Press Release - reporting results for the quarter and year ended 02/29/2008

EX-99.1 2 dex991.htm PRESS RELEASE - REPORTING RESULTS FOR THE QUARTER AND YEAR ENDED 02/29/2008 Press Release - reporting results for the quarter and year ended 02/29/2008

Exhibit 99.1

AMERICAN GREETINGS ANNOUNCES IMPROVED FOURTH QUARTER RESULTS

CLEVELAND (April 17, 2008) – American Greetings Corporation (NYSE: AM) today announced its results for the fourth quarter and fiscal year ended February 29, 2008.

Fourth Quarter Results

For the fourth quarter of fiscal 2008, the Company reported total revenue of $493.2 million, pre-tax income from continuing operations of $12.7 million, and income from continuing operations of $15.6 million or 31 cents per share (all per-share amounts assume dilution).

In the prior year’s fourth fiscal quarter, the Company reported total revenue of $495.9 million, a pre-tax loss from continuing operations of $6.9 million, and a loss from continuing operations of $9.8 million or 18 cents per share. In the prior period, the Company sold its candle product lines and recorded a pre-tax loss of $16 million or approximately 18 cents per share within continuing operations. Also in the prior period, the Company incurred exit costs in connection with the closure of 60 of its retail stores resulting in a pre-tax loss of $6.5 million or approximately 7 cents per share.

Full Year Results

For the fiscal year ended February 29, 2008, the Company reported total revenue of $1,776.5 million, pre-tax income from continuing operations of $124.0 million, and income from continuing operations of $83.3 million or $1.53 per share.

For the prior fiscal year ended February 28, 2007, the Company reported total revenue of $1,794.3 million, pre-tax income from continuing operations of $65.4 million, and income from continuing operations of $39.9 million or 67 cents per share. Included in these results are a pre-tax loss on the sale of the Company’s candle product lines of $16 million or approximately 16 cents per share, a pre-tax loss associated with the closure of 60 stores within the retail operations segment of $6.5 million or approximately 7 cents per share, and a pre-tax gain of $20 million or approximately 20 cents per share as a result of retailer consolidations and the effect the consolidations had on several long-term supply agreements between the Company and the affected retailers.

Management Comments and Outlook

Chief Executive Officer Zev Weiss said, “I am pleased that we were able to achieve earnings within our forecasted range and exceed our cash flow guidance. Our strong cash flow allowed us to make two acquisitions in the digital photo space, repurchase shares, and raise the dividend this past year.” Weiss added, “While we are expecting a more challenging economy, in fiscal 2009 we are projecting earnings per share increasing to between $1.60 and $1.85, and cash flow from operating activities less capital expenditures between $60 million and $80 million.”

Financing Activities

The Company purchased 4.7 million shares of its common stock for $97.3 million during the fourth quarter of fiscal 2008. During the fiscal year, the Company repurchased a total of 6.7 million shares for a total of $149.1 million under two share repurchase programs. The Company has reduced its total share count by about 40% over the past three 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 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, stationery, calendars, ornaments and electronic greetings. Located in Cleveland, Ohio, American Greetings generates annual revenue of approximately $1.8 billion. For more information on the Company, visit http://corporate.americangreetings.com.

###

CONTACT:

Gregory M. Steinberg

Treasurer and Director of 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:

•

a weak retail environment;

•

retail consolidations, acquisitions and bankruptcies, including the possibility of resulting adverse changes to retail contract terms;

•

competitive terms of sale offered to customers;

•

the Company’s ability to successfully implement its strategy to invest in its core greeting card business;

•

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 integrate acquisitions;

•

the ability to successfully implement, or achieve the desired benefits associated with any information systems refresh the Company may implement;

•

the ability to execute share repurchase programs or the ability to achieve the desired accretive effect from such repurchases;

•

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;

•

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 28, 2007.

AMERICAN GREETINGS CORPORATION

FOURTH QUARTER CONSOLIDATED STATEMENT OF OPERATIONS

FISCAL YEAR ENDED FEBRUARY 29, 2008

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


	(Unaudited)
	Quarter Ended						Year Ended
	February 29, 2008			February 28, 2007			February 29, 2008			February 28, 2007
Net sales	$	471,875		$	472,969		$	1,730,784		$	1,744,798
Other revenue		21,358			22,955			45,667			49,492

Total revenue		493,233			495,924			1,776,451			1,794,290

Material, labor and other production costs		233,262			233,559			780,771			826,791
Selling, distribution and marketing expenses		176,778			176,493			621,478			627,940
Administrative and general expenses		67,261			68,179			246,722			253,035
Goodwill impairment		—			2,196			—			2,196
Other operating (income) expense—net		(518	)		15,711			(1,325	)		(5,252	)


