-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, QWZGo/83dlwQyMHIoC0p2zUnS57kUqUkQ6HGkYqpzpQPIDFi36XXAXIcVHVxheUH Z2ijUXWex+uD6Ya67rcM/g== 0000950109-94-000050.txt : 19940114 0000950109-94-000050.hdr.sgml : 19940114 ACCESSION NUMBER: 0000950109-94-000050 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19931130 FILED AS OF DATE: 19940113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN GREETINGS CORP CENTRAL INDEX KEY: 0000005133 STANDARD INDUSTRIAL CLASSIFICATION: 2771 IRS NUMBER: 340065325 STATE OF INCORPORATION: OH FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 34 SEC FILE NUMBER: 000-01502 FILM NUMBER: 94501306 BUSINESS ADDRESS: STREET 1: 10500 AMERICAN RD CITY: CLEVELAND STATE: OH ZIP: 44144 BUSINESS PHONE: 2162527300 MAIL ADDRESS: STREET 1: 10500 AMERICAN ROAD CITY: CLEVELAND STATE: OH ZIP: 44144 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------ FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES - ------- EXCHANGE ACT OF 1934 For the quarterly period ended November 30, 1993 ---------------------------------- OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES - ------- EXCHANGE ACT OF 1934 For the transition period from to -------------------- ------------------- Commission file number 0-1502 -------------- AMERICAN GREETINGS CORPORATION ------------------------------------------------------ (Exact name of registrant as specified in its charter) Ohio 34-0065325 - ------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) One American Road, Cleveland, Ohio 44144 - ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area (216) 252-7300 ----------------------- Indicate whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- As of November 30, 1993, the date of this report, the number of shares outstanding of each of the issuer's classes of common stock was: Class A Common 69,562,368 Class B Common 4,579,465 Part I. FINANCIAL INFORMATION ------------------------------- Item 1. Financial Statements -------------------- AMERICAN GREETINGS CORPORATION CONSOLIDATED STATEMENT OF INCOME
(Unaudited) Nine Months Ended November 30, --------------------------- 1993 1992 ------------- ------------ (Thousands of dollars, except per-share amounts) Net sales $1,296,652 $1,228,346 Other income 9,674 11,315 ----------- ----------- Total revenue 1,306,326 1,239,661 Costs and expenses: Material, labor and other production costs 512,681 495,749 Selling, distribution and marketing 474,861 451,899 Administrative and general 159,602 145,158 Interest 12,923 20,948 ----------- ----------- Total costs and expenses 1,160,067 1,113,754 ----------- ----------- Income before income taxes and cumulative effect of accounting changes 146,259 125,907 Income taxes 54,847 47,593 ----------- ----------- Income before cumulative effect of accounting changes 91,412 78,314 Cumulative effect of accounting changes, net of tax 17,182 - ----------- ----------- Net income $74,230 $78,314 =========== =========== Income per share: Before cumulative effect of accounting changes $1.24 $1.08 Cumulative effect of accounting changes, net of tax 0.23 - ----- ----- Net income per share $1.01 $1.08 ===== ===== Dividends per share $0.3575 $0.3125 ======= ======= Average number of common shares outstanding 73,670,209 72,293,148
Page 1 AMERICAN GREETINGS CORPORATION CONSOLIDATED STATEMENT OF INCOME
(Unaudited) Three Months Ended November 30, ------------------------ 1993 1992 ----------- ----------- Net sales $518,987 $489,491 Other income 3,517 3,484 ----------- ----------- Total revenue 522,504 492,975 Costs and expenses: Material, labor and other production costs 210,215 203,605 Selling, distribution and marketing 170,288 160,741 Administrative and general 55,057 51,088 Interest 4,599 6,515 ----------- ----------- Total costs and expenses 440,159 421,949 ----------- ----------- Income before income taxes 82,345 71,026 Income taxes 30,879 27,122 ----------- ----------- Net income $51,466 $43,904 =========== =========== Net income per share $0.70 $0.60 ===== ===== Dividends per share 0.1250 $0.1075 ====== ======= Average number of common shares outstanding 74,097,140 72,718,754
