MEDIA RELEASE PR36275
American Greetings Announces Record Second Quarter Earnings
CLEVELAND, Sept. 24 /PRNewswire-AsiaNet/ --
American Greetings Corporation (NYSE: AM) today announced its second
quarter results for the quarter ended August 28, 2009.
Second Quarter Results
For the second quarter of fiscal 2010, the Company reported total revenue
of US$356.4 million, pre-tax income of US$34.1 million, and net income of
US$23.1 million or 59 cents per share (all per-share amounts assume
dilution). Included within these results was a pre-tax benefit from an
insurance program of US$7.9 million (after tax of approximately US$7.6
million) or approximately 19 cents per share.
For the second quarter of fiscal 2009, the Company reported total revenue
of US$385.8 million, pre-tax income of US$2.4 million, and net income of
US$2.3 million or 5 cents per share.
Management Comments and Outlook
Chief Executive Officer Zev Weiss said, "I am very pleased with our
record earnings performance this quarter as well as our strong cash flow. I
believe the changes we have made to our business over the last year are
showing up in our results. We could not have achieved these results without
the teamwork and coordination of all our associates."
Weiss continued, "We have devoted more time and effort to develop new
products so that consumers can find unique and fresh offerings in the
greeting card aisle. We have expanded our use of technology for both
traditional greeting cards as well as on-line applications including Facebook
and the iPhone. These examples of leadership in innovation are all in
addition to the recent enhancements we have made to our portfolio,
specifically the acquisitions of Recycled Paper Greetings and Papyrus, which
complement our innovation with leadership in both humor and elegant design."
As a result of the strong cash flow performance during the first half of
the fiscal year, the Company raised its previously announced fiscal 2010 cash
flow estimate. Previously, the Company expected cash flow from operating
activities of approximately US$105 million to US$115 million and capital
expenditures of approximately US$35 million to US$45 million resulting in
cash flow from operating activities minus capital expenditures of
approximately US$70 million. The Company now expects cash flow from operating
activities of at least US$160 million and capital expenditures of
approximately US$35 million resulting in cash flow from operating activities
minus capital expenditures to be greater than US$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
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 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 US$1.7 billion, and its
products can be found in retail outlets worldwide. For more information on
Non-GAAP Measures
Certain after-tax and liquidity amounts included in this earnings 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
after-tax information is 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 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 ability to adapt
to rapidly changing social media, 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
SECOND 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 Six Months Ended
------------------ ----------------
August 28, August 29, August 28, August 29,
2009 2008 2009 2008
---------- ---------- ---------- ----------
Net sales $348,639 $372,942 $757,916 $798,405
Other revenue 7,711 12,893 11,356 15,730
----- ------ ------ ------
Total revenue 356,350 385,835 769,272 814,135
Material, labor
and other
production costs 153,248 170,112 320,417 363,454
Selling,
distribution and
marketing expenses 117,531 154,387 249,748 305,262
Administrative and
general expenses 48,483 57,162 111,634 119,723
Other operating
(income) expense -
net (1,397) (111) 26,376 (838)
------ ---- ------ ----
Operating income 38,485 4,285 61,097 26,534
Interest expense 6,671 5,434 13,658 10,339
Interest income (989) (898) (1,265) (1,888)
Other non-operating
income - net (1,291) (2,617) (2,333) (3,518)
------ ------ ------ ------
Income before
income tax expense 34,094 2,366 51,037 21,601
Income tax expense 10,972 69 17,954 5,971
------ --- ------ -----
Net income $23,122 $2,297 $33,083 $15,630
======= ====== ======= =======
Earnings per share
- basic $0.59 $0.05 $0.84 $0.32
Earnings per share
- assuming
dilution $0.59 $0.05 $0.84 $0.32
Average number of
common shares
outstanding 39,407,532 47,769,594 39,508,240 48,285,267
Average number of
common shares
outstanding -
assuming dilution 39,407,532 47,807,313 39,508,240 48,328,659
Dividends declared
per share $0.12 $0.12 $0.12 $0.24
AMERICAN GREETINGS CORPORATION
SECOND QUARTER CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FISCAL YEAR ENDING FEBRUARY 28, 2010
(In thousands of dollars)
(Unaudited)
-----------
August 28, 2009 August 29, 2008
--------------- ---------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $49,903 $84,040
Trade accounts receivable, net 78,070 62,826
Inventories 208,130 259,789
Deferred and refundable
income taxes 63,665 54,149
Assets held for sale 1,423 2,604
Prepaid expenses and other 144,773 179,571
------- -------
Total current assets 545,964 642,979
GOODWILL 26,393 289,662
OTHER ASSETS 363,480 440,589
DEFERRED AND REFUNDABLE
INCOME TAXES 167,138 133,827
Property, plant and
