<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 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
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 AUGUST 12, 1997
----------------------------------------------------------------------------------------
<S> <C>
Common stock, $.01 par value 1,703,676
</TABLE>
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<PAGE> 2
WYANT CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 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>
JUNE 30 DECEMBER 31
1997 1996
----------- -----------
(Restated
Note 2)
<S> <C> <C>
ASSETS
CURRENT
Cash and cash equivalents....................................... $ 937,431 $ 1,570,625
Marketable securities, at cost.................................. -- 446,812
Accounts receivable............................................. 12,996,611 11,299,555
Income taxes recoverable........................................ 501,111 456,039
Deferred income taxes........................................... 331,186 331,186
Inventories (note 3)............................................ 9,131,960 10,012,033
Prepaid expenses................................................ 1,507,229 836,013
----------- -----------
TOTAL CURRENT ASSETS............................................ 25,405,528 24,952,263
Capital assets.................................................. 19,158,778 19,281,210
Goodwill........................................................ 339,334 410,142
Other assets.................................................... 941,346 761,404
----------- -----------
TOTAL ASSETS.................................................... $45,844,986 $45,405,019
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT
Bank indebtedness............................................... $ 3,134,396 $ 1,293,351
Accounts payable and accrued liabilities........................ 11,776,862 12,143,970
Income taxes payable............................................ 594,028 280,727
Dividend payable................................................ -- 3,667,033
Current portion of long-term debt............................... 7,693,180 2,106,873
----------- -----------
TOTAL CURRENT LIABILITIES....................................... 23,198,466 19,491,954
Long-term debt (notes 2 and 4).................................. 7,504,859 10,186,656
Preferred shares of subsidiary (note 2)......................... 2,273,058 2,267,900
Deferred income taxes........................................... 1,754,605 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...................................... 6,789,397 6,789,397
Retained earnings............................................... 4,339,472 4,999,823
Cumulative translation adjustment............................... (10,378) 26,955
----------- -----------
11,145,528 11,843,212
Less: Cost of 11,200 shares of common stock held in treasury.... 31,530 31,530
----------- -----------
11,113,998 11,811,682
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY...................... $45,844,986 $45,405,019
=========== ===========
</TABLE>
See accompanying notes
3
<PAGE> 4
WYANT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30 SIX MONTHS ENDED JUNE 30
--------------------------- --------------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
(Restated (Restated
note 2) note 2)
<S> <C> <C> <C> <C>
Net sales........................... $24,048,484 $23,173,227 $46,178,082 $47,041,997
Cost of sales....................... 16,644,682 15,671,644 32,078,105 31,858,598
----------- ----------- ----------- -----------
Gross profit........................ 7,403,802 7,501,583 14,099,977 15,183,399
Expenses
Selling, general and
administrative................. 7,145,178 6,881,119 13,903,636 13,646,747
Amortization...................... 124,462 151,419 250,905 283,663
----------- ----------- ----------- -----------
7,269,640 7,032,538 14,154,541 13,930,410
----------- ----------- ----------- -----------
Operating income (loss)............. 134,162 469,045 (54,564) 1,252,989
Other Income (expense)
Interest income................... 9,578 34,556 21,394 86,244
Interest expense.................. (298,231) (198,121) (471,299) (384,048)
Other............................. 61,089 17,155 198,582 47,453
----------- ----------- ----------- -----------
(227,564) (146,410) (251,323) (250,351)
----------- ----------- ----------- -----------
Earnings (loss) before tax.......... (93,402) 322,635 (305,887) 1,002,638
Income tax expense
Current........................... 132,000 (83,200) (14,000) 79,900
Deferred.......................... 4,000 248,900 114,000 375,700
----------- ----------- ----------- -----------
136,000 165,700 100,000 455,600
----------- ----------- ----------- -----------
Net earnings (loss)................. (229,402) 156,935 (405,887) 547,038
Dividend requirements and accretion
of mandatorily redeemable
preferred shares.................. 47,937 -- 47,937 --
----------- ----------- ----------- -----------
Net earnings (loss) attributable to
