<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
X
- ----- 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, 1997.
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.,
- --------------------------------------------------------------------------------
(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.)
18604 West Creek Drive, Tinley Park, Illinois 60477-6243
- --------------------------------------------------------------------------------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (708) 687-5000
-----------------
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)
<PAGE> 2
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 2, 1997, (within 60 days prior to the date of filing)
was approximately $8,961,000.
The number of shares of the registrant's common stock $1.00 par value per
share outstanding, as of April 30, 1997 was 584,700.
DOCUMENTS INCORPORATED BY REFERENCE
1. Annual Report to Stockholders for fiscal year ended April 30, 1997,
("1997 Annual Report").
2. Proxy Statement for Annual Meeting of Stockholders, July 8, 1997, ("Proxy
Statement").
3. Registration Statement, Form S-1, File No. 2-45113, dated July 25, 1972,
("Registration Statement").
Part II
Item 5 - 1997 Annual Report Page Inside Back Cover
Item 6 - 1997 Annual Report Pages Inside Front Cover, 2-16
Item 7 - 1997 Annual Report Pages 2-16
Item 8 - 1997 Annual Report Pages 2-16
PART III
Item 10 - 1997 Proxy Statement Pages 2-8
Item 11 - 1997 Proxy Statement Pages 3-8
Item 12 - 1997 Proxy Statement Pages 4-5
PART IV
Item 14 - 1997 Annual Report Pages 2-16
Exhibit Index Pages 13-14
2
<PAGE> 3
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 508 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, making up the individual pages,
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 7 new texts, 14 new
supplements to accompany established texts, 15 textbook revisions and 39
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
8.3% 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-
3
<PAGE> 4
tion committee. There are presently 16 such states that adopt in the Company's
subject areas in which the Company has from 16 to 79 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 10% 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 10 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 2.7% 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 62 full-time persons. Employee relations are
considered good. Much of the Company's textbook business is seasonal, and
approximately 55.5% 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 relocated its principal place of business in the late summer
of 1996 from South Holland, Illinois to its newly constructed warehouse and
office building on a 3.65 acre site in Tinley Park, Illinois. The building
contains approximately 72,000 square feet of floor space, of which
approximately 20,000 square feet is used for office requirements.
4
<PAGE> 5
The Company financed the cost of the property acquisition, building
construction and relocation from its own funds.
The South Holland properties on a 5.5 acre site consisting of two separate
buildings physically connected by an enclosed corridor, contain an aggregate of
approximately 58,275 square feet of floor space. The buildings are presently
vacant and are being offered for sale.
Item 3. Legal Proceedings
None
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 1997 Annual Report to Stockholders
is hereby incorporated by reference:
(a) Market - Over-the-Counter - Symbol-GWOX Page Inside Back Cover
Quotation Ranges and Dividends Page Inside Back Cover
(b) 150 common shareholders based upon the number of record owners as of May
23, 1997, 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 1997 Annual Report to Stockholders
is hereby incorporated by reference:
Five year Summary of Selected Financial Data Page Inside Front Cover
This referenced section should be read in conjunction with the Financial
Statements and related Notes (hereby incorporated by reference) in the
Company's 1997 Annual Report to Stockholders, Pages 2-16.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following section of the Company's 1997 Annual Report to Stockholders
is hereby incorporated by reference:
Management's Discussion and Analysis of Financial Pages 13-16
5
<PAGE> 6
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 1997 Annual Report to Stockholders, Pages 2-16.
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 13. Those portions of The
Goodheart-Willcox Company, Inc.'s 1997 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 1997 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 1997 Proxy Statement is hereby
incorporated by reference:
a) Identification of Directors Page 2
b) Identification of Executive Officers
John F. Flanagan, age 53, Chairman of the Board since March, 1997; 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.
Donald A. Massucci, age 57, 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 60, 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.
6
<PAGE> 7
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.
7
<PAGE> 8
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> <C>
George A. Fischer (6) Chairman, $ 44,666 $ 6,700 $245,728 $2,397,886
Deceased 2/1/97 Director
John F. Flanagan (7) Chairman, 387,650(2) 22,500 193,121 1,901,771
President,
Chief Executive
Officer, Director
Donald A. Massucci (8) Vice President, 163,475(3) 22,500 104,327 1,037,712
Administration &
Treasurer
Dick G. Snyder (8) Vice President, Sales 163,475(3) 22,500 56,257 569,940
Secretary
Walter C. Brown Consulting Editor, 95,655 5,400 20,118 201,170
Director
All Directors and Officers as a Group (5) $987,884 $79,600 $619,551 $6,108,479
</TABLE>
8
<PAGE> 9
(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 $59,655 to Dr. Brown and of $81,963 to Dr. Kicklighter.
(2) Includes salary pursuant to employment agreement and discretionary year
end bonus which was set by the Company's Board of Directors of $125,000
for Mr. Flanagan.
(3) Includes salaries established by management and year end bonuses fixed by
the Company's Board of Directors of $50,000 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) Mr. Fischer died on February 1, 1997. Under an agreement dated June 1,
1975, the Company is required to pay his surviving spouse salary
continuation for twenty-four months at the rate he was receiving at death,
namely $56,650 per year.
(7) An agreement dated June 1, 1975, amended from time to time and further
amended April 18, 1997, 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, 1997, he is to be paid compensation of
$275,000 per year, plus reimbursement of 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. Flanagan 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. 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.
9
<PAGE> 10
(8) Messrs. Massucci and Snyder annual salaries were each increased,
effective May 1, 1997, to $125,000.
The following sections of the Company's 1997 Proxy Statement are hereby
incorporated by reference.
Summary Compensation Table Page 7
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
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following section of the Company's 1996 Proxy Statement is hereby
incorporated by reference.
(a) Security Ownership of Certain Beneficial Owners Pages 4-5
(b) Security Ownership of Management
<TABLE>
<CAPTION>
Amount and
Name of Position Nature of Percent of
Beneficial Owner with Company Ownership Class (6)
- ------------------ ------------ --------- ---------
<S> <C> <C> <C>
Mrs. Loraine J. Mix Director 291,630(1) 49.9%(6)
Fred Eychaner 111,412(2) 19.1%(6)
Century Partners 42,700(3) 7.3%(6)
John F. Flanagan Director and
Executive Officer 21,304(4) 3.6%
Walter C. Brown Director 1,000(5) *
Robert C. DeBolt Director - -
Wilma Pitts Griffin Director 150 *
Clois E. Kicklighter Director 100 *
Donald A. Massucci Executive Officer 300 *
Dick G. Snyder Executive Officer 700 *
Directors and Executive
Officers as a Group (8 Persons) 315,184 53.9%
*Less than one percent
</TABLE>
10
<PAGE> 11
(1) Mrs. Mix owns 26,430 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. Mrs. Mix's
daughter Joyce Meister owns 18,000 shares and her daughter Patti Flanagan
owns 18,335 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 56.59% of the Company's
outstanding stock.
