Item 1. Business.
Development
Winthrop Residential Associates III ("WRA III"), a limited partnership, was originally organized under the Uniform Limited Partnership Act of the State of Maryland on June 28, 1982, for the purpose of investing, as a limited partner, in other limited partnerships which would develop, manage, own, operate and otherwise deal with apartment complexes which would be assisted by federal, state and local government agencies ("Local Limited Partnerships") pursuant to programs which would not significantly restrict distributions to owners or the rates of return on investments in such complexes. On December 15, 1982, WRA III elected to comply with and be governed by the Maryland Revised Uniform Limited Partnership Act (the "Act") and filed its Agreement and Certificate of Limited Partnership (the "Partner ship Agreement") with the Maryland State Department of Assess ments and Taxation. In accordance with, and upon filing its certificate of Limited Partnership pursuant to, the Act, WRA III changed its name to Winthrop Residential Associates III, A Limited Partnership (the "Partnership").
The General Partners of the Partnership are Two Winthrop Properties, Inc. ("Two Winthrop") and Linnaeus-Oxford Associates Limited Partnership ("Linnaeus-Oxford"). The Initial Limited Partner is WFC Realty Co., Inc. ("WFC"). Two Winthrop and WFC are Massachusetts corporations which are wholly owned subsidiaries of First Winthrop Corporation ("First Winthrop"), a Delaware corporation, which in turn is wholly-owned by Winthrop Financial Associates, A Limited Partnership ("WFA"), a Maryland public limited partnership. Linnaeus-Oxford is a Massachusetts limited partnership. Two Winthrop is the Partnership's Managing General Partner. See "Change in Control".
The Partnership was initially capitalized with contributions totaling $2,000 from its General Partners and $5,000 from WFC.
In late 1982, the Partnership filed a Registration Statement on Form S-11 with the Securities and Exchange Commission with re spect to a public offering of 25,000 Units of limited partnership interest ("Units") at a purchase price of $1,000 per Unit (an aggregate of $25,000,000). The Registration Statement was
declared effective on March 8, 1983. The offering terminated in July 1983, at which time subscriptions for 25,000 Units, repre senting capital contributions from Investor Limited Partners of $25,000,000, had been accepted. Capital contributions net of selling commissions, sales and registration costs, were utilized to purchase investments in Local Limited Partnerships and temporary short-term investments.
Description of Business
The only business of the Partnership is investing as a limited partner in other limited partnerships that own, operate and otherwise deal with apartment properties with financing in sured by the U.S. Department of Housing and Urban Development ("HUD"). The Partnership's investment objectives and policies are described at pages 21-26 of its Prospectus dated March 11, 1983 (the "Prospectus") under the caption "Investment Objectives and Policies," which description is attached hereto as an exhibit and incorporated herein by this reference. The Prospectus was previously filed with the Commission pursuant to Rule 424(b).
Change in Control
On December 22, 1994, Arthur J. Halleran, Jr., the sole general partner of Linnaeus Associates Limited Partnership ("Linnaeus"), the sole general partner of WFA, pursuant to an Investment Agreement entered into among Nomura Asset Capital Corporation ("NACC"), Mr. Halleran and certain other individuals who comprised the senior management of WFA, transferred the general partnership interest in Linnaeus to W.L. Realty, L.P. ("W.L. Realty"). W.L. Realty is a Delaware limited partnership, the general partner of which was, until July 18, 1995, A.I. Realty Company, LLC ("Realtyco"), an entity owned by certain employees of NACC. On July 18, 1995 Londonderry Acquisition II Limited Partnership (Londonderry II"), a Delaware limited partnership, and affiliate of Apollo Real Estate Advisors, L.P. ("Apollo"), acquired, among other things, Realtyco's general partner interest in W.L. Realty and a sixty four percent (64%) limited partnership interest in W.L. Realty, and WFA acquired the sole general partnership interest in Linneaus-Oxford.
As a result of the foregoing acquisitions, Londonderry II is the sole general partner of W.L. Realty which is the sole general partner of Linnaeus, and which in turn is the sole general partner of WFA. As a result of the foregoing, effective July 18, 1995,
Londonderry II, an affiliate of Apollo, became the controlling entity of the General Partners. In connection with the transfer of control, the officers and directors of Two Winthrop resigned and Londonderry II appointed new officers and directors. See Item 10, "Directors and Executive Officers of Registrant.
Local Limited Partnerships
The Partnership initially acquired equity interests in the form of limited partnership interests in 12 Local Limited Partnerships owning and operating apartment properties. The Partnership sold its interests in four Local Limited Partnerships owning the following properties: Fairfax Towers (October 1988); Harborside Apartments Phase II (February 1989); and Hunter's Ridge Apartments Phase I and Hunter's Ridge Apartments Phase II (October 1991). The Partnership lost its ownership interest in a fifth property, Liberty Square Townhomes, when HUD foreclosed on the Local Limited Partnership owning that property in February 1992. In addition, the Partnership reduced its interest in two Local Limited Partnerships, those owning Maple Manor and The Groves, during 1988 to 50%.
The following table sets forth certain information regarding the properties owned by the seven Local Limited Partnerships in which the Partnership has retained an interest and which continue to own apartment properties as of March 15, 1996:
(1) Represents the mortgage amount or mortgage commitment as of the time the Partnership acquired its interest in the Local Limited Partnership. (2) Represents the full term or the remaining term of the mortgage, as the case may be, at the time the Partnership acquired its interest in the Local Limited Partnership. (3) This Local Limited Partnership's mortgage is held by HUD. (4) This Local Limited Partnership is operating under a Provisional Workout Arrangement with HUD which expires May 31, 1998. (5) This property is managed by Winthrop Management, an affiliate of WFA. (6) This Local Limited Partnership is currently in default on its mortgage obligation.
Descriptions of the properties and the terms upon which the Partnership acquired them are set forth at pages 32-45 of the Prospectus under the caption "Initial Investment"; pages 1-10 of the Supplement to the Prospectus dated July 20, 1983 (the "July 20, 1983 Supplement"), under the caption "Investments in Local Limited Partnerships"; pages 17-20 of the Property Report of the Partnership dated September 30, 1983, and pages 7-27 of the Partnership's Annual Report on Form 10-K filed March 31, 1984 under the caption "Item 1. Business," all of which descriptions are attached hereto as an Exhibit and incorporated herein by this reference. The July 20, 1983 Supplement was filed with the Commission as Post Effective Amendment No. 2 to the Partnership's Registration Statement on Form S-11 (Registration No. 2-81033). See also Note 4 of Notes to Financial Statements included as a part of this Annual Report for additional information concerning the properties.
Defaults
The Partnership holds limited partnership interests in Local Limited Partnerships which own apartment properties, all of which were originally financed with HUD-insured first mortgages. If a Local Limited Partnership defaults on a HUD-insured mortgage, the mortgagee can assign the defaulted mortgage to HUD and recover the principal owed on its first mortgage from HUD. HUD, in its discretion, may then either (i) negotiate a workout agreement with the Local Limited Partnership, (ii) sell the mortgage to another lender, or (iii) pursue its right to transfer the own ership of the property from the Local Limited Partnership to HUD or a new lender if HUD sells its mortgage (collectively, the "Lender") through a foreclosure action. The objective of a workout agreement between an owner and the Lender is to secure the Lender's sanction of a plan which, over time, will cure any mortgage delinquencies. While a workout agreement is effective and its terms are being met, the Lender agrees not to pursue any remedies available to it as a result of the default. If the owner does default under the terms of the workout agreement or if the Lender concludes that a property in default lacks the ability to generate sufficient revenue to cure its default, it may pursue its right to assume ownership of the property through foreclosure.
Two Local Limited Partnerships (owning Autumn Chase and Clear Creek), which were previously in default, currently have Provisional Workout Arrangements in effect with HUD, which expires in April 2000 and May 1988, respectively. The Partnership also holds an ownership interest in a Local Limited Partnership (owning Dunhaven Apartments, Section 2, Phase 2) which is currently in default on its mortgage obligation. This mortgage was assigned to HUD on March 23, 1995. The Partnership is working with the Local Limited Partnership to bring this debt current. See Item 7 "Management's Discussion and Analysis of Financial Condition - Results of Operation".
Employees
The Partnership does not have any employees. Services are performed for the Partnership by the Managing General Partner, and agents retained by it.
Item 2.

Item 2. Properties.
Other than the limited partnership interests set forth in Item 1 above, the Partnership does not own any property.
Item 3.

Item 3. Legal Proceedings. None.
Item 4.

Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted to a vote of security holders during the period covered by this report.
PART II
Item 5.

Item 5. Market for the Registrant's Common Stock and Related Stockholders Matters.
The Registrant is a partnership and thus has no common stock. There is no active market for the Units. Trading in the Units is sporadic and occurs solely through private transactions.
As of December 31, 1995, there were 2,220 holders of the Units.
The Partnership Agreement requires that if the Partnership has Cash Available for Distribution it be distributed quarterly to the Partners in specified proportions. The Partnership Agreement defines Cash Available for Distribution as Cash Flow less cash designated by the Managing General Partner to be held for restoration or creation of reserves. Cash Flow, in turn, is defined as cash derived from the Local Limited Partnerships (but excluding sale or refinancing proceeds) and all cash derived from Partnership operations, less cash used to pay operating expenses of the Partnership. During the years ended December 31, 1995 and 1994, Registrant has made the following cash distributions with respect to the Units to holders thereof as of the dates set forth below in the amounts set forth opposite such dates:
Distribution with Amount of Distribution Respect to Quarter Ended Per Unit
1995 1994 ---- ----
March 31 10.00 10.00 June 30 10.00 10.00 September 30 7.00 10.00 December 31 7.00 10.00
Item 6.

