American Greetings Announces Second Quarter Earnings

CLEVELAND, Sept. 27, 2011 /CNW/ - American Greetings Corporation (NYSE: AM) today announced its results for the second fiscal quarter ended August 26, 2011.

Second Quarter Results

For the second quarter of fiscal 2012, the Company reported total revenue of $368.8 million, pre-tax income of $25.0 million, and net income of $14.5 million or 35 cents per share (all per-share amounts assume dilution). Compared to the prior year, revenue increased approximately $26 million. Included within these results was a pre-tax benefit from the sale of certain minor characters in our intellectual property portfolio of $4.5 million (after-tax of approximately $2.8 million) or approximately 7 cents per share.

For the second quarter of fiscal 2011, the Company reported total revenue of $342.8 million, pre-tax income of $17.0 million, and net income of $8.5 million or 21 cents per share. During the quarter, the Company incurred pre-tax costs associated with the integrations of Papyrus and Recycled Paper Greetings of $5.2 million (after-tax of approximately $3.2 million) or approximately 8 cents per share.

Management Comments and Outlook

Chief Executive Officer Zev Weiss said, "I am very pleased with our innovative new products and revenue growth this quarter, which resulted in market share gains both domestically and internationally. As we look at the balance of this year, we are certainly more cautious than we were at the beginning of the year about the global economy and the effect it is having on the consumer. However, while this could create earnings volatility during the second half of the year, we remain steadfast in our investments to continue our product leadership and remain focused on our longer term goals."

Financing Activities

Under the Company's $75 million share repurchase program, during the second fiscal quarter the Company purchased approximately 0.5 million shares of its common stock for about $11.1 million. The share repurchases this second fiscal quarter are a continuation of a multi-year effort where the Company has reduced its diluted share count by about 50 percent over the past six-and-a-half years.

Conference Call on the Web

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 Investors section of the American Greetings Web site at http://investors.americangreetings.com. A replay of the call will be available on the site.

About American Greetings Corporation

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 to create happiness, laughter and love. 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.

Non-GAAP Measures

Certain after-tax and earnings per share 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%. The earnings per share amounts were calculated based on the average number of common shares outstanding assuming dilution for the period presented. Management believes that after-tax and earnings per share information is useful in analyzing the Company's results.

Factors That May Affect Future Results

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:

    <<
    --  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 expenses incurred and investments made to
        support new retail or product strategies as well as new product
        introductions and achieving the desired benefits from those
        investments;
    --  the timing of investments in, together with the ability to
        successfully implement or achieve the desired benefits associated
        with, any information systems refresh the Company may implement;
    --  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;
    --  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 Fiscal 2011 Annual Report on Form 10-K.

    <<
                              AMERICAN GREETINGS CORPORATION
                      SECOND QUARTER CONSOLIDATED STATEMENT OF INCOME
                             FISCAL YEAR ENDING FEBRUARY 29, 2012




    (In thousands of dollars except share and per share amounts)


                                                         (Unaudited)
                                                     Three Months Ended
                                                     ------------------
                                               August 26,        August 27,
                                                   2011              2010
                                              -----------       -----------


      Net sales                                 $359,741          $333,339
      Other revenue                                9,052             9,480
                                                   -----             -----
      Total revenue                              368,793           342,819


      Material, labor and other
       production costs                          158,198           145,713
      Selling, distribution and
       marketing expenses                        125,089           112,318
      Administrative and general
       expenses                                   60,926            62,193
      Other operating income - net                (5,122)             (936)
                                                  ------              ----


      Operating income                            29,702            23,531


      Interest expense                             5,763             6,718
      Interest income                               (310)             (197)
      Other non-operating income - net              (704)               (3)
                                                    ----               ---


      Income before income tax expense            24,953            17,013
      Income tax expense                          10,477             8,481
                                                  ------             -----


      Net income                                 $14,476            $8,532
                                                 -------            ------
                                                 -------            ------




      Earnings per share - basic                 $0.36             $0.21




      Earnings per share -assuming
       dilution                                  $0.35             $0.21




      Average number of common shares
       outstanding                          40,696,961        40,026,649


      Average number of common shares
       outstanding -                        41,688,787        40,875,329
        assuming dilution


