American Greetings Announces Record First Quarter Earnings Per Share

Jun 30, 2010, 07:30 ET from American Greetings Corporation

CLEVELAND, June 30 /PRNewswire-FirstCall/ -- American Greetings Corporation (NYSE: AM) today announced its results for the first fiscal quarter ended May 28, 2010.

First Quarter Results

For the first quarter of fiscal 2011, the Company reported total revenue of $396.3 million, pre-tax income of $51.0 million, and net income of $30.8 million or 75 cents per share (all per-share amounts assume dilution).  

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.  During the first quarter of fiscal 2010, American Greetings sold its retail store operations.  The Retail Operations segment reported revenue of $11.7 million and a segment loss of $34.8 million (after-tax of approximately $21.3 million), which reduced earnings per share by approximately 54 cents during the quarter.  

Management Comments and Outlook

Chief Executive Officer Zev Weiss said, "I am pleased that our earnings per share of 75 cents were the highest we have ever achieved in a first quarter.  Our first quarter EPS benefited from several factors including the solid performance in our core business units, the changes we made over the last eighteen months to our portfolio of businesses, and the shares we repurchased over the last several years.  We believe our refined business portfolio, which focuses on our core greeting card business, 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."

"The refined portfolio is contributing to the solid EPS for the quarter.  Eliminating the earnings drag of our retail operations has added meaningfully to our earnings swing quarter on quarter.  In addition, we continue to believe that by the end of this fiscal year, the integration of both Recycled Paper Greetings and Papyrus will enhance our operating income by $15 to 20 million on an annual run rate," Weiss added.

For fiscal year 2011, the Company continues to anticipate cash flow from operating activities of about $165 million and capital expenditures of approximately $40 million resulting in cash flow from operating activities minus capital expenditures of approximately $125 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 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 Cleveland, Ohio, American Greetings generates annual revenue of approximately $1.6 billion, and its products can be found in retail outlets worldwide.  For more information on the Company, visit http://corporate.americangreetings.com.

Non-GAAP Measures

Certain 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 prior year after-tax amounts were calculated based on the Company's statutory tax rate of approximately 38.9%.  Management believes that after-tax and earnings per share information are useful 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.

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 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 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, and the ability to adapt to rapidly changing social media and 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, 2011

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

(Unaudited)

Three Months Ended

May 28, 2010

May 29, 2009

Net sales

$             392,105

$             409,277

Other revenue

4,203

3,645

Total revenue

396,308

412,922

Material, labor and other production costs

158,013

167,169

Selling, distribution and marketing expenses

117,551

132,217

Administrative and general expenses

66,032

63,151

Other operating (income) expense - net

(594)

27,773

Operating income

55,306

22,612

Interest expense

6,202

6,987

Interest income

(213)

(276)

Other non-operating income - net

(1,700)

(1,042)

Income before income tax expense

51,017

16,943

Income tax expense

20,178

6,982

Net income

$               30,839

$                 9,961

Earnings per share - basic

$                   0.78

$                   0.25

Earnings per share - assuming dilution

$                   0.75

$                   0.25

Average number of common shares outstanding

39,638,568

39,608,947

Average number of common shares outstanding -

assuming dilution

40,849,429

39,608,947

Dividends declared per share                        

$                   0.14

$                       -

AMERICAN GREETINGS CORPORATION

FIRST QUARTER CONSOLIDATED STATEMENT OF FINANCIAL POSITION

FISCAL YEAR ENDING FEBRUARY 28, 2011

(In thousands of dollars)

(Unaudited)

May 28, 2010

May 29, 2009

ASSETS

CURRENT ASSETS

Cash and cash equivalents

$          186,775

$            87,611

Trade accounts receivable, net

110,085

120,964

Inventories

157,913

172,977

Deferred and refundable income taxes

74,951

65,217

Assets held for sale

12,936

23,328

Prepaid expenses and other

118,047

157,471

Total current assets

660,707

627,568

GOODWILL

30,238

25,921

OTHER ASSETS

413,236

377,973

DEFERRED AND REFUNDABLE INCOME TAXES

150,207

172,672

Property, plant and equipment - at cost

839,928

856,723

Less accumulated depreciation

600,087

589,614

PROPERTY, PLANT AND EQUIPMENT - NET

239,841

267,109

$       1,494,229

$       1,471,243

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES

Debt due within one year

$            99,000

$            27,325

Accounts payable

80,205

85,483

Accrued liabilities

75,572

84,074

Accrued compensation and benefits

35,472

37,274

Income taxes payable

25,390

2,937

Other current liabilities

93,405

108,863

Total current liabilities

409,044

345,956

LONG-TERM DEBT

230,973

409,455

OTHER LIABILITIES

163,969

125,668

DEFERRED INCOME TAXES AND

   NONCURRENT INCOME TAXES PAYABLE

30,548

30,292

SHAREHOLDERS' EQUITY

Common shares - Class A

37,064

35,921

Common shares - Class B

2,926

3,497

Capital in excess of par value

478,676

450,059

Treasury stock

(951,830)

