American Greetings Announces Second Quarter Results



    CLEVELAND, Sept. 26 /CNW/ -- American Greetings Corporation (NYSE:   AM)
today announced its second quarter results for the fiscal quarter ended August
29, 2008.
    
    Second Quarter Results
    
    For the second quarter of fiscal 2009, the Company reported total revenue
of $385.8 million, pre-tax income from continuing operations of $2.4 million,
and income from continuing operations of $2.3 million or 5 cents per share
(all per-share amounts assume dilution).  For the second quarter of fiscal
2008, the Company reported total revenue of $377.5 million, pre-tax income
from continuing operations of $12.6 million, and income from continuing
operations of $8.4 million or 15 cents per share.
    
    Management Comments and Outlook
    
    Chief Executive Officer Zev Weiss said, "I am pleased with our revenue
performance, particularly given current economic conditions.  We believe the
changes we have made to our products the last couple of years are showing up
in our revenue growth.  Increasing the quality of our product to achieve that
revenue growth has come at a cost, especially in this time of inflation. We
remain committed to mitigating the increasing cost structure while
simultaneously continuing to delight the consumer."
    The Company reaffirmed its previously announced fiscal 2009 estimate of
earnings per share from continuing operations to be between $1.60 to $1.85 per
share and cash flow from operations minus capital expenditures to be between
$60 million and $80 million.
    Weiss continued, "Due to the seasonality of our business, the majority of
our earnings are typically earned in the second half of the fiscal year.
During the second half, we are increasing our efforts on productivity
improvement projects to help offset the margin pressure we experienced in the
first half.  The combination of both the challenging economic conditions and
the risk inherent in a seasonal business could cause us to finish the year
near the lower end of our earnings guidance."
    
    Financing Activities
    
    Under the Company's $100 million share repurchase program, during the
second quarter, the Company purchased approximately 3.1 million shares of its
common stock for $46.0 million.  The Company has reduced its diluted share
count by forty two percent over the past three and one half years.
    The Company's Board of Directors authorized a cash dividend of 12 cents
per share to be paid on October 27, 2008 to shareholders of record at the
close of business on October 15, 2008.
    
    Conference Call on the Web
    
    American Greetings will broadcast its conference call live on the
Internet at 9:00 a.m. Eastern time today.  The conference call will be
accessible through the Investor Relations section of the American Greetings
Web site at http://investors.americangreetings.com .  A replay of the call
will be available on the site.
    
    About American Greetings Corporation
    
    American Greetings Corporation (NYSE:   AM) is one of the world's largest
manufacturers of social expression products.  Along with greeting cards, its
product lines include gift wrap, party goods, stationery, calendars, ornaments
and electronic greetings.  Located in Cleveland, Ohio, American Greetings
generates annual revenue of approximately $1.8 billion.  For more information
on the Company, visit http://corporate.americangreetings.com .
    Certain statements in this release, including those under "Management
Comments and Outlook," may constitute forward-looking statements within the
meaning of the Federal securities laws. These statements can be identified by
the fact that they do not relate strictly to historic or current facts. They
use such words as "anticipate," "estimate," "expect," "project," "intend,"
"plan," "believe," and other words and terms of similar meaning in connection
with any discussion of future operating or financial performance. These
forward-looking statements are based on currently available information, but
are subject to a variety of uncertainties, unknown risks and other factors
concerning the Company's operations and business environment, which are
difficult to predict and may be beyond the control of the Company. Important
factors that could cause actual results to differ materially from those
suggested by these forward-looking statements, and that could adversely affect
the Company's future financial performance, include, but are not limited to,
the following:

    
    -- a weak retail environment;
    -- retail consolidations, acquisitions and bankruptcies, including the
       possibility of resulting adverse changes to retail contract terms;
    -- competitive terms of sale offered to customers;
    -- the timing and impact of investments in new retail or product
       strategies as well as new product introductions and achieving the
       desired benefits from those investments;
    -- consumer acceptance of products as priced and marketed;
    -- the impact of technology on core product sales;
    -- the timing and impact of converting customers to a scan-based trading
       model;
    -- escalation in the cost of providing employee health care;
    -- the ability to successfully integrate acquisitions;
    -- the ability to identify, complete, or achieve the desired benefits
       associated with productivity improvement projects;
    -- the ability to successfully implement, or achieve the desired benefits
       associated with any information systems refresh the Company may
       implement;
    -- the ability to execute share repurchase programs or the ability to
       achieve the desired accretive effect from such repurchases;
    -- the Company's ability to comply with its debt covenants;
    -- the Company's ability to successfully complete, or achieve the desired
       benefits associated with, dispositions, including the sale of the
       Strawberry Shortcake and Care Bears properties;
    -- fluctuations in the value of currencies in major areas where the
       Company operates, including the U.S. Dollar, Euro, U.K. Pound Sterling,
       and Canadian Dollar; and
    -- the outcome of any legal claims known or unknown.
    
    Risks pertaining specifically to AG Interactive include the viability of
online advertising, subscriptions as revenue generators, the public's
acceptance of online greetings and other social expression products, and the
ability to gain a leadership position in the digital photo sharing space.
    In addition, this release contains time-sensitive information that
reflects management's best analysis as of the date of this release. American
Greetings does not undertake any obligation to publicly update or revise any
forward-looking statements to reflect future events, information or
circumstances that arise after the date of this release. Further information
concerning issues that could materially affect financial performance related
to forward-looking statements can be found in the Company's periodic filings
with the Securities and Exchange Commission, including the "Risk Factors"
section of the Company's Annual Report on Form 10-K for the fiscal year ended
February 29, 2008.



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

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

    
                                                (Unaudited)
                                 Three Months Ended       Six Months Ended
                               ----------------------  ----------------------
                               August 29,  August 24,  August 29,  August 24,
                                  2008        2007        2008        2007
                               ----------  ----------  ----------  ----------
    

    
    Net sales                    $372,942    $365,878    $798,405    $783,894
    Other revenue                  12,893      11,607      15,730      13,558
                               ----------  ----------  ----------  ----------
    Total revenue                 385,835     377,485     814,135     797,452
    

    
    Material, labor and other
     production costs             170,112     163,052     363,454     324,180
    Selling, distribution and
     marketing expenses           154,387     144,586     305,262     285,280
    Administrative and general
     expenses                      57,162      56,351     119,723     118,586
    Other operating income - net     (111)       (320)       (838)       (680)
                               ----------  ----------  ----------  ----------
    

    
    Operating income                4,285      13,816      26,534      70,086
    

    
    Interest expense                5,434       4,839      10,339       9,596
    Interest income                  (898)     (2,234)     (1,888)     (3,733)
    Other non-operating income
     - net                         (2,617)     (1,353)     (3,518)     (2,896)
                               ----------  ----------  ----------  ----------
    

    
    Income from continuing
     operations before income tax
     expense                        2,366      12,564      21,601      67,119
    Income tax expense                 69       4,189       5,971      28,481
                               ----------  ----------  ----------  ----------
    

    
    Income from continuing
     operations                     2,297       8,375      15,630      38,638
    

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

    
    Net income                     $2,297      $8,375     $15,630     $38,425
                               ==========  ==========  ==========  ==========
    

    
    Earnings per share - basic:
       Income from continuing
        operations                  $0.05       $0.15       $0.32       $0.69
       Loss from discontinued
        operations                    -           -           -           -
                               ----------  ----------  ----------  ----------
       Net income                   $0.05       $0.15       $0.32       $0.69
                               ==========  ==========  ==========  ==========
    

    
    Earnings per share -
     assuming dilution:
       Income from continuing
        operations                  $0.05       $0.15       $0.32       $0.69
       Loss from discontinued
        operations                    -           -           -           -
                               ----------  ----------  ----------  ----------
       Net income                   $0.05       $0.15       $0.32       $0.69
                               ==========  ==========  ==========  ==========
    

    
    Average number of common
     shares outstanding        47,769,594  55,766,802  48,285,267  55,514,759
    

    
    Average number of common
     shares outstanding -
     assuming dilution         47,807,313  56,180,165  48,328,659  55,902,189
    

    
    Dividends declared per
     share                          $0.12       $0.10       $0.24       $0.20
    



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

    
                          (In thousands of dollars)
    

