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 SECURITIES
X EXCHANGE ACT OF 1934
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For the quarterly period ended November 30, 2001
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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
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Commission file number 1-13859
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AMERICAN GREETINGS CORPORATION
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(Exact name of registrant as specified in its charter)
Ohio 34-0065325
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One American Road, Cleveland, Ohio 44144
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(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 November 30, 2001, the date of this report, the number of shares
outstanding of each of the issuer's classes of common stock was:
Class A Common 59,124,949
Class B Common 4,620,456
AMERICAN GREETINGS CORPORATION
INDEX
Page
Number
------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements..........................................1
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..........................17
PART II - OTHER INFORMATION
Item 1. Legal Proceedings............................................24
Item 6. Exhibits and Reports on Form 8-K.............................25
SIGNATURES.................................................................25
PART I - FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements
--------------------
AMERICAN GREETINGS CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(Thousands of dollars except share and per share amounts)
(Unaudited)
Nine Months Ended
November 30,
---------------------------------
2001 2000
------------ ------------
Net sales $ 1,699,398 $ 1,855,568
Costs and expenses:
Material, labor and other production costs 751,529 754,293
Selling, distribution and marketing 799,049 810,083
Administrative and general 214,488 208,896
Restructure charges 52,925 --
Interest 59,144 39,649
Other (income) - net (2,478) (12,376)
------------ ------------
Total costs and expenses 1,874,657 1,800,545
------------ ------------
(Loss) income before income tax (benefit) expense and
cumulative effect of accounting change (175,259) 55,023
Income tax (benefit) expense (66,072) 20,007
------------ ------------
(Loss) income before cumulative effect of
accounting change (109,187) 35,016
Cumulative effect of accounting change,
net of tax -- (21,141)
------------ ------------
Net (loss) income $ (109,187) $ 13,875
============ ============
(Loss) earnings per share and (loss) earnings per share assuming dilution:
Before cumulative effect of
accounting change $ (1.72) $ 0.55
Cumulative effect of accounting
change, net of tax -- (0.33)
------------ ------------
(Loss) earnings per share and (loss) earnings per share
assuming dilution
$ (1.72) $ 0.22
============ ============
Dividends per share $ 0.20 $ 0.52
============ ============
Average number of common shares outstanding 63,569,030 63,699,617
See notes to condensed consolidated financial statements.
1
AMERICAN GREETINGS CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(Thousands of dollars except per share amounts)
(Unaudited)
Three Months Ended
November 30,
--------------------------------------
2001 2000
----------- ------------
Net sales $ 705,433 $ 766,095
Costs and expenses:
Material, labor and other production costs 313,512 355,858
Selling, distribution and marketing 284,785 277,327
Administrative and general 71,290 70,326
Interest 23,619 15,066
Other expense (income) - net 1,592 (2,803)
----------- ------------
Total costs and expenses 694,798 715,774
----------- ------------
Income before income tax expense 10,635 50,321
Income tax expense 4,010 18,306
----------- ------------
Net income $ 6,625 $ 32,015
=========== ============
Earnings per share and earnings per share -
assuming dilution $ 0.10 $ 0.50
=========== ============
Dividends per share $ 0.10 $ 0.31
=========== ============
Average number of common shares outstanding 63,705,743 63,506,387
See notes to condensed consolidated financial statements.
2
AMERICAN GREETINGS CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(Thousands of dollars)
(Unaudited) (Note A) (Unaudited)
November 30, 2001 Feb. 28, 2001 November 30, 2000
----------------- ----------------- -----------------
ASSETS
Current assets
Cash and equivalents $ 45,353 $ 51,691 $ 78,846
Trade accounts receivable, less allowances
of $185,499, $184,799 and $179,618,respectively
(principally for sales returns) 538,546 387,534 612,990
Inventories 341,962 365,221 344,981
Deferred and refundable income taxes 151,048 190,241 219,460
Prepaid expenses and other 207,742 211,049 232,328
------------- ------------- -------------
Total current assets 1,284,651 1,205,736 1,488,605
Goodwill 256,259 229,802 211,949
Other assets 901,061 799,348 788,164
Property, plant and equipment - at cost 1,069,519 1,086,094 1,078,216
Less accumulated depreciation 631,186 608,906 606,109
------------- ------------- -------------
Property, plant and equipment - net 438,333 477,188 472,107
------------- ------------- -------------
$ 2,880,304 $ 2,712,074 $ 2,960,825
============= ============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Debt due within one year $ 35,056 $ 378,904 $ 647,717
Accounts payable 119,170 139,753 137,511
Accrued liabilities 227,209 164,310 109,811
Accrued compensation and benefits 97,762 89,936 89,179
Dividends payable 6,368 12,732 19,677
Income taxes 118,787 192,936 10,540
Other current liabilities 143,775 132,710 146,012
------------- ------------- -------------
Total current liabilities 748,127 1,111,281 1,160,447
Long-term debt 995,239 380,124 423,263
Other liabilities 198,258 146,187 146,066
Deferred income taxes 23,351 27,292 56,326
Shareholders' equity 915,329 1,047,190 1,174,723
------------- ------------- -------------
$ 2,880,304 $ 2,712,074 $ 2,960,825
============= ============= =============
See notes to condensed consolidated financial statements.
