-----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, fCkEwtuZOG6r0jgsH5cDnIhylDEFTpLO8RIKpXeYLZz8NKfj4tAgNQ+SS2B83gJs bPXJU69GXGCutSXMh6n02g== 0000950152-94-000711.txt : 19940715 0000950152-94-000711.hdr.sgml : 19940715 ACCESSION NUMBER: 0000950152-94-000711 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940531 FILED AS OF DATE: 19940714 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: 1934 Act SEC FILE NUMBER: 000-01502 FILM NUMBER: 94538807 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 AM GREETINGS 10-Q 1 UNITED STATES 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 May 31, 1994 For the quarterly period ended________________________________________________ OR __ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES __________ EXCHANGE ACT OF 1934 For the transition period from ____________________ to ____________________ 0-502 Commission file number ________ 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) (216) 252-7300 __________________________________________________ Registrant's telephone number, including area code Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. X Yes_____ No______ As of May 31, 1994, the date of this report, the number of shares outstanding of each of the issuer's classes of common stock was: Class A Common 69,610,694 Class B Common 4,637,017 2 AMERICAN GREETINGS CORPORATION INDEX
Page Number ------ PART I - FINANCIAL INFORMATION - ------------------------------ Item 1. Financial Statements . . . . . . . . . . . . . . . . . . . . 1 Item 2. Management's Discussion and Analysis. . . . . . . . . . . . . 5 PART II - OTHER INFORMATION - --------------------------- Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . 7 SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 - ----------
-i- 3 PART I - FINANCIAL INFORMATION ------------------------------ ITEM 1. FINANCIAL STATEMENTS - ---------------------------- AMERICAN GREETINGS CORPORATION CONSOLIDATED STATEMENT OF INCOME
(Unaudited) Three Months Ended May 31, ------------------------------- 1994 1993 ----------- ----------- (Thousands of dollars except per-share amounts) Net sales $ 416,403 $ 391,959 Other income 2,389 3,482 ----------- ----------- Total revenue 418,792 395,441 Costs and expenses: Material, labor and other production costs 137,741 143,626 Selling, distribution and marketing 172,348 152,260 Administrative and general 53,944 49,848 Interest 3,663 3,263 ----------- ----------- Total costs and expenses 367,696 348,997 ----------- ----------- Income before income taxes and cumulative effect of accounting changes 51,096 46,444 Income taxes 17,934 17,417 ----------- ----------- Income before cumulative effect of accounting changes 33,162 29,027 Cumulative effect of accounting changes, net of tax -- 17,182 ----------- ----------- Net income $ 33,162 $ 11,845 =========== =========== Income per share: Before cumulative effect of accounting changes $ 0.45 $ 0.39 Cumulative effect of accounting changes, net of tax -- 0.23 ----------- ----------- Net income per share $ 0.45 $ 0.16 =========== =========== Dividends per share $ 0.125 $ 0.1075 =========== =========== Average number of common shares outstanding 74,210,536 73,164,578
Page 1 4 AMERICAN GREETINGS CORPORATION CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(Unaudited) Audited (Unaudited) May 31, 1994 Feb. 28, 1994 May 31, 1993 ------------ ------------- ------------ (Thousands of dollars) ASSETS Current assets Cash and equivalents $ 70,187 $ 101,066 $ 83,509 Trade accounts receivable, less allowances of $86,023, $110,987 and $80,156, respec- tively (principally for sales returns) 348,894 322,675 301,365 Inventories: Raw material 48,214 48,845 44,623 Work in process 54,376 38,956 35,422 Finished products 222,021 202,620 223,024 ---------- ---------- --------- 324,611 290,421 303,069 Less LIFO reserve 86,755 84,970 85,876 ---------- ---------- --------- 237,856 205,451 217,193 Display material and factory supplies 38,018 37,906 31,844 ---------- ---------- --------- Total inventories 275,874 243,357 249,037 Deferred and refundable income taxes 51,160 62,075 42,614 Prepaid expenses 125,333 121,022 93,839 ---------- ---------- --------- Total current assets 871,448 850,195 770,364 Other assets 274,149 286,117 267,611 Property, plant and equipment 812,894 793,965 720,146 Less accumulated depreciation and amortization 384,357 365,043 333,292 ---------- ---------- --------- Property, plant and equipment - net 428,537 428,922 386,854 ---------- ---------- --------- $1,574,134 $1,565,234 $1,424,829 ========== ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Debt due within one year $148,153 $132,036 $124,432 Accounts payable 120,869 127,792 96,427 Payroll and payroll taxes 40,573 53,164 45,165 Retirement plans 3,254 20,766 4,955 Dividends payable 9,451 9,300 7,866 Income taxes 26,925 32,857 25,991 ---------- ---------- --------- Total current liabilities 349,225 375,915 304,836 Long-term debt 64,910 54,207 71,882 Postretirement benefit obligation 20,048 19,427 21,672 Deferred income taxes 60,379 62,243 61,053 Shareholders' equity 1,079,572 1,053,442 965,386 ---------- ---------- --------- $1,574,134 $1,565,234 $1,424,829 ========== ========== =========
Page 2 5 AMERICAN GREETINGS CORPORATION CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited) Three Months Ended May 31, --------------------------- 1994 1993 ------- ------- (Thousands of dollars) OPERATING ACTIVITIES: Net income $33,162 $11,845 Adjustments to reconcile to net cash provided (used) by operating activities: Postretirement benefit obligation - 22,530 Depreciation 17,676 13,427 Deferred and refundable income taxes 9,182 2,115 Change in operating assets and liabilities (101,484) (105,446) Other - net 2,630 2,695 ------- -------- Cash Used by Operating Activities (38,834) (52,834) INVESTING ACTIVITIES: Property, plant & equipment additions (21,308) (11,472) Other - net 8,228 3,309 ------- -------- Cash Used by Investing Activities (13,080) (8,163) FINANCING ACTIVITIES: Increase in long-term debt 17,973 - Reduction of long-term debt (25,273) (100,217) Increase in short-term debt 34,422 9,313 Sale of stock under benefit plans 3,195 8,140 Purchase of treasury shares - (50) Dividends to shareholders (9,282) (7,866) ------- -------- Cash Provided (Used) by Financing Activities 21,035 (90,680) ------- -------- DECREASE IN CASH AND EQUIVALENTS (30,879) (151,677) Cash and Equivalents at Beginning of Year 101,066 235,186 ------- -------- Cash and Equivalents at End of Period $70,187 $83,509 ======= =======
Page 3 6 AMERICAN GREETINGS CORPORATION NOTES TO FINANCIAL STATEMENTS Three Months Ended May 31, 1994 and 1993 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 - 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. Note D - Prepaid Expenses and Other The prepaid expenses and other 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, and prepaid rent and insurance. The largest component of prepaid expenses and other is deferred costs estimated to be charged to operations during the next twelve months. Note E - 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 4 7 Part I., Item 2., MANAGEMENT'S DISCUSSION AND ANALYSIS - ------------------------------------------------------ Results of Operations - --------------------- For the three months ended May 31, 1994, net sales increased 6.2% over the prior year to $416.4 million on the strength of both everyday and seasonal cards and accessories sales. This increase was lessened by approximately one percentage point because of the continued weakening of foreign currencies, particularly the Canadian dollar, against the U. S. dollar. Unit sales of greeting cards were up 1% for the quarter. Other income for the three months was $2.4 million, a decrease of $1.1 million from the previous year which was due to lower character and design licensing royalties. Material, labor and other production costs as a percentage of net sales continued to decline, from 36.6% in the prior year to 33.1% for the current period, due to a shift in sales to higher-margin product and continued improvements in manufacturing efficiencies. Selling, distribution and marketing expenses were 41.4% of net sales for the quarter compared to 38.8% last year. Higher amortization expense related to deferred costs and the national advertising program for CreataCard caused this increase. For the three months, administrative and general expenses were 13.0% of net sales, up from 12.7% last year, primarily due to the impact of Magnivision, which incurred higher administrative expenses in relation to net sales than the traditional business. Interest expense for the period was $0.4 million higher than the prior year due to higher domestic short-term borrowings. The effective tax rate for the quarter was 35.1%, lower than the 37.5% in the prior year due to the increased benefit from the corporate-owned life insurance program. 