American Greetings Announces Third Quarter Results



    CLEVELAND, Dec. 20 /CNW/ -- American Greetings Corporation (NYSE:   AM)
today announced its third quarter results for the fiscal quarter ended
November 23, 2007 and announced a 10 cent per share cash dividend.
    
    (Logo:  http://www.newscom.com/cgi-bin/prnh/20060321/CLTU081LOGO )
    Third Quarter Results
    
    For the third quarter of fiscal 2008, the Company reported total revenue
of $485.7 million, pre-tax income from continuing operations of $44.5 million,
and income from continuing operations of $29.5 million or 53 cents per share
(all per-share amounts assume dilution).
    In the prior year's third fiscal quarter, the Company reported total
revenue of $521.2 million, pre-tax income from continuing operations of $68.1
million, and income from continuing operations of $47.0 million or 79 cents
per share.  Included in the prior year's results is a $20 million pre-tax gain
the Company recognized as a result of retailer consolidations and the effect
the consolidations had on several long-term supply agreements between the
Company and the affected retailers.  The prior year's third quarter also
included approximately $14 million of revenue associated with product lines
that have since been divested.
    
    Management Comments and Outlook
    
    Chief Executive Officer Zev Weiss said, "During the third quarter, we
continued to see improved performance at retail as a result of our strategic
card initiative.  We continue to receive positive feedback from our retail
partners regarding the improvements in cards and are pleased with the card
initiative."
    During the third quarter, the Company also announced that it acquired
Webshots and that it entered into an agreement to acquire PhotoWorks, two
Internet based digital photo sharing businesses.  Weiss said, "The acquisition
of Webshots gives us the opportunity to expand our current product offerings
of online social expressions into the adjacent area of online photo sharing,
while PhotoWorks is expected to bring together both the digital and physical
products that we believe consumers desire. These transactions provide the
opportunity to establish a leadership position in this growing channel of the
social expression industry."
    Weiss affirmed the Company's previously announced estimate of earnings
per share from continuing operations for fiscal 2008 to be between $1.35 to
$1.55 per share.  "While we believe that the earnings guidance provided in
April of this year is still appropriate, considering the balance of risks and
opportunities it is possible that we will perform around the higher end of the
range," added Weiss.
    
    Investing and Financing Activities
    
    The Company used $45.2 million of cash during the quarter to acquire
Webshots.
    Under the Company's $100 million share repurchase program, during the
third quarter, the Company purchased approximately 1.7 million shares of its
Class A common stock for about $41 million.  The Company has reduced its
diluted share count by about 35% over the past 30 months.
    The Company's Board of Directors authorized a cash dividend of 10 cents
per share to be paid on January 14, 2008 to shareholders of record at the
close of business on January 4, 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 $1.7 billion.  For more information
on the Company, visit http://corporate.americangreetings.com.
    Certain statements in this release, including those under "Management
Comments and Outlook" may constitute forward-looking statements within the
meaning of the Federal securities laws. These statements can be identified by
the fact that they do not relate strictly to historic or current facts. They
use such words as "anticipate," "estimate," "expect," "project," "intend,"
"plan," "believe," and other words and terms of similar meaning in connection
with any discussion of future operating or financial performance. These
forward-looking statements are based on currently available information, but
are subject to a variety of uncertainties, unknown risks and other factors
concerning the Company's operations and business environment, which are
difficult to predict and may be beyond the control of the Company. Important
factors that could cause actual results to differ materially from those
suggested by these forward-looking statements, and that could adversely affect
the Company's future financial performance, include, but are not limited to,
the following:
    
    -- retail consolidations, acquisitions and bankruptcies, including the
       possibility of resulting adverse changes to retail contract terms;
    -- the Company's ability to successfully implement its strategy to invest
       in its core greeting card business;
    -- the timing and impact of investments in new retail or product
       strategies as well as new product introductions and achieving the
       desired benefits from those investments;
    -- the timing and impact of converting customers to a scan-based trading
       model;
    -- the ability to execute share repurchase programs or the ability to
       achieve the desired accretive effect from such repurchases;
    -- the ability to successfully complete the proposed acquisition of
       PhotoWorks and the ability to successfully integrate acquisitions;
    -- the Company's ability to successfully complete, or achieve the desired
       benefits associated with, dispositions;
    -- a weak retail environment;
    -- consumer acceptance of products as priced and marketed;
    -- the impact of technology on core product sales;
    -- competitive terms of sale offered to customers;
    -- successful implementation of supply chain improvements and achievement
       of projected cost savings from those improvements;
    -- increases in the cost of material, energy, freight, and other
       production costs;
    -- the Company's ability to comply with its debt covenants;
    -- fluctuations in the value of currencies in major areas where the
       Company operates, including the U.S. Dollar, Euro, U.K. Pound Sterling,
       and Canadian Dollar;
    -- escalation in the cost of providing employee health care; and
    -- the outcome of any legal claims known or unknown.
    
