American Greetings Announces First Quarter Earnings

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CLEVELAND, June 29, 2011 /CNW/ -- American Greetings Corporation (NYSE: AM) today announced its results for the first fiscal quarter ended May 27, 2011.

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    First Quarter Results
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For the first quarter of fiscal 2012, the Company reported total revenue of $402.3 million, pre-tax income of $50.8 million, and net income of $32.6 million or 78 cents per share (all per-share amounts assume dilution). Revenue was reduced by $1.9 million as a result of scan-based trading conversions that occurred during the quarter. The pre-tax income impact of the scan-based trading conversions was $2.3 million (after-tax $1.4 million, reducing earnings per share by about 3 cents).

For the first quarter of fiscal 2011, the Company reported total revenue of $396.3 million, pre-tax income of $51.0 million, and net income of $30.8 million or 75 cents per share. The Company incurred pre-tax costs associated with the integrations of Papyrus and Recycled Paper Greetings of $3.4 million (after-tax of $2.1 million, reducing earnings per share by about 5 cents).

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    Management Comments and Outlook
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Chief Executive Officer Zev Weiss said, "Despite the continuing erratic economic environment, we achieved a record level of earnings per share in the first quarter driven by the combination of the changes we made to our portfolio of businesses in recent years, our growing market share in North America, and the continuation of good expense management."

For fiscal 2012, the Company expects revenue to grow approximately 5% compared to fiscal 2011. The Company expects cash flow from operating activities to fall within the range of $125 million to $145 million and capital expenditures between $45 million and $50 million, resulting in cash flow from operating activities minus capital expenditures of $80 million to $100 million. This cash flow estimate includes an aggregate use of cash of approximately $5 million to $15 million for the combination of working capital, deferred costs, and taxes.

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    Conference Call on the Web
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American Greetings will broadcast its conference call live on the Internet at 9:00 a.m. Eastern time today. The conference call will be accessible through the Investor Relations section of the American Greetings Web site at http://investors.americangreetings.com. A replay of the call will be available on the site.

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    About American Greetings Corporation
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For more than 100 years, American Greetings Corporation (NYSE: AM) has been a creator and manufacturer of innovative social expression products that assist consumers in enhancing their relationships. The Company's major greeting card lines are American Greetings, Carlton Cards, Gibson, Recycled Paper Greetings and Papyrus, and other paper product offerings include DesignWare party goods and American Greetings and Plus Mark gift-wrap and boxed cards. American Greetings also has one of the largest collections of electronic greetings on the Web, including cards available at AmericanGreetings.com through AG Interactive, Inc. (the Company's online division). In addition to its product lines, American Greetings also creates and licenses popular character brands through the American Greetings Properties group. Headquartered in Cleveland, Ohio, American Greetings generates annual revenue of approximately $1.6 billion, and its products can be found in retail outlets worldwide. For more information on the Company, visit http://corporate.americangreetings.com.

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    Non-GAAP Measures
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Certain after-tax and liquidity amounts included in this earnings release may be considered non-GAAP measures under the Securities and Exchange Commission's Regulation G. The after-tax amounts were calculated based on the Company's statutory tax rate of approximately 38.9%. Management believes that after-tax information is useful in analyzing the Company's results and that cash flow from operating activities minus capital expenditures provides a liquidity measure useful to investors in analyzing the cash generation of the Company.

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    Factors That May Affect Future Results
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Certain statements in this release, including those under Management Comments and Outlook, may constitute forward-looking statements within the meaning of the Federal securities laws. These statements can be identified by the fact that they do not relate strictly to historic or current facts. They use such words as "anticipate," "estimate," "expect," "project," "intend," "plan," "believe," and other words and terms of similar meaning in connection with any discussion of future operating or financial performance. These forward-looking statements are based on currently available information, but are subject to a variety of uncertainties, unknown risks and other factors concerning the Company's operations and business environment, which are difficult to predict and may be beyond the control of the Company. Important factors that could cause actual results to differ materially from those suggested by these forward-looking statements, and that could adversely affect the Company's future financial performance, include, but are not limited to, the following:

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    --  a weak retail environment and general economic conditions;
    --  competitive terms of sale offered to customers;
    --  retail consolidations, acquisitions and bankruptcies, including the
        possibility of resulting adverse changes to retail contract terms;
    --  the timing and impact of investments in new retail or product
        strategies as well as new product introductions and achieving the
        desired benefits from those investments;
    --  the timing and impact of converting customers to a scan-based trading
        model;
    --  the ability to achieve the desired benefits associated with the
        Company's cost reduction efforts;
    --  the ability to successfully implement or achieve the desired benefits
        associated with any information systems refresh the Company may
        implement;
    --  Schurman Fine Papers' ability to successfully operate its retail
        operations and satisfy its obligations to the Company;
    --  consumer acceptance of products as priced and marketed;
    --  the impact of technology, including social media, on core product
        sales;
    --  escalation in the cost of providing employee health care;
    --  the Company's ability to achieve the desired accretive effect from any
        share repurchase programs;
    --  the Company's ability to comply with its debt covenants;
    --  fluctuations in the value of currencies in major areas where the
        Company operates, including the U.S. Dollar, Euro, U.K. Pound
Sterling,
        and Canadian Dollar; and
    --  the outcome of any legal claims known or unknown.

