SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934.
For the fiscal year ended December 31, 1995.
Commission file number 0-4479.
THE OHIO ART COMPANY
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(Exact name of Registrant as specified in its charter)
Ohio 34-4319140
- ------------------------------- --------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
P.O. Box 111, Bryan, Ohio 43506
- ------------------------------- -------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 419-636-3141
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, $1 Par Value American Stock Exchange
- -------------------------- -----------------------
Securities registered pursuant to Section 12(g) of the Act: None
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 (paragraph 229.405 of this chapter) is not
contained herein, and will not be 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. [ X ].
Page 1 of 2 of Cover Page
<PAGE>
The aggregate market value of the Common Stock held by non-affiliates of
the Registrant as of March 21, 1996 was approximately $6,250,000 (based
upon the closing price on The American Stock Exchange). The number of
shares outstanding of the issuer's Common Stock as of March 21, 1996 was
470,761. It is estimated that 27% of such stock is held by
non-affiliates. (Excludes shares beneficially owned by officers and
directors and their immediate families).
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the annual shareholders' report for the year ended
December 31, 1995 are filed as Exhibit (13) filed hereto and are
incorporated by reference into Parts I, II, and IV.
Portions of the Ohio Art Company Proxy Statement for the 1996 Annual
Meeting of Shareholders are incorporated by reference into Part III.
This document, including exhibits, contains 49 pages.
The cover page consists of two pages.
The Exhibit Index is located on page 15.
Page 2 of 2 of Cover Page
<PAGE>
PART I
Item 1. Business
Registrant is principally engaged in two lines of business: (a)
the manufacture and distribution of toys and (b) the manufacture and
sale of custom metal lithography and molded plastic products to other
manufacturers and consumer goods companies. (See Note 6 of Notes to
Consolidated Financial Statements included in the Annual Shareholders'
Report for the year ended December 31, 1995, and included in Exhibit
(13) filed hereunder.)
Registrant manufactures and markets approximately 70 toy items
including the nationally advertised Etch A Sketch(registered trademark),
Color Etch A Sketch(registered trademark), Travel Etch A Sketch
(registered trademark), and Pocket Etch A Sketch(registered trademark)
drawing devices, Glitter Writer(registered trademark), craft items,
drums, and a line of activity toys, primarily basketball sets.
Registrant maintains showrooms in Bryan, Ohio and New York City
and distributes its products through its own full-time sales force and
through manufacturers' representatives. The toy products are sold
directly to general and specialty merchandise chains, discount stores,
wholesalers, mail order houses, and both direct to customers and through
licensees in foreign countries.
The Registrant's Diversified Products segment manufactures
specialty plastic and lithographic metal items such as parts for
automobile trim, lithographed metal serving trays, replica metal signs,
and film canisters. These products are sold to others directly or
through manufacturers' representatives.
The following table reflects the approximate percentage of total
sales contributed by each class of similar products of Registrant's
total sales in any of the last three fiscal years.
Year Ended December 31
CLASS 1995 1994 1993
- ----- ---- ---- ----
Writing and Drawing Toys ................... 52% 50% 57%
Activity Toys .............................. 21% 15% 16%
Traditional Toys ........................... 4% 7% 5%
Diversified Products ....................... 23% 28% 22%
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<PAGE>
The toy industry is highly competitive, and among Registrant's
competitors are a number of substantially larger firms having greater
financial resources and doing a substantially greater volume of
business. Published statistics for the year 1995 indicate the
Registrant accounted for less than one percent (1%) of the total toy
sales in the United States. Competition in Registrant's business is
believed to be based on novelty of product, customer appeal,
merchandising of character licenses, ability to deliver products on a
timely basis, price, and reputation for quality.
The Diversified Products segment sales are primarily products
manufactured to customers' specifications. Registrant believes that the
principal competitive factors in this business are price and
demonstrated ability to deliver quality products on a timely basis.
Registrant's toy business is seasonal and historically
approximately 65% to 75% of its sales have been made in the last six
months of the calendar year. Second half shipments in 1995 and 1994
amounted to 71% and 66% of annual sales respectively. Second half sales
have shown particular strength in recent years due to the introduction
of new products supported with television advertising concentrated in
the primary selling season prior to Christmas. Although customers
historically have ordered toy merchandise during the spring and summer
months for fall shipments in anticipation of Christmas sales, the
Company's customers in recent years tend to order later in the year
in an effort to control inventories, particularly in years with
uncertain economic conditions. The Diversified Products segment does
not have any established seasonal pattern.
Registrant's order backlog at the end of any fiscal year is not a
meaningful predictor of financial results of the preceding or succeeding
year. Historically, new toy products have been introduced to the trade
at the annual industry trade fair in February in New York and at foreign
trade fairs which generally occur within a thirty day period prior to
the U.S. trade fair. In recent years there has been a trend to earlier
introduction of new items to major customers. Major customers normally
place tentative orders during the first and second calendar quarters
which indicate the items they will be buying for the coming season and
an indication of quantity. These orders are usually "blanket" orders
which have no designated shipment date. Customers confirm specific
shipment dates during the year to meet their requirements. Industry
practice is that these orders are cancellable until shipped at no cost
to the customer. As the Registrant's product mix was changed to a
higher percentage of promotional type products in recent years, the
dollar amount of orders in the order backlog which have been cancelled
in the third and fourth calendar quarters has been unpredictable. It is
therefore difficult to state the level of order backlog believed to be
firm during the first calendar quarter.
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<PAGE>
Order backlog at mid-March is also impacted by the timing of the
February trade fair and placing of initial tentative orders by major
accounts, the product mix between spring and fall items, the mix between
domestic versus international orders, and the year-end inventory
carry-over of the Company's products at the retail level on the part of
its customers. The order backlogs believed to be firm, subject to
comments above, as of mid-March were:
1996 - approximately $2,200,000
1995 - approximately $2,100,000
The seasonal nature of the business generally requires a
substantial build-up of working capital during the second and third
calendar quarters to carry inventory and accounts receivable. Extended
payment terms are in general use in the toy industry to encourage
earlier shipment of merchandise required for selling during the spring
and Christmas seasons.
Registrant's basic raw materials are sheet metal, plastic resins,
fiber board, and corrugated containers and are generally readily
available from a number of sources. Although Registrant has at times
not been able to procure sufficient quantities of certain raw materials
to meet its needs, adequate supplies have been available in recent
years.
Registrant imports a variety of plastic and miscellaneous parts as
well as finished products from China, Taiwan, and Thailand as well as
steel from Japan for its lithography business. In 1995, these imports
accounted for approximately 27% of total cost of goods sold. Tariffs,
internal affairs of foreign countries, and other restraints on
international trade have not materially affected Registrant to date but
no assurance can be given that these conditions will continue.
Registrant has utilized forward exchange contracts to cover requirements
for major purchase commitments based on foreign currencies. However,
the use of foreign exchange contracts has not been necessary in the past
five years.
Preventing competitors from copying Registrant's toy products is
important, and where possible, Registrant attempts to protect its
products by the use of patents, trademarks, copyrights, and exclusive
licensing agreements. Registrant believes its patents, trademarks,
trade names, copyrights, and exclusive licensing agreements are
important to its business, but it is unable to state what their value is
or that their validity will be maintained, or that any particular
pending application will be successful. It is believed that the loss of
proprietory rights for any important product might have a material
adverse effect on Registrant's business.
Registrant's Diversified Products segment sells products
manufactured to customers' specifications and does not rely on its own
patents, trademarks, or copyrights to any extent.
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<PAGE>
The Registrant has an established program for licensing others for
manufacture and/or distribution of its products outside the United
States. In 1993 and again in 1994, international sales, as well as
royalty income decreased dramatically as the relationship with a key
European distributor became strained and then terminated at year-end.
The Company had developed new relationships in Europe for 1995, and
significant increases were realized in international sales and royalty
income in 1995.
Because of the seasonal nature of the Registrant's business, the
number of full-time employees at December 31 is not as indicative of
activity as the average number of employees during the year. The
average number of employees has been: 1995 - 304; 1994 - 302;
1993 - 311.
The Company has installed equipment to control the possible
discharge of materials into the environment by its lithography
operations at the Bryan, Ohio manufacturing facility. The expenses of
operation and depreciation on installed equipment have increased
manufacturing costs for the lithography operations, but these cost
increases have not impacted the competitive position of the Company.
Because of increased demand from its lithography customers, the
Company has committed approximately $5,530,000 for equipment for its
lithography department. This equipment is expected to be operational
late in the fourth quarter of 1996.
Registrant maintains its own design and development staff and, in
addition, utilizes contractual arrangements with outside development
groups. Approximately $650,000 in 1995, $510,000 in 1994, and $500,000
in 1993 was spent on such activities.
Customers of the toy segment include a number of large retailers.
