8-K/A 1 l91474ae8-ka.txt AMERICAN GREETINGS 8-K/AMENDMENT NO. 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K/A AMENDMENT NO. 1 TO CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported) September 12, 2001 ------------------ AMERICAN GREETINGS CORPORATION ------------------------------ (Exact name of registrant as specified in Charter) 1-13859 ------- Commission File Number Ohio 34-0065325 ---- ---------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) One American Road, Cleveland, Ohio 44144 -------------------------------------------------------------------------------- (Address of principal executive Offices) (Zip Code) (216) 252-7300 -------------- Registrant's telephone number, including area code ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS This Current Report on Form 8-K/A (Amendment No. 1) amends the Current Report on Form 8-K previously filed with the Securities and Exchange Commission on September 27, 2001 relating to the acquisition by American Greetings Corporation, an Ohio corporation ("American Greetings") through its subsidiary AmericanGreetings.com, Inc., of the BlueMountain.com division ("Blue Mountain Arts") of At Home Corporation, a Delaware corporation ("Excite@Home"), on September 12, 2001. The following documents are included as part of this report: (a) Financial Statements of Business Acquired The audited financial statements of Blue Mountain Arts as of and for the year ended December 31, 2000 with the report of independent auditors and the financial statements as of and for the six months ended June 30, 2000 and 2001 (unaudited) are included as Exhibit 99 of this Form 8-K/A. (b) Unaudited Pro Forma Financial Information The accompanying unaudited pro forma financial information has been prepared to give effect to the acquisition of Blue Mountain Arts by American Greetings. The unaudited pro forma combined statement of operations for the year ended February 28, 2001 gives effect to the acquisition as if the acquisition had occurred on March 1, 2000. The unaudited pro forma combined statement of operations presented for the year ended February 28, 2001 includes the historical financial results of American Greetings for the year ended February 28, 2001 and of Blue Mountain Arts for the year ended December 31, 2000. The unaudited pro forma combined statement of operations for the six months ended August 31, 2001 gives effect to the acquisition as if the acquisition had occurred on March 1, 2001. The unaudited pro forma combined statement of operations presented for the six months ended August 31, 2001 includes the historical financial results of American Greetings for the six months ended August 31, 2001 and of Blue Mountain Arts for the six months ended June 30, 2001. Synergies and expected cost savings from the integration of Blue Mountain Arts with American Greetings' existing businesses or any additional profitability resulting from the application of American Greetings revenue enhancement measures have not been included in the unaudited pro forma combined statement of operations. The unaudited pro forma combined statement of financial position as of August 31, 2001 gives effect to the acquisition as if the acquisition had occurred on that date. The unaudited pro forma combined statement of financial position includes the balance sheet of American Greetings as of August 31, 2001 and the balance sheet of Blue Mountain Arts as of June 30, 2001. The unaudited pro forma financial information includes the adjustments that have a continuing impact to the combined company to reflect the transaction using purchase accounting. The pro forma adjustments are described in the notes to the unaudited pro forma financial information. The adjustments are based upon preliminary information and certain management judgments and estimates. The purchase accounting adjustments are subject to revisions which will be reflected in future periods. Revisions, if any, are not expected to have a material effect on the statement of operations or financial position of American Greetings. Certain reclassifications have been reflected to conform Blue Mountain Arts' financial information to American Greetings' presentation. The unaudited pro forma financial information and accompanying notes are presented for illustrative purposes only and do not purport to be indicative of and should not be relied upon