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Risks pertaining specifically to AG Interactive include the viability of online advertising, subscriptions as revenue generators, and the ability to adapt to rapidly changing social media and the digital photo sharing space.

In addition, this release contains time-sensitive information that reflects management's best analysis as of the date of this release. American Greetings does not undertake any obligation to publicly update or revise any forward-looking statements to reflect future events, information or circumstances that arise after the date of this release. Further information concerning issues that could materially affect financial performance related to forward-looking statements can be found in the Company's periodic filings with the Securities and Exchange Commission, including the "Risk Factors" section of the Company's Annual Report on Form 10-K.

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                    AMERICAN GREETINGS CORPORATION
            FIRST QUARTER CONSOLIDATED STATEMENT OF INCOME
                 FISCAL YEAR ENDING FEBRUARY 29, 2012
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(In thousands of dollars except share and per share amounts)

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                                           (Unaudited)
                                       Three Months Ended
                                       ------------------
                                      May 27,         May 28,
                                        2011            2010
                                     --------        --------
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    Net sales                         $396,776        $392,105
    Other revenue                        5,573           4,203
                                         -----           -----
    Total revenue                      402,349         396,308
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    Material, labor and other
     production costs                  157,929         158,013
    Selling, distribution and
     marketing expenses                123,292         117,551
    Administrative and general
     expenses                           65,298          66,032
    Other operating income - net          (923)           (594)
                                          ----            ----
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Operating income 56,753 55,306

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    Interest expense                     6,124           6,202
    Interest income                       (321)           (213)
    Other non-operating expense
     (income) - net                        160          (1,700)
                                           ---          ------
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    Income before income tax
     expense                            50,790          51,017
    Income tax expense                  18,197          20,178
                                        ------          ------
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    Net income                         $32,593         $30,839
                                       =======         =======
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Earnings per share - basic $0.80 $0.78

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    Earnings per share -assuming
     dilution                            $0.78           $0.75
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    Average number of common
     shares outstanding             40,500,357      39,638,568
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    Average number of common
     shares outstanding -
      assuming dilution             41,799,366      40,849,429
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    Dividends declared per share         $0.15           $0.14





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                   AMERICAN GREETINGS CORPORATION
    FIRST QUARTER CONSOLIDATED STATEMENT OF FINANCIAL POSITION
                FISCAL YEAR ENDING FEBRUARY 29, 2012
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(In thousands of dollars)

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                                                    (Unaudited)
                                                    -----------
                                               May 27,          May 28,
                                                2011             2010
                                              --------         --------
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    ASSETS
    CURRENT ASSETS
      Cash and cash equivalents                $211,139         $186,775
      Trade accounts receivable, net            137,213          110,085
      Inventories                               203,346          157,913
      Deferred and refundable income taxes       46,686           74,951
      Assets held for sale                        7,180           14,680
      Prepaid expenses and other                117,315          118,046
                                                -------          -------
        Total current assets                    722,879          662,450
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    GOODWILL                                     29,701           30,238
    OTHER ASSETS                                431,472          413,237
    DEFERRED AND REFUNDABLE INCOME TAXES        127,731          150,207
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    Property, plant and equipment -at
     cost                                       859,189          835,707
    Less accumulated depreciation               616,706          597,610
                                                -------          -------
    PROPERTY, PLANT AND EQUIPMENT - NET         242,483          238,097
                                                -------          -------
                                             $1,554,266       $1,494,229
                                             ==========       ==========
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    LIABILITIES AND SHAREHOLDERS' EQUITY
    CURRENT LIABILITIES
      Debt due within one year                       $-          $99,000
      Accounts payable                           98,641           80,205
      Accrued liabilities                        65,527           61,425
      Accrued compensation and benefits          35,163           35,472
      Income taxes payable                       18,752           25,390
      Other current liabilities                 100,107           91,878
                                                -------           ------
        Total current liabilities               318,190          393,370
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    LONG-TERM DEBT                              233,298          230,973
    OTHER LIABILITIES                           186,484          179,643
    DEFERRED INCOME TAXES AND
      NONCURRENT INCOME TAXES PAYABLE            32,132           30,548
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    SHAREHOLDERS' EQUITY
      Common shares - Class A                    37,942           37,064
      Common shares - Class B                     2,803            2,926
      Capital in excess of par value            502,131          478,676
      Treasury stock                           (951,643)        (951,830)
      Accumulated other comprehensive
       income (loss)                              2,121          (40,257)
      Retained earnings                       1,190,808        1,133,116
                                              ---------        ---------
        Total shareholders' equity              784,162          659,695
                                                -------          -------
                                             $1,554,266       $1,494,229
                                             ==========       ==========





