<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
X
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Annual Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934 [Fee Required]
For the fiscal year ended April 30, 1995.
or
-----
Transition report pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934 [No Fee Required]
For the transition period from to
Commission File Number 0-7276
THE GOODHEART-WILLCOX COMPANY, INC.,
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(Exact name of registrant as specified in its charter)
Delaware 36-2135994
-------------------------------- -------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
123 West Taft Drive, South Holland, Illinois 60473-2089
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (708) 333-7200
--------------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each Exchange on
Title of each Class which registered
------------------- ------------------------
None None
------------------- ------------------------
Securities registered pursuant to Section 12(g) of the Act:
Common Stock
--------------------------------------------------------------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
------- -------
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
(continued)
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contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K [ ].
The aggregate market value of the voting stock held by nonaffiliates
of the registrant as of June 1, 1995, (within 60 days prior to the date of
filing) was approximately $5,659,836.
The number of shares of the registrant's common stock, $1.00 par value
per share outstanding, as of April 30, 1995 was 747,900.
DOCUMENTS INCORPORATED BY REFERENCE
1. Annual Report to Stockholders for fiscal year ended April 30, 1995,
("1995 Annual Report").
2. Proxy Statement for Annual Meeting of Stockholders, July 11, 1995,
("Proxy Statement").
3. Registration Statement, Form S-1, File No. 2-45113, dated July 25,
1972, ("Registration Statement").
Part II
Item 5 - 1995 Annual Report Page 13
Item 6 - 1995 Annual Report Pages 2-13, Inside front cover
Item 7 - 1995 Annual Report Pages 2-13
Item 8 - 1995 Annual Report Pages 2-13
PART III
Item 10 - 1995 Proxy Statement Pages 2-7
Item 11 - 1995 Proxy Statement Pages 5-7
Item 12 - 1995 Proxy Statement Pages 4-5
PART IV
Item 14 - 1995 Annual Report Pages 2-13
Exhibit Index Pages 12-13
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PART I
Item I. Business
(a) General Development of Business
The Company was reorganized as a Delaware corporation in 1972. The
Company publishes textbooks and workbooks for junior and senior high schools,
vocational, technical and private trade schools, colleges and universities.
Its books are also used for apprentice training, adult education, home study
and by do-it-yourselfers. The current catalogs list approximately 413 texts,
workbooks, computer software supplements, instructor's guides, and other
supplements published by the Company, including such subjects as Trade and
Industry, Technical, Family and Consumer Sciences, and Technology. There has
been no material change in the general development of the Company's business
since the beginning of the fiscal year.
(b) Financial Information About Industry Segments
During the last three fiscal years, the registrant has been engaged in
only one business segment, the publication of textbooks, workbooks, guides and
computer software supplements for sale primarily to educational institutions.
(c) Narrative Description of Business
The publishing activities of the Company encompass the search for and
development of authors to create manuscripts, assisting authors in the
preparation of their product, editing manuscripts, designing textbooks and
arranging for art work and illustrations, contracting for printing and binding,
and marketing its textbooks. The Company contracts for all plates, offset
printing and binding requirements with suppliers and contractors which
generally serve the book publishing industry. The Company purchases its paper
requirements principally from 2 sources, although a number of other sources are
available.
During the past fiscal year the Company published 8 new texts, 14
new supplements to accompany established texts, 15 textbook revisions and 14
supplement revisions. Changes in technology require periodic revisions of
existing titles. Books used primarily by schools are revised frequently. The
texts which historically have accounted for a very substantial amount of the
Company's sales have been completely revised within the past several years.
A major portion of the Company's sales are made directly to high
schools, vocational schools, technical schools, trade schools and colleges, and
indirectly to such schools through bookstores and state textbook depositories.
The remainder of sales are made to bookstores, mail order companies, department
stores, correspondence schools, a Canadian distributor and an export
distributor. During the latest fiscal year, no title accounted for more than
9.2% of sales.
Selections of the Company's textbooks in most states are made at the
individual school or school district level. However, in some states,
selections or adoptions of such books are made at the state level by an adop-
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tion committee. There are presently 16 such states that adopt in the Company's
subject areas in which the Company has from 14 to 82 adopted titles. Schools
in such states are generally required to select their textbooks from those
approved and adopted by the state. Most states following statewide adoption
practices, however, adopt more than one textbook for each subject so the local
schools are afforded a choice of author and publisher. The prices of the
Company's books in effect at the time of an adoption usually cannot be changed
during the adoption period.
In 15 states, the Company's textbooks are consigned to a state
depository from which the local schools make their purchases. Sales through
state depositories accounted for approximately 12.8% of sales in the latest
fiscal year.
There has been no significant change in the kinds of products
produced, or in the markets or methods of distribution, since the beginning of
the fiscal year.
There have been a number of mergers, acquisitions and joint ventures
involving competitors of the Company during recent years. Many companies
publish textbooks competing with many but not all of the Company's titles. The
remaining competitors publish textbooks competing with some of the Company's
titles. Most competitors employ outside sales personnel in their marketing
efforts. The Company employs 9 outside sales persons. However, the promotion
by the Company of its textbooks continues to be primarily accomplished by
mailings to teachers and schools. It continues to follow a liberal policy of
providing sample copies. No industry statistics are available for this segment
of the publishing business. Accordingly, it is not possible to ascertain the
Company's competitive position in its field. No customer accounts for more
than 3.5% of sales.
The Company does not consider backlogs, patents, licenses, franchises
and concessions, research or environmental considerations as material to its
business. No significant problems have been encountered, and none are
anticipated, in obtaining adequate supplies of paper. The Company has
continued to add new book titles and discontinue others at a normal rate. The
Company presently employs 60 full-time persons. Employee relations are
considered good. Much of the Company's textbook business is seasonal, and
approximately 57.7% of the year's sales were made in the four months of July
through October.
(d) Financial Information About Foreign and Domestic Operations and Export
Sales
Export sales during the last three years have not been material in
relation to the total sales. Profitability and risk are essentially similar on
the Company's foreign and domestic sales.
Item 2. Properties
The Company's principal property is a one-story building in South
Holland, Illinois, of steel and masonry construction. It contains
approximately 56,000 square feet of floor space and is located on 5-1/2 acres
of land owned by the Company. The main part of the building, which houses the
Company's offices and book warehouse, was completed in 1970 and an additional
3,300 square feet of office space was completed in 1976. A ware-
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house addition of 24,000 square feet was completed in October, 1981. In
January 1985, the Company acquired an adjoining parcel of 15,000 sq. ft.,
improved with a 2,274 sq. ft., single story office building, which was then
physically connected to the principal offices and is now used by the editorial
staff.
The Company has acquired 5.94 acres of land in Tinley Park, Illinois upon
which it plans to construct a warehouse and office building containing
approximately 75,000 square feet of floor space, of which approximately 15,000
square feet will be used for office requirements. It is anticipated that
building may be completed for occupancy in late fiscal 1996 and that all the
Company's South Holland operations will then be relocated from South Holland to
the new building in Tinley Park. It is expected that the South Holland
properties will be offered for sale after the relocation. The Company expects
to finance the cost of the acquisition, construction, and relocation from its
own funds.
Item 3. Legal Proceedings
No material legal proceedings
Item 4. Submission of Matters to a Vote of Security Holders
None
PART II
Item 5. Market for the Registrant's Common Stock and Related Security
Holder Matters
The following section of the Company's 1995 Annual Report to
Stockholders is hereby incorporated by reference:
(a) Market - Over-the-Counter - Symbol-GWOX Page 13
Quotation Ranges and Dividends Page 13
(b) 145 common shareholders based upon the number of record owners as of
May 26, 1995, the record date for the Company's Annual Meeting of Shareholders.