A number of major toy retailers have, in recent years, experienced
financial difficulties resulting in either bankruptcy, restructuring, or
slow payment. The loss of any of these customers could have a material
adverse effect on this segment of Registrant's business. Registrant's
consolidated revenues for 1995 included approximately $8,900,000
($8,100,000 and $6,200,000 in 1994 and 1993, respectively) of sales to
Wal-Mart, and sales to Kmart of $5,300,000 ($4,200,000 and $4,700,000
in 1994 and 1993, respectively). Both customers listed are major toy
retailers.
Registrant's Diversified Products segment sales are concentrated in
a limited number of accounts. Sales to the five largest customers
account for approximately 64% of the total sales of this segment. The
loss of any of these customers could have a material adverse effect on
the Diversified Products segment of Registrant's business.
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<PAGE>
Item 2. Properties
Registrant owns plants located at Bryan, Ohio, which consist of
approximately 50,000 square feet of office, 725,000 square feet of
production, and 235,000 square feet of warehouse space. Registrant also
owns a plant at Stryker, Ohio, which consists of approximately 134,000
square feet. The majority of Registrant's facilities are of masonry
construction and are adequate for its present operation. Production,
other than metal lithography, which is normally scheduled on a
two-shift, ten hour, four day week with overtime for Friday, Saturday,
and Sunday, is primarily on a one-shift basis at the Bryan, Ohio
facilities. The Bryan facilities run second shift operations on
selected toy items during seasonal demand peaks and the Stryker, Ohio
plant is normally scheduled on the basis of three-shift operations.
Because of the seasonal nature of its business and the fact that a
portion of its manufacturing facilities operate on a one-shift or
limited two-shift basis, the Registrant's facilities have operated below
maximum productive capacity in recent years, including 1995.
Item 3. Legal Proceedings
Neither the Registrant nor any of its subsidiaries is involved in
pending legal procedures which, in the aggregate, could materially
affect the Registrant's financial position.
Item 4. Submission of Matters to a Vote of Security Holders
None.
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<PAGE>
PART II
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters
Market, Earnings, and Dividend Information on page 25 of Exhibit
(13) filed hereunder are incorporated herein by reference.
Item 6. Selected Financial Data
Selected Financial Data on page 18 of Exhibit (13) filed
hereunder is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Management's Discussion and Analysis of Financial Condition and
Results of Operations on pages 19 through 24 of Exhibit (13) filed
hereunder are incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
The consolidated financial statements of the Registrant and its
subsidiaries on pages 27 through 46 of Exhibit (13) filed hereunder
are incorporated herein by reference.
Quarterly Results of Operations on page 25 of Exhibit (13) filed
hereunder are incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
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<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
(a) Identification of Directors
Information in regard to identification of Directors of the
Registrant is presented under the heading "Information With Respect to
Directors and Nominees" in the Registrant's Proxy Statement for the
1996 Annual Meeting of Shareholders as filed with the Securities and
Exchange Commission and is incorporated herein by reference.
(b) Executive Officers of the Registrant
First Year
Elected To
Present Position Present
Name Age With Registrant Position
- ---- --- ---------------- ----------
William C. Killgallon 57 Chairman 1989
Martin L. Killgallon II 48 President 1989
C. G. Dahl 49 Vice President 1995
Marketing
P. R. Manley 45 Vice President 1992
Manufacturing
P. R. McCusty 46 Vice President 1993
Finance/Treasurer
N. O. Meyers 66 Vice President 1975
International Operations
L. T. Wilson 59 Vice President 1995
Diversified Products
W. E. Shaffer 73 Secretary 1995
W. C. Killgallon 83 Chairman, Board 1989
Executive Committee
W. C. Killgallon was elected Chairman, Executive Committee of the
Board in June 1989. He had served as Chairman since 1978. William C.
Killgallon was elected Chairman in June 1989. He had served as
President since 1978. M. L. Killgallon, II was elected President in
June 1989. He had served as Executive Vice President since 1987 and as
Senior Vice President of Marketing from September 1983. C. G. Dahl was
elected as Vice President of Marketing in June 1995. He had served as
Vice President of Sales since June 1987.
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<PAGE>
Mr. Wayne E. Shaffer was elected to serve as Secretary in September
1995 replacing L. F. Koerber who retired in June 1995. W. E. Shaffer
has been Of Counsel with the law firm of Newcomer, Shaffer, Bird, &
Spangler for more than the last five years. L. T. Wilson was elected as
Vice President of Diversified Products in June 1995. He had served as
Vice President of Product Development for at least the past five years.
N. O. Meyers had been employed in his present position for at least the
past five years and retired on December 31, 1995. P. R. McCusty was
elected Vice President, Finance/Treasurer in June 1993. He had
previously served as Treasurer since June 1992 and Controller since
1984. P. R. Manley was elected Vice President, Manufacturing in June
1992. He had previously served as General Manager of Manufacturing
Operations since 1990 and as Director of Operations Planning from 1987
to 1990. William C. Killgallon and Martin L. Killgallon, II are the
sons of W. C. Killgallon. Officers are elected annually to serve until
the first meeting of directors following the annual meeting of
shareholders in each year.
Item 11. Executive Compensation and Transactions
Information regarding Executive Compensation and Transactions is
stated under the heading "Compensation of Executive Officers" of the
Registrant's Proxy Statement for the 1996 Annual Meeting of Shareholders
as filed with the Securities and Exchange Commission and is incorporated
herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Securities beneficially owned by principal shareholders and
management are stated under the heading "Securities Beneficially Owned
by Principal Shareholders and Management" of the Registrant's Proxy
Statement for the 1996 Annual Meeting of Shareholders as filed with the
Securities and Exchange Commission and such information is incorporated
herein by reference.
Item 13. Certain Relationships and Related Transactions
Not applicable.
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<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K
(a) The following documents are filed as a part of this report.
(1) The following consolidated financial statements of The Ohio
Art Company and subsidiaries, included on pages 27 - 46 of
Exhibit (13) filed hereunder are incorporated by reference in
Item 8.
Report of Independent Auditors
Consolidated Balance Sheets - December 31, 1995 and 1994
Consolidated Statements of Income - Years ended December 31,
1995, 1994, and 1993
Consolidated Statements of Stockholders' Equity - Years ended
December 31, 1995, 1994, and 1993
Consolidated Statements of Cash Flow - Years ended December
31, 1995, 1994, and 1993
Notes to Consolidated Financial Statements - December 31, 1995
(2) The following consolidated financial statement schedule of The
Ohio Art Company and subsidiaries is filed under Item 14(d):
SCHEDULE PAGE
-------- ----
Schedule II - Valuation and Qualifying Accounts 14
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are
not required under the related instructions or are inapplicable,
and therefore have been omitted.
(3) See Item 14(c) below.
(b) Reports on Form 8-K
None
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<PAGE>
(c) The following exhibits are filed as part of this Form 10-K Annual
Report:
3 (a) Articles of Incorporation as amended, filed as Exhibit
3 (a) to Registrant's Form 10-K for the year ended December
31, 1986, and incorporated herein by reference.
(b) Code of Regulations filed as Exhibit 3 (b) to Registrant's
Form 10-K for the year ended December 31, 1990, and
incorporated herein by reference.
(c) By-Laws filed as Exhibit 3 to Registrant's Form 8-K dated
September 21, 1990, and incorporated herein by reference.
10 (a) Employee Stock Ownership Plan, filed as Exhibit 10 (c) to
Registrant's Form 10-K for the year ended December 31,
1987, and incorporated herein by reference.
(b) The Ohio Art Company Supplemental Retirement Plan, as
amended and restated effective January 1, 1992 filed as
Exhibit 10 (d) to Registrant's Form 10-K for the year ended
December 31, 1992, and incorporated herein by reference.
(c) Revolving Credit Agreement dated January 24, 1994 filed as
Exhibit 10 (c) to Registrant's Form 10-K for the year ended
December 31, 1993, and incorporated herein by reference.
(d) Amendment to the Revolving Credit Agreement dated May 26,
1995.
13 Portions of the 1995 Annual Report of The Ohio Art Company.
22 Subsidiaries of the Registrant.
23 Consent of Independent Auditors.
27 Financial Data Schedule.
(d) The financial statement schedule which is listed under Item 14
(a)(2) is filed hereunder.
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<PAGE>
SIGNATURES
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 OHIO ART COMPANY
Date: March 15, 1996 By /s/ William C. Killgallon
-------------------------------
William C. Killgallon, Chairman
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 date
indicated.
