<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 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
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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 November 15, 2000
--------------------------------------------------------------------------------
Common stock, $.01 par value 2,270,617
1
<PAGE> 2
WYANT CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 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 7-13
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>
September 30 December 31
2000 1999
------------ -----------
Restated
(Note 10)
<S> <C> <C>
ASSETS
CURRENT
Cash and cash equivalents $ 195 $ 1,204
Accounts receivable 12,839 12,685
Inventories (note 3) 6,966 8,887
Deferred income taxes 1,288 1,419
Prepaid expenses 267 373
-------- --------
TOTAL CURRENT ASSETS 21,555 24,568
Property, plant and equipment, net of accumulated
amortization of $13,111 (December 31, 1999 - $13,020) 10,573 11,014
Goodwill, net of accumulated amortization of $212
(December 31, 1999 - $159) 4,137 4,365
Other assets 1,280 1,301
-------- --------
TOTAL ASSETS $ 37,545 $ 41,248
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT
Revolving line of credit $ 4,605 $ 2,078
Accounts payable 5,496 5,589
Accrued expenses 3,496 4,093
Accrued restructuring expenses 432 976
Income taxes payable 218 1,035
Current portion of long-term debt (note 4) 1,307 3,182
Current portion of preferred stock of subsidiary 947 545
-------- --------
TOTAL CURRENT LIABILITIES 16,501 17,498
Long-term debt, excluding current portion (note 4) 1,480 2,391
Other long-term liabilities 1,399 1,514
Preferred stock of subsidiary (note 12) 4,029 5,483
Deferred income taxes 1,757 1,918
STOCKHOLDERS' EQUITY
Common stock, par value $0.01 per share 27 27
Additional paid-in capital 6,813 6,813
Retained earnings 5,982 5,649
Cumulative translation adjustment (443) (45)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 12,379 12,444
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 37,545 $ 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 Nine months ended
September 30 September 30
------------------ --------------------
2000 1999 2000 1999
---- ---- ---- ----
Restated
(Note 10)
<S> <C> <C> <C> <C>
Net sales $ 20,267 $ 20,514 $ 59,803 $ 59,340
Cost of sales 13,432 13,455 39,005 39,289
-------- -------- -------- --------
Gross profit 6,835 7,059 20,798 20,051
Expenses
Selling 3,763 4,180 11,386 11,752
General and administration 2,623 2,165 7,177 6,737
Amortization 208 193 610 484
Interest expense 184 224 538 870
Other income (66) (69) (206) (219)
-------- -------- -------- --------
6,712 6,693 19,505 19,624
-------- -------- -------- --------
Income from continuing operations
before income taxes 123 366 1,293 427
Income tax expense
Current 286 102 666 128
Deferred (146) 23 26 66
-------- -------- -------- --------
140 125 692 194
-------- -------- -------- --------
Income (loss) from continuing operations (17) 241 601 233
Discontinued operations, net of income taxes (note 2) (1) -- (224) -- 750
-------- -------- -------- --------
Net income (loss) (17) 17 601 983
Dividends and accretion of mandatorily
redeemable preferred stock 90 93 268 279
-------- -------- -------- --------
Net income (loss) attributable to common shares $ (107) $ (76) $ 333 $ 704
======== ======== ======== ========
Per common share (note 6)
BASIC
Income (loss) from continuing operations $ (0.03) $ 0.04 $ 0.09 $ (0.01)
Discontinued operations -- (0.06) -- 0.21
Net income (loss) (0.03) (0.02) 0.09 0.20
DILUTED
Income (loss) from continuing operations (0.03) 0.04 0.09 (0.01)
Discontinued operations -- (0.06) -- 0.19
Net income (loss) (0.03) (0.02) 0.09 0.20
</TABLE>
(1) Income tax (recovery) of discontinued operations amounted to $(17,000)
in the three months ended September 30, 1999 and $ 500,000 in the nine
months ended September 30, 1999.
