SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from__________ to __________
Commission File Number 1-4438
O'SULLIVAN CORPORATION
(Exact name of registrant as specified in its charter)
Virginia 54-0463029
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1944 Valley Avenue, PO Box 3510
Winchester, Virginia 22601
(Address of principal executive offices) (Zip Code)
540-667-6666
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common stock - par value $ 1 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 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. [ ]
The aggregate market value of the voting stock held by non-affiliates of
the Registrant on March 8, 1996 (based on the last sale price on the
American Stock Exchange as of such date) was $164,246,020.
The number of shares of the registrant's Common Stock, Par Value $ 1,
outstanding as of March 8, 1996 was 16,424,602.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement for the Annual Meeting of
Shareholders on April 30, 1996 are incorporated by reference into Part III.
1
PART I
Item 1. BUSINESS
O'Sullivan Corporation ("O'Sullivan" or the "Corporation") is a Virginia
corporation originally organized in 1896 as O'Sullivan Rubber Company. In
1932 the Corporation was moved to Winchester, Virginia. In 1970 the
corporate name was changed from O'Sullivan Rubber Corporation to O'Sullivan
Corporation to acknowledge the increasing importance of plastics
manufacturing to the Corporation's operations.
Subsequent to the Corporation's name change through the early 1990's, the
Corporation concentrated on expansion of its plastics manufacturing
operations, both calendering and injection-molding. The expansion was
accomplished by adding additional capacity within the Corporation and the
acquisition or creation of several subsidiaries to gain facilities in other
regions of the United States. In 1986, the Corporation divested itself of
its rubber operations.
In 1994, the Corporation sold the injection-molding operations portion of
its plastics products segment. The sale involved primarily the inventories
and fixed assets of the Corporation associated with injection-molding
operations and the stock of a subsidiary corporation also involved in
injection-molding operations. The sale was for approximately $50 million
net of certain liabilities assumed by the purchaser. The disposal of this
portion of the Corporation's operations has been treated as a discontinued
operation in the accompanying financial statements.
In 1992, the Corporation created a subsidiary, Melnor Inc. ("Melnor"), to
acquire substantially all the assets of a corporation engaged in the water
sprinkler and lawn and garden business.
The Corporation's activities are now conducted in two business segments:
(i) calendered plastics products which manufactures calendered plastics
products for the automotive and specialty plastics manufacturing industries
and (ii) lawn and garden consumer products which is involved with the
manufacture and distribution of a wide range of lawn and garden products.
For financial information with respect to industry segments, see "Item 7 -
Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Note 13 of "Notes to Consolidated Financial Statements"
included elsewhere in this Form 10-K.
PLASTICS PRODUCTS BUSINESS
The Corporation's Plastics Products segment manufactures calendered
plastics products for the automotive and specialty plastics manufacturing
industries. Calendered plastics products manufactured include vinyl
sheeting for vehicular dashboard pads and door panels, swimming pool liners
and covers, notebook binders, luggage, upholstered furniture, golf bags,
floor tile, pond liners, protective clothing, mine curtains, boat and
automobile windows and medical grade materials. The Plastics Products segment
products are sold in markets in which there is competition from many
plastic manufacturers, both domestic and foreign. While no single
competitor offers all of the products produced by this segment, there are
2
many competitors for any single product. Major competitors include;
Canadian General Tower, Gencorp Inc., Achilles USA Inc., Nanya Plastics
Corporation, Intex Plastics Corporation, Borden, Inc. and HPG
International, Inc.
Distribution of the segment's products is by direct sales to other
manufacturers.
The normal production backlog of the Plastic Products segment is
approximately thirty to forty-five days. The Corporation has various long-
term contracts totaling several million dollars applicable to this segment,
but such contracts are not considered as firm orders until production
releases are received from customers. The business of the segment is not
seasonal.
All essential raw materials are readily available to the Plastics Products
segment. For critical raw materials, secondary sources of supply are
available if required. Major suppliers of raw materials to this segment
include the following companies; Geon Company, Occidental Chemical,
Aristech Chemicals, Witco Corporation, Goodyear Tire and Rubber Company,
Penn Colors and Toray.
This segment of the Corporation possesses significant technology in the
compounding, formulation and manufacture of its products.
A significant customer of the Plastics Products segment accounting for ten
percent or more of the segment's 1995 sales was Ford Motor Company.
CONSUMER PRODUCTS BUSINESS
The Corporation's Consumer Products segment has as a primary activity the
manufacture, assembly, sale and distribution of lawn and garden products.
The products produced and sold by this segment include; oscillating, rotary
and traveling sprinklers, hose storage units, watering timers, aqua guns,
air spray tanks and snow shovels. Secondary product lines representing
less than ten percent of sales volumes include humidification systems and
buy-sell distribution of ceiling fans and thermostats. The products of its
segment are sold in markets in which there is intense competition from many
lawn and garden products suppliers. While it is believed that no one
competitor offers the array of products offered by the segment, there are
numerous competitors for specific products. Major competitors include;
Rain Bird Corporation, Suncast Company, Gilmour Corporation and Nelson
Company.
All essential raw materials utilized by this segment are readily
available. Some raw materials are obtained from foreign sources and can be
obtained from secondary sources, if necessary. Purchased components are
generally designs that are readily available from several suppliers. Major
suppliers to this segment include; Computime, Ltd., Stax Ltd., Landen
Enterprises, Eurotec De Mexico, S.A. DE C.V., Montoi, S.A. DE C.V., and
CPC of Vermont.
The business in which this segment is involved is highly seasonal in
nature. Lawn and garden products are traditionally shipped to distribution
and retail outlets beginning in late-December or early-January and
continuing through the following May.
3
This segment holds many patents and trademarks for products produced and
sold. However, due to the rapidly changing nature of the segment's
business activity, the Corporation does not believe that the patents and
trademarks have any significant long-term value or provide any material
benefit to the long-term success of the segment's business operations.
Home Depot, Inc. was the only customer of the Consumer Products segment
accounting for ten percent or more of the segment's sales for 1995.
GENERAL
The Corporation anticipates no material effects on the capital
expenditures, earnings or competitive position of the Corporation's
businesses from the enactment or adoption of federal, state or local
environmental regulations. The Corporation has several ongoing
environmental programs, including recycling, waste reduction and
environmental audits. The Corporation also has proactive dialogues with
federal and state environmental agencies to insure continuing compliance
with environmental regulations.
The Corporation and its Subsidiaries currently have approximately 1,100
employees.
The Corporation and its Subsidiaries are not engaged in any material
transactions with customers or suppliers located outside North America.
Item 2. PROPERTIES
The Corporation owns approximately 663,000 square feet of manufacturing,
warehouse and office space on approximately 123 acres in Winchester,
Virginia; 76,000 square feet of manufacturing, warehouse and office space
on approximately six acres in Lebanon, Pennsylvania; 110,000 square feet of
manufacturing and warehouse space on approximately five acres in Newton
Upper Falls, Massachusetts; 85,000 square feet of manufacturing and
warehouse space on approximately thirteen acres in Yerington, Nevada;
82,000 square feet of manufacturing, warehouse and office space in
Brantford, Ontario, Canada.
The Corporation leases 29,250 square feet of warehouse space in St. Louis,
Missouri; 10,000 square feet of warehouse space in Yerington, Nevada and
347,000 square feet of manufacturing, warehouse and office space in
Moonachie, New Jersey. Operations formerly housed in the New Jersey
location were substantially relocated to Winchester, Virginia during 1995.
The Corporation also has sales offices located in Chicago, Illinois and
Bloomfield Hills, Michigan.
Management of the Corporation believes that unused capacity existed in both
segments of the Corporation's operations during 1995. Percentage
utilization of the Corporation's facilities is difficult to accurately
measure due to the Corporation's policy of adding facilities as required by
business conditions.
4
Item 3. LEGAL PROCEEDINGS
As of December 31, 1995, the Corporation and its Subsidiaries had no
material proceedings pending to which the corporations were a party or of
which any of their property was the subject.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were voted upon during the fourth quarter of 1995.
EXECUTIVE OFFICERS OF THE REGISTRANT
See information provided under Part III, item 10, included in this
Form 10-K.
5
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
SHAREHOLDER MATTERS
The principal market in which the Corporation's common stock is traded is
the American Stock Exchange. The stock is traded under the symbol OSL.
The quarterly price range of common stock and the quarterly dividends per
share for 1995 and 1994 are included as part of Note 19 of "Notes to
Consolidated Financial Statements" included elsewhere in this Form 10-K.
At December 31, 1995 the number of owners of the Corporation's common stock
was 3,000.
No change is anticipated regarding the Corporation's dividend policy.
There are no restrictions on the payment of dividends at the current time.
Item 6. SELECTED FINANCIAL DATA (FROM CONTINUING OPERATIONS)
1995 1994 1993 1992 1991
------------ ------------ ------------ ------------ ------------
Net sales $209,723,562 $194,974,264 $173,345,501 $125,776,914 $114,368,326
Net income 14,032,063 10,974,970 10,382,400 8,407,638 8,498,059
Net income
per common
share .85 .67 .63 .51 .52
Total
assets 149,996,525 144,528,888 144,365,419 121,996,656 101,144,600
Long-term
debt 51,745 1,652,996 1,501,834 4,871,664 19,719
Total debt 1,717,193 1,705,069 13,518,543 12,132,365 248,197
Cash dividends
per common
share .31 .28 .28 .28 .28
Return on
equity 13.2% 10.1% 10.0% 8.6% 8.5%
6
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS 1995 VERSUS 1994
Consolidated net sales from continuing operations for 1995 were $209.7
million compared to $195.0 million for 1994. Consolidated net income from
continuing operations for 1995 was $14.0 million, $ .85 per share, compared
to $11.0 million, $ .67 per share, for 1994.
Income tax expense for continuing operations was $9.6 million for 1995
compared to $7.1 million for 1994. The increase is due to higher pre-tax
income and an increase in the Corporation's effective tax rate from 39.4%
for 1994 to 40.7% for 1995. The increase in the effective tax rate is
primarily due to charges for state income taxes.
Other income increased by $929 thousand over 1994. The increase was
primarily due to additional interest income generated from investment of
funds received from the sale of the Corporation's Gulfstream Division.
