-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MLrToRfX7RhDaZCMIixDkuK6JDG0jKbc3NS1vMMeVIPbjBiYKEEWjfbKluV9SAgC Rhgts0Ymbd1Ccvxl6zLo6Q== 0000950152-95-002329.txt : 19951016 0000950152-95-002329.hdr.sgml : 19951016 ACCESSION NUMBER: 0000950152-95-002329 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950831 FILED AS OF DATE: 19951013 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN GREETINGS CORP CENTRAL INDEX KEY: 0000005133 STANDARD INDUSTRIAL CLASSIFICATION: GREETING CARDS [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: 95580459 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, 1995 ---------------------------------------------- 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, 1995, the date of this report, the number of shares outstanding of each of the issuer's classes of common stock was: Class A Common 70,006,622 Class B Common 4,585,081 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. Submissions 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, ------------------------------------------ 1995 1994 -------------- --------------- Net sales $ 869,680 $ 817,539 Other income 4,105 4,342 ------------- ------------- Total revenue 873,785 821,881 Costs and expenses: Material, labor and other production costs 315,645 291,404 Selling, distribution and marketing 360,818 342,119 Administrative and general 107,794 108,783 Interest 10,242 7,806 ------------- ------------- Total costs and expenses 794,499 750,112 ------------- ------------- Income before income taxes 79,286 71,769 Income taxes 26,957 25,191 ------------- ------------- Net income $ 52,329 $ 46,578 ============= ============= Net income per share $ 0.70 $ 0.63 ============= ============= Dividends per share $ 0.30 $ 0.265 ============= ============= Average number of common shares outstanding 74,424,282 74,254,245
See notes to consolidated financial statements. Page 1 4 AMERICAN GREETINGS CORPORATION CONSOLIDATED STATEMENT OF INCOME (Thousands of dollars except per share amounts)
(Unaudited) Three Months Ended August 31, -------------------------------- 1995 1994 ----------- ----------- Net sales $ 431,171 $ 401,136 Other income 1,997 1,953 ----------- ----------- Total revenue 433,168 403,089 Costs and expenses: Material, labor and other production costs 172,059 153,663 Selling, distribution and marketing 178,996 169,771 Administrative and general 54,017 54,839 Interest 5,325 4,143 ----------- ----------- Total costs and expenses 410,397 382,416 ----------- ----------- Income before income taxes 22,771 20,673 Income taxes 7,742 7,257 ----------- ----------- Net income $ 15,029 $ 13,416 =========== =========== Net income per share $ 0.20 $ 0.18 =========== =========== Dividends per share $ 0.16 $ 0.14 =========== =========== Average number of common shares outstanding 74,469,837 74,297,953
See notes to consolidated financial statements. Page 2 5
AMERICAN GREETINGS CORPORATION CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION (Thousands of dollars) (Unaudited) (Unaudited) Aug. 31, 1995 Feb. 28, 1995 Aug. 31, 1994 ------------- ------------- ------------- ASSETS Current assets Cash and equivalents $ 35,320 $ 87,151 $ 36,494 Trade accounts receivable, less allowances of $69,795, $116,972 and $55,635, respec- tively (principally for sales returns) 366,669 324,329 355,377 Inventories: Raw material 59,555 54,196 47,684 Work in process 47,825 40,608 46,773 Finished products 318,983 225,959 261,141 ------------ ------------ ------------ 426,363 320,763 355,598 Less LIFO reserve 88,293 86,169 86,997 ------------ ------------ ------------ 338,070 234,594 268,601 Display material and factory supplies 42,000 44,676 38,316 ------------ ------------ ------------ Total inventories 380,070 279,270 306,917 Deferred income taxes 56,330 66,409 42,514 Prepaid expenses and other 151,082 136,290 126,822 ------------ ------------ ------------ Total current assets 989,471 893,449 868,124 Other assets 417,957 419,477 265,217 Property, plant and equipment 871,678 861,979 812,064 Less accumulated depreciation 434,726 413,154 387,641 ------------ ------------ ------------ Property, plant and equipment - net 436,952 448,825 424,423 ------------ ------------ ------------ $ 1,844,380 $ 1,761,751 $ 1,557,764 ============ ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Debt due within one year $ 215,566 $ 123,407 $ 163,857 Accounts payable 118,409 140,660 91,141 Payroll and payroll taxes 51,595 53,136 45,661 Retirement plans 8,545 20,633 5,711 Dividends payable 11,941 10,426 10,443 Income taxes 677 13,988 6,330 Other current liabilities 56,819 - - ------------ ------------ ------------ Total current liabilities 463,552 362,250 323,143 Long-term debt 77,175 74,480 67,443 Postretirement benefit obligation 18,236 17,815 20,877 Other liabilities 34,150 90,969 - Deferred income taxes 55,356 56,696 59,966 Shareholders' equity 1,195,911 1,159,541 1,086,335 ------------ ------------ ------------ $ 1,844,380 $ 1,761,751 $ 1,557,764 ============ ============ ============