    
                                                        (Unaudited)
                                             ---------------------------------
                                             August 29, 2008   August 24, 2007
                                             ---------------   ---------------
    ASSETS
    CURRENT ASSETS
       Cash and cash equivalents                    $84,040          $192,450
       Trade accounts receivable, net                62,918            71,199
       Inventories                                  260,845           248,176
       Deferred and refundable income taxes          54,149            66,399
       Prepaid expenses and other                   182,526           215,375
                                             ---------------   ---------------
         Total current assets                       644,478           793,599
    

    
    GOODWILL                                        289,662           226,920
    OTHER ASSETS                                    437,633           405,283
    DEFERRED AND REFUNDABLE INCOME TAXES            133,827            98,968
    

    
    Property, plant and equipment - at cost         983,723           950,385
    Less accumulated depreciation                   682,025           672,642
                                             ---------------   ---------------
    PROPERTY, PLANT AND EQUIPMENT - NET             301,698           277,743
                                             ---------------   ---------------
                                                 $1,807,298        $1,802,513
                                             ===============   ===============
    


    
    LIABILITIES AND SHAREHOLDERS' EQUITY
    CURRENT LIABILITIES
       Debt due within one year                    $209,645           $22,690
       Accounts payable                             125,648           126,376
       Accrued liabilities                           66,007            70,903
       Accrued compensation and benefits             39,378            50,397
       Income taxes payable                           7,729             1,456
       Other current liabilities                    113,379            97,766
                                             ---------------   ---------------
         Total current liabilities                  561,786           369,588
    

    
    LONG-TERM DEBT                                  200,689           200,988
    OTHER LIABILITIES                               147,906           148,721
    DEFERRED INCOME TAXES AND NONCURRENT INCOME
     TAXES PAYABLE                                   23,343            29,930
    

    
    SHAREHOLDERS' EQUITY
       Common shares - Class A                       42,208            51,497
       Common shares - Class B                        3,494             4,291
       Capital in excess of par value               447,502           439,985
       Treasury stock                              (914,262)         (720,027)
       Accumulated other comprehensive
        (loss) income                                (9,711)           10,690
       Retained earnings                          1,304,343         1,266,850
                                             ---------------   ---------------
         Total shareholders' equity                 873,574         1,053,286
                                             ---------------   ---------------
                                                 $1,807,298        $1,802,513
                                             ===============   ===============
    



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

    
                                                        (Unaudited)
                                                     Six Months Ended
                                             ---------------------------------
                                             August 29, 2008   August 24, 2007
                                             ---------------   ---------------
    OPERATING ACTIVITIES:
      Net income                                   $15,630            $38,425
      Loss from discontinued operations                  -                213
                                             ---------------   ---------------
      Income from continuing operations             15,630             38,638
      Adjustments to reconcile income
       from continuing operations
       to cash flows from operating
       activities:
        Net loss (gain) on disposal of
         fixed assets                                  385                (41)
        Depreciation and amortization               25,324             23,930
        Deferred income taxes                       15,394             14,335
        Other non-cash charges                       3,379              3,861
        Changes in operating assets and
         liabilities, net of acquisitions and
         dispositions:
          Trade accounts receivable                   (584)            33,389
          Inventories                              (47,606)           (61,980)
          Other current assets                         (55)            (2,641)
          Deferred costs - net                      14,654             28,451
          Accounts payable and other
           liabilities                             (69,511)           (23,376)
          Other - net                              (10,684)             2,784
                                             ---------------   ---------------
        Total Cash Flows From Operating
         Activities                                (53,674)            57,350
    

    
    INVESTING ACTIVITIES:
      Proceeds from sale of short-term
       investments                                       -            480,630
      Purchases of short-term investments                -           (480,630)
      Property, plant and equipment
       additions                                   (28,545)           (13,577)
      Cash payments for business
       acquisitions, net of cash acquired          (15,625)            (6,056)
      Cash receipts related to
       discontinued operations                           -              3,419
      Proceeds from sale of fixed assets               275              1,105
      Other - net                                  (44,153)                 -
                                             ---------------   ---------------
        Total Cash Flows From Investing
         Activities                                (88,048)           (15,109)
    