Interest expense declined by approximately $750 thousand. The reduction in
interest expense was a result of the payoff in December, 1994 of several
debt instruments utilizing a portion of the funds received from the 1994
sale of the Gulfstream Division.
Plastics Products Segment
Net sales for the Plastics Products segment were $169.5 million for 1995 as
compared to $149.4 million for 1994. The 1995 net sales represent an
increase of $20.1 million or 13.4%. Approximately 70% of the sales
increase was from automotive-related products. The sales increase in the
automotive-related component of this segment was substantially a result of
product mix changes to shipments of products with greater incremental
prices. Competitive pressures in both automotive and industrial sales
components of this segment continue to preclude unit price increases except
for negotiated pass-throughs of raw material price increases. Approved
increases frequently lag several months behind increased costs incurred by
the Corporation.
The gross margin for this segment improved to 20.3% in 1995 from 18.7% in
1994. The margin improvement is a result of higher sales volumes and
reductions in variable manufacturing expenses.
Operating income for the segment increased by $7.8 million for the year
from $21.6 million for 1994 to $29.4 million for 1995. The increase is
primarily a result of the volume sales increases experienced in 1995 aided
by the improvements in gross margin and the significant reduction in
selling expenses.
Selling expenses for this segment were $4.9 million or 2.9% as a percent of
net sales for 1995, compared to $6.2 million or 4.2% as a percent of net
sales for 1994. The reduction in selling expenses is a result of
consolidations made within the selling area following the disposal of the
Corporation's Gulfstream Division in December of 1994 along with a
significant reduction in charges for doubtful accounts. General and
7
administrative expenses were $5.7 million or 3.4% of net sales for 1995,
compared to $5.2 million or 3.5% of net sales for 1994.
Management anticipates continuing sales volume increases for the Plastics
Products segment in 1996 due to increased market share rather than an
increase in the economy. Automotive-related products will likely provide
the greatest opportunity for increased sales.
Consumer Products Segment
Net sales for the Consumer Products segment were $40.2 million for 1995
compared to $45.5 million for 1994. The 1995 sales represent a decrease of
$5.3 million. Changes in customer purchasing patterns and dramatically
unfavorable weather conditions during 1995 caused sales to fall
considerably below sales levels expected by management.
This segment experienced a significant decline in its gross margin for 1995
as compared to 1994. The gross margin declined from 22.3% to 17.9%. The
decline was due to excess rework costs for purchased components, increases
in raw material prices over those anticipated and excess freight costs for
product deliveries from off-shore sources. Operating income for this
segment decreased by $3.1 million for 1995. The decrease can be directly
attributed to the substantial sales volume reductions experienced by this
segment during 1995.
Selling and warehousing expenses were $5.3 million for 1995 and $5.9
million for 1994. These amounts represent 13.0% and 12.9% of sales for
1995 and 1994, respectively. The dollar decrease in these costs is a
result of lower sales commission and advertising costs that are directly
related to sales volumes. General and administrative expenses for this
segment were $2.4 million for 1995 and $2.1 million for 1994. During 1995
this segment incurred charges of $756 thousand in connection with the
relocation of US operations.
Management expects improved results for this segment in 1996 due to
significant cost containment, productivity improvements and new product
introductions.
RESULTS OF OPERATIONS 1994 VERSUS 1993
Consolidated net sales from continuing operations for 1994 of $195.0
million were an increase of $21.7 million or 12.5% over 1993 net sales of
$173.3 million. Consolidated net income from continuing operations for
1994 was $11.0 million , $ .67 per share, compared to $10.4 million,
$ .63 per share for 1993.
Income tax expense for continuing operations was $7.1 million for 1994 and
$6.9 million for 1993. The effective tax rate fell slightly from 1993
(from 40.1% to 39.4%) due to a reduced level of state income tax expense.
8
Other income was substantially unchanged from 1993 to 1994. Interest
expense for 1994 declined by $66 thousand. In December, 1994 the
Corporation used a portion of the funds received from the sale of the
Gulfstream Division to retire several debt instruments. The full effect of
the debt reduction, in the form of reduced interest expense, was realized
in 1995.
Plastics Products Segment
Net sales for the Plastics Products segment increased by 12.5% from $132.8
million in 1993 to $149.4 million in 1994. Sales increases experienced by
this segment were primarily volume related since competitive and
contractual restrictions prohibited significant price increases during
1994.
The gross profit margin for the segment declined to 18.6% for 1994 from
20.8% for 1993. The margin was adversely affected by raw material prices
and mixed compound costs that increased at a rate greater than could be
recovered through pass throughs to customers and start up costs associated
with new and improved flexible vinyl sheeting compounds associated with new
programs to be launched in 1995.
Operating income for this segment declined by $1.5 million or 6.3% in 1994.
The decline was a result of the factors described in the preceding
paragraph along with increases in selling costs described below.
Selling expenses for 1994 were $6.2 million, 4.2% as a percent of sales and
$5.0 million, 3.8% as a percent of sales for 1993. The major cause of the
increased expense for 1994 was a substantial increase in charges for
doubtful accounts resulting from the financial failure of two customers of
the industrial component of the Plastics Product segment. General and
administrative expenses were $5.2 million or 3.5% of net sales for 1994 and
$4.7 million or 3.5% for 1993.
Consumer Products Segment
Net sales for the Consumer Products segment were $45.5 million for 1994,
an increase of $5.0 million or 12.4% over net sales of $40.5 million for
1993. Net sales increases for 1994 were primarily due to volume increases
for products sold to the markets served. Unit price increases were
negligible for the period due to competitive market pressures.
The gross profit margin for this segment improved during 1994 from 20.4% to
22.3%. Operating efficiency improvements during 1994 were primarily
responsible for the improved margin.
Operating income for this segment improved by $2.2 million for 1994. The
increase was a result primarily of the 12.4% net sales increase for the
year. Also contributing to the increase were the improvements in the gross
margin and reductions in general and administrative costs.
Selling and warehousing expenses were $5.9 million for 1994 and $5.7
million for 1993. The expenses represented 12.9% and 14.1% of net sales
for 1994 and 1993, respectively. General and administrative costs for the
segment were $2.1 million or 4.6% of net sales for 1994 and $2.5 million or
9
6.3% of net sales for 1993. The improvement in this area can be directly
attributed to reductions in administrative personnel with resulting
reductions in salaries, benefits and other associated overhead expense.
DISCONTINUED OPERATIONS
On December 2, 1994 the Corporation sold the portion of its business
identified as the Gulfstream Division. The assets sold consisted primarily
of those assets included with the former injection-molding part of the
Plastics Products segment. Those assets were the inventories and
property, plant and equipment of the injection-molding operations along
with the capital stock of Capital Plastics of Ohio, Inc., a subsidiary also
involved in the injection-molding business. Additional information
regarding discontinued operations is included with footnote number 16 of
these financial statements.
LIQUIDITY AND CAPITAL RESOURCES
Net cash flow for 1995 was approximately $700 thousand. Cash flows from
operating activities were $16.8 million for 1995. Increases in inventories
of both segments of the Corporation during 1995 were the major factor in
the minimal net cash flow for the year. Throughout 1995 the Plastics
Product segment increased certain elements of its inventories to enhance
machine utilization and to meet requirements for the launch of various
automotive-related production programs. The Consumer Products segment
experienced increased inventory levels due to changes in customer
purchasing patterns and reductions in customer demand due to weather-
related causes.
Capital expenditures for property, plant and equipment for 1995 were $10.2
million compared to $8.8 million for 1994. 1996 capital expenditures are
projected to be comparable to 1995. At December 31, 1995, the majority of
the projected outlay was uncommitted. Presently, the Corporation has
unused capacity in both business operating segments. Future capital
expenditures for the Corporation would be to provide additional capacity or
modernize equipment to meet customer demands for new or improved products
or production processes.
Total corporate debt was $1.7 million at both December 31, 1995 and 1994.
The Corporation has in place a $35 million line of credit that expires in
June, 1997. At December 31, 1995 the line of credit was unused except for
a $850 thousand letter of credit commitment.
The Corporation's Board of Directors has authorized the repurchase of up to
800 thousand shares of the Corporation's common stock as market conditions
permit.
Management of the Corporation believes that net cash flow from operating
activities, along with available financing capabilities will be adequate to
meet the Corporation's funding requirements for 1996.
10
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
This page left blank intentionally. See following pages for financial
statements.
11
O'SULLIVAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994
1995 1994
------------- -------------
ASSETS
Current Assets
Cash and cash equivalents $ 10,400,583 $ 9,701,801
Receivables 30,458,872 40,367,968
Inventories 42,196,303 32,475,205
Deferred income tax assets 2,262,636 2,642,523
Other current assets 3,562,325 3,485,292
------------- -------------
Total current assets $ 88,880,719 $ 88,672,789
------------- -------------
Property, Plant and Equipment $ 48,027,329 $ 44,605,639
------------- -------------
Intangibles $ 497,251 $ 751,609
------------- -------------
Other Assets $ 12,591,226 $ 10,498,851
------------- -------------
Total assets $ 149,996,525 $ 144,528,888
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt $ 1,665,448 $ 52,073
Accounts payable 15,714,112 16,729,891
Accrued expenses 10,574,317 13,941,121
------------- -------------
Total current liabilities $ 27,953,877 $30,723,085
------------- -------------
Long-Term Debt $ 51,745 $ 1,652,996
------------- -------------
Other Long-Term Liabilities $ 2,708,799 $ 2,006,974
------------- -------------
Deferred Income Tax Liabilities $ 3,519,139 $ 3,503,530
------------- -------------
Commitments and Contingencies $ -- -- $ -- --
------------- -------------
Shareholders' Equity
Common stock, par value $1.00 per share;
authorized 30,000,000 shares $ 16,510,402 $ 16,484,831
Additional paid-in capital 10,182,295 9,963,516
Retained earnings 89,453,514 80,539,058
Cumulative translation adjustments (220,566) (345,102)
Unrecognized pension costs, net of
deferred tax effect (162,680) -- --
------------- -------------
Total shareholders' equity $ 115,762,965 $ 106,642,303
------------- -------------
Total liabilities and
shareholders' equity $ 149,996,525 $ 144,528,888
============= =============
The accompanying notes are an integral part of the consolidated financial
statements.
