-----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, IsqCfNhX3XSz+qYCPcCpdmywlhzasB/t7/CpCIYxfuIFc7qAtm47vwnaEdrkGGIs ylshhRtWS0X0aKxJNWehUw== 0000950152-94-001009.txt : 19941010 0000950152-94-001009.hdr.sgml : 19941010 ACCESSION NUMBER: 0000950152-94-001009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940831 FILED AS OF DATE: 19941007 SROS: NASD 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: 94552087 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 AMERICAN GREETINGS 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES X EXCHANGE ACT OF 1934 - ------- For the quarterly period ended August 31, 1994 ---------------------------------------- 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 0-502 ----------- 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. Yes X No ----- ----- As of August 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 69,727,017 Class B Common 4,636,494 2 AMERICAN GREETINGS CORPORATION INDEX
Page Number PART I - FINANCIAL INFORMATION ------ - ------------------------------ Item 1. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 Item 2. Management's Discussion and Analysis. . . . . . . . . . . . . . . . . . . . . 6 PART II - OTHER INFORMATION - --------------------------- Item 4. Submission of Matters to a Vote of Security Holders.. . . . . . . . . . . . . .8 Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . . . . . . . . .8 SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9 - ----------
-i- 3 PART I - FINANCIAL INFORMATION ------------------------------ Item 1. Financial Statements -------------------- AMERICAN GREETINGS CORPORATION CONSOLIDATED STATEMENT OF INCOME (Thousands of dollars except per-share amounts)
(Unaudited) Six Months Ended August 31, ------------------------- 1994 1993 --------- --------- Net sales $ 817,539 $ 777,665 Other income 4,342 6,157 --------- --------- Total revenue 821,881 783,822 Costs and expenses: Material, labor and other production costs 291,404 302,466 Selling, distribution and marketing 342,119 304,573 Administrative and general 108,783 104,545 Interest 7,806 8,324 --------- --------- Total costs and expenses 750,112 719,908 --------- --------- Income before income taxes and cumulative effect of accounting changes 71,769 63,914 Income taxes 25,191 23,968 --------- --------- Income before cumulative effect of accounting changes 46,578 39,946 Cumulative effect of accounting changes, net of tax -- 17,182 --------- --------- Net income $ 46,578 $ 22,764 ========= ========= Income per share: Before cumulative effect of accounting changes $ 0.63 $ 0.54 Cumulative effect of accounting changes, net of tax -- 0.23 --------- --------- Net income per share $ 0.63 $ 0.31 ========= ========= Dividends per share $ 0.265 $ 0.2325 ========= ========= Average number of common shares outstanding 74,254,245 73,456,742
Page 1 4 AMERICAN GREETINGS CORPORATION CONSOLIDATED STATEMENT OF INCOME (Thousands of dollars except per share amounts)
(Unaudited) Three Months Ended August 31, -------------------------- 1994 1993 ---------- ---------- Net sales $ 401,136 $ 385,706 Other income 1,953 2,675 ---------- ---------- Total revenue 403,089 388,381 Costs and expenses: Material, labor and other production costs 153,663 158,840 Selling, distribution and marketing 169,771 152,313 Administrative and general 54,839 54,697 Interest 4,143 5,061 ---------- ---------- Total costs and expenses 382,416 370,911 ---------- ---------- Income before income taxes 20,673 17,470 Income taxes 7,257 6,551 ---------- ---------- Net income $ 13,416 $ 10,919 ========== ========== Net income per share $ 0.18 $ 0.15 ========== ========== Dividends per share $ 0.14 $ 0.125 ========== ========== Average number of common shares outstanding 74,297,953 73,748,908
Page 2 5 AMERICAN GREETINGS CORPORATION CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(Thousands of dollars) (Unaudited) (Audited) (Unaudited) ASSETS Aug. 31, 1994 Feb. 28, 1994 Aug. 31, 1993 ------------- ------------- ------------- Current assets Cash and equivalents $ 36,494 $ 101,066 $ 37,542 Trade accounts receivable, less allowances of $55,635, $110,987 and $50,236, respec- tively (principally for sales returns) 355,377 322,675 336,669 Inventories: Raw material 47,684 48,845 47,148 Work in process 46,773 38,956 38,013 Finished products 261,141 202,620 242,290 ------------- ------------- ------------- 355,598 290,421 327,451 Less LIFO reserve 86,997 84,970 86,926 ------------- ------------- ------------- 268,601 205,451 240,525 Display material and factory supplies 38,316 37,906 31,894 ------------- ------------- ------------- Total inventories 306,917 243,357 272,419 Deferred and refundable income taxes 42,514 