    
    FINANCING ACTIVITIES:
      Reduction of long-term debt                  (22,509)                 -
      Net increase in short-term debt              189,545                  -
      Sale of stock under benefit plans                434             24,250
      Purchase of treasury shares                  (46,137)           (11,883)
      Dividends to shareholders                    (11,667)           (11,115)
                                             ---------------   ---------------
        Total Cash Flows From Financing
         Activities                                109,666              1,252
    

    
    DISCONTINUED OPERATIONS:
      Operating cash flows from
       discontinued operations                           -                (59)
                                             ---------------   ---------------
        Total Cash Flows from
         Discontinued Operations                         -                (59)
    

    
    EFFECT OF EXCHANGE RATE CHANGES ON
     CASH                                           (7,404)             4,303
                                             ---------------   ---------------
    

    
    (DECREASE) INCREASE IN CASH AND CASH
     EQUIVALENTS                                   (39,460)            47,737
    

    
        Cash and Cash Equivalents at
         Beginning of Year                         123,500            144,713
                                             ---------------   ---------------
        Cash and Cash Equivalents at End
         of Period                                 $84,040           $192,450
                                             ===============   ===============
    



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

    
                                                (Unaudited)
                                 Three Months Ended       Six Months Ended
                               ----------------------  ----------------------
                               August 29,  August 24,  August 29,  August 24,
                                  2008        2007        2008        2007
                               ----------  ----------  ----------  ----------
    Total Revenue:
    North American Social
     Expression Products         $261,296    $258,141    $563,714    $558,085
    Intersegment items            (14,736)    (14,582)    (29,380)    (23,085)
    Exchange rate adjustment          262        (279)        775      (2,788)
                               ----------  ----------  ----------  ----------
    Net                           246,822     243,280     535,109     532,212
    

    
    International Social
     Expression Products           63,191      64,071     133,064     128,488
    Exchange rate adjustment          133         576       1,220         (92)
                               ----------  ----------  ----------  ----------
    Net                            63,324      64,647     134,284     128,396
    

    
    Retail Operations              37,547      39,072      79,040      79,611
    Exchange rate adjustment          117        (621)        607      (2,232)
                               ----------  ----------  ----------  ----------
    Net                            37,664      38,451      79,647      77,379
    

    
    AG Interactive                 20,975      17,155      41,502      37,054
    Exchange rate adjustment           (3)          2          31          (1)
                               ----------  ----------  ----------  ----------
    Net                            20,972      17,157      41,533      37,053
    

    
    Non-reportable segments        17,053      13,942      23,562      22,327
    

    
    Unallocated                       -             8         -            85
                               ----------  ----------  ----------  ----------
    

    
                                 $385,835    $377,485    $814,135    $797,452
                               ==========  ==========  ==========  ==========
    


    
    Segment Earnings (Loss):
    North American Social
     Expression Products          $34,364     $41,984     $88,059    $130,846
    Intersegment items            (10,750)    (10,955)    (21,993)    (17,477)
    Exchange rate adjustment          (14)        101          45      (1,549)
                               ----------  ----------  ----------  ----------
    Net                            23,600      31,130      66,111     111,820
    

    
    International Social
     Expression Products           (2,134)      1,574         728       1,750
    Exchange rate adjustment          (24)         19         (81)         30
                               ----------  ----------  ----------  ----------
    Net                            (2,158)      1,593         647       1,780
    

    
    Retail Operations              (6,669)     (6,561)    (10,076)     (9,330)
    Exchange rate adjustment           (7)         74         (13)         62
                               ----------  ----------  ----------  ----------
    Net                            (6,676)     (6,487)    (10,089)     (9,268)
    

    
    AG Interactive                    759       3,163        (337)      6,442
    Exchange rate adjustment            2           6          37          14
                               ----------  ----------  ----------  ----------
    Net                               761       3,169        (300)      6,456
    

    
    Non-reportable segments         2,541       1,772         575       2,335
    

    
    Unallocated                   (15,558)    (18,531)    (35,191)    (45,883)
    Exchange rate adjustment         (144)        (82)       (152)       (121)
                               ----------  ----------  ----------  ----------
    Net                           (15,702)    (18,613)    (35,343)    (46,004)
                               ----------  ----------  ----------  ----------
    

    
                                   $2,366     $12,564     $21,601     $67,119
                               ==========  ==========  ==========  ==========

    




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                
http://investors.americangreetings.com

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