American Greetings Announces First Quarter Results



    CLEVELAND, June 25 /CNW/ -- American Greetings Corporation (NYSE:   AM)
today announced its first quarter results for the fiscal quarter ended May 30,
2008.
    
    First Quarter Results
    
    For the first quarter of fiscal 2009, the Company reported total revenue
of $428.3 million, pre-tax income from continuing operations of $19.2 million,
and income from continuing operations of $13.3 million or 27 cents per share
(all per-share amounts assume dilution).  For the first quarter of fiscal
2008, the Company reported total revenue of $420.0 million, pre-tax income
from continuing operations of $54.6 million, and income from continuing
operations of $30.3 million or 54 cents per share.
    
    Management Comments and Outlook
    
    Chief Executive Officer Zev Weiss said, "I am pleased with our revenue
performance, particularly given current economic conditions.  Our point of
sale performance is encouraging.  One of the larger components that caused
lower margins in the quarter compared to last year was the rollout of a new
card line in Canada.  As part of that process, we had additional activity and
recognized incremental expenses.  While the costs associated with the new
Canadian card line are transitional in nature, we are focusing additional
efforts on redesigning supply chain processes in an effort to become more
efficient."
    The Company reaffirmed its previously announced fiscal 2009 estimate of
earnings per share from continuing operations to be between $1.60 to $1.85 per
share and cash flow from operations minus capital expenditures to be between
$60 million and $80 million.
    
    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 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.
    
    About American Greetings Corporation
    
    American Greetings Corporation (NYSE:   AM) is one of the world's largest
manufacturers of social expression products.  Along with greeting cards, its
product lines include gift wrap, party goods, stationery, calendars, ornaments
and electronic greetings.  Located in Cleveland, Ohio, American Greetings
generates annual revenue of approximately $1.8 billion.  For more information
on the Company, visit http://corporate.americangreetings.com.
    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;
    
    -- retail consolidations, acquisitions and bankruptcies, including the
possibility of resulting adverse changes to retail contract terms;
    
    -- competitive terms of sale offered to customers;
    
    -- 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;
    
    -- consumer acceptance of products as priced and marketed;
    -- the impact of technology on core product sales;
    
    -- the timing and impact of converting customers to a scan-based trading
model;
    
    -- escalation in the cost of providing employee health care;
    -- the ability to successfully integrate acquisitions;
    
    -- the ability to successfully implement, or achieve the desired benefits
associated with any information systems refresh the Company may implement;
    -- the ability to execute share repurchase programs or the ability to
achieve the desired accretive effect from such repurchases;
    
    -- the Company's ability to comply with its debt covenants;
    
    -- the Company's ability to successfully complete, or achieve the desired
benefits associated with, dispositions;
    -- 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, the public's
acceptance of online greetings and other social expression products, and the
ability to gain a leadership position in 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 for the fiscal year ended
February 29, 2008.



    
                         AMERICAN GREETINGS CORPORATION
                 FIRST QUARTER CONSOLIDATED STATEMENT OF INCOME
                      FISCAL YEAR ENDING FEBRUARY 28, 2009
    

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

    
                                                          (Unaudited)
                                                       Three Months Ended
                                                 -----------------------------
                                                 May 30, 2008     May 25, 2007
                                                 ------------     ------------
    

    
    Net sales                                       $425,463         $418,016
    Other revenue                                      2,837            1,951
                                                  ----------       ----------
    Total revenue                                    428,300          419,967
    

    
    Material, labor and other production costs       193,342          161,128
    Selling, distribution and marketing expenses     150,875          140,694
    Administrative and general expenses               62,561           62,235
    Other operating income - net                        (727)            (360)
                                                  ----------       ----------
    

    Operating income                                  22,249           56,270

    
    Interest expense                                   4,905            4,757
    Interest income                                     (990)          (1,499)
    Other non-operating income - net                    (901)          (1,543)
                                                  ----------       ----------
    

    
    Income from continuing operations before
     income tax expense                               19,235           54,555
    Income tax expense                                 5,902           24,292
                                                  ----------       ----------
    

    Income from continuing operations                 13,333           30,263

    
    Loss from discontinued operations, net of tax          -             (213)
                                                  ----------       ----------
    

    
    Net income                                       $13,333          $30,050
                                                  ==========       ==========
    

    
    Earnings per share - basic:
       Income from continuing operations               $0.27            $0.54
       Loss from discontinued operations                   -                -
                                                  ----------       ----------
       Net income                                      $0.27            $0.54
                                                  ==========       ==========
    

