<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
---------------------------------------
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
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(Exact name of registrant as specified in its charter)
New York 11-2236837
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1170 U.S. Highway 22 East, Suite 203, Bridgewater, New Jersey 08807
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code 514-636-9926
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(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports, and (2) has been subject to such
filing requirement for the past 90 days.
Yes X No
------- -----------
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the close of the latest practicable date.
Class Outstanding at August 8, 2000
--------------------------------------------------------------------------------
Common stock, $.01 par value 2,270,617
1
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WYANT CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 2000
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The attached unaudited consolidated financial statements of Wyant Corporation
and Subsidiaries reflect all adjustments which are, in the opinion of
management, necessary to present a fair statement of the operating results for
the interim periods.
Consolidated balance sheet 3
Consolidated statement of operations 4
Consolidated statement of cash flows 5
Consolidated statement of stockholders' equity 6
Notes to consolidated financial statements 7-12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
2
<PAGE> 3
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WYANT CORPORATION
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
June 30 December 31
2000 1999
-------- -----------
<S> <C> <C>
ASSETS
Current
Cash and cash equivalents $ 147 $ 1,204
Accounts receivable 13,210 12,685
Inventories (note 3) 8,522 8,887
Deferred income taxes 1,289 1,419
Income taxes recoverable 127 --
Prepaid expenses 249 373
-------- --------
Total current assets 23,544 24,568
Property, plant and equipment, net of accumulated
amortization of $12,900 (December 31, 1999 - $13,020) 10,821 11,014
Goodwill, net of accumulated amortization of $195
(December 31, 1999 - $159) 4,221 4,365
Other assets 1,273 1,301
-------- --------
Total assets $ 39,859 $ 41,248
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current
Revolving line of credit $ 5,264 $ 2,078
Accounts payable 4,448 4,855
Accrued expenses 4,554 4,093
Accrued restructuring expenses 375 976
Income taxes payable -- 1,285
Current portion of long-term debt (note 4) 752 3,182
Current portion of preferred stock of subsidiary 532 545
-------- --------
Total current liabilities 15,925 17,014
Long-term debt, excluding current portion (note 4) 2,245 2,391
Other long-term liabilities 1,438 1,514
Preferred stock of subsidiary (note 12) 4,915 5,483
Deferred income taxes 1,927 1,918
Stockholders' equity
Common stock, par value $0.01 per share 27 27
Additional paid-in capital 6,813 6,813
Retained earnings 6,855 6,133
Cumulative translation adjustment (286) (45)
-------- --------
Total stockholders' equity 13,409 12,928
-------- --------
Total liabilities and stockholders' equity $ 39,859 $ 41,248
======== ========
</TABLE>
See accompanying notes
3
<PAGE> 4
WYANT CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30 June 30
------------------------ -----------------------
2000 1999 2000 1999
---- ---- ---- ----
Restated Restated
(Note 10) (Note 10)
<S> <C> <C> <C> <C>
Net sales $ 20,751 $ 20,301 $ 39,536 $ 38,826
Cost of sales 13,196 13,313 25,146 25,681
-------- -------- -------- --------
Gross profit 7,555 6,988 14,390 13,145
Expenses
Selling 3,855 3,982 7,623 7,572
General and administration 2,338 2,386 4,554 4,572
Amortization 207 147 402 291
Interest expense 178 337 354 646
Other income (59) (26) (140) (150)
-------- -------- -------- --------
6,519 6,826 12,793 12,931
-------- -------- -------- --------
Income from continuing operations
before income taxes 1,036 162 1,597 214
Income tax expense
Current 409 60 525 78
Deferred 40 22 172 43
-------- -------- -------- --------
449 82 697 121
-------- -------- -------- --------
Income from continuing operations 587 80 900 93
Discontinued operations, net of income taxes (note 2) (1) -- 567 -- 974
-------- -------- -------- --------
Net income 587 647 900 1,067
Dividends and accretion of mandatorily
redeemable preferred stock 88 90 178 186
-------- -------- -------- --------
Net income attributable to common shares $ 499 $ 557 $ 722 $ 881
======== ======== ======== ========
Per common share (note 6)
Basic
Income from continuing operations $ 0.14 $ -- $ 0.20 $ (0.03)
Discontinued operations -- 0.15 -- 0.27
Net income 0.14 0.15 0.20 0.24
Diluted
Income from continuing operations 0.14 -- 0.20 (0.03)
Discontinued operations -- 0.15 -- 0.25
Net income 0.14 0.15 0.20 0.23
</TABLE>
(1) Income taxes of discontinued operations amounted to $ 305,000 in the three
months ended June 30, 1999 and $ 517,000 in the six months ended June 30,
1999.