(941,063)

Accumulated other comprehensive loss

(40,257)

(43,276)

Retained earnings

1,133,116

1,054,734

Total shareholders' equity

659,695

559,872

$       1,494,229

$       1,471,243

AMERICAN GREETINGS CORPORATION

FIRST QUARTER CONSOLIDATED STATEMENT OF CASH FLOWS

FISCAL YEAR ENDING FEBRUARY 28, 2011

(In thousands of dollars)

(Unaudited)

Three Months Ended

May 28, 2010

May 29, 2009

OPERATING ACTIVITIES:

Net income

$            30,839

$              9,961

Adjustments to reconcile net income to

cash flows from operating activities:

Loss on disposition of retail stores

-

28,333

Net (gain) loss on disposal of fixed assets

(151)

199

Depreciation and amortization

10,294

12,393

Deferred income taxes

(535)

17,158

Other non-cash charges

3,385

2,657

Changes in operating assets and liabilities,

   net of acquisitions and dispositions:

Trade accounts receivable

19,576

(43,770)

Inventories

4,483

11,926

Other current assets

(2,878)

(1,243)

Income taxes

15,830

(849)

Deferred costs - net

13,802

(2,846)

Accounts payable and other liabilities

(66,362)

(29,548)

Other - net

4,256

4,358

Total Cash Flows From Operating Activities

32,539

8,729

INVESTING ACTIVITIES:

Property, plant and equipment additions

(5,965)

(8,909)

Cash payments for business acquisitions, net of cash acquired

-

(16,286)

Proceeds from sale of fixed assets

555

113

Proceeds from escrow related to party goods transaction

24,523

-

Total Cash Flows From Investing Activities

19,113

(25,082)

FINANCING ACTIVITIES:

Net (decrease) increase in long-term debt

(250)

19,800

Net increase in short-term debt

-

26,325

Sale of stock under benefit plans

19,087

30

Purchase of treasury shares

(12,979)

(5,877)

Dividends to shareholders

(5,525)

(4,865)

Total Cash Flows From Financing Activities

333

35,413

EFFECT OF EXCHANGE RATE CHANGES ON CASH

(3,159)

8,335

INCREASE IN CASH AND CASH EQUIVALENTS

48,826

27,395

Cash and Cash Equivalents at Beginning of Year

137,949

60,216

Cash and Cash Equivalents at End of Period

$          186,775

$            87,611

AMERICAN GREETINGS CORPORATION

FIRST QUARTER CONSOLIDATED SEGMENT DISCLOSURES

FISCAL YEAR ENDING FEBRUARY 28, 2011

(In thousands of dollars)

(Unaudited)

Three Months Ended

May 28, 2010

May 29, 2009

Total Revenue:

North American Social Expression Products

$          304,168

$          323,813

Intersegment items

-

(5,104)

Exchange rate adjustment

4,141

370

Net

308,309

319,079

International Social Expression Products

57,801

56,051

Exchange rate adjustment

(228)

(3,289)

Net

57,573

52,762

Retail Operations

-

11,727

Exchange rate adjustment

-

112

Net

-

11,839

AG Interactive

18,666

18,949

Exchange rate adjustment

(112)

(104)

Net

18,554

18,845

Non-reportable segments

11,872

10,397

$          396,308

$          412,922

Segment Earnings (Loss):

North American Social Expression Products

$            68,107

$            77,986

Intersegment items

-

(3,511)

Exchange rate adjustment

1,942

81

Net

70,049

74,556

International Social Expression Products

2,834

513

Exchange rate adjustment

-

(174)

Net

2,834

339

Retail Operations

-

(34,830)

Exchange rate adjustment

-

(285)

Net

-

(35,115)

AG Interactive

2,474

1,796

Exchange rate adjustment

(102)

(82)

Net

2,372

1,714

Non-reportable segments

2,152

(129)

Unallocated

(26,399)

(24,852)

Exchange rate adjustment

9

430

Net

(26,390)

(24,422)

$            51,017

$            16,943

SOURCE American Greetings Corporation



RELATED LINKS

http://corporate.americangreetings.com