American Greetings Announces Improved Second Quarter Results



    CLEVELAND, Sept. 20 /CNW/ -- American Greetings Corporation (NYSE:   AM)
today announced its second quarter results for the fiscal quarter ended August
24, 2007.
    
    Second Quarter Results
    
    For the second quarter of fiscal 2008, the Company reported total revenue
of $377.4 million, pre-tax income from continuing operations of $12.9 million,
and income from continuing operations of $8.7 million or 16 cents per share
(all per-share amounts assume dilution).  For the second quarter of fiscal
2007, the Company reported total revenue of $371.5 million, a pre-tax loss
from continuing operations of $13.9 million, and a loss from continuing
operations of $12.6 million or 22 cents per share.
    
    Management Comments and Outlook
    
    Chief Executive Officer Zev Weiss said, "I am pleased with the
improvement in our financial performance this quarter as the team has been
working hard on several initiatives.  Specifically, our everyday and seasonal
card performance improved nicely.  The combination of the improved performance
in our card business as well as careful management of our costs caused our
results to be well above the prior period."
    Weiss affirmed the Corporation's previously announced estimate of
earnings per share from continuing operations for fiscal 2008 to be between
$1.35 to $1.55 per share.  "While I am happy with our first half results, we
have a lot of initiatives planned in the second half of the year. The team is
working hard with our retail partners to accomplish our mutual goals.  Given
the strong start to the year, but also recognizing that the seasonality of our
business causes the majority of our earnings to typically be earned during the
second fiscal half, we remain comfortable with our earnings guidance for the
full year," added Weiss.
    
    Financing Activities
    
    Under the Company's $100 million share repurchase program, during the
second quarter, the Company purchased approximately 300,000 shares of its
common stock for about $7 million.  The Company has reduced its diluted share
count by about one-third over the past 28 months.
    The Company's Board of Directors authorized a cash dividend of 10 cents
per share to be paid on October 15, 2007 to shareholders of record at the
close of business on October 5, 2007.
    
    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 $1.7 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:

    
    -- retail consolidations, acquisitions and bankruptcies, including the
       possibility of resulting adverse changes to retail contract terms;
    -- the Company's ability to successfully implement its strategy to invest
       in its core greeting card business;
    -- 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 execute share repurchase programs or the ability to
       achieve the desired accretive effect from such repurchases;
    -- the Company's ability to successfully complete, or achieve the desired
       benefits associated with, dispositions;
    -- a weak retail environment;
    -- consumer acceptance of products as priced and marketed;
    -- the impact of technology on core product sales;
    -- competitive terms of sale offered to customers;
    -- successful implementation of supply chain improvements and achievement
       of projected cost savings from those improvements;
    -- increases in the cost of material, energy, freight, and other
       production costs;
    -- 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;
    -- escalation in the cost of providing employee health care;
    -- successful integration of acquisitions; 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 public's
acceptance of online greetings and other social expression products.
    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 28, 2007.



    
                          AMERICAN GREETINGS CORPORATION
               SECOND QUARTER CONSOLIDATED STATEMENT OF OPERATIONS
                       FISCAL YEAR ENDING FEBRUARY 29, 2008
    


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

    
                                                (Unaudited)
                                 Three Months Ended       Six Months Ended
                               ---------------------   ----------------------
                               August 24,  August 25,  August 24,  August 25,
                                  2007        2006        2007        2006
                               ---------   ---------   ---------   ---------
    

    
    Net sales                    $365,821    $357,483    $783,834    $761,653
    Other revenue                  11,606      14,044      13,558      15,485
                                  -------     -------     -------     -------
    Total revenue                 377,427     371,527     797,392     777,138
    

    
    Material, labor and other
     production costs             163,052     172,808     324,180     348,045
    Selling, distribution and
     marketing expenses           144,584     151,475     285,275     294,055
    Administrative and general
     expenses                      55,938      56,881     117,810     118,229
    Other operating income -
     net                             (320)        (93)       (680)       (422)
                                  -------     -------     -------     -------
    