common shares..................... $ (277,339) $ 156,935 $ (453,824) $ 547,038
=========== =========== =========== ===========
Per share (note 6).................. $ (0.17) $ 0.06 $ (0.27) $ 0.20
Weighted average number of common
and common equivalent shares...... 1,692,476 2,692,476 1,692,476 2,692,476
</TABLE>
See accompanying notes
4
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WYANT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30
-------------------------
1997 1996
----------- -----------
(Restated
note 2)
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings (loss)............................................. $ (405,887) $ 547,038
Items not affecting cash
Depreciation and amortization................................. 847,799 940,915
Deferred income taxes......................................... 114,000 375,700
Deferred pension costs........................................ (70,870) --
Changes in non-cash working capital balances
Accounts receivable........................................... (1,697,056) (730,275)
Income taxes recoverable...................................... (45,072) 414,975
Inventories................................................... 880,073 (456,911)
Prepaid expenses.............................................. (671,216) (311,453)
Accounts payable.............................................. (367,107) (1,109,390)
Incomes taxes payable......................................... 313,301 --
----------- -----------
(1,102,035) (329,401)
INVESTING ACTIVITIES
Purchase of capital assets...................................... (710,968) (1,186,027)
Proceeds from sale of capital assets............................ -- 208,743
Sale of marketable securities................................... 446,812 194,043
Increase in other assets........................................ (106,892) (12,894)
----------- -----------
(371,048) (796,135)
FINANCING ACTIVITIES
Repayment of long-term debt..................................... (1,179,772) (1,471,588)
Increase in long-term debt...................................... 4,120,000 731,529
Distribution to G.H. Wood + Wyant Inc. shareholders (note 2).... (3,667,033) --
Increase (decrease) in bank indebtedness........................ 1,841,045 (452,000)
Distribution to minority shareholders........................... (206,527) (44,022)
Decrease (increase) in acquisition escrow fund.................. (2,180) 253,998
Dividends paid.................................................. (31,937) --
----------- -----------
873,596 (982,083)
Effect of currency translation on cash.......................... (33,707) (5,396)
----------- -----------
Net decrease in cash............................................ (633,194) (2,113,015)
Cash and cash equivalents, beginning of period.................. 1,570,625 2,919,469
----------- -----------
Cash and cash equivalents, end of period........................ $ 937,431 $ 806,454
=========== ===========
</TABLE>
See accompanying notes
5
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WYANT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS AT JUNE 30, 1997 AND FOR THE SIX MONTHS
ENDED JUNE 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 June 30, 1997, the results of operations for the six months
and three months ended June 30, 1997 and 1996 and cash flows for the six
months ended June 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 will
be exchanged 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 Note bears interest at 6% per annum.
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 JUNE 30, 1997 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1997 AND 1996 ARE UNAUDITED) - (CONTINUED)
2. BASIS OF PRESENTATION - (CONTINUED)
The above amounts have been restated, where applicable, from the amounts
reported in the consolidated financial statements at March 31, 1997 to
reflect the adjustment to the consideration required under the terms of the
Asset Purchase Agreement.
3. INVENTORIES
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
1997 1996
--------- -----------
<S> <C> <C>
Raw materials............................................ $ 3,126,685 $ 4,004,172
Finished goods........................................... 6,005,275 6,007,861
----------- -----------
$ 9,131,960 $10,012,033
=========== ===========
</TABLE>
4. LONG-TERM DEBT
<TABLE>
<CAPTION>
JUNE 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%.... $ 4,122,500 $ 4,292,337
Note payable maturing November 2003 and bearing
interest at 8.12%.................................... 1,356,538 1,463,681
Term loan repayable in monthly principal installments
of $33,333 plus interest at 9.43%, maturing March
18, 2002............................................. 1,900,000 --
Revolving term loan maturing April 1, 1999 bearing
interest at prime (June 30, 1997 -- 8.5%)............ 2,000,000 --
Other................................................... 80,000 --
----------- -----------
9,459,038 5,756,018
Wood Wyant Inc.
