UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
Commission file number 0-4479
THE OHIO ART COMPANY
(Exact name of registrant as specified in its charter)
Ohio 34-4319140
(State of Incorporation) (I.R.S. Employer Identification No.)
P.O. Box 111, Bryan, Ohio 43506
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (419) 636-3141
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 _____
At April 30, 1995 there were 497,277 shares outstanding of the
Company's Common Stock at $1.00 par value.
Page 1 of 9
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<TABLE>
FORM 10-Q
PART I - FINANCIAL INFORMATION
THE OHIO ART COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<CAPTION>
Three Months Ended
March 31
------------------
1995 1994
------- -------
(In thousands, except
per share data)
<S> <C> <C>
Net Sales $ 7,011 $ 6,028
Other Income 234 224
------- -------
7,245 6,252
Costs and Expenses:
Cost of products sold 5,651 4,930
Selling, administrative and general 2,787 2,610
Interest 15 18
------- -------
8,453 7,558
LOSS BEFORE INCOME TAXES (1,208) (1,306)
Income Tax Credit (411) (444)
------- -------
NET LOSS $ (797) $ (862)
======= =======
Net Loss Per Share $ (1.61) $ (1.72)
Dividends Per Share $ .30 $ .12
Average Shares Outstanding (Note 3) 494 501
<FN>
See notes to condensed consolidated unaudited financial statements.
Page 2 of 9
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<PAGE>
FORM 10-Q
<TABLE>
THE OHIO ART COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
March 31 December 31
1995 1994
--------- -----------
(Unaudited) (Note)
(Thousands of dollars)
<S> <C> <C>
ASSETS
Current Assets
Cash $ 3,206 $ 4,400
Accounts receivable less allowance
(1995 - $435; 1994 - $465) 4,054 7,494
Inventories - Note 2
On first-in, first-out cost method:
Finished products 3,817 2,902
Products in process 487 287
Raw materials 3,139 2,835
Less: Adjustment to reduce inventories
to last-in, first-out cost method (2,466) (2,445)
------- -------
4,977 3,579
Recoverable income taxes 399 -0-
Prepaid expenses 696 955
Deferred federal income taxes 811 810
------- -------
Total Current Assets 14,143 17,238
Property, Plant and Equipment
Cost 25,368 24,849
Less allowances for depreciation 19,789 19,305
------- -------
5,579 5,544
Other Assets 1,523 1,530
Goodwill 857 862
------- -------
$22,102 $25,174
======= =======
<FN>
See notes to condensed consolidated unaudited financial statements.
NOTE: The balance sheet at December 31, 1994 has been derived from the
audited financial statements at that date but does not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements.
</TABLE>
Page 3 of 9
<PAGE>
FORM 10-Q
<TABLE>
THE OHIO ART COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
March 31 December 31
1995 1994
-------- -----------
(Unaudited) (Note)
(Thousands of dollars)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 4,887 $ 6,055
Income taxes payable -0- 678
Other current liabilities 923 1,195
------- -------
Total Current Liabilities 5,810 7,928
Deferred Federal Income Taxes 906 906
Long-Term Obligations 521 454
Stockholders' Equity
Common Stock, par value $1.00 per share:
Authorized: 1,935,552 shares
Outstanding: 1995-497,368; 1994-497,470
shares (excluding treasury shares of
181,641 and 181,539 respectively) 497 497
Additional paid-in capital 759 760
Retained earnings 13,609 14,629
------- -------
14,865 15,886
------- -------
$22,102 $25,174
======= =======
<FN>
See notes to condensed consolidated unaudited financial statements
NOTE: The balance sheet at December 31, 1994 has been derived from the
audited financial statements at that date but does not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements.
</TABLE>
Page 4 of 9
<PAGE>
FORM 10-Q
<TABLE>
THE OHIO ART COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Three Months Ended
March 31
-------------------
1995 1994
-------- --------
(Thousands of dollars)
<S> <C> <C>
Operating Activities
Net loss $ (797) $ (862)
Adjustments to reconcile net loss to net
cash used in operating activities:
Provision for depreciation and amortization 503 448
Changes in accounts receivable, inventories,
prepaid expenses, other assets, accounts
payable, and other liabilities (419) (417)
-------- --------
NET CASH USED IN OPERATING ACTIVITIES (713) (831)
Investing Activities
Purchase of plant and equipment, less
net book value of disposals (519) (397)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (519) (397)
Financing Activities
Borrowings 71 73
Purchase of common stock (3) -0-
Cash dividends (30) (60)
-------- --------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 38 13
-------- --------
Cash
Decrease during period (1,194) (1,215)
At beginning of period 4,400 3,019
-------- --------
CASH AT END OF PERIOD $ 3,206 $ 1,804
======== ========
<FN>
See notes to condensed consolidated unaudited financial statements.
</TABLE>
Page 5 of 9
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FORM 10-Q
THE OHIO ART COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
March 31, 1995
Note 1 - Basis of Presentation
The accompanying condensed consolidated unaudited financial statements
have been prepared in accordance with the instructions to Form 10-Q and
therefore do not include all information and footnotes necessary for a
fair presentation of financial position, results of operations, and cash
flows in conformity with generally accepted accounting principles.
For further information, refer to the consolidated financial statements
and footnotes included in the Company's annual report on Form 10-K for
the year ended December 31, 1994.