Signature Title Date
- ------------------------- --------------------- --------------
/s/ William C. Killgallon Chairman of the Board March 15, 1996
William C. Killgallon Principal Executive
Officer and Director
/s/ Martin L. Killgallon, II President and Director March 15, 1996
Martin L. Killgallon, II
/s/ Paul R. McCusty Vice President Finance/ March 15, 1996
Paul R. McCusty Treasurer and Principal
Financial Officer
/s/ W. C. Killgallon Chairman, Board Executive March 15, 1996
W. C. Killgallon Committee and Director
/s/ Neil H. Borden, Jr. Director March 15, 1996
Neil H. Borden, Jr.
/s/ Earl J. Wright Director March 15, 1996
Earl J. Wright
/s/ Frank L. Gallucci Director March 15, 1996
Frank L. Gallucci
/s/ Wayne E. Shaffer Secretary March 15, 1996
Wayne E. Shaffer
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<PAGE>
<TABLE>
The Ohio Art Company and Subsidiaries
Schedule II - Valuation and Qualifying Accounts
<CAPTION>
Additions
--------------------------------
Balance at Charged Charged Deductions- Balance
Beginning to Costs to Other Describe at End
Description of Period and Expenses Accounts-Describe (1) of Period
- --------------------------------- --------- ------------ ----------------- ----------- ---------
<S> <C> <C> <C> <C>
Year ended December 31, 1995:
Reserves and allowances deducted from
asset accounts:
Allowances for uncollectible accounts $465,000 $ 34,048 $ 84,048 $415,000
========================================================================
Year ended December 31, 1994:
Reserves and allowances deducted from
asset accounts:
Allowanced for uncollectible accounts $415,000 $ 25,943 $(24,057) $465,000
========================================================================
Year ended December 31, 1993:
Reserves and allowances deducted from
asset accounts:
Allowances for uncollectible accounts $515,000 $(96,584) $ 3,416 $415,000
========================================================================
<FN>
(1) Uncollectible accounts charged off and collection costs, less recoveries.
( ) Denotes credit.
</FN>
</TABLE>
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<PAGE>
THE OHIO ART COMPANY AND SUBSIDIARIES
EXHIBIT INDEX
Exhibit # Page
- --------- --------
3 (a) Articles of Incorporation as amended, filed as --
Exhibit 3 (a) to Registrant's Form 10-K for the
year ended December 31, 1986, and incorporated
herein by reference.
3 (b) Code of Regulations filed as Exhibit 3 (b) to --
Registrant's Form 10-K for the year ended December
31, 1990, and incorporated herein by reference.
3 (c) By-Laws filed as Exhibit 3 to Registrant's Form --
8-K dated September 21, 1990, and incorporated
herein by reference.
10 (a) Employee Stock Ownership Plan, filed as Exhibit --
10 (c) to Registrant's Form 10-K for the year
ended December 31, 1987, and incorporated herein
by reference.
10 (b) The Ohio Art Company Supplemental Retirement Plan, --
as amended and restated effective January 1, 1992
filed as Exhibit 10 (d) to Registrant's Form 10-K
for the year ended December 31, 1992, and
incorporated herein by reference.
10 (c) Revolving Credit Agreement dated January 24, 1994 --
filed as Exhibit 10 (c) to Registrant's Form 10-K
for the year ended December 31, 1993, and
incorporated herein by reference.
10 (d) Amendment to the Revolving Credit Agreement dated 16 - 17
May 26, 1995.
13 Portions of the 1995 Annual Report to Shareholders 27 - 46
(to the extent incorporated by reference hereunder).
22 Subsidiaries of the Registrant. 47
23 Consent of Independent Auditors. 48
27 Financial Data Schedule. 49
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<PAGE>
AMENDMENT
Customer #883798 The Fifth Third Bank of NW Ohio NA
606 Madison Avenue
$10,000,000.00 Toledo, OH 43604
Due Date: May 25, 1998
This Amendment, entered into the 26th date of May 1995, by The
Fifth Third Bank of Northwestern Ohio, N.A. ("Bank"), and THE OHIO ART
COMPANY, ("Borrower").
WHEREAS, Borrower executed and delivered to The Fifth Third Bank
a Credit Agreement and a $10,000,000.00 Revolving Note, both dated
January 24, 1994, a copy of the $10,000,000.00 Revolving Note is
attached hereto as Exhibit "A" and made a part hereof; and
WHEREAS, The Fifth Third Bank assigned to Bank all of its right,
title and interest in the $10,000,000.00 Revolving Note and in that
part of the Credit Agreement which relates in any way to the loan
evidenced by the $10,000,000.00 Revolving Note; and
WHEREAS, the present balance due on the $10,000,000.00 Revolving
Note is $300,000.00; and
WHEREAS, Borrower and Bank have agreed to amend the $10,000,000.00
Revolving Note and the Credit Agreement, as follows.
NOW, THEREFORE, Borrower and Bank mutually agree as follows:
1. The following recitals, the $10,000,000.00 Revolving Note, the
Credit Agreement, and all documents pertaining thereto are incorporated
by reference.
2. The maturity date of the $10,000,000.00 Revolving Note is
hereby extended to May 25, 1998.
3. The Credit Agreement is amended to provide that Borrower may
utilize up to $400,000.00 of the loan proceeds for Employee Stock
Ownership Plan purposes.
4. The warrant of attorney to confess judgment and all waivers in
the $10,000,000.00 Revolving Note are hereby expressly granted to the
Bank by Borrower.
5. Except as amended hereby, the original terms and conditions of
the $10,000,000.00 Revolving Note and the Credit Agreement are and
remain in full force and effect.
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<PAGE>
WARNING - BY SIGNING THIS PAPER, YOU GIVE UP YOUR RIGHT TO NOTICE AND
COURT TRIAL. IF YOU DO NOT PAY ON TIME, A COURT JUDGMENT MAY BE TAKEN
AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN
BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE
AGAINST THE CREDITOR WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE
ON HIS PART TO COMPLY WITH THE AGREEMENT OR ANY OTHER CAUSE.
THE OHIO ART COMPANY
By: __________________________________
Paul R. McCusty, Vice President Finance
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<PAGE>
EXHIBIT 13
<TABLE>
PORTIONS OF THE 1995 ANNUAL REPORT TO SHAREHOLDERS
FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA
YEARS ENDED DECEMBER 31, 1995, 1994, 1993, 1992, AND 1991
Amounts in thousands, except per share data
<CAPTION>
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Consolidated Net Sales
and Other Income ......... $49,230 $41,073 $42,784 $56,927 $50,022
Net Income ................. 1,961 824 416 3,442 2,603
Earnings per Share of Common
Stock (a) ................ 4.07 1.66 .82 6.68 5.05
Dividends Declared per Share
of Common Stock (b) ...... .48 .30 .90 .64 .24
Book Value per Share of
Common Stock (c) ......... 35.02 31.93 29.64 30.20 24.03
Average Shares of Common
Stock .................... 481,524 497,077 507,996 515,547 515,623
Stockholders of Record
(d) ...................... 600 660 670 650 490
Working Capital ............ $10,375 $ 9,311 $ 8,348 $ 9,004 $ 6,339
Property, Plant and
Equipment (net) .......... 5,464 5,544 6,195 6,137 5,545
Total Assets ............... 25,572 25,174 22,396 25,848 23,945
Long-Term Obligations ...... 667 455 589 408 511
Stockholders' Equity ....... 16,832 15,886 14,899 15,531 12,390
Average Number of
Employees ............... 304 302 311 358 405
<FN>
(a) Based upon average shares outstanding during the year ended
December 31.
(b) Stock or cash dividend paid every year since 1908.
(c) Based upon shares outstanding at December 31.
(d) Includes Employee Stock Ownership Plan participants who were
100% vested at December 31.
</FN>
</TABLE>
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<PAGE>
<TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OPERATIONS
The following table sets forth for the periods indicated selected
expense and earnings items, the percentage relationship to net sales and
the percentage increase or decrease of such items as compared to the
corresponding period:
<CAPTION>
YEAR ENDED DECEMBER 31
- ------------------------------------------------------------------------
% Increase(Decrease)
1995 1994 1993 1995 1994
------ ------ ------ --------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Net Sales .............. $47,354 $40,196 $41,647 17.8% (3.5%)
Gross Margin ........... $16,598 $12,241 $12,210 35.6% .3%
Percent of Net Sales ... 35.1% 30.5% 29.3%
Selling,Administrative
and General .......... $15,151 $11,764 $12,684 28.8% (7.3%)
Percent of Net Sales ... 32.0% 29.3% 30.5%
Earnings from Operations $3,323 $1,354 $663 145.4% 104.2%
Percent of Net Sales ... 7.0% 3.4% 1.6%
Interest Expense ....... $201 $84 $175 139.3% (52.0%)
Percent of Net Sales ... .4% .2% .4%
Income Tax Expense ..... $1,161 $446 $72 160.3% 519.4%
Percent of Net Sales ... 2.5% 1.1% .2%
Net Earnings ........... $1,961 $824 $416 138.0% 98.1%
Percent of Net Sales ... 4.1% 2.0% 1.0%
</TABLE>
Sales were lackluster in the first and second quarters of 1995 but
came on strong in the third and fourth quarters resulting in a 17.8%
increase in sales over the previous year. Of the $7,158,000 increase in
sales for 1995, approximately $6,900,000 came in the third and fourth
quarters. Sales volume increased for both the domestic and
international toy divisions, but decreased by approximately 3% for the
Diversified Products segment. The majority of the sales increase for
toys, both domestic and international was primarily due to the increase
of our Making Creativity Fun(registered trademark) category of toys,
which includes the world renowned Etch A Sketch(registered trademark).