Various term loans repayable in monthly installments
of Cdn. $174,476 plus interest at prime plus 3/4%
(prime June 30, 1997 -- 4.75%), maturing at various
dates to June 1, 1999. Principal amount Cdn.
$4,077,428 (December 31, 1996 -- Cdn.$5,124,285)..... 2,953,588 3,738,717
Promissory note, principal amount Cdn. $3,845,263
(December 31, 1996 -- Cdn. $3,845,263) (note 2)...... 2,785,413 2,798,794
----------- -----------
15,198,039 12,293,529
Current portion......................................... 7,693,180 2,106,873
----------- -----------
$ 7,504,859 $10,186,656
=========== ===========
</TABLE>
7
<PAGE> 8
WYANT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS AT JUNE 30, 1997 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1997 AND 1996 ARE UNAUDITED) - (CONTINUED)
4. LONG-TERM DEBT - (CONTINUED)
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 June 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:
Tangible Capital Funds
The Agreement requires consolidated Tangible Capital Funds, as defined
therein, to be not less than $11,600,000 on June 30, 1997. At June 30, 1997
the consolidated Tangible Capital Funds amounted to $10,643,000.
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 June
30, 1997 the ratio was 1.5 to 1.0.
The Company is presently in discussions with First Union National Bank with
a view to either obtaining a waiver of the defaults, or renegotiating the
financial covenants. However, as a consequence of these defaults, the full
amount outstanding on these loans and the note payable is required to be
classified in the balance sheet at June 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 six months ended June
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) 11,811,682
Net earnings (loss)...... (405,887) (405,887)
Dividends declared....... (31,937) (31,937)
Accretion................ (16,000) (16,000)
Distribution to
minority
shareholders........... (206,527) (206,527)
Translation
adjustments............ (37,333) (37,333)
------- --------- --------- ------- ------- ----------
Balance June 30, 1997.... $27,037 6,789,397 4,339,472 (10,378) (31,530) 11,113,998
======= ========= ========= ======= ======= ==========
</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 is
effective for the Company's December 31, 1997 year end. The Company has not
determined the impact, if any, of SFAS 128 on its consolidated financial
statements.
8
<PAGE> 9
WYANT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS AT JUNE 30, 1997 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1997 AND 1996 ARE UNAUDITED) - (CONTINUED)
7. SUPPLEMENTARY INFORMATION
Three months ended June 30
<TABLE>
<CAPTION>
WYANT IFC
HEALTH CARE DISPOSABLES WOOD WYANT ELIMINATIONS TOTAL
----------- ----------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C>
1997
----
Net sales........... $ 8,073,123 $3,945,618 $14,273,423 $(2,243,680) $24,048,484
Operating income
(loss)............ (971,724) 80,152 1,025,734 134,162
Earnings (loss)
before tax........ (1,107,381) 83,518 930,461 (93,402)
Net earnings
(loss)............ (822,381) 52,518 540,461 (229,402)
1996
----
Net sales........... 7,601,002 2,857,284 13,563,706 (848,765) 23,173,227
Operating income
(loss)............ (475,029) 69,948 874,126 469,045
Earnings (loss)
before tax........ (439,486) 68,456 693,665 322,635
Net earnings
(loss)............ (270,786) 44,056 383,665 156,935
</TABLE>
Six months ended June 30
<TABLE>
<S> <C> <C> <C> <C> <C>
1997
----
Net sales........... $15,141,342 $7,177,523 $27,286,735 $(3,427,518) $46,178,082
Operating income
(loss)............ (1,732,568) 163,447 1,514,557 (54,564)
Earnings (loss)
before tax........ (1,949,470) 169,738 1,473,845 (305,887)
Net earnings
(loss)............ (1,351,470) 106,738 838,845 (405,887)
1996
----
Net sales........... 16,365,102 5,784,828 26,832,397 (1,940,330) 47,041,997
Operating income
(loss)............ (373,353) 102,187 1,524,155 1,252,989
Earnings (loss)
before tax........ (245,048) 105,038 1,142,648 1,002,638
Net earnings
(loss)............ (154,048) 66,038 635,048 547,038
</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 JUNE 30, 1997 COMPARED WITH THE THREE MONTHS ENDED JUNE 30,
1996
SALES
Sales for the three months ended June 30, 1997 increased by $875,257 to
$24,048,484 from the sales of $23,173,227 in the second quarter of 1996. Sales
of Wyant Health Care for the second quarter of 1997 at $8,073,123 were $472,121
or 6.2% higher than the total of $7,601,002 in the same period last year, as the
increase in sales from the new adult brief product line introduced late in the
first quarter of 1997 more than offset the weakness in demand for airlaid
nonwoven fabrics.