See accompanying notes
4
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WYANT CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
Six months ended
June 30
-------------------------------
2000 1999
---- ----
Restated
(Note 10)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income from continuing operations $ 900 $ 93
Adjustments to reconcile net income to net cash provided by
operating activities
Depreciation and amortization 663 615
Gain on sale of fixed assets -- 2
Deferred income tax expense 172 93
Deferred pension costs (24) (17)
Changes in non-cash working capital balances
Accounts receivable (525) (3,883)
Inventories 364 66
Other current assets (2) 99
Accounts payable (552) 473
Income taxes payable (1,285) 407
Cash provided by discontinued operations -- 562
------- -------
Net cash used in operating activities (289) (1,490)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of businesses, net of cash acquired (7) (1,054)
Capital expenditures (708) (2,254)
Cash proceeds from sale of fixed assets 22 5
Decrease in other assets 31 --
Cash used for discontinued operations -- (69)
------- -------
Net cash used in investing activities (662) (3,372)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in committed revolving credit facility -- 656
Repayment of long-term debt (4,115) (657)
Increase in long-term debt 1,666 1,654
Redemption of preferred shares (545) (513)
Dividends paid by subsidiary (75) (84)
Increase in bank indebtedness 3,186 3,612
Cash used by discontinued operations (70) --
------- -------
Net cash provided by financing activities 47 4,668
Effect of exchange rate changes on cash (153) 217
------- -------
Net increase (decrease) in cash and cash equivalents (1,057) 23
Cash and cash equivalents, beginning of period 1,204 60
------- -------
Cash and cash equivalents, end of period $ 147 $ 83
======= =======
</TABLE>
See accompanying notes
5
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WYANT CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
(IN THOUSANDS OF DOLLARS, EXCEPT FOR NUMBER OF SHARES)
<TABLE>
<CAPTION>
Six months ended
June 30
------------------------------------
2000 1999
---- ----
Restated
(Note 10)
<S> <C> <C>
Common stock at par value $ 27 $ 27
----------- -----------
Additional paid-in capital 6,813 6,822
----------- -----------
Retained earnings
Balance at beginning of period 6,133 6,326
Net income 900 1,067
Dividends declared by subsidiary (75) (84)
Accretion on preferred shares of subsidiary (103) (101)
----------- -----------
Balance at end of period 6,855 7,208
----------- -----------
Accumulated other comprehensive income
Balance at beginning of period (45) (501)
Foreign currency translation adjustments (241) 248
----------- -----------
Balance at end of period (286) (253)
----------- -----------
Total stockholders' equity $ 13,409 $ 13,804
=========== ===========
Comprehensive income
Net income $ 900 $ 1,067
Other - Foreign currency translation adjustments (241) 248
----------- -----------
Comprehensive income for period $ 659 $ 1,315
=========== ===========
Number of common shares issued and outstanding 2,270,617 2,273,817
Common shares issuable upon conversion
of exchangeable shares 1,333,333 1,333,333
----------- -----------
Number of common shares issued, issuable and outstanding 3,603,950 3,607,150
=========== ===========
</TABLE>
See accompanying notes
6
<PAGE> 7
WYANT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS AT JUNE 30, 2000 AND FOR THE SIX MONTHS
ENDED JUNE 30, 2000 AND 1999 ARE UNAUDITED)
(IN THOUSANDS OF DOLLARS, UNLESS OTHERWISE STATED)
1. GENERAL
The accompanying unaudited consolidated financial statements include the
accounts of Wyant Corporation and its wholly-owned subsidiaries, IFC
Disposables, Inc. and Wood Wyant Inc. They have been prepared in accordance
with accounting principles generally accepted in the United States for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
the accompanying consolidated financial statements contain all adjustments,
consisting only of normal recurring accruals considered necessary to
present fairly the financial position as of June 30, 2000, the results of
operations for the six months and three months ended June 30, 2000 and 1999
and cash flows and changes in stockholders' equity for the six months ended
June 30, 2000 and 1999. For further information, refer to the financial
statements and notes thereto included in the Company's annual report for
the year ended December 31, 1999.
