American Greetings Announces First Quarter Results



    CLEVELAND, June 24 /CNW/ -- American Greetings Corporation (NYSE:   AM)
today announced its results for the first fiscal quarter ended May 29, 2009.
    

    First Quarter Results
    
    For the first quarter of fiscal 2010, the Company reported total revenue
of $412.9 million, pre-tax income of $16.9 million, and net income of $10.0
million or 25 cents per share (all per-share amounts assume dilution).

    As previously announced, during the first quarter of fiscal 2010,
American Greetings sold its retail store operations to Schurman Fine Papers
("Schurman"), which operates card and gift retail stores under the name
Papyrus.  American Greetings recognized a preliminary non-cash loss on the
disposition, recorded within the Retail Operations segment, of $28.3 million
(after-tax of approximately $17.4 million) that reduced earnings per share by
approximately 44 cents during the quarter.  At the time of the sale of the
retail stores, American Greetings also purchased the wholesale division of
Schurman which supplies Papyrus brand greeting cards primarily to leading
specialty, mass, grocery and drug store channels and purchased a fifteen
percent equity interest in Schurman.

    For the first quarter of fiscal 2009, the Company reported total revenue
of $428.3 million, pre-tax income of $19.2 million, and net income of $13.3
million or 27 cents per share.
    

    Management Comments and Outlook
    
    Chief Executive Officer Zev Weiss said, "I am very pleased with our
performance this quarter.  Specifically, sales of greeting cards increased
primarily as a result of the additions of Recycled Paper Greetings and Papyrus
as well as strength in our overall North American business despite weak
economic conditions.  We also realized improved margins as a result of our
cost reduction activities last year and we will continue to focus on
efficiencies this year.  We currently anticipate cash flow from operating
activities less capital expenditures to be greater than $70 million this
fiscal year.  We are diligently working through the integration planning
processes for Recycled Paper Greetings, the acquired Papyrus wholesale
business, and the transition of our former retail operations to Schurman Fine
Papers."
    

    Financing Activities
    
    Under the Company's $75 million share repurchase program, during the
first fiscal quarter the Company purchased approximately 1.1 million shares of
its common stock for $4.3 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
    
    For more than 100 years, American Greetings Corporation (NYSE:   AM) has
been a manufacturer and retailer of innovative social expression products that
assist consumers in enhancing their relationships.  The Company's major
greeting card brands are American Greetings, Carlton Cards, Gibson, Recycled
Paper Greetings and Papyrus, and other paper product offerings include
DesignWare party goods, American Greetings and Plus Mark gift-wrap and boxed
cards and DateWorks calendars.  American Greetings also has the largest
collection of electronic greetings on the Web, including cards available at
AmericanGreetings.com through AG Interactive, Inc. (the Company's online
division).  AG Interactive also offers digital photo sharing and personal
publishing at PhotoWorks.com and Webshots.com and provides a one-stop source
for online graphics and animations at Kiwee.com.  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 $1.7
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 amounts included in this earnings release may be
considered non-GAAP measures in accordance with Regulation G and were
calculated based on the Company's statutory tax rate of approximately 38.7%. 
Management believes that after-tax 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;
    --  the ability to successfully integrate acquisitions, including the
        recent acquisitions of Recycled Paper Greetings and the Papyrus brand;
    --  the Company's ability to successfully complete the sale of the
        Strawberry Shortcake and Care Bears properties;
    --  the Company's successful transition of the Retail Operations segment
to
        its buyer, Schurman Fine Papers, and the ability to achieve the
desired
        benefits associated with this and other dispositions;
    --  retail consolidations, acquisitions and bankruptcies, including the
        possibility of resulting adverse changes to retail contract terms;
    --  the ability to achieve the desired benefits associated with its cost
        reduction efforts;
    --  competitive terms of sale offered to customers;
    --  the Company's ability to comply with its debt covenants;
    --  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 implement, or achieve the desired benefits
        associated with, any information systems refresh the Company may
        implement;
    --  the Company's ability to achieve the desired accretive effect from any
        share repurchase programs;
    --  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.
    


