UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported): December 19, 2012
American Greetings Corporation
(Exact Name of Registrant as Specified in its Charter)
Ohio | 1-13859 | 34-0065325 | ||
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification No.) | ||
One American Road Cleveland, Ohio |
44144 | |||
(Address of principal executive offices) | (Zip Code) |
Registrants telephone number, including area code: (216) 252-7300
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 1.01 | Entry into a Material Definitive Agreement. |
On December 19, 2012, American Greetings Corporation (American Greetings) amended (the Amendment) its existing Amended and Restated Credit Agreement (the Credit Agreement) by and among various lending institutions party thereto (the Lenders), PNC Bank, National Association, as the Global Administrative Agent, as the Swing Line Lender, a LC Issuer and the Collateral Agent, JPMorgan Chase Bank, N.A. and Bank of America, N.A., as Co-Syndication Agents, KeyBank National Association and The Bank of Nova Scotia as Co-documentation Agents, and PNC Capital Markets LLC, as the Lead Arranger and Sole Bookrunner. The Amendment amends the Credit Agreement to exclude from the definition of consolidated EBITDA up to $40,000,000 of certain cash and non-cash fees, costs and expenses incurred by American Greetings from April 1, 2012 through December 19, 2013 in connection with its acquisition of the senior secured debt of Clinton Cards PLC and its subsidiaries, the bankruptcy administration of Clinton Cards PLC and its subsidiaries, and the subsequent acquisition of select assets of Clinton Cards PLC and certain of its subsidiaries (the Clinton Cards Transaction). American Greetings was required to amend the methodology for calculating consolidated EBITDA to exclude certain fees, costs and expenses incurred in connection with the Clinton Cards Transaction to ensure it remained in compliance with the requirement under the Credit Agreement that American Greetings not permit its leverage ratio for any testing period to exceed 3.00 to 1.00.
Certain of the Lenders and their affiliates have provided, from time to time, and may continue to provide, investment banking, commercial banking, trustee, financial and other services to American Greetings, including letters of credit, depository and account processing services, and underwriting in connection with American Greetings sale of its 7.375% Senior Notes due 2021, in any such case for which American Greetings has paid and intends to pay customary fees.
The foregoing description of the Amendment does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Amendment, which is attached hereto as Exhibit 10.1 and is incorporated herein by reference.
Item 2.02 | Results of Operations and Financial Condition. |
On December 20, 2012, American Greetings Corporation issued a press release reporting its results for the quarter ended November 23, 2012. A copy of this press release is attached hereto as Exhibit 99.1.
The information in Item 2.02 of this Current Report on Form 8-K (including exhibit 99.1 attached hereto) is being furnished under Item 2.02 and shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the Exchange Act), or otherwise subject to the liability of such section, or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Item 9.01 | Financial Statements and Exhibits. |
d) Exhibits.
Exhibit |
Description | |
Exhibit 10.1 | Second Amendment to Amended and Restated Credit Agreement, dated as of December 19, 2012, among American Greetings Corporation, certain foreign subsidiary borrowers thereto, various lending institutions party thereto, and PNC Bank, National Association, as the Global Agent. | |
Exhibit 99.1 | Press Release - reporting results for the quarter ended November 23, 2012. |
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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 hereunto duly authorized.
American Greetings Corporation | ||
(Registrant) | ||
By: |
/s/ Robert D. Tyler | |
Robert D. Tyler | ||
Corporate Controller and | ||
Chief Accounting Officer |
Date: December 20, 2012
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Exhibit 10.1
SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
THIS SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (this Amendment) is dated as of December 19, 2012 by and among (i) AMERICAN GREETINGS CORPORATION, an Ohio corporation (the Company); (ii) THE FOREIGN SUBSIDIARY BORROWERS (as defined in the Credit Agreement, as hereinafter defined) party hereto; (iii) THE LENDERS (as defined in the Credit Agreement) party hereto; and (iv) PNC BANK, NATIONAL ASSOCIATION, as the global agent (the Global Agent).
WITNESSETH:
WHEREAS, the Borrower, the Foreign Subsidiary Borrowers, the Lenders and the Global Agent are parties to that certain Amended and Restated Credit Agreement dated as of June 11, 2010, as amended by First Amendment to Amended and Restated Credit Agreement dated as of January 18, 2012 (as further amended, restated, modified or supplemented from time to time, the Credit Agreement);
WHEREAS, the Borrower, the Foreign Subsidiary Borrowers, the Lenders and the Global Agent wish to amend the Credit Agreement, as hereinafter provided.
NOW, THEREFORE, the parties hereto, in consideration of their mutual covenants and agreements hereinafter set forth and intending to be legally bound hereby, covenant and agree as follows:
1. Recitals. The foregoing recitals are incorporated herein by reference.
2. Defined Terms. All terms used in this Amendment and not otherwise defined herein shall have the meaning given to them in the Credit Agreement, as amended hereby.
