<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 March 31, 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
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
New York 11-2236837
- -------------------------------------------------------------------------------
(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
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code 514-636-9926
- -------------------------------------------------------------------------------
(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 May 10, 2000
- --------------------------------------------------------------------------------
Common stock, $.01 par value 2,270,617
1
<PAGE> 2
WYANT CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 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 7-11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
2
<PAGE> 3
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WYANT CORPORATION
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
2000 1999
-------- -----------
<S> <C> <C>
ASSETS
CURRENT
Cash and cash equivalents $ 417 $ 1,204
Accounts receivable 12,023 12,685
Inventories (note 3) 8,788 8,887
Deferred income taxes 1,307 1,419
Income taxes recoverable 378 --
Prepaid expenses 355 373
------- -------
TOTAL CURRENT ASSETS 23,268 24,568
Property, plant and equipment, net of accumulated
amortization of $13,318 (December 31, 1999 - $13,020) 11,120 11,014
Goodwill, net of accumulated amortization of $180 (1999- $159) 4,333 4,365
Other assets 1,290 1,301
------- -------
TOTAL ASSETS $40,011 $41,248
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT
Revolving line of credit $ 6,330 $ 2,078
Accounts payable 4,478 4,855
Accrued expenses 3,533 4,093
Accrued restructuring expenses 679 976
Income taxes payable -- 1,285
Current portion of long-term debt (note 4) 768 3,182
Current portion of preferred stock of subsidiary 543 545
------ ------
TOTAL CURRENT LIABILITIES 16,331 17,014
Long-term debt, excluding current portion (note 4) 2,189 2,391
Other long-term liabilities 1,476 1,514
Preferred stock of subsidiary 4,969 5,483
Deferred income taxes 1,931 1,918
STOCKHOLDERS' EQUITY
Common stock, par value $0.01 per share 27 27
Additional paid-in capital 6,813 6,813
Retained earnings 6,356 6,133
Cumulative translation adjustment (81) (45)
------- ------
TOTAL STOCKHOLDERS' EQUITY 13,115 12,928
------- ------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $40,011 $41,248
======= =======
</TABLE>
See accompanying notes
3
<PAGE> 4
WYANT CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
2000 1999
---- ----
Restated
[Note 9]
<S> <C> <C>
Net sales $18,785 $18,525
Cost of sales 11,950 12,368
------- -------
Gross profit 6,835 6,157
Expenses
Selling 3,768 3,589
General and administration 2,216 2,186
Amortization 195 144
Interest expense 176 310
Other income (81) (123)
------- --------
6,274 6,106
------- --------
Income from continuing operations before income taxes 561 51
Income tax expense
Current 116 18
Deferred 132 21
------- --------
248 39
------- --------
Income from continuing operations 313 12
Discontinued operations, net of income taxes of $212 in 1999 -- 407
------- --------
Net income 313 419
Dividends and accretion of mandatorily redeemable preferred stock 90 95
------- --------
Net income attributable to common shares $ 223 $ 324
======= ========
Per common share (note 5)
BASIC
Income from continuing operations $ 0.06 $ (0.02)
Discontinued operations -- 0.11
Net income 0.06 0.09
DILUTED
Income from continuing operations 0.06 (0.02)
Discontinued operations -- 0.10
Net income 0.06 0.08
</TABLE>
See accompanying notes
4
<PAGE> 5
WYANT CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
2000 1999
---- ----
Restated
[Note 9]
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income from continuing operations $ 313 $ 12
Adjustments to reconcile net income to net cash provided by
operating activities
Depreciation and amortization 318 305
Deferred income tax expense 132 12
Deferred pension costs (11) (9)
Changes in non-cash working capital balances
Accounts receivable 663 (1,494)
Inventories 99 99
Other current assets 17 251
Accounts payable (1,237) (449)
Income taxes payable (1,662) 225
Cash provided by discontinued operations -- 167
-------- --------
NET CASH USED IN OPERATING ACTIVITIES (1,368) (881)
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (458) (1,777)
Cash proceeds from sale of fixed assets 6 9
Decrease in other assets 18 --
Cash used for discontinued operations -- (19)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (434) (1,787)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in committed revolving credit facility -- (449)
Increase in long-term debt 1,376 1,654
Repayment of long-term debt (3,962) (297)
Redemption of preferred shares (545) (513)
Dividends paid by subsidiary (38) (42)
Increase in bank indebtedness 4,252 2,169
