EX-99.1 2 l28019aexv99w1.htm EX-99.1 EX-99.1
 

Exhibit 99.1
AMERICAN GREETINGS ANNOUNCES IMPROVED SECOND QUARTER RESULTS
CLEVELAND (September 20, 2007) — American Greetings Corporation (NYSE: AM) today announced its second quarter results for the fiscal quarter ended August 24, 2007.
Second Quarter Results
For the second quarter of fiscal 2008, the Company reported total revenue of $377.4 million, pre-tax income from continuing operations of $12.9 million, and income from continuing operations of $8.7 million or 16 cents per share (all per-share amounts assume dilution). For the second quarter of fiscal 2007, the Company reported total revenue of $371.5 million, a pre-tax loss from continuing operations of $13.9 million, and a loss from continuing operations of $12.6 million or 22 cents per share.
Management Comments and Outlook
Chief Executive Officer Zev Weiss said, “I am pleased with the improvement in our financial performance this quarter as the team has been working hard on several initiatives. Specifically, our everyday and seasonal card performance improved nicely. The combination of the improved performance in our card business as well as careful management of our costs caused our results to be well above the prior period.”
Weiss affirmed the Corporation’s previously announced estimate of earnings per share from continuing operations for fiscal 2008 to be between $1.35 to $1.55 per share. “While I am happy with our first half results, we have a lot of initiatives planned in the second half of the year. The team is working hard with our retail partners to accomplish our mutual goals. Given the strong start to the year, but also recognizing that the seasonality of our business causes the majority of our earnings to typically be earned during the second fiscal half, we remain comfortable with our earnings guidance for the full year,” added Weiss.
Financing Activities
Under the Company’s $100 million share repurchase program, during the second quarter, the Company purchased approximately 300,000 shares of its common stock for about $7 million. The Company has reduced its diluted share count by about one-third over the past 28 months.
The Company’s Board of Directors authorized a cash dividend of 10 cents per share to be paid on October 15, 2007 to shareholders of record at the close of business on October 5, 2007.
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 $1.7 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:
  •   retail consolidations, acquisitions and bankruptcies, including the possibility of resulting adverse changes to retail contract terms;
 
  •   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;
 
  •   the timing and impact of converting customers to a scan-based trading model;
 
  •   the ability to execute share repurchase programs or the ability to achieve the desired accretive effect from such repurchases;
 
  •   the Company’s ability to successfully complete, or achieve the desired benefits associated with, dispositions;
 
  •   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;
 
  •   successful implementation of supply chain improvements and achievement of projected cost savings from those improvements;
 
  •   increases in the cost of material, energy, freight, and other production costs;
 
  •   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;
 
  •   successful integration of acquisitions; 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.
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
SECOND QUARTER CONSOLIDATED STATEMENT OF OPERATIONS
FISCAL YEAR ENDING FEBRUARY 29, 2008
(In thousands of dollars except share and per share amounts)
                                 
    (Unaudited)  
    Three Months Ended     Six Months Ended  
    August 24, 2007     August 25, 2006     August 24, 2007     August 25, 2006  
 
                                
Net sales
   $ 365,821     $ 357,483     $ 783,834     $ 761,653  
Other revenue
     11,606       14,044       13,558       15,485  
 
                        
Total revenue
     377,427       371,527       797,392       777,138  
 
                                
Material, labor and other production costs
     163,052       172,808       324,180       348,045  
Selling, distribution and marketing expenses
     144,584       151,475       285,275       294,055  
Administrative and general expenses
     55,938       56,881       117,810       118,229  
Other operating income — net
     (320 )     (93 )     (680 )     (422 )
 
                        
 
                                
Operating income (loss)
     14,173       (9,544 )     70,807       17,231  
 
                                
Interest expense
     4,839       7,609       9,596       20,073  
Interest income
     (2,227 )     (2,628 )     (3,719 )     (5,458 )
Other non-operating income — net
     (1,352 )     (642 )     (2,896 )     (2,902 )
 
                        
 
                                
Income (loss) from continuing operations before income tax expense (benefit)
     12,913       (13,883 )     67,826       5,518  
Income tax expense (benefit)
     4,187       (1,326 )     28,478       1,525  
 
                        
 
                                
Income (loss) from continuing operations
     8,726       (12,557 )     39,348       3,993  
 
                                
(Loss) income from discontinued operations, net of tax
     (351 )     2,059       (923 )     901  
 
                        
 
                                
Net income (loss)
   $ 8,375     $ (10,498 )   $ 38,425     $ 4,894  
 
                        
 
                                
Earnings (loss) per share — basic:
                                
Income (loss) from continuing operations
   $ 0.16     $ (0.22 )   $ 0.71     $ 0.06  
(Loss) income from discontinued operations
     (0.01 )     0.04       (0.02 )     0.02  
 
