<PAGE> 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
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For the quarterly period ended May 31, 1995
----------------------------------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the transition period from ____________________ to____________________
Commission file number 0-502
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AMERICAN GREETINGS CORPORATION
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(Exact name of registrant as specified in its charter)
Ohio 34-0065325
- -------------------- ---------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One American Road, Cleveland, Ohio 44144
- -----------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(216) 252-7300
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Registrant's telephone number, including area code
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -------
As of May 31, 1995, the date of this report, the number of shares
outstanding of each of the issuer's classes of common stock was:
Class A Common 69,779,876
Class B Common 4,630,571
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AMERICAN GREETINGS CORPORATION
INDEX
<TABLE>
<CAPTION>
Page
Number
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PART I - FINANCIAL INFORMATION
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<S> <C>
Item 1. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 2. Management's Discussion and Analysis. . . . . . . . . . . . . . . . . . . . . 5
PART II - OTHER INFORMATION
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Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . . . . . . . . 7
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
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</TABLE>
-i-
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<TABLE>
PART I - FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements
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AMERICAN GREETINGS CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(Thousands of dollars except per share amounts)
(Unaudited)
Three Months Ended
May 31,
---------------------------------------
1995 1994
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<S> <C> <C>
Net sales $438,509 $416,403
Other income 2,108 2,389
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Total revenue 440,617 418,792
Costs and expenses:
Material, labor and other production costs 143,586 137,741
Selling, distribution and marketing 181,822 172,348
Administrative and general 53,777 53,944
Interest 4,917 3,663
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Total costs and expenses 384,102 367,696
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Income before income taxes 56,515 51,096
Income taxes 19,215 17,934
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Net income $37,300 $33,162
========= =========
Net income per share $0.50 $0.45
========= =========
Dividends per share $0.14 $0.125
========= ===========
Average number of common shares outstanding 74,378,727 74,210,536
</TABLE>
Page 1
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<TABLE>
AMERICAN GREETINGS CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(Thousands of dollars)
<CAPTION>
(Unaudited) (Audited) (Unaudited)
May 31, 1995 Feb. 28, 1995 May 31, 1994
ASSETS ------------ -------------- -------------
<S> <C> <C> <C>
Current assets
Cash and equivalents $39,446 $87,151 $70,187
Trade accounts receivable, less allowances
of $103,144, $116,972 and $86,023, respec-
tively (principally for sales returns) 333,513 324,329 348,894
Inventories:
Raw material 60,234 54,196 48,214
Work in process 51,303 40,608 54,376
Finished products 267,224 225,959 222,021
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378,761 320,763 324,611
Less LIFO reserve 87,043 86,169 86,755
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291,718 234,594 237,856
Display material and factory supplies 41,750 44,676 38,018
---------- --------- ----------
Total inventories 333,468 279,270 275,874
Deferred income taxes 65,985 66,409 51,160
Prepaid expenses and other 143,887 136,290 125,333
---------- --------- ----------
Total current assets 916,299 893,449 871,448
Other assets 432,700 419,477 274,149
Property, plant and equipment 865,801 861,979 812,894
Less accumulated depreciation 418,213 413,154 384,357
---------- --------- ----------
Property, plant and equipment - net 447,588 448,825 428,537
---------- --------- ----------
$1,796,587 $1,761,751 $1,574,134
=========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Debt due within one year $153,829 $123,407 $148,153
Accounts payable 124,247 140,660 120,869
Payroll and payroll taxes 48,583 53,136 40,573
Retirement plans 5,859 20,633 3,254
Dividends payable 10,442 10,426 9,451
Income taxes 27,587 13,988 26,925
Other current liabilities 56,819 - -
---------- --------- ----------
Total current liabilities 427,366 362,250 349,225
Long-term debt 72,246 74,480 64,910
Postretirement benefit obligation 17,992 17,815 20,048
Other liabilities 34,150 90,969 -
Deferred income taxes 55,964 56,696 60,379
Shareholders' equity 1,188,869 1,159,541 1,079,572
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$1,796,587 $1,761,751 $1,574,134
=========== ========== ==========
</TABLE>
