EX-99.1 2 l16171aexv99w1.htm EX-99.1 PRESS RELEASE EX-99.1 Press Release
 

Exhibit 99.1
AMERICAN GREETINGS ANNOUNCES SOLID SECOND QUARTER EARNINGS
  •   Domestic business units contributing to second quarter earnings
 
  •   Company repurchases 2 million additional shares and declares 8 cent dividend
CLEVELAND (September 29, 2005) — American Greetings Corporation (NYSE: AM) today announced its second quarter results for the fiscal quarter ended August 31, 2005, reported that it had repurchased an incremental 2 million shares and announced an 8 cent per share cash dividend.
Second Quarter Results
For the second quarter of fiscal 2006, the Company reported net sales of $387.6 million, pretax income of $8.3 million and net income of $3.2 million or 5 cents per share (all per-share amounts assume dilution).
These results compare to net sales of $392.1 million, pretax income of $9.6 million and income from continuing operations of $5.9 million or 9 cents per share for the second quarter of fiscal 2005.
Contributing to the Company’s second quarter, greeting card performance increased slightly more than 3% versus the prior year’s second quarter with the domestic business responsible for the improvement. The online portion of the interactive business continued to grow, driving a more than $2 million pretax earnings improvement over the prior period. Somewhat offsetting these improvements in performance during the second quarter was weakness within the international operations.
Financing Activities
The Company purchased 2.0 million shares of common stock for $51.0 million during the second quarter of 2006 under its previously announced $200 million share repurchase program. The second quarter repurchases bring the year-to-date purchases to 3.9 million shares of common stock for $96.5 million. Share repurchases during the second quarter, net of lost interest income during the year, will add approximately 3 cents to the Company’s full year estimate.
The Company’s Board of Directors authorized a cash dividend of 8 cents per share to be paid on October 31, 2005 to shareholders of record at the close of business on October 19, 2005.

 

 

Management Comments and Outlook
Chief Executive Officer Zev Weiss said, “I am pleased with our performance in the first half of the year. Our core greeting card business has improved, especially domestically. We will continue to invest in our card business as we enhance our mix of product at retail.”
For the third quarter of fiscal 2006, the Company is projecting earnings per share to be between 70 cents and 75 cents. This estimate would compare to income from continuing operations of 51 cents per share in the prior year’s third quarter. Included in the 51 cents of earnings per share were pretax costs of $37.8 million resulting from a plant closure, an overhead reduction program and a revised merchandising strategy.
Conference call on the Web
American Greetings will broadcast its conference call live on the Internet at 9:30 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, candles, stationery, calendars, educational products, ornaments and electronic greetings. Located in Cleveland, Ohio, American Greetings generates annual net sales of approximately $2 billion. For more information on the Company, visit http://corporate.americangreetings.com .
###
CONTACT:
Stephen J. Smith
VP, Treasurer and Investor Relations
American Greetings Corporation
216-252-4864
investor.relations@amgreetings.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 bankruptcies and consolidations; successful integration of acquisitions; successful transition of management; 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; successfully implementing supply

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chain improvements and achieving projected cost savings from those improvements; increases in the cost of material, energy 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; the timing and impact of new product introductions; 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 and the ability of the mobile division to compete effectively in the wireless content aggregation market.
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.

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AMERICAN GREETINGS CORPORATION
SECOND QUARTER CONSOLIDATED STATEMENT OF INCOME
FISCAL YEAR ENDING FEBRUARY 28, 2006
(In thousands of dollars except share and per share amounts)
                                 
    (Unaudited)     (Unaudited)  
    Three Months Ended     Six Months Ended  
    August 31,     August 31,  
    2005     2004     2005     2004  
Net sales
   $ 387,556     $ 392,084     $ 830,832     $ 825,625  
 
                                
Costs and expenses:
                                
Material, labor and other production costs
     176,316       186,717       356,789       368,332  
Selling, distribution and marketing
     147,328       146,303       302,602       292,955  
Administrative and general
     58,970       57,505       122,098       121,642  
Interest expense
     8,587       9,163       18,269       61,857  
Other income — net
     (11,932 )     (17,230 )     (20,303 )     (33,576 )
 
                        
Total costs and expenses
     379,269       382,458       779,455       811,210  
 
                        
Income before income tax expense
     8,287       9,626       51,377       14,415  
Income tax expense
     5,046       3,726       21,722       5,579  
 
                        
Income from continuing operations
     3,241       5,900       29,655       8,836  
 
                                
Income from discontinued operations, net of tax
     —       1,010       —       2,312  
 
                        
 
                                
Net income
   $ 3,241     $ 6,910     $ 29,655     $ 11,148  
 
                        
 
                                
Earnings per share — basic:
                                
Income from continuing operations
     0.05       0.09       0.44       0.13  
Income from discontinued operations
     —       0.01       —       0.03  
 
                        
Net income
   $ 0.05     $ 0.10     $ 0.44     $ 0.16  
 
                        
Earnings per share — assuming dilution:
                                
Income from continuing operations
     0.05       0.09       0.41       0.13  
Income from discontinued operations
     —       0.01       —       0.03  
 
                        
Net income
   $ 0.05     $ 0.10     $ 0.41     $ 0.16  
 
                        
 
                                
Average number of common shares outstanding
     67,101,944       68,418,773       67,848,865       68,209,732  
 