2. DISCONTINUED OPERATIONS
The sale of the Company's Wyant Health Care Division ("Division") was
completed on July 21, 1999 for cash proceeds of $12,193,000, of which an
amount of $581,000 is to be held in escrow for a period of 24 months from
the date of sale. Consequently, the results of the Division are reported in
these financial statements as discontinued operations.
The operating results of the Division were as follows:
<TABLE>
<CAPTION>
Six months
ended
June 30, 1999
-------------------
<S> <C>
Net sales $20,889
Income before income taxes 1,491
</TABLE>
3. INVENTORIES
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
---- ----
<S> <C> <C>
Raw materials $2,617 $2,780
Finished goods 5,905 6,107
------ ------
$8,522 $8,887
====== ======
</TABLE>
7
<PAGE> 8
4. LONG-TERM DEBT
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
-------- -----------
<S> <C> <C>
Wood Wyant Inc.
Term loan repayable in monthly installments of
Cdn. $20 plus interest at prime plus 3/4%
(prime at June 30, 2000 - 7.5%), maturing
October 1, 2001. Principal amount Cdn. $1,324
(December 31, 1999 - Cdn. $1,447) $ 894 $1,003
Term loan repayable in monthly installments of
Cdn. $35 plus interest at prime plus 3/4%,
maturing April 30, 2003. (Principal amount -
December 31, 1999 - Cdn. $1,400) -- 970
Term loan repayable in monthly installments of
Cdn. $50 plus interest at prime plus 3/4%,
maturing June 30, 2003. (Principal amount -
December 31, 1999 - Cdn. $2,080) -- 1,441
Term loan repayable in monthly installments of
Cdn. $42 plus interest at prime plus 3/4%,
maturing March 15, 2004. Principal amount -
Cdn. $1,833 (December 31, 1999 - Cdn. $2,083) 1,238 1,443
Revolving credit facility (Cdn. $1,280 -
December 31, 1999 - Cdn. $1,034) 865 716
------ ------
2,997 5,573
Current portion 752 3,182
------ ------
$2,245 $2,391
====== ======
</TABLE>
Wood Wyant also has a collateralized revolving line of credit with the Bank
of Nova Scotia bearing interest at the prime rate in Canada (7.5% at June
30, 2000). The maximum available under this line of credit was increased on
February 22, 2000 from Cdn. $7,500,000 (U.S. $5,066,000) to Cdn.
$10,000,000 (U.S. $6,754,000), and the line of credit was then used, on
March 8, 2000, to repay the outstanding balance on two term loans totalling
Cdn. $3,321,000 (U.S. $2,243,000) which had been obtained in the second
quarter of 1998 to finance business acquisitions.
Also on February 22, 2000, the collateralized revolving credit facility of
Cdn. $3,000,000 (U.S. $2,026,000) was renegotiated, with the maturity date
changing from September 30, 2000 to September 30, 2001 and the maximum
availability reducing to Cdn. $2,000,000 (U.S. $1,351,000).
8
<PAGE> 9
5. Preferred stock of subsidiary
<TABLE>
<CAPTION>
June 30, 2000 December 31, 1999
---------------------------- ----------------------------
No. of No. of
shares $ shares $
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Wood Wyant Inc.