    Risks pertaining specifically to AG Interactive include the viability of
online advertising, subscriptions as revenue generators and the public's
acceptance of online greetings and other social expression products.
    In addition, this release contains time-sensitive information that
reflects management's best analysis as of the date of this release. American
Greetings does not undertake any obligation to publicly update or revise any
forward-looking statements to reflect future events, information or
circumstances that arise after the date of this release. Further information
concerning issues that could materially affect financial performance related
to forward-looking statements can be found in the Company's periodic filings
with the Securities and Exchange Commission, including the "Risk Factors"
section of the Company's Annual Report on Form 10-K for the fiscal year ended
February 28, 2007.



    
                          AMERICAN GREETINGS CORPORATION
                  THIRD QUARTER CONSOLIDATED STATEMENT OF INCOME
                       FISCAL YEAR ENDING FEBRUARY 29, 2008
    


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

    
                                              (Unaudited)
                              Three Months Ended        Nine Months Ended
                           ------------------------- -------------------------
                           November 23, November 24, November 23, November 24,
                               2007         2006         2007         2006
                           ------------ ------------ ------------ ------------
    

    
    Net sales                 $474,995     $510,102   $1,258,829   $1,271,755
    Other revenue               10,751       11,052       24,309       26,537
                           ------------ ------------ ------------ ------------
    Total revenue              485,746      521,154    1,283,138    1,298,292
    

    
    Material, labor and other
     production costs          223,329      245,187      547,509      593,232
    Selling, distribution and
     marketing expenses        159,420      157,364      444,695      451,419
    Administrative and general
     expenses                   60,481       65,287      178,291      183,516
    Other operating income -
     net                          (127)     (20,541)        (807)     (20,963)
                           ------------ ------------ ------------ ------------
    

    Operating income            42,643       73,857      113,450       91,088

    
    Interest expense             4,835        6,951       14,431       27,024
    Interest income             (2,115)      (1,258)      (5,834)      (6,716)
    Other non-operating
     (income) expense - net     (4,582)          91       (7,478)      (2,811)
                           ------------ ------------ ------------ ------------
    

    
    Income from continuing
     operations before income
     tax expense                44,505       68,073      112,331       73,591
    Income tax expense          15,017       21,058       43,495       22,583
                           ------------ ------------ ------------ ------------
    

    
    Income from continuing
     operations                 29,488       47,015       68,836       51,008
    

    
    (Loss) income from
     discontinued
     operations, net of tax       (472)       2,692       (1,395)       3,593
                           ------------ ------------ ------------ ------------
    

    
    Net income                 $29,016      $49,707      $67,441      $54,601
                           ============ ============ ============ ============
    

    
    Earnings per share -
     basic:
       Income from continuing
        operations               $0.54        $0.79        $1.25        $0.87
       (Loss) income from
        discontinued
        operations               (0.01)        0.05        (0.03)        0.06
                           ------------ ------------ ------------ ------------
       Net income                $0.53        $0.84        $1.22        $0.93
                           ============ ============ ============ ============
    

    
    Earnings per share -
     assuming dilution:
       Income from continuing
        operations               $0.53        $0.79        $1.24        $0.82
       (Loss) income from
        discontinued
        operations               (0.01)        0.04        (0.03)        0.06
                           ------------ ------------ ------------ ------------
       Net income                $0.52        $0.83        $1.21        $0.88
                           ============ ============ ============ ============
    


    
    Average number of common
     shares outstanding     55,022,689   59,502,276   55,350,736   58,590,857
    

    
    Average number of common
     shares outstanding -
     assuming dilution      55,466,351   59,902,127   55,726,990   64,361,644
    

    
    Dividends declared per
     share                       $0.10        $0.08        $0.30        $0.24
    



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

    
                            (In thousands of dollars)
                                                         (Unaudited)
                                                ------------------------------
                                                November 23,      November 24,
                                                     2007              2006
                                                ------------      ------------
    

