Annual Report — [x] Reg. S-K Item 405 — Form 10-K
Filing Table of Contents
Document/Exhibit Description Pages Size
1: 10-K405 Annual Report 31 150K
2: EX-3.41 Certificate of Amendment to the Restated 1 9K
Certificate of Incorporation of Western
Publishing Group, Inc.
3: EX-10.25 Amendment No. 1 to Securities Purchase Agreement 3 14K
4: EX-10.42 Second Amendment of Golden Comprehensive Security 2 12K
Program
5: EX-10.43 Third Amendment of Golden Comprehensive Security 16 40K
Program
6: EX-10.55 Second Amendment of Golden Retirement Savings 16 41K
Program
7: EX-10.71D Twelfth Amendment of Penn Corporation 17 44K
Comprehensive Security Program
8: EX-10.74D Sixth Amendment of Beach Products (Division of 17 45K
Penn Corporation) Retirement Savings
Program
9: EX-10.86 Letter Agreement 4 18K
10: EX-10.86A Letter Agreement 7 27K
11: EX-10.86B Amendment to Letter Agreement 1 10K
12: EX-10.98A First Amendment to Credit Agreement 2 12K
13: EX-27 Financial Data Schedule 1 11K
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the Fiscal year ended February 3, 1996
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 0-14399
Western Publishing Group, Inc.
(Exact name of registrant as specified in its charter)
Delaware 06-1104930
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
444 Madison Avenue, New York, New York 10022
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 212-688-4500
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of Each Class
-------------------
Common Stock, par value $ .01
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, and (2) has been subject to
such filing requirements for the past 90 days. Yes X or 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, is definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [X]
The aggregate market value of the Registrant's voting stock
held by non-affiliates of the Registrant, computed by reference to the closing
sales price as quoted on NASDAQ on April 9, 1996, was approximately
$246,459,156.
As of April 9, 1996, 21,666,739 shares of the Registrant's
$.01 par value common stock were outstanding.
Portions of the Registrant's April 18, 1996 Proxy Statement
for the Special Meeting of Stockholders scheduled for May 8, 1996 are
incorporated by reference into Part III.
PART I
ITEM 1. BUSINESS
BACKGROUND
Western Publishing Group, Inc., through its two operating
subsidiaries, Western Publishing Company, Inc., a Delaware corporation, and Penn
Corporation, a Delaware corporation, is engaged in two business segments. The
Consumer Products segment creates, produces and markets a variety of consumer
products including children's story and picture books, interactive electronic
books and games, computer and multi-media "edutainment" products, coloring books
and other activity books, educational workbooks sold at retail, craft products,
children's pre-recorded audio cassettes, book and audio cassette sets,
pre-recorded video cassettes, FRAME-TRAY(R) puzzles, special interest books for
adults, decorated paper tableware, paper party accessories, gift wrap products,
invitations, stationery and gift items. The Commercial Products segment provides
the following printing and manufacturing services: (1) graphic services and
commercial printing, such as the printing of books, catalogs, labels, tax forms,
magazines and trading cards; (2) educational kit manufacturing, including
printing, sourcing, packaging, development and assembly of educational kits; and
(3) Custom Publishing(R) services, such as the creation, production, assembly
and distribution for consumer product and fast food companies of customized
products for their marketing and promotional programs.
Western Publishing Group, Inc.'s principal offices are located
at 444 Madison Avenue, New York, New York 10022, and its telephone number is
(212) 688-4500.
Proposed Equity Investment
On January 31, 1996, Western Publishing Group, Inc. (the
"Company") entered into a Securities Purchase Agreement with Golden Press
Holding, L.L.C. ("Golden Press"), a newly-formed Delaware limited liability
company owned by Richard E. Snyder, Barry Diller and Warburg, Pincus Ventures,
L.P., pursuant to which Golden Press will acquire a significant equity interest
in the Company. The transaction is subject to customary conditions, including
stockholder approval.
Under the terms of the equity investment transaction, Golden
Press will invest $65 million of cash in the Company in exchange for $65 million
of newly-issued Series B Convertible Preferred Stock and a warrant to purchase
3,250,000 shares of Common Stock (the "Warrant"). The Company will utilize the
investment proceeds to redeem its existing Series A Convertible Preferred Stock
which matured on March 31, 1996, for expenses associated with the transaction
and for general working capital purposes.
The Series B Convertible Preferred Stock will have a dividend
rate of 12% per annum, will be convertible at $10 per share, and will not have a
mandatory redemption date. The preferred stock dividend will be payable
quarterly in 195,000 shares of Common Stock for the first four years, subject to
certain adjustments based on the market price of the Common Stock at that time.
Thereafter, preferred stock dividends will be paid in cash.
The Warrant, which will not be exercisable for the first two
years, will have a seven year term and an exercise price of $10 per share.
Upon consummation of the equity investment by Golden Press,
Richard E. Snyder will succeed Richard A. Bernstein as Chairman and Chief
Executive Officer of the Company. Since his appointment as President of Western
Publishing Group, Inc. on January 31, 1996, Mr. Snyder has not been directly
involved in the Company's business or financial decisions.
Reference is made to the Company's April 18, 1996 Proxy
Statement for the Special Meeting of Stockholders scheduled for May 8, 1996 for
a complete description of the Golden Press equity investment and the agreements
and instruments referred to above, which Proxy Statement is incorporated by
reference herein and included as an exhibit hereto.
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RESTRUCTURING AND ASSET DISPOSITIONS
Provision for Restructuring and Closure of Operations
During the quarter ended October 28, 1995, the Company
recorded an $8,701,000 provision for restructuring and closure of operations in
a further effort to reduce its operating cost structure and improve future
operating results, and to reflect the costs incurred in connection with the
termination of a previously announced transaction to sell a significant interest
in the Company. The provision includes a non-cash charge of $2,000,000 and
consists of the following components:
o Severance costs of $3,660,000 associated with the Company's
previously announced workforce reductions of salaried and hourly
personnel. These reductions were completed in the fourth quarter of
Fiscal 1996.
o Unrecoverable assets and costs of $3,171,000 to be incurred in
connection with the Company's decision to close certain of its
retail store locations.
o Transaction costs of $1,870,000 resulting from the Company's October
17, 1995 announcement of the termination of its initial agreement in
principle to sell a significant interest in the Company to Warburg,
Pincus Ventures, L.P. and Richard E. Snyder.
Sale and Phase Out Of Operations
On April 7, 1994, the Company adopted a plan (the "Plan")
designed to improve its competitive position and reduce its cost structure
through the sale, divestiture, consolidation or phase out of certain operations,
properties and products, and a workforce reduction.
The Plan included the following major components:
o An agreement to sell its game and puzzle operation (including
certain inventories) to Hasbro, Inc. ("Hasbro"). This transaction
was completed in August 1994 for cash proceeds of approximately
$101,400,000.
o The decision to exit the Direct Marketing Continuity Clubs and
School Book Club businesses. These businesses were sold during the
second and third quarters of Fiscal 1995 for aggregate cash proceeds
of approximately $14,500,000.
o The closedown and sale of the Company's Fayetteville, North Carolina
manufacturing and distribution facility, which was primarily
dedicated to the game and puzzle operation but was not included in
the sale to Hasbro. This property, which is comprised of 702,000
square feet of office, warehousing and distribution space, has been
closed and is currently being marketed for sale.
o The decision to streamline the Company's publishing business so as
to focus on its core competencies. This included a reduction in the
management, administrative and direct labor workforces.
The Company recorded a net gain from the Plan of $20,352,000
($12,396,000, net of income taxes), inclusive of operating losses of the game,
puzzle, direct marketing and school book club operations from January 30, 1994
through their respective disposition dates in the third quarter of Fiscal 1995.
During the second quarter ended July 29, 1995, an additional gain of $2,000,000
was recorded as certain costs and expenses of implementing the Plan were less
than originally anticipated.
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Provision for Write-down of Division
During Fiscal 1994, the Company established a provision,
including operating losses through the expected disposition date of $28,180,000
($19,280,000, net of income taxes), to write-down the assets of the Advertising
Specialty Division of its Penn Corporation subsidiary to net realizable value.
On August 5, 1994, the sale of the Ritepoint/Chromatic and
Adtrend businesses of the Division was completed for cash proceeds of
approximately $5,650,000. On November 7, 1994, the sale of the Vitronic and
K-Studio businesses of the Division was completed for cash proceeds of
approximately $8,350,000. As the proceeds from the sale of this Division
exceeded management's estimate, the Company adjusted its previously recorded
provision for write-down of Division by recognizing a pre-tax gain of $1,100,000
in the fourth quarter of Fiscal 1995.
BUSINESS SEGMENT INFORMATION
For certain information with respect to net sales, operating
profits and identifiable assets attributable to Western Publishing Group, Inc.'s
Consumer Products and Commercial Products business segments, see Note 16 of the
Notes to the Western Publishing Group, Inc. Consolidated Financial Statements,
which appears on pages F-19 to F-20 of the Company's April 18, 1996 Proxy
Statement for the Special Meeting of Stockholders scheduled for May 8, 1996,
which is incorporated by reference herein and included as an exhibit hereto.
CONSUMER PRODUCTS SEGMENT
Products
Western Publishing Company, Inc. is the largest creator,
publisher, manufacturer, printer and marketer of children's books in the United
States. Children's books, including story and picture books for children aged
two through eight, are principally marketed under the GOLDEN BOOKS(R), LITTLE
GOLDEN BOOKS(R), GOLDEN BOOKS(R) WITH SOUND, GOLDEN SING ALONG(R), MY FIRST
GOLDEN SOUND STORY(R), GOLDEN TALKING TALES(R), GOLDEN SEEK 'N' SOUND(R) and
GOLDEN SOUND STORY(R) trademarks. Activity books and products and educational
workbooks for children are marketed under the GOLDEN BOOK(R), MERRIGOLD PRESS(R)
and GOLDEN STEP AHEAD(R) trademarks. Activity books and products include
coloring books, PAINT WITH WATER & DESIGN(R) books, STICKER FUN(R) books, paper
doll books, pop-up books, board books, shape books, MAGIC SLATE(R) pads,
crayons, markers and boxed activity products. Western Publishing Company, Inc.
also produces and markets pre-recorded video and audio cassettes for children
under its GOLDEN BOOK VIDEO(R) and GOLDEN MUSIC(R) trademarks. Coin collecting
products are marketed under its WHITMAN(R) trademark. Western Publishing
Company, Inc. also sells arts and crafts products under its MERRIGOLD PRESS(R)
and GOLDEN BOOKS(R) trademarks, pre-recorded audio cassette tapes packaged with
books under its GOLDEN BOOK 'N' TAPE(R) trademark and other products that
complement its lines of books, activity products and puzzles.
