American Greetings Announces Record Second Quarter Earnings


    


    
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<p><location>CLEVELAND</location>, <chron>Sept. 24</chron> /CNW/ -- American Greetings Corporation (NYSE:   AM) today announced its second quarter results for the quarter ended <chron>August 28, 2009</chron>.</p>
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    Second Quarter Results
    
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<p>For the second quarter of fiscal 2010, the Company reported total revenue of <money>$356.4 million</money>, pre-tax income of <money>$34.1 million</money>, and net income of <money>$23.1 million</money> or 59 cents per share (all per-share amounts assume dilution).  Included within these results was a pre-tax benefit from an insurance program of <money>$7.9 million</money> (after tax of approximately <money>$7.6 million</money>) or approximately 19 cents per share.</p>
<p/>
<p>For the second quarter of fiscal 2009, the Company reported total revenue of <money>$385.8 million</money>, pre-tax income of <money>$2.4 million</money>, and net income of <money>$2.3 million</money> or 5 cents per share.</p>
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    Management Comments and Outlook
    
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<p>Chief Executive Officer Zev Weiss said, "I am very pleased with our record earnings performance this quarter as well as our strong cash flow.  I believe the changes we have made to our business over the last year are showing up in our results.  We could not have achieved these results without the teamwork and coordination of all our associates."</p>
<p/>
<p>Weiss continued, "We have devoted more time and effort to develop new products so that consumers can find unique and fresh offerings in the greeting card aisle.  We have expanded our use of technology for both traditional greeting cards as well as on-line applications including Facebook and the iPhone.  These examples of leadership in innovation are all in addition to the recent enhancements we have made to our portfolio, specifically the acquisitions of Recycled Paper Greetings and Papyrus, which complement our innovation with leadership in both humor and elegant design."</p>
<p/>
<p>As a result of the strong cash flow performance during the first half of the fiscal year, the Company raised its previously announced fiscal 2010 cash flow estimate.  Previously, the Company expected cash flow from operating activities of approximately <money>$105 million to $115 million</money> and capital expenditures of approximately <money>$35 million to $45 million</money> resulting in cash flow from operating activities minus capital expenditures of approximately <money>$70 million</money>.  The Company now expects cash flow from operating activities of at least <money>$160 million</money> and capital expenditures of approximately <money>$35 million</money> resulting in cash flow from operating activities minus capital expenditures to be greater than <money>$125 million</money>.</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 <chron>9:00 a.m. Eastern time</chron> 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 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 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 <location>Cleveland</location>, Ohio, American Greetings generates annual revenue of approximately <money>$1.7 billion</money>, 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 and liquidity amounts included in this earnings release may be considered non-GAAP measures under the Securities and Exchange Commission's Regulation G.  The after-tax amounts were calculated based on the Company's statutory tax rate of approximately 38.9%.  Management believes that after-tax information is 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 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.

    
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<p>Risks pertaining specifically to AG Interactive include the viability of online advertising, subscriptions as revenue generators, the ability to adapt to rapidly changing social media, and the ability to gain a leadership position in the digital photo sharing space.</p>
<p/>
<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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<p> </p>
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                          AMERICAN GREETINGS CORPORATION
                  SECOND QUARTER CONSOLIDATED STATEMENT OF INCOME
                       FISCAL YEAR ENDING FEBRUARY 28, 2010
    
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<p> </p>
<p>       (In thousands of dollars except share and per share amounts)</p>
<p> </p>
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                                              (Unaudited)
                            Three Months Ended           Six Months Ended
                            ------------------           ----------------
                          August 28,     August 29,   August 28,   August 29,
                             2009          2008          2009         2008
                          ----------    ----------    ----------   ----------
    
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<p> </p>
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    Net sales               $348,639      $372,942      $757,916     $798,405
    Other revenue              7,711        12,893        11,356       15,730
                               -----        ------        ------       ------
    Total revenue            356,350       385,835       769,272      814,135
    
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<p> </p>
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    Material, labor
     and other
     production costs        153,248       170,112       320,417      363,454
    Selling,
     distribution and
     marketing expenses      117,531       154,387       249,748      305,262
    Administrative and
     general expenses         48,483        57,162       111,634      119,723
    Other operating
     (income) expense -
     net                      (1,397)         (111)       26,376         (838)
                              ------          ----        ------         ----
    
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<p> </p>
<p>Operating income          38,485         4,285        61,097       26,534</p>
<p> </p>
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    Interest expense           6,671         5,434        13,658       10,339
    Interest income             (989)         (898)       (1,265)      (1,888)
    Other non-operating
     income - net             (1,291)       (2,617)       (2,333)      (3,518)
                              ------        ------        ------       ------
    
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<p> </p>
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    Income before
     income tax expense       34,094         2,366        51,037       21,601
    Income tax expense        10,972            69        17,954        5,971
                              ------           ---        ------        -----
    
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<p> </p>
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    Net income               $23,122        $2,297       $33,083      $15,630
                             =======        ======       =======      =======
    