See accompanying notes
4
<PAGE> 5
WYANT CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
Nine months ended
September 30
------------------------------
2000 1999
---- ----
Restated
(Note 10)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income from continuing operations $ 601 $ 233
Adjustments to reconcile net income to net cash provided by
operating activities
Depreciation and amortization 1,125 952
Loss on sale of fixed assets -- 3
Deferred income tax expense 26 66
Deferred pension costs (37) (28)
Changes in non-cash working capital balances
Accounts receivable (154) (4,202)
Inventories 1,920 756
Other current assets 106 143
Accounts payable (1,241) 1,357
Income taxes payable (817) 1,093
Cash provided by discontinued operations -- 517
------ -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,529 890
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of businesses, net of cash acquired (7) (1,030)
Capital expenditures (1,053) (2,598)
Cash proceeds from sale of fixed assets 22 9
Decrease (increase) in other assets 23 (42)
Cash used for discontinued operations -- (49)
Proceeds of sale of discontinued operations, net of $581
held in escrow and expenses of $3,061 -- 8,551
------ -------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (1,015) 4,841
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in committed revolving credit facility -- (4,239)
Repayment of long-term debt (4,269) (1,015)
Increase in long-term debt 1,666 3,283
Redemption of preferred shares (978) (513)
Dividends paid by subsidiary (129) (127)
Purchase of common shares for cancellation -- (9)
Increase (decrease) in bank indebtedness 2,527 (710)
Cash used by discontinued operations (106) --
------ -------
NET CASH USED IN FINANCING ACTIVITIES (1,289) (3,330)
Effect of exchange rate changes on cash (234) 203
------ -------
Net increase (decrease) in cash and cash equivalents (1,009) 2,604
Cash and cash equivalents, beginning of period 1,204 60
------ -------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 195 $ 2,664
====== =======
</TABLE>
See accompanying notes
5
<PAGE> 6
WYANT CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
(IN THOUSANDS OF DOLLARS, EXCEPT FOR NUMBER OF SHARES)
<TABLE>
<CAPTION>
Nine months ended
September 30
------------------------------
2000 1999
---- ----
Restated
(Note 10)
<S> <C> <C>
COMMON STOCK AT PAR VALUE
Balance at beginning of period $ 27 $ 27
Stock purchased for cancellation -- --
----------- -----------
BALANCE AT END OF PERIOD 27 27
----------- -----------
ADDITIONAL PAID-IN CAPITAL
Balance at beginning of period 6,813 6,822
Stock purchased for cancellation -- (9)
----------- -----------
Balance at end of period 6,813 6,813
----------- -----------
RETAINED EARNINGS
Balance at beginning of period 5,649 5,882
Net income 601 983
Dividends declared by subsidiary (129) (127)
Accretion on preferred shares of subsidiary (139) (152)
----------- -----------
BALANCE AT END OF PERIOD 5,982 6,586
----------- -----------
ACCUMULATED OTHER COMPREHENSIVE INCOME
Balance at beginning of period (45) (501)
Foreign currency translation adjustments (398) 234
----------- -----------
BALANCE AT END OF PERIOD (443) (267)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY $ 12,379 $ 13,159
=========== ===========
COMPREHENSIVE INCOME
Net income $ 601 $ 983
Other - Foreign currency translation adjustments (398) 234
----------- -----------
COMPREHENSIVE INCOME FOR PERIOD $ 203 $ 1,217
=========== ===========
COMMON SHARES
NUMBER OF COMMON SHARES ISSUED AT BEGINNING OF PERIOD 2,270,617 2,273,817
SHARES PURCHASED FOR CANCELLATION -- (3,200)
----------- -----------
NUMBER OF COMMON SHARES ISSUED AND OUTSTANDING 2,270,617 2,270,617
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 3,603,950
=========== ===========
</TABLE>
See accompanying notes
6
<PAGE> 7
WYANT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS AT SEPTEMBER 30, 2000 AND FOR THE NINE MONTHS
ENDED SEPTEMBER 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 September 30, 2000, the results
of operations for the nine months and three months ended September 30, 2000
and 1999 and cash flows and changes in stockholders' equity for the nine
months ended September 30, 2000 and 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>
Nine months ended
September 30, 1999
------------------
<S> <C>
Net sales $22,747
Income before income taxes 1,835
</TABLE>
3. INVENTORIES
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
---- ----
<S> <C> <C>
Raw materials $1,619 $2,780
Finished goods 5,347 6,107
------ ------
$6,966 $8,887
====== ======
</TABLE>
7
<PAGE> 8
4. LONG-TERM DEBT
<TABLE>
<CAPTION>
September 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 September 30, 2000 - 7.5%), maturing
October 1, 2001. Principal amount Cdn. $ 1,263
(December 31, 1999 - Cdn. $1,447) $ 840 $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. $1,708 (December 31, 1999 - Cdn. $2,083) 1,136 1,443
Revolving credit facility (Cdn. $1,219 -
December 31, 1999 - Cdn. $1,034) 811 716
------ ------
2,787 5,573
Current portion 1,307 3,182
------ ------
$1,480 $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
September 30, 2000). The maximum available under this line of credit was
increased on February 22, 2000 from Cdn. $7,500,000 (U.S. $4,988,000) to
Cdn. $10,000,000 (U.S. $6,651,000), 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. $2,209,000) 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. $1,995,000) 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. $1,330,000).