Western Publishing Company, Inc. believes that its GOLDEN
BOOK(R) brand name has strong consumer awareness and recognition and a
reputation among consumers for creativity, quality, entertainment and
educational value and customer satisfaction. Among the best known GOLDEN BOOK(R)
titles are "Richard Scarry's Best Word Book Ever", "Pat the Bunny", "The Poky
Little Puppy(C)" and the "Golden Treasury of Children's Literature." GOLDEN
BOOK(R) products are believed by Western Publishing Company, Inc., as a result
of market research, to be recognized by virtually all American mothers with
children under the age of ten.
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Many of Western Publishing Company, Inc.'s products are
published or produced under license from authors, inventors and other owners of
intellectual properties. Products often feature popular characters licensed from
other companies, including The Walt Disney Company, Children's Television
Workshop (Sesame Street(R)), Mattel, Inc., Jim Henson Productions, Inc., DC
Comics Inc., the Estate of Richard Scarry, Saban Entertainment, Inc.,
Time-Warner, Inc. and the Lyons Group.
Western Publishing Company, Inc.'s adult non-fiction book line
is designed to inform the family on subjects of special interest and includes
the GOLDEN GUIDES(R) line of books on subjects such as science, birds and
astronomy and WHITMAN(R) coin collector products and other special interest
adult books. However, Western Publishing Company, Inc. does not have significant
market share in the adult book category.
Penn Corporation believes that it is a recognized leader in
the design and production of quality decorated paper tableware, party
accessories, invitations, gift wrap products, stationery and giftware. Under its
BEACH(R) and CONTEMPO(R) trademarks, Penn Corporation produces and markets to
retailers an extensive line of decorated paper tableware consisting of plates,
cups, napkins, table covers and guest towels, in a variety of coordinated
designs, themes and colors. Penn Corporation works directly with leading design
studios such as Laurette, Gloria Vanderbilt, Peacock Paper, J.G. Hook, Giordano,
Pangborn Studios, Brushcreek, Gear, Nick & Nora and Merrimekko to offer
tableware patterns that it believes are representative of the most current
international design trends. Penn Corporation also produces and markets an
extensive line of children's party tableware, party favors and accessories (such
as games, horns, hats and blowouts), many of which feature characters licensed
from The Walt Disney Company, Western Publishing Company, Inc., Children's
Television Workshop (Sesame Street(R)), Jim Henson Productions, Inc., Marvel
Entertainment Group, Inc. and Time-Warner, Inc.
Penn Corporation also produces under its CONTEMPO(R) trademark
a complete line of gift wrap products, including gift wrap paper, ribbons, bows,
gift enclosure cards, tissue paper and tote bags. Penn Corporation's gift wrap
products are produced in a wide variety of colors and designs, including the
work of many of the same leading design studios who design Penn Corporation's
tableware products. Penn Corporation's gift wrap paper also comes in a variety
of materials, including metallic and high gloss paper.
Under the RENNER DAVIS BY CONTEMPO(TM) trademark, Penn
Corporation produces and markets hand-crafted stationery and giftware. RENNER
DAVIS(R) stationery items include correspondence cards, invitations, writing
papers and envelopes. Penn Corporation's writing papers are crafted by hand from
fine quality watermarked papers with a high cotton fiber content. All sheets and
notes are individually hand-edged and all envelopes are either lined or
hand-bordered. The RENNER DAVIS BY CONTEMPO(TM) giftware line includes
hand-crafted keepsake boxes, desk accessories and decorative kitchen
accessories, such as address books, memo holders, picture frames and pencil
holders, which are constructed from quality materials coordinated for color,
finish, texture, pattern and style. Imaginative gift books featuring The Walt
Disney Company and Jim Henson's Muppet Babies(TM) characters are also marketed
to gift and department stores under the RENNER DAVIS BY CONTEMPO(TM) brand.
Licensing
Licensing agreements are important factors in the
differentiation of Western Publishing Group, Inc. products from those of its
competitors. For the year ended February 3, 1996 ("Fiscal 1996"), approximately
69% of Western Publishing Group, Inc.'s Consumer Products segment sales were
generated by books, games, FRAME-TRAY(R) puzzles, activity products, paper party
goods and party favors featuring popular juvenile characters and properties
licensed by Western Publishing Company, Inc. and Penn Corporation from authors,
illustrators, inventors and other companies. Most of Western Publishing Group,
Inc.'s character licenses have terms of one to three years. Despite the
relatively short period of each license, Western Publishing Group, Inc. has
longstanding relationships with virtually all of its licensors. Licenses from
authors and inventors are generally longer in duration, often for the term of
the copyright.
Approximately 45% of the Consumer Products segment sales in
Fiscal 1996 were attributable to juvenile products incorporating characters and
properties licensed from its five largest licensors: The Walt Disney Company,
Children's Television Workshop (Sesame Street(R)), DC Comics Inc., Mercer Mayer
and Time-Warner, Inc.
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Royalty rates paid by Western Publishing Company, Inc.
generally range from 8% to 12% of the invoiced price of the product featuring
the licensed characters and properties. Many license agreements require advance
royalty payments and minimum royalty guarantees, contain editorial standards
that govern Western Publishing Company, Inc.'s use of the characters and
properties and can be cancelled for failure to meet these standards or certain
other contractual obligations. None of Western Publishing Company, Inc.'s
licenses has been cancelled by the licensor for failure to meet these standards
or obligations.
Western Publishing Company, Inc. selects the characters and
properties to be licensed primarily on such factors as adaptability to its
markets, compatibility with its product lines, the identity of the licensor and
other licensees of the character, the amount of licensor advertising and
marketing support for the character, the timing of any scheduled promotion of
the character and the terms offered by the licensor. Western Publishing Company,
Inc. believes that the large breadth of its product categories and its vast
distribution network, as well as the breadth and effectiveness of its sales
force, gives it an advantage over its competitors in obtaining licensing rights
in part because of the large number of consumer impressions it creates, and the
royalties it generates. However, competition to obtain licenses is intense and
Western Publishing Company, Inc. sometimes does not obtain a license that it
seeks, or only obtains a non-exclusive license, and other times does not obtain
a license for all of its desired product categories. In Fiscal 1996, Western
Publishing Company, Inc. entered into a number of new and renewed licensing
agreements, including one for the Essence(R) trademark with Essence
Communications, Inc., a MAGIC SLATE(R) license utilizing a number of Disney
characters, a television/animated Batman(R) license covering
FRAME-TRAY(TM) puzzles, MAGIC SLATE(R) pads, crayons and markers, a license for
a number of Disney movie and standard characters for GOLDEN BOOKS(R) WITH SOUND
product with The Walt Disney Company, and an agreement in principle for a
Barbie(TM) license with Mattel, Inc. In addition, existing licenses allow
product lines to be produced in conjunction with Disney's June 1996 release of
the movie "The Hunchback of Notre Dame" and with Jim Henson Productions, Inc.'s
February 1996 release of the movie "Muppet Treasure Island(TM)".
Upon obtaining a license, Western Publishing Company, Inc.
develops story and activity books and other products featuring the licensed
character or property to incorporate into its GOLDEN BOOK(R) lines and
associated products. To develop those products, Western Publishing Company, Inc.
utilizes its internal creative staff of over 84 editors, artists and designers
and an extensive network of authors, artists and inventors who work on a
regular, but free-lance basis, with Western Publishing Company, Inc.
Penn Corporation's BEACH(R)/CONTEMPO(R) Division produces a
line of children's party tableware and accessories featuring characters licensed
from, among others, The Walt Disney Company, Western Publishing Company, Inc.,
Children's Television Workshop (Sesame Street(R)), Marvel Entertainment Group,
Inc. and Time-Warner, Inc. Royalty rates paid by Penn Corporation generally
range from 5% to 10% of the invoiced price of the product featuring the licensed
characters and properties.
New Product Lines
Western Publishing Group, Inc., through market research
activities, has intensified its efforts to identify opportunities for either the
development or acquisition of new product lines that consumers will recognize as
offering value at a popular price and has allocated substantial resources to its
new product acquisition and development efforts. In calendar 1993, it introduced
new GOLDEN SOUND STORY(R) products including MY FIRST GOLDEN SOUND STORY(R) and
GOLDEN TALKING TALES(R) books as well as GOLDEN SEEK 'N' SOUND(R) games. In
calendar 1994, it introduced a number of items to its growing boxed arts &
crafts category, including Barbie(TM) party pins and keepsakes, a button and
magnet maker kit that featured easy to make plaster designs; and Jim Henson's
Muppet Workshop(TM), a series of paper based, make your own Muppet(TM) craft
kits. The GOLDEN BOOKS(R) WITH SOUND product line introductions included MAGIC
CORNER(R) books, a one sound board book series and SOUNDS BY ME(R), a storybook
that includes sounds and a recording feature. In calendar 1995, the Company
added three new formats to its GOLDEN BOOKS(R) WITH SOUND line: GOLDEN BOOKS(R)
SOUND GAMES, an electronic interactive game, SOUND PICTURES(TM), an electronic
activity product with interchangeable pictures and SILLY SOUND STORIES(R), an
electronic create-your-own story activity product. The Company expanded its
GOLDEN BOOKS(R) Interactive Software line adding two new titles, SCIENCE SHOP
WITH
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MONKER and COLORS AND SHAPES WITH HICKORY. GOLDEN BOOKS(R) ENCYCLOPEDIA FOR KIDS
on CD-ROM was also introduced.
