American Greetings Announces Fourth Quarter Earnings

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    -- Earnings improvement over prior year

    -- Cash flow exceeds expectations





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CLEVELAND, April 28, 2011 /CNW/ -- American Greetings Corporation (NYSE: AM) today announced its financial results for both the fiscal fourth quarter and year ended February 28, 2011.

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    Management Comments and Outlook
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Chief Executive Officer Zev Weiss said, "I am quite pleased with our overall performance this year. Our business is running well, our financial results exceeded our expectations, and the team had a great performance in an otherwise challenging year. We successfully completed the integrations of Papyrus and Recycled Paper Greetings and have established what we believe to be the industry-leading portfolio of products. Our earnings increased compared to the previous year, enabled by our refined portfolio, good expense management, and changed capital structure. Our cash flow from operating activities minus capital expenditures was $143 million and exceeded our original guidance by 14%. I want to thank our associates around the world for their continued commitment and teamwork."

For fiscal 2012, the Company expects revenue to grow approximately 5% compared to fiscal 2011, driven equally by organic revenue growth and the acquisition of Watermark Publishing in the United Kingdom. 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.

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    Fourth Quarter Results
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For the fourth quarter of fiscal 2011, the Company reported total revenue of $423.3 million, pre-tax income of $36.4 million, and net income of $15.5 million or 37 cents per share (all per-share amounts assume dilution). Several items impacted revenue and income during the quarter. Compared to the prior year, quarterly revenue was $5.0 million lower as a result of the party goods transaction that occurred in the fourth quarter of fiscal 2010. Revenue was $7.1 million lower 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 $5.5 million (after-tax $3.4 million, reducing earnings per share by about 8 cents). The Company also recorded severance costs of $4.0 million (after-tax $2.4 million, reducing earnings per share by about 6 cents) and costs associated with the integrations of Papyrus and Recycled Paper Greetings of $0.7 million (after-tax $0.4 million, reducing earnings per share by about 1 cent). These costs were partially offset by a $2.8 million gain associated with a building sale (after-tax $1.7 million, increasing earnings per share by about 4 cents) and $1.3 million of dividend income (after-tax $0.8 million, increasing earnings per share by about 2 cents). Both the building sale and the dividend were reported as other non-operating income. The Company also effectively settled ten years of domestic tax audits which increased income tax expense by $6.9 million (reducing earnings per share by about 17 cents).

For the fourth quarter of fiscal 2010, the Company reported total revenue of $426.4 million, pre-tax income of $31.8 million, and net income of $18.8 million or 46 cents per share. The Company recorded costs of $12.3 million (after-tax $8.6 million, reducing earnings per share by about 21 cents) related to the wind down of its operations in Mexico. Other costs included $19.0 million for the settlement of a lawsuit (after-tax $11.6 million, reducing earnings per share by about 29 cents) and $5.9 million for severance (after-tax $3.6 million, reducing earnings per share by about 9 cents). These costs were partially offset by a $21.2 million net benefit from the party goods transaction (after-tax $12.9 million, increasing earnings per share by about 33 cents). The Company also recognized a $3.3 million gain related to the liquidation of a business in France (the after-tax amount was also about $3.3 million, increasing earnings per share by about 8 cents).

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    Full Year Results
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For the full year fiscal 2011, the Company reported total revenue of $1,592.6 million, pre-tax income of $156.0 million, and net income of $87.0 million or $2.11 per share. Compared to the prior year, revenues were $11.7 million lower as a result of the sale of the retail store operations in the first quarter of fiscal 2010 and $31.2 million lower as a result of the party goods transaction that occurred in the fourth quarter of fiscal 2010. Scan-based trading conversions during the year further reduced revenue by $7.2 million. The pre-tax income impact of the scan-based trading conversions was $5.7 million (after-tax $3.5 million, reducing earnings per share by about 9 cents). The Company also recorded $10.3 million of costs associated with the integrations of Papyrus and Recycled Paper Greetings (after-tax $6.3 million, reducing earnings per share by about 15 cents) and severance costs of $6.9 million (after-tax $4.2 million, reducing earnings per share by about 10 cents). These costs were partially offset by a $3.8 million gain associated with the sales of two buildings (after-tax $2.3 million, increasing earnings per share by about 5 cents) and $1.3 million of dividend income (after-tax $0.8 million, increasing earnings per share by about 2 cents). Both the buildings sales and the dividend were reported as other non-operating income. During fiscal 2011, the Company also effectively settled ten years of domestic tax audits which increased income tax expense by $6.9 million (reducing earnings per share by about 17 cents).