(2) 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.
(3) 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 of the Company's securities.
(4) Of these shares, 18,335 are owned beneficially and of record by Mr.
Flanagan's wife, 335 are owned beneficially and of record by Mr. Flanagan,
2,614 are owned jointly by Mr. Flanagan and his wife, and 20 are held by
Mr. Flanagan and his wife as custodian for their children.
(5) These shares are owned beneficially and of record by Dr. Brown and his
wife as co-trustees under a living trust.
(6) Pursuant to the Stock Purchase Agreement between George A. Fischer, and
the Company, dated November 18, 1981, upon the death of Mr. Fischer on
February 1, 1997, the Company was required to and subsequently did
purchase from the George A. Fischer Trust on April 11, 1997, 163,200
shares of common stock of the Company, the same being all the shares of
the Company owned by Mr. Fischer at his death. The purchase price
pursuant to the Stock Purchase Agreement was determined by its fair market
value at the date of Mr. Fischer's death as appraised by Prairie Capital
Services, Inc., at $33.25 a share or $5,426,400 in the aggregate. The
purchase price was paid $2,170,560 in cash and the balance by an
installment promissory note in the principal amount of $3,255,840 dated
April 11, 1997, providing for five consecutive annual payments of $651,168
each, the first annual payment being due April 11, 1998, with interest at
the prime rate of The First National Bank of Chicago, computed monthly.
The source of the cash portion of the purchase price was provided in part
by the $1,200,000 proceeds of an insurance policy on the life of Mr.
Fischer owned by the Company and the balance of $970,560 was provided by
internally generated funds. It is anticipated that the source of the
annual installment payments as required by the note will be met by
internally generated funds.
As a result of the acquisition by the Company of the said 163,200 shares
of its $1.00 par value common stock from the George A. Fischer
11
<PAGE> 12
Trust, the total outstanding shares of the Company have been reduced
from 747,900 shares to 584,700 shares of said common stock, increasing the
percentage beneficial ownership of Mrs. Mix from 39.1% to 49.9%, Fred
Eychaner from 14.9% to 19.1% and Century Partners from 5.7% to 7.3%.
(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.
Item 13. Certain Relationships and Related Transactions
None.
12
<PAGE> 13
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, 1997
Page Number Reference
---------------------
Annual
Report to
Form 10-K Stockholders
--------- ------------
(a) 1. Financial Statements
Consolidated statements of earnings and stockholders' Pages 4-5
equity for the years ended April 30, 1997, 1996 and 1995
Consolidated balance sheets as of April 30, 1997, and Pages 2-3
1996
Consolidated statements of cash flows for the years Page 6
ended April 30, 1997, 1996 and 1995
Notes to consolidated financial statements Pages 7-11
Report of Independent Certified Public Accountants Page 12
Statement of Management Responsibilities Page 12
(a) 2. Financial Statements Schedules
Schedule II - Valuation and Qualifying Accounts Page 15
Report of Independent Certified Public
Accountants on Schedules
Consent of Independent Certified Public
Accountants
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.
13
<PAGE> 14
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: Form 8-K was filed during the last quarter of the
Company's fiscal year ended April 30, 1997.
13. 1997 Annual Report of The Goodheart-Willcox Co., Inc.
21. List of Subsidiaries.
23. Report of Independent Certified Public Accountants on Schedules.
27. Financial Data Schedule.
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.
14
<PAGE> 15
THE GOODHEART-WILLCOX COMPANY, INC.
SCHEDULE II
Valuation and Qualifying Accounts
For the years ended April 30, 1997, 1996 and 1995
<TABLE>
<CAPTION>
Balance at Additions Deductions Beginning
Beginning charged to from at end of
Description of Period Income Reserves Period
- ----------- --------- ---------- ---------- ------
<S> <C> <C> <C> <C>
Year ended April 30, 1997
Allowance for Sales returns(1) $98,000 $121,000 $121,000 $98,000
Allowance for doubtful accounts $15,000 $ 1,000 $ 1,000 $15,000
</TABLE>
Note: The allowance for sales returns and doubtful accounts for the years
ended April 30, 1996 and 1995 were not material to the Consolidated financial
statements.
(1) Allowance for Sales returns represents anticipated returns net of
inventory and royalty costs.
15
<PAGE> 16
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____________________________________
John F. Flanagan, Chairman of
the Board of Directors,
President and
Chief Executive Officer
By____________________________________
Donald A. Massucci, Vice
President, Administration,
and Treasurer
By____________________________________
Dick G. Snyder, Vice President,
Sales, and Secretary
Dated: July 8, 1997.
16
<PAGE> 17
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____________________________________
Walter C. Brown, EdD
A Director
Date: July 8, 1997
By____________________________________
Robert C. DeBolt
A Director
Date: July 8, 1997
By____________________________________
John F. Flanagan
Chairman, President and a Director
Date: July 8, 1997
By____________________________________
Wilma Pitts Griffin, PhD, CFCS
A Director
Date: July 8, 1997
By____________________________________
Clois E. Kicklighter, EdD
A Director
Date: July 8, 1997
By____________________________________
Loraine J. Mix
A Director
Date: July 8, 1997
17
<PAGE> 1
EXHIBIT 13
[GOODHEART-WILLCOX LOGO] 1997 Annual Report
The Goodheart-Willcox Co., Inc.