    
    ASSETS
    CURRENT ASSETS
       Cash and cash equivalents                    $71,117           $86,216
       Trade accounts receivable, net               205,702           239,207
       Inventories                                  239,209           244,181
       Deferred and refundable income
        taxes                                        76,568           160,983
       Assets of businesses held for sale             2,216            13,310
       Prepaid expenses and other                   213,529           295,866
                                                ------------      ------------
         Total current assets                       808,341         1,039,763
    

    
    GOODWILL                                        267,308           219,093
    OTHER ASSETS                                    389,324           459,269
    DEFERRED AND REFUNDABLE INCOME TAXES            111,959                 -
    

    
    Property, plant and equipment - at
     cost                                           975,721           968,755
    Less accumulated depreciation                   684,170           668,524
                                                ------------      ------------
    PROPERTY, PLANT AND EQUIPMENT - NET             291,551           300,231
                                                ------------      ------------
                                                 $1,868,483        $2,018,356
                                                ============      ============
    


    
    LIABILITIES AND SHAREHOLDERS' EQUITY
    CURRENT LIABILITIES
       Debt due within one year                     $46,490          $142,000
       Accounts payable                             131,099           126,956
       Accrued liabilities                           89,751            91,108
       Accrued compensation and benefits             58,969            58,720
       Income taxes                                  31,255            17,412
       Liabilities of businesses held for
        sale                                          1,383             1,629
       Other current liabilities                     96,896            91,162
                                                ------------      ------------
         Total current liabilities                  455,843           528,987
    

    
    LONG-TERM DEBT                                  200,975           223,985
    OTHER LIABILITIES                               149,869           101,003
    DEFERRED INCOME TAXES AND
     NONCURRENT INCOME TAXES PAYABLE                 31,877            25,306
    

    
    SHAREHOLDERS' EQUITY
       Common shares - Class A                       49,929            53,775
       Common shares - Class B                        3,442             4,224
       Capital in excess of par value               443,326           417,444
       Treasury stock                              (780,044)         (643,540)
       Accumulated other comprehensive
        income                                       22,982            36,067
       Retained earnings                          1,290,284         1,271,105
                                                ------------      ------------
         Total shareholders' equity               1,029,919         1,139,075
                                                ------------      ------------
                                                 $1,868,483        $2,018,356
                                                ============      ============
    



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

    
                                                         (Unaudited)
                                                      Nine Months Ended
                                               -------------------------------
                                               November 23,       November 24,
                                                    2007               2006
                                               ------------       ------------
    

    
    OPERATING ACTIVITIES:
      Net income                                   $67,441            $54,601
      Loss (income) from discontinued
       operations                                    1,395             (3,593)
                                               ------------       ------------
      Income from continuing operations             68,836             51,008
      Adjustments to reconcile to net
       cash provided (used) by
       operating activities:
        Net (gain) loss on disposal of
         fixed assets                                 (481)               754
        Loss on extinguishment of debt                   -              5,055
        Depreciation and amortization               36,002             37,229
        Deferred income taxes                       (7,994)             5,827
        Other non-cash charges                       5,719              9,180
        Changes in operating assets and
         liabilities, net of acquisitions
         and dispositions:
          Increase in trade accounts
           receivable                              (99,268)           (92,821)
          Increase in inventories                  (49,911)           (27,202)
          Decrease (increase) in other
           current assets                           18,090            (96,250)
          Decrease in deferred costs -
           net                                      29,338            110,076
          Increase (decrease) in accounts
           payable and other liabilities            38,295             (5,894)
          Other - net                                4,718             (6,265)
                                               ------------       ------------
          Cash Provided (Used) by
           Operating Activities                     43,344             (9,303)
    

    
    INVESTING ACTIVITIES:
      Proceeds from sale of short-term
       investments                                 692,985          1,026,280
      Purchases of short-term investments         (692,985)          (817,540)
      Property, plant and equipment
       additions                                   (37,394)           (29,600)
      Cash payments for business
       acquisitions, net of cash acquired          (51,256)           (11,154)
      Cash receipts related to
       discontinued operations                       4,283             12,559
      Proceeds from sale of fixed assets             2,656                695
                                               ------------       ------------
          Cash (Used) Provided by
           Investing Activities                    (81,711)           181,240
    