For fiscal 2010, the Company reported total revenue of $1,635.9 million, pre-tax income of $121.0 million, and net income of $81.6 million or $2.03 per share. The Company recorded costs of approximately $18.2 million (after-tax $6.5 million, reducing earnings per share by about 16 cents) related to the wind down of its operations in Mexico. The Company also incurred a $24.0 million charge for the settlement of a lawsuit (after-tax $14.7 million, reducing earnings per share by about 37 cents), severance expense of $9.4 million (after-tax $5.8 million, reducing earnings per share by about 14 cents) and a $28.3 million charge related to the divestiture of our retail business early in the year (after-tax $17.3 million, reducing earnings per share by about 43 cents). These costs were partially offset by a $21.2 million net benefit related to the party goods transaction (after-tax $12.9 million, increasing earnings per share by about 33 cents), a $3.3 million gain related to the liquidation of a business in France (the after-tax amount was also about $3.3 million, increasing earnings per share by about 8 cents) and a $7.9 million benefit associated with a legacy insurance program (after-tax $7.6 million, increasing earnings per share by about 19 cents).

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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% for U.S. based items (other than cumulative currency translation adjustments, for which a 0% tax rate is applied) and the appropriate rates for international jurisdictions. 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.
    >>

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
                        FOURTH QUARTER CONSOLIDATED STATEMENT OF INCOME
                              FISCAL YEAR ENDED FEBRUARY 28, 2011
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(In thousands of dollars except share and per share amounts)

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                                                    (Unaudited)
                                                   Quarter Ended
                                                   -------------
                                            February         February
                                            28, 2011         28, 2010
                                           ---------        ---------
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    Net sales                                $412,779         $408,864
    Other revenue                              10,524           17,556
                                               ------           ------
    Total revenue                             423,303          426,420
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    Material, labor and other production
     costs                                    179,465          187,661
    Selling, distribution and marketing
     expenses                                 131,044          134,045
    Administrative and general expenses        73,526           95,164
    Other operating income - net                 (627)         (26,111)
                                                 ----          -------
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Operating income 39,895 35,661

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    Interest expense                            6,248            6,322
    Interest income                              (267)            (112)
    Other non-operating income - net           (2,520)          (2,327)
                                               ------           ------
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    Income before income tax expense           36,434           31,778
    Income tax expense                         20,950           12,982
                                               ------           ------
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    Net income                                $15,484          $18,796
                                              =======          =======
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Earnings per share - basic $0.39 $0.48

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    Earnings per share -assuming
     dilution                                   $0.37            $0.46
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    Average number of common shares
     outstanding                           40,194,003       39,463,368
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    Average number of common shares
     outstanding -
      assuming dilution                    41,479,079       40,445,332
    >>

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    Dividends declared per share                $0.14            $0.12



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                                             (Unaudited)
                                                    Year Ended
                                                    ----------
                                            February         February
                                            28, 2011         28, 2010
                                           ---------        ---------
    >>

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    Net sales                              $1,560,213       $1,598,292
    Other revenue                              32,355           37,566
                                               ------           ------
    Total revenue                           1,592,568        1,635,858
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    Material, labor and other production
     costs                                    682,368          713,075
    Selling, distribution and marketing
     expenses                                 478,227          507,960
    Administrative and general expenses       260,476          276,031
    Other operating income - net               (3,205)            (310)
                                               ------             ----
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Operating income 174,702 139,102

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    Interest expense                           25,389           26,311
    Interest income                              (853)          (1,676)
    Other non-operating income - net           (5,841)          (6,487)
                                               ------           ------
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    Income before income tax expense          156,007          120,954
    Income tax expense                         68,989           39,380
                                               ------           ------
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    Net income                                $87,018          $81,574
                                              =======          =======
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Earnings per share - basic $2.18 $2.07

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    Earnings per share -assuming
     dilution                                   $2.11            $2.03
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    Average number of common shares
     outstanding                           39,982,784       39,467,811
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    Average number of common shares
     outstanding -
      assuming dilution                    41,244,903       40,159,651
    >>

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    Dividends declared per share                $0.56            $0.36




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                        AMERICAN GREETINGS CORPORATION
          FOURTH QUARTER CONSOLIDATED STATEMENT OF FINANCIAL POSITION
                      FISCAL YEAR ENDED FEBRUARY 28, 2011
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                           (In thousands of dollars)
                                                     (Unaudited)
                                                     -----------
                                          February 28,       February 28,
                                               2011               2010
                                         -------------      -------------
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    ASSETS
    CURRENT ASSETS
      Cash and cash equivalents                $215,838           $137,949
      Trade accounts receivable, net            119,779            135,758
      Inventories                               179,730            163,956
      Deferred and refundable income
       taxes                                     50,051             78,433
      Assets held for sale                        7,154             15,147
      Prepaid expenses and other                128,372            148,048
                                                -------            -------
        Total current assets                    700,924            679,291
    >>

