Goshen. The leases are classified as operating leases. Rental
commitments, net of sublease income, under the operating leases, exclusive of
property taxes and insurance, are as follows:
<TABLE>
<CAPTION>
Year (In thousands)
- ------------------------------------------------------------------------
<S> <C>
2000 $ 641
2001 660
2002 680
2003 701
2004 721
2005 and after 2,583
- ------------------------------------------------------------------------
$5,986
========================================================================
</TABLE>
The amount of debt for financing the two buildings and related equipment at
December 31, 1999 is $3,845,000 and has been included in the Company's
consolidated balance sheet as other long-term debt. Payments under these debt
obligations are due monthly through 2010 and include interest at an effective
rate of 8.5%.
37
<PAGE> 22
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Wynn's International, Inc.
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 consolidated results of operations, cash flows, 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, 1999, included in
current other accrued liabilities and noncurrent other liabilities are
consolidated accrued reserves of approximately $10.4 million relating to
environmental matters. In establishing such reserves, the Company evaluates to
the extent known for each matter the nature and extent of the underlying
contamination, the estimated cost of the likely remedy, the number and financial
strength of other potentially responsible parties, and the evidence against the
various potentially responsible parties. During this evaluation process, the
Company makes its best estimate of its likely exposure with respect to each
matter based on information known to the Company at that time. Such estimates
may involve a range of exposures for each matter. The Company provides aggregate
reserves for no less than the minimum amount of the aggregate range of outcomes
established by the Company.
The Company lacks sufficient information at this time to provide an
estimate of its "reasonably possible" (as such term is defined in Statement of
Financial Accounting Standards No. 5) potential liability from all environmental
matters. In establishing reserves for environmental matters, the Company assumes
that it has appropriately evaluated key factors, such as expected remedy costs,
the likely degree of responsibility and ability to pay of other potentially
responsible parties, and the Company's probable allocable share. It is
reasonably possible that regulatory or technical developments or subsequently
developed information could cause the Company to reevaluate its present range of
outcomes and to record additional liabilities for existing environmental
matters. However, based upon information presently known to the Company, the
Company believes that any such additional liabilities should not materially
affect the Company's consolidated annual results of operations, cash flows, or
financial position.
13. STOCK PLANS
- --------------------------------------------------------------------------------
The Company has two stock-based plans pursuant to which current grants of
options to purchase common stock of Wynn's may be made. The 1999 Stock Awards
Plan ("1999 Plan") authorizes the grant of nonqualified stock options, incentive
stock options, stock appreciation rights, restricted stock and performance
shares to officers and key employees of the Company. The Non-Employee Directors'
Stock Option Plan ("1994 Plan") provides for the grant of nonqualified stock
options to non-employee directors of the Company. In addition, the Stock-Based
Incentive Award Plan ("1989 Plan"), which expired in May 1999, authorized the
grant of incentive stock options, nonqualified stock options, restricted stock
and performance shares. Under the 1989 Plan, the aggregate number of options
granted could not exceed 1,870,312 shares. Under the 1999 and 1994 Plans, the
aggregate number of stock related awards may not exceed 1,668,750 shares. In
addition, the 1999 Plan contains special provisions that prohibit the Company
from granting options under the 1999 Plan if the number of shares subject to
options outstanding under all stock plans of the Company would exceed 10% of the
number of shares issued and outstanding on the date of grant. At December 31,
1999, the aggregate number of options available for future grants was 1,078,673.
All options granted under the three plans have been made at prices not less than
100% of the fair market value of the stock at the date of grant. Options granted
under the three plans are exercisable at various dates over a ten-year period.
However, under the three plans, no options may be exercised until at least one
year after the date of grant.
The Company grants performance shares in connection with certain stock
options granted to officers and other key employees. Performance shares are
issuable to recipients of these grants who exercise the underlying stock
options, hold the shares of stock received for a three-year vesting period and
remain continuously employed by the Company during the vesting period. The
Company records unearned
38
<PAGE> 23
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Wynn's International, Inc.
compensation at the date of exercise of the underlying stock options based on
the market value of the performance shares. Unearned compensation is amortized
to expense over the three-year vesting period.
Pursuant to the 1999 acquisition of Goshen Rubber Companies, Inc.