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<TABLE>
AMERICAN GREETINGS CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Thousands of dollars)
(Unaudited)
Three Months Ended
May 31,
----------------------------
1995 1994
OPERATING ACTIVITIES: ------- -------
<S> <C> <C>
Net income $37,300 $33,162
Adjustments to reconcile to net cash
provided (used) by operating activities:
Depreciation 19,526 17,676
Deferred income taxes (393) 9,182
Change in operating assets and liabilities (109,016) (101,484)
Other - net 2,717 2,630
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Cash Used by Operating Activities (49,866) (38,834)
INVESTING ACTIVITIES:
Property, plant & equipment additions (18,637) (21,308)
Other - net 2,752 8,228
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Cash Used by Investing Activities (15,885) (13,080)
FINANCING ACTIVITIES:
Increase in long-term debt - 17,973
Reduction of long-term debt (3,748) (25,273)
Increase in short-term debt 29,977 34,422
Sale of stock under benefit plans 2,806 3,195
Purchase of treasury shares (622) -
Dividends to shareholders (10,367) (9,282)
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Cash Provided by Financing Activities 18,046 21,035
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DECREASE IN CASH AND EQUIVALENTS (47,705) (30,879)
Cash and Equivalents at Beginning of Year 87,151 101,066
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Cash and Equivalents at End of Period $39,446 $70,187
========== ==========
</TABLE>
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AMERICAN GREETINGS CORPORATION
NOTES TO FINANCIAL STATEMENTS
Three Months Ended May 31, 1995 and 1994
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 - Basis for Determining Net Income Per Share Information
Net income per share information is based on the average number of
shares outstanding. For the periods presented, stock options have an
immaterial dilutive effect.
Note D - Deferred Costs
The major components of both the Other Assets and Prepaid Expenses and
Other classifications are deferred costs relating to agreements with
certain customers. Deferred costs are charged to operations on a
straight-line basis over the effective period of each agreement,
generally three to six years. Future payment commitments relating to
these agreements are classified as Other Current Liabilities or Other
Liabilities. The short term portion of deferred costs and payment
commitments are classified with Prepaid Expenses and Other and Other
Current Liabilities, respectively, and the long term portions are
classified with Other Assets and Other Liabilities.
Page 4
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Part I., Item 2, MANAGEMENT'S DISCUSSION AND ANALYSIS
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Results of Operations
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Net sales of $438.5 million for the first quarter ended May 31, 1995 were up
5.3% over the same period in the prior year. This increase was due to higher
sales of both everyday and seasonal cards; unit sales of greeting cards
increased approximately 1% over the same period in the prior year.
Material, labor and other production costs, which were 32.7% of net sales for
the quarter compared to 33.1% for the same period in the prior year, reflected
the increased sales of high-margin cards.
Selling, distribution and marketing expenses were 41.5% of net sales for the
quarter, up slightly from 41.4% for the same period last year. Amortization
expense related to deferred costs increased during the first quarter, while the
same period last year included expenses related to CreataCard's national
advertising campaign.
Administrative and general expenses for the quarter were $53.8 million, flat
with the $53.9 million for the same period in the prior year as a result of
overall general cost containment.
Interest expense increased $1.3 million for the quarter over the prior year due
to higher debt levels, particularly in Canada.
The effective tax rate for the quarter was 34.0%, lower than the 35.1% in the
prior year due to the increased benefit from the corporate owned life insurance
program and the reduction in foreign losses with no tax benefit.
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Liquidity and Capital Resources
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The seasonality of the Corporation's business precludes a useful comparison of
the current period and the year-end financial statements; therefore, a
statement of Financial Position for May 31, 1994 has been included.
Operations for the quarter required $11.0 million more cash than the same
period last year. Increased growth in inventories and deferred costs related
to agreements with customers, partially offset by slower growth in accounts
receivable and improved management of cash disbursements, caused this increased
cash requirement.
The increase in inventory growth during the quarter this year compared
to last year was due primarily to advance purchases of paper and higher levels
of non-card product to support new accessory product offerings. Inventories as
a percent of the prior twelve months' material, labor and other production
costs increased to 48.9% at May 31, 1995 from 41.4% at May 31, 1994.