[ART PHOTOS]
<PAGE> 2
The Goodheart-Willcox Company, Inc. and Subsidiary
FIVE YEAR SUMMARY
<TABLE>
<CAPTION>
Year Ended April 30,
- ----------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SELECTED INCOME STATEMENT
DATA:
Sales $16,631,000 $14,645,000 $14,708,000 $12,641,000 $11,873,000
Costs and expenses 13,199,000 12,405,000 11,644,000 10,260,000 10,061,000
Other income (expense), net 692,000 227,000 260,000 (74,000) 108,000
Income taxes 1,349,000 871,000 1,307,000 950,000 700,000
Net earnings 2,775,000 1,596,000 2,017,000 1,357,000 1,220,000
- ----------------------------------------------------------------------------------------------
Earnings per share $3.75 $2.13 $2.70 $1.81 $1.63
- ----------------------------------------------------------------------------------------------
Weighted average number
of shares outstanding 739,405 747,900 747,900 747,900 747,900
- ----------------------------------------------------------------------------------------------
Dividends per share $.90 $.80 $.80 $.70 $.60
- ----------------------------------------------------------------------------------------------
SELECTED BALANCE SHEET DATA:
Total assets $14,065,000 $13,705,000 $13,192,000 $11,136,000 $10,307,000
Redeemable common stock -- 3,077,000 3,643,000 2,696,000 2,631,000
Total stockholders' equity 8,573,000 8,739,000 7,169,000 6,697,000 5,914,000
- ----------------------------------------------------------------------------------------------
</TABLE>
Contents
1 - Letter to Shareholders
2 - Balance Sheets
4 - Statements of Earnings
5 - Statements of Stockholders Equity
6 - Statements of Cash Flows
7 - Notes to Consolidated Financial Statements
12 - Statement of Management Responsibilities
Report of Independent Certified Public Accountants
13 - Management's Discussion and Analysis of Financial Condition and
Results of Operation
Inside Back Cover - Corporate Information
Common Stock Price Ranges and Dividends
The cover of this Annual Report shows six typical books published by
Goodheart-Willcox in fiscal 1997 along with four catalogs issued for 1997.
<PAGE> 3
TO OUR SHAREHOLDERS:
In fiscal 1997, your Company completed its strongest year ever, reporting
outstanding financial results and participating in major transitional events
which position Goodheart-Willcox for the future. The five year summary of key
financial data printed on the inside front cover illustrates the progress made
this past fiscal year. Highlights of the year are listed below:
Revenues rose to a record $16,631,000, an increase of 13%.
Operating income increased 53% to $3,432,000.
100% of our employees moved to our new office/distribution facility.
The Company repurchased 163,200 shares of GWOX stock.
Earnings per share, including extraordinary insurance proceeds, were $3.75.
The 13% growth in net sales is attributable to strong orders from open
territories as well as one adoption state. The appeal of Goodheart-Willcox
texts and supplements is a result of a combination of expert authors, editors
knowledgeable in the curriculum subject areas, a talented creative staff,
effective marketing strategies by our sales staff, and caring customer service.
The continued updating of content coupled with design improvements for new and
revised titles allows the product line to be the first choice of many
instructors and students.
The improvement in operating income reflects not only the growth in sales but
also the constant monitoring of costs and expenses. Careful planning and wise
decisions reduced the cost of goods sold as a percentage of sales by 4%.
Selling expenses grew only 6%, while general and administrative expenses
increased 14% in line with the sales growth. The selection of titles submitted
in adoption states is carefully balanced against the supplements offered as
incentives, the goal being the ultimate profitability to your Company.
The warehousing and distribution functions were moved into our new facility
last July to fulfill the needs of our customers in the peak shipping period
before the first semester. The new warehouse provides approximately two and
one-half times the storage capacity of the South Holland facility. The packing
and shipping functions have been streamlined and consolidated. Last August, the
office and editorial staff were relocated to the new building and were
immediately productive in serving our customers with a newly formed sales
support team and a revamped customer service staff. All the employees made the
move to the new building, a tribute to their loyalty and commitment to the
Company. The new facility supports Goodheart-Willcox customers, provides an
attractive work environment for current and future employees, and allows your
Company to utilize advances in technology. The expansion into the Tinley Park
facility was financed using existing capital resources and is reflected on the
balance sheet.
The death of George A. Fischer following a brief illness was a personal loss to
all Goodheart-Willcox employees. Under the terms the agreement previously noted
in earlier annual reports, the Company purchased 163,200 shares of his common
stock at fair market value. Insurance proceeds met a portion of the Company's
obligation under the agreement and appear on the income statement under Other
Income. The effect of this repurchase reduced the number of shares outstanding
from 747,900 to 584,700, with the weighted average outstanding at April 30th
being 739,405 shares.
Net income, including extraordinary insurance proceeds, increased to $2,775,000
or $3.75 per share based on the 739,405 weighted average shares outstanding.
(For comparative purposes, without the insurance proceeds and without the
repurchase of the shares, net income would have been $2,227,000 or $2.98 per
share based upon the previous year's 747,900 shares outstanding.) Overall,
fiscal 1997 was a profitable year which positioned your Company in a new
facility designed for future expansion. The internally financed facility, the
stock repurchase, the solid balance sheet, the focused publishing program, and
the dedicated employees of Goodheart-Willcox support and reinforce our positive
outlook for the future of your Company.
The understanding and encouragement provided by the Board of Directors, the
willingness of the entire staff to relocate to new workspaces, the cooperation
of our suppliers, and the enthusiasm of our customers for Goodheart-Willcox
products and service made this a memorable and successful year!
/s/ John F. Flanagan
John F. Flanagan
President and Chief Executive Officer
<PAGE> 4
The Goodheart-Willcox Company, Inc. and Subsidiary
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
April 30,
- -------------------------------------------------------------------------------------------
1997 1996
- -------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $2,613,000 $5,118,000
Accounts receivable-net of allowance for doubtful
receivables and sales returns of $113,000 1,565,000 1,421,000
Inventories 2,730,000 1,967,000
Deferred income taxes 646,000 476,000
Other 125,000 155,000
- -------------------------------------------------------------------------------------------
Total current assets 7,679,000 9,137,000
- -------------------------------------------------------------------------------------------
Investment securities available-for-sale 92,000 91,000
PREPUBLICATION COSTS-net of accumulated amortization of
$1,528,000 and $1,071,000 1,487,000 1,639,000
PROPERTY AND EQUIPMENT-net 4,769,000 2,253,000
CASH SURRENDER VALUE OF LIFE INSURANCE-net of loans of
$-0- and $363,000 38,000 585,000
- -------------------------------------------------------------------------------------------
$14,065,000 $13,705,000
- -------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements.