3. Amendments to Credit Agreement.
(a) Restated Definition. Effective as of November 23, 2012, the following definition set forth in Section 1.01 [Certain Defined Terms] of the Credit Agreement is hereby amended and restated as follows:
Consolidated EBITDA means, for any period, Consolidated Net Income for such period; plus (i) (A) the sum of the amounts for such period included in determining such Consolidated Net Income of (1) Consolidated Interest Expense, (2) Consolidated Income Tax Expense, (3) Consolidated Depreciation and Amortization Expense, and (4) extraordinary non-cash losses and charges and other non-recurring non-cash losses and charges, (B) the applicable non-cash Scheduled Add-Backs for such period, (C) fees, costs and expenses in connection with the World Headquarters Initiative in an amount not to exceed $7,500,000 in the aggregate during the term of this Agreement and (D) except as set forth below, non-recurring cash and non-cash fees, costs and expenses in connection with the Clinton Transaction incurred from April 1, 2012 through December 19,
2013 and consisting of bad debt expense (net of any recovery), legal and advisory fees and impairment of debt purchased, in an amount not to exceed $40,000,000 in the aggregate (for any period, the amount in the foregoing clause (D) is referred to as the Clinton Add-Back); less (ii) gains on sales of assets, extraordinary gains, and non-recurring non-cash gains in excess, for any such gain, of $5,000,000; all as determined for the Company and its Subsidiaries on a consolidated basis in accordance with GAAP; provided, however, that Consolidated EBITDA for any Testing Period shall (x) for any Person or business unit that has been acquired by the Company or any of its Subsidiaries during such Testing Period, include the EBITDA of such Person or business unit for any portion of such Testing Period prior to the date of acquisition, so long as such EBITDA has been verified by appropriate audited financial statements or other financial statements acceptable to the Global Agent and (y) for any Person or business unit that has been disposed of by the Company or any of its Subsidiaries during such Testing Period, exclude the EBITDA of such Person or business unit for the portion of such Testing Period prior to the date of disposition; provided, further, in calculating the Leverage Ratio for the purpose of determining the Applicable Commitment Fee Rate and the Applicable Margin only, the Clinton Add-Back shall not be added back to Consolidated Net Income in determining Consolidated EBITDA.
(b) New Definition. Effective as of November 23, 2012, the following new definition is hereby inserted in Section 1.01 [Certain Defined Terms] of the Credit Agreement in alphabetical order:
Clinton Add-Back shall have the meaning given to such term in the definition of Consolidated EBITDA.
Clinton Transaction means the acquisition by the Borrower (through one or more Subsidiaries) of the senior secured debt of Clinton Cards PLC and its Subsidiaries, the bankruptcy administration of Clinton Cards PLC and certain of its Subsidiaries in the United Kingdom, and the subsequent acquisition by the Borrower (through one or more Subsidiaries) of certain assets of Clinton Cards PLC and certain of its Subsidiaries.
4. Conditions Precedent. The effectiveness of this Amendment is subject to the receipt by the Global Agent on behalf of the Lenders of the following, in form and substance satisfactory to the Global Agent, and the first date on which the Borrower and the Subsidiary Guarantors (collectively, the Loan Parties) have satisfied all of the following conditions to the satisfaction of the Global Agent shall be referred to as the Second Amendment Effective Date.
(a) Counterparts. The Global Agent shall have received (i) from the Borrowers and each of the Required Lenders an executed counterpart original of this Amendment and (ii) from the Subsidiary Guarantors an executed original of Guarantor Acknowledgment and Consent to Second Amendment to Amended and Restated Credit Agreement in the form attached to this Amendment as Exhibit A.
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(b) No Material Adverse Effect. Since February 29, 2012, no Material Adverse Effect shall have occurred with respect to any of the Borrowers or any of the Subsidiary Guarantors.
(c) Legal Details. All legal details and proceedings in connection with the transactions contemplated by this Amendment shall be in form and substance reasonably satisfactory to the Global Agent.
(d) Payment of Fees. The Borrowers unconditionally agree (i) to pay to the Global Agent, for the ratable benefit of each Lender which executes this Amendment on or before December 19, 2012, a nonrefundable amendment fee in an amount equal to five (5) basis points multiplied by such Lenders Revolving Commitment as in effect on the Second Amendment Effective Date, (ii) to pay the Global Agent the fees set forth in that certain letter agreement dated December 12, 2012 among the Borrower, the Global Agent and PNC Capital Markets LLC and (iii) to pay and reimburse the Global Agent and hold the Global Agent harmless against liability for the payment of all reasonable out-of-pocket costs, expenses and disbursements, including, without limitation, reasonable expenses of counsel, incurred by the Global Agent in connection with the development, preparation and execution of this Amendment and all other documents or instruments to be delivered in connection herewith.
