-----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, BmMAa5gQuCn6S/D3Hg3BleOXVH4r61wll5Jhklj22dDfHFHHqSym0YQOdBEwi+/R WDNtFJor3JLBlj8Pr/7HYw== 0000950152-99-000181.txt : 19990115 0000950152-99-000181.hdr.sgml : 19990115 ACCESSION NUMBER: 0000950152-99-000181 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981130 FILED AS OF DATE: 19990114 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: SEC FILE NUMBER: 001-13859 FILM NUMBER: 99506067 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 CORPORATION 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 X SECURITIES EXCHANGE ACT OF 1934 - ----------------- For the quarterly period ended November 30, 1998 ------------------------------------------------- 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 1-13859 ------------- AMERICAN GREETINGS CORPORATION ------------------------------------------------------ (Exact name of registrant as specified in its charter) 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 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 November 30, 1998, the date of this report, the number of shares outstanding of each of the issuer's classes of common stock was: Class A Common 65,263,920 Class B Common 4,656,836 2 AMERICAN GREETINGS CORPORATION INDEX Page Number ------ PART I - FINANCIAL INFORMATION - ------------------------------ Item 1. Financial Statements.....................................1 Item 2. Management's Discussion and Analysis.....................9 PART II - OTHER INFORMATION - --------------------------- Item 6. Exhibits and Reports on Form 8-K........................14 SIGNATURES................................................................14 - ---------- 3 PART I - FINANCIAL INFORMATION ------------------------------ Item 1. Financial Statements -------------------- AMERICAN GREETINGS CORPORATION CONSOLIDATED STATEMENT OF INCOME (Thousands of dollars except per share amounts)
(Unaudited) Nine Months Ended November 30, --------------------------------- 1998 1997 ------------ ------------ Net sales $ 1,606,004 $ 1,599,456 Costs and expenses: Material, labor and other production costs 556,537 591,741 Selling, distribution and marketing 660,855 633,784 Administrative and general 165,662 168,200 Non-recurring items 13,925 (22,125) Interest 20,651 17,462 Other expense (income) (2,747) 3,686 ------------ ------------ Total costs and expenses 1,414,883 1,392,748 ------------ ------------ Income before income taxes 191,121 206,708 Income taxes 68,804 71,314 ------------ ------------ Net income $ 122,317 $ 135,394 ============ ============ Earnings per share $ 1.73 $ 1.82 ============ ============ Earnings per share - assuming dilution $ 1.71 $ 1.80 ============ ============ Dividends per share $ 0.56 $ 0.53 ============ ============ Average number of common shares outstanding 70,625,300 74,324,220
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 November 30, --------------------------------- 1998 1997 ------------ ------------ Net sales $ 638,363 $ 639,655 Costs and expenses: Material, labor and other production costs 226,331 242,331 Selling, distribution and marketing 219,939 212,693 Administrative and general 56,156 56,324 Non-recurring items 13,925 -- Interest 6,733 6,332 Other expense (income) (1,223) 1,307 ------------ ------------ Total costs and expenses 521,861 518,987 ------------ ------------ Income before income taxes 116,502 120,668 Income taxes 41,941 41,630 ------------ ------------ Net income $ 74,561 $ 79,038 ============ ============ Earnings per share $ 1.06 $ 1.07 ============ ============ Earnings per share - assuming dilution $ 1.04 $ 1.05 ============ ============ Dividends per share $ 0.19 $ 0.18 ============ ============ Average number of common shares outstanding 70,150,852 73,420,783
See notes to consolidated financial statements. Page 2 5 AMERICAN GREETINGS CORPORATION CONSOLIDATED STATEMENT OF FINANCIAL POSITION (Thousands of dollars)
(Unaudited) (Unaudited) Nov. 30, 1998 Feb. 28, 1998 Nov. 30, 1997 ------------- ------------- ------------- ASSETS Current assets Cash and equivalents $ 38,318 $ 47,623 $ 31,220 Trade accounts receivable, less allowances of $150,106, $151,245 and $140,245, respectively (principally for sales returns) 555,343 373,594 581,763 Total inventories 301,085 271,205 283,113 Deferred and refundable income taxes 120,254 120,507 101,393 Prepaid expenses and other 214,222 210,316 207,769 ---------- ---------- ---------- Total current assets 1,229,222 1,023,245 1,205,258 Goodwill 136,064 84,741 86,702 Other assets 675,847 605,846 593,581 Property, plant and equipment - at cost 954,771 938,743 917,396 Less accumulated depreciation 527,619 491,111 482,127 ---------- ---------- ---------- Property, plant and equipment - net 427,152 447,632 435,269 ---------- ---------- ---------- $2,468,285 $2,161,464 $2,320,810 ========== ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Debt due within one year $ 67,838 $ 199,640 $ 286,106 Accounts payable and accrued liabilities 176,913 145,554 123,742 Accrued compensation and benefits 75,043 84,997 68,056 Income taxes 55,207 22,536 33,342 Other current liabilities 96,340 64,489 69,227 ---------- ---------- ---------- Total current liabilities 471,341 517,216 580,473 Long-term debt 482,578 148,800 214,134 Other liabilities 122,362 107,509 115,313 Deferred income taxes 37,656 42,722 39,950 Shareholders' equity 1,354,348 1,345,217 1,370,940 ---------- ---------- ---------- $2,468,285 $2,161,464 $2,320,810 ========== ========== ==========