Cash used for discontinued operations (35) --
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,048 2,522
Effect of exchange rate changes on cash (33) 86
-------- --------
Net decrease in cash and cash equivalents (787) (60)
Cash and cash equivalents, beginning of period 1,204 60
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 417 $ --
======== ========
</TABLE>
See accompanying notes
5
<PAGE> 6
WYANT CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
(IN THOUSANDS OF DOLLARS, EXCEPT FOR NUMBER OF SHARES)
<TABLE>
<CAPTION>
2000 1999
---- ----
Restated
[Note 9]
<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 313 419
Dividends declared (38) (42)
Accretion on preferred shares of subsidiary (52) (53)
--------- ---------
BALANCE AT END OF PERIOD 6,356 6,650
--------- ---------
ACCUMULATED OTHER COMPREHENSIVE INCOME
Balance at beginning of period (45) (501)
Foreign currency translation adjustments (36) 107
--------- ---------
BALANCE AT END OF PERIOD (81) (394)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY $ 13,115 $ 13,105
========= =========
COMPREHENSIVE INCOME
Net income $ 313 $ 419
Other - Foreign currency translation adjustments (36) 107
--------- ---------
COMPREHENSIVE INCOME FOR PERIOD $ 277 $ 526
========= =========
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 MARCH 31, 2000 AND FOR THE THREE MONTHS
ENDED MARCH 31, 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 March 31, 2000, the results of
operations, cash flows and changes in stockholders' equity for the three
months ended March 31, 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>
Three months
ended
March 31, 1999
-------------------
<S> <C>
Net sales $10,286
Income before income taxes 619
</TABLE>
7
<PAGE> 8
3. INVENTORIES
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
-------- -----------
<S> <C> <C>
Raw materials $2,459 $2,780
Finished goods 6,329 6,107
------ ------
$8,788 $8,887
====== ======
</TABLE>
4. LONG-TERM DEBT
<TABLE>
<CAPTION>
March 31, 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 March 31, 2000 - 7%), maturing
October 1, 2001. Principal amount Cdn. $1,386
(December 31, 1999 - Cdn. $1,447) $ 956 $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. $1,958 (December 31, 1999 - Cdn. $2,083) 1,351 1,443
Revolving credit facility (Cdn. $942 -
December 31, 1999 - Cdn. $1,034) 650 716
------ ------
2,957 5,573
Current portion 768 3,182
------ ------
$2,189 $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% at March 31, 2000). The maximum available under this
line of credit was increased on February 22, 2000 from Cdn.
$7,500,000 (U.S. $5,175,000) to Cdn. $10,000,000 (U.S.
$6,899,000), 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. $2,291,000) 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. $2,070,000) 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.
$1,380,000).
8
<PAGE> 9
5. EARNINGS PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31
2000 1999
---- ----
Restated
[Note 9]
<S> <C> <C>
Numerator
Income from continuing operations $ 313 $ 12
Preferred stock dividends and accretion 90 95
---------- ----------
Numerator for basic earnings per share -
Income (loss) from continuing operations available
to common stockholders 223 (83)
Accretion on convertible preferred shares 31 29
---------- ----------
Numerator for diluted earnings per share -
Income (loss) from continuing operations available
to common stockholders $ 254 $ (54)
========== ==========
Denominator
Denominator for basic earnings per share -
Weighted-average shares issued, issuable and
outstanding 3,603,950 3,607,150
Effect of dilutive securities
Convertible securities 283,111 283,111
Stock options 8,526 540
---------- ----------
Denominator for diluted earnings per share -
Adjusted weighted-average shares 3,895,587 3,890,801
========== ==========
Basic earnings per share from continuing operations $ 0.06 $ (0.02)
Diluted earnings per share from continuing operations $ 0.06 $ ( 0.02)
</TABLE>
6. SEGMENT INFORMATION FROM CONTINUING OPERATIONS
<TABLE>
<CAPTION>
Three months ended March 31
Sanitation Wiping
Products Products Corporate Total
---------- -------- --------- -----
<S> <C> <C> <C> <C>
2000
----
Revenues from external customers $14,559 $4,226 $18,785
Intersegment revenues 930 99 1,029
Segment income (loss) before taxes 536 28 (3) 561
Segment assets 31,335 6,901 1,775 40,011
1999 [Restated - Note 9]
----
Revenues from external customers $14,406 $4,119 $18,525
Intersegment revenues 813 85 898
Segment income (loss) before taxes 213 23 (185) 51
</TABLE>
9
<PAGE> 10
7. 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
$1,996,620 for all known and quantifiable liabilities arising at the
time of the sale of the Division. The balance of this provision at
March 31, 2000 was $1,992,093.
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.