    Operating income (loss)        14,173      (9,544)     70,807      17,231

    
    Interest expense                4,839       7,609       9,596      20,073
    Interest income                (2,227)     (2,628)     (3,719)     (5,458)
    Other non-operating income
     - net                         (1,352)       (642)     (2,896)     (2,902)
                                  -------     -------     -------     -------
    

    
    Income (loss) from
     continuing operations
     before income tax
     expense (benefit)             12,913     (13,883)     67,826       5,518
    Income tax expense
     (benefit)                      4,187      (1,326)     28,478       1,525
                                  -------     -------     -------     -------
    

    
    Income (loss) from
     continuing operations          8,726     (12,557)     39,348       3,993
    

    
    (Loss) income from
     discontinued
     operations, net of tax          (351)      2,059        (923)        901
                                  -------     -------     -------     -------
    

    
    Net income (loss)              $8,375    $(10,498)    $38,425      $4,894
                                  =======     =======     =======     =======
    

    
    Earnings (loss) per share
     - basic:
       Income (loss) from
        continuing operations       $0.16      $(0.22)      $0.71       $0.06
       (Loss) income from
        discontinued
        operations                  (0.01)       0.04       (0.02)       0.02
                                  -------     -------     -------     -------
       Net income (loss)            $0.15      $(0.18)      $0.69       $0.08
                                  =======     =======     =======     =======
    

    
    Earnings (loss) per share
     - assuming dilution:
       Income (loss) from
        continuing operations       $0.16      $(0.22)      $0.71       $0.06
       (Loss) income from
        discontinued
        operations                  (0.01)       0.04       (0.02)       0.02
                                  -------     -------     -------     -------
       Net income (loss)            $0.15      $(0.18)      $0.69       $0.08
                                  =======     =======     =======     =======
    


    
    Average number of common
     shares outstanding        55,766,802  58,133,066  55,514,759  58,135,148
    

    
    Average number of common
     shares outstanding -
     assuming dilution         56,180,165  58,133,066  55,902,189  59,990,069
    

    
    Dividends declared per
     share                          $0.10       $0.08       $0.20       $0.16
    



    
                          AMERICAN GREETINGS CORPORATION
           SECOND QUARTER CONSOLIDATED STATEMENT OF FINANCIAL POSITION
                       FISCAL YEAR ENDING FEBRUARY 29, 2008
    

    (In thousands of dollars)

    
                                                         (Unaudited)
                                             ---------------------------------
                                             August 24, 2007   August 25, 2006
                                             ---------------   ---------------
    

    
    ASSETS
    CURRENT ASSETS
       Cash and cash equivalents                   $192,450           $89,113
       Trade accounts receivable, net                71,195            87,926
       Inventories                                  248,176           273,788
       Deferred and refundable income
        taxes                                        66,399           170,472
       Assets of businesses held for sale             2,434            12,648
       Prepaid expenses and other                   215,369           194,291
                                                    -------           -------
         Total current assets                       796,023           828,238
    

    
    GOODWILL                                        226,920           214,969
    OTHER ASSETS                                    402,931           549,931
    DEFERRED AND REFUNDABLE INCOME TAXES             98,968                 -
    

    
    Property, plant and equipment - at
     cost                                           950,273           967,253
    Less accumulated depreciation                   672,602           665,936
                                                    -------           -------
    PROPERTY, PLANT AND EQUIPMENT - NET             277,671           301,317
                                                    -------           -------
                                                 $1,802,513        $1,894,455
                                                  =========         =========
    


    
    LIABILITIES AND SHAREHOLDERS' EQUITY
    CURRENT LIABILITIES
       Debt due within one year                     $22,690           $20,000
       Accounts payable                             126,341           127,619
       Accrued liabilities                           70,880            76,071
       Accrued compensation and benefits             50,397            48,932
       Income taxes                                   1,457             8,364
       Liabilities of businesses held for
        sale                                          1,283               639
       Other current liabilities                     97,765           100,517
                                                    -------           -------
         Total current liabilities                  370,813           382,142
    