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<p> </p>
<p> </p>
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    Earnings per share
     - basic                   $0.59         $0.05         $0.84        $0.32
    
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<p> </p>
<p> </p>
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    Earnings per share
     - assuming
     dilution                  $0.59         $0.05         $0.84        $0.32
    
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<p> </p>
<p> </p>
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    Average number of
     common shares
     outstanding          39,407,532    47,769,594    39,508,240   48,285,267
    
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<p> </p>
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    Average number of
     common shares
     outstanding -
     assuming dilution    39,407,532    47,807,313    39,508,240   48,328,659
    
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<p> </p>
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    Dividends declared
     per share                 $0.12         $0.12         $0.12        $0.24
    
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<p> </p>
<p> </p>
<p> </p>
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                     AMERICAN GREETINGS CORPORATION
      SECOND QUARTER CONSOLIDATED STATEMENT OF FINANCIAL POSITION
                  FISCAL YEAR ENDING FEBRUARY 28, 2010
    
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<p> </p>
<p>                   (In thousands of dollars)</p>
<p> </p>
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                                             (Unaudited)
                                             -----------
                                  August 28, 2009  August 29, 2008
                                  ---------------  ---------------
    
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<p> </p>
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    ASSETS
    CURRENT ASSETS
      Cash and cash equivalents           $49,903          $84,040
      Trade accounts receivable, net       78,070           62,826
      Inventories                         208,130          259,789
      Deferred and refundable
       income taxes                        63,665           54,149
      Assets held for sale                  1,423            2,604
      Prepaid expenses and other          144,773          179,571
                                          -------          -------
        Total current assets              545,964          642,979
    
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<p> </p>
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    GOODWILL                               26,393          289,662
    OTHER ASSETS                          363,480          440,589
    DEFERRED AND REFUNDABLE
     INCOME TAXES                         167,138          133,827
    
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<p> </p>
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    Property, plant and
     equipment - at cost                  893,554          980,103
    Less accumulated depreciation         607,851          679,862
                                          -------          -------
    PROPERTY, PLANT AND
     EQUIPMENT - NET                      285,703          300,241
                                          -------          -------
                                       $1,388,678       $1,807,298
                                       ==========       ==========
    
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<p> </p>
<p> </p>
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    LIABILITIES AND SHAREHOLDERS' EQUITY
    CURRENT LIABILITIES
      Debt due within one year             $1,000          $18,445
      Accounts payable                     96,279          125,648
      Accrued liabilities                  67,985           66,007
      Accrued compensation and
       benefits                            50,925           39,378
      Income taxes payable                  2,856            7,729
      Other current liabilities            94,462          113,379
                                           ------          -------
        Total current liabilities         313,507          370,586
    
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<p> </p>
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    LONG-TERM DEBT                        335,372          391,889
    OTHER LIABILITIES                     127,066          147,906
    DEFERRED INCOME TAXES AND
     NONCURRENT INCOME TAXES
     PAYABLE                               30,736           23,343
    
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<p> </p>
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    SHAREHOLDERS' EQUITY
      Common shares - Class A              35,923           42,208
      Common shares - Class B               3,477            3,494
      Capital in excess of par
       value                              451,328          447,502
      Treasury stock                     (941,198)        (914,262)
      Accumulated other
       comprehensive loss                 (40,562)          (9,711)
      Retained earnings                 1,073,029        1,304,343
                                        ---------        ---------
        Total shareholders'
         equity                           581,997          873,574
                                          -------          -------
                                       $1,388,678       $1,807,298
                                       ==========       ==========
    
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<p> </p>
<p> </p>
<p> </p>
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                       AMERICAN GREETINGS CORPORATION
             SECOND QUARTER CONSOLIDATED STATEMENT OF CASH FLOWS
                    FISCAL YEAR ENDING FEBRUARY 28, 2010
                          (In thousands of dollars)
    
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<p> </p>
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                                                      (Unaudited)
                                                    Six Months Ended
                                                    ----------------
                                            August 28, 2009  August 29, 2008
                                            ---------------  ---------------
    
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<p> </p>
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    OPERATING ACTIVITIES:
      Net income                                    $33,083          $15,630
      Adjustments to reconcile net income
       to cash flows from operating activities:
        Net loss on dispositions                     27,696                -
        Net loss on disposal of fixed assets              9              385
        Depreciation and intangible
         assets amortization                         23,466           25,324
        Deferred income taxes                        26,708           15,394
        Other non-cash charges                        4,622            3,379
        Changes in operating assets and liabilities,
         net of acquisitions and dispositions:
          Trade accounts receivable                 (10,877)            (725)
          Inventories                               (15,022)         (47,426)
          Other current assets                       12,347             (952)
          Deferred costs - net                       11,885           14,654
          Accounts payable and other
           liabilities                              (22,190)         (69,511)
          Other - net                                (7,561)          (9,826)
                                                     ------           ------
        Total Cash Flows From
         Operating Activities                        84,166          (53,674)
    