    
    FINANCING ACTIVITIES:
      Increase in long-term debt                         -            200,000
      Reduction of long-term debt                        -           (440,588)
      Increase in short-term debt                   23,800            142,000
      Sale of stock under benefit plans             26,198              5,630
      Purchase of treasury shares                  (74,572)          (186,331)
      Dividends to shareholders                    (16,657)           (13,909)
      Debt issuance costs                                -             (8,344)
                                               ------------       ------------
        Cash Used by Financing Activities          (41,231)          (301,542)
    

    
    DISCONTINUED OPERATIONS:
      Cash used by operating activities
       from discontinued operations                   (839)            (2,377)
      Cash provided by investing
       activities from discontinued
       operations                                        -              1,656
                                               ------------       ------------
        Cash Used by Discontinued
         Operations                                   (839)              (721)
    

    
    EFFECT OF EXCHANGE RATE CHANGES ON
     CASH                                            6,841              2,929
                                               ------------       ------------
    

    DECREASE IN CASH AND CASH EQUIVALENTS          (73,596)         
(127,397)

    
        Cash and Cash Equivalents at
         Beginning of Year                         144,713            213,613
                                               ------------       ------------
        Cash and Cash Equivalents at End
         of Period                                 $71,117            $86,216
                                               ============       ============
    



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

    
                                              (Unaudited)
                              Three Months Ended        Nine Months Ended
                           ------------------------- -------------------------
                           November 23, November 24, November 23, November 24,
                               2007         2006         2007         2006
                           ------------ ------------ ------------ ------------
    Total Revenue:
    North American Social
       Expression Products    $339,543     $371,726     $892,518     $908,909
    Intersegment items         (19,423)     (14,953)     (41,532)     (47,811)
    Exchange rate adjustment     2,972          218        4,318          325
                           ------------ ------------ ------------ ------------
    Net                        323,092      356,991      855,304      861,423
    

    
    International Social
       Expression Products      80,604       82,526      199,648      209,019
    Exchange rate adjustment     8,606          794       17,958       (1,527)
                           ------------ ------------ ------------ ------------
    Net                         89,210       83,320      217,606      207,492
    

    
    Retail Operations           39,550       42,252      115,856      125,206
    Exchange rate adjustment     2,467          178        3,540          299
                           ------------ ------------ ------------ ------------
    Net                         42,017       42,430      119,396      125,505
    

    
    AG Interactive              18,912       21,663       55,964       62,151
    Exchange rate adjustment        (2)          31           (1)          76
                           ------------ ------------ ------------ ------------
    Net                         18,910       21,694       55,963       62,227
    

    Non-reportable segments     12,486       16,679       34,754       41,510

    
    Unallocated                     31           40          115          135
                           ------------ ------------ ------------ ------------
    

    
                              $485,746     $521,154   $1,283,138   $1,298,292
                           ============ ============ ============ ============
    


    
    Segment Earnings (Loss):
    North American Social
       Expression Products     $64,549      $98,533     $192,288     $182,111
    Intersegment items         (14,481)     (10,296)     (31,203)     (34,125)
    Exchange rate adjustment     1,557           80        2,360          129
                           ------------ ------------ ------------ ------------
    Net                         51,625       88,317      163,445      148,115
    

    
    International Social
       Expression Products      10,037        6,092       11,470        7,148
    Exchange rate adjustment     1,117          (30)       1,464           34
                           ------------ ------------ ------------ ------------
    Net                         11,154        6,062       12,934        7,182
    

    
    Retail Operations           (5,833)      (5,056)     (15,098)     (21,428)
    Exchange rate adjustment        86            4           83            1
                           ------------ ------------ ------------ ------------
    Net                         (5,747)      (5,052)     (15,015)     (21,427)
    

    
    AG Interactive               2,194        2,249        8,667        5,498
    Exchange rate adjustment        15          (18)          (2)         (17)
                           ------------ ------------ ------------ ------------
    Net                          2,209        2,231        8,665        5,481
    

    Non-reportable segments        636        3,668        3,598        8,308

    
    Unallocated                (15,312)     (27,157)     (61,161)     (73,919)
    Exchange rate adjustment       (60)           4         (135)        (149)
                           ------------ ------------ ------------ ------------
    Net                        (15,372)     (27,153)     (61,296)     (74,068)
                           ------------ ------------ ------------ ------------
    

    
                               $44,505      $68,073     $112,331      $73,591
                           ============ ============ ============ ============
    




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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