-----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, LTVf6IHbJWpqA37R8AUh8Tm5K6t1kUwgPwZrgO3JVivH5NI8fYlr8iMa0SvRKgNG jrw+T97bEAkaLo/j9sd/WQ== 0000950152-96-003449.txt : 19960716 0000950152-96-003449.hdr.sgml : 19960716 ACCESSION NUMBER: 0000950152-96-003449 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960531 FILED AS OF DATE: 19960715 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: 96594726 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 May 31, 1996 ----------------------------------------------- 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 May 31, 1996, the date of this report, the number of shares outstanding of each of the issuer's classes of common stock was: Class A Common 70,206,048 Class B Common 4,552,182 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 (Thousands of dollars except per share amounts)
(Unaudited) Three Months Ended May 31, -------------------------- 1996 1995 ----------- ----------- Net sales $ 438,212 $ 438,509 Other income 1,915 2,108 ----------- ----------- Total revenue 440,127 440,617 Costs and expenses: Material, labor and other production costs 154,667 143,586 Selling, distribution and marketing 181,791 181,822 Administrative and general 54,317 53,777 Interest 7,590 4,917 ----------- ----------- Total costs and expenses 398,365 384,102 ----------- ----------- Income before income taxes 41,762 56,515 Income taxes 13,990 19,215 ----------- ----------- Net income $ 27,772 $ 37,300 =========== =========== Net income per share $ 0.37 $ 0.50 =========== =========== Dividends per share $ 0.16 $ 0.14 =========== =========== Average number of common shares outstanding 74,735,967 74,378,727
See notes to consolidated financial statements. Page 1 4 AMERICAN GREETINGS CORPORATION CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION (Thousands of dollars)
(Unaudited) (Unaudited) May 31, 1996 Feb. 29, 1996 May 31, 1995 ---------- ---------- ---------- ASSETS Current assets Cash and equivalents $ 42,970 $ 30,130 $ 39,446 Trade accounts receivable, less allowances of $113,444, $157,626 and $103,144, respec- tively (principally for sales returns) 352,691 353,671 333,513 Inventories: Raw material 53,368 57,415 60,234 Work in process 58,308 49,741 51,303 Finished products 312,873 274,713 267,224 ---------- ---------- ---------- 424,549 381,869 378,761 Less LIFO reserve 93,002 92,020 87,043 ---------- ---------- ---------- 331,547 289,849 291,718 Display material and factory supplies 44,924 45,225 41,750 ---------- ---------- ---------- Total inventories 376,471 335,074 333,468 Deferred income taxes 88,340 102,889 65,985 Prepaid expenses and other 156,599 148,429 143,887 ---------- ---------- ---------- Total current assets 1,017,071 970,193 916,299 Other assets 611,930 595,369 432,700 Property, plant and equipment 867,846 851,143 865,801 Less accumulated depreciation 421,280 410,873 418,213 ---------- ---------- ---------- Property, plant and equipment - net 446,566 440,270 447,588 ---------- ---------- ---------- $2,075,567 $2,005,832 $1,796,587 ========== ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Debt due within one year $ 228,994 $ 119,174 $ 153,829 Accounts payable 132,183 144,242 124,247 Payroll and payroll taxes 52,070 57,562 48,583 Retirement plans 5,087 17,151 5,859 Dividends payable 11,981 11,975 10,442 Income taxes 8,403 21,210 27,587 Other current liabilities 58,544 82,533 56,819 ---------- ---------- ---------- Total current liabilities 497,262 453,847 427,366 Long-term debt 235,224 231,073 72,246 Postretirement benefit obligation 15,480 15,496 17,992 Other liabilities 31,332 25,310 34,150 Deferred income taxes 44,863 45,084 55,964 Shareholders' equity 1,251,406 1,235,022 1,188,869 ---------- ---------- ---------- $2,075,567 $2,005,832 $1,796,587 ========== ========== ==========
See notes to consolidated financial statements. Page 2 5 AMERICAN GREETINGS CORPORATION CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Thousands of dollars)
(Unaudited) Three Months Ended May 31, -------------------------------- 1996 1995 -------------- -------------- OPERATING ACTIVITIES: Net income $27,772 $37,300 Adjustments to reconcile to net cash provided (used) by operating activities: Depreciation 15,857 19,526 Deferred income taxes 14,346 (393) Change in operating assets and liabilities (128,338) (109,016) Other - net 1,898 2,717 -------------- -------------- Cash Used by Operating Activities (68,465) (49,866) INVESTING ACTIVITIES: Property, plant & equipment additions (23,324) (18,637) Other - net 3,206 2,752 -------------- -------------- Cash Used by Investing Activities (20,118) (15,885) FINANCING ACTIVITIES: Increase in long-term debt 8,917 - Reduction of long-term debt (6,924) (3,748) Increase in short-term debt 110,539 29,977 Sale of stock under benefit plans 1,361 2,806 Purchase of treasury shares (513) (622) Dividends to shareholders (11,957) (10,367) -------------- -------------- Cash Provided by Financing Activities 101,423 18,046 -------------- -------------- INCREASE (DECREASE) IN CASH AND EQUIVALENTS 12,840 (47,705) Cash and Equivalents at Beginning of Year 30,130 87,151 -------------- -------------- Cash and Equivalents at End of Period $42,970 $39,446 ============== ==============