62,075 35,283 Prepaid expenses and other 126,822 121,022 102,074 ------------- ------------- ------------- Total current assets 868,124 850,195 783,987 Other assets 265,217 286,117 269,996 Property, plant and equipment 812,064 793,965 734,842 Less accumulated depreciation 387,641 365,043 341,638 ------------- ------------- ------------- Property, plant and equipment - net 424,423 428,922 393,204 ------------- ------------- ------------- $1,557,764 $1,565,234 $1,447,187 ============= ============= ============= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Debt due within one year $ 163,857 $ 132,036 $ 113,146 Accounts payable 91,141 127,792 116,337 Payroll and payroll taxes 45,661 53,164 49,769 Retirement plans 5,711 20,766 7,445 Dividends payable 10,443 9,300 9,255 Income taxes 6,330 32,857 5,042 ------------- ------------- ------------- Total current liabilities 323,143 375,915 300,994 Long-term debt 67,443 54,207 85,748 Postretirement benefit obligation 20,877 19,427 20,533 Deferred income taxes 59,966 62,243 61,893 Shareholders' equity 1,086,335 1,053,442 978,019 ------------- ------------- ------------- $1,557,764 $1,565,234 $1,447,187 ============= ============= =============
Page 3 6 AMERICAN GREETINGS CORPORATION CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Thousands of dollars)
(Unaudited) Six Months Ended August 31, ----------------------- 1994 1993 ------- ------- OPERATING ACTIVITIES: Net income $46,578 $22,764 Adjustments to reconcile to net cash provided (used) by operating activities: Postretirement benefit obligation - 22,530 Depreciation 34,256 28,197 Deferred and refundable income taxes 17,350 10,500 Change in operating assets and liabilities (170,173) (157,974) Other - net 9,450 6,185 ------- ------- Cash Used by Operating Activities (62,539) (67,798) INVESTING ACTIVITIES: Property, plant & equipment additions (38,834) (33,394) Other - net 6,419 7,704 ------- ------- Cash Used by Investing Activities (32,415) (25,690) FINANCING ACTIVITIES: Increase in long-term debt 19,884 14,872 Reduction of long-term debt (25,308) (204,020) Increase in short-term debt 49,839 92,491 Sale of stock under benefit plans 5,811 9,795 Purchase of treasury shares (158) (161) Dividends to shareholders (19,686) (17,133) ------- ------- Cash Provided (Used) by Financing Activities 30,382 (104,156) ------- ------- DECREASE IN CASH AND EQUIVALENTS (64,572) (197,644) Cash and Equivalents at Beginning of Year 101,066 235,186 ------- ------- Cash and Equivalents at End of Period $36,494 $37,542 ======= =======
Page 4 7 AMERICAN GREETINGS CORPORATION NOTES TO FINANCIAL STATEMENTS Six Months Ended August 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 5 8 Part I., Item 2, MANAGEMENT'S DISCUSSION AND ANALYSIS - ----------------------------------------------------- Results of Operations - --------------------- Net sales of $401.1 million for the second quarter and $817.5 million for the six months ended August 31, 1994 were up 4.0% and 5.1%, respectively, over the same periods in the prior year. These increases were due to strong seasonal card sales in both periods, offset somewhat by delays in the shipment of seasonal accessories from the second quarter to the third quarter. In addition, weakening of foreign currencies, particularly the Canadian dollar, against the U.S. dollar continued with an unfavorable impact on net sales growth of .5 percentage points for the quarter and .7 percentage points for the six months. Unit sales of greeting cards increased approximately 2% for both the quarter and six-month period. Other income decreased $.7 million and $1.8 million for the three months and six months, respectively, from the same periods last year due primarily to lower royalties from character licensing. Material, labor and other production costs were 38.3% of net sales for the quarter compared to 41.2% for the second quarter last year and 35.6% for the six months, down from 38.9% for the same period last year. The improvements in these numbers were due to the strong sales of high margin cards and continued cost savings from manufacturing efficiencies. For the quarter, selling, distribution and marketing expenses were 42.3% of net sales compared to 39.5% last year. Through six months these expenses were 41.8% of net sales, up from 39.2% last year. These increases resulted from higher amortization expense related to deferred costs and CreataCard's national advertising program. Administrative and general expenses increased $4.2 million for the six months over the same period last year, due primarily to the higher pre-tax costs of corporate owned life insurance. For the second quarter, administrative and general expenses were at the