(c) (1) and (2) Dividends, see table referred to above. There are no known
restrictions on the Company's present or future ability to pay dividends. The
Company currently expects that cash dividends will be continued to be paid in
the future at a rate based upon earnings for the prior fiscal year.
Item 6. Selected Financial Data
The following section of the Company's 1995 Annual Report to
Stockholders is hereby incorporated by reference:
Five year Summary of Selected Financial Data Page Inside front cover
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This referenced section should be read in conjunction with the
Financial Statements and related Notes (hereby incorporated by reference) in
the Company's 1995 Annual Report to Stockholders, Pages 2-13.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following section of the Company's 1995 Annual Report to
Stockholders is hereby incorporated by reference:
Management's Discussion and Analysis of Financial Pages 11-12
Condition and Results of Operations
This referenced section should be read in conjunction with the
Financial Statements and related Notes (hereby incorporated by reference) in
the Company's 1995 Annual Report to Stockholders, Pages 2-13.
Item 8. Financial Statements and Supplementary Data
(a) Financial statements:
(1) Financial statements and schedules are included in this Form 10-K
Annual Report as indicated in the index on Page 12. Those portions of The
Goodheart-Willcox Company, Inc.'s 1995 Annual Report to Stockholders
listed under the caption "Financial Statements" in such index are
incorporated by reference.
(2) Exhibits:
The Goodheart-Willcox Company, Inc.'s 1995 Annual Report to Stockholders
(which, except for those portions thereof incorporated by reference in this
Form 10-K Annual Report, is furnished for the information of the
Commission but is not deemed to be "filed" as part of this report).
Item 9. Disagreements on Accounting and Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
The following section of the Company's 1995 Proxy Statement is hereby
incorporated by reference:
a) Identification of Directors Page 2
b) Identification of Executive Officers
John F. Flanagan, age 51, President and Chief Executive Officer since June,
1980; Treasurer from January, 1973 to April, 1988; Vice President from January,
1973 to June, 1980; prior thereto various positions with the Company since
1968.
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Donald A. Massucci, age 55, Vice President, Administration, since June, 1980,
Treasurer since April, 1988, and Secretary from July, 1976 to April, 1988. Mr.
Massucci has been with the Company since 1962.
Dick G. Snyder, age 58, Vice President, Sales, since June, 1980, and Secretary
since April, 1988. Mr. Snyder has been with the Company since 1977.
c) Identification of certain significant employees
None.
d) Family relationships
See, Item 12(b), below.
e) (1) Business experience
See, Item 10(b), above.
(2) Directorships - Except for Robert C. DeBolt who is a director of
the First National Bank, Chicago Heights, Illinois, no other director or
nominee serves as a director of any other public company.
f) Involvement in certain legal proceedings
None.
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Item 11. Management Remuneration and Transactions
<TABLE>
<CAPTION>
(A) (B) (C) (D)
---------------- ------------ --------------- ----------------------------------------
PROFIT SHARING PLAN
----------------------------------------
D1 D2 D3
Cash and Cash Company Amount Aggregate
Name of Individual Equivalent Contribution Accrued Accrued
or Number of Capacity in Forms of During Last During Last To
Persons in Group Which Served Remuneration(1) Fiscal Year Fiscal Year Date(4)
---------------- ------------ --------------- ----------- ----------- -------
<S> <C> <C> <C> <C>
George A. Fischer (6) Chairman, $61,500 (2) $9,225 $160,907 $1,830,646
Director
John F. Flanagan (7) President, 345,000 (2) 22,500 125,150 1,424,856
Chief Executive
Officer, Director
Donald A. Massucci (8) Vice President, 140,675 (3) 21,101 66,905 762,311
Administration &
Treasurer
Dick G. Snyder (8) Vice President, Sales & 140,675 (3) 21,101 35,270 402,532
Secretary
Walter C. Brown Consulting Editor, 92,972 6,300 12,702 144,886
Director
All Directors and Officers as a Group (5) $901,739 $80,227 $400,934 $4,565,231
</TABLE>
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(1) Amounts paid, if any, in securities or property, insurance benefits or
reimbursements, personal benefits, fees and commissions are
insignificant and therefore, said types of remuneration are combined
with salaries, directors' fees and bonuses. This also includes author
royalty payments of $50,972 to Dr. Brown and of $69,917 to Dr.
Kicklighter.
(2) Includes salaries pursuant to employment agreements and discretionary
year end bonuses which were set by the Company's Board of Directors of
$9,000 for Mr. Fischer and of $100,000 for Mr. Flanagan.
(3) Includes salaries established by management and year end bonuses fixed
by the Company's Board of Directors of $35,000 for each of Messrs.
Massucci and Snyder.
(4) Represents aggregate equity in the Company's profit sharing plan. The
plan is qualified under the Internal Revenue Code and the Company's
contributions to it are deductible for income tax purposes. Employees
may make voluntary contributions. The amount which the Company
contributes is discretionary and is determined annually by the Board
of Directors as a percentage of eligible compensation. All
participants are credited with amounts equal to such percentage of
their respective compensation for that year. Historically, Company's
contributions have approximated 15% of salaries. In no event may the
Company's contribution exceed the amount allowed as a deduction under
the Internal Revenue Code. An employee becomes eligible to
participate in the profit sharing plan on the first entry date after
completing a "year of service" as an employee.
(5) Includes 9 persons receiving direct remuneration, of whom 5 are in the
profit sharing plan.
(6) An agreement dated June 1, 1975, amended from time to time and further
amended April 6, 1995, to renew it for one year, between the Company
and Mr. Fischer provides that until May 31, 1996, or any renewal date,
he will serve as Chairman of the Board, his duties to be determined by
the Board of Directors or the President. Effective May 1, 1995, he is
to be paid compensation of $55,000 per year, plus reimbursement for
expenses and any bonus awarded to him by the Board of Directors. From
the date the contract or any renewal thereof expires he is to be paid
until his death consultative compensation of $40,000 per year. In the
event Mr. Fischer should die or become physically or mentally
incapable of performing services before the expiration date of the
agreement or any renewal thereof, the Company will pay him if he is
living, or his estate if he is deceased, twenty-four months' full
salary. The agreement further provides for reimbursement of medical
care expenses incurred by him, his spouse or defined dependents, not
otherwise reimbursed by insurance provided by the Company.
(7) An agreement dated June 1, 1975, amended from time to time and further
amended April 6, 1995, between the Company and Mr. Flanagan provides
that until May 31, 1998, or any renewal date, he will serve as Chief
Executive Officer, with his duties to be determined by the Board of
Directors. Effective May 1, 1995, he is to be paid compensation of
$255,000 per year, plus reimbursement of expenses and any bonus
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awarded to him by the Board of Directors. His agreement includes
provisions for medical care reimbursement and for death or disability
and consultative compensation on terms similar to those provided for
Mr. Fischer. In addition, his agreement provides that if he is living
and under continuing disability for more than twenty-four months, the
Company will pay him one-half salary per month, not to exceed,
however, sixty months.
(8) Messrs. Massucci and Snyder annual salaries were each increased,
effective May 1, 1995, to $110,000.
The following sections of the Company's 1995 Proxy Statement are
hereby incorporated by reference.
<TABLE>
<S> <C>
Summary Compensation Table Page 6
Remuneration of Directors Page 3
Options, Warrants, or Rights None
Indebtedness of Management None
Transactions with Management None
Transactions with Pension or Similar Plans None
</TABLE>
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following section of the Company's 1995 Proxy Statement is hereby
incorporated by reference.