3
AMERICAN GREETINGS CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Thousands of dollars)
(Unaudited)
Nine Months Ended
November 30,
------------------------------
2001 2000
------------ ------------
OPERATING ACTIVITIES:
Net (loss) income $ (109,187) $ 13,875
Adjustments to reconcile to net cash
used by operating activities:
Cumulative effect of accounting change, net of tax -- 21,141
Restructure charges 46,439 --
Depreciation and amortization 62,284 71,948
Deferred income taxes 41,636 262
Changes in operating assets and liabilities,
net of effects from acquisitions:
Increase in trade accounts receivable (153,099) (208,740)
Decrease (increase) in inventories 20,589 (25,418)
Decrease (increase) in other current assets 6,394 (14,614)
Increase in deferred cost - net (46,551) (1,296)
Decrease in accounts payable and other liabilities (67,251) (61,896)
Other - net 7,263 (9,486)
------------ ------------
Cash Used by Operating Activities (191,483) (214,224)
INVESTING ACTIVITIES:
Business acquisitions (35,000) (179,993)
Property, plant & equipment additions (21,597) (56,730)
Proceeds from sale of fixed assets 3,459 24,484
Investment in corporate-owned life insurance 5,745 2,526
Other - net (14,058) 24,200
------------ ------------
Cash Used by Investing Activities (61,451) (185,513)
FINANCING ACTIVITIES:
Increase in long-term debt 688,485 --
Reduction of long-term debt (80,622) (35,003)
(Decrease) increase in short-term debt (341,058) 537,420
Sale of stock under benefit plans 92 --
Purchase of treasury shares (99) (45,448)
Dividends to shareholders (20,202) (39,396)
------------ ------------
Cash Provided by Financing Activities 246,596 417,573
------------ ------------
(DECREASE) INCREASE IN CASH AND EQUIVALENTS (6,338) 17,836
Cash and Equivalents at Beginning of Year 51,691 61,010
------------ ------------
Cash and Equivalents at End of Period $ 45,353 $ 78,846
============ ============
See notes to condensed consolidated financial statements.
4
AMERICAN GREETINGS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Thousands of dollars except per share amounts)
Nine Months Ended November 30, 2001 and 2000
Note A - Basis of Presentation
------------------------------
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States for interim financial information and with the instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all
of the information and notes required by accounting principles generally
accepted in the United States for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included.
The Corporation's fiscal year ends on February 28 or 29. References to a
particular fiscal year refer to the fiscal year ending in February of that year.
The balance sheet at February 28, 2001 has been derived from the audited
financial statements at that date but does not include all of the information
and notes required by accounting principles generally accepted in the United
States for complete financial statements.
Certain amounts in the prior year financial statements have been reclassified to
conform with the fiscal 2002 presentation.
For further information, refer to the consolidated financial statements and
notes thereto included in the Corporation's annual report on Form 10-K for the
year ended February 28, 2001.
Note B - Change in Accounting Principle
---------------------------------------
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101, "Revenue Recognition in Financial Statements" (SAB 101), which
among other guidance, clarified the Staff's views on various revenue recognition
and reporting matters. As a result, effective March 1, 2000, the Corporation
adopted a change in its method of accounting for certain shipments of seasonal
product. Under the new accounting method, the Corporation recognizes revenue on
these seasonal shipments at the approximate date the merchandise is received by
the customer and not upon shipment from the distribution facility. Customer
receipt is a more preferable method of recording revenue due to the large
volumes of seasonal product shipment activity and the time required to achieve
customer-requested delivery dates.
The implementation of the change has been accounted for as a change in
accounting principle and applied cumulatively as if the change occurred at March
1, 2000. The effect of the change was a one-time non-cash reduction to the
Corporation's earnings of $21,141 (net of tax of $12,564) or approximately $0.33
per share, which is included in operations for the nine months ended November
30, 2000.
5
Note C - Seasonal Nature of Business
------------------------------------
A significant portion of 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 D - Special Charges and Restructure Reserves
-------------------------------------------------
Fiscal 2002
The Corporation has undertaken a previously-announced review of its operations,
which has resulted in three initiatives: the reorganization of the core greeting
card business, the implementation of scan-based trading, and a change in the
contractual relationship with a strategic partner of the Corporation's Internet
business. In total, the Corporation expects these pre-tax special charges to be
approximately $300,000 to $330,000 during fiscal 2002. The Corporation incurred
$225,472 of these pre-tax special charges during the nine months ended November
30, 2001, of which $54,978 was incurred in the three months ended November 30,
2001.
Included in the special charges noted above is a restructure charge of $52,925
($32,970 net of tax, or earnings per share of $0.52). This charge was for costs
associated with the consolidation and rationalization of certain of the
Corporation's domestic and foreign manufacturing and distribution operations,
including employee severance and benefit termination costs. The restructure
charge also included a charge for a change in the contractual relationship with
a partner of the Corporation's Internet unit. More specifically, the restructure
charge included $26,470 for employee termination benefits, $3,727 for facility
rationalization costs, $2,296 for lease exit costs, $17,727 for a change in the
contractual relationship with a partner of the Corporation's Internet unit and
$2,705 of other costs. In total, approximately 1,500 positions will be
eliminated, comprised of 1,106 hourly and 394 salaried positions. All activities
are expected to be completed by the end of fiscal 2002. As of November 30, 2001,
386 hourly and 264 salaried positions have been eliminated.
6
The following table summarizes the provisions and remaining reserve associated
with the restructure charge at November 30, 2001:
Facility Change in
Termination Rationalization Lease Exit Contractual Other
Benefits Costs Costs Relationship Costs Total
---------- --------------- --------- ------------ -------- --------
Provision $ 26,470 $ 3,727 $ 2,296 $ 17,727 $ 2,705 $ 52,925
Non-cash charge (17,727) (17,727)
Cash expenditures (4,500) (429) (121) (1,436) (6,486)
-------- -------- -------- -------- -------- --------
Balance November
30, 2001 $ 21,970 $ 3,298 $ 2,175 $ -- $ 1,269 $ 28,712
======== ======== ======== ======== ======== ========
Included in accrued liabilities at November 30, 2001 is $28,712 related to
severance and other exit costs for those actions not yet completed.
Also, $34,140 of other special pre-tax costs associated with the restructure
efforts were incurred during the nine months. In addition, the Corporation
recorded a charge of $54,014 during the period to write down inventory in its
domestic operations to net realizable value associated with its
previously-announced one-time efforts. These efforts include a brand
rationalization and product line size reduction, which entail the elimination of
the Corporation's Forget Me Not greeting card brand. This amount is included in
material, labor and other production costs.
The total pre-tax impact of these special charges was $141,079 ($87,892 net of
tax) or $1.38 per share.
Also during the period, the Corporation began implementing its scan-based
trading business model with certain of its retailers. The impact of its
implementation was a $65,485 reduction in its net sales and a $10,149 reduction
in its material, labor, and other production costs. In addition, the Corporation
incurred implementation and other costs of $29,057, for a total pre-tax impact
of approximately $84,393 ($52,577 net of tax) or $0.83 per share.