5. Representations and Warranties of the Loan Parties. Each Loan Party covenants and agrees with and represents and warrants to the Global Agent and the Lenders as follows:
(a) such Loan Party possesses all of the powers requisite for it to enter into and carry out the transactions of such Loan Party referred to herein and to execute, enter into and perform the terms and conditions of this Amendment and any other documents contemplated herein that are to be performed by such Loan Party; and that any and all actions required or necessary pursuant to such Loan Partys organizational documents or otherwise have been taken to authorize the due execution, delivery and performance by such Loan Party of the terms and conditions of this Amendment and said other documents, and that such execution, delivery and performance will not conflict with, constitute a default under or result in a breach of any applicable Law or any agreement, instrument, order, writ, judgment, injunction or decree to which such Loan Party is a party or by which such Loan Party or any of its properties are bound, and that all consents, authorizations and/or approvals required or necessary from any third parties in connection with the entry into, delivery and performance by such Loan Party of the terms and conditions of this Amendment, the said other documents and the transactions contemplated hereby have been obtained by such Loan Party and are in full force and effect;
(b) this Amendment and any other documents contemplated herein constitute the valid and legally binding obligations of such Loan Party, enforceable against such Loan Party in accordance with their respective terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws and by general equitable principles, whether enforcement is sought by proceedings at law or in equity;
(c) all representations and warranties made by such Loan Party in the Loan Documents are true and correct in all material respects as of the date hereof with the same force and effect as if all such representations and warranties were fully set forth herein and made as of
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the date hereof except to the extent that such representations and warranties expressly relate to an earlier specified date, in which case such representations and warranties shall have been true and correct in all material respects as of the date when made, and such Loan Party has complied with all covenants and undertakings in the Loan Documents;
(d) the execution and delivery of this Amendment is not intended to and shall not cause or result in a novation with regard to the existing indebtedness of any Loan Party to the Global Agent or any Lender, which indebtedness shall continue without interruption and has not been discharged;
(e) (i) after giving effect to this Amendment, no Event of Default has occurred and is continuing under the Loan Documents; and (ii) and there exist no defenses, offsets, counterclaims or other claims with respect to the obligations and liabilities of such Loan Party under the Credit Agreement or any of the other Loan Documents; and
(f) such Loan Party hereby ratifies and confirms in full its duties and obligations under the Loan Documents, as modified hereby.
6. References to Credit Agreement. From and after the Second Amendment Effective Date, any references to the Credit Agreement contained in any of the Loan Documents shall be deemed to refer to the Credit Agreement as amended hereby and as further amended, restated, modified or supplemented from time to time.
7. Successors and Assigns. This Amendment shall apply to and be binding upon, and shall inure to the benefit of, each of the other parties hereto and their respective successors and assigns permitted under the Credit Agreement. Nothing expressed or referred to in this Amendment is intended or shall be construed to give any person or entity other than the parties hereto a legal or equitable right, remedy or claim under or with respect to this Amendment or any Loan Documents, it being the intention of the parties hereto that this Amendment and all of its provisions and conditions are for the sole and exclusive benefit of the parties hereto.
8. Severability. If any one or more of the provisions contained in this Amendment or the Loan Documents shall be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained in this Amendment or the Loan Documents shall not in any way be affected or impaired thereby, and this Amendment shall otherwise remain in full force and effect.
9. Governing Law. This Amendment shall be deemed to be a contract under the Laws of the State of Ohio without regard to its conflict of laws principles.
10. Counterparts; Facsimile or Electronic Signatures. This Amendment may be executed in any number of counterparts each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute but one and the same instrument. Delivery of executed signature pages hereof by facsimile or other electronic method of transmission (such as pdf) from one party to another shall constitute effective and binding execution and delivery thereof by such party. Any party that delivers its original counterpart signature to this Amendment by facsimile or other electronic method of transmission hereby covenants to personally deliver its original counterpart signature promptly thereafter to the Global Agent.
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[SIGNATURE PAGES FOLLOW]
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[SIGNATURE PAGE TO SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT]
IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly authorized, have executed this Amendment as of the day and year first above written.
AMERICAN GREETINGS CORPORATION | ||
By: | /s/ Gregory M. Steinberg | |
Name: | Gregory M. Steinberg | |
Title: | Treasurer |
[SIGNATURE PAGE TO SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT]
PNC BANK, NATIONAL ASSOCIATION, as a Lender, a LC Issuer, the Swing Line Lender and the Global Agent | ||
By: | /s/ Christian S. Brown | |
Name: | Christian S. Brown | |
Title: | Senior Vice President |
[SIGNATURE PAGE TO SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT]
PNC BANK CANADA BRANCH, as a Canadian Lender | ||
By: | /s/ Caroline Stade | |
Name: | Caroline Stade | |
Title: | Senior Vice President | |
By: | /s/ Bill Hines | |
Name: | Bill Hines | |
Title: | Regional President |
[SIGNATURE PAGE TO SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT]
BANK OF AMERICA, N.A., as a Lender and a Co-Syndication Agent | ||
By: | /s/ Joseph R. Jackson | |
Name: | Joseph R. Jackson | |
Title: | Vice President |
