<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934........FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934................FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-8410
WYANT CORPORATION
(EXACT NAME OF REGISTRATION AS SPECIFIED IN ITS CHARTER)
NEW YORK
(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION)
11-2236837
(I.R.S. EMPLOYER
IDENTIFICATION NO.)
100 READINGTON ROAD
SOMERVILLE, NEW JERSEY 08876
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 908-707-1800
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE.
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST
REPORT.)
------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports, and (2) has been subject to such filing
requirement for the past 90 days.
Yes X No ___
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the latest practicable date.
<TABLE>
<CAPTION>
CLASS OUTSTANDING AT NOVEMBER 12, 1997
----------------------------------------------------------------------------------------
<S> <C>
Common stock, $.01 par value 1,703,676
</TABLE>
================================================================================
<PAGE> 2
WYANT CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1997
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The attached unaudited consolidated financial statements of Wyant
Corporation and Subsidiaries reflect all adjustments which are, in the opinion
of management, necessary to present a fair statement of the operating results
for the interim periods.
<TABLE>
<S> <C>
Consolidated balance sheets......................................... 3
Consolidated statements of operations............................... 4
Consolidated statements of cash flows............................... 5
Notes to consolidated financial statements.......................... 6-9
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WYANT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
1997 1996
------------ -----------------
(RESTATED NOTE 2)
<S> <C> <C>
ASSETS
CURRENT
Cash and cash equivalents.................................... $ 484,483 $ 1,570,625
Marketable securities, at cost............................... -- 446,812
Accounts receivable.......................................... 12,577,408 11,299,555
Income taxes recoverable..................................... 495,111 456,039
Deferred income taxes........................................ 331,186 331,186
Inventories (note 3)......................................... 8,196,902 10,012,033
Prepaid expenses............................................. 1,513,435 836,013
----------- -----------
TOTAL CURRENT ASSETS......................................... 23,598,525 24,952,263
Capital assets............................................... 19,114,718 19,281,210
Goodwill..................................................... 305,268 410,142
Other assets................................................. 975,564 761,404
----------- -----------
TOTAL ASSETS................................................. $43,994,075 $45,405,019
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT
Bank indebtedness............................................ $ 2,187,061 $ 1,293,351
Accounts payable and accrued liabilities..................... 10,885,530 12,143,970
Income taxes payable......................................... 796,252 280,727
Dividend payable............................................. -- 3,667,033
Current portion of long-term debt............................ 5,920,917 2,106,873
Current portion of preferred shares of subsidiary (note 2)... 569,760 --
----------- -----------
TOTAL CURRENT LIABILITIES.................................... 20,359,520 19,491,954
Long-term debt (notes 2 and 4)............................... 5,836,611 10,186,656
Preferred shares of subsidiary (note 2)...................... 4,502,573 2,267,900
Deferred income taxes........................................ 1,763,710 1,646,827
STOCKHOLDERS' EQUITY (notes 2 and 5)
Common stock, par value $0.01 per share...................... 27,037 27,037
Additional paid-in capital................................... 6,800,867 6,789,397
Retained earnings............................................ 4,714,588 4,999,823
Cumulative translation adjustment............................ (10,831) 26,955
----------- -----------
11,531,661 11,843,212
Less: Cost of 11,200 shares of common stock held in
treasury................................................... -- 31,530
----------- -----------
11,531,661 11,811,682
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY................... $43,994,075 $45,405,019
=========== ===========
</TABLE>
See accompanying notes
3
<PAGE> 4
WYANT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
--------------------------- ---------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
(Restated (Restated
Note 2) Note 2)
<S> <C> <C> <C> <C>
Net sales............................ $22,889,362 $22,682,740 $69,067,444 $69,724,737
Cost of sales........................ 15,711,521 15,711,200 47,789,626 47,569,798
----------- ----------- ----------- -----------
Gross profit......................... 7,177,841 6,971,540 21,277,818 22,154,939
Expenses
Selling, general and
administrative.................. 6,178,223 6,603,637 20,081,859 20,250,384
Amortization....................... 146,745 151,782 397,650 435,445
----------- ----------- ----------- -----------