See notes to consolidated financial statements. Page 3 6 AMERICAN GREETINGS CORPORATION CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Thousands of dollars)
(Unaudited) Six Months Ended August 31, ---------------------- 1995 1994 -------- -------- OPERATING ACTIVITIES: Net income $52,329 $46,578 Adjustments to reconcile to net cash provided (used) by operating activities: Depreciation 40,394 34,256 Deferred income taxes 8,532 17,350 Change in operating assets and liabilities (200,485) (170,173) Other - net 5,572 9,450 -------- -------- Cash Used by Operating Activities (93,658) (62,539) INVESTING ACTIVITIES: Property, plant & equipment additions (29,321) (38,834) Other - net (6,271) 6,419 -------- -------- Cash Used by Investing Activities (35,592) (32,415) FINANCING ACTIVITIES: Increase in long-term debt 2,711 19,884 Reduction of long-term debt (79) (25,308) Increase in short-term debt 91,288 49,839 Sale of stock under benefit plans 8,120 5,811 Purchase of treasury shares (2,340) (158) Dividends to shareholders (22,281) (19,686) -------- -------- Cash Provided by Financing Activities 77,419 30,382 -------- -------- DECREASE IN CASH AND EQUIVALENTS (51,831) (64,572) Cash and Equivalents at Beginning of Year 87,151 101,066 -------- -------- Cash and Equivalents at End of Period $35,320 $36,494 ======== ========
See notes to consolidated financial statements. Page 4 7 AMERICAN GREETINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Thousands of dollars) Six Months Ended August 31, 1995 and 1994 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 - Deferred Costs The major components of both the Other Assets and Prepaid Expenses and Other classifications are deferred costs relating to agreements with certain customers. Deferred costs are charged to operations on a straight-line basis over the effective period of each agreement, generally three to six years. Deferred costs estimated to be charged to operations during the next twelve months are classified with Prepaid Expenses and Other. Deferred costs included in the Prepaid Expenses and Other classification are $118,795, $110,890 and $99,947 at August 31, 1995, February 28, 1995 and August 31, 1994, respectively. Deferred costs included in the Other Assets classification at the same dates are $308,498, $311,503 and $158,119, respectively. Future payment commitments relating to these agreements are classified as Other Current Liabilities or Other Liabilities. Page 5 8 Part I., Item 2, MANAGEMENT'S DISCUSSION AND ANALYSIS - ----------------------------------------------------- Results of Operations - --------------------- Net sales of $431.2 million for the second quarter and $869.7 million for the six months ended August 31, 1995 were up 7.5% and 6.4%, respectively, over the same periods in the prior year. These increases were due to higher sales of greeting cards, seasonal accessories and consumer products. Unit sales of cards increased approximately 1% for both the quarter and six month period. Material, labor and other production costs were 39.9% of net sales for the quarter compared to 38.3% for the second quarter last year and 36.3% for the six months, up from 35.6% for the same period last year. These increases are due primarily to a higher sales mix of non-greeting card products, which have higher costs than greeting cards. For the quarter, selling, distribution and marketing expenses were 41.5% of net sales compared to 42.3% last year. This decrease is primarily due to the higher sales of consumer products, which generally have lower selling costs than the traditional greeting card business. Through six months, selling, distribution and marketing were 41.5% of net sales, down from 41.8% last year, due primarily to the CreataCard national advertising program which has not been repeated at the same level this year. For the quarter, administrative and general expenses were $54.0 million, down from $54.8 million for the same period in the prior year. Through six months these expenses were $107.8 million, down from $108.8 million in the prior year. These decreases are a result of overall cost containment. Interest expense increased $1.2 million for the quarter and $2.4 million for the six months due to higher debt levels, both in the U.S. and Canada. The effective tax rate for the quarter and six months was 34.0%, lower than the 35.1% in the prior year due to the increased benefit from the corporate owned life insurance program and the reduction in foreign losses with no tax benefit. 