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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1 TO CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report
(Date of earliest event reported) March 19, 2001
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AMERICAN GREETINGS CORPORATION
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(Exact name of registrant as specified in Charter)
1-13859
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Commission File Number
Ohio 34-0065325
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
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
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
This Current Report on Form 8-K/A (Amendment No. 1) amends the Current Report on
Form 8-K previously filed with the Commission on April 3, 2001 relating to the
acquisition by American Greetings Corporation, an Ohio corporation ("American
Greetings") through its subsidiary AmericanGreetings.com, Inc., of Egreetings
Network, Inc., a Delaware corporation ("Egreetings"), on March 19, 2001. The
following documents are included as part of this report:
(a) Financial Statements of Business Acquired
The audited financial statements of Egreetings Network, Inc. as of and for the
year ended December 31, 2000, together with the report of independent auditors
are incorporated herein by reference from Exhibit 99.2 of Egreetings Network,
Inc.'s Form 8-K received by the Commission on March 16, 2001, File Number
000-28479.
(b) Unaudited Pro Forma Financial Information
The accompanying unaudited pro forma financial information has been prepared to
give effect to the acquisition of Egreetings by American Greetings. The
unaudited pro forma combined statement of operations for the year ended
February 28, 2001 gives effect to the acquisition as if the acquisition had
occurred on March 1, 2000. The unaudited pro forma combined statement of
operations presented for the year ended February 28, 2001 includes the
historical financial results of American Greetings for the year ended February
28, 2001 and of Egreetings for the year ended December 31, 2000. Synergies and
expected cost savings from the integration of Egreetings with American
Greetings' existing businesses or any additional profitability resulting from
the application of American Greetings revenue enhancement measures have not
been included in the unaudited pro forma combined statement of operations.
The unaudited pro forma combined statement of financial position as of February
28, 2001 gives effect to the acquisition as if the acquisition had occurred on
that date. The unaudited pro forma combined statement of financial position
includes the balance sheet of American Greetings as of February 28, 2001 and the
balance sheet of Egreetings as of December 31, 2000.
The unaudited pro forma financial information includes the adjustments that have
a continuing impact to the combined company to reflect the transaction using
purchase accounting. The pro forma adjustments are described in the notes to the
unaudited pro forma financial information. The adjustments are based upon
preliminary information and certain management judgments and estimates. The
purchase accounting adjustments are subject to revisions which will be reflected
in future periods. Revisions, if any, are not expected to have a material effect
on the statement of operations or financial position of American Greetings.
Certain reclassifications have been reflected to conform Egreetings' financial
information to American Greetings' presentation.
The unaudited pro forma financial information and accompanying notes are
presented for illustrative purposes only and do not purport to be indicative of
and should not be relied upon as indicative of the financial position or
operating results which may occur in the future, or that would have occurred if
the acquisition had been consummated on March 1, 2000. The unaudited pro forma
financial information should be read in conjunction with American Greetings'
consolidated financial statements and notes thereto and management's discussion
and analysis for the year ended February 28, 2001 filed as part of American
Greetings' Form 10-K and Egreetings' financial statements and notes thereto for
the year ended December 31, 2000 filed as part of Egreetings' Form 8-K.
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Unaudited Pro Forma Combined Statement of Operations
For the Year Ended February 28, 2001
Thousands of dollars except per share amounts
Historical
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American Egreetings
Greetings Network, Pro Forma Pro Forma
Corporation Inc. Adjustments Combined
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Net sales $2,518,814 $10,437 $2,529,251
Costs and expenses:
Material, labor and other production costs 999,271 11,609 $ (456) (1) 1,011,447
(1,063) (2)
4,220 (4)
(3,528) (5)
(437) (6)
1,831 (7)
Selling, distribution and marketing 1,068,543 16,438 1,063 (2) 1,083,291
(1,300) (3)
(467) (4)
(986) (6)
Administrative and general 280,202 27,121 1,300 (3) 303,580
(3,753) (4)
(882) (5)
1,423 (6)
(1,831) (7)
Non-recurring items - 24,856 24,856
Interest expense 55,387 747 56,134
Other expense (income) -net 16,778 (3,763) 456 (1) 13,471
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2,420,181 77,008 (4,410) 2,492,779
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Income (loss) before income taxes and
cumulative effect of accounting change 98,633 (66,571) 4,410 36,472
Income tax provision (benefit) 191,306 - (23,000) (8) 168,306
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Net (loss) income before cumulative effect of
accounting change $ (92,673) $(66,571) $ 27,410 $(131,834)
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Loss per share and loss per share assuming
dilution before cumulative effect of
accounting change $ (1.46) $ (2.07)
Weighted average number of shares
outstanding for loss per share and loss per
share assuming dilution 63,646,405 63,646,405
See notes to Unaudited Pro Forma Combined Statement of Operations
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Notes to Unaudited Pro Forma Combined Statement of Operations
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(1) Elimination of royalties paid by Egreetings to American Greetings for
online card content.