as indicative of the financial position or operating results which may occur in the future, or that would have occurred if the acquisition had been consummated on March 1, 2000. The unaudited pro forma financial information should be read in conjunction with: (a) American Greetings' consolidated financial statements and notes thereto and management's discussion and analysis for the year ended February 28, 2001 filed as part of American Greetings' Form 10-K; (b) American Greetings' consolidated financial statements and notes thereto and management's discussion and analysis for the six months ended August 31, 2001 filed as part of American Greetings' Form 10-Q; (c) Blue Mountain Arts' audited financial statements and notes thereto as of and for the year ended December 31, 2000 and the financial statements as of and for the six months ended June 30, 2000 and 2001 (unaudited) included as Exhibit 99 of this Form 8-K/A. Unaudited Pro Forma Combined Statement of Operations For the Year Ended February 28, 2001 Thousands of dollars except per share amounts
Historical -------------------------------- American Blue Greetings Mountain Pro Forma Pro Forma Corporation Arts Adjustments Combined --------------- -------------- ----------------- -------------- Net sales $ 2,518,814 $ 13,867 $ 2,532,681 Costs and expenses: Material, labor and other production costs 999,271 9,073 1,008,344 Selling, distribution and marketing 1,068,543 10,111 1,078,654 Administrative and general 280,202 10,121 290,323 Interest expense 55,387 -- 55,387 Other expense -net 16,778 924,207 (1) $ 1,810 (2) 942,795 ----------- ---------- ---------- ----------- 2,420,181 953,512 1,810 3,375,503 ----------- ---------- ---------- ----------- Income (loss) before income tax provision (benefit) and cumulative effect of accounting change 98,633 (939,645) (1,810) (842,822) Income tax provision (benefit) 191,306 -- (6,382) (3) 184,924 ----------- ---------- ---------- ----------- Net (loss) income before cumulative effect of accounting change $ (92,673) $ (939,645) $ 4,572 $(1,027,746) =========== ========== ========== =========== Loss per share and loss per share assuming dilution before cumulative effect of accounting change $ (1.46) $ (16.15) Weighted average number of shares outstanding for loss per share and loss per share assuming dilution 63,646,405 63,646,405
See Notes to Unaudited Pro Forma Combined Statement of Operations. NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS (1) Includes $684,205 related to write-down of goodwill, other intangible assets and other assets. See Notes 1 and 2 to the Financial Statements of Blue Mountain Arts included in Exhibit 99 for further discussion. (2) Represents interest income foregone due to use of cash in acquisition. (3) Income tax benefit at statutory rate of 37% for loss incurred by Blue Mountain Arts (but for which no benefit was available to Blue Mountain Arts due to its having no operating profits in any of its periods), except amortization of other intangible assets, and including the impact of interest income foregone due to use of cash in acquisition. Unaudited Pro Forma Combined Statement of Operations For the Six Months Ended August 31, 2001 Thousands of dollars except per share amounts
Historical ------------------------------- American Blue Greetings Mountain Pro Forma Pro Forma Corporation Arts Adjustments Combined --------------- ------------- ----------------- -------------- Net sales $ 993,965 $ 4,345 $ 998,310 Costs and expenses: Material, labor and other production costs 438,017 3,896 441,913 Selling, distribution and marketing 514,264 4,795 519,059 Administrative and general 143,198 4,984 148,182 Restructure charges 52,925 -- 52,925 Interest expense 35,525 -- 35,525 Other expense (income) -net (4,070) 19,485 (1) $ 905 (2) 16,320 ------------ ------------ ------- ----------- 1,179,859 33,160 905 1,213,924 ------------ ------------ ------- ----------- (Loss) before income tax benefit (185,894) (28,815) (905) (215,614) Income tax (benefit) (70,082) -- (3,787) (3) (73,869) ------------ ------------ ------- ----------- Net (loss) income $ (115,812) $ (28,815) $ 2,882 $ (141,745) ============ ============ ======= =========== Loss per share and loss per share assuming dilution $ (1.82) $ (2.23) Weighted average number of shares outstanding for loss per share and loss per share assuming dilution 63,500,674 63,500,674