All adjustments necessary (consisting of normal adjustments), in the
opinion of management, for a fair statement of results for the periods
indicated have been made.
Due to the seasonal nature of the toy business in which the Company is
engaged and the factors set forth in Management's Discussion and
Analysis, the results of interim periods are not necessarily indicative
of a full calendar year.
Note 2 - Inventories
The Company takes a physical inventory annually at each location. The
amounts shown in the quarterly financial statements have been determined
using the Company's standard cost accounting system. An estimate, based
on past experience, of the adjustment which may result from the next
physical inventory has been included in the financial statements.
Inventories are priced at the lower of cost or market under the last-in,
first-out (LIFO) cost method. Since inventories under the LIFO method
can only be determined at the end of each fiscal year based on
quantities and costs at that time, interim inventory valuation must be
based on estimates of quantities and costs at year-end.
Note 3 - Average Shares Outstanding
Unallocated ESOP shares are deducted from outstanding shares of Common
Stock to arrive at average shares outstanding.
Page 6 of 9
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FORM 10-Q
MANAGEMENT'S DISCUSSION AND ANALYSIS
OPERATIONS
- - ----------
Net sales for the three months ended March 31, 1995 increased to
$7,011,000 from $6,028,000 for the comparable 1994 period as a result of
sales increases in both domestic and international toy markets along
with increases in the Company's Custom Manufactured Products segment.
Toy sales in the United States market increased approximately $600,000
for the three months ended March 31, 1995 from the similar 1994 period
due to increased sales of the Company's Making Creativity Fun!(R)line of
products. International toy shipments increased approximately $200,000
for the quarter ended March 31, 1995 as compared to the same period in
1994 as a result of the restructuring of our distribution network with
western European toy companies, which was effective January 1, 1995.
Toy sales trends did not have a material impact on the Company's sales
increase for the first three months of 1995 as compared to the similar
1994 period. Net sales increased slightly for the Company's Custom
Manufactured Products segment primarily as a result of increased
shipments of film canisters.
The Company's business is seasonal, with approximately 60-70% of its
sales being made in the last six months of the calendar year in recent
years. Because of the seasonality of the Company's business, the dollar
order backlog in mid-May is not necessarily indicative of expectations
of sales for the full year. Subject to industry practice and comments
as detailed in the Registrant's annual Form 10-K for the year ended
December 31, 1994, order receipts through May 10 are approximately
$14,770,000 versus $12,385,000 for the same period of 1994, or
approximately 19% ahead of the prior year.
Gross profit margin (percentage) for the first quarter of 1995 (19.4%)
increased slightly from the first quarter of 1994 (18.2%) primarily due
to the increased sales of the Making Creativity Fun!(R)line of products,
which are generally at a higher gross margin than other products.
Selling, administrative, and general expenses for the first quarter of
1995 increased to $2,787,000 from $2,610,000 for the comparable period
in 1994. This is due to increases of approximately $120,000 in salaries
and other employee related costs as a result of a higher headcount in
the first quarter of 1995 as compared to the similar 1994 period.
Royalty expense also increased approximately $50,000 as a result of
increased sales of products subject to inventor royalties.
Page 7 of 9
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FORM 10-Q
MANAGEMENT'S DISCUSSION AND ANALYSIS
FINANCIAL CONDITION
- - -------------------
The company's current ratio increased from 2.2 to 1 at December 31, 1994
to 2.4 to 1 at March 31, 1995. This change is due principally to the
Company's payment of incentive compensation awards and income taxes
payable during the first quarter of 1995, which were accrued as of
December 31, 1994. Incentive compensation awards paid during the first
quarter of 1995 were directly related to the Company's profitability in
1994, as detailed in the Registrant's annual Form 10-K for the year
ended December 31, 1994.
PART II - OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K - The company did not
file any reports on Form 8-K during the three months ended
March 31, 1995.
The information called for in Items 1, 2, 3, 4, and 5 are not
applicable.
Page 8 of 9
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FORM 10-Q
SIGNATURES
Pursuant to the requirements 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 OHIO ART COMPANY
--------------------
(Registrant)
Date: May 12, 1995 /s/ William C. Killgallon
-------------------------
William C. Killgallon
Chairman of the Board
Date: May 12, 1995 /s/ M. L. Killgallon II
-----------------------
M. L. Killgallon II
President
Date: May 12, 1995 /s/ Paul R. McCusty
---------------------
Paul R. McCusty
Vice President Finance
Page 9 of 9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FIRST QUARTER 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 3206
<SECURITIES> 0
<RECEIVABLES> 4489
<ALLOWANCES> (435)
<INVENTORY> 4977
<CURRENT-ASSETS> 14143
<PP&E> 25368
<DEPRECIATION> (19789)
<TOTAL-ASSETS> 22102
<CURRENT-LIABILITIES> 5810
<BONDS> 0
<COMMON> 497
0
0
<OTHER-SE> 14368
<TOTAL-LIABILITY-AND-EQUITY> 22102
<SALES> 7011
<TOTAL-REVENUES> 7245
<CGS> 5651
<TOTAL-COSTS> 5651
<OTHER-EXPENSES> 2787
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15
<INCOME-PRETAX> (1208)
<INCOME-TAX> (411)
<INCOME-CONTINUING> (797)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (797)
<EPS-PRIMARY> (1.61)
<EPS-DILUTED> (1.61)
</TABLE>
