American Greetings Announces Third Quarter Earnings


    


    
</pre>
<p><span class="xn-location">CLEVELAND</span>, <span class="xn-chron">Dec. 22, 2010</span> /CNW/ -- American Greetings Corporation (NYSE:  AM) today announced its results for the third fiscal quarter ended <span class="xn-chron">November 26, 2010</span>.</p>
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    Third Quarter Results
    
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<p>For the third quarter of fiscal 2011, the Company reported total revenue of <span class="xn-money">$430.1 million</span>, pre-tax income of <span class="xn-money">$51.5 million</span>, and net income of <span class="xn-money">$32.2 million</span> or 78 cents per share (all per-share amounts assume dilution).  Compared to the prior year, revenue was down approximately <span class="xn-money">$10.0 million</span>.  Approximately <span class="xn-money">$8.6 million</span> of the revenue decline was a result of the party goods transaction that occurred in <span class="xn-chron">December 2009</span>.  Holding aside the effect of the party goods transaction, revenue declined about <span class="xn-money">$1.4 million</span>.</p>
<p/>
<p>For the third quarter of fiscal 2010, the Company reported total revenue of <span class="xn-money">$440.2 million</span>, pre-tax income of <span class="xn-money">$38.1 million</span>, and net income of <span class="xn-money">$29.7 million</span> or 75 cents per share.  Included within these results were pre-tax costs related to the wind down of the Mexican operations of <span class="xn-money">$5.9 million</span> (after-tax of approximately <span class="xn-money">$5.7 million</span>) or approximately 14 cents per share as well as incremental variable compensation expense of approximately <span class="xn-money">$12.1 million</span> (after-tax of approximately <span class="xn-money">$7.4 million</span>) or approximately 19 cents during the quarter.</p>
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    Management Comments and Outlook
    
</pre>
<p>Chief Executive Officer Zev Weiss said, "I am pleased with our overall performance in the third fiscal quarter.  We have managed to continuously develop new and innovative products while tightly managing expenses, which has resulted in solid earnings for the quarter.  During the fourth fiscal quarter, we will face the traditional risk of Christmas and Valentines Day holidays, and this year we face the additional uncertainty of the pace of the economic recovery, which makes consumer buying patterns more difficult to predict.  However, we believe our refined business portfolio, 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.  We expect to at least meet our projected cash flow from operations minus capital expenditures goal of <span class="xn-money">$125 million</span> with upside to this estimate based on further improvements to the balance sheet and lower than anticipated capital expenditures."</p>
<p/>
<p>Previously, for fiscal year 2011, the Company projected 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 one of the largest collections 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 revenue, 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 after-tax amounts were calculated based on the Company's statutory tax rate of approximately 38.9% for U.S. based items and the appropriate statutory rates for international jurisdictions.  Management believes that providing adjusted revenue information is useful to investors as it explains the impact of the party goods transaction on the Company's total revenue.  In addition, Management believes that providing after-tax and earnings per share information is useful to investors 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>
<pre>
    

    --  a weak retail environment and general economic conditions;
    --  competitive terms of sale offered to customers;
    --  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;
    --  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;
    --  the timing and impact of converting customers to a scan-based trading
        model;
    --  the Company's ability to successfully integrate both Recycled Paper
        Greetings and Papyrus;
    --  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 ability to successfully implement, or achieve the desired benefits
        associated with, any information systems refresh the Company may
        implement;
    --  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;
    --  escalation in the cost of providing employee health care;
    --  the Company's ability to achieve the desired accretive effect from any
        share repurchase programs;
    --  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; and
    --  the outcome of any legal claims known or unknown.
    