Operating income (loss)		16,450			(214	)		128,805			89,580

Interest expense		5,575			7,962			20,006			34,986
Interest income		(1,903	)		(1,401	)		(7,758	)		(8,135	)
Other non-operating expense (income)—net		67			130			(7,411	)		(2,682	)


Income (loss) from continuing operations before income tax (benefit) expense		12,711			(6,905	)		123,968			65,411
Income tax (benefit) expense		(2,851	)		2,886			40,648			25,473


Income (loss) from continuing operations		15,562			(9,791	)		83,320			39,938

(Loss) income from discontinued operations, net of tax		—			(2,432	)		(317	)		2,440


Net income (loss)	$	15,562		$	(12,223	)	$	83,003		$	42,378


Earnings (loss) per share—basic:
Income (loss) from continuing operations	$	0.31		$	(0.18	)	$	1.54		$	0.69
(Loss) income from discontinued operations		—			(0.04	)		(0.01	)		0.04

Net income (loss)	$	0.31		$	(0.22	)	$	1.53		$	0.73


Earnings (loss) per share—assuming dilution:
Income (loss) from continuing operations	$	0.31		$	(0.18	)	$	1.53		$	0.67
(Loss) income from discontinued operations		—			(0.04	)		(0.01	)		0.04

Net income (loss)	$	0.31		$	(0.22	)	$	1.52		$	0.71


Average number of common shares outstanding		50,895,638			56,035,238			54,236,961			57,951,952

Average number of common shares outstanding—assuming dilution		50,972,834			56,035,238			54,506,048			62,392,794

Dividends declared per share	$	0.10		$	0.08		$	0.40		$	0.32

AMERICAN GREETINGS CORPORATION

FOURTH QUARTER CONSOLIDATED STATEMENT OF FINANCIAL POSITION

FISCAL YEAR ENDED FEBRUARY 29, 2008

(In thousands of dollars)


	(Unaudited)
	February 29, 2008			February 28, 2007
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	123,500		$	144,713
Trade accounts receivable, net		61,902			104,000
Inventories		216,671			182,618
Deferred and refundable income taxes		72,280			135,379
Assets of businesses held for sale		—			2,810
Prepaid expenses and other		195,017			227,496

Total current assets		669,370			797,016

GOODWILL		285,072			224,105
OTHER ASSETS		420,219			419,071
DEFERRED AND REFUNDABLE INCOME TAXES		133,762			52,869

Property, plant and equipment—at cost		974,073			944,646
Less accumulated depreciation		678,068			659,493

PROPERTY, PLANT AND EQUIPMENT—NET		296,005			285,153

	$	1,804,428		$	1,778,214


LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Debt due within one year	$	42,790		$	—
Accounts payable		123,713			118,250
Accrued liabilities		79,345			80,389
Accrued compensation and benefits		68,669			61,192
Income taxes payable		29,037			26,386
Liabilities of businesses held for sale		—			674
Other current liabilities		108,867			84,897

Total current liabilities		452,421			371,788

LONG-TERM DEBT		200,518			223,915
OTHER LIABILITIES		181,720			163,623
DEFERRED INCOME TAXES AND NONCURRENT INCOME TAXES PAYABLE		26,358			6,314

SHAREHOLDERS' EQUITY
Common shares—Class A		45,324			50,839
Common shares—Class B		3,434			4,283
Capital in excess of par value		445,696			414,859
Treasury stock		(872,949	)		(710,414	)
Accumulated other comprehensive income (loss)		21,244			(1,013	)
Retained earnings		1,300,662			1,254,020

Total shareholders' equity		943,411			1,012,574

	$	1,804,428		$	1,778,214

AMERICAN GREETINGS CORPORATION

FOURTH QUARTER CONSOLIDATED STATEMENT OF CASH FLOWS

FISCAL YEAR ENDED FEBRUARY 29, 2008

(In thousands of dollars)


	(Unaudited) Year Ended
	February 29, 2008			February 28, 2007
OPERATING ACTIVITIES:
Net income	$	83,003		$	42,378
Loss (income) from discontinued operations		317			(2,440	)

Income from continuing operations		83,320			39,938
Adjustments to reconcile to net cash provided by operating activities:
Goodwill impairment		—			2,196
Net loss on disposal of fixed assets		961			1,726
Loss on extinguishment of debt		—			5,055
Loss on disposal of product lines		—			15,969
Depreciation and amortization		48,535			49,412
Deferred income taxes		(7,562	)		(16,277	)
Other non-cash charges		9,303			13,891
Changes in operating assets and liabilities, net of acquisitions and dispositions:
Decrease in trade accounts receivable		41,758			42,206
(Increase) decrease in inventories		(28,456	)		22,227
Decrease (increase) in other current assets		27,970			(36,082	)
Decrease in deferred costs—net		53,438			128,752
Increase in accounts payable and other liabilities		18,934			553
Other—net		(4,664	)		(4,836	)