12
O'SULLIVAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31, 1995, 1994 and 1993
1995 1994 1993
------------ ------------ ------------
Net sales $209,723,562 $194,974,264 $173,345,501
Cost of products sold 168,142,885 156,984,225 137,453,119
------------ ------------ ------------
Gross profit $ 41,580,677 $ 37,990,039 $ 35,892,382
------------ ------------ ------------
Operating expenses
Selling and warehousing $ 10,161,297 $ 12,077,019 $ 10,750,183
General and administrative 8,170,944 7,289,802 7,184,538
Relocation charge 755,930 -- -- -- --
------------ ------------ ------------
$ 19,088,171 $ 19,366,821 $ 17,934,721
------------ ------------ ------------
Income from operations $ 22,492,506 $ 18,623,218 $ 17,957,661
------------ ------------ ------------
Other income (expense)
Interest income $ 863,530 $ 180,217 $ 105,982
Interest expense (59,753) (811,676) (877,834)
Other, net 364,320 118,720 143,341
------------ ------------ ------------
$ 1,168,097 $ (512,739) $ (628,511)
------------ ------------ ------------
Income from continuing
operations before
income taxes and
cumulative effect of
accounting changes $ 23,660,603 $ 18,110,479 $ 17,329,150
Income taxes 9,628,540 7,135,509 6,946,750
------------ ------------ ------------
Income from continuing
operations before
cumulative effect of
accounting changes $ 14,032,063 $ 10,974,970 $ 10,382,400
------------ ------------ ------------
Discontinued operations:
Loss from discontinued
operations, net of taxes $ -- -- $ (125,126) $ (673,282)
Loss on disposal of
discontinued operations,
net of taxes -- -- (8,220,000) -- --
------------ ------------ ------------
$ -- -- $ (8,345,126) $ (673,282)
------------ ------------ ------------
Income before cumulative
effect of accounting
changes $ 14,032,063 $ 2,629,844 $ 9,709,118
Cumulative effect of accounting
changes -- -- -- -- 305,338
------------ ------------ ------------
Net income $ 14,032,063 $ 2,629,844 $ 10,014,456
============ ============ ============
13
O'SULLIVAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31, 1995, 1994 and 1993
(continued)
1995 1994 1993
------------ ------------ ------------
Net income per common share:
Income from continuing
operations $ .85 $ .67 $ .63
Loss from discontinued
operations -- -- (.01) (.04)
Loss on disposal of
discontinued operations -- -- (.50) -- --
Cumulative effect of
accounting changes -- -- -- -- .02
------------ ------------ ------------
Net income per common share $ 0.85 $ .16 $ .61
============ ============ ============
The accompanying notes are an integral part of the consolidated financial
statements.
14
O'SULLIVAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1995, 1994 and 1993
1995 1994 1993
------------ ------------ ------------
Cash Flows from Operating Activities
Net income $ 14,032,063 $ 2,629,844 $ 10,014,456
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 6,820,128 10,867,275 11,438,370
Provision for doubtful accounts 439,480 1,138,617 209,719
Deferred income taxes 486,782 (6,064,033) 938,091
(Gain) loss on disposal
of assets (38,090) 10,964,763 210,128
Interest accrual on zero
coupon notes payable 163,246 138,864 116,657
Interest accrual on zero
coupon notes receivable (196,025) 25,191 -- --
Cumulative effect of
accounting changes -- -- -- -- (305,338)
Foreign currency exchange
rate (gains) losses (237,018) 37,336 39,808
Unremitted loss from
joint venture 209,825 -- -- -- --
Provision for restructuring
and withdrawal of non
-productive assets -- -- -- -- (969,251)
Changes in operating assets
and liabilities net of
effect of business
acquisition:
Receivables 9,469,616 8,340,071 (14,970,510)
Inventories (9,721,098) (2,702,071) (4,192,871)
Other current assets (77,033) (1,169,491) (967,404)
Accounts payable (1,015,779) (4,791,149) 3,601,697
Accrued expenses (3,532,609) 4,023,149 (545,949)
------------ ------------ ------------
Net cash provided by operating
activities $ 16,803,488 $ 23,438,366 $ 4,617,603
------------ ------------ ------------
15
O'SULLIVAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1995, 1994 and 1993
(Continued)
1995 1994 1993
------------ ------------ ------------
Cash Flows from Investing Activities
Purchase of property, plant and
equipment $(10,172,585) $ (8,751,196) $(16,631,214)
Investment in and loan to joint
venture (1,128,362) -- -- -- --
Decrease in deposits 463,328 -- -- -- --
Purchase of intangible assets -- -- (211,275) (249,723)
Acquisition of business, less
cash acquired -- -- -- -- (1,153,643)
Disbursements on non-operating
notes receivable -- -- (150,000) -- --
Payments received from non-
operating notes receivable -- -- 250,894 729,176
Proceeds from disposal of assets 138,127 46,655,229 127,917
Other, net (652,530) 362,766 (284,421)
------------ ------------ ------------
Net cash provided by (used in)
investing activities $(11,352,022) $ 38,156,418 $(17,461,908)
------------ ------------ ------------
Cash Flows from Financing Activities
Changes in short-term debt $ -- -- $ (8,483,977) $ 1,734,995
Net change in line of credit
borrowings -- -- (13,000,000) (7,500,000)
Proceeds from long-term debt -- -- -- -- 25,000,000
Repayment of long-term debt (46,322) (28,622,307) (2,217,750)
Cash dividends paid (4,950,712) (4,615,539) (4,615,743)
Issuance of common stock 246,985 -- -- -- --
Purchase of common stock (2,635) (1,175) (3,504)
------------ ------------ ------------
Net cash provided by (used in)
financing activities $ (4,752,684) $(54,722,998) $ 12,397,998
------------ ------------ ------------
Increase (decrease) in cash and
cash equivalents $ 698,782 $ 6,871,786 $ (446,307)
------------ ------------ ------------
Cash and cash equivalents at
beginning of year $ 9,701,801 $ 2,830,015 $ 3,545,943
Less cash and cash equivalents
of discontinued operations -- -- -- -- (269,621)
------------ ------------ ------------
Cash and cash equivalents of
continuing operations at
beginning of year $ 9,701,801 $ 2,830,015 $ 3,276,322
------------ ------------ ------------
Cash and cash equivalents at
end of year $ 10,400,583 $ 9,701,801 $ 2,830,015
============ ============ ============
The accompanying notes are an integral part of the consolidated financial
statements.
16
O'SULLIVAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Years Ended December 31, 1995, 1994 and 1993
Additional
Common Paid-in Retained
Stock Capital Earnings
------------ ------------ ------------
Balance at January 1, 1993 $ 16,485,268 $ 9,967,758 $ 77,126,131
Net income -- -- -- -- 10,014,456
Purchase of common stock (320) (3,184) -- --
Dividends declared, $.28 per share -- -- -- -- (4,615,718)
Translation adjustments -- -- -- -- -- --
Unrecognized pension costs -- -- -- -- -- --
------------ ------------ ------------
Balance at December 31, 1993 $ 16,484,948 $ 9,964,574 $ 82,524,869
Net income -- -- -- -- 2,629,844
Purchase of common stock (117) (1,058) -- --
Dividends declared, $.28 per share -- -- -- -- (4,615,655)
Translation adjustments -- -- -- -- -- --
Unrecognized pension costs -- -- -- -- -- --
------------ ------------ ------------
Balance at December 31, 1994 $ 16,484,831 $ 9,963,516 $ 80,539,058
Net income -- -- -- -- 14,032,063
Issuance of common stock 25,811 221,174 -- --
Purchase of common stock (240) (2,395) -- --
Dividends declared, $.31 per share -- -- -- -- (5,117,607)
Translation adjustments -- -- -- -- -- --
Unrecognized pension costs -- -- -- -- -- --
------------ ------------ ------------
Balance at December 31, 1995 $ 16,510,402 $ 10,182,295 $ 89,453,514
============ ============ ============
17
O'SULLIVAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Years Ended December 31, 1995, 1994 and 1993
(Continued)
Cumulative Unrecognized
Translation Pension Shareholders'
Adjustments Costs Equity
------------ ------------ ------------
Balance at January 1, 1993 $ 34,085 $ -- -- $103,613,242
Net income -- -- -- -- 10,014,456
Purchase of common stock -- -- -- -- (3,504)
Dividends declared, $.28 per share -- -- -- -- (4,615,718)
Translation adjustments (135,817) -- -- (135,817)
Unrecognized pension costs -- -- (119,296) (119,296)
------------ ------------ ------------
Balance at December 31, 1993 $ (101,732) $ (119,296) $108,753,363
Net income -- -- -- -- 2,629,844
Purchase of common stock -- -- -- -- (1,175)
Dividends declared, $.28 per share -- -- -- -- (4,615,655)
Translation adjustments (243,370) -- -- (243,370)
Unrecognized pension costs -- -- 119,296 119,296
------------ ------------ ------------
Balance at December 31, 1994 $ (345,102) $ -- -- $106,642,303
Net income -- -- -- -- 14,032,063
Issuance of common stock -- -- -- -- 246,985
Purchase of common stock -- -- -- -- (2,635)
Dividends declared, $.31 per share -- -- -- -- (5,117,607)
Translation adjustments 124,536 -- -- 124,536
Unrecognized pension costs -- -- (162,680) (162,680)
------------ ------------ ------------
Balance at December 31, 1995 $ (220,566) $ (162,680) $115,762,965
============ ============ ============
The accompanying notes are an integral part of the consolidated financial
statements.
18
O'Sullivan Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Accounting Policies
Principles of Consolidation-The consolidated financial statements include
the accounts and transactions of the Corporation and all of its
subsidiaries. Intercompany accounts and transactions have been eliminated
in consolidation.
Investments in affiliates in which the Corporation has a 20% to 50%
interest are carried at cost, adjusted for the Corporation's proportionate
share of the affiliate's undistributed earnings or losses.
Cash and Cash Equivalents-The Corporation considers all highly liquid
investments with a maturity of three months or less at the time of purchase
to be cash equivalents.
