American Greetings Announces Record First Quarter Earnings Per Share


    




    
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<p><span class="xn-location">CLEVELAND</span>, <span class="xn-chron">June 30</span> /CNW/ -- American Greetings Corporation (NYSE:   AM) today announced its results for the first fiscal quarter ended <span class="xn-chron">May 28, 2010</span>.</p>
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    First Quarter Results
    
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<p>For the first quarter of fiscal 2011, the Company reported total revenue of <span class="xn-money">$396.3 million</span>, pre-tax income of <span class="xn-money">$51.0 million</span>, and net income of <span class="xn-money">$30.8 million</span> or 75 cents per share (all per-share amounts assume dilution).</p>
<p/>
<p>For the first quarter of fiscal 2010, the Company reported total revenue of <span class="xn-money">$412.9 million</span>, pre-tax income of <span class="xn-money">$16.9 million</span>, and net income of <span class="xn-money">$10.0 million</span> or 25 cents per share.  During the first quarter of fiscal 2010, American Greetings sold its retail store operations.  The Retail Operations segment reported revenue of <span class="xn-money">$11.7 million</span> and a segment loss of <span class="xn-money">$34.8 million</span> (after-tax of approximately <span class="xn-money">$21.3 million</span>), which reduced earnings per share by approximately 54 cents during the quarter.</p>
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    Management Comments and Outlook
    
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<p>Chief Executive Officer Zev Weiss said, "I am pleased that our earnings per share of 75 cents were the highest we have ever achieved in a first quarter.  Our first quarter EPS benefited from several factors including the solid performance in our core business units, the changes we made over the last eighteen months to our portfolio of businesses, and the shares we repurchased over the last several years.  We believe our refined business portfolio, which focuses on our core greeting card business, along with the changes we have made to our capital structure over the last several years, position the Company well for the opportunities and challenges ahead."</p>
<p/>
<p>"The refined portfolio is contributing to the solid EPS for the quarter.  Eliminating the earnings drag of our retail operations has added meaningfully to our earnings swing quarter on quarter.  In addition, we continue to believe that by the end of this fiscal year, the integration of both Recycled Paper Greetings and Papyrus will enhance our operating income by <span class="xn-money">$15</span> to 20 million on an annual run rate," Weiss added.</p>
<p/>
<p>For fiscal year 2011, the Company continues to anticipate cash flow from operating activities of about <span class="xn-money">$165 million</span> and capital expenditures of approximately <span class="xn-money">$40 million</span> resulting in cash flow from operating activities minus capital expenditures of approximately <span class="xn-money">$125 million</span>.</p>
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    Conference Call on the Web
    
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<p>American Greetings will broadcast its conference call live on the Internet at <span class="xn-chron">9:00 a.m. Eastern time</span> today.  The conference call will be accessible through the Investor Relations section of the American Greetings Web site at <a href="http://investors.americangreetings.com">http://investors.americangreetings.com</a>.  A replay of the call will be available on the site.</p>
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    About American Greetings Corporation
    
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<p>For more than 100 years, American Greetings Corporation (NYSE:   AM) has been a creator and manufacturer of innovative social expression products that assist consumers in enhancing their relationships.  The Company's major greeting card lines are American Greetings, Carlton Cards, Gibson, Recycled Paper Greetings and Papyrus, and other paper product offerings include DesignWare party goods and American Greetings and Plus Mark gift-wrap and boxed cards.  American Greetings also has 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 <span class="xn-location">Cleveland</span>, Ohio, American Greetings generates annual revenue of approximately <span class="xn-money">$1.6 billion</span>, and its products can be found in retail outlets worldwide.  For more information on the Company, visit <a href="http://corporate.americangreetings.com">http://corporate.americangreetings.com</a>.</p>
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    Non-GAAP Measures
    
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<p>Certain after-tax, earnings per share, and liquidity amounts included in this release may be considered non-GAAP measures under the Securities and Exchange Commission's Regulation G.  The prior year after-tax amounts were calculated based on the Company's statutory tax rate of approximately 38.9%.  Management believes that after-tax and earnings per share information are useful in analyzing the Company's results and that cash flow from operating activities minus capital expenditures provides a liquidity measure useful to investors in analyzing the cash generation of the Company.</p>
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    Factors That May Affect Future Results
    
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<p>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:</p>
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    --  a weak retail environment and general economic conditions;
    --  the ability to achieve both the desired benefits from the transaction
        with Amscan as well as ensuring a seamless transition for affected
        retail customers and consumers;
    --  the Company's successful transition of the Retail Operations segment
to
        its buyer, Schurman Fine Papers, and Schurman Fine Papers' ability to
        successfully operate its retail operations and satisfy its obligations
        to the Company;
    --  the Company's ability to successfully integrate both Recycled Paper
        Greetings and Papyrus;
    --  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 the
        Company's 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.
    