2
<PAGE> 5
The Goodheart-Willcox Company, Inc and Subsidiary
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
April 30,
- -------------------------------------------------------------------------------------------
<S> <C> <C>
1997 1996
- -------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable, current portion $651,000 $--
Accounts payable 1,020,000 852,000
Accrued compensation 360,000 325,000
Accrued other 170,000 89,000
Dividends payable 293,000 299,000
Royalties payable 224,000 212,000
- -------------------------------------------------------------------------------------------
Total current liabilities 2,718,000 1,777,000
- -------------------------------------------------------------------------------------------
DEFERRED INCOME TAXES 169,000 112,000
COMMITMENTS AND CONTINGENCIES -- --
NOTES PAYABLE, NET OF CURRENT PORTION 2,605,000 --
REDEEMABLE COMMON STOCK, 0 and 163,200 shares at estimated
redeemable value in excess of insurance proceeds less cash
surrender value -- 3,077,000
STOCKHOLDERS' EQUITY
Common stock 762,000 599,000
Retained earnings 13,513,000 8,416,000
- -------------------------------------------------------------------------------------------
14,275,000 9,015,000
- -------------------------------------------------------------------------------------------
Net unrealized gain on investment securities available-for-sale 7,000 6,000
Less cost of 177,300 and 14,100 shares of common stock held
in Treasury (5,709,000) (282,000)
- -------------------------------------------------------------------------------------------
8,573,000 8,739,000
- -------------------------------------------------------------------------------------------
$14,065,000 $13,705,000
- -------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 6
The Goodheart-Willcox Company, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
Year Ended April 30,
- ------------------------------------------------------------------------------------
1997 1996 1995
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
SALES $16,631,000 $14,645,000 $14,708,000
Cost of goods sold 5,095,000 5,196,000 4,590,000
- ------------------------------------------------------------------------------------
GROSS PROFIT 11,536,000 9,449,000 10,118,000
- ------------------------------------------------------------------------------------
Operating expenses
Selling, general and administrative 6,377,000 5,693,000 5,511,000
Royalties 1,727,000 1,516,000 1,543,000
- ------------------------------------------------------------------------------------
8,104,000 7,209,000 7,054,000
- ------------------------------------------------------------------------------------
OPERATING PROFIT 3,432,000 2,240,000 3,064,000
Other income (expense)
Life insurance proceeds 548,000 -- --
Interest 131,000 198,000 212,000
Other 13,000 29,000 48,000
- ------------------------------------------------------------------------------------
692,000 227,000 260,000
- ------------------------------------------------------------------------------------
Earnings before income taxes 4,124,000 2,467,000 3,324,000
- ------------------------------------------------------------------------------------
Income taxes 1,349,000 871,000 1,307,000
- ------------------------------------------------------------------------------------
NET EARNINGS 2,775,000 $1,596,000 $2,017,000
- ------------------------------------------------------------------------------------
EARNINGS PER SHARE $3.75 $2.13 $2.70
====================================================================================
Weighted average number of shares outstanding 739,405 747,900 747,900
====================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 7
The Goodheart- Willcox Company, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
For the three years ended April 30, 1997
Net unrealized gain (loss)
Common Retained on investment securities Treasury
Stock Earnings available-for-sale Stock Total
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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) $7,169,000
Net earnings for the year 1,596,000 1,596,000
Change in estimated value of redeemable
common stock in excess of insurance
proceeds 566,000 566,000
Net change in unrealized gain (loss) on
investment securities available-for-sale 6,000 6,000
Cash dividends declared ($.80 per share) (598,000) (598,000)
- ------------------------------------------------------------------------------------------------------------------------
Balance at April 30, 1996 $599,000 $ 8,416,000 $ 6,000 $ (282,000) $8,739,000
Net earnings for the year 2,775,000 2,775,000
Change in estimated value of redeemable
common stock in excess of insurance
proceeds 163,000 2,914,000 3,077,000
Net change in unrealized gain (loss) on
investment securities available-for-sale 1,000 1,000
Cash dividends declared ($.90 per share) (592,000) (592,000)
Cost of 163,200 shares of common stock
acquired for treasury (5,427,000) (5,427,000)
- ------------------------------------------------------------------------------------------------------------------------
Balance at April 30,1997 $762,000 $13,513,000 $ 7,000 $(5,709,000) $8,573,000
========================================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 8
The Goodheart-Willcox Company, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended April 30,
- --------------------------------------------------------------------------------------------------------
1997 1996 1995
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $2,775,000 $1,596,000 $2,017,000
Adjustments to reconcile net earnings to net
cash provided by operating activities
Depreciation expense 199,000 91,000 93,000
Amortization of prepublication costs 1,001,000 851,000 622,000
Provision for (recovery of) doubtful
receivables and sales returns -- (70,000) 544,000
Deferred income taxes (113,000) 33,000 (56,000)
Changes in operating assets and liabilities
Accounts receivable (144,000) (192,000) (326,000)
Inventories (763,000) (318,000) (76,000)
Other assets 30,000 (69,000) 90,000
Accounts payable 168,000 (126,000) 202,000
Accrued expenses 128,000 (369,000) 395,000
Net cash provided by operating
activities 3,281,000 1,427,000 3,505,000
========================================================================================================
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (2,715,000) (1,608,000) (127,000)
Purchases of prepublication costs (849,000) (1,393,000) (877,000)
Proceeds from sale of investment securities
available-for-sale -- 4,000 --
Change in cash surrender value of
officer's life insurance 547,000 (174,000) (50,000)
Net cash used in
investing activities (3,017,000) (3,171,000) (1,054,000)
========================================================================================================
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (598,000) (598,000) (561,000)
Purchase of Treasury Stock (2,171,000) -- --
Net cash used in financing activities (2,769,000) (598,000) (561,000)
========================================================================================================
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS: (2,505,000) (2,342,000) 1,890,000
Cash and cash equivalents at beginning of year 5,118,000 7,460,000 5,570,000
- --------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $2,613,000 $5,118,000 $7,460,000
- --------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the year for income taxes $1,342,000 $1,109,000 $1,137,000
- --------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF NON-CASH
ACTIVITY:
Unrealized gain (loss) on investment securities
available-for-sale $1,000 $6,000 --
Purchase of Treasury Stock financed with notes payable 3,256,000 -- --
- --------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE> 9
The Goodheart-Willcox Company, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS April 30, 1997, 1996, and 1995
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. The Company's sales are
primarily domestic, and the Company's customer base includes state schools
and community colleges. 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 C):
<TABLE>
<CAPTION>
April 30,
1997 1996
---------- ----------
<S> <C> <C>
Last-in, first-out method $2,639,000 $1,898,000
First-in, first-out method 91,000 69,000
---------- ----------
$2,730,000 $1,967,000
---------- ----------
</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. Available-for-sale securities are those that
management designated as available to be sold in response to changes in
market interest rates or liquidity needs. Investment securities
available-for-sale are stated at fair value, with the unrealized gains or
losses shown as a component of stockholders' equity. Gains or losses on
disposition of these securities are determined using the specific
identification method.
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. The Company expenses advertising costs as incurred.
Advertising costs were $351,000 in 1997, $369,000 in 1996 and $381,000 in
1995.
