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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(AMENDMENT NO. 2)
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(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, 1998
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 registrant as specified in its charter)
<TABLE>
<S> <C>
New York 11-2236837
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
100 Readington Road, Somerville, New Jersey 08876
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 908-707-1800
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12 (g) of the Act:
Title of Each Class
- ---------------------------------------
Common Stock, par value $.01 per share
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
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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/A or any amendment to
this Form 10-K/A. ( )
The aggregate market value of the voting and non-voting common equity held by
non-affiliates of the registrant as of May 12, 1999, was $2,436,413.
As of May 12, 1999, there were 2,273,817 shares of common stock of the
registrant outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
1. The Exhibits identified in Item 14 (a) 3.
ii
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Item Page
<S> <C> <C>
PART I.
1. Business.................................................................. 1
2. Properties................................................................ 8
3. Legal Proceedings......................................................... 9
4. Submission of Matters to a Vote of Security Holders....................... 9
PART II.
5. Market for Registrant's Common Equity and Related Stockholder Matters..... 9
6. Selected Financial Data................................................... 11
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations................................................................ 12
7A. Quantitative and Qualitative Disclosures about Market Risk................ 21
8. Financial Statements and Supplementary Data............................... 22
9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure...................................................... 22
PART III.
10. Directors and Executive Officers of the Registrant....................... 22
11. Executive Compensation................................................... 24
12. Security Ownership of Certain Beneficial Owners and Wyant Management..... 29
13. Certain Relationships and Related Transactions........................... 31
PART IV.
14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.......... 32
</TABLE>
iii
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PART 1
ITEM 1. BUSINESS
A. GENERAL
Wyant Corporation (formerly Hosposable Products, Inc.), a New York
corporation incorporated in 1971 (hereinafter "Wyant"), has three wholly-owned
subsidiaries, Bridgewater Manufacturing Corp., a New Jersey corporation
("Bridgewater"), IFC Disposables, Inc., a Tennessee corporation ("IFC") and Wood
Wyant Inc. (formerly 3290441 Canada Inc.), a Canadian corporation ("Wood
Wyant"). Through its Wyant Health Care Division (the "Division" or "Wyant
Health Care Division"), it manufactures and distributes adult incontinent
products, including disposable underpads and adult briefs. IFC manufactures and
distributes disposable wipers and sanitary paper products and systems. Wyant
Health Care and IFC products are sold primarily in domestic markets. Wood Wyant
manufactures and distributes sanitation products and systems to commercial and
institutional markets in Canada. (The "Company" is used herein to make general
references, without distinction among Wyant, Wyant Health Care Division,
Bridgewater, IFC and Wood Wyant).
WYANT HEALTH CARE DIVISION
The majority of the sales of the Wyant Health Care Division's branded
products are to distributors for eventual use by hospitals, nursing homes and
other health care institutions, and to government agencies. Disposable
underpads and adult briefs are the Division's principal products. Their end-use
is for protection against incontinence. A portion of the Division's revenue is
derived through the sale of finished products as private label brands for major
customers. The Division's airlaid fabrics (AirlayTM) are used as
components of wiping products manufactured by IFC, and also are sold in roll
good form to converters and manufacturers who produce a wide range of health
care, consumer and industrial products.
In late 1996 the Division purchased a high speed adult brief converting
line. Both branded and private label adult briefs were introduced in 1997 to
further expand the Division's line of incontinent care products in this growth
market.
The Division's products are manufactured on a number of continuous
production lines that automatically assemble the various layers of product
materials, bond them with various fixative means, cut the materials to specific
lengths and fold, count, stack and bag/box the completed products. During 1998,
the Division produced the vast majority of its products with its own equipment,
at leased facilities in Fresno, California and at its principal manufacturing
facility in Branchburg, New Jersey purchased by Wyant in December 1993. The
Division's products are sold by a direct sales organization supported by a
customer service department located at the Branchburg facility.
SALE OF WYANT HEALTH CARE DIVISION
On February 23, 1999, Wyant's Board of Directors, pursuant to an Asset
Purchase Agreement (the "Asset Purchase Agreement") dated as of such date,
approved the sale of its Wyant Health Care Division to Paper-Pak Products, Inc.
("PaperPak") of LaVerne, California, for total consideration of approximately
$15,500,000 including the assumption of certain debt of $3,500,000. The
transaction is subject to PaperPak's completion of financing, customary
regulatory approvals and the approval of Wyant shareholders and is expected to
close during the second quarter of 1999.
As stated above, the operations of the Division comprise the company-owned
facility in Branchburg, New Jersey and the leased facility in Fresno, California
and incorporate the adult incontinent products manufacturing activities
undertaken directly by Wyant and Bridgewater. All assets related to these
operations (including equipment) will be sold to Paper-Pak subject to the terms
of the Asset Purchase Agreement. The lease covering the Fresno, California
facility will be assigned to Paper-Pak.
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Following completion of the sale, the Company will cease the manufacture of
adult incontinent products and the sale of the Division is not expected to
materially affect the operations of the Company's other operating units as each
is autonomous and separately managed. The Company will be precluded from
re-entering the adult incontinent products business for a period of five years
following the sale.
The Division supplies airlaid non-woven fabric and incontinent products to
IFC which will be subject to a three-year supply agreement upon completion of
the sale. IFC will supply PaperPak with QuickableTM absorbent washcloths at an
agreed upon price, which will be renegotiated every twelve months, and at a
volume which will be predetermined.
In reaching its decision to sell the Division , the Board of Directors
considered the following principal factors:
1. Strategic review of business
During 1998, the Company completed a strategic review of its business. The
major conclusion of this review was that the Company was operating in three
uncomplementary industry sectors. After evaluating each segment,
management found that the industry dynamics and market position and
prospects of Wood Wyant and IFC were critical to the future results of
Wyant, and that the Division's branded product sales had fallen in recent
years. The Board of Directors, in this context, also considered the
increase in income from operations in 1998 against cumulative operating
losses of approximately $2,000,000 in 1997 and 1996.
2. Significant capital investment could not be provided.
The industry in which the Division operates has already experienced
significant consolidation. Accordingly, the Division would require
significant additional capital investment to experience future growth.
Management concluded that the Company would not be able to provide the
necessary capital to the Division for it to be successful.
3. Debt reduction
The sale of the Division will provide the opportunity to reduce the
Company's debt while, at the same time, achieving significant value for the
business and assets related to the Division.
4. Future uncertainties related to the Division
The Division faces several significant uncertainties in the near term that
could have a material affect on the Company if the Division is not sold.
(See "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Significant factors and known trends with regard to
Discontinued Operations").
5. Business risks associated with disposition of the Division
As a result of the sale of the Division, the Company's results of
operations will be significantly dependent on, and materially affected by,
the results of operations of its two remaining business segments. The
Board of Directors viewed these as acceptable risks in light of the
anticipated benefits of the sale of the Division, the Company's roots in
the janitorial and sanitation business dating back to 1922 and management's
strategic review and assessment of the Company's business segments.
6. Fairness opinion
The Board of Directors retained the services of outside financial advisors
to assist in evaluating the financial elements of the sale of the Division.
On March 16, 1999, these advisors provided the Board of Directors with the
opinion that the transaction was fair from a financial point of view.
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WOOD WYANT
Wood Wyant is a manufacturer and national distributor, in Canada, of a
broad range of industrial and institutional sanitation products, including paper
hand towels, bathroom tissue, related sanitary paper products, janitorial
chemicals, waste receptacles and cleaning equipment and systems. Wood Wyant is
one of two national distributors of a full line of sanitary paper products,
janitorial chemicals and equipment, and sanitation supplies to institutional
markets in Canada and is the only distributor focused solely on janitorial and
sanitation supply products. Wood Wyant, headquartered in Montreal, employs
approximately 440 people and operates a paper converting plant and two chemical
manufacturing facilities in Ontario and British Columbia. Wood Wyant services
some 20,000 customers through a direct sales organization supported by customer
service centers located across Canada.
Wood Wyant's manufacturing operations include the conversion of base paper
and the manufacture of janitorial chemicals. Base paper is converted into paper
hand towels and bathroom tissue at a plant owned by Wood Wyant in Pickering,
Ontario. Specialized machinery in this plant cuts, folds or winds the paper into
finished products that are packaged and placed in shipping containers.
Wood Wyant develops and manufactures janitorial chemicals from raw
materials produced by major base chemical suppliers. The chemicals are blended
in large tanks and packed into shipping containers for sale by Wood Wyant's
distribution network.
Wood Wyant's distribution operations are conducted primarily from leased
facilities throughout Canada, thereby providing flexibility in meeting market
requirements and eliminating the need to make capital expenditures for real
estate.
In 1998, the Company, through Wood Wyant, acquired several businesses
engaged in the distribution of sanitation products and manufacture of janitorial
chemicals. On April 30, 1998, Wood Wyant acquired all of the issued and
outstanding shares of H.A. Perigord Company Limited, a distributor of sanitation
products. On June 26, 1998, Wood Wyant acquired all of the issued and
outstanding shares of Professional Sanitation Products Ltd., a distributor of
sanitation products. The total consideration for these acquisitions amounted to
$3,070,806, which was comprised of cash of $2,107,645 and 146,666 Class F
Preferred shares of Wood Wyant.
On June 30, 1998, Wood Wyant acquired all of the issued and outstanding
shares of four related businesses based in British Columbia for $2,644,228,
comprised of cash of $1,760,696 and 136,445 Class F Preferred shares of Wood
Wyant. The companies acquired are Midway Supply Ltd., Purnel Distributors Ltd.
and Midway Purnel Sanitary Supply Ltd., all of which are distributors of
sanitation products, and Fraser Valley Industrial Chemicals Inc., a manufacturer
of janitorial chemicals. For further information with respect to these
acquisitions, please see Note 3 to the Company's consolidated financial
statements.
IFC
IFC's operations are conducted at a newly established location in
Brownsville, Tennessee. IFC's manufacturing operations include the conversion of
various materials into wiping products. Specialized machinery cuts, folds or
winds various materials into finished products which are packaged and placed
into shipping containers. IFC's products are sold to some 683 distributors and
brokers located in 44 states by a direct sales organization and independent
brokers supported by customer service located at the Brownsville facility.
B. INDUSTRY SEGMENTS
The Company operates in three industry segments, including the health care
products segment. The assets, revenues and income before taxes of the two
continuing segments are shown in the "Notes to Consolidated Financial
Statements" (Part IV, Item 14).
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C. SUPPLY OF RAW MATERIALS
The Company purchases raw materials necessary for the manufacture of its
products from several unaffiliated suppliers. These raw materials are readily
available from numerous sources. The Company is not dependent upon any one major
source of supply, and is not limited by any supply contracts.
As of January 1, 1999, the Company signed a five-year supply agreement to
purchase a minimum of 16,200 short tons of paper towelling and tissue annually
at market prices. This supplier provides 100% of the Company's requirements for
these products.
D. MARKETING AND SALES
WOOD WYANT
Wood Wyant's products are sold by a field sales organization of
approximately 110. Sales (other than inter-company transactions with IFC) are
made primarily to end users, with a minor percentage made to distributors.
STRATEGY AND MARKETING
Wood Wyant's marketing strategy was established in the fall of 1994
following an extensive study of its sales organization by Wood Wyant and Tandem
Consulting Group, Canada's leading sales and marketing consulting group. This
study, which was undertaken over a period of several months, led to the
corporate strategy of building a business with superior return based upon a
consultative approach of developing comprehensive cost effective solutions to
customers' sanitation needs. In pursuing this strategy, Wood Wyant's primary
focus was on washroom and floor care programs within the health care, education,
industrial and office channels of distribution. This strategy has required
increased investment in sales training activities to increase product knowledge
and improve sales and account management capabilities. In addition, a broad
cross-section of managers participated under the direction of a task force in
the development of a strategic sales plan designed to ensure growth consistent
with Wood Wyant's objective.
Wood Wyant's direction in marketing calls for profitable growth based upon
a consultative selling approach where skilled and highly trained account
managers provide customers with cost effective solutions to sanitation problems.
Wood Wyant's marketing activities are consolidated in Montreal and have been
strengthened by the appointment of a Director of Marketing reporting to the Vice
President, Sales and Marketing and by the appointment of Product Line Managers
responsible for the planning and profitability of Wood Wyant's product lines.
The marketing group of Wood Wyant is responsible for the strategic direction and
growth and development of Wyant's various product lines.
SERVICE AND LOGISTICS
Wood Wyant operates fourteen full service customer service centers located
strategically across Canada in Dartmouth (Halifax), Lachine (Montreal), Hull
(Ottawa), Pickering (Toronto), Sudbury, Sault Ste-Marie, Thunder Bay, Winnipeg,
Edmonton, Castlegar, Kelowna and Vancouver (3). Responsibility for logistics is
centralized to provide greater control over essential operations of the business
in the areas of forecasting, production planning, inventory control and
management and purchasing. Service level standards are established and
performance is monitored on a continuous basis. Wood Wyant maintains a policy of
next day delivery of all core stocking products from its major service centers.
Such deliveries are made via courier companies, transportation companies, local
cartage or company - operated vehicles in selected locations. As a result of
these service levels and short lead times for replenishment, there are no
material backlogs.
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Wood Wyant's principal customer channels are in the health care and
education (including schools, universities and colleges) segments, but also
include industrial entities and distributors. Most of its customers are located
in Canada, with customers in the United States accounting for less than 8% of
sales, including sales to IFC. Wood Wyant has no single customer that accounts
for more than 1% of sales, except for IFC, which accounts for 6.5% of sales.
WYANT HEALTH CARE DIVISION
The Division's products are sold by 13 salaried sales and marketing
personnel and by several independent sales organizations that work on a
commission basis.
Most of the Division's sales (other than inter-company transactions with
IFC) are made to distributors that, in turn, sell the Company's products to
institutional users such as hospitals and nursing homes, and to industrial
users. Other sales are made to private labellers that sell to retail
individual/chain stores. The retail chains usually sell the products under
private label.
The following table shows, for the years indicated, percentage information
in respect of the Division's net sales.
<TABLE>
<CAPTION>
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Major Distributors................... 10.5 12.4 11.1
Other Distributors................... 34.7 19.9 21.0
Government Agencies.................. 1.0 1.1 0.8
Private Label........................ 18.4 28.9 28.7
Converters (airlaid/nonwoven fabrics) 7.0 * 5.2 * 7.7 *
Industrial Wiping Products (IFC)..... 28.4 32.5 30.7
</TABLE>
[FN]
* Does not include inter-company sales of $2,474,815, $2,498,939 and
$1,542,772, in 1998, 1997 and 1996, respectively, to IFC.
</FN>
At December 31, 1998 the Division had a backlog of firm orders of
approximately $2,120,000, compared to $1,460,000 at December 31, 1997. These
firm orders will be filled during the first quarter of 1999.
IFC
IFC's products are sold by 8 salaried sales personnel and by several
independent sales organizations that are paid on a commission basis.
IFC sales are comprised of wiping products (60%) and sanitary paper
products (40%). All wiper products sold by IFC are manufactured in its
Brownsville, Tennessee facility. All of IFC's sanitary paper products and
systems are supplied by Wood Wyant with IFC acting as Wood Wyant's master
distributor in the continental United States market.
IFC's sales are made primarily to distributors that resell IFC's products
to institutional users such as manufacturers, utilities, nursing homes and
restaurants.
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E. COMPETITION
WOOD WYANT
Wood Wyant competes in the sanitary paper and janitorial product markets
across Canada. The Canadian market for sanitary paper and sanitation products
is fragmented and is served by over 200 distribution companies that compete
directly with Wood Wyant on a regional basis and that tend to be small to medium
sized. Only two companies compete on a national basis, with Wood Wyant being
the only national full line distributor focused solely on the institutional
sanitation market. Recently, the North American sanitation distribution
industry has been experiencing a period of consolidation. Wood Wyant
participated in this consolidation process through the acquisition of four
distributors in Canada during the second quarter of 1998. Wood Wyant will
continue to seek out acquisition opportunities which meet its investment
criteria.
Wood Wyant's distribution capabilities are enhanced by its vertical
integration as a converter of paper products and a manufacturer of a complete
line of sanitation chemicals. Wood Wyant's size also permits it to take full
advantage of the benefits of bulk pricing and volume discounts offered by its
suppliers. However, Wood Wyant's ability to compete successfully is dependent
upon its ability to make timely delivery of quality products at competitive
prices. With respect to sanitary paper products, Wood Wyant is not fully
integrated and competes with fully integrated sanitary paper producers that have
substantial financial resources and significant market share relative to Wood
Wyant; therefore, Wood Wyant's results of operations could be adversely affected
if such fully integrated producers attempt to significantly increase market
share.
WYANT HEALTH CARE DIVISION
The industry in which the Division competes is highly competitive. Among
the competitors are such firms as Kendall, PaperPak (the proposed buyer of the
Division) and others with substantially greater resources than the Company's,
as well as many firms comparable to the Division in size and the primary
businesses of which are directly competitive. Although the Division is a
leading manufacturer of underpads, it is not a significant factor in the overall
adult incontinent market.
The Division's ability to compete successfully is dependent upon its
ability to make timely deliveries of value added products of a quality similar
to or higher than that of its competitors and at competitive prices.
IFC
IFC competes with major paper mills and smaller converters of towel,
tissue and disposable wiping products. The major mill category of competition
includes such companies as Kimberly Clark, Fort James and Wisconsin Tissue.
The smaller converters are multiple in number and are more regional in their
market approach.
In order to compete successfully, IFC must supply its customers with
quality products at competitive prices. Customer service and sales support
programs are necessary to insure that IFC is regarded as a valuable partner by
its customers.
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F. EMPLOYEES/UNION CONTRACTS
WOOD WYANT
Wood Wyant currently has approximately 440 employees, including
approximately 320 salaried employees and 120 hourly employees. Wood Wyant's
hourly workers are covered under four separate collective bargaining agreements,
the largest of which covers 80 workers at Wood Wyant's Pickering plant and
expires on October 25, 1999. Wood Wyant has never had a work stoppage in its
history, nor has it had any other material labor problems.
WYANT HEALTH CARE DIVISION
The Division has 187 employees, of whom 145 are employed in New Jersey,
and 42 are employed in Fresno, California.