(a) Security Ownership of Certain Beneficial Owners Pages 4-5
(b) Security Ownership of Management
<TABLE>
<CAPTION>
Title of Name of Beneficial Amount and Nature Percent of
Class Owner of Beneficial Ownership Class
-------- ------------------ ----------------------- ----------
<S> <C> <C> <C>
Common Stock Mrs. Loraine J. Mix 292,300 (1) 39.1%
Common Stock George A. Fischer 163,200 21.8%
Common Stock John F. Flanagan 20,634 (2) 2.8%
Common Stock Walter C. Brown 1,000 (3) *
Common Stock Robert C. DeBolt 0 -
Common Stock Wilma Pitts Griffin 150 *
Common Stock Clois E. Kicklighter 100 *
Common Stock Donald A. Massucci 300 *
Common Stock Dick G. Snyder 700 *
</TABLE>
Directors and Executive Officers as a Group (9 persons) 64%
* less than one percent
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(1) Mrs. Mix owns 27,100 shares, and, in addition, is a co-trustee with
sole voting and investment power relating to the shares of the
Company, and a beneficiary together with her two daughters, one of
whom is the wife of Mr. Flanagan, of a trust established by the Last
Will of Floyd M. Mix, deceased, which trust holds 265,200 shares of
the Company. Each of the two daughters of Mrs. Mix owns 18,000
shares. In addition, Mrs. Flanagan owns jointly with her husband
2,614 shares. The aggregate holdings of all members of the Mix
family in all capacities are 330,914 shares, or 44.2% of the Company's
outstanding stock.
(2) Of these shares 18,000 are owned beneficially and of record by Mr.
Flanagan's wife, 2,614 are owned jointly by Mr. Flanagan and his wife
and 20 are held by him as custodian for their children.
(3) These shares are owned beneficially and of record by Dr. Brown and his
wife as co-trustees under a living trust.
(c) Changes in Control - The Company is not aware of any arrangements by
any person which may, at a subsequent date, result in a change in control of
the Company.
On November 19, 1981, the Company entered into an agreement with
George A. Fischer for the right to purchase all his common stock (securities)
in the Company as of the date of his death. The price shall be equal to the
fair market value of the securities as of the date of his death as determined
by a designated independent securities dealer located in Chicago, Illinois.
After an initial payment of 40% of the securities' purchase price, the Company
can pay for the securities over a 5 year period. The Company owns and is the
beneficiary of insurance on the life of Mr. Fischer, the proceeds of which are
intended to meet a substantial portion of its obligation under this agreement.
On or about June 1, 1993, Century Partners filed an Amendment No. 1 to
Schedule 13G with the Securities and Exchange Commission disclosing the
beneficial ownership of 42,700 shares or 5.7% of the Company's securities.
On October 12, 1994, Mr. Fred Eychaner filed a Schedule 13D Statement
with the Securities and Exchange Commission disclosing the purchase of 111,412
shares or 14.9% of the Company's securities. Mr. Eychaner stated that the
shares were purchased for investment and additional purchases of the Company's
stock may be made subject to the availability of additional shares, an
acceptable price, alternative sources of investment and other factors. Mr.
Eychaner also stated therein that there are no present plans to seek
representation on the Company's Board of Directors.
Item 13. Certain Relationships and Related Transactions
None.
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PART IV
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
FOR FORM 10-K ANNUAL REPORT
OF YEAR ENDED APRIL 30, 1995
<TABLE>
<CAPTION>
Page Number Reference
-------------------------------
Annual
Report to
Form 10-K Stockholders
--------- -------------
<S> <C> <C>
(a) 1. Financial Statements
Consolidated statements of earnings and stockholders' Pages 3-4
equity for the years ended April 30, 1995, 1994 and 1993
Consolidated balance sheets as of April 30, 1995, and Page 2
1994
Consolidated statements of cash flows for the years Page 5
ended April 30, 1995, 1994 and 1993
Notes to consolidated financial statements Pages 6-9
Report of Independent Certified Public Accountants Page 10
Statement of Management Responsibilities Page 10
(a) 2. Financial Statements Schedules
Schedule II - Valuation and Qualification Page 14
Accounts for Continuing Operations
Report of Independent Certified Public Page 16
Accountants on Schedules
Consent of Independent Certified Public Page 16
Accountants
</TABLE>
All other schedules are not submitted because they are not applicable or not
required or because the required information is included in the financial
statements or notes thereto.
(a) 3. Exhibit Index
(a) Certificate of Incorporation; heretofore filed as Exhibit 3(a) to Form
S-1 dated July 25, 1972, Registration No. 2-45113, and incorporated herein by
reference pursuant to Rule 12B-23. A Certificate of Amendment to the
Certificate of Incorporation, adopted July 10, 1987 by the shareholders filed
as Exhibit 3(a) to this Form 10K for the year ended April 30, 1988.
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By-Laws as amended as of June 1, 1981; heretofore filed as Exhibit 3(a) to Form
10K for year ended April 30, 1982, and incorporated herein by reference
pursuant to Rule 12B-23.
(b) Reports on Form 8-K: no reports on Form 8-K were filed during the
last quarter of the Company's fiscal year ended April 30, 1995.
22. List of Subsidiaries. Page 15 of this Form 10-K.
All other exhibits are not submitted because they are not applicable or not
required or because the required information is included in the financial
statements or notes thereto.
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THE GOODHEART-WILLCOX COMPANY, INC.
Schedule II
Valuation and Qualifying Accounts For
the years ended April 30,1995,1994 and 1993
<TABLE>
<CAPTION>
Balance at Additions Deductions Balance
Beginning charged to from at end of
Description of Period Income Reserves Period
----------- --------- ------ -------- ------
<S> <C> <C> <C> <C>
Year Ended April 30,1995
Allowance for Sales returns(1) $ -- $530,000 $361,000 $169,000
Allowance for doubtful $15,000 $ 14,000 $ 14,000 $ 15,000
accounts
</TABLE>
Note: The allowance for sales returns and doubtful accounts for the years ended
April 30, 1994 and 1993 were not material to the Consolidated financial
statements.
(1) Allowance for Sales returns represents anticipated returns net of
inventory and royalty costs.
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EXHIBIT 22
SUBSIDIARY OF THE REGISTRANT
Name - G/W Investment Company, Inc.
State of Incorporation - Delaware
15
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REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To The Goodheart-Willcox Company, Inc.
In connection with our audit of the consolidated financial statements
of The Goodheart-Willcox Company, Inc. and Subsidiary referred to in our
report dated May 31, 1995, which is included in the Company's 1995 Annual
Report to Stockholders, filed as an exhibit to this Form 10-K, we have also
audited Schedule II for each of the three years in the period ended April 30,
1995. In our opinion, this schedule presents fairly, in all material respects,
the information required to be set forth therein.
GRANT THORNTON LLP
Chicago, Illinois
May 31, 1995
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To The Goodheart-Willcox Company, Inc.:
We consent to the incorporation by reference of our report dated May
31, 1995, accompanying the consolidated financial statements of The
Goodheart-Willcox Company, Inc., included in the 1995 Annual Report to
Stockholders, in the Annual Report on Form 10-K for the year ended April 30,
1995.
GRANT THORNTON LLP
Chicago, Illinois
July 11, 1995
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Pursuant to the requirements of Section 13 or 15(d) 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.
THE GOODHEART-WILLCOX COMPANY, INC.
By /s/ George A. Fischer
-----------------------------------
George A. Fischer, Chairman of
the Board of Directors
By /s/ John F. Flanagan
-----------------------------------
John F. Flanagan, President and
Chief Executive Officer
By /s/ Donald A. Massucci
-----------------------------------
Donald A. Massucci, Vice
President, Administration,
and Treasurer
By /s/ Dick G. Snyder
-----------------------------------
Dick G. Snyder, Vice President,
Sales, and Secretary
Dated: July 11, 1995.