("Goshen"), the Company issued 25,225 shares of restricted stock under the 1999
Plan to certain employees of Goshen. The restricted stock award vests over a
three-year period. 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 vesting period. The fair market value of
the restricted stock on the date issued was $320,000 and has been included as
part of the purchase price for Goshen.
During 1999, 21,400 performance shares were granted under the 1999 and 1989
Plans. At December 31, 1999, grants for 96,656 performance shares were
outstanding, including 5,689 shares pending issuance based on satisfaction of
vesting requirements. During 1999, 2,756 shares of the Company's common stock
were issued pursuant to performance share grants. No stock appreciation rights
were outstanding at December 31, 1999. The following tabulation summarizes
certain information related to options for common stock:
<TABLE>
<CAPTION>
Weighted
Average
Exercise
Options Price
- --------------------------------------------------------------------------------
<S> <C> <C>
Outstanding options at
January 1, 1997 1,344,713 $ 5.20
Granted during the year 80,625 13.74
Surrendered, forfeited or expired (17,063) 13.22
Exercised (398,764) 3.95
- --------------------------------------------------------------------------------
Outstanding at December 31, 1997 1,009,511 6.24
Granted during the year 172,875 21.96
Surrendered, forfeited or expired (16,139) 15.05
Exercised (98,284) 6.85
- --------------------------------------------------------------------------------
Outstanding at December 31, 1998 1,067,963 8.60
Granted during the year 122,875 18.71
Surrendered, forfeited or expired (32,451) 18.97
Exercised (387,353) 4.95
- --------------------------------------------------------------------------------
Outstanding at December 31, 1999 771,034 $11.61
================================================================================
</TABLE>
Exercisable options outstanding at December 31, 1999, 1998 and 1997 and the
related weighted average exercise prices were 592,326, 856,654 and 866,784 and
$9.40, $5.86 and $5.50, respectively.
The following tabulation summarizes certain information concerning
outstanding and exercisable options at December 31, 1999:
<TABLE>
<CAPTION>
Range of Exercise Prices
- --------------------------------------------------------------------------------
$3.46 $6.13 $ 9.72
to to to
$3.90 $6.89 $22.31
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Outstanding options:
Number outstanding 118,970 272,061 380,003
Weighted average
exercise price $3.62 $6.19 $17.99
Weighted average
remaining contrac-
tual life in years 1.4 3.9 8.0
Exercisable options:
Number exercisable 118,970 272,061 201,295
Weighted average
exercise price $3.62 $6.19 $17.15
</TABLE>
If the Company had elected to recognize compensation cost based on the fair
value of the options granted at the grant date, net income and earnings per
share would have been reduced to the pro forma amounts shown below:
<TABLE>
<CAPTION>
(In thousands, except
per share amounts) 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Pro forma:
Net income $27,233 $26,629 $25,913
Earnings per share:
Basic $1.45 $1.39 $1.32
Diluted $1.43 $1.35 $1.28
================================================================================
</TABLE>
The fair value of each option grant was estimated on the date of grant
using the Black-Scholes option pricing model using the following weighted
average assumptions:
<TABLE>
<CAPTION>
1999 1998 1997
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Risk free interest rate 4.95% 5.48% 6.22%
Expected life in years 4.5 4.5 4.5
Expected volatility .269 .276 .276
Expected dividend yield 1.50% 1.10% 1.56%
===============================================================================
</TABLE>
The weighted average fair value of options granted during 1999, 1998 and
1997 was $4.97, $6.40, and $3.98 per share, respectively.
The Company has an Employee Stock Purchase Plan (the "Plan") under which
there are authorized and available for sale to employees, at a 15%
39
<PAGE> 24
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Wynn's International, Inc.
discount, an aggregate of 1,350,000 shares of the Company's common stock. For
the Plan year ended December 31, 1999, 45,727 shares were issued at $12.01 per
share in January 2000. At December 31, 1999, 1,143,797 shares were available
under the Plan for future sales to employees.