The Company, since acquiring Sight & Sound, Inc. in July 1990,
has expanded its GOLDEN BOOKS(R) WITH SOUND product line to over 120 titles,
including DELUXE GOLDEN SOUND STORY(TM) books with 10 sounds, MY FIRST GOLDEN
SOUND STORY(R) books with 5 sounds, The RANDOMIZER(TM) books featuring
electronic book adventures, GOLDEN TALKING TALES(R) books with prerecorded
conversations and 9 sounds, LITTLE GOLDEN BOOKS(R) WITH SOUND books with 4
sounds, FAVORITE GOLDEN SOUND STORY(R) books with 7 sounds; MAGIC CORNER(R)
books, a one sound board book, GOLDEN SEEK 'N' SOUND(R) ACTIVITIES, a sound
based activity board, GOLDEN SING ALONG(R) with 5 sound effects and 8 songs, and
SOUNDS BY ME(R) which features pre-programmed sounds and a recording capability
to create sounds. The Company sources sound pad components and certain finished
goods abroad and as a result, scheduling is an important prerequisite to
producing and distributing particular licensed product in a timely fashion. In
calendar 1995, all of the aforementioned products were marketed utilizing the
GOLDEN BOOKS(R) trademark as their primary brand for consistency and to take
advantage of the strong brand loyalty that customers have shown towards GOLDEN
BOOKS(R).
In calendar 1993, Penn Corporation's BEACH(R)/CONTEMPO(R)
Division ("Beach") introduced its first shape and die cut paper plates and its
first all over spring designs for napkins and table covers. It also introduced
The Disney Gift Book program of social expression books in 8 innovative formats.
In calendar 1994, Beach introduced its European designs gift
wrap selections with dozens of floral and artistic designs on premium paper. The
year also saw the introduction of a full line of party favors, accessories and
decorations, including those featuring Disney's Lion King characters. Toward the
end of calendar 1994, Beach introduced new products including (a) paper plates
with special shapes such as octagon and flower/petal scallops (b) designer
napkins with edge to edge printing (c) a new selection of stationery, keepsake
gifts and tableware products featuring the Vatican Library Collection and (e)
the Gale and Ardie Sayers Celebration Collection of tableware designs.
In calendar 1995, Beach broadened its line of designs to
include full milestone birthday programs developed under license from Peacock
Paper. New party programs featuring Mardi Gras and Luau themes were launched.
Other new programs in Fiscal 1996 include expanded programs for picnics, the
Fourth of July, Halloween and the Christmas holidays. Accessories which have
been included in these expanded design ensembles include candles, treat bags,
confetti, cutlery, stadium cups, garlands, balloons and window decorations.
Marketing and Distribution
Western Publishing Company, Inc.'s marketing strategy for its
Consumer Products is to create consumer demand through advertising, promotion
and attractive point-of-purchase presentations in order to sell a high volume of
popularly priced products through mass merchandising chains such as Wal-Mart
Stores, Inc. ("Wal-Mart"), K-Mart Corp., Fred Meyer Inc., Caldor, Inc. and
Target Stores Incorporated; national book chains such as Barnes & Noble (B.
Dalton Book Seller) and Borders, Inc. (including Waldenbook Co., Inc.); toy
stores such as Toys 'R' Us, Inc. and Kay-Bee Toys, Inc.; supermarket chains such
as Winn Dixie Stores, Inc., H.E. Butt Grocery Co. and Smith's Food and Drug
Centers, Inc.; drug chains such as Walgreen Co., Thrifty-Payless, Inc. and
Long's Drug Stores Corporation; warehouse clubs such as Price/Costco and Sam's
Clubs (Wal-Mart); deep discount drug stores such as Drug Emporium, Inc., Marc
Glassman, Inc. (Marc's) and Phar-Mor, Inc.; trade bookstores; independent toy
stores and other retail outlets.
A majority of Western Publishing Company, Inc.'s Consumer
Products sales are made directly to retailers through its 95 employee direct
sales force.
Western Publishing Company, Inc. also sells through
wholesalers, distributors, sales representative organizations and food brokers.
Western Publishing Company, Inc. generally provides retailers with racks,
spinners, plan-o-gramming and its computerized space management planning
service, all of which it believes provides a
7
competitive advantage in obtaining favorable shelf space for its products. To
promote sales, Western Publishing Company, Inc. uses print media, television,
cooperative advertising programs, point-of-sale displays and a variety of
consumer promotions (See "Retail Businesses").
Beach markets its products to retailers through a combination
of independent sales representatives and its own sales force. Beach provides
retailers with display units and racks for its party goods and gift wrap
products and conducts various sales incentive programs for its sales
representatives and retailers. Beach also markets its decorated paper tableware
directly to food service organizations and other institutional customers under
the CUSTOMPRINTS(R) trademark. These items are imprinted with names, logos or
messages for business and promotional use. In the mass market and chain store
channels, Beach utilizes Western Publishing Company, Inc. and third party
in-store retail merchandising forces.
Brand Equity
The Company continued to focus on the GOLDEN BOOKS(R) brand
building program that it began in Fiscal 1995. The purpose of the GOLDEN
BOOKS(R) brand building program is to capitalize on the brand's high level of
awareness among consumers and transfer it across all of the Company's consumer
product lines. A consumer print advertising campaign, which focuses on the
GOLDEN BOOKS(R) brand and the products it represents, began in Fiscal 1996. In
addition to consumer advertising, the brand equity effort includes a total
branding "line look" for all GOLDEN BOOKS(R) products. The Company's LITTLE
GOLDEN BOOKS(R) have retained their historic and universally recognized trade
dress.
In-Store Merchandising
During Fiscal 1996, in anticipation of the resumption of the
operation of Wal-Mart's GOLDEN BOOKS STORYLAND FOR KIDS(TM) program by its
management (see "Retail Businesses") and in recognition of the trend among mass
market retailers to consolidate operating decisions at the headquarters level
rather than at store level, the Company announced the elimination of
approximately 400 positions from its in-store merchandising and sales forces.
The merchandising unit is responsible for providing in-store merchandising
services in support of all Western Publishing Group, Inc.'s product lines. This
unit is focused on key mass market, discount, toy and drug chain classes of
trade and supports Western's expansion into other retail channels. As of
February 3, 1996, the Company had a reduced group of merchandisers responsible
for setting plan-o-grams, moving merchandise out of stock rooms, building
displays, managing racks and product presentation and performing store level
ordering services. The Company believes it is providing vital services to the
retailer which will enhance product take away and its long-term relationship
with the retailer.
Retail Businesses
o Category Management
Western Publishing Company, Inc.'s TOTAL CATEGORY
MANAGEMENT(TM) program provides retailers with Western's management of all
operational and supply chain functions within the children's book departments.
Created in Fiscal 1993, Western's innovative
"shop-within-a-store" Books `R' Us(TM) concept at Toys `R' Us, Inc. was expanded
to approximately 330 stores, when Toys `R' Us, Inc. assumed day to day
management in Fiscal 1995. Books `R' Us(TM) locations feature a full array of
GOLDEN BOOKS(R) products.
8
Western's GOLDEN BOOKS STORYLAND FOR KIDS(TM)
"store-within-an-aisle" program features a greatly expanded book department at
mass market retailers, with a bookstore atmosphere including special racks,
signage and full face presentation of children's books. Wal-Mart Stores, Inc.,
Caldor Inc., Fred Meyer Inc. and other national chains are participants in this
program. Toward the end of Fiscal 1996, it was determined that despite the
success of the program in expanding the sales of children's books at the mass
market level, operation of the Wal-Mart program would be returned to Wal-Mart
management. As a result, rack management and product presentation will be the
responsibility of Wal-Mart. Additionally, the Company will no longer be
responsible for the sourcing of third party ("guest") publisher product for
Storyland locations at Wal-Mart.
During Fiscal 1995, Western placed its GOLDEN BOOKS(R) kiosk
units, a part of its retail management services efforts, in 190 Kids 'R' Us(TM)
stores. In Fiscal 1996, Western placed an additional 570 kiosk units primarily
in major supermarket chains. The kiosk unit, which is specifically designed to
showcase a variety of products in a minimum amount of floor space, features a
full product assortment mix of the top selling GOLDEN BOOKS(R), including
seasonal products and everyday favorites.
o GOLDEN BOOKS(R) Showcase Stores and Factory Outlets
The Company has three GOLDEN BOOKS(R) Showcase Store locations
in Schaumburg, IL, CityWalk Center at Universal City in Burbank, CA and
Rockefeller Center in New York, NY. Each of the stores features only Western
Publishing Group, Inc. Consumer Products.
The Company opened its first GOLDEN BOOKS(R) Mini Factory
Outlet Kiosk in August 1994 in the Gurnee Mills Mall in Gurnee, IL and a second
in the Kenosha Factory Outlet Centre in Kenosha, WI in November 1995 to provide
an outlet for effective liquidation of corporate overstocks and discontinued
products. The kiosk features an array of GOLDEN BOOKS(R) products.
During the third quarter of Fiscal 1996, the Company announced
that certain of its retail store locations would be closed. The CityWalk Center
Showcase store at Universal City in Burbank, CA was closed in March, 1996. The
Company is currently negotiating with interested parties to lease certain of its
other retail store locations.
International Sales
Western Publishing Group, Inc.'s international sales in Fiscal
1996 were approximately 10% of net sales, the majority of which were derived
through a Canadian subsidiary of Western Publishing Company, Inc., Western
Publishing (Canada) Inc., and a sales, distribution and licensing division of
Western Publishing Company, Inc. in the United Kingdom. The Canadian subsidiary
serves the Canadian market and distributes Western Publishing Company, Inc.