4% Cumulative Redeemable Class A Preferred Stock -
Cdn. $1,665 (December 31, 1999 - Cdn. $2,433) 1,708,266 $ 1,125 2,495,161 $ 1,685
3.999999% Cumulative Redeemable Class B Preferred
Stock - Cdn. $3,366 (December 31, 1999 - Cdn. $3,325) 3,800,000 2,273 3,800,000 2,304
Class F Preferred Stock - Cdn. $3,033
(December 31,1999 - Cdn. $2,943) 283,111 2,049 283,111 2,039
---------- ----------
5,447 6,028
Current portion 532 545
---------- ----------
$ 4,915 $ 5,483
========== ==========
</TABLE>
6. Earnings per share
<TABLE>
<CAPTION>
Three months ended June 30 Six months ended June 30
-------------------------------- ---------------------------------
2000 1999 2000 1999
---- ---- ---- ----
Restated Restated
(Note 10) (Note 10)
<S> <C> <C> <C> <C>
Numerator
Income from continuing operations $ 587 $ 80 $ 900 $ 93
Preferred stock dividends and accretion 88 90 178 186
---------- ---------- ---------- ----------
Numerator for basic earnings per share -
Income from continuing operations available
to common stockholders 499 (10) 722 (93)
Accretion on convertible preferred shares 31 29 62 57
---------- ---------- ---------- ----------
Numerator for diluted earnings per share -
Income from continuing operations available
to common stockholders $ 530 $ 19 $ 784 $ (36)
========== ========== ========== ==========
Denominator
Denominator for basic earnings per share -
Weighted-average shares issued, issuable and
outstanding 3,603,950 3,607,150 3,603,950 3,607,150
Effect of dilutive securities
Convertible securities 283,111 283,111 283,111 283,111
Stock options -- -- -- --
---------- ---------- ---------- ----------
Denominator for diluted earnings per share -
Adjusted weighted-average shares 3,887,061 3,890,261 3,887,061 3,890,261
========== ========== ========== ==========
Basic earnings per share from continuing operations $ 0.14 $ -- $ 0.20 $ (0.03)
Diluted earnings per share from continuing operations $ 0.14 $ -- $ 0.20 $ (0.03)
</TABLE>
The effect of the convertible preferred shares has not been included in
computing the diluted earnings per share from continuing operations for the six
months ended June 30, 1999, since to do so would be anti-dilutive.
9
<PAGE> 10
7. Segment information from continuing operations
<TABLE>
<CAPTION>
Sanitation Wiping
Products Products Corporate Total
---------- -------- --------- -----
<S> <C> <C> <C> <C>
Three months ended June 30
2000
----
Revenues from external customers $15,736 $ 5,015 $20,751
Intersegment revenues 1,001 92 1,093
Segment income (loss) before taxes 1,116 68 (148) 1,036
Segment assets 31,173 7,031 1,655 39,859
1999 (Restated - Note 10)
-----
Revenues from external customers 15,608 4,693 20,301
Intersegment revenues 1,162 97 1,259
Segment income (loss) before taxes 253 64 (155) 162
Six months ended June 30
2000
----
Revenues from external customers $30,295 $ 9,241 $39,536
Intersegment revenues 1,931 191 2,122
Segment income (loss) before taxes 1,652 96 (151) 1,597
1999 (Restated - Note 10)
----
Revenues from external customers 30,014 8,812 38,826
Intersegment revenues 1,975 182 2,157
Segment income (loss) before taxes 466 87 (339) 214
</TABLE>
10
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8. CONTINGENCIES
PENSION PLAN
------------
Certain employees of the Wyant Health Care Division were 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.
As a result of the sale of the Division, the Company incurred a
withdrawal liability and recorded a provision in the amount of
$1,998,620 for all known and quantifiable liabilities arising at the
time of the sale of the Division. The balance of this provision at June
30, 2000 was $1,956,578.
If the remaining members were to withdraw from the Plan, a mass
withdrawal liability could be triggered which could result in an
additional liability to the Company in excess of $700,000 if such a
mass withdrawal were to occur within three years of the Company
withdrawing from the Pension Plan. The actual amount of any such
withdrawal liability can only be determined at the time of any such
mass withdrawal.
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. Upon final 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 reach $200,000. 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.
11
<PAGE> 12
9. RESTRUCTURING CHARGE
During the fourth quarter of 1999 Wood Wyant incurred a special charge
of $1,085,000, composed entirely of severance costs related to 38
employee terminations. During the six months ended June 30, 2000,
$760,000 of this amount was paid and charged against the amount
accrued, leaving a balance of $325,000 remaining to be paid as at June
30, 2000. All of the above employees had been terminated by June 30,
2000.