    

    
                 AMERICAN GREETINGS CORPORATION
         FIRST QUARTER CONSOLIDATED STATEMENT OF INCOME
              FISCAL YEAR ENDING FEBRUARY 28, 2010
    

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

    
                                              (Unaudited)
                                          Three Months Ended
                                          ------------------
                                      May 29, 2009  May 30, 2008
                                      ------------  ------------
    

    
    Net sales                             $409,277      $425,463
    Other revenue                            3,645         2,837
                                             -----         -----
    Total revenue                          412,922       428,300
    

    
    Material, labor and other
     production costs                      167,169       193,342
    Selling, distribution and marketing
     expenses                              132,217       150,875
    Administrative and general expenses     63,151        62,561
    Other operating expense (income) - net  27,773          (727)
                                            ------          ----
    

    Operating income                        22,612        22,249

    
    Interest expense                         6,987         4,905
    Interest income                           (276)         (990)
    Other non-operating income - net        (1,042)         (901)
                                            ------          ----
    

    
    Income before income tax expense        16,943        19,235
    Income tax expense                       6,982         5,902
                                             -----         -----
    

    
    Net income                              $9,961       $13,333
                                            ======       =======
    


    Earnings per share - basic               $0.25         $0.27

    Earnings per share - assuming dilution   $0.25         $0.27

    
    Average number of common shares
     outstanding                        39,608,947    48,800,941
    

    
    Average number of common shares
     outstanding - assuming dilution    39,608,947    48,833,108
    

    Dividends declared per share             $  -          $0.12



    
                  AMERICAN GREETINGS CORPORATION
        FIRST QUARTER CONSOLIDATED STATEMENT OF FINANCIAL POSITION
               FISCAL YEAR ENDING FEBRUARY 28, 2010
    

    
                  (In thousands of dollars)
                                                   (Unaudited)
                                                  -----------
                                            May 29, 2009  May 30, 2008
                                            ------------  ------------
    

    
    ASSETS
    CURRENT ASSETS
      Cash and cash equivalents                 $87,611    $108,192
      Trade accounts receivable, net            110,743      59,789
      Inventories                               181,425     211,125
      Deferred and refundable income taxes       69,800      67,604
      Assets held for sale                        1,515       2,483
      Prepaid expenses and other                153,374     183,865
                                                -------     -------
        Total current assets                    604,468     633,058
    

    
    GOODWILL                                     25,921     300,323
    OTHER ASSETS                                373,622     408,228
    DEFERRED AND REFUNDABLE INCOME TAXES        168,391     133,118
    

    
    Property, plant and equipment - at cost     890,173     980,376
    Less accumulated depreciation               601,251     683,192
                                                -------     -------
    PROPERTY, PLANT AND EQUIPMENT - NET         288,922     297,184
                                                -------     -------
                                             $1,461,324  $1,771,911
                                             ==========  ==========
    


    
    LIABILITIES AND SHAREHOLDERS' EQUITY
    CURRENT LIABILITIES
      Debt due within one year                  $27,325     $35,835
      Accounts payable                           85,483     110,394
      Accrued liabilities                        73,852      73,281
      Accrued compensation and benefits          37,274      39,582
      Income taxes payable                        2,937      23,348
      Other current liabilities                 108,864     117,160
                                                -------     -------
        Total current liabilities               335,735     399,600
    

    
    LONG-TERM DEBT                              409,455     235,541
    OTHER LIABILITIES                           125,668     157,610
    DEFERRED INCOME TAXES AND
     NONCURRENT INCOME TAXES PAYABLE             30,594      26,986
    

    
    SHAREHOLDERS' EQUITY
      Common shares - Class A                    35,921      45,345
      Common shares - Class B                     3,497       3,495
      Capital in excess of par value            450,059     446,075
      Treasury stock                           (941,063)   (871,379)
      Accumulated other comprehensive
       (loss) income                            (43,276)     20,746
      Retained earnings                       1,054,734   1,307,892
                                              ---------   ---------
        Total shareholders' equity              559,872     952,174
                                                -------     -------
                                             $1,461,324  $1,771,911
                                             ==========  ==========
    



    
                 AMERICAN GREETINGS CORPORATION
       FIRST QUARTER CONSOLIDATED STATEMENT OF CASH FLOWS
              FISCAL YEAR ENDING FEBRUARY 28, 2010
                    (In thousands of dollars)
    

    
                                                    (Unaudited)
                                                 Three Months Ended
                                                 ------------------
                                             May 29, 2009  May 30, 2008
                                             ------------  ------------
    