Consumer Products, as well as distributing toy products for other manufacturers.
The operation located in London, England serves the United Kingdom and other
European markets. Additionally, the Company has been expanding its export sales
to its distributor in Australia as well as to customers in Spanish speaking
countries including Mexico and South America.
9
Competition
Although Western Publishing Company, Inc. has one of the
largest shares of the market for children's storybooks and activity books, there
are other major competitors in the industry, such as Random House, Inc., Simon &
Schuster, Inc. and G.P. Putnam & Sons, a division of The Putnam Berkley
Publishing Group in the storybook category, Landoll, Inc. in the color and
activity category, Publications International, Ltd. in the electronic storybook
category and School Zone Inc. in the educational workbook area. There also are
numerous competitors in the markets for in-laid puzzles and adult books marketed
by Western Publishing Company, Inc. Competition is intense and is based
primarily on price, quality, distribution, advertising and licenses. In
addition, Western Publishing Company, Inc. competes for a share of consumer
spending on juvenile entertainment and educational products against companies
that market a broad range of other products for children.
Western Publishing Company, Inc. believes that its specialized
manufacturing equipment for many of its products results in lower production
costs and its integrated production facilities provide it with greater
flexibility in the timing and volume of its production of inventory. Its large
market share in most of the product lines in which it competes gives it greater
economies of scale in producing, marketing, selling and distributing those
products.
Penn Corporation has many major competitors in the paper
tableware, gift wrap and stationery industries, including Hallmark Cards, Inc.,
American Greetings Corp., Unique Industries, Inc., Fonda Group, Inc. and Amscan,
Inc.
Trademarks
Western Publishing Company, Inc. has numerous registered
trademarks and service marks in the United States and other countries for
various uses, including LITTLE GOLDEN BOOKS(R), GOLDEN BOOKS(R), GOLDEN
PRESS(R), SIGHT & SOUND(R), GOLDEN SOUND STORY(R), ARTISTS & WRITERS GUILD
BOOKS(R), GOLDEN STEP AHEAD(R), MERRIGOLD PRESS(R), GOLDEN SEEK 'N' SOUND(R),
GOLDEN TALKING TALES(R), GOLDEN SING ALONG(R), GOLDEN BOOK 'N' TAPE(R) and
WHITMAN(R). Western Publishing Company, Inc. believes that the GOLDEN BOOK(R)
trademark is material to the conduct of its business. Western Publishing
Company, Inc. also has registered trademarks for MAGIC SLATE(R), its well-known
children's activity product, STICKER FUN(R), its children's activity books,
FRAME-TRAY(R), its popular children's in-laid puzzles and WHITMAN(R), its line
of products for coin collecting enthusiasts. Western Publishing Company, Inc.
has certain patents, some of which are material to the conduct of its business.
Penn Corporation has several registered trademarks in the United States,
including BEACH(R), CONTEMPO(R) and RENNER DAVIS by CONTEMPO(TM), PARTY
MAKERS(R) and FASHION COLORS(R).
Inventory; Returns; Backlog
Both Western Publishing Company, Inc. and Penn Corporation
have their own production capabilities and do not rely to any material extent on
suppliers for their finished product inventory needs, except for a limited
number of products that they do not self-manufacture. Western Publishing
Company, Inc. continues to maintain a high level of finished goods inventory to
support the just-in-time nature of its business and fulfill its customer service
requirements (see Management's Discussion and Analysis on page 66 of the
Company's April 18, 1996 Proxy Statement for the Special Meeting of Stockholders
scheduled for May 8, 1996, which is incorporated by reference herein and
included as an exhibit hereto for a further discussion of inventory). Under
certain circumstances, when Company approval is secured in advance, a customer
may return saleable merchandise. Both companies provide payment terms standard
in their respective industries. Backlog is not meaningful to either company's
business.
10
Regulation
Some of Western Publishing Company, Inc.'s products must
comply with the child safety laws which, in general, prohibit the use of
materials that might be hazardous to children. Western Publishing Company, Inc.
maintains its own materials testing laboratory to assure the quality and safety
of its products. Western Publishing Company, Inc. has experienced no difficulty
and incurred no material costs in complying with these laws. Certain of Penn
Corporation's tableware products are subject to regulations of the Food and Drug
Administration and the Company has experienced no difficulty and has incurred no
material costs in complying with these regulations.
COMMERCIAL PRODUCTS SEGMENT
Western Publishing Company, Inc., through its Diversified
Products Division, provides creative, printing and publishing services to
others. Western Publishing Company, Inc. groups these activities into three
business categories: graphic art services and commercial printing; educational
kit manufacturing and Custom Publishing(R) services.
Graphic Art Services and Commercial Printing
A substantial portion of Western Publishing Company's graphic
services and commercial printing business is concentrated in the printing of
books, industrial manuals, catalogs, maps and promotional materials. Western
Publishing Company, Inc. also engages in commodity printing (such as tax
instruction booklets and tax forms), which business usually is obtained on a
competitive bid basis and is generally produced when the Company has production
capacity available. Customers include Bantam Doubleday Dell Publishing Group,
International Bible Society, American Bible Society, Ralston Purina Company,
General Motors Corp. and The Walt Disney Company.
Educational Kit Manufacturing
Educational kit manufacturing includes the development,
printing, sourcing, packaging and assembly of as many as 200 different
components for one kit. Western Publishing Company, Inc. has produced
educational kits for the nation's foremost educational publishers, including
International Horizons (Curacao) N.V., World Book Publishing, Houghton Mifflin
Company, Macmillan/McGraw-Hill School Publishing Company, Grolier, Inc., IBM
Corp. and P.F. Collier.
Custom Publishing
Custom Publishing(R) includes the creation, design,
production, assembly and distribution for major consumer products and fast food
companies of customized products for their marketing and promotional programs.
Recent Custom Publishing(R) customers include Wendy's International, Inc.,
Planters Lifesavers Co., Chick-Fil-A Inc. Hershey Chocolate USA, Toys 'R' Us,
Inc. and Blockbuster Entertainment Group. Custom Publishing(R) utilizes the
complete creative capabilities of Western Publishing Company, Inc., as well as
its marketing, art, editorial, rights and royalty, manufacturing and product
engineering groups.
11
Marketing and Competition
Western Publishing Company, Inc.'s Diversified Products
Division services are sold by approximately 30 employee sales representatives
located in field sales offices throughout the United States. Western Publishing
Company, Inc. utilizes its Consumer Products resources and relationships to
assist in the marketing of its Diversified Products services. Competition, which
is based upon formats, price, quality and delivery, is intense, particularly in
the graphic art and commercial printing businesses. Western Publishing Company,
Inc. has several unique manufacturing processes and creative resources which
enhance its competitive position in the marketplace. Western Publishing Company,
Inc. competes in this area with numerous companies, the largest of which is R.R.
Donnelly & Sons Company.
GENERAL INFORMATION
Seasonality
Western Publishing Group, Inc. experiences seasonality,
particularly in its Consumer Products segment, with highest revenues in the
third fiscal quarter. Western Publishing Company, Inc. generally uses certain of
its production facilities that are not being fully utilized by its Consumer
Products segment for its graphic art and commercial printing activities, thereby
somewhat reducing the seasonality of Western Publishing Company, Inc.'s overall
business. Revenues in the second half of Fiscal 1996 were approximately 52%.
Raw Materials
Both Western Publishing Company, Inc. and Penn Corporation use
a wide variety of paper, plastic, inks and other raw materials in the
manufacture of their products. Neither Western Publishing Company, Inc. nor Penn
Corporation is dependent on any one supplier for any raw material. However, due
to increased industry-wide demand, the Company has experienced price increases
and some difficulty in obtaining certain grades of paper from time to time.
Western does not anticipate any interruption in its business because of current
conditions.
Employees
Western Publishing Group, Inc. employs in the aggregate
approximately 1,950 full-time employees and 150 part-time employees.
Approximately 500 employees are represented by labor unions. In Fiscal 1996,
Western Publishing Company, Inc. negotiated a new three-year contract with the
Graphic Communications International Union, Local 223B; the International
Brotherhood of Teamsters, Local 43; the Graphic Communications International
Union, Local 254M and the International Union of Operating Engineers, Local 309
on terms it considers satisfactory. Western Publishing Company, Inc. and Penn
Corporation believe that their relations with their employees are generally
good.
ITEM 2. PROPERTIES
Western Publishing Company, Inc.'s facilities are designed
principally for the manufacture of products of its Consumer Products and
Diversified Products Divisions. Western Publishing Company, Inc. devotes
substantial resources to maintain its facilities in good operating condition
and, where appropriate, to improve facilities so that they are cost efficient
and competitive in the principal markets in which it competes. Western
Publishing Company, Inc. has substantial sheetfed and web press manufacturing
capacity in its Cambridge, MD and Racine, WI plants. Capacity utilization in
these facilities, based on operating three shifts a day, five days a week,
averaged approximately 68% in Fiscal 1996.
12
Penn Corporation's manufacturing facilities are designed
solely for the manufacture of its products. These facilities are maintained in
good operating condition and, where necessary, upgraded in line with business
needs. Penn Corporation employs certain sophisticated machinery in its
manufacturing facilities including napkin, table cover, paper plate and cup
making machinery, color presses, a narrow web press, plate formers, table cover
embosser/folders and Senning wrap-over machines at its BEACH(R)/CONTEMPO(R)
Division; and paper cutting, scoring, box erecting and envelope making machinery
at its RENNER DAVIS(R) Division.