      Dividends declared per share               $0.15             $0.14







                                                       (Unaudited)
                                                      Six Months Ended
                                                      ----------------
                                               August 26,        August 27,
                                                   2011              2010
                                              -----------       -----------


      Net sales                                 $756,517          $725,444
      Other revenue                               14,625            13,683
                                                  ------            ------
      Total revenue                              771,142           739,127


      Material, labor and other
       production costs                          316,127           303,726
      Selling, distribution and
       marketing expenses                        248,381           229,869
      Administrative and general
       expenses                                  126,224           128,225
      Other operating income - net                (6,045)           (1,530)
                                                  ------            ------


      Operating income                            86,455            78,837


      Interest expense                            11,887            12,920
      Interest income                               (631)             (410)
      Other non-operating income - net              (544)           (1,703)
                                                    ----            ------


      Income before income tax expense            75,743            68,030
      Income tax expense                          28,674            28,659
                                                  ------            ------


      Net income                                 $47,069           $39,371
                                                 -------           -------
                                                 -------           -------




      Earnings per share - basic                 $1.16             $0.99




      Earnings per share -assuming
       dilution                                  $1.12             $0.96




      Average number of common shares
       outstanding                          40,598,659        39,832,609


      Average number of common shares
       outstanding -                        41,842,760        40,861,761
              assuming dilution


      Dividends declared per share               $0.30             $0.28






                           AMERICAN GREETINGS CORPORATION
           SECOND QUARTER CONSOLIDATED STATEMENT OF FINANCIAL POSITION
                        FISCAL YEAR ENDING FEBRUARY 29, 2012


                           (In thousands of dollars)


                                                          (Unaudited)
                                                          -----------
                                                August 26,         August 27,
                                                    2011               2010
                                               -----------        -----------


     ASSETS
     CURRENT ASSETS
      Cash and cash equivalents                $209,326           $133,834
      Trade accounts receivable, net            111,691             89,408
      Inventories                               248,805            189,366
      Deferred and refundable income
       taxes                                     45,029             61,742
      Assets held for sale                        5,282             13,711
      Prepaid expenses and other                110,598            113,112
                                                -------            -------
         Total current assets                   730,731            601,173


     GOODWILL                                    29,044             29,929
     OTHER ASSETS                               430,344            413,808
     DEFERRED AND REFUNDABLE INCOME
     TAXES                                      129,594            153,775


     Property, plant and equipment -
      at cost                                   872,455            845,497
     Less accumulated depreciation              620,875            607,215
                                                -------            -------
     PROPERTY, PLANT AND EQUIPMENT -
      NET                                       251,580            238,282
                                                -------            -------
                                             $1,571,293         $1,436,967
                                             ----------         ----------
                                             ----------         ----------



     LIABILITIES AND SHAREHOLDERS'
      EQUITY
     CURRENT LIABILITIES
       Accounts payable                       $118,162            $88,668
       Accrued liabilities                      56,056             59,283
       Accrued compensation and benefits        47,916             48,287
       Income taxes payable                     15,812             23,052
       Other current liabilities                97,602             87,872
                                                ------             ------
           Total current liabilities           335,548            307,162


     LONG-TERM DEBT                            233,970            231,525
     OTHER LIABILITIES                         184,259            190,457
     DEFERRED INCOME TAXES AND
     NONCURRENT INCOME TAXES PAYABLE          32,740             32,194


     SHAREHOLDERS' EQUITY
       Common shares - Class A                  37,561             37,137
       Common shares - Class B                   2,781              2,923
       Capital in excess of par value          507,256            482,035
       Treasury stock                         (962,747)          (951,682)
       Accumulated other comprehensive
        income (loss)                              764            (30,815)
       Retained earnings                     1,199,161          1,136,031
                                             ---------          ---------
           Total shareholders' equity          784,776            675,629
                                                -------            -------
                                             $1,571,293         $1,436,967
                                             ----------          ---------
                                             ----------          ---------



                            AMERICAN GREETINGS CORPORATION
                  SECOND QUARTER CONSOLIDATED STATEMENT OF CASH FLOWS
                         FISCAL YEAR ENDING FEBRUARY 29, 2012
                               (In thousands of dollars)


                                                         (Unaudited)
                                                       Six Months Ended
                                                       ----------------
                                                 August 26,      August 27,
                                                     2011            2010
                                                -----------     -----------