10
<PAGE> 11
8. 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 first quarter of 2000, $578,000 of
this amount was paid and charged against the amount accrued, leaving a
balance of $398,000 remaining to be paid as at March 31, 2000. All of
the above employees had been terminated by March 31, 2000.
9. RESTATEMENT
Results for the first quarter of 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 by $122,000
and income from continuing operations and net income by $71,000 or
$0.02 per common share. The balance of retained earnings was similarly
reduced by $71,000.
10. 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.
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.
11
<PAGE> 12
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 COMPARED WITH THE THREE MONTHS ENDED
MARCH 31, 1999
SALES
- -----
Sales of continuing operations for the first quarter of 2000 increased by
$260,000 or 1.4% to $18,785,000 from the total of $18,525,000 in the same
quarter last year, after eliminating inter-segment sales of $1,029,000 in the
current quarter and $898,000 in the first quarter of 1999. Sales of the
sanitation products segment were $15,489,000 in the current quarter, an increase
of $270,000 or 1.8% over the same quarter last year. The increase resulted
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 at $4,325,000 were $121,000 or
2.9% higher than in the first quarter of 1999.
COST OF SALES AND GROSS PROFIT
- ------------------------------
Gross profit of the sanitation products segment improved to 39.2% of sales in
the first quarter of 2000 from 35.6% 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 virtually unchanged at
17.6% of sales compared with 17.7% in the first quarter of 1999.
SELLING EXPENSES
- ----------------
Selling expenses for the first quarter of 2000 amounted to $3,768,000, an
increase of $179,000 or 5.0% over the same quarter last year. In the sanitation
products segment, selling expenses at $3,176,000 were $149,000 or 4.9% higher
than in the corresponding quarter last year. The increase was primarily due to
the unfavorable impact of the stronger Canadian dollar translation rate and
higher outward freight costs, which more than offset the reduction in other
selling and marketing expenses which resulted for the most part from the
restructuring of operations in the fourth quarter of 1999. In the wiping
products segment, selling expenses increased by $29,000 or 5.2% to $592,000 in
the current quarter, reflecting primarily higher outward freight costs.
GENERAL AND ADMINISTRATION EXPENSES
- -----------------------------------
General and administration expenses increased by $30,000 or 1.4% to $2,216,000
in the current quarter. Expenses of the sanitation products segment at
$2,099,000 were $114,000 or 5.7% higher than in the first quarter of 1999. The
increase was primarily due to the negative impact of the stronger Canadian
dollar translation rate. General and administration expenses of the wiping
products segment were $126,000 in the current quarter, a reduction of $6,000 or
4.5% from the same quarter last year. Corporate charges in the current quarter
at ($9,000) were $78,000 lower than in the first quarter of 1999, when expenses
were $69,000. A reduction of $66,000 in the allowance for doubtful accounts
receivable during the current quarter was the principal reason for the change.
AMORTIZATION
- ------------
Amortization amounted to $195,000 in the first quarter of 2000, an increase of
$51,000 over the same quarter last year. The increase resulted primarily from
the amortization of the Company's new information systems hardware and software.
12
<PAGE> 13
INTEREST EXPENSE
- ----------------
Interest expense declined to $176,000 in the current quarter, from $310,000 in
the corresponding quarter last year. The lower expense was due to a reduction of
$110,000 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
$25,000 in interest expense in Canada, reflecting the utilization of part of an
investment in 1999 of $4,500,000 by Wyant Corporation in additional common
shares of Wood Wyant Inc. to reduce the Company's bank borrowing.
OTHER INCOME
- ------------
Other income decreased to $81,000 in the first quarter of 2000 from $123,000 in
the same quarter last year.
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
- -----------------------------------------------------
Income from continuing operations before income taxes amounted to $561,000 in
the current quarter, an increase of $510,000 over the level of $51,000 in the
same quarter last year. The sanitation products and wiping products segments
improved by $323,000 and $5,000, respectively, while corporate expenses were
$182,000 lower than in the first quarter of 1999.
INCOME TAXES
- ------------
Income tax expense was $248,000 in the first quarter of 2000, compared with
$39,000 in the corresponding 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 first
quarter of 1999 the discontinued health care operations generated after-tax
income from operations of $407,000 or $0.11 per common share.
NET INCOME
- ----------
Net income for the first quarter of 2000 amounted to $313,000, compared with
$419,000 in the first quarter of 1999. After deducting dividends and accretion
relating to the mandatorily redeemable preferred shares, this represented $0.06
per common share in the current quarter and $0.09 per common share in the first
quarter of 1999. The 1999 amounts have been restated to reflect accounting
adjustments made during the 1999 year-end financial close.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Liquidity and capital resources of the Company's Canadian operations (Wood
Wyant) and United States operations (IFC Disposables) are discussed separately,
as each is self-financing and has separate banking facilities.