                        
Net income (loss)
   $ 0.15     $ (0.18 )   $ 0.69     $ 0.08  
 
                        
 
                                
Earnings (loss) per share — assuming dilution:
                                
Income (loss) from continuing operations
   $ 0.16     $ (0.22 )   $ 0.71     $ 0.06  
(Loss) income from discontinued operations
     (0.01 )     0.04       (0.02 )     0.02  
 
                        
Net income (loss)
   $ 0.15     $ (0.18 )   $ 0.69     $ 0.08  
 
                        
 
                                
Average number of common shares outstanding
     55,766,802       58,133,066       55,514,759       58,135,148  
 
                                
Average number of common shares outstanding — assuming dilution
     56,180,165       58,133,066       55,902,189       59,990,069  
 
                                
Dividends declared per share
   $ 0.10     $ 0.08     $ 0.20     $ 0.16  

 

 

AMERICAN GREETINGS CORPORATION
SECOND QUARTER CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FISCAL YEAR ENDING FEBRUARY 29, 2008
(In thousands of dollars)
                 
    (Unaudited)  
    August 24, 2007     August 25, 2006  
 
                
ASSETS
                
CURRENT ASSETS
                
Cash and cash equivalents
   $ 192,450     $ 89,113  
Trade accounts receivable, net
     71,195       87,926  
Inventories
     248,176       273,788  
Deferred and refundable income taxes
     66,399       170,472  
Assets of businesses held for sale
     2,434       12,648  
Prepaid expenses and other
     215,369       194,291  
 
            
Total current assets
     796,023       828,238  
 
                
GOODWILL
     226,920       214,969  
OTHER ASSETS
     402,931       549,931  
DEFERRED AND REFUNDABLE INCOME TAXES
     98,968       —  
 
                
Property, plant and equipment — at cost
     950,273       967,253  
Less accumulated depreciation
     672,602       665,936  
 
            
PROPERTY, PLANT AND EQUIPMENT — NET
     277,671       301,317  
 
            
 
   $ 1,802,513     $ 1,894,455  
 
            
 
                
LIABILITIES AND SHAREHOLDERS’ EQUITY
                
CURRENT LIABILITIES
                
Debt due within one year
   $ 22,690     $ 20,000  
Accounts payable
     126,341       127,619  
Accrued liabilities
     70,880       76,071  
Accrued compensation and benefits
     50,397       48,932  
Income taxes
     1,457       8,364  
Liabilities of businesses held for sale
     1,283       639  
Other current liabilities
     97,765       100,517  
 
            
Total current liabilities
     370,813       382,142  
 
                
LONG-TERM DEBT
     200,988       224,078  
OTHER LIABILITIES
     147,496       101,744  
DEFERRED INCOME TAXES AND NONCURRENT INCOME TAXES PAYABLE
     29,930       25,775  
 
                
SHAREHOLDERS’ EQUITY
                
Common shares — Class A
     51,497       56,858  
Common shares — Class B
     4,291       4,226  
Capital in excess of par value
     439,985       412,919  
Treasury stock
     (720,027 )     (569,143 )
Accumulated other comprehensive income
     10,690       29,726  
Retained earnings
     1,266,850       1,226,130  
 
            
Total shareholders’ equity
     1,053,286       1,160,716  
 
            
 
   $ 1,802,513     $ 1,894,455  
 
            

 

 

AMERICAN GREETINGS CORPORATION
SECOND QUARTER CONSOLIDATED STATEMENT OF CASH FLOWS
FISCAL YEAR ENDING FEBRUARY 29, 2008
(In thousands of dollars)
                 
    (Unaudited)  
    Six Months Ended  
    August 24, 2007     August 25, 2006  
 
                
OPERATING ACTIVITIES:
                
Net income
   $ 38,425     $ 4,894  
Loss (income) from discontinued operations
     923       (901 )
 
            
Income from continuing operations
     39,348       3,993  
Adjustments to reconcile to net cash provided by operating activities:
                
Net gain on disposal of fixed assets
     (41 )     (24 )
Loss on extinguishment of debt
     —       4,972  
Depreciation and amortization
     23,919       24,823  
Deferred income taxes
     14,335       15,532  
Other non-cash charges
     3,861       7,016  
Changes in operating assets and liabilities, net of acquisitions and dispositions:
                
Decrease in trade accounts receivable
     33,385       55,353  
Increase in inventories
     (61,980 )     (57,101 )
Increase in other current assets
     (2,750 )     (24,196 )
Decrease in deferred costs — net
     28,451       26,787  
Decrease in accounts payable and other liabilities
     (23,400 )     (33,170 )
Other — net
     2,952       4,152  
 
            
Cash Provided by Operating Activities
     58,080       28,137  
 
                
INVESTING ACTIVITIES:
                
