Press Release - reporting results for the quarter ended May 29, 2009

EX-99.1 2 dex991.htm PRESS RELEASE - REPORTING RESULTS FOR THE QUARTER ENDED MAY 29, 2009 Press Release - reporting results for the quarter ended May 29, 2009

Exhibit 99.1

AMERICAN GREETINGS ANNOUNCES FIRST QUARTER RESULTS

CLEVELAND (June 24, 2009) – American Greetings Corporation (NYSE: AM) today announced its results for the first fiscal quarter ended May 29, 2009.

First Quarter Results

For the first quarter of fiscal 2010, the Company reported total revenue of $412.9 million, pre-tax income of $16.9 million, and net income of $10.0 million or 25 cents per share (all per-share amounts assume dilution).

As previously announced, during the first quarter of fiscal 2010, American Greetings sold its retail store operations to Schurman Fine Papers (“Schurman”), which operates card and gift retail stores under the name Papyrus. American Greetings recognized a preliminary non-cash loss on the disposition, recorded within the Retail Operations segment, of $28.3 million (after-tax of approximately $17.4 million) that reduced earnings per share by approximately 44 cents during the quarter. At the time of the sale of the retail stores, American Greetings also purchased the wholesale division of Schurman which supplies Papyrus brand greeting cards primarily to leading specialty, mass, grocery and drug store channels and purchased a fifteen percent equity interest in Schurman.

For the first quarter of fiscal 2009, the Company reported total revenue of $428.3 million, pre-tax income of $19.2 million, and net income of $13.3 million or 27 cents per share.

Management Comments and Outlook

Chief Executive Officer Zev Weiss said, “I am very pleased with our performance this quarter. Specifically, sales of greeting cards increased primarily as a result of the additions of Recycled Paper Greetings and Papyrus as well as strength in our overall North American business despite weak economic conditions. We also realized improved margins as a result of our cost reduction activities last year and we will continue to focus on efficiencies this year. We currently anticipate cash flow from operating activities less capital expenditures to be greater than $70 million this fiscal year. We are diligently working through the integration planning processes for Recycled Paper Greetings, the acquired Papyrus wholesale business, and the transition of our former retail operations to Schurman Fine Papers.”

Financing Activities

Under the Company’s $75 million share repurchase program, during the first fiscal quarter the Company purchased approximately 1.1 million shares of its common stock for $4.3 million.

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

For more than 100 years, American Greetings Corporation (NYSE: AM) has been a manufacturer and retailer of innovative social expression products that assist consumers in enhancing their relationships. The Company’s major greeting card brands are American Greetings, Carlton Cards, Gibson, Recycled Paper Greetings and Papyrus, and other paper product offerings include DesignWare party goods, American Greetings and Plus Mark gift-wrap and boxed cards and DateWorks calendars. 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 Cleveland, Ohio, American Greetings generates annual revenue of approximately $1.7 billion, and its products can be found in retail outlets worldwide. For more information on the Company, visit http://corporate.americangreetings.com.

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CONTACT:

Gregory M. Steinberg

Treasurer and Director of Investor Relations

American Greetings Corporation

216-252-4864

investor.relations@amgreetings.com

Non-GAAP Measures

Certain after-tax amounts included in this earnings release may be considered non-GAAP measures in accordance with Regulation G and were calculated based on the Company’s statutory tax rate of approximately 38.7%. Management believes that after-tax information is useful in analyzing the Company’s results.

