SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period Ended Commission File
March 31, 1995 No. 1-1345
AMERICAN FINANCIAL ENTERPRISES, INC.
Incorporated under IRS Employer I.D.
the Laws of Connecticut No. 31-0996797
One East Fourth Street, Cincinnati, Ohio 45202
(513) 579-2172
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, and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
As of May 1, 1995, there were 13,291,117 shares of the Registrant's
Common Stock outstanding.
Page 1 of 9
<PAGE>
AMERICAN FINANCIAL ENTERPRISES, INC. 10-Q
PART I
FINANCIAL INFORMATION
AMERICAN FINANCIAL ENTERPRISES, INC.
BALANCE SHEET
(Dollars in Thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
<S> <C> <C>
Assets
Cash and short-term investments $ 190 $ 275
Investment in investees:
American Premier Underwriters, Inc. 346,476 341,276
American Annuity Group, Inc. 25,481 21,461
Citicasters Inc. 25,012 24,882
Other assets 2,488 2,502
$399,647 $390,396
Liabilities and Shareholders' Equity
Accounts payable, accrued expenses and
other liabilities $ 1,155 $ 1,027
Payable to American Financial Corporation 38,326 35,134
Long-term debt - payable to bank 15,300 16,000
54,781 52,161
Shareholders' Equity:
Preferred Stock, none issued - -
Common Stock, $1 par value
- 20,000,000 shares authorized
- 13,291,117 shares outstanding 13,291 13,291
Capital surplus 114,106 114,106
Retained earnings 218,769 216,638
Equity in investees' net unrealized
losses on marketable securities,
net of deferred income taxes (1,300) (5,800)
Total Shareholders' Equity 344,866 338,235
$399,647 $390,396
</TABLE>
2
<PAGE>
AMERICAN FINANCIAL ENTERPRISES, INC. 10-Q
AMERICAN FINANCIAL ENTERPRISES, INC.
STATEMENT OF EARNINGS
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Three months ended
March 31,
1995 1994
<S> <C> <C>
Income:
Equity in net earnings of investees:
American Premier Underwriters, Inc. $3,688 $3,695
American Annuity Group, Inc. 1,120 933
Citicasters Inc. 130 -
Interest income 17 16
4,955 4,644
Costs and Expenses:
Interest charges on borrowed money 275 165
Administrative and general expenses 428 454
703 619
Earnings before federal income taxes 4,252 4,025
Provision for federal income taxes 792 796
Net Earnings $3,460 $3,229
Average number of common shares 13,291 13,291
Net earnings per common share $.26 $.24
Cash dividends per common share $.10 $ -
</TABLE>
3
<PAGE>
AMERICAN FINANCIAL ENTERPRISES, INC. 10-Q
AMERICAN FINANCIAL ENTERPRISES, INC.
STATEMENT OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
Three months ended
March 31,
1995 1994
<S> <C> <C>
Operating Activities:
Net earnings $3,460 $3,229
Adjustments:
Equity in net earnings of investees (4,938) (4,628)
Cash dividends from investees 2,488 2,190
Decrease in other assets 14 297
Increase in payable to American Financial Corporation 792 796
Increase in accounts payable, accrued expenses
and other liabilities 128 93
1,944 1,977
Financing Activities:
Reduction of long-term debt (700) -
Cash dividends paid (1,329) -
(2,029) -
Net Increase (Decrease) in Cash and Short-term Investments (85) 1,977
Cash and short-term investments at beginning of period 275 392
Cash and short-term investments at end of period $ 190 $2,369
</TABLE>
4
<PAGE>
AMERICAN FINANCIAL ENTERPRISES, INC. 10-Q
NOTES TO FINANCIAL STATEMENTS
A. Basis of Presentation The accompanying financial statements for
American Financial Enterprises, Inc. ("AFEI") are unaudited, but
management believes that all adjustments (consisting only of normal
recurring accruals unless otherwise disclosed herein) necessary for
fair presentation have been made. The results of operations for
interim periods are not necessarily indicative of results to be
expected for the year. The financial statements have been prepared
in accordance with the instructions to Form 10-Q and therefore do
not include all information and footnotes necessary to be in
conformity with generally accepted accounting principles.
At March 31, 1995, American Financial Corporation and its
subsidiaries ("AFC") owned 10,981,429 shares (83%) of AFEI's
outstanding Common Stock.