10. RESTATEMENT
Results for the three months and six months ended June 30, 1999 have
been restated to reflect accounting adjustments made during the 1999
year-end financial close. The effect of the adjustments was to reduce
gross profit, income from continuing operations and net income by
$177,000, $102,000 and $102,000 or $0.03 per common share,
respectively, for the three months ended June 30, 1999 and by $299,000,
$173,000 and $173,000 or $0.05 per common share, respectively, for the
six months ended June 30, 1999.
The balance of retained earnings at June 30, 1999 was reduced by
$275,000.
11. ACCOUNTING DEVELOPMENTS
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, Revenue Recognition in Financial
Statements (SAB 101), which among other guidance clarifies certain
conditions to be met in order to recognize revenue. The Company has
reviewed the provisions of SAB 101 and has determined that it is in
compliance.
12. SUBSEQUENT EVENT
During July 2000, holders of the 283,111 outstanding Class F Preferred
shares of Wood Wyant Inc. exercised an option to redeem those shares at
a price of Cdn. $11.250028 ($7.60) per share. As a consequence, the
shares will be redeemed in five equal annual instalments commencing
August 3, 2000. In addition, dividends on the outstanding shares will
be paid at a rate of 3.5% per annum commencing July l, 2000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following information should be read in conjunction with the accompanying
unaudited financial statements and the notes thereto included in Item I of this
quarterly report, and the financial statements and the notes thereto and
management's discussion and analysis of financial condition and results of
operations contained in the Company's Annual Report on Form 10-K for the year
ended December 31, 1999. As indicated in Note 2 to the consolidated financial
statements, the Company has sold its Wyant Health Care Division and
substantially all of its operating assets. Accordingly, such consolidated
financial statements, as well as the discussion below, reflect the consummation
of this transaction by showing the health care business as "discontinued
operations" for income statement purposes.
The following information 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 implement its business strategy
following consummation of the sale of the Wyant Health Care Division, 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.
12
<PAGE> 13
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2000 COMPARED WITH THE THREE MONTHS
ENDED JUNE 30, 1999.
SALES
-----
Sales of continuing operations for the second quarter of 2000 increased by
$450,000 or 2.2% to $20,751,000 from the total of $20,301,000 in the same
quarter last year, after eliminating inter-segment sales of $1,093,000 in the
current quarter and $1,259,000 in the second quarter of 1999. Sales of the
sanitation products segment at $16,737,000 for the current quarter were $33,000
or 0.2% lower than in the corresponding quarter of 1999. The reduction was
primarily due to lower direct sales of paper products from the Company's paper
converting operation, which offset the increase in sales derived from a business
acquired in mid-1999. Sales of the wiping products segment at $5,107,000 were
$317,000 or 6.6% higher than in the second quarter last year.
COST OF SALES AND GROSS PROFIT
------------------------------
Gross profit of the sanitation products segment improved to 40.1% of sales in
the second quarter of 2000 from 36.0% of sales in the same quarter last year,
due primarily to increased selling prices for paper products and an improved
product mix. Gross profit of the wiping products segment was 16.5% of sales in
the current quarter, down from 18.2% of sales in the same quarter last year due
to competitive pricing pressures.
SELLING EXPENSES
----------------
Selling expenses for the second quarter of 2000 amounted to $3,855,000, a
reduction of $127,000 or 3.2% from the same quarter last year. In the sanitation
products segment, selling expenses at $3,221,000 were $121,000 or 3.6% lower
than in the second quarter of 1999. The improvement was primarily due to the
reduction in expenses resulting from the restructuring of operations in the
fourth quarter of 1999. In the wiping products segment, selling expenses at
$633,000 were $7,000 or 1.1% lower than in the second quarter of 1999, as higher
outward freight costs associated primarily with the increased level of sales
were more than offset by savings from reduced staffing levels.
GENERAL AND ADMINISTRATION EXPENSES
-----------------------------------
General and administration expenses were $2,338,000 in the current quarter, a
decrease of $48,000 or 2.0% from the second quarter last year. Expenses of the
sanitation products segment at $2,089,000 were $107,000 or 4.9% lower than in
the same quarter of 1999, primarily reflecting the reduced level of expenses
following the restructuring of operations in the fourth quarter last year.