7
In summary, the pre-tax special charges consist of the following:
Severance $ 26,470
Lease exit costs 2,296
Facility rationalization costs 3,727
Change in contractual relationship 17,727
Other costs 2,705
--------
Total restructure charge $ 52,925
Inventory write-down 54,014
Scan-based trading initiative 84,393
Other costs 34,140
--------
Total special charges $225,472
Fiscal 2000 - Fourth Quarter
During the three months ended February 29, 2000, the Corporation recorded a
$6,126 ($4,849 net of tax, or earnings per share of $0.08) restructure charge
related to various international operations. The primary component of this
charge was for the rationalization of various warehouse, distribution and
manufacturing facilities in the United Kingdom in order to increase operating
efficiency and lower fixed expenses. Additional initiatives included, to a
lesser extent, the integration of Mexican manufacturing in the United States and
the realignment of various business functions in Australia.
This restructure charge included $5,198 for employee termination benefits, $654
for lease exit costs, $274 for the write off of assets no longer in use and
other restructure costs. In total, approximately 336 positions were anticipated
to be eliminated, comprised of 304 hourly and 32 salaried employees. As of
November 30, 2001, 161 hourly and 36 salaried employees have been terminated.
All activities are expected to be completed by the end of fiscal 2002.
Fiscal 2000 - Second Quarter
In connection with the Corporation's initiative to continue to streamline its
North American operations, and to a lesser extent, its United Kingdom
operations, the Corporation recorded a $40,429 ($24,224 net of tax, or earnings
per share of $0.36) special charge during the three months ended November 30,
1999 relating primarily to the consolidation of Canadian manufacturing and
distribution in the United States. Included in this special charge is a $32,747
restructure charge primarily for exit costs associated with the closure of
certain facilities in Canada and to a lesser extent, costs to exit certain minor
United Kingdom businesses. The remaining $7,682 of the special charge was
recorded in material, labor and other production costs for the write-down of
inventory in Canada to net realizable value.
The restructure charge of $32,747 included $25,820 of severance, pension and
personnel-related benefits, $4,634 of facility shut-down costs, $1,454 of lease
exit costs and $839 related to other restructure costs. All initiatives
associated with the Canadian restructuring have been substantially completed.
The largest remaining restructuring activity relates to the Canadian Division's
pension plans. The Corporation has taken the necessary actions to settle the
8
pension liabilities, and Canadian regulatory approval has been obtained. The
Corporation is in the process of distributing the remaining pension plan assets
to satisfy those obligations.
The following table summarizes the provisions, payments and remaining reserves
associated with the restructure charges recorded in fiscal 2000:
Facility Lease
Termination Rationalization Exit Other
Benefits Costs Costs Costs Total
----------- --------------- -------- -------- --------
Balance, February 28, 2001 $ 5,408 $ 1,148 $ 934 $ 235 $ 7,725
Cash expenditures (3,363) (314) (235) (3,912)
-------- -------- -------- -------- --------
Balance, November 30, 2001 $ 2,045 $ 1,148 $ 620 $ -- $ 3,813
======== ======== ======== ======== ========
Included in accounts payable and accrued liabilities at November 30, 2001 is
$3,813 related to severance and other exit costs for those actions not
completed. The Corporation believes the remaining accrued restructure liability
is adequate for its remaining cash and non-cash obligations.
9
Note E - Debt
-------------
On June 22, 2001, the Corporation entered into agreements to sell $175,000 of
7.00% convertible subordinated notes due in 2006 and $260,000 of 11.75% senior
subordinated notes due in 2008 to qualified institutional investors. The
convertible notes outstanding could potentially result in the issuance of 12.6
million shares of the Class A Common Stock of the Corporation. The transactions,
which closed on June 29, 2001, resulted in net proceeds to the Corporation of
approximately $390,300, after deducting underwriting discounts and estimated
transactional expenses. The Corporation used the net proceeds from these
offerings to repay indebtedness and to provide funds for other general corporate
purposes. On August 28, 2001, the Corporation filed Form S-3 and Form S-4 with
the Securities and Exchange Commission as required with respect to these debt
offerings.
On August 9, 2001, the Corporation entered into a new $350,000 senior secured
credit facility. It consists of three tranches: a $105,000, 364-day revolving
facility, a $120,000 revolving facility maturing January 15, 2006, and a
$125,000 term loan maturing June 15, 2006. The Corporation has the option to
request a one-year extension of the 364-day revolving facility. The credit
facility contains various restrictive covenants which require, among other
things, that the Corporation meet specified periodic financial ratios, minimum
net worth and earnings requirements. The credit facility restricts the
Corporation's ability to incur additional indebtedness and to engage in
acquisitions of other businesses and entities. As part of the debt
restructuring, the Corporation also announced it had entered into a three-year,
$250,000 credit facility secured by certain trade accounts receivable.
Note F - Acquisitions
---------------------
On March 9, 2000, the Corporation completed its acquisition of Gibson Greetings,
Inc. ("Gibson") for a cash price of $10.25 per share. Gibson distributed
individual relationship communication products, including greeting cards, gift
wrap, party goods and licensed products. Gibson held a minority interest in
Egreetings Network, Inc.("Egreetings"); the Corporation subsequently acquired
the remaining shares of Egreetings in March 2001. The acquisition of Gibson has
been accounted for by the purchase method of accounting, and accordingly, the
consolidated statements of operations include the results of Gibson beginning
with the first quarter of fiscal 2001. The assets acquired and liabilities
assumed were recorded at estimated fair values as determined by the
Corporation's management based on information available and on assumptions as to
future operations. For financial statement purposes, the excess of cost over net
assets acquired is amortized by the straight-line method over 40 years.
On July 13, 2000, the Corporation completed its acquisition of CPS Corporation
("CPS"), for a cash price of $31,000 plus 1,200,000 shares of the Corporation's
common stock. CPS is a supplier of gift wrap and decorative packaging.
On September 12, 2001, the Corporation completed its acquisition of the
BlueMountain.com division of At Home Corporation for a cash price of $35
million. The BlueMountain.com division operates an online card and entertainment
Internet site, www.bluemountain.com.