14. SHAREHOLDER RIGHTS PLAN
- --------------------------------------------------------------------------------
The Company maintains a Shareholder Rights Plan. The plan provides for a
dividend distribution of rights (the "Rights") with respect to outstanding
shares of common stock of the Company issued prior to the earliest of March 3,
2009, the redemption date of the Rights or certain takeover events. In the event
the Company is acquired under certain circumstances in a merger in which the
Company is not the surviving corporation, the Rights become rights to purchase
the acquiring company's common stock at a 50% discount (the "flip-over
feature"). In the event of certain acquisitions of 25% or more of the Company's
common stock, the Rights become rights to purchase the Company's common stock at
a 50% discount (the "flip-in feature"). The flip-in feature does not apply to
tender or exchange offers for all outstanding common stock determined by
nonmanagement directors of the Company to be fair and in the best interests of
the Company and its stockholders (a "Qualified Offer"). The flip-over feature
does not apply to a merger following a Qualified Offer which provided the same
or a higher value to the remaining stockholders. The Rights may be redeemed by
the Company at a nominal price under certain circumstances. The Rights will
expire on March 3, 2009 or on such later date to which the Rights may be
extended by the Company, unless earlier redeemed.
15. OPERATING SEGMENTS AND RELATED INFORMATION
- --------------------------------------------------------------------------------
The Company has two reportable segments, Automotive and Industrial
Components and Specialty Chemicals. These reportable segments are each managed
separately because they manufacture and distribute distinct products with
different production processes and distribution channels. Operations in the
Automotive and Industrial Components segment involve the development,
manufacturing and marketing of O-rings and other static and dynamic seals
principally for the automotive industry, and other rubber, plastic and urethane
products. In addition, operations for Robert Skeels & Company, which are not
significant, are included in the Automotive and Industrial Components segment.
Operations in the Specialty Chemicals segment 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 and vehicle service contract
programs for automotive dealerships, as well as industrial coolants, specialty
fluids and cutting fluids used in metal-working. The Corporate and Other
segment includes business activities for corporate operations.
The Company evaluates segment performance based on pretax profit or loss
from operations, including intercompany interest income and expense allocations
and other intercompany charges, but excluding certain expenses for goodwill
amortization, litigation and environmental matters and nonrecurring gains and
losses. Excluded items are generally considered part of corporate activities.
Segment assets are those assets used in the operations of each segment and
include amounts for intercompany cash advances, accounts receivable and notes
receivable. In 1999, the amounts for assets and expenditures for long-lived
assets for the automotive and industrial components segment include the December
1999 acquisition of Goshen Rubber Companies, Inc. The Company does not allocate
certain items to its segments, such as various goodwill and tax assets. Assets
included in the Corporate and Other category include corporate assets which are
principally cash and cash equivalents, prepaid expenses, other receivables and
intercompany cash advances, accounts receivable and notes receivable. Assets
exclude investments in consolidated subsidiaries.
Sales to the largest customer of the Automotive and Industrial Components
segment were 7.8% of consolidated net sales during 1999 (10.0% in 1998 and 10.1%
in 1997). Net sales included in the geographic information are attributed to
countries based on the location of the business unit reporting the sales. The
Company does not have any significant intersegment sales.
40
<PAGE> 25
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Wynn's International, Inc.
<TABLE>
<CAPTION>
Automotive
and Industrial Specialty Corporate Segment Consolidated
(In thousands) Components Chemicals and Other Totals Eliminations Totals
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1999 Net sales $186,802 $173,497 $ -- $360,299 $ -- $360,299
Interest income 169 2,106 1,903 4,178 (1,184) 2,994
Interest expense 17 62 1,315 1,394 (1,184) 210
Depreciation and
amortization 7,115 1,665 32 8,812 -- 8,812
Pretax profit (loss) 31,722 17,449 (5,858) 43,313 -- 43,313
Assets 213,237 143,472 31,578 388,287 (29,315) 358,972
Expenditures for
long-lived assets 54,447 2,712 81 57,240 -- 57,240
==========================================================================================================================
1998 Net sales $175,823 $161,052 $ -- $336,875 $ -- $336,875
Interest income 223 980 1,789 2,992 (636) 2,356
Interest expense 12 73 801 886 (636) 250
Depreciation and
amortization 6,583 1,739 43 8,365 -- 8,365
Pretax profit (loss) 29,234 17,736 (4,329) 42,641 -- 42,641
Assets 106,281 101,971 34,916 243,168 (17,572) 225,596
Expenditures for
long-lived assets 8,745 1,673 17 10,435 -- 10,435
==========================================================================================================================
1997 Net sales $168,266 $152,687 $ -- $320,953 $ -- $320,953
Interest income 149 730 1,604 2,483 (377) 2,106
Interest expense 3 105 506 614 (377) 237
Depreciation and
amortization 6,562 1,681 40 8,283 -- 8,283
Pretax profit (loss) 26,446 20,095 (5,308) 41,233 -- 41,233
Assets 100,051 87,258 37,434 224,743 (17,652) 207,091
Expenditures for
long-lived assets 9,896 1,850 65 11,811 -- 11,811
==========================================================================================================================
</TABLE>
Interest income and expense eliminations include amounts for intercompany
interest. Asset eliminations primarily include amounts for intercompany accounts
receivable and notes receivable, and the reclassification of current deferred
tax liabilities against current deferred tax assets.