General and administration expenses of the wiping products segment were $120,000
in the current quarter, a reduction of $14,000 from the same quarter last year
due to reduced staffing costs. Corporate charges in the current quarter amounted
to $128,000, an increase of $63,000 over the corresponding quarter last year due
primarily to a higher level of professional fees.
AMORTIZATION
------------
Amortization amounted to $207,000 in the second quarter of 2000, an increase of
$60,000 over the same quarter last year. The increase primarily resulted from
the amortization of the Company's new information systems hardware and software.
INTEREST EXPENSE
----------------
Interest expense declined to $178,000 in the second quarter from $337,000 in the
corresponding quarter of 1999. The lower expense was due to a reduction of
$96,000 in interest costs in the United States, resulting from the repayment of
the loan from Congress Financial Corporation from the proceeds of sale of the
Company's health care operations in July 1999, together with a decrease of
$63,000 in interest expense in Canada, reflecting the utilization of part of an
investment in 1999 by Wyant Corporation of $4,500,000 in additional common
shares of Wood Wyant Inc. to reduce the Company's bank borrowing.
13
<PAGE> 14
OTHER INCOME
------------
Other income increased to $59,000 from $26,000 in the second quarter of 1999.
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
-----------------------------------------------------
Income from continuing operations before income taxes amounted to $1,036,000 in
the current quarter, an increase of $874,000 over the level of $162,000 in the
second quarter last year. The sanitation products segment contributed $863,000
of the improvement, while the wiping products segment and corporate expenses
were favorable by $4,000 and $7,000 respectively.
INCOME TAXES
------------
Income tax expense was $449,000 in the current quarter, compared with $82,000 in
the same quarter last year. The change reflected the higher level of pre-tax
earnings in the current quarter.
DISCONTINUED OPERATIONS
-----------------------
There were no discontinued operations in the current quarter, while in the
second quarter of 1999 the discontinued health care operations generated
after-tax income from operations of $567,000 or $0.15 per common share.
NET INCOME
----------
Net income for the second quarter of 2000 amounted to $587,000, compared with
$647,000 in the second quarter last year. After deducting dividends and
accretion relating to the mandatorily redeemable preferred shares, this
represented $0.14 per common share in the current quarter and $0.15 per common
share in the second quarter of 1999. The 1999 amounts have been restated to
reflect accounting adjustments made during the 1999 year-end financial close.
SIX MONTHS ENDED JUNE 30, 2000 COMPARED WITH THE SIX MONTHS ENDED JUNE 30,1999.
SALES
-----
Sales of continuing operations for the six months ended June 30, 2000 were
$39,536,000, an increase of $710,000 or 1.8% over the total of $38,826,000 in
the first half of 1999, after eliminating inter-segment sales of $2,122,000 in
the current period and $2,157,000 in the same period last year. Sales of the
sanitation products segment amounted to $32,226,000 in the first half of 2000,
an increase of $237,000 or 0.7% over the corresponding period last year. The
increase was primarily from sales of a business acquired in mid-1999 and the
favorable impact of a stronger Canadian dollar translation rate, which more than
offset a reduction in direct sales of paper products from the Company's paper
converting operation. Sales of the wiping products segment increased by $438,000
or 4.9% to $9,432,000 in the first half of 2000.
COST OF SALES AND GROSS PROFIT
------------------------------
Gross profit of the sanitation products segment improved to 39.7% of sales in
the first half of 2000 from 35.6% of sales in the first half of 1999, due
primarily to an improved product mix and increased selling prices for paper
products. Gross profit of the wiping products segment was 17.0% of sales in the
current period compared with 18.0% of sales in the first half of 1999.
SELLING EXPENSES
----------------
Selling expenses increased by $51,000 or 0.7% to $7,623,000 in the six months
ended June 30, 2000 from $7,572,000 in the corresponding period last year.
Expenses of the sanitation products segment at $6,397,000 were $28,000 or 0.4%
higher than in the first half of 1999. The higher expenses resulted primarily
from the unfavorable impact of the stronger Canadian dollar translation rate,
which more than offset the reduction in expenses resulting from the
restructuring of operations in the fourth quarter of 1999.
14
<PAGE> 15
Selling expenses of the wiping products segment at $1,226,000 were $24,000
higher than in the first half of 1999, primarily as a result of an increase of
$57,000 in outward freight costs, which more than offset a reduction in staffing
costs of $34,000.