6,324,968 6,755,419 20,479,509 20,685,829
----------- ----------- ----------- -----------
Operating income..................... 852,873 216,121 798,309 1,469,110
Other Income (expense)
Interest income.................... 8,882 32,071 30,276 118,315
Interest expense................... (273,238) (177,368) (744,537) (561,416)
Other.............................. 85,704 (2,892) 284,286 44,561
----------- ----------- ----------- -----------
(178,652) (148,189) (429,975) (398,540)
----------- ----------- ----------- -----------
Earnings before tax.................. 674,221 67,932 368,334 1,070,570
Income tax expense
Current............................ 236,710 (128,152) 222,710 (48,252)
Deferred........................... 9,031 182,025 123,031 557,725
----------- ----------- ----------- -----------
245,741 53,873 345,741 509,473
----------- ----------- ----------- -----------
Net earnings......................... 428,480 14,059 22,593 561,097
Dividend requirements and accretion
of mandatorily redeemable preferred
shares............................. 53,364 -- 101,301 --
----------- ----------- ----------- -----------
Net earnings (loss) attributable to
common shares...................... $ 375,116 $ 14,059 $ (78,708) $ 561,097
=========== =========== =========== ===========
Per share (note 6)................... $ 0.14 $ 0.01 $ (0.05) $ 0.21
Weighted average number of common and
common equivalent shares........... 2,702,824 2,692,476 1,695,963 2,692,476
</TABLE>
See accompanying notes
4
<PAGE> 5
WYANT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30
---------------------------------
1997 1996
----------- -----------------
(RESTATED NOTE 2)
<S> <C> <C>
OPERATING ACTIVITIES
Net income ................................................... $ 22,593 $ 561,097
Items not affecting cash
Depreciation and amortization............................... 1,336,869 1,494,367
Deferred income taxes....................................... 108,031 557,725
Deferred pension costs...................................... (105,882) 30,000
Gain on disposal of capital assets.......................... -- (2,691)
Changes in non-cash working capital balances
Accounts receivable......................................... (1,277,853) (1,103,885)
Income taxes recoverable.................................... (39,072) 187,421
Inventories................................................. 1,815,131 (5,182)
Prepaid expenses............................................ (677,422) (128,566)
Accounts payable............................................ (1,258,438) (1,793,865)
Incomes taxes payable....................................... 515,525 242,732
----------- -----------
439,482 39,153
INVESTING ACTIVITIES
Purchase of capital assets.................................... (1,165,138) (3,404,242)
Proceeds from sale of capital assets.......................... 37,506 234,485
Sale of marketable securities................................. 446,812 1,320,921
Increase in other assets...................................... (105,357) (40,078)
----------- -----------
(786,177) (1,888,914)
FINANCING ACTIVITIES
Repayment of long-term debt................................... (2,962,046) (1,966,649)
Increase in long-term debt.................................... 5,248,950 2,050,994
Distribution to G.H. Wood + Wyant Inc. shareholders (note 2).. (3,667,033) --
Increase (decrease) in bank indebtedness...................... 893,710 (598,705)
Distribution to minority shareholders......................... (206,527) (171,689)
Decrease (increase) in acquisition escrow fund................ (2,921) 252,753
Sale of treasury stock........................................ 43,000 --
Dividends paid................................................ (69,301) --
----------- -----------
(722,168) (433,296)
Effect of currency translation on cash........................ (17,279) 8,746
----------- -----------
Net decrease in cash.......................................... (1,086,142) (2,274,311)
Cash and cash equivalents, beginning of period................ 1,570,625 2,919,469
----------- -----------
Cash and cash equivalents, end of period...................... $ 484,483 $ 645,158
=========== ===========
</TABLE>
See accompanying notes
5
<PAGE> 6
WYANT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS AT SEPTEMBER 30, 1997 AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1997 AND 1996 ARE UNAUDITED)
1. GENERAL
The accompanying unaudited consolidated financial statements include the
accounts of Wyant Corporation (formerly Hosposable Products, Inc.) and its
wholly-owned subsidiaries, Bridgewater Manufacturing Corp., IFC
Disposables, Inc. and Wood Wyant Inc. (formerly 3290441 Canada Inc.). They
have been prepared in accordance with accounting principles generally
accepted in the United States for interim financial information and with
the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, the accompanying consolidated
financial statements contain all adjustments, consisting only of normal
recurring accruals considered necessary to present fairly the financial
position as of September 30, 1997, the results of operations for the nine
months and three months ended September 30, 1997 and 1996 and cash flows
for the nine months ended September 30, 1997 and 1996. For further
information, refer to the financial statements and notes thereto included
in the Company's annual report for the year ended December 31, 1996.