Receivables and Concentration of Credit Risk-Receivables from trade
customers are generally due within thirty to sixty days. The Corporation
conducts periodic reviews of its major customers' financial condition and
grants trade credit based upon evaluations of the credit worthiness of each
customer. Management performs regular assessments of receivables and makes
estimates as to the adequacy of the allowance for doubtful accounts based
on historical data and knowledge of customers' financial condition. Credit
losses have been within the expectations of management. Receivable are
presented net of an allowance for doubtful accounts of $898,648 at December
31, 1995 and $884,467 at December 31, 1994. Accounts receivable balances
for automotive related business at December 31, 1995 and 1994 were
$13,825,514 and $9,507,357, respectively.
Inventories-Inventories are valued at the lower of cost or market, with
cost being determined substantially by the first-in, first-out or average
cost method.
Property, Plant and Equipment and Depreciation-Property, plant and
equipment are stated at historical cost, adjusted to current exchange rates
where applicable. Depreciation is computed primarily by the straight-line
method over the estimated useful lives of assets. The estimated useful
lives are twenty to forty years for buildings and three to fourteen years
for machinery and other equipment. Accelerated methods of depreciation are
utilized for tax purposes. Expenditures for repairs and maintenance are
charged to operations as incurred. Betterments and improvements that
extend the useful life of an asset are capitalized. Upon sale and other
dispositions of assets, the cost and related accumulated depreciation is
removed from the accounts and the resulting gain or loss is reflected in
operations.
Intangibles-Intangible assets are stated at historical cost less
accumulated amortization. Amortization is determined on a straight-line
basis over the estimated useful lives of the assets that have been
determined to range from two to seven years. Amortization expense for
1995, 1994 and 1993 was $266,718, $447,770 and $197,224, respectively.
19
Income Taxes-Deferred taxes are provided on a liability method whereby
deferred tax assets are recognized for deductible temporary differences and
tax credit carryforwards and deferred tax liabilities are recognized for
taxable temporary differences. Temporary differences are the differences
between the reported amounts of assets and liabilities and their tax bases.
Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or all
of the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates
on the date of enactment.
Advertising Costs-Costs incurred for producing and communicating
advertising are expensed when incurred, including costs incurred in
connection with cooperative advertising programs with distributors and
other customers. Advertising costs were $1,203,141 for 1995, $1,649,788
for 1994 and $1,216,008 for 1993.
Research and Development-Product and process research and development are
charged to expense as incurred.
Per Share Information-Net income and dividends per share were calculated on
the weighted average common shares outstanding for 1995, 1994 and 1993
which were 16,503,877, 16,484,879 and 16,485,103, respectively. Stock
options were not dilutive for 1995, 1994 or 1993.
Foreign Currency Translation-Financial statements for the Corporation's
foreign subsidiary are translated into US dollars at year-end exchange
rates as to assets and liabilities and weighted average exchange rates as
to revenues and expenses. The resulting translation adjustments are
recorded in shareholders' equity. Transaction gains and losses are
reflected in net income.
Pension Plans-The Corporation and its subsidiaries have retirement plans
that cover substantially all employees who meet certain eligibility
requirements. Employees not covered under a retirement plan maintained by
the Corporation and its subsidiaries are generally participants in
multiemployer plans sponsored by other entities. The plans include non-
contributory defined benefit plans providing benefits to certain salaried
employees based on years of service and final years' average earnings and
to certain hourly employees based on a dollar unit multiplied by years of
eligible service. The Corporation's policy is to fund at least the minimum
amounts required by the applicable governing bodies.
The Corporation also maintains a Retirement Savings Plan ("Plan") to
provide retirement benefits to employees not covered by a defined benefit
plan. The Plan provides that the Corporation will make a basic
contribution of three percent of eligible compensation for participants.
The Plan also provides that the Corporation will make an additional
contribution of up to two percent of eligible compensation if the
participant is making voluntary contributions to the Plan. Participants
may generally contribute up to five percent of their eligible compensation.
The Corporation is not required to make any contributions during a plan
year if it elects to not do so.
20
Postretirement Benefits-The Corporation provided health care benefits to
certain of its retired employees under a plan which was terminated January
1, 1993. Upon termination of the plan this group of retired employees was
allowed to continue to be covered by the Corporation's group insurance
plan. Effective January 1, 1993 the Corporation adopted Financial
Accounting Standards Board Statement No. 106 to account for its share of
the costs of benefits provided to this group. To effect adoption of
Statement No. 106, the Corporation accrued as of January 1, 1993 its share
of the estimated costs to insure this group of retirees. Prior to January
1, 1993, the Corporation expensed its share of these expenses as they were
incurred.
Reclassification of Amounts-Certain amounts for 1994 and 1993 have been
reclassified to reflect comparability with account classifications for
1995.
2. Nature of Operations, Risks and Uncertainties
The Corporation and its subsidiaries are manufacturers and distributors of
calendered plastics products and lawn and garden products. A significant
portion of the Corporation's businesses are conducted in North America.
Reference should be made to Note 13 which provides further information as
to the Corporation's operations.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from
those estimates.
3. Inventories
Inventories at December 31 were composed of the following:
1995 1994
------------ ------------
Finished goods $ 11,801,242 $ 8,848,411
Work in process 10,754,865 7,581,465
Raw materials 16,373,017 13,163,840
Supplies 3,267,179 2,881,489
------------ ------------
$ 42,196,303 $ 32,475,205
============ ============
Slow-moving inventories at December 31, 1995 amounted to $1,268,587, less a
reserve of $98,959. At December 31, 1994 slow-moving inventories amounted
to $1,044,138 less a reserve of $329,906. Slow-moving inventories is an
estimate of inventory held in excess of one year's requirements, based on
historical sales volumes.
21
4. Property, Plant and Equipment
Property, plant and equipment at December 31 were composed of the
following:
1995 1994
------------ ------------
Land $ 1,262,754 $ 1,243,761
Buildings 26,898,482 23,980,895
Machinery and equipment 67,730,663 61,457,280
Transportation equipment 3,626,921 3,533,039
------------ ------------
$ 99,518,820 $ 90,214,975
Less accumulated depreciation 51,491,491 45,609,336
------------ ------------
$ 48,027,329 $ 44,605,639
============ ============
Depreciation expense totaled $6,553,410, $10,419,505 and $11,241,146 in
1995, 1994 and 1993, respectively.
5. Accrued Expenses
Accrued expenses at December 31 were composed of the following:
1995 1994
------------ ------------
Accrued compensation $ 2,633,871 $ 2,368,084
Employee benefits 1,447,905 1,983,227
Contingency reserve for
discontinued operations 2,417,252 5,543,042
Dividends payable 1,319,419 1,153,614
Other accrued expenses 2,755,870 2,893,154
------------ ------------
$ 10,574,317 $ 13,941,121
============ ============
The contingency reserve for discontinued operations is an allowance for
potential adjustments relating to the ultimate outcome of the Corporation's
sale of the Gulfstream Division.
6. Debt
December 31,
1995 1994
Long-Term Debt ------------ ------------
Unsecured non-interest bearing promissory
note payable to Melnor Industries, Inc.
discounted at 9.0% due on November 24, 1996.
The principal amount of the note is
$ 1,463,037. $ 1,340,738 $ 1,360,945
22
December 31,
1995 1994
------------ ------------
Non-interest bearing obligation payable to
Melnor Industries, Inc. discounted at 9.0%.
Payment is contingent upon Melnor Industries,
Inc. satisfying its obligation under the New
Jersey Environmental Cleanup Responsibility
Act and the release by the State of the
escrow fund of $300,000 established to fund
environmental cleanup activities.
276,331 252,632
Notes payable from Melnor Inc. to equipment
finance companies due in monthly payments
totaling $223 including interest at rates
from 4.9% to 5.1%. The notes are secured by
equipment with a book value of $9,600. 5,687 7,754
Capital lease obligations 94,437 83,738
------------ ------------
$ 1,717,193 $ 1,705,069
Less current maturities 1,665,448 52,073
------------ ------------
$ 51,745 $ 1,652,996
============ ============
Long-term debt matures as follows:
1996 $ 1,665,448
1997 35,955
1998 15,790
------------
$ 1,717,193
============
Interest incurred and capitalized are as follows:
1995 1994 1993
--------- --------- ---------
Interest incurred $ 143,825 $ 914,211 $ 959,226
Less interest capitalized 84,072 102,535 81,392
--------- --------- ---------
$ 59,753 $ 811,676 $ 877,834
========= ========= =========
The Corporation has a $35,000,000 unsecured line of credit through First
Union National Bank of Virginia to support general corporate activities.
Interest rates for the line of credit vary based on the Corporation's
choice of rate options provided by the lender. All available rates are at
or below prevailing prime interest rates. The line of credit matures June
30, 1997. At December 31, 1995 the Corporation has utilized $850,000 of
the line of credit to provide a standby letter of credit in that amount for
a subsidiary corporation. The Corporation is also the guarantor of a
commercial letter of credit for a subsidiary corporation in the amount of
$371,674.
23
7. Investment in Unconsolidated Joint Venture
The Corporation acquired a 49% equity interest in Keifel Technologies, Inc.
("Keifel") during 1995. Keifel designs, manufactures and distributes
thermoforming and radio frequency welding machines and related machinery
and tools. Financial information for Keifel is as follows:
Income Statement Data For The Period August 9, 1995 Through
December 31, 1995
Net Sales $ 213,312
Gross Loss $ (27,439)
Net Loss $ (428,214)
Corporation's share of net loss $ (209,825)
Balance Sheet Data at December 31, 1995
Assets
Current assets $ 736,317
Property, plant and equipment, net 1,525,028
Other assets 9,500
------------
Total assets $ 2,270,845
============
Liabilities and Equity
Current liabilities $ 399,059
Notes payable 1,800,000
Shareholders' equity 71,786
------------
Total liabilities and equity $ 2,270,845
============
Corporation's share of equity $ 35,175
============
8. Income Tax Matters
Pretax income from operations for the years ended December 31, 1995, 1994
and 1993 was taxed by the following jurisdictions:
1995 1994 1993
------------ ------------ ------------
Domestic $ 22,800,687 $ 16,934,578 $ 15,741,703
Foreign 859,616 1,175,901 1,587,447
------------ ------------ ------------
$ 23,660,303 $ 18,110,479 $ 17,329,150
============ ============ ============
24
Effective January 1, 1993, the Corporation adopted Statement of Financial
Standards No. 109, Accounting for Income Taxes. The adoption of Statement
No. 109 changes the Corporation's method of accounting for income taxes
from the deferred method to a liability method. Under the deferred method
the Corporation deferred the past tax effects of a timing difference
between financial reporting and tax reporting. The liability method
requires the recognition of deferred tax assets and liabilities for the
expected future tax consequences of temporary differences between the
reported amounts of assets and liabilities and their tax bases.
