SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
Annual Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934 [Fee Required]
For the fiscal year ended April 30, 1998.
or
Transition report pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934 [No Fee Required]
For the transition period from to
Commission File Number 0-7276
Delaware 36-2135994
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(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
18604 West Creek Drive, Tinley Park, Illinois 60477-6243
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (708) 687-5000
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Securities registered pursuant to Section 12(b) of the Act:
Name of each Exchange on
Title of each Class which registered
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None None
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Securities registered pursuant to Section 12(g) of the Act:
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.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
(continued)
contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K [ ].
The aggregate market value of the voting stock held by nonaffiliates of the registrant as of June 1, 1998, (within 60 days prior to the date of filing) was approximately $15,825,186.
The number of shares of the registrant's common stock $1.00 par value per share outstanding, as of April 30, 1998 was 584,700.
DOCUMENTS INCORPORATED BY REFERENCE
1. Annual Report to Stockholders for fiscal year ended April 30, 1998, ("1998 Annual Report").
2. Proxy Statement for Annual Meeting of Stockholders, July 14, 1998, ("Proxy Statement").
3. Registration Statement, Form S-1, File No. 2-45113, dated July 25, 1972, ("Registration Statement").
Part II
Item 5 - 1998 Annual Report Page Inside Back Cover
Item 6 - 1998 Annual Report Pages Inside Front Cover, 2-16
Item 7 - 1998 Annual Report Pages 2-16
Item 8 - 1998 Annual Report Pages 2-16
PART III
Item 10 - 1998 Proxy Statement Pages 2-8
Item 11 - 1998 Proxy Statement Pages 3-8
Item 12 - 1998 Proxy Statement Pages 4-5
PART IV
Item 14 - 1998 Annual Report Pages 2-16
Exhibit Index Pages 12-13
PART I
Item I. Business
(a) General Development of Business
The Company was reorganized as a Delaware corporation in 1972. The Company publishes textbooks and workbooks for junior and senior high schools, vocational, technical and private trade schools, colleges and universities. Its books are also used for apprentice training, adult education, home study and by do-it-yourselfers. The current catalogs list approximately 516 texts, workbooks, computer software supplements, instructor's guides, and other supplements published by the Company, including such subjects as Trade and Industry, Technical, Family and Consumer Sciences and Technology. There has been no material change in the general development of the Company's business since the beginning of the fiscal year.
(b) Financial Information About Industry Segments
During the last three fiscal years, the registrant has been engaged in only one business segment, the publication of textbooks, workbooks, guides and computer software supplements for sale primarily to educational institutions.
(c) Narrative Description of Business
The publishing activities of the Company encompass the search for and development of authors to create manuscripts, assisting authors in the preparation of their product, editing manuscripts, designing textbooks and arranging for art work and illustrations, making up the individual pages, contracting for printing and binding, and marketing its textbooks. The Company contracts for all plates, offset printing and binding requirements with suppliers and contractors which generally serve the book publishing industry. The Company purchases its paper requirements principally from 2 sources, although a number of other sources are available.
During the past fiscal year the Company published 6 new texts, 6 new supplements to accompany established texts, 17 textbook revisions and 34 supplement revisions. Changes in technology require periodic revisions of existing titles. Books used primarily by schools are revised frequently. The texts which historically have accounted for a very substantial amount of the Company's sales have been completely revised within the past several years.
A major portion of the Company's sales are made directly to high schools, vocational schools, technical schools, trade schools and colleges, and indirectly to such schools through bookstores and state textbook depositories. The remainder of sales are made to bookstores, mail order companies, department stores, correspondence schools, a Canadian distributor and an export distributor. During the latest fiscal year, no title accounted for more than 7.1% of sales.
Selections of the Company's textbooks in most states are made at the individual school or school district level. However, in some states, selections or adoptions of such books are made at the state level by an adop-
tion committee. There are presently 16 such states that adopt in the Company's subject areas in which the Company has from 16 to 85 adopted titles. Schools in such states are generally required to select their textbooks from those approved and adopted by the state. Most states following statewide adoption practices, however, adopt more than one textbook for each subject so the local schools are afforded a choice of author and publisher. The prices of the Company's books in effect at the time of an adoption usually cannot be changed during the adoption period.
In 15 states, the Company's textbooks are consigned to a state depository from which the local schools make their purchases. Sales through state depositories accounted for approximately 10.9% of sales in the latest fiscal year.
There has been no significant change in the kinds of products produced, or in the markets or methods of distribution, since the beginning of the fiscal year.