same level as the second quarter last year. Interest expense decreased slightly from the prior year for both the second quarter and the six months due primarily to a shift in debt from the United Kingdom to lower rate borrowings in the United States. Page 6 9 Liquidity and Capital Resources - ------------------------------- The seasonality of the Corporation's business precludes a useful comparison of the current period and the year-end financial statements; therefore, a Statement of Financial Position for August 31, 1993 has been included. Operations for the first six months required $5.3 million less cash than the same period last year due to a slower growth in accounts receivable and a decrease in deferred costs related to agreements with customers. Net accounts receivable, which were 19.6% of the prior twelve months net sales compared to 19.7% last year, reflect the increase in the allowance for sales returns resulting from this year's strong seasonal card sales. The decrease in deferred costs resulted from amortization of costs related to existing agreements which exceeded deferred costs related to new or additional agreements. Offsetting these two items were a greater increase in inventories this year, due to advance purchases of favorably priced raw materials and the build up of seasonal inventory which is ahead of schedule, and the timing of the payment of trade accounts payable. Inventories as a percent of the prior twelve months' material, labor and other production costs increased to 46.4% at August 31, 1994 from 40.6% at August 31, 1993. Cash flow used by investing activities in the first six months was $6.7 million higher than in the prior year, primarily due to capital expenditures for information systems. Financing activities provided $30.4 million of cash during the first six months of fiscal 1995 after using $104.2 million in the comparable period last year. During the first six months last year, the Corporation retired $200 million of long-term debt, $100 million of which was repaid with funds on hand and $100 million of which was replaced with short-term borrowings. The ratio of total debt to total capitalization, which was 17.6% at August 31, 1994 compared to 16.9% last year, increased slightly as the higher borrowings were tempered by the increase in shareholders' equity. 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 August 31, 1994, the end of its last fiscal quarter and the date of the most recent balance sheet included in this report, nor from August 31, 1993, the end of the corresponding fiscal quarter last year, to August 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 7 10 PART II - OTHER INFORMATION --------------------------- Item 4. Submission of Matters to a Vote of Security Holders --------------------------------------------------- (a) The Annual Meeting of Shareholders of the Corporation was held on June 24, 1994. (c) - 1 The following individuals were elected to Class II of the Corporation's Board of Directors: Albert B. Ratner, Harry H. Stone and Abraham Zaleznik. The vote was as follows for the above-listed nominees:
Nominee Votes For Votes Withheld ------- --------- -------------- Albert B. Ratner 101,711,909 716,568 Harry H. Stone 101,747,564 726,641 Abraham Zaleznik 101,802,588 721,417
(c) - 2 A proposal to approve the compensation plans for the Corporation's Chairman and Chief Executive Officer, and President and Chief Operating Officer, was approved by the shareholders. The vote was as follows: Affirmative 95,939,586 Negative 4,640,596 Abstain 1,672,391 Broker Non-Votes 227,505 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 Page 8 11 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 October 7, 1994 Page 9 EX-11 2 AMERICAN GREETINGS EX-11 1 EXHIBIT 11 American Greetings Corporation ------------------------------ Computation of Earnings Per Share ---------------------------------
(Unaudited) Six Months Ended August 31, ---------------------------------- 1994 1993 ---------- ----------- Average number of common shares outstanding 74,254,245 73,456,742 ========== ========== Net income (thousands) $ 46,578 $ 22,764 ========== ========== Primary earnings per share $ .63 $ .31 ========== ==========
Computation of Fully-Diluted Earnings Per Share (a)
(Unaudited) Six Months Ended August 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 ending market price which was higher than the average market price 75,578,443 74,760,272 ========== ========== Net income (thousands) $ 46,578 $ 22,764 ========== ========== Fully-diluted earnings per share $ .62 $ .30 ========== ========== (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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