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                 AMERICAN GREETINGS CORPORATION
       FIRST QUARTER CONSOLIDATED STATEMENT OF CASH FLOWS
              FISCAL YEAR ENDING FEBRUARY 29, 2012
                   (In thousands of dollars)
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                                                           (Unaudited)
                                                           Three Months
                                                              Ended
                                                             ------------
                                                         May            May
                                                         27,            28,
                                                         2011           2010
                                                        ----           ----
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    OPERATING ACTIVITIES:
      Net income                                       $32,593        $30,839
      Adjustments to reconcile net income to
          cash flows from operating activities:
        Stock-based compensation                         2,662          2,650
        Net loss (gain) on disposal of fixed
         assets                                             86           (151)
        Depreciation and amortization                    9,929         10,294
        Deferred income taxes                            1,147           (535)
        Other non-cash charges                             872            735
        Changes in operating assets and
         liabilities,
              net of acquisitions and dispositions:
          Trade accounts receivable                    (12,389)        19,576
          Inventories                                  (18,750)         4,483
          Other current assets                           2,442         (2,878)
          Income taxes                                   7,596         15,830
          Deferred costs - net                          13,099         13,802
          Accounts payable and other liabilities       (27,922)       (66,362)
          Other - net                                      597          4,256
                                                           ---          -----
        Total Cash Flows From Operating
         Activities                                     11,962         32,539
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    INVESTING ACTIVITIES:
      Property, plant and equipment additions           (8,891)        (5,965)
      Cash payments for business
       acquisitions, net of cash acquired               (5,992)             -
      Proceeds from sale of fixed assets                    24            555
      Proceeds from escrow related to party
       goods transaction                                     0         24,523
                                                           ---         ------
        Total Cash Flows From Investing
         Activities                                    (14,859)        19,113
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    FINANCING ACTIVITIES:
      Net decrease in long-term debt                         -           (250)
      Sale of stock under benefit plans                 12,000         19,087
      Purchase of treasury shares                       (9,942)       (12,979)
      Dividends to shareholders                         (6,062)        (5,525)
                                                        ------         ------
        Total Cash Flows From Financing
         Activities                                     (4,004)           333
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    EFFECT OF EXCHANGE RATE CHANGES ON CASH              2,202         (3,159)
                                                         -----         ------
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    (DECREASE) INCREASE IN CASH AND CASH
     EQUIVALENTS                                        (4,699)        48,826
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        Cash and Cash Equivalents at Beginning
         of Year                                       215,838        137,949
                                                       -------        -------
        Cash and Cash Equivalents at End of
         Period                                       $211,139       $186,775
                                                      ========       ========





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                 AMERICAN GREETINGS CORPORATION
         FIRST QUARTER CONSOLIDATED SEGMENT DISCLOSURES
              FISCAL YEAR ENDING FEBRUARY 29, 2012
                    (In thousands of dollars)
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                                                  (Unaudited)
                                                  Three Months
                                                     Ended
                                                     ------------
                                             May 27,        May 28,
                                               2011           2010
                                             --------       --------
    Total Revenue:
    North American Social Expression
     Products                                $303,228       $308,309
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    International Social Expression
     Products                                  70,205         57,573
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AG Interactive 16,717 18,554

Non-reportable segments 12,199 11,872

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                                             $402,349       $396,308
                                             ========       ========
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    Segment Earnings (Loss):
    North American Social Expression
     Products                                 $59,618        $64,063
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    International Social Expression
     Products                                   3,303          2,834
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AG Interactive 2,312 2,372

Non-reportable segments 4,606 2,152

Unallocated (19,049) (20,404)

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                                              $50,790        $51,017
                                              =======        =======






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SOURCE American Greetings Corporation

For further information: Gregory M. Steinberg, Treasurer and Executive Director of Investor Relations, American Greetings Corporation, +1-216-252-4864, investor.relations@amgreetings.com Web Site: http://corporate.americangreetings.com

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American Greetings Corporation

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