10
Note G - (Loss) Earnings per Share
----------------------------------
The following table sets forth the computation of (loss) earnings per share and
loss (earnings) per share - assuming dilution:
Nine Months Ended
November 30,
------------------------------
2001 2000
------------ ------------
Numerator:
Net (loss) income for (loss) earnings per share
and (loss) earnings per share -
assuming dilution $ (109,187) $ 13,875
============ ============
Denominator (thousands):
Denominator for (loss) earnings per share
-weighted average shares outstanding 63,569 63,700
Effect of dilutive securities - stock options and
convertible debt -- --
------------ ------------
Denominator for (loss) earnings per share-assuming
dilution -adjusted weighted average shares outstanding 63,569 63,700
============ ============
(Loss) earnings per share $ (1.72) $ 0.22
============ ============
(Loss) earnings per share - assuming dilution $ (1.72) $ 0.22
============ ============
Three Months Ended
November 30,
------------------------------
2001 2000
------------ ------------
Numerator:
Net income for earnings per share
and earnings per share -
assuming dilution $ 6,625 $ 32,015
============ ============
Denominator (thousands):
Denominator for earnings per share
-weighted average shares outstanding 63,706 63,506
Effect of dilutive securities - stock options and
convertible debt -- --
------------ ------------
Denominator for earnings per share-assuming
dilution -adjusted weighted average shares outstanding 63,706 63,506
============ ============
Earnings per share $ 0.10 $ 0.50
============ ============
Earnings per share - assuming dilution $ 0.10 $ 0.50
============ ============
Certain stock options and convertible debt have been excluded for the three and
nine months ended November 30, 2001 and 2000 because the effect would have been
antidilutive.
11
Note H - Comprehensive Income (Loss)
------------------------------------
The Corporation's total comprehensive income (loss) was as follows:
Nine Months Ended
November 30,
------------------------------
2001 2000
------------ ------------
Net (loss) income $ (109,187) $ 13,875
Other comprehensive (loss) income:
Foreign currency translation adjustments (13,934) (13,418)
Unrealized gain (loss) on available-for-sale securities 2,088 (23,464)
------------ ------------
Other comprehensive loss (11,846) (36,882)
------------ ------------
Total comprehensive loss $ (121,033) $ (23,007)
============ ============
Three Months Ended
November 30,
------------------------------
2001 2000
------------ ------------
Net income $ 6,625 $ 32,015
Other comprehensive (loss) income:
Foreign currency translation adjustments (11,590) (2,966)
Unrealized gain (loss) on available-for-sale securities 410 (4,425)
------------ ------------
Other comprehensive loss (11,180) (7,391)
------------ ------------
Total comprehensive (loss) income $ (4,555) $ 24,624
============ ============
12
Note I - Business Segment Information
-------------------------------------
Nine Months Ended
November 30,
------------------------------
2001 2000
------------ ------------
Net Sales
Social Expressions Products $ 1,359,456 $ 1,441,460
Intersegment items (66,328) (66,408)
------------ ------------
Total 1,293,128 1,375,052
AmericanGreetings.com 24,747 14,770
Non-reportable segments 472,399 464,586
Exchange rate adjustment-net (14,141) 1,160
Special charges (76,735) --
------------ ------------
Consolidated total $ 1,699,398 $ 1,855,568
============ ============
Earnings
Social Expressions Products $ 189,998 $ 212,634
Intersegment items (46,502) (47,296)
------------ ------------
Total 143,496 165,338
AmericanGreetings.com (4,736) (32,832)
Non-reportable segments 43,534 34,614
Exchange rate adjustment - net (849) (719)
Special charges (225,472) --
Unallocated items - net (131,232) (111,378)
------------ ------------
Consolidated total $ (175,259) $ 55,023
============ ============
13
Three Months Ended
November 30,
------------------------------
2001 2000
------------ ------------
Net Sales
Social Expressions Products $ 505,499 $ 539,439
Intersegment items (25,837) (29,206)
------------ ------------
Total 479,662 510,233
AmericanGreetings.com 9,407 3,210
Non-reportable segments 240,075 256,330
Exchange rate adjustment-net (6,154) (3,678)
Special charges (17,557) --
------------ ------------
Consolidated total $ 705,433 $ 766,095
============ ============
Earnings
Social Expressions Products $ 88,812 $ 102,084
Intersegment items (17,341) (20,076)
------------ ------------
Total 71,471 82,008
AmericanGreetings.com (142) (12,752)
Non-reportable segments 46,775 34,296
Exchange rate adjustment - net (731) (2,058)
Special charges (54,978) --
Unallocated items - net (51,760) (51,173)
------------ ------------
Consolidated total $ 10,635 $ 50,321
============ ============
Special charges for the period ended November 30, 2001 include the costs
associated with the consolidation and rationalization of certain of the
Corporation's operations, including employee severance and benefit termination
costs, a change in the contractual relationship with a partner of the
Corporation's Internet unit, an inventory write-down, the implementation of the
scan-based trading business model, and other non-recurring costs in
connection with these initiatives.
14
Note J - New Pronouncements
---------------------------
In June 1998, Statement of Financial Accounting Standards ("SFAS") No. 133,
"Accounting for Derivative Instruments and Hedging Activities", was issued. This
Statement, which establishes new accounting and reporting standards for
derivative financial instruments, along with its amendments SFAS No. 137 and
SFAS No. 138, became effective for the Corporation March 1, 2001. The adoption
of the Statements did not have a material effect on the Corporation's
consolidated financial statements.
In July 2001, SFAS No. 141, "Business Combinations", was issued. This Statement,
which supersedes Accounting Principles Board ("APB") Opinion No. 16, "Business
Combinations", eliminated the pooling-of-interests method of accounting for
business combinations and modifies the application of the purchase accounting
method. The elimination of the pooling-of-interests method is effective for
transactions initiated after June 30, 2001. The remaining provisions of SFAS No.
141 will be effective for transactions accounted for using the purchase method
that are completed after June 30, 2001.
Also in July 2001, SFAS No. 142, "Goodwill and Intangible Assets", was issued.