Notes continued on page 8
7
<PAGE> 10
The Goodheart-Willcox Company, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS April 30, 1997, 1996, and 1995
continued
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-CONTINUED
Editorial costs. Editorial costs are charged to expense as incurred.
Income taxes. Deferred income taxes are recorded to reflect the tax
consequences on future years of temporary differences between the tax basis
of assets and liabilities and their financial reporting amounts.
Earnings per share. Earnings per share is computed on the weighted
average number of shares outstanding for the period. The FASB has issued
Statement of Financial Accounting Standards No. 128, Earnings Per Share,
which is effective for financial statements issued after December 15, 1997.
Early adoption of the new standard is not permitted. The new standard
eliminates primary and fully diluted earnings per share and requires
presentation of basic and diluted earnings per share together with
disclosure of how the per share amounts were computed. The adoption of this
new standard is not expected to have a material impact on the disclosure of
earnings per share in the financial statements.
Common Stock. The Company has 1,000,000 shares of $1 par value common
stock authorized and 762,000 shares issued, of which 177,300 shares have
been repurchased by the Company. As of April 30, 1997, the Company had
584,700 shares outstanding with a weighted average of 739,405 shares used
to compute the end-of-year financial results. As of April 30, 1996, the
Company had 747,900 shares outstanding including 163,200 redeemable shares.
Cash equivalents. The Company considers all highly liquid debt
instruments purchased with a maturity of three months or less to be cash
equivalents. The cost of cash equivalents approximates fair value.
Reclassifications. Certain 1995 and 1996 amounts have been reclassified
to conform with the 1997 presentation.
Pervasiveness of Estimates. The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
NOTE B - INVESTMENT SECURITIES
The amortized cost, unrealized gains and losses, and fair value of the
company's investment securities are as follows:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
April 30, 1997:
Available-for-sale:
Municipal Income Trusts $85,000 $7,000 -- $92,000
------- ------ ------ -------
April 30, 1996:
Available-for-sale:
Municipal Income Trusts $85,000 $6,000 -- $91,000
------- ------ ------ -------
Available-for-sale securities shown above do not have contractual
maturities.
NOTE C - INVENTORIES
Inventories consist of the following: 1997 1996
----------------------
Raw materials $ 100,000 $ 78,000
Work in process 91,000 69,000
Finished goods 2,539,000 1,820,000
---------- ----------
$2,730,000 $1,967,000
---------- ----------
</TABLE>
Notes to continued on page 9
8
<PAGE> 11
The Goodheart-Willcox Company, Inc and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS April 30, 1997, 1995 continued
NOTE C - INVENTORIES-CONTINUED
Inventories would have been $2,491,000 and $2,681,000 higher at April 30, 1997
and 1996, respectively, if the first-in, first-out method of accounting had
been used on all inventories. The use of the LIFO method, as opposed to the
FIFO method, had the effect of (increasing) decreasing net earnings by
approximately ($118,000) (.16 per share), $228.000 (.30 per share), and
$103,000 (.14 per share) for the years ended April 30, 1997, 1996, and 1995,
respectively.
NOTE D - PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
Property and equipment consists of the following: 1997 1996
----------- -----------
<S> <C> <C>
Land $ 814,000 $ 814,000
Building and improvements 4,013,000 1,027,000
Equipment 1,404,000 840,000
----------- -----------
6,231,000 2,681,000
Less accumulated depreciation 1,462,000 1,263,000
----------- -----------
4,769,000 1,418,000
Construction in progress -- 835,000
----------- -----------
$4,769,000 $2,253,000
----------- -----------
</TABLE>
NOTE E - INCOME TAXES
Income tax expense (benefit) consists of the following:
<TABLE>
<CAPTION>
1997 1996 1995
Currently payable: ---------- -------- ----------
<S> <C> <C> <C>
Federal $1,181,000 $683,000 $1,078,000
State 281,000 155,000 285,000
---------- -------- ----------
1,462,000 838,000 1,363,000
Deferred (113,000) 33,000 (56,000)
---------- -------- ----------
$1,349,000 $871,000 $1,307,000
---------- -------- ----------
</TABLE>
The tax effects of the existing temporary differences that give rise to
deferred tax assets and liabilities at April 30, are as follows:
<TABLE>
<CAPTION>
1997 1996
---------- --------
<S> <C> <C>
Deferred tax assets
Inventory capitalization $ 505,000 $327,000
Accrued compensation 111,000 103,000
Allowance for doubtful receivables and sales returns 30,000 46,000
646,000 476,000
---------- --------
Deferred tax liabilities
Depreciation (169,000) (112,000)
---------- --------
Net deferred tax asset $ 477,000 $364,000
---------- --------
</TABLE>
The components of the deferred tax expense (benefit) are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
--------- -------- --------
<S> <C> <C> <C>
Excess of tax over book depreciation 57,000 $ 4,000 $ 3,000
Inventory capitalization (178,000) 6,000 6,000
Accrued compensation (8,000) (7,000) 5,000
Allowance for doubtful receivables and sales returns 16,000 30,000 (70,000)
Other -- -- --
--------- -------- --------
$(113,000) $ 33,000 $(56,000)
========= ======== ========
</TABLE>
continued on page 10
9
<PAGE> 12
The Goodheart-Willcox Company, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS April 30, 1996,1995 and 1994,
continued
NOTE E - INCOME TAXES-CONTINUED
A reconciliation of income taxes computed at the Federal statutory rate (34%)
and income tax expense is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---------- -------- ----------
<S> <C> <C> <C>
Federal income taxes at statutory rate $1,402,000 $839,000 $1,130,000
State income taxes-net of Federal tax benefit 185,000 102,000 196,000
Municipal bond interest exemption (30,000) (65,000) (52,000)
Officer's life insurance (222,000) (16,000) 17,000
Other 14,000 11,000 16,000
---------- -------- ----------
$1,349,000 $871,000 $1,307,000
========== ======== ==========
</TABLE>
NOTE F - 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 $359,000 in 1997, $318,000 in 1996, and $306,000 in
1995. 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
contributions to the plan were $7,000 in 1997, $7,500 in 1996 and $7,500 in
1995.