GENERAL AND ADMINISTRATION EXPENSES
-----------------------------------
General and administration expenses at $4,554,000 were $18,000 or 0.4% lower
than in the first half of 1999. In the sanitation products segment, expenses
increased by $8,000 to $4,189,000, as the unfavorable impact of the stronger
Canadian dollar translation rate and higher consulting fees more than offset
reduced employee costs. Expenses of the wiping products segment at $246,000 were
$19,000 or 7.2% lower than in the first half of 1999. Corporate charges for the
first half of 2000 were $119,000, compared with $126,000 in the same period last
year.
AMORTIZATION
------------
Amortization amounted to $402,000 in the first half of 2000, an increase of
$111,000 over the same period last year. The higher expense was primarily due to
the amortization of the Company's new information systems hardware and software.
INTEREST EXPENSE
----------------
Interest expense for the first half of 2000 decreased by $292,000 to $354,000,
compared with $646,000 in the corresponding period last year. The reduction was
due to a decrease of $204,000 in interest costs in the United States following
the repayment of the loan from Congress Financial Corporation from the proceeds
of sale of the Company's health care operations in July 1999, together with a
decrease of $88,000 in interest expense in Canada, where bank borrowing was
reduced as a result of the investment of $4,500,000 in 1999 by Wyant Corporation
in additional common shares of Wood Wyant Inc.
OTHER INCOME
------------
Other income for the current period of $140,000 was $10,000 lower than in the
same period last year.
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
-----------------------------------------------------
Income from continuing operations before income taxes for the first half of 2000
amounted to $1,597,000, an increase of $1,383,000 over the total of $214,000 for
the corresponding period in 1999. The sanitation products and wiping products
segments improved by $1,186,000 and $9,000 respectively, while corporate
expenses were $188,000 lower than in the first half of 1999.
INCOME TAXES
------------
Income tax expense was $697,000 in the first half of 2000, compared with
$121,000 in the same period last year, reflecting the higher level of pre-tax
earnings in the current period.
DISCONTINUED OPERATIONS
-----------------------
The discontinued health care operations generated after-tax income of $974,000
or $0.27 per common share in the first half of 1999. There were no discontinued
operations in the current period.
NET INCOME
----------
Net income for the first half of 2000 amounted to $900,000, compared with
$1,067,000 in the first half of 1999. After deducting dividends and accretion
relating to the mandatorily redeemable preferred shares, this represented $0.20
per common share in the current period and $0.24 per common share in the first
half of 1999. The 1999 amounts have been restated to reflect accounting
adjustments made during the 1999 year-end financial close.
15
<PAGE> 16
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Liquidity and capital resources of the Company's Canadian operations (Wood Wyant
Inc.) and United States operations (IFC Disposables) are discussed separately,
as each is self-financing and has separate banking facilities.
CANADIAN OPERATIONS
-------------------
The Canadian operations utilized $2,821,000 of cash during the first half of
2000. Operating activities generated $935,000 of cash during the period, despite
an increase in working capital of $679,000, primarily due to higher receivables
($788,000) and lower payables ($527,000), partially offset by lower inventories
($290,000) and higher income taxes payable ($229,000). The higher receivables
reflected the increased sales activity, partially offset by improved collection
performance. The reduction in payables was due primarily to the payment during
the first half of 2000 of $650,000 relating to the restructuring charge incurred
in the fourth quarter of 1999. Capital expenditures during the period totalled
$550,000. Long-term debt repayments amounted to $4,115,000, including the
renegotiation of a revolving credit facility on February 22, 2000 which changed
the maturity date from September 30, 2000 to September 30, 2001 and the maximum
availability to Cdn. $2,000,000 ($1,351,000). The Company also restructured its
financing on the same date by increasing the collateralized revolving line of
credit by Cdn. $2,500,000 to Cdn. $10,000,000 ($6,754,000) and utilizing this
line of credit to repay, on March 8, 2000, the outstanding balance of Cdn.