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<p>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.</p>
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<p>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.</p>
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                          AMERICAN GREETINGS CORPORATION
                  FIRST QUARTER CONSOLIDATED STATEMENT OF INCOME
                       FISCAL YEAR ENDING FEBRUARY 28, 2011
    
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<p> </p>
<p>       (In thousands of dollars except share and per share amounts)</p>
<p> </p>
<p> </p>
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                                                 (Unaudited)
                                             Three Months Ended
                                             ------------------
                                    May 28, 2010          May 29, 2009
                                    ------------          ------------
    
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<p> </p>
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    Net sales                             $392,105              $409,277
    Other revenue                              4,203                 3,645
                                               -----                 -----
    Total revenue                            396,308               412,922
    
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<p> </p>
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    Material, labor and other
     production costs                      158,013               167,169
    Selling, distribution and
     marketing expenses                    117,551               132,217
    Administrative and general
     expenses                               66,032                63,151
    Other operating (income)
     expense -net                             (594)               27,773
                                              ----                ------
    
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<p> </p>
<p>Operating income                        55,306                22,612</p>
<p> </p>
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    Interest expense                         6,202                 6,987
    Interest income                           (213)                 (276)
    Other non-operating income -
     net                                    (1,700)               (1,042)
                                            ------                ------
    
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    Income before income tax
     expense                                51,017                16,943
    Income tax expense                      20,178                 6,982
                                            ------                 -----
    
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    Net income                             $30,839                $9,961
                                           =======                ======
    
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<p>Earnings per share - basic               <span class="xn-money">$0.78</span>                 <span class="xn-money">$0.25</span></p>
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    Earnings per share -assuming
     dilution                                $0.75                 $0.25
    
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    Average number of common shares
     outstanding                        39,638,568            39,608,947
    
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    Average number of common shares
     outstanding -
      assuming dilution                 40,849,429            39,608,947
    
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    Dividends declared per share             $0.14                    $-




    
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                           AMERICAN GREETINGS CORPORATION
             FIRST QUARTER CONSOLIDATED STATEMENT OF FINANCIAL POSITION
                        FISCAL YEAR ENDING FEBRUARY 28, 2011
    
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<p> </p>
<p>                         (In thousands of dollars)</p>
<p> </p>
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                                                       (Unaudited)
                                                       -----------
                                            May 28, 2010       May 29, 2009
                                            ------------       ------------
    
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<p> </p>
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    ASSETS
    CURRENT ASSETS
      Cash and cash equivalents                   $186,775            $87,611
      Trade accounts receivable, net               110,085            120,964
      Inventories                                157,913            172,977
      Deferred and refundable income
       taxes                                      74,951             65,217
      Assets held for sale                        12,936             23,328
      Prepaid expenses and other                 118,047            157,471
                                                 -------            -------
        Total current assets                     660,707            627,568
    
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    GOODWILL                                      30,238             25,921
    OTHER ASSETS                                 413,236            377,973
    DEFERRED AND REFUNDABLE INCOME
     TAXES                                       150,207            172,672
    
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<p> </p>
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    Property, plant and
     equipment -at cost                          839,928            856,723
    Less accumulated
     depreciation                                600,087            589,614
                                                 -------            -------
    PROPERTY, PLANT AND EQUIPMENT -
     NET                                         239,841            267,109
                                                 -------            -------
                                              $1,494,229         $1,471,243
                                              ==========         ==========
    
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    LIABILITIES AND SHAREHOLDERS'
     EQUITY
    CURRENT LIABILITIES
      Debt due within one year                   $99,000            $27,325
      Accounts payable                            80,205             85,483
      Accrued liabilities                         75,572             84,074
      Accrued compensation and benefits           35,472             37,274
      Income taxes payable                        25,390              2,937
      Other current liabilities                   93,405            108,863
                                                  ------            -------
        Total current liabilities                 409,044            345,956
    
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    LONG-TERM DEBT                               230,973            409,455
    OTHER LIABILITIES                            163,969            125,668
    DEFERRED INCOME TAXES AND
        NONCURRENT INCOME TAXES PAYABLE           30,548             30,292
    
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<p> </p>
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    SHAREHOLDERS' EQUITY
      Common shares - Class A                     37,064             35,921
      Common shares - Class B                      2,926              3,497
      Capital in excess of par
       value                                     478,676            450,059
      Treasury stock                            (951,830)          (941,063)
      Accumulated other comprehensive
       loss                                      (40,257)           (43,276)
      Retained earnings                        1,133,116          1,054,734
                                               ---------          ---------
        Total shareholders' equity               659,695            559,872
                                                 -------            -------
                                              $1,494,229         $1,471,243
                                              ==========         ==========




    
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<p> </p>
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                           AMERICAN GREETINGS CORPORATION
                 FIRST QUARTER CONSOLIDATED STATEMENT OF CASH FLOWS
                        FISCAL YEAR ENDING FEBRUARY 28, 2011
                              (In thousands of dollars)
    
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                                                    (Unaudited)
                                                Three Months Ended
                                                ------------------
                                        May 28, 2010       May 29, 2009
                                        ------------       ------------
    
