American Greetings Announces Third Quarter Results
CLEVELAND, Dec. 24 /PRNewswire-AsiaNet/ --
American Greetings Corporation (NYSE: AM) today announced its third quarter
results for the fiscal quarter ended November 28, 2008.
Third Quarter Results
For the third quarter of fiscal 2009, the Company reported total revenue
of $454.1 million, a pre-tax loss from continuing operations of $228.7
million, and a loss from continuing operations of $193.3 million or $4.25 per
share (all per-share amounts assume dilution). For the third quarter of
fiscal 2008, the Company reported total revenue of $485.8 million, pre-tax income
from continuing operations of $44.1 million, and income from continuing
operations of $29.1 million or 52 cents per share.
On December 9, 2008, the Company announced that as a result of the recent
deterioration in the global economic environment, indicators arose during the
third quarter requiring the Company to accelerate the process of reviewing its
goodwill and other long-lived assets for impairment. As a result of this
accelerated review, the Company recorded, within the International Social
Expression Products and AG Interactive segments, estimated non-cash pre-tax
goodwill and other asset impairment charges of $242.9 million (after-tax of
approximately $202.6 million) that reduced earnings per share by $4.46 during
the quarter.
The Company also reviewed its long-lived assets within the Retail
Operations segment. As a result of that review, the Company recorded a
non-cash pre-tax long-lived asset impairment charge of $3.9 million (after-tax
of approximately $2.7 million) that reduced earnings per share by 6 cents during
the quarter.
The Company also announced on December 9, 2008, the elimination of
approximately 275 positions as part of a cost reduction effort. As a result
of those position eliminations, the Company recognized a pre-tax severance charge
of $7.0 million (after-tax of approximately $4.7 million) that reduced
earnings per share by 10 cents. Partially offsetting these charges was a
reduction of variable compensation expense of $11.1 million (after-tax of
approximately $7.5 million), which increased the Company's earnings per share
by 17 cents.
Chief Executive Officer Zev Weiss said, "The rapidly deteriorating economy
has significantly impacted our business in the third fiscal quarter. We are
currently focused on taking additional steps to reduce our cost structure in
order to position our business during this difficult economic period."
Outlook
As a result of the rapid changes in the economy and the uncertainty of the
impact those changes will have on the business, the potential for additional
retail store closures, and the finalization of the goodwill impairment tests,
the Company is currently unable to provide definitive earnings guidance for the
balance of this fiscal year.
Financing Activities
During the third quarter, the Company purchased approximately 300,000 shares
of its common stock for $5.0 million completing the Company's $100 million share
repurchase program announced in January 2008. The Company has
reduced its diluted share count by approximately 45 percent over the past four
years.
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
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 and Gibson, and other
paper product offerings include DesignWare party goods, American
Greetings and Plus Mark gift-wrap and boxed cards and Date Works 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 a one-stop source for online graphics, animations, and more
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 $1.8 billion, and its products can
be found in retail outlets domestically and worldwide, including Company-owned
American Greetings and Carlton Cards stores. For more information on the
Certain statements in this release 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 the desired benefits associated with its cost
reduction efforts;
-- retail consolidations, acquisitions and bankruptcies, including the
possibility of resulting adverse changes to retail contract terms; --
competitive terms of sale offered to customers;
-- if the Company determines additional retail store closures are
necessary;
-- 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 ability to successfully integrate acquisitions;
-- 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 identify, complete, or achieve the desired benefits
associated with productivity improvement projects;
-- the ability to successfully implement, or achieve the desired benefits
associated with any information systems refresh the Company may
implement;
-- whether the Company executes share repurchase programs or the ability
to achieve the desired accretive effect from any such share
repurchases;
-- whether the Company will be repaid our recent investment in its
first-lien distressed debt securities of another social expressions
company;
-- the Company's ability to comply with its debt covenants;
-- the Company's ability to successfully complete, or achieve the desired
benefits associated with, dispositions, including the sale of the
Strawberry Shortcake and Care Bears properties;
-- 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 for the fiscal year ended
February 29, 2008.