Unlike last year, when late customer demand could not be fulfilled and
orders were cancelled, product was available for shipment in 1995.
Although somewhat speculative, we believe the movie, Toy Story, released
by Walt Disney in the fourth quarter of 1995, contributed to some of the
increased demand for our Making Creativity Fun(registered trademark)
category of toys, since Etch A Sketch(registered trademark) was
featured in the movie.
- 19 -
<PAGE>
The Company's 1994 net sales decrease of 3.5% from the prior year
reflected lower sales volume in both the domestic and international toy
divisions and a significant increase of approximately 15% in the
Diversified Products segment. Domestic sales decreased approximately
$2.4 million in the first quarter of 1994 from the similar 1993 period
as key retailers carried over significantly higher inventory levels of
the Company's product into 1994 than the prior year. This was reflected
in the Company's rate of order receipt and order backlog calling for
shipment in early 1994 which was down significantly from the prior year.
The first quarter domestic toy sales decrease was offset by increases in
the second and third quarters, but decreased again in the fourth quarter
as late customer demand for product could not be filled and orders were
cancelled. The trend towards overseas manufacturing which started in
earlier years has continued in 1995. Although domestic toy production
increased approximately 8% in 1995 over 1994, it is still significantly
below 1992 levels, which were approximately 50% higher than 1995 levels.
The underutilization of plant facilities again contributed significantly
to reduced gross margins from the levels attained in 1992.
Toy segment export sales, foreign royalty income, and direct
shipments from foreign manufacturers to foreign customers included in
consolidated revenues amounted to approximately $6,696,000, $3,567,000,
and $5,679,000 in 1995, 1994, and 1993 respectively. A combination of
factors contributed to the decrease in 1994 from 1993 including the
reorganization of a major distributor in Europe, excess inventory from
the prior year, and poor product acceptance at the retail level. The
relationship with the major distributor in Europe terminated at the end
of 1994. The increase in 1995 over 1994, although still not at the
levels attained in 1992 ($11,410,000), was the result of the new
relationship developed with overseas partners in 1994 that produced
results in 1995.
The decrease in sales of approximately 3% in the Diversified
Products segment for 1995 was made up of an increase of approximately
10% in sales for our Lithography and Premium business located at our
Bryan, Ohio facility, and a decrease of approximately 47% for our
automotive business located at Strydel, Inc., our injection molding
facility. Injection molding customers, who in prior years had farmed
out some of their injection molding work to Strydel, pulled this work
back to their own facilities in 1995 resulting in a decrease in sales of
approximately $1,200,000 in 1995 from the 1994 level.
Sales by the Diversified Products segment increased approximately
16% in 1994 from 1993. Our injection molding subsidiary, Strydel, Inc.,
increased its sales to automotive companies to approximately $2,600,000
from $1,800,000 in 1993. The remainder of the increase was associated
with our lithography business which increased with new and existing
customers.
- 20 -
<PAGE>
The Company's gross profit margin percentage in 1995 (35.1%)
improved significantly from the previous year (30.5%). Approximately
3.2% of the increase is due to overall price increases and the change
in product mix, primarily the increase in the sales of the Making
Creativity Fun(registered trademark) category, which has a higher than
average gross profit margin. Overhead variance, although only decreasing
slightly from 1994 levels, was spread over a higher level of sales and
resulted in a favorable increase in gross profit margin of 1.4%.
The Company's gross profit margin percentage in 1994 (30.5%)
improved slightly over the level of the prior year (29.3%). The
increase resulted from the turnaround at Strydel, Inc., our injection
molding facility, as its gross profit margin percentage improved from
approximately negative 4% to a positive 13%.
Selling, administrative, and general expenses increased both in
dollars and as a percentage of sales in 1995 from 1994. Of the total
increase of $3,387,000, advertising expense accounted for approximately
$1,200,000 and employee compensation expense accounted for approximately
$850,000. All other increases for individual categories were less than
$400,000. In prior years, the Company controlled advertising
expenditures to a percentage of sales, rather that committing funds with
the expectation of higher sales. In 1995, funds were committed for
international advertising and some domestic promotional programs that
did not follow a percentage of sales. The increase in employee
compensation expense is directly related to the Company's incentive
compensation program, which depends upon the Company's profitability.
The higher level of profitability in 1995 accounted for the majority of
the increase in employee compensation expense.
Selling, administrative, and general expenses decreased as a
percentage of sales in 1994 from 1993. The primary reason for the
decrease was an 18% decrease in advertising expense (or approximately
$640,000) and a 39% decrease in professional services (or approximately
$230,000). The decrease in advertising expense was the result of
controlling expenditures to a percentage of sales, rather than
committing funds with the expectation of higher sales. The decrease in
professional services was primarily legal services due to lower legal
activity in 1994 from 1993.
Interest expense increased in 1995 ($201,000) from 1994 ($84,000)
as the average borrowing levels, as well as the prime rate, increased
over the prior year levels.
Interest expense continued to decline in 1994 ($84,000) from 1993
($175,000) as the reduced average borrowing levels more than offset the
higher interest rates in effect during 1994.
- 21 -
<PAGE>
The 1995 earnings from operations more than doubled from the prior
year, and resulted from higher sales, increased gross margins, and an
increase in royalty income from the distribution of the Company's
products in foreign countries and licensing agreements entered into by
the Company domestically.
The improvement in earnings from operations in 1994 resulted
primarily from controlling costs and the turnaround to profitability at
Strydel, Inc., the Company's injection molding facility. The turnaround
at Strydel, Inc. was due to increased sales to automotive companies as
well as a tight control on costs.
Note 4 of Notes to Consolidated Financial Statements presents the
components of the income taxes (credits) for 1995, 1994, and 1993, and
the reconciliation of taxes at the statutory rate to the income tax
expense.
LIQUIDITY AND SOURCES OF CAPITAL
Because of the seasonal nature of the toy business, the Company
normally requires a substantial build-up in working capital from the
beginning of the year to a seasonal peak during the third and early part
of the fourth calendar quarter. Extended payment terms are in general
use in the toy industry to encourage earlier shipments of merchandise
required for selling during the Christmas season. As a result, the
Company's working capital requirements typically increase with seasonal
shipments as collection of a substantial portion of accounts receivable
is deferred until the fourth calendar quarter. This increased working
capital requirement has been financed in recent years by bank borrowings
under both a revolving line-of-credit and by short-term lines-of-credit.
The Company's current ratio at December 31, 1995 increased to 2.4
to 1 from 2.2 to 1 at December 31, 1994. Two major factors increased
the current ratio. First, a payment of approximately $1.2 million was
made to our advertising agency on December 29, 1995 which had the effect
of reducing cash and accounts payable. The amount outstanding to our
advertising agency at the end of 1994 was approximately $400,000 and was
not paid until 1995. The timing of the payment was directly related to
the Company's receipt of cash from a customer. Secondly, inventories
increased approximately $2.5 million and were financed by the
profitability of the Company and the reduction of accounts receivable
From a historical viewpoint, inventories were high at the end of 1995
although product availability in the fourth quarter was a key element to
the Company's profitability.
- 22 -
<PAGE>
The Company's current ratio at December 31, 1994 had decreased to
2.2 to 1 from 2.4 to 1 at December 31, 1993. Due to a more aggressive
cash management position, accounts payable increased approximately
$900,000 from the prior year even though purchases only increased
approximately $300,000 in the fourth quarter of 1994. In addition,
current income taxes payable increased approximately $600,000 primarily
because of the higher level of income generated in 1994.
Investing activities consist primarily in the purchase of tooling,
equipment, and major repairs to existing facilities. Major expenditures
for 1995 were for the purchase of tooling for new product in the 1995
and 1996 product lines and improvements to the Company's Lithography
department. Late in the fourth quarter of 1995, the Board of Directors
approved the expansion of the Lithography department to purchase a new
Lithography system. The cost of the equipment, as well as
modifications to the existing plant, will be approximately $6.2 million.
This is in addition to the expenditures noted above. It is anticipated
that funding for these expenditures will be from the Company's
operations and borrowings as required.