The following table presents net sales by country based on the location of
the subsidiary:
<TABLE>
<CAPTION>
(In thousands) 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
United States $262,656 $238,684 $224,769
France 40,050 41,334 38,710
Other foreign 57,593 56,857 57,474
- --------------------------------------------------------------------------------
Total $360,299 $336,875 $320,953
================================================================================
</TABLE>
The following table presents long-lived assets by country based on the location
of the assets:
<TABLE>
<CAPTION>
(In thousands) 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
United States $103,165 $53,555 $50,886
Foreign 7,362 5,257 5,273
- --------------------------------------------------------------------------------
Total $110,527 $58,812 $56,159
================================================================================
</TABLE>
41
<PAGE> 26
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Wynn's International, Inc.
16. QUARTERLY INFORMATION (UNAUDITED)
- --------------------------------------------------------------------------------
Quarterly information is as follows for the two years ended December 31,
1999:
<TABLE>
<CAPTION>
First Second Third Fourth Total
(Dollars in thousands, except per share amounts) Quarter Quarter Quarter Quarter Year
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1999 Net sales $88,538 $92,770 $91,120 $87,871 $360,299
Gross profit 35,060 36,289 35,472 30,346 137,167
Net income 7,453 7,587 6,866 5,858 27,764
Earnings per share:
Basic $.40 $.40 $.37 $.31 $1.48
Diluted $.39 $.40 $.36 $.31 $1.46
======================================================================================================================
1998 Net sales $85,809 $85,589 $79,835 $85,642 $336,875
Gross profit 33,683 33,864 30,350 31,890 129,787
Net income 7,494 7,149 6,124 6,523 27,290
Earnings per share:
Basic $.39 $.37 $.32 $.35 $1.43
Diluted $.38 $.36 $.31 $.34 $1.39
======================================================================================================================
</TABLE>
42
<PAGE> 27
Report of 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, 1999 and 1998, and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the three years in the period ended December 31, 1999. 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 auditing standards generally
accepted in the United States. 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, 1999 and 1998, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended December 31, 1999, in conformity with accounting principles generally
accepted in the United States.
/s/ ERNST & YOUNG LLP
Los Angeles, California
January 27, 2000
43
<PAGE> 28
Corporate Information
- --------------------------------------------------------------------------------
Wynn's International, Inc.
NUMBER OF STOCKHOLDERS
- --------------------------------------------------------------------------------
There were 897 stockholders of record at March 9, 2000.
STOCK EXCHANGE LISTING
- --------------------------------------------------------------------------------
New York Stock Exchange
Ticker Symbol: WN
COMMON STOCK PRICES AND CASH DIVIDENDS PER SHARE: 1999-1998
- --------------------------------------------------------------------------------
The stock price and cash dividends of the Company's Common Stock for the past
two years are shown in the following table:
<TABLE>
<CAPTION>
Quarter 1st 2nd 3rd 4th
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1999 HIGH $ 22 1/16 $ 19 5/16 $ 20 1/4 $ 16 7/16
LOW 16 1/8 16 1/2 15 1/2 12 11/16
DIVIDENDS $.07 $.07 $.07 $.07
================================================================================
1998 High $ 25 3/4 $ 25 1/16 $ 20 3/8 $ 22 3/4
Low 20 18 11/16 15 5/8 15 1/16
Dividends $.06 $.06 $.06 $.06
================================================================================
</TABLE>
45
<PAGE> 1
EXHIBIT 21
WYNN'S INTERNATIONAL, INC.
