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, 1996
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, 1996 there were 470,751 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
------------------
1996 1995
------- -------
(In thousands, except
per share data)
<S> <C> <C>
Net Sales $ 5,321 $ 7,011
Other Income 185 234
------- -------
5,506 7,245
Costs and Expenses:
Cost of products sold 4,933 5,651
Selling, administrative and general 2,751 2,787
Interest 28 15
------- -------
7,712 8,453
------- -------
LOSS BEFORE INCOME TAXES (2,206) (1,208)
Income Tax Credit (772) (411)
------- -------
NET LOSS $(1,434) $ (797)
======= =======
Net Loss Per Share $ (3.10) $ (1.61)
Dividends Per Share $ .26 $ .30
Average Shares Outstanding (Note 3) 462 494
<FN>
See notes to condensed consolidated unaudited financial statements.
</FN>
</TABLE>
Page 2 of 9
<PAGE>
FORM 10-Q
<TABLE>
THE OHIO ART COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
March 31 December 31
1996 1995
-------- --------
(Unaudited) (Note)
(Thousands of dollars)
<S> <C> <C>
ASSETS
Current Assets
Cash(Overdraft) $ (140) $ 2,800
Accounts receivable less allowance
(1996 - $472; 1995 - $435) 3,758 7,123
Inventories - Note 2
On first-in, first-out cost method:
Finished products 5,298 5,067
Products in process 731 445
Raw materials 3,073 2,991
Less: Adjustment to reduce inventories
to last-in, first-out cost method (2,435) (2,420)
------- -------
6,667 6,083
Recoverable income taxes 759 -0-
Prepaid expenses 936 915
Deferred federal income taxes 640 640
------- -------
Total Current Assets 12,620 17,561
Property, Plant and Equipment
Cost 28,066 26,199
Less allowances for depreciation 21,022 20,735
------- -------
7,044 5,464
Other Assets 1,782 1,706
Goodwill 836 841
------- -------
$22,282 $25,572
======= =======
<FN>
See notes to condensed consolidated unaudited financial statements.
NOTE: The balance sheet at December 31, 1995 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.
</FN>
</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
1996 1995
-------- --------
(Unaudited) (Note)
(Thousands of dollars)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 2,552 $ 4,419
Income taxes payable -0- 901
Other current liabilities 1,103 1,866
------- -------
Total Current Liabilities 3,655 7,186
Deferred Federal Income Taxes 893 887
Long-Term Obligations 2,956 667
Stockholders' Equity
Common Stock, par value $1.00 per share:
Authorized: 1,935,552 shares
Outstanding: 1996-470,761; 1995-480,633
shares (excluding treasury shares of
208,248 and 198,376 respectively) 471 481
Additional paid-in capital 710 733
Retained earnings 13,597 15,618
------- -------
14,778 16,832
------- -------
$22,282 $25,572
======= =======
<FN>
See notes to condensed consolidated unaudited financial statements
NOTE: The balance sheet at December 31, 1995 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.
</FN>
</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
------------------
1996 1995
------- -------
(Thousands of dollars)
<S> <C> <C>
Operating Activities
Net loss $(1,434) $ (797)
Adjustments to reconcile net loss to net
cash used in operating activities:
Provision for depreciation and amortization 287 503
Changes in accounts receivable, inventories,
prepaid expenses, other assets, accounts
payable, and other liabilities (1,606) (419)
------- -------
NET CASH USED IN OPERATING ACTIVITIES (2,753) (713)
Investing Activities
Purchase of plant and equipment, less
net book value of disposals (1,867) (519)
------- -------
NET CASH USED IN INVESTING ACTIVITIES (1,867) (519)
Financing Activities
Borrowings 2,300 71
Purchase of common stock (497) (3)
Cash dividends (122) (30)
------- -------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 1,680 38
------- -------
Cash
Decrease during period (2,940) (1,194)
At beginning of period 2,800 4,400
------- -------
CASH(OVERDRAFT) AT END OF PERIOD $ (140) $ 3,206
======= =======
<FN>
See notes to condensed consolidated unaudited financial statements.
</FN>
</TABLE>
Page 5 of 9
<PAGE>
FORM 10-Q
THE OHIO ART COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
March 31, 1996
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, 1995.
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, 1996 decreased to
$5,321,000 from $7,011,000 for the comparable 1995 period. Domestic toy
sales decreased approximately $1,300,000 (77% of the decrease).
Domestic toy customers did not place orders for product for shipment in
the first quarter of 1996 because of the carryover of inventory from
year-end which reduced their "open to buy" dollars. The majority of the
decrease in domestic toy sales was in our "Home and Travel" category of
toys (approximately $1,200,000), which includes Hot Pocket Etch A
Sketch(registered) and Pocket Glitter Writer(registered). International
toy shipments were down slightly from the prior year (approximately $40,000).
The Diversified Products Division shipments were also down slightly
(approximately $140,000) although our Lithography operations experienced
record shipments for the first quarter of 1996, which were offset by
decreased shipments at Strydel, Inc., our injection molding facility.
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, 1995, order receipts through May 10 are approximately
$12,600,000 versus $14,770,000 for the same period of 1995, or
approximately 15% behind the prior year.
Gross profit margin (percentage) for the first quarter of 1996 (7.3%)
decreased dramatically from the first quarter of 1995 (19.4%) primarily
due to the change in product mix as the sale of lower margin items had a
greater influence on overall margins because of the lower level of
sales. Manufacturing overhead variances, although slightly less than
the prior year in dollars, had a greater negative effect on margin
percentages because of the lower level of sales.
Selling, administrative, and general expenses for the first quarter of
1996 decreased to $2,751,000 from $2,787,000 for the comparable period
in 1995. Although the change is favorable, selling, administrative, and
general expenses as a percentage of sales amounted to 51.7% versus 39.8%
for the comparable 1995 period.
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 2.4 to 1 at December 31, 1995
to 3.5 to 1 at March 31, 1996. This change was the result of using cash
on hand, cash from the collection of accounts receivable, and non current
line of credit to reduce accounts payable, to pay income taxes owed on the
prior year profits, as well as to finance the loss for the first quarter
of 1996.
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, 1996.
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 13, 1996 /s/ William C. Killgallon
--------------------------
William C. Killgallon
Chairman of the Board
Date: May 13, 1996 /s/ M. L. Killgallon II
------------------------
M. L. Killgallon II
President
Date: May 13, 1996 /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
THIRD 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-31-1995
<PERIOD-END> MAR-31-1995
<CASH> (140)
<SECURITIES> 0
<RECEIVABLES> 4,230
<ALLOWANCES> 472
<INVENTORY> 6,667
<CURRENT-ASSETS> 12,620
<PP&E> 28,066
<DEPRECIATION> 21,022
<TOTAL-ASSETS> 22,282
<CURRENT-LIABILITIES> 3,655
<BONDS> 0
0
0
<COMMON> 471
<OTHER-SE> 14,307
<TOTAL-LIABILITY-AND-EQUITY> 22,282
<SALES> 5,321
<TOTAL-REVENUES> 5,506
<CGS> 4,933
<TOTAL-COSTS> 4,933
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28
<INCOME-PRETAX> (2,206)
<INCOME-TAX> (772)
<INCOME-CONTINUING> (1,434)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,434)
<EPS-PRIMARY> (3.10)
<EPS-DILUTED> (3.10)
</TABLE>