On May 26, 1995, the Company amended its existing three year
$10,000,000 Revolving Credit Agreement to extend the three year term
until May of 1998 and amended its $6,000,000 Demand Credit Agreement to
extend the term until May of 1996. Maximum borrowings during 1995
amounted to $5,200,000 with no outstanding balance at December 31, 1995,
other than borrowings by the Company's ESOP.
Maximum borrowings which had reached $11,800,000 in 1990, have
been significantly lower in the years following. This has resulted from
the carryover of cash from previous years as well as reduced working
capital requirements as a result of lower average inventories and
reduced days sales outstanding in accounts receivable.
The decrease in the carryover of cash was greater than the
decrease in current liabilities at December 31, 1995, and, unlike 1994,
has had a negative impact on liquidity during the first quarter of 1996.
However, it is anticipated that the carryover of cash and the bank
financing provided for under the May 26, 1995 agreements will be more
than adequate to meet working capital requirements for the year ahead.
The Company does anticipate changing its mix of working capital in the
coming year by reducing current inventory levels, and will continue to
strive for a reduction of days sales outstanding in accounts receivable.
ENVIRONMENTAL MATTERS
The Company is subject to various laws and governmental
regulations concerning environmental matters and employee safety and
health in the United States. The Company is subject to the Occupational
Safety and Health Administration (OSHA) concerning employee safety and
health matters, and the United States Environmental Protection Agency.
These groups and other federal agencies have the authority to promulgate
regulations that could have an impact on the Company's operations.
- 23 -
<PAGE>
The Company is committed to a long-term environmental protection
program that reduces emissions of hazardous materials into the
environment, as well as to the remediation of identified existing
environmental or OSHA concerns.
IMPACT OF INFLATION AND CHANGING PRICES
The Company's current labor contracts and management compensation
policies have lessened the impact that wage inflation has on operations
because compensation above base wages has been based on overall Company
performance. Although the Company continued to be impacted by increased
costs of materials and services during 1995, the magnitude of these
increases, other than costs of employee health care, over the past
several years has not been significant in most areas of the business.
In recent years a higher percentage of component parts used in the
Company's products have been purchased from sources outside of the
United States. Changes in product mix in 1995, 1994, and 1993 resulted
in only a small portion of these purchases being committed in foreign
currencies and therefore only minor exposure to exchange risk.
Some of the primary raw materials used in the manufacture of the
Company's products are petrochemical derivative plastics. Costs of
these raw materials which are closely tied to the price of oil
continually increased during 1994 as compared to 1993 for these plastics
as market demand exceeded existing supplies. Costs increased in 1994
and continued to increase and peak in the third quarter of 1995,
subsequently decreasing for the remainder of the year, ending at a lower
price than the end of the prior year. It is anticipated that plastic
prices will increase throughout 1996. During a period of rapidly rising
costs the Company is not able to fully recover these cost increases
through price increases due to competitive conditions and trade
practices.
- 24 -
<PAGE>
<TABLE>
QUARTERLY RESULTS OF OPERATIONS
The following is a summary of the quarterly results of operations
for the years ended December 31, 1995, and 1994 (in thousands of
dollars, except per share amounts).
<CAPTION>
Net Income
Cost of Net (Loss) Per
Net Products Income Share of
1995 Sales Sold (Loss) Common Stock
- ---- ------ -------- ------ ------------
<S> <C> <C> <C> <C>
March 31 ................... $ 7,011 $ 5,651 $ (797) $(1.61)
June 30 .................... 6,811 5,242 (658) (1.35)
September 30 ............... 15,513 10,103 916 1.85
December 31 ................ 18,019 9,760 2,500 5.18
------- ------- ------- -------
TOTALS $47,354 $30,756 $1,961 $ 4.07
======= ======= ======= =======
1994
- ----
March 31 ................... $ 6,028 $ 4,930 $ (862) $(1.72)
June 30 .................... 7,496 5,614 (425) (.86)
September 30 ............... 13,197 8,606 900 1.80
December 31 ................ 13,475 8,805 1,211 2.44
------- ------- ------- -------
TOTALS $40,196 $27,955 $ 824 $ 1.66
======= ======= ====== =======
<CAPTION>
COMMON STOCK - MARKET, EARNINGS, AND DIVIDEND INFORMATION
The principal market for the Common Stock of The Ohio Art Company
is the American Stock Exchange under Ticker Symbol OAR. The approximate
number of record holders of the Company's Common Stock at December 31,
1995 was 600. The high and low sales prices of the stock on that
Exchange, as reported by the Exchange, and earnings (loss) and dividends
per share paid on the stock in 1995 and 1994 by quarter, were as
follows:
1995 1994
------------------------------ ------------------------------
Sales Prices Earnings Dividend Sales Prices Earnings Dividend
High Low (Loss) Declared High Low (Loss) Declared
----- ----- -------- -------- ----- ----- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jan-Mar $37 $28 $(1.61) $.30 $31 $27.50 $(1.72) $.12
Apr-Jun 35 29.50 (1.35) .06 28.50 21 (.86) .06
Jul-Sep 39 31.50 1.85 .06 25.88 23 1.80 .06
Oct-Dec 56 34 5.18 .06 36 23 2.44 .06
The Company expects to continue its policy of paying regular cash
dividends, although there is no assurance as to future dividends because
they are dependent on future earnings, capital requirements, and
financial condition.
</TABLE>
- 25 -
<PAGE>
On March 6, 1996, the Board of Directors of the Company approved
a two-for-one stock split, payable on May 7, 1996 to shareholders of
record as of April 9, 1996. The cash dividends that were declared,
which included a regular cash dividend of $.06 and a special cash
dividend of $.20 per share, will be paid on the pre-split shares.
- 26 -
<PAGE>
Report of Independent Auditors
To The Board of Directors and Stockholders
The Ohio Art Company
We have audited the accompanying consolidated balance sheets of The Ohio
Art Company and subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of income, stockholders' equity, and
cash flows for each of the three years in the period ended December 31,
1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe
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 Ohio Art Company and subsidiaries at December 31, 1995 and 1994,
and the consolidated results of their operations and their cash flows
for each of the three years in the period ended December 31, 1995 in
conformity with generally accepted accounting principles.
As discussed in Notes 2 and 5 to the financial statements, the Company
changed its methods of accounting for investments and the employee stock
ownership plan in 1994 and income taxes in 1993.
ERNST & YOUNG LLP
Toledo, Ohio
February 7, 1996
- 27 -
<PAGE>
<TABLE>
The Ohio Art Company and Subsidiaries
Consolidated Balance Sheets
<CAPTION>
December 31
1995 1994
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 2,800,076 $ 4,400,110
Accounts receivable, less allowances of
$415,000 in 1995 and $465,000 in 1994 7,123,264 7,493,576
Inventories:
Finished products 5,067,172 2,902,442
In process 444,621 286,822
Materials and purchased parts 2,991,169 2,834,605
----------- -----------
Total FIFO 8,502,962 6,023,869
Less adjustment to reduce inventories to
last-in, first-out (LIFO) method 2,420,429 2,444,807
----------- -----------
Inventories at LIFO 6,082,533 3,579,062
Prepaid expenses 915,099 955,464
Deferred federal income taxes (Note 4) 640,100 810,300
----------- -----------
TOTAL CURRENT ASSETS 17,561,072 17,238,512
OTHER ASSETS
Cash value of life insurance, less
policy loans of $457,833 in 1995
and $644,824 in 1994 543,699 541,517
Marketable equity security (Note 2) 972,664 848,747
Deposits and advances 189,672 139,016
Goodwill 841,326 862,328
----------- -----------
2,547,361 2,391,608
PROPERTY, PLANT, AND EQUIPMENT
Land 164,626 164,626
Land improvements 121,362 121,362
Leasehold improvements 132,920 132,920
Buildings and building equipment 5,885,738 5,673,800
Machinery and equipment 19,894,216 18,756,412
----------- -----------
26,198,862 24,849,120
Allowances for depreciation and
amortization 20,735,232 19,305,159
----------- -----------
5,463,630 5,543,961
----------- -----------
$25,572,063 $25,174,081
=========== ===========
<FN>
See accompanying notes
</FN>
</TABLE>
- 28 -
<PAGE>
<TABLE>
The Ohio Art Company and Subsidiaries
Consolidated Balance Sheets (continued)
<CAPTION>
December 31
1995 1994
----------- -----------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 3,586,461 $ 4,828,795
Income taxes payable 900,541 588,383
Employees' compensation and amounts
withheld therefrom 1,361,720 830,337
Taxes, other than federal income taxes 475,528 424,152
Other liabilities 832,896 1,226,245
Dividend payable 28,838 29,848
----------- -----------
TOTAL CURRENT LIABILITIES 7,185,984 7,927,760
LONG-TERM OBLIGATIONS (Note 3) 667,252 454,562
DEFERRED FEDERAL INCOME TAXES (Note 4) 886,884 905,684
STOCKHOLDERS' EQUITY (Note 3)
Common Stock, par value $1.00 per share:
Authorized - 1,935,552 shares
Outstanding - 480,633 shares in 1995 and
497,470 shares in 1994 (excluding 198,376
and 181,539 treasury shares, respectively) 480,633 497,470
Additional paid-in capital 732,995 759,632
Retained earnings 15,573,728 14,389,158
Unrealized gains, net of income taxes of
$225,100 in 1995 and $195,000 in 1994
(Note 2) 435,164 376,775
Reduction for:
Minimum pension liability (27,577) (40,211)
ESOP loan guarantee (363,000) (96,749)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 16,831,943 15,886,075
----------- -----------
$25,572,063 $25,174,081
=========== ===========
<FN>
See accompanying notes.