[SIGNATURE PAGE TO SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT]
JPMORGAN CHASE BANK, N.A., as a Lender, as a Canadian Lender and a Co-Syndication Agent | ||
By: | /s/ Brendan Korb | |
Name: | Brendan Korb | |
Title: | Vice President |
[SIGNATURE PAGE TO SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT]
KEYBANK NATIONAL ASSOCIATION, as a Lender and a Co-Documentation Agent | ||
By: | /s/ Marianne T. Meil | |
Name: | Marianne T. Meil | |
Title: | Senior Vice President |
[SIGNATURE PAGE TO SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT]
THE BANK OF NOVA SCOTIA, as a Lender, as a Canadian Lender and a Co-Documentation Agent | ||
By: | /s/ Rafael Tobon | |
Name: | Rafael Tobon | |
Title: | Director |
[SIGNATURE PAGE TO SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT]
RBS CITIZENS, NATIONAL ASSOCIATION, as a Lender | ||
By: | /s/ Joshua Botnick | |
Name: | Joshua Botnick | |
Title: | Vice President |
[SIGNATURE PAGE TO SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT]
WELLS FARGO BANK, N.A., as a Lender | ||
By: | /s/ Beth Rue | |
Name: | Beth Rue | |
Title: | Director |
[SIGNATURE PAGE TO SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT]
THE NORTHERN TRUST COMPANY, as a Lender | ||
By: | /s/ Jeffrey P. Sullivan | |
Name: | Jeffrey P. Sullivan | |
Title: | Vice President |
[SIGNATURE PAGE TO SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT]
UNION BANK, N.A., as a Lender | ||
By: | /s/ Dana Philbin | |
Name: | Dana Philbin | |
Title: | Vice President |
[SIGNATURE PAGE TO SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT]
U.S. BANK NATIONAL ASSOCIATION, as a Lender | ||
By: | Steven L. Sawyer | |
Name: | Steven L. Sawyer | |
Title: | Vice President |
[SIGNATURE PAGE TO SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT]
FIFTH THIRD BANK, as a Lender | ||
By: | Martin H. McGinty | |
Name: | Martin H. McGinty | |
Title: | Vice President |
[SIGNATURE PAGE TO SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT]
THE HUNTINGTON NATIONAL BANK, as a Lender | ||
By: | Brian H. Gallagher | |
Name: | Brian H. Gallagher | |
Title: | Senior Vice President |
EXHIBIT A
GUARANTOR ACKNOWLEDGMENT AND CONSENT TO SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
Each of the undersigned enters into this Guarantor Acknowledgment and Consent to Second Amendment to Amended and Restated Credit Agreement dated as of December 19, 2012, and agrees for benefit of the Global Agent, the Lenders, and the other Creditors (each as defined below) as follows:
Reference is made to (i) that certain Amended and Restated Guaranty of Payment of Debt, dated as of June 11, 2010 (as the same may from time to time be further amended, restated, supplemented, or otherwise modified, the Guaranty), by each of the undersigned, jointly and severally as a Guarantor thereunder, in favor of PNC Bank, National Association, as global administrative agent (the Global Agent), for the benefit of the Creditors (as defined therein), entered into pursuant to and in connection with that certain Amended and Restated Credit Agreement (as the same may from time to time be amended, restated, supplemented or otherwise modified, the Credit Agreement), dated as of even date therewith, among the American Greetings Corporation and the Foreign Subsidiary Borrowers from time to time party thereto (collectively, the Borrowers), the lenders from time to time party thereto (collectively, the Lenders), and the Global Agent; (ii) that certain First Amendment to Amended and Restated Credit Agreement (the First Amendment), dated as of January 18, 2012, among the Borrowers, the Lenders and the Global Agent; and (iii) that certain Second Amendment to Amended and Restated Credit Agreement (the Second Amendment), dated as of even date herewith, among the Borrowers, the Lenders and the Global Agent.
Each of the undersigned hereby (i) acknowledges and consents to the Second Amendment, (ii) confirms the representations and warranties with respect to the undersigned contained in Section 5 of the Second Amendment and (iii) ratifies and confirms the Guaranty and acknowledges that the Guaranty shall continue to guaranty the Guaranteed Obligations (as defined therein), including without limitation, those under the Credit Agreement as amended by the First Amendment and the Second Amendment.
[SIGNATURE PAGES FOLLOW]
[SIGNATURE PAGE TO GUARANTOR ACKNOWLEDGMENT AND CONSENT TO SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT]
IN WITNESS WHEREOF, each of the undersigned, intending to be legally bound hereby, has executed this Guarantor Acknowledgment and Consent as of the date first above written.
[Signature block for each Subsidiary Guarantor to be added in execution version] |
Exhibit 99.1
AMERICAN GREETINGS ANNOUNCES THIRD QUARTER EARNINGS
CLEVELAND (December 20, 2012) American Greetings Corporation (NYSE: AM) today announced its results for the third fiscal quarter ended November 23, 2012.
Third Quarter Results
For the third quarter of fiscal 2013, the Company reported total revenue of $506.8 million, a pre-tax loss of $2.1 million, and a net loss of $0.8 million or 3 cents per share (all per-share amounts assume dilution).
The Company announced, on June 7, 2012, the acquisition of certain assets of United Kingdom-based Clinton Cards, including approximately 400 stores and related overhead as well as the Clinton Cards and related brands. As a result of the acquisition, the Company recognized during the third quarter of fiscal 2013 a revenue increase of approximately $67.6 million from the operations of the Clintons retail stores, reflected in the Companys new Retail Operations segment. This revenue increase was partially offset by the revenue reduction of approximately $25.5 million from inter-segment sales eliminations, reflected in the Companys International Social Expressions segment, resulting in a net increase in consolidated revenue of approximately $42.1 million in the quarter. The revenue being eliminated would have been third party sales in the prior year quarter.
The Company recognized a loss of $11.5 million (after-tax of approximately $7.0 million or 22 cents per share) from the operation of its Retail Operations segment. The Company also recognized a reduction in pre-tax income of approximately $4.1 million (after-tax of approximately $2.5 million or 8 cents per share) as a result of inter-segment items within the International Social Expressions segment. The total consolidated net reduction in pre-tax income associated with the operation of the Clintons retail stores during the third fiscal quarter was approximately $15.6 million (after-tax of approximately $9.5 million or 30 cents per share).