The cumulative effect of the adoption of Statement No. 109 was to increase
net income determined for 1993 by $680,488. Financial statements for prior
years have not been restated.
Net deferred tax liabilities at December 31, 1995 and 1994 consisted of the
following components:
1995 1994
------------ ------------
Deferred tax assets:
Provision for doubtful accounts $ 279,344 $ 277,708
Employee benefits 1,580,115 1,487,986
Inventory basis differences 191,775 189,615
Contingency reserve-
discontinued operations 966,901 1,330,621
Other 328,796 308,348
------------ ------------
$ 3,346,931 $ 3,594,278
------------ ------------
Deferred tax liabilities:
Property, plant and equipment $ 4,181,375 $ 4,093,935
Like-kind exchange 254,856 254,856
Other 167,203 106,494
------------ ------------
$ 4,603,434 $ 4,455,285
------------ ------------
$ (1,256,503) $ (861,007)
============ ============
The deferred tax amounts mentioned above have been classified on the
accompanying balance sheets as of December 31, 1995 and 1994 as follows:
Noncurrent (liabilities) $ (3,519,139) $ (3,503,530)
Current assets 2,262,636 2,642,523
------------ ------------
$ (1,256,503) $ (861,007)
============ ============
25
The provision for income taxes charged to operations for the years ended
December 31, 1995, 1994 and 1993 consists of the following:
1995 1994 1993
------------ ------------ ------------
Current:
Federal $ 6,728,076 $ 5,478,787 $ 4,807,962
Foreign 301,072 472,492 611,451
State 2,112,610 960,462 1,449,583
------------ ------------ ------------
$ 9,141,758 $ 6,911,741 $ 6,868,996
------------ ------------ ------------
Deferred:
Federal $ 403,589 $ 190,369 $ 29,886
Foreign 28,853 21,387 - -
State 54,340 12,012 47,868
------------ ------------ ------------
$ 486,782 $ 223,768 $ 77,754
------------ ------------ ------------
$ 9,628,540 $ 7,135,509 $ 6,946,750
============ ============ ============
The income tax provision differs from the amount of income tax determined
by applying the US federal income tax rate to pretax income for the years
ended December 31, 1995, 1994 and 1993 due to the following:
1995 1994 1993
% Income % Income % Income
Before Before Before
Taxes Taxes Taxes
-------- -------- --------
Computed "expected" tax expense 35.0% 35.0% 35.0%
Increases (reductions) in taxes resulting from:
Income taxed at lower US federal rate -- -- (.6%) (.6%)
State taxes, net of federal benefit 6.0% 3.5% 5.6%
Higher rate on earnings of foreign operations .1% .5% .3%
Federal tax credits -- -- (.4%) (.4%)
Other (.4%) 1.4% .2%
-------- -------- --------
40.7% 39.4% 40.1%
======== ======== ========
9. Benefit Plans
Defined Benefit Plans
The net pension cost for defined benefit plans included the following
components:
1995 1994 1993
----------- ----------- -----------
Benefits earned during the year $ 100,835 $ 228,417 $ 242,837
Interest cost on projected
benefit obligation 607,454 678,236 654,682
Actual (return) on assets (1,082,007) (222,158) (592,401)
Net amortization and deferral 549,493 (312,142) 94,403
Settlement (gain) (81,954) (92,961) -- --
----------- ----------- -----------
Net pension cost $ 93,821 $ 279,392 $ 399,521
=========== =========== ===========
26
The funded status of the defined benefit pension plans as of December 31,
1995 was as follows:
Overfunded Underfunded
------------ ------------
Actuarial present value:
Vested benefit obligation $ 2,334,090 $ 6,193,084
Nonvested benefit obligation -- -- 101,795
------------ ------------
Accumulated benefit obligation $ 2,334,090 $ 6,294,879
Effect of projected compensation
increases -- -- 269,707
------------ ------------
Projected benefit obligation $ 2,334,090 $ 6,564,586
Fair value of plan assets 2,860,196 5,288,778
------------ ------------
Plan assets in excess of (less than)
projected benefit obligation $ 526,106 $ (1,275,808)
Unrecognized net loss 144,980 80,676
Unrecognized prior service costs -- -- 594,823
Unrecognized net (asset) obligation
at initial adoption of FAS 87 (253,080) (3,268)
Adjustment required to recognize
minimum liability -- -- (691,139)
------------ ------------
Prepaid (accrued) pension cost $ 418,006 $ (1,294,716)
============ ============
The funded status of the defined benefit pension plans as of December 31,
1994 was as follows:
Overfunded Underfunded
------------ ------------
Actuarial present value:
Vested benefit obligation $ 2,792,538 $ 4,968,242
Nonvested benefit obligation -- -- 196,544
------------ ------------
Accumulated benefit obligation $ 2,792,538 $ 5,164,786
Effect of projected compensation
increases -- -- 312,964
------------ ------------
Projected benefit obligation $ 2,792,538 $ 5,477,750
Fair value of plan assets 3,572,189 4,553,633
------------ ------------
Plan assets in excess of (less than)
projected benefit obligation $ 779,651 $ (924,117)
Unrecognized net (gain) (141,839) (363,643)
Unrecognized prior service costs -- -- 567,526
Unrecognized net (asset) obligation
at initial adoption of FAS 87 (371,578) 26,921
Adjustment required to recognize
minimum liability -- -- (142,333)
------------ ------------
Prepaid (accrued) pension cost $ 266,234 $ (835,646)
============ ============
27
Discount rates for the plans ranged from 7% to 8%. The assumed long-term
rates of return on plan assets were also 7% to 8%. The assumed rate of
increase in future compensation levels was 7%. The unrecognized asset
(liability) at the initial adoption of FAS 87 is being amortized on a
straight-line basis over the average remaining service period of plan
participants. Plan assets consist of listed common stocks, corporate and
government bonds and short-term investments.
Retirement Savings Plan
The expense associated with the Retirement Savings Plan was $1,312,222 for
1995, $1,268,087 for 1994 and $1,152,278 for 1993.
Deferred Compensation Plan
During 1985, the Corporation initiated a deferred compensation program for
key employees of the Corporation. Under this program, the Corporation has
agreed to pay each covered employee a certain sum annually for fifteen
years upon their retirement or, in the event of their death, to their
designated beneficiary. A benefit is also paid if the employee terminates
employment (other than by his voluntary action or discharge for cause)
before they attain age 65. In that event, the amount of the benefit
depends on the employee's years of service with the Corporation (with full
benefit paid only if the employee has completed 25 years of service). The
Corporation has purchased individual life insurance contracts with respect
to each employee covered by this program. The Corporation is the owner and
beneficiary of the insurance contracts. The employees are general
creditors of the Corporation with respect to these benefits. The expense
associated with the Deferred Compensation plan was $397,798 for 1995,
$295,299 for 1994 and $196,064 for 1993.
Postretirement Benefit Plan
At January 1, 1993 the Corporation adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions." This statement requires the Corporation to
recognize the estimated costs of providing certain postretirement benefits
to former employees of the Corporation. The Corporation elected to
recognize the transition obligation immediately as the effect of an
accounting change. This change resulted in a one-time charge to income in
1993 of $375,150, net of deferred income taxes of $239,850.
Annual net postretirement benefit costs are determined on an actuarial
basis. Net periodic postretirement benefit cost included the following
components for the years ended December 31, 1995, 1994 and 1993:
1995 1994 1993
---------- ---------- ----------
Interest expense on accumulated
postretirement benefit obligation $ 27,000 $ 29,000 $ 40,000
Other amortization and deferrals (16,000) (12,000) (95,000)
---------- ---------- ----------
$ 11,000 $ 17,000 $ (55,000)
========== ========== ==========
28
Postretirement benefit obligations at December 31, 1995 and 1994, none of
which are funded, are summarized as follows:
1995 1994
------------ ------------
Accumulated postretirement
benefit obligation, retirees $ 394,000 $ 387,000
Plan assets -- -- -- --
------------ ------------
Accumulated postretirement benefit
obligation in excess of plan assets $ 394,000 $ 387,000
Unrecognized transition obligation -- -- -- --
Unrecognized net experience losses (gains) -- -- -- --
------------ ------------
Accrued postretirement benefit obligation $ 394,000 $ 387,000
============ ============
For measurement purposes, a 14% annual rate of increase in per capita
health care costs of covered benefits was assumed for 1995, with such
annual rate of increase gradually declining to 6% in 2003.
10. Leases
The Corporation and its subsidiaries lease various plant and warehouse
facilities along with various equipment. Leases for the plant and
warehouse facilities and capitalized leases for machinery and equipment
generally require the payment of appropriate taxes, insurance and
maintenance costs. Most noncapitalized leases, except for the lease of
facilities in New Jersey by a subsidiary, are cancelable within a limited
period of time. The facility in New Jersey is leased under a noncancelable
agreement that expires June 30, 1998.
Minimum
Rental Capitalized
Commitments Leases
------------ ------------
1996 $ 6,050 $ 56,245
1997 151,564 38,720
1998 69,507 16,102
------------ ------------
$ 227,121 $ 111,067
============
Less amount representing interest 16,630
------------
Present value of net minimum lease payments $ 94,437
============
Net rental expense for all non-capitalized leases for the years ended 1995,
1994, and 1993 was $738,588, $858,213 and $849,963, respectively.
11. Research and Development
Research and development costs charges to expense were $3,545,330 in 1995,
$3,423,175 in 1994 and $3,331,796 in 1993.
