EX-99.1 2 ag2998ex991.txt Exhibit 99.1 AMERICAN GREETINGS ANNOUNCES IMPROVED FIRST QUARTER EARNINGS AND REPURCHASE OF 2 MILLION SHARES - Earnings per share ahead of prior year - Company repurchases approximately 2 million shares under $200 million program CLEVELAND, June 30 /PRNewswire-FirstCall/ -- American Greetings Corporation (NYSE: AM) today announced its first quarter results for the fiscal quarter ended May 31, 2005. For the first quarter of fiscal 2006, the Company reported net sales of $443.3 million, pretax income of $43.1 million and net income of $26.4 million or 35 cents per share (all per-share amounts assume dilution). Included in these results are $4.1 million of pretax expenses recognized during the quarter for both the previously announced plant closure and the call of $10.2 million of outstanding 11.75% notes. This year's first quarter reported results compare to net sales of $433.5 million, pretax income of $4.8 million and income from continuing operations of $2.9 million or 4 cents per share for the first quarter of fiscal 2005. The prior year's first quarter included $39.0 million of pretax expenses associated with the retirement of $186.2 million of debt and $3.1 million of income from the gain on the sale of a marketable security. Management Comments and Outlook Chief Executive Officer Zev Weiss said, "We are off to a good start this fiscal year as we are seeing the very early stages of the benefit of additional focus on our core consumer. We have been concentrating our resources on efforts to increase our point of sale results while maintaining a relentless focus on cost containment to help support margins." The Company updated its fiscal year earnings per share estimate due to both the Securities and Exchange Commission's April 2005 decision to delay the implementation of new rules on the expensing of employee stock options as well as the effects of share repurchases. The Company's fiscal year estimate provided in April was $1.46 to $1.51 per share. The Company previously anticipated adopting Financial Accounting Standard 123R during its third fiscal quarter. The delay in adoption of the new accounting rules until March of 2006 causes the previous estimate to be increased by 4 cents per share. In addition, share repurchases through the end of the first quarter, net of lost interest income during the year, will add approximately 2 cents to the Company's estimate. The combination of the change in adoption date of the accounting rules as well as the effects from the first quarter share repurchases increase the range of estimated earnings per share by 6 cents for fiscal 2006 from $1.46 to $1.51 up to $1.52 to $1.57. The second quarter is one in which American Greetings has historically reported a net loss due to the seasonal nature of its business. For the second quarter of fiscal 2006, the Company is projecting earnings per share to be between a loss of 6 cents and a loss of 1 cent. This estimate would compare to income from continuing operations of 9 cents per share in the prior year's second quarter. Included in the 9 cents of earnings per share was a pretax gain of $10 million resulting from the modification of certain agreements for the Company's licensing activities. Financing Activities The Company purchased more than 1.9 million shares of common stock for $45.5 million during the first fiscal quarter of 2006 under its previously announced $200 million share repurchase program. During the quarter, the Company provided notice to bondholders that the remaining $10.2 million of debt with a coupon of 11.75% would be called during the second quarter. Once repurchased, the entire original issuance of $260 million of 11.75% notes will have been prepaid over the previous two-year period. The Company's Board of Directors authorized a cash dividend of 8 cents per share to be paid on August 1, 2005 to shareholders of record at the close of business on July 20, 2005. 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. 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 chain improvements and achieving projected cost savings from those improvements; 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; 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. AMERICAN GREETINGS CORPORATION FIRST QUARTER CONSOLIDATED STATEMENT OF INCOME FISCAL YEAR ENDING FEBRUARY 28, 2006 (In thousands of dollars except share and per share amounts)

(Unaudited) Three Months Ended May 31, ------------------------------- 2005 2004 -------------- -------------- Net sales $ 443,276 $ 433,541 Costs and expenses: Material, labor and other production costs 180,473 181,615 Selling, distribution and marketing 155,274 146,652 Administrative and general 63,128 64,137 Interest expense 9,682 52,694 Other income - net (8,371) (16,346) 400,186 428,752 Income from continuing operations before income tax expense 43,090 4,789 Income tax expense 16,676 1,853 Income from continuing operations 26,414 2,936 Income from discontinued operations, net of tax - 1,302 Net income $ 26,414 $ 4,238 Earnings per share - basic: Income from continuing operations $ 0.39 $ 0.04 Income from discontinued operations - 0.02 Net income $ 0.39 $ 0.06 Earnings per share - assuming dilution: Income from continuing operations $ 0.35 $ 0.04 Income from discontinued operations - 0.02 Net income $ 0.35 $ 0.06 Average number of common shares outstanding 68,595,786 68,000,691 Average number of common shares outstanding - assuming dilution 81,952,895 68,846,170 Dividends declared per share $ 0.08 $ -