At IFC Disposables, sales for the three months ended June 30, 1997 at
$3,945,618 recorded an increase of $1,088,334 or 38.1% over the sales of
$2,857,284 in the second quarter of 1996. This improvement reflected the
continued expansion of sales of paper products and systems in all of IFC's key
markets.
Second quarter sales of Wood Wyant at $14,273,423 were $709,717 or 5.2%
higher than the total of $13,563,706 for the same period last year. The effect
of lower selling prices for paper products was more than offset by increased
sales volumes of all major product lines.
COST OF SALES AND GROSS PROFIT
Wyant Health Care's cost of sales for the second quarter of 1997
increased to 87.7% of sales, compared to 86.3% in the same period last year. The
increase was primarily due to startup expenses for the new adult brief line and
resulted in gross profit for the second quarter of 1997 declining to 12% of
sales from the level of 14% in the second quarter of 1996.
Gross profit of IFC Disposables decreased to 18% of sales in the quarter
ended June 30, 1997 from 22% in the same quarter last year. The decrease
reflected mainly the significant growth in sales of paper products, which
generate a lower gross profit percentage than IFC's other product lines.
Wood Wyant's gross profit for the second quarter of 1997 declined to 40%
of sales from the level of 43% in the second quarter of 1996. This was caused
primarily by the continuing competitive pricing environment for paper products.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses increased by $264,059 or 4% to
$7,145,178 in the second quarter of 1997 compared to the total of $6,881,119 in
the second quarter last year. Selling, general and administrative expenses of
Wyant Health Care increased to $1,945,929 from $1,494,703 in the second quarter
of 1996. The increase was due to the inclusion in the current quarter of non-
recurring charges of $427,000 for severance payments and professional fees
incurred following the recent restructuring of the Wyant Health Care operations.
At IFC Disposables, expenses increased by $74,643 or 14% to $615,503 over the
second quarter of 1996 level of $540,860. The major cause of this increase was
an amount of $56,106 for higher outward freight costs resulting from the
significantly higher sales level. Selling, general and administrative expenses
of Wood Wyant for the second quarter of 1997 were $261,810 lower than in the
corresponding quarter of 1996. The reduction was primarily due to reduced
10
<PAGE> 11
staffing levels in 1997 and lower marketing and promotion expenses than in 1996,
when a new catalogue of products was published. Partially offsetting these
savings were higher shipping costs in 1997, due to increased transportation
rates in two major market areas and an unfavourable mix of shipments.
AMORTIZATION
Amortization of $124,462 in the three months ended June 30, 1997 was
$26,957 lower than in the second quarter of 1996 due to relatively low capital
spending in 1996.
INTEREST EXPENSE
Interest expense increased by $100,110 over the second quarter of 1996 to
$298,231, due to additional interest from financing of the acquisition of the
Wood Wyant business in March 1997, partly offset by the favorable impact of
lower interest rates at Wood Wyant.
OTHER INCOME
Other income increased by $43,934 compared to the second quarter of 1996,
primarily due to foreign exchange gains in Wood Wyant.
EARNINGS (LOSS) BEFORE TAX
A loss before tax of $93,402 was incurred in the second quarter of 1997,
compared with the earnings before tax of $322,635 generated in the second
quarter of 1996. The pre-tax loss of Wyant Health Care was $667,895 worse than
in the second quarter of 1996, but this was partially offset by improved pre-tax
earnings of $236,796 in Wood Wyant and $15,062 in IFC Disposables.