During the quarter, consolidated revenue was also reduced by $0.6 million as a result of scan-based trading conversions that occurred during the current years third quarter while the impact of scan-based trading conversions on pre-tax income was $0.6 million (after-tax of approximately $0.4 million or 1 cent per share).
Also impacting the consolidated results was a pre-tax non-operating income benefit of $1.1 million (after-tax of approximately $0.7 million or 2 cents per share) from a gain on the sale of a portion of a legacy minority investment. A separate but related gain from this minority investment was previously recognized during our second fiscal quarter of 2013.
In the prior years third quarter, the Company reported total revenue of $465.0 million, pre-tax income of $29.7 million, and net income of $20.2 million or 50 cents per share. Scan-based trading conversions reduced revenue by approximately $1.2 million during the quarter and reduced pre-tax income by approximately $1.1 million (after-tax of approximately $0.7 million or 2 cents per share).
Financing Activities
During the third quarter of fiscal 2013, under the Companys $75 million share repurchase program announced July 2012, the Company purchased approximately 1.1 million shares of its common stock for approximately $15.9 million. Purchases under this share repurchase program were suspended as of September 26, 2012.
Conference Call on the Web
American Greetings will broadcast its conference call live on the Internet at 9:00 a.m. Eastern time today. The conference call will be accessible through the Investors section of the American Greetings Web site at http://investors.americangreetings.com. A replay of the call will also be available on the site.
About American Greetings Corporation
For more than 100 years, American Greetings Corporation (NYSE: AM) has been a creator and manufacturer of innovative social expression products that assist consumers in enhancing their relationships to create happiness, laughter and love. The Companys major greeting card lines are American Greetings, Carlton Cards, Gibson, Recycled Paper Greetings and Papyrus, and other paper product offerings include DesignWare party goods and American Greetings and Plus Mark gift-packaging and boxed cards. American Greetings also has one of the largest collections of greetings on the Web, including greeting cards available at Cardstore.com and electronic greeting cards available at AmericanGreetings.com. In addition to its product lines, American Greetings creates and licenses popular character brands through the American Greetings Properties group. Headquartered in Cleveland, Ohio, American Greetings generates annual revenue of approximately $1.7 billion, and its products can be found in retail outlets worldwide. For more information on the Company, visit http://corporate.americangreetings.com.
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CONTACT:
Gregory M. Steinberg
Treasurer and Executive Director of Investor Relations
American Greetings Corporation
216-252-4864
investor.relations@amgreetings.com
Non-GAAP Measures
Certain after-tax amounts included in the earnings release may be considered non-GAAP measures under the Securities and Exchange Commissions Regulation G. The after-tax amounts were calculated based on the Companys statutory tax rate of approximately 38.9% for U.S. based items and the appropriate rates for international jurisdictions. Management believes that after-tax information is useful in analyzing the Companys results.
Factors That May Affect Future Results
Certain statements in this release may constitute forward-looking statements within the meaning of the Federal securities laws. These statements can be identified by the fact that they do not relate strictly to historic or current facts. They use such words as anticipate, estimate, expect, project, intend, plan, believe, and other words and terms of similar meaning in connection with any discussion of future operating or financial performance. These forward-looking statements are based on currently available information, but are subject to a variety of uncertainties, unknown risks and other factors concerning the Companys operations and business environment, which are difficult to predict and may be beyond the control of the Company. Important factors that could cause actual results to differ materially from those suggested by these forward-looking statements, and that could adversely affect the Companys future performance, include, but are not limited to, the following:
| a weak retail environment and general economic conditions; |
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| the loss of one or more retail customers and/or retail consolidations, acquisitions and bankruptcies, including the possibility of resulting adverse changes to retail contract terms; |
| competitive terms of sale offered to customers, including costs and other terms associated with new and expanded customer relationships; |
| the ability to successfully integrate Clinton Cards and achieve the anticipated revenue and operating profits, together with the outcome of negotiations with landlords and the ultimate number of stores acquired; |
| the ability of the administrators to generate sufficient proceeds from the liquidation of the remaining Clinton Cards business to repay the remaining secured debt owed to American Greetings; |
| the timing and impact of expenses incurred and investments made to support new retail or product strategies, including increased marketing expenses, as well as new product introductions and achieving the desired benefits from those investments; |
| the timing of investments in, together with the ability to successfully implement or achieve the desired benefits and cost savings associated with, any information technology systems refresh the Company may implement; |
| the timing and amount of expenses incurred by the Company in connection with the non-binding proposal dated September 25, 2012 from Zev Weiss, its Chief Executive Officer, and Jeffrey Weiss, its President and Chief Operating Officer, on behalf of themselves and certain other members of the Weiss family and related parties to acquire all of the outstanding Class A and Class B common shares of the Company not currently owned by the them; |
| the timing and impact of converting customers to a scan-based trading model; |
| the ability to achieve the desired benefits associated with the Companys cost reduction efforts; |
| Schurman Fine Papers ability to successfully operate its retail operations and satisfy its obligations to the Company; |
| consumer demand for social expression products generally, shifts in consumer shopping behavior, and consumer acceptance of products as priced and marketed including the success of new and expanded advertising and marketing efforts, such as the Companys on-line efforts through Cardstore.com; |
| the impact and availability of technology, including social media, on product sales; |
| escalation in the cost of providing employee health care; |
| the Companys ability to achieve the desired accretive effect from any share repurchase programs; |
| the Companys ability to comply with its debt covenants; |
| fluctuations in the value of currencies in major areas where the Company operates, including the U.S. Dollar, Euro, U.K. Pound Sterling, and Canadian Dollar; and |
| the outcome of any legal claims known or unknown. |
Risks pertaining specifically to AG Interactive include the viability of online advertising, subscriptions as revenue generators, and the ability to adapt to rapidly changing social media and the digital photo sharing space.