2. BASIS OF PRESENTATION
On March 18, 1997 the Company, through a wholly owned subsidiary, Wood
Wyant Inc. purchased the Canadian operations of G.H. Wood + Wyant Inc. for
(i) cash consideration of Cdn. $5,000,000 (U.S. $3,667,033), (ii) a
promissory note ("Note") in the amount of Cdn. $4,068,951 (U.S. $2,961,606)
having a fair value of U.S. $2,798,794, (iii) 3,800,000 shares of Class B
Preferred Stock of Wood Wyant Inc. having a liquidation preference of Cdn.
$3,800,000 (U.S. $2,765,849) and a fair value of U.S. $2,267,900, and (iv)
1,000,000 shares of Class E Preferred Stock of Wood Wyant Inc. having a
liquidation preference per share of one share of Wyant Corporation Common
Stock, par value $0.01 per share and which are exchangeable for 1,000,000
shares of Wyant Corporation Common Stock. The fair value of the Class E
Preferred Stock at March 18, 1997 was U.S. $5,000,000. These Class E
Preferred shares are recorded at par of $10,000 in Wyant Corporation Common
Stock and $4,990,000 in Additional Paid-in Capital.
The transaction represents a combination of entities under common control
and has been accounted for in a manner similar to a pooling of interests.
Accordingly, the comparative figures in these financial statements have
been restated to reflect retroactively the financial information of the
combined entities. The excess of the fair value of the consideration paid
of $13,733,727 over the book value of the net assets acquired of $8,638,875
(Cdn. $11,868,951) is considered a deemed dividend for accounting purposes,
which reduces the Additional Paid-in Capital by $5,094,852. The Note, which
yielded interest at 6% per annum, was exchanged on August 29, 1997 for
shares of Class A Preferred Stock of Wood Wyant Inc. on the basis of one
share for each Cdn. $1.00 of unpaid principal amount of the Note.
The Class A and B shares entitle holders to fixed cumulative preferential
dividends at the rate of 4% and 3.999999%, respectively, of their
redemption price of $1.00 Canadian per share and are mandatorily redeemable
in ten consecutive annual tranches, each equal to 10% of their combined
redemption value commencing on January 3, 1998. No Class B shares shall be
redeemed until all Class A shares have been redeemed. The Class E shares
entitle holders to receive dividends on a pro-rata basis equivalent to
dividends declared to the Company's common shareholders.
6
<PAGE> 7
WYANT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS AT SEPTEMBER 30, 1997 AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1997 AND 1996 ARE UNAUDITED)
3. INVENTORIES
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
1997 1996
------------ -----------
<S> <C> <C>
Raw materials.......................................... $ 2,910,808 $ 4,004,172
Finished goods......................................... 5,286,094 6,007,861
----------- -----------
$ 8,196,902 $10,012,033
=========== ===========
</TABLE>
4. LONG-TERM DEBT
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
1997 1996
------------ -----------
<S> <C> <C>
Wyant Corporation
New Jersey Economic Development Authority bonds
maturing December 1, 1997 to December 1, 2013 and
bearing interest at fixed rates from 4.1% to
5.7%.............................................. $ 4,031,250 $ 4,292,337
Note payable maturing November 2003 and bearing
interest at 8.12%................................. 1,302,967 1,463,681
Term loan repayable in monthly principal installments
of $33,333 plus interest at 9.43%, maturing March
18, 2002.......................................... 1,800,000 --
Revolving term loan maturing April 1, 1999 bearing
interest at prime (September 30, 1997 -- 8.5%).... 2,000,000 --
Other................................................ 50,000 --
---------- ----------
9,184,217 5,756,018
Wood Wyant Inc.
