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) September 12, 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
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION 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 Securities and Exchange Commission on
September 27, 2001 relating to the acquisition by American Greetings
Corporation, an Ohio corporation ("American Greetings") through its subsidiary
AmericanGreetings.com, Inc., of the BlueMountain.com division ("Blue Mountain
Arts") of At Home Corporation, a Delaware corporation ("Excite@Home"), on
September 12, 2001. The following documents are included as part of this report:
(a) Financial Statements of Business Acquired
The audited financial statements of Blue Mountain Arts as of and for the year
ended December 31, 2000 with the report of independent auditors and the
financial statements as of and for the six months ended June 30, 2000 and 2001
(unaudited) are included as Exhibit 99 of this Form 8-K/A.
(b) Unaudited Pro Forma Financial Information
The accompanying unaudited pro forma financial information has been prepared to
give effect to the acquisition of Blue Mountain Arts 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 Blue
Mountain Arts for the year ended December 31, 2000. The unaudited pro forma
combined statement of operations for the six months ended August 31, 2001 gives
effect to the acquisition as if the acquisition had occurred on March 1, 2001.
The unaudited pro forma combined statement of operations presented for the six
months ended August 31, 2001 includes the historical financial results of
American Greetings for the six months ended August 31, 2001 and of Blue Mountain
Arts for the six months ended June 30, 2001. Synergies and expected cost savings
from the integration of Blue Mountain Arts 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 August
31, 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 August 31, 2001 and the
balance sheet of Blue Mountain Arts as of June 30, 2001.
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 Blue Mountain Arts'
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:
(a) 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;
(b) American Greetings' consolidated financial statements and notes
thereto and management's discussion and analysis for the six months
ended August 31, 2001 filed as part of American Greetings' Form 10-Q;
(c) Blue Mountain Arts' audited financial statements and notes thereto as
of and for the year ended December 31, 2000 and the financial
statements as of and for the six months ended June 30, 2000 and 2001
(unaudited) included as Exhibit 99 of this Form 8-K/A.
Unaudited Pro Forma Combined Statement of Operations
For the Year Ended February 28, 2001
Thousands of dollars except per share amounts
Historical
--------------------------------
American Blue
Greetings Mountain Pro Forma Pro Forma
Corporation Arts Adjustments Combined
--------------- -------------- ----------------- --------------
Net sales $ 2,518,814 $ 13,867 $ 2,532,681
Costs and expenses:
Material, labor and other production costs 999,271 9,073 1,008,344
Selling, distribution and marketing 1,068,543 10,111 1,078,654
Administrative and general 280,202 10,121 290,323
Interest expense 55,387 -- 55,387
Other expense -net 16,778 924,207 (1) $ 1,810 (2) 942,795
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2,420,181 953,512 1,810 3,375,503
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Income (loss) before income tax provision (benefit)
and cumulative effect of accounting change 98,633 (939,645) (1,810) (842,822)
Income tax provision (benefit) 191,306 -- (6,382) (3) 184,924
----------- ---------- ---------- -----------
Net (loss) income before cumulative effect of
accounting change $ (92,673) $ (939,645) $ 4,572 $(1,027,746)
=========== ========== ========== ===========
Loss per share and loss per share assuming
dilution before cumulative effect of
accounting change $ (1.46) $ (16.15)
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.
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
(1) Includes $684,205 related to write-down of goodwill, other intangible
assets and other assets. See Notes 1 and 2 to the Financial Statements
of Blue Mountain Arts included in Exhibit 99 for further discussion.
(2) Represents interest income foregone due to use of cash in acquisition.
(3) Income tax benefit at statutory rate of 37% for loss incurred by Blue
Mountain Arts (but for which no benefit was available to Blue Mountain
Arts due to its having no operating profits in any of its periods),
except amortization of other intangible assets, and including the
impact of interest income foregone due to use of cash in acquisition.
Unaudited Pro Forma Combined Statement of Operations
For the Six Months Ended August 31, 2001
Thousands of dollars except per share amounts
Historical
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American Blue
Greetings Mountain Pro Forma Pro Forma
Corporation Arts Adjustments Combined
--------------- ------------- ----------------- --------------
Net sales $ 993,965 $ 4,345 $ 998,310
Costs and expenses:
Material, labor and other production costs 438,017 3,896 441,913
Selling, distribution and marketing 514,264 4,795 519,059
Administrative and general 143,198 4,984 148,182
Restructure charges 52,925 -- 52,925
Interest expense 35,525 -- 35,525
Other expense (income) -net (4,070) 19,485 (1) $ 905 (2) 16,320
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1,179,859 33,160 905 1,213,924
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(Loss) before income tax benefit (185,894) (28,815) (905) (215,614)
Income tax (benefit) (70,082) -- (3,787) (3) (73,869)
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Net (loss) income $ (115,812) $ (28,815) $ 2,882 $ (141,745)
============ ============ ======= ===========
Loss per share and loss per share assuming
dilution $ (1.82) $ (2.23)
Weighted average number of shares
outstanding for loss per share and loss per
share assuming dilution 63,500,674 63,500,674
See Notes to Unaudited Pro Forma Combined Statement of Operations.