AMERICAN GREETINGS CORPORATION
THIRD QUARTER CONSOLIDATED STATEMENT OF OPERATIONS
FISCAL YEAR ENDING FEBRUARY 28, 2009
(In thousands of dollars except share and per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
------------------------ ------------------------
November 28, November 23, November 28, November 23,
2008 2007 2008 2007
----------- ----------- ----------- -----------
Net sales $444,527 $475,015 $1,242,932 $1,258,909
Other revenue 9,557 10,751 25,287 24,309
----------- ----------- ----------- -----------
Total revenue 454,084 485,766 1,268,219 1,283,218
Material, labor and
other production
costs 223,214 223,329 586,668 547,509
Selling, distribution
and marketing expenses 159,819 159,420 465,081 444,700
Administrative and
general expenses 50,841 60,875 170,564 179,461
Goodwill and other
intangible assets
impairment 242,889 - 242,889 -
Other operating income -
net (491) (127) (1,329) (807)
----------- ----------- ----------- -----------
Operating (loss) income (222,188) 42,269 (195,654) 112,355
Interest expense 6,634 4,835 16,973 14,431
Interest income (947) (2,122) (2,835) (5,855)
Other non-operating
expense (income) - net 792 (4,582) (2,726) (7,478)
----------- ----------- ----------- -----------
(Loss) income from
continuing operations
before income tax
(benefit) expense (228,667) 44,138 (207,066) 111,257
Income tax (benefit)
expense (35,356) 15,018 (29,385) 43,499
----------- ----------- ----------- -----------
(Loss) income from
continuing operations (193,311) 29,120 (177,681) 67,758
Loss from discontinued
operations, net of tax - (104) - (317)
----------- ----------- ----------- -----------
Net (loss) income $(193,311) $29,016 $(177,681) $67,441
=========== =========== =========== ===========
(Loss) earnings per
share - basic:
(Loss) income from
continuing operations $(4.25) $0.53 $(3.75) $1.23
Loss from discontinued
operations - - - (0.01)
----------- ----------- ----------- -----------
Net (loss) income $(4.25) $0.53 $(3.75) $1.22
=========== =========== =========== ===========
(Loss) earnings per share
- assuming dilution:
(Loss) income from
continuing operations $(4.25) $0.52 $(3.75) $1.22
Loss from discontinued
operations - - - (0.01)
----------- ----------- ----------- -----------
Net (loss) income $(4.25) $0.52 $(3.75) $1.21
=========== =========== =========== ===========
Average number of
common shares
outstanding 45,460,385 55,022,689 47,343,640 55,350,736
Average number of
common shares
outstanding -
assuming dilution 45,460,385 55,466,351 47,343,640 55,726,990
Dividends declared
per share $0.12 $0.10 $0.36 $0.30
AMERICAN GREETINGS CORPORATION
THIRD QUARTER CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FISCAL YEAR ENDING FEBRUARY 28, 2009
(In thousands of dollars)
(Unaudited)
------------------------------
November 28, November 23,
2008 2007
------------ ------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $55,604 $71,117
Trade accounts receivable, net 163,463 205,709
Inventories 246,596 239,209
Deferred and refundable income
taxes 62,490 76,568
Prepaid expenses and other 182,803 213,534
------------ ------------
Total current assets 710,956 806,137
GOODWILL 56,965 267,308
OTHER ASSETS 408,677 391,460
DEFERRED AND REFUNDABLE INCOME TAXES 166,269 111,959
Property, plant and equipment - at
cost 966,088 975,832
Less accumulated depreciation 671,180 684,213
------------ ------------
PROPERTY, PLANT AND EQUIPMENT - NET 294,908 291,619
------------ ------------
$1,637,775 $1,868,483
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Debt due within one year $247,945 $46,490
Accounts payable 135,002 131,190
Accrued liabilities 78,607 89,818
Accrued compensation and benefits 35,184 58,969
Income taxes payable 36,686 31,255
Other current liabilities 106,436 96,896
------------ ------------
Total current liabilities 639,860 454,618
LONG-TERM DEBT 200,684 200,975
OTHER LIABILITIES 148,320 151,094
DEFERRED INCOME TAXES AND
NONCURRENT INCOME TAXES PAYABLE 17,229 31,877
SHAREHOLDERS' EQUITY
Common shares - Class A 41,917 49,929
Common shares - Class B 3,495 3,442
Capital in excess of par value 447,958 443,326
Treasury stock (918,826) (780,044)
Accumulated other comprehensive
(loss) income (48,334) 22,982
Retained earnings 1,105,472 1,290,284
------------ ------------
Total shareholders' equity 631,682 1,029,919
------------ ------------
$1,637,775 $1,868,483
============ ============
AMERICAN GREETINGS CORPORATION
THIRD QUARTER CONSOLIDATED STATEMENT OF CASH FLOWS
FISCAL YEAR ENDING FEBRUARY 28, 2009
(In thousands of dollars)
(Unaudited)
Nine Months Ended
------------------------------
November 28, November 23,
2008 2007
------------ ------------
OPERATING ACTIVITIES:
Net (loss) income $(177,681) $67,441
Loss from discontinued operations - 317
------------ ------------
(Loss) income from continuing