Factors That May Affect Future Results

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 and general economic conditions;

•

the ability to successfully integrate acquisitions, including the recent acquisitions of Recycled Paper Greetings and the Papyrus brand;

•

the Company’s ability to successfully complete the sale of the Strawberry Shortcake and Care Bears properties;

•

the Company’s successful transition of the Retail Operations segment to its buyer, Schurman Fine Papers, and the ability to achieve the desired benefits associated with this and other dispositions;

•

retail consolidations, acquisitions and bankruptcies, including the possibility of resulting adverse changes to retail contract terms;

•

the ability to achieve the desired benefits associated with its cost reduction efforts;

•

competitive terms of sale offered to customers;

•

the Company’s ability to comply with its debt covenants;

•

the timing and impact of investments in new retail or product strategies as well as new product introductions and achieving the desired benefits from those investments;

•

consumer acceptance of products as priced and marketed;

•

the impact of technology on core product sales;

•

the timing and impact of converting customers to a scan-based trading model;

•

escalation in the cost of providing employee health care;

•

the ability to successfully implement, or achieve the desired benefits associated with, any information systems refresh the Company may implement;

•

the Company’s ability to achieve the desired accretive effect from any share repurchase programs;

•

fluctuations in the value of currencies in major areas where the Company operates, including the U.S. Dollar, Euro, U.K. Pound Sterling, and Canadian Dollar; and

•

the outcome of any legal claims known or unknown.

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.

AMERICAN GREETINGS CORPORATION

FIRST QUARTER CONSOLIDATED STATEMENT OF INCOME

FISCAL YEAR ENDING FEBRUARY 28, 2010

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


	(Unaudited) Three Months Ended
	May 29, 2009			May 30, 2008
Net sales	$	409,277		$	425,463
Other revenue		3,645			2,837

Total revenue		412,922			428,300

Material, labor and other production costs		167,169			193,342
Selling, distribution and marketing expenses		132,217			150,875
Administrative and general expenses		63,151			62,561
Other operating expense (income) - net		27,773			(727	)


Operating income		22,612			22,249

Interest expense		6,987			4,905
Interest income		(276	)		(990	)
Other non-operating income - net		(1,042	)		(901	)


Income before income tax expense		16,943			19,235
Income tax expense		6,982			5,902


Net income	$	9,961		$	13,333


Earnings per share - basic	$	0.25		$	0.27

Earnings per share - assuming dilution	$	0.25		$	0.27

Average number of common shares outstanding		39,608,947			48,800,941

Average number of common shares outstanding - assuming dilution		39,608,947			48,833,108

Dividends declared per share	$	—		$	0.12

AMERICAN GREETINGS CORPORATION

FIRST QUARTER CONSOLIDATED STATEMENT OF FINANCIAL POSITION

FISCAL YEAR ENDING FEBRUARY 28, 2010

(In thousands of dollars)


	(Unaudited)
	May 29, 2009			May 30, 2008
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	87,611		$	108,192
Trade accounts receivable, net		110,743			59,789
Inventories		181,425			211,125
Deferred and refundable income taxes		69,800			67,604
Assets held for sale		1,515			2,483
Prepaid expenses and other		153,374			183,865

Total current assets		604,468			633,058

GOODWILL		25,921			300,323
OTHER ASSETS		373,622			408,228
DEFERRED AND REFUNDABLE INCOME TAXES		168,391			133,118

Property, plant and equipment - at cost		890,173			980,376
Less accumulated depreciation		601,251			683,192

PROPERTY, PLANT AND EQUIPMENT - NET		288,922			297,184

	$	1,461,324		$	1,771,911


LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Debt due within one year	$	27,325		$	35,835
Accounts payable		85,483			110,394
Accrued liabilities		73,852			73,281
Accrued compensation and benefits		37,274			39,582
Income taxes payable		2,937			23,348
Other current liabilities		108,864			117,160

Total current liabilities		335,735			399,600

LONG-TERM DEBT		409,455			235,541
OTHER LIABILITIES		125,668			157,610
DEFERRED INCOME TAXES AND NONCURRENT INCOME TAXES PAYABLE		30,594			26,986

SHAREHOLDERS’ EQUITY
Common shares - Class A		35,921			45,345
Common shares - Class B		3,497			3,495
Capital in excess of par value		450,059			446,075
Treasury stock		(941,063	)		(871,379	)
Accumulated other comprehensive (loss) income		(43,276	)		20,746
Retained earnings		1,054,734			1,307,892