17
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Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By /s/ Walter C. Brown
-----------------------------------
Walter C. Brown, EdD
A Director
Date: July 11, 1995
By /s/ Robert C. DeBolt
-----------------------------------
Robert C. DeBolt
A Director
Date: July 11, 1995
By /s/ George A. Fischer
-----------------------------------
George A. Fischer
Chairman and a Director
Date: July 11, 1995
By /s/ John F. Flanagan
-----------------------------------
John F. Flanagan
President and a Director
Date: July 11, 1995
By /s/ Wilma Pitts Griffin
-----------------------------------
Wilma Pitts Griffin, PhD, CHE
A Director
Date: July 11, 1995
By /s/ Clois E. Kicklighter
-----------------------------------
Clois E. Kicklighter, EdD
A Director
Date: July 11, 1995
By /s/ Loraine J. Mix
-----------------------------------
Loraine J. Mix
A Director
Date: July 11, 1995
18
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EXHIBIT 13
1995 ANNUAL REPORT
THE GOODHEART-WILCOX COMPANY, INC.
[PICTURES]
<PAGE> 2
THE GOODHEART-WILCOX COMPANY, INC.
CONTENTS
<TABLE>
<S> <C>
LETTER TO OUR SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
CONSOLIDATED BALANCE SHEETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
CONSOLIDATED STATEMENTS OF EARNINGS . . . . . . . . . . . . . . . . . . . . . . . . . 3
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY . . . . . . . . . . . . . . . . . . . 4
CONSOLIDATED STATEMENTS OF CASH FLOWS . . . . . . . . . . . . . . . . . . . . . . . . 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . 6
STATEMENT OF MANAGEMENT RESPONSIBILITIES . . . . . . . . . . . . . . . . . . . . . . 10
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS . . . . . . . . . . . . . . . . . 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 11
CORPORATE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
COMMON STOCK PRICE RANGES AND DIVIDENDS . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
FIVE YEAR SUMMARY
<TABLE>
<CAPTION>
Year Ended April 30,
--------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SELECTED INCOME STATEMENT
DATA:
Sales $14,708,000 $12,641,000 $11,873,000 $11,081,000 $11,661,000
Costs and expenses 11,524,000 10,260,000 10,061,000 9,766,000 9,947,000
Other income (expense), net 260,000 (74,000) 108,000 154,000 (4,000)
Income taxes 1,383,000 950,000 700,000 529,000 709,000
Net earnings 2,061,000 1,357,000 1,220,000 940,000 1,001,000
--------------------------------------------------------------------------------------------------------------
Earnings per share $2.76 $1.81 $1.63 $1.25 $1.31
--------------------------------------------------------------------------------------------------------------
Weighted average number
of shares outstanding 747,900 747,900 747,900 750,250 762,000
--------------------------------------------------------------------------------------------------------------
Dividends per share $.80 $.70 $.60 $.60 $.60
--------------------------------------------------------------------------------------------------------------
SELECTED BALANCE SHEET DATA:
Total assets $13,340,000 $11,136,000 $10,307,000 $9,261,000 $8,917,000
Redeemable common stock 3,729,000 2,696,000 2,631,000 1,731,000 2,249,000
Total stockholders' equity 7,127,000 6,697,000 5,914,000 6,035,000 5,314,000
--------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 3
TO OUR SHAREHOLDERS:
Highlights for fiscal 1995 include:
o Sales grew approximately 16% to a record $14,708,000;
o Operating profit increased to $3,064,000;
o Net earnings rose 49% to $2,017,000, or $2.70 per share;
o Dividends were increased from 70c. to 80c. per share;
o Selling, General, and Administrative Expenses were held to a
11% gain during a very active year;
o The cost of goods sold as a percentage of sales remained
constant despite rising paper prices.
Sales increased $2,067,000 over our previous record year so that your Company
can report sales of $14,708,000 for fiscal 1995. Contributing to the increase
in sales is our adherence to the publishing philosophy of introducing quality
products, written and illustrated by experts in the field focused on our niche
markets. By concentrating on only the needs of the Industrial & Technical and
the Family & Consumer Sciences markets, the editors and the sales staff target
shifts in curriculum trends and provide timely products, either revised to fit
current and future needs, or new products developed as the changes in
curriculum demand. Revised backlist titles continue to provide significant
sales for your Company.
The profitability of your Company remains our first concern. For fiscal 1995
the record is very strong with operating profits reaching $3,064,000, or about
21% of sales. The net earnings grew by 49% this past fiscal year to $2,017,000
or $2.70 per share. By very carefully monitoring costs and investments in new
product development as well as the general, selling, and administrative costs,
your Company can report strong earnings this year. In order to build publishing
capacity for future growth and profitability, significant investment will be
made in a new facility which should improve productivity by enhancing
communications among work groups, providing for increased staffing, improving
order fulfillment, and matching new technology to our publishing and customer
service teams. It should also make Goodheart- Willcox a more competitive
employer, and increase our appeal to potential authors.
One key ratio impacting the performance of your Company is the Cost of Goods
Sold as a percentage of Sales. In fiscal 1993, this ratio was 35%, in fiscal
1994 it was 31%, and in the year just ended it was 31%. There was actually a
two tenths of a percentage improvement for this past year. This ratio shows
that Goodheart-Willcox is publishing and producing products with an improved
profit margin. By matching new and revised titles to the appropriate grade of
paper which is then printed on computer controlled presses, the Company can
publish high quality textbooks and supplements in shorter press runs than
previously possible, thus holding down the unit cost of the products. Book
paper prices for rolls and sheets used to replenish the Goodheart-Willcox
inventory and for use in new titles are increasing dramatically. The profit
margins reported in the next fiscal year will likely reflect that
Goodheart-Willcox, in this very competitive market, is not able to pass through
all of the paper price increases to our customers.
As a shareholder, you are probably aware of the seasonal plus the cyclical
nature of the textbook business. In fiscal 1995, a substantial part of the
overall sales increase was attributable to shipments into the adoption states
of Indiana, Georgia, and Florida. For the approaching busy summer season, there
are no significant state adoptions in our curriculum areas. Increased sales
from open territories will only make up a part of the decline in potential
adoption opportunities in the coming year.
Short term paper price increases and lack of state adoptions will not detract
us from planning for the long term growth and profitability of your Company.
Employee commitment and participation has never been more focused as we look
ahead to publishing in the second half of the decade of the '90s.
A note of gratitude has to be shared with the conscientious members of the
Board of Directors who guide and lead Goodheart-Willcox. As a shareholder, you
can be assured that the management and employees of Goodheart-Willcox are
exerting every effort to serve the customer for the benefit of the Company and
the shareholders.
/s/ GEORGE A. FISCHER /s/ JOHN F. FLANAGAN
George A. Fischer John F. Flanagan
Chairman of the Board President and Chief Executive
Officer
<PAGE> 4
The Goodheart-Willcox Company, Inc. and Subsidiary
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
April 30,
----------------------------------------------------------------------------------------------------------------
1995 1994
----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 7,460,000 $ 5,570,000
Accounts receivable-net of allowance for doubtful
receivables, and sales returns of $183,000 and $15,000 1,159,000 1,377,000
Inventories 1,649,000 1,573,000
Deferred income taxes 505,000 446,000
Other 86,000 176,000
----------------------------------------------------------------------------------------------------------------
Total current assets 10,859,000 9,142,000
----------------------------------------------------------------------------------------------------------------
INVESTMENT IN MARKETABLE SECURITIES 89,000 89,000
PREPUBLICATION COSTS-net of accumulated amortization of
$892,000 and $770,000 1,097,000 842,000
PROPERTY AND EQUIPMENT-net 683,000 702,000
CASH SURRENDER VALUE OF LIFE INSURANCE-net of loans of $331,000
and $325,000 411,000 361,000
Other Assets 53,000 --
----------------------------------------------------------------------------------------------------------------
$ 13,192,000 $ 11,136,000
----------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 978,000 $ 776,000
Accrued real estate taxes 80,000 75,000
Accrued compensation 496,000 291,000
Dividends payable 299,000 262,000
Royalties payable 184,000 206,000
Income taxes payable 235,000 28,000
----------------------------------------------------------------------------------------------------------------
Total current liabilities 2,272,000 1,638,000
----------------------------------------------------------------------------------------------------------------
DEFERRED INCOME TAXES 108,000 105,000
COMMITMENTS AND CONTINGENCIES -- --
REDEEMABLE COMMON STOCK, 163,200 shares at estimated redeemable
value in excess of insurance proceeds less cash surrender value 3,643,000 2,696,000
STOCKHOLDERS' EQUITY
Common stock-authorized, 1,000,000 shares of $1
par value; issued and outstanding, 598,800 shares,
exclusive of 163,200 redeemable shares 599,000 599,000
Retained earnings 6,852,000 6,380,000
----------------------------------------------------------------------------------------------------------------
7,451,000 6,979,000
----------------------------------------------------------------------------------------------------------------
Cost of 14,100 shares of common stock held in treasury (282,000) (282,000)
----------------------------------------------------------------------------------------------------------------
7,169,000 6,697,000
----------------------------------------------------------------------------------------------------------------
$ 13,192,000 $ 11,136,000
----------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements.