</FN>
</TABLE>
- 29 -
<PAGE>
<TABLE>
The Ohio Art Company and Subsidiaries
Consolidated Statements of Income
<CAPTION>
Year ended December 31
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Net sales $47,354,141 $40,195,811 $41,647,002
Royalty income 1,617,032 704,027 926,235
Other income 258,948 172,808 210,761
----------- ----------- -----------
49,230,121 41,072,646 42,783,998
Costs and expenses:
Cost of products sold 30,756,599 27,955,062 29,436,683
Selling, general and
administrative 15,150,917 11,764,327 12,683,918
Interest 201,024 83,740 175,208
----------- ----------- -----------
46,108,540 39,803,129 42,295,809
----------- ----------- -----------
Income before income taxes 3,121,581 1,269,517 488,189
Income taxes (Note 4) 1,160,900 446,000 72,000
----------- ----------- -----------
Net income $ 1,960,681 $ 823,517 $ 416,189
=========== =========== ===========
Net income per share of Common
Stock $4.07 $1.66 $.82
=========== =========== ===========
Average number of shares of
Common Stock outstanding
(Note 1) 481,524 497,077 507,996
=========== =========== ===========
<FN>
See accompanying notes.
</FN>
</TABLE>
- 30 -
<PAGE>
<TABLE>
The Ohio Art Company and Subsidiaries
Consolidated Statements of Stockholders' Equity
<CAPTION>
Additional Reduction for Reduction for
Common Paid-In Retained Unrealized Minimum Pension ESOP Loan
Stock Capital Earnings Gains Liability Guaranty
-------- -------- ----------- ---------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balances at January 1, 1993 $514,318 $825,024 $14,292,659 $ (41,835) $ (59,288)
Net income 416,189
Cash dividends declared($.90 per share) (460,379)
Change in ESOP loan guarantee (Note 5) 6,091
Purchase of 11,636 treasury shares (11,636) (62,992) (409,135)
Pension liability adjustment (Note 5) (117,461)
Tax benefit of dividends paid to ESOP 7,000
-------- -------- ----------- ---------- -------------- -------------
Balances at December 31, 1993 502,682 762,032 13,846,334 (159,296) (53,197)
Net income 823,517
Unrealized gain from change in accounting
for marketable equity security, net of
income taxes of $180,000 (Note 2) $351,383
Cash dividends declared($.30 per share) (150,323)
Change in ESOP loan guarantee(Note 5) (43,552)
Purchase of 5,212 treasury shares (5,212) (7,297) (130,370)
Pension liability adjustment(Note 5) 119,085
ESOP credit 4,897
Change in unrealized gain on
marketable equity security 25,392
-------- -------- ----------- ---------- -------------- -------------
Balances at December 31, 1994 497,470 759,632 14,389,158 376,775 (40,211) (96,749)
Net income 1,960,681
Cash dividends declared ($.48 per share) (236,534)
Change in ESOP loan guarantee (Note 5) (266,251)
Purchase of 16,837 treasury shares (16,837) (26,637) (539,577)
Pension liability adjustment (Note 5) 12,634
Change in unrealized gain on marketable
equity security 58,389
-------- -------- ----------- ---------- -------------- -------------
Balances at December 31, 1995 $480,633 $732,995 $15,573,728 $435,164 $ (27,577) $(363,000)
======== ======== =========== ========== ============== =============
<FN>
See accompanying notes.
</FN>
</TABLE>
- 31 -
<PAGE>
<TABLE>
The Ohio Art Company and Subsidiaries
Consolidated Statements of Cash Flows
<CAPTION>
Year ended December 31
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $1,960,681 $ 823,517 $ 416,189
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Provision for depreciation and amortization 1,588,818 1,896,623 1,721,815
Provision (credit) for losses on accounts receivable 34,048 25,943 (96,584)
Gain on sale of property, plant and equipment (13,762) (7,053) (74,850)
Deferred federal income taxes 127,800 (168,000) 93,000
Increase (decrease) in scholarship obligation (1,579) 8,279 24,623
Credit for ESOP - 4,897 -
Changes in operating assets and liabilities:
Accounts receivable 387,798 (1,558,043) (771,577)
Inventories (2,503,471) 339,089 984,182
Accounts payable (1,242,334) 1,224,652 (1,132,300)
Prepaid expenses, accrued expenses and other liabilities 408,992 457,037 (2,005,132)
---------- ---------- ----------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 746,991 3,046,941 (840,634)
INVESTING ACTIVITIES
Purchases of plant and equipment (1,506,274) (1,226,833) (1,792,286)
Proceeds from sale of property, plant, and equipment 32,550 9,575 108,173
Changes in net cash value of life insurance (53,716) (44,613) (41,253)
---------- ---------- ----------
NET CASH USED IN INVESTING ACTIVITIES (1,527,440) (1,261,871) (1,725,366)
FINANCING ACTIVITIES
Borrowings 7,400,000 2,700,000 4,900,000
Repayments (7,400,000) (2,810,680) (5,019,720)
Cash dividends paid (236,534) (150,323) (460,379)
Purchase of treasury shares (583,051) (142,879) (483,763)
---------- ---------- ----------
NET CASH USED IN FINANCING ACTIVITIES (819,585) (403,882) (1,063,862)
</TABLE>
- 32 -
<PAGE>
<TABLE>
The Ohio Art Company and Subsidiaries
Consolidated Statements of Cash Flows
<CAPTION>
Year ended December 31
1995 1994 1993
<S> ---------- ---------- ----------
CASH AND CASH EQUIVALENTS <C> <C> <C>
Increase (decrease) during year (1,600,034) 1,381,188 (3,629,862)
At beginning of year 4,400,110 3,018,922 6,648,784
---------- ---------- ----------
CASH AND CASH EQUIVALENTS AT END OF YEAR $2,800,076 $4,400,110 $3,018,922
========== ========== ==========
Supplementary cash flow information
Interest paid $ 190,714 $ 126,122 $ 177,078
Income taxes paid $ 729,349 $ 18,302 $ 568,166
SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTION
During 1995, the Company was eligible to receive the death benefits of four life insurance policies
with net cash values totalling $51,534, which have been included in accounts receivable at December
31, 1995.
<FN>
See accompanying notes.
</FN>
</TABLE>
- 33 -
<PAGE>
The Ohio Art Company and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1995
1. ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of The Ohio
Art Company and its subsidiaries (the Company) after elimination of
significant intercompany accounts, transactions and profits.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those
estimates.
Cash Equivalents
Cash equivalents consist of investments with an original maturity of
three months or less when purchased.
Property, Plant and Equipment
Property, plant and equipment are stated on the basis of cost.
Depreciation and amortization are computed by the straight-line method
over the estimated useful lives of the respective assets.
Goodwill
Goodwill represents the excess of cost over equity in net assets of
businesses acquired. The portion of such excess which relates to
acquisitions prior to October 31, 1970 ($477,283) is not being amortized
because, in the opinion of the Company's management, there has been no
diminution in value. The remaining portion is being amortized over 40
years. Accumulated amortization is $476,056 and $455,054 at December
31, 1995 and 1994, respectively.
Product Development Costs
Costs related to the development of new products and changes to existing
products are charged to operations as incurred.
- 34 -
<PAGE>
The Ohio Art Company and Subsidiaries
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (continued)
Advertising and Sales Promotion
Advertising and sales promotion expenditures are charged to operations
in the year incurred. Advertising expense was approximately $4,189,000
in 1995, $3,000,000 in 1994, and $3,636,000 in 1993.
Net Income Per Share of Common Stock
Net income per share is computed based upon the average number of shares
outstanding during the year. Effective January 1, 1994, the Company
adopted new accounting for its Employee Stock Ownership Plan (ESOP)
(see Note 5). The adoption of this statement decreased the average
shares outstanding by 8,528 shares and 6,064 shares for unallocated ESOP
shares which increased earnings per share by $.07 and $.02 for the year
ended December 31, 1995 and 1994, respectively.