INCOME TAXES
Despite the net pre-tax loss in the current quarter, income tax expense
was $136,000, down from $165,700 in the second quarter of 1996. The expense, in
the current quarter, reflected the Company's inability to tax-effect
approximately $224,000 of the losses of Wyant Health Care, together with the
higher tax rate on earnings of Wood Wyant in Canada.
NET EARNINGS (LOSS)
A net loss of $229,402 or $0.17 per common share was incurred in the
second quarter of 1997, as compared to net earnings of $156,935 or $0.06 per
share in the second quarter of 1996. The 1996 earnings per share are fully
diluted by giving full effect to the one million Class E Preferred shares of
Wood Wyant which are exchangeable for common shares of Wyant Corporation. The
1997 loss per share does not reflect these shares.
SIX MONTHS ENDED JUNE 30, 1997 COMPARED WITH THE SIX MONTHS ENDED JUNE 30, 1996
SALES
Sales for the first half of 1997 at $46,178,082 were $863,915 lower than
the total of $47,041,997 in the same period last year. Wyant Health Care sales
decreased by $1,223,760 to $15,141,342 in the six months to June 30, 1997,
reflecting a sales increase of $472,121 in the second quarter of 1997 compared
with 1996, which partially offset a significant shortfall in the first quarter
of 1997, which was primarily due to the lower sales of airlaid nonwoven fabrics,
the reorganization of the sales force, the loss of a major private label
customer and the failure of a significant regional distributor. At IFC
Disposables, sales for the first six months of 1997 at $7,177,523 were
$1,392,695 higher than in the first half of 1996, due to the significant
increase in sales of paper products and systems. Sales of Wood Wyant for the
first half of 1997 at $27,286,735 were $454,338 higher than in the corresponding
11
<PAGE> 12
period last year as higher sales of equipment and sanitation products more than
offset reduced sales of paper products which resulted from lower selling prices.
COST OF SALES AND GROSS PROFIT
In Wyant Health Care, gross profit for the first half of 1997 decreased
to 12% of sales, compared with 16% in the first half of 1996. The deterioration
resulted from manufacturing inefficiencies, due in part to the lower level of
sales, and the startup expenses incurred for the new adult brief line. Gross
profit of IFC Disposables for the first half of 1997 was 19% of sales, down from
20% in the first half of 1996 due to the significant increase in sales of paper
products, which have comparatively lower margins than IFC's other product lines.
For the first half of 1997, Wood Wyant's gross profit declined to 40% of sales
from 42% in the same period last year. The decrease resulted primarily from the
competitive pricing environment for paper products.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses for the first six months of
1997 at $13,903,636 were $256,889 or 2% higher than the total of $13,646,747 in
the same period last year. At Wyant Health Care, expenses increased by $579,674
over the first half of 1996, to $3,522,641 due to the non-recurring severance
payments and professional fees totalling $427,000 related to the restructuring
of operations, together with higher shipping expenses due to an increased number
of more costly smaller shipments. Expenses of IFC Disposables increased by
$94,226 over the first half of 1996 to $1,168,565. The increase was mainly due
to higher shipping costs resulting from the increased sales volume. At Wood
Wyant, expenses were $417,011 lower than in the first half of 1996, reflecting
the savings from lower staffing levels in 1997 and the higher marketing and
promotion expenses in 1996, when a new product catalogue was published.
AMORTIZATION
Amortization of $250,905 was $32,758 lower than in the first half of 1996
due to relatively low 1996 capital spending.
INTEREST EXPENSE
Interest expense increased by $87,251 over the first half of 1996 to
$471,299, due to additional interest costs associated with the Wood Wyant
acquisition, which more than offset the benefits derived from lower interest
rate levels.
OTHER INCOME
Other income for the first half of 1997 was $151,129 higher than in the
first half of 1996 due to foreign exchange gains in Wood Wyant.
EARNINGS (LOSS) BEFORE TAX
A loss before tax of $305,887 was incurred in the first half of 1997, a
deterioration of $1,308,525 compared with the first half of 1996. Results of
Wyant Health Care worsened by $1,704,422, but this was partially offset by
improved pre-tax earnings in both Wood Wyant ($331,197) and IFC Disposables
($64,700).