The Division is party to collective bargaining agreements with the
International Production Service & Sales Employees Union that serves its New
Jersey factory-labor employees. The agreements expire in 2001. The Division
considers its relations with its employees to be satisfactory, and no labor
disputes are anticipated, nor have any affected operations negatively to date.
IFC
IFC employs 62 personnel at its facility in Brownsville, Tennessee.
Employees are not unionized.
G. PATENTS AND TRADEMARKS
The Company is the owner of 36 patents and 167 trademarks.
Of the patents, 35 apply to the Sanitation Products segment and relate to
dispensers used with the Company's paper and chemicals products. The remaining
patent is for "Tuckables(R)" underpads manufactured by the Health Care Products
segment. The Company is not able to assess any economic advantage particularly
attributable to any of the above patents.
The trademarks relate primarily to the Sanitation Products segment (134
trademarks), with 19 applicable to the Health Care Products segment and 14 to
the Wiping Products segment. These trademarks are used to protect the
identification of individual products, but the Company is unable to assess any
economic advantage particularly attributable to any of them. Moreover, there is
no assurance that trademark rights are enforceable as a mere consequence of
trademark registration.
H. ENVIRONMENTAL
The Company has been participating with the New Jersey Department of
Environmental Protection ("DEP") in the investigation and potential clean-up of
the Company's former site of operation located at 5 and 6 Easy Street,
Bridgewater, New Jersey. As a tenant, the Company is potentially responsible to
the DEP for environmental contamination based solely upon it having been a
tenant at the site where there is contamination. Similarly, the Company is
potentially jointly and severally liable with the landlord for both the
investigation and clean-up costs. To date, the investigation has established
that, in addition to on-site contamination, some of the contamination on the
site is or has come from off site. The Company disputes it caused any such
contamination and maintains that on-site contamination was a result of prior
tenants' acts.
Nevertheless, the Company has fully cooperated with the DEP and has
presently been directed by the DEP to delineate the ground water contaminant
plume, which may result in establishing that the contamination is a regional
problem rather than one specific to the former site that the Company leased.
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The Company has entered into a flat fee contract with its environmental
consultants for $11,750 for the delineation investigation. Upon determination
of the contaminant plume, the Company will petition the DEP for a classification
exception area where the remedial action will be natural attenuation.
After the investigation is completed, the DEP could require clean-up or
remediation of the contamination on site, the cost of which could potentially be
in the range of $100,000 to $150,000. However, present technology is such that
no remedial action plan could bring the site in conformity with the present DEP
regulations, regardless of the funds spent.
The Company is unaware of any other environmental or similar matters that
would have a material effect on the capital expenditures, earnings or
competitive position of the Company.
Item 2. PROPERTIES
WOOD WYANT
Wood Wyant's manufacturing operations include the conversion of base paper
and the manufacturing of janitorial chemicals. Base paper is converted into
paper hand towels and bathroom tissue at a plant owned by Wood Wyant in
Pickering (Toronto), Ontario. Specialized machinery in this plant cuts, folds
or winds the paper into finished products that are packaged and placed in
shipping containers. The Pickering plant occupies approximately 149,500 square
feet. For the year ended December 31, 1998, production at Pickering totalled
approximately 1,808,000 cases, which represents approximately 66% of capacity.
Wood Wyant develops and blends janitorial chemicals from raw materials
produced by major base chemical suppliers. The chemicals are blended in large
tanks and packed into shipping containers for sale by the Wood Wyant
distribution network. Wood Wyant operates two chemical plants which are located
in rented facilities in Scarborough (Toronto), Ontario and Abbotsford
(Vancouver), British Columbia. For the year ended December 31, 1998, total
production at these plants reached approximately 2,857,000 liters (49% of
capacity).
Wood Wyant's distribution operations are conducted through leased
facilities throughout Canada, thereby providing flexibility in meeting market
requirements and eliminating the need to make capital expenditures for real
estate. The location of the leased facilities, including square footage and
lease expiration dates, are as follows:
<TABLE>
<CAPTION>
AREA IN YEAR OF
SQUARE FEET EXPIRATION
----------- ----------
<S> <C> <C>
Manufacturing
Pickering (Toronto), Ontario (1)...... 78,200 --
Scarborough (Toronto), Ontario........ 22,700 2001
Abbotsford, B.C....................... 4,500 month to month
Distribution
Dartmouth (Halifax), Nova Scotia...... 12,100 2003
Lachine (Montreal), Quebec............ 91,700 2004
Hull (Ottawa), Quebec (2)............. 7,800 month to month
Pickering (Toronto), Ontario (1)...... 71,300 --
Sudbury, Ontario...................... 12,000 2003
Sault Ste-Marie, Ontario.............. 8,100 2003
Thunder Bay, Ontario.................. 4,200 2003
Winnipeg, Manitoba.................... 12,000 2001
Edmonton, Alberta..................... 14,000 2000
Burnaby (Vancouver), B.C.............. 10,400 2000
Coquitlam (Vancouver), B.C............ 25,000 2000
Vancouver, B.C........................ 8,000 2000
</TABLE>
(1) Wood Wyant owns this 149,500 sq. ft. facility.
(2) A new lease for a term of 5 years is currently being finalized.
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WYANT HEALTH CARE DIVISION
Since May 31, 1994 the Division has conducted all New Jersey operations at
its Branchburg, New Jersey location. This facility accommodates manufacturing
operations, warehousing and administrative activities in a 111,640 square foot
building. This facility will be sold to PaperPak pursuant to the Asset Purchase
Agreement if the transaction is consummated.
The Division leases approximately 80,000 square feet, used for
manufacturing and warehousing, in a building at 95 Santa Fe Avenue, Fresno,
California, from Len-Sid Realty Co. Leonard Schramm, a former President of the
Company is a partner in Len-Sid Realty Co. The terms of the lease agreement,
including $110,116 as annual rent, are comparable to terms that might be
obtainable from an unaffiliated lessor of like property in the immediate
vicinity of the Fresno warehouse. The lease term is for six months, but
terminable on 90 days' notice (essentially, because the landowner, The Atchison,
Topeka and Santa Fe Railroad, has the right to terminate Len-Sid Realty Co.'s
"possession" on 90 days' notice). This lease will be assigned to PaperPak upon
completion of the sale of the Division. See "Business - General - Sale of Wyant
Health Care Division."
IFC
During November 1997, IFC relocated its manufacturing operations from
leased premises in Jackson, Tennessee to a leased facility in Brownsville,
Tennessee. The lease for this 100,000 square foot facility will expire on
December 31, 2004. IFC has the option to extend the term by three years to
December 31, 2007.
Item 3. LEGAL PROCEEDINGS
From time to time, the Company may be a party to legal proceedings
incidental to its business. At present, there are no legal proceedings that are
material to the Company.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No event that would be described in response to this item has occurred.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Common Stock is traded on The Nasdaq SmallCap Market under the symbol
"WYNT". The listing of the Common Stock was transferred to The Nasdaq SmallCap
Market from the Nasdaq National Market System, effective with the open of
business on April 5, 1999. Wyant has been informed by the Nasdaq Stock Market
that it currently satisfies the continued listing requirements of The Nasdaq
SmallCap Market. The continued listing of the Common Stock on The Nasdaq
SmallCap Market is subject to customary administrative requirements of the
Nasdaq Stock Market relating to the listing.
On May 21, 1998, the Company effected a four-for-three stock split of the
Common Stock (the "Stock Split") in the form of a stock dividend to holders of
record on April 28, 1998. The following table sets forth the quarterly high and
low prices per share for the Common Stock for the periods indicated, as reported
by the Nasdaq National Market System. The prices for the period prior to May 21,
1998 have been retroactively adjusted to reflect the Stock Split. These prices
represent prices by dealers, do not include retail markups, markdowns or
commissions and do not necessarily represent actual transactions.
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<TABLE>
<CAPTION>
HIGH LOW
----- -----
<S> <C> <C>
1997
1st Quarter 4.312 3.375
2nd Quarter 3.937 3.187
3rd Quarter 4.875 2.625
4th Quarter 5.250 4.125
1998
1st Quarter 7.406 4.594
2nd Quarter 6.750 5.188
3rd Quarter 5.750 3.250
4th Quarter 4.500 3.250
</TABLE>
As of May 12, 1999, there were 2,273,817 shares of Common Stock
outstanding and approximately 700 record holders of Common Stock.
Wyant has never paid a cash dividend on the Common Stock and does not
anticipate paying any cash dividends in the foreseeable future. Wyant's ability
to pay dividends is subject to Wyant's income, receipt of cash flow from
subsidiaries in the form of dividends or similar distributions, financial
condition, capital needs and restrictions contained in various credit
agreements.
10
<PAGE> 14
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
Unaudited
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales..................................... $ 67,124 $ 63,560 $ 62,591 $ 60,539 $ 59,456
Cost of sales............................. 43,218 39,691 38,152 37,035 38,167
--------- --------- --------- --------- ---------
Gross profit.............................. 23,906 23,869 24,439 23,504 21,289
Selling, general and administration
expenses................................ 21,358 21,125 21,325 20,814 22,125
Amortization.............................. 508 429 505 584 653
Non-recurring items....................... -- -- 550 1,808 61
Interest expense.......................... 1,158 745 511 742 724
Other income (expense).................... (244) (230) (185) 191 265
--------- --------- --------- --------- ---------
22,780 22,069 22,706 24,139 23,828
Income (loss) from continuing
operations before income taxes
and extraordinary gain.................. 1,126 1,800 1,733 (635) (2,539)
Income tax expense (benefit).............. 572 801 796 (460) (625)
--------- --------- --------- --------- ---------
Income (loss) from continuing operations
before extraordinary gain............... 554 999 937 (175) (1,914)
Income (loss) from discontinued
operations, net of income taxes......... 1,021 (581) (793) 269 1,210
--------- --------- --------- --------- ---------
Income (loss) before extraordinary gain... 1,575 418 144 94 (704)
Extraordinary gain, net of income taxes... -- 92 -- -- --
--------- --------- --------- --------- ---------
Net income (loss)......................... 1,575 510 144 94 (704)
Dividends and accretion of mandatorily
redeemable preferred shares............. 360 191 -- -- --
--------- --------- --------- --------- ---------
Net income (loss) attributable to
common shares........................... $ 1,215 $ 319 $ 144 $ 94 $ (704)
========= ========= ========= ========= =========
Per common share
Basic
Income (loss) from continuing operations
before extraordinary gain............. $ 0.06 $ 0.22 $ 0.26 $ (0.05) $ (0.53)
Discontinued operations................. $ 0.28 $ (0.16) $ (0.22) $ 0.08 $ 0.33
Net income (loss)....................... $ 0.34 $ 0.09 $ 0.04 $ 0.03 $ (0.20)
Diluted
Income (loss) from continuing operations
before extraordinary gain............. $ 0.06 $ 0.22 $ 0.26 $ (0.05) $ (0.53)
Discontinued operations................. $ 0.27 $ (0.16) $ (0.22) $ 0.08 $ 0.33
Net income (loss)....................... $ 0.33 $ 0.09 $ 0.04 $ 0.03 $ (0.20)
Weighted average number of common
shares outstanding...................... 3,606,247 3,597,125 3,589,884 3,589,884 3,589,124
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31
---------------------------------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
Unaudited Unaudited
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital of continuing operations.. $ 1,822 $ 82 $ 3,217 $ 8,410 $ 6,783
Total assets.............................. 42,540 37,156 37,593 38,441 39,586
Long-term obligations (excluding
current maturities)..................... 3,888 1,998 6,259 5,945 7,718
Redeemable preferred shares............... 5,990 4,930 2,268 2,268 2,268
Cash Dividends declared per common share.. -- -- -- -- --
</TABLE>
NOTE: Data for the years 1994 to 1997 inclusive have been restated to reflect
the discontinued operations presentation and the stock split which
occurred in 1998.
11
<PAGE> 15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
INTRODUCTION
The following discussion and analysis of financial condition and results of
operations should be read in conjunction with the Company's consolidated
financial statements and accompanying notes. (See Item 14). As discussed under
"Business - General - Sale of Wyant Health Care Division", pursuant to the Asset
Purchase Agreement, Wyant has agreed to sell the Division and substantially all
of its operating assets to PaperPak. Accordingly, such consolidated financial
statements, as well as the discussion below and analysis of financial condition
and operations, reflect the consummation of this transaction by showing the
health care business as "discontinued operations" for income statement purposes
and as "assets held for divestiture" for balance sheet purposes.
The following information and the information included under "Business"
includes forward-looking statements (within the meaning of Section 21E of the
Securities Exchange Act of 1934) that involve a number of risks and
uncertainties that may influence the financial performance and earnings of the
Company, and may cause actual results to differ materially from those in the
forward-looking statements, including, but not limited to, factors such as the
ability of the Company to successfully integrate the business and personnel of
various acquired businesses into its operations, the ability to implement its
business strategy assuming consummation of the PaperPak transaction, the ability
to adequately address Year 2000-related issues, the ability to maintain existing
customer relationships and to secure new customers on satisfactory terms,
whether by contract or otherwise, unforeseen price pressure on the Company's
products or significant cost increases that cannot be recovered through price
increases or productivity improvements, the ability to obtain any necessary
financing on reasonably satisfactory terms, the effect of exchange rate
fluctuations and the effect of competitive, capital market and general economic
conditions. Such forward-looking statements, which reflect the Company's current
views with respect to certain future events and financial performance, should be
considered in light of such factors.
RESULTS OF OPERATIONS FOR YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED
DECEMBER 31, 1997
SALES: Sales of continuing operations for the year ended December 31, 1998
increased by $3,564,434 or 5.6% to $67,124,137 from the total of $63,559,703 in
the year ended December 31, 1997, after eliminating inter-segment sales of
$4,083,590 in 1998 and of $4,074,080 in 1997.
Sales of the sanitation products segment were $54,490,900 in 1998, up by
$1,956,172 or 3.7% over the 1997 sales of $52,534,728. This increase resulted
from additional sales from the businesses acquired in the second quarter of
1998, which more than offset a reduction in selling prices of paper products and
the adverse effect of a weaker Canadian dollar translation rate.
Sales of the wiping products segment increased by $1,617,772 or 10.7% to
$16,716,827 in 1998, from $15,099,055 in 1997. The increase resulted primarily
from higher sales of paper products and systems.
COST OF SALES AND GROSS PROFIT: Gross profit of the sanitation products
segment for 1998 was $21,041,150 or 38.6% of sales, compared with $21,169,065 or
40.3% of sales in 1997. The lower margin primarily reflected the continuing
competitive pricing environment for paper products, together with slightly
reduced margins for chemicals and sanitation products.
Gross profit of the wiping products segment in 1998 amounted to $2,864,521
or 17.1% of sales, compared with $2,699,437 or 17.9% of sales in 1997. The
reduced margin resulted from increased sales of paper products, which generate
relatively lower margins than most of the segment's other product lines.
12
<PAGE> 16
SELLING EXPENSES: Selling expenses for 1998 amounted to $12,658,838, an
increase of $727,358 or 6.1% over the 1997 level of $11,931,480. Expenses of the
sanitation products segment in 1998 at $10,438,946 were $573,953 or 5.8% higher
than the 1997 amount of $9,864,993. The increase resulted primarily from the
added expenses of the acquired businesses, which more than offset the favorable
impact of the weaker Canadian dollar translation rate. In the wiping products
segment, selling expenses in 1998 were $2,219,892, an increase of $153,405 or
7.4% over the 1997 total of $2,066,487, due principally to higher outward
freight costs resulting from the higher level of sales ($119,934).
GENERAL AND ADMINISTRATION EXPENSES: General and administration expenses
for 1998 were $8,699,535, a reduction of $494,408 or 5.4% compared with the 1997
expenses of $9,193,943. Expenses of the sanitation products segment for 1998
were $7,811,599, compared with $8,288,049 in 1997. The decrease of $476,450 or
5.7% from 1997 resulted from savings derived primarily from lower staffing
levels and the consolidation of warehousing activities at a Company-owned
facility which, together with the favorable impact of the weaker Canadian dollar
translation rate, more than offset the expenses added from the businesses
acquired during the second quarter of 1998 and the special charge of $464,286
incurred in the third quarter of the year for the rationalization of Wood
Wyant's operations following the acquisition of those businesses.
Expenses of the wiping products segment for 1998 were $572,936, an increase
of $114,542 or 25.0% over the 1997 level of $458,394. This resulted primarily
from a $50,000 increase to the allowance for doubtful accounts which was
required due to slower collection of accounts receivable, together with higher
staffing costs. Corporate charges in 1998 were $315,000, a decrease of $132,500
compared with the total of $447,500 in 1997, which included $206,500 of
professional fees associated with the purchase of the Canadian sanitation
products business in March 1997.
AMORTIZATION: Amortization amounted to $507,540 in 1998, an increase of
$78,729 over the 1997 level of $428,811, due to the additional amortization from
the acquired businesses and from the goodwill resulting from their purchase.
INTEREST EXPENSE: Interest expense amounted to $1,158,249 in 1998, an
increase of $413,160 over the 1997 expense of $745,089. The increase resulted
from higher borrowing costs in the United States ($290,450), together with an
increase in Canada of $122,710 which resulted from the financing of the
businesses acquired during 1998. Interest expense in the United States for 1998
includes approximately $632,000 of interest on the loan from Congress Financial
Corporation. This loan will be repaid from the proceeds from the sale of the
discontinued health care operations and consequently the interest expense will
be reduced accordingly from the time of the transaction.
OTHER INCOME: Other income amounted to $244,067 in 1998, up from $230,790
in 1997.
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND EXTRAORDINARY
GAIN: Income from continuing operations before income taxes and extraordinary
gain amounted to $1,125,576 in 1998, a reduction of $674,393 from the 1997 level
of $1,799,969. The sanitation products and wiping products segments decreased by
$414,468 and $149,059 respectively, while corporate expenses were $110,866
higher in 1998. The results for 1998 include the special charge of $464,286
incurred in the third quarter for the rationalization of Wood Wyant's operations
following the acquisitions in the second quarter of the year.
INCOME TAXES: Income tax expense at $572,000 was $228,597 lower in 1998
than the expense of $800,597 in 1997, reflecting the reduced level of pre-tax
income in 1998.
