<PAGE>
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
June 30, 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 August 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>
June 30, December 31,
1995 1994
<S> <C> <C>
Assets
Cash and short-term investments $ 443 $ 275
Investment in affiliates:
American Financial Group, Inc. 365,028 -
American Annuity Group, Inc. 30,479 21,461
Citicasters Inc. 25,622 24,882
American Premier Underwriters, Inc. - 341,276
Other assets 2,489 2,502
$424,061 $390,396
Liabilities and Shareholders' Equity
Accounts payable, accrued expenses and
other liabilities $ 859 $ 1,027
Payable to American Financial Corporation 46,764 35,134
Long-term debt - payable to bank 15,300 16,000
62,923 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 220,741 216,638
Equity in affiliates' net unrealized gains
(losses) on marketable securities,
net of deferred income taxes 13,000 (5,800)
Total Shareholders' Equity 361,138 338,235
$424,061 $390,396
</TABLE>
2
<PAGE>
AMERICAN FINANCIAL ENTERPRISES, INC. 10-Q
AMERICAN FINANCIAL ENTERPRISES, INC.
STATEMENT OF OPERATIONS
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Income:
Equity in net earnings (losses) of
affiliates:
American Financial Group, Inc. $2,940 $ - $2,940 $ -
American Annuity Group, Inc. 1,198 801 2,318 1,734
Citicasters Inc. 610 - 740 -
American Premier Underwriters, Inc. - (12,025) 3,688 (8,330)
Gain on sale of affiliate - 339 - 339
Interest income 23 50 40 65
4,771 (10,835) 9,726 (6,192)
Costs and Expenses:
Interest charges on borrowed money 275 134 550 299
Administrative and general expenses 357 341 785 794
632 475 1,335 1,093
Earnings (loss) before federal income taxes 4,139 (11,310) 8,391 (7,285)
Provision (credit) for federal income taxes 838 (4,572) 1,630 (3,776)
Net Earnings (Loss) $3,301 ($ 6,738) $6,761 ($3,509)
Average number of common shares 13,291 13,291 13,291 13,291
Net earnings (loss) per common share $.25 ($.51) $.51 ($.26)
Cash dividends per common share $.10 $ - $.20 $ -
</TABLE>
3
<PAGE>
AMERICAN FINANCIAL ENTERPRISES, INC. 10-Q
AMERICAN FINANCIAL ENTERPRISES, INC.
STATEMENT OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
Six months ended
June 30,
1995 1994
<S> <C> <C>
Operating Activities:
Net earnings (loss) $6,761 ($ 3,509)
Adjustments:
Equity in net losses (earnings) of affiliates (9,686) 6,596
Gain on sale of affiliate - (339)
Cash dividends from affiliates 4,976 4,380
Decrease in other assets 13 341
Increase (decrease) in payable to
American Financial Corporation 1,630 (3,776)
Increase (decrease) in accounts payable, accrued
expenses and other liabilities (168) 27
3,526 3,720
Investing Activities:
Sale of affiliate - 21,628
Purchase of affiliate - (23,852)
- (2,224)
Financing Activities:
Additional long-term borrowings - 13,500
Reduction of long-term debt (700) (15,000)
Cash dividends paid (2,658) -
(3,358) (1,500)
Net Increase (Decrease) in Cash and Short-term Investments 168 (4)
Cash and short-term investments at beginning of period 275 392
Cash and short-term investments at end of period $ 443 $ 388
</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.
On April 3, 1995, American Financial Corporation ("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. Subsequent to the merger, New
American Premier's name was changed to American Financial Group, Inc.
("AFG"). As a result of the merger, AFEI owns 10.0 million shares of AFG.
AFEI (and AFC) will receive dividends paid on AFG common stock; however,
their shares generally will not be eligible to be voted as long as AFEI
(and AFC) are owned by AFG.
At June 30, 1995, AFG (through AFC and its subsidiaries) owned 10,981,429
shares (83%) of AFEI's outstanding Common Stock.
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 Affiliates AFEI's and AFC's combined ownership of the
common stock of AFG, 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
affiliates differs from amounts reported by these companies, adjustments
are made to their reported earnings in calculating AFEI's share of
affiliate earnings.
5
<PAGE>
AMERICAN FINANCIAL ENTERPRISES, INC. 10-Q
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Investment in American Financial Group AFEI owned 10.0 million shares of
AFG common stock at June 30, 1995 representing 14% of the shares issued by
AFG at that date. Since AFEI and AFC are AFG subsidiaries, AFG does not
report shares owned by them as outstanding for financial reporting
purposes. AFG's subsidiaries operate in a variety of financial
businesses, including property and casualty insurance and annuities.