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
(1) Includes $15,503 related to write-down of goodwill, other intangible
assets and other assets. See Notes 1 and 2 to the Financial Statements
of Blue Mountain Arts included in Exhibit 99 for further discussion.
(2) Represents interest income foregone due to use of cash in acquisition.
(3) Income tax benefit at statutory rate of 37% for loss incurred by Blue
Mountain Arts (but for which no benefit was available to Blue Mountain
Arts due to its having no operating profits in any of its periods),
except amortization of other intangible assets, and including the
impact of interest income foregone due to use of cash in acquisition.
Unaudited Pro Forma Combined Statement of Financial Position
August 31, 2001
Thousands of dollars except per share amounts
Historical
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American Blue
Greetings Mountain Pro Forma Pro Forma
ASSETS Corporation Arts Adjustments Combined
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CURRENT ASSETS
Cash and cash equivalents $ 74,883 $ (36,200) (1) $ 38,683
Trade accounts receivable, less
allowances for sales returns
and for doubtful accounts 369,544 $ 355 (241) (2) 369,658
Inventories 429,657 429,657
Deferred and refundable income taxes 164,924 164,924
Prepaid expenses and other 215,298 215,298
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Total current assets 1,254,306 355 (36,441) 1,218,220
GOODWILL 227,202 37,384 (3) 264,586
OTHER ASSETS 906,291 12,350 (12,332) (4) 906,568
260 (5)
(1) (2)
PROPERTY, PLANT AND EQUIPMENT-NET 454,587 1,757 (121) (2) 456,223
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$ 2,842,386 $ 14,462 $ (11,251) $ 2,845,597
============ ============ ============ ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Debt due within one year $ 141,311 $ 141,311
Accounts payable 152,574 $ 74 152,648
Accrued liabilities 198,340 669 $ 1,980 (2) 200,989
Accrued compensation and benefits 86,667 250 13 (2) 86,930
Dividends payable 6,367 6,367
Income taxes 128,303 128,303
Other current liabilities 132,014 199 132,213
----------- ---------- ---------- ------------
Total current liabilities 845,576 1,192 1,993 848,761
LONG-TERM DEBT 850,250 850,250
OTHER LIABILITIES 199,585 199,585
DEFERRED INCOME TAXES 23,005 23,005
SHAREHOLDERS' EQUITY
Common shares - par value $1
Class A 58,877 58,877
Class B 4,626 4,626
Capital in excess of par value 286,054 993,461 (993,461) (6) 286,054
Treasury stock (447,124) (447,124)
Accumulated other comprehensive loss (58,844) (58,844)
Retained earnings 1,080,381 (980,191) 980,191 1,080,381
26 (7) 26
----------- ---------- ---------- ------------
Total shareholders' equity 923,970 13,270 (13,244) 923,996
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$ 2,842,386 $ 14,462 $ (11,251) $ 2,845,597
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See notes to Unaudited Pro Forma Combined Statement of Financial Position.
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF FINANCIAL POSITION
(1) Represents cash paid in acquisition ($35,000 plus $1,200 of
acquisition-related expenses).
(2) Certain items included in Blue Mountain Arts' balance sheet have been
adjusted to reflect their fair value at the date of acquisition.
(3) Represents goodwill established in purchase accounting, representing excess
of purchase price over fair value of assets acquired and liabilities
assumed.
(4) Intangible assets included in Blue Mountain Arts' results have been written
off to reflect their fair value to the combined entity.
(5) Represents establishment of fair value for Blue Mountain Arts' Universal
Resource Locator acquired.
(6) Represents the elimination of the shareholders' equity related to Blue
Mountain Arts.
(7) Difference in acquisition date net book value as compared to June 30, 2001
net book value.
(c) Exhibits:
Page
Number
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Exhibit 23 Consent of Ernst & Young LLP A-1
Exhibit 99 Financial Statements of Blue Mountain Arts for A-2
year ended December 31, 2000 and six months ended
June 30, 2000 and 2001 (unaudited)
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, Corporate Controller
Chief Accounting Officer
November 21, 2001