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In addition, this release contains time-sensitive information that reflects managements best analysis as of the date of this release; however the risks and uncertainties identified above are not the only risks the Company faces. Additional risks and uncertainties not presently known to the Company or that the Company believes to be immaterial also may adversely affect American Greetings. Should any known or unknown risks or uncertainties develop into actual events, or underlying assumptions prove inaccurate, these developments could have a material adverse effect on our business, financial condition and results of operations. American Greetings does not undertake any obligation to publicly update or revise any forward-looking statements to reflect future events, information or circumstances that arise after the date of this release. Further information concerning issues that could materially affect performance related to forward-looking statements can be found in the Companys periodic filings with the Securities and Exchange Commission, including without limitation the risk factors described in the Companys most recent annual report on Form 10-K and in each of its subsequent quarterly reports on Form 10-Q.
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AMERICAN GREETINGS CORPORATION
THIRD QUARTER CONSOLIDATED STATEMENT OF OPERATIONS
FISCAL YEAR ENDING FEBRUARY 28, 2013
(In thousands of dollars except share and per share amounts)
(Unaudited) | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
November 23, 2012 |
November 25, 2011 |
November 23, 2012 |
November 25, 2011 |
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Net sales |
$ | 499,368 | $ | 458,535 | $ | 1,275,139 | $ | 1,217,800 | ||||||||
Other revenue |
7,446 | 6,472 | 18,617 | 21,097 | ||||||||||||
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Total revenue |
506,814 | 465,007 | 1,293,756 | 1,238,897 | ||||||||||||
Material, labor and other production costs |
244,071 | 230,572 | 584,667 | 546,699 | ||||||||||||
Selling, distribution and marketing expenses |
190,041 | 141,501 | 466,199 | 392,630 | ||||||||||||
Administrative and general expenses |
74,483 | 60,510 | 225,521 | 186,734 | ||||||||||||
Other operating income - net |
(2,217 | ) | (813 | ) | (1,421 | ) | (6,858 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating income |
436 | 33,237 | 18,790 | 119,692 | ||||||||||||
Interest expense |
4,504 | 5,821 | 13,314 | 17,708 | ||||||||||||
Interest income |
(65 | ) | (207 | ) | (297 | ) | (838 | ) | ||||||||
Other non-operating (income) expense - net |
(1,904 | ) | (2,077 | ) | 3,523 | (2,621 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
(Loss) income before income tax (benefit) expense |
(2,099 | ) | 29,700 | 2,250 | 105,443 | |||||||||||
Income tax (benefit) expense |
(1,290 | ) | 9,454 | 63 | 38,128 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net (loss) income |
$ | (809 | ) | $ | 20,246 | $ | 2,187 | $ | 67,315 | |||||||
|
|
|
|
|
|
|
|
|||||||||
(Loss) earnings per share - basic |
$ | (0.03 | ) | $ | 0.51 | $ | 0.06 | $ | 1.67 | |||||||
(Loss) earnings per share - assuming dilution |
$ | (0.03 | ) | $ | 0.50 | $ | 0.06 | $ | 1.63 | |||||||
Average number of common shares outstanding |
31,877,088 | 39,480,798 | 33,712,073 | 40,226,039 | ||||||||||||
Average number of common shares outstanding - assuming dilution |
31,877,088 | 40,436,865 | 34,478,737 | 41,381,157 | ||||||||||||
Dividends declared per share |
$ | 0.15 | $ | 0.15 | $ | 0.45 | $ | 0.45 |
AMERICAN GREETINGS CORPORATION
THIRD QUARTER CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FISCAL YEAR ENDING FEBRUARY 28, 2013
(In thousands of dollars)
(Unaudited) | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
November 23, 2012 |
November 25, 2011 |
November 23, 2012 |
November 25, 2011 |
|||||||||||||
Net (loss) income |
$ | (809 | ) | $ | 20,246 | $ | 2,187 | $ | 67,315 | |||||||
Other comprehensive income (loss), net of tax: |
||||||||||||||||
Foreign currency translation adjustments |
2,680 | (15,592 | ) | (91 | ) | (12,554 | ) | |||||||||
Pension and postretirement benefit adjustments |
145 | 536 | 643 | 607 | ||||||||||||
Unrealized loss on securities |