NOTE G - COMMITMENTS AND CONTINGENCIES
In April 1997, under an agreement between the Company and a principal
stockholder/officer, the Company purchased 163,200 shares of the Company's
stock owned by him upon his death for $5,427,000. The purchase price was based
on the fair market value of the Company's shares at that time, as determined by
a named third party and consisted of $2,171,000 in cash and a note payable of
$3,256,000. The note payable, which matures on April 11, 2002, provides for
five annual principal payments of $651,168 with interest at the prime rate. The
Company carried a life insurance policy to help meet a portion of the
obligation created by this agreement. Net proceeds from the policy were
$1,207,000, which had the effect of reducing the cash surrender value by
$538,000 and resulting in other income of $548,000. In addition, the excess of
estimated fair market value over the amount of life insurance, net of cash
surrender value, previously segregated from stockholders equity has been
recorded as retained earnings. As a result of the acquisition of the stock by
the Company, the total outstanding shares of stock have been reduced from
747,900 to 584,700.
The Company has entered into employment agreements with the former Chairman of
the Board of Directors and President that provides 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, 1997 and 1996.
In May 1995, the Company acquired property in Tinley Park, Illinois, for
approximately $738,000. The Company completed construction of its new office
and distribution facility on this property in August of 1996 for a total cost
of $2,973,000. The assets held for sale are included in property and equipment
in the accompanying balance sheets.
10 Notes continued on page 11
<PAGE> 13
The Goodheart-Willcox Company, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS April 30, 1997, 1996, and 1995
continued
<TABLE>
<CAPTION>
NOTE H - QUARTERLY FINANCIAL DATA (UNAUDITED)
Net earnings (loss)
-------------------
Net sales Gross profit Total Per share
----------- ----------- ---------- ----------
FISCAL YEAR 1997
<S> <C> <C> <C> <C>
FIRST $ 4,505,000 $ 3,076,000 $ 746,000 $1.00
SECOND 6,507,000 4,489,000 1,390,000 1.86
THIRD 3,335,000 2,205,000 209,000 .28
FOURTH 2,284,000 1,766,000 430,000 .61
----------- ----------- ---------- ---------
$16,631,000 $11,536,000 $2,775,000 $3.75
============ ============ ========== ==========
Fiscal year 1996
First $ 4,373,000 $ 3,110,000 $ 796,000 $1.06
Second 5,111,000 3,328,000 810,000 1.09
Third 2,933,000 1,777,000 41,000 .05
Fourth 2,228,000 1,234,000 (51,000) (.07)
----------- ----------- ---------- ----------
$14,645,000 $ 9,449,000 $1,596,000 $2.13
============ ============ ========== ==========
</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.
11
<PAGE> 14
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 LLP 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 LLP to monitor
the proper discharge of each of their respective responsibilities. Grant
Thornton LLP 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
John F. Flanagan
President and Chief Executive Officer
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS
THE GOODHEART-WILLCOX COMPANY, INC. AND SUBSIDIARY
TINLEY PARK, ILLINOIS
We have audited the accompanying consolidated balance sheets of The
Goodheart-Willcox Company, Inc. and Subsidiary as of April 30, 1997 and 1996,
and the related consolidated statements of earnings, stockholders' equity, and
cash flows for each of the three years in the period ended April 30, 1997.
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 that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of The
Goodheart-Willcox Company, Inc. and Subsidiary as of April 30, 1997 and 1996,
and the consolidated results of their operations and their consolidated cash
flows for each of the three years in the period ended April 30, 1997, in
conformity with generally accepted accounting principles.
/s/ Grant Thorton LLP
Chicago, Illinois
May 30, 1997
12
<PAGE> 15
The Goodheart-Willcox Company, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OPERATING RESULTS
The Company's net sales for fiscal year ending April 30, 1997 increased
$1,986,000 or approximately 13% over the previous fiscal year. The net sales
increase for the fiscal year was due to stronger orders for the Company's
products from open territories and increased orders from the adoption state of
New Mexico, along with selective price increases. The Company's net sales for
fiscal 1996 decreased $63,000, or less than one-half percent from the previous
fiscal year, and can be attributed to the lack of significant state textbook
adoptions and weaker orders from open territories during the first two quarters
of the fiscal year when a majority of the seasonal sales are recorded. In
fiscal 1995, net sales 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 adoptions orders from
Indiana, Florida, and Georgia. State textbook adoptions, which contribute
substantially to the Company's sales, historically have been held at regular
intervals. During the past several years, the intervals for several states have
been significantly increased. Selective price increases are made each year on a
product-by-product basis after considering the cost of paper, printing, and
binding, the overhead contribution, and competitive pricing. The selective
price increases will not totally offset any significant decline in school
expenditures for textbooks and supplements as witnessed in the first two
quarters of fiscal 1996. The reserve for future returns will experience minor
revisions as the sales product mix continues to shift from middle and senior
high schools to community college bookstores, where the number of books and
supplements returned occur with greater frequency. The reserve for future
returns may experience minor fluctuations to reflect current business practices
and expectations of the return rate for various product categories and markets.
The cost of goods sold as a percentage of sales in fiscal 1997 was 31% compared
to 35% in fiscal 1996 and 31% in fiscal 1995. The change in the ratio of the
cost of goods sold as a percentage of sales for fiscal 1997 reflects
fluctuations in the cost of paper, which is a major component of the cost of
goods sold, with added influences being the substantial investment in the
revision of a number of backlist titles. While paper prices stabilized during
the fiscal year, the buildup of inventory in preparation of the seasonal
selling patterns before the opening of schools took place during a period of
higher paper prices. The change in the ratio of the cost of goods sold as a
percentage of sales for fiscal 1996 was primarily attributed to the increase in
the cost of paper along with substantial investment in new and revised titles.
As stated in a recent annual report, "It is possible that the Company will not
be able to pass through all the paper price increases to our customers."
Factors affecting the ratio of the cost of goods sold as a percentage of sales
are the result of decisions regarding selected price increases, adjustments to
the print and reprint quantities, and the application of computer technology by
outside suppliers permitting more rapid creative preparation, shorter press
runs, reduction in manufacturing time, and consistent high quality, all
allowing Goodheart-Willcox to better control the unit cost of textbooks and
supplements. Management decisions must be balanced between the cost of the
goods sold as a percentage of sales versus the timing of when new or revised
products come to market and contribute to sales.
Operating expenses for fiscal 1997 consisting of royalties, selling, general,
and administrative expenses increased $895,000 or approximately 12% over the
previous fiscal year due primarily to increased sampling expenses, additional
employees, and added depreciation of the new facility. This compares to an
increase in operating expenses in fiscal 1996 of $155,000 or approximately 2%
from the previous year, and an increase in fiscal 1995 of $767,000 or
approximately 12% over the prior fiscal year. As a percentage of sales, the
selling, general, and administrative cost for fiscal 1997 was 38% compared to
39% in fiscal 1996 and 37% in fiscal 1995. The ratio for the current fiscal
year reflects added investment in staffing for an inside sales support group
and adjustments in warehousing and shipping. A major component of the operating
expenses is the distribution of sample textbooks and supplements as a marketing
tool unique to the textbook publishing industry. In fiscal 1997, sampling
expenses were $592,000 compared to $440,000 in fiscal 1996 and $342,000 in
fiscal 1995. The sampling increase of $152,000 or approximately 34% can be
attributed to added marketing efforts aimed at future state and local adoptions
as well as the introduction of a significant number of new and revised titles.