AMERICAN GREETINGS CORPORATION CONSOLIDATED STATEMENT OF FINANCIAL POSITION FISCAL YEAR ENDING FEBRUARY 28, 2006 (In thousands of dollars)

(Unaudited) May 31, ------------------------------- 2005 2004 -------------- -------------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 214,273 $ 115,850 Short-term investments 208,750 - Trade accounts receivable, net 196,210 241,656 Inventories 233,933 254,035 Deferred and refundable income taxes 165,123 154,713 Assets of businesses held for sale - 37,905 Prepaid expenses and other 210,043 220,773 Total current assets 1,228,332 1,024,932 GOODWILL 263,823 220,316 OTHER ASSETS 625,847 663,449 PROPERTY, PLANT AND EQUIPMENT - NET 331,234 346,538 $ 2,449,236 $ 2,255,235 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Debt due within one year $ 10,184 $- Accounts payable 117,247 112,294 Accrued liabilities 120,192 113,329 Accrued compensation and benefits 65,514 62,921 Income taxes 31,178 15,731 Liabilities of businesses held for sale - 4,635 Other current liabilities 112,575 69,862 Total current liabilities 456,890 378,772 LONG-TERM DEBT 476,159 483,783 OTHER LIABILITIES 124,058 94,149 DEFERRED INCOME TAXES 34,612 27,300 SHAREHOLDERS' EQUITY Common shares - Class A 63,365 63,502 Common shares - Class B 4,213 4,603 Capital in excess of par value 376,586 340,608 Treasury stock (487,563) (435,112) Accumulated other comprehensive income 14,894 13,591 Retained earnings 1,386,022 1,284,039 Total shareholders' equity 1,357,517 1,271,231 $ 2,449,236 $ 2,255,235

AMERICAN GREETINGS CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS FISCAL YEAR ENDING FEBRUARY 28, 2006 (In thousands of dollars)

(Unaudited) Three Months Ended May 31, ------------------------------- 2005 2004 -------------- -------------- OPERATING ACTIVITIES: Net income $ 26,414 $ 4,238 Income from discontinued operations - 1,302 Income from continuing operations 26,414 2,936 Adjustments to reconcile to net cash provided by operating activities: Gain on sale of investment - (3,090) Loss (gain) on fixed assets 944 (21) Loss on extinguishment of debt 862 39,024 Depreciation and amortization 14,646 14,091 Deferred income taxes 7,740 (7,192) Changes in operating assets and liabilities, net of acquisitions: Increase in trade accounts receivable (10,895) (13,216) Increase in inventories (13,947) (17,174) Decrease in other current assets 14,360 7,946 Decrease in deferred costs - net 25,147 33,274 Decrease in accounts payable and other liabilities (48,193) (28,145) Other - net 654 (4,882) Cash Provided by Operating Activities 17,732 23,551 INVESTING ACTIVITIES: Proceeds from sale of short-term investments 575,785 - Purchases of short-term investments (575,795) - Property, plant & equipment additions (8,607) (4,403) Proceeds from sale of fixed assets 36 104 Investment in corporate owned life insurance 1,614 1,098 Other - net (1,205) 26,879 Cash (Used) Provided by Investing Activities (8,172) 23,678 FINANCING ACTIVITIES: Reduction of long-term debt - (216,417) Sale of stock under benefit plans 8,511 12,035 Purchase of treasury shares (45,533) (9,299) Dividends to shareholders (5,500) - Cash Used by Financing Activities (42,522) (213,681) Cash Used by Discontinued Operations - (1,342) EFFECT OF EXCHANGE RATE CHANGES ON CASH (3,032) (1,806) DECREASE IN CASH AND CASH EQUIVALENTS (35,994) (169,600) Cash and Cash Equivalents at Beginning of Year 250,267 285,450 Cash and Cash Equivalents at End of Period $ 214,273 $ 115,850

SOURCE American Greetings Corporation -0- 06/30/2005 /CONTACT: Stephen J. Smith, VP, Treasurer and Investor Relations of American Greetings Corporation, +1-216-252-4864, or investor.relations@amgreetings.com/ /Company News On-Call: http://www.prnewswire.com/comp/044150.html/ /Web site: http://corporate.americangreetings.com http://investors.americangreetings.com/ -