29
12. Commitments and Contingencies
Environmental Matters
The Corporation continues to modify, on an ongoing, regular basis, certain
of its processes which may have an environmental impact. The Corporation's
efforts in this regard include the removal of many of its underground
storage tanks and the reduction or elimination of certain chemicals and
wastes in its operations. Although it is very difficult to quantify the
potential impact of compliance with environmental protection laws, the
Corporation's financial statements reflect the cost of these ongoing
modifications. Management believes that the continuing costs to the
Corporation of environmental compliance will not result in a material
adverse effect on its future financial condition or results of operations.
13. Business Segment Information
The Corporation's operations are classified principally into two business
segments; Calendered Plastics Products ("Plastics Products") and Lawn and
Garden Consumer Products ("Consumer Products"). The Plastics Products
segment primarily involves the manufacture of calendered plastics products
for the automotive and specialty plastics manufacturing industries. The
Consumer Products segment primarily involves the manufacture and
distribution of a wide range of lawn and garden products. Operating profit
represents net sales less operating expenses for each segment and excludes
general corporate expenses and non-operating revenues and expenses.
Identifiable assets for each segment represent those assets used in the
Corporation's operations and exclude general corporate assets. General
corporate assets include cash, investments and other non-operating assets.
Net sales for the Plastics Products segment to the divisions and
subsidiaries of Ford Motor Company amounted to $40,622,615 (19.4% of net
sales) in 1995, $24,385,299 (12.5% of net sales) in 1994 and $13,374,601
(7.7% of net sales) in 1993.
Receivables at December 31, 1995, 1994 and 1993 from Ford Motor Company
were $6,275,579, $3,396,054 and $2,085,303, respectively.
30
Business Segment Information
1995 1994 1993
Net Sales By Classes of Similar ------------ ------------ ------------
Products
Plastics Products $169,455,886 $149,438,108 $132,832,228
Consumer Products 40,267,676 45,536,156 40,513,273
------------ ------------ ------------
Total Net Sales $209,723,562 $194,974,264 $173,345,501
============ ============ ============
Operating Profit
Plastics Products $ 29,443,430 $ 21,630,468 $ 23,085,147
Consumer Products 1,200,708 4,282,552 2,057,052
------------ ------------ ------------
Total Operating Profit $ 30,644,138 $ 25,913,020 $ 25,142,199
General Corporate Expenses 7,957,829 7,289,802 7,184,538
Non-Operating Revenue (Expense) 974,294 (512,739) (628,511)
------------ ------------ ------------
Income From Continuing
Operations Before Income
Taxes and Cumulative Effect
of Accounting Changes $ 23,660,603 $ 18,110,479 $ 17,329,150
============ ============ ============
Identifiable Assets
Plastics Products $ 91,139,594 $ 92,203,867 $ 99,706,260
Consumer Products 30,056,412 27,318,222 25,394,702
------------ ------------ ------------
Total Identifiable Assets $121,196,006 $119,522,089 $125,100,962
General Corporate Assets 28,800,519 25,006,799 19,264,457
------------ ------------ ------------
Total Assets-Continuing
Operations $149,996,525 $144,528,888 $144,365,419
============ ============ ============
Capital Expenditures
Plastics Products $ 7,617,926 $ 7,477,833 $ 15,193,167
Consumer Products 2,382,011 1,205,377 1,351,516
General Corporate 172,648 67,986 86,531
------------ ------------ ------------
Total Capital Expenditures $ 10,172,585 $ 8,751,196 $ 16,631,214
============ ============ ============
Depreciation and Amortization
Plastics Products $ 4,391,048 $ 8,644,205 $ 9,651,506
Consumer Products 1,958,777 1,719,307 1,402,596
General Corporate 470,303 503,763 384,268
------------ ------------ ------------
Total Depreciation and
Amortization $ 6,820,128 $ 10,867,275 $ 11,438,370
============ ============ ============
31
14. Incentive Stock Option Plan
1985 Incentive Stock Option Plan
The Corporation has an incentive stock option plan begun January 29, 1985
under which options were granted to certain key employees for the purchase
of the Corporation's common stock. The plan expired on January 28, 1995.
The original number of shares authorized under the plan totaled 50,000
shares. Antidilutive provisions in the plan required an increase in
authorized shares to 165,886 shares for stock dividends and distributions
that occurred during 1989, 1988, 1987, 1986 and 1985. The option price
covered by an option could not be less than 100% of fair market value of
the common stock on the date of grant.
As of December 31, 1995, options for 96,965 shares remain unexercised.
No options were granted in 1995 or 1994. Options for 1,000 shares at an
exercise price of $10.50 per share were granted during 1993. Options for
25,811 at an average price of $9.57 were exercised during 1995. No options
were exercised during 1994 or 1993. Options for 30,286 shares during 1995,
7,956 shares during 1994 and 2,000 shares during 1993 were forfeited.
Since the plan expired on January 28, 1995 all shares reserved for future
option grants were canceled. Although the 1985 incentive stock option plan
has expired, those options previously granted may be exercised by the
individual recipients until the options expire, normally ten years after
the date of the original grant.
1995 Stock Option Plan
During 1995 the Corporation adopted a new incentive stock option plan under
which options may be granted to certain key employees for the purchase of
the Corporation's common stock. The effective date of the Plan was
February 7, 1995 with an expiration date of February 6, 2005. The Plan
reserves for issuance an aggregate of 200,000 shares of the Corporation's
common stock. The option price for options granted cannot be less than
100% of fair market value of the common stock on the date of the grant.
The Plan contains an antidilutive provision providing for adjustments to
the options previously granted in the event of changes in the Corporation's
capital structure.
Options for 102,000 shares at an exercise price of $10.31 were issued
during 1995. No options were exercised during 1995. At December 31, 1995
98,000 shares were reserved for the grant of future options.
1995 Outside Directors Stock Option Plan
During 1995 the Corporation adopted an incentive stock plan under which
options may be granted to members of the Corporation's Board of Directors
for the purchase of the Corporation's common stock. The effective date of
the Plan was April 25, 1995 with an expiration date of April 24, 2005.
The Plan reserves for issuance an aggregate of 200,000 share of the
Corporation's common stock. Each eligible director received an option for
10,000 shares common stock on the effective date of the Plan. On each
April 25 thereafter each eligible director will receive an option for 1,000
shares of common stock. Directors who become eligible after April 25, 1995
will receive an option for 10,000 shares as of the date they become
32
eligible for the Plan and will receive an option for 1,000 shares on each
April 25 thereafter. The option price for options granted cannot be less
than 100% of fair market value of the common stock on the date of the
grant. The plan contains an antidilutive provision providing for
adjustments to the options previously granted in the event of changes in
the Corporation's capital structure.
Options for 80,000 shares at an exercise price of $10.31 were issued during
1995. No options were exercised during 1995. At December 31, 1995 120,000
shares were reserved for the grant of future options.
15. Fair Value of Financial Instruments
The Corporation estimates that each category of financial instruments;
including cash, trade receivables and payables, investments and debt
instruments, approximate current value at December 31, 1995 and 1994.
16. Discontinued Operations
On December 2, 1994 the Corporation sold certain specified assets of the
Corporation's Gulfstream Division, which was part of the Corporation's
plastics products business segment, to Automotive Industries Holding, Inc.
The assets sold consisted primarily of property, plant and equipment,
inventories and the capital stock of Capitol Plastics of Ohio, Inc., a
subsidiary of O'Sullivan Corporation. In addition, certain specified
liabilities, consisting primarily of employee compensation payables were
assumed by Automotive Industries Holding, Inc. The Corporation received
$46,656,382 in cash and $4,000,000 in an unsecured promissory note.
The loss on disposal of the division of $8,220,000 (net of income tax
benefit of $5,480,000) represented the loss on disposal of the assets of
the division, along with expenses associated with disposal activities,
including severance costs, environmental clean-up costs, professional fees
and various other costs associated with the disposal, net of the operating
income of $1,289,064, during the phase-out period.
Income (loss) from the discontinued operations of the Gulfstream Division
is shown separately in the accompanying income statements. The income
statement for the year ended December 31, 1993 has been restated to show
the results of the Gulfstream Division separately from continuing
operations. Income taxes (benefit) applicable to the years ended December
31, 1994 and 1993 were $(86,439) and $141,614.
Net sales of the Gulfstream Division were $149,595,597 and $118,910,213
for the years ended December 31, 1994 and 1993. These amounts are not
included in net sales in the accompanying income statements.
33
17. Supplemental Cash Flow Information
Supplemental Disclosure of Cash Flow Information
1995 1994 1993
------------ ------------ ------------
Cash payments for interest,
net of interest capitalized $ 59,753 $ 3,199,018 $ 2,028,606
------------ ------------ ------------
Cash payments for income taxes $ 8,373,829 $ 8,797,775 $ 7,964,853
------------ ------------ ------------
Supplemental Schedule of Noncash Investment Activities
The Corporation's 1993 business acquisition involved the following:
Fair value of assets acquired, other than
cash and cash equivalents $ 8,173,416
Liabilities assumed 7,019,773
------------
Cash payments made $ 1,153,643
------------
In 1994, the Corporation received a note receivable of $4,000,000 as part
of the proceeds from the sale of assets of discontinued operations.