This Statement, which supersedes APB Opinion No. 17, "Intangible Assets",
eliminates the current requirement to amortize goodwill and indefinite-lived
intangible assets, addresses the amortization of intangible assets with a
defined life and addresses the impairment testing and recognition for goodwill
and intangible assets. SFAS No. 142 will apply to goodwill and intangible assets
arising from transactions completed before and after the Statement's effective
date. SFAS No. 142 will be effective for the Corporation beginning in the first
quarter of fiscal 2003. The Corporation is currently assessing the Statement and
has not yet determined the impact of its adoption on its financial statements.
In August 2001, SFAS No. 143, "Accounting for Asset Retirement Obligations", was
issued. This Statement requires entities to record the fair value of a liability
for an asset retirement obligation in the period in which it is incurred. When
the liability is initially recorded, the entity capitalizes a cost by increasing
the carrying amount of the related long-lived asset. Over time, the liability is
accreted to its present value each period, and the capitalized cost is
depreciated over the useful life of the related asset. Upon settlement of the
liability, an entity either settles the obligation for its recorded amount or
incurs a gain or loss upon settlement. The Corporation is required to adopt this
Statement for fiscal 2004. The Corporation is analyzing the effect of this
Statement and does not expect it to have a material effect on the Corporation's
consolidated financial position, results of operations or cash flows.
In October 2001, SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets", was issued. This Statement, which supersedes SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of", provides a single accounting model for long-lived assets to be
disposed of. Although retaining many of the fundamental recognition and
measurement provisions of SFAS No. 121, the Statement significantly changes the
criteria that would have to be met to classify an asset as held-for-sale. This
distinction is important because assets held-for-sale are stated at the lower of
their fair values or carrying amounts and depreciation is no longer recognized.
The Corporation is required to adopt this Statement for fiscal 2003. The
Corporation is analyzing the effect of this
15
Statement and does not expect it to have a material effect on the Corporation's
consolidated financial position, results of operations or cash flows.
In November 2001, the Financial Accounting Standards Board's Emerging Issues
Task Force ("EITF") issued EITF Issue No. 01-09 ("EITF 01-09"), "Accounting for
Consideration Given by a Vendor to a Customer/Reseller", which addresses the
accounting for consideration given by a vendor to a customer including both a
reseller of the vendor's products and an entity that purchases the vendor's
products from a reseller. EITF 01-09 also codifies and reconciles related
guidance issued by the EITF including EITF No. 00-25, "Vendor Income Statement
Characterization of Consideration Paid to a Reseller of the Vendor's Products",
and EITF No. 00-14, "Accounting for Certain Sales Incentives". EITF 01-09
outlines the presumption that consideration given by a vendor to a customer, a
reseller or a customer of a reseller is to be treated as a reduction of revenue.
Treatment of such payments as an expense would only be appropriate if two
conditions are met: a) the vendor receives an identifiable benefit in return for
the consideration paid that is sufficiently separable from the sale such that
the vendor could have entered into an exchange transaction with a party other
than the purchaser or its products in order to receive that benefit; and b) the
vendor can reasonably estimate the fair value of that benefit. The Corporation
is required to adopt EITF 01-09 no later than the first quarter of fiscal 2003.
Although the Corporation does not expect the adoption to have any effect on its
operations, it will have a material effect on certain reported income statement
classifications. Upon adoption, the Corporation will be required to reclassify
certain prior period amounts to conform to these reporting requirements. The
Corporation has not yet completed its analysis of the amounts which will be
reclassified for prior periods.
Note K - Inventories
November 30, 2001 February 28, 2001 November 30, 2000
----------------- ----------------- -----------------
Raw materials $ 60,827 $ 49,408 $ 47,273
Work in process 38,532 33,370 20,166
Finished products 289,376 330,664 328,883
-------------- -------------- --------------
388,735 413,442 396,322
Less LIFO reserve (95,888) (93,111) (93,530)
-------------- -------------- --------------
292,847 320,331 302,792
Display materials and factory supplies 49,115 44,890 42,189
-------------- -------------- --------------
Inventories $ 341,962 $ 365,221 $ 344,981
============== ============== ==============
The valuation of inventory under the Last-In, First-Out (LIFO) method is made at
the end of each fiscal year based on inventory levels and costs at that time.
Accordingly, interim LIFO calculations, by necessity, are based on estimates of
expected fiscal year-end inventory levels and costs and are subject to final
fiscal year-end LIFO inventory calculations.
16
Note L - Deferred Costs
-----------------------
Deferred costs relating to agreements with certain customers are charged to
operations on a straight-line basis over the effective period of each agreement,
generally three to six years. Deferred costs estimated to be charged to
operations during the next year are classified with prepaid expenses and other.
Total commitments under the agreements are capitalized as deferred costs and
future payment commitments, if any, are recorded as liabilities when the
agreements are consummated.
As of November 30, 2001, February 28, 2001 and November 30, 2000 deferred costs
and future payment commitments are included in the following financial statement
captions:
November 30, 2001 February 28, 2001 November 30, 2000
----------------- ----------------- -----------------
Prepaid expenses and other $ 151,552 $ 142,436 $ 165,222
Other assets 820,572 717,400 714,267
Other current liabilities (133,505) (119,770) (132,512)
Other liabilities (159,193) (111,030) (114,915)
-------------- -------------- --------------
$ 679,426 $ 629,036 $ 632,062
============== ============== ==============
Part 1, Item 2, MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
-------------------------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
Business Developments
---------------------
As previously reported, during fiscal 2002 the Corporation has undertaken a
review of its operations focusing on process improvements that are expected to
improve efficiency and reduce costs. Additionally, the Corporation has
undertaken two other initiatives, all of which will take place during fiscal
2002 and result in the following special pre-tax charges:
- The reorganization of the core business, which is expected to result in a
pre-tax charge of $200 million to $220 million for the full year. The
implementation of this new business structure will result in expected
ongoing pre-tax cost savings of about $90 million beginning in fiscal 2003.
Included in the restructuring are a brand rationalization process, product
line size reduction program, the consolidation and rationalization of
facilities, and a headcount reduction of approximately 1,500 associates, or
about 13 percent of the Corporation's full-time workforce. The Corporation
expects the reorganization to conclude by the end of fiscal year 2002.