2
<PAGE> 5
The Goodheart-Willcox Company, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
Year Ended April 30,
---------------------------------------------------------------------------------------------------------
1995 1994 1993
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SALES $ 14,708,000 $ 12,641,000 $ 11,873,000
Cost of goods sold 4,590,000 3,973,000 4,121,000
---------------------------------------------------------------------------------------------------------
GROSS PROFIT 10,118,000 8,668,000 7,752,000
---------------------------------------------------------------------------------------------------------
Operating expenses
Selling, general and administrative 5,511,000 4,967,000 4,700,000
Royalties 1,543,000 1,320,000 1,240,000
---------------------------------------------------------------------------------------------------------
7,054,000 6,287,000 5,940,000
---------------------------------------------------------------------------------------------------------
OPERATING PROFIT 3,064,000 2,381,000 1,812,000
Other income (expense)
Loss on equity securities -- (15,000) (2,000)
Interest 212,000 101,000 99,000
Other 48,000 (160,000) 11,000
---------------------------------------------------------------------------------------------------------
260,000 (74,000) 108,000
---------------------------------------------------------------------------------------------------------
Earnings before income taxes 3,324,000 2,307,000 1,920,000
---------------------------------------------------------------------------------------------------------
Income taxes 1,307,000 950,000 700,000
---------------------------------------------------------------------------------------------------------
NET EARNINGS $ 2,017,000 $ 1,357,000 $ 1,220,000
---------------------------------------------------------------------------------------------------------
EARNINGS PER SHARE $2.70 $1.81 $1.63
---------------------------------------------------------------------------------------------------------
Weighted average number of shares outstanding 747,900 747,900 747,900
---------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 6
The Goodheart-Willcox Company, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the three years ended April 30, 1995
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
Net unrealized loss
Common Retained on marketable Treasury
stock Earnings equity securities Stock Total
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at April 30, 1992 $ 599,000 $ 5,741,000 $ (23,000) $ (282,000) $ 6,035,000
Net earnings for the year 1,220,000 1,220,000
Change in estimated value of redeemable
common stock in excess of insurance
proceeds (900,000) (900,000)
Net change in unrealized loss on
marketable equity securities 8,000 8,000
Cash dividends declared ($.60 per share) (449,000) (449,000)
--------------------------------------------------------------------------------------------------------------------
Balance at April 30,1993 $ 599,000 $ 5,612,000 $ (15,000) $ (282,000) $ 5,914,000
Net earnings for the year 1,357,000 1,357,000
Change in estimated value of redeemable
common stock in excess of insurance
proceeds (65,000) (65,000)
Net change in unrealized loss on
marketable equity securities 15,000 15,000
Cash dividends declared ($.70 per share) (524,000) (524,000)
--------------------------------------------------------------------------------------------------------------------
Balance at April 30, 1994 $ 599,000 $ 6,380,000 $ -- $ (282,000) $ 6,697,000
Net earnings for the year 2,017,000 2,017,000
Change in estimated value of redeemable
common stock in excess of insurance
proceeds (947,000) (947,000)
Cash dividends declared ($.80 per share) (598,000) (598,000)
--------------------------------------------------------------------------------------------------------------------
Balance at April 30,1995 $ 599,000 $ 6,852,000 $ -- $ (282,000) $ 7,169,000
--------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 7
The Goodheart-Willcox Company, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended April 30,
-----------------------------------------------------------------------------------------------------------------------
1995 1994 1993
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 2,017,000 $ 1,357,000 $ 1,220,000
Adjustments to reconcile net
earnings to net cash provided
by operating activities
Depreciation expense 93,000 73,000 60,000
Amortization of prepublication costs 622,000 601,000 513,000
Provision for doubtful receivables and sales returns 544,000 16,000 41,000
Deferred income taxes (56,000) 82,000 (42,000)
Loss on equity securities -- 15,000 2,000
Changes in operating assets and liabilities
Accounts receivable (326,000) (301,000) 22,000
Inventories (76,000) 334,000 72,000
Other assets 90,000 (35,000) (3,000)
Accounts payable 202,000 (23,000) 169,000
Income taxes payable 207,000 (61,000) 154,000
Accrued expenses 188,000 33,000 19,000
Net cash provided by operating
activities 3,505,000 2,091,000 2,227,000
-----------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (74,000) (104,000) (28,000)
Purchases of prepublication costs (877,000) (671,000) (516,000)
Sales of marketable securities -- 79,000 217,000
Change in cash surrender value of
officer's life insurance (50,000) 180,000 (44,000)
Change in other assets (53,000) -- --
Net cash used in
investing activities (1,054,000) (516,000) (371,000)
-----------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (561,000) (486,000) (449,000)
Net cash used in financing activities (561,000) (486,000) (449,000)
-----------------------------------------------------------------------------------------------------------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS: 1,890,000 1,089,000 1,407,000
Cash and cash equivalents at
beginning of year 5,570,000 4,481,000 3,074,000
-----------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents
at end of year $ 7,460,000 $ 5,570,000 $ 4,481,000
-----------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the year for income taxes $ 1,137,000 $ 928,000 $ 588,000
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 8
The Goodheart-Willcox Company, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS April 30, 1995, 1994, and 1993
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Goodheart-Willcox Company, Inc., a Delaware corporation, publishes
textbooks on trade and technical, family and consumer sciences, technology, and
vocational subjects. The Company's activities include the search for authors,
the procurement and editing of manuscripts, and the design, illustration, and
marketing of its textbooks and supplements. Printing and binding of books are
done by outside contractors. Historically the Company has experienced its
highest level of sales in the first and second quarter and its lowest level in
the fourth quarter. This pattern has resulted from the purchasing habits of its
school customers.
A summary of the significant accounting policies applied in the accompanying
consolidated financial statements follows
Principles of consolidation. The consolidated financial statements include the
accounts of the Company and its wholly- owned subsidiary, G/W Investment
Company, Inc. All significant intercompany transactions have been eliminated in
consolidation.
Revenue recognition. The Company recognizes revenue at the time of shipment
from Company warehouse or outside depositories. A provision for estimated
returns, consisting of the sales value less related inventory value and royalty
costs, is made at time of sale.
Inventories. Inventories are valued at the lower of cost or market. Cost of
inventories was determined by the last-in, first-out (LIFO) and the first-in,
first-out (FIFO) methods as summarized below (see Note B):
<TABLE>
<CAPTION>
April 30,
1995 1994
---------- ----------
<S> <C> <C>
Last-in, first-out method $1,612,000 $1,549,000
First-in, first-out method 37,000 24,000
---------- ----------
$1,649,000 $1,573,000
---------- ----------
</TABLE>
Cost includes the purchase of paper, printing, and binding from outside
sources. No allocation of selling and administrative expenses is included in
inventories.
