American Greetings Announces Second Quarter Earnings
</pre>
<p><span class="xn-location">CLEVELAND</span>, <span class="xn-chron">Sept. 29</span> /CNW/ -- American Greetings Corporation (NYSE: AM) today announced its results for the second fiscal quarter ended <span class="xn-chron">August 27, 2010</span>.</p>
<pre>
Second Quarter Results
</pre>
<p>For the second quarter of fiscal 2011, the Company reported total revenue of <span class="xn-money">$342.8 million</span>, pre-tax income of <span class="xn-money">$17.0 million</span>, and net income of <span class="xn-money">$8.5 million</span> or 21 cents per share (all per-share amounts assume dilution). Compared to the prior year, revenue was down approximately <span class="xn-money">$13.6 million</span>. Approximately <span class="xn-money">$10.2 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">$3.4 million</span> or approximately one percent. Also during the quarter, the Company incurred pre-tax costs associated with the integrations of Papyrus and Recycled Paper Greetings of <span class="xn-money">$5.2 million</span> (after tax of approximately <span class="xn-money">$3.2 million</span>) or approximately 8 cents per share.</p>
<p/>
<p>For the second quarter of fiscal 2010, the Company reported total revenue of <span class="xn-money">$356.4 million</span>, pre-tax income of <span class="xn-money">$34.1 million</span>, and net income of <span class="xn-money">$23.1 million</span> or 59 cents per share. Included within these results was a pre-tax benefit from an insurance program of <span class="xn-money">$7.9 million</span> (after tax of approximately <span class="xn-money">$7.6 million</span>) or approximately 19 cents per share.</p>
<pre>
Management Comments and Outlook
</pre>
<p>Chief Executive Officer Zev Weiss said, "I am pleased with our overall performance in the first half of this year. While we continue to see an erratic recovery in the economy and its effect on our top line, our team has executed well on cost containment and that execution has directly led to healthy cash flow. Our cash flow from operations minus capital expenditures of <span class="xn-money">$74 million</span> in the first half gets us more than halfway to our full year forecast of approximately <span class="xn-money">$125 million</span>."</p>
<p/>
<p>For fiscal year 2011, the Company continues to anticipate cash flow from operating activities of about <span class="xn-money">$165 million</span> and capital expenditures of approximately <span class="xn-money">$40 million</span> resulting in cash flow from operating activities minus capital expenditures of approximately <span class="xn-money">$125 million</span>.</p>
<pre>
Conference Call on the Web
</pre>
<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>
<pre>
About American Greetings Corporation
</pre>
<p>For more than 100 years, American Greetings Corporation (NYSE: AM) has been a creator and manufacturer of innovative social expression products that assist consumers in enhancing their relationships. The Company's major greeting card lines are American Greetings, Carlton Cards, Gibson, Recycled Paper Greetings and Papyrus, and other paper product offerings include DesignWare party goods and American Greetings and Plus Mark gift-wrap and boxed cards. American Greetings also has the largest collection of electronic greetings on the Web, including cards available at AmericanGreetings.com through AG Interactive, Inc. (the Company's online division). AG Interactive also offers digital