Item 6. Selected Financial Data.
The following represents selected financial data for Registrant for the years ended December 31, 1995, 1994, 1993, 1992 and 1991. The data should be read in conjunction with the financial statements included elsewhere herein. This data is not covered by the independent auditors' report.
(1) Includes $20.00 per Unit from reserves. (2) Includes $160 per Unit from the sale proceeds from Hunter's Ridge Phases I and II and reserves. (3) Includes $26 per Unit from reserves.
Item 7.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Liquidity and Capital Reserves
As of March 15, 1996, the Partnership retained an equity interest in seven Local Limited Partnerships. The Partnership follows the equity method of accounting for these interests and recognizes its proportionate share of income and losses incurred by the Local Limited Partnerships. Generally, the Partnership's equity in losses in the Local Limited Partnerships decrease over time. Losses attributable to a Local Limited Partnership are not recognized if those losses would cause the Partnership's investment account for that Local Limited Partnership to become negative since the Partnership has no obligation to fund them. In 1993, the equity in losses decreased because The Groves' remaining investment account was not sufficient to recognize all 1993 losses from the Local Limited Partnership. In 1994, the equity in losses decreased since the only losses recognized by the Partnership were from Maple Manor. For fiscal 1995, $192,352 of the Partnership's share of losses from the Local Limited Partnerships were not recognized since the related investments had been fully written off. Cumulatively through 1995, a total of $4,672,335 of the Partnership's equity in losses from the Local Limited Partnerships has been deferred.
The equity method of accounting is used solely for financial reporting purposes; all losses continue to be recognized for tax purposes. The tax losses of the Partnership will decrease over time because the advantages of accelerated depreciation taken by the Local Limited Partnerships are greatest in the earlier years. Also, the deductions for mortgage interest expense will steadily decrease as the mortgage principals are amortized.
The Partnership requires cash to pay its general and administrative expenses or to make advances to any of the Local Limited Partnerships the Managing General Partner deems to be in the Partnership's best interest to preserve its ownership interest. To date, all cash requirements have been satisfied by interest income earned on short-term investments and cash distributed to the Partnership by the Local Limited Partnerships. If the Partnership funds any operating deficits, it will use monies from its operating reserves. As of December 31, 1995, the Partnership held operating reserves (after satisfaction of liabilities) of approximately $1,419,000 which is expected to be
sufficient to fund any anticipated deficits. Reserves of $652,285 were used in 1995 to fund distributions to Investor Limited Partners. The Managing General Partner's current policy is to maintain a reserve balance sufficient to provide, at a minimum, interest income in an amount equal to the Partnership's annual general and administrative expenses. Therefore, a lack of cash distributed by the Local Limited Partnerships to the Partnership in the future will not deplete the reserves, though it may restrict the Partnership from making distributions to the Investor Limited Partners.
The Partnership has reserves which, in principal, could be used to make advances to the Local Limited Partnerships. However, the Partnership does not intend to make advances to fund any future operating deficits incurred by the Local Limited Partnerships, but retains its prerogative to exercise a business judgment to reverse this position if circumstances warrant a change in this policy. Moreover, the Partnership is not obligated to provide any additional funds to the Local Limited Partnerships to fund operating deficits. If a Local Limited Partnership sustains continuing operating deficits and had no other source of funding, it is likely that the Local Limited Partnership will eventually default on its mortgage obligation and risk a foreclosure on its property by the lender. If a foreclosure were to occur, the Local Limited Partnership would lose its investment in the property and would incur a tax liability due to the recapture of tax benefits taken in prior years. The Partnership as an owner of the Local Limited Partnership, would share these consequences in proportion to its ownership interest in the Local Limited Partnership.
Results of Operations
A number of the properties owned by the Local Limited Partnerships in which the Partnership has invested have operated at a deficit for many years due to their location in areas with weak economies or overbuilt rental markets. Economic and competitive forces also impede properties operating at break even or better to improve their financial operating results, that is, to generate increasing net cash flow in each subsequent year after operating expenses and financial obligations. As markets deteriorated during the mid-1980's, the Local Limited Partnerships experiencing financial difficulties sought alternative sources of funding to cover operating deficits. In some cases, these Local Limited Partnerships secured additional
funding from their general partners. From 1985 through 1988, the Partnership did provide some funding to five Local Limited Partnerships to preserve its ownership interest in those properties. However, as it became apparent that the recovery of these markets would be prolonged and that the Partnership's resources were limited, funding was discontinued. Consequently, some Local Limited Partnerships incurring continuing deficits ceased making full debt service payments, putting the mortgages into default, and instead began negotiating with lenders for mortgage modifications to reduce debt service payments to a level property operations could support.
Three Local Limited Partnerships, owning Autumn Chase, Clear Creek and Dunhaven Apartments, Section 2, Phase 2, were in default during 1995 on their mortgage obligations.
On October 1, 1995, the mortgage encumbering Autumn Chase was modified such that the Local Limited Partnership is no longer in default. Prior to October 1, 1995, the mortgage was in default and the property operated under a Provisional Workout Agreement which required minimum payments of $24,428 per month. Pursuant to a mortgage modification agreement effective October 1, 1995, the outstanding principal balance on the note was increased to $3,181,513 by adding to the existing note an amount equal to the existing accrued and unpaid interest of $108,057. Beginning on November 1, 1995, monthly installments of $22,435 including interest at 7.5% are required under this note. The modified loan matures on November 1, 2024.
Clear Creek is currently operating under a Provisional Workout Arrangement which is effective from December 1, 1995 through May 31, 1998. The terms of the agreement require minimum monthly payments equal to approximately 130% of accruing interest as well as payments for a service charge and real estate taxes. The two previous workout agreements which expired in July 1995 and July 1994 required minimum monthly debt service payments equal to 130% and 110%, respectively, of the accruing interest as well as a service charge and real estate tax payments. Clear Creek has met the minimum debt service requirements in 1993 and 1994 and 1995. Due to the financial condition of Clear Creek, however, no cash distributions have been made to the Partnership in 1993, 1994 or 1995 and no cash distribution is expected to be made to the Partnership in 1996.
The Local Limited Partnership owning Dunhaven Apartments, Section 2, Phase 2 defaulted on its mortgage obligation in June 1994. The mortgage was assigned to HUD on March 23, 1995. Due to Dunhaven's financial situation, no cash distribution will be made to the Partnership in 1996 from 1995 operations. While Dunhaven Apartments, Section 2, Phase 2 was able to meet its debt service payments in 1993 through funding by the local general partner and Dunhaven Apartments, Section 2, Phase 1, no cash was distributed to the Partnership from 1993 operations.
Dunhaven Apartments, Section 2, Phase 1 operated at breakeven in 1995 and incurred a slight deficit in 1994 which was funded by cash reserves. Accordingly, no cash distribution was made to the Partnership in 1995 and none is expected in 1996. While Dunhaven Apartments, Section 2, Phase 1 was able to generate a small amount of cash flow in 1993, no cash distributions was made to the Partnership.
Village Square generated substantial operating cash flow in 1995 and it is anticipated that a cash distribution will be made to the Partnership in 1996 from the 1995 cash flow. The Partnership received cash distributions from Village Square of $186,573 in 1995, $263,298 in 1994 and $246,843 in 1993 from cash flow generated by Village Square in 1994, 1993 and 1992, respectively.
Maple Manor generated positive cash flow in 1995. However, the cash flow is being retained by the Local Limited Partnership for working capital and, therefore, it is not expected that a cash distribution will be made to the Partnership in 1996. In 1994, Maple Manor operated at breakeven. In 1993, Maple Manor generated positive cash flow, a portion of which was used to make a capital contribution to The Groves.
The Groves operated at breakeven in 1995 and will not be making a cash distribution to the Partnership. The Groves generated positive cash flow in 1994, however, the cash flow was retained as working capital by the Local Limited Partnership. In 1993, The Groves operated at a deficit. The improved operations are due, in part, to a reduction in repair and maintenance expenditures. An aggressive repair and maintenance program which began in 1992 and was completed in 1993. As a result, lower repair and maintenance expenditures were incurred in 1994 as compared to 1993.
The Local Limited Partnerships' objectives are to improve operating results for all properties and to continue to operate under Lender-sanctioned workout agreements for those properties that are in default on their mortgage obligations until any delinquencies are cured. The Partnership believes that as long as the Local Limited Partnerships which own properties in default continue to negotiate with the Lender to work out their financial difficulties, the threat of foreclosure is mitigated. Moreover, any workout agreement entered into between the Lender and the Local Limited Partnerships will have no affect on the Partnership's ability to deduct mortgage interest expense unless the Lender agrees to forgive such interest indebtedness. As of March 15, 1996, none of the Local Limited Partnerships had agreements with their respective Lender which would forgive accrued interest.
The results of operations for future years may differ from those in 1995 as a result of many factors. One will be the ability of the Local Limited Partnership which currently has a provisional workout agreements with HUD to extend the agreement until all mortgage delinquencies have been cured. Another factor will be the ability of the Local Limited Partnership owning Dunhaven Apartments, Section 2 Phase 1 to operate at break even or better. Another factor will be the ability of each Local Limited Partnership to deal with the consequences of changing economic conditions that affect property operations. The Partnership's investment in Local Limited Partnerships owning rental real estate is subject to the risk involved with the management and ownership of rental real estate. Vacancy levels, rental payment defaults and operating expenses are all dependent on general and local economic conditions. Shifts in the economy could result in differing operating results for each individual Local Limited Partnership. In these markets, operating results in future years may depend on the properties' ability to maintain competitive rental rates while using its available resources to fund necessary repairs and replacements.
The Partnership's plan is to work with the Local Limited Partnerships to maintain ownership of and seek workout agreements with the Lenders for those properties in default on their mortgages. Although the Partnership has no ability to force a sale of properties owned by the Local Limited Partnerships, the Partnership will also work with the Local Limited Partnerships to investigate sale opportunities and will continue to work with the
Local Limited Partnerships to improve the financial performance of all the properties.
Item 8.