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, 1994 has been included. Operations for the first six months required $31.1 million more cash than the same period last year due primarily to increases in inventory, deferred costs related to agreements with customers and accounts receivable. These increased requirements were partially offset by improved management of cash disbursements. Page 6 9 Inventory growth required required $35.1 million more in cash this year than last year due primarily to advance purchases of paper and higher levels of non-card product to support new product offerings. Inventories as a percent of the prior twelve months' material, labor and other production costs was 54.3% at August 31, 1995 and 46.4% at August 31, 1994. Deferred costs related to agreements with customers required $13.2 million more in cash for the six months compared to the prior year. Although accounts receivable also required $9.6 million more in cash for the same time period, the net accounts receivable balance at August 31, 1995 improved to 18.0% of the prior twelve months' net sales from 18.4% last year. This improvement was due primarily to stronger cash collections. Investing activities used $3.2 million more cash for the six months than in the same period in the prior year, while financing activities provided $47.0 million more cash during the first six months of this year than in the prior year, due to higher borrowing levels in both the U.S. and Canada. Debt as a percentage of debt plus equity was 19.7% at August 31, 1995, an increase from 17.6% in the prior year. On a per share basis, shareholders' equity increased from $14.61 at August 31, 1994 to $16.03 at August 31, 1995. There were no material changes in the financial condition, liquidity or capital resources of the Corporation from February 28, 1995, the end of its preceding fiscal year, to August 31, 1995, the end of its last fiscal quarter and the date of the most recent balance sheet included in this report, nor from August 31, 1994, the end of the corresponding fiscal quarter last year, to August 31, 1995, except the changes discussed above and aside from normal seasonal fluctuations. Other Information - ----------------- On September 19, 1995, the Corporation announced that its United Kingdom subsidiary, Carlton Cards Ltd., has sold substantially all of its retail stores to Clinton Cards PLC, the largest specialty greeting card retailer in the United Kingdom. This transaction will enable the Carlton Cards operation in the U.K. to focus on its core business of creating, manufacturing and distributing greeting cards and related product and also extends Carlton Card Ltd.'s long-term supplier relationship with Clinton Cards. The Corporation's results for the year will not be materially impacted. 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 23, 1995. (c) - 1 The following individuals were elected to Class III of the Corporation's Board of Directors: Scott S. Cowen, Edward Fruchtenbaum, Irving I. Stone and Milton A. Wolf. The vote was as follows for the above-listed nominees: Nominee Votes For Votes Withheld ------- --------- -------------- Scott S. Cowen 103,323,549 427,515 Edward Fruchtenbaum 103,005,409 745,655 Irving I. Stone 103,058,965 672,100 Milton A. Wolf 103,323,405 427,660 (c) - 2 A proposal to approve the 1995 Director Stock Plan was approved by the shareholders. The vote was as follows: Affirmative 97,727,655 Negative 3,161,897 Abstain 2,500,868 Broker Non-Votes 360,645 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 27 Financial Data Schedule (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 Senior Vice President Chief Financial Officer October 13, 1995 Page 9 EX-11 2 AMERICAN GREETINGS EX-11 1 EXHIBIT 11 American Greetings Corporation ------------------------------ Computation of Earnings Per Share ---------------------------------
(Unaudited) (Unaudited) Six Months Ended August 31, Three Months Ended August 31, ---------------------------------------- ---------------------------------------- 1995 1994 1995 1994 ---- ---- ---- ---- Average number of common shares outstanding 74,424,282 74,254,245 74,469,837 74,297,953 ============== ============== ============== ============== Net income (thousands) $ 52,329 $ 46,578 $ 15,029 $ 13,416 ============== ============== ============== ============== Primary earnings per share $ .70 $ .63 $ .20 $ .18 ============== ============== ============== ==============
Computation of Fully-Diluted Earnings Per Share (a) -----------------------------------------------
(Unaudited) (Unaudited) Six Months Ended August 31, Three Months Ended August 31, ---------------------------------------- ---------------------------------------- 1995 1994 1995 1994 ---- ---- ---- ---- 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 75,610,620 75,578,443 75,656,175 75,622,152 ============== ============== ============== ============== Net income (thousands) $ 52,329 $ 46,578 $ 15,029 $ 13,416 ============== ============== ============== ============== Fully-diluted earnings per share $ .69 $ .62 $ .20 $ .18 ============== ============== ============== ============== (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.
EX-27 3 AMERICAN GREETINGS EX-27
5 This schedule contains summary financial information extracted from Part I, Item 1 of the second-quarter Form 10-Q and is qualified in its entirety by reference to such financial statements. 0000005133 AMERICAN GREETINGS 1,000 6-MOS FEB-29-1996 MAR-01-1995 AUG-31-1995 35,320 0 366,669 14,581 380,070 989,471 871,678 434,726 1,844,340 463,552 0 74,592 0 0 1,121,319 1,844,380 869,680 873,785 315,645 315,645 468,612 3,609 10,242 79,286 26,957 52,329 0 0 0 52,329 .70 .69
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