34
18. Supplemental Financial Data (Unaudited)
QUARTER ENDED
------------------------------------------------------
1995 March 31 June 30 September 30 December 31
------------ ------------ ------------ ------------
Net sales $ 55,052,191 $ 57,070,658 $ 48,551,668 $ 49,049,045
Gross profit $ 12,191,603 $ 11,280,312 $ 8,736,647 $ 9,372,115
Net income $ 4,083,884 $ 3,963,481 $ 2,784,742 $ 3,199,956
Earnings per share $ .25 $ .24 $ .17 $ .19
Dividends declared $ .07 $ .08 $ .08 $ .08
Market price per
share:
High 10 5/8 12 3/8 12 11 7/8
Low 9 1/4 9 7/8 10 3/8 9 7/8
QUARTER ENDED
------------------------------------------------------
1994 March 31 June 30 September 30 December 31
------------ ------------ ------------ ------------
Net sales $ 47,405,015 $ 57,027,493 $ 44,696,455 $ 45,845,301
Gross profit $ 9,664,206 $ 11,506,661 $ 8,552,102 $ 8,267,070
Income (loss) from:
Continuing
operations $ 2,837,888 $ 3,826,222 $ 2,408,003 $ 1,902,857
Discontinued
operations (226,823) 1,072,996 (9,191,299) - -
------------ ------------ ------------ ------------
Net income $ 2,611,065 $ 4,899,218 $ (6,783,296) $ 1,902,857
------------ ------------ ------------ ------------
Earnings (loss)
per share:
Continuing
operations $ .17 $ .23 $ .15 $ .12
Discontinued
operations (.01) .07 (.57) - -
------------ ------------ ------------ ------------
Earnings (loss)
per share $ .16 $ .30 $ (.42) $ .12
------------ ------------ ------------ ------------
Dividends declared $ .07 $ .07 $ .07 $ .07
------------ ------------ ------------ ------------
Market price per
share:
High 10 5/8 10 5/8 10 5/8 10 3/8
Low 8 7/8 8 7/8 8 7/8 8 7/8
19. New Accounting Pronouncements
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of," establishes standards for the impairment of long-lived assets,
certain identifiable intangibles and goodwill related to those assets to be
held and used and for long-lived assets and certain identifiable
intangibles to be disposed of. This Statement requires that long-lived
assets and certain identifiable intangibles to be held and used by an
35
entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. This Statement is effective for fiscal years beginning after
December 15, 1995. The Statement is not expected to have a material impact
on the Corporation.
Statement of Financial Accounting Standards no. 123, "Accounting for Stock-
Based Compensation," establishes financial accounting and reporting
standards for stock-based employee compensation plans. Those plans include
arrangements by which employees receive shares of stock of the
Corporation, primarily stock options and stock appreciation rights in the
case of O'Sullivan Corporation.
This Statement also applies to transactions in which an entity issues
equity instruments to acquire goods or services from nonemployees. Those
transactions must be accounted for based on the fair value of the
consideration received or the fair value of the equity instruments issued,
whichever is more reliably measured.
This Statement defines a "fair value based method" of accounting for an
employee stock option or similar equity instrument and encourages all
entities to adopt that method of accounting for all of their employee stock
compensation plans. However, it also allows the Corporation to continue to
measure compensation cost for those plans using the "intrinsic value based
method" of accounting prescribed by APB Opinion No. 25, "Accounting for
Stock Issued to Employees". Entities electing to remain with the
accounting in APB Opinion No. 25 must make pro forma disclosures of net
income and earnings per share as if the fair value based method of
accounting defined by this Statement had been applied.
Under the fair value based method, compensation cost is measured at the
grant date based on the value of the award and is recognized over the
service period, normally the vesting period. Under the intrinsic value
based method, compensation cost is the excess, if any, of the quoted market
price of the stock at grant date over the amount an employee must pay to
acquire the stock. The plans in effect for the Corporation have no
intrinsic value at the grant date since the grant price is the quoted
market price at the grant date.
The Statement is effective for fiscal years beginning after December 15,
1995. It is anticipated that the Corporation will continue to measure
compensation costs in accordance with APB Opinion No. 25 providing the pro
forma data required by FAS No. 123. The Statement is not expected to have
a material impact on the Corporation.
36
INDEPENDENT AUDITOR'S REPORT
To the Stockholders and Board of Directors
of O'Sullivan Corporation
We have audited the accompanying consolidated balance sheets of O'Sullivan
Corporation and Subsidiaries as of December 31, 1995 and 1994 and the
related consolidated statements of income, changes in shareholders equity
and cash flows for the years ended December 31, 1995, 1994 and 1993. These
financial statements are the responsibility of the Corporation'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 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
O'Sullivan Corporation and Subsidiaries as of December 31, 1995 and 1994
and the results of their operations and their cash flows for the years
ended December 31, 1995, 1994 and 1993 in conformity with generally accepted
accounting principles.
/s/ YOUNT, HYDE & BARBOUR, P.C.
Winchester, Virginia
February 2, 1996
37
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None
38
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
For information with respect to the Corporation's Directors and Director
nominees, see pages 3 through 6 of the Corporation's definitive Proxy
Statement dated March 29, 1996 which pages are incorporated herein by
reference.
Executive Officers of the Registrant
The names, ages of and positions of the executive officers of O'Sullivan
Corporation as December 31, 1995 are listed below. All officers are
elected by the Board of Directors for a one year term. There are no family
relationships among officers or any other arrangement or understanding
between any officer and any other person pursuant to which the officer was
elected.
Served As
Name Age Office Officer Since
- --------------------- ---- --------------------- -------------
James T. Holland 55 President 1976
C. Bryant Nickerson 49 Secretary & Treasurer 1986
Phillip S. Griffin 57 Vice President 1975
John S.Campbell 45 Vice President 1986
Mr. Holland has served in the following capacities for the Corporation;
Treasurer, 1976-1979, Vice President and Treasurer, 1979-1984, Executive
vice President and Chief Operating Officer, 1984-1986, President and Chief
Operating Officer, 1986-1995, President and Chief Executive Officer, 1995-
Present.
Mr. Nickerson has been employed by the Corporation since 1973 serving in
various capacities within the corporate financial area. He has served as
Controller and Treasurer and Chief Accounting Officer before being elected
as Secretary, Treasurer and Chief Financial Officer in 1995.
Mr. Griffin has served the Corporation in various capacities in sales,
manufacturing and corporate management since 1968. He has served as a Vice
President since 1975 and also serves as the President of Melnor Inc., a
subsidiary of the Corporation.
Mr. John S. Campbell has served as a Vice President since 1986. He has
been employed by the Corporation since 1973 and has been involved in both
the sales and manufacturing operations of the calendered plastics products
business of the Corporation.
39
Other Officers of the Registrant
Served As
Name Age Office Officer Since
- --------------------- ---- --------------------- -------------
William O. Bauserman 52 Vice President 1987
Ewen A. Campbell 48 Vice President 1993
Dee S. Johnston 59 Vice President 1992
Michael J. Meissner 56 Vice President 1995
James L. Tremoulis 42 Vice President 1986
Robert C. Westfall 53 Vice President 1979
Mr. Bauserman has been employed by the Corporation since 1968 and has
served as a Vice President since 1987. Mr. Bauserman has been employed in
various capacities within the data processing and management information
services areas during his tenure with the Corporation.
Mr. Ewen A. Campbell has an extensive background in chemistry and plastics
compounding. He has been employed by the Corporation since 1991 in the
areas of compounding and research and development activities. He has
served as a Vice President since 1993. Mr. Ewen Campbell and Mr. John
Campbell are not related.
Mrs. Johnston has been employed by the Corporation since 1976 and has
served as a Vice president since 1992. Mrs. Johnston has been involved in
all phases of the Corporation's purchasing function during her employment.
Mr. Meissner has been employed by the Corporation since 1995. Prior to
that time he was employed by and was a principal with a business that
served as a manufacturers' representative to the automotive industry for
the Corporation.
Mr. Tremoulis has served in various capacities in the sales area for
calendered plastics products since his employment by the Corporation in
1980. He was elected as a Vice President in 1986.
Mr. Westfall has been employed by the Corporation since 1965. He was a
chemist, the Quality Control Director and a Plant Manager for the
Corporation prior to being elected as a Vice President of Research and
Development in 1979.
Item 11. EXECUTIVE COMPENSATION
See Pages 6 through 10 of the Corporation's Proxy Statement dated March 29,
1996, which pages are incorporated herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
See Pages 3 through 6 of the Corporation's Proxy Statement dated March 29,
1996, which pages are incorporated herein by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There were no transactions during 1995 that would be applicable for
disclosure under this item.
40
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K
(a). (1) Financial Statements Page
Included in Part II, Item 8, of this report:
Report of Independent Auditors 37
Consolidated Balance Sheets at December 31, 1995
and 1994 12
Consolidated Statements of Income for the Years
Ended December 31, 1995, 1994 and 1993 13-14
Consolidated Statements of Cash Flows for the
Years Ended December 31, 1995, 1994 and 1993 15-16
Consolidated Statements of Changes in
Shareholders' Equity for the Years Ended
December 31, 1995, 1994 and 1993 17-18
Consolidated Notes to Financial Statements 19-36
(a). (2) Financial Statement Schedules
Included in part IV of this report:
Report of Independent Auditors on Financial
Statement Schedule 43
Schedule II - Valuation and Qualifying Accounts
and Reserves for the Years Ended December 31,
1995, 1994 and 1993 44
(a). (3) Exhibits
3.1 O'Sullivan Corporation Amended and Restated
Articles of Incorporation, including the
Articles of Amendment, dated April 30, 1985,
filed with the State Corporation Commission
of Virginia on May 6, 1985, adopted by
shareholders of O'Sullivan Corporation at
the annual meeting held April 30, 1985.
(Incorporated by reference to the March 31,
1985, Quarterly Report on Form 10-Q of the
Corporation.)
3.2 O'Sullivan Corporation Bylaws as amended to
January 29, 1985. (Incorporated by reference
to the March 31, 1985, Quarterly Report on
Form 10-Q of the Corporation.)
41
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K (continued)
Page
3.3 O'Sullivan Corporation Amended and Restated
Articles of Incorporation dated April 29, 1989,
filed with the State Corporation Commission
dated April 29, 1989, adopted by shareholders of
O'Sullivan Corporation at the annual meeting
held April 25, 1989. (Incorporated by reference
to the March 31, 1989 Quarterly Report on Form
10-Q of the Corporation.)
10. Compensatory arrangement with executive officers
of the registrant. See Pages 9 and 10 of the
Corporation's Proxy Statement dated March 29, 1996
which pages are incorporated herein by reference.
21. Subsidiaries of the Registrant - filed herewith.
23. Consent of Independent Auditors - filed herewith.
24. Powers of Attorney - filed herewith.
27. Financial Data Schedule - filed herewith.
99.1 The O'Sullivan Corporation 1995 Stock Option Plan
filed as exhibit 99.1 to the Corporation's Form
S-8 registration statement (Registration Number
033-58895) filed with the Commission on April
28, 1995 and incorporated herein by reference.