Item 8. Financial Statements and Supplementary Data.
WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
FINANCIAL STATEMENTS AND SCHEDULE
INDEX
FINANCIAL STATEMENTS
Reports of Independent Public Accountants
Statements of Operations for the Years Ended December 31, 1995, 1994 and 1993
Balance Sheets as of December 31, 1995 and 1994
Statements of Changes in Partners' Capital for the Years Ended December 31, 1995, and 1994 and 1993
Statements of Cash Flows for the Years Ended December 31, 1995, 1994 and 1993
Notes to Financial Statements
SCHEDULE
III - Real Estate and Accumulated Depreciation of Property Held by Local Limited Partnerships as of December 31, 1995
All schedules prescribed by Regulations S-X other than the one indicated above have been omitted as the required information is inapplicable or the information is presented elsewhere in the financial statements or related notes.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP:
We have audited the accompanying balance sheets of WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP (a Maryland limited partnership) as of December 31, 1995 and 1994, and the related statements of operations, changes in partners' capital and cash flows for each of the three years in the period ended December 31, 1995. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements of certain Local Limited Partnerships, the investments in which are reflected in the accompanying financial statements using the equity method of accounting and have been written down to zero (see Note 2). Those statements were audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts included for those Local Limited Partnerships, is based solely on the reports of the other auditors.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the reports of other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of other auditors, the financial statements referred to above present fairly, in all material respects, the financial position of WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP as of December 31, 1995 and 1994, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts March 20, 1996
The accompanying notes are an integral part of these financial statements.
BALANCE SHEETS
The accompanying notes are an integral part of these financial statements.
The accompanying notes are an integral part of these financial statements.
Supplemental disclosure of noncash activities: The Managing General Partner declared a fourth quarter distribution of $189,227, which was distributed on February 14, 1996.
The accompanying notes are an integral part of these financial statements.
NOTES TO FINANCIAL STATEMENTS December 31, 1995
1. ORGANIZATION
Winthrop Residential Associates III, a Limited Partnership (the "Partnership") was organized on June 28, 1982 under the Uniform Limited Partnership Act of the State of Maryland to invest in limited partnerships (the "Local Limited Partnerships") which develop, manage, operate and otherwise deal in government-assisted apartment complexes that do not significantly restrict distributions to owners or the rate of return on investments in such properties. On December 15, l982, the Partnership elected to comply with and be governed by the Maryland Revised Uniform Limited Partnership Act. The Partnership will terminate on December 31, 2003, or sooner, in accordance with the terms of the Partnership Agreement.
2. SIGNIFICANT ACCOUNTING POLICIES
Financial Statements - The financial statements of the Partnership are prepared on the accrual basis of accounting.
Cash and Cash Equivalents - Cash and cash equivalents consist of money market mutual funds that invest in treasury bills and repurchase agreements with original maturities of three months or less. Cash equivalents are valued at cost, which approximates market value.
Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Income Taxes - No provision has been made for federal, state or local income taxes in the financial statements of the Partnership. The Partners are required to report on their individual tax returns their allocable share of income, gains, losses, deductions and credits of the Partnership. The Partnership files its tax returns on the accrual basis. On May 6, l983, the Internal Revenue Service issued a ruling that the Partnership should be classified as a partnership for federal income tax purposes.
Investments in Local Limited Partnerships - The Partnership accounts for its investment in each Local Limited Partnership using the equity method. Under the equity method of accounting, the investment cost (including amounts paid or accrued) is subsequently adjusted by the Partnership's share of the Local Limited Partnership's results of operations and by distributions received or accrued. Equity in the loss of Local Limited Partnerships is not recognized to the extent that the investment balance would become negative because the Partnership has no obligation to fund these losses.
2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Distributions to Partners - Cash distributions from the Local Limited Partnerships (Cash Flow) are included in the computation of the Partnership's Cash Available for Distribution in the quarter received. As provided for in the Partnership Agreement, quarterly distributions are payable to the Partners within 60 days after the end of the quarter, exclusive of sales proceeds. The total amount distributed or accrued was approximately $919,100 in 1995 and $1,081,300 in 1994 and 1993.
3. TRANSACTIONS WITH RELATED PARTIES
Two Winthrop Properties, Inc. ("Two Winthrop"), the Managing General Partner, is a wholly owned subsidiary of First Winthrop Corporation ("First Winthrop"), which, in turn, is wholly owned by Winthrop Financial Associates, A Limited Partnership ("WFA").
At December 31, 1995, a subsidiary of First Winthrop remains a comanaging general partner in a Local Limited Partnership.
The General Partners are entitled to 7.5% of Cash Available for Distribution. The General Partners had been accrued or received cash distributions of approximately $68,900 in 1995 and $81,100 in 1994 and in 1993.
During the liquidation stage of the Partnership, the General Partners and their affiliates are entitled to receive certain distributions, subordinated to specified minimum returns to the Limited Partners as described in the Partnership Agreement.
4. INVESTMENTS IN LOCAL LIMITED PARTNERSHIPS
As of December 31, 1995, the Partnership has limited partnership equity interests in seven Local Limited Partnerships that own fully operating apartment complexes. These Local Limited Partnerships have outstanding mortgages totaling $21,261,070, which are secured by the Local Limited Partnerships' real property, security interests, liens and endorsements common to first mortgage loans.
Since inception, the Partnership has made additional investments of $291,489 in several Local Limited Partnerships, $154,382 of which was accounted for as operating deficit advances and $137,107 as capital contributions by the Local Limited Partnerships. Additional investments in 1993 were $16,500. There were no additional investments in 1994 or 1995.
4. INVESTMENTS IN LOCAL LIMITED PARTNERSHIPS (Continued)
During 1988, the Partnership entered into agreements with the local General Partner of the Savannah River Associates Limited Partnership and Fayetteville Apartments. The agreement stipulates that the local General Partner will contribute additional capital in the aggregate of $250,000 to avoid an assignment of the mortgages by the mortgage lender to HUD. There is no obligation on the part of the General Partner to make any contribution when, in the exercise of reasonable business judgment, it is determined that it is not reasonably likely that the partners will realize a return on their investment sufficient to justify making such contribution. In exchange for this agreement to fund additional capital, the Partnership's interest in the sharing arrangements of profit, losses, cash flow and residuals has been reduced.
The investments in Local Limited Partnerships as of December 31, 1995 and 1994 are as follows: - ------------------------------------------------------------
4. INVESTMENTS IN LOCAL LIMITED PARTNERSHIPS (Continued)
The combined balance sheets of the Local Limited Partnerships at December 31, 1995 and 1994 are as follows:
The combined statements of operations of the Local Limited Partnerships for the years ended December 31, 1995, 1994 and 1993 are as follows:
5. TAX LOSS
The Partnership's tax loss for 1995 differs from net income for financial reporting purposes primarily due to accounting differences in the recognition of construction period costs, calculation of depreciation incurred by the Local Limited Partnerships, and losses not recognizable under the equity method. The tax loss for 1995 is as follows:
6. LOCAL LIMITED PARTNERSHIPS
The Local Limited Partnership owning Autumn Chase, which had been in default since 1989, secured a Provisional Workout Arrangement with the Department of Housing and Urban Development (HUD) during 1994. Effective October 1, 1995, the Local Limited Partnership entered into a mortgage modification agreement which has satisfied the requirements of HUD.
During 1994, the Local Limited Partnership owning Clear Creek secured a Provisional Workout Arrangement with HUD which expired in July of 1995. The Local Limited Partnership secured an amended agreement which covers the period beginning December 1, 1995 and expires May 31, 1998.
The Local Limited Partnership owning Dunhaven Apartments, Section 2, Phase 2, defaulted on its mortgage obligation in June 1994. The mortgage was assigned to HUD on March 23, 1995. Management makes payments as funds become available, and they were delinquent as of December 31, 1995.
The Partnership is unable to determine at this time if these Local Limited Partnerships will be able to meet their financing requirements during the coming year. The Partnership is not obligated to fund operating deficits or mortgage loans of these Local Limited Partnerships. The Partnership's investment balance in these Local Limited Partnerships is zero at December 31, 1995.
SUPPLEMENTARY INFORMATION REQUIRED PURSUANT TO SECTION 9.4 OF THE PARTNERSHIP AGREEMENT
2. Fees or other compensation were paid or accrued to the General Partners or their affiliates during the three months ended December 31, 1995:
Entity Receiving Form of Compensation Compensation Amount
General Partners Interest in Cash Available for Distribution $14,192
WFC Realty Co. Interest in Cash $ 35 Available for Distribution
All other information required pursuant to Section 9.4 of the Partnership Agreement is set forth in the attached financial statements and related notes or Annual Partnership Report.
Item 9.