    
    OPERATING ACTIVITIES:
      Net income                                   $9,961    $13,333
      Adjustments to reconcile net income to
       cash flows from operating activities:
        Loss on disposition of retail stores       28,333          -
        Net loss on disposal of fixed assets          199        168
        Depreciation and amortization              12,393     12,785
        Deferred income taxes                      17,158      5,459
        Other non-cash charges                      2,657      1,718
        Changes in operating assets and liabilities,
         net of acquisitions and dispositions:
          Trade accounts receivable               (43,770)     5,186
          Inventories                              12,360      6,495
          Other current assets                     11,942      1,260
          Deferred costs - net                     (2,846)     1,253
          Accounts payable and other liabilities  (43,494)   (57,606)
          Other - net                               3,836     (1,938)
                                                    -----     ------
        Total Cash Flows From Operating Activities  8,729    (11,887)
    

    
    INVESTING ACTIVITIES:
      Property, plant and equipment additions      (8,909)   (10,088)
      Cash payments for business acquisitions,
       net of cash acquired                       (16,286)   (15,625)
      Proceeds from sale of fixed assets              113        265
                                                      ---        ---
        Total Cash Flows From Investing
         Activities                               (25,082)   (25,448)
    

    
    FINANCING ACTIVITIES:
      Net increase in long-term debt               19,800     14,900
      Net increase in short-term debt              26,325     13,145
      Sale of stock under benefit plans                30        363
      Purchase of treasury shares                  (5,877)       (38)
      Dividends to shareholders                    (4,865)    (5,852)
                                                   ------     ------
        Total Cash Flows From
         Financing Activities                      35,413     22,518
    

    
    EFFECT OF EXCHANGE RATE CHANGES ON CASH         8,335       (491)
                                                    -----       ----
    

    
    INCREASE (DECREASE) IN CASH AND CASH
     EQUIVALENTS                                   27,395    (15,308)
    

    
        Cash and Cash Equivalents at
         Beginning of Year                         60,216    123,500
                                                   ------    -------
        Cash and Cash Equivalents at
         End of Period                            $87,611   $108,192
                                                  =======   ========
    



    
                     AMERICAN GREETINGS CORPORATION
              FIRST QUARTER CONSOLIDATED SEGMENT DISCLOSURES
                   FISCAL YEAR ENDING FEBRUARY 28, 2010
                       (In thousands of dollars)
    

    
                                    (Unaudited)
                                 Three Months Ended
                                 ------------------
                              May 29, 2009  May 30, 2008
                              ------------  ------------
    Total Revenue:
    North American Social
     Expression Products         $323,884     $298,177
    Intersegment items             (5,104)     (13,306)
    Exchange rate adjustment          299        3,416
                                      ---        -----
    Net                           319,079      288,287
    

    
    International Social
     Expression Products           47,006       47,914
    Exchange rate adjustment        5,756       23,046
                                    -----       ------
    Net                            52,762       70,960
    

    
    Retail Operations              11,727       38,477
    Exchange rate adjustment          112        3,506
                                      ---        -----
    Net                            11,839       41,983
    

    
    AG Interactive                 18,634       19,899
    Exchange rate adjustment          211          662
                                      ---          ---
    Net                            18,845       20,561
    

    
    Non-reportable segments        10,397        6,509
                                 --------     --------
                                 $412,922     $428,300
                                 ========     ========
    


    
    Segment Earnings (Loss):
    North American Social
     Expression Products          $77,877      $52,183
    Intersegment items             (3,511)     (10,177)
    Exchange rate adjustment          190          505
                                      ---          ---
    Net                            74,556       42,511
    

    
    International Social
     Expression Products              333        1,773
    Exchange rate adjustment            6        1,032
                                        -        -----
    Net                               339        2,805
    

    
    Retail Operations             (34,830)      (3,351)
    Exchange rate adjustment         (285)         (62)
                                     ----          ---
    Net                           (35,115)      (3,413)
    

    
    AG Interactive                  1,652       (1,335)
    Exchange rate adjustment           62          274
                                       --          ---
    Net                             1,714       (1,061)
    

    Non-reportable segments          (129)      (1,966)

    
    Unallocated                   (24,311)     (19,695)
    Exchange rate adjustment         (111)          54
                                     ----           --
    Net                           (24,422)     (19,641)
    

    
                                  -------      -------
                                  $16,943      $19,235
                                  =======      =======



    




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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