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<p> </p>
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    INVESTING ACTIVITIES:
      Property, plant and equipment additions       (15,447)         (28,545)
      Cash payments for business acquisitions,
       net of cash acquired                         (19,300)         (15,625)
      Proceeds from sale of fixed assets                729              275
      Other - net                                     3,063          (44,153)
                                                      -----          -------
        Total Cash Flows From
         Investing Activities                       (30,955)         (88,048)
    
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<p> </p>
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    FINANCING ACTIVITIES:
      Net (decrease) increase in long-term debt     (54,750)         148,591
      Increase in short-term debt                         -           18,445
      Sale of stock under benefit plans                  91              434
      Purchase of treasury shares                    (6,176)         (46,137)
      Dividends to shareholders                      (9,593)         (11,667)
                                                     ------          -------
        Total Cash Flows From
         Financing Activities                       (70,428)         109,666
    
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<p> </p>
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    EFFECT OF EXCHANGE RATE CHANGES ON CASH           6,904           (7,404)
                                                      -----           ------
    
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<p> </p>
<p>DECREASE IN CASH AND CASH EQUIVALENTS           (10,313)         (39,460)</p>
<p> </p>
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        Cash and Cash Equivalents at
         Beginning of Year                           60,216          123,500
                                                     ------          -------
        Cash and Cash Equivalents at
         End of Period                              $49,903          $84,040
                                                    =======          =======
    
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<p> </p>
<p> </p>
<p> </p>
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                         AMERICAN GREETINGS CORPORATION
                SECOND QUARTER CONSOLIDATED SEGMENT DISCLOSURES
                      FISCAL YEAR ENDING FEBRUARY 28, 2010
                           (In thousands of dollars)
    
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<p> </p>
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                                           (Unaudited)
                              Three Months                Six Months
                                  Ended                      Ended
                              -------------               -----------
                         August 28,     August 29,   August 28,  August 29,
                            2009          2008         2009        2008
                         ----------     ----------   ---------   ---------
    Total Revenue:
    North American Social
     Expression Products   $266,934       $256,756    $590,818    $554,933
    Intersegment items            -        (13,720)     (5,104)    (27,026)
    Exchange rate
     adjustment               1,995          3,786       2,294       7,202
                              -----          -----       -----       -----
    Net                     268,929        246,822     588,008     535,109
    
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<p> </p>
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    International Social
     Expression Products     45,754         43,374      92,760      91,288
    Exchange rate
     adjustment              10,986         19,950      16,742      42,996
                             ------         ------      ------      ------
    Net                      56,740         63,324     109,502     134,284
    
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<p> </p>
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    Retail Operations             -         34,586      11,727      73,063
    Exchange rate
     adjustment                   -          3,078         112       6,584
                                ---          -----         ---       -----
    Net                           -         37,664      11,839      79,647
    
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<p> </p>
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    AG Interactive           18,075         20,334      36,709      40,233
    Exchange rate
     adjustment                 422            638         633       1,300
                                ---            ---         ---       -----
    Net                      18,497         20,972      37,342      41,533
    
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<p> </p>
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    Non-reportable
     segments                11,964         17,053      22,361      23,562
    
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<p> </p>
<p>Unallocated                 220              -         220           -</p>
<p> </p>
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                           --------       --------    --------    --------
                           $356,350       $385,835    $769,272    $814,135
                           ========       ========    ========    ========
    
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<p> </p>
<p> </p>
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    Segment Earnings (Loss):
    North American Social
     Expression Products    $42,679        $32,248    $120,556     $84,431
    Intersegment items            -         (9,973)     (3,511)    (20,150)
    Exchange rate
     adjustment               1,092          1,325       1,282       1,830
                              -----          -----       -----       -----
    Net                      43,771         23,600     118,327      66,111
    
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<p> </p>
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    International Social
     Expression Products      1,887         (1,569)      2,220         204
    Exchange rate
     adjustment                 428           (589)        434         443
                                ---           ----         ---         ---
    Net                       2,315         (2,158)      2,654         647
    
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<p> </p>
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    Retail Operations             -         (6,588)    (34,830)     (9,939)
    Exchange rate
     adjustment                   -            (88)       (285)       (150)
                                ---            ---        ----        ----
    Net                           -         (6,676)    (35,115)    (10,089)
    
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<p> </p>
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    AG Interactive            1,644            456       3,296        (879)
    Exchange rate
     adjustment                 287            305         349         579
                                ---            ---         ---         ---
    Net                       1,931            761       3,645        (300)
    
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<p> </p>
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    Non-reportable
     segments                   367          2,541         238         575
    
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<p> </p>
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    Unallocated             (14,209)       (19,415)    (38,520)    (39,110)
    Exchange rate
     adjustment                 (81)         3,713        (192)      3,767
                                ---          -----        ----       -----
    Net                     (14,290)       (15,702)    (38,712)    (35,343)
    
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<p> </p>
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                            -------         ------     -------     -------
                            $34,094         $2,366     $51,037     $21,601
                            =======         ======     =======     =======




    

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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