photo sharing and personal publishing at PhotoWorks.com and Webshots.com and provides a one-stop source for online graphics and animations at Kiwee.com. In addition to its product lines, American Greetings also creates and licenses popular character brands through the American Greetings Properties group. Headquartered in <span class="xn-location">Cleveland</span>, Ohio, American Greetings generates annual revenue of approximately <span class="xn-money">$1.6 billion</span>, and its products can be found in retail outlets worldwide. For more information on the Company, visit <a href="http://corporate.americangreetings.com">http://corporate.americangreetings.com</a>.</p>
<pre>
Non-GAAP Measures
</pre>
<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%. 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>
<pre>
Factors That May Affect Future Results
</pre>
<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;
-- the ability to achieve both the desired benefits from the transaction
with Amscan as well as ensuring a seamless transition for affected
retail customers and consumers;
-- the Company's successful transition of the Retail Operations segment
to
its buyer, Schurman Fine Papers, and Schurman Fine Papers' ability to
successfully operate its retail operations and satisfy its obligations
to the Company;
-- the Company's ability to successfully integrate both Recycled Paper
Greetings and Papyrus;
-- retail consolidations, acquisitions and bankruptcies, including the
possibility of resulting adverse changes to retail contract terms;
-- the ability to achieve the desired benefits associated with the
Company's cost reduction efforts;
-- competitive terms of sale offered to customers;
-- the 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;
-- the timing and impact of converting customers to a scan-based trading
model;
-- 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>
<pre>
</pre>
<p> </p>
<p> </p>
<pre>
AMERICAN GREETINGS CORPORATION
SECOND QUARTER CONSOLIDATED STATEMENT OF INCOME
FISCAL YEAR ENDING FEBRUARY 28, 2011
</pre>
<p> </p>
<p> (In thousands of dollars except share and per share amounts)</p>
<p> </p>
<pre>
(Unaudited)
Three Months Ended Six Months Ended
------------------ ----------------
August 27, August 28, August 27, August 28,
2010 2009 2010 2009
----------- ----------- ----------- -----------
</pre>
<p> </p>
<pre>
Net
sales $333,339 $348,639 $725,444 $757,916
Other
revenue 9,480 7,711 13,683 11,356
----- ----- ------ ------
Total
revenue 342,819 356,350 739,127 769,272
</pre>
<p> </p>
<pre>
Material,
labor and
other
production
costs 145,713 153,248 303,726 320,417
Selling,
distribution
and
marketing
expenses 112,318 117,531 229,869 249,748
Administrative
and
general
expenses 62,193 48,483 128,225 111,634
Other
operating
(income)
expense
-net (936) (1,397) (1,530) 26,376
---- ------ ------ ------
</pre>
<p> </p>
<pre>
Operating
income 23,531 38,485 78,837 61,097
</pre>
<p> </p>
<pre>
Interest
expense 6,718 6,671 12,920 13,658
Interest
income (197) (989) (410) (1,265)
Other
non-
operating
income -
net (3) (1,291) (1,703) (2,333)
--- ------ ------ ------
</pre>
<p> </p>
<pre>
Income
before
income
tax
expense 17,013 34,094 68,030 51,037
Income
tax
expense 8,481 10,972 28,659 17,954
----- ------ ------ ------
</pre>
<p> </p>
<pre>
Net
income $8,532 $23,122 $39,371 $33,083
====== ======= ======= =======
</pre>
<p> </p>
<p> </p>
<pre>
Earnings
per
share -
basic $0.21 $0.59 $0.99 $0.84
</pre>
<p> </p>
<p> </p>
<pre>
Earnings
per
share -
assuming