SUBSIDIARIES OF REGISTRANT
<TABLE>
<CAPTION>
State or other
Jurisdiction of
Name Incorporation
- ---- ---------------
<S> <C>
Wynn Oil Company............................................. California
Medallion Warranty Services, Inc....................... California
WECI Warranty Services, Inc............................ Florida
Wynn's Extended Care, Inc.............................. California
Wynn's Australia Pty. Limited.......................... Australia
Wynn's Belgium N.V..................................... Belgium
Wynn's Italia SpA................................. Italy
Wynn's Mekuba India Private Limited............... India
Wynn's Nederland B.V.............................. Netherlands
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 S.A...................... France
Wynn's Automotive France (Professional)........... France
Wynn's Reseau S.A............................ France
Wynn's Industrie S.N.C............................ France
Wynn's Friction Proofing de 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
Guidedetail 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
Goshen Rubber Companies, Inc................................. Indiana
Bower Manufacturing Corp............................... Indiana
GRB Enterprises, Inc................................... Indiana
ETI, Incorporated...................................... Florida
Goshen Rubber of Canada, Ltd........................... Canada
</TABLE>
1
<PAGE> 2
<TABLE>
<CAPTION>
State or other
Jurisdiction of
Name Incorporation
- ---- ---------------
<S> <C>
Goshen Rubber International, Ltd....................... U.S. Virgin Islands
Syracuse Rubber Products, Inc.......................... Indiana
Waukesha Rubber Company, Inc........................... Wisconsin
Goshen Rubber Co., Inc................................. Indiana
Bond-Flex Rubber Co., Inc......................... Indiana
GRN Corporation................................... Nebraska
GNC Corporation................................... North Carolina
GR Plastics, Inc............................ Indiana
</TABLE>
Except for Wynn Oil Venezuela, S.A. ("Wynn's Venezuela") and Wynn's
Mekuba India Private Limited ("Wynn's India"), all of the above-named
subsidiaries are 100% owned by Registrant. Wynn's Venezuela and Wynn's India are
each 51% owned by Registrant.
2
<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 27, 2000,
included in the 1999 Annual Report to Stockholders of Wynn's International, Inc.
Our audits also included the financial statement schedule of Wynn's
International, Inc. in Item 14(a). This schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents 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., the Registration Statements (Form S-8 Nos.
33-30296, 33-64090, 333-39045 and 333-93699) pertaining to the Wynn's
International, Inc. Stock-Based Incentive Award Plan and the Wynn's
International, Inc. 1999 Stock Awards Plan, the Registration Statement (Form S-8
No. 33-53917) pertaining to the Wynn's International, Inc. Non-Employee
Directors' Stock Option Plan, the Registration Statement (Form S-8 No. 33-53921)
pertaining to the Wynn's International, Inc. Employee Stock Purchase Plan, and
in the related Prospectuses of our report dated January 27, 2000, 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 schedule included in the Annual Report (Form 10-K) of Wynn's
International, Inc. for the year ended December 31, 1999.
/s/ ERNST & YOUNG LLP
Los Angeles, California
March 24, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS CONTAINED IN FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 37,954<F1>
<SECURITIES> 0
<RECEIVABLES> 94,155
<ALLOWANCES> 1,276
<INVENTORY> 49,704
<CURRENT-ASSETS> 209,149
<PP&E> 162,607
<DEPRECIATION> 63,676
<TOTAL-ASSETS> 358,972
<CURRENT-LIABILITIES> 111,849
<BONDS> 48,287
0
0
<COMMON> 219
<OTHER-SE> 154,962
<TOTAL-LIABILITY-AND-EQUITY> 358,972
<SALES> 360,299
<TOTAL-REVENUES> 363,293
<CGS> 223,132
<TOTAL-COSTS> 223,132
<OTHER-EXPENSES> 96,079
<LOSS-PROVISION> 559
<INTEREST-EXPENSE> 210
<INCOME-PRETAX> 43,313
<INCOME-TAX> 15,549
<INCOME-CONTINUING> 27,764
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27,764
<EPS-BASIC> 1.48
<EPS-DILUTED> 1.46
<FN>
<F1>Includes Cash and Cash Equivalents Restricted
For Vehicle Service Contract Obligations of
$25,820.
</FN>
</TABLE>