Management's Discussion and Analysis continued on page 14
13
<PAGE> 16
The Goodheart-Willcox Company, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS-CONTINUED
The 13% increase in net sales for fiscal 1997 over the previous fiscal
year coupled with a 31% cost of goods sold as a percentage of sales and a 12%
increase in operating expenses resulted in income from operations of $3,432,000,
an increase of $1,192,000 or approximately 53%. In fiscal 1996, the half a
percent decrease in net sales from the previous fiscal year coupled with a 35%
cost of goods sold as a percentage of sales and a 2% increase in the operating
expenses resulted in income from operations of $2,240,000 or a decrease of
approximately 27% from the previous year. In fiscal 1995, a 16% increase in net
sales over the previous fiscal year coupled with a 31% cost of goods sold as a
percentage of sales and a 12% increase in operating expenses increased the
Company's income from operations by $683,000 to $3,064,000. Other income for
fiscal 1997 totaled $692,000, composed primarily of $548,000 of extraordinary
income from life insurance proceeds and $131,000 of interest income, $67,000
less interest income than the previous fiscal year due to the investment in the
new facility. Other income for fiscal 1996 was $227,000 due to reduced interest
income and reduced royalty income as titles licensed to other publishers became
dated. 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. The
Company's fiscal year ending April 30 divides the purchasing patterns of its
school customers such that the major marketing, sampling, and inventory buildup
efforts occur at the end of the fiscal year, while resulting sales primarily
follow in the first two quarters of the next fiscal year.
LIQUIDITY
Cash and cash equivalents totaled $2,613,000 at April 30, 1997, a decrease of
$2,505,000 from the year ending April 30, 1996. For the fiscal year ending
April 30, 1997 the Company had long-term debt of $2,605,000 resulting from the
stock repurchase. The Company had no long-term debt at April 30, 1996. As shown
in the cash flow statements, the cash provided by the operating activities of
the Company for fiscal 1997 amounted to $3,282,000 as compared to $1,427,000
for fiscal 1996, an increase of $1,855,000, a change which is attributed to an
increase in the net earnings after adjustments to accounts primarily covering
amortization of prepublication costs, inventories, depreciation expenses,
accounts payable, and income taxes payable. In fiscal 1996, the cash provided
by the operating activities of the Company amounted to $1,427,000 as compared
to $3,505,000 for fiscal 1995, a decrease of $2,078,000 which is attributable
principally to the decrease in net earnings after adjustments to accounts
covering amortization of prepublication costs, provision for doubtful
receivables and sales returns, accounts receivable, inventories, accounts
payable, and income taxes payable. In fiscal 1995, the cash provided by the
operating activities of the Company amounted to $3,505,000 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 provisions for doubtful receivables and sales returns, deferred income
taxes, accounts receivable, inventories, accounts payable, and income taxes
payable. The changes in the assets and liabilities for fiscal 1997 include: a
decrease in cash and cash equivalents along with an increase in property and
equipment reflecting the completion of the new office/distribution facility, an
increase in accounts receivable due to the increase in sales, a decline in
prepublication costs based upon the number of revisions in work during the
previous year, a decline in the cash surrender value of life insurance
resulting from the receipt of the proceeds from policies, an increase in
accounts payable, an increase in income taxes due to the strong sales and
profits, notes payable replaced redeemable common stock resulting from the
purchase of stock, and an increase in the Treasury Stock. In fiscal 1996, the
changes in the assets and liabilities include: a decrease in cash and cash
equivalents as well as an increase in accounts receivable from the better than
expected sales in the third and fourth quarters, an increase in inventories
from the substantial efforts to revise major titles, an increase in
prepublication services for new and revised products under development, an
increase in property and equipment from the construction of the new facility,
and a decrease in income taxes payable. There have been no changes in business
practices including credit terms or collection efforts from previous years.
Management's Discussion and Analysis continued on page 15
14
<PAGE> 17
The Goodheart-Willcox Company, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS-CONTINUED
Investment in new and revised products for fiscal 1997 was $849,000 or a
decrease of $544,000 from fiscal 1996 when a significant number of major titles
were revised and substantial investment was allocated for the purchase of
prepublication services. In fiscal 1996, the investment in new and revised
products was $1,393,000 or an increase of $516,000 more than the $877,000
invested in fiscal 1995 for the purchase of prepublication services. The rate of
investment in new and revised products as a percentage of sales for fiscal 1997
was approximately 5%, compared to an investment rate of 9% in fiscal 1996 and 6%
in fiscal 1995. The Company currently intends to maintain its traditional pace
of prepublication investment in products and services in future quarters to
maintain a publishing program of adding new titles and products to the lines
while revising a backlist of products to match marketing and customer needs.
With advances in general technology, the magnitude of revision efforts required
to keep the industrial and technical books up-to-date has typically increased
investment allocations over patterns earlier in the decade. The investment in
new hardware and software to keep Goodheart-Willcox advancing with technology is
an ongoing process which required $30,000 in fiscal 1997, compared to $31,000 in
fiscal 1996 and $74,000 in fiscal 1995. Plans are being developed to acquire a
new software/hardware system for the business/marketing functions, replacing an
existing system which is not robust enough to grow the Company into the future.
In fiscal 1997, $2,716,000 was invested in new equipment and facilities with
added storage, racking, conveyors, and material handling equipment to improve
service to customers and to strengthen warehousing and distribution capability.
The added office capacity for sales and marketing, customer service, editorial,
and creative services should allow your Company to increase employee
productivity and retention, while attracting new talent. The investment in
property and equipment for fiscal 1996, when the land in Tinley Park was
acquired, amounted to $1,608,000 compared to the investment of $127,000 in
fiscal 1995. The changes in the cash surrender value of life insurance amounted
to $547,000 when the proceeds of the officer's policy were received.
The primary financing use of cash in each of the last three years was the
payment of dividends at the rate of $.90 per share in fiscal 1997 and $.80 per
share in both fiscal 1996 and fiscal 1995. In fiscal 1997, the purchase of
treasury stock required $2,171,000 along with the acceptance of a note payable
in the amount of $3,256,000. The source of the cash portion of the purchase
price was provided in part by the $1,200,000 proceeds of an insurance policy
owned by the Company and the balance provided by internally generated funds. It
is anticipated the source of the annual installment payments as required by the
note will be met by internally generated funds.