There have been a number of mergers, acquisitions and joint ventures involving competitors of the Company during recent years. Many companies publish textbooks competing with many but not all of the Company's titles. The remaining competitors publish textbooks competing with some of the Company's titles. Most competitors employ outside sales personnel in their marketing efforts. The Company employs 10 outside sales persons. However, the promotion by the Company of its textbooks continues to be primarily accomplished by mailings to teachers and schools. It continues to follow a liberal policy of providing sample copies. No industry statistics are available for this segment of the publishing business. Accordingly, it is not possible to ascertain the Company's competitive position in its field. No customer accounts for more than 2% of sales.
The Company does not consider backlogs, patents, licenses, franchises and concessions, research or environmental considerations as material to its business. No significant problems have been encountered, and none are anticipated, in obtaining adequate supplies of paper. The Company has continued to add new book titles and discontinue others at a normal rate. The Company presently employs 63 full-time persons. Employee relations are considered good. Much of the Company's textbook business is seasonal, and approximately 51.6% of the year's sales were made in the four months of July through October.
(d) Financial Information About Foreign and Domestic Operations and Export Sales
Export sales during the last three years have not been material in relation to the total sales. Profitability and risk are essentially similar on the Company's foreign and domestic sales.
Item 2. Properties
The Company relocated its principal place of business in the late summer of 1996 from South Holland, Illinois to its newly constructed warehouse and office building on a 3.65 acre site in Tinley Park, Illinois. The building contains approximately 72,000 square feet of floor space, of which approximately 20,000 square feet is used for office requirements.
The Company financed the cost of the property acquisition, building construction and relocation from its own funds.
The South Holland properties on a 5.5 acre site consisting of two separate buildings physically connected by an enclosed corridor, contain an aggregate of approximately 58,275 square feet of floor space. The buildings are presently vacant and are being offered for sale.
Item 3. Legal Proceedings
None
Item 4. Submission of Matters to a Vote of Security Holders
None
PART II
Item 5. Market for the Registrant's Common Stock and Related Security Holder Matters
The following section of the Company's 1998 Annual Report to Stockholders is hereby incorporated by reference:
(a) Market - Over-the-Counter - Symbol-GWOX Page Inside Back Cover Quotation Ranges and Dividends Page Inside Back Cover
(b) 150 common shareholders based upon the number of record owners as of May 22, 1998, the record date for the Company's Annual Meeting of Shareholders.
(c) (1) and (2) Dividends, see table referred to above. There are no known restrictions on the Company's present or future ability to pay dividends. The Company currently expects that cash dividends will be continued to be paid in the future at a rate based upon earnings for the prior fiscal year.
Item 6. Selected Financial Data
The following section of the Company's 1998 Annual Report to Stockholders is hereby incorporated by reference:
Five year Summary of Selected Financial Data Page Inside Front Cover
This referenced section should be read in conjunction with the Financial Statements and related Notes (hereby incorporated by reference) in the Company's 1998 Annual Report to Stockholders, Pages 2-16.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following section of the Company's 1998 Annual Report to Stockholders is hereby incorporated by reference:
Management's Discussion and Analysis of Financial Pages 13-16
Condition and Results of Operations
This referenced section should be read in conjunction with the Financial Statements and related Notes (hereby incorporated by reference) in the Company's 1998 Annual Report to Stockholders, Pages 2-16.
Item 8. Financial Statements and Supplementary Data
(a) Financial statements:
(1) Financial statements and schedules are included in this Form 10-K Annual Report as indicated in the index on Page 12. Those portions of The Goodheart-Willcox Company, Inc.'s 1998 Annual Report to Stockholders listed under the caption "Financial Statements" in such index are incorporated by reference.
(2) Exhibits:
The Goodheart-Willcox Company, Inc.'s 1998 Annual Report to Stockholders (which, except for those portions thereof incorporated by reference in this Form 10-K Annual Report, is furnished for the information of the Commission but is not deemed to be "filed" as part of this report).
Item 9. Disagreements on Accounting and Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
The following section of the Company's 1998 Proxy Statement is hereby incorporated by reference:
a) Identification of Directors Page 2
b) Identification of Executive Officers
John F. Flanagan, age 54, Chairman of the Board since March, 1997; President and Chief Executive Officer since June, 1980; Treasurer from January, 1973 to April, 1988; Vice President from January, 1973 to June, 1980; prior thereto various positions with the Company since 1968.
Donald A. Massucci, age 58, Vice President, Administration, since June, 1980, Treasurer since April, 1988, and Secretary from July, 1976 to April, 1988. Mr. Massucci has been with the Company since 1962.