    
    LONG-TERM DEBT                                  200,988           224,078
    OTHER LIABILITIES                               147,496           101,744
    DEFERRED INCOME TAXES AND
      NONCURRENT INCOME TAXES PAYABLE                29,930            25,775
    

    
    SHAREHOLDERS' EQUITY
       Common shares - Class A                       51,497            56,858
       Common shares - Class B                        4,291             4,226
       Capital in excess of par value               439,985           412,919
       Treasury stock                              (720,027)         (569,143)
       Accumulated other comprehensive
        income                                       10,690            29,726
       Retained earnings                          1,266,850         1,226,130
                                                  ---------         ---------
         Total shareholders' equity               1,053,286         1,160,716
                                                  ---------         ---------
                                                 $1,802,513        $1,894,455
                                                  =========         =========
    



    
                         AMERICAN GREETINGS CORPORATION
               SECOND QUARTER CONSOLIDATED STATEMENT OF CASH FLOWS
                      FISCAL YEAR ENDING FEBRUARY 29, 2008
                            (In thousands of dollars)
    

    
                                                         (Unaudited)
                                                      Six Months Ended
                                              --------------------------------
                                              August 24, 2007  August 25, 2006
                                              ---------------  ---------------
    

    
    OPERATING ACTIVITIES:
      Net income                                   $38,425            $4,894
      Loss (income) from discontinued
       operations                                      923              (901)
                                                   -------           -------
      Income from continuing operations             39,348             3,993
      Adjustments to reconcile to net cash
       provided by operating activities:
        Net gain on disposal of fixed
         assets                                        (41)              (24)
        Loss on extinguishment of debt                   -             4,972
        Depreciation and amortization               23,919            24,823
        Deferred income taxes                       14,335            15,532
        Other non-cash charges                       3,861             7,016
        Changes in operating assets and
         liabilities, net of acquisitions
         and dispositions:
          Decrease in trade accounts
           receivable                               33,385            55,353
          Increase in inventories                  (61,980)          (57,101)
          Increase in other current assets          (2,750)          (24,196)
          Decrease in deferred costs - net          28,451            26,787
          Decrease in accounts payable and
           other liabilities                       (23,400)          (33,170)
          Other - net                                2,952             4,152
                                                   -------           -------
          Cash Provided by Operating
           Activities                               58,080            28,137
    

    
    INVESTING ACTIVITIES:
      Proceeds from sale of short-term
       investments                                 480,630         1,026,280
      Purchases of short-term investments         (480,630)         (817,540)
      Property, plant and equipment
       additions                                   (13,577)          (18,708)
      Cash payments for business
       acquisitions, net of cash acquired           (6,056)          (11,154)
      Cash receipts related to
       discontinued operations                       3,419             9,559
      Proceeds from sale of fixed assets             1,105               461
                                                   -------           -------
          Cash (Used) Provided by
           Investing Activities                    (15,109)          188,898
    

    
    FINANCING ACTIVITIES:
      Increase in long-term debt                         -           200,000
      Reduction of long-term debt                        -          (440,505)
      Increase in short-term debt                        -            20,000
      Sale of stock under benefit plans             24,250             2,804
      Purchase of treasury shares                  (11,883)         (108,674)
      Dividends to shareholders                    (11,115)           (9,164)
      Debt issuance costs                                -            (8,136)
                                                   -------           -------
        Cash Provided (Used) by Financing
         Activities                                  1,252          (343,675)
    

    
    DISCONTINUED OPERATIONS:
      Cash used by operating activities
       from discontinued operations                   (789)           (2,296)
      Cash provided by investing
       activities from discontinued
       operations                                        -             1,656
                                                   -------           -------
        Cash Used by Discontinued
         Operations                                   (789)             (640)
    