13
<PAGE> 17
DISCONTINUED OPERATIONS: The discontinued health care operations generated
after-tax income from operations of $1,021,602 or $0.28 per common share in
1998, compared with an after-tax loss of $580,874 or ($0.16) per common share in
1997. The improvement in 1998 was primarily a result of a 16.4% increase in
sales, due to the higher sales of Symphony(R) and private label adult
incontinent briefs, which were introduced during the first half of 1997 and of
higher margins, at 20% of sales compared with 16% of sales in 1997, due to
manufacturing efficiencies and increased sales activity. In addition, general
and administration expenses were lower than in 1997, when a non-recurring charge
of $427,000 for severance costs and professional fees was incurred.
EXTRAORDINARY GAIN: An extraordinary gain of $91,958 or $0.03 per common
share, net of tax of $47,372, was realized in 1997 on the refinancing of certain
term debt.
NET INCOME: Net income for 1998 amounted to $1,575,178, an improvement of
$1,064,722 over the 1997 income of $510,456. After deducting dividends and
accretion relating to the mandatorily redeemable preferred shares, the earnings
amounted to $0.34 per common share in 1998, compared with $0.09 per common
share in 1997.
RESULTS OF OPERATIONS FOR YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED
DECEMBER 31, 1996
SALES: Sales of continuing operations for the year ended December 31,
1997 increased by $968,996 or 1.55% to $63,559,703 from the level of
$62,590,707 in the year 1996, after eliminating inter-segment sales, which
increased to $4,074,080 in 1997 from $2,299,634 in 1996.
Sales of the sanitation products segment were $52,534,728 in 1997, down by
$351,618 or 0.7% from the 1996 sales of $52,886,346. This reduction resulted
from the negative impact of a weaker Canadian dollar translation rate and lower
selling prices for paper products, partially offset by higher sales volume of
paper products and increased sales of sanitation products and equipment.
Sales of the wiping products segment increased by $3,095,060 or 25.8% to
$15,099,055 in 1997, from $12,003,995 in 1996. This improvement was the result
of significantly higher sales of paper products and systems.
COST OF SALES AND GROSS PROFIT: The sanitation products segment realized
gross profit of $21,169,065 or 40.3% of sales in 1997, compared with
$21,991,889 or 41.6% of sales in 1996. The margin reduction was primarily
caused by the competitive pricing environment for paper products in 1997.
Gross profit of the wiping products segment was $2,699,437 or 17.9% of
sales in 1997. In 1996 gross profit amounted to $2,447,344 or 20.4% of sales.
The lower margin was the result of the significant increase in sales of paper
products, which generate lower margins than the segment's other product lines.
SELLING EXPENSES: Selling expenses for 1997 totalled $11,931,480, a
reduction of $84,284 from the 1996 level of $12,015,764. Expenses of the
sanitation products segment for 1997 at $9,864,993 were $468,691 lower than the
1996 amount of $10,333,684. The reduction was due primarily to lower staffing
levels in 1997 and the favorable impact of the weaker Canadian dollar
translation rate, together with lower marketing and promotion expenses than in
1996, when a new product catalogue was produced. In the wiping products
segment, 1997 expenses were $2,066,487, an increase of $384,407 or 22.9% over
the 1996 expenses of $1,682,080. This increase resulted primarily from higher
outward freight costs associated with the increased sales activity ($180,660)
and related selling expense increases.
14
<PAGE> 18
GENERAL AND ADMINISTRATION EXPENSES: General and administration expenses
for 1997 at $9,193,943 were $114,895 lower than the 1996 total of $9,308,838.
In the sanitation products segment, expenses declined by $463,916 in 1997 to
$8,288,049, compared with $8,751,965 in 1996 The reduction resulted primarily
from lower staffing levels in 1997 and the favorable impact of the weaker
Canadian dollar translation rate During 1997, the Company transferred its
Ontario Distribution Center from a leased facility in Scarborough, Ontario to
the company-owned facility at Pickering, Ontario The Company provided
approximately $238,000 at December 31, 1997 for future costs related to the
sublease of the Scarborough facility In the wiping products segment, 1997
expenses amounted to $458,394, an increase of $33,521 over the 1996 expenses of
$424,873, due primarily to higher staffing costs Corporate charges were
$447,500 in 1997, compared with $132,000 in 1996 The increase of $315,500 was
primarily a result of professional fees of $206,500 related to the Wood Wyant
acquisition in March 1997, together with increased insurance costs.
AMORTIZATION: Amortization amounted to $428,811 in 1997, a reduction of
$76,534 from the 1996 level due to the relatively low level of capital spending
in 1997.
NON-RECURRING ITEMS: A charge of $549,805 was recorded in 1996 for
expenses incurred in relation to the Wood Wyant acquisition.
INTEREST EXPENSE: Interest expense totalled $745,089 for 1997, an
increase of $233,836 over the 1996 expense of $511,253, as the additional
interest costs related to the debt used to finance the Wood Wyant acquisition
more than offset the favorable impact of lower interest rates in 1997.
OTHER INCOME: Other income for 1997 of $230,790 was $46,154 higher than
in 1996 The increase resulted from foreign exchange gains in Canada.
INCOME FROM CONTINUING OPERATIONS BEFORE INCOMES TAXES AND EXTRAORDINARY
GAIN: Income from continuing operations before tax and extraordinary gain
totalled $1,799,969 in 1997, an improvement of $67,105 over the 1996 amount of
$1,732,864 The sanitation products segment improved by $326,224, while the
wiping products segment declined by $171,424 Corporate expenses increased by
$86,695 in 1997.
INCOME TAXES: Income tax expense increased by $4,604 in 1997 to $800,597,
reflecting primarily the higher pre-tax income in 1997.
DISCONTINUED OPERATIONS: The discontinued health care operations incurred
an after-tax loss from operations of $580,874 or $(0.16) per common share in
1997, compared with an after-tax loss of $792,481 or $(0.22) per common share
in 1996 The reduction in after-tax loss resulted from higher margins in 1997
due to cost reductions and improved operating efficiencies, together with
general and administration expenses which were lower in 1997 as a result of
cost reduction programs, despite the inclusion of a non-recurring charge of
$427,000 in 1997 for severance costs and professional fees.
EXTRAORDINARY GAIN: An extraordinary gain of $91,958 or $0.03 per common
share, net of tax of $47,372, was realized in 1997 on the refinancing of
certain term debt.
NET INCOME: Net income for 1997 amounted to $510,456, an improvement of
$366,066 over the 1996 income of $144,390 After deducting dividends and
accretion relating to the mandatorily redeemable preferred shares, the earnings
amounted to $0.09 per common share in 1997, compared with $0.04 per common
share in 1996.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity and capital resources of the Company's United States operations
(IFC Disposables) and Canadian operations (Wood Wyant) are discussed
separately, as each is self-financing and has separate banking facilities.
15
<PAGE> 19
CANADIAN OPERATIONS
Cash utilized during 1998 amounted to $941,045. Cash generated from
operations, net of a working capital increase of $167,032, amounted to
$1,912,769. The higher working capital resulted primarily from decreases in
accounts payable ($428,079) and income taxes payable ($595,130) which, together
with an increase in prepaid expenses ($176,753), more than offset a reduction
in accounts receivable of $1,098,925. The lower receivables resulted from the
return to more normal levels following a postal strike in Canada in late -
1997, together with the impact of a weaker Canadian dollar translation rate.
The reduction in payables was primarily due to the weaker Canadian dollar
translation rate. The decrease in income taxes payable resulted from the
payment of 1997 income tax liabilities and a higher level of instalment
payments in 1998. Capital expenditures amounted to $679,331 in 1998.
Repayments of long-term debt during the year totalled $1,001,944, while an
amount of $197,671 was borrowed from an existing facility to finance certain of
the capital expenditures. In addition, $550,122 of outstanding Class A
Preferred shares were redeemed in January 1998 and dividends of $190,955 have
been paid on the Class A and Class B Preferred shares.
During the second quarter of 1998, Wood Wyant acquired four businesses for
total consideration of $5,715,034. These acquisitions were financed by term
bank loans, under which an amount of $3,525,440 was drawn down, and by the
issue of 283,111 Class F Preferred shares of Wood Wyant with a fair value of
$1,861,876.
The Class F Preferred shares of Wood Wyant were issued to the former
owners of the businesses acquired during the second quarter of 1998. The
significant conditions of the Class F Preferred shares of Wood Wyant are:
Prior to July 1, 2000 and subject to the priorities of the other classes
of preferred stock of Wood Wyant Inc., the shares:
1. are exchangeable for Wyant Corporation common stock on a share for
share basis and are entitled to dividends equivalent on a per share
basis, to any dividends paid on Wyant Corporation common stock; and
2. have a liquidation preference per share of one share of Wyant
Corporation common stock.
Holders of the shares have an option, which may be exercised between
July 1, 2000 and July 31, 2000, to cause Wood Wyant Inc. to redeem the shares in
five equal annual instalments at a price of Cdn $11.250028 ($7.3371) per share
plus any accrued and unpaid dividends. If the redemption option is exercised,
dividends of 3.5% per annum will be payable commencing July 1, 2000.
On June 25, 1998 the Company increased its secured revolving line of
credit from Cdn. $6,000,000 to Cdn. $7,500,000 ($4,891,411) and on March 10,
1999 increased it by an additional Cdn. $2,000,000 to Cdn. $9,500,000
($6,195,787). These increases were required to assist in refinancing the
operating cash requirements of the newly-acquired companies and to meet
increased working capital requirements. At December 31, 1998, approximately
$1,190,000 was available under the Cdn. $7,500,000 facility. In addition,
approximately $721,000 was available to finance future capital expenditures
under a revolving credit facility of $1,956,564 (Cdn. $3,000,000).
16
<PAGE> 20
All borrowings of the Canadian Operations are with the Bank of Nova
Scotia. Long-term debt outstanding at December 31, 1998 amounted to
$4,948,925, including $1,061,332 due within one year. All of the loans were at
the commercial prime rate in Canada (6.75% at December 31, 1998) plus 0.75%.
The secured revolving line of credit bears interest at the prime rate in
Canada. Under the terms of the loan agreements, covenants exist which require
Wood Wyant to meet certain ratios relating to debt to tangible net worth,
current assets to current liabilities and cash flow to debt service, as well as
maintaining a minimum level of tangible net worth. Also, borrowings under the
revolving credit facility must not exceed a given proportion of accounts
receivable. The Company was in compliance with all of the covenants at
December 31, 1998.
The Company has no commitments for material capital expenditures and has
no plans for major capital expenditures for existing businesses during the next
five years. Payments on long-term debt obligations existing at December 31,
1998 average less than $1,000,000 over the next five years with a maximum of
$1,496,000 in 2000. Amounts required to redeem Class A and Class B Preferred
shares approximate $550,000 per annum during that period, while redemption of
the Class F Preferred shares in the event that the option to redeem is
exercised by the holders of those shares would require an additional annual
amount of approximately $425,000 for five years commencing in 2000.
Management believes that operating cash flows from the continuing
businesses and amounts available under existing credit facilities will be
sufficient to meet ongoing operating cash requirements and amounts required for
capital asset additions, as well as meet the cash requirements for debt and
Preferred shares redemptions discussed above.
U.S. OPERATIONS
Cash of $2,524,213 was utilized by continuing operations in the United
States during 1998. Working capital increased $344,847, primarily due to
higher inventories ($509,741) and lower payables ($234,987), partially offset
by an increase of $347,435 in income taxes payable. The higher inventory
levels were at IFC and resulted primarily from a build-up of inventories to
counter temporary raw material supply shortages. Capital expenditures of
continuing operations in 1998 amounted to $174,361. A total of $1,642,028 of
the committed revolving credit facility with Congress Financial Corporation was
repaid during 1998.
Borrowings of the U.S. Operations consist of a committed revolving credit
facility of $13,000,000 with Congress Financial Corporation which bears
interest at commercial prime rate plus 1% (prime at December 31, 1998 was
7.75%). Unused availability was approximately $2,841,000 at December 31, 1998.
Maximum borrowing under the facility is determined by certain advance formulas
applicable to the level of accounts receivable and inventories and the value of
property, plant and equipment, net of guarantees.
Management believes that future operating cash flows and the unused
balance available under the existing credit facility will be sufficient to
enable the Company to meet its ongoing operating cash requirements and to
finance capital asset additions until the sale of the Wyant Health Care
Division and to meet its ongoing cash requirements if the sale of the Wyant
Health Care Division is not consummated. Thereafter, following the repayment of
the balance outstanding under the secured line of credit with Congress
Financial Corporation, management believes that future operating cash flows
and excess cash on hand will be sufficient to meet operating cash requirements
and to finance capital asset additions.
17
<PAGE> 21
DISCONTINUED OPERATIONS
On February 23, 1999, the Board of Directors approved the sale of the
Company's Wyant Health Care Division, subject to completion of buyer financing,
customary regulatory approvals and the approval of the Company's shareholders,
for cash on closing of $11,500,000 and $550,000 which will be held in escrow for
twenty-four months. These cash proceeds are subject to adjustment on closing,
which is expected to occur in the second quarter of 1999. Results of operations
between the measurement date of December 17, 1998 and the closing date are
expected to contribute positively to the Company's overall results.
Cash received on closing will be utilized to pay off the balance under the
secured line of credit with Congress Financial Corporation ($4,238,720 as at
December 31, 1998), and to pay the withdrawal liability and income taxes
generated by the transaction. The Company is in the process of evaluating
possible alternative uses of the balance of the net cash proceeds from the sale,
including the acquisition of assets or businesses in North America that are
consistent with its overall strategy of growing as a North American janitorial
and sanitation products manufacturer and distributor. Although the Company is
evaluating several opportunities, currently, there are no significant
acquisitions of assets or businesses that would be considered probable. To the
extent that it acquires any such assets or businesses, whether related to its
overall strategy or otherwise, there can be no assurance that such acquisitions
will be successfully integrated with its operations or that such acquisitions
will ultimately be profitable for the Company. Pending the application of such
proceeds, the Company intends to use such proceeds to repay certain short-term
debt of its subsidiaries.
Following completion of the sale, the Company will cease the manufacture of
adult incontinent products and the sale of the Division is not expected to
materially affect the operations of the Company's other operating units as each
is autonomous and separately managed. The Company will be precluded from
re-entering the adult incontinent products business for a period of five years
following the sale.
The Division supplies airlaid non-woven fabric and incontinent products to
IFC which will be subject to a three-year supply agreement upon completion of
the sale. IFC will supply PaperPak with Quickable(TM) absorbent washcloths at an
agreed upon price, which will be renegotiated every twelve months, and at a
volume which will be predetermined.
For more information with respect to the sale of the Division, including
the principal factors considered by the Board of Directors in approving the
sale, see "Business - General - Sale of the Wyant Health Care Division."
SIGNIFICANT FACTORS AND KNOWN TRENDS WITH REGARD TO DISCONTINUED OPERATIONS
PENSION PLAN
Certain employees of the Wyant Health Care Division are members of a
multi-employer defined benefit Pension Plan (the "Plan" or "Pension Plan"). The
Company was informed by the Pension Plan administrators that the Plan had failed
to meet minimum legal funding requirements and that the Company's pro-rata share
of the minimum funding deficiency was $370,000. The Plan has applied to the IRS
for a waiver from the minimum funding requirements and awaits a response. If the
waiver is obtained, the employers contributing to the Plan would be required to
fund and charge to earnings the funding deficiency, and corresponding interest
charges, over a 15 year period. If the waiver is not obtained, an excise tax may
be imposed on the Plan and such excise tax could be as much as 100% of the
funding deficiency.
18
<PAGE> 22
The sale of the Wyant Health Care Division will trigger a withdrawal
liability as PaperPak, the acquirer of the Division, will not assume the
Company's obligation under the Plan. This withdrawal liability will be funded
through the proceeds from the sale of the Division. In addition to the
withdrawal liability, the Plan may also seek to collect the Division's pro-rata
share of the funding deficiency discussed above. After taking into account these
Pension Plan liabilities, the Company estimates that it will realize a gain on
the sale of the Division.
AIRLAY II MACHINE
In 1992, the Division purchased a machine ("Airlay II") for the production
of airlaid products. During 1993, the machine was redesigned for commercial use.
Although Airlay II was installed in the Branchburg, New Jersey manufacturing
facility in the fourth quarter of 1994, only a small quantity of commercially
acceptable product has been manufactured to date. During the second quarter of
1998, a complete engineering evaluation of the machine was performed.
The Division implemented the majority of the recommended changes included
in the engineering evaluation. In December 1998 the Division developed a
business plan that included, as an objective, full commercial operation of
Airlay II by the end of 1999.
Airlay II is part of the assets of the Division that Wyant has agreed to
sell to PaperPak. As of December 31, 1998 the net book value of Airlay II was
approximately $2.2 million. In the event that the sale of the Division is not
consummated, there can be no assurance that Airlay II will achieve full
commercial operation or produce saleable product for the Division. Accordingly,
failure to achieve full commercial operation in the near future could result in
a significant write-down of the Company's investment in Airlay II, which
write-down would have a material adverse effect on the results of operations of
the Company.
ENVIRONMENTAL
The Company has been participating with the New Jersey Department of
Environmental Protection ("DEP") in the investigation and potential clean-up of
the Company's former site of operation located at 5 and 6 Easy Street,
Bridgewater, New Jersey. As a tenant, the Company is potentially responsible to
the DEP for environmental contamination based solely upon it having been a
tenant at the site where there is contamination. Similarly, the Company is
potentially jointly and severally liable with the landlord for both the
investigation and clean-up costs. To date, the investigation has established
that, in addition to on-site contamination, some of the contamination on the
site is or has come from off site. The Company disputes it caused any such
contamination and maintains that on-site contamination was a result of prior
tenants' acts.
Nevertheless, the Company has fully cooperated with the DEP and has
presently been directed by the DEP to delineate the ground water contaminant
plume, which may result in establishing that the contamination is a regional
problem rather than one specific to the former site that the Company leased. The
Company has entered into a flat fee contract with its environmental consultants
for $11,750 for the delineation investigation. Upon determination of the
contaminant plume, the Company will petition the DEP for a classification
exception area where the remedial action will be natural attenuation.