Dick G. Snyder, age 61, Vice President, Sales, since June, 1980, and Secretary since April, 1988. Mr. Snyder has been with the Company since 1977.
c) Identification of certain significant employees None.
d) Family relationships See, Item 12(b), below.
e) (1) Business experience See, Item 10(b), above.
(2) Directorships - Except for Robert C. DeBolt who is a director of the First National Bank, Chicago Heights, Illinois, no other director or nominee serves as a director of any other public company.
f) Involvement in certain legal proceedings
None.
Item 11. Management Remuneration and Transactions
(A) (B) (C) (D)
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PROFIT SHARING PLAN
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D1 D2 D3
Cash and Cash Company Amount Aggregate
Name of Individual Equivalent Contribution Accrued Accrued
or Number of Capacity in Forms of During Last During Last To
Persons in Group Which Served Remuneration(1) Fiscal Year Fiscal Year Date(4)
---------------- ------------ --------------- ------------ ----------- ----------
John F. Flanagan (6) Chairman, 430,658(2) 24,000 381,682 2,307,453
President,
Chief Executive
Officer, Director
Donald A. Massucci (7) Vice President, 192,677(3) 24,000 208,309 1,270,021
Administration &
Treasurer
Dick G. Snyder (7) Vice President, Sales 192,284(3) 24,000 114,451 708,391
Secretary
Walter C. Brown Consulting Editor, 82,641 1,217 16,216 218,603
Director
All Directors and Officers as a Group (5) $1,048,108 $73,217 $720,658 $4,504,468
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(1) Amounts paid, if any, in securities or property, insurance benefits or reimbursements, personal benefits, fees and commissions are insignificant and therefore, said types of remuneration are combined with salaries, directors' fees and bonuses. This also includes author royalty payments of $74,529 to Dr. Brown and of $91,848 to Dr. Kicklighter.
(2) Includes salary pursuant to employment agreement and discretionary year end bonus which was set by the Company's Board of Directors of $150,000 for Mr. Flanagan.
(3) Includes salaries established by management and year end bonuses fixed by the Company's Board of Directors of $60,000 for each of Messrs. Massucci and Snyder.
(4) Represents aggregate equity in the Company's profit sharing plan. The plan is qualified under the Internal Revenue Code and the Company's contributions to it are deductible for income tax purposes. The amount which the Company contributes is discretionary and is determined annually by the Board of Directors as a percentage of eligible compensation. All participants are credited with amounts equal to such percentage of their respective compensation for that year. Historically, Company's contributions have approximated 15% of salaries. In no event may the Company's contribution exceed the amount allowed as a deduction under the Internal Revenue Code. An employee becomes eligible to participate in the profit sharing plan on the first entry date after completing a "year of service" as an employee.
(5) Includes 8 persons receiving direct remuneration, of whom 4 are in the profit sharing plan.
(6) An agreement dated June 1, 1975, amended from time to time and further amended April 17, 1998, between the Company and Mr. Flanagan provides that until May 31, 1999, or any renewal date, he will serve as Chief Executive Officer, with his duties to be determined by the Board of Directors. Effective May 1, 1998, he is to be paid compensation of $300,000 per year, plus reimbursement of expenses and any bonus awarded to him by the Board of Directors. From the date the contract or any renewal thereof expires he is to be paid until his death consultative compensation of $40,000 per year. In the event Mr. Flanagan should die or become physically or mentally incapable of performing services before the expiration date of the agreement or any renewal thereof, the Company will pay him if he is living, or his estate if he is deceased, twenty-four months' full salary. The agreement further provides for reimbursement of medical care expenses incurred by him, his spouse or defined dependents, not otherwise reimbursed by insurance provided by the Company. In addition, his agreement provides that if he is living and under continuing disability for more than twenty-four months, the Company will pay him one-half salary per month, not to exceed, however, sixty months.
(7) Messrs. Massucci and Snyder annual salaries were each increased, effective May 1, 1998, to $135,000.
The following sections of the Company's 1998 Proxy Statement are hereby incorporated by reference.
Summary Compensation Table Page 6 Remuneration of Directors Page 3 Options, Warrants, or Rights None Indebtedness of Management None Transactions with Management None Transactions with Pension or Similar Plans None |
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following section of the Company's 1998 Proxy Statement is hereby incorporated by reference.