As a consequence of the accounting irregularities referred to in Note 10,
IFC Disposables is in default of certain of the loan covenants relating to
the secured revolving line of credit. The balance outstanding under the
revolving line of credit at September 30, 2000 of $365,000 has since been
fully repaid. The Company expects to renegotiate the terms of the facility
and to restore normal operating practices during the fourth quarter of
2000.
8
<PAGE> 9
5. PREFERRED STOCK OF SUBSIDIARY
<TABLE>
<CAPTION>
September 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. $1,674 (December 31, 1999 - Cdn. $2,433) 1,708,266 $1,114 2,495,161 $1,685
3.999999% Cumulative Redeemable Class B Preferred
Stock - Cdn. $3,387 (December 31, 1999 - Cdn. $3,325) 3,800,000 2,252 3,800,000 2,304
Class F Preferred Stock - Cdn. $2,420
(December 31,1999 - Cdn. $2,943) 226,488 1,610 283,111 2,039
------------ -----------
4,976 6,028
Current portion 947 545
------------ -----------
$4,029 $5,483
============ ===========
</TABLE>
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 are being redeemed in
five equal annual installments commencing August 3, 2000. In addition, dividends
on the outstanding shares are being paid at a rate of 3.5% per annum commencing
July l, 2000.
9
<PAGE> 10
6. EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30 September 30
-------------------------------- ---------------------------------
2000 1999 2000 1999
---- ---- ---- ----
Restated
Note 10)
<S> <C> <C> <C> <C>
Numerator
Income (loss) from continuing operations $(17) $ 241 $ 601 $ 233
Preferred stock dividends and accretion 90 93 268 279
-------- --------- --------- ----------
Numerator for basic earnings per share -
Income (loss) from continuing operations available
to common stockholders (107) 148 333 (46)
Accretion on convertible preferred shares 10 29 72 86
-------- --------- --------- ---------
Numerator for diluted earnings per share -
Income (loss) from continuing operations available
to common stockholders $(97) $ 177 $ 405 $ 40
======== ========= ========= =========
Denominator
Denominator for basic earnings per share -
Weighted-average shares issued, issuable and
outstanding 3,603,950 3,607,080 3,603,950 3,607,127
Effect of dilutive securities
Convertible securities 95,396 283,111 220,083 283,111
Stock options 32,029 -- 4,977 --
-------- --------- --------- ---------
Denominator for diluted earnings per share -
Adjusted weighted-average shares 3,731,375 3,890,191 3,829,010 3,890,238
========= ========= ========= =========
Basic earnings per share from continuing operations $(0.03) $ 0.04 $ 0.09 $(0.01)
Diluted earnings per share from continuing operations $(0.03) $ 0.04 $ 0.09 $(0.01)
</TABLE>
The effect of the convertible preferred shares has not been included in
computing the diluted earnings per share from continuing operations for the
three months and nine months ended September 30, 1999 and for the nine months
ended September 30, 2000, since to do so would be anti-dilutive.
10
<PAGE> 11
7. SEGMENT INFORMATION FROM CONTINUING OPERATIONS
<TABLE>
<CAPTION>
Sanitation Wiping
Products Products Corporate Total
---------- -------- --------- -----
<S> <C> <C> <C> <C>
Three months ended September 30
2000
----
Revenues from external customers $14,753 $ 5,514 $20,267
Intersegment revenues 1,275 83 1,358
Segment income (loss) before taxes 1,050 (541) (386) 123
Segment assets 29,344 6,555 1,646 37,545
1999
----
Revenues from external customers 15,193 5,321 20,514
Intersegment revenues 966 72 1,038
Segment income (loss) before taxes 391 71 (96) 366
Nine months ended September 30
2000
----
Revenues from external customers $45,048 $14,755 $59,803
Intersegment revenues 3,206 274 3,480
Segment income (loss) before taxes 2,702 (872) (537) 1,293
1999 (Restated - Note 10)
----
Revenues from external customers 45,207 14,133 59,340
Intersegment revenues 2,941 254 3,195
Segment income (loss) before taxes 857 6 (436) 427
</TABLE>
11
<PAGE> 12
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
September 30, 2000 was $1,920,446.
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.