After the investigation is completed, the DEP could require clean-up or
remediation of the contamination on site, the cost of which could potentially be
in the range of $100,000 to $150,000. However, present technology is such that
no remedial action plan could bring the site in conformity with the present DEP
regulations, regardless of the funds spent.
The Company is unaware of any other environmental or similar matters that
would have a material effect on the capital expenditures, earnings or
competitive position of the Company.
19
<PAGE> 23
BACKLOG, IMPACT OF INFLATION, SEASONALITY
The Company attempts to maintain sufficient inventory levels for all
products to allow shipment against most orders for wiping products within a one
week period and next day for core stocking items of the Company's sanitation
products. To some extent, however, certain components must be inventoried
further in advance of actual orders to ensure availability. For the most part,
purchases are based upon quarterly requirements as projected after calculating
sales indications from the sales and marketing departments.
The Company's products are not subject to significant seasonal influences.
Because its products are sold primarily to distributors throughout the
United States and to distributors and end-users in Canada, the Company is
affected by general economic conditions. Accordingly, any adverse change in the
economic climate may have an adverse impact on the Company's sales and financial
condition.
YEAR 2000
The Year 2000 problem arises because many computer systems and software
products currently in use are coded to accept only two digit entries in the date
code field. Four digit entries will be required to identify 21st century dates.
Consequently, the use of software and computer systems that are not Year 2000
compliant could result in the disruption of operations. As a result, many
companies' computer systems and software may need to be upgraded or replaced to
conform with Year 2000 requirements.
In order to properly address the Year 2000 Issue, the Company has appointed
the Vice President, Information Technology of Wood Wyant as Year 2000 Project
Director to direct a project team which will coordinate the implementation of a
Year 2000 Plan by identifying Year 2000 issues and coordinating solutions. The
project team is currently being assembled. Its role will be to conduct Year 2000
readiness assessment audits at all of the Company's facilities, encompassing all
equipment and processes deemed important to the facility's operation.
Wood Wyant has installed new applications software for which it has
obtained written confirmation from the vendor that it is Year 2000 compliant.
This software has become operational in the first quarter of 1999. The software
currently in use at IFC is not Year 2000 compliant and will be replaced by
hardware and applications software which will be Year 2000 compliant by
mid-1999. As an additional precaution, the technical infrastructure of all the
Company's businesses will be audited and tested to ensure Year 2000 compliance
under normal business conditions.
The total cost of purchasing and installing the new Wood Wyant software is
estimated to be $1,957,000 (Cdn. $3,000,000), and is being financed through
lease facilities established with the Bank of Nova Scotia. The cost to replace
computer hardware and applications software at IFC has not yet been determined
but is not expected to be material.
The Company is also preparing to issue Year 2000 compliance letters
requesting confirmation of suppliers' readiness and follow-up discussions will
take place for all business-critical suppliers. Major customers will also be
contacted to confirm their Year 2000 readiness.
To date, the Company has not incurred significant incremental costs in
order to comply with Year 2000 requirements and does not believe it will incur
significant incremental costs in the foreseeable future. However, there can be
no assurance that Year 2000 errors or defects will not be discovered in the
Company's software systems and, if errors or defects are discovered, there is no
assurance that this would not result in a material financial risk to the
Company.
20
<PAGE> 24
In addition, the Company purchases goods and services from third party
vendors that may not be Year 2000 compliant. While the Company intends to obtain
confirmation of vendors' state of readiness during the second quarter of 1999,
their failure to operate properly with regard to Year 2000 requirements could
require the Company to incur material expenses to rectify the impact on the
Company of such failure. However, all of the Company's raw materials are widely
available and the Company is not dependent on any one supplier or group of
suppliers.
The Company does not know the state of preparedness for Year 2000 issues of
all of its customers. However, no single customer exceeds 2% of consolidated
sales and therefore the risk the Company faces is broad based if many customers
are unable to use information systems necessary to place orders for Company
products.
The Company's Year 2000 Issue involves significant risks. There can be no
assurance that the Company will succeed in implementing its Year 2000 Plan. The
following describes the Company's most reasonably likely worst-case scenario,
given current uncertainties.
If the Company's replaced internal information technology systems fail the
Company will experience significant difficulties in supplying customers and such
a failure could hamper the Company's ability to manage the orderly replenishment
of inventories.
If the Company's vendors or suppliers of its required power,
telecommunications, transportation and financial services, fail to provide the
Company with products and services, it will be unable to provide services to its
customers.
If any of these uncertainties were to occur, the Company's business,
financial condition and results of operations would be adversely affected. The
Company is unable to assess the likelihood of such events occurring or the
extent of the effect on the Company.
Although the Company has not yet developed a comprehensive contingency plan
to address situations that may result if the Company or any of the third parties
upon which the Company is dependent is unable to achieve Year 2000 readiness,
the Company's Year 2000 compliance program is ongoing and its ultimate scope, as
well as the consideration of contingency plans, will continue to be evaluated as
new information becomes available.
The Company plans to achieve Year 2000 compliance by mid-1999.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is subject to market risk principally in two areas, interest
rate risk and foreign currency exchange rate risk.
INTEREST RATE RISK
The Company's lines of credit and long-term debt are all at rates of
interest which fluctuate with changes to bank prime rates in either the United
States or Canada. Consequently, increases in interest rates could have an
adverse effect on the Company's future results.
21
<PAGE> 25
FOREIGN CURRENCY EXCHANGE RATE RISK
The Company's results of operations are significantly dependent on, and
materially affected by, the results of operations of Wood Wyant and the
attendant business risks that are associated with the operation of Wood Wyant as
a going concern. These material risks include the following:
- A significant portion of the Company's earnings, on a consolidated
basis, will come from Wood Wyant, a Canadian corporation. As a
result, the Company's results of operations and earnings may be
adversely affected by the fluctuation in the currency exchange rate
between US and Canadian dollars.
- Since Wood Wyant conducts its business using Canadian dollars as its
operational currency, to the extent the Canadian dollar strengthens
against the US dollar, United States competitors in the institutional
sanitation business may become more active in the Canadian market. As
a result, the Company's results of operations and earnings may be
adversely affected in light of potential greater competition in times
of a stronger Canadian dollar.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Item 14.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
On April 21, 1997, the firm of Arthur Andersen LLP (the "Former Auditors")
was notified that it was being dismissed as Wyant's independent certified public
accountants as of such date and that the firm of Ernst & Young LLP (the
"Auditors") had been engaged as of such date as Wyant's independent certified
public accountants. The decision to dismiss the Former Auditors and to engage
the Auditors was approved by the Board of Directors at the time.
The Former Auditors served as independent certified public accountants for
Wyant since 1990. The Report of Independent Public Accountants of the Former
Auditors on the consolidated financial statements of Wyant and subsidiaries as
of December 31, 1996 and 1995 and for each of the three years in the period
ended December 31, 1996 expressed an unqualified opinion. There were no
reportable events (as defined in Commission Regulation S-K, Item 304(a)(1)(v))
or disagreements with the Former Auditors on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedure
that were not resolved to the satisfaction of the Former Auditors during the
1995 and 1996 fiscal years and through April 21, 1997.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS
ROBERT E. BRIGGS, AGE 54, a director since 1997, has been President of the
Division since May 1997. He joined Wyant as Vice President of Operations in
August 1996. Prior to that, Mr. Briggs was the Director of Operations for
American White Cross from 1993 to 1996. He started his career with Johnson &
Johnson, spending 26 years in increasingly important roles and held a number of
positions including Director of Operations for the Johnson & Johnson Film and
Finishing Operations.
22
<PAGE> 26
RICHARD J. CHARLES, AGE 68, a director since 1997, was a director of Wyant
& Company, an affiliate of Wyant, from 1995 to March 1997. He has been Vice
President - Customer Service and Subsidiaries of the Paper Converting Machine
Company of Green Bay, Wisconsin for 17 years.
THOMAS R.M. DAVIS, AGE 51, a director since 1996, was counsel to Wyant &
Company from 1987 to March 1997 and to Wood Wyant, Wyant's wholly owned Canadian
subsidiary, since March 1997 and has been a partner in the Canadian law firm of
McCarthy T#trault since 1980.
NICHOLAS A. GALLOPO, AGE 66, a director since 1996, is a consultant and
Certified Public Accountant. He retired as a partner of Arthur Andersen LLP in
1995 after 31 years with the firm. He also served as a director of Neuman Drug
Company in 1995 and 1996.
DONALD C. MACMARTIN, AGE 56, a director since 1995, was President of Wyant
& Company from 1994 until March 1997 and became Chairman, President and Chief
Executive Officer of Wood Wyant in March 1997. Prior to that, he was President
of Canstar Sports Inc. of Montreal, Quebec from 1992 to 1994 and President of
Corby Distilleries Ltd. of Montreal, Quebec from 1989 to 1992. Since 1996, Mr.
MacMartin has served as Wyant's Chief Executive Officer and the Chairman of the
Board of Directors and, in addition since 1997, as its President.
JOHN B. WIGHT, AGE 73, a director since 1995, is a Canadian Chartered
Accountant. He was a director of Wyant & Company from 1988 until March 1997.
JAMES A. WYANT, AGE 46, a director since 1990, has served as Vice Chairman
of the Board of Directors since 1995 and was appointed Corporate Secretary of
Wyant in March 1997. He was President and a director of Wyant & Company from
1986 until 1994, subsequently served as Vice Chairman of the Board of Directors
until March 1997 and became President and Secretary of Wyant & Company in March
1997. Mr. Wyant has also been a director and Vice Chairman of the Board of
Directors of Wood Wyant since March 1997.
Each director of the Company is elected yearly to serve by the shareholders
of the Company at its annual meeting.
EXECUTIVE OFFICERS
MARC A. D'AMOUR, AGE 41, was Vice President, Finance and Chief Financial
Officer of Wyant & Company from 1994 until March 1997 and became Vice President,
Finance and Chief Financial Officer of Wood Wyant in March 1997. Mr. D'Amour has
served as Vice President, Chief Financial Officer and Treasurer of Wyant since
March 1997. Prior to joining Wyant & Company, Mr. D'Amour held senior financial
positions with Domtar Inc. after an eleven-year career with Price Waterhouse.
The business experience, current position and related disclosure with
respect to Wyant's other executive officers, each of whom is also a director of
Wyant, is set forth above under "--Directors."
COMPLIANCE WITH SECTION 16 (A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires executive officers, directors and persons who beneficially own more
than 10% of the Common Stock to file within prescribed periods initial
statements of beneficial ownership and statements of changes in beneficial
ownership of their shares of Common Stock with the Securities and Exchange
Commission (the "Commission") and the Nasdaq Stock Market. Such persons are also
required to furnish Wyant with copies of all such statements that they file.
Based on its review of the copies of such statements received by it, except as
described in the next paragraph, Wyant believes that, during 1998, all such
filing requirements applicable to such persons were duly complied with.
23
<PAGE> 27
Thomas R.M. Davis and Nicholas A. Gallopo each failed to report his initial
statement of beneficial ownership and the subsequent acquisition of options to
purchase 16,002 shares of Common Stock that were issued to each of them pursuant
to the 1997 Stock Incentive Plan on three separate dates between 1996 and 1998.
This failure to report was corrected by each of Mr. Davis and Mr. Gallopo by the
filing of a Form 3 and 4 with the Commission in March 1999.
Item 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLES
The following table summarizes compensation earned in 1998, 1997 and 1996
by the Chief Executive Officer and the only other executive officers whose 1998
salary and bonus exceeded $100,000 (the "named officers").
TABLE I
1998 SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Number
of Shares
Covered
Name and by Stock
Principal Positions Year Salary Bonus Options (1)
- ------------------- ---- ------ ----- -----------
<S> <C> <C> <C> <C>
Donald C. MacMartin (2)
Chairman, President 1998 $269,633 -0- -0-
and Chief Executive 1997 245,582 $56,484 73,334
Officer 1996 -0- -0- 62,667
James A. Wyant (2) 1998 147,219 -0- -0-
Vice-Chairman and 1997 155,295 19,024 -0-
Corporate Secretary 1996 -0- -0- -0-
Robert E. Briggs 1998 190,000 45,600 -0-
President, Wyant 1997 158,461 25,000 33,335
Health Care Division 1996 47,767 12,500 13,334
Marc A. D'Amour (2) 1998 124,705 -0- -0-
Vice-President, Chief 1997 122,791 22,265 33,335
Financial Officer and 1996 -0- -0- 13,334
Treasurer
</TABLE>
(1) The number of shares referred to in Table I reflect the Stock Split.
(2) Compensation payments to Messrs. Donald C. MacMartin, James A. Wyant and
Marc A. D'Amour were made in Canadian dollars and, accordingly, such
payments have been converted to United States dollars using an average of
the exchange rates in effect during 1998 and 1997 of U.S. $1.00 = Cdn.
$1.4835 and U.S. $1.00 = Cdn. $1.3844, respectively.
24
<PAGE> 28
On September 23, 1997, the Board of Directors, acting on the recommendation
of a Special Subcommittee of the Compensation Committee of the Board of
Directors, unanimously approved a Cdn. $300,000 loan from Wood Wyant to
Donald C. MacMartin, the Corporation's Chairman, President and Chief
Executive Officer. Mr. MacMartin absented himself from the meeting.
Interest is payable annually based on Wood Wyant's cost of funds, which is
at prevailing commercial market rates (at December 31, 1998, such rate was
6.75%); principal is payable at the rate of $15,000 annually, over a ten
year period, with the balance payable at the end of such 10 year period.
As of April 22, 1999, there is Cdn. $285,000 outstanding with respect to
the loan.
TABLE 2
1998 STOCK OPTIONS TABLE
<TABLE>
<CAPTION>
NUMBER OF SHARES COVERED BY VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
NAME DECEMBER 31, 1998 (1) AT DECEMBER 31, 1998 (2)
- ------------------ -------------------------------- --------------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
$ $
<S> <C> <C> <C> <C>
Donald C. MacMartin 140,001 6,667 -0- -0-
Robert E. Briggs 40,001 6,668 2,500 834
Marc A. D'Amour 41,668 5,001 -0- -0-
</TABLE>
____________
(1) The number of shares referred to in Table 2 reflect the Stock Split.
(2) Based on the price of $3.25 per share, the closing price of the shares
on the Nasdaq National Market System on December 31, 1998.
REPORT OF THE COMPENSATION COMMITTEE
Wyant's executive compensation program is based upon creating shareholder
value. All executive activities including Wyant strategic planning, management
initiatives and overall financial performance are focused on increasing
shareholder value. The Compensation Committee of the Board of Directors has
established a program to:
(1) Reward executives for long-term strategic management and the
enhancement of shareholder value.
(2) Integrate compensation programs with Wyant's annual and long-term
strategic planning.
(3) Support a performance-oriented environment that rewards performance
not only with respect to Wyant goals but also Wyant performance as
compared to industry performance levels.
25
<PAGE> 29
The total compensation program consists of both cash and equity-based
compensation. The Compensation Committee determines the level of salary and
bonuses, if any, for key executive officers based upon competitive norms.
Actual salary changes are based upon performance.
Long-term incentives are provided through the issuance of stock options,
pursuant to Wyant's 1991 Stock Option Plan and 1997 Stock Incentive Plan. The
1997 Stock Incentive Plan also permits the granting of other types of
stock-based awards. The Board of Directors has the power, subject to the
provisions of these plans, and utilizing recommendations received from the
Stock Option Committee, to determine the persons to whom and the dates on which
awards will be granted, the number of shares subject to each award and the term
and other conditions applicable to each award.
Compensation Committee
James A. Wyant (Chair)
Richard J. Charles
Thomas R.M. Davis
Donald C. MacMartin
John B. Wight
EMPLOYMENT AND RELATED AGREEMENTS WITH NAMED EXECUTIVE OFFICERS
Pursuant to an employment agreement with Wood Wyant, James A. Wyant serves
as Vice-Chairman of Wood Wyant and receives a base salary (Cdn. $218,400 in
1998 [U.S. $147,219]), subject to annual increases based on the increase, if
any, in the Consumer Price Index of Canada, bonus compensation based upon a
specified formula and certain other benefits. Unless it is terminated earlier
pursuant to its terms, such employment agreement will expire on December 31,
2001, subject to extension on a year-to-year basis thereafter. Mr. Wyant also
serves as Vice-Chairman and Corporate Secretary of Wyant.
Effective January 1, 1999, Donald C. MacMartin and Marc D'Amour entered
into employment agreements with Wood Wyant and will receive a base salary of
Cdn. $410,000 and Cdn. $195,000, respectively. The agreements also provide for
bonus compensation at the discretion of the Board of Directors of Wood Wyant
and for certain other benefits. Mr. MacMartin serves as Chairman, President and
Chief Executive Officer of Wood Wyant and Mr. D'Amour as Vice-President,
Finance and Chief Financial Officer. Unless terminated earlier pursuant to
their terms, the employment agreements will expire on December 31, 2001,
subject to extension on a year-to-year basis thereafter. Mr. MacMartin also
serves as Chairman, President and Chief Executive Officer of Wyant and Mr.
D'Amour serves as Wyant's Vice-President, Chief Financial Officer and
Treasurer.
Pursuant to a retirement arrangement agreement dated June 27, 1994, as
amended, between Mr. MacMartin and Wood Wyant, Wood Wyant agreed to provide Mr.
MacMartin, on retirement or death, with supplementary retirement benefits to
the extent that the benefits provided under such retirement arrangement exceed
the benefits provided pursuant to Wood Wyant's defined benefit final average
pension plan.
Pursuant to a severance agreement dated August 14, 1997 between Wyant and
Robert E. Briggs, Mr. Briggs will receive one year's salary from Wyant if
either (1) within three months after the sale of all or substantially all of
the assets of the Division, Mr. Briggs is terminated without cause by the
buyer thereof or (2) at the time of such sale, Mr. Briggs declines any offer of
employment made by the buyer of the Division. In either situation, the payment
to Mr. Briggs of one year's salary will be made on the final date of employment
with the buyer or the Division, as the case may be, based on his salary then in
effect. Notwithstanding this agreement, no payment will be made to Mr. Briggs
should he resign following his acceptance of any such offer of employment from
the buyer of the Division. This severance agreement would be applicable to Mr.
Briggs if the Paper-Pak Transaction is consummated. Mr. Briggs serves as
President of the Division.