- Implementing scan-based trading at select retailers will result in an
expected pre-tax charge of $80 million to $90 million for the full year.
While the charge associated with the conversion will have a one-time
negative impact on profitability, the Corporation is optimistic
17
that scan-based trading will ultimately reduce costs, result in a reduction
in working capital, maximize retail productivity and throughput, and
continue to enhance retailer relationships.
- Changes in contractual relationships with a strategic partner related to
the Corporation's Internet business resulted in a pre-tax, non-cash charge
of $17.7 million.
The Corporation expects that these three initiatives will result in total
pre-tax special charges of $300 million to $330 million for the full year.
Combined, these efforts are expected to use $110 million to $120 million in
after-tax cash, with the majority of the cash usage coming in fiscal 2002.
Several special charges related to the above items, totaling $225.5 million,
occurred during the nine months ended November 30, 2001:
- A pre-tax restructuring charge of $52.9 million. This pre-tax charge
included $35.2 million for the consolidation and rationalization of certain
of the Corporation's domestic and foreign manufacturing and distribution
operations, including employee severance and benefit termination costs, and
$17.7 million related to the completion of contractual changes with an
online strategic partner of the Corporation's Internet unit.
- A pre-tax charge of $34.1 million for non-recurring administrative costs
related to the reorganization were incurred.
- A pre-tax charge of $54.1 million to reduce the value of inventory in the
Corporation's domestic operations to net realizable value associated with
its previously-announced one-time efforts. These efforts include a brand
rationalization and product line size reduction, which entail the
elimination of the Corporation's Forget Me Not greeting card brand.
- The conversion to scan-based trading for two retail customers, resulting in
reductions in net sales of $65.5 million and in material, labor and other
production costs of $10.1 million, as well as additional non-recurring
costs of $29.0 million. The Corporation expects to complete the conversion
by the end of fiscal 2002.
On June 22, 2001, the Corporation entered into agreements to sell $175 million
of 7.00% convertible subordinated notes due in 2006 and $260 million of 11.75%
senior subordinated notes due in 2008 to qualified institutional investors. The
convertible notes outstanding could potentially result in the issuance of 12.6
million shares of the Class A Common Stock of the Corporation. The transactions,
which closed on June 29, 2001, resulted in net proceeds to the Corporation of
approximately $390.3 million, after deducting underwriting discounts and
estimated transactional expenses. The Corporation used the net proceeds from
these offerings to repay indebtedness and to provide funds for other general
corporate purposes. On August 28, 2001, the Corporation filed Form S-3 and Form
S-4 with the Securities and Exchange Commission as required with respect to
these debt offerings.
On August 9, 2001, the Corporation entered into a new $350 million senior
secured credit facility. It consists of three tranches: a $105 million, 364-day
revolving facility, a $120 million revolving facility maturing January 15, 2006,
and a $125 million term loan maturing June 15,
18
2006. The Corporation has the option to request a one-year extension of the
364-day revolving facility. The credit facility contains various restrictive
covenants which require, among other things, that the Corporation meet specified
periodic financial ratios, minimum net worth and earnings requirements. The
credit facility restricts the Corporation's ability to incur additional
indebtedness and to engage in acquisitions of other businesses and entities. As
part of the debt restructuring, the Corporation also announced it had entered
into a three-year, $250 million credit facility secured by certain trade
accounts receivable.
Results of Operations
---------------------
For the three months ended November 30, 2001, net sales were $705.4 million, a
7.9% decrease from $766.1 million in the same period in the prior year. For the
nine months ended November 30, 2001, net sales were $1,699.4 million, a decrease
of 8.4% from $1,855.6 million in the same period last year. Included in the
current-year nine-month amount is a reduction of $65.5 million for the
conversion to scan-based trading for two of the Corporation's retail customers.
The revenue impact of the conversion to scan-based trading was complete as of
the end of the period ended November 30, 2001. All-inclusive unit sales of total
greeting cards for the nine months decreased approximately 5% from the same
period in the prior year. The decrease from last year also reflects the
Corporation's retail inventory reduction initiative and the new pricing
strategy.
Material, labor and other production costs for the three months were $313.5
million, a decrease of 11.9% from $355.9 million in the same period in the prior
year. As a percentage of net sales, these costs decreased to 44.4% from 46.5% in
the prior year. For the nine months, material, labor and other production costs
were $751.5 million, a decrease from $754.3 million for the same period in the
prior year. Included in the current year nine-month amount is a pre-tax charge
of $54.1 million to reduce the value of inventory in the Corporation's domestic
operations to net realizable value associated with its brand rationalization and
product line reduction. The current year amount also includes a pre-tax
reduction of approximately $10.1 million related to the Corporation's conversion
to scan-based trading. Excluding these items, material, labor and other
production costs would have been 40.1% of net sales for the nine months. The
decrease in that percentage from 40.7% in the same period in the prior year
reflects some benefit of the integration of the Gibson brand and CPS into the
Corporate cost structure.
Selling, distribution and marketing costs for the three months were $284.8
million, an increase from $277.3 million for the same period in the prior year.
As a percentage of net sales, these costs increased to 40.4% from 36.2% in the
prior year. For the nine months ended November 30, 2001, selling, distribution,
and marketing costs were $799.0 million, a decrease from $810.1 in the same
period of the prior year. The Corporation's Internet unit reduced its costs by
$18.0 million, primarily due to lower expense for online partner arrangements.
However, as a percentage of net sales, these costs increased to 47.0% from 43.7%
in the same period last year, as the selling, distribution and marketing cost
decrease was less than the corresponding sales decrease.
Administrative and general expenses increased $1.0 million from $70.3 million to
$71.3 million in comparison to the same period in the prior year for the three
months. For the nine months, administrative and general expenses were $214.5
million, up from $209.0 million in the prior year. The increases from prior year
for both the three months and nine months were due to costs related to the
Corporation's conversion to scan based trading ($ 1.8 million and $9.1 million
for the three and nine months, respectively); special charges associated with
the Corporation's restructuring efforts ($9.6 million and $21.2 million for the
three and nine months,
19
respectively); and various other cost increases. The higher costs were offset
somewhat by the elimination of costs related to Gibson Greetings, Inc. in the
prior year.