</pre>
<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>
<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
                        THIRD QUARTER CONSOLIDATED STATEMENT OF INCOME
                             FISCAL YEAR ENDING FEBRUARY 28, 2011
    
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<p> </p>
<p> </p>
<p>             (In thousands of dollars except share and per share amounts)</p>
<p> </p>
<pre>
    
                                  (Unaudited)
                         Three Months Ended     Nine Months Ended
                         ------------------     -----------------
                          November     November    November    November
                             26,          27,         26,         27,
                          ---------    ---------   ---------   ---------
                               2010         2009        2010        2009
                               ----         ----        ----        ----
    
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<p> </p>
<pre>
    
    Net sales              $421,990     $431,512  $1,147,434  $1,189,428
    Other revenue             8,148        8,654      21,831      20,010
                              -----        -----      ------      ------
    Total revenue           430,138      440,166   1,169,265   1,209,438
    
</pre>
<p> </p>
<pre>
    
    Material, labor and
     other production
     costs                  199,177      204,997     502,903     525,414
    Selling,
     distribution and
     marketing expenses     117,314      124,167     347,183     373,915
    Administrative and
     general expenses        58,725       69,233     186,950     180,867
    Other operating
     (income) expense -
     net                     (1,048)        (575)     (2,578)     25,801
                             ------         ----      ------      ------
    
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<p> </p>
<p>Operating income         55,970       42,344     134,807     103,441</p>
<p> </p>
<pre>
    
    Interest expense          6,221        6,331      19,141      19,989
    Interest income            (176)        (299)       (586)     (1,564)
    Other non-operating
     income - net            (1,618)      (1,827)     (3,321)     (4,160)
                             ------       ------      ------      ------
    
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<p> </p>
<pre>
    
    Income before income
     tax expense             51,543       38,139     119,573      89,176
    Income tax expense       19,380        8,444      48,039      26,398
                             ------        -----      ------      ------
    
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<p> </p>
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    Net income              $32,163      $29,695     $71,534     $62,778
                            =======      =======     =======     =======
    
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<p> </p>
<p> </p>
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    Earnings per share -
     basic                    $0.80        $0.75       $1.79       $1.59
    
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<p> </p>
<p> </p>
<pre>
    
    Earnings per share -
     assuming dilution        $0.78        $0.75       $1.75       $1.59
    
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<p> </p>
<p> </p>
<pre>
    
    Average number of
     common shares
     outstanding         40,071,916   39,391,399  39,912,378  39,469,293
    
</pre>
<p> </p>
<pre>
    
    Average number of
     common shares
     outstanding -
     assuming dilution   40,985,909   39,755,233  40,911,964  39,495,247
    
</pre>
<p> </p>
<pre>
    
    Dividends declared
     per share                $0.14        $0.12       $0.42       $0.24





    
</pre>
<p> </p>
<pre>
    
                        AMERICAN GREETINGS CORPORATION
          THIRD 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>
<pre>
    
                                                         (Unaudited)
                                                         -----------
                                                        November    November
                                                           26,         27,
                                                       ---------   ---------
                                                             2010        2009
                                                             ----        ----
    
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<p> </p>
<pre>
    
    ASSETS
    CURRENT ASSETS
      Cash and cash equivalents                           $93,899     $50,563
      Trade accounts receivable, net                      206,286     208,964
      Inventories                                         181,511     168,103
      Deferred and refundable income taxes                 70,847      59,791
      Assets held for sale                                 12,325      21,931
      Prepaid expenses and other                          127,598     151,842
                                                          -------     -------
        Total current assets                              692,466     661,194
    
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<p> </p>
<pre>
    
    GOODWILL                                               31,686      38,177
    OTHER ASSETS                                          403,815     349,284
    DEFERRED AND REFUNDABLE INCOME TAXES                  146,767     173,847
    
</pre>
<p> </p>
<pre>
    
    Property, plant and equipment - at cost               851,636     860,670
    Less accumulated depreciation                         614,894     602,863
                                                          -------     -------
    PROPERTY, PLANT AND EQUIPMENT - NET                   236,742     257,807
                                                          -------     -------
                                                       $1,511,476  $1,480,309
                                                       ==========  ==========
    
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<p> </p>
<p> </p>
<pre>
    
    LIABILITIES AND SHAREHOLDERS' EQUITY
    CURRENT LIABILITIES
      Debt due within one year                                 $-      $1,000
      Accounts payable                                     97,899      86,835
      Accrued liabilities                                  80,744      91,469
      Accrued compensation and benefits                    59,128      74,770
      Income taxes payable                                 39,593      10,479
      Other current liabilities                            86,419      87,221
                                                           ------      ------
        Total current liabilities                         363,783     351,774
    