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    GOODWILL                                     28,903             31,106
    OTHER ASSETS                                436,137            428,161
    DEFERRED AND REFUNDABLE INCOME
     TAXES                                      124,789            148,210
    >>

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    Property, plant and equipment -
     at cost                                    849,552            836,245
    Less accumulated depreciation               607,903            593,362
                                                -------            -------
    PROPERTY, PLANT AND EQUIPMENT -
     NET                                        241,649            242,883
                                                -------            -------
                                             $1,532,402         $1,529,651
                                             ==========         ==========
    >>

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    LIABILITIES AND SHAREHOLDERS' EQUITY
    CURRENT LIABILITIES
      Debt due within one year                       $-             $1,000
      Accounts payable                           87,105             95,434
      Accrued liabilities                        69,824             78,245
      Accrued compensation and benefits          72,379             85,092
      Income taxes payable                       10,951             13,901
      Other current liabilities                 102,286             94,915
                                                -------             ------
        Total current liabilities               342,545            368,587
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    LONG-TERM DEBT                              232,688            328,723
    OTHER LIABILITIES                           176,522            168,098
    DEFERRED INCOME TAXES AND
      NONCURRENT INCOME TAXES PAYABLE            31,736             28,179
    >>

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    SHAREHOLDERS' EQUITY
      Common shares - Class A                    37,470             36,257
      Common shares - Class B                     2,937              3,223
      Capital in excess of par value            492,048            461,076
      Treasury stock                           (952,206)          (946,724)
      Accumulated other comprehensive
       loss                                      (2,346)           (29,815)
      Retained earnings                       1,171,008          1,112,047
                                              ---------          ---------
        Total shareholders' equity              748,911            636,064
                                                -------            -------
                                             $1,532,402         $1,529,651
                                             ==========         ==========




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                           AMERICAN GREETINGS CORPORATION
                FOURTH QUARTER CONSOLIDATED STATEMENT OF CASH FLOWS
                        FISCAL YEAR ENDED FEBRUARY 28, 2011
                             (In thousands of dollars)
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                                                         (Unaudited)
                                                         Year Ended
                                                         ----------
                                              February 28,       February 28,
                                                  2011               2010
                                             -------------      -------------
    >>

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    OPERATING ACTIVITIES:
      Net income                                   $87,018            $81,574
      Adjustments to reconcile net income
          to cash flows from operating activities:
        Stock-based compensation                    13,017              5,870
        Net gain on dispositions                      (254)            (6,507)
        Net (gain) loss on disposal
         of fixed assets                            (3,463)                59
        Depreciation and intangible
         assets amortization                        41,048             45,165
        Deferred income taxes                       28,642             25,268
        Fixed asset impairments                        119             13,005
        Other non-cash charges                       3,663             12,419
        Changes in operating assets and
         liabilities,
              net of acquisitions and dispositions:
          Trade accounts receivable                 15,296            (56,105)
          Inventories                              (13,097)            14,923
          Other current assets                      (1,922)            16,936
          Income taxes                              19,947             18,863
          Deferred costs - net                      14,262             18,405
          Accounts payable and other
           liabilities                             (31,015)              (633)
          Other - net                                6,538              8,248
                                                     -----              -----
        Total Cash Flows From
         Operating Activities                      179,799            197,490
    >>

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    INVESTING ACTIVITIES:
      Property, plant and equipment
       additions                                   (36,346)           (26,550)
      Cash payments for business
       acquisitions, net of cash
       acquired                                       (500)           (19,300)
      Proceeds from sale of fixed
       assets                                       14,242              1,124
      Proceeds from escrow related
       to party goods transaction                   25,151                  -
      Other - net                                    5,663              4,713
                                                     -----              -----
        Total Cash Flows From
         Investing Activities                        8,210            (40,013)
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    FINANCING ACTIVITIES:
      Net decrease in long-term
       debt                                        (98,250)           (62,350)
      Net decrease in short-term
       debt                                         (1,000)                 -
      Sale of stock under benefit
       plans                                        16,620              6,557
      Excess tax benefit from
       share-based payment awards                    4,512                148
      Purchase of treasury shares                  (13,521)           (11,848)
      Dividends to shareholders                    (22,354)           (19,049)
      Debt issuance costs                           (3,199)                 -
                                                    ------                ---
        Total Cash Flows From
         Financing Activities                     (117,192)           (86,542)
    >>