See notes to consolidated financial statements. Page 3 6 AMERICAN GREETINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Thousands of dollars) Three Months Ended May 31, 1996 and 1995 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 Prepaid Expenses and Other and Other Assets are deferred costs relating to agreements with certain customers. Total commitments under the agreements are capitalized as deferred costs and future payment commitments, if any, are recorded as liabilities when the agreements are consummated. 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 $125,498, $121,937 and $115,098 at May 31, 1996, February 29, 1996 and May 31, 1995, respectively. Deferred costs included in the Other Assets classification at the same dates are $429,425, $410,119 and $328,891, respectively. The Other Liabilities and Other Current Liabilities classifications consist of the future payment commitments relating to these agreements. Page 4 7 Part I., Item 2, MANAGEMENT'S DISCUSSION AND ANALYSIS - ----------------------------------------------------- Results of Operations - --------------------- Net sales of $438.2 million for the first quarter ended May 31, 1996 did not increase from the same period in the prior year and reflected a shift in shipments out of the first quarter as a result of efforts to work with retailers to reduce lead times in inventories. This revenue shift primarily impacted sales of greeting cards and, as a result, unit sales of greeting cards for this quarter were down approximately 6% from the same period in the prior year. Strong sales of non-card product, along with price increases, offset the greeting card unit decline. Material, labor and other production costs were 35.3% of net sales for the quarter compared to 32.7% in the prior year. This increase was due to higher product costs associated with newly acquired subsidiaries, higher manufacturing costs in the United States and Canada and the stronger sales of higher-cost non-card product. Both the selling, distribution and marketing and the administrative expense categories were unchanged from prior year as a result of overall general cost containment. Interest expense for the quarter was up $2.7 million over the prior year, mostly due to higher debt levels incurred to finance the John Sands acquisition. The effective tax rate for the quarter was 33.5%, compared to 34.0% 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. Page 5 8 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 May 31, 1995 has been included. Operations for the first three months required $18.6 million more in cash than the same period last year. This increased use is due primarily to the decrease in net income, and an increase in net deferred costs related to agreements with customers offset by decreases in the growth of both accounts receivable and inventories. Accounts receivable remained unchanged from February 29, compared to a $8.7 million use of cash in the same period in the prior year. Net accounts receivable were 17.6% of the prior twelve months' sales at both May 31, 1996 and 1995. Inventory growth required $10.8 million less cash for the first quarter compared to the prior year, reflecting the Corporation's continued efforts to manage growth in this area while expanding product offerings. Inventories as a percent of the prior twelve months' material, labor and other production costs improved to 48.7% at May 31, 1996 from 48.9% for the prior year. Investing activities used $4.2 million more cash for the three months than in the same period in the prior year, due primarily to property, plant and equipment additions. Financing activities provided $83.4 million more cash during the first three months of this year than last year, due to higher borrowing levels to support operating requirements. Debt as a percentage of debt plus equity was 27.1% at May 31, 1996, an increase from 16.0% in the prior year, reflecting the debt incurred to finance the acquisition of the John Sands Group during the fourth quarter of fiscal 1996. On a per share basis, shareholders' equity increased from $15.98 at May 31, 1995 to $16.74 at May 31, 1996. There were no material changes in the financial condition, liquidity or capital resources of the Corporation from February 29, 1996, the end of its preceding fiscal year, to May 31, 1996, the end of its last fiscal quarter and the date of the most recent balance sheet included in this report, nor from May 31, 1995, the end of the corresponding fiscal quarter last year, to May 31, 1996, except the changes discussed above and aside from normal seasonal fluctuations. 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 27 Financial Data Schedule (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 Senior Vice President Chief Financial Officer July 15, 1996 Page 7 EX-11.A 2 EXHIBIT 11(A) 1 EXHIBIT 11(a) American Greetings Corporation ------------------------------ Computation of Earnings Per Share ---------------------------------
(Unaudited) Three Months Ended May 31, 1996 1995 ---- ---- Average number of common shares outstanding 74,735,967 74,378,727 ==================== ==================== Net income (thousands) $ 27,772 $ 37,300 ==================== ==================== Primary earnings per share $ .37 $ .50 ==================== ====================
EX-11.B 3 EXHIBIT 11(B) 1 EXHIBIT 11(b) Computation of Fully-Diluted Earnings Per Share (a) -----------------------------------------------
(Unaudited) Three Months Ended May 31, ---------------------------------- 1996 1995 ---- ---- Average number of common shares outstanding on a fully diluted basis assuming exercise of stock options based on the treasury stock method using the higher of average market price or ending market price (b) 75,673,431 75,595,096 ==================== ==================== Net income (thousands) $ 27,772 $ 37,300 ==================== ==================== Fully-diluted earnings per share $ .37 $ .49 ==================== ==================== (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. (b) Average market price was used for May 31, 1996. Ending market price was used for May 31, 1995.
EX-27 4 EXHIBIT 27
5 This schedule contains summary financial information extracted from Part 1, Item 1 of the first quarter Form 10-Q and is qualified in its entirety by reference to such financial statements. 1,000 3-MOS FEB-28-1997 MAR-01-1996 MAY-31-1996 42,970 0 352,691 15,505 376,471 1,017,071 867,846 421,566 2,075,567 497,262 0 0 0 74,758 1,176,648 2,075,567 438,212 440,127 154,667 154,667 0 (95) 7,590 41,762 13,990 27,772 0 0 0 27,772 .37 .37
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