dilution $0.21 $0.59 $0.96 $0.84
</pre>
<p> </p>
<p> </p>
<pre>
Average
number
of
common
shares
outstanding 40,026,649 39,407,532 39,832,609 39,508,240
</pre>
<p> </p>
<pre>
Average
number
of
common
shares
outstanding
- assuming
dilution 40,875,329 39,407,532 40,861,761 39,508,240
</pre>
<p> </p>
<pre>
Dividends
declared
per share $0.14 $0.12 $0.28 $0.12
</pre>
<p> </p>
<pre>
AMERICAN GREETINGS CORPORATION
SECOND QUARTER CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FISCAL YEAR ENDING FEBRUARY 28, 2011
</pre>
<p> </p>
<p> (In thousands of dollars)</p>
<p> </p>
<pre>
(Unaudited)
-----------
August 27, August 28,
2010 2009
----------- -----------
</pre>
<p> </p>
<pre>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $133,834 $49,903
Trade accounts receivable,
net 89,408 92,167
Inventories 189,366 199,941
Deferred and refundable
income taxes 61,742 59,082
Assets held for sale 11,868 23,188
Prepaid expenses and other 113,112 148,868
------- -------
Total current assets 599,330 573,149
</pre>
<p> </p>
<pre>
GOODWILL 29,929 26,393
OTHER ASSETS 413,809 367,574
DEFERRED AND REFUNDABLE
INCOME TAXES 153,775 171,419
</pre>
<p> </p>
<pre>
Property, plant and
equipment -at cost 850,025 859,695
Less accumulated
depreciation 609,901 595,757
------- -------
PROPERTY, PLANT AND
EQUIPMENT -NET 240,124 263,938
------- -------
$1,436,967 $1,402,473
========== ==========
</pre>
<p> </p>
<p> </p>
<pre>
LIABILITIES AND
SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Debt due within one year $- $1,000
Accounts payable 88,668 96,279
Accrued liabilities 74,129 82,082
Accrued compensation and
benefits 48,287 50,925
Income taxes payable 23,052 2,856
Other current liabilities 89,111 94,462
------ ------
Total current liabilities 323,247 327,604
</pre>
<p> </p>
<pre>
LONG-TERM DEBT 231,525 335,372
OTHER LIABILITIES 174,372 127,066
DEFERRED INCOME TAXES AND
NONCURRENT INCOME TAXES
PAYABLE 32,194 30,434
</pre>
<p> </p>
<pre>
SHAREHOLDERS' EQUITY
Common shares - Class A 37,137 35,923
Common shares - Class B 2,923 3,477
Capital in excess of par
value 482,035 451,328
Treasury stock (951,682) (941,198)
Accumulated other
comprehensive loss (30,815) (40,562)
Retained earnings 1,136,031 1,073,029
--------- ---------
Total shareholders' equity 675,629 581,997
------- -------
$1,436,967 $1,402,473
========== ==========
</pre>
<p> </p>
<pre>
AMERICAN GREETINGS CORPORATION
SECOND QUARTER CONSOLIDATED STATEMENT OF CASH FLOWS
FISCAL YEAR ENDING FEBRUARY 28, 2011
(In thousands of dollars)
</pre>
<p> </p>
<pre>
(Unaudited)
Six Months Ended
----------------
August 27, August 28,
2010 2009
----------- -----------
</pre>
<p> </p>
<pre>
OPERATING ACTIVITIES:
Net income $39,371 $33,083
Adjustments to reconcile net
income
to cash flows from operating
activities:
Net (gain) loss on
dispositions (254) 27,696
Net (gain) loss on disposal of
fixed assets (1,268) 9
Depreciation and intangible
assets amortization 20,463 23,466
Deferred income taxes 10,618 26,708
Other non-cash charges 8,210 4,622
Changes in operating assets and
liabilities,
net of acquisitions and
dispositions:
Trade accounts receivable 44,279 (10,877)
Inventories (24,908) (15,714)
Other current assets (2,169) 12,801
Income taxes 15,125 (2,376)
Deferred costs - net 27,905 11,885
Accounts payable and other
liabilities (54,639) (20,439)
Other - net 5,814 (6,698)
----- ------
Total Cash Flows From Operating
Activities 88,547 84,166
</pre>
<p> </p>
<pre>
INVESTING ACTIVITIES:
Property, plant and equipment
additions (14,128) (15,447)
Cash payments for business