See Notes to Unaudited Pro Forma Combined Statement of Operations. NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS (1) Includes $15,503 related to write-down of goodwill, other intangible assets and other assets. See Notes 1 and 2 to the Financial Statements of Blue Mountain Arts included in Exhibit 99 for further discussion. (2) Represents interest income foregone due to use of cash in acquisition. (3) Income tax benefit at statutory rate of 37% for loss incurred by Blue Mountain Arts (but for which no benefit was available to Blue Mountain Arts due to its having no operating profits in any of its periods), except amortization of other intangible assets, and including the impact of interest income foregone due to use of cash in acquisition. Unaudited Pro Forma Combined Statement of Financial Position August 31, 2001 Thousands of dollars except per share amounts
Historical ----------------------------- American Blue Greetings Mountain Pro Forma Pro Forma ASSETS Corporation Arts Adjustments Combined ------------ ------------ --------------- -------------- CURRENT ASSETS Cash and cash equivalents $ 74,883 $ (36,200) (1) $ 38,683 Trade accounts receivable, less allowances for sales returns and for doubtful accounts 369,544 $ 355 (241) (2) 369,658 Inventories 429,657 429,657 Deferred and refundable income taxes 164,924 164,924 Prepaid expenses and other 215,298 215,298 ----------- ---------- ---------- ------------ Total current assets 1,254,306 355 (36,441) 1,218,220 GOODWILL 227,202 37,384 (3) 264,586 OTHER ASSETS 906,291 12,350 (12,332) (4) 906,568 260 (5) (1) (2) PROPERTY, PLANT AND EQUIPMENT-NET 454,587 1,757 (121) (2) 456,223 ----------- ---------- ---------- ------------ $ 2,842,386 $ 14,462 $ (11,251) $ 2,845,597 ============ ============ ============ =============== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Debt due within one year $ 141,311 $ 141,311 Accounts payable 152,574 $ 74 152,648 Accrued liabilities 198,340 669 $ 1,980 (2) 200,989 Accrued compensation and benefits 86,667 250 13 (2) 86,930 Dividends payable 6,367 6,367 Income taxes 128,303 128,303 Other current liabilities 132,014 199 132,213 ----------- ---------- ---------- ------------ Total current liabilities 845,576 1,192 1,993 848,761 LONG-TERM DEBT 850,250 850,250 OTHER LIABILITIES 199,585 199,585 DEFERRED INCOME TAXES 23,005 23,005 SHAREHOLDERS' EQUITY Common shares - par value $1 Class A 58,877 58,877 Class B 4,626 4,626 Capital in excess of par value 286,054 993,461 (993,461) (6) 286,054 Treasury stock (447,124) (447,124) Accumulated other comprehensive loss (58,844) (58,844) Retained earnings 1,080,381 (980,191) 980,191 1,080,381 26 (7) 26 ----------- ---------- ---------- ------------ Total shareholders' equity 923,970 13,270 (13,244) 923,996 ----------- ---------- ---------- ------------ $ 2,842,386 $ 14,462 $ (11,251) $ 2,845,597 =========== ========== ========== ============
See notes to Unaudited Pro Forma Combined Statement of Financial Position. NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF FINANCIAL POSITION (1) Represents cash paid in acquisition ($35,000 plus $1,200 of acquisition-related expenses). (2) Certain items included in Blue Mountain Arts' balance sheet have been adjusted to reflect their fair value at the date of acquisition. (3) Represents goodwill established in purchase accounting, representing excess of purchase price over fair value of assets acquired and liabilities assumed. (4) Intangible assets included in Blue Mountain Arts' results have been written off to reflect their fair value to the combined entity. (5) Represents establishment of fair value for Blue Mountain Arts' Universal Resource Locator acquired. (6) Represents the elimination of the shareholders' equity related to Blue Mountain Arts. (7) Difference in acquisition date net book value as compared to June 30, 2001 net book value. (c) Exhibits:
Page Number --------- Exhibit 23 Consent of Ernst & Young LLP A-1 Exhibit 99 Financial Statements of Blue Mountain Arts for A-2 year ended December 31, 2000 and six months ended June 30, 2000 and 2001 (unaudited)
SIGNATURE 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 hereunto duly authorized. AMERICAN GREETINGS CORPORATION By: /s/ Joseph B. Cipollone ----------------------- Joseph B. Cipollone Vice President, Corporate Controller Chief Accounting Officer November 21, 2001