Even though some books will not be sold in the current period, large quantities
of books are printed initially for stock, due to economies of scale. Management
feels that substantially all books will be sold in the current period and,
therefore, classifies all inventories as a current asset.
Investment securities. During fiscal 1995, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 115 "Accounting for Certain
Investments in Debt and Equity Securities." The adoption of SFAS No. 115 did
not have a material effect on the financial statements.
Property and equipment. Property and equipment are carried at cost less
accumulated depreciation. Depreciation is provided on straight-line and
accelerated methods over the estimated useful lives of the assets. Annual
depreciation rates range from 20% to 40% for equipment and from 3% to 20% for
buildings and improvements.
Expenditures for repairs and maintenance are charged against income when
incurred, and replacements are capitalized. Gains or losses on dispositions of
property and equipment are included in income.
Prepublication costs. The Company capitalizes certain outside contractor costs,
primarily artwork, film and preparation costs, associated with creation of the
textbooks and supplements. Prepublication costs are amortized over a period of
three years, under the straight-line method.
Advertising costs. During fiscal 1995 the Company adopted Statement of Position
(SOP) 93-7, "Reporting on Advertising Costs," and has elected to expense
advertising costs as incurred. The impact of adopting the SOP was not material
to the financial statements for the year ended April 30, 1995. Advertising
costs were $381,000 in 1995, $297,000 in 1994 and $317,000 in 1993.
Notes continued on page 7
6
<PAGE> 9
The Goodheart-Willcox Company, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS April 30, 1995, 1994, and 1993
continued
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-CONTINUED
Editorial costs. Editorial costs are charged to expense as incurred.
Income taxes. Effective May 1, 1993, the Company implemented the provisions of
Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes." SFAS No. 109 utilizes the liability method, and deferred taxes
are determined based on the estimated future tax effects of differences between
the financial statement and tax bases of assets and liabilities given the
provisions of the enacted tax laws. Prior to the implementation of SFAS No.
109, the Company accounted for income taxes using Accounting Principles Board
Opinion No. 11. The implementation of SFAS No. 109 did not have a material
effect on the financial statements.
Earnings per share. Earnings per share is computed on the weighted average
number of shares outstanding for the period.
Cash equivalents. The Company considers all highly liquid debt instruments
purchased with a maturity of three months or less to be cash equivalents.
Reclassifications. Certain 1994 and 1993 amounts have been reclassified to
conform with the 1995 presentation.
NOTE B - INVENTORIES
<TABLE>
<CAPTION>
Inventories consist of the following: 1995 1994
---------- ----------
<S> <C> <C>
Raw materials $ 105,000 $ 31,000
Work in process 37,000 24,000
Finished goods 1,507,000 1,518,000
---------- ----------
$1,649,000 $1,573,000
========== ==========
</TABLE>
Inventories would have been $2,301,000 and $2,130,000 higher at April 30, 1995
and 1994, respectively, if the first-in, first-out method of accounting had
been used on all inventories. During the year ended April 30, 1994, reduction
in LIFO inventories had the effect of increasing earnings before income taxes
by $140,000 and net earnings by approximately $83,000 (.11 per share).
NOTE C - PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
Property and equipment consists of the following: 1995 1994
---------- ----------
<S> <C> <C>
Land $ 75,000 $ 75,000
Building and improvements 1,026,000 1,026,000
Equipment 754,000 680,000
---------- ----------
1,855,000 1,781,000
Less accumulated depreciation 1,172,000 1,079,000
---------- ----------
$ 683,000 $ 702,000
========== ==========
</TABLE>
Notes continued on page 8
7
<PAGE> 10
The Goodheart-Willcox Company, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS April 30, 1995, 1994, and 1993
continued
NOTE D - INCOME TAXES
Income tax expense (benefit) consists of the following:
<TABLE>
<CAPTION>
Currently payable: 1995 1994 1993
---------- -------- --------
<S> <C> <C> <C>
Federal $1,078,000 $708,000 $609,000
State 285,000 160,000 133,000
---------- -------- --------
1,363,000 868,000 742,000
Deferred (56,000) 82,000 (42,000)
---------- -------- --------
$1,307,000 $950,000 $700,000
========== ======== ========
</TABLE>
The tax effects of the existing temporary differences that give rise to
deferred tax assets and liabilities at April 30, 1995 are as follows:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Deferred tax assets
Inventory capitalization $333,000 $339,000
Accrued compensation 96,000 101,000
Allowance for doubtful receivables and sales returns 76,000 6,000
-------- --------
505,000 446,000
Deferred tax liabilities
Depreciation (108,000) (105,000)
-------- --------
Net deferred tax asset $397,000 $341,000
-------- --------
</TABLE>
The components of the deferred tax provision (benefit) are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- ------- --------
<S> <C> <C> <C>
Excess of tax over book depreciation $3,000 $3,000 $3,000
Inventory capitalization 6,000 67,000 (13,000)
Accrued compensation 5,000 (2,000) (36,000)
Allowance for doubtful receivables and sales returns (70,000) -- --
Other -- 14,000 4,000
-------- ------- --------
$(56,000) $82,000 $(42,000)
-------- ------- --------
</TABLE>
A reconciliation of income taxes computed at the Federal statutory rate (34%)
and income tax expense is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---------- -------- --------
<S> <C> <C> <C>
Federal income taxes at statutory rate $1,130,000 $784,000 $653,000
State income taxes-net of Federal tax benefit 196,000 116,000 87,000
Municipal bond interest exemption (52,000) (26,000) (26,000)
Officer's life insurance 17,000 61,000 (15,000)
Other 16,000 15,000 1,000
---------- -------- --------
$1,307,000 $950,000 $700,000
---------- -------- --------
</TABLE>
NOTE E - EMPLOYEE BENEFIT PLANS
The Company has a profit sharing plan, covering all full-time employees, to
which both the Company and eligible employees may contribute. Company
contributions are voluntary and at the discretion of the Board of Directors.
Annual contributions by the Company cannot exceed 15% of eligible compensation.
Company contributions were $306,000 in 1995, $269,000 in 1994, and $286,000 in
1993.
Notes continued on page 9
8
<PAGE> 11
The Goodheart-Willcox Company, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS April 30, 1995, 1994, and 1993
continued
NOTE E - EMPLOYEE BENEFIT PLANS-CONTINUED
Effective May 1, 1994, the Company adopted The Goodheart-Willcox Company, Inc.
Supplemental Executive Retirement Plan for the benefit of certain management
employees as determined by the Board of Directors. The purpose of the plan is
to provide additional benefits for those participants who have profit sharing
benefits limited by the Internal Revenue Code. The company's contribution to
the plan in 1995 was $7,500.
NOTE F - COMMITMENTS AND CONTINGENCIES
Under an agreement between the Company and a principal stockholder/officer, the
Company will purchase approximately 163,200 shares of the Company's stock owned
by him upon his death. The purchase price will be based on the fair market
value of the Company's shares at that time, as determined by a named third
party. The excess of the estimated fair market value of the mandatorily
redeemable shares over the amount of life insurance, net of cash surrender
value, carried to meet a portion of the Company's obligation under this
agreement has been segregated from stockholders' equity.
Prior to fiscal 1994, the life insurance was with Executive Life Insurance
Company, held in conservatorship by the California Department of Insurance. In
fiscal 1994, the California Department of Insurance approved the sale of
Executive Life to Aurora National Life Assurance Company (Aurora). Under the
terms of the sale, Aurora assumed the obligations of the restructured policies
of Executive Life. In connection with the restructuring of Executive Life and
the sale to Aurora, the Company recorded in other expenses a fourth quarter
charge in fiscal 1994 of $180,000 for the reduction in the cash surrender value
of the life insurance. Aurora has assumed all policy obligations, thus no
reduction has been made in the amount of insurance proceeds available for stock
redemption upon the death of the principal stockholder.