Item 9. Changes in and Disagreements on Accounting and Financial Disclosure.
None.
PART III
Item 10.

Item 10. Directors and Executive Officers of the Registrant.
(a) and (b) Identification of Directors and Executive Officers. Registrant has no officers or directors. The Managing General Partner manages and controls substantially all of Registrant's affairs and has general responsibility and ultimate authority in all matters effective its business. As of March 1, 1996, the names of the directors and executive officers of the Managing General Partner and the position held by each of them, are as follows:
Has Served as Position Held with the a Director or Name and Age Managing General Partner Officer Since
Michael L. Ashner Chief Executive Officer 1-96 and Director
Ronald J. Kravit Director 7-95
W. Edward Scheetz Director 7-95
Richard J. McCready President and Chief Operating Officer 7-95
Jeffrey D. Furber Executive Vice President 1-96 and Clerk
Anthony R. Page Chief Financial Officer 8-95 Vice President and Treasurer
Peter Braverman Senior Vice President 1-96
(c) Identification of Certain Significant Employees. None.
(d) Family Relationships. None.
(e) Business Experience. The Managing General Partner was incorporated in Massachusetts in October 1978. The background and experience of the executive officers and directors of the
Managing General Partner, described above in Items 10(a) and (b), are as follows:
Michael L. Ashner, age 44, has been the Chief Executive Officer of Winthrop Financial Associates, A Limited Partnership ("WFA") since January 15, 1996. From June 1994 until January 1996, Mr. Ashner was a Director, President and Co-chairman of National Property Investors, Inc., a real estate investment company ("NPI"). Mr. Ashner was also a Director and executive officer of NPI Property Management Corporation ("NPI Management") from April 1984 until January 1996. In addition, since 1981 Mr. Ashner has been President of Exeter Capital Corporation, a firm which has organized and administered real estate limited partnerships.
W. Edward Scheetz, age 31, has been a Director of WFA since July 1995. Mr. Scheetz was a director of NPI from October 1994 until January 1996. Since May 1993, Mr. Scheetz has been a limited partner of Apollo Real Estate Advisors, L.P. ("Apollo"), the managing general partner of Apollo Real Estate Investment Fund, L.P., a private investment fund. Mr. Scheetz has also served as a Director of Roland International, Inc., a real estate investment company since January 1994, and as a Director of Capital Apartment Properties, Inc., a multi-family residential real estate investment trust, since January 1994. From 1989 to May 1993, Mr. Scheetz was a principal of Trammel Crow Ventures, a national real estate investment firm.
Ronald Kravit, age 39, has been a Director of WFA since July 1995. Mr. Kravit has been associated with Apollo since August 1995. From October 1993 to August 1995, Mr. Kravit was a Senior Vice President with G. Soros Realty Advisors/Reichman International. Mr. Kravit was a Vice President and Chief Financial Officer of MAXXAM Property Company from July 1991 to October 1993.
Richard J. McCready, age 37, is the President and Chief Operating Officer of WFA and its subsidiaries. Mr. McCready previously served as a Managing Director, Vice President and Clerk of WFA and a Director, Vice President and Clerk of the Managing General Partner and all other subsidiaries of WFA. Mr. McCready joined the Winthrop organization in 1990.
Jeffrey Furber, age 36, has been the Executive Vice President of WFA and the President of Winthrop Management since January 1996. Mr. Furber served as a Managing Director of WFA from January 1991 to December 1995 and as a Vice President from June 1984 until December 1990.
Anthony R. Page, age 32, has been the Chief Financial Officer for WFA since August 1995. From July, 1994 to August 1995, Mr. Page was a Vice President with Victor Capital Group, L.P. and from 1990 to July 1994, Mr. Page was a Managing Director with Principal Venture Group. Victor Capital and Principal Venture are investment banks emphasizing on real estate securities, mergers and acquisitions.
Peter Braverman, age 44, has been a Senior Vice President of WFA since January 1996. From June 1995 until January 1996, Mr. Braverman was a Vice President of NPI and NPI Management. From June 1991 until March 1994, Mr. Braverman was President of the Braverman Group, a firm specializing in management consulting for the real estate and construction industries. From 1988 to 1991, Mr. Braverman was a Vice President and Assistant Secretary of Fischbach Corporation, a publicly traded, international real estate and construction firm.
One or more of the above persons are also directors or officers of a general partner (or general partner of a general partner) of the following limited partnerships which either have a class of securities registered pursuant to Section 12(g) of the Securities and Exchange Act of 1934, or are subject to the reporting requirements of Section 15(d) of such Act: Winthrop Partners 79 Limited Partnership; Winthrop Partners 80 Limited Partnership; Winthrop Partners 81 Limited Partnership; Winthrop Residential Associates I, A Limited Partnership; Winthrop Residential Associates II, A Limited Partnership; 1626 New York Associates Limited Partnership; 1999 Broadway Associates Limited Partnership; Indian River Citrus Investors Limited Partnership; Nantucket Island Associates Limited Partnership; One Financial Place Limited Partnership; Presidential Associates I Limited Partnership; Riverside Park Associates Limited Partnership; Sixty-Six Associates Limited Partnership; Springhill Lake Investors Limited Partnership; Twelve AMH Associates Limited Partnership; Winthrop California Investors Limited Partnership; Winthrop Growth Investors I Limited Partnership; Winthrop Interim Partners I, A Limited Partnership; Winthrop Financial Associates, A Limited Partnership; Southeastern Income Properties Limited Partnership; Southeastern Income Properties II Limited
Partnership; Winthrop Miami Associates Limited Partnership; and Winthrop Apartment Investors Limited Partnership.
(f) Involvement in certain legal proceedings. None.
Item 11.

Item 11. Executive Compensation.
The Partnership is not required to and did not pay any compensation to the officers or directors of the Managing General Partner. The Managing General Partner does not presently pay any compensation to any of its officers or directors. (See Item 13, "Certain Relationships and Related Transactions.")
Item 12.

Item 12. Security Ownership of Certain Beneficial Owners and Management.
(a) Security ownership of certain beneficial owners.
The General Partners own all the outstanding general partnership interests. No person or group is known by the Partnership to be the beneficial owner of more than 5% of the outstanding Units at March 15, 1996. Under the Partnership Agreement, the voting rights of the Limited Partners are limited.
Under the Partnership Agreement, the right to manage the business of the Partnership is vested in the General Partners and is generally to be exercised only by the Managing General Partners, although approval of Linnaeus-Oxford is required as to all investments in Local Limited Partnerships and in connection with any votes or consents arising out of the ownership of a Local Limited Partnership interest.
(b) Security ownership of management.
As of March 15, 1996, one Partner of WFA owns five Units in the Partnership and WFC Realty Co., Inc. owns 100 Units, which together is less than 1%. None of the officers, directors or the general partner of the General Partners own any Units.
(c) Changes in control.
There exists no arrangement known to the Partnership the operation of which may at a subsequent date result in a change in control of the Partnership.
Item 13.

Item 13. Certain Relationships and Related Transactions.
The General Partners and their affiliates are entitled to receive various fees, commissions, cash distributions, alloca tions of taxable income, or loss and expense reimbursements from the Partnership. The amounts of these items and the times at which they are payable to the General Partners and their affiliates are described at pages 16-18 and 30-32 of the Prospectus under the captions "Management Compensation" and "Profits or Losses for Tax Purposes and Cash Distributions," which descriptions are incorporated herein by this reference.
For the years ended December 31, 1995, 1994 and 1993, the Partnership allocated taxable in the General Partners of $20,434, $22,818 and $13,179, respectively. For the years ended December 31, 1995, 1994 and 1993, the Partnership paid or accrued cash distributions to the General Partners of $68,933, $81,097, and $81,096, respectively. For the year ended December 31, 1995, Village Square paid $103,484 of property management fees to Winthrop Management, an affiliate of WFA.
PART IV
Item 14.