Page 2 AMERICAN GREETINGS CORPORATION CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(Unaudited) (Unaudited) (Unaudited) ------------ ------------ ------------ Nov 30, 1993 Feb 28, 1993 Nov 30, 1992 ------------ ------------ ------------ ASSETS (Thousands of dollars) Current assets Cash and equivalents $ 64,752 $ 235,186 $ 52,760 Trade accounts receivable, less allowances of $91,152, $85,870 and $77,028, respectively (principally for sales returns) 568,931 276,932 446,787 Inventories: Raw material 38,155 44,469 38,850 Work in process 29,609 30,171 23,933 Finished products 223,156 204,010 242,727 ---------- ---------- ---------- 290,920 278,650 305,510 Less LIFO reserve 87,976 84,887 92,382 ---------- ---------- ---------- 202,944 193,763 213,128 Display material and factory supplies 33,957 34,360 27,751 ---------- ---------- ---------- Total inventories 236,901 228,123 240,879 Deferred and refundable income taxes 49,583 66,339 59,626 Prepaid expenses 108,334 105,277 95,464 ---------- ---------- ---------- Total current assets 1,028,501 911,857 895,516 Other assets 247,431 248,991 233,816 Property, plant and equipment 757,095 708,241 681,105 Less accumulated depreciation and amortization 351,485 320,689 313,439 ---------- ---------- ---------- Property, plant and equipment -- net 405,610 387,552 367,666 ---------- ---------- ---------- $1,681,542 $1,548,400 $1,496,998 ========== ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Debt due within one year $ 256,420 $ 113,986 $ 148,087 Accounts payable 124,281 113,684 73,681 Payroll and payroll taxes 54,504 54,099 42,138 Retirement plans 14,527 17,409 12,648 Dividends payable 9,293 7,837 7,829 Income taxes 29,256 23,191 28,166 ---------- ---------- ---------- Total current liabilities 488,281 330,206 312,549 Long-term debt 87,129 169,381 162,859 Postretirement benefit obligation 20,832 -- -- Deferred income taxes 62,023 96,278 95,856 Shareholders' equity 1,023,277 952,535 925,734 ---------- ---------- ---------- $1,681,542 $1,548,400 $1,496,998 ========== ========== ==========
Page 3 AMERICAN GREETINGS CORPORATION CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited) Nine Months Ended November 30, ---------------------- 1993 1992 -------- -------- (Thousands of dollars) OPERATING ACTIVITIES: Net income $74,230 $78,314 Adjustments to reconcile to net cash used by operating activities: Postretirement benefit obligation 22,530 -- Depreciation and amortization 43,222 36,644 Deferred and refundable income taxes (3,626) (2,665) Change in operating assets and liabilities (322,283) (202,419) Other -- net 7,471 3,685 -------- -------- Cash Used by Operating Activities (178,456) (86,441) INVESTING ACTIVITIES: Property, plant & equipment additions (61,695) (43,557) Other -- net 32,336 (4,215) -------- -------- Cash Used by Investing Activities (29,359) (47,772) FINANCING ACTIVITIES Increase in long-term debt 17,864 19,090 Reduction of long-term debt (204,606) (3,032) Increase in notes payable 236,368 10,221 Sale of stock under benefit plans 20,311 14,012 Purchase of treasury shares (6,145) (8,023) Dividends to shareholders (26,411) (22,657) -------- -------- Cash Provided by Financing Activities 37,381 9,611 -------- -------- DECREASE IN CASH AND EQUIVALENTS (170,434) (124,602) Cash and Equivalents at Beginning of Year 235,186 177,362 -------- -------- Cash and Equivalents at End of Period $64,752 $52,760 ======== ========
Page 4 NOTES TO FINANCIAL STATEMENTS Nine Months Ended November 30, 1993 and 1992 Note A -- Basis of Presentation The accompanying financial statements have been prepared in accordance with the instructions to Form 10-Q. Although they are unaudited, the Corporation believes that all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of the results of operations have been made. Note B -- Seasonal Nature of Business The Corporation's business is seasonal in nature. Therefore, the results of operations for interim periods are not necessarily indicative of the results for the fiscal year taken as a whole. Note C -- Reclassifications Certain amounts in the 1992 financial statements have been reclassified to conform with the 1993 presentation. Note D -- Cumulative Effect of Accounting Changes Effective March 1, 1993, the Corporation adopted Statement of Financial Accounting Standard Number 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," the cumulative effect of which was to reduce net income by $22,530. Operating income has not been materially impacted by this accounting change. Also effective March 1, 1993, the Corporation adopted Statement of Financial Accounting Standard Number 109, "Accounting for Income Taxes," the cumulative effect of which was to increase net income by $5,348. Note E -- Stock Split On June 25, 