Various term loans repayable in monthly installments
of Cdn. $46,376 plus interest at prime plus 3/4%
(prime September 30, 1997 -- 4.75%), maturing at
various dates to October 1, 2001. Principal amount
Cdn. $3,553,999 (December 31, 1996 -- Cdn
$5,124,285)....................................... 2,573,311 3,738,717
Promissory note (principal amount December 31, 1996
-- Cdn. $3,845,263) (note 2)...................... -- 2,798,794
----------- -----------
11,757,528 12,293,529
Current portion...................................... 5,920,917 2,106,873
----------- -----------
$ 5,836,611 $10,186,656
=========== ===========
</TABLE>
The term loan and revolving term loan facilities of Wyant Corporation were
obtained in the first quarter of 1997 and replaced all previous existing
lines of credit. As at September 30, 1997 the Company is in default of
certain financial covenants with respect to these loans, which are governed
by a Loan and Security Agreement ("Agreement") dated March 18, 1997. The
financial covenants in default are as follows:
7
<PAGE> 8
WYANT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS AT SEPTEMBER 30, 1997 AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1997 AND 1996 ARE UNAUDITED)
4. LONG-TERM DEBT -- (Continued)
Tangible Capital Funds
The Agreement requires consolidated Tangible Capital Funds, as defined
therein, to be not less than $11,600,000 on September 30, 1997. At
September 30, 1997 the consolidated Tangible Capital Funds amounted to
$10,762,000.
Total Liabilities to Tangible Capital Funds Ratio
The Agreement requires that the ratio of consolidated total liabilities to
consolidated Tangible Capital Funds shall not exceed 1.2 to 1.0. At
September 30, 1997 the ratio was 1.5 to 1.0.
The Company is presently in negotiations to obtain an alternative source of
financing. The amount of the facilities being negotiated exceeds the amount
required to repay all amounts outstanding with First Union National Bank.
However, as a consequence of these defaults, the full amount outstanding on
these loans and the note payable is required to be classified on the
balance sheet at September 30, 1997 as a current liability in "Current
portion of long-term debt".
5. STOCKHOLDERS' EQUITY
The Company's authorized share capital comprises 3,000,000 common shares
with par value of $0.01 per share.
A summary of changes in stockholders' equity for the nine months ended
September 30, 1997 is as follows:
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED TREASURY
STOCK CAPITAL EARNINGS CTA STOCK TOTAL
-------- ---------- ---------- --------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance January 1, 1997... $27,037 $6,789,397 $4,999,823 $ 26,955 $(31,530) 1,811,682
Net earnings.............. 22,593 22,593
Dividends declared........ (69,301) (69,301)
Accretion................. (32,000) (32,000)
Distribution to minority
shareholders............ (206,527) (206,527)
Sale of treasury stock.... 11,470 31,530 43,000
Translation adjustments... (37,786) (37,786)
-------- ---------- ---------- -------- -------- ---------
Balance September 30,
1997.................... $27,037 $6,800,867 $4,714,588 $(10,831) -- 1,531,661
======== ========== ========== ======== ======== =========
</TABLE>
6. EARNINGS PER SHARE
Earnings per share data is based on the weighted average number of common
shares and common stock equivalents which would arise from the exercise of
dilutive stock options and the conversion of the Class E Preferred shares
of Wood Wyant Inc.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standard No. 128 "Earnings per Share" ("SFAS 128"), which will
be effective for the Company's December 31, 1997 year end. If the new
standard had been in effect for the nine months ended September 30, 1997,
8
<PAGE> 9
WYANT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS AT SEPTEMBER 30, 1997 AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1997 AND 1996 ARE UNAUDITED)
6. EARNINGS PER SHARE -- (Continued)
the basic and diluted earnings per share which would have been reported
under SFAS 128 would not have differed from the earnings per share shown in
the Consolidated Statements of Operations.