    
    Earnings per share - assuming dilution:
       Income from continuing operations               $0.27            $0.54
       Loss from discontinued operations                   -                -
                                                  ----------       ----------
       Net income                                      $0.27            $0.54
                                                  ==========       ==========
    

    Average number of common shares outstanding   48,800,941       55,262,716

    
    Average number of common shares outstanding
     - assuming dilution                          48,833,108       55,650,033
    

    Dividends declared per share                       $0.12            $0.10



    
                          AMERICAN GREETINGS CORPORATION
            FIRST QUARTER CONSOLIDATED STATEMENT OF FINANCIAL POSITION
                       FISCAL YEAR ENDING FEBRUARY 28, 2009
    

    (In thousands of dollars)

    
                                                          (Unaudited)
                                                 -----------------------------
                                                 May 30, 2008     May 25, 2007
                                                 ------------     ------------
    

    
    ASSETS
    CURRENT ASSETS
       Cash and cash equivalents                    $108,192         $132,582
       Short-term investments                              -           28,325
       Trade accounts receivable, net                 59,897          119,147
       Inventories                                   212,032          192,399
       Deferred and refundable income taxes           67,604           76,892
       Prepaid expenses and other                    186,977          215,983
                                                  ----------       ----------
         Total current assets                        634,702          765,328
    

    
    GOODWILL                                         300,323          225,318
    OTHER ASSETS                                     405,116          399,880
    DEFERRED AND REFUNDABLE INCOME TAXES             133,118          102,060
    

    
    Property, plant and equipment - at cost          983,988          947,268
    Less accumulated depreciation                    685,336          666,687
                                                  ----------       ----------
    PROPERTY, PLANT AND EQUIPMENT - NET              298,652          280,581
                                                  ----------       ----------
                                                  $1,771,911       $1,773,167
                                                  ==========       ==========
    


    
    LIABILITIES AND SHAREHOLDERS' EQUITY
    CURRENT LIABILITIES
       Debt due within one year                      $70,835         $      -
       Accounts payable                              110,394          100,955
       Accrued liabilities                            73,281           77,837
       Accrued compensation and benefits              39,582           43,656
       Income taxes payable                           23,348           29,878
       Other current liabilities                     117,160           84,621
                                                  ----------       ----------
         Total current liabilities                   434,600          336,947
    

    
    LONG-TERM DEBT                                   200,541          223,800
    OTHER LIABILITIES                                157,610          147,597
    DEFERRED INCOME TAXES AND
      NONCURRENT INCOME TAXES PAYABLE                 26,986           27,184
    

    
    SHAREHOLDERS' EQUITY
       Common shares - Class A                        45,345           51,148
       Common shares - Class B                         3,495            4,340
       Capital in excess of par value                446,075          424,201
       Treasury stock                               (871,379)        (712,147)
       Accumulated other comprehensive income         20,746            6,030
       Retained earnings                           1,307,892        1,264,067
                                                  ----------       ----------
         Total shareholders' equity                  952,174        1,037,639
                                                  ----------       ----------
                                                  $1,771,911       $1,773,167
                                                  ==========       ==========
    



    
                          AMERICAN GREETINGS CORPORATION
                FIRST QUARTER CONSOLIDATED STATEMENT OF CASH FLOWS
                       FISCAL YEAR ENDING FEBRUARY 28, 2009
                            (In thousands of dollars)
    

    
                                                          (Unaudited)
                                                       Three Months Ended
                                                 -----------------------------
                                                 May 30, 2008     May 25, 2007
                                                 ------------     ------------
    

    
    OPERATING ACTIVITIES:
       Net income                                    $13,333          $30,050
       Loss from discontinued operations                   -              213
                                                  ----------       ----------
       Income from continuing operations              13,333           30,263
       Adjustments to reconcile to net cash
        (used) provided by operating activities:
         Net loss (gain) on disposal of fixed
          assets                                         168             (116)
         Depreciation and amortization                12,785           11,995
         Deferred income taxes                         5,459            4,466
         Other non-cash charges                        1,718            1,979
         Changes in operating assets and liabilities,
          net of acquisitions and dispositions:
           Decrease (increase) in trade accounts
            receivable                                 5,310          (14,745)
           Decrease (increase) in inventories          6,463           (7,389)
           Decrease in other current assets            2,001              646
           Decrease in deferred costs - net            1,253           11,691
           Decrease in accounts payable and
            other liabilities                        (57,606)         (21,759)
           Other - net                                (2,771)           4,107
                                                  ----------       ----------
           Cash (Used) Provided by Operating
            Activities                               (11,887)          21,138
    