Proceeds from sale of short-term investments
     480,630       1,026,280  
Purchases of short-term investments
     (480,630 )     (817,540 )
Property, plant and equipment additions
     (13,577 )     (18,708 )
Cash payments for business acquisitions, net of cash acquired
     (6,056 )     (11,154 )
Cash receipts related to discontinued operations
     3,419       9,559  
Proceeds from sale of fixed assets
     1,105       461  
 
            
Cash (Used) Provided by Investing Activities
     (15,109 )     188,898  
 
                
FINANCING ACTIVITIES:
                
Increase in long-term debt
     —       200,000  
Reduction of long-term debt
     —       (440,505 )
Increase in short-term debt
     —       20,000  
Sale of stock under benefit plans
     24,250       2,804  
Purchase of treasury shares
     (11,883 )     (108,674 )
Dividends to shareholders
     (11,115 )     (9,164 )
Debt issuance costs
     —       (8,136 )
 
            
Cash Provided (Used) by Financing Activities
     1,252       (343,675 )
 
                
DISCONTINUED OPERATIONS:
                
Cash used by operating activities from discontinued operations
     (789 )     (2,296 )
Cash provided by investing activities from discontinued operations
     —       1,656  
 
            
Cash Used by Discontinued Operations
     (789 )     (640 )
 
                
EFFECT OF EXCHANGE RATE CHANGES ON CASH
     4,303       2,780  
 
            
 
                
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
     47,737       (124,500 )
 
                
Cash and Cash Equivalents at Beginning of Year
     144,713       213,613  
 
            
Cash and Cash Equivalents at End of Period
   $ 192,450     $ 89,113  
 
            

 

 

AMERICAN GREETINGS CORPORATION
SECOND QUARTER CONSOLIDATED SEGMENT DISCLOSURES
FISCAL YEAR ENDING FEBRUARY 29, 2008
(In thousands of dollars)
                                 
            (Unaudited)          
    Three Months Ended     Six Months Ended  
    August 24, 2007     August 25, 2006     August 24, 2007     August 25, 2006  
Total Revenue:
                                
North American Social Expression Products
   $ 255,881     $ 244,220     $ 552,975     $ 537,183  
Intersegment items
     (13,942 )     (15,310 )     (22,109 )     (32,858 )
Exchange rate adjustment
     1,341       170       1,346       107  
 
                        
Net
     243,280       229,080       532,212       504,432  
 
                                
International Social Expression Products
     59,390       62,385       119,044       126,493  
Exchange rate adjustment
     5,257       (59 )     9,352       (2,321 )
 
                        
Net
     64,647       62,326       128,396       124,172  
 
                                
Retail Operations
     37,382       39,453       76,306       82,954  
Exchange rate adjustment
     1,069       183       1,073       121  
 
                        
Net
     38,451       39,636       77,379       83,075  
 
                                
AG Interactive
     17,158       20,447       37,052       40,488  
Exchange rate adjustment
     (2 )     40       1       45  
 
                        
Net
     17,156       20,487       37,053       40,533  
 
                                
Non-reportable segments
     13,885       19,936       22,268       24,831  
 
                                
Unallocated
     8       62       84       95  
 
                                
 
                        
 
   $ 377,427     $ 371,527     $ 797,392     $ 777,138  
 
                        
 
                                
Segment Earnings (Loss):
                                
North American Social Expression Products
   $ 40,799     $ 15,417     $ 127,739     $ 83,578  
Intersegment items
     (10,467 )     (10,919 )     (16,722 )     (23,829 )
Exchange rate adjustment
     798       82       803       49  
 
                        
Net
     31,130       4,580       111,820       59,798  
 
                                
International Social Expression Products
     1,393       559       1,433       1,056  
Exchange rate adjustment
     200       18       347       64  
 
                        
Net
     1,593       577       1,780       1,120  
 
                                
Retail Operations
     (6,484 )     (9,071 )     (9,265 )     (16,372 )
Exchange rate adjustment
     (3 )     (5 )     (3 )     (3 )
 
                        
Net
     (6,487 )     (9,076 )     (9,268 )     (16,375 )
 
                                
AG Interactive
     3,177       1,208       6,473       3,249  
Exchange rate adjustment
     (8 )     2       (17 )     1  
 
                        
Net
     3,169       1,210       6,456       3,250  
 
                                
Non-reportable segments
     2,035       6,735       2,962       4,640  
 
                                
Unallocated
     (18,456 )     (17,856 )     (45,849 )     (46,762 )
Exchange rate adjustment
     (71 )     (53 )     (75 )     (153 )
 
                        
Net
     (18,527 )     (17,909 )     (45,924 )     (46,915 )
 
                                
 
                        
 
   $ 12,913     $ (13,883 )   $ 67,826     $ 5,518