99.2 The O'Sullivan Corporation 1995 Outside Directors
Stock Option Plan filed as exhibit 99.2 to the
Corporation's Form S-8 registration statement
(Registration Number 033-58895) filed with the
Commission on April 28, 1995 and incorporated
herein by reference.
99.3 1985 Incentive Stock Option Plan. Amended and
Restated as of July 27, 1993. (Incorporated by
reference to the Annual report on form 10-K for
the Year Ended December 31, 1994.)
(b). Reports on Form 8-K
There were no reports filed on Form 8-K for the quarter
ended December 31, 1995.
(c). Index to Exhibits. 47
42
INDEPENDENT AUDITOR'S REPORT
ON FINANCIAL STATEMENT SCHEDULE
To the Shareholders and Board of Directors
of the O'Sullivan Corporation
The examination referred to in our opinion dated February 2, 1996 of the
consolidated financial statements as of December 31, 1995 and 1994 and for
the three years ended December 31 ,1995, 1994 and 1993 included the related
supplemental financial schedule as listed in Item 14(a) 2, which, when
considered in relation to the basis financial statements, present fairly in
all material respects the information shown therein.
/s/ YOUNT, HYDE & BARBOUR, P.C.
43
O'SULLIVAN CORPORATION AND SUBSIDIARIES Schedule II
VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 1995, 1994 and 1993
Column A Column B Column C Column D Column E
- ---------- ---------- ----------------------------- ----------- ----------
Additions
-----------------------------
(1) (2) (3)
Balance Charged Charged Additions Balance
at to costs to From at
Beginning and Other Business End
Description of Year Expense Accounts Acquisition Deductions of Year
- ---------- ---------- ---------- ------- ------- ----------- ----------
1995:
Allowance
for
Doubtful
Accounts $ 884,467 $ 439,480 $ -- -- $ -- -- $ 425,299(B)$ 898,648
========== ========== ======= ======= ========== ==========
1994:
Allowance
for
Doubtful
Accounts $1,133,793 $1,138,617 $ -- -- $ -- -- $1,387,943(B)$ 884,467
========== ========== ======= ======= ========== ==========
1993:
Allowance
for
Doubtful
Accounts $1,804,676 $ 209,719 $ -- -- $27,013(A)$ 907,615(B)$1,133,793
========== ========== ======= ======= ========== ==========
Note (A) - Allowance for doutful accounts established at acquisition date
for businesses acquired in 1993.
Note (B) - Write-offs of uncollectible accounts, net of recoveries.
Column D for 1994 also includes a reduction of $27,013 for a
bad debt allowance pertaining to a subsidiary disposed of
during 1994.
44
SIGNATURES
Pursuant to the requirement 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.
March 26, 1996 O'SULLIVAN CORPORATION
- -------------- By: /s/ C.Bryant Nickerson
Date --------------------------
C. Bryant Nickerson
Secretary, Treasurer and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed by the following persons on behalf of the Registrant
and in the capacities indicated on the dates given.
Arthur H. Bryant, II * March 26, 1996
- ------------------------ --------------
Arthur H. Bryant, II Chairman and Director Date
/s/ James T. Holland March 26, 1996
- ------------------------ --------------
James T. Holland President, Chief Executive Date
Officer and Director
/s/ C. Bryant Nickerson March 26, 1996
- ------------------------ --------------
C. Bryant Nickerson Secretary, Treasurer and Date
Chief Financial Officer
John J. Armstrong * March 26, 1996
- ------------------------ --------------
John J. Armstrong Director Date
C. Hugh Bloom * March 26, 1996
- ------------------------ --------------
C. Hugh Bloom Director Date
Magalen O. Bryant * March 26, 1996
- ------------------------ --------------
Magalen O. Bryant Director Date
Robert L. Burrus, Jr. * March 26, 1996
- ------------------------ --------------
Robert L. Burrus, Jr. Director Date
Max C. Chapman, Jr. * March 26, 1996
- ------------------------ --------------
Max C. Chapman, Jr. Director Date
R. Michael McCullough * March 26, 1996
- ------------------------ --------------
R. Michael McCullough Director Date
45
Stephen P. Munn * March 26, 1996
- ------------------------ --------------
Stephen P. Munn Director Date
* By: /s/ James T. Holland
---------------------
James T. Holland
Attorney-In-Fact
46
EXHIBIT INDEX
Page
21. Subsidiaries of the Registrant 48
23. Consent of Experts 49
24. Powers of Attorney 50-57
27. Financial Data Schedule 58
47
SUBSIDIARIES OF THE REGISTRANT
STATE OR
JURISDICTION NAME UNDER WHICH
NAME OF INCORPORATION SUBSIDIARY DOES BUSINESS
- ------------------------------ ---------------- -------------------------------
Regalite Plastics Corporation Massachusetts Regalite Plastics Corporation
O'Sullivan Plastics Corporation Nevada O'Sullivan Plastics Corporation
O'Sullivan Engineering, Inc. Michigan O'Sullivan Engineering, Inc.
Melnor Inc. Virginia Melnor Inc.
48
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of Registration Statement on Form S-8 filed
December 29, 1987 of O'Sullivan Corporation of our report dated
February 2, 1996 appearing on page 37 of this Annual Report on Form 10-K.
/s/ YOUNT, HYDE & BARBOUR, P.C.
Winchester, Virginia
March 26, 1996
49
POWER OF ATTORNEY
I hereby appoint James T. Holland my true and lawful attorney-in-fact to
sign on my behalf, as an individual and in the capacity stated below,
the Annual Report on Form 10-K of O'Sullivan Corporation for its fiscal
year ended December 31, 1995 and any amendment which such attorney or
attorney-in-fact may deem appropriate or necessary.
2/26/96 /s/ Arthur H. Bryant, II
- ------------- ------------------------------
DATE DIRECTOR
50
POWER OF ATTORNEY
I hereby appoint James T. Holland my true and lawful attorney-in-fact to
sign on my behalf, as an individual and in the capacity stated below,
the Annual Report on Form 10-K of O'Sullivan Corporation for its fiscal
year ended December 31, 1995 and any amendment which such attorney or
attorney-in-fact may deem appropriate or necessary.
2/26/96 /s/ John J. Armstrong
- ------------- ------------------------------
DATE DIRECTOR
51
POWER OF ATTORNEY
I hereby appoint James T. Holland my true and lawful attorney-in-fact to
sign on my behalf, as an individual and in the capacity stated below,
the Annual Report on Form 10-K of O'Sullivan Corporation for its fiscal
year ended December 31, 1995 and any amendment which such attorney or
attorney-in-fact may deem appropriate or necessary.
2/26/96 /s/ C. Hugh Bloom
- ------------- ------------------------------
DATE DIRECTOR
52
POWER OF ATTORNEY
I hereby appoint James T. Holland my true and lawful attorney-in-fact to
sign on my behalf, as an individual and in the capacity stated below,
the Annual Report on Form 10-K of O'Sullivan Corporation for its fiscal
year ended December 31, 1995 and any amendment which such attorney or
attorney-in-fact may deem appropriate or necessary.
2/26/96 /s/ Magalen O. Bryant
- ------------- ------------------------------
DATE DIRECTOR
53
POWER OF ATTORNEY
I hereby appoint James T. Holland my true and lawful attorney-in-fact to
sign on my behalf, as an individual and in the capacity stated below,
the Annual Report on Form 10-K of O'Sullivan Corporation for its fiscal
year ended December 31, 1995 and any amendment which such attorney or
attorney-in-fact may deem appropriate or necessary.
2/26/96 /s/ Robert L. Burrus, Jr.
- ------------- ------------------------------
DATE DIRECTOR
54
POWER OF ATTORNEY
I hereby appoint James T. Holland my true and lawful attorney-in-fact to
sign on my behalf, as an individual and in the capacity stated below, the
Annual Report on Form 10-K of O'Sullivan Corporation for its fiscal year
ended December 31, 1995 and any amendment which such attorney or
attorney-in-fact may deemvappropriate or necessary.
2/26/96 /s/ Max C. Chapman, Jr.
- ------------- ------------------------------
DATE DIRECTOR
55
POWER OF ATTORNEY
I hereby appoint James T. Holland my true and lawful attorney-in-fact to
sign on my behalf, as an individual and in the capacity stated below,
the Annual Report on Form 10-K of O'Sullivan Corporation for its fiscal
year ended December 31, 1995 and any amendment which such attorney or
attorney-in-fact may deem appropriate or necessary.
2/26/96 /s/ R. Michael McCullough
- ------------- ------------------------------
DATE DIRECTOR
56
POWER OF ATTORNEY
I hereby appoint James T. Holland my true and lawful attorney-in-fact to
sign on my behalf, as an individual and in the capacity stated below,
the Annual Report on Form 10-K of O'Sullivan Corporation for its fiscal
year ended December 31, 1995 and any amendment which such attorney or
attorney-in-fact may deem appropriate or necessary.
2/26/96 /s/ Stephen P. Munn
- ------------- ------------------------------
DATE DIRECTOR
57
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 10,400,583
<SECURITIES> 0
<RECEIVABLES> 31,357,520
<ALLOWANCES> 898,648
<INVENTORY> 42,196,303
<CURRENT-ASSETS> 88,880,719
<PP&E> 99,518,820
<DEPRECIATION> 51,491,491
<TOTAL-ASSETS> 149,996,525
<CURRENT-LIABILITIES> 27,953,877
<BONDS> 1,717,193
<COMMON> 16,510,402
0
0
<OTHER-SE> 99,252,563
<TOTAL-LIABILITY-AND-EQUITY> 149,996,525
<SALES> 209,723,562
<TOTAL-REVENUES> 210,951,412
<CGS> 168,142,885
<TOTAL-COSTS> 168,142,885
<OTHER-EXPENSES> 18,648,691
<LOSS-PROVISION> 439,480
<INTEREST-EXPENSE> 59,753
<INCOME-PRETAX> 23,660,603
<INCOME-TAX> 9,628,540
<INCOME-CONTINUING> 14,032,063
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,032,063
<EPS-PRIMARY> 0.85
<EPS-DILUTED> 0.85
</TABLE>