Certain information as to the significant properties used by
Western Publishing Company, Inc. and Penn Corporation in the conduct of their
businesses is set forth in the following table:
Location Square Feet Type of Use
-------- ----------- -----------
Racine, WI 960,000 Corporate, creative and marketing offices and
printing facilities
Kalamazoo, MI 560,000 Corporate offices; manufacturing; warehousing
and distribution
Coffeyville, KS 547,000 Warehousing and distribution
Crawfordsville, IN 403,000 Warehousing and distribution
Cambridge, MD 231,000 Printing; warehousing
Cambridge, 148,000 Canadian corporate offices; sales offices;
Ontario, Canada warehousing and distribution
W. Springfield, MA 41,000 Manufacturing; warehousing
New York, NY 35,000 Publishing offices; sales offices
All of these properties are owned by either Western Publishing
Company, Inc. or Penn Corporation, except for two leases covering 90,000 square
feet in Cambridge, MD, both of which are on a month to month basis; one lease
covering the Massachusetts property (lease expires December 31, 1996); and a
lease covering a New York property (lease expires December 31, 2003). All of
these properties, except for West Springfield, MA; Kalamazoo, MI and Canadian
locations are employed in both the Consumer Products and Commercial Business
segments; the West Springfield, MA; Kalamazoo, MI and Canadian properties are
used solely in the Consumer Products business segment. In addition to the
properties described above, Western Publishing Company, Inc. and Penn
Corporation own or rent various other properties that are used for
administration, sales offices and warehousing.
Western Publishing Group, Inc. believes that, in general, its
plants and equipment are well maintained, in good operating condition and
adequate for its present needs. Western Publishing Group, Inc. regularly
upgrades and modernizes its facilities and equipment. Capital additions were
approximately $17,900,000 in Fiscal 1996.
13
ITEM 3. LEGAL PROCEEDINGS
Western Publishing Group, Inc. and its subsidiaries are
parties to certain legal proceedings which are incidental to their ordinary
business and none of which the Company believes will be material to Western
Publishing Group, Inc. or its subsidiaries.
Two subsidiaries of Western Publishing Group, Inc., Western
Publishing Company, Inc. ("Western") and Penn Corporation ("Penn"), have been
informed by the United States Environmental Protection Agency ("EPA") and/or
state regulatory agencies that they may be potentially responsible parties
("PRPs") and face liabilities under the Comprehensive Environmental Response,
Compensation, and Liability Act (commonly known as "CERCLA" or "Superfund") or
similar state laws at seven sites that are currently undergoing investigation
and/or remediation of environmental contamination. In all but one instance, the
relevant subsidiary of Western Publishing Group, Inc. is one of a number of PRPs
that have been identified by EPA or the relevant state agency with respect to
the site.
Western is a PRP at four sites in Wisconsin. With respect to
one of those sites, Western has been classified in the de minimis category based
upon the initial allocation performed by EPA. The state has identified
approximately 100 PRPs at the site. Currently, the PRP group is negotiating the
cost and timing of a number of clean-up actions. While the cost of the remedies
has not been determined, Western does not believe its contribution will be
significant. With respect to the second site, the evidence of Western's
involvement as set forth by Federal EPA in support of its claim is conflicting.
At most, Western would have used the disposal site for only four of the 30 years
that the site was in operation. The estimated cost of the selected remedy for
the site is $7.4 million and the owner/operator has agreed to accept a 70%
allocable share, leaving the approximately 60 generator PRPs (including Western)
with the remaining 30% share. Based on available information, Western's
liability should not exceed $20,000. At the third site, Western is in the
process of negotiating with the Wisconsin Department of Natural Resources
("WDNR") to resolve its liability at the site. Based on current information, the
drum removal action proposed by WDNR, if accepted by Western will cost in the
range of $100,000 to $150,000. Western has filed a claim in state court against
the estate of the former site owner to recover any costs incurred. At the fourth
site, Western's liability pursuant to the terms of a consent decree is limited
to approximately 4% of the total costs at the site. The current estimate of
total costs is in the range of $22 million. In accordance with the consent
decree, Western has provided for its share of the probable cleanup costs.
A division of Penn Corporation has been identified as a PRP at
a Michigan site. In September 1990, EPA approved a remedial action for this site
that EPA estimated would cost $16.2 million. The PRP identified as the largest
contributor to the site is conducting the cleanup, and has entered into
settlements with approximately 225 other PRPs. This PRP filed a private cost
recovery action against Penn Corporation and approximately 40 other PRPs in the
U.S. District Court for the Western District of Michigan. The percentage of
waste at the site attributed to Penn Corporation is approximately 1% or less of
the total volume of waste shipped to the site, but Penn Corporation has not been
able to reach a settlement with the plaintiff PRP. The litigation is currently
in discovery.
At the Hertel Landfill in Plattekill, New York, Western is one
of five PRPs sued by EPA in 1994 for recovery of past EPA response costs. United
States v. Western Publishing Company, Civil Action No. 94-CV-1247 (CGC\DNH)
(N.D.N.Y.). In September 1991, EPA approved a remedial action for the Hertel
Landfill site that had a present value cost of approximately $8 million.
Currently, one of the PRPs is complying with an EPA unilateral administrative
order requiring investigation and cleanup of the Site and is seeking
contribution towards its cost from approximately 25 PRPs, including Western. At
the time that order was issued, Western, as one of the recipients of the order,
chose not to comply with the order, believing that it had sufficient cause not
to comply. The 1994 action filed by the United States does not seek penalties or
damages related to Western's decision not to comply with the EPA unilateral
administrative order. At the current time, the PRPs have not allocated
responsibility at this site.
Western also has been identified as a PRP at another site in
New York State. Western and eight other PRPs received a notice letter from the
State of New York regarding this site and is in the process of investigating
that alleged use of this site for disposal. The State has incurred past
oversight costs of at least $500,000 in connection with this site and has sought
to recover a portion of those costs from Western. In addition, there may be
future monitoring costs associated with this site, but the amount of these costs
is presently not known, as there has been no attempt made to develop an
allocation or to identify all PRPs.
14
Western and Penn are actively pursuing resolution of the
aforementioned matters. Environmental expenditures that relate to current
operations are expensed or capitalized, as appropriate. Liabilities are recorded
when environmental assessments and/or remedial efforts are probable, the cost
can be reasonably estimated and the Company's responsibility is established.
While it is not feasible to predict or determine the outcome of these
proceedings, it is the opinion of management that their outcome, to the extent
not provided for through insurance or otherwise, will not have a materially
adverse effect on the Company's financial position or future results of
operations. Western Publishing Group, Inc. believes that certain of its
insurance policies may cover these claims and is currently litigating against
its insurers for coverage.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
[Download Table]
NAME AGE POSITION(S)
---- --- -----------
Richard A. Bernstein 49 Director, Chairman and Chief Executive Officer of Western
Publishing Group, Inc.; Chairman of Western Publishing
Company, Inc.; Chairman, President and Chief Executive
Officer of Penn Corporation
James A. Cohen 50 Senior Vice President-Legal Affairs and Secretary of
Western Publishing Group, Inc.; Senior Vice
President-Legal Affairs and Secretary of Western
Publishing Company, Inc. and Vice President-Legal Affairs
and Secretary of Penn Corporation
Ira A. Gomberg 52 Vice President-Business Development and Corporate
Communications of Western Publishing Group, Inc.; Vice
President of Western Publishing Company, Inc.; Vice
President of Penn Corporation
Dale Gordon 48 Vice President and General Counsel of Western Publishing
Group, Inc.; Western Publishing Company, Inc. and Penn
Corporation
Steven M. Grossman 35 Executive Vice President, Treasurer and Chief Financial
Officer of Western Publishing Group, Inc.; Executive Vice
President and Treasurer of Western Publishing Company,
Inc.; Executive Vice President, Treasurer and Chief
Financial Officer of Penn Corporation
Michael J. Kutchin 38 Vice President-Chief Financial Officer of Western
Publishing Company, Inc.
Ilan Reich 41 Vice President-Special Projects of Western Publishing
Group, Inc.
Richard E. Snyder 63 President of Western Publishing Group, Inc.
Hal B. Weiss 39 Vice President and Assistant Treasurer of Western
Publishing Group, Inc.
15
Mr. Bernstein has been Chairman and Chief Executive Officer of
Western Publishing Group, Inc. and Chairman of Western Publishing Company, Inc.
since February 1984. From 1984 to August 1989, Mr. Bernstein was also President
of Western Publishing Group, Inc. In November 1986, Mr. Bernstein became
Chairman, President and Chief Executive Officer of Penn Corporation. He is
President of P & E Properties, Inc., a private commercial real estate
ownership/management company, and has been for more than five years. Mr.
Bernstein is the sole shareholder of P & E Properties, Inc. He is a member of
the Regional Advisory Board of Chemical Bank, a member of the Board of Trustees
of New York University, a member of the Board of Overseers of the New York
University Stern School of Business, a Director and Vice President of the Police
Athletic League, Inc., a member of the Board of Trustees of New York
University's Hospital for Joint Diseases/Orthopedic Institute, a member of the
Board of Directors of The Big Apple Circus, Inc., and a member of The Economic
Club of New York.
Mr. Cohen has been Senior Vice President-Legal Affairs and
Secretary of Western Publishing Group, Inc. since December 1991 and a senior
executive of P & E Properties, Inc. since February 1984. He became Senior Vice
President-Legal Affairs & Secretary of Western Publishing Company, Inc. in
January 1995. From February 1984 until December 1991 he was Vice President,
General Counsel and Secretary of Western Publishing Group, Inc. In March 1987,
Mr. Cohen became Secretary of Western Publishing Company, Inc. and in January
1993, Vice President-Legal Affairs of that company. In November 1986, Mr. Cohen
became Secretary of Penn Corporation, in April 1987, Vice President and General
Counsel, and in May 1991, Vice President-Legal Affairs and Secretary of that
corporation.
Mr. Gomberg has been Vice President-Business Development and
Corporate Communications of Western Publishing Group, Inc. since February 1986.
In April 1987, Mr. Gomberg became a Vice President of Penn Corporation. In
addition, he is a Vice President and Assistant Secretary of Western Publishing
Company, Inc. Since February 1986, he has also been a senior executive of P & E
Properties, Inc. From 1976 through January 1986, Mr. Gomberg was employed by
Sony Corporation of America, a manufacturer and distributor of consumer
electronic products, first as General Counsel and after November 1983 as Vice
President-Government Affairs.