(2) Costs related to marketing are included in selling, distribution and
marketing by American Greetings. Certain of these costs are classified
as product costs by Egreetings. This adjustment conforms the
classification of these costs to that of American Greetings.
(3) Costs related to bad debt expense are included in administrative and
general expenses by American Greetings. These costs are classified as
selling costs by Egreetings. This adjustment conforms the
classification of these costs to that of American Greetings.
(4) Reclassification of depreciation expense as reported by Egreetings to
conform the classification of these costs to that of American
Greetings
(5) Represents reduction of depreciation expense reflecting write-down of
property, plant and equipment to fair value.
(6) Reclassification of occupancy costs as reported by Egreetings to
conform the classification of these costs to that of American
Greetings.
(7) Costs related to Internet web monitoring and maintenance are included
in material, labor and other production costs by American Greetings.
These costs are classified as administrative and general costs by
Egreetings. This adjustment conforms the classification of these costs
to that of American Greetings.
(8) Income tax benefit at statutory rate of 37% for loss incurred by
Egreetings (but for which no benefit was available to Egreetings due
to its having no operating profits in any of its periods), including
pro forma adjustments.
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Unaudited Pro Forma Combined Statement of Financial Position
February 28, 2001
Thousands of dollars except per share amounts
Historical
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American Egreetings
Greetings Network, Pro Forma Pro Forma
ASSETS Corporation Inc. Adjustments Combined
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CURRENT ASSETS
Cash and cash equivalents $ 51,691 $ 3,841 $ (24,552) (3) $ 30,980
Marketable securities 36,535 43 (1) 36,578
Trade accounts receivable, less allowances
for sales returns and for doubtful accounts 387,534 2,635 (88) (1) 390,081
Inventories 365,221 59 (54) (1) 365,226
Deferred and refundable income taxes 190,241 10,982 (2) 201,223
Prepaid expenses and other 211,049 802 (464) (1) 211,387
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Total current assets 1,205,736 43,872 (14,133) 1,235,475
GOODWILL 229,802 229,802
OTHER ASSETS 799,348 825 (651) (4) 793,765
(5,757) (9)
PROPERTY, PLANT AND EQUIPMENT-NET 477,188 10,365 (7,826) (5) 479,727
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$ 2,712,074 $ 55,062 $ (28,367) $ 2,738,769
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Debt due within one year $ 378,904 $ 1,994 $ 380,898
Accounts payable and accrued liabilities 304,063 3,467 $ (167) (1) 315,451
8,088 (6)
Accrued compensation and benefits 89,936 1,807 (40) (1) 91,703
Dividends payable 12,732 12,732
Income taxes 192,936 192,936
Other current liabilities 132,710 1,612 (56) (1) 134,266
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Total current liabilities 1,111,281 8,880 7,825 1,127,986
LONG-TERM DEBT 380,124 1,759 (171) (1) 381,712
OTHER LIABILITIES 146,187 146,187
DEFERRED INCOME TAXES 27,292 27,292
SHAREHOLDERS' EQUITY
Common shares - par value $1
Class A 58,860 160,971 (160,971) (7) 58,860
Class B 4,629 4,629
Capital in excess of par value 286,054 (266) 266 (7) 286,054
Treasury stock (447,127) (447,127)
Accumulated other comprehensive loss (58,179) (58,179)
Retained earnings 1,202,953 (116,282) 116,282 (7) 1,211,355
8,402 (8)
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Total shareholders' equity 1,047,190 44,423 (36,021) 1,055,592
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$ 2,712,074 $ 55,062 $ (28,367) $2,738,769
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See Notes to Unaudited Pro Forma Combined Statement of Financial Position
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Notes to Unaudited Pro Forma Combined Statement of Financial Position
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(1) Certain items included in Egreetings' balance sheet have been adjusted
to reflect their fair value.
(2) Represents deferred tax asset established in purchase accounting.
(3) Represents net cash paid for acquisition of Egreetings shares.
(4) Write off deferred financing costs, security deposits and other assets.
(5) Net write down of leasehold improvements, furniture and fixtures,
software and hardware computer equipment, net of related accumulated
depreciation, to estimated fair values.
(6) Represents accruals for costs related to the assumptions and cancellation
of facility leases and the related exit costs for the closure of those
facilities and the related termination of employees in connection with
redundant activities and operations.
(7) Represents the elimination of the shareholders' equity related to
Egreetings.
(8) Difference in acquisition date net book value as compared to December
31, 2000 net book value.
(9) Elimination of book value of Egreetings shares held by American Greetings
at February 28, 2001.
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(c) Exhibits:
Page Number
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Exhibit 23.1 Consent of Ernst & Young LLP A-1
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AMERICAN GREETINGS CORPORATION
By: /s/ Joseph B. Cipollone
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Joseph B. Cipollone
Vice President-Controller
June 1, 2001