The first and second quarters historically have displayed increased shipments
and increased growth in accounts receivable while inventory declined. In the
third quarter this past fiscal year, the strength of the Company's product line
also contributed to increased sales. The fourth quarter has historically
displayed an anticipated growth in inventory as new and revised products are
published for the next calendar/copyright year and for the next marketing
cycle. The seasonal and cyclical 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.
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, such as editorial or creative services, will
be met from operating cash flow. Goodheart-Willcox is planning to invest in new
software and hardware for the business/marketing operations to improve customer
service, inventory and warehouse management, and information technology. In
fiscal 1998, the investment in prepublication products and services is expected
to follow the pattern established in previous years with plans to revise
popular backlist titles and add new products to the Company's line. The
Company's warehouse and distribution operations were relocated to a new
facility in Tinley Park, Illinois, on July 1, 1996 and the business, marketing
and sales, editorial, and creative operations relocated August 26, 1996. The
new facility project was completed using internally generated funds with no
financing expenses for the Company. The Company's previous land and building in
South Holland, Illinois, are being offered for sale and are carried at net book
value which is less than the estimated fair market value less cost to sell. The
promissory note for $3,256,000 used to acquire Treasury Stock provides for five
consecutive annual payments of $651,000 and it is anticipated the source of the
annual installment payments will be met by internally generated funds.
Management's Discussion and Analysis continued on page 16
15
<PAGE> 18
The Goodheart-Willcox Company, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS-CONTINUED
THE EFFECTS OF INFLATION
Inflation affects the Company due to increases in costs of materials and
services. In both fiscal 1996 and fiscal 1995, the Company experienced
tightening of supplier's schedules and some price increases which appeared to be
more inflationary than patterns experienced in the previous fiscal year. The
cost of paper purchased in fiscal 1996 to replenish inventory and print new
products to be sold in fiscal 1997 experienced dramatic increases. In fiscal
1997, the outlook for paper pricing appeared to be more stable than in the
immediate past few quarters. However, new price increases appear to cloud the
future trends in paper pricing for fiscal 1998. By advanced planning and
shifting grades of paper, the effect of some of the paper cost fluctuations may
be softened. Fiscal 1998 shows a tightening of available press time in the short
term, thus necessitating clearer projections for initial printings or reprints.
The ability of the Company to reflect cost increases from suppliers in the
selling price of Goodheart-Willcox products depends upon the pricing of
competing product lines and general market conditions which may require the
Company to absorb part of the price increases for paper or other materials and
services. 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, obtaining quotations from new suppliers,
reviewing the variety of paper grades appropriate for various titles, scheduling
press runs in batches, balancing the quantities printed with considerations for
unit cost versus turnover of inventory, nurturing close relationships with key
suppliers, and staying alert to outside opportunities available to meet key
deadlines.
16
<PAGE> 19
CORPORATE INFORMATION
CORPORATE OFFICE, The Goodheart-Willcox Company, Inc., 18604 W. Creek Drive,
Tinley Park, Illinois 60477
ANNUAL MEETING, The next annual meeting will take place at 9:30 a.m. C.D.T.,
July 8, 1997, at the Corporate Office, Tinley Park, Illinois
STOCK SYMBOL, GWOX, Over-the-Counter Market
TRANSFER AGENT, First Chicago Trust Company of New York
GENERAL COUNSEL, Hedberg, Tobin, Flaherty & Whalen, A Professional
Corporation, Chicago
INDEPENDENT PUBLIC ACCOUNTANTS, Grant Thornton LLP, Chicago
S.E.C. FORM 10-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 Chief Executive Officer, F. H. Ayer
Manufacturing Co.
John F. Flanagan, Chairman, President, Chief Executive Officer, The
Goodheart-Willcox Company, Inc.
Wilma Pitts Griffin, PhD, CFCS, Professor, Department of Family and Consumer
Sciences, Baylor University
Clois E. Kicklighter, EdD, Dean, School of Technology, Indiana State
University
Loraine J. Mix, Private Investor
EXECUTIVE OFFICERS
John F. Flanagan, Chairman, 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>
4Q97 $35 3/4 $45 3/4 $.50
3Q97 31 1/2 33 1/2 .40
2Q97 30 3/4 36 3/4 --
1Q97 26 27 1/2 --
---------------------------------------
4Q96 $25 1/4 $27 $.40
3Q96 24 3/4 26 1/2 .40
2Q96 24 1/2 26 1/2 --
1Q96 21 23 --
---------------------------------------
</TABLE>
Fiscal year ends April 30
<PAGE> 20
THE GOODHEART-WILLCOX CO., INC.
18604 West Creek Dr., Tinley Park, IL 60477-6243
<PAGE> 1
EXHIBIT 21
SUBSIDIARY OF THE REGISTRANT
Name-G/W Investment Company, Inc.
State of Incorporation-Delaware
<PAGE> 1
EXHIBIT 23
REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS ON SCHEDULES
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 30, 1997, which is included in the Company's 1997 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, 1997. 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 30, 1997.
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To The Goodheart-Willcox Company, Inc.:
We consent to the incorporation by reference of our report dated May 30,
1997, accompanying the consolidated financial statements of The
Goodheart-Willcox Company, Inc., included in the 1997 Annual Report to
Stockholders, in the Annual Report on Form 10-K for the year ended April 30,
1997.
GRANT THORNTON LLP
Chicago, Illinois
July 8, 1997.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-END> APR-30-1997
<CASH> $2,613
<SECURITIES> 92
<RECEIVABLES> 1,565
<ALLOWANCES> 113
<INVENTORY> 2,730
<CURRENT-ASSETS> 7,679
<PP&E> 6,231
<DEPRECIATION> 1,462
<TOTAL-ASSETS> 14,065
<CURRENT-LIABILITIES> 2,718
<BONDS> 0
0
0
<COMMON> 762
<OTHER-SE> 13,513
<TOTAL-LIABILITY-AND-EQUITY> 14,065
<SALES> 16,631
<TOTAL-REVENUES> 16,631
<CGS> 5,095
<TOTAL-COSTS> 13,199
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 15
<INTEREST-EXPENSE> 14
<INCOME-PRETAX> 4,124
<INCOME-TAX> 1,349
<INCOME-CONTINUING> 2,775
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,775
<EPS-PRIMARY> $3.75
<EPS-DILUTED> $3.75
</TABLE>