Mr. Gordon joined Western Publishing Company, Inc. in August
1993 as Vice President and General Counsel. He became Vice President and General
Counsel of Western Publishing Group, Inc. and Penn Corporation in January, 1994.
From 1980 through July 1993 he was with Playboy Enterprises, Inc. in various
legal/management positions, most recently as Vice President, Secretary and
Associate General Counsel.
Mr. Grossman has been Executive Vice President, Treasurer and
Chief Financial Officer of Western Publishing Group, Inc. since June 1994. Prior
to that, Mr. Grossman was Vice President-Financial Planning. Since July, 1992,
he has also been an employee of P & E Properties, Inc. From August 1983 to July
1992 Mr. Grossman was with the public accounting firm of Deloitte & Touche LLP.
He is a Certified Public Accountant licensed in the State of New York.
Mr. Kutchin joined Western Publishing Company, Inc. in
February 1995 as Vice President-Corporate Controller and was appointed Chief
Financial Officer in September 1995. Before joining Western Publishing Company,
Inc., he was Vice President-Chief Financial Officer of Ganton Technologies, Inc.
From 1982 through 1989 Mr. Kutchin was with the public accounting firm of Price
Waterhouse LLP. He is a Certified Public Accountant.
Mr. Reich has been Vice President-Special Projects of Western
Publishing Group, Inc. since October 1992. Since December, 1987 he has also been
an employee of P & E Properties, Inc.
Mr. Snyder was elected as President of Western Publishing
Group, Inc. on January 31, 1996, in connection with the signing of the
Securities Purchase Agreement. Prior to that time, Mr. Snyder had, since 1994,
been an independent business consultant and investor. He was the Chairman and
Chief Executive Officer of Simon & Schuster from 1975 to 1994. Mr. Snyder is a
director of Franklin Electronic Publishers, Inc. and of Reliance Group Holdings,
Inc.
16
Mr. Weiss has been Vice President and Assistant Treasurer of
Western Publishing Group, Inc. since August 1990. From April 1986 until July
1990, Mr. Weiss was Controller and Assistant Treasurer of Western Publishing
Group, Inc. and from November 1986 until July 1989 he was Controller of Penn
Corporation. In addition, Mr. Weiss has been Controller of P & E Properties,
Inc. since 1985. Mr. Weiss is a Certified Public Accountant. Prior to joining
Western Publishing Group, Inc. in 1985, Mr. Weiss practiced public accounting at
the firm of Turner, Imowitz and Company.
17
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
STOCKHOLDERS' INFORMATION
COMMON STOCK PRICES
Western Publishing Group, Inc. completed an initial public offering of its
Common Stock on April 22, 1986. The Common Stock is traded over-the-counter and
is quoted on the NASDAQ National Market System (symbol WPGI). The following
table sets forth the range of prices (which represent actual transactions) by
quarter as provided by the National Association of Securities Dealers, Inc.
Fiscal Year Ended February 3, 1996
.........................................
High Low
First Quarter 9 15/16 8
Second Quarter 11 3/4 9 1/16
Third Quarter 14 1/2 7 7/8
Fourth Quarter 7 3/4 10 7/8
Fiscal Year Ended January 28, 1995
.........................................
High Low
First Quarter 20 1/4 11
Second Quarter 12 7/8 9 5/8
Third Quarter 14 1/8 10
Fourth Quarter 12 5/8 9 1/4
DIVIDEND POLICY
Since its organization in 1984, Western Publishing Group, Inc. has not paid any
cash dividends on its Common Stock. Management does not anticipate the payment
of cash dividends on Common Stock in the foreseeable future (see Note 7 to the
Company's Consolidated Financial Statements on page F-11 of the Company's April
18, 1996 Proxy Statement, for the Special Meeting of Stockholders scheduled for
May 8, 1996, which is incorporated by reference herein and included as an
exhibit hereto).
18
ITEM 6. SELECTED FINANCIAL DATA
[Enlarge/Download Table]
1996 1995 1994 1993 1992
(In Thousands Except For Per Share Data)
INCOME STATEMENT DATA:
REVENUES:
Net sales $369,572 $398,354 $613,464 $649,089 $552,360
Royalties and other income 4,685 4,201 3,211 3,062 2,141
-------- -------- -------- -------- --------
Total revenues 374,257 402,555 616,675 652,151 554,501
-------- -------- -------- -------- --------
COSTS AND EXPENSES:
Cost of sales 281,392 297,421 432,503 425,274 365,913
Selling, general and administrative 129,020 124,128 203,042 188,161 160,059
Provision for restructuring and closure of operations 8,701
Gain on streamlining plan (2,000) (20,352)
Provision for write-down of Division (1,100) 28,180
-------- -------- -------- -------- --------
Total costs and expenses 417,113 400,097 663,725 613,435 525,972
-------- -------- -------- -------- --------
(LOSS) INCOME BEFORE INTEREST EXPENSE, INCOME TAXES AND
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE (42,856) 2,458 (47,050) 38,716 28,529
INTEREST EXPENSE 12,859 17,567 16,270 10,358 6,255
-------- -------- -------- -------- --------
(LOSS) INCOME BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE (55,715) (15,109) (63,320) 28,358 22,274
PROVISION (BENEFIT) FOR INCOME TAXES 11,332 2,470 (22,295) 10,860 8,580
-------- -------- -------- -------- --------
(LOSS) INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE (67,047) (17,579) (41,025) 17,498 13,694
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE (14,800)
-------- -------- -------- -------- --------
NET (LOSS) INCOME $(67,047) $(17,579) $(55,825) $ 17,498 $ 13,694
======== ======== ======== ======== ========
(LOSS) INCOME PER COMMON SHARE:
Before cumulative effect of change in accounting
principle $ (3.23) $ (0.88) $ (1.99) $ 0.80 $ 0.62
Cumulative effect of change in accounting principle (0.71)
-------- -------- -------- -------- --------
NET (LOSS) INCOME (3.23) (0.88) (2.70) 0.80 0.62
======== ======== ======== ======== ========
BALANCE SHEET DATA (AT PERIOD END):
Working capital $165,309 $228,240 $332,979 $283,101 $106,556
Total assets 321,965 428,806 505,116 508,585 390,965
Long-term debt 149,845 149,828 229,812 179,797
Convertible preferred stock 9,985 9,985 9,985 9,985 9,985
Common stockholders' equity 74,368 140,794 158,673 215,246 199,393
The selected financial data should be read in conjunction with the audited
consolidated financial statements and notes thereto included in the Company's
April 18, 1996 Proxy Statement for the Special Meeting of Stockholders scheduled
for May 8, 1996, which is incorporated by reference herein and included as an
exhibit hereto.
19
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Cautionary Statement on Forward-Looking Statements
Forward-looking statements, within the meaning of Section 21E of the
Securities and Exchange Act of 1934, are made throughout this
Management's Discussion and Analysis and in the other sections of this
report.
Total Company results may differ materially from those in the
forward-looking statements. Forward-looking statements are based on
management's current views and assumptions, and involve risks and
uncertainties that could significantly affect expected results. For
example, operating results may be affected by external factors such as:
actions of competitors; changes in laws and regulations, including
changes in accounting standards; customer demand; effectiveness of
spending or programs; and fluctuations in the cost of supply-chain
resources.
The Company's expected earnings improvement in Fiscal 1997 is based on
its analysis of current financial and operating conditions, which it
reviews and updates periodically through its planning process. This
process includes an assessment of current operating conditions and the
competitive environment, as well as the projected outcome of
supply-chain management programs, the effectiveness of its
manufacturing and overhead streamlining programs and a reduction in
excess inventories.
Management's Discussion and Analysis
The information called for is incorporated by reference to the
information under "Management's Discussion and Analysis of Financial
Condition and Results of Operations" on page 66 in the Registrant's
April 18, 1996 Proxy Statement for the Special Meeting of Stockholders
scheduled for May 8, 1996, which is included as an exhibit hereto.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Item 14 on page 22.
CONSOLIDATED QUARTERLY FINANCIAL INFORMATION
The information called for is incorporated by reference to the
information under "Consolidated Quarterly Financial Information" on
page 72 in the Registrant's April 18, 1996 Proxy Statement for the
Special Meeting of Stockholders scheduled for May 8, 1996, which is
included as an exhibit hereto.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Not applicable.
20
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information called for with respect to Directors is incorporated by
reference to the information under "Business Experience of Directors
and Executive Officers" on page 49 in the Registrant's April 18, 1996
Proxy Statement for the Special Meeting of Stockholders scheduled for
May 8, 1996, which is included as an exhibit hereto.
ITEM 11. EXECUTIVE COMPENSATION
The information called for is incorporated by reference to the
information under "Executive Compensation" on page 55 in the
Registrant's April 18, 1996 Proxy Statement for the Special Meeting of
Stockholders scheduled for May 8, 1996, which is included as an exhibit
hereto.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information called for is incorporated by reference to the
information under "Beneficial Stock Ownership - Principal Stockholders"
and "Beneficial Stock Ownership - Directors and Executive Officers" on
page 15, respectively in the Registrant's April 18, 1996 Proxy
Statement for the Special Meeting of Stockholders scheduled for May 8,
1996, which is included as an exhibit hereto.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information called for is incorporated by reference to the
information under "Certain Transactions" on page 57 in the Registrant's
April 18, 1996 Proxy Statement for the Special Meeting of Stockholders
scheduled for May 8, 1996, which is included as an exhibit hereto.
21
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements.
The consolidated financial statements of Western Publishing Group, Inc.
and subsidiaries, which appear on pages F-1 through F-20 of the
Company's April 18, 1996 Proxy Statement for the Special Meeting of
Stockholders scheduled for May 8, 1996, which is incorporated by
reference herein and included as an exhibit hereto.
Page Reference
------------------------
April 18, 1996
Proxy
Form 10-K Statement
--------- --------------
WESTERN PUBLISHING GROUP, INC.