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    EFFECT OF EXCHANGE RATE
     CHANGES ON CASH                                 7,072              6,798
                                                     -----              -----
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    INCREASE IN CASH AND CASH
     EQUIVALENTS                                    77,889             77,733
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        Cash and Cash Equivalents at
         Beginning of Year                         137,949             60,216
                                                   -------             ------
        Cash and Cash Equivalents at
         End of Year                              $215,838           $137,949
                                                  ========           ========




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                              AMERICAN GREETINGS CORPORATION
                     FOURTH QUARTER CONSOLIDATED SEGMENT DISCLOSURES
                           FISCAL YEAR ENDED FEBRUARY 28, 2011
                                (In thousands of dollars)
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                                       (Unaudited)
                                      Quarter Ended
                                      -------------
                             February 28,        February 28,
                                  2011                2010
                             -------------       -------------
    Total Revenue:
    North American Social
      Expression Products         $307,935            $311,056
    Intersegment items                   -                   -
    Exchange rate
     adjustment                      5,560               3,485
                                     -----               -----
    Net                            313,495             314,541
    >>

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    International Social
      Expression Products           66,143              65,413
    Exchange rate
     adjustment                      3,157               2,409
                                     -----               -----
    Net                             69,300              67,822
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    Retail Operations                    -                   -
    Exchange rate
     adjustment                          -                   -
                                       ---                 ---
    Net                                  -                   -
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    AG Interactive                  22,247              23,577
    Exchange rate
     adjustment                          5                  50
                                       ---                 ---
    Net                             22,252              23,627
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    Non-reportable
     segments                       18,256              20,429
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Unallocated - 1

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                                  $423,303            $426,420
                                  ========            ========
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    Segment Earnings
     (Loss):
    North American Social
      Expression Products          $54,157             $68,684
    Intersegment items                   -                   -
    Exchange rate
     adjustment                      2,509               1,482
                                     -----               -----
    Net                             56,666              70,166
    >>

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    International Social
      Expression Products            5,340               4,466
    Exchange rate
     adjustment                         91                 168
                                       ---                 ---
    Net                              5,431               4,634
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    Retail Operations                    -                   -
    Exchange rate
     adjustment                          -                   -
                                       ---                 ---
    Net                                  -                   -
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    AG Interactive                   3,550               6,110
    Exchange rate
     adjustment                         48                  93
                                       ---                 ---
    Net                              3,598               6,203
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    Non-reportable
     segments                        2,570               5,762
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    Unallocated                    (32,335)            (54,926)
    Exchange rate
     adjustment                        504                 (61)
    Net                            (31,831)            (54,987)
    >>

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                                   $36,434             $31,778
                                   =======             =======



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                                (Unaudited)
                                       Year Ended
                                       ----------
                             February 28,        February 28,
                                  2011                2010
                             -------------       -------------
    Total Revenue:
    North American Social
      Expression Products       $1,173,599          $1,231,624
    Intersegment items                   -              (5,104)
    Exchange rate
     adjustment                     17,884               8,659
                                    ------               -----
    Net                          1,191,483           1,235,179
    >>

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    International Social
      Expression Products          256,507             250,026
    Exchange rate
     adjustment                      5,205               4,006
                                     -----               -----
    Net                            261,712             254,032
    >>

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    Retail Operations                    -              11,727
    Exchange rate
     adjustment                          -                 112
                                       ---                 ---
    Net                                  -              11,839
    >>

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    AG Interactive                  78,407              80,320
    Exchange rate
     adjustment                       (201)                126
                                      ----                 ---
    Net                             78,206              80,446
    >>

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    Non-reportable
     segments                       61,167              53,975
    >>

Unallocated - 387

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                                $1,592,568          $1,635,858
                                ==========          ==========
    >>

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    Segment Earnings
     (Loss):
    North American Social
      Expression Products         $210,154            $236,125
    Intersegment items                   -              (3,511)
    Exchange rate
     adjustment                      8,170               3,800
                                     -----               -----
    Net                            218,324             236,414
    >>

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    International Social
      Expression Products           19,536              16,693
    Exchange rate
     adjustment                         36                 153
                                       ---                 ---
    Net                             19,572              16,846
    >>

    <<
    Retail Operations                    -             (34,830)
    Exchange rate
     adjustment                          -                (285)
                                       ---                ----
    Net                                  -             (35,115)
    >>

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    AG Interactive                  14,103              11,319
    Exchange rate
     adjustment                       (112)                100
                                      ----                 ---
    Net                             13,991              11,419
    >>

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    Non-reportable
     segments                        9,477               7,634
    >>

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    Unallocated                   (106,259)           (116,476)
    Exchange rate
     adjustment                        902                 232
    Net                           (105,357)           (116,244)
    >>

    <<
                                  $156,007            $120,954
                                  ========            ========




    >>

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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