Cash Provided by Operating Activities		243,537			264,730

INVESTING ACTIVITIES:
Proceeds from sale of short-term investments		692,985			1,026,280
Purchases of short-term investments		(692,985	)		(817,540	)
Property, plant and equipment additions		(56,623	)		(41,716	)
Cash payments for business acquisitions, net of cash acquired		(76,338	)		(13,122	)
Cash receipts related to discontinued operations		4,283			12,559
Proceeds from sale of fixed assets		3,104			4,847
Other—net		—			6,160

Cash (Used) Provided by Investing Activities		(125,574	)		177,468

FINANCING ACTIVITIES:
Increase in long-term debt		—			200,000
Reduction of long-term debt		—			(440,588	)
Net increase in short-term debt		20,100			—
Sale of stock under benefit plans		27,156			6,834
Purchase of treasury shares		(172,328	)		(257,817	)
Dividends to shareholders		(21,803	)		(18,418	)
Debt issuance costs		—			(8,533	)

Cash Used by Financing Activities		(146,875	)		(518,522	)

DISCONTINUED OPERATIONS:
Cash (used) provided by operating activities from discontinued operations		(59	)		1,283
Cash provided by investing activities from discontinued operations		—			1,634

Cash (Used) Provided by Discontinued Operations		(59	)		2,917

EFFECT OF EXCHANGE RATE CHANGES ON CASH		7,758			4,507

DECREASE IN CASH AND CASH EQUIVALENTS		(21,213	)		(68,900	)
Cash and Cash Equivalents at Beginning of Year		144,713			213,613

Cash and Cash Equivalents at End of Year	$	123,500		$	144,713

AMERICAN GREETINGS CORPORATION

FOURTH QUARTER CONSOLIDATED SEGMENT DISCLOSURES

FISCAL YEAR ENDED FEBRUARY 29, 2008

(In thousands of dollars)


	(Unaudited)
	Quarter Ended						Year Ended
	February 29, 2008			February 28, 2007			February 29, 2008			February 28, 2007
Total Revenue:
North American Social Expression Products	$	286,443		$	297,452		$	1,178,961		$	1,206,361
Intersegment items		(13,204	)		(11,995	)		(54,736	)		(59,806	)
Exchange rate adjustment		1,099			(579	)		5,417			(254	)

Net		274,338			284,878			1,129,642			1,146,301

International Social Expression Products		86,010			70,826			285,658			279,845
Exchange rate adjustment		7,710			3,412			25,668			1,885

Net		93,720			74,238			311,326			281,730

Retail Operations		74,293			82,235			190,149			207,441
Exchange rate adjustment		3,660			(554	)		7,200			(255	)

Net		77,953			81,681			197,349			207,186

AG Interactive		22,087			23,196			78,051			85,347
Exchange rate adjustment		665			25			664			101

Net		22,752			23,221			78,715			85,448

Non-reportable segments		24,522			31,857			59,356			73,441

Unallocated		(52	)		49			63			184


	$	493,233		$	495,924		$	1,776,451		$	1,794,290


Segment Earnings (Loss):
North American Social Expression Products	$	24,066		$	21,968		$	216,354		$	204,079
Intersegment items		(9,864	)		(8,592	)		(41,067	)		(42,717	)
Exchange rate adjustment		(419	)		(216	)		1,941			(87	)

Net		13,783			13,160			177,228			161,275

International Social Expression Products		10,738			2,286			22,208			9,434
Exchange rate adjustment		1,064			225			2,528			259

Net		11,802			2,511			24,736			9,693

Retail Operations		10,616			5,013			(4,482	)		(16,415	)
Exchange rate adjustment		746			(23	)		829			(22	)

Net		11,362			4,990			(3,653	)		(16,437	)

AG Interactive		(2,344	)		315			6,323			5,813
Exchange rate adjustment		134			(22	)		132			(39	)

Net		(2,210	)		293			6,455			5,774

Non-reportable segments		1,181			4,837			3,779			11,852

Unallocated		(22,704	)		(32,643	)		(83,939	)		(106,544	)
Exchange rate adjustment		(503	)		(53	)		(638	)		(202	)

Net		(23,207	)		(32,696	)		(84,577	)		(106,746	)


	$	12,711		$	(6,905	)	$	123,968		$	65,411