    
    EFFECT OF EXCHANGE RATE CHANGES ON
     CASH                                            4,303             2,780
                                                   -------           -------
    

    
    INCREASE (DECREASE) IN CASH AND CASH
     EQUIVALENTS                                    47,737          (124,500)
    

    
        Cash and Cash Equivalents at
         Beginning of Year                         144,713           213,613
                                                   -------           -------
        Cash and Cash Equivalents at End
         of Period                                $192,450           $89,113
                                                   =======            ======
    



    
                         AMERICAN GREETINGS CORPORATION
                 SECOND QUARTER CONSOLIDATED SEGMENT DISCLOSURES
                      FISCAL YEAR ENDING FEBRUARY 29, 2008
                            (In thousands of dollars)
    

    
                                                   (Unaudited)
                                    Three Months Ended     Six Months Ended
                                   --------------------- ---------------------
                                   August 24, August 25, August 24, August 25,
                                      2007       2006       2007      2006
                                   ---------  ---------  ---------  ---------
    Total Revenue:
    North American Social
       Expression Products            $255,881  $244,220  $552,975  $537,183
    Intersegment items                 (13,942)  (15,310)  (22,109)  (32,858)
    Exchange rate adjustment             1,341       170     1,346       107
                                       -------   -------   -------   -------
    Net                                243,280   229,080   532,212   504,432
    

    
    International Social
       Expression Products              59,390    62,385   119,044   126,493
    Exchange rate adjustment             5,257       (59)    9,352    (2,321)
                                       -------   -------   -------   -------
    Net                                 64,647    62,326   128,396   124,172
    

    
    Retail Operations                   37,382    39,453    76,306    82,954
    Exchange rate adjustment             1,069       183     1,073       121
                                       -------   -------   -------   -------
    Net                                 38,451    39,636    77,379    83,075
    

    
    AG Interactive                      17,158    20,447    37,052    40,488
    Exchange rate adjustment                (2)       40         1        45
                                       -------   -------   -------   -------
    Net                                 17,156    20,487    37,053    40,533
    

    Non-reportable segments             13,885    19,936    22,268    24,831

    
    Unallocated                              8        62        84        95
                                       -------   -------   -------   -------
    

    
                                      $377,427  $371,527  $797,392  $777,138
                                       =======   =======   =======   =======
    


    
    Segment Earnings (Loss):
    North American Social
       Expression Products             $40,799   $15,417  $127,739   $83,578
    Intersegment items                 (10,467)  (10,919)  (16,722)  (23,829)
    Exchange rate adjustment               798        82       803        49
                                       -------   -------   -------   -------
    Net                                 31,130     4,580   111,820    59,798
    

    
    International Social
       Expression Products               1,393       559     1,433     1,056
    Exchange rate adjustment               200        18       347        64
                                       -------   -------   -------   -------
    Net                                  1,593       577     1,780     1,120
    

    
    Retail Operations                   (6,484)   (9,071)   (9,265)  (16,372)
    Exchange rate adjustment                (3)       (5)       (3)       (3)
                                       -------   -------   -------   -------
    Net                                 (6,487)   (9,076)   (9,268)  (16,375)
    

    
    AG Interactive                       3,177     1,208     6,473     3,249
    Exchange rate adjustment                (8)        2       (17)        1
                                       -------   -------   -------   -------
    Net                                  3,169     1,210     6,456     3,250
    

    Non-reportable segments              2,035     6,735     2,962     4,640

    
    Unallocated                        (18,456)  (17,856)  (45,849)  (46,762)
    Exchange rate adjustment               (71)      (53)      (75)     (153)
                                       -------   -------   -------   -------
    Net                                (18,527)  (17,909)  (45,924)  (46,915)
                                       -------   -------   -------   -------
    

    
                                       $12,913  $(13,883)  $67,826    $5,518
                                       =======   =======   =======   =======
    




For further information:

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

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