Total shareholders’ equity		559,872			952,174

	$	1,461,324		$	1,771,911

AMERICAN GREETINGS CORPORATION

FIRST QUARTER CONSOLIDATED STATEMENT OF CASH FLOWS

FISCAL YEAR ENDING FEBRUARY 28, 2010

(In thousands of dollars)


	(Unaudited) Three Months Ended
	May 29, 2009			May 30, 2008
OPERATING ACTIVITIES:
Net income	$	9,961		$	13,333
Adjustments to reconcile net income to cash flows from operating activities:
Loss on disposition of retail stores		28,333			—
Net loss on disposal of fixed assets		199			168
Depreciation and amortization		12,393			12,785
Deferred income taxes		17,158			5,459
Other non-cash charges		2,657			1,718
Changes in operating assets and liabilities, net of acquisitions and dispositions:
Trade accounts receivable		(43,770	)		5,186
Inventories		12,360			6,495
Other current assets		11,942			1,260
Deferred costs - net		(2,846	)		1,253
Accounts payable and other liabilities		(43,494	)		(57,606	)
Other - net		3,836			(1,938	)

Total Cash Flows From Operating Activities		8,729			(11,887	)

INVESTING ACTIVITIES:
Property, plant and equipment additions		(8,909	)		(10,088	)
Cash payments for business acquisitions, net of cash acquired		(16,286	)		(15,625	)
Proceeds from sale of fixed assets		113			265

Total Cash Flows From Investing Activities		(25,082	)		(25,448	)

FINANCING ACTIVITIES:
Net increase in long-term debt		19,800			14,900
Net increase in short-term debt		26,325			13,145
Sale of stock under benefit plans		30			363
Purchase of treasury shares		(5,877	)		(38	)
Dividends to shareholders		(4,865	)		(5,852	)

Total Cash Flows From Financing Activities		35,413			22,518

EFFECT OF EXCHANGE RATE CHANGES ON CASH		8,335			(491	)


INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		27,395			(15,308	)

Cash and Cash Equivalents at Beginning of Year		60,216			123,500

Cash and Cash Equivalents at End of Period	$	87,611		$	108,192

AMERICAN GREETINGS CORPORATION

FIRST QUARTER CONSOLIDATED SEGMENT DISCLOSURES

FISCAL YEAR ENDING FEBRUARY 28, 2010

(In thousands of dollars)


	(Unaudited) Three Months Ended
	May 29, 2009			May 30, 2008
Total Revenue:
North American Social Expression Products	$	323,884		$	298,177
Intersegment items		(5,104	)		(13,306	)
Exchange rate adjustment		299			3,416

Net		319,079			288,287

International Social Expression Products		47,006			47,914
Exchange rate adjustment		5,756			23,046

Net		52,762			70,960

Retail Operations		11,727			38,477
Exchange rate adjustment		112			3,506

Net		11,839			41,983

AG Interactive		18,634			19,899
Exchange rate adjustment		211			662

Net		18,845			20,561

Non-reportable segments		10,397			6,509

	$	412,922		$	428,300


Segment Earnings (Loss):
North American Social Expression Products	$	77,877		$	52,183
Intersegment items		(3,511	)		(10,177	)
Exchange rate adjustment		190			505

Net		74,556			42,511

International Social Expression Products		333			1,773
Exchange rate adjustment		6			1,032

Net		339			2,805

Retail Operations		(34,830	)		(3,351	)
Exchange rate adjustment		(285	)		(62	)

Net		(35,115	)		(3,413	)

AG Interactive		1,652			(1,335	)
Exchange rate adjustment		62			274

Net		1,714			(1,061	)

Non-reportable segments		(129	)		(1,966	)

Unallocated		(24,311	)		(19,695	)
Exchange rate adjustment		(111	)		54

Net		(24,422	)		(19,641	)

	$	16,943		$	19,235