operations (177,681) 67,758
Adjustments to reconcile (loss)
income from continuing operations
to cash flows from operating
activities:
Goodwill and other intangible
assets impairment 242,889 -
Net loss (gain) on disposal of
fixed assets 642 (481)
Depreciation and amortization 37,732 36,016
Deferred income taxes (32,726) (7,994)
Other non-cash charges 8,053 5,719
Changes in operating assets and
liabilities, net of acquisitions
and dispositions:
Trade accounts receivable (115,268) (99,267)
Inventories (45,394) (49,911)
Other current assets 10,486 18,199
Deferred costs - net 6,023 29,338
Accounts payable and other
liabilities (17,452) 38,419
Other - net (1,468) 4,768
------------ ------------
Total Cash Flows From Operating
Activities (84,164) 42,564
INVESTING ACTIVITIES:
Proceeds from sale of short-term
investments - 692,985
Purchases of short-term investments - (692,985)
Property, plant and equipment
additions (44,320) (37,394)
Cash payments for business
acquisitions, net of cash acquired (15,625) (51,256)
Cash receipts related to
discontinued operations - 4,283
Proceeds from sale of fixed assets 278 2,656
Other - net (44,153) -
------------ ------------
Total Cash Flows From Investing
Activities (103,820) (81,711)
FINANCING ACTIVITIES:
Reduction of long-term debt (22,509) -
Net increase in short-term debt 227,845 23,800
Sale of stock under benefit plans 494 26,198
Purchase of treasury shares (51,190) (74,572)
Dividends to shareholders (17,116) (16,657)
------------ ------------
Total Cash Flows From Financing
Activities 137,524 (41,231)
DISCONTINUED OPERATIONS:
Operating cash flows from
discontinued operations - (59)
------------ ------------
Total Cash Flows from
Discontinued Operations - (59)
EFFECT OF EXCHANGE RATE CHANGES ON
CASH (17,436) 6,841
------------ ------------
DECREASE IN CASH AND CASH EQUIVALENTS (67,896) (73,596)
Cash and Cash Equivalents at
Beginning of Year 123,500 144,713
------------ ------------
Cash and Cash Equivalents at End
of Period $55,604 $71,117
============ ============
AMERICAN GREETINGS CORPORATION
THIRD QUARTER CONSOLIDATED SEGMENT DISCLOSURES
FISCAL YEAR ENDING FEBRUARY 28, 2009
(In thousands of dollars)
(Unaudited)
Three Months Ended Nine Months Ended
------------------------- ------------------------
November 28, November 23, November 28, November 23,
2008 2007 2008 2007
------------ ----------- ----------- -----------
Total Revenue:
North American Social
Expression Products $322,853 $342,487 $886,567 $900,572
Intersegment items (19,031) (20,337) (48,411) (43,422)
Exchange rate
adjustment (2,661) 942 (1,886) (1,846)
------------ ----------- ----------- -----------
Net 301,161 323,092 836,270 855,304
International Social
Expression Products 89,365 86,951 222,429 215,439
Exchange rate
adjustment (10,797) 2,259 (9,577) 2,167
------------ ----------- ----------- -----------
Net 78,568 89,210 212,852 217,606
Retail Operations 39,994 41,312 119,034 120,923
Exchange rate
adjustment (1,895) 705 (1,288) (1,527)
------------ ----------- ----------- -----------
Net 38,099 42,017 117,746 119,396
AG Interactive 20,996 18,908 62,498 55,962
Exchange rate
adjustment (321) 2 (290) 1
------------ ----------- ----------- -----------
Net 20,675 18,910 62,208 55,963
Non-reportable segments 15,581 12,507 39,143 34,834
Unallocated - 30 - 115
------------ ----------- ----------- -----------
$454,084 $485,766 $1,268,219 $1,283,218
============ =========== =========== ===========
Segment Earnings (Loss):
North American Social
Expression Products $48,496 $66,022 $136,555 $196,868
Intersegment items (13,721) (15,172) (35,714) (32,649)
Exchange rate
adjustment (1,222) 775 (1,177) (774)
------------ ----------- ----------- -----------
Net 33,553 51,625 99,664 163,445
International Social
Expression Products (80,478) 10,904 (79,750) 12,654
Exchange rate
adjustment 4,883 250 4,802 280
------------ ----------- ----------- -----------
Net (75,595) 11,154 (74,948) 12,934
Retail Operations (9,596) (5,814) (19,672) (15,144)
Exchange rate
adjustment 53 67 40 129
------------ ----------- ----------- -----------
Net (9,543) (5,747) (19,632) (15,015)
AG Interactive (160,907) 2,222 (161,244) 8,664
Exchange rate
adjustment 93 (13) 130 1
------------ ----------- ----------- -----------
Net (160,814) 2,209 (161,114) 8,665
Non-reportable segments 1,614 263 2,189 2,598
Unallocated (16,926) (14,928) (52,117) (60,811)
Exchange rate
adjustment (956) (438) (1,108) (559)
------------ ----------- ----------- -----------
Net (17,882) (15,366) (53,225) (61,370)
------------ ----------- ----------- -----------
$(228,667) $44,138 $(207,066) $111,257
============ =========== =========== ===========
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
(AM)
__________________________________________________________________________________________
NEWS 