26
<PAGE> 30
PERFORMANCE GRAPH
Set forth below is a line graph comparing cumulative total shareholder
return, over five years, upon an investment in the Common Stock with
(artificially aggregated) an equivalent investment in (a) Nasdaq Stock Market
companies (U.S.), and (b) those in the Paper and Allied Products index of the
Nasdaq Stock Market:
GRAPH
COMPARISON OF FIVE YEAR-CUMULATIVE TOTAL RETURNS
PERFORMANCE GRAPH FOR
WYANT CORPORATION
Prepared by the Center for Research in Security Prices
Produced on 03/11/99 including data to 12/31/1998
LOGO
LEGEND
<TABLE>
<CAPTION>
SYMBOL CRSP TOTAL RETURNS INDEX FOR: 12/1993 12/1994 12/1995 12/1996 12/1997 12/1998
- ------ ----------------------------- ------- ------- -------- ------- ------- -------
<C> <S> <C> <C> <C> <C> <C> <C>
Wyant Corporation 100.0 116.0 110.0 74.0 104.0 69.3
Nasdaq Stock Market (US Companies) 100.0 97.8 138.3 170.0 208.3 293.5
NASDAQ Stocks (SIC 2600-2699 US Companies)
Paper and allied products 100.0 107.7 117.5 151.9 202.8 164.9
</TABLE>
NOTES:
A. The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on the
previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a trading
day, the preceding trading day is used.
D. The index level for all series was set to 100.0 on 12/31/93.
27
<PAGE> 31
STANDING COMMITTEES OF THE BOARD OF DIRECTORS, COMPENSATION COMMITTEE
INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors has no Nominating Committee, but the Board of
Directors as a whole nominates director candidates.
The Board of Directors met twelve times in 1998 to review financial
information, corporate business strategies and general matters in respect of
Wyant's business.
The Executive Committee, comprised of Donald C. MacMartin, Thomas R.M.
Davis, Nicholas A. Gallopo and James A. Wyant, met once in 1998 to review a
strategic business issue.
The Audit Committee, comprised of Richard J. Charles, Nicholas A. Gallopo,
John B. Wight and James A. Wyant, met three times during 1998 to review
financial reporting matters and to discuss audit, internal control, information
technology and other matters.
The Compensation Committee, comprised of Richard J. Charles, Thomas R.M.
Davis, Donald C. MacMartin, John B. Wight and James A. Wyant, met seven times
during 1998 to consider compensation principles and practices and the amounts to
be paid to officers and senior employees.
The Stock Option Committee, comprised of Richard J. Charles, Thomas R.M.
Davis and Nicholas A. Gallopo, met once during 1998 to consider the grants of
options to employees of Wyant and its subsidiaries.
Donald C. MacMartin and James A. Wyant serve on the Compensation Committee
and are also executive officers of Wyant. John B. Wight also serves on the
Compensation Committee and is an employee of Wood Wyant. Mr. MacMartin does not
participate in any decisions of the Compensation Committee concerning his own
compensation. The Compensation Committee does not consider the compensation of
Mr. Wyant or Mr. Wight.
During 1998 all directors of Wyant attended 75% or more of the meetings of
the Board of Directors and the committees on which they served.
COMPENSATION OF DIRECTORS
During 1998, each director of Wyant who was not an employee of the Company
received an annual director's fee of $8,000 paid in equal quarterly
installments. In addition, under Wyant's 1997 Stock Incentive Plan, options to
purchase Common Stock at $5.8125 per share were awarded during 1998 to the
following directors: Richard J. Charles (1,334 shares), Thomas R.M. Davis (1,334
shares) and Nicholas A. Gallopo (1,334 shares). Under this plan, each new
non-employee director of Wyant receives an option to purchase 13,334 shares of
Common Stock upon joining Wyant's Board of Directors and each continuing
non-employee director receives an option to purchase 1,334 shares of Common
Stock for each year of service on the Board of Directors. The exercise price of
each such option is equal to the fair market value of the covered shares at the
time the option is granted. Lastly, effective May 28, 1998, Mr. Davis and Mr.
Gallopo each received a special fee of $1,000 payable in quarterly installments
in respect of their services as chairmen of the Stock Option Committee and the
Audit Committee, respectively.
28
<PAGE> 32
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND WYANT MANAGEMENT
The following table sets forth certain information regarding the ownership
of Common Stock as of April 22, 1999 by (1) all of those known by Wyant to be
beneficial owners of more than five percent (5%) of the outstanding shares of
Common Stock; (2) each director of Wyant, (3) each of the executive officers
named in Table I - 1998 Summary Compensation Table under "Executive
Compensation # Summary Compensation Tables;" and (4) all executive officers and
directors of Wyant as a group.
<TABLE>
<CAPTION>
NUMBER
OF SHARES
NAME AND ADDRESS BENEFICIALLY PERCENT
OF BENEFICIAL OWNER OWNED (1)(2) OF CLASS
- ------------------- ------------ --------
<S> <C> <C>
The Wyant Voting Trusts 1,250,252 (3) 55.0%
c/o Wyant & Company Inc.
1475, 32nd Avenue
Lachine, Quebec
Wyant & Company Inc. 1,333,333 (4) 37.0%
1475, 32nd Avenue
Lachine, Quebec
First Wilshire Securities Management, Inc. 194,841 8.6%
600 South Lake Street
Pasadena, California
Wilen Management Company, Inc. 214,149 9.4%
2360 West Joppa Road
Lutherville, Maryland
Donald C. MacMartin
(Chairman of the Board, President & Chief 178,001 (5) 7.4%
Executive Officer)
James A. Wyant 0 (3)(4) 0.0%
(Vice Chairman of the Board &
Corporate Secretary)
Marc A. D'Amour 45,335 (6) 2.0%
(Vice-President, Chief Financial Officer &
Treasurer)
Robert E. Briggs 44,001 (7) 1.9%
(A Director)
Richard J. Charles 14,668 (8) 0.6%
(A Director)
Thomas R.M. Davis 17,002 (9) 0.7%
(A Director)
Nicholas A. Gallopo 16,002 (10) 0.7%
(A Director)
John B. Wight 32,001 (11) 1.4%
(A Director)
All Directors and Officers as a Group 2,708,373 (12) 73.5%
(8 Persons)
</TABLE>
29
<PAGE> 33
1. In accordance with Rule 13d-3 under the Securities Exchange Act of 1934
(the "Exchange Act"), a person is deemed to be the beneficial owner, for
the purposes of this table, of any shares of Wyant if he or she has or
shares voting or investment power with respect to such security or has the
right to acquire beneficial ownership of any shares of Wyant within 60 days
of the Record Date. For purposes of calculating the percentage of
outstanding shares held by each person included in the table above, any
shares which such person has the right to acquire within 60 days of the
Record Date are deemed to be outstanding, but not for the purpose of
calculating the percentage ownership of any other person. Unless otherwise
noted, the persons as to whom the information is provided have sole voting
and investment power over the shares of Wyant shown as beneficially owned.
2. These shares of Common Stock include fractional shares issued pursuant to
the Stock Split, rounded to the nearest whole number.
3. These shares of Common Stock are held pursuant to certain trust agreements
for the benefit of certain Canadian corporations owned by members of the
Wyant family as follows: (i) 420,920 shares held for the benefit of Wyant
& Company Inc., a Canadian corporation owned by members of the Wyant family
("Wyant & Company"); (ii) 317,333 shares held for the benefit of 3287858
Canada Inc., a Canadian corporation wholly owned by Lynne Emond
("Lynneco"); (iii) 317,333 shares held for the benefit of Derek Wyant
Holdings Inc., a Canadian corporation wholly owned by John Derek Wyant,
M.D. ("Derekco"); and (iv) 194,666 shares held for the benefit of 3323986
Canada Inc., a Canadian corporation wholly owned by the Estate of the late
Gerald W. Wyant ("Geraldco"). The shares held for the benefit of Wyant &
Company, Lynneco and Derekco are subject to a voting trust (the "First
Voting Trust"), under which James A. Wyant has sole and absolute discretion
to vote and dispose of such shares. After March 18, 2003, Wyant & Company,
Lynneco and Derekco shall each have the right to have up to ten percent of
their respective shares released from the First Voting Trust each year. The
First Voting Trust will terminate as of March 18, 2012, unless terminated
earlier pursuant to its terms. The shares held for the benefit of Geraldco
are subject to the terms of a separate voting trust (the "Second Voting
Trust"), under which James A. Wyant has sole and absolute discretion to
vote such shares. The terms of the Second Voting Trust limit the power of
James A. Wyant and Geraldco to dispose of the shares directly or
indirectly, but provide James A. Wyant with an option to purchase the
shares pursuant to terms established thereunder. The Second Voting Trust
will terminate as of March 31, 2007, unless terminated earlier pursuant to
its terms. James A. Wyant, in his capacity as voting trustee, may be deemed
to be the beneficial owner of all the shares held in the First and Second
Voting Trusts but he disclaims beneficial ownership of such shares, other
than the shares held in the First Voting Trust for the benefit of Wyant &
Company.
4. These shares of Common Stock represent record ownership by Wyant & Company
of 1,333,333 shares of Class E Exchangeable Preferred Stock of Wood Wyant
Inc. ("Wood Wyant"), a wholly owned Canadian subsidiary of Wyant (the
"Class E Preferred Stock"), which are exchangeable, on demand and without
additional consideration, for shares of Common Stock of Wyant on a
one-for-one basis. Although Wyant & Company is the record owner of the
Class E Preferred Stock, under the terms of a written agreement among
Wyant & Company and certain of its shareholders, and by virtue of
Lynneco's and Derekco's respective interests in Wyant & Company, each of
Lynneco and Derekco is entitled to cause Wyant & Company to (i) exchange
up to 111,111 shares of the Class E Preferred Stock for an equal number of
shares of Common Stock and (ii) immediately thereafter, sell such shares
of Common Stock and deliver to Derekco and Lynneco the net after-tax
proceeds resulting from such sale. Accordingly, Wyant & Company disclaims
beneficial ownership of the Class E Preferred Stock with respect to which
Lynneco and Derekco retain investment control.
5. Includes 73,334 shares subject to stock options granted under Wyant's 1991
Stock Option Plan and 66,667 shares subject to stock options granted under
Wyant's 1997 Stock Incentive Plan.
6. Includes 13,334 shares subject to stock options granted under Wyant's 1991
Stock Option Plan and 30,001 shares subject to stock options granted under
Wyant's 1997 Stock Incentive Plan.
30
<PAGE> 34
7. Includes 13,334 shares subject to stock options granted under Wyant's 1991
Stock Option Plan and 26,667 shares subject to stock options granted under
Wyant's 1997 Stock Incentive Plan.
8. Includes 14,668 shares subject to the Non-Employee Director Options granted
to Mr. Charles under Wyant's 1997 Stock Incentive Plan.
9. Includes 16,002 shares subject to the Non-Employee Director Options granted
to Mr. Davis under Wyant's 1997 Stock Incentive Plan.
10. Includes 16,002 shares subject to the Non-Employee Director Options granted
to Mr. Gallopo under Wyant's 1997 Stock Incentive Plan.
11. Includes 10,667 shares subject to stock options granted under Wyant's 1991
Stock Option Plan and 17,334 shares subject to stock options granted under
Wyant's 1997 Stock Incentive Plan.
12. Includes 1,250,252 shares beneficially owned by the Wyant Voting Trusts,
1,111,111 shares of the Class E Preferred Stock beneficially owned by Wyant
& Company and 298,010 shares subject to options held by the directors and
executive officers of Wyant.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1998, the law firm of McCarthy Tetrault provided legal services to
Wyant and Wood Wyant. Thomas R.M. Davis, a director of Wyant, is a member of
the law firm of McCarthy Tetrault. In 1998, the fees paid by Wyant and Wood
Wyant to McCarthy Tetrault were approximately Cdn. $263,000 (US $177,000). These
fees are comparable to the fees that Wyant and Wood Wyant would have paid to an
unaffiliated law firm based on the legal services that were provided.
31
<PAGE> 35
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)1. The following Financial Statements are included in Item 8.
<TABLE>
<S> <C>
Reports of Independent Auditors F-1
Consolidated Balance Sheet as at December 31, 1998
and 1997 F-3
Consolidated Statement of Operations for the years
ended December 31, 1998, 1997 and 1996 F-4
Consolidated Statement of Stockholders' Equity for
the years ended December 31,1998, 1997 and 1996 F-5
Consolidated Statement of Cash Flows for the years
ended December 31, 1998, 1997 and 1996 F-7
Notes to Consolidated Financial Statements F-9
</TABLE>
2. Financial Statement Schedules.
Schedule II - Valuation and Qualifying Accounts. F-32
All other schedules are omitted because they are not applicable or not
required, or the applicable information is shown in the Consolidated
Financial Statements or in notes thereto.
3. Exhibits
The following exhibits have been previously filed or incorporated by
reference as indicated. Exhibit numbers refer to Item 601 of
Regulation S-K.
EXHIBIT NO. DESCRIPTION OF EXHIBIT
2.1 Asset Purchase Agreement dated as of February 23, 1999 between
Wyant Corporation and Paper-Pak Products, Inc. (incorporated by
reference from the Company's Current Report on Form 8-K dated
February 23, 1999).
3.1 Certificate of Incorporation and Amendments thereof (with the
exception of Exhibits 3.2 and 3.3 below) and By-Laws are
incorporated by reference. They were filed as exhibits with the
Company's February 2, 1984 and January 7, 1987 Registration
Statements and the Registrant's Proxy Statement filed May 30,
1990.
3.2 Certificate of Amendment of the Certificate of Incorporation
dated March 18, 1997 (incorporated by reference from the
Company's Annual Report on Form 10-K for the year ended December
31, 1996).
3.3 Certificate of Amendment of the Certificate of Incorporation
dated June 3, 1998 (incorporated by reference from the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1998).
32
<PAGE> 36
EXHIBIT NO. DESCRIPTION OF EXHIBIT
9.1 Voting Trust Agreement dated March 14, 1997 among McCarthy
Tetrault, as depository, James A. Wyant, as voting trustee, and
3323986 Canada Inc. (incorporated by reference to Exhibit D of
Amendment No. 13 to Schedule 13D filed March 18, 1997).
9.2 Voting Trust Agreement dated March 18, 1997 among Wyant & Company
Inc., McCarthy Tetrault, as depository, James A. Wyant, as voting
trustee, 3287858 Canada Inc., and Derek Wyant Holdings Inc.
(f/k/a 1186020 Ontario Limited) (incorporated by reference to
Exhibit C of Amendment No. 12 to Schedule 13D dated December 3,
1996 and filed on December 13, 1996).
10.1 The 1991 Stock Option Plan filed with the Company's 1994 Proxy
Statement is incorporated by reference thereto.
10.2 The 1997 Stock Incentive Plan filed with the Company's Form S-8
on March 19, 1997 is incorporated by reference thereto.
10.3 Loan and Security Agreement between Congress Financial
Corporation and Wyant Corporation, IFC Disposables, Inc. and
Bridgewater Manufacturing Corp. dated November 18, 1997
(incorporated by reference from the Company's Annual Report on
Form 10-K for the year ended December 31, 1997).
10.4 Credit facilities agreement between the Bank of Nova Scotia and
Wood Wyant Inc. dated June 22, 1998, together with amendments
thereto dated February 19, 1999 and March 10, 1999 (previously
filed).
10.5 Employment Agreement dated November 11, 1996 between James A.
Wyant and Wood Wyant Inc. (successor to G.H. Wood + Wyant Inc.),
as amended (incorporated by reference from the Company's Annual
Report on Form 10-K for the year ended December 31, 1997).
10.6 Addendum dated March 10, 1998 to the Employment Agreement dated
November 11, 1996, as amended, between James A. Wyant and Wood
Wyant Inc. (previously filed).
10.7 Retirement Arrangement Agreement dated June 27, 1994 between Wood
Wyant Inc. (successor to G.H. Wood + Wyant Inc.) and Donald C.
MacMartin (incorporated by reference from the Company's Annual
Report on Form 10-K for the year ended December 31, 1997).
10.8 Employment Agreement dated January 1, 1999 between Donald C.
MacMartin and Wood Wyant Inc. (previously filed).
10.9 Employment Agreement dated January 1, 1999 between Marc D'Amour
and Wood Wyant Inc. (previously filed).
10.10 Letter of Agreement dated August 14, 1997 between Wyant
Corporation and Robert E. Briggs (previously filed).
10.11 Indemnification Agreement dated March 11, 1999 between Wyant
Corporation and James A. Wyant (previously filed).
16.1 Letters from Arthur Andersen LLP regarding change of certifying
independent accountants (incorporated by reference from the
Company's Current Report on Form 8-K dated April 21, 1997).
33
<PAGE> 37
EXHIBIT NO. DESCRIPTION OF EXHIBIT
21.1 Subsidiaries (previously filed).
(b) Reports on Form 8-K
No current reports on Form 8-K have been filed during the quarter ended
December 31, 1998.
Shareholders may obtain a copy of any exhibit not filed herewith by writing
to Wyant Corporation, P.O. Box 8609, Somerville, New Jersey 08876.
34
<PAGE> 38
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
WYANT CORPORATION
<TABLE>
<S> <C>
By: /s/M.A. D'Amour
--------------------------
M.A. D'Amour
Vice President,
Chief Financial Officer and Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
Date: May 13, 1999
</TABLE>
35
<PAGE> 39
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Wyant Corporation [formerly Hosposable Products, Inc.]
We have audited the accompanying consolidated balance sheet of Wyant
Corporation [formerly Hosposable Products, Inc.] as at December 31, 1998 and
1997, and the related consolidated statements of operations, stockholders'
equity, and cash flows for the two years then ended. Our audit also included the
financial statement schedule listed in the Index at 14(a). These financial
statements and the schedule are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United States. Those standards require that we plan and perform
an 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 opinions.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Wyant
Corporation at December 31, 1998 and 1997, and the consolidated results of their
operations and their cash flows for the years then ended, in conformity with
generally accepted accounting principles in the United States. Also, in our
opinion, the related financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, present fairly in all
material respects the information set forth therein.