Reclassifications
Certain amounts from 1994 have been reclassified to conform to the
current year classifications.
2. MARKETABLE EQUITY SECURITY
Effective December 31, 1994, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 115, "Accounting for Certain Investments
in Debt and Equity Securities." The marketable equity security is
categorized as available for sale and as a result is stated at fair
value. Unrealized gains and losses, net of deferred income taxes, are
included as a component of stockholders' equity until realized. The
adoption of SFAS No. 115 resulted in an increase in stockholders' equity
of $351,383 (net of income taxes of $180,000).
3. LONG-TERM OBLIGATIONS
December 31
1995 1994
-------- --------
Long-term obligation--scholarships $246,527 $285,607
Long-term obligation--pension 57,725 72,206
Note payable by ESOP, guaranteed by
the Company (Note 5) 363,000 96,749
-------- --------
$667,252 $454,562
- 35 -
<PAGE>
The Ohio Art Company and Subsidiaries
Notes to Consolidated Financial Statements (continued)
3. LONG-TERM OBLIGATIONS (continued)
The Company has a credit agreement that provides for borrowings on a
revolving credit basis to May 1998 ($10,000,000) and to May 1996
($6,000,000) at the Bank's prime rate or a fixed rate based on the
federal funds rate plus 175 to 225 basis points. A quarterly facility
fee is payable equal to .125% of the unused $10,000,000 facility. Other
than borrowings by the Company's ESOP, no borrowings were outstanding at
December 31, 1995 and 1994.
The credit agreement contains certain financial covenants that require,
among other things, maintenance of minimum amounts and ratios of working
capital, minimum amounts of tangible net worth, maximum ratio of
indebtedness to tangible net worth and limits purchases of property,
plant and equipment.
The Company has recorded the present value of the long-term obligations
related to ETCH A SKETCHr scholarship contests conducted in 1985 and
1990. Future payments to the contest winners are payable by the
Company through 2012.
4. INCOME TAXES
The Company uses the liability method of accounting for income taxes.
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes. Significant components of the Company's deferred tax assets
and liabilities are as follows:
December 31
1995 1994
------ ------
(In Thousands)
DEFERRED TAX ASSETS
Inventories $ 233 $ 367
Allowance for uncollectible accounts receivable 136 150
Supplemental benefit accrual 116 61
Trademarks 50 44
Self insurance accrual 27 72
Advertising costs 25 52
Other 168 190
------ ------
755 936
- 36 -
<PAGE>
The Ohio Art Company and Subsidiaries
Notes to Consolidated Financial Statements (continued)
4. INCOME TAXES (continued)
December 31
1995 1994
------ ------
(In Thousands)
DEFERRED TAX LIABILITIES
Depreciation 524 583
Pension accrual 253 253
Unrealized gains on marketable equity security 225 195
------ ------
1,002 1,031
------ ------
Net deferred tax liabilities $ (247) $ (95)
====== ======
The above are reflected in the consolidated balance sheets as follows:
December 31
1995 1994
------ ------
Current deferred tax asset $ 640 $ 810
Noncurrent deferred tax liability (887) (905)
------ ------
$ (247) $ (95)
====== ======
Significant components of the provision (credit) for income taxes
attributable to operations are as follows:
Year ended December 31
1995 1994 1993
------ ------ ------
(In Thousands)
Federal:
Current $ 898 $ 588 $ (21)
Deferred 128 (168) 93
------ ------ ------
1,026 420 72
State and local 135 26 -
------ ------ ------
$1,161 $ 446 $ 72
====== ====== ======
- 37 -
<PAGE>
The Ohio Art Company and Subsidiaries
Notes to Consolidated Financial Statements (continued)
4. INCOME TAXES (continued)
The reasons for the difference between total income tax expense and the
amount computed by applying the statutory federal income tax rate to
income before income taxes follows:
Year ended December 31
1995 1994 1993
------ ------ ------
(In Thousands)
Tax expense at statutory federal
income tax rate $1,061 $ 432 $ 166
State and local income taxes 89 17 -
Effect of adoption of new method of
accounting for income taxes - - (100)
Other items (credit) 11 (3) 6
------ ------ ------
Total income tax expense $1,161 $ 446 $ 72
5. PENSION PLANS
The Company has pension plans covering substantially all of its
employees. Benefits provided by the plans are based on compensation,
years of service, and a negotiated rate per year of service for
collectively-bargained plans. The Company generally funds pension costs
based upon amortization of prior service costs over 25 years, but not in
excess of the amount deductible for income tax purposes. One plan,
which has a limited number of participants, is unfunded.
- 38 -
<PAGE>
<TABLE>
The Ohio Art Company and Subsidiaries
Notes to Consolidated Financial Statements (continued)
5. PENSION PLANS (continued)
The following table sets forth the plans' funded status and amounts recognized in the Company's consolidated
balance sheets at December 31:
<CAPTION>
1995 1994
-------------------------- --------------------------
Plans Whose Plans Whose Plans Whose Plans Whose
Assets Accumulated Assets Accumulated
Exceed Benefits Exceed Benefits
Accumulated Exceed Accumulated Exceed
Benefits Assets Benefits Assets
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation:
Vested benefits $ 8,344,674 $ 1,121,205 $ 7,636,909 $ 987,931
Nonvested benefits 81,352 11,925 94,509 1,468
----------- ----------- ----------- -----------
8,426,026 1,133,130 7,731,418 989,399
Effect of future salary increases 1,230,148 163,966 1,168,632 296,058
----------- ----------- ----------- -----------
Projected benefit obligation for service rendered
to date 9,656,174 1,297,096 8,900,050 1,285,457
Plan assets (principally invested in immediate
participation guaranteed fixed income insurance
contracts) at fair value 10,544,529 710,541 9,425,476 617,379
----------- ----------- ----------- ----------
Plan assets in excess of (less than) projected
benefit obligation 888,355 (586,555) 525,426 (668,078)
Unrecognized net (asset) liability at the
transition date (211,084) 289,517 (279,461) 319,416
Prior service cost not yet recognized in net
periodic pension cost 95,103 10,710 109,216 12,131
Unrecognized net (gain) loss 35,532 (47,759) 353,927 85,106
Adjustment required to recognize minimum liability (66,344) (120,592)
----------- ----------- ----------- -----------
Net pension asset (liability) $ 807,906 $ (400,431) $ 709,108 $ (372,017)
=========== =========== =========== ===========
</TABLE>
- 39 -
<PAGE>
<TABLE>
The Ohio Art Company and Subsidiaries
Notes to Consolidated Financial Statements (continued)
5. PENSION PLANS (continued)
<CAPTION>
1995 1994
-------------------------- --------------------------
Plans Whose Plans Whose Plans Whose Plans Whose
Assets Accumulated Assets Accumulated
Exceed Benefits Exceed Benefits
Accumulated Exceed Accumulated Exceed
Benefits Assets Benefits Assets
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Pension assets (liabilities) included in:
Prepaid expenses $ 807,906 $ 709,108
Accounts payable $ (349,206) $ (299,811)
Long-term obligations (51,225) (72,206)
----------- ----------- ----------- -----------
Net pension asset (liability) $ 807,906 $ (400,431) $ 709,108 $ (372,017)
=========== =========== =========== ===========
</TABLE>
- 40 -
<PAGE>
The Ohio Art Company and Subsidiaries
Notes to Consolidated Financial Statements (continued)
5. PENSION PLANS (continued)
In accordance with FASB Statement No. 87, "Employers' Accounting for
Pensions," the amounts relating to the minimum pension liability have
been recorded as follows at December 31:
1995 1994
--------- ---------
Minimum pension liability $ (66,344) $(120,592)
Intangible pension asset $ 24,558 $ 59,665
Equity reduction, net of deferred federal income
taxes of $14,216 in 1995 and $20,716 in 1994 $ 27,577 $ 40,211
Net periodic pension cost includes the following components:
Year ended December 31
1995 1994 1993
----------- ----------- -----------
Service cost--benefits earned
during the period $ 309,378 $ 342,690 $ 290,156
Interest cost on projected
benefit obligation 742,749 696,327 701,673
Return on plan assets (1,474,904) 221,873 (928,953)
Net amortization and deferral 617,028 (1,011,349) 150,962
----------- ----------- -----------
Net periodic pension cost $ 194,251 $ 249,541 $ 213,838
=========== =========== ===========
Actuarial assumptions:
Discount rate 7.5% 7.5% 6.5%
Long-term rate of return 8.5% 8.5% 7.5%
Rate of increase of future
compensation 5.5% 5.5% 5.5%
The Company has an Employee Stock Ownership Plan (ESOP) for eligible
employees. Effective January 1, 1994, the Company elected to adopt new
accounting for its ESOP in accordance with Statement of Position (SOP)
93-6 of the Accounting Standards Division of the American Institute of
Certified Public Accountants, issued in November 1993. During 1994,
7,126 shares were allocated to the employees, leaving 2,619 unallocated
shares in the ESOP at December 31, 1994. An additional 8,250 shares
were acquired by the ESOP during 1995. The fair market value of
unallocated shares is $576,050 at December 31, 1995. No unallocated
shares are committed to be released within one year. The ESOP has
outstanding borrowings which the Company has guaranteed. Accordingly,
the Company has recorded the loans as long-term obligations and as
reductions of stockholders' equity ($363,000 and $96,749 at December
31, 1995 and 1994, respectively).