12
<PAGE> 13
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 nine months ended September 30, 2000,
$858,000 of this amount was paid and charged against the amount
accrued, leaving a balance of $227,000 remaining to be paid as at
September 30, 2000. All of the above employees had been terminated by
June 30, 2000.
10. RESTATEMENTS
A) Results for the nine months ended September 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 for the nine months ended September 30, 1999 by $299,000,
$173,000 and $173,000 or $0.05 per common share, respectively.
B) Results for the nine months ended September 30, 1999 have also
been restated to reflect the correction of accounting
irregularities discovered at the Company's subsidiary, IFC
Disposables, Inc. This had the effect of reducing gross profit,
income from continuing operations and net income for the nine
months ended September 30, 1999 by $149,000, $98,000 and $98,000
or $0.02 per common share, respectively.
Also, results for the nine months ended September 30, 2000
reflect the restatement of the results for the six months ended
June 30, 2000 resulting from the above accounting irregularities.
The restatement for the six months period reduced gross profit,
income from continuing operations and net income by $427,000,
$282,000 and $282,000 or $0.08 per common share, respectively.
The balance of retained earnings at September 30, 2000 has been
reduced by a total of $766,000 as a result of these accounting
irregularities, which commenced in 1997, as follows:
<TABLE>
<S> <C>
Year 1997 $135,000
Year 1998 309,000
Year 1999 40,000
Six months ended June 30, 2000 282,000
</TABLE>
As a result of the above restatements, the balance of retained earnings
at September 30, 1999 has been reduced by $715,000.
11. ACCOUNTING DEVELOPMENTS
The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards No. 133 "Accounting for Derivative
Instruments and Hedging Activities." SFAS 133 will be effective for
the Company's December 31, 2001 year-end and interim periods. The
Company has not determined the impact, if any, on its consolidated
financial statements arising from the eventual application of SFAS 133.
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.
13
<PAGE> 14
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.
RESULTS OF OPERATIONS
RESTATEMENT OF RESULTS OF PRIOR PERIODS
---------------------------------------
Accounting irregularities discovered at the Company's wholly-owned subsidiary,
IFC Disposables, Inc. have resulted in earnings for the period from January 1,
1997 to June 30, 2000 being overstated by a total of $766,000 on an after-tax
basis, as follows:
<TABLE>
<S> <C>
Year 1997 $135,000
Year 1998 309,000
Year 1999 40,000
Six months ended June 30, 2000 282,000
</TABLE>
The resulting restatement of results for the nine months ended September 30,
1999 has reduced net income for that period by $98,000 or $0.02 per common
share. Net income for the six months ended June 30, 2000 had been overstated by
$282,000 or $0.08 per common share and the results for the nine months ended
September 30, 2000 reflect this restatement.
In addition to the above, results for the nine months ended September 30, 1999
have been restated to reflect accounting adjustments made during the 1999
year-end financial close. The effect of these adjustments was to reduce net
income for the nine months by a further $173,000 or $0.05 per common share.
THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED WITH THE THREE MONTHS ENDED
SEPTEMBER 30, 1999.
SALES
-----
Sales of continuing operations for the third quarter of 2000 decreased by
$247,000 or 1.2% to $20,267,000 from $20,514,000 in the same quarter last year,
after eliminating inter-segment sales of $1,358,000 in the current quarter and
$1,038,000 in the third quarter of 1999. Sales of the sanitation products
segment were $16,028,000 in the current quarter, a decrease of $131,000 or 0.8%
from the corresponding quarter last year. Sales of the wiping products segment
at $5,597,000 were $204,000 or 3.6% higher than in the third quarter of 1999.
COST OF SALES AND GROSS PROFIT
------------------------------
Gross profit of the sanitation products segment improved to 40.2% of sales, from
38.1% of sales in the third 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 6.9% of sales in the current quarter, down from
16.7% of sales in the same quarter last year, primarily due to an increase in
the quarter in the reserve for obsolete inventories of $300,000 and to
competitive pricing pressures.
14
<PAGE> 15
SELLING EXPENSES
----------------
Selling expenses for the third quarter of 2000 totalled $3,763,000, a reduction
of $417,000 or 10.0% from the same quarter in 1999. In the sanitation products
segment, selling expenses at $3,133,000 were $360,000 or 10.3% lower than in the
third quarter of 1999. The improvement was primarily the result of lower outward
freight costs and savings derived from the restructuring of operations in the
fourth quarter of 1999. In the wiping products segment, selling expenses at
$630,000 were $57,000 or 8.3% lower than in the corresponding quarter last year.