7. SUPPLEMENTARY INFORMATION
Three months ended September 30
<TABLE>
<CAPTION>
WYANT IFC
HEALTH CARE DISPOSABLES WOOD WYANT ELIMINATIONS TOTAL
----------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
1997
Net sales........... 8,098,173 $4,080,360 $12,968,693 $(2,257,864) $22,889,362
Operating income.... 171,760 53,567 627,546 852,873
Earnings before
tax............... 13,252 55,055 605,914 674,221
Net earnings........ 33,252 35,055 360,173 428,480
1996
Net sales........... 7,740,754 3,193,189 12,768,517 (1,019,720) 22,682,740
Operating income
(loss)............ (641,037) 134,994 722,164 216,121
Earnings (loss)
before tax........ (677,005) 135,827 609,110 67,932
Net earnings
(loss)............ (410,005) 84,827 339,237 14,059
</TABLE>
Nine months ended September 30
<TABLE>
<S> <C> <C> <C> <C> <C>
1997
Net sales........... $23,239,515 $11,257,883 $40,255,428 $(5,685,382) $69,067,444
Operating income
(loss)............ (1,560,808) 217,014 2,142,103 798,309
Earnings (loss)
before tax........ (1,936,218) 224,793 2,079,759 368,334
Net earnings
(loss)............ (1,318,218) 141,793 1,199,018 22,593
1996
Net sales........... 24,105,856 8,978,017 39,600,914 (2,960,050) 69,724,737
Operating income
(loss)............ (1,014,390) 237,181 2,246,319 1,469,110
Earnings (loss)
before tax........ (922,053) 240,865 1,751,758 1,070,570
Net earnings
(loss)............ (564,053) 150,865 974,285 561,097
</TABLE>
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following information should be read in conjunction with the
accompanying unaudited financial statements and the notes thereto included in
Item 1 of this quarterly report, and the financial statements and the notes
thereto and management's discussion and analysis of financial condition and
results of operations contained in the Company's Annual Report on Form 10-K for
the year ended December 31, 1996.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED WITH THE THREE MONTHS ENDED
SEPTEMBER 30, 1996
SALES
Sales for the three months ended September 30, 1997 increased by $206,622
to $22,889,362 from the sales of $22,682,740 in the third quarter of 1996. Sales
of Wyant Health Care were $8,098,173 in the third quarter of 1997, an increase
of $357,419 or 4.6% over the corresponding quarter last year. The improvement
resulted from the sales of the new adult brief product line introduced in the
first quarter of 1997, which more than offset the weakness in demand for
underpads and the loss of a major private label customer.
Sales of IFC Disposables were $4,080,360 for the three months ended
September 30, 1997, an increase of $887,171 or 27.8% over the sales of
$3,193,189 in the third quarter of 1996. The increase resulted primarily from
the expanded sales of paper products and systems in all of IFC's key markets.
Wood Wyant sales in the third quarter of 1997 at $12,968,693 were
$200,176 or 1.6% higher than in the same quarter last year, as the effect of
lower selling prices for paper products continued to be more than offset by
increased sales volumes of all major product lines.
COST OF SALES AND GROSS PROFIT
Wyant Health Care's gross profit for the third quarter of 1997 increased
to 18% of sales, compared to 12% of sales in the third quarter last year. The
improvement resulted from reduced overhead spending, together with improved
operating efficiency.
Gross profit of IFC Disposables decreased to 17% of sales in the quarter
ended September 30, 1997 from the 21% of sales generated in the third quarter of
1996, reflecting the significant growth in sales of paper products, which earn
lower gross profit percentages than IFC's other product lines.
Wood Wyant's gross profit declined to 39% of sales in the third quarter
of 1997, compared to the level of 42% in the same quarter last year, due to the
continuing competitive pricing environment for paper products.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses at $6,178,223 were $425,414
or 6.4% lower than in the third quarter of 1996. At Wyant Health Care, selling,
general and administrative expenses were $1,240,129, a decrease of $313,005 from
the third quarter of 1996. The improvement reflected reduced salary costs in the
current quarter, while the third quarter of 1996 was at a higher level as a
result of professional and consulting fees, and employee separation costs. At
IFC Disposables, expenses increased by $106,245 or 20% to $639,102 in the
current quarter, compared with $532,857 in the third quarter of 1996. The
increase resulted primarily from higher outward freight costs, which rose by
$58,746 due to the significantly higher sales level. Selling, general and
administrative expenses of Wood Wyant were $238,345 lower than in the third
quarter last year. The reduction resulted from lower staffing levels in 1997.