The Company has entered into employment agreements with the chairman of the
board of directors and president that provide for annual compensation and
certain other benefits including death benefit payments equal to two years
salary. The present value of the estimated death benefit payable under these
agreements of approximately $160,000 is included in accrued compensation at
April 30, 1995 and 1994.
In May 1995, the Company acquired property in Tinley Park, Illinois, for
approximately $738,000 (for which a deposit of $50,000 was recorded in other
assets at April 30, 1995) upon which it intends to construct a warehouse and
office building. It is anticipated the building will be completed for occupancy
in late fiscal 1996 at a total cost exclusive of land of approximately
$2,762,000.
NOTE G - QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
Net earnings (loss)
-----------------------------
Net sales Gross profit Total Per share
----------- ------------ ---------- ---------
<S> <C> <C> <C> <C>
FISCAL YEAR 1995
FIRST $4,431,000 $3,204,000 $940,000 $1.26
SECOND 5,853,000 4,115,000 1,269,000 1.69
THIRD 2,737,000 1,716,000 97,000 .13
FOURTH 1,687,000 1,083,000 (289,000) (.38)
----------- ----------- ---------- -----
$14,708,000 $10,118,000 $2,017,000 $2.70
=========== =========== ========== =====
Fiscal year 1994
First $ 4,096,000 $2,799,000 $ 732,000 $ .98
Second 4,193,000 2,835,000 800,000 1.07
Third 2,354,000 1,709,000 155,000 .21
Fourth 1,998,000 1,325,000 (330,000) (.45)
----------- ----------- ---------- -----
$12,641,000 $8,668,000 $1,357,000 $1.81
=========== ========== ========== =====
</TABLE>
The quantities and costs used in calculating cost of goods sold on a quarterly
basis include estimates of the annual LIFO effect. The actual effect cannot be
known until the year-end physical inventory is completed and quantity and price
indices developed. The quarterly cost of goods sold above includes such
estimates.
9
<PAGE> 12
The Goodheart-Willcox Company, Inc.
STATEMENT OF MANAGEMENT RESPONSIBILITIES
The management of Goodheart-Willcox Company, Inc. is responsible for the
integrity and objectivity of the financial and operating information contained
in this Annual Report. The consolidated financial statements were prepared in
conformity with generally accepted accounting principles and include amounts
that are based on the best estimates and judgments of management. The audit
report of Grant Thornton on these financial statements is the result of their
audit performed in accordance with generally accepted auditing standards.
The Company maintains a system of internal financial controls designed to
provide management with reasonable assurance that transactions are executed in
accordance with appropriate authorization, assets are properly safeguarded, and
accounting records may be relied upon for the preparation of financial
statements. This system includes written policies and procedures and an
organizational structure that segregates duties.
The Audit/Compensation Committee of the Board of Directors has an oversight
role in the area of financial reporting and internal controls. This committee
meets several times each year with management and Grant Thornton to monitor the
proper discharge of each of their respective responsibilities. Grant Thornton
has free access to management and to the Audit/Compensation Committee to
discuss the results of their activities and adequacy of controls.
/s/ JOHN F. FLANAGAN /s/ GEORGE A. FISCHER
John F. Flanagan George A. Fischer
President and Chief Executive Officer Chairman of the Board
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS
THE GOODHEART-WILLCOX COMPANY, INC. AND SUBSIDIARY
SOUTH HOLLAND, ILLINOIS
We have audited the accompanying consolidated balance sheets of The
Goodheart-Willcox Company, Inc. and Subsidiary as of April 30, 1995 and 1994,
and the related consolidated statements of earnings, stockholders' equity, and
cash flows for each of the three years in the period ended April 30, 1995.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of The
Goodheart-Willcox Company, Inc. and Subsidiary as of April 30, 1995 and 1994,
and the results of their operations and their consolidated cash flows for each
of the three years in the period ended April 30, 1995, in conformity with
generally accepted accounting principles.
/s/ GRANT THORNTON LLP
Chicago, Illinois
May 31, 1995
10
<PAGE> 13
The Goodheart-Willcox Company, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND REULTS OF
OPERATIONS
OPERATING RESULTS
The Company's sales for fiscal 1995 increased $2,067,000 or approximately 16%
over the previous fiscal year due to generally stronger demand for new and
revised Goodheart-Willcox products including strong state adoption orders from
Indiana, Florida, and Georgia, coupled with selective price increases. In
fiscal 1994, sales increased $768,000 or approximately 6% over the previous
year due to the sale of new and revised titles outside of the typical state
adoptions cycle coupled with sales in two adoption calls from Florida and
Texas. In fiscal 1993, sales increased $792,000 or approximately 7% over the
previous year due to the sale of new and revised titles outside of the typical
state textbook adoption cycle coupled with selective price increases. State
textbook adoptions, which contribute substantially to the Company's sales,
historically have been held at regular, predictable intervals. During the past
several years the intervals for several states have been significantly
increased. Selective price increases are made each year but will not
significantly offset any substantial decline in state budgeted expenditures for
textbooks and supplements. Price adjustments are made each year, on a product
by product basis, taking into consideration the cost of paper, printing,
binding, the overhead contribution, and competitive pricing. The reserve for
future sales returns is reviewed and modified slightly on a quarter by quarter
basis as the sales mix continues to shift from middle and senior high schools
to community college bookstores where the number of books and supplements
returned occurs with greater frequency.
The cost of goods sold as a percentage of sales in fiscal 1995 was 31% compared
to 31% in fiscal 1994 and 35% in fiscal 1993. The stabilization in the cost of
goods sold as a percentage of sales is the result of selected selling price
increases, continued monitoring of print and reprint quantities, the
application of computer technology by outside suppliers permitting shorter
press runs, reduction in manufacturing time, and consistent high quality
allowing Goodheart-Willcox to hold down the unit cost of textbooks and
supplements.
Operating expenses consisting of royalties, selling, general, and
administrative expenses increased $767,000 or 12% over the previous year,
compared to an increase of $347,000 or approximately 6% over fiscal 1994.
Selling, general, and administrative cost as a percentage of sales for fiscal
1995 was 37% compared to 39% in fiscal 1994 and 40% in fiscal 1993. A major
component of the selling, general, and administrative expenses is the
distribution of sample textbooks and supplements which is a marketing tool
unique to the textbook publishing market. In fiscal 1995, sampling expenses
were $342,000 compared to $425,000 in fiscal 1994 and $316,000 in fiscal 1993.
The 16% increase in net sales for fiscal 1995 coupled with a stable ratio for
the cost of goods sold as a percentage of sales and an approximate 12% increase
in the operating expenses resulted in income from operations of $3,064,000 or
an increase of approximately 29% over the previous fiscal year's income from
operations of $2,381,000. In fiscal 1994, a 6% increase in sales coupled with
the improvement in the cost of goods sold percentage and 6% increase in
operating expenses increased the Company's income from operations by $569,000
over the previous year's income from operations of $1,812,000. For fiscal 1993,
the Company experienced a 7% increase in sales coupled with the improvement in
the cost of goods sold percentage and a 4% increase in operating expenses to
increase income from operations by $497,000 over the previous year's income
from operations of $1,315,000. Other income for fiscal 1995 was $260,000 due to
the rise in interest rates combined with the Company's increase in cash and
cash equivalents. For fiscal 1994, other income (expense) was ($74,000) due
primarily to the $180,000 reduction in the cash surrender value of the life
insurance policy carried to redeem the mandatorily redeemable common stock,
compared to other income of $108,000 in fiscal 1993. The Company's fiscal year
end of April 30 divides the purchasing patterns of its school customers such
that the major marketing and inventory buildup efforts occur at the end of the
fiscal year, while the resulting sales primarily follow in the first two
quarters of the next fiscal year.