Net accounts receivable were 17.6% of the prior twelve months' net sales at May
31, 1995 compared to 19.4% at May 31, 1994, reflecting a decrease in extended
payment terms and a higher allowance for sales returns.
Investing activities used $2.8 million more cash for the quarter than in the
same period in the prior year, while financing activities provided $3.0 million
less cash during the quarter than in the prior year, due in part to the
increase in dividends paid this year compared to last year.
Debt as a percentage of debt plus equity was 16.0% at May 31, 1995, a decrease
from 16.5% the prior year. On a per share basis, shareholders' equity
increased from $14.55 at May 31, 1994 to $15.98 at May 31, 1995.
There were no material changes in the financial condition, liquidity or capital
resources of the Corporation from February 28, 1995, the end of its preceding
fiscal year, to May 31, 1995, the end of its last fiscal quarter and the date
of the most recent balance sheet included in this report, nor from May 31,
1994, the end of the corresponding fiscal quarter last year, to May 31, 1995,
except the changes discussed above and aside from normal seasonal fluctuations.
Prospective Information
- -----------------------
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.
Page 6
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PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits (exhibit reference numbers refer to Item 601 of
Regulation S-K)
11 (a) Calculation of Primary Earnings Per Share
11 (b) Calculation of Fully-Diluted Earnings Per Share
27 Financial Data Schedule
(b) Reports on Form 8-K
None
SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN GREETINGS CORPORATION
By: /s/ William S. Meyer
-----------------------------------
William S. Meyer
Senior Vice President
Controller Chief Accounting
Officer
July 13, 1995
Page 7
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<TABLE>
Exhibit 11
AMERICAN GREETINGS CORPORATION
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COMPUTATION OF EARNINGS PER SHARE (a)
---------------------------------
(Unaudited)
Three Months Ended May 31,
--------------------------
1995 1994
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<S> <C> <C>
Average number of
common shares outstanding 74,378,727 74,210,536
========== ==========
Net income (thousands) $ 37,300 $ 33,162
============ =============
Primary earnings per share $ .50 $ .45
============ =============
</TABLE>
<TABLE>
Computation of Fully-Diluted Earnings Per Share (b)
----------------------------------------------------
(Unaudited)
Three Months Ended May 31,
--------------------------
1995 1994
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<S> <C> <C>
Average number of common
shares outstanding
on a fully diluted
basis assuming exercise of
stock options based on
the treasury stock method
using the ending market price
which was higher than the
average market price 75,535,036 75,510,238
============ =============
Net income (thousands) $ 37,300 $ 33,162
============ =============
Fully-diluted earnings
per share $ .49 $ .44
============ =============
</TABLE>
(a) This calculation is submitted in accordance with the
Securities Exchange Act of 1934, although not required by
Accounting Principles Board Opinion No. 15, since less than a 3%
dilution results.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Part I,
Item 1 of the first-quarter Form 10-Q 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> FEB-29-1996
<PERIOD-END> MAY-31-1995
<CASH> 39,446
<SECURITIES> 0
<RECEIVABLES> 333,513
<ALLOWANCES> 15,410
<INVENTORY> 333,468
<CURRENT-ASSETS> 916,299
<PP&E> 865,801
<DEPRECIATION> 418,213
<TOTAL-ASSETS> 1,796,587
<CURRENT-LIABILITIES> 427,366
<BONDS> 0
<COMMON> 74,411
0
0
<OTHER-SE> 1,114,458
<TOTAL-LIABILITY-AND-EQUITY> 1,796,587
<SALES> 438,509
<TOTAL-REVENUES> 440,617
<CGS> 143,586
<TOTAL-COSTS> 143,586
<OTHER-EXPENSES> 235,599
<LOSS-PROVISION> 1,845
<INTEREST-EXPENSE> 4,917
<INCOME-PRETAX> 56,515
<INCOME-TAX> 19,215
<INCOME-CONTINUING> 37,300
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 37,300
<EPS-PRIMARY> .50
<EPS-DILUTED> .49
</TABLE>