10
<PAGE> 11
AMORTIZATION
Amortization of $146,745 in the third quarter of 1997 was $5,037 lower
than in the corresponding quarter last year due to relatively low capital
spending.
INTEREST EXPENSE
Interest expense increased by $95,870 over the third quarter of 1996 to
$273,238 due to additional interest from the financing of the acquisition of the
Wood Wyant business in March 1997, partially offset by the favorable impact of
lower interest rates at Wood Wyant.
OTHER INCOME
Other income increased by $88,596 in the third quarter of 1997, due to
foreign exchange gains in Wood Wyant.
EARNINGS BEFORE TAX
Earnings before tax amounted to $674,221 in the current quarter, an
increase of $606,289 over the third quarter of 1996. Wyant Health Care generated
earnings before tax of $13,252 in the quarter, an improvement of $690,257 over
the same period last year, which more than offset reductions in pre-tax earnings
of IFC Disposables ($80,772) and Wood Wyant ($3,196).
INCOME TAXES
Income tax expense for the third quarter of 1997 was $245,741, compared
with an expense of $53,873 in the corresponding quarter of 1996. Losses of Wyant
Health Care of approximately $68,000 which had not been tax-effected were
utilized in the current quarter. In the third quarter of 1996, the level of
income tax expense reflected the higher tax rate on earnings of Wood Wyant
compared with the lower tax rate applicable to the loss of Wyant Health Care.
NET EARNINGS
Net earnings of $428,480 or $0.14 per share were generated in the third
quarter of 1997, compared with earnings of $14,059 or $0.01 per share in the
corresponding quarter of 1996. The 1997 earnings per share reflect the sale on
July 8, 1997 of 11,200 shares of common stock which had been held in treasury.
The earnings per share of both 1997 and 1996 are fully diluted by giving full
effect to the one million Class E Preferred shares of Wood Wyant Inc. which are
exchangeable for common shares of Wyant Corporation.
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED WITH THE NINE MONTHS ENDED
SEPTEMBER 30, 1996
SALES
Sales for the nine months ended September 30, 1997 at $69,067,444 were
$657,293 lower than the total of $69,724,737 in the corresponding period last
year. Sales of Wyant Health Care decreased by $866,341 to $23,239,515 in the
current period to date, reflecting the shortfall which occurred in the first
quarter of 1997 primarily due to the reorganization of the sales force, the loss
of a major private label customer and the failure of a significant regional
distributor. These factors have been partially offset by the sales from the new
adult brief product line. IFC Disposables sales of $11,257,883 were $2,279,866
higher than in the nine months ended September 30, 1996 as a result of the
significantly higher sales of paper products and systems. Sales of Wood Wyant
for the first nine months of 1997 at $40,255,428 were $654,514 higher than in
the same period in 1996, as higher sales of equipment and sanitation products
more than offset the lower sales of paper products which resulted from reduced
selling prices.
11
<PAGE> 12
COST OF SALES AND GROSS PROFIT
Gross profit of Wyant Health Care for the first nine months of 1997
decreased to 14% of sales from 15% of sales in the nine months ended September
30, 1996, as a result of manufacturing inefficiencies in the first half of 1997
and start-up expenses incurred for the new adult brief line. Gross profit of IFC
Disposables for the current year to date was 18% of sales, down from 21% of
sales in the corresponding period last year, due to the significant increase in
sales of paper products, which generate lower margins than IFC's other product
lines. Wood Wyant's gross profit for the first nine months of 1997 declined to
40% of sales from 42% of sales in the 1996 period. The decrease resulted
primarily from the competitive pricing environment for paper products.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses for the first nine months of
1997 were $20,081,859, a reduction of $168,525 compared with the same period
last year. At Wyant Health Care, expenses increased by $266,669 to $4,762,770 in
the current period, primarily due to higher shipping expenses resulting from an
increased number of more costly smaller shipments. Expenses of IFC Disposables
increased by $106,245 to $639,102 in the first nine months of 1997, due to a
higher level of shipping costs resulting from the increased sales volume. At
Wood Wyant, expenses at $13,475,422 for the current period to date were $808,327
lower than in the corresponding period last year. Lower staffing levels in the
current year, together with higher marketing and promotion expenses incurred in
1996 to produce a new product catalogue, accounted for the reduction.