AND SUBSIDIARIES
Independent Auditors' Report A-1 F-2
Consolidated Balance Sheets as of February 3,
1996 and January 28, 1995 F-3
Consolidated Statements of Operations for the
Years ended February 3, 1996, January 28,
1995 and January 29, 1994 F-4
Consolidated Statements of Common Stockholders'
Equity for the Years ended February 3, 1996,
January 28, 1995 and January 29, 1994 F-5
Consolidated Statements of Cash Flows for the
Years ended February 3, 1996, January 28,
1995 and January 29, 1994 F-6
Notes to Consolidated Financial Statements F-7
2. Financial Statement Schedule.
II - Valuation and Qualifying Accounts S-1
22
EXHIBITS
--------
3.1 Restated Certificate of Incorporation of the Registrant dated March 11,
1986 (incorporated by reference to Exhibit 3.1 to the Registrant's
Registration Statement No 33-4127 on Form S-1 (the "Registration
Statement")).
3.2 Certificate of Correction of the Certificate of Incorporation of the
Registrant dated January 13, 1987 (incorporated by reference to Exhibit
3.2 to the Registrant's Annual Report on Form 10-K for fiscal year 1988
(the "1988 Form 10-K")).
3.3 Amendment to Certificate of Incorporation of Registrant as approved by a
majority of the stockholders at the Annual Meeting of Stockholders held
May 14, 1987 (incorporated by reference to Exhibit 3.3 to the 1988 Form
10-K).
3.4 Amendment to Certificate of Incorporation of Registrant as approved by a
majority of the stockholders at the Annual Meeting of Stockholders held
May 17, 1990 (incorporated by reference to Exhibit 3.4 to Registrant's
Annual Report on From 10-K for fiscal year 1991 (the "1991 Form 10-K")).
3.41 Amendment to Certificate of Incorporation of Registrant as approved by a
majority of the stockholders at the Annual Meeting of Stockholders held
December 19, 1995.
3.5 By-laws of the Registrant (incorporated by reference to Exhibit 3.4 to
the 1988 Form 10-K).
4.1 Form of certificate for shares of the Registrant's Common Stock
(incorporated by reference to Exhibit 4.4 to the Registration
Statement).
10.20 Securities Purchase Agreement, dated as of January 31, 1996, by and
between Western Publishing Group, Inc. and Golden Press Holding, L.L.C.,
with exhibits (incorporated by reference to Exhibit 10.20 to the
Registrant's Form 8-K as of January 31, 1996).
10.21 Irrevocable Proxy, dated as of January 31, 1996, between Golden Press
Holding, L.L.C. and Richard A. Bernstein (incorporated by reference to
Exhibit 10.21 to the Registrant's Form 8-K as of January 31, 1996).
10.22 Irrevocable Proxy, dated as of January 31, 1996, between Golden Press
Holding, L.L.C. and the Trust, fbo Richard A. Bernstein u/a March 16,
1978, Richard A. Bernstein and Stuart Turner, as trustees (incorporated
by reference to Exhibit 10.22 to the Registrant's Form 8-K as of January
31, 1996).
10.23 Irrevocable Proxy, dated as of January 31, 1996, between Golden Press
Holding, L.L.C. and the Trust, fbo Richard A. Bernstein u/a Barry S.
Bernstein, dated April 5, 1986, Fleet National Bank of Connecticut, as
trustee (incorporated by reference to Exhibit 10.23 to the Registrant's
Form 8-K as of January 31, 1996).
10.24 Registration Rights Agreement, dated as of January 31, 1996, by and
among Western Publishing Group, Inc., Richard A. Bernstein, the Trust,
fbo Richard A. Bernstein u/a March 16, 1978, Richard A. Bernstein and
Stuart Turner, as trustees, The Richard A. and Amelia Bernstein
Foundation, Inc. and the Trust, fbo Richard A. Bernstein u/a Barry S.
Bernstein dated April 5, 1986, Fleet National Bank of Connecticut, as
trustee (incorporated by reference to Exhibit 10.24 to the Registrant's
Form 8-K as of January 31, 1996).
10.25 Amendment No. 1 dated April 5, 1996 to Securities Purchase Agreement.
10.27 Lease dated January 15, 1985, between PG Investments and Western
Publishing Company, Inc. with amendment dated January 22, 1986
(incorporated by reference to Exhibit 10.9 to the Registration
Statement).
23
10.28 Amendment dated December 29, 1986, between PG Investments and Western
Publishing Company, Inc. to the lease dated January 15, 1985, as amended
(incorporated by reference to Exhibit 10.9 to the 1988 Form 10-K).
10.29 Amendment dated January 18, 1988, between PG Investments and Western
Publishing Company, Inc. to the Lease dated January 15, 1985, as amended
(incorporated by reference to Exhibit 10.10 to the 1988 Form 10-K).
10.30 Amendment dated August 25, 1988, between PG Investments and Western
Publishing Company, Inc. to the Lease dated January 15, 1985, as amended
(incorporated by reference to Exhibit 10.16 to the Registrant's Annual
Report on Form 10-K for fiscal year 1989 (the "1989 Form 10-K")).
10.31 Amendment dated December 21, 1989, between PG Investments and Western
Publishing Company, Inc. to the Lease dated January 15, 1985, as amended
(incorporated by reference to Exhibit 10.31 to the Registrant's Annual
Report on Form 10-K for fiscal year 1990 (the "1990 Form 10-K")).
10.33 Lease dated February 1, 1989, between Golden Press, Inc. and 850 Third
Avenue LP (incorporated by reference to Exhibit 10.33 to the 1990 Form
10-K).
10.33a First Amendment Agreement dated February 3, 1993 (to lease dated
February 1, 1989) between 850 Third Avenue LP and Golden Press, Inc., as
modified by Letter Agreement dated February 3, 1993 (incorporated by
reference to Exhibit 10.33a to the 1990 Form 10-K).
10.35 Warehouse Lease Agreement - Indenture dated April 15, 1987, between
Cambridge Terminal Warehouse and Western Publishing Company, Inc.
(incorporated by reference to Exhibit 10.21 to the 1988 Form 10-K).
10.36 Lease Amendment dated March 17, 1989, between Cambridge Terminal
Warehouse and Western Publishing Company, Inc. to the Warehouse Lease
Agreement - Indenture dated April 15, 1987 (incorporated by reference to
Exhibit 10.36 to the 1990 Form 10-K).
10.37 Lease dated May 1, 1987, between West Springfield Industrial Center,
Inc. and Penn Corporation (incorporated by reference to Exhibit 10.23 to
the 1988 Form 10-K).
10.40 Golden Comprehensive Security Program, as amended and restated,
effective January 1, 1993 (incorporated by reference to Exhibit 10.40 to
the Registrant's Annual Report on Form 10-K for fiscal year 1993 (the
"1993 Form 10-K")).
10.41 First Amendment of Golden Comprehensive Security Program, as amended and
restated, effective January 1, 1993 (incorporated by reference to
Exhibit 10.41 to the Registrant's Annual Report on Form 10-K for the
fiscal year 1995 (the "1995 Form 10-K")).
10.42 Second Amendment of Golden Comprehensive Security Program, as amended
and restated, effective January 1, 1993.
10.43 Third Amendment of Golden Comprehensive Security Program, as amended and
restated, effective January 1, 1993.
10.53 Golden Retirement Savings Program, as amended and restated, effective
January 1, 1993 (incorporated by reference to Exhibit 10.53 to the 1993
Form 10-K).
10.54 First Amendment of Golden Retirement Savings Program, as amended and
restated, effective January 1, 1993 (incorporated by reference to
Exhibit 10.54 to the 1995 Form 10-K).
10.55 Second Amendment of Golden Retirement Savings Program, as amended and
restated, effective January 1, 1993.
24
10.63 Penn Corporation Comprehensive Security Program, effective January 1,
1987 (incorporated by reference to Appendix A to the Registrant's
Registration Statement 33-18430 on Form S-8 (the "Penn Comprehensive
Registration Statement")).
10.64 First Amendment of Penn Corporation Comprehensive Security Program,
effective November 2, 1987 (incorporated by reference to Appendix A to
the Penn Comprehensive Registration Statement).
10.65 Second Amendment of Penn Corporation Comprehensive Security Program,
effective January 1, 1987 (incorporated by reference to Exhibit 10.36 to
the 1988 Form 10-K).
10.66 Third Amendment of Penn Corporation Comprehensive Security Program,
effective November 2, 1987 (incorporated by reference to Exhibit 10.37
to the 1988 Form 10-K).
10.67 Fourth Amendment of Penn Corporation Comprehensive Security Program,
effective January 1, 1988 (incorporated by reference to Exhibit 10.48 to
the 1989 Form 10-K).
10.68 Fifth Amendment of Penn Corporation Comprehensive Security Program,
effective January 1, 1988 (incorporated by reference to Exhibit 10.49 to
the 1989 Form 10-K).
10.69 Sixth Amendment of Penn Corporation Comprehensive Security Program,
effective January 1, 1988 (incorporated by reference to Exhibit 10.50 to
the 1989 Form 10-K).
10.70 Seventh Amendment of Penn Corporation Comprehensive Security Program,
effective January 1, 1987, 1988 or 1989 as applicable (incorporated by
reference to Exhibit 10.52 to the 1990 Form 10-K).
10.71 Eighth Amendment of Penn Corporation Comprehensive Security Program,
effective October 18, 1989 (incorporated by reference to Exhibit 10.67
to the 1990 Form 10-K).
10.71a Ninth Amendment of Penn Corporation Comprehensive Security Program,
effective July 1, 1991 (incorporated by reference to Exhibit 10.67 to
the Registrant's Annual Report on Form 10-K for fiscal year 1992 (the
"1992 Form 10-K")).
10.71b Tenth Amendment of Penn Corporation Comprehensive Security Program,
effective April 1, 1993 (incorporated by reference to Exhibit 10.67 to
the 1994 Form 10-K).