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<p> </p>
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    OPERATING ACTIVITIES:
      Net income                              $30,839             $9,961
      Adjustments to reconcile net
       income to
          cash flows from operating
           activities:
        Loss on disposition of retail
         stores                                     -             28,333
        Net (gain) loss on disposal of
         fixed assets                            (151)               199
        Depreciation and amortization          10,294             12,393
        Deferred income taxes                    (535)            17,158
        Other non-cash charges                  3,385              2,657
        Changes in operating assets and
         liabilities,
              net of acquisitions and
               dispositions:
          Trade accounts receivable            19,576            (43,770)
          Inventories                           4,483             11,926
          Other current assets                 (2,878)            (1,243)
          Income taxes                         15,830               (849)
          Deferred costs - net                 13,802             (2,846)
          Accounts payable and other
           liabilities                        (66,362)           (29,548)
          Other - net                           4,256              4,358
                                                -----              -----
        Total Cash Flows From Operating
         Activities                            32,539              8,729
    
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<p> </p>
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    INVESTING ACTIVITIES:
      Property, plant and equipment
       additions                               (5,965)            (8,909)
      Cash payments for business
       acquisitions, net of cash
       acquired                                     -            (16,286)
      Proceeds from sale of fixed
       assets                                     555                113
      Proceeds from escrow related to
       party goods transaction                 24,523                  -
                                               ------                ---
        Total Cash Flows From Investing
         Activities                            19,113            (25,082)
    
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    FINANCING ACTIVITIES:
      Net (decrease) increase in
       long-term debt                            (250)            19,800
      Net increase in short-term
       debt                                         -             26,325
      Sale of stock under benefit
       plans                                   19,087                 30
      Purchase of treasury shares             (12,979)            (5,877)
      Dividends to shareholders                (5,525)            (4,865)
                                               ------             ------
        Total Cash Flows From Financing
         Activities                               333             35,413
    
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<p> </p>
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    EFFECT OF EXCHANGE RATE CHANGES
     ON CASH                                   (3,159)             8,335
                                               ------              -----
    
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<p> </p>
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    INCREASE IN CASH AND CASH
     EQUIVALENTS                               48,826             27,395
    
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<p> </p>
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        Cash and Cash Equivalents at
         Beginning of Year                    137,949             60,216
                                              -------             ------
        Cash and Cash Equivalents at
         End of Period                       $186,775            $87,611
                                             ========            =======




    
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                      AMERICAN GREETINGS CORPORATION
              FIRST QUARTER CONSOLIDATED SEGMENT DISCLOSURES
                   FISCAL YEAR ENDING FEBRUARY 28, 2011
                        (In thousands of dollars)
    
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                                                 (Unaudited)
                                              Three Months Ended
                                              ------------------
                                    May 28, 2010          May 29, 2009
                                    ------------          ------------
    Total Revenue:
    North American Social
     Expression Products                   $304,168              $323,813
    Intersegment items                            -                (5,104)
    Exchange rate adjustment                  4,141                   370
                                            -----                   ---
    Net                                   308,309               319,079
    
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<p> </p>
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    International Social Expression
     Products                              57,801                56,051
    Exchange rate adjustment                 (228)               (3,289)
                                             ----                ------
    Net                                    57,573                52,762
    
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    Retail Operations                           -                11,727
    Exchange rate adjustment                    -                   112
                                              ---                   ---
    Net                                         -                11,839
    
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<p> </p>
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    AG Interactive                         18,666                18,949
    Exchange rate adjustment                 (112)                 (104)
                                             ----                  ----
    Net                                    18,554                18,845
    
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    Non-reportable segments                11,872                10,397
                                         $396,308              $412,922
                                         ========              ========
    
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<p> </p>
<p> </p>
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    Segment Earnings (Loss):
    North American Social
     Expression Products                  $68,107               $77,986
    Intersegment items                          -                (3,511)
    Exchange rate adjustment                1,942                    81
                                            -----                   ---
    Net                                    70,049                74,556
    
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<p> </p>
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    International Social Expression
     Products                               2,834                   513
    Exchange rate adjustment                    -                  (174)
                                              ---                  ----
    Net                                     2,834                   339
    
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<p> </p>
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    Retail Operations                           -               (34,830)
    Exchange rate adjustment                    -                  (285)
                                              ---                  ----
    Net                                         -               (35,115)
    
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<p> </p>
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    AG Interactive                          2,474                 1,796
    Exchange rate adjustment                 (102)                  (82)
                                             ----                   ---
    Net                                     2,372                 1,714
    
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<p> </p>
<p>Non-reportable segments                 2,152                  (129)</p>
<p> </p>
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    Unallocated                           (26,399)              (24,852)
    Exchange rate adjustment                    9                   430
                                              ---                   ---
    Net                                   (26,390)              (24,422)
                                          $51,017               $16,943
                                          =======               =======







    

For further information: For further information: Gregory M. Steinberg, Treasurer and Executive 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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