| (1 | ) | (1 | ) | | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Other comprehensive income (loss), net of tax: |
2,825 | (15,057 | ) | 551 | (11,947 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Comprehensive income |
$ | 2,016 | $ | 5,189 | $ | 2,738 | $ | 55,368 | ||||||||
|
|
|
|
|
|
|
|
AMERICAN GREETINGS CORPORATION
THIRD QUARTER CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FISCAL YEAR ENDING FEBRUARY 28, 2013
(In thousands of dollars)
(Unaudited) | ||||||||
November 23, 2012 |
November 25, 2011 |
|||||||
ASSETS |
||||||||
CURRENT ASSETS |
||||||||
Cash and cash equivalents |
$ | 63,291 | $ | 85,661 | ||||
Trade accounts receivable, net |
197,844 | 235,318 | ||||||
Inventories |
264,330 | 214,412 | ||||||
Deferred and refundable income taxes |
80,502 | 57,400 | ||||||
Prepaid expenses and other |
155,543 | 123,481 | ||||||
|
|
|
|
|||||
Total current assets |
761,510 | 716,272 | ||||||
GOODWILL |
| 27,713 | ||||||
OTHER ASSETS |
460,647 | 417,479 | ||||||
DEFERRED AND REFUNDABLE INCOME TAXES |
120,870 | 128,595 | ||||||
Property, plant and equipment - at cost |
1,004,686 | 904,555 | ||||||
Less accumulated depreciation |
642,994 | 637,334 | ||||||
|
|
|
|
|||||
PROPERTY, PLANT AND EQUIPMENT - NET |
361,692 | 267,221 | ||||||
|
|
|
|
|||||
$ | 1,704,719 | $ | 1,557,280 | |||||
|
|
|
|
|||||
LIABILITIES AND SHAREHOLDERS EQUITY |
||||||||
CURRENT LIABILITIES |
||||||||
Accounts payable |
$ | 194,945 | $ | 108,254 | ||||
Accrued liabilities |
82,893 | 67,596 | ||||||
Accrued compensation and benefits |
60,702 | 58,411 | ||||||
Income taxes payable |
14,641 | 26,626 | ||||||
Deferred revenue |
26,404 | 29,477 | ||||||
Other current liabilities |
44,287 | 60,963 | ||||||
|
|
|
|
|||||
Total current liabilities |
423,872 | 351,327 | ||||||
LONG-TERM DEBT |
356,832 | 234,642 | ||||||
OTHER LIABILITIES |
259,787 | 182,565 | ||||||
DEFERRED INCOME TAXES AND NONCURRENT INCOME TAXES PAYABLE |
21,008 | 21,769 | ||||||
SHAREHOLDERS EQUITY |
||||||||
Common shares - Class A |
28,849 | 35,562 | ||||||
Common shares - Class B |
2,860 | 2,778 | ||||||
Capital in excess of par value |
520,119 | 509,999 | ||||||
Treasury stock |
(1,093,789 | ) | (995,338 | ) | ||||
Accumulated other comprehensive loss |
(11,279 | ) | (14,293 | ) | ||||
Retained earnings |
1,196,460 | 1,228,269 | ||||||
|
|
|
|
|||||
Total shareholders equity |
643,220 | 766,977 | ||||||
|
|
|
|
|||||
$ | 1,704,719 | $ | 1,557,280 | |||||
|
|
|
|
AMERICAN GREETINGS CORPORATION
THIRD QUARTER CONSOLIDATED STATEMENT OF CASH FLOWS
FISCAL YEAR ENDING FEBRUARY 28, 2013
(In thousands of dollars)
(Unaudited) Nine Months Ended |
||||||||
November 23, 2012 |
November 25, 2011 |
|||||||
OPERATING ACTIVITIES: |
||||||||
Net income |
$ | 2,187 | $ | 67,315 | ||||
Adjustments to reconcile net income to cash flows from operating activities: |
||||||||
Stock-based compensation |
7,806 | 8,038 | ||||||
Gain on dispositions |
| (4,500 | ) | |||||
Net loss (gain) on disposal of fixed assets |
394 | (807 | ) | |||||
Depreciation and intangible assets amortization |
36,095 | 32,993 | ||||||
Provision for doubtful accounts |
17,771 | 4,879 | ||||||
Impairment of Clinton Cards debt |
10,043 | | ||||||
Deferred income taxes |
809 | 6,412 | ||||||
Gain on sale of Party City investment |
(4,293 | ) | | |||||
Other non-cash charges |
892 | 2,747 | ||||||
Changes in operating assets and liabilities, net of acquisitions: |
||||||||
Trade accounts receivable |
(101,363 | ) | (122,298 | ) | ||||
Inventories |
(39,105 | ) | (30,939 | ) | ||||
Other current assets |
(17,877 | ) | 6,470 | |||||
Income taxes |
(15,336 | ) | 3,362 | |||||
Deferred costs - net |
23,702 | (3,838 | ) | |||||
Accounts payable and other liabilities |
112,283 | 3,528 | ||||||
Other - net |
(1,913 | ) | 98 | |||||
|
|
|
|
|||||
Total Cash Flows From Operating Activities |
32,095 | (26,540 | ) | |||||
INVESTING ACTIVITIES: |
||||||||
Property, plant and equipment additions |
(87,408 | ) | (48,956 | ) | ||||
Cash payments for business acquisitions, net of cash acquired |
621 | (5,899 | ) | |||||
Proceeds from sale of fixed assets |
559 | 9,046 | ||||||
Proceeds from sale of intellectual properties |
| 4,500 | ||||||
Proceeds from sale of Party City investment |