Summarized financial information for AFG follows (in millions):
<TABLE>
<CAPTION>
Three months
ended
June 30, 1995
<S> <C>
Revenues $1,005.9
Earnings Before Extraordinary Items 33.0
Extraordinary Items 0.5
Net Earnings 33.5
</TABLE>
Investment in American Annuity Group AFEI owned approximately 3.9 million
shares of American Annuity common stock at June 30, 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 $38 million and $37 million at June 30,
1995 and December 31, 1994, respectively. Summarized financial
information for American Annuity follows (in millions):
<TABLE>
<CAPTION>
Six months ended June 30,
1995 1994
<S> <C> <C>
Revenues $198.7 $187.0
Income from Continuing Operations 23.6 21.9
Loss from Discontinued Operations - (2.6)
Extraordinary Item - (1.4)
Cumulative Effect of Accounting Change - (0.5)
Net Income 23.6 17.4
</TABLE>
<PAGE>
Investment in Citicasters AFEI purchased 1.7 million shares of
Citicasters common stock (adjusted for a 3-for-2 stock split) for
$23.9 million cash in June 1994. These shares represented 13% of
its outstanding shares at June 30, 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 $48 million and $29 million at June 30, 1995 and December 31,
1994, respectively. Summarized financial information for
Citicasters follows (in millions):
<TABLE>
<CAPTION>
Six months ended June 30,
1995 1994
<S> <C> <C>
Net Revenues $65.9 $108.9
Operating Income 16.3 25.5
Net Earnings 6.5 3.4
</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
Investment in American Premier As discussed in Note A, AFEI received
shares of American Financial Group in exchange for its American Premier
stock on a one-for-one basis in April 1995. Summarized financial
information for American Premier (for the periods it was accounted for as
an affiliate) follows (in millions):
<TABLE>
<CAPTION>
Three months Six months
ended ended
March 31, 1995 June 30, 1994
<S> <C> <C>
Revenues $433.3 $827.7
Income (Loss) from Continuing Operations 16.3 (39.3)
Loss from Discontinued Operations - (1.4)
Net Earnings (Loss) 16.3 (40.7)
</TABLE>
American Premier's 1994 results included a $73.5 million loss on the sale
of securities of General Cable.
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 AFG 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 June 30, 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 Financial Group, American Annuity and Citicasters.
LIQUIDITY AND CAPITAL RESOURCES AFEI relies on dividends from its affiliates
to meet fixed charges and other operating expenses. At the current indicated
rate, $10 million in annual dividends from American Financial Group is
expected to be more than sufficient to cover such charges. If, in the future,
affiliate 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 affiliates, or similar transactions.
During the first quarter of 1995, AFEI announced its intent to begin paying
quarterly dividends. AFEI paid quarterly dividends of $.10 per share or
$1.3 million in March and June.
RESULTS OF OPERATIONS
Affiliates Since AFEI's basis in certain assets and liabilities of affiliates
differs from amounts reported by these companies adjustments are made to
AFEI's share of affiliate earnings. The following table presents the
significant amounts used in calculating AFEI's equity in net earnings (losses)
of affiliates for the six months ended June 30 (in millions):
<TABLE>
<CAPTION>
AFG American Annuity Citicasters American Premier
1995(a) 1995 1994 1995(b) 1995(a) 1994
<S> <C> <C> <C> <C> <C> <C>
Affiliate earnings (losses) $33.5 $23.6 $17.4 $6.5 $16.3 ($40.7)
AFEI's share of affiliate earnings (losses) $ 4.7 $ 2.3 $ 1.7 $0.8 $ 3.7 ($9.0)
Basis adjustments, including amortization
of goodwill (1.8) - - (0.1) - 0.7
Equity in net earnings (losses) of affiliates
as shown in Statement of Operations $ 2.9 $ 2.3 $ 1.7 $0.7 $ 3.7 ($ 8.3)
<FN>
(a) As discussed in Note A, AFEI received shares of AFG in exchange for its investment in American
Premier on April 3, 1995. Affiliate earnings for AFG are AFG's results since April and affiliate
earnings for American Premier in 1995 are American Premier's first quarter results.
(b) AFEI purchased Citicasters common stock in June 1994.
</TABLE>
American Premier's results for 1994 included a loss of $73.5 million on the
sale of securities of General Cable.
<PAGE>
Interest Expense Interest expense increased $251,000 for the first six months
of 1995 compared to the same period of 1994 due to increased average
borrowings and higher interest rates on borrowings.
Income Taxes The provision for income taxes reflects the effects of
deductions relating to affiliate dividends.
8
<PAGE>
AMERICAN FINANCIAL ENTERPRISES, INC. 10-Q
PART II
OTHER INFORMATION
ITEM 4
Submission of Matters to a Vote of Security Holders
The Registrant's annual shareholders' meeting was held May 16, 1995. Proxies
were solicited pursuant to Regulation 14 under the Securities Exchange Act of
1934. The nominated directors were elected as indicated below:
<TABLE>
<CAPTION>
Votes
Against or
Nominated Directors For Withheld
<S> <C> <C>
Carl H. Lindner 12,843,507 1,360
Julius S. Anreder 12,843,507 1,360
James E. Evans 12,843,507 1,360
Robert D. Lindner 12,843,507 1,360
Fred J. Runk 12,843,567 1,300
Ronald F. Walker 12,843,567 1,300
</TABLE>
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.
<PAGE>
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.
August 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 June 30, 1995 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 443
<SECURITIES> 421,129<F1>
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 424,061
<CURRENT-LIABILITIES> 0
<BONDS> 15,300
<COMMON> 13,291
0
0
<OTHER-SE> 347,847
<TOTAL-LIABILITY-AND-EQUITY> 424,061
<SALES> 0
<TOTAL-REVENUES> 9,726<F2>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 785
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 550
<INCOME-PRETAX> 8,391
<INCOME-TAX> 1,630
<INCOME-CONTINUING> 6,761
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,761
<EPS-PRIMARY> .51
<EPS-DILUTED> .51
<FN>
<F1>"Marketable securities" represents AFEI's investment in affiliates
which are accounted for under the equity method.
<F2>Included in "Total revenues" is equity in net earnings of affiliates of
$9,686.
</FN>
</TABLE>