AMORTIZATION
Amortization of $397,650 was $37,795 lower than in the first nine months of
1996 due to relatively low capital spending in 1996.
INTEREST EXPENSE
Interest expense increased by $183,121 to $744,537 in the first nine months
of 1997, due to additional interest costs related to the Wood Wyant acquisition,
which more than offset the favorable impact of lower interest rates in the
current period.
OTHER INCOME
Other income for the nine months ended September 30, 1997 was $239,725
higher than in the same period last year due to foreign exchange gains in Wood
Wyant.
EARNINGS BEFORE TAX
Earnings before tax totalled $368,334 in the first nine months of 1997, a
reduction of $702,236 from the nine months ended September 30, 1996. Wyant
Health Care and IFC Disposables results deteriorated by $1,014,165 and $16,072
respectively, but these were partially offset by an improvement of $328,001 in
pre-tax earnings of Wood Wyant.
INCOME TAXES
Income tax expense declined by $163,732 to $345,741 in the current period
to date. The level of expense in 1997 is adversely impacted by approximately
$156,000 of losses in the United States which could not be tax-effected.
NET EARNINGS
Net earnings for the nine months ended September 30, 1997 amounted to
$22,593, which after taking into account dividends and accretion of mandatorily
redeemable Preferred shares resulted in a loss per common share of $0.05,
compared with net earnings of $561,097 or $0.21 per share in the corresponding
period last year. The 1996 earnings per share are fully diluted to give effect
to the one million Class E Preferred shares of Wood Wyant which are exchangeable
for common shares of Wyant Corporation, but the 1997 loss per share does not
reflect these shares.
12
<PAGE> 13
LIQUIDITY AND CAPITAL RESOURCES
Liquidity and capital resources of Wyant Health Care and IFC Disposables
are discussed together, while Wood Wyant is discussed separately as it is
self-financing and has separate banking facilities.
WYANT HEALTH CARE & IFC DISPOSABLES
A total of $1,532,955 of cash was utilized in the first nine months of
1997. Working capital increased by $411,699 in the current period, compared with
an increase of $2,519,957 in the same period last year. The increase in the
current year resulted primarily from increases in accounts receivable ($606,205)
and prepaid expenses ($324,331), together with a decrease in accounts payable of
$158,786, all of which were partially offset by a decrease in inventories of
$728,080. The increase in the prior year was primarily due to an increase of
$1,103,885 in accounts receivable and a decrease of $1,793,865 in accounts
payable, partially offset by increased income taxes payable of $242,732. Capital
expenditures in the first nine months of 1997 amounted to $520,972. The Company
borrowed $4,000,000 on March 18, 1997 from First Union National Bank, of which
$3,667,033 was utilized to finance the Wood Wyant acquisition. Debt repayments
in the current nine months period amounted to $704,464. The 11,200 shares of
common stock held in treasury were sold on August 8, 1997 for proceeds of
$43,000.
As described in note 4 to the consolidated financial statements, the
Company is in default of certain financial covenants with respect to the March
18, 1997 Loan and Security Agreement. As a result, $4,488,681 of long-term debt
with maturities after September 30, 1998 has been included with the current
portion of long-term debt in current liabilities.
The Company is presently in negotiations to obtain an alternative source
of financing. The amount of the facilities being negotiated exceeds the amount
required to repay all amounts outstanding with First Union National Bank.
These arrangements are expected to be finalized prior to the end of the current
year. When these arrangements are in place, management believes that future
operating cash flows, together with the unused balance under the new credit
facility, will enable the Company to meet its ongoing cash requirements,
including repayments of term debt, and cash requirements for capital asset
additions.
WOOD WYANT
Wood Wyant utilized $893,710 of cash during the nine months ended
September 30, 1997. Cash from operations generated $1,129,953, net of an
increase in working capital of $647,204. The working capital increase resulted
primarily from increases in accounts receivable ($1,169,411) and prepaid
expenses ($515,478), partially offset by a reduction in inventories of
$1,091,461. The higher level of accounts receivable resulted from the
significantly increased level of sales activity in the month of September than
in December. Capital expenditures were $644,166 in the first nine months of
1997. Principal repayments of debt amounted to $2,269,730 in the current period.
New borrowing during the period amounted to $1,128,950.