LIQUIDITY
Cash and cash equivalents totaled $7,460,000 at April 30, 1995, an increase of
$1,890,000 from the year ending April 30, 1994. The Company had no outstanding
long term debt at April 30, 1995 or 1994. As shown in the cash flow statements,
the cash provided by the operating activities of the Company amounted to
$3,505,000 for fiscal 1995 as compared to $2,091,000 for fiscal 1994, an
increase of $1,414,000 which is attributable principally to the increase in net
earnings with other adjustments to accounts covering provision for doubtful
receivables and sales returns, deferred income taxes, accounts receivable,
inventories, accounts payable, and income taxes payable. In fiscal 1994 the
cash provided by the operating activities of the Company amounted to
Management's Discussion and Analysis continued on page 12
11
<PAGE> 14
The Goodheart-Willcox Company, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS-CONTINUED
$2,091,000 as compared to $2,227,000 for fiscal 1993, a decrease of $136,000
which is attributable to the increase in net earnings with adjustments in
accounts covering the amortization of prepublication cost, deferred income
taxes, and the write down of the cash surrender value of the life insurance.
The changes in assets and liabilities for fiscal 1995 include an increase in
the cash and cash equivalents as well as an increase in inventories due to the
addition of new products and replenishing the warehouse following a successful
shipping season, an increase in prepublication investment, an increase in
accounts payable, an increase in accrued compensations due to the timing of the
distribution of the end-of-year checks, and an increase in income taxes
payable. The changes in assets and liabilities for fiscal 1994 include an
increase in accounts receivable due to greater sales, a decline in inventory
due to purchasing decisions selecting shorter press runs for market timing due
to revision schedules and adoption calls. There have been no changes in
Goodheart-Willcox business practices including credit terms, collection
efforts, and return policies from previous years.
Investment in new and revised products for fiscal 1995 was $877,000 or an
increase of $206,000 more than the $671,000 invested in fiscal 1994.
Prepublication products and services amounted to $516,000 for fiscal 1993. The
Company currently intends to continue an aggressive pace of prepublication
investment in products and services in future quarters to maintain a publishing
program of adding new titles to the lines while revising a backlist of products
to match marketing needs. In fiscal 1995, $74,000 was invested in new hardware
and software to update the editorial word- processing capabilities and the
creative/design team's ability to place our products with more outside
suppliers. In fiscal 1994, $104,000 was invested in new hardware and software
to provide lap top computers to sales representatives, to update personal
computers for editorial stations, and to acquire a server for the
layout/production department. In fiscal 1993, $28,000 was invested in property
and equipment. In fiscal 1995, there was no investing activities relating to
marketable securities compared to fiscal 1994 when $79,000 was received from
the sale of marketable securities and compared to fiscal 1993 when $217,000 of
municipal bonds were called by the issuer.
The primary financing use of cash in each of the last three years was the
payment of dividends at the rate of $.80 per share in fiscal 1995, $.70 per
share in fiscal 1994, and $.60 per share in fiscal 1993.
The first and second quarters historically have displayed increased shipments
and increased growth in accounts receivable while inventory declines. The
fourth quarter has historically displayed an anticipated growth in inventories
as new and revised products are published for the next calendar/copyright year
and for the next marketing cycle. The seasonal nature of selling products such
as textbooks and supplements into the school market with two separate semesters
tends to affect the periodic liquidity of the Company due to the required
buildup of inventory for the anticipated needs of schools opening in the fall.
CAPITAL RESOURCES
It is anticipated that the future capital needs of the Company will be met from
internally generated funds. The investment in computer hardware and software on
a department by department basis will be met from cash flow from operating
activities. The 1996 investment in prepublication products and services is
expected to follow the pattern established in previous years. The South Holland
facility has reached its design limits for office and warehouse alike. In May
1995, the Company acquired 5.9 acres in Tinley Park, Illinois, for
approximately $738,000 upon which it intends to construct a warehouse and
office building, and to which it intends to relocate its entire business
operation. It is anticipated the building will be completed for occupancy in
late fiscal 1996 at a total cost of approximately $2,762,000 which may be met
using existing capital resources.
THE EFFECTS OF INFLATION
Inflation affects the Company due to increases in cost of materials and
services. In fiscal 1995, the Company experienced some tightening of suppliers
schedules and some price increases which appear to be more inflationary than
patterns experienced in the previous year. Paper used to replenish inventory
and to print new products is experiencing dramatic price increases. By advance
planning and by shifting grades, the effect of the price increases may be
delayed. The ability to reflect such cost increases in the selling price of
Goodheart-Willcox products depends upon the pricing for competing product lines
and general market conditions. It is possible that the Company will not be able
to pass through all of the paper price increases to our customers. The Company
continues to manage its cost of doing business in these very uncertain times by
using various suppliers with specialized graphic arts equipment and production
capabilities, by obtaining quotations from new suppliers, by reviewing the
variety of paper grades appropriate for various titles, by scheduling press
runs in batches, and by staying alert to outside opportunities available to
meet key deadlines.
12
<PAGE> 15
The Goodheart-Willcox Company, Inc.
CORPORATE INFORMATION
CORPORATE OFFICE, The Goodheart-Willcox Company, Inc., 123 W. Taft Drive, South
Holland, Illinois 60473
ANNUAL MEETING, The next annual meeting will take place at 9:30 a. m. C. D. T.,
July 11, 1995, at the Corporate Office, South Holland, Illinois
STOCK SYMBOL, GWOX, Over-the-Counter Market
TRANSFER AGENT, First National Bank of Chicago
GENERAL COUNSEL, Hedberg, Tobin, Flaherty & Whalen, A Professional Corporation,
Chicago
INDEPENDENT PUBLIC ACCOUNTANTS, Grant Thornton, Chicago
S.E.C. FORM 1O-K AVAILABLE, Copies of the Corporation's annual report on Form
10-K filed with the Securities and Exchange Commission will be available to
stockholders without charge by written request addressed to the Secretary of
the Corporation.
DIRECTORS
Walter C. Brown, EdD, Professor Emeritus, Division of Technology, Arizona State
University
Robert C. DeBolt, President and Cheif Executive Officer, F. H. Ayer
Manufacturing Co.
George A. Fischer, Chairman, The Goodheart-Willcox Company, Inc.
John F. Flanagan, President, Chief Executive Officer, The Goodheart-Willcox
Company, Inc.
Wilma Pitts Griffin, PhD, CFCS, Chairperson and Professor, Department of Home
Economics, Baylor University
Clois E. Kicklighter, EdD, Dean, School of Technology, Indiana State University
Mrs. Loraine J. Mix, Private Investor
EXECUTIVE OFFICERS
George A. Fischer, Chairman
John F. Flanagan, President, Chief Executive Officer
Donald A. Massucci, Vice-President, Administration and Treasurer
Dick G. Snyder, Vice-President, Sales and Secretary
COMMON STOCK PRICE RANGES AND DIVIDENDS
Stock prices represent high and low closing bids
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
Cash
Fiscal Price Range Dividend
Quarter Low High Declared
-----------------------------------------------------------------------------------
<S> <C> <C> <C>
1Q95 17 20 $--
2Q95 18 21 --
3Q95 18 1/2 21 .40
4Q95 19 22 .40
-----------------------------------------------------------------------------------
1Q94 $16 $18 $--
2Q94 16 18 --
3Q94 17 20 .35
4Q94 17 20 .35
</TABLE>
Fiscal year ends April 30
13
<PAGE> 16
THE GOODHEART-WILLCOX COMPANY, INC.
123 West Taft Drive, South Holland, Illinois 60473-2089
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