10.71c Eleventh Amendment of Penn Corporation Comprehensive Security Program,
effective January 1, 1994 (incorporated by reference to Exhibit 10.71c
to the 1995 Form 10-K).
10.71d Twelfth Amendment of Penn Corporation Comprehensive Security Program,
effective January 1, 1994.
10.72 Beach Products (Division of Penn Corporation) Retirement Savings
Program, effective May 2, 1989 (incorporated by reference to Exhibit
10.72 to the 1992 Form 10-K).
10.73 First Amendment of Beach Products (Division of Penn Corporation)
Retirement Savings Program, effective October 1, 1990 (incorporated by
reference to Exhibit 10.73 to the 1992 Form 10-K).
10.74 Second Amendment of Beach Products (Division of Penn Corporation)
Retirement Savings Program, effective October 17, 1991 (incorporated by
reference to Exhibit 10.74 to the 1992 Form 10-K).
10.74a Third Amendment of Beach Products (Division of Penn Corporation)
Retirement Savings Program, effective July 1, 1991 (incorporated by
reference to Exhibit 10.73 to the 1993 Form 10-K).
10.74b Fourth Amendment of Beach Products (Division of Penn Corporation)
Retirement Savings Program, effective April 1, 1993 (incorporated by
reference to Exhibit 10.73 to the 1994 Form 10-K).
25
10.74c Fifth Amendment of Beach Products (Division of Penn Corporation)
Retirement Savings Program, effective January 1, 1994 (incorporated by
reference to Exhibit 10.74c to the 1995 Form 10-K).
10.74d Sixth Amendment of Beach Products (Division of Penn Corporation)
Retirement Savings Program, effective January 1, 1994.
10.75 Master Trust Agreement between the Registrant, Western Publishing
Company, Inc., Penn Corporation and Bankers Trust Company, effective
November 19, 1987 (incorporated by reference to Exhibit 10.38 to the
1988 Form 10-K).
10.76 Form of Agreement between the Registrant, Penn Corporation and certain
employees of Penn Corporation relating to the award of shares of common
stock of the Registrant, as adopted by the Board of Directors of the
Registrant on May 1, 1987 (incorporated by reference to Exhibit 10.39 to
the 1988 Form 10-K).
10.77 Amended and Restated 1986 Employee Stock Option Plan of the Registrant
(incorporated by reference to Exhibit 10.40 to the 1988 Form 10-K).
10.78 Amendment dated April 11, 1989 to the Amended and Restated 1986 Employee
Stock Option Plan of the Registrant (incorporated by reference to
Exhibit 10.56 to the 1990 Form 10-K).
10.79 Employment Agreement dated the 24th day of April, 1990 between Western
Publishing Group, Inc. and Frank P. DiPrima (incorporated by reference
to Exhibit 10.72 to the 1991 Form 10-K).
10.80 Western Publishing Company, Inc.'s Executive Medical Reimbursement Plan
dated January 1, 1991 (incorporated by reference to Exhibit 10.73 to the
1991 Form 10-K).
10.85 Western Publishing Group, Inc. 1995 Stock Option Plan (incorporated by
reference to Appendix A to the Registrant's November 17, 1995 Proxy
Statement).
10.86 Employment Agreement dated as of May 9, 1995 between Western Publishing
Group, Inc. and John P. Moore.
10.86a Agreement dated February 6, 1996 between Western Publishing Group, Inc.
and John P. Moore.
10.86b Amendment to the Agreement dated February 6, 1996 between Western
Publishing Group, Inc. and John P. Moore dated February 7, 1996.
10.88 Credit Agreement dated as of November 12, 1992, providing up to $200
million, among the Registrant, Western Publishing Group, Inc. and a
group of commercial banks (incorporated by reference to Exhibit 10.88 to
the Form 10-Q for the quarter ended October 31, 1992).
10.89 Amendment No. 1 dated as of July 31, 1993, to the Credit Agreement dated
as of November 12, 1992 (incorporated by reference to Exhibit 10.89 to
the 1994 Form 10-K).
10.90 Amendment No. 2 dated as of October 30, 1993, to the Credit Agreement
dated as of November 12, 1992 (incorporated by reference to Exhibit
10.90 to the 1994 Form 10-K).
10.91 Guarantee Agreement dated as of December 13, 1993, to the Credit
Agreement dated as of November 12, 1992 (incorporated by reference to
Exhibit 10.91 to the 1994 Form 10-K).
10.92 Amendment No. 3 dated as of May 13, 1994, to the Credit Agreement dated
as of November 12, 1992 (incorporated by reference to Exhibit 10.92 to
the 1994 Form 10-K).
26
10.93 Amended and Restated Credit Agreement dated as of May 31, 1994,
providing up to $140 million, among the Registrant, Western Publishing
Group, Inc. and a group of commercial banks (incorporated by reference
to Exhibit 10.93 to the 1995 Form 10-K).
10.94 Amendment No. 1 dated as of August 4, 1994, to the Amended and Restated
Credit Agreement dated as of May 31, 1994 (incorporated by reference to
Exhibit 10.94 to the 1995 Form 10-K).
10.95 Amendment No. 2 dated as of February 21, 1995, to the Amended and
Restated Credit Agreement dated as of May 31, 1994 (incorporated by
reference to Exhibit 10.95 to the 1995 Form 10-K).
10.96 Asset Purchase and Supply Agreement dated as of August 4, 1994 among
Western Publishing Company, Inc., Western Publishing (Canada), Ltd., and
Hasbro, Inc. (incorporated by reference to Exhibit 10.96 to the 1995
Form 10-K).
10.97 Agreement dated as of September 23, 1994 between Western Publishing
Group, Inc. and George P. Oess (incorporated by reference to Exhibit
10.97 to the 1995 Form 10-K).
10.98 Receivables Purchasing Agreement and related transaction documents dated
as of September 29, 1995 between Western Publishing Company, Inc. and
Heller Financial, Inc. (incorporated by reference to Exhibit 10.98 to
the Registrant's Form 8-K as of September 29, 1995).
10.98a First Amendment to Receivables Purchasing Agreement dated as of December
26, 1995, as relates to the Credit Agreement dated as of September 29,
1995.
21.1 List of Subsidiaries (incorporated by reference to Exhibit 21.1 to the
1995 Form 10-K).
99.4 Undertaking incorporated by reference into Part II of certain
registration statements on Form S-8 of the Registrant.
99.5 Proxy Statement dated April 18, 1996 for the Special Meeting of
Stockholders scheduled for May 8, 1996, as filed with the Securities and
Exchange Commission on April 19, 1996.
(b) Form 8-K as of January 31, 1996.
27
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this Report to
be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: May 3, 1996
Western Publishing Group, Inc.
By: /s/ Richard A. Bernstein
------------------------------------
Richard A. Bernstein,
Chairman and Chief Executive Officer
28
Pursuant to the requirements of the Securities Exchange Act of
1934, this Report has been executed below by the following persons on behalf of
the Registrant and in the capacities and on the date indicated.
Signature Title Date
--------- ----- ----
/s/ Richard A. Bernstein Chairman, Chief Executive May 3, 1996
-------------------------- Officer and Director
Richard A. Bernstein (Principal Executive Officer)
/s/ Steven M. Grossman Executive Vice President, May 3, 1996
-------------------------- Treasurer and Chief Financial
Steven M. Grossman Officer (Principal Financial
and Accounting Officer)
/s/ Richard H. Hochman Director May 3, 1996
--------------------------
Richard H. Hochman
/s/ John F. Moore Director May 3, 1996
--------------------------
John F. Moore
/s/ Jenny Morgenthau Director May 3, 1996
--------------------------
Jenny Morgenthau
/s/ Michael A. Pietrangelo Director May 3, 1996
--------------------------
Michael A. Pietrangelo
29
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Western Publishing Group, Inc.:
We have audited the consolidated financial statements of Western Publishing
Group, Inc. and subsidiaries as of February 3, 1996 and January 28, 1995, and
for each of the three years in the period ended February 3, 1996, and have
issued our report thereon dated April 2, 1996 (which report includes an
explanatory paragraph regarding the adoption of Statement of Financial
Accounting Standards No. 106); such financial statements and report are included
in your April 18, 1996 Proxy Statement for the Special Meeting of Stockholders
scheduled for May 8, 1996, and are incorporated herein by reference. Our audits
also included the financial statement schedule of Western Publishing Group,
Inc., listed in Item 14. This financial statement schedule is the responsibility
of the Company's management. Our responsibility is to express an opinion based
on our audits. In our opinion, such financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly in all material respects the information set forth
therein.
DELOITTE & TOUCHE LLP
Milwaukee, Wisconsin
April 2, 1996
A-1
WESTERN PUBLISHING GROUP, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
THREE YEARS ENDED FEBRUARY 3, 1996 (IN THOUSANDS)
[Download Table]
Allowance for Allowance
Doubtful for
Accounts Returns Total
BALANCES, JANUARY 30, 1993 $ 6,929 $ 8,243 $ 15,172
Additions charged to costs and expenses 5,577 40,951 46,528
Deductions - amounts written off (5,686) (40,268) (45,954)
Other changes - net (2,318) 2,767 449
Foreign currency conversion (11) (15) (26)
------- -------- --------
BALANCES, JANUARY 29, 1994 4,491 11,678 16,169
Additions charged to costs and expenses 472 26,248 26,720
Deductions - amounts written off (885) (30,442) (31,327)
Foreign currency conversion (11) (12) (23)
------- -------- --------
BALANCES, JANUARY 28, 1995 4,067 7,472 11,539
Additions charged to costs and expenses 1,440 16,712 18,152
Deductions - amounts written off (2,989) (19,708) (22,697)
Foreign currency conversion 4 6 10
------- -------- --------
BALANCES, FEBRUARY 3, 1996 $ 2,522 $ 4,482 $ 7,004
======= ======== ========
S-1
Dates Referenced Herein and Documents Incorporated by Reference
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