The reduction was primarily due to lower outward freight costs in the current
quarter.
GENERAL AND ADMINISTRATION EXPENSES
-----------------------------------
General and administration expenses amounted to $2,623,000 in the third quarter,
an increase of $458,000 or 21.2% over the same quarter last year. Expenses of
the sanitation products segment at $1,967,000 were $11,000 or 0.6% higher than
in the third quarter of 1999. In the wiping products segment, expenses increased
by $152,000 to $276,000 in the current quarter, resulting primarily from an
increase of $145,000 to the allowance for doubtful accounts. Corporate charges
in the current quarter amounted to $380,000, an increase of $295,000 over the
corresponding quarter of 1999, due primarily to a higher level of professional
fees.
AMORTIZATION
------------
Amortization expense was $208,000 in the third quarter of 2000, an increase of
$15,000 over the same quarter last year. The increase was primarily the result
of amortization of the Company's new information systems hardware and software.
INTEREST EXPENSE
----------------
Interest expense declined to $184,000 in the third quarter from $224,000 in the
same quarter of 1999. The decrease was primarily due to a lower level of
borrowing 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.
OTHER INCOME
------------
Other income at $66,000 was $3,000 lower than in the third quarter of 1999.
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
-----------------------------------------------------
Income from continuing operations before income taxes amounted to $123,000 in
the current quarter, a decrease of $243,000 from the level of $366,000 earned in
the corresponding quarter last year. The sanitation products segment improved by
$659,000 over the third quarter of 1999, while the wiping products segment
declined by $612,000 and corporate expenses increased by $290,000.
INCOME TAXES
------------
Income tax expense amounted to $140,000 in the third quarter of 2000, compared
with $125,000 in the same quarter last year. The higher expense in the current
quarter, despite the significantly lower pre-tax earnings, resulted from the
earnings in Canada being taxed at a higher rate than that applicable to the tax
losses incurred in the United States.
DISCONTINUED OPERATIONS
-----------------------
There were no discontinued operations in the current quarter, while in the third
quarter of 1999 the discontinued health care operations incurred a loss of
$224,000 or $0.06 per common share.
15
<PAGE> 16
NET INCOME
----------
The third quarter of 2000 recorded a loss of $17,000, compared with net income
of $17,000 in the same quarter last year. After deducting dividends and
accretion relating to the mandatorily redeemable preferred shares, this
represented a loss of $0.03 per common share in the current quarter and a loss
of $0.02 in the same quarter last year.
NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED WITH THE NINE MONTHS ENDED
SEPTEMBER 30,1999.
SALES
-----
Sales of continuing operations for the nine months ended September 30, 2000 were
$59,803,000, an increase of $463,000 or 0.8% over the total of $59,340,000 in
the same period last year, after eliminating inter-segment sales of $3,480,000
in the current period and $3,195,000 in the corresponding period in 1999. Sales
of the sanitation products segment amounted to $48,254,000 in the first nine
months of 2000, an increase of $106,000 or 0.2% over the same period last year.
Sales of the wiping products segment were $15,029,000, an increase of $642,000
or 4.5% over the same period in 1999.
COST OF SALES AND GROSS PROFIT
------------------------------
Gross profit of the sanitation products segment increased to 39.8% of sales from
36.7% of sales in the first nine months of 1999 due primarily to an improved
product mix and increased selling prices for paper products. Gross profit of the
wiping products segment declined to 10.4% of sales from 16.4% in the same period
last year, primarily due to an increase to the reserve for obsolete inventories
of $300,000 which was recorded in the third quarter of 2000 and to competitive
pricing pressures.
SELLING EXPENSES
----------------
Selling expenses amounted to $11,386,000 in the current period, a decrease of
$366,000 or 3.1% from the corresponding period last year. Expenses of the
sanitation products segment at $9,530,000 were $332,000 or 3.4% lower than in
the same period last year. Selling expenses of the wiping products segment at
$1,856,000 were $34,000 or 1.8% lower than in the same period last year.
GENERAL AND ADMINISTRATION EXPENSES
-----------------------------------
General and administration expenses at $7,177,000 were $440,000 or 6.5% higher
than in the first nine months of 1999. In the sanitation products segment,
expenses at $6,156,000 were only $19,000 higher than in the corresponding period
last year. In the wiping products segment, expenses increased by $133,000 or
34.2% to $522,000 as a result of the increase of $145,000 to the reserve for
doubtful accounts receivable. Corporate charges increased to $499,000 from
$211,000 in the same period last year, primarily due to higher professional
fees.