- 41 -
<PAGE>
The Ohio Art Company and Subsidiaries
Notes to Consolidated Financial Statements (continued)
5. PENSION PLANS (continued)
Compensation expense for 1995 and 1994 measured using the fair market
value when the shares are committed to be released amounted to $1,098
and $204,897, respectively. Dividends paid on unallocated shares in the
trust are recorded as compensation rather than as dividends. ESOP
funding, as determined by the Board of Directors, amounted to $1,098,
$200,000, and $200,000 in 1995, 1994, and 1993, respectively.
6. INDUSTRY SEGMENTS
The Company is principally engaged in two lines of business which are
the manufacture and distribution of toys and the manufacture and sale of
custom lithographed products and molded plastic products to other
manufacturers and consumer goods companies. The toy segment principally
includes drawing activity toys, sports activity toys, pre-school
activity toys, and other inexpensive toys.
- 42 -
<PAGE>
<TABLE>
The Ohio Art Company and Subsidiaries
Notes to Consolidated Financial Statements (continued)
6. INDUSTRY SEGMENTS (continued)
Financial information relating to industry segments is as follows:
<CAPTION>
Depreciation
and
Operating Identifiable Amortization Capital
Business Segment Net Sales Earnings Assets Expense Expenditures
- ---------------------------- ---------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
1995
- ----
Toy Segment $36,356,222 $2,219,434 $14,064,941 $1,163,628 $ 952,512
Diversified Products Segment 10,997,919 1,661,952 4,604,486 425,190 553,762
----------- ---------- ----------- ---------- ----------
$47,354,141 3,881,386 18,669,427 $1,588,818 $1,506,274
=========== ========== ==========
General corporate amounts (558,781) 6,902,636
Interest expense (201,024)
---------- -----------
Totals $3,121,581 $25,572,063
========== ===========
1994
- ----
Toy Segment $28,849,075 $ 647,594 $11,385,344 $1,421,177 $ 634,923
Diversified Products Segment 11,346,736 1,185,294 5,231,255 475,446 591,910
----------- ---------- ----------- ---------- ----------
$40,195,811 1,832,888 16,616,599 $1,896,623 $1,226,833
=========== ========== ==========
General corporate amounts (479,631) 8,557,482
Interest expense (83,740)
---------- -----------
Totals $1,269,517 $25,174,081
========== ===========
</TABLE>
- 43 -
<PAGE>
<TABLE>
The Ohio Art Company and Subsidiaries
Notes to Consolidated Financial Statements (continued)
6. INDUSTRY SEGMENTS (continued)
<CAPTION>
Depreciation
and
Operating Identifiable Amortization Capital
Business Segment Net Sales Earnings Assets Expense Expenditures
- ---------------------------- ---------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
1993
- ----
Toy Segment $31,846,303 $ 114,260 $12,869,457 $1,271,240 $1,293,399
Diversified Products Segment 9,800,699 1,306,473 4,088,771 450,575 498,887
----------- ---------- ----------- ---------- ----------
$41,647,002 1,420,733 16,958,228 $1,721,815 $1,792,286
=========== ========== ==========
General corporate amounts (757,336) 5,437,537
Interest expense (175,208)
---------- -----------
Totals $ 488,189 $22,395,765
========== ===========
</TABLE>
- 44 -
<PAGE>
The Ohio Art Company and Subsidiaries
Notes to Consolidated Financial Statements (continued)
6. INDUSTRY SEGMENTS (continued)
Operating earnings are net sales less operating expenses directly
attributable to the segments and general corporate expenses which are
allocated to the segments. Identifiable assets by business segment
include all assets directly identified with those operations (accounts
receivable, inventories and property, plant and equipment and
intangibles). General corporate expenses consist of the costs of
operating the corporate headquarters and other corporate expenses not
directly attributable to the operations of the two segments.
Toy segment export sales from the United States, foreign royalty income,
and direct shipments from foreign manufacturers to foreign customers
included in consolidated revenues amounted to approximately $6,696,000,
$3,567,000, and $5,679,000 in 1995, 1994, and 1993, respectively, of
which approximately $2,595,000, $610,000, and $2,008,000 were to
customers in the European community. Identifiable assets located
outside the United States are less than 10% of consolidated assets at
December 31, 1995 and 1994.
Substantially all of the Company's accounts receivable are from toy
retailers, wholesalers, and other toy manufacturers. The Company has
credit insurance to cover a portion of its losses on accounts
receivable. The Company had net credit losses (recoveries) of $84,000,
($24,000), and $3,000 during 1995, 1994, and 1993, respectively. Net
toy segment sales includes approximately $14,200,000 in 1995 and
$12,310,000 in 1994 to two major retailers, and $15,200,000 in 1993 to
three major retailers.
7. OPERATING LEASES
The Company leases office space and equipment pursuant to operating
leases. Total rent expense is less than 1% of total revenues. The
lease term for the office space extends through April, 2006 with monthly
lease payments of $10,670. In addition, rent for the office lease is
subject to escalation based upon the Consumer Price Index. Future
commitments under the leases as of December 31, 1995 are as shown below:
- 45 -
<PAGE>
The Ohio Art Company and Subsidiaries
Notes to Consolidated Financial Statements (continued)
7. OPERATING LEASES (continued)
Office Equipment Total
---------- ---------- ----------
1996 $ 130,257 $ 59,843 $ 190,100
1997 133,270 9,721 142,991
1998 136,353 136,353
1999 139,507 139,507
2000 142,734 142,734
Thereafter 819,016 819,016
---------- ---------- ----------
$1,501,137 $ 69,564 $1,570,701
========== ========== ==========
8. COMMITMENT AND CONTINGENCY
At December 31, 1995, the Company has agreements to purchase lithography
equipment costing approximately $5,530,000. The Company intends to
partially finance the equipment acquisitions by short-term borrowings.
The Company has guaranteed up to a $600,000 note payable of a customer
with which the Company does a significant amount of business.
- 46 -
<PAGE>
Exhibit 22
THE OHIO ART COMPANY AND SUBSIDIARIES
Percentage
of Voting
Name of Subsidiaries and Jurisdiction Control Owned
of Incorporation by Registrant
------------------------------------- -------------
Strydel, Inc. (Ohio) 100%
Trinc Company (Ohio) 100%
- 47 -
<PAGE>
Exhibit 23
Consent of Independent Auditors
We consent to the incorporation by reference in this Annual Report
(Form 10-K) of The Ohio Art Company for the year ended December 31,
1995, of our report dated February 7, 1996, included in Exhibit 13 to
Form 10-K.
Our audit also included the financial statement schedule of The Ohio Art
Company and Subsidiaries listed in Item 14(a). This schedule is the
responsibility of the Company's management. Our responsibility is to
express an opinion based on our audits. In our opinion, the financial
statement schedule referred to above, when considered in relation to the
basic financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
ERNST & YOUNG LLP
Toledo, Ohio
February 7, 1996
- 48 -
<PAGE>
Exhibit 27
FINANCIAL DATA SCHEDULE
[ARTICLE] 5
[LEGEND]
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF INCOME AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
[/LEGEND]
[MULTIPLIER] 1
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-END] DEC-31-1995
[CASH] 2,800,076
[SECURITIES] 0
[RECEIVABLES] 7,538,264
[ALLOWANCES] 415,000
[INVENTORY] 6,082,533
[CURRENT-ASSETS] 17,561,072
[PP&E] 26,198,862
[DEPRECIATION] 20,735,232
[TOTAL-ASSETS] 25,572,063
[CURRENT-LIABILITIES] 7,185,984
[BONDS] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 480,633
[OTHER-SE] 16,351,310
[TOTAL-LIABILITY-AND-EQUITY] 25,572,063
[SALES] 47,354,141
[TOTAL-REVENUES] 49,230,121
[CGS] 30,756,599
[TOTAL-COSTS] 30,756,599
[OTHER-EXPENSES] 0
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 201,024
[INCOME-PRETAX] 3,121,581
[INCOME-TAX] 1,160,900
[INCOME-CONTINUING] 1,960,681
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 1,960,681
[EPS-PRIMARY] 4.07
[EPS-DILUTED] 4.07
</TABLE>