See notes to consolidated financial statements. Page 3 6 AMERICAN GREETINGS CORPORATION CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Thousands of dollars)
(Unaudited) Nine Months Ended November 30, --------------------------- 1998 1997 --------- --------- OPERATING ACTIVITIES: Net income $ 122,317 $ 135,394 Adjustments to reconcile to net cash provided (used) by operating activities: Non-recurring items 12,479 (22,125) Depreciation 50,247 49,601 Deferred income taxes (7,924) (3,874) Change in operating assets and liabilities, net of effects from acquisitions and divestitures (224,150) (252,750) Other - net 3,873 5,970 --------- --------- Cash Used by Operating Activities (43,158) (87,784) INVESTING ACTIVITIES: Business acquisitions and divestitures (52,957) 82,000 Property, plant & equipment additions (33,652) (37,608) Investment in corporate-owned life insurance 22,067 3,196 Other - net 14,066 205 --------- --------- Cash (Used) Provided by Investing Activities (50,476) 47,793 FINANCING ACTIVITIES: Increase in long-term debt 342,703 37,048 Reduction of long-term debt (19,940) (3,512) (Decrease) increase in short-term debt (120,456) 127,794 Sale of stock under benefit plans 15,681 10,616 Purchase of treasury shares (94,059) (96,645) Dividends to shareholders (39,600) (39,140) --------- --------- Cash Provided by Financing Activities 84,329 36,161 --------- --------- DECREASE IN CASH AND EQUIVALENTS (9,305) (3,830) Cash and Equivalents at Beginning of Year 47,623 35,050 --------- --------- Cash and Equivalents at End of Period $ 38,318 $ 31,220 ========= =========
See notes to consolidated financial statements. Page 4 7 AMERICAN GREETINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Thousands of dollars) Nine Months Ended November 30, 1998 and 1997 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 - Reclassifications - -------------------------- Certain amounts in the prior fiscal year financial statements have been reclassified to conform with the 1998 presentation. Note D - Non-recurring Items - ---------------------------- During the period ended November 30, 1998, the Corporation recorded a restructuring charge of $13,925 ($8,342 net of tax, or earnings per share of $0.12). The primary components of this charge were employee severance and termination benefit costs associated with a headcount reduction of approximately 300 management, salaried and clerical positions. The balance of the charge is comprised of costs associated with exiting the Corporation's kiosk business and lease exit costs due to the closure of certain sales offices. On August 12, 1997, the Corporation divested the net assets of two subsidiaries, Acme Frame Products, Inc., a manufacturer and distributor of picture frames, and Wilhold, Inc., a manufacturer and distributor of hair accessories. As a result of the transaction, the Corporation recorded a one-time pre-tax gain of $22,125 ($13,192 net of tax, or earnings per share of $0.18.) Page 5 8 Note E - Earnings Per Share - --------------------------- The following table sets forth the computation of earnings per share and earnings per share - assuming dilution:
Nine Months Ended November 30, ------------------------ 1998 1997 -------- -------- Numerator: Net income, earnings per share and earnings per share - assuming dilution $122,317 $135,394 ======== ======== Denominator (thousands): Weighted average shares outstanding 70,625 74,324 Effect of dilutive securities - stock options 831 780 -------- -------- Adjusted weighted average shares outstanding 71,456 75,104 ======== ======== Earnings per share $ 1.73 $ 1.82 ======== ======== Earnings per share - assuming dilution $ 1.71 $ 1.80 ======== ========
Page 6 9 Note F - Comprehensive Income - ----------------------------- The Corporation has adopted SFAS No. 130, Reporting Comprehensive Income, as required, which established standards for reporting and displaying comprehensive income and its components in an annual financial statement that is displayed with the same prominence as other financial statements. This Standard also requires that an entity report a total of comprehensive income in financial statements of interim periods. Comprehensive income represents all changes in shareholders' equity during the period except those resulting from investments by owners and distributions to owners. The Corporation's total comprehensive income was as follows:
(Unaudited) Nine Months Ended November 30, ------------------------- 1998 1997 -------- -------- Net income $122,317 $135,394 Other comprehensive (loss) income Foreign currency translation adjustments (1,317) (3,266) Unrealized gain on available-for-sale securities 6,109 -- -------- -------- Other comprehensive income 4,792 (3,266) -------- -------- Total comprehensive income $127,109 $132,128 ======== ========
Note G - New Accounting Standards - --------------------------------- The Corporation will adopt the disclosure requirements of SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, for the fiscal year ending February 28, 1999, as required. The Corporation is currently evaluating the effect of this Standard on its segment reporting. The Corporation will adopt SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, for the fiscal quarter beginning March 1, 2000, as required. Because of the Corporation's current minimal use of derivatives, the Corporation does not anticipate that the adoption of SFAS No. 133 will have a significant effect on its earnings or financial position. Page 7 10 Note H - Inventories - --------------------
November 30, 1998 February 28, 1998 November 30, 1997 ----------------- ----------------- ----------------- Raw materials $ 37,773 $ 42,641 $ 36,282 Work in process 27,203 37,204 28,727 Finished products 280,449 240,845 270,725 -------- -------- -------- 345,425 320,690 335,734 Less LIFO reserve 91,260 90,130 90,618 -------- -------- -------- 254,165 230,560 245,116 Display materials and factory supplies 46,920 40,645 37,997 -------- -------- -------- Inventories $301,085 $271,205 $283,113 ======== ======== ========
Note I - Deferred Costs - ----------------------- Deferred costs relating to agreements with certain customers 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 year are classified with prepaid expenses and other. 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. As of November 30, 1998, February 28, 1998 and November 30, 1997 deferred costs and future payment commitments are included in the following financial statement captions:
November 30, 1998 February 28, 1998 November 30, 1997 ----------------- ----------------- ----------------- Prepaid expenses and other $ 184,814 $ 179,818 $ 175,411 Other assets 568,532 481,236 477,020 Other current liabilities (83,055) (51,676) (56,124) Other liabilities (92,083) (81,080) (87,440) --------- --------- --------- $ 578,208 $ 528,298 $ 508,867 ========= ========= =========
Page 8 11 Part 1., Item 2, MANAGEMENT'S DISCUSSION AND ANALYSIS - ----------------------------------------------------- Results of Operations - --------------------- Net sales of $638.4 million for the quarter ended November 30, 1998 were down 0.2% compared to the same period in the prior year. However, for the nine months ended November 30, 1998, net sales were up 0.4% to $1,606.0 million. For the quarter, excluding the negative impact of foreign currency exchange rate movements, net sales would have increased 1.0%. On a year-to-date basis, net sales would have increased 3.5% excluding the impact of foreign exchange rate movements and the divestiture of two subsidiary businesses which occurred during the second quarter of last year. The increases in net sales were due primarily to sales of everyday cards and accessories, primarily giftwrap, partially offset by lower seasonal product shipments. In the first quarter of fiscal year 1999, the Corporation strengthened its position in the United Kingdom social expression product market through the acquisition of two greeting card companies. These acquisitions contributed 2.8% and 2.4% to the increases for the quarter and nine months, respectively. Unit sales of total greeting cards increased approximately 1% for the quarter and 2% year-to-date from the same periods in the prior year. Material, labor and other production costs were 35.5% and 34.7% of net sales for the quarter and nine months, respectively, a significant decrease from 37.9% and 37.0% from the same periods in the prior year. Gross profit margins continued to improve during the third quarter as the Corporation reduced shipments of low-margin seasonal products. For the third quarter, selling, distribution and marketing expenses were 34.5% of net sales, up from 33.3% in the prior year, due primarily to higher competitive costs. On a year-to-date basis, selling, distribution and marketing expenses were 41.1% of net sales, compared to 39.6% last year. In addition to increased competitive costs, the cost of a national consumer advertising campaign and selling expenses