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) The following documents are filed as part of this report:
1. Financial Statements - The Financial Statements listed on the accompanying Index to Financial Statements and Schedule are filed as a part of this Annual Report.
2. Financial Statement - Schedule. The Financial Statement Schedule listed on the accompanying Index to Financial Statements and Schedule is filed as a part of this Annual Report.
3. Exhibits - The exhibits listed in the accompanying Index to Exhibits are filed as part of this Annual Report.
(b) Reports on Form 8-K - None
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, there unto duly authorized as of this 29th day of March 1996.
WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
By: ONE WINTHROP PROPERTIES, INC.
By: /s/ Michael L. Ashner Michael L. Ashner Chief Executive Officer
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.
Signature/Name Title Date
/s/ Michael L. Ashner Chief Executive March 29, 1996 Michael L. Ashner Officer and Director
/s/ Ronald J. Kravit Director March 29, 1996 Ronald J. Kravit
/s/ Anthony R. Page Chief Financial Officer March 29, 1996 Anthony R. Page
INDEX TO EXHIBITS
Exhibit Number Title of Document
3.A. Agreement and Certificate of Limited Partnership of Winthrop Residential Associates III, A Limited Partnership, dated as of June 28, 1982 (incorporated herein by reference to the Fund's Registration Statement on Form S-11, File No. 2-81033).
3.B. Twelfth Amendment dated as of January 24, 1984 to the Agreement and Certificate of Limited Partnership (incorporated herein by reference to the Partnership's Annual Report on Form 10-K filed March 30, 1984, File No. 2-81033).
4. Agreement and Certificate of Limited Partnership of Winthrop Residential Associates III, A Limited Partnership, dated as of June 28, 1982 (incorporated herein by reference to Exhibit 3A hereto).
10.A. Sales Agency Agreement between Winthrop Residential Associates III, A Limited Partnership and Winthrop Securities Co., Inc. (incorporated herein by reference to the Registrant's Registration Statement on Form S-11, File No. 2-81033).
10.B. Escrow Deposit Agreement among Winthrop Residential Associates III, A Limited Partnership, Winthrop Securities Co., Inc. and United States Trust Company (incorporated herein by reference to the Registrant's Registration Statement on Form S-11, File No. 2-81033).


ITEM 1. BUSINESS
(a) General Development of Business
OshKosh B'Gosh, Inc. (together with its subsidiaries, the "Company") was founded in 1895 and was incorporated in the state of Delaware in 1929. The Company designs, manufactures, sources and sells apparel for the children's wear, youth wear, and men's wear markets. While its heritage is in the men's workwear market, the Company is currently best known for its line of high quality children's wear. The children's wear and youth wear business represented approximately 92% of consolidated Company revenues for 1995. The success of the children's wear business can be attributed to the Company's core themes: quality, durability, style, trust and Americana.
These themes have propelled the Company to the position of market leader in the branded children's wear industry. The Company also leverages the economic value of the OshKosh B'Gosh name via both domestic and international licensing agreements.
The Company's long-term strategy is to provide high quality, high value clothing for the entire family. Toward this end the Company continues to expand its business lines and avenues for marketing its products. In 1990, the Company acquired Essex Outfitters, Inc. ("Essex"), a vertically integrated children's and youth wear retailer marketed under the Boston Trader label through a licensing agreement with Boston Trader Ltd. In 1994, the Company merged the operations of Essex into OshKosh B'Gosh, Inc. and created a new brand name, Genuine Kids , for the line of children's and youth wear formerly marketed under the Boston Trader label. The Genuine Kids line of apparel is sourced from third party manufacturers, primarily offshore, and sold primarily through a chain of 92 domestic retail stores.
OshKosh B'Gosh International Sales, Inc. was created in 1985 for the sale of OshKosh B'Gosh products to foreign distributors. In 1990, the Company formed OshKosh B'Gosh Europe, S.A. in conjunction with a joint venture with Poron Diffusion, S.A. to provide further access to European markets.
In 1992 the Company acquired Poron's 49% interest in OshKosh B'Gosh Europe, S.A. During 1993 OshKosh B'Gosh made moves to strategically position itself for international expansion. OshKosh B'Gosh/Asia Pacific Ltd. was created in Hong Kong to oversee licensees and distributors in the Pacific Rim, to assist international licensees with the sourcing of product, and to expand the Company's presence in that region. OshKosh B'Gosh U.K. Ltd. and OshKosh B'Gosh Deutschland GmbH, incorporated in the United Kingdom and Germany respectively, were established to increase sales emphasis in those countries.
The Company's chain of 80 domestic OshKosh B'Gosh factory outlet stores sells irregular and first quality OshKosh B'Gosh merchandise throughout the United States. In 1994, the
Company opened an OshKosh B'Gosh showcase store in New York City bringing total domestic stores to 81. In addition, Oshkosh B'Gosh Europe opened showcase stores in London and Paris during 1994. The showcase stores are designed to reinforce awareness and demand for OshKosh B'Gosh as a global brand. In 1993, the Company distributed its first children's wear mail order catalog. Due to low sales volume the decision was made to discontinue the catalog sales as of December 31, 1995.
The Company has been expanding its utilization of off- shore sourcing as a cost-effective means to produce its products and to this end leased a production facility in Honduras in 1990 through its wholly owned subsidiary Manufacturera International Apparel S.A. As a part of the Company's ongoing review of its internal manufacturing capacity, operational effectiveness, and alternative sourcing opportunities, during 1995 the Company decided to close two of its operating facilities and downsize an operating facility.
For the last nine years the Company has licensed its name for use on footwear. In 1995, the Company began sourcing footwear itself and distributed its first footwear line in the fall of 1995.
(b) Financial Information About Industry Segments
The Company is engaged in only one line of business, namely, the apparel industry.
(c) Narrative Description of Business
Products
The Company designs, manufactures, sources and markets a broad range of children's clothing as well as lines of youth wear and men's casual and work wear clothing under the OshKosh, OshKosh B'Gosh, Baby B'Gosh , Genuine Kids or OshKosh Men's Wear labels. The products are distributed primarily through better quality department and specialty stores, 173 Company owned domestic stores, direct mail catalogs and foreign retailers. The children's wear and youth wear business, which is the largest segment of the business, accounted for approximately 92% of 1995 sales compared to approximately 94% of such sales in both 1994 and 1993.
The children's wear and youth wear business is targeted to reach the middle to upper middle segment of the sportswear market. Children's wear is in size ranges from newborn/infant to girls 6X and boys 7. Youth wear is in size ranges girls 7 to 16 and boys 8 to 16.
The Company's children's wear and youth wear business includes a broad range of product categories organized primarily in a collection format whereby the products in that collection share a primary design theme which is carried out through fabric design, screenprint, embroidery, and trim applications. The Company also offers basic denim products
with multiple wash treatments. The product offerings for each season will typically consist of a variety of clothing items including bib overalls, pants, jeans, shorts, and shortalls (overalls with short pant legs), shirts, blouses and knit tops, skirts, jumpers, sweaters, dresses, playwear and fleece.
The men's wear line is the original business that started the Company in 1895. The current line comprises the traditional bib overalls, several styles of waistband-work, carpenter, and painters-pants, five pocket jeans, work shirts and flannel shirts as well as coats and jackets. The line is designed with a full array of sizes up to and including size 60 inch waists and 5x size shirts.
Most products are designed by an in-house staff. Product design requires long lead times, with products generally being designed a year in advance of the time they actually reach the retail market. In general, the Company's products are traditional in nature and not intended to be "designer" items.
In designing new products and styles, the Company attempts to incorporate current trends and consumer preferences in its traditional product offerings.
In selecting fabrics and prints for its products, the Company seeks, where possible, to obtain exclusive rights to the fabric design from its suppliers in order to provide the Company with some protection from imitation by competitors for a limited period of time.
Raw Materials, Manufacturing, and Sourcing
All raw materials used in the manufacture of Company products are purchased from unaffiliated suppliers. The Company procures and purchases its raw materials directly for its owned manufacturing facilities and may also procure and retain ownership of fabric relating to garments cut and assembled by contract manufacturers. In other circumstances, fabric is procured by the contract manufacturer directly but in accordance with the Company's specifications. In 1995, approximately 74% of the Company's direct expenditures for raw materials (fabric) were from its five largest suppliers, with the largest such supplier accounting for approximately 24% of total raw material expenditures. Fabric and various non- fabric items, such as thread, zippers, rivets, buckles and snaps are purchased from a variety of independent suppliers. The fabric and accessory market in which OshKosh B'Gosh purchases its raw materials is composed of a substantial number of suppliers with similar products and capabilities, and is characterized by a high degree of competition. As is customary in its industry, the Company has no long-term contracts with its suppliers. To date, the Company has experienced little difficulty in satisfying its requirements for raw materials, considers its sources of supply to be adequate, and believes that it would be able to obtain sufficient raw materials should any one of its product suppliers become unavailable.
Production administration is primarily coordinated from the Company's headquarters facility in Oshkosh with most production taking place in its one Wisconsin, six Tennessee, and four Kentucky plants. Overseas labor is also accessed through a leased sewing plant in Honduras, where cut apparel pieces are received from the United States and are reimported by OshKosh B'Gosh as finished goods. In addition, product is produced by contractors in 16 countries and imported into the United States.
The majority of the product engineering and sample making, allocation of production among plants and independent suppliers, material purchases and invoice payments is done through the Company's Oshkosh headquarters. All designs and specifications utilized by independent manufacturers are provided by the Company. While no long-term, formal arrangements exist with these manufacturers, the Company considers these relationships to be satisfactory. The Company believes it could obtain adequate alternative production capacity if any of its independent manufacturers become unavailable.
Because higher quality apparel manufacturing is generally labor intensive (sewing, pressing, finishing and quality control), the Company has continually sought to upgrade its manufacturing and distribution facilities. Economies are therefore realized by technical advances in areas like computer-assisted design, computer-controlled fabric cutting, computer evaluation and matching of fabric colors, automated sewing processes, and computer-assisted inventory control and shipping. In order to realize economies of operation within the domestic production facilities, cutting operations are located in two of the Company's eleven plants, with all product washing, pressing and finishing done in one facility in Tennessee and all screenprint and embroidery done in one facility in Kentucky. Quality control inspections of both semi-finished and finished products are required at each plant, including those of independent manufacturers, to assure compliance.
Customer orders for fashion products are booked from three to six months in advance of shipping. Because most Company production of styled products is scheduled to fill orders already booked, the Company believes that it is better able to plan its production and delivery schedules than would be the case if production were in advance of actual orders. In order to secure necessary fabrics on a timely basis and to obtain manufacturing capacity from independent suppliers, the Company must make substantial advance commitments, sometimes as much as five to seven months prior to receipt of customer orders. Inventory levels therefore depend on Company judgment of market demand.
Trademarks
The Company utilizes the OshKosh , OshKosh B'Gosh , Baby B'Gosh or Genuine Kids trademarks on most of its products, either alone or in conjunction with a white triangular
background. In addition, "The Genuine Article " is embroidered on the small OshKosh B'Gosh patch to signify apparel that is classic in design and all-but-indestructible in quality construction. The Company currently uses approximately 24 registered and 22 unregistered trademarks in the United States and has registered trademarks in 84 other countries. These trademarks and universal awareness of the OshKosh B'Gosh name are significant in marketing the products.
Seasonality
Products are designed and marketed primarily for three principal selling seasons:
RETAIL SALES SEASON PRIMARY BOOKING PERIOD SHIPPING PERIOD Spring/Summer August-September January-April Fall/Back-to-School January-February May-August Winter/Holiday April-May September-December
The Company's business is increasingly seasonal, with highest sales and income in the third quarter which is the Company's peak wholesale shipping period and a major retail selling season at its retail outlet stores. The Company's second quarter sales and income are the lowest because of both relatively low domestic wholesale unit shipments and relatively modest retail outlet store sales during this period. The Company anticipates this seasonality trend to continue to impact 1996 quarterly sales and income.
Working Capital
Working capital needs are affected primarily by inventory levels, outstanding accounts receivable and trades payable. The Company maintains a credit agreement with a number of banks which provides a $60 million revolving credit facility and a $40 million revocable demand line of credit for cash borrowings, issuance of commercial paper and letters of credit. The agreement expires in June 1997. There were no outstanding borrowings against these credit arrangements at December 31, 1995. Letters of credit of approximately $19 million were outstanding at December 31, 1995.
Inventory levels are affected by order backlog and anticipated sales. Accounts receivable are affected by payment terms offered. It is general practice in the apparel industry to offer payment terms of ten to sixty days from date of shipment. The Company offers net 30 days terms only.
The Company believes that its working capital requirements and financing resources are comparable with those of other major, financially sound apparel manufacturers.
Sales and Marketing
Company products are sold primarily through better quality department and specialty stores, although sales are also made through direct mail catalog companies, foreign
retailers and other outlets, including 172 Company operated domestic retail and factory outlet stores and one retail showcase store. No one customer accounted for more than 10% of the Company's 1995 sales. The Company's largest ten and largest 100 customers accounted for approximately 42% and 62% of 1995 sales, respectively. In 1995, the Company's products were sold to approximately 3,200 wholesale customers (approximately 9,600 stores) throughout the United States, and a sizeable number of international accounts.
Product sales to better quality department and specialty stores are primarily by an employee sales force with the balance of sales made through manufacturer's representatives or to in-house accounts. In addition to the central sales office in Oshkosh, the Company maintains regional sales offices and product showrooms in Dallas and New York. Most members of the Company's sales force are assigned to defined geographic territories, with some assigned to specific large national accounts. In sparsely populated areas and new markets, manufacturer's representatives represent the Company on a non-exclusive basis.
Direct advertising in consumer and trade publications is the primary method of advertising used. The Company also offers a cooperative advertising program, paying half of its customers' advertising expenditures for their products, generally up to two percent of the higher of the customer's prior or current year's gross purchases from the Company.
Backlog
The dollar amount of backlog of orders believed to be firm as of the end of the Company's fiscal year and as of the preceding fiscal year end is not material for an understanding of the business of the Company taken as a whole.
Competitive Conditions
The apparel industry is highly competitive and consists of a number of domestic and foreign companies. Some competitors have assets and sales greater than those of the Company. In addition, the Company competes with a number of firms that produce and distribute only a limited number of products similar to those sold by the Company or sell only in certain geographic areas being supplied by the Company.
A characteristic of the apparel industry is the requirement that a marketer recognize fashion trends and adequately provide products to meet such trends. Competition within the apparel industry is generally in terms of quality, price, service, style and, with respect to branded product lines, consumer recognition and preference. The Company believes that it competes primarily on the basis of quality, style, and consumer recognition and to a lesser extent on the basis of service and price. The Company is focusing attention on the issue of price and service and has taken and will continue to take steps to reduce costs, become more
competitive in the eyes of value conscious consumers and deliver the service expected by its customers.
The Company's share of the overall children's wear market is quite small. This is due to the diverse structure of the market where there is no truly dominant producer of children's garments across all size ranges and garment types. In the Company's primary channel of distribution, department and specialty stores, it holds the largest share of the branded children's wear market.
Environmental Matters
The Company's compliance with Federal, State, and local environmental laws and regulations had no material effect upon its capital expenditures, earnings, or competitive position. The Company does not anticipate any material capital expenditures for environmental control in either the current or succeeding fiscal years.
Employees
At December 31, 1995, the Company employed approximately 6,500 persons. Approximately 41% of the Company's personnel are covered by collective bargaining agreements with the United Garment Workers of America.
The Company considers its relations with its personnel to be good.
ITEM 2.