Interest expense increased $8.6 million for the three months ended November 30,
2001 from the prior year to $23.6 million and increased $19.5 million to $59.1
million for the nine months ended November 30, 2001. This increase was primarily
due to higher borrowing levels to fund the Corporation's acquisitions of CPS in
July 2000 and Blue Mountain.com in September 2001, and for special charges and
general corporate purposes, as well as higher interest rates on its new debt
arrangements.
Other expense (income) - net was $1.6 million of expense for the three months
compared to $2.8 million of income in the prior year. For the nine months, this
caption has income of $2.5 million, down from $12.4 million of income in the
prior year. The prior-year amount of $12.4 million included an $8.4 million
pre-tax gain on the sale of a building.
The effective tax rate for the nine months was 37.7%, an increase from 36.4% in
the prior year, as previous years benefitted from loss carryforwards. The
increase is due to foreign operations, particularly the United Kingdom.
Earnings per share and earnings per share - assuming dilution for the quarter
was $0.10 compared to the prior year of $0.50.
Loss per share was $(1.72) for the nine months, compared to earnings per share
before the cumulative effect of the accounting change of $0.55 for the nine
months ended November 30, 2000. The nine months ended November 30, 2001 includes
various special after-tax charges equating to $2.21 per share as follows:
Per Share
---------
Restructuring charge $0.52
Inventory write-down $0.52
Conversion to scan-based trading $0.83
Other activities $0.34
-----
$2.21
The prior year period included a gain of $0.08 per share on the sale of a
building. Excluding the above items, basic earnings per share for the nine
months ended November 30, 2001 was $0.49 compared to $0.47 in the same period in
the prior year.
SEGMENT INFORMATION
The Corporation is organized and managed according to a number of factors,
including product categories, geographic locations and channels of distribution.
The Social Expressions Products segment primarily designs, manufactures and
sells greeting cards and other products through various channels of distribution
with mass retailers as the primary channel and is managed by geographic
location. As permitted under Statement of Financial Accounting Standards No.
131, "Disclosures about Segments of an Enterprise and Related Information,"
certain operating divisions have been aggregated into the Social Expressions
Products segment. These operating divisions have similar economic
characteristics, products, production processes,
20
types of customers and distribution methods. AmericanGreetings.com is the online
greetings and personal expression subsidiary of the Corporation.
Social Expressions Products Segment
Net sales, net of intersegment items, for the three months ended November 30,
2001, decreased $30.6 million or 6.0% from the same period in the prior year.
For the nine months, net sales decreased $81.9 million or 6.0% from the same
period in the prior year. The Corporation's new pricing strategy, which includes
a higher mix of lower-priced greeting cards in the mass retail channels,
negatively affected net sales for both the three and nine months. The remainder
of the decrease from the prior year relates primarily to the Corporation's
continuing efforts to reduce inventory levels at its customers' retail stores.
Segment earnings, net of intersegment items, for the three months ended November
30, 2001, decreased from $82.0 million in the prior year to $71.5 million in the
current year. For the nine months, segment earnings decreased from $165.3
million in the prior year to $143.5 million in the current period. The decrease
from prior year in the nine-month period reflects the lower net sales as noted
above, with $26.5 million of the decrease in the United States.
AmericanGreetings.com Segment
Net sales increased $6.2 million for the three months and $10.0 million for the
nine months ended November 30, 2001 compared to the prior year, as higher
advertising and co-branded site revenues more than offset lower subscription
revenue. The higher advertising revenues reflect the sites' increased traffic.
The segment loss was lower than the prior year by $12.6 million and $28.1
million for the three and nine months, respectively. This reduction in the loss
reflects the higher revenues as well as lower expenses due to a change in the
contractual relationship with an Internet partner.
In March 2001, AmericanGreetings.com acquired Egreetings Network, Inc., a
company that operates an online card and entertainment Internet site,
www.egreetings.com. This acquisition was previously disclosed in the
Corporation's Form 8-K filed on April 3, 2001 and Form 8-K/A filed on June 1,
2001.
In September 2001, AmericanGreetings.com acquired the BlueMountain.com division
of At Home Corporation. The BlueMountain.com division operates an online card
and entertainment Internet site, www.bluemountain.com. This acquisition was
previously disclosed in the Corporation's Form 8-K filed on September 27, 2001
and Form 8-K/A filed on November 21, 2001.
Liquidity and Capital Resources
-------------------------------
The seasonality of the Corporation's business precludes a useful comparison of
the current period and the fiscal year-end financial statements; therefore, a
Statement of Financial Position for November 30, 2000 has been included.
Operating activities used $191.5 million of cash in the nine months ended
November 30, 2001, compared to using $214.2 million in the same period in the
prior year. The decrease in earnings, excluding non-cash charges, for the period
compared to the prior year adversely impacted cash flow significantly.
21
Accounts receivable, net of the effect of acquisitions, increased $153.1 million
from February 28, 2001, compared to an increase of $208.7 million during the
same period in the prior year. This lower increase reflects the impact of the
lower sales level during the current period compared to the prior year,
including the effect of the reduction in sales related to the conversion to
scan-based trading for two of the Corporation's customers. As a percentage of
the prior twelve months' net sales, net accounts receivable were 22.8% at
November 30, 2001 compared to 24.8% at November 30, 2000.
Inventories, net of the effect of acquisitions, decreased $20.6 million from
February 28, 2001, compared to an increase of $25.4 million for the same period
in the prior year. The decrease from February 28, 2001 includes the write-down
of $54.1 million recorded during the nine months ended November 30, 2001.
Partially offsetting that decrease from February 28, 2001 were increases in
inventories due to the conversion to scan-based trading for two of the
Corporation's major customers, as well as some build-up to complete the brand
rationalization and product line size reduction.
Cash payments exceeded amortization of deferred costs cash payments by $46.6
million for the nine months ended November 30, 2001, compared to $1.3 million
for the same period in the prior year. The current year includes a significant
expansion of an agreement with a major customer.