On April 3, 1995, AFC merged with a newly formed subsidiary of
American Premier Group, Inc. ("New American Premier"), another new
company formed to own 100% of the common stock of AFC and American
Premier Underwriters, Inc. ("American Premier"). Shareholders of
American Premier, including AFEI, received shares of New American
Premier on a one-for-one basis. As a result of the merger, AFEI
owns 10.0 million shares of New American Premier and New American
Premier beneficially owns 83% of AFEI's Common Stock. AFEI (and
AFC) will receive dividends paid on New American Premier common
stock; however, their shares generally will not be eligible to be
voted as long as AFEI (and AFC) are owned by New American Premier.
Income Taxes AFEI files consolidated federal income tax returns
with AFC. Deferred income taxes are calculated using the liability
method. Under this method, deferred income tax assets and
liabilities are determined based on differences between financial
reporting and tax bases and are measured using enacted tax rates.
Current and deferred tax assets and liabilities are aggregated with
other amounts receivable from or payable to AFC.
Statement of Cash Flows For cash flow purposes, "investing
activities" are defined as making and collecting loans and
acquiring and disposing of debt or equity instruments and property
and equipment. "Financing activities" include obtaining resources
from owners and providing them with a return on their investments,
borrowing money and repaying amounts borrowed. All other
activities are considered "operating". Short-term investments
having original maturities of three months or less when purchased
are considered to be cash equivalents for purposes of the financial
statements.
<PAGE>
B. Investment in Investees AFEI's and AFC's combined ownership of the
common stock of American Premier Underwriters, Inc., American
Annuity Group, Inc. and Citicasters Inc. exceeds 20%. Accordingly,
these investments are accounted for under the equity method. Since
AFEI's basis in certain assets and liabilities of investees
differs from amounts reported by these investees, adjustments are
made to their reported earnings in calculating AFEI's share of
investee earnings.
Investment in American Premier AFEI owned approximately
10.0 million shares of American Premier common stock at March 31,
1995 and December 31, 1994, representing 24% and 22%, respectively,
of its outstanding shares. American Premier is a specialty
property and casualty insurance company. The market value of
AFEI's investment in American Premier was $240 million and
$258 million at March 31, 1995 and December 31, 1994, respectively.
5
<PAGE>
AMERICAN FINANCIAL ENTERPRISES, INC. 10-Q
NOTES TO FINANCIAL STATEMENTS - CONTINUED
As discussed in Note A, AFEI received shares of New American
Premier in exchange for its American Premier stock on a one-for-one
basis in April 1995.
Summarized financial information for American Premier follows (in
millions):
<TABLE>
<CAPTION>
Three months ended March 31,
1995 1994
<S> <C> <C>
Revenues $433.3 $357.8
Net Earnings (Loss) 16.3 (55.9)
</TABLE>
American Premier's 1994 results included a $75.8 million loss on
notes receivable from General Cable which American Premier sold
back to General Cable at a discount in June.
Investment in American Annuity Group AFEI owned approximately
3.9 million shares of American Annuity common stock at March 31,
1995 and December 31, 1994, representing 10% of its outstanding
shares. American Annuity is engaged in the tax-deferred annuity
business. The market value of AFEI's investment in American
Annuity was $39 million and $37 million at March 31, 1995 and
December 31, 1994, respectively. Summarized financial information
for American Annuity follows (in millions):
<TABLE>
<CAPTION>
Three months ended March 31,
1995 1994
<S> <C> <C>
Revenues $98.2 $92.9
Income from Continuing Operations 11.4 10.8
Extraordinary Item - (1.1)
Cumulative Effect of Accounting Change - (0.5)
Net Income 11.4 9.2
</TABLE>
<PAGE>
Investment in Citicasters AFEI purchased 1.2 million shares of
Citicasters common stock for $23.9 million cash in June 1994. These
shares represented 13% of its outstanding shares at March 31, 1995 and
December 31, 1994. Citicasters operates 15 radio stations along with
two network-affiliated television stations in major markets throughout
the country. The market value of AFEI's investment in Citicasters was
$35 million and $29 million at March 31, 1995 and December 31, 1994,
respectively. Summarized financial information for Citicasters follows
(in millions):
<TABLE>
<CAPTION>
Three months ended March 31,
1995 1994
<S> <C> <C>
Net Revenues $29.0 $48.4
Operating Income 4.7 7.2
Net Earnings (Loss) 1.3 (1.8)
</TABLE>
In the third and fourth quarters of 1994, Citicasters sold four network-
affiliated television stations for $355 million in cash and a warrant
to purchase common stock of the purchaser. The proceeds were used to
reduce debt and repurchase shares of common stock.
6
<PAGE>
AMERICAN FINANCIAL ENTERPRISES, INC. 10-Q
NOTES TO FINANCIAL STATEMENTS - CONTINUED
C. Long-Term Debt AFEI has a revolving credit agreement under which
it may borrow a maximum of $20 million through December 1997.