resulting from store remodelings due to retailer consolidations contributed to this increase. Administrative and general expenses were $165.7 million for the nine month period, down slightly from $168.2 million for the same period in the prior year. The decrease is due primarily to overall cost containment programs. For the quarter, administrative and general expenses were $56.2 million, comparable with the $56.3 million last year. During the third quarter, the Corporation recorded a restructure charge of $13.9 million ($8.3 million net of tax, or earnings per share of $0.12) which reflects management's efforts to optimize the Corporation's cost structure and to provide for operational streamlining initiatives. Approximately 60% of the restructure charge consists of employee severance and termination benefits due to employee headcount reductions of approximately 300 management, salaried and clerical positions. The balance of the restructure charge is comprised of costs associated with exiting the Corporation's kiosk business and lease exit costs due to the closure of certain sales offices. While these initiatives are expected to result in annualized pre-tax savings of approximately $12 to $15 million when completed, future incremental earnings may not be impacted proportionately due to management's commitment to invest in competitive business strategies, new markets and growth opportunities. Page 9 12 Interest expense increased from the prior year by $0.4 million for the quarter and $3.2 million for the nine months. The increase was due primarily to higher borrowing to fund the Corporation's common stock repurchase program and the acquisitions in the United Kingdom. Other expense (income) was $1.2 million of income for the quarter compared to $1.3 million of expense in the prior year due primarily to timing of costs related to the conversion of information systems to be Year 2000 compliant . Other expense (income) was $2.7 million of income for the nine months compared to $3.7 million of expense for the same period in the prior year. The improvement was due primarily to the gain on the sale of the Artistic Greetings stock partially offset by an increase in foreign currency exchange losses. The effective tax rate for the nine months was 36.0%, up from 34.5% in the prior year due to the reduced tax benefit from the corporate-owned life insurance program. Excluding non-recurring items, net income for the quarter increased 4.9% to $82.9 million from $79 million last year while earnings per share rose 10.3% to $1.18 from $1.07 last year. For the first nine months, excluding non-recurring items, net income increased to $130.7 million compared to $122.2 million last year for the same period while earnings per share increased 12.8% to $1.85 from $1.64 last year. Year 2000 - --------- The Year 2000 issue is the result of information technology ("IT") system programs being written using two digits rather than four digits to define the application year. Any of the Corporation's IT systems that have date-sensitive software may be unable to interpret appropriately the calendar Year 2000 and thus could cause the disruption of normal business activities. The Corporation uses IT systems in various aspects of its business, including manufacturing, distribution, product development, and many administrative functions, and much of this software will need to be modified or replaced. The Corporation is currently in the process of working toward Year 2000 compliance so that all of its material business processes and components will properly handle dates prior to, during and after the Year 2000. The Corporation has prioritized its IT systems into three categories: critical, necessary or other. Failure of a "critical" system would result in a serious disruption of revenue and would critically impact competitive advantages. Failure of a "necessary" system would result in serious processing delays and a significant reduction in productivity. The Corporation believes its critical systems will be Year 2000 compliant by the end of the first quarter of calendar 1999. The Corporation also believes its necessary systems will be Year 2000 compliant by the end of the second quarter of calendar 1999. The remainder of the Corporation's systems should be remediated by the end of the third quarter of calendar 1999. However, material slippage in the schedule and number of systems that are Year 2000 compliant could occur. The Corporation's non-IT systems include embedded technology such as microcontrollers included in production equipment, environmental control equipment and timeclocks. These non-IT systems are continuing to be assessed, and plans continue to be updated. Remediation actions have begun. Page 10 13 The Corporation is also in the process of ensuring the continuity and stability of its normal business