ITEM 2. PROPERTIES
The Company's principal executive and administrative offices are located in Oshkosh, Wisconsin. Its principal office, manufacturing and distribution operations are conducted at the following locations:
Approximate Floor Area in Principal Location Square Feet Use
Albany, KY 20,000 Manufacturing Byrdstown, TN 32,000 Manufacturing Celina, TN 100,000 Manufacturing Celina, TN 90,000 Laundering/Pressing Columbia, KY 78,000 Manufacturing Columbia, KY 23,000 Manufacturing Dallas, TX (1) 1,995 Sales Offices/Showroom Gainesboro, TN 61,000 Manufacturing Gainesboro, TN 29,000 Warehousing Jamestown, TN 43,000 Manufacturing Liberty, KY 218,000 Manufacturing/ Warehousing Liberty, KY (2) 32,000 Warehousing
New York City, NY (3) 18,255 Sales Offices/Showrooms Oshkosh, WI 99,000 Exec. & Operating Co. Offices Oshkosh, WI 88,000 Manufacturing Oshkosh, WI 128,000 Distribution/ Warehousing Red Boiling Springs,TN 41,000 Manufacturing White House, TN 284,000 Distribution/ Warehousing
All properties are owned by the Registrant with the exception of: (1) Lease expiration date - 1998 , (2) Lease expiration date - 1999, (3) Lease expiration date - 2007.
The Company believes that its properties are well maintained and its manufacturing equipment is in good operating condition and sufficient for current production.
Substantially all of the Company's retail stores occupy leased premises. For information regarding the terms of the leases and rental payments thereunder, refer to the "Leases" note to the consolidated financial statements on page 26 of this Form 10-K.
ITEM 3.

ITEM 3. LEGAL PROCEEDINGS
The Company and its subsidiaries are not parties to any material pending legal proceedings.
ITEM 4.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5.

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS.
Quarterly Common Stock Data
1995 1994 Stock Price Dividends Stock Price Dividends High Low Per Share High Low Per Share
Class A Common Stock 1st $15 $13-1/2 $ 0.07 $21-3/4 $14-1/2 $ 0.1025 2nd 16-3/4 14 0.07 15 12-1/4 0.1025 3rd 18 15-1/2 0.07 15-1/2 13-1/2 0.1025 4th 17-1/2 11-1/2 0.07 15-1/4 13 0.07
Class B Common Stock 1st $15 $13-1/2 $ 0.06 $22 $16-3/4 $ 0.09 2nd 16-1/2 14-1/4 0.06 17 13-3/4 0.09 3rd 18 16-1/4 0.06 15-1/2 14 0.09 4th 18-3/4 17-1/4 0.06 15-1/4 13-1/2 0.06
The Company's Class A common stock and Class B common stock trade on the Over-The-Counter market and are quoted on NASDAQ under the symbols GOSHA and GOSHB, respectively. The table reflects the "last" price quotation on the NASDAQ National Market System and does not reflect mark-ups, mark- downs, or commissions and may not represent actual transactions.
The Company has paid cash dividends on its common stock each year since 1936. The Company's Certificate of Incorporation requires that when any dividend (other than a dividend payable solely in shares of the Company's stock) is paid on the Company's Class B Common Stock, a dividend equal to 115% of such amount per share must concurrently be paid on each outstanding share of Class A Common Stock. Company management currently expects that quarterly dividends comparable to dividends paid in 1995 will continue.
As of February 16, 1996, there were 1,721 Class A common stock shareholders of record and 176 Class B common stock shareholders of record.
ITEM 6.