13
<PAGE> 14
CANADIAN OPERATIONS
- -------------------
The Canadian operations utilized $3,702,000 of cash during the first quarter of
2000. Operating activities utilized $75,000 as a result of an increase in
working capital of $746,000, primarily due to lower payables ($1,272,000) and
income taxes payable ($92,000), partially offset by lower receivables ($303,000)
and inventories ($291,000). The reduction in payables was in part due to the
payment during the quarter of $578,000 relating to the restructuring charge
incurred in the fourth quarter of 1999. The lower receivables reflected
primarily improved collection performance. Capital expenditures during the
quarter amounted to $431,000. Repayments of long-term debt totalled $3,962,000
in the first quarter, including the renegotiation of a revolving credit facility
on February 22, 2000, with the maturity date changing from September 30, 2000 to
September 30, 2001 and the maximum availability changing to Cdn. $2,000,000
($1,376,000). In addition, also on February 22, 2000, the Company restructured
its financing by increasing the collateralized revolving line of credit by Cdn.
$2,500,000 to Cdn. $10,000,000 ($6,899,000) and utilizing this line of credit to
repay, on March 8, 2000, the outstanding balance of Cdn. $3,321,000 ($2,291,000)
on two term loans which had been obtained in the second quarter of 1998 to
finance business acquisitions. In January 2000, $545,000 of Class A Preferred
shares of Wood Wyant Inc. were redeemed. Dividends paid in the quarter on the
outstanding Class A and Class B Preferred shares amounted to $38,000.
As at March 31, 2000, approximately $1,379,000 was available under the Company's
Cdn. $10,000,000 collateralized revolving line of credit. In addition,
approximately $709,000 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 March 31, 2000 amounted to $2,957,000, including
$768,000 due within one year. All of the loans were at the commercial prime rate
in Canada (7% at March 31, 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 March 31, 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 March 31, 2000
average less than $600,000 over the next five years, with a maximum of
$1,634,000 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 have an option to redeem those shares which may be exercised
between July 1 and July 31, 2000. Exercise of the option would require an
additional annual amount of approximately $440,000 for five years commencing in
2000.
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.
14
<PAGE> 15
U.S. OPERATIONS
- ---------------
Cash of $1,302,000 was utilized by continuing operations in the United States
during the first quarter of 2000. Operating activities utilized $1,293,000 due
to an increase of $1,374,000 in working capital. This increase was primarily due
to a reduction of $1,571,000 in income taxes payable, reflecting the income tax
payments for 1999 made in the current quarter, together with an increase in
inventories of $157,000. These were partially offset by a reduction in accounts
receivable of $301,000 due for the most part to the settlement of an insurance
claim for $239,000 relating to a fire which occurred in 1998. Capital
expenditures amounted to $27,000 in the current quarter.
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% at
March 31, 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 March 31, 2000 amounted to $450,000. 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 $1,996,620 for all known and
quantifiable liabilities arising at the time of the sale of the Division. The
balance of this provision at March 31, 2000 was $1,992,093.
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.
15
<PAGE> 16
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.
16
<PAGE> 17
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
March 31, 2000.
17
<PAGE> 18
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: May 11, 2000 SIGNATURE: /s/ Marc D'Amour
------------ ----------------------
Marc D'Amour
Vice President,
Chief Financial Officer
and Treasurer
(For the registrant and as
Principal Financial Officer)
18
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM WYANT
CORPORATION FORM 10-Q RE QUARTER ENDED MARCH 31, 2000 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FORM 10-Q FOR QUARTER ENDED MARCH 31, 2000.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 417
<SECURITIES> 0
<RECEIVABLES> 12,023
<ALLOWANCES> 0
<INVENTORY> 8,788
<CURRENT-ASSETS> 23,268
<PP&E> 11,120
<DEPRECIATION> 0
<TOTAL-ASSETS> 40,011
<CURRENT-LIABILITIES> 16,331
<BONDS> 2,189
4,969
0
<COMMON> 27
<OTHER-SE> 13,088
<TOTAL-LIABILITY-AND-EQUITY> 40,011
<SALES> 18,785
<TOTAL-REVENUES> 18,785
<CGS> 11,950
<TOTAL-COSTS> 18,129
<OTHER-EXPENSES> (81)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 176
<INCOME-PRETAX> 561
<INCOME-TAX> 248
<INCOME-CONTINUING> 313
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 313
<EPS-BASIC> 0.06
<EPS-DILUTED> 0.06
</TABLE>