The unused balance at September 30, 1997 of the maximum credit of
$4,344,000 (CDN. $6,000,000) available under the revolving credit facility
amounted to approximately $2,157,000 (CDN. $2,979,000).
Management believes that future operating cash flows and the unused
balance available under existing credit facilities will be sufficient to meet
its ongoing operating cash requirements, to repay the term debt as it becomes
due and to meet cash requirements for capital asset additions.
13
<PAGE> 14
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not involved in any material legal proceedings.
ITEMS 2, 4, 5 & 6
Not applicable.
ITEM 3. DEFAULT UPON SENIOR SECURITIES
The Company is in default of certain financial covenants contained in a
Loan and Security Agreement dated March 18, 1997, and related financing
agreements, with First Union National Bank pursuant to which a revolving term
loan of $2,000,000 (due April 1, 1999) and a term loan of $2,000,000 (due March
18, 2002) are outstanding.
In December 1993, the New Jersey Economic Development Authority (the
"Authority") issued $5,325,000 aggregate principal amount of Economic
Development Bonds (Hosposable Products, Inc. -- 1993 Project) (the "Bonds")
pursuant to an Indenture of Trust dated as of December 1, 1993 (the "Indenture")
between the Authority and The Bank of New York, as trustee (the "Trustee"), and
loaned the proceeds from such issuance to the Company pursuant to a Loan
Agreement dated as of December 1, 1993 between the Company and the Authority. In
connection with the issuance of the Bonds, First Union National Bank, as
successor-in-interest to First Fidelity Bank (the "Bank"), issued a letter of
credit for the account of the Company providing for the payment of principal and
up to 210 days interest on the Bonds pursuant to a Letter of Credit and
Reimbursement Agreement dated as of December 1, 1993, as amended, between the
Company and the Bank (the "Reimbursement Agreement"). The Company currently has
no amounts outstanding under the Reimbursement Agreement.
As of September 30, 1997, the Company is in default of certain financial
covenants contained in the Reimbursement Agreement. These covenants are the same
as the financial covenants contained in the Loan and Security Agreement referred
to above. Such default, however, is not an Event of Default (as defined in the
Indenture) under the Indenture with respect to the Bonds unless the Trustee
receives from the Bank a written declaration of the occurrence of an "Event of
Default" under the Reimbursement Agreement. Currently, to the best of the
Company's knowledge, the Bank has not delivered any such written declaration to
the Trustee.
14
<PAGE> 15
WYANT CORPORATION
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WYANT CORPORATION
(Registrant)
<TABLE>
<S> <C>
Date: November 12, 1997 Signature: /s/ Marc D'Amour
Marc D'Amour
Vice President, Finance &
Chief Financial Officer
(For the registrant and as
Principal Financial Officer)
</TABLE>
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM WYANT
CORPORATION FORM 10-Q RE QUARTER ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q SEPTEMBER 30, 1997.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 484,483
<SECURITIES> 0
<RECEIVABLES> 12,577,408
<ALLOWANCES> 0
<INVENTORY> 8,196,902
<CURRENT-ASSETS> 23,598,525
<PP&E> 19,114,718
<DEPRECIATION> 0
<TOTAL-ASSETS> 43,994,075
<CURRENT-LIABILITIES> 20,359,520
<BONDS> 5,836,611
4,502,573
0
<COMMON> 27,037
<OTHER-SE> 11,504,624
<TOTAL-LIABILITY-AND-EQUITY> 43,994,075
<SALES> 22,889,362
<TOTAL-REVENUES> 22,889,362
<CGS> 15,711,521
<TOTAL-COSTS> 22,036,489
<OTHER-EXPENSES> (94,586)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 273,238
<INCOME-PRETAX> 674,221
<INCOME-TAX> 245,741
<INCOME-CONTINUING> 428,480
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 428,480
<EPS-PRIMARY> 0.14
<EPS-DILUTED> 0.14
</TABLE>