(a) Security Ownership of Certain Beneficial Owners Pages 4-5
(b) Security Ownership of Management
Amount and
Name of Position Nature of Percent
Beneficial Owner with Company Ownership of Class
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Mrs. Loraine J. Mix Director 290,782(1) 49.7%
Fred Eychaner 111,412(2) 19.1%
Century Partners 42,700(3) 7.3%
John F. Flanagan Director and
Executive Officer 22,152(4) 3.8%
Walter C. Brown Director 1,000(5) *
Robert C. DeBolt Director - -
Wilma Pitts Griffin Director 150 *
Clois E. Kicklighter Director 100 *
Donald A. Massucci Executive Officer 300 *
Dick G. Snyder Executive Officer 700 *
Directors and Executive
Officers as a Group (7 Persons) 315,184 53.9%
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*Less than one percent
(1) Mrs. Mix owns 25,582 shares, and, in addition, is a co-trustee with sole voting and investment power relating to the shares of the Company, and a beneficiary together with her two daughters, one of whom is the wife of Mr. Flanagan, of a trust established by the Last Will of Floyd M. Mix, deceased, which trust holds 265,200 shares of the Company. Mrs. Mix's daughter Joyce Meister owns 18,000 shares and her daughter Patti Flanagan owns 18,547 shares. In addition, Mrs. Flanagan owns jointly with her husband 2,614 shares. The aggregate holdings of all members of the Mix family in all capacities are 330,914 shares, or 56.59% of the Company's outstanding stock.
(2) On October 12, 1994, Mr. Fred Eychaner filed a Schedule 13D Statement with the Securities and Exchange Commission disclosing the purchase of 111,412 shares or 14.9% of the Company's securities. Mr. Eychaner stated that the shares were purchased for investment and additional purchases of the Company's stock may be made subject to the availability of additional shares, an acceptable price, alternative sources of investment and other factors. Mr. Eychaner also stated therein that there are no present plans to seek representation on the Company's Board of Directors.
(3) On or about June 1, 1993, Century Partners filed an Amendment No. 1 to Schedule 13G with the Securities and Exchange Commission disclosing the beneficial ownership of 42,700 shares of the Company's securities.
(4) Of these shares, 18,547 are owned beneficially and of record by Mr. Flanagan's wife, 547 are owned beneficially and of record by Mr. Flanagan, 2,614 are owned jointly by Mr. Flanagan and his wife, and 20 are held by Mr. Flanagan and his wife as custodian for their children and 424 are held by their children.
(c) Changes in Control - The Company is not aware of any arrangements by any person which may, at a subsequent date, result in a change in control of the Company.
Item 13. Certain Relationships and Related Transactions
None.
PART IV
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
FOR FORM 10-K ANNUAL REPORT
OF YEAR ENDED APRIL 30, 1998
Page Number Reference
Annual
Report to
Form 10-K Stockholders
(a) 1. Financial Statements
Consolidated statements of earnings and stockholders' Pages 4-5
equity for the years ended April 30, 1998, 1997 and 1996
Consolidated balance sheets as of April 30, 1998, and Pages 2-3
1997
Consolidated statements of cash flows for the years Page 6
ended April 30, 1998, 1997 and 1996
Notes to consolidated financial statements Pages 7-11
Report of Independent Certified Public Accountants Page 12
Statement of Management Responsibilities Page 12
(a) 2. Financial Statements Schedules
Schedule II - Valuation and Qualifying Accounts Page 14
Report of Independent Certified Public Page 16
Accountants on Schedules
Consent of Independent Certified Public Page 16
Accountants
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All other schedules are not submitted because they are not applicable or not required or because the required information is included in the financial statements or notes thereto.
(a) 3. Exhibit Index
(a) Certificate of Incorporation; heretofore filed as Exhibit 3(a) to Form S-1 dated July 25, 1972, Registration No. 2-45113, and incorporated herein by reference pursuant to Rule 12B-23. A Certificate of Amendment to the Certificate of Incorporation, adopted July 10, 1987 by the shareholders filed as Exhibit 3(a) to this Form 10K for the year ended April 30, 1988.
By-Laws as amended as of June 1, 1981; heretofore filed as Exhibit 3(a) to Form 10K for year ended April 30, 1982, and incorporated herein by reference pursuant to Rule 12B-23.
(b) Reports on Form 8-K: No reports on Form 8-K were filed during the last quarter of the Company's fiscal year ended April 30, 1998.
22. List of Subsidiaries. Page 15 of this Form 10-K.
23. Consent of Grant Thornton LLP.
All other exhibits are not submitted because they are not applicable or not required or because the required information is included in the financial statements or notes thereto.
THE GOODHEART-WILLCOX COMPANY, INC.