functions by identifying and assessing potential Year 2000 compliance risks associated with its external business relationships, including those with vendors, customers, financial institutions and employee benefit providers. This process is currently in the assessment phase with potential risks being identified and implementation plans being developed. The Corporation's current estimate of total cost to achieve Year 2000 compliance in both its IT and non-IT systems is approximately $35 million for both modifications to existing software and software replacement. Through November 30, 1998, $19 million has been cumulatively expended on Year 2000 compliance, with approximately $24 million anticipated to be expended cumulatively through the end of fiscal 1999, and the balance anticipated for fiscal 2000. The Corporation is also currently assessing what contingency plans will be needed in the event any of the Corporation's critical or necessary systems or any of its business partners' critical or necessary systems are not Year 2000 compliant when required. Although the Corporation does not currently anticipate such a situation, business partner assessment and contingency planning are in process, and the Corporation expects that they will be completed during the second quarter of calendar 1999. In addition, the Corporation is also currently developing a program to provide independent validation of its Year 2000 compliance efforts and plans to have that program in place by the end of the first quarter of calendar 1999. This program will likely include engaging independent consultants for audits of its completed coding corrections and for providing guidance and suggestions for the remediation efforts. The Corporation believes, but cannot warrant, that with timely modifications to its existing software and conversion to new software, by both the Corporation and its significant business partners, the Year 2000 compliance issue should not have a material impact on the Corporation's operations. Specific factors which might cause a material adverse effect include the availability and cost of trained personnel and the ability to recruit and retain them, as well as the ability to locate all system coding requiring correction. Based upon information available at this time, the Corporation believes that the cost of modifications, replacements and related testing will not have a material impact on the Corporation's liquidity or results of operations. Year 2000 expenditures are being funded through operations. 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 November 30, 1997 has been included. Page 11 14 Operations used $43.2 million of cash for the nine months, an improvement of $44.6 million from the same period last year. Contributing to this improvement was an increase in net income over the prior year, after adjusting for non-recurring items. Also contributing to this improvement was a reduction in the growth of trade accounts receivable and improved management of trade accounts payable partially offset by an increase in inventories and deferred costs. As of November 30,1998, the cash outlay for restructuring expenditures totaled approximately $1.4 million, primarily for employee termination benefits. Accounts receivable, net of the effect of acquisitions and divestitures, increased $174.0 million from February 28,1998, down from an increase of $228.7 million during the same period in the prior year, due to strong collections and lower seasonal product shipments. Net accounts receivable improved to 24.8% of the prior twelve months' sales at November 30, 1998, compared to 27.0% at November 30, 1997, net of the effect of acquisitions and divestitures. Inventories, net of the effect of acquisitions and divestitures, increased by $32.3 million from February 28, 1998, compared to an increase of $5.2 million during the same period in the prior year due to an increase in non-card product relating to new products and to support future sales growth. Inventories as a percent of the prior twelve months' material, labor, and other production costs increased to 40.4% at November 30, 1998 from 36.7% at November 30, 1997, net of the effect of acquisitions and divestitures. Investing activities used $50.5 million in cash for the nine months this year, including $53.0 million for the acquisition of two greeting card companies in the United Kingdom, compared to providing $47.8 million for the same period last year, which included $82.0 million in proceeds from the divestiture of two subsidiaries. Excluding the acquisitions and divestitures, investing activities used $2.5 million for the nine months. This improvement of $31.7 million from the prior year reflects cash distributions received from the Corporation's investment in corporate owned life insurance, proceeds from the sale of the Artistic