AMORTIZATION
------------
Amortization expense was $610,000, an increase of $126,000 over the
corresponding period in 1999, primarily due to the amortization of the Company's
new information systems hardware and software.
INTEREST EXPENSE
----------------
Interest expense for the current period amounted to $538,000, a decrease of
$332,000 from the same period last year due to lower levels of borrowing in both
the United States and Canada.
OTHER INCOME
------------
Other income for the current period at $206,000 was $13,000 lower than in the
corresponding period last year.
16
<PAGE> 17
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
-----------------------------------------------------
Income from continuing operations before income taxes for the current period
amounted to $1,293,000, an increase of $866,000 over the same period in 1999.
The sanitation products segment improved by $1,845,000, while the wiping
products segment declined by $878,000 and corporate expenses increased by
$101,000.
INCOME TAXES
------------
Income tax expense was $692,000 in the current period, compared with $194,000 in
the corresponding 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 $750,000
or $0.21 per common share in the first nine months of 1999. There were no
discontinued operations in the current period.
NET INCOME
----------
Net income for the nine months ended September 30, 2000 amounted to $601,000,
compared with $983,000 in the same period last year. After deducting dividends
and accretion of mandatorily redeemable preferred shares, this represented
earnings of $0.09 per common share in the current period and $0.20 per common
share in the same period in 1999.
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 $2,162,000 of cash during the first nine months
of 2000. Operating activities generated $2,639,000 of cash during the period,
despite an increase in working capital of $179,000, as increased receivables
($684,000) and lower payables ($1,984,000) more than offset lower inventories
($1,225,000) and increased income taxes payable ($1,107,000). Capital
expenditures during the period totalled $873,000. Long-term debt repaid amounted
to $4,269,000, 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 ($1,330,000).
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
($6,651,000) and utilizing this line of credit to repay, on March 8, 2000, the
outstanding balance of Cdn. $3,321,000 ($2,209,000) 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 ($286,000) 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 and on
August 3, 2000, $433,000 of Class F Preferred shares were redeemed following the
exercise in July 2000 by the Class F Preferred shareholders of an option to
redeem the 283,111 outstanding shares at a price of Cdn. $11.250028 ($7.60) per
share in five equal annual instalments commencing August 3, 2000. Dividends paid
on outstanding preferred shares during the first nine months of 2000 totalled
$129,000.
As at September 30, 2000, approximately $2,426,000 was available under the
Company's Cdn. $10,000,000 collateralized revolving line of credit. In addition,
approximately $242,000 was available to finance future capital expenditures
under the Cdn. $2,000,000 revolving credit facility.
17
<PAGE> 18
All borrowings of the Canadian operations are with the Bank of Nova Scotia.
Long-term debt outstanding at September 30, 2000 amounted to $2,787,000,
including $1,307,000 due within one year. All of the loans were at the
commercial prime rate in Canada (7.5% at September 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 September
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 September 30,
2000 average less than $600,000 over the next five years, with a maximum of
$1,861,000 in 2001. Amounts required to redeem preferred shares approximate
$950,000 per annum during that period.
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.
US OPERATIONS
-------------
Cash of $1,264,000 was utilized by continuing operations in the United States
during the first nine months of 2000. Operating activities utilized $1,107,000
primarily due to the losses incurred in the period. Working capital increased by
$4,000, as a decrease of $1,924,000 in income taxes payable was largely offset
by an increase in payables of $1,466,000 and a reduction of inventories of
$668,000, while receivables increased by $163,000. Capital expenditures in the
current period amounted to $179,000.
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
September 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 September 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.
As a consequence of the accounting irregularities previously discussed, IFC
Disposables is in default of certain of the loan covenants relating to the
secured revolving line of credit. The balance outstanding under the revolving
line of credit at September 30, 2000 of $365,000 has since been fully repaid.
The Company expects to renegotiate the terms of the facility and to restore
normal operating practices during the fourth quarter of 2000.
Management believes that future operating cash flows, cash on hand and other
sources of cash available 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.
18
<PAGE> 19
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 September 30, 2000 was $1,920,446.
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.
19
<PAGE> 20
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.
20
<PAGE> 21
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
September 30, 2000.
21
<PAGE> 22
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: November 16, 2000 SIGNATURE: /s/ Marc D'Amour
----------------- ----------------------
Marc D'Amour
Vice President,
Chief Financial Officer
and Treasurer
(For the registrant and as
Principal Financial Officer)
22