We previously audited and reported on the consolidated balance sheet and
related consolidated statements of income, stockholders' equity and cash flows
of The Canadian Operations of G.H. Wood + Wyant Inc. and Subsidiaries for the
year ended December 31, 1996, prior to their restatement for the 1997
transaction more fully described in Note 3. The contribution of G.H. Wood +
Wyant Inc. and Subsidiaries to total assets, revenues and expenses represented
46.9%, 68.8% and 57.1% of the respective restated totals for 1996. Financial
statements of the other pooled company included in the 1996 restated
consolidated statements were audited and reported on separately by other
auditors. We also have audited, as to combination only, the accompanying
consolidated statements of operations, stockholders' equity, and cash flows for
the year ended December 31, 1996, after restatement for the 1997 pooling of
interests; in our opinion, such consolidated financial statements have been
properly combined on the basis described in Note 3 to the consolidated financial
statements.
Montreal, Canada,
February 16, 1999, except for Note 2
which is as at February 23, 1999. Ernst & Young LLP
F-1
<PAGE> 40
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Hosposable Products, Inc.
We have audited the accompanying consolidated balance sheets of Hosposable
Products, Inc. (a New York corporation) and subsidiaries as of December 31, 1996
and 1995, and the related consolidated statements of operations, changes in
stockholders equity and cash flows for each of the three years in the period
ended December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatements. 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 financial position of Hosposable Products, Inc.
and subsidiaries as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
New York, New York Arthur Andersen LLP
February 11, 1997 (except with respect
to matters discussed in Note 13 as to
which the date is March 18, 1997)
F-2
<PAGE> 41
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
As at December 31
------------------------
1998 1997
$ $
---------- ---------
[Restated]
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents 59,985 156,131
Receivables [note 4] 10,215,812 9,298,779
Inventories [note 5] 8,576,960 6,161,254
Net assets held for divestiture [note 2] 9,203,356 9,981,183
Other 1,393,270 1,683,097
---------- ----------
TOTAL CURRENT ASSETS 29,449,383 27,280,444
---------- ---------
Property, plant and equipment, net of accumulated depreciation and
amortization of $11,474,155 [1997- $10,651,878] [notes 6 & 8 8,593,460 8,798,204
Other assets [note 7] 4,496,821 1,077,229
---------- ----------
TOTAL ASSETS 42,539,664 37,155,877
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Revolving line of credit [note 8] 4,092,128 2,204,719
Committed revolving credit facility [note 8] 4,238,720 5,880,748
Accounts payable 4,856,657 4,951,071
Accrued expenses 3,228,412 1,988,842
Income taxes payable 433,288 1,252,988
Current portion of long-term debt [note 8] 1,061,332 389,035
Current portion of preferred stock of subsidiary [note 3] 513,204 550,084
---------- ----------
TOTAL CURRENT LIABILITIES 18,423,741 17,217,487
---------- ----------
Long-term debt, excluding current portion [note 8] 3,887,593 1,998,152
Preferred stock of subsidiary [note 3] 5,477,072 4,379,527
Deferred income taxes [note 9] 2,076,416 1,780,726
Commitments [note 14]
STOCKHOLDERS' EQUITY
Common stock, par value $.01 per share, authorized 6,000,000
shares; issued and issuable 3,607,150 {3,604,817 in 1997} 27,053 27,037
Additional paid-in capital 6,821,825 6,806,867
Retained earnings 6,326,679 5,112,006
Cumulative translation adjustment (500,715) (165,925)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 12,674,842 11,779,985
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 42,539,664 37,155,877
========== ==========
</TABLE>
See accompanying notes
F-3
<PAGE> 42
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Year ended December 31
1998 1997 1996
$ $ $
[Restated] [Restated]
<S> <C> <C> <C>
NET SALES 67,124,137 63,559,703 62,590,707
COST OF SALES 43,218,466 39,691,201 38,151,474
---------- ---------- ----------
GROSS PROFIT 23,905,671 23,868,502 24,439,233
---------- ---------- ----------
EXPENSES
Selling 12,658,838 11,931,480 12,015,764
General and administration 8,699,535 9,193,943 9,308,838
Amortization 507,540 428,811 505,345
Non-recurring items [note 11] -- -- 549,805
Interest expense 1,158,249 745,089 511,253
Other income [note 12] (244,067) (230,790) (184,636)
---------- ---------- ----------
22,780,095 22,068,533 22,706,369
---------- ---------- ----------
Income from continuing operations before income
taxes and extraordinary gain 1,125,576 1,799,969 1,732,864
Income tax expense [note 9] 572,000 800,597 795,993
---------- ---------- ----------
Income from continuing operations before
extraordinary gain 553,576 999,372 936,871
Discontinued operations [note 2] --
Income (loss) from operations (net of income taxes
(recoveries) of $545,000, ($289,610) and ($448,358),
respectively) 1,021,602 (580,874) (792,481)
---------- ---------- ----------
Income before extraordinary gain 1,575,178 418,498 144,390
Extraordinary gain, net of income taxes [note 13] -- 91,958 --
---------- ---------- ----------
NET INCOME 1,575,178 510,456 144,390
Dividends and accretion of mandatorily
redeemable preferred stock 360,505 191,746 --
---------- ---------- ----------
NET INCOME ATTRIBUTABLE TO COMMON SHARES 1,214,673 318,710 144,390
========== ========== ==========
Per common share [note 15]
BASIC
Income from continuing operations before
extraordinary gain 0.06 0.22 0.26
Discontinued operations 0.28 (0.16) (0.22)
Extraordinary gain -- 0.03 --
Net income 0.34 0.09 0.04
DILUTED
Income from continuing operations before
extraordinary gain 0.06 0.22 0.26
Discontinued operations 0.27 (0.16) (0.22)
Extraordinary gain -- 0.03 --
Net income 0.33 0.09 0.04
</TABLE>
See accompanying notes
F-4
<PAGE> 43
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
CONSOLIDATED STATEMENT OF
STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Year ended December 31
------------------------------------------
1998 1997 1996
$ $ $
---------- ---------- -----------
[Restated] [Restated]
<S> <C> <C> <C>
COMMON STOCK AT PAR VALUE
Balance at beginning of year 27,037 27,037 27,037
Stock issued for options exercised 16 -- --
---------- ---------- -----------
BALANCE AT END OF YEAR 27,053 27,037 27,037
---------- ---------- -----------
ADDITIONAL PAID-IN CAPITAL
Balance at beginning of year 6,806,867 6,789,397 6,789,397
Stock issued for options exercised 14,958 -- --
Gain on sale of treasury stock -- 17,470 --
---------- ---------- ----------
BALANCE AT END OF YEAR 6,821,825 6,806,867 6,789,397
---------- ---------- ----------
RETAINED EARNINGS
Balance at beginning of year 5,112,006 4,999,823 5,390,064
Net income 1,575,178 510,456 144,390
Dividends declared by subsidiary (190,955) (125,746) --
Accretion on preferred shares of subsidiary (169,550) (66,000) --
Distribution to minority shareholders -- (206,527) (534,631)
---------- ---------- ----------
BALANCE AT END OF YEAR 6,326,679 5,112,006 4,999,823
---------- ---------- ----------
ACCUMULATED OTHER COMPREHENSIVE INCOME
Balance at beginning of year (165,925) 26,955 72,146
Foreign currency translation adjustments (334,790) (192,880) (45,191)
---------- ---------- ----------
BALANCE AT END OF YEAR (500,715) (165,925) 26,955
---------- ---------- ----------
TREASURY STOCK
Balance at beginning of year -- (31,530) (31,530)
Treasury stock sold, at cost -- 31,530 --
---------- ---------- ----------
BALANCE AT END OF YEAR -- -- (31,530)
---------- ---------- ----------
TOTAL STOCKHOLDERS' EQUITY 12,674,842 11,779,985 11,811,682
========== ========== ==========
COMPREHENSIVE INCOME
Net income 1,575,178 510,456 144,390
Other - foreign currency translation adjustments (334,790) (192,880) (45,191)
---------- ---------- ----------
COMPREHENSIVE INCOME FOR YEAR 1,240,388 317,576 99,199
---------- ---------- ----------
</TABLE>
F-5
<PAGE> 44
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
CONSOLIDATED STATEMENT OF
STOCKHOLDERS' EQUITY [CONT'D]
<TABLE>
<CAPTION>
Year ended December 31
-----------------------------------------
1998 1997 1996
$ $ $
--------- --------- ---------
[Restated] [Restated]
<S> <C> <C> <C>
COMMON SHARES
Number issued at beginning of year 2,271,484 2,271,484 2,271,484
Shares issued for options exercised 2,333 -- --
NUMBER ISSUED AT END OF YEAR 2,273,817 2,271,484 2,271,484
--------- --------- ---------
TREASURY STOCK
Held at beginning of year -- (14,933) (14,933)
Sold during the year -- 14,933 --
--------- --------- --------
HELD AT END OF YEAR -- -- (14,933)
--------- --------- --------
COMMON SHARES ISSUED AND OUTSTANDING 2,273,817 2,271,484 2,256,551
COMMON SHARES ISSUABLE UPON CONVERSION OF
EXCHANGEABLE SHARES [NOTE 3] 1,333,333 1,333,333 1,333,333
--------- --------- ---------
COMMON SHARES ISSUED, ISSUABLE AND OUTSTANDING 3,607,150 3,604,817 3,589,884
========= ========= =========
</TABLE>
See accompanying notes
F-6
<PAGE> 45
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended December 31
---------------------------------------------
1998 1997 1996
$ $ $
----------- ----------- -----------
[Restated] [Restated]
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income from continuing operations 553,576 1,091,330 936,871
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES
Depreciation and amortization 1,137,698 990,013 1,060,687
Loss (gain) on sale of fixed assets 11,792 (28,470) (122,810)
Deferred income tax expense (benefit) 72,000 (25,823) 814,027
Deferred pension costs (107,014) (92,177) (13,200)
Increase in deferred charges (49,480) (320,234) --
Decrease (increase) in working capital (511,879) 752,956 (73,888)
Decrease in other liabilities -- -- (100,000)
Cash provided by (used for) discontinued
operations 2,727,120 (1,994,643) (57,400)
---------- ---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 3,833,813 372,952 2,444,287
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of businesses, net of cash
acquired [note 3] (3,853,158) -- --
Capital expenditures (853,692) (1,313,246) (970,985)
Cash proceeds from sale of fixed assets 15,850 35,628 236,188
Sale of marketable securities -- 446,812 1,488,783
Purchase of marketable securities -- -- (573,362)
Decrease in other assets 83,278 -- --
Cash used for discontinued operations (234,590) (564,933) (2,969,853)
---------- ---------- ----------
NET CASH USED IN INVESTING ACTIVITIES (4,842,312) (1,395,739) (2,789,229)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in committed revolving
credit facility (1,642,028) 5,880,748 --
Repayment of long-term debt (1,001,944) (7,820,959) (2,066,431)
Increase in long-term debt 3,723,111 5,122,507 2,233,353
Distribution to minority shareholders -- (206,527) (534,631)
Issue of common shares 14,974 -- --
Redemption of preferred shares (550,122) -- --
Sale of treasury stock -- 49,000 --
Dividends paid by subsidiary (190,955) (125,746) --
Increase (decrease) in bank indebtedness 1,376,683 911,368 (481,598)
Distribution to G.H. Wood + Wyant Inc.
shareholders [note 3] -- (3,667,033) --
Cash used for discontinued operations (500,101) (349,428) (98,327)
---------- ---------- ----------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 1,229,618 (206,070) (947,634)
---------- ---------- ----------
Effect of exchange rate changes on cash (317,265) (185,637) (56,268)
---------- ---------- ----------
Net decrease in cash and cash equivalents (96,146) (1,414,494) (1,348,844)
Cash and cash equivalents, beginning of year 156,131 1,570,625 2,919,469
---------- ---------- ----------
CASH AND CASH EQUIVALENTS, END OF YEAR 59,985 156,131 1,570,625
========== ========== ==========
</TABLE>
F-7
<PAGE> 46
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
CONSOLIDATED STATEMENT OF CASH FLOWS [CONT'D]
<TABLE>
<CAPTION>
Year ended December 31
-------------------------------------------
1998 1997 1996
$ $ $
--------- --------- ---------
[Restated] [Restated]
<S> <C> <C> <C>
DECREASE (INCREASE) IN WORKING CAPITAL
Decrease in accounts receivable 976,667 338,451 376,263
Decrease (increase) in inventories (575,736) 852,005 732,898
Decrease (increase) in other current assets 593,683 29,537 (139,879)
Decrease in accounts payable and accrued liabilities (663,066) (1,439,298) (1,323,897)
Increase (decrease) in income taxes payable (843,427) 972,261 280,727
--------- ---------- ----------
(511,879) 752,956 (73,888)
========= ========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid (received) during the year for
Interest 1,002,946 530,153 495,767
Income taxes 1,061,716 (216,376) (300,690)
---------- ---------- ----------
</TABLE>
See accompanying notes
F-8
<PAGE> 47
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
Wyant Corporation [formerly Hosposable Products, Inc.], a New York
corporation incorporated in 1971 [the "Corporation"], operates the
following wholly owned subsidiaries: IFC Disposables, Inc., a Tennessee
corporation ["IFC"] and Wood Wyant Inc., a Canadian corporation ["Wood
Wyant]. IFC manufactures and distributes disposable wipers and sanitary
paper products and systems which are sold primarily in domestic markets.
Wood Wyant manufactures and distributes sanitation products and systems to
commercial and institutional markets in Canada.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the
Corporation and its wholly owned subsidiaries, IFC and Wood Wyant
[collectively, the "Company"]. All significant intercompany balances and
transactions have been eliminated in consolidation.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform with the
current year's presentation.
UTILIZATION OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
EARNINGS PER SHARE
Basic earnings per share are calculated using the weighted average number
of shares outstanding during the period. Contingently issuable shares are
considered outstanding common shares and included in the calculation of
basic earnings per share only when there is no circumstance under which
these shares would not be issued.
Diluted earnings per share are calculated taking into consideration the
effect of the potential exercise of stock options and of the exchangeable
Class F preferred shares.
F-9
<PAGE> 48
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [CONT'D]
INVENTORIES
Inventories are stated at the lower of cost and net realizable value. Cost
is determined on a first-in, first-out basis.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost. Depreciation and
amortization of property, plant and equipment in the Wiping Products
segment is provided utilizing the straight-line method over the estimated
useful lives of the respective assets ranging from 5 to 30 years; in the
Sanitation Products segment, the declining balance method is used, with
rates ranging from 5% to 20% per year. Leasehold improvements are amortized
on a straight-line basis over the term of the related leases or the
estimated useful life, whichever is shorter. Patents and trademarks are
amortized on a straight-line basis over periods from 5 to 17 years.
GOODWILL
Goodwill is amortized on a straight-line basis over periods not exceeding
40 years. The Company periodically reviews goodwill for possible
impairment, which would be recognized if a permanent decline in value has
occurred.
STOCK-BASED COMPENSATION
Statement of Financial Accounting Standards ["SFAS"] No.123, "Accounting
for Stock-Based Compensation," encourages, but does not require companies
to record compensation cost for stock-based employee compensation plans at
fair value. The Company has chosen to continue to account for stock-based
compensation awards to employees and directors using the intrinsic value
method prescribed in Accounting Principles Board Opinion ["APB"] No.25,
"Accounting for Stock Issued to Employees," and related Interpretations.
Accordingly, compensation cost for stock options awarded to employees and
directors is measured as the excess, if any, of the quoted market price of
the Corporation's stock at the date of grant over the amount an employee or
director must pay to acquire the stock.
As required, the Company has adopted SFAS No.123 to account for stock-based
compensation awards to outside consultants and affiliates. Accordingly,
compensation costs for stock option awards to outside consultants and
affiliates are measured at the date of grant based on the fair value of the
award using the Black-Scholes option pricing model.
F-10
<PAGE> 49
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [CONT'D]
INCOME TAXES
The Company files a consolidated federal income tax return for its United
States companies. Deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the year in
which those temporary differences are expected to be recovered or settled.
Deferred income taxes result primarily from differences between financial
and tax reporting of depreciation.
FOREIGN CURRENCY TRANSLATION
The Corporation translates the accounts of its foreign subsidiary, Wood
Wyant, such that the assets and liabilities of the subsidiary are
translated into U.S. dollars at rates of exchange prevailing at the
year-end. Exchange gains and losses arising from these translations are
deferred and included as a separate component of stockholders' equity on
the consolidated balance sheet ["Cumulative Translation Adjustment"].
Revenue and expense items are translated at average rates of exchange
prevailing during the year.
ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". This statement requires all
derivatives to be recorded on the balance sheet at fair value and provides
a comprehensive and consistent standard for the recognition and measurement
of derivatives and hedging activities. The Company is studying the
application of this new standard but has not yet determined its impact. As
required, the Company will adopt this statement upon its applicable
effective date in fiscal 2000.
2. DISCONTINUED OPERATIONS
On December 17, 1998, the Board of Directors authorized management to
pursue the sale of the Company's Wyant Health Care Division ("Division").
On February 23, 1999 the Board approved the sale of the Division, subject
to completion of buyer financing, customary regulatory approvals and the
approval of the Company's shareholders. Consequently, the results of the
Division have been reported in these financial statements as discontinued
operations.
F-11
<PAGE> 50
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
2. DISCONTINUED OPERATIONS [CONT'D]
The Company will receive cash of $11,500,000 on closing and $550,000 will
be held in escrow for twenty four months, subject to adjustment on closing.
The operating results of the Division are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
$ $ $
---------- ---------- ---------
<S> <C> <C> <C>
Net sales 36,462,815 31,324,702 31,829,712
Income (loss) before income taxes 1,566,602 (870,484) (1,240,839)
---------- ---------- ----------
</TABLE>
The net assets of the Division are as follows:
<TABLE>
<CAPTION>
1998 1997
$ $
---------- ----------
<S> <C> <C>
Current assets 5,785,245 6,146,234
Property, plant and equipment 9,787,618 10,520,611
Other assets 215,928 332,913
Current liabilities (3,428,034) (3,468,706)
Long-term liabilities (3,157,401) (3,549,869)
---------- ----------
Net assets of discontinued operations 9,203,356 9,981,183
========== ==========
</TABLE>
The Company expects the sale of the Division to close in the second quarter
of 1999. At the date of disposal, the Company expects to record a small
gain. Included in the Company's estimated gain are the estimated costs to
satisfy the Division's obligation with respect to a defined benefit
multi-employer pension plan which covers certain of the Division's
employees.