ITEM 6. SELECTED FINANCIAL DATA
Financial Highlights (Dollars in thousands, except per share amounts)
Year Ended December 31, 1995 1994 1993 1992 1991 Financial Results
Net Sales $ 432,266 $ 363,363 $ 340,186 $346,206 $ 365,173 Net Income 10,947 7,039 4,523 15,135* 23,576 Return on Sales 2.5% 1.9% 1.3% 4.4% 6.5%
Financial Condition
Working Capital $ 95,414 $ 101,946 $ 111,794 $111,075 $ 106,803 Total Assets 208,579 217,211 229,131 226,195 214,963 Shareholders' Equity 150,078 158,814 171,998 175,153 167,380
Data per Common Share
Net Income $ .85 $ .50 $ .31 $ 1.04* $ 1.62 Cash Dividends Declared Class A .28 .3775 .5125 .5125 .5125 Class B .24 .33 .45 .45 .45 Shareholders' Equity 12.05 11.76 11.79 12.01 11.48
* After a charge of $601 or $.04 per share to reflect cummulative effect of change in accounting for nonpension postretirement benefits.
ITEM 7.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
Results of Operations
The following table sets forth, for the periods indicated, selected Company income statement data expressed as a percentage of net sales and the percentage change in dollar amounts compared to the previous years.
As a Percentage of Net Sales Percentage Change in For the Years Ended Dollar Amounts December 31, from Fiscal Year 1995 1994 1993 1995 to 1994 1994 to 1993 Net sales 100.0% 100.0% 100.0% 19.0% 6.8% Cost of products sold 68.2% 71.4% 72.0% 13.6% 5.9% Gross profit 31.8% 28.6% 28.0% 32.3% 9.1% Selling, general, and administrative expenses 27.6% 26.1% 23.1% 25.6% 21.0% Restructuring & plant closings 0.6% --- 3.2% --- -100.0% Operating income 3.6% 2.5% 1.7% 73.0% 51.0% Other income - net 1.1% 1.1% 1.0% 17.2% 19.0% Income before income taxes 4.7% 3.6% 2.7% 55.8% 39.5% Income taxes 2.2% 1.7% 1.4% 56.1% 24.1% Net income 2.5% 1.9% 1.3% 55.5% 55.6%
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
Net sales in 1995 were $432.3 million, an increase of $68.9 million (19%) over 1994 sales of $363.4 million. The Company's 1995 domestic wholesale business of approximately $255 million was 9% more than 1994 sales of approximately $234 million, with a corresponding increase in unit shipments of approximately 11.7%. The average unit selling price during 1995 was down slightly due primarily to product mix (i.e., consumer preference towards garments with lighter weight fabrics). The increase in domestic wholesale unit shipments was the result of a number of factors. Improved product design during 1994 contributed to better "sell-thrus" and margins for a majority of our wholesale customers, and resulted in significantly higher spring 1995 (shipped primarily during the Company's first quarter) and fall back- to-school (shipped primarily during the Company's third quarter) children's fashion shipments. In addition, Company initiatives undertaken during 1994, and continuing during 1995, resulted in significantly improved shipping performance to customers on spring and fall back-to-school orders. Difficulties experienced by the Company in coordinating the transition of its sourcing strategy (which calls for increasing sourcing of its product from offshore contractors) resulted in the inability of the Company to make timely deliveries on certain holiday orders to customers. This resulted in a slowdown in the rate of unit shipment growth during the fourth quarter of 1995. Company management is implementing adjustments to its sourcing plan and anticipates improved shipping performance in 1996.
With a relatively weak apparel market in general, the Company does not anticipate the unit shipment growth experienced during 1995 to continue in 1996. The Company's preliminary outlook for 1996 indicates that unit shipments of domestic wholesale products will be generally flat as compared with 1995.
Company retail sales at its OshKosh B'Gosh branded outlet stores and Genuine Kids stores were approximately $138.4 million for 1995, a 39.2% increase over 1994 retail sales of approximately $99.4 million. This retail sales increase was primarily driven by the opening of an additional 35 retail stores during 1995. In addition, the Company's comparable store sales for 1995 were up approximately 3.6%. At year end, the Company operated 81 OshKosh B'Gosh branded stores and 92 Genuine Kids stores. Current Company plans for 1996 call for the opening of approximately 14 new retail stores and the closing of 8 to 10 unprofitable stores. Accordingly, the Company anticipates a slowdown in its retail sales growth for 1996 as compared to 1995 and 1994.
The Company's gross profit margin as a percent of sales increased to 31.8% in 1995 compared with 28.6% in 1994. This gross profit margin improvement was due to the impact of the Company's increased retail sales at higher gross margins relative to its domestic wholesale business, as well as
improvement in the wholesale business gross profit margin. The Company's restructuring and plant closing initiatives over the past two years, including redirection to a higher volume of product sourced offshore, improved internal manufacturing efficiencies, as well as more focused attention to product design, have also contributed to the Company's increased gross profit margin experienced during 1995. With the anticipated growth of the Company's retail business during 1996, along with the continuing effects of its internal manufacturing capacity reduction initiatives, the Company anticipates further improvement in its gross profit margins during 1996.
Selling, general, and administrative expenses for 1995 (excluding the $2.7 million charge for plant closures recorded during the third quarter) increased $24.3 million over 1994. As a percent of net sales, these costs increased to 27.6% as compared to 26.1% in 1994. The primary reason for the increase in the Company's selling, general, and administrative expenses is the Company's expansion of its retail business. In addition, the Company's expansion of its international operations have added to these costs.
During the third quarter of 1995, the Company recorded a pretax charge for plant closings of $2.7 million. This plant closing charge (net of income tax benefit) reduced net income by $1.6 million ($.13 per share) in 1995. As a part of the Company's ongoing review of its manufacturing capacity, operational effectiveness, and alternative sourcing opportunities, the Company decided to close its Hermitage Springs and McEwen, Tennessee facilities and downsize its Oshkosh, Wisconsin sewing facility.
During the fourth quarter of 1995, the Company substantially completed its downsizing of the Oshkosh sewing facility. The Hermitage Springs and McEwen facilities were closed in January, 1996. The Hermitage Springs facility was also sold in early 1996.
The $2.7 million pretax charge for plant closings included approximately $1.9 million of severance and related costs pertaining to workforce reductions, as well as $750,000 for facility closings and the write-down of the related assets. The Company anticipates that the plant closings (net of income tax benefit) will require cash expenditures of approximately $1.1 million. Of this amount, $375,000 was expended in the fourth quarter of 1995. The Company believes that these plant closings, along with its other restructuring initiatives carried out over the past two years, will result in reduced cost of products and improved gross profit margins. During 1993, the Company recorded a pretax restructuring charge of $10.8 million. The restructuring charge including approximately $3.3 million for facility closings, write-down of the related assets, and severance costs pertaining to workforce reductions. The restructuring charge also reflected the Company's decision to market its Trader Kids line of children's apparel under the new name of Genuine Kids and the resulting costs of the Company's decision not to renew its Boston Trader license arrangement beyond 1994, as well as
expenses to consolidate its retail operations. Accordingly, the restructuring charge included approximately $7.5 million for write-off of unamortized trademark rights and expenses related to consolidating the Company s retail operations.
During 1994, the Company implemented its restructuring plan. The Company closed its McKenzie, Tennessee facility and reached satisfactory agreements with all affected workforce concerning severance arrangements. The Company began to market a portion of its children's wear line under the Genuine Kids label, discontinuing the Trader Kids line of children's apparel. The Company also successfully consolidated the operations of its retail business into its Oshkosh office.
During 1995, the Company finalized its 1993 restructuring plan by closing its Marrowbone, Kentucky and Dover, Tennessee facilities. The Dover facility has been sold, and the Company reached satisfactory agreements with the workforce concerning severance arrangements.
There were no material changes in cost to fully implement the Company's 1993 restructuring plan. The Company's cash expenditures (net of income tax benefit) to carry out this restructuring plan were approximately $4.4 million.
Interest expense for 1995 was $1.8 million compared to $1.0 million in 1994. This increase is the result of additional Company borrowings to finance the Company's stock repurchase program.
The Company licenses the use of its trade names to selected licensees in the U.S. and in foreign countries. The Company's net royalty income was $4.4 million in 1995, a $1.0 million increase over 1994 net royalty income of $3.4 million. Net royalty income from domestic licensees was approximately $2.3 million in 1995 as compared to $2.4 million in 1994. Net royalty income from foreign licensees was approximately $2.1 million in 1995 as compared to $1.0 million in 1994. The increase in royalty income from foreign licensees is the result of both the addition of new licensees during 1994 and 1995 as well as the increased royalties from existing licensees.
The Company's effective tax rate for 1995 was 45.8% compared to 45.7% in 1994. The relatively high effective tax rates for both years result primarily from the Company's foreign operating losses (principally in Europe), which provide no tax benefit. Company management believes that the $11.4 million deferred tax asset at December 31, 1995 can be fully realized through reversals of existing taxable, temporary differences, and the Company's history of substantial taxable income which allows the opportunity for carrybacks of current or future losses.
Net income per share of $.85 in 1995 was a 70% increase over 1994 net income per share of $.50. While the Company's domestic wholesale and retail operations demonstrated progress during 1995, its European subsidiaries continued to struggle. The Company incurred a loss from its European subsidiaries of