equipment - at cost 893,554 980,103
Less accumulated depreciation 607,851 679,862
------- -------
PROPERTY, PLANT AND
EQUIPMENT - NET 285,703 300,241
------- -------
$1,388,678 $1,807,298
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Debt due within one year $1,000 $18,445
Accounts payable 96,279 125,648
Accrued liabilities 67,985 66,007
Accrued compensation and
benefits 50,925 39,378
Income taxes payable 2,856 7,729
Other current liabilities 94,462 113,379
------ -------
Total current liabilities 313,507 370,586
LONG-TERM DEBT 335,372 391,889
OTHER LIABILITIES 127,066 147,906
DEFERRED INCOME TAXES AND
NONCURRENT INCOME TAXES
PAYABLE 30,736 23,343
SHAREHOLDERS' EQUITY
Common shares - Class A 35,923 42,208
Common shares - Class B 3,477 3,494
Capital in excess of par
value 451,328 447,502
Treasury stock (941,198) (914,262)
Accumulated other
comprehensive loss (40,562) (9,711)
Retained earnings 1,073,029 1,304,343
--------- ---------
Total shareholders'
equity 581,997 873,574
------- -------
$1,388,678 $1,807,298
========== ==========
AMERICAN GREETINGS CORPORATION
SECOND QUARTER CONSOLIDATED STATEMENT OF CASH FLOWS
FISCAL YEAR ENDING FEBRUARY 28, 2010
(In thousands of dollars)
(Unaudited)
Six Months Ended
----------------
August 28, 2009 August 29, 2008
--------------- ---------------
OPERATING ACTIVITIES:
Net income $33,083 $15,630
Adjustments to reconcile net income
to cash flows from operating activities:
Net loss on dispositions 27,696 -
Net loss on disposal of fixed assets 9 385
Depreciation and intangible
assets amortization 23,466 25,324
Deferred income taxes 26,708 15,394
Other non-cash charges 4,622 3,379
Changes in operating assets and liabilities,
net of acquisitions and dispositions:
Trade accounts receivable (10,877) (725)
Inventories (15,022) (47,426)
Other current assets 12,347 (952)
Deferred costs - net 11,885 14,654
Accounts payable and other
liabilities (22,190) (69,511)
Other - net (7,561) (9,826)
------ ------
Total Cash Flows From
Operating Activities 84,166 (53,674)
INVESTING ACTIVITIES:
Property, plant and equipment additions (15,447) (28,545)
Cash payments for business acquisitions,
net of cash acquired (19,300) (15,625)
Proceeds from sale of fixed assets 729 275
Other - net 3,063 (44,153)
----- -------
Total Cash Flows From
Investing Activities (30,955) (88,048)
FINANCING ACTIVITIES:
Net (decrease) increase in long-term debt (54,750) 148,591
Increase in short-term debt - 18,445
Sale of stock under benefit plans 91 434
Purchase of treasury shares (6,176) (46,137)
Dividends to shareholders (9,593) (11,667)
------ -------
Total Cash Flows From
Financing Activities (70,428) 109,666
EFFECT OF EXCHANGE RATE CHANGES ON CASH 6,904 (7,404)
----- ------
DECREASE IN CASH AND CASH EQUIVALENTS (10,313) (39,460)
Cash and Cash Equivalents at
Beginning of Year 60,216 123,500
------ -------
Cash and Cash Equivalents at
End of Period $49,903 $84,040
======= =======
AMERICAN GREETINGS CORPORATION
SECOND QUARTER CONSOLIDATED SEGMENT DISCLOSURES
FISCAL YEAR ENDING FEBRUARY 28, 2010
(In thousands of dollars)
(Unaudited)
Three Months Six Months
Ended Ended
------------- -----------
August 28, August 29, August 28, August 29,
2009 2008 2009 2008
---------- ---------- --------- ---------
Total Revenue:
North American Social
Expression Products $266,934 $256,756 $590,818 $554,933
Intersegment items - (13,720) (5,104) (27,026)
Exchange rate
adjustment 1,995 3,786 2,294 7,202
----- ----- ----- -----
Net 268,929 246,822 588,008 535,109
International Social
Expression Products 45,754 43,374 92,760 91,288
Exchange rate
adjustment 10,986 19,950 16,742 42,996
------ ------ ------ ------
Net 56,740 63,324 109,502 134,284
Retail Operations - 34,586 11,727 73,063
Exchange rate
adjustment - 3,078 112 6,584
--- ----- --- -----
Net - 37,664 11,839 79,647
AG Interactive 18,075 20,334 36,709 40,233
Exchange rate
adjustment 422 638 633 1,300
--- --- --- -----
Net 18,497 20,972 37,342 41,533
Non-reportable
segments 11,964 17,053 22,361 23,562
Unallocated 220 - 220 -
-------- -------- -------- --------
$356,350 $385,835 $769,272 $814,135
======== ======== ======== ========
Segment Earnings (Loss):
North American Social
Expression Products $42,679 $32,248 $120,556 $84,431
Intersegment items - (9,973) (3,511) (20,150)
Exchange rate
adjustment 1,092 1,325 1,282 1,830
----- ----- ----- -----
Net 43,771 23,600 118,327 66,111
International Social
Expression Products 1,887 (1,569) 2,220 204
Exchange rate
adjustment 428 (589) 434 443
--- ---- --- ---
Net 2,315 (2,158) 2,654 647
Retail Operations - (6,588) (34,830) (9,939)
Exchange rate
adjustment - (88) (285) (150)
--- --- ---- ----
Net - (6,676) (35,115) (10,089)
AG Interactive 1,644 456 3,296 (879)
Exchange rate
adjustment 287 305 349 579
--- --- --- ---
Net 1,931 761 3,645 (300)
Non-reportable
segments 367 2,541 238 575
Unallocated (14,209) (19,415) (38,520) (39,110)
Exchange rate
adjustment (81) 3,713 (192) 3,767
--- ----- ---- -----
Net (14,290) (15,702) (38,712) (35,343)
------- ------ ------- -------
$34,094 $2,366 $51,037 $21,601
======= ====== ======= =======
SOURCE: American Greetings Corporation
CONTACT: Gregory M. Steinberg,
Treasurer and Director of Investor Relations,
American Greetings Corporation,
+1-216-252-4864,
investor.relations@amgreetings.com
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