3. ACQUISITIONS
[a] On April 30, 1998, the Company, through its wholly-owned Canadian
subsidiary, Wood Wyant Inc., acquired all of the issued and outstanding
shares of H.A. Perigord Company Limited, a distributor of sanitation
products. On June 26, 1998, Wood Wyant Inc. acquired all of the issued and
outstanding shares of Professional Sanitation Products Ltd., a distributor
of sanitation products. The total consideration for these acquisitions
amounted to $3,070,806, which was comprised of cash of $2,107,645 and
146,666 Class F Preferred shares of Wood Wyant Inc.
F-12
<PAGE> 51
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
3. ACQUISITIONS [CONT'D]
On June 30, 1998, Wood Wyant acquired all of the issued and outstanding
shares of four related businesses based in British Columbia for $2,644,228,
comprised of cash of $1,760,696 and 136,445 Class F Preferred shares of
Wood Wyant Inc. The companies acquired are Midway Supply Ltd., Purnel
Distributors Ltd. and Midway Purnel Sanitary Supply Ltd., all of which are
distributors of sanitation products, and Fraser Valley Industrial Chemicals
Inc., a manufacturer of janitorial chemicals.
The significant conditions of the Class F Preferred shares of Wood Wyant
Inc. are:
Prior to July 1, 2000 and subject to the priorities of the other classes of
preferred stock of Wood Wyant Inc., the shares:
1) are exchangeable for Wyant Corporation common stock on a share for
share basis and are entitled to dividends equivalent on a per share
basis, to any dividends paid on Wyant Corporation common stock; and
2) have a liquidation preference per share of one share of Wyant
Corporation common stock.
Holders of the shares have an option, which may be exercised between July
1, 2000 and July 31, 2000, to cause Wood Wyant Inc. to redeem the shares in
five equal annual instalments at a price of Cdn $11.250028 ($7.3371) per
share plus any accrued and unpaid dividends. If the redemption option is
exercised, dividends of 3.5% per annum will be payable commencing July 1,
2000.
Each of the above acquisitions has been accounted for under the purchase
method and the results of operations accordingly are included in the
consolidated statement of operations from the respective dates of
acquisition. The purchase prices have been allocated to assets acquired and
liabilities assumed based on fair market value at the dates of
acquisitions, as follows:
<TABLE>
<S> <C>
Working capital, other than cash $1,618,307
Property, plant and equipment 386,518
Other assets 60,975
Goodwill 3,831,153
Long-term liabilities (177,491)
Deferred income taxes (4,428)
</TABLE>
The excess of purchase price over the fair values of the net assets
acquired was $3,831,153 and has been recorded as goodwill, which is being
amortized on a straight-line basis over 40 years.
F-13
<PAGE> 52
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
3. ACQUISITIONS [CONT'D]
The following unaudited pro forma information gives effect to the
transactions as if they had occurred at January 1, 1998. This pro forma
information does not necessarily reflect the results of operations that
would have been achieved if the acquisitions had been consummated as of
that time.
<TABLE>
<CAPTION>
1998
$
----------
<S> <C>
Net sales 73,391,486
Income from continuing operations 529,740
Net income 1,551,342
Per common share
Income from continuing operations 0.03
Net income 0.31
</TABLE>
[b] On March 18, 1997 the Corporation, 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 [US$3,667,033], [ii] a
promissory note ["the Note"] in the amount of Cdn $4,068,951 [US
$2,961,606] having a fair value of US $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 [US $2,765,849] and a fair value of US $2,267,900, and
[iv] 1,333,333 shares of Class E Preferred Stock of Wood Wyant Inc. having
a liquidation preference per share of one share of Wyant Corporation Common
Stock. The fair value of Class E Preferred shares at March 18, 1997 was US
$5,000,000. These Class E Preferred shares are recorded at par value of
$10,000 in Wyant Corporation Common Stock and $4,990,000 in additional
paid-in capital. Each Class E Preferred share is exchangeable by the holder
at any time for one share of Wyant Corporation Common Stock. Other than
having a liquidation preference to obtain payment of any accrued but
unpaid dividends in cash, the liquidation preference of each Class E
Preferred share is equal to that of a share of Wyant Corporation
Common Stock.
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 retroactively reflect the financial information of the
combined entities. The excess of the fair value of the consideration paid
of US $13,733,727 over the book value of the net assets acquired of US
$8,638,875 [Cdn $11,868,951] is considered a deemed dividend for accounting
purposes, which reduces the additional paid-in capital by US $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.
F-14
<PAGE> 53
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
3. ACQUISITIONS [CONT'D]
The Class A and B Preferred shares entitle holders to fixed cumulative
preferential dividends at the rate of 4% and 3.999999%, respectively, of
their redemption price of $1.00 Cdn 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
Preferred shares shall be redeemed until all Class A Preferred shares have
been redeemed. The Class E Preferred shares entitle holders to receive
dividends on a pro-rata basis equivalent to dividends declared to the
Corporation's common stockholders.
Included in the consolidated statement of operations for the three years
ended December 31, 1998 are the following results of the previously
separate companies for periods prior to the transaction date.
<TABLE>
<CAPTION>
CANADIAN
OPERATIONS OF
G.H. WOOD + HOSPOSABLE
WYANT INC. PRODUCTS, INC. CONSOLIDATED
$ $ $
---------- ----------- -----------
<S> <C> <C> <C>
UNAUDITED
1997
Revenue from external customers 12,287,019 9,842,579 22,129,598
Inter Company revenues 726,293 116,675 842,968
Net income (loss) 474,869 (651,354) (176,485)
---------- ----------- -----------
UNAUDITED
1996
Revenue from external customers 50,835,445 42,009,735 92,845,180
Inter Company revenues 2,050,901 283,898 2,334,799
Net income (loss) 1,199,580 (1,055,190) 144,390
---------- ----------- -----------
</TABLE>
4. RECEIVABLES
<TABLE>
<CAPTION>
1998 1997
$ $
----------- -----------
<S> <C> <C>
Trade 9,882,672 8,838,881
Less allowance for doubtful accounts 405,424 323,759
----------- -----------
9,477,248 8,515,122
Other 738,564 783,657
----------- -----------
10,215,812 9,298,779
=========== ===========
</TABLE>
F-15
<PAGE> 54
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
5. INVENTORIES
<TABLE>
<CAPTION>
1998 1997
$ $
--------- ---------
<S> <C> <C>
Raw materials 2,065,073 1,716,534
Finished goods 6,511,887 4,444,720
--------- ---------
8,576,960 6,161,254
========= =========
</TABLE>
6. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31 consisted of the following:
<TABLE>
<CAPTION>
ACCUMULATED
DEPRECIATION NET BOOK
COST AND AMORTIZATION VALUE
$ $ $
---------- ----------------- ----------
<S> <C> <C> <C>
1998
Land 584,410 -- 584,410
Buildings and improvements 3,232,031 1,248,044 1,983,987
Machinery and equipment 9,522,060 5,421,294 4,100,766
Computer equipment 1,901,811 1,651,201 250,610
Furniture, fixtures and equipment 2,896,169 2,323,532 572,637
Leasehold improvements 876,931 493,494 383,437
Patents and trademarks 1,054,203 336,590 717,613
---------- ---------- ---------
20,067,615 11,474,155 8,593,460
========== ========== =========
1997
Land 626,408 -- 626,408
Buildings and improvements 3,358,486 1,231,300 2,127,186
Machinery and equipment 9,654,271 5,392,597 4,261,674
Computer equipment 1,567,487 1,385,706 181,781
Furniture, fixtures and equipment 2,301,585 1,960,191 341,394
Leasehold improvements 871,973 387,910 484,063
Patents and trademarks 1,069,872 294,174 775,698
---------- ---------- ---------
19,450,082 10,651,878 8,798,204
========== ========== =========
</TABLE>
Depreciation and amortization expense amounted to $851,873, $785,093 and
$942,688 in 1998, 1997 and 1996, respectively.
F-16
<PAGE> 55
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
7. OTHER ASSETS
<TABLE>
<CAPTION>
1998 1997
$ $
--------- ---------
<S> <C> <C>
Goodwill, at cost 4,481,761 916,925
Accumulated amortization 785,168 654,946
--------- ---------
Net book value 3,696,593 261,979
Deferred pension costs 551,882 484,586
Deferred financing charges 248,346 330,664
--------- ---------
4,496,821 1,077,229
========= =========
</TABLE>
Amortization expense amounted to $179,978, $135,351 and $137,416 in 1998,
1997 and 1996, respectively.
8. LONG-TERM DEBT
Long-term debt at December 31 consisted of the following:
<TABLE>
<CAPTION>
1998 1997
$ $
--------- ---------
<S> <C> <C>
WOOD WYANT INC.
Term loan repayable in monthly instalments of
Cdn $20,476 plus interest at the prime rate in Canada
plus 0.75% [prime at December 31, 1998 - 6.75%]
maturing October 1, 2001. Principal amount
Cdn $1,692,856 [December 31, 1997 - Cdn. $1,938,571] 1,104,060 1,355,170
Revolving credit facility - Cdn. $1,401,125
[December 31, 1997 - Cdn $1,476,300] 913,797 1,032,017
Term loan repayable in monthly instalments of
Cdn $35,000 plus interest at the prime rate in Canada
plus 0.75%, maturing April 30, 2003 [principal
amount Cdn. $1,820,000] 1,186,982 --
Term loan repayable in monthly instalments of
Cdn $49,523 plus interest at the prime rate in
Canada plus 0.75%, maturing June 30, 2003
[principal amount Cdn $2,674,207] 1,744,086 --
--------- ---------
4,948,925 2,387,187
Current port 1,061,332 389,035
--------- ---------
3,887,593 1,998,152
========= =========
</TABLE>
F-17
<PAGE> 56
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
8. LONG-TERM DEBT [CONT'D]
The exchange rate used at December 31, 1998 to translate the long-term debt
denominated in Canadian dollars was Cdn $1.5333 = US $1.00 [December 31,
1997 - Cdn $1.4305 = US $1.00].
Principal payments of long-term debt over the next five years are as
follows:
<TABLE>
<CAPTION>
$
---------
<S> <C>
1999 1,061,332
2000 1,495,965
2001 1,445,056
2002 661,499
2003 285,073
---------
</TABLE>
In September 1997, Wood Wyant obtained a collateralized revolving credit
facility in the amount of Cdn $3,000,000 with the Bank of Nova Scotia which
expires on September 30, 2000 and bears interest at prime plus 0.75%. This
facility was utilized on September 30, 1997 to repay two existing term
loans totalling Cdn $1,554,000 and in March 1998 to finance equipment
purchases of Cdn $282,749. These amounts are being repaid by monthly
instalments of Cdn $30,612. The balance is available to finance future
equipment purchases. Maximum availability under the facility reduces
monthly by Cdn $50,000. Unused availability at December 31, 1998 was
Cdn $848,876.
LINES OF CREDIT
On November 18, 1997, the Corporation obtained a committed revolving credit
facility with Congress Financial Corporation ["Congress"] in the amount of
$13,000,000 which expires on November 18, 2000 and bears interest at prime
plus 1% [prime rate at December 31, 1998 - 7.75%].
The maximum amount that the Corporation may borrow at any time is
determined by the sum of:
i. Amounts based on advance formulas applicable to the book value of
accounts receivable and inventories of the Corporation and IFC
["Tranche A"]
and
ii. Advance formulas applicable to the November 1997 appraised values of
property, plant and equipment to a maximum of $5,500,000 less the
amounts required to guarantee amounts outstanding under New Jersey
Economic Development Authority bonds ($3,560,000 at December 31,
1998), which are included under "Net Assets Held for Divestiture'
["Tranche B"].
Maximum availability under Tranche B reduces monthly by $76,388.
F-18
<PAGE> 57
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
8. LONG-TERM DEBT [CONT'D]
The facility is collateralized by substantially all of the assets of the
Corporation and IFC, tangible and intangible, except for the Corporation's
investment in the shares of Wood Wyant. Unused availability at December
31, 1998 was approximately $2,841,000. Amounts outstanding under the line
of credit are classified as a current liability due to the inclusion in the
loan agreement of a subjective acceleration clause and a lock box
arrangement. The agreement also contains a minimum adjusted net worth
requirement.
Wood Wyant has available a collateralized revolving line of credit in
Canada in the amount of Cdn $7,500,000 with the Bank of Nova Scotia which
is subject to periodic review and which bears interest at the prime rate
[6.75% at December 31, 1998]. This line of credit and the term loans of
Wood Wyant are collateralized by a general assignment of book debts of Wood
Wyant, a pledge of inventory under Section 427 of the Bank Act, a hypothec
in the amount of Cdn $30,000,000 on all movable property and a general
security agreement.
9. INCOME TAXES
Details of the income tax provision are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
$ $ $
<S> <C> <C> <C>
CURRENT
Federal (324,132) (210,559) (179,144)
State 46,132 10,291 3,929
Foreign 778,000 945,482 223,673
------- ------- -------
500,000 745,214 48,458
======= ======= =======
DEFERRED
Federal (45,000) (26,413) 110,775
State -- -- (95,098)
Foreign 117,000 81,796 731,858
------- ------- -------
72,000 55,383 747,535
------- ------- -------
INCOME TAX PROVISION 572,000 800,597 795,993
======= ======= =======
</TABLE>
F-19
<PAGE> 58
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
9. INCOME TAXES [CONT'D]
The reported income tax provision differs from the amount computed by
applying the Federal tax rate to income before income taxes. The reasons
for this difference and the related tax effects are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
$ $ $
------- ------- -------
<S> <C> <C> <C>
Expected Federal tax rate 34.0% 34.0% 34.0%
Expected tax provision 382,696 611,990 589,174
State income tax 46,132 18,219 3,996
Foreign tax rate differences 146,403 66,408 84,464
Non-deductible expenses 65,000 25,377 46,110
Other (68,231) 78,603 72,249
-------- ------- -------
REPORTED INCOME TAX PROVISION 572,000 800,597 795,993
======== ======= =======
</TABLE>
Deferred income taxes result principally from temporary differences in the
recognition of certain revenue and expense items for financial and tax
reporting purposes. Significant components of the Company's deferred tax
assets and liabilities as at December 31, 1998 and December 31, 1997 are as
follows:
<TABLE>
<CAPTION>
1998 1997
$ $
--------- ---------
<S> <C> <C>
Deferred tax assets
Reserves and allowances 272,760 236,000
Goodwill 151,784 137,474
Other 177,839 151,821
--------- ---------
TOTAL DEFERRED TAX ASSETS 602,383 525,295
Deferred tax liabilities
Book and tax differences on property,
plant and equipment 1,855,109 1,572,601
Pension 221,307 194,689
Other -- 13,436
--------- ---------
TOTAL DEFERRED TAX LIABILITIES 2,076,416 1,780,726
--------- ---------
NET DEFERRED INCOME TAX LIABILITY 1,474,033 1,255,431
========= =========
</TABLE>
Income before taxes attributable to all foreign operations was $2,066,867,
$2,481,335 and $2,155,111 in each of fiscal 1998, 1997 and 1996,
respectively.
F-20
<PAGE> 59
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
10. STOCK-BASED COMPENSATION PLANS
The Corporation has two stock option plans, the 1997 Stock Incentive Plan
[the "1997 Plan"] and the 1991 Stock Option Plan [the "1991 Plan"]. The
Company accounts for options granted to employees and directors under these
plans using APB No.25, under which no compensation cost has been recognized
for stock options granted. Had compensation cost for these stock options
been determined consistent with SFAS No.123, the Company's pro forma
earnings per share would have been as follows:
<TABLE>
<CAPTION>
1998 1997 1996
$ $ $
---------- --------- ---------
<S> <C> <C> <C>
Net income (loss) available to common stockholders
As reported 1,214,673 318,710 144,390
Pro forma 745,270 (248,852) (273,691)
Earnings (loss) per share
Basic
As reported 0.34 0.09 0.04
Pro forma 0.21 (0.07) (0.08)
Diluted
As reported 0.33 0.09 0.04
Pro forma 0.21 (0.07) (0.08)
---------- --------- ---------
</TABLE>
The effects of applying SFAS 123 in this pro forma disclosure are not
indicative of future amounts. Additional awards in future years are
anticipated.
During 1997 and 1991, the stockholders of the Company approved the adoption
of the 1997 Plan and the 1991 Plan, respectively. Each plan authorizes the
granting of stock options [either non-qualified stock options or incentive
stock options], the exercise of which would allow up to an aggregate of
400,000 shares of the Company's common stock under the 1997 Plan and
333,333 shares under the 1991 Plan, to be acquired by the holders of the
stock options. The 1997 Plan also permits the granting of other types of
stock-based awards.
Under the 1997 and 1991 Plans, non-qualified stock options have been
granted to directors, employees and consultants for terms of up to ten
years at exercise prices of not less than 100% of the fair market value of
the shares at the date of grant, exercisable in whole or in part at stated
times from the date of grant to up to two years thereafter. At December 31,
1998, options to purchase 319,351 shares and 165,340 shares of common stock
were exercisable with respect to the 1997 Plan and the 1991 Plan,
respectively. Option activity during 1998, 1997 and 1996 is summarized as
follows:
F-21
<PAGE> 60
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
10. STOCK-BASED COMPENSATION PLANS [CONT'D]
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE
SHARES PRICE
$
<S> <C> <C>
------- --------
1998
OUTSTANDING, BEGINNING OF YEAR 592,048 4.53
Granted 25,335 5.29
Exercised (2,333) 4.19
Expired (33,334) 4.50
Canceled / surrendered (44,340) 4.79
------- ----
OUTSTANDING, END OF YEAR 537,376 4.55
------- ----
EXERCISABLE, END OF YEAR 484,691 4.57
======= ====
Weighted average fair value of options granted 2.34
1997
OUTSTANDING, BEGINNING OF YEAR 332,048 5.41
Granted 416,000 4.01
Canceled / surrendered (156,000) 5.00
------- ----
OUTSTANDING, END OF YEAR 592,048 4.53
------- ----
EXERCISABLE, END OF YEAR 342,667 4.66
======= ====
Weighted average fair value of options granted 1.69
1996
OUTSTANDING, BEGINNING OF YEAR 141,381 5.28
Granted 250,667 5.59
Expired (21,333) 4.33
Canceled / surrendered (38,667) 5.44
------- ----
OUTSTANDING, END OF YEAR 332,048 5.41
------- ----
EXERCISABLE, END OF YEAR 216,000 5.32
======= ====
Weighted average fair value of options granted 2.51
</TABLE>
F-22
<PAGE> 61
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
10. STOCK-BASED COMPENSATION PLANS [CONT'D]
The fair value of options at date of grant was estimated using the
Black-Scholes pricing model with the following weighted average
assumptions.