approximately $4.6 million in 1995 as compared to an approximate $1.7 million loss in 1994. Management is currently instituting a number of changes including elimination of independent European design and sourcing functions. Beginning with the fall 1996 product line, the European subsidiaries will function primarily as distributors of U.S. designed and sourced products. Management believes that these changes will serve to improve European operating results primarily during the second half of 1996. Management is also evaluating alternative product sales and marketing options for Europe.
In March, 1995, the Financial Accounting Standards Board issued its Statement No. 121 entitled "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of". This standard requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. Statement No. 121 also addresses the accounting for long-lived assets that are expected to be disposed of. The Company will adopt Statement No. 121 during 1996. The effect of applying this new standard has not yet been fully determined.
Year Ended December 31, 1994 Compared to Year Ended December 31, 1993
Net sales in 1994 were $363.4 million, an increase of $23.2 million (6.8%) over 1993 sales of $340.2 million. The Company's 1994 domestic wholesale business of approximately $234 million was 9% less than 1993 sales of approximately $257 million, with a corresponding decline in unit shipments of approximately 6.7%. The decrease in domestic wholesale unit shipments related primarily to the effects of the competitive environment in the children's wear business combined with the effects of prior years' poor shipping performance and perceived weakness in product design.
Company retail sales at its OshKosh B'Gosh branded outlet stores and Genuine Kids stores were approximately $99.4 million for 1994, a 52.5% increase over 1993 retail sales of approximately $65.2 million. This retail sales increase was primarily driven by the opening of an additional 46 retail stores during 1994. In addition, the Company's comparable store sales for 1994 were up approximately 3.6%. At December 31, 1994, the Company operated 61 OshKosh B'Gosh branded stores and 77 Genuine Kids stores.
The Company's gross profit margin as a percent of sales improved to 28.6% in 1994 compared with 28.0% in 1993. This gross profit margin improvement was due primarily to the impact of the Company's increased retail sales at higher gross margins relative to its domestic wholesale business. The favorable impact of the Company's retail gross margins was offset in part by the domestic wholesale gross margin, which was down in 1994 primarily as a result of the adverse impact
of reduced unit volume on our manufacturing operations and slightly lower pricing to wholesale customers.
Selling, general, and administrative expenses for 1994 increased $16.5 million over 1993. As a percent of net sales, selling, general, and administrative expenses were 26.1% in 1994, up from 23.1% in 1993. The primary reason for the increased selling, general, and administrative expenses is the Company's aggressive expansion of its retail business. In addition, the Company's increasing focus on its international operations resulted in an increase in 1994's selling, general, and administrative expenses of approximately $2.7 million. Also, the Company's catalog division, initiated in the second half of 1993, added approximately $1.6 million to selling, general, and administrative expenses in 1994.
During the fourth quarter of 1993, the Company recorded a pretax restructuring charge of $10.8 million. Restructuring costs (net of income tax benefit) reduced net income by $7.1 million ($.49 per share) in 1993.
The Company's effective tax rate for 1994 was 45.7% compared to 51.3% in 1993. The relatively high effective tax rates for both years result primarily from the Company's foreign operating losses, which provide no tax benefit. In addition, the high 1993 effective tax rate was the result of substantially lower U.S. income before income taxes in 1993 (which resulted in part from the restructuring charge).
Seasonality
The Company's business is increasingly seasonal, with highest sales and income in the third quarter, which is the Company's peak wholsesale shipping period and a major retail selling season at its retail outlet stores. The Company's second quarter sales and income are the lowest both because of relatively low domestic wholesale unit shipments and relatively modest retail outlet store sales during this period. The Company anticipates this seasonality trend to continue to impact 1996 quarterly sales and income.
Financial Position, Capital Resources, and Liquidity
The Company's financial strength is demonstrated by its balance sheet. At December 31, 1995 and 1994, the Company did not have any outstanding long-term debt.
At December 31, 1995, the Company's cash and cash equivalents were $2.4 million compared to $10.5 million at the end of 1994 and $17.9 million at the end of 1993. The decrease in cash and cash equivalents is primarily due to the Company s stock repurchase program which was completed in 1995. Net working capital at the end of 1995 was $95.4 million, compared to $101.9 million at 1994 year end and $111.8 million at 1993 year end. Cash provided by operations was approximately $19.5 million in 1995, compared to $22.1 million in 1994, and $21.6 million in 1993.
Accounts receivable at December 31, 1995 were $24.7 million compared to $23.9 million at December 31, 1994. Inventories at the end of 1995 were $95.7 million, up $1.8 million from 1994. Management believes that year end 1995 inventory levels are generally appropriate for anticipated 1996 business activity.
Capital expenditures were approximately $9.7 million in 1995 and $9.9 million in 1994. Capital expenditures for 1996 are currently budgeted at approximately $10 million.
The Company's stock repurchase program announced in 1994 was completed in 1995. A total of 2,150,000 shares of Class A common stock were acquired under the repurchase program, requiring a cash outlay of approximately $16.8 million in 1995 and $15.0 million in 1994.
The Company has a credit agreement with participating banks. This arrangement provides a $60 million revolving credit facility and a $40 million revocable demand line of credit for cash borrowings, issuance of commercial paper, and letters of credit. The agreement expires in June, 1997. The Company believes that these credit facilities, along with cash generated from operations, will be sufficient to finance the Company's seasonal working capital needs as well as its capital expenditures, remaining plant closing costs, and business development needs.
Dividends on the Company's Class A and Class B common stock totaled $.28 per share and $.24 per share, respectively, in 1995 compared to $.3775 per share and $.33 per share on the Company's Class A and Class B common stock, respectively, in 1994. The dividend payout rate was 33% of net income in 1995 and 75% in 1994.
Inflation
The effects of inflation on the Company's operating results and financial condition were not significant.
ITEM 8.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Page Financial Statements: Reports of Independent Auditors 17 Consolidated Balance Sheets - December 31, 1995 and 1994 18 Consolidated Statements of Income - years ended December 31, 1995, 1994, and 1993 19 Consolidated Statements of Changes in Shareholders' Equity - years ended December 31, 1995, 1994, and 1993 20 Consolidated Statements of Cash Flows - years ended December 31, 1995, 1994, and 1993 21 Notes to Consolidated Financial Statements 22
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors OshKosh B'Gosh, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of OshKosh B'Gosh, Inc. and subsidiaries (the Company) as of December 31, 1995 and 1994, and the related consolidated statements of income, changes in shareholders' equity and cash flows for each of the three years in the period ended December 31, 1995. Our audits also included the financial statement schedule listed in the Index at Item 14. These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We beleive that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company at December 31, 1995 and 1994, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
/S/ ERNST & YOUNG LLP
Milwaukee, Wisconsin ERNST & YOUNG LLP February 2, 1996
OSHKOSH B'GOSH, INC. AND SUBSIDIARIES
Consolidated Balance Sheets (Dollars in thousands, except share and per share amounts)
December 31, 1995 1994 ASSETS Current assets Cash and cash equivalents $ 2,418$ 10,514 Accounts receivable, less allowances of $3,970 in 1995 and $3,700 in 1994 24,691 23,857 Inventories 95,743 93,916 Prepaid expenses and other current assets 3,127 2,510 Deferred income taxes 11,400 11,510 Total current assets 137,379 142,307 Property, plant, and equipment, net 65,011 69,829 Other assets 6,189 5,075
Total assets $208,579 $217,211
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities Accounts payable $ 13,910$ 9,436 Accrued liabilities 28,055 30,925 Total current liabilities 41,965 40,361 Deferred income taxes 2,700 2,869 Employee benefit plan liabilities 13,836 15,167 Commitments - - Shareholders' equity Preferred stock, par value $.01 per share: Authorized - 1,000,000 shares; Issued and outstanding - None - - Common stock, par value $.01 per share: Class A, authorized - 30,000,000 shares; Issued and outstanding - 11,189,387 shares in 1995, 12,233,787 shares in 1994 112 122 Class B, authorized - 3,750,000 shares; Issued and outstanding - 1,266,413 shares in 1995, 1,267,713 shares in 1994 13 13 Retained earnings 149,720 158,933 Cumulative foreign currency translation adjustments 233 (254) Total shareholders' equity 150,078 158,814
Total liabilities and shareholders' equity $208,579 $217,211
See notes to consolidated financial statements.
OSHKOSH B'GOSH, INC. AND SUBSIDIARIES
Consolidated Statements of Income (Dollars and shares in thousands, except per share amounts)
Year Ended December 31, 1995 1994 1993
Net sales $432,266 $363,363 $340,186 Cost of products sold 294,770 259,416 244,926
Gross profit 137,496 103,947 95,260
Selling, general, and administrative expenses 119,295 94,988 78,492 Restructuring and plant closings 2,700 - 10,836
Operating income 15,501 8,959 5,932
Other income (expense): Interest expense (1,772) (1,034) (626) Interest income 1,383 1,048 1,114 Royalty income, net of expenses4,443 3,442 3,417 Miscellaneous 633 543 (545)
Other income - net 4,687 3,999 3,360
Income before income taxes 20,188 12,958 9,292
Income taxes 9,241 5,919 4,769
Net income $ 10,947 $ 7,039 $ 4,523
Weighted average common shares outstanding 12,865 14,144 14,586
Net income per common share $.85 $.50 $.31
See notes to consolidated financial statements.