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<p> </p>
<pre>
    
    LONG-TERM DEBT                                        232,078     355,974
    OTHER LIABILITIES                                     173,017     129,517
    DEFERRED INCOME TAXES AND  NONCURRENT INCOME TAXES
     PAYABLE                                               32,824      31,633
    
</pre>
<p> </p>
<pre>
    
    SHAREHOLDERS' EQUITY
      Common shares - Class A                              37,199      36,111
      Common shares - Class B                               2,905       3,232
      Capital in excess of par value                      486,399     456,478
      Treasury stock                                     (952,183)   (946,569)
      Accumulated other comprehensive loss                (27,114)    (35,824)
      Retained earnings                                 1,162,568   1,097,983
                                                        ---------   ---------
        Total shareholders' equity                        709,774     611,411
                                                          -------     -------
                                                       $1,511,476  $1,480,309
                                                       ==========  ==========





    
</pre>
<p> </p>
<pre>
    
               AMERICAN GREETINGS CORPORATION
     THIRD QUARTER CONSOLIDATED STATEMENT OF CASH FLOWS
            FISCAL YEAR ENDING FEBRUARY 28, 2011
                  (In thousands of dollars)
    
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<p> </p>
<pre>
    
                                                  (Unaudited)
                                               Nine Months Ended
                                               -----------------
                                            November        November
                                                26,             27,
                                            ---------       ---------
                                                 2010            2009
                                                 ----            ----
    
</pre>
<p> </p>
<pre>
    
    OPERATING ACTIVITIES:
      Net income                              $71,534         $62,778
      Adjustments to reconcile net
       income to cash flows from
       operating activities:
        Net (gain) loss on dispositions          (254)         27,671
        Net (gain) loss on disposal of
         fixed assets                          (1,599)            163
        Depreciation and intangible
         assets amortization                   30,336          34,121
        Deferred income taxes                   3,957          20,133
        Other non-cash charges                 12,351           7,096
        Changes in operating assets and
         liabilities, net of acquisitions
         and dispositions:
          Trade accounts receivable           (71,336)       (124,205)
          Inventories                         (16,461)         16,651
          Other current assets                   (694)         16,927
          Income taxes                         36,187          17,711
          Deferred costs - net                 19,365           1,904
          Accounts payable and other
           liabilities                        (31,541)        (10,636)
          Other - net                           5,896           3,886
                                                -----           -----
        Total Cash Flows From Operating
         Activities                            57,741          74,200
    
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<p> </p>
<pre>
    
    INVESTING ACTIVITIES:
      Property, plant and equipment
       additions                              (19,660)        (21,368)
      Cash payments for business
       acquisitions, net of cash
       acquired                                     -         (19,300)
      Proceeds from sale of fixed
       assets                                   3,835             886
      Proceeds from escrow related to
       party goods transaction                 25,151               -
      Other - net                                   -           4,713
                                                  ---           -----
        Total Cash Flows From Investing
         Activities                             9,326         (35,069)
    
</pre>
<p> </p>
<pre>
    
    FINANCING ACTIVITIES:
      Net decrease in long-term debt          (98,250)        (34,600)
      Net decrease in short-term debt          (1,000)              -
      Sale of stock under benefit plans        19,831           3,683
      Purchase of treasury shares             (13,439)        (11,826)
      Dividends to shareholders               (16,737)        (14,327)
      Debt issuance costs                      (3,178)              -
                                               ------             ---
        Total Cash Flows From Financing
         Activities                          (112,773)        (57,070)
    
</pre>
<p> </p>
<pre>
    
    EFFECT OF EXCHANGE RATE CHANGES
     ON CASH                                    1,656           8,286
                                                -----           -----
    
</pre>
<p> </p>
<pre>
    
    DECREASE IN CASH AND CASH
     EQUIVALENTS                              (44,050)         (9,653)
    