Greetings stock and a lower level of capital expenditures. On May 20, 1998, the Corporation filed a Form S-3 Registration Statement with the Securities and Exchange Commission for a shelf registration to issue up to $600 million of debt securities. Under the registration, the Corporation on July 27, 1998 completed the sale of $300 million of 30-year senior notes with a 6.10% coupon rate. The majority of the proceeds were used to retire commercial paper and other short-term debt, with the remainder used for other general corporate purposes and short-term investments. On August 7, 1998, the Corporation entered into a new multi-currency credit facility to provide liquidity and working capital financing for the Corporation and its subsidiaries in the United States, Canada, the United Kingdom, Australia, New Zealand and France. The aggregate availability under this facility is approximately $713 million. A portion of the facility matures on August 7, 2003. The balance of the facility matures on August 6, 1999. This portion of the facility is annually renewable for an additional 364-day period and is convertible to a term loan with a maturity of August 7, 2003. Page 12 15 Financing activities provided $84.3 million for the nine months compared to $36.2 million during the same period in the prior year. The Corporation utilized a portion of the proceeds from the sale of the $300 million of debt securities to effectively shift much of its previously short-term debt to long-term. The remaining portion of the proceeds were used to fund various other activities during the nine months, including the purchase of 2.0 million shares of the Corporation's Class A common stock for $87.5 million at an average price of $43.74 per share. During the same period last year, 2.7 million shares of stock had been purchased for $95.9 million. Total debt less cash increased from $469.0 million at November 30, 1997 to $512.1 million at November 30, 1998. Debt as a percentage of debt plus equity also increased to 28.9% at November 30, 1998 from 26.7% at November 30, 1997. On a per-share basis, shareholders' equity increased from $18.83 per share at November 30, 1997 to $19.37 at November 30, 1998. There were no material changes in the financial condition, liquidity or capital resources of the Corporation from February 28, 1998, the end of its preceding fiscal year, to November 30, 1998, the end of its last fiscal quarter and the date of the most recent balance sheet included in this report, nor from November 30, 1997, the end of the corresponding fiscal quarter last year, to November 30, 1998, except the changes discussed above and aside from normal seasonal fluctuations. Prospective Information - ----------------------- On September 17, 1998, the Corporation announced plans to enhance profitability by targeting removal of $20 to $30 million from the cost structure of the Corporation. As noted above, during the third quarter, the Corporation initiated the first phase of this restructure by recording a pretax charge of $13.9 million. The Corporation will continue to conduct an evaluation of its worldwide manufacturing and distribution capabilities, focusing on additional cost savings and expects to record an additional restructure charge during the fiscal year ending February 2000 as part of this initiative. 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, except those mentioned above. However, the Corporation's future results could be negatively impacted by such factors as retail bankruptcies, a weak retail environment, loss of retail accounts to other suppliers or as a result of retail consolidation and competitive terms of sale offered to customers to expand or maintain business. Other risks, which are not all-inclusive, include costs associated with correcting the Year 2000 issues, unforeseen circumstances which may affect the Corporation's plans to reduce its cost structure, as well as economic conditions in the various markets served by the Corporation's operations. Please see the Corporation's Form 10-K for the year ended February 28, 1998 for other risks and uncertainties that may affect future results. Page 13 16 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) 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/ Patricia L. Ripple --------------------------------- Patricia L. Ripple Controller Chief Accounting Officer January 14, 1999 Page 14 EX-27 2 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PART I, ITEM 1 OF THE THIRD QUARTER FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS FEB-28-1999 MAR-01-1998 NOV-30-1998 38,318 0 555,343 21,072 301,085 1,229,222 954,771 527,619 2,468,285 471,341 0 0 0 69,921 1,284,427 2,468,285 1,606,004 1,606,004 556,537 556,537 0 6,128 20,651 191,121 68,804 122,317 0 0 0 122,317 1.73 1.71
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