INCOME TAXES
Income tax expense declined from $455,600 in the first half of 1996 to
$100,000 in the first half of the current year. The $100,000 expense in 1997
resulted despite the pre-tax loss for the period, as approximately $224,000 of
losses in the United States could not be tax-effected.
12
<PAGE> 13
NET EARNINGS (LOSS)
A net loss of $405,887 or $0.27 per common share was incurred in the
first half of 1997, compared with net earnings of $547,038 or $0.20 per share in
the first half of 1996. The 1996 earnings 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.
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
During the first half of 1997 the Company utilized $1,080,007 of cash.
Working capital decreased by $110,399 in the first half of 1997, compared to an
increase of $2,063,237 in the same period last year. The increase in 1996
resulted from inventories, which were $1,504,481 higher in the six months ended
June 30, and from payables, which decreased by $747,219. During the first half
of 1997, a decrease of $638,990 in inventories was largely offset by an increase
in accounts receivable of $571,373. Capital expenditures in the first half of
1997 amounted to $450,812, which included $220,000 to acquire a trademark. The
Company borrowed $4,000,000 on March 18, 1997 from First Union National Bank, of
which $3,667,033 was used to finance the acquisition of the Wood Wyant business.
Debt repayments in the six months ended June 30, 1997 totalled $429,643.
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, $4,642,252 of long-term debt
with maturities after June 30, 1998 has been included with the current portion
of long-term debt in current liabilities.
The Company is presently in discussions with First Union National Bank
with a view to either obtaining a waiver of the defaults, or renegotiating the
financial covenants in the Loan and Security Agreement. If these long-term
credit facilities remain in place, management believes that future operating
cash flows, together with advances from Wood Wyant Inc., will enable the Company
to meet its ongoing cash requirements, including repayments of term debt, as
they would normally become due, and cash requirements for a minimum level of
capital asset additions. Should the Company not be able to obtain waivers or
renegotiate the financial covenants and First Union National Bank accelerates
repayment of these long-term facilities, the Company will have to seek other
financing to meet its cash requirements.
WOOD WYANT
Wood Wyant utilized $1,841,045 of cash during the first half of 1997,
compared with cash generation of $452,000 in the first half of 1996. Cash used
for operations in the current year to date amounted to $599,515, as a result of
an increase of $1,845,164 in working capital. This increase was due primarily to
higher accounts receivable, reflecting the significantly increased level of
sales activity in the month of June than in December. Capital expenditures were
$260,156 in the first half of 1997. Principal repayments on debt amounted to
$762,792 in the current year.
The unused balance at June 30, 1997 of the maximum credit of $4,346,000
(Cdn. $6,000,000) available under the revolving credit facility amounted to
approximately $1,212,000 (Cdn. $1,673,000).
13
<PAGE> 14
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.
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. The Company is currently in discussions with First
Union National Bank with respect to such default.
In December 1993, the New Jersey Ecomomic 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 June 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: August 13, 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 (A) WYANT
CORPORATION FORM 10-Q RE QUARTER ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH (B) 10-Q MARCH 31, 1997.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 800,670
<SECURITIES> 0
<RECEIVABLES> 12,218,488
<ALLOWANCES> 0
<INVENTORY> 10,240,854
<CURRENT-ASSETS> 25,649,157
<PP&E> 19,287,958
<DEPRECIATION> 0
<TOTAL-ASSETS> 46,183,582
<CURRENT-LIABILITIES> 22,820,047
<BONDS> 7,764,868
0
0
<COMMON> 27,037
<OTHER-SE> 11,525,546
<TOTAL-LIABILITY-AND-EQUITY> 46,183,582
<SALES> 22,129,598
<TOTAL-REVENUES> 22,129,598
<CGS> 15,433,423
<TOTAL-COSTS> 22,318,324
<OTHER-EXPENSES> (149,309)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 173,068
<INCOME-PRETAX> (212,485)
<INCOME-TAX> (36,000)
<INCOME-CONTINUING> (176,485)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (176,485)
<EPS-PRIMARY> (.10)
<EPS-DILUTED> (.10)
</TABLE>