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 May 31, 1993 has been included. For the first quarter, operating activities used $14.0 million less cash compared to the first quarter last year, primarily due to a decrease in the deferred costs related to agreements with customers. During the first quarter, amortization of deferred costs related to existing agreements exceeded the deferred costs related to new or additional agreements. The impact of this decrease was tempered by an increase in inventories which reflect production of new card lines for both the United Kingdom and Canada and advance purchases of favorably-priced raw materials in the United States. As a result, inventories as a percentage of the prior twelve Page 5 8 months' material, labor and other production costs increased to 41.4% at May 31, 1994 from 37.3% at May 31, 1993. Accounts receivable also increased from the prior year due to the higher sales level combined with extended terms. As a percentage of the prior twelve months' net sales, accounts receivable were 19.4% at May 31, 1994, compared to 17.8% last year. Investing activities used $4.9 million more cash than during the same period in the prior year due to higher capital purchases, primarily for CreataCard, partially offset by cash withdrawals from the corporate-owned life insurance program. Cash flow from financing activities for the three months was $111.7 million favorable compared to the first quarter last year, reflecting the retirement of $100 million of long-term debt with current funds on hand in the prior year. Debt as a percentage of debt plus equity was 16.5% at May 31, 1994, a decrease from 16.9% a year ago, reflecting the increase in equity. On a per share basis, shareholders' equity increased from $13.17 at May 31, 1993 to $14.54 at May 31, 1994. On June 10, 1994, the Corporation replaced its $250 million revolving credit agreement with a $400 million revolving credit agreement to support its commercial paper borrowing arrangement and provide a six-year term out option for up to $200 million. The agreement extends through June 1999 and is renewable thereafter on an annual basis. A commitment fee of 1/8 of 1% is due on the unused portion; however, the fee is subject to change based on the credit position of the Corporation. The Corporation also continues to have a $100 million domestic uncommitted line of credit available for short-term financing. There were no material changes in the financial condition, liquidity or capital resources of the Corporation from February 28, 1994, the end of its preceding fiscal year, to May 31, 1994, the end of its last fiscal quarter and the date of the most recent balance sheet included in this report, nor from May 31, 1993, the end of the corresponding fiscal quarter last year, to May 31, 1994, 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, which reasonably can be expected to have a material effect on the liquidity, capital resources, financial position or results of operations of the Corporation. Page 6 9 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 By: /s/ William S. Meyer ----------------------------- William S. Meyer Controller Chief Accounting Officer July 14, 1994 Page 7 EX-11 2 EXHIBIT 1 EXHIBIT 11 American Greetings Corporation ------------------------------ Computation of Earnings Per Share ---------------------------------
(Unaudited) Three Months Ended May 31, --------------------------------- 1994 1993 ---------- ---------- Average number of common shares outstanding 74,210,536 73,164,578 ========== ========== Net income (thousands) $ 33,162 $ 11,845 ========== ========== Primary earnings per share $ .45 $ .16 ========== ==========
Computation of Fully-Diluted Earnings Per Share (a) ___________________________________________________
(Unaudited) Three Months Ended May 31, --------------------------------- 1994 1993 ---------- ---------- Average number of common shares outstanding on a fully diluted basis assuming exercise of stock options based on the treasury stock method using the average market price which was higher than the ending market price 75,510,238 74,413,328 ========== ========== Net income (thousands) $ 33,162 $ 11,845 ========== ========== Fully-diluted earnings per share $ .44 $ .16 ========== ========== (a) This calculation is submitted in accordance with the Securities Exchange Act of 1934, although not required by Accounting Principles Board Opinion No. 15, since less than a 3% dilution results.
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