1993, the Corporation declared a two-for-one stock split of the Corporation's common stock, effected in the form of a 100% share dividend. Such distribution was made on September 10, 1993 to stockholders of record at the close of business on August 27, 1993. All share and per share amounts have been restated to retroactively reflect the stock split. Note F -- Basis for Determining Net Income Per Share Information Net income per share information is based on the average number of shares outstanding. For the periods presented, stock options have an immaterial dilutive effect. Page 5 Note G -- Prepaid Expenses The prepaid expense classification consists of deferred costs relating to agreements with certain customers, cash and short-term investments held in trust for the payment of medical benefits, rent and insurance. The largest component of prepaid expenses is deferred costs estimated to be charged to operations during the next twelve months. Note H -- Other Assets The other asset classification consists of various long-term assets such as deferred costs relating to agreements with certain customers, corporate-owned life insurance, goodwill and equity investments. The largest component of other assets is deferred costs, which are charged to operations on a straight-line basis, generally three to six years. Deferred costs estimated to be charged to operations during the next twelve months are classified as a prepaid expense. Page 6 Part I., Item 2., MANAGEMENT'S DISCUSSION AND ANALYSIS - ------------------------------------------------------ Results of Operations - --------------------- Third quarter net sales of $519 million represent a 6% increase over the same period last year and, for the nine months ended November 30, 1993, net sales increased 5.6% to $1.3 billion. Both periods reflect strong sales of Everyday cards and Seasonal cards and accessories through traditional channels. These increases were offset somewhat by the continuing decreases in foreign currency exchange rates. Unit sales of greeting cards were up 1% for both the quarter and the nine months. Compared to the prior year, other income at $3.5 million for the third quarter and $9.7 million through nine months was flat for the quarter and decreased $1.6 million for the nine months. This decrease resulted from lower investment income, primarily due to lower interest rates, and lower character and design licensing royalties. Material, labor and other production costs as a percent of net sales continued to decrease compared to the prior year, both for the quarter and the nine months. As a percent of net sales, these costs were 40.5% for the quarter and 39.5% for the nine months down from 41.6% and 40.4%, respectively, for the same periods last year as strong sales of the higher margin greeting cards continued to improve this cost relationship. Expenses in the categories of selling, distribution and marketing and general and administrative continue to reflect the impact of the CreataCard and Magnivision units. These operating units, when compared to the traditional business, have lower selling expenses and higher administrative expenses in relation to net sales. As a result, the impact of increases in selling, distribution and marketing expenses due to higher amortization of deferred costs has been offset by the lower costs in these units. For the nine months selling, distribution and marketing expenses decreased slightly to 36.6% of net sales from 36.8% last year. Administrative and general expenses, however, increased to 12.3% of net sales for the nine months from 11.8% last year. Interest expense continued to be impacted by lower interest rates and the savings associated with the repayment of the 8.375% notes on March 1, 1993. Compared to the same periods last year, interest expense decreased $1.9 million for the quarter and $8 million for the nine months. Liquidity and Capital Resources - ------------------------------- The seasonality of the Corporation's business precludes a useful comparison of the current period and the year end financial position; therefore, a Statement of Financial Position for November 30, 1992 has been included. Page 7 Working capital of $540.2 million at November 30, 1993 represents a $42.7 million decrease from last year and reflects a shift from long term debt to short term borrowings. On July 15, 1993, the Corporation called the $100 million 8.125% notes and repaid them with short term