4,920 | | ||||||
Purchase of Clinton Cards debt |
(56,560 | ) | | |||||
|
|
|
|
|||||
Total Cash Flows From Investing Activities |
(137,868 | ) | (41,309 | ) | ||||
FINANCING ACTIVITIES: |
||||||||
Net increase in long-term debt |
131,651 | | ||||||
Issuance or exercise of share-based payment awards |
(496 | ) | 12,293 | |||||
Tax (deficiency) benefit from share-based payment awards |
(376 | ) | 2,380 | |||||
Purchase of treasury shares |
(78,742 | ) | (55,304 | ) | ||||
Dividends to shareholders |
(15,182 | ) | (18,146 | ) | ||||
|
|
|
|
|||||
Total Cash Flows From Financing Activities |
36,855 | (58,777 | ) | |||||
EFFECT OF EXCHANGE RATE CHANGES ON CASH |
(229 | ) | (3,551 | ) | ||||
|
|
|
|
|||||
DECREASE IN CASH AND CASH EQUIVALENTS |
(69,147 | ) | (130,177 | ) | ||||
Cash and Cash Equivalents at Beginning of Year |
132,438 | 215,838 | ||||||
|
|
|
|
|||||
Cash and Cash Equivalents at End of Period |
$ | 63,291 | $ | 85,661 | ||||
|
|
|
|
AMERICAN GREETINGS CORPORATION
THIRD QUARTER CONSOLIDATED SEGMENT DISCLOSURES
FISCAL YEAR ENDING FEBRUARY 28, 2013
(In thousands of dollars)
(Unaudited) | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
November 23, 2012 |
November 25, 2011 |
November 23, 2012 |
November 25, 2011 |
|||||||||||||
Total Revenue: |
||||||||||||||||
North American Social Expression Products |
$ | 333,852 | $ | 333,305 | $ | 908,267 | $ | 902,333 | ||||||||
International Social Expression Products |
101,972 | 103,352 | 239,486 | 249,448 | ||||||||||||
Intersegment items |
(25,538 | ) | | (39,080 | ) | | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net |
76,434 | 103,352 | 200,406 | 249,448 | ||||||||||||
Retail Operations (1) |
67,635 | | 107,519 | | ||||||||||||
AG Interactive |
15,982 | 16,878 | 47,255 | 49,664 | ||||||||||||
Non-reportable segments |
12,911 | 11,472 | 30,309 | 37,452 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 506,814 | $ | 465,007 | $ | 1,293,756 | $ | 1,238,897 | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Segment (Loss) Earnings: |
||||||||||||||||
North American Social Expression Products |
$ | 22,099 | $ | 28,016 | $ | 98,757 | $ | 113,009 | ||||||||
International Social Expression Products |
3,413 | 9,537 | (18,855 | ) | 15,308 | |||||||||||
Intersegment items |
(4,123 | ) | | (11,525 | ) | | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net |
(710 | ) | 9,537 | (30,380 | ) | 15,308 | ||||||||||
Retail Operations (1) |
(11,473 | ) | | (16,579 | ) | | ||||||||||
AG Interactive |
5,331 | 3,737 | 13,713 | 10,970 | ||||||||||||
Non-reportable segments |
3,259 | 2,368 | 5,501 | 17,467 | ||||||||||||
Unallocated |
(20,605 | ) | (13,958 | ) | (68,762 | ) | (51,311 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | (2,099 | ) | $ | 29,700 | $ | 2,250 | $ | 105,443 | ||||||||
|
|
|
|
|
|
|
|
(1) | Retail Operations segment only includes five months of activity |
AMERICAN GREETINGS CORPORATION
SUPPLEMENTAL EXHIBIT
(Dollars in millions)
During the nine months ended November 23, 2012, the Corporation recorded certain charges associated with activities and transactions related to Clinton Cards PLC (Clinton Cards) that do not have comparative amounts in the prior year period.
(Unaudited) Three Months Ended November 23, 2012 |
||||||||||||||||||||
Contract asset impairment |
Bad debt expense |
Legal and advisory fees |
Impairment of debt purchased |
Total | ||||||||||||||||
Net sales |
$ | | $ | | $ | | $ | | $ | | ||||||||||
Administrative and general expenses |
| | 0.3 | | 0.3 | |||||||||||||||
Other non-operating expense |
| | | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
$ | | $ | | $ | 0.3 | $ | | $ | 0.3 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
(Unaudited) Nine Months Ended November 23, 2012 |
||||||||||||||||||||
Contract asset impairment |
Bad debt expense |
Legal and advisory fees |
Impairment of debt purchased |
Total | ||||||||||||||||
Net sales |
$ | 4.0 | $ | | $ | | $ | | $ | 4.0 | ||||||||||
Administrative and general expenses |
| 17.2 | 6.3 | | 23.5 | |||||||||||||||
Other non-operating expense |
| | | 10.0 | 10.0 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
$ | 4.0 | $ | 17.2 | $ | 6.3 | $ | 10.0 | $ | 37.5 | |||||||||||
|
|
|
|
|
|
|
|
|
|