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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 9, 2000
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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
The Registrant hereby amends Item 7 of its Current Report on Form 8-K previously
filed with the Securities and Exchange Commission on March 24, 2000 relating to
the acquisition by American Greetings Corporation, an Ohio Corporation
("American Greetings"), of Gibson Greetings, Inc., an Ohio Corporation
("Gibson"), on March 9, 2000. The following documents are included as part of
this report:
(a) Financial Statements of Business Acquired
The audited consolidated financial statements of Gibson Greetings, Inc. as of
December 31, 1999 and 1998 and for each of the three years in the period ended
December 31, 1999 and the independent auditors' report are filed as Exhibit
99.1 to this report.
(b) Unaudited Pro Forma Financial Information
The accompanying unaudited pro forma financial information has been prepared to
give effect to the acquisition of Gibson by American Greetings. The unaudited
pro forma combined statement of income for the year ended February 29, 2000
gives effect to the acquisition as if the acquisition had occurred on March 1,
1999. The unaudited pro forma combined statement of income presented for the
year ended February 29, 2000 includes the historical financial results of
American Greetings for the year ended February 29, 2000 and of Gibson for the
year ended December 31, 1999. Synergies and expected cost savings from the
integration of Gibson with American Greetings' previously 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 income.
The unaudited pro forma combined statement of financial position as of
February 29, 2000 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 29, 2000 and the balance sheet of Gibson as of December 31, 1999.
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. The purchase
accounting adjustments are preliminary and subject to revisions for the final
resolution of preacquisition contingencies and restructuring. Any revisions
will be reflected in future periods. Certain reclassifications have been
reflected to conform 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, 1999. The unaudited pro forma
financial information should be read in conjunction with Gibson's consolidated
financial statements and notes thereto for the year ended December 31, 1999
filed as Exhibit 99.1 to this report and American Greetings' consolidated
financial statements and notes thereto and management's discussion and analysis
for the year ended February 29, 2000 filed as Exhibits 99.2 and 99.3,
respectively, to this report.
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Unaudited Pro Forma Combined Statement of Income
For the Year Ended February 29, 2000
Thousands of dollars except per share amounts
Historical
--------------------------------
American Gibson
Greetings Greetings, Pro-Forma Pro Forma
Corporation Inc. Adjustments Combined
--------------- -------------- ----------------- ------------
Net sales $2,175,236 $296,205 $ 48,825 (1) $2,521,663
(1,484) (8)
2,881 (14)
Costs and expenses:
Material, labor and other production costs 809,347 168,713 10,100 (2) 1,015,342
30,847 (3)
271 (9)
788 (15)
(4,724)(11)
Selling, distribution and marketing 921,392 189,117 48,825 (1) 1,081,086
(10,100) (2)
(30,847) (3)
(42,767) (4)
(271) (9)
3,644 (10)
2,881 (14)
(788)(15)
Administrative and general 227,075 41,797 (4) 268,175
614 (5)
(450)(13)
(861)(12)
Non-recurring items 38,873 38,873
Interest expense 34,255 336 10,344 (6) 44,935
Other expense-net 3,670 (1,484) (8) (488)
970 (4)
(3,644)(10)
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2,034,612 358,166 55,145 2,447,923
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Income (loss) before income taxes 140,624 (61,961) (4,923) 73,740
Income tax provision (benefit) 50,625 (26,228) (1,761) (7) 22,636
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Net income (loss) $ 89,999 $ (35,733) $ (3,162) $ 51,104
=============== ============== ================= ==============
Earnings per share $1.37 $0.78
Earnings per share - assuming dilution $1.37 $0.78
Average number of shares outstanding 65,591,798 65,591,798
See notes to Unaudited Pro Forma Combined Statement of Income
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Notes to Unaudited Pro Forma Combined Statement of Income
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(1) Amortization of deferred costs relating to agreements with certain
customers is included in selling, distribution and marketing costs by
American Greetings. Amortization of deferred costs is classified as a
reduction of net sales by Gibson. This adjustment conforms the
classification of these costs to that of American Greetings.
(2) Costs related to facilities, plant operation and processing of
returned goods are included in material, labor and other production
costs by American Greetings. These costs are classified as selling and
administrative costs by Gibson. This adjustment conforms the
classification of these costs to that of American Greetings.
(3) Costs related to providing display fixtures to customers are included
in material, labor and other production costs by American Greetings.
These costs are classified as selling and administrative costs by
Gibson. This adjustment conforms the classification of these costs to
that of American Greetings.
(4) Costs related to administrative functions are included in
administrative and general expenses by American Greetings. These costs
are classified as selling and administrative costs by Gibson. This
adjustment conforms the classification of these costs to that of
American Greetings.
(5) Amortization of goodwill created in the acquisition based on a 40-year
life.
(6) Interest expense on financing of acquisition.
(7) Provision for income taxes on Pro Forma adjustments, except goodwill
amortization, at 37%.
(8) Royalty income is included in other income by American Greetings.
Royalty income is included in total revenue by Gibson. This adjustment
conforms the classification of royalty income to that of American
Greetings.
(9) A portion of creative costs are included in selling and administrative
costs by Gibson. These costs are included in material, labor and other
production costs by American Greetings. This adjustment conforms the
classification of creative costs to that of American Greetings.
(10) Miscellaneous income is included in selling and administrative costs
by Gibson. This income is included in other income by American
Greetings. This adjustment conforms the classification of
miscellaneous income to that of American Greetings.
(11) Fixtures provided to customers are expensed when shipped by American
Greetings. Fixtures are capitalized and amortized over five years by
Gibson. This adjustment reflects the net difference in accounting
treatment to conform to that of American Greetings.