     OPERATING ACTIVITIES:
       Net income                                   $47,069         $39,371
       Adjustments to reconcile net income
          to cash flows from operating
            activities:
         Stock-based compensation                     5,362           6,261
         Net gain on dispositions                    (4,500)           (254)
         Net gain on disposal of fixed
          assets                                       (484)         (1,268)
         Depreciation and intangible assets
          amortization                               19,986          20,463
         Deferred income taxes                        4,039          10,618
         Other non-cash charges                       1,814           1,949
         Changes in operating assets and
          liabilities,
               net of acquisitions:
           Trade accounts receivable                 12,829          44,279
           Inventories                              (64,515)        (24,908)
           Other current assets                       4,258          (2,169)
           Income taxes                               2,785          15,125
           Deferred costs - net                      16,400          27,905
           Accounts payable and other
            liabilities                              (8,751)        (54,639)
           Other - net                                  (63)          5,814
                                                        ---           -----
         Total Cash Flows From Operating
         Activities                                 36,229          88,547


     INVESTING ACTIVITIES:
       Property, plant and equipment
        additions                                   (26,951)        (14,128)
       Cash payments for business
        acquisitions, net of cash acquired           (5,992)              -
       Proceeds from sale of fixed assets             2,567           2,997
       Proceeds from escrow related to
        party goods transaction                           -          25,151
       Proceeds from sale of intellectual
        properties                                    4,500               -
                                                      -----             ---
         Total Cash Flows From Investing
          Activities                                (25,876)         14,020


     FINANCING ACTIVITIES:
       Net decrease in long-term debt                     -         (98,250)
       Net decrease in short-term debt                    -          (1,000)
       Sale of stock under benefit plans             12,222          16,540
       Excess tax benefits from share-
       based payment awards                          2,370           2,485
       Purchase of treasury shares                  (20,791)        (13,052)
       Dividends to shareholders                    (12,176)        (11,127)
       Debt issuance costs                                -          (2,917)
                                                        ---          ------
         Total Cash Flows From Financing
          Activities                                (18,375)       (107,321)


     EFFECT OF EXCHANGE RATE CHANGES ON
      CASH                                            1,510             639
                                                      -----             ---


     DECREASE IN CASH AND CASH
      EQUIVALENTS                                    (6,512)         (4,115)


         Cash and Cash Equivalents at
          Beginning of Year                         215,838         137,949
                                                    -------         -------
         Cash and Cash Equivalents at End of
          Period                                   $209,326        $133,834
                                                    -------         -------
                                                    -------         -------



                                AMERICAN GREETINGS CORPORATION
                       SECOND QUARTER CONSOLIDATED SEGMENT DISCLOSURES
                              FISCAL YEAR ENDING FEBRUARY 29, 2012
                                    (In thousands of dollars)


                                       (Unaudited)
                         Three Months Ended             Six Months Ended
                         ------------------             ----------------
                      August 26,    August 27,    August 26,    August 27,
                           2011          2010          2011          2010
                      -----------   -----------   -----------   -----------
     Total Revenue:
     North American
     Social
     Expression
     Products            $262,944      $252,158      $566,280      $560,467


     International
     Social
     Expression
     Products              75,891        54,736       146,096       112,309


     AG Interactive         16,177        18,167        32,786        36,721

     Non-reportable
      segments              13,781        17,758        25,980        29,630

                        -----------   -----------   -----------   -----------
                          $368,793      $342,819      $771,142      $739,127
                        -----------   -----------   -----------   -----------
                        -----------   -----------   -----------   -----------



     Segment Earnings
      (Loss):
     North American
      Social
      Expression
      Products             $25,699       $28,627       $84,993       $92,690


     International
      Social
      Expression
      Products               2,468         1,325         5,771         4,159


     AG Interactive          4,597         2,886         7,233         5,258


     Non-reportable
      segments              10,493         3,317        15,099         5,469


     Unallocated           (18,304)      (19,142)      (37,353)      (39,546)

                        -----------   -----------   -----------   -----------
                           $24,953       $17,013       $75,743       $68,030
                        -----------   -----------   -----------   -----------
                        -----------   -----------   -----------   -----------

    >>

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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