debt. The interest rate swap related to these notes was exercised by the option holder on July 15, 1993. Under the terms of the swap, the Corporation pays 8.125% fixed and receives the US Dealer Commercial Paper Composite Rate floating until July 15, 1996, the maturity date of the swap agreement. Cash used by operating activities for the nine months ended November 30, 1993 was $92 million higher than in the prior year. Higher accounts receivable resulting from increased sales and extended terms caused this greater use of cash. The receivables related to the extended terms are expected to decrease by the end of the fiscal year. As a percent of the prior twelve months' net sales, accounts receivable increased to 32.7% from 27.8% last year. Investing activities used $18.4 million less cash during the nine months compared to last year, primarily due to cash withdrawals from the corporate-owned life insurance programs. Financing activities included higher seasonal short term borrowings and provided $27.8 million more cash this year. Debt as a percentage of debt and equity remained at the 25.1% reported last year as the additional seasonal borrowings offset the increase in shareholders' equity. Shareholders' equity increased to $13.80 per share at November 30, 1993, up from $12.71 per share last year. There were no material changes in the financial condition, liquidity or capital resources of the Corporation from February 28, 1993, the end of its preceding fiscal year, to November 30, 1993, the end of its last fiscal quarter and the date of the most recent balance sheet included in this report, nor from November 30, 1992, the end of the corresponding fiscal quarter last year, to November 30, 1993, except the changes discussed above and aside from normal seasonal fluctuations. Prospective Information - ----------------------- Management is not aware of any current trends, events, demands, commitments or uncertainties, aside from general industry competitive conditions, which reasonably can be expected to have a material effect on the liquidity, capital resources, financial condition or results of operations of the Corporation. Page 8 PART II OTHER INFORMATION ------------------------- Item 6. Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits (exhibit reference numbers refer to Item 601 of Regulation S-K) 11 (a) Calculation of Primary Earnings Per Share 11 (b) Calculation of Fully-Diluted Earnings Per Share (b) Reports on Form 8-K None SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AMERICAN GREETINGS CORPORATION Date: January 12, 1994 By: ---------------- --------------------------- William S. Meyer Controller Chief Accounting Officer Page 9 AMERICAN GREETINGS CORPORATION INDEX
Page Number ------ PART I. Financial Information - ------------------------------- Item 1. Financial Statements.................................1 Item 2. Management's Discussion and Analysis.................7 PART II. Other Information - --------------------------- Item 6. Exhibits and Reports on Form 8-K......................9 Signatures.....................................................9
-i- EX-11 2 EXHIBIT 11 EXHIBIT 11 American Greetings Corporation ------------------------------ Computation of Common Earnings Per Share ----------------------------------------
(Unaudited) Nine Months Ended November 30, ------------------------------ 1993 1992 ---------- ---------- Average number of common shares outstanding 73,670,209 72,293,148 ========== ========== Net income (thousands) $74,230 $78,314 ========== ========== Primary earnings per share $1.01 $1.08 ========== ==========
Computation of Primary and Fully-Diluted Earnings Per Share (a) - -----------------------------------------------------------
(Unaudited) Nine Months Ended November 30, ------------------------------ 1993 1992 ---------- ---------- Weighted average common shares outstanding on a fully diluted basis assuming exercise of stock options based on the treasury stock method using the ending price which was higher than the average market price 74,988,675 73,365,176 ========== ========== Net income (thousands) $74,230 $78,314 ========== ========== Fully-diluted earnings per share $.99 $1.07 ========== ==========
(a) This calculation is submitted in accordance with Securities Exchange Act of 1934, although not required by Accounting Principles Board Opinion No. 15, since less than a 3% dilution results. -----END PRIVACY-ENHANCED MESSAGE-----