                                
Average number of common shares outstanding - assuming dilution
     67,913,912       69,265,799       81,240,972       69,057,063  
 
                                
Dividends declared per share
   $ 0.08     $ —     $ 0.16     $ —  

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AMERICAN GREETINGS CORPORATION
SECOND QUARTER CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FISCAL YEAR ENDING FEBRUARY 28, 2006
(In thousands of dollars)
                 
    (Unaudited)  
    August 31,  
    2005     2004  
ASSETS
                
CURRENT ASSETS
                
Cash and cash equivalents
   $ 163,807     $ 152,763  
Short-term investments
     208,750       —  
Trade accounts receivable, net
     172,020       232,054  
Inventories
     296,133       308,977  
Deferred and refundable income taxes
     176,265       152,143  
Assets of businesses held for sale
     —       40,390  
Prepaid expenses and other
     219,244       218,931  
 
            
Total current assets
     1,236,219       1,105,258  
GOODWILL
     260,276       231,886  
OTHER ASSETS
     603,757       628,619  
Property, plant and equipment — at cost
     976,308       992,348  
Less accumulated depreciation
     657,361       652,049  
 
            
PROPERTY, PLANT AND EQUIPMENT — NET
     318,947       340,299  
 
            
 
   $ 2,419,199     $ 2,306,062  
 
            
 
                
LIABILITIES AND SHAREHOLDERS’ EQUITY
                
CURRENT LIABILITIES
                
Accounts payable
   $ 132,978     $ 150,513  
Accrued liabilities
     118,980       101,951  
Accrued compensation and benefits
     76,933       65,891  
Income taxes
     21,462       15,012  
Liabilities of businesses held for sale
     —       4,462  
Other current liabilities
     116,564       68,201  
 
            
Total current liabilities
     466,917       406,030  
LONG-TERM DEBT
     476,222       483,876  
OTHER LIABILITIES
     121,467       105,480  
DEFERRED INCOME TAXES
     37,077       27,427  
 
                
SHAREHOLDERS’ EQUITY
                
Common shares — Class A
     62,170       64,022  
Common shares — Class B
     4,221       4,603  
Capital in excess of par value
     391,174       348,474  
Treasury stock
     (536,249 )     (435,107 )
Accumulated other comprehensive income
     12,853       10,325  
Retained earnings
     1,383,347       1,290,932  
 
            
Total shareholders’ equity
     1,317,516       1,283,249  
 
            
 
   $ 2,419,199     $ 2,306,062  
 
            

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AMERICAN GREETINGS CORPORATION
SECOND QUARTER CONSOLIDATED STATEMENT OF CASH FLOWS
FISCAL YEAR ENDING FEBRUARY 28, 2006
(In thousands of dollars)
                 
    (Unaudited)  
    Six Months Ended  
    August 31,  
    2005     2004  
OPERATING ACTIVITIES:
                
Net income
   $ 29,655     $ 11,148  
Income from discontinued operations
     —       2,312  
 
            
Income from continuing operations
     29,655       8,836  
Adjustments to reconcile to net cash provided by operating activities:
                
Gain on sale of investment
     —       (3,095 )
Loss on sale of fixed assets
     1,628       1,127  
Loss on extinguishment of debt
     863       39,056  
Depreciation and amortization
     28,426       28,321  
Deferred income taxes
     25,773       (5,787 )
Other non-cash charges
     1,749       1,038  
Changes in operating assets and liabilities, net of acquisitions:
                
Decrease (increase) in trade accounts receivable
     11,685       (238 )
Increase in inventories
     (75,697 )     (72,229 )
(Increase) decrease in other current assets
     (17,865 )     8,590  
Decrease in deferred costs — net
     52,774       71,006  
(Decrease) increase in accounts payable and other liabilities
     (29,901 )     2,358  
Other — net
     4,580       2,672  
 
            
Cash Provided by Operating Activities
     33,670       81,655  
 
                
INVESTING ACTIVITIES:
                
Property, plant & equipment additions
     (18,780 )     (15,019 )
Proceeds from sale of fixed assets
     7,369       115  
Proceeds from sale of short-term investments
     1,070,480       —  
Purchases of short-term investments
     (1,070,490 )     —  
Cash payments for business acquisitions
     —       (3,894 )
Investment in corporate owned life insurance
     (2,219 )     (2,861 )
Other — net
     (5,893 )     19,783  
 
            
Cash Used by Investing Activities
     (19,533 )     (1,876 )
 
                
FINANCING ACTIVITIES:
                
Reduction of long-term debt
     (10,782 )     (216,417 )
Sale of stock under benefit plans
     21,302       18,739  
Dividends to shareholders
     (10,906 )     —  
Purchase of treasury shares
     (98,026 )     (9,363 )
 
            
Cash Used by Financing Activities
     (98,412 )     (207,041 )
Cash Used by Discontinued Operations
     —       (2,789 )
 
                
EFFECT OF EXCHANGE RATE CHANGES ON CASH
     (2,185 )     (2,636 )
 
            
 
                
DECREASE IN CASH AND CASH EQUIVALENTS
     (86,460 )     (132,687 )
 
                
Cash and Cash Equivalents at Beginning of Year
     250,267       285,450  
 
            
Cash and Cash Equivalents at End of Period
   $ 163,807     $ 152,763  
 
            

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