    
    INVESTING ACTIVITIES:
       Proceeds from sale of short-term
        investments                                        -          134,900
       Purchases of short-term investments                 -         (163,225)
       Property, plant and equipment additions       (10,088)          (5,875)
       Cash payments for business acquisitions,
        net of cash acquired                         (15,625)          (6,056)
       Cash receipts related to discontinued
        operations                                         -            2,344
       Proceeds from sale of fixed assets                265              890
                                                  ----------       ----------
         Cash Used by Investing Activities           (25,448)         (37,022)
    

    
    FINANCING ACTIVITIES:
       Net increase in short-term debt                28,045                -
       Sale of stock under benefit plans                 363            9,358
       Purchase of treasury shares                       (38)          (3,568)
       Dividends to shareholders                      (5,852)          (5,536)
                                                  ----------       ----------
         Cash Provided by Financing Activities        22,518              254
    

    
    DISCONTINUED OPERATIONS:
       Cash used by operating activities from
        discontinued operations                            -              (59)
                                                  ----------       ----------
         Cash Used by Discontinued Operations              -              (59)
    

    
    EFFECT OF EXCHANGE RATE CHANGES ON CASH             (491)           3,558
                                                  ----------       ----------
    

    DECREASE IN CASH AND CASH EQUIVALENTS            (15,308)        
(12,131)

    
         Cash and Cash Equivalents at Beginning
          of Year                                    123,500          144,713
                                                  ----------       ----------
         Cash and Cash Equivalents at End
          of Period                                 $108,192         $132,582
                                                  ==========       ==========
    



    
                          AMERICAN GREETINGS CORPORATION
                  FIRST QUARTER CONSOLIDATED SEGMENT DISCLOSURES
                       FISCAL YEAR ENDING FEBRUARY 28, 2009
                            (In thousands of dollars)
    

    
                                                          (Unaudited)
                                                       Three Months Ended
                                                 -----------------------------
                                                 May 30, 2008     May 25, 2007
                                                 ------------     ------------
    Total Revenue:
    North American Social Expression Products       $302,418         $299,944
    Intersegment items                               (14,644)          (8,503)
    Exchange rate adjustment                             513           (2,509)
                                                  ----------       ----------
    Net                                              288,287          288,932
    

    
    International Social Expression Products          69,873           64,417
    Exchange rate adjustment                           1,087             (668)
                                                  ----------       ----------
    Net                                               70,960           63,749
    

    
    Retail Operations                                 41,493           40,539
    Exchange rate adjustment                             490           (1,611)
                                                  ----------       ----------
    Net                                               41,983           38,928
    

    
    AG Interactive                                    20,527           19,899
    Exchange rate adjustment                              34               (3)
                                                  ----------       ----------
    Net                                               20,561           19,896
    

    Non-reportable segments                            6,509            8,385

    
    Unallocated                                            -               77
                                                  ----------       ----------
                                                    $428,300         $419,967
                                                  ==========       ==========
    


    
    Segment Earnings (Loss):
    North American Social Expression Products        $53,695          $88,862
    Intersegment items                               (11,243)          (6,522)
    Exchange rate adjustment                              59           (1,650)
                                                  ----------       ----------
    Net                                               42,511           80,690
    

    
    International Social Expression Products           2,862              176
    Exchange rate adjustment                             (57)              11
                                                  ----------       ----------
    Net                                                2,805              187
    

    
    Retail Operations                                 (3,407)          (2,769)
    Exchange rate adjustment                              (6)             (12)
                                                  ----------       ----------
    Net                                               (3,413)          (2,781)
    

    
    AG Interactive                                    (1,096)           3,279
    Exchange rate adjustment                              35                8
                                                  ----------       ----------
    Net                                               (1,061)           3,287
    

    Non-reportable segments                           (1,966)             563

    
    Unallocated                                      (19,633)         (27,352)
    Exchange rate adjustment                              (8)             (39)
                                                  ----------       ----------
    Net                                              (19,641)         (27,391)
                                                  ----------       ----------
                                                     $19,235          $54,555
                                                  ==========       ==========
    




For further information:

For further information: Gregory M. Steinberg, Treasurer and 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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