SCHEDULE II
Valuation and Qualifying Accounts
For the years ended April 30, 1998, 1997 and 1996
Balance at Additions Deductions Balance
Beginning charged to from at end of
Description of Period Income Reserves Period
----------- ---------- ---------- ---------- ---------
Year ended April 30, 1998
Allowance for Sales returns(1) $98,000 $217,000 $124,000 $191,000
Allowance for doubtful accounts $15,000 $ 3,000 $ 3,000 $ 15,000
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Note: The allowance for sales returns and doubtful accounts for the years ended April 30, 1997 and 1996 were not material to the Consolidated financial statements.
(1) Allowance for Sales returns represents anticipated returns net of inventory and royalty costs.
REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS ON SCHEDULES
To The Goodheart-Willcox Company, Inc.
In connection with our audit of the consolidated financial statements of The Goodheart-Willcox Company, Inc. and Subsidiary referred to in our report dated May 30, 1998, which is included in the Company's 1998 Annual Report to Stockholders, filed as an exhibit to this Form 10-K, we have also audited Schedule II for each of the three years in the period ended April 30, 1998. In our opinion, this Schedule presents fairly, in all material respects, the information required to be set forth therein.
GRANT THORNTON LLP
Chicago, Illinois
May 29, 1998.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
THE GOODHEART-WILLCOX COMPANY, INC.
By /s/ John F. Flanagan
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John F. Flanagan, Chairman of
the Board of Directors,
President and
Chief Executive Officer
By /s/ Donald A. Massucci
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Donald A. Massucci, Vice
President, Administration,
and Treasurer
By /s/ Dick G. Snyder
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Dick G. Snyder, Vice President,
Sales, and Secretary
Dated: July 14, 1998.
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Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By /s/ Walter C. Brown
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Walter C. Brown, EdD
A Director
Date: July 14, 1998
By /s/ Robert C. DeBolt
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Robert C. DeBolt
A Director
Date: July 14, 1998
By /s/ John F. Flanagan
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John F. Flanagan
Chairman, President and a Director
Date: July 14, 1998
By /s/ Wilma Pitts Griffin
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Wilma Pitts Griffin, PhD, CFCS
A Director
Date: July 14, 1998
By /s/ Clois E. Kicklighter
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Clois E. Kicklighter, EdD
A Director
Date: July 14, 1998
By /s/ Loraine J. Mix
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Loraine J. Mix
A Director
Date: July 14, 1998
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EXHIBIT 22
SUBSIDIARY OF THE REGISTRANT
Name-G/W Investment Company, Inc.
State of Incorporation-Delaware
EXHIBIT 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To The Goodheart-Willcox Company, Inc.:
We consent to the incorporation by reference of our report dated May 30, 1998, accompanying the consolidated financial statements of The Goodheart-Willcox Company, Inc., included in the 1998 Annual Report to Stockholders, in the Annual Report on Form 10-K for the year ended April 30, 1998.
GRANT THORNTON LLP
Chicago, Illinois
July 14, 1998.
| ARTICLE 5 |
| MULTIPLIER: 1,000 |
| PERIOD TYPE | 12 MOS |
| FISCAL YEAR END | APR 30 1998 |
| PERIOD END | APR 30 1998 |
| CASH | 2,119 |
| SECURITIES | 0 |
| RECEIVABLES | 1,661 |
| ALLOWANCES | 206 |
| INVENTORY | 2,415 |
| CURRENT ASSETS | 7,043 |
| PP&E | 6,727 |
| DEPRECIATION | 1,797 |
| TOTAL ASSETS | 13,177 |
| CURRENT LIABILITIES | 2,136 |
| BONDS | 0 |
| PREFERRED MANDATORY | 0 |
| PREFERRED | 0 |
| COMMON | 762 |
| OTHER SE | 15,902 |
| TOTAL LIABILITY AND EQUITY | 13,177 |
| SALES | 19,068 |
| TOTAL REVENUES | 19,068 |
| CGS | 5,537 |
| TOTAL COSTS | 14,207 |
| OTHER EXPENSES | 0 |
| LOSS PROVISION | 15 |
| INTEREST EXPENSE | 180 |
| INCOME PRETAX | 4,866 |
| INCOME TAX | 1,893 |
| INCOME CONTINUING | 2,973 |
| DISCONTINUED | 0 |
| EXTRAORDINARY | 0 |
| CHANGES | 0 |
| NET INCOME | 2,973 |
| EPS PRIMARY | 5.09 |
| EPS DILUTED | 0 |