</pre>
<p> </p>
<pre>
    
        Cash and Cash Equivalents at
         Beginning of Year                    137,949          60,216
                                              -------          ------
        Cash and Cash Equivalents at End
         of Period                            $93,899         $50,563
                                              =======         =======





    
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<p> </p>
<pre>
    
                 AMERICAN GREETINGS CORPORATION
         THIRD QUARTER CONSOLIDATED SEGMENT DISCLOSURES
              FISCAL YEAR ENDING FEBRUARY 28, 2011
                    (In thousands of dollars)
    
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<p> </p>
<pre>
    
                               (Unaudited)
                      Three Months Ended    Nine Months Ended
                      ------------------    -----------------
                      November      November    November    November
                          26,           27,        26,         27,
                      ---------     ---------  ---------   ---------
                           2010          2009        2010        2009
                           ----          ----        ----        ----
    Total Revenue:
    North American
     Social
      Expression
       Products        $312,773      $329,869    $865,664    $920,568
    Intersegment
     items                    -             -           -      (5,104)
    Exchange rate
     adjustment           4,748         2,761      12,324       5,174
                          -----         -----      ------       -----
    Net                 317,521       332,630     877,988     920,638
    
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<p> </p>
<pre>
    
    International
     Social
      Expression
       Products          77,601        73,972     190,364     184,613
    Exchange rate
     adjustment           2,502         2,736       2,048       1,597
                          -----         -----       -----       -----
    Net                  80,103        76,708     192,412     186,210
    
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<p> </p>
<pre>
    
    Retail Operations         -             -           -      11,727
    Exchange rate
     adjustment               -             -           -         112
                            ---           ---         ---         ---
    Net                       -             -           -      11,839
    
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<p> </p>
<pre>
    
    AG Interactive       19,234        19,393      56,160      56,743
    Exchange rate
     adjustment              (1)           84        (206)         76
                            ---           ---        ----         ---
    Net                  19,233        19,477      55,954      56,819
    
</pre>
<p> </p>
<pre>
    
    Non-reportable
     segments            13,281        11,185      42,911      33,546
    
</pre>
<p> </p>
<p>Unallocated               -           166           -         386</p>
<p> </p>
<pre>
    
                       $430,138      $440,166  $1,169,265  $1,209,438
                       ========      ========  ==========  ==========
    
</pre>
<p> </p>
<p> </p>
<pre>
    
    Segment Earnings
     (Loss):
    North American
     Social
      Expression
       Products         $54,277       $46,675    $155,997    $167,441
    Intersegment
     items                    -             -           -      (3,511)
    Exchange rate
     adjustment           2,218         1,246       5,661       2,318
                          -----         -----       -----       -----
    Net                  56,495        47,921     161,658     166,248
    
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<p> </p>
<pre>
    
    International
     Social
      Expression
       Products          10,001         9,404      14,196      12,227
    Exchange rate
     adjustment             (19)          154         (55)        (15)
                            ---           ---         ---         ---
    Net                   9,982         9,558      14,141      12,212
    
</pre>
<p> </p>
<pre>
    
    Retail Operations         -             -           -     (34,830)
    Exchange rate
     adjustment               -             -           -        (285)
                            ---           ---         ---        ----
    Net                       -             -           -     (35,115)
    
</pre>
<p> </p>
<pre>
    
    AG Interactive        5,134         1,510      10,553       5,209
    Exchange rate
     adjustment               1            61        (160)          7
                            ---           ---        ----         ---
    Net                   5,135         1,571      10,393       5,216
    
</pre>
<p> </p>
<pre>
    
    Non-reportable
     segments             1,438         1,634       6,907       1,872
    
</pre>
<p> </p>
<pre>
    
    Unallocated         (21,761)      (22,507)    (73,924)    (61,550)
    Exchange rate
     adjustment             254           (38)        398         293
    Net                 (21,507)      (22,545)    (73,526)    (61,257)
    
</pre>
<p> </p>
<pre>
    
                        $51,543       $38,139    $119,573     $89,176
                        =======       =======    ========     =======





    

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