$3,321,000 ($2,243,000) on two term loans which had been obtained in the second
quarter of 1998 to finance business acquisitions. On June 8, 2000, Cdn. $430,000
($290,000) was borrowed, utilizing the existing revolving credit facility, to
finance equipment purchases. In January 2000, $545,000 of Class A Preferred
shares of Wood Wyant Inc. were redeemed. Dividends paid on the outstanding Class
A and Class B Preferred shares during the first half of 2000 amounted to
$75,000.
As at June 30, 2000, approximately $2,178,000 was available under the Company's
Cdn. $10,000,000 collateralized revolving line of credit. In addition,
approximately $313,000 was available to finance future capital expenditures
under the Cdn. $2,000,000 revolving credit facility.
All borrowings of the Canadian operations are with the Bank of Nova Scotia.
Long-term debt outstanding at June 30, 2000 amounted to $2,997,000, including
$752,000 due within one year. All of the loans were at the commercial prime rate
in Canada (7.5% at June 30, 2000) plus 0.75%. The collateralized 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, borrowing 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 June 30, 2000.
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 June 30, 2000
average less than $600,000 over the next five years, with a maximum of
$1,890,000 in 2001. Amounts required to redeem Class A and Class B Preferred
shares approximate $550,000 per annum during that period. Holders of the Class F
Preferred shares exercised an option in July 2000 to redeem all of the
outstanding Class F Preferred shares of Wood Wyant Inc. As a result, an annual
amount of approximately $430,000 will be paid to the shareholders for five years
commencing on August 3, 2000 to redeem the shares.
Management believes that future operating cash flows and amounts available under
existing credit facilities will be sufficient to meet its ongoing operating cash
requirements and amounts required for capital asset additions, as well as meet
the cash requirements for debt and Preferred share redemptions discussed above.
16
<PAGE> 17
US OPERATIONS
-------------
Cash of $1,352,000 was utilized by continuing operations in the United States
during the first half of 2000. Operating activities utilized $1,224,000 due to
an increase in working capital of $1,321,000. This increase was primarily due to
the payment of income taxes for 1999 during the current period, which resulted
in a decrease of $1,640,000 in income taxes payable. This was partially offset
by an increase in payables of $374,000. Capital expenditures in the first half
of 2000 amounted to $159,000.
IFC Disposables has a secured revolving line of credit of $1,000,000 with Union
Planters Bank, National Association, which bears interest at bank prime (9.5% at
June 30, 2000) plus 1%. This line of credit, which expires on July 16, 2002, is
guaranteed by Wyant Corporation and is available to finance working capital.
Unused availability at June 30, 2000 amounted to $635,000. Maximum borrowing
under the facility is determined by advance formulas applicable to the book
value of accounts receivable and inventories of IFC.
Management believes that future operating cash flows, cash on hand and the
unused balance available under the credit facility will be sufficient to enable
the Company to meet its ongoing operating cash requirements and to finance
capital asset additions.
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.
SIGNIFICANT FACTORS AND KNOWN TRENDS
PENSION PLAN
------------
Certain employees of the Wyant Health Care Division were 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.
As a result of the sale of the Division, the Company incurred a withdrawal
liability and recorded a provision in the amount of $1,998,620 for all known and
quantifiable liabilities arising at the time of the sale of the Division. The
balance of this provision at June 30, 2000 was $1,956,578.
If the remaining members were to withdraw from the Plan, a mass withdrawal
liability could be triggered which could result in an additional liability to
the Company in excess of $700,000 if such a mass withdrawal were to occur within
three years of the Company withdrawing from the Pension Plan. The actual amount
of any such withdrawal liability can only be determined at the time of any such
mass withdrawal.
17
<PAGE> 18
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. Upon final
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
reach $200,000. 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 3. 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.
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.
18
<PAGE> 19
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
The Company is not involved in any material legal proceedings.
ITEMS 2, 3, 4 & 5
Not applicable
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
a) Not applicable
b) Reports on Form 8-K
No current reports on Form 8-K have been filed during the quarter ended
June 30, 2000.
19
<PAGE> 20
WYANT CORPORATION
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Wyant Corporation
(Registrant)
Date: August 9, 2000 SIGNATURE: /s/ Marc D'Amour
------------ ----------------------
Marc D'Amour
Vice President,
Chief Financial Officer
and Treasurer
(For the registrant and as
Principal Financial Officer)
20