acquisitions, net of cash
acquired - (19,300)
Proceeds from sale of fixed
assets 2,997 729
Proceeds from escrow related to
party goods transaction 25,151 -
Other - net - 3,063
--- -----
Total Cash Flows From Investing
Activities 14,020 (30,955)
</pre>
<p> </p>
<pre>
FINANCING ACTIVITIES:
Net decrease in long-term
debt (98,250) (54,750)
Net decrease in short-term
debt (1,000) -
Sale of stock under benefit
plans 19,025 91
Purchase of treasury shares (13,052) (6,176)
Dividends to shareholders (11,127) (9,593)
Debt issuance costs (2,917) -
Total Cash Flows From Financing
Activities (107,321) (70,428)
</pre>
<p> </p>
<pre>
EFFECT OF EXCHANGE RATE CHANGES
ON CASH 639 6,904
--- -----
</pre>
<p> </p>
<pre>
DECREASE IN CASH AND CASH
EQUIVALENTS (4,115) (10,313)
</pre>
<p> </p>
<pre>
Cash and Cash Equivalents at
Beginning of Year 137,949 60,216
------- ------
Cash and Cash Equivalents at End
of Period $133,834 $49,903
======== =======
</pre>
<p> </p>
<p> </p>
<pre>
AMERICAN GREETINGS CORPORATION
SECOND QUARTER CONSOLIDATED SEGMENT DISCLOSURES
FISCAL YEAR ENDING FEBRUARY 28, 2011
(In thousands of dollars)
</pre>
<p> </p>
<pre>
(Unaudited)
Three Months Ended Six Months Ended
------------------ ----------------
August 27, August 28, August 27, August 28,
2010 2009 2010 2009
----------- ----------- ----------- -----------
Total Revenue:
North American
Social
Expression
Products $248,723 $266,886 $552,891 $590,699
Intersegment
items - - - (5,104)
Exchange rate
adjustment 3,435 2,043 7,576 2,413
----- ----- ----- -----
Net 252,158 268,929 560,467 588,008
</pre>
<p> </p>
<pre>
International
Social
Expression
Products 54,962 54,590 112,763 110,641
Exchange rate
adjustment (226) 2,150 (454) (1,139)
---- ----- ---- ------
Net 54,736 56,740 112,309 109,502
</pre>
<p> </p>
<pre>
Retail
Operations - - - 11,727
Exchange rate
adjustment - - - 112
--- --- --- ---
Net - - - 11,839
</pre>
<p> </p>
<pre>
AG Interactive 18,260 18,401 36,926 37,350
Exchange rate
adjustment (93) 96 (205) (8)
--- --- ---- ---
Net 18,167 18,497 36,721 37,342
</pre>
<p> </p>
<pre>
Non-reportable
segments 17,758 11,964 29,630 22,361
</pre>
<p> </p>
<p>Unallocated - 220 - 220</p>
<p> </p>
<pre>
$342,819 $356,350 $739,127 $769,272
======== ======== ======== ========
</pre>
<p> </p>
<p> </p>
<pre>
Segment Earnings
(Loss):
North American
Social
Expression
Products $33,613 $42,780 $101,720 $120,766
Intersegment
items - - - (3,511)
Exchange rate
adjustment 1,501 991 3,443 1,072
----- --- ----- -----
Net 35,114 43,771 105,163 118,327
</pre>
<p> </p>
<pre>
International
Social
Expression
Products 1,361 2,310 4,195 2,823
Exchange rate
adjustment (36) 5 (36) (169)
--- --- --- ----
Net 1,325 2,315 4,159 2,654
</pre>
<p> </p>
<pre>
Retail
Operations - - - (34,830)
Exchange rate
adjustment - - - (285)
--- --- --- ----
Net - - - (35,115)
</pre>
<p> </p>
<pre>
AG Interactive 2,945 1,903 5,419 3,699
Exchange rate
adjustment (59) 28 (161) (54)
--- --- ---- ---
Net 2,886 1,931 5,258 3,645
</pre>
<p> </p>
<pre>
Non-reportable
segments 3,317 367 5,469 238
</pre>
<p> </p>
<pre>
Unallocated (25,764) (14,191) (52,163) (39,043)
Exchange rate
adjustment 135 (99) 144 331
--- --- --- ---
Net (25,629) (14,290) (52,019) (38,712)
</pre>
<p> </p>
<pre>
$17,013 $34,094 $68,030 $51,037
======= ======= ======= =======
For further information: Gregory M. Steinberg, Treasurer and Executive Director of Investor Relations, American Greetings Corporation, +1-216-252-4864, [email protected] Web Site: http://corporate.americangreetings.com
Share this article