(12) Gibson's results include amortization of capitalized costs associated
with computer equipment and software. This project has been cancelled
and the related capitalized costs expensed by American Greetings. This
adjustment reflects the elimination of that amortization expense
included in Gibson's results.
(13) Adjustment to remove amortization expense associated with goodwill
included in Gibson's historical results.
(14) Certain other competitive expenses are classified as reductions
of net sales by Gibson. This adjustment conforms the classification
of these costs to that of American Greetings.
(15) Freight expenses for returned goods are classified as selling costs by
Gibson. This adjustment conforms the classification of these costs to
that of American Greetings.
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Unaudited Pro Forma Combined Statement of Financial Position
As of February 29, 2000
Thousands of dollars except per share amounts
Historical
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American Gibson
Greetings Greetings, Pro Forma Pro Forma
ASSETS Corporation Inc. Adjustments Combined
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CURRENT ASSETS
Cash and cash equivalents $ 61,010 $ 4,674 $ 65,684
Marketable securities 68,579 (30,268)(4) 38,311
Trade accounts receivable, less allowances
for sales returns and for doubtful
accounts 430,825 66,936 (7,904)(1) 483,713
(6,144)(2)
Inventories 249,433 50,474 (8,780)(2) 291,127
Deferred and refundable income taxes 99,709 30,689 12,129 (4) 168,070
27,476 (9)
(1,933)(13)
Prepaid expenses and other 259,707 14,271 (1,129)(2) 272,849
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Total Current Assets 1,100,684 235,623 (16,553) 1,319,754
GOODWILL 149,437 9,762 24,555 (12) 173,992
(9,762)(8)
OTHER ASSETS 820,447 97,793 (2,412)(6) 920,692
9,439 (9)
(4,575)(13)
PROPERTY, PLANT AND EQUIPMENT-NET 447,415 87,497 (31,621)(3) 462,420
(15,032)(6)
(25,839)(5)
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$ 2,517,983 $ 430,675 $ (71,800) $ 2,876,858
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Debt due within one year $ 109,694 $ 31,943 177,722(10) $ 319,359
Accounts payable and accrued liabilities 213,180 20,761 29,246 (1) 260,823
(715)(6)
(1,649)(2)
Accrued compensation and benefits 84,456 16,600 (1) 115,644
200 (2)
14,388 (6)
Dividends payable 25,808 25,808
Income taxes 13,090 13,090
Other current liabilities 136,260 59,714 (53,750)(1) 147,029
761 (6)
4,044 (2)
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Total Current Liabilities 582,488 112,418 186,847 881,753
LONG-TERM DEBT 442,102 9,389 451,491
OTHER LIABILITIES 195,985 46,431 (16,092)(2) 242,144
7,945 (6)
17,414 (6)
(9,539)(6)
DEFERRED INCOME TAXES 44,997 44,997
SHAREHOLDERS' EQUITY
Common shares - par value $1
Class A 59,873 171 (171)(11) 59,873
Class B 4,647 4,647
Capital in excess of par value 304,946 54,986 (54,986)(11) 304,946
Treasury stock (445,758) (21,999) 21,999 (11) (445,758)
Accumulated other comprehensive (loss) income (27,572) 27,476 (9,337)(11) (27,572)
(18,139)(4)
Retained earnings 1,356,275 201,803 (201,803)(11) 1,360,337
4,062 (7)
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Total shareholders' equity 1,252,411 262,437 (258,375) 1,256,473
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$ 2,517,983 $ 430,675 $ (71,800) $ 2,876,858
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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) Reclassification of payroll and payroll taxes, customer allowances and
other accrued liabilities to conform with the presentation of American
Greetings.
(2) Certain items included in Gibson's results have been adjusted to
reflect their fair value at the date of acquisition.
(3) Adjustment to expense capitalized costs associated with computer
equipment and software that will not be used by the combined company.
(4) Adjustment to reflect decline in market value of investment in
Egreetings Network from December 31, 1999 to February 29, 2000.
(5) Fixtures provided to customers are expensed when shipped by American
Greetings. Fixtures are capitalized and amortized over five years by
Gibson. Adjustment to expense capitalized fixture costs in Gibson's
results.
(6) Represents accruals for costs related to the assumption 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) Difference in acquisition date net book value vs December 31, 1999 net
book value.
(8) Represents the write-off of goodwill associated with previous
acquisitions of Gibson.
(9) Represents deferred tax asset established in purchase accounting.
(10) Represents commercial paper borrowings used to finance the
acquisition.
(11) Represents the elimination of the shareholders' equity related to
Gibson.
(12) Represents goodwill generated from acquisition.
(13) Represents adjustment in tax rate for Gibson's deferred tax assets.
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(c) Exhibits:
Page Number
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Exhibit 23.1 Consent of Deloitte & Touche LLP A-1
Exhibit 23.2 Consent of Ernst & Young LLP B-1
Exhibit 99.1 Audited Consolidated Financial Statements of Gibson Greetings, Inc. C-1
as of December 31, 1999 and 1998 and for the three years ended
December 31, 1999
Exhibit 99.2 Audited Consolidated Financial Statements of American Greetings D-1
Corporation as of February 29, 2000 and February 28, 1999 and for the
three years ended February 29, 2000
Exhibit 99.3 Management's Discussion and Analysis of American Greetings E-1
Corporation for the years ended February 29, 2000 and February 28,
1999 and 1998
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/ Patricia L. Ripple
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Patricia L. Ripple
Vice President-Controller
May 23, 2000