Accounts payable and other liabilities decreased $67.3 million during the nine
months ended November 30, 2001, compared to a decrease of $61.9 million during
the same period in the prior year. The increase in the movement reflects an
adjustment among the current and deferred income tax amounts.
Included in income taxes payable at November 30, 2001 is $143.6 million for
potential tax exposure for the fiscal years ended 1992 through 1999 relating to
the Corporation's corporate-owned life insurance (COLI) program. This amount
represents the effect of assessments by the Internal Revenue Service for the
disallowance of certain deductions related to this insurance program. The
Corporation believes that it has fully complied with the tax law as it related
to its COLI program and plans to vigorously contest the assessments or any
subsequent assessments.
Investing activities resulted in a use of $61.5 million of cash during the nine
months, compared to a use of $185.5 million in the same period in the prior
year. The prior year amount included $137.6 million used in the acquisition of
Gibson Greetings, Inc., $31.0 million for the acquisition of CPS, and $11.4
million for the acquisition of M&D Balloons, as well as the proceeds from the
sale of a building.
Financing activities provided $246.6 million for the nine months compared to
providing $417.6 million during the same period in the prior year. The current
period includes the proceeds from the long-term debt agreements entered into
during the second quarter. The prior year included a larger increase in the
level of short-term debt borrowings during the period.
Total debt less cash at November 30, 2001 was $984.9 million, compared to $992.1
million at November 30, 2000. Debt as a percentage of debt plus equity increased
to 53.0% at November
22
30, 2001 from 47.7% at November 30, 2000. Based on actual shares outstanding,
shareholders' equity decreased from $18.50 per share at November 30, 2000 to
$14.36 per share at November 30, 2001.
There were no material changes in the financial condition, liquidity or capital
resources of the Corporation from February 28, 2001, the end of its preceding
fiscal year, to November 30, 2001, the end of its last fiscal quarter and the
date of the most recent balance sheet included in this report, nor from November
30, 2000, the end of the corresponding fiscal quarter last year, to November 30,
2001, except the changes discussed above and aside from normal seasonal
fluctuations.
Prospective Information
-----------------------
The statements contained in this document that are not historical facts are
forward-looking statements. Actual results may differ materially from those
projected in the forward-looking statements. These forward-looking statements
involve risks and uncertainties, including but not limited to retail
bankruptcies and consolidations, successful integration of acquisitions, a weak
retail environment, consumer acceptance of products as priced and marketed, the
impact of technology on core product sales and competitive terms of sale offered
to customers. Risks pertaining specifically to the Corporation's electronic
marketing business include the viability of online advertising as a revenue
generator and the public's acceptance of online greetings and other social
expression products.
23
PART II - OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings
-----------------
1. In re: Underground Storage Tank Release Report United States Environmental
Protection Agency (US EPA) Facility ID# TN 1-300153 Tennessee Department of
Environment & Conservation (TDEC) v. Plus Mark
This matter was previously disclosed in Form 10-K for the period ending February
29, 2000. In January 2000, Plus Mark Inc. ("Plus Mark"), a wholly-owned
subsidiary of the Corporation, received a request from US EPA in connection with
the excavation of eight underground storage tanks at Plus Mark's Afton,
Tennessee facility to perform initial site characterization for both soil and
groundwater. After Plus Mark submitted the initial test results, US EPA
concluded that no further action was required regarding soil, but that further
site characterization was required for groundwater. US EPA transferred the
matter to TDEC for administration. No remedy has been determined, but costs are
not expected to be material. In November 2001, Plus Mark voluntarily entered
into a Remediation Order with TDEC. A Remediation Plan addressing groundwater
contamination, including a plan for off-site work, is due in February 2002.
2. In re: Tennessee Dept. of Environment and Conservation (TDEC) v. Cleo
Tennessee State Superfund Site - Carl Wright Site, Henry County, TN
This matter was previously disclosed in Form 10-K for the period ending February
29, 2000. In May 1998, TDEC informed Gibson Greetings Inc. ("Gibson") now a
wholly-owned subsidiary of the Corporation, that Cleo, a former subsidiary of
Gibson may be a potentially responsible party for the costs incurred by the
State of Tennessee in remediating the Carl Wright Site. TDEC notified Gibson
that storage drums recovered from the Site during clean up bore "Cleo Wrap"
labels. Gibson had agreed to indemnify Cleo and its shareholder, CSS, against
various environmental liabilities, in connection with the sale of Cleo to CSS.
Gibson's share of the estimated clean up cost is not expected to be material. In
November 2001, the Division of Superfund issued a second notice of assessment to
"Cleo Wrap/Gibson Greetings" for $94,261.55, representing 8.3% of the clean-up
costs assessed. Payment of the assessment is due January 25, 2002.
24
Item 6. Exhibits and Reports on Form 8-K
---------------------------------
(b) Reports on Form 8-K
On April 3, 2001, the Corporation filed Form 8-K with the Securities and
Exchange Commission. This filing reported that the Corporation had completed its
acquisition of Egreetings Network, Inc. On June 1, 2001, the Corporation filed
Form 8-K/A with the Securities and Exchange Commission. This filing amended the
Form 8-K filed April 3, 2001 to include the historical and pro forma information
required for the combined entity.
On September 27, 2001, the Corporation filed Form 8-K with the Securities and
Exchange Commission. This filing reported that the Corporation had acquired the
BlueMountain.com division of At Home Corporation. On November 21, 2001, the
Corporation filed Form 8-K/A with the Securities and Exchange Commission. This
filing amended the Form 8-K filed September 27, 2001 to include the historical
and pro forma information required for the combined entity.
On December 21, 2001, the Corporation filed Form 8-K with the Securities and
Exchange Commission. This filing reported that on December 18, 2001, the
Corporation had issued a press release announcing financial results for the
fiscal quarter ended November 20, 2001. This filing also reported that on
December 18, 2001, the Corporation announced suspension of its dividend.
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN GREETINGS CORPORATION
By: /s/ Joseph B. Cipollone
---------------------------------------
Joseph B. Cipollone
Vice President, Corporate Controller
Chief Accounting Officer
January 14, 2002
25