Loans under the line of credit bear interest at rates approximating
prime and are collateralized by a pledge of American Premier common
stock having a market value of two times the amount borrowed under
the line. The lender charges an annual fee of 1/4% of the unused
portion of the line of credit.
D. Shareholders' Equity At March 31, 1995, there were 462,500 shares
of AFEI Common Stock reserved for issuance upon exercise of stock
options.
E. Income Taxes At December 31, 1994, AFEI had net operating loss
carryforwards for tax return purposes of approximately $45 million
which are scheduled to expire from 2000 to 2003.
7
<PAGE>
AMERICAN FINANCIAL ENTERPRISES, INC. 10-Q
ITEM 2
Management's Discussion and Analysis
of Financial Condition and Results of Operations
GENERAL AFEI's assets consist primarily of investments in the common
stock of American Premier, American Annuity and Citicasters.
LIQUIDITY AND CAPITAL RESOURCES AFEI relies on dividends from its
investees to meet fixed charges and other operating expenses. At the
current indicated rate, $10 million in annual dividends from American
Premier is expected to be more than sufficient to cover such charges.
If, in the future, investee dividends are insufficient to meet its
fixed charges and debt maturities, AFEI would be required to meet them
through bank borrowings, sales of investments, borrowings from AFC, or
similar transactions.
During the first quarter of 1995, AFEI announced its intent to begin
paying quarterly dividends with the first such dividend being a March
payment of $.10 per share or $1.3 million.
<PAGE>
RESULTS OF OPERATIONS
Investee Corporations Since AFEI's basis in certain assets and
liabilities of investees differs from amounts reported by these
investees, adjustments are made to AFEI's share of investee earnings.
The following table presents the significant amounts used in
calculating AFEI's equity in net earnings of investees for the three
months ended March 31 (in millions):
<TABLE>
<CAPTION>
American Premier American Annuity Citicasters
1995 1994 1995 1994 1995(*)
<S> <C> <C> <C> <C> <C>
Investee earnings (losses) $16.3 ($55.9) $11.4 $9.2 $1.3
AFEI's share of investee earnings (losses) $ 3.7 ($12.3) $ 1.1 $0.9 $0.2
Basis adjustments, including amortization
of goodwill - 16.0 - - (0.1)
Equity in net earnings of investees
as shown in Statement of Earnings $ 3.7 $ 3.7 $ 1.1 $0.9 $0.1
<FN>
(*) AFEI purchased Citicasters common stock in June 1994.
</TABLE>
American Premier's results for 1994 included a loss of $75.8 million on
the sale of General Cable notes.
Interest Expense Interest expense increased $110,000 for the first
three months of 1995 compared to the same period of 1994 due primarily
to higher interest rates on borrowings.
Income Taxes The provision for income taxes reflects the effects of
deductions relating to investee dividends.
8
<PAGE>
AMERICAN FINANCIAL ENTERPRISES, INC. 10-Q
PART II
OTHER INFORMATION
ITEM 6
Exhibits and Reports on Form 8-K
(a) Exhibit 27 - Financial Data Schedule - Included in Report
filed electronically with the Securities and Exchange
Commission.
(b) Report on Form 8-K:
Date of Report Item Reported
April 7, 1995 Acquisition of American Financial
Corporation by American Premier
Group, Inc.
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934,
American Financial Enterprises, Inc. has duly caused this Report to be
signed on its behalf by the undersigned duly authorized.
American Financial Enterprises, Inc.
May 11, 1995 BY: FRED J. RUNK
Fred J. Runk
Vice President and Treasurer
9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
American Financial Enterprises, Inc. 10-Q for March 31, 1995 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> $190
<SECURITIES> 396,969<F1>
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 399,647
<CURRENT-LIABILITIES> 0
<BONDS> 15,300
<COMMON> 0
0
13,291
<OTHER-SE> 331,575
<TOTAL-LIABILITY-AND-EQUITY> 399,647
<SALES> 0
<TOTAL-REVENUES> 4,955<F2>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 428
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 275
<INCOME-PRETAX> 4,252
<INCOME-TAX> 792
<INCOME-CONTINUING> 3,460
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,460
<EPS-PRIMARY> $.26
<EPS-DILUTED> $.26
<FN>
<F1>"Marketable securities" represents AFEI's investments in investees which
are accounted for under the equity method.
<F2>Included in "Total revenues" is equity in net earnings of investees
of $4,938.
</FN>
</TABLE>