<TABLE>
<CAPTION>
1998 1997
% %
----- -----
<S> <C> <C>
Expected life [years] 5.00 5.00
Risk-free interest rates 5.15 6.22
Volatility 41.20 37.60
Dividend yield 0.00 0.00
</TABLE>
The following table summarizes information with respect to stock options
outstanding at December 31, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------------------------------------- -------------------------------
NUMBER WEIGHTED NUMBER
OUTSTANDING AVERAGE EXERCISABLE
RANGE AT REMAINING WEIGHTED AT WEIGHTED
OF EXERCISE DECEMBER 31, CONTRACTUAL AVERAGE DECEMBER 31, AVERAGE
PRICES 1998 LIFE EXERCISE PRICE 1998 EXERCISE PRICE
----------- ----------- ------------ -------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
$3.00 - $4.50 346,701 8.32 years $4.01 304,683 $3.99
$4.51 - $5.81 190,675 7.12 years $5.52 180,008 $5.54
------------- --------- ------------ ----------- --------- ----------
</TABLE>
All comparative data have been restated to reflect the four-for-three stock
split effected in the form of a stock dividend, which was announced on
March 27, 1998 and paid on May 21, 1998.
11. NON-RECURRING ITEMS
<TABLE>
<CAPTION>
1998 1997 1996
$ $ $
------ ------ -------
<S> <C> <C> <C>
Acquisition costs -- -- 549,805
------ ------- -------
-- -- 549,805
====== ======= =======
</TABLE>
ACQUISITION COSTS
During 1996, the Company incurred $549,805 for professional services in
connection with the acquisition described in note 3.
F-23
<PAGE> 62
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
12. OTHER INCOME
<TABLE>
<CAPTION>
1998 1997 1996
$ $ $
------- ------- -------
<S> <C> <C> <C>
Interest income 2,492 7,323 11,553
Gain on disposal of assets -- 28,470 122,810
Cash discounts and other 241,575 194,997 50,273
------- ------- -------
244,067 230,790 184,636
======= ======= =======
</TABLE>
13. EXTRAORDINARY GAIN
In 1997, the Company realized a net gain of $139,330 [$91,958 net of income
tax] as a result of the refinancing of certain term debt.
14. COMMITMENTS
The Company occupies manufacturing, warehousing and office facilities under
operating leases which expire at various dates to December 31, 2004.
Future minimum rental commitments relating to continuing operations are as
follows:
<TABLE>
<CAPTION>
$
---------
<S> <C>
1999 1,137,841
2000 1,007,522
2001 696,673
2002 599,775
2003 542,239
Thereafter 209,523
---------
</TABLE>
Aggregate rental expense of continuing operations amounted to $1,078,283
[net of sublease income of $177,821] $1,480,409 [net of sublease income of
$124,893] and $1,242,186 [net of sublease income of $140,000 and $100,000
previously provided for [note 11]] for the years ended December 31, 1998,
1997 and 1996, respectively.
As of January 1, 1999, the Company signed a five-year supply agreement to
purchase a minimum of 16,200 short tons of paper towelling and tissue
annually at market prices. This supplier provides 100% of the Company's
requirements for these products.
F-24
<PAGE> 63
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
14. COMMITMENTS [CONT'D]
In September 1997, the Company entered into a lease agreement for a maximum
amount of Cdn $2,000,000 for computer equipment. The equipment leases
under this agreement will be for a maximum term of five years and will be
based on either a floating rate of bank prime plus 0.75%, or a fixed rate
of the leasing company's base rate at the commencement date of each lease
plus 1.75%. As at December 31, 1998, an amount of Cdn $1,716,732 had been
committed under this agreement.
A financial institution has registered a second-ranking lien in the amount
of $650,000 on the Company's book debts as collateral for letters of
guarantee that it may issue from time to time in favour of customers to
guarantee the Company's performance under certain contracts. As at
December 31, 1998 there were no letters of guarantee outstanding.
15. EARNINGS PER SHARE
<TABLE>
<CAPTION>
1998 1997 1996
$ $ $
--------- --------- -------
<S> <C> <C> <C>
Numerator
Income from continuing operations before
extraordinary gain 553,576 999,372 936,871
Preferred stock dividends and accretion 360,505 191,746 --
--------- --------- -------
Numerator for basic earnings per share --
income from continuing operations available to
common stockholders before extraordinary gain 193,071 807,626 936,871
Accretion on convertible preferred shares 61,542 -- --
--------- -------- --------
Numerator for diluted earnings per share --
income from continuing operations
available to common stockholders before
extraordinary gain 254,613 807,626 936,871
--------- --------- --------
Denominator
Denominator for basic earnings per share --
Weighted-average shares issued, issuable and
outstanding 3,606,247 3,597,125 3,589,884
Effect of dilutive securities
Convertible preferred shares 165,147 -- --
Stock options 62,867 6,668 4,080
--------- --------- --------
Denominator for diluted earnings per share --
adjusted weighted-average shares 3,834,261 3,603,793 3,593,964
========= ========= =========
Basic earnings per share from continuing operations
before extraordinary gain 0.06 0.22 0.26
========= ========= =========
Diluted earnings per share from continuing operations
before extraordinary gain 0.06(1) 0.22 0.26
========= ========= =========
</TABLE>
F-25
<PAGE> 64
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
15. EARNINGS PER SHARE [CONT'D]
(1) For purposes of calculating diluted earnings per share from continuing
operations before extraordinary gain for 1998, the effect of the
convertible preferred shares has not been considered, as its effect is
anti-dilutive.
Options to purchase 209,000 shares of common stock at exercise prices
ranging from $5.06 to $5.81 per share were outstanding during 1998 but were
not included in the computation of diluted earnings per share because the
options' exercise prices were greater than the average market price of the
common stock and, therefore, the effect would be anti-dilutive.
The number of shares and earnings per share for 1997 and 1996 have been
restated to reflect a four-for-three stock split effected in the form of a
stock dividend, which was announced on March 27, 1998 and paid on May 21,
1998.
16. PENSION PLANS
The Company maintains a defined benefit final average pension plan which
covers certain of its Canadian employees. The periodic cost of pension
benefits is determined using the projected benefit method prorated on
service. The pension plan is administered by a major Canadian financial
institution. At December 31, 1998, the Company had made or accrued for all
required contributions.
Net periodic pension expense (income) in 1998, 1997 and 1996 included the
following components:
<TABLE>
<CAPTION>
1998 1997 1996
$ $ $
--------- --------- ---------
<S> <C> <C> <C>
Current service cost 170,745 161,731 182,605
Interest cost on projected benefit obligations 270,711 272,176 274,861
Expected return on plan assets (457,566) (442,936) (409,358)
Net amortization and deferral (87,024) (84,875) (61,308)
--------- --------- ---------
Net periodic pension expense (income) (103,134) (93,904) (13,200)
========= ========= =========
The assumptions used in the Company's plan at December 31, 1998, 1997 and 1996 are as follows:
1998 1997 1996
% % %
--------- --------- ---------
Weighted average discount rate 7.5 7.5 7.5
Expected long-term rate of return on assets 7.5 7.5 7.5
========= ========= =========
</TABLE>
F-26
<PAGE> 65
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
16. PENSION PLANS [CONT'D]
The changes to the projected benefit obligation and the amount of pension
assets were as follows:
<TABLE>
<CAPTION>
1998 1997
$ $
---------- ---------
<S> <C> <C>
BENEFIT OBLIGATION
Balance at January 1 3,649,283 3,532,540
Current service cost 262,959 262,135
Interest cost 270,711 272,176
Benefit payments (345,062) (260,835)
Foreign currency exchange rate component (250,791) (156,733)
---------- ----------
BALANCE AT DECEMBER 31 3,587,100 3,649,283
========== ==========
PENSION PLAN ASSETS
Balance at January 1 6,417,616 6,088,428
Contributions 92,214 100,405
Return on pension plan assets 525,177 764,013
Benefit payments (345,062) (260,835)
Foreign currency exchange rate component (439,113) (274,395)
---------- ----------
BALANCE AT DECEMBER 31 6,250,832 6,417,616
========== ==========
</TABLE>
The following table sets forth the funded status of the Company's defined
benefit plan at December 31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
$ $
---------- ----------
<S> <C> <C>
Actuarial present value of
Vested benefit obligation 2,626,296 2,648,165
Non-vested benefit obligation -- --
---------- ----------
Accumulated benefit obligation 2,626,296 2,648,165
Additional benefits based on
salary projection 960,804 1,001,118
---------- ----------
Projected benefit obligation 3,587,100 3,649,283
Plan assets at fair market value
[primarily listed stocks and bonds] 6,250,832 6,417,616
---------- ----------
Plan assets in excess of projected
benefit obligation 2,663,732 2,768,333
Unrecognized net asset at transition (39,457) (46,976)
Unrecognized net gain (2,431,814) (2,647,746)
Unrecognized prior service cost 359,421 410,975
---------- ----------
PENSION ASSET INCLUDED IN THE CONSOLIDATED
BALANCE SHEET 551,882 484,586
========== ==========
</TABLE>
F-27
<PAGE> 66
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
16. PENSION PLANS [CONT'D]
The Company has a pension plan under Section 401(k) of the INTERNAL REVENUE
CODE for certain of its US employees. Under the terms of the 401(k) plan,
the Company makes a matching contribution of up to 6% of each eligible
employee's earned wages, to a maximum of $1,000 per employee per year.
Under this plan employees may also contribute up to 15% of their earned
wages. The Company makes monthly contributions to the plan whereby $18,998
was paid in 1998, $25,139 in 1997 and $21,968 in 1996.
The Company has a non-contributory defined contribution pension plan for
certain of its Canadian employees. Under the terms of the plan, the Company
contributed 3% of each eligible employee's earned wages. The Company made
monthly contributions to the plan whereby $15,061 was paid in 1997 and
$62,527 was paid in 1996. In March 1997 the Company ceased to contribute to
this plan and instead contributed the 3% of each eligible employee's earned
wages to a group retirement savings plan. The monthly contributions made to
this plan in 1998 amounted to $66,851 [1997 - $54,993].
17. FINANCIAL INSTRUMENTS
OFF-BALANCE-SHEET RISK
The Company's policy with respect to foreign currency exposure is to manage
its financial exposure to certain foreign exchange fluctuations with the
objective of neutralizing some of the impact of foreign currency exchange
movements. To achieve this objective, the Company enters into foreign
exchange forward contracts to hedge certain non-local-currency payables.
The Company enters into foreign exchange forward contracts with a major
Canadian chartered bank, and therefore does not anticipate non-performance
by its counterparty. The amount of the exposure on account of any
non-performance is restricted to the unrealized gains in such contracts. As
at December 31, 1998, the Company had no significant foreign exchange
forward contracts outstanding.
FAIR VALUE OF FINANCIAL INSTRUMENTS
For certain of the Company's financial instruments, including cash and cash
equivalents, short-term investments, accounts receivable, accounts payable
and other accrued charges, the carrying amounts approximate the fair value
due to their short maturities. The carrying value of long-term debt and
preferred stock approximates the fair value.
F-28
<PAGE> 67
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
18. SEGMENT INFORMATION FROM CONTINUING OPERATIONS
The Company's reportable segments are strategic business units that offer
different products. They are managed separately because each business
requires different technology and marketing services and has a different
customer base.
The Company conducts business in two operating segments: Sanitation
Products and Wiping Products. The Sanitation Products segment manufactures
and distributes sanitary paper products, cleaning and maintenance
chemicals, sanitation products, electro-mechanical and maintenance systems.
The Wiping Products segment manufactures and distributes disposable wiping
products and sanitary paper products and systems.
The Company evaluates performance based on profit or loss from operations
before income taxes not including non-recurring gains and losses.
The Company accounts for intersegment sales and transfers as if the sales
or transfers were to third parties, that is, at current market prices.
<TABLE>
<CAPTION>
SANITATION WIPING
PRODUCTS PRODUCTS CORPORATE TOTAL
SEGMENT INFORMATION $ $ $ $
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
1998
Revenues from external customers 50,787,121 16,337,016 67,124,137
Intersegment revenues 3,703,779 379,811 4,083,590
Interest revenue 2,343 149 2,492
Interest expense 478,799 47,084 632,366 1,158,249
Depreciation and amortization of
property, plant and equipment and
goodwill 833,287 196,984 1,030,271
Segment income (loss) before taxes 2,066,867 6,075 (947,366) 1,125,576
Segment assets [1] 28,239,472 6,948,348 1,906,218 33,336,308
Expenditures for segment property,
plant and equipment and goodwill 4,510,484 127,361 4,637,845
---------- ---------- --------- ----------
</TABLE>
F-29
<PAGE> 68
WYANT CORPORATION
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
18. SEGMENT INFORMATION FROM CONTINUING OPERATIONS [CONT'D]
<TABLE>
<CAPTION>
SANITATION WIPING
PRODUCTS PRODUCTS CORPORATE TOTAL
SEGMENT INFORMATION $ $ $ $
------------------- ---------- -------- --------- -----
<S> <C> <C> <C> <C>
1997
Revenues from external customers 48,847,534 14,712,169 63,559,703
Intersegment revenues 3,687,194 386,886 4,074,080
Interest revenue -- 7,323 7,323
Interest expense 356,089 -- 389,000 745,089
Depreciation and amortization of
property, plant and equipment and
goodwill 748,985 190,876 939,861
Segment income (loss) before taxes 2,481,335 155,134 (836,500) 1,799,969
Segment assets [1] 21,884,327 6,289,975 2,009,049 27,174,694
Expenditures for segment
property, plant and equipment and
goodwill 991,126 273,834 1,264,960
---------- ---------- --------- ----------
1996
Revenues from external customers 50,835,445 11,755,262 62,590,707
Intersegment revenues 2,050,901 248,733 2,299,634
Interest revenue -- 11,553 11,553
Interest expense 444,253 -- 67,000 511,253
Depreciation and amortization of
property, plant and equipment and
goodwill 856,990 180,863 1,037,853
Segment income (loss) before taxes 2,155,111 326,558 (748,805) 1,732,864
Expenditures for segment
property, plant and equipment and
goodwill 894,743 40,251 934,994
---------- ---------- --------- ----------
</TABLE>
F-30
<PAGE> 69
Wyant Corporation
[formerly Hosposable Products, Inc.]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
18. SEGMENT INFORMATION FROM CONTINUING OPERATIONS [CONT'D]
<TABLE>
<CAPTION>
PROPERTY, PLANT
AND EQUIPMENT
GEOGRAPHIC INFORMATION REVENUES[2] AND GOODWILL
$ % $
------------------------- ---------------- ------------
<S> <C> <C>
1998
United States 16,397,707 24.4 1,017,172
Canada 50,092,840 74.6 11,272,881
Other foreign countries 633,590 1.0 --
---------- ----- ----------
67,124,137 100.0 12,290,053
========== ===== ==========
1997
United States 14,598,461 23.0 1,039,795
Canada 48,521,689 76.3 8,020,388
Other foreign countries 439,553 0.7 --
---------- ----- ----------
63,559,703 100.0 9,060,183
========== ===== ==========
1996
United States 11,878,609 19.0 956,837
Canada 50,615,592 80.9 8,146,876
Other foreign countries 96,506 0.1 --
---------- ----- ----------
62,590,707 100.0 9,103,713
========== ===== ==========
</TABLE>
Notes
[1] Inter segment eliminations at December 31 were $3,757,730 and
$3,008,657 in 1998 and 1997 respectively.
[2] Revenues are attributed to countries based on location of customers.
F-31
<PAGE> 70
WYANT CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, 1996
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND COMPANIES AT END
DESCRIPTION OF YEAR EXPENSES DEDUCTIONS (1) ACQUIRED OF YEAR
----------- ---------- ---------- -------------- --------- -------
<S> <C> <C> <C> <C> <C>
ALLOWANCE FOR
DOUBTFUL ACCOUNTS:
Year ended December 31 -
1998 $323,759 $119,788 $ 64,335 $26,212 $405,424
1997 $325,276 $116,923 $118,440 -- $323,759
1996 $594,489 $(66,826) $202,387 -- $325,276
</TABLE>
________________________________________________________________
(1) Represents amounts written off, net of recoveries
F-32
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ANNUAL
REPORT ON FORM 10-K/A FOR YEAR ENDED DECEMBER 31, 1998-AMENDMENT NO. 2 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ANNUAL REPORT ON FORM 10-K/A FOR
YEAR ENDED DECEMBER 31, 1998 (AMENDMENT NO.2).
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 59,985
<SECURITIES> 0
<RECEIVABLES> 10,215,812
<ALLOWANCES> 0
<INVENTORY> 8,576,960
<CURRENT-ASSETS> 29,449,383
<PP&E> 8,593,460
<DEPRECIATION> 0
<TOTAL-ASSETS> 42,539,664
<CURRENT-LIABILITIES> 18,423,741
<BONDS> 3,887,593
5,477,072
0
<COMMON> 27,053
<OTHER-SE> 12,647,789
<TOTAL-LIABILITY-AND-EQUITY> 42,539,664
<SALES> 67,124,137
<TOTAL-REVENUES> 67,124,137
<CGS> 43,218,466
<TOTAL-COSTS> 65,084,379
<OTHER-EXPENSES> (244,067)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,158,249
<INCOME-PRETAX> 1,125,576
<INCOME-TAX> 572,000
<INCOME-CONTINUING> 553,576
<DISCONTINUED> 1,021,602
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,575,178
<EPS-PRIMARY> 0.34
<EPS-DILUTED> 0.34
</TABLE>
