American Greetings Announces First Quarter Earnings

By American Greetings Corporation, PRNE
Tuesday, June 28, 2011

CLEVELAND, June 29, 2011 -

American Greetings Corporation (NYSE: AM) today announced its
results for the first fiscal quarter ended May 27, 2011.

First Quarter Results

For the first quarter of fiscal 2012, the Company reported total
revenue of $402.3 million, pre-tax income of $50.8 million, and net
income of $32.6 million or 78 cents per share (all per-share
amounts assume dilution). Revenue was reduced by $1.9 million as a
result of scan-based trading conversions that occurred during the
quarter. The pre-tax income impact of the scan-based trading
conversions was $2.3 million (after-tax $1.4 million, reducing
earnings per share by about 3 cents).

For the first quarter of fiscal 2011, the Company reported total
revenue of $396.3 million, pre-tax income of $51.0 million, and net
income of $30.8 million or 75 cents per share. The Company incurred
pre-tax costs associated with the integrations of Papyrus and
Recycled Paper Greetings of $3.4 million (after-tax of $2.1
, reducing earnings per share by about 5 cents).

Management Comments and Outlook

Chief Executive Officer Zev Weiss said, “Despite the continuing
erratic economic environment, we achieved a record level of
earnings per share in the first quarter driven by the combination
of the changes we made to our portfolio of businesses in recent
years, our growing market share in North America, and the
continuation of good expense management.”

For fiscal 2012, the Company expects revenue to grow
approximately 5% compared to fiscal 2011. The Company expects cash
flow from operating activities to fall within the range of $125
million to $145 million
and capital expenditures between $45
million and $50 million
, resulting in cash flow from operating
activities minus capital expenditures of $80 million to $100
. This cash flow estimate includes an aggregate use of cash
of approximately $5 million to $15 million for the combination of
working capital, deferred costs, and taxes.

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 href="">
A replay of the call will be available on the site.

About American Greetings

For more than 100 years, American Greetings Corporation (NYSE:
AM) has been a creator and manufacturer of innovative social
expression products that assist consumers in enhancing their
relationships. The Company’s major greeting card lines 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 one of the largest collections
of electronic greetings on the Web, including cards available at through AG Interactive, Inc. (the Company’s
online division). 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 $1.6 billion, and its products can be found in retail
outlets worldwide. For more information on the Company, visit href="">

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;
  • competitive terms of sale offered to customers;
  • retail consolidations, acquisitions and bankruptcies, including
    the possibility of resulting adverse changes to retail contract
  • 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 achieve the desired benefits associated with the
    Company’s cost reduction efforts;
  • the ability to successfully implement or achieve the desired
    benefits associated with any information systems refresh the
    Company may implement;
  • Schurman Fine Papers’ ability to successfully operate its
    retail operations and satisfy its obligations to the Company;
  • consumer acceptance of products as priced and marketed;
  • the impact of technology, including social media, on core
    product sales;
  • escalation in the cost of providing employee health care;
  • the Company’s ability to achieve the desired accretive effect
    from any share repurchase programs;
  • 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
    , 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, and the ability to adapt to rapidly changing social
media and 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

                 FISCAL YEAR ENDING FEBRUARY 29, 2012

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

                                       Three Months Ended
                                  May 27, 2011      May 28, 2010
                                  ------------      ------------    Net sales                         $396,776        $392,105
    Other revenue                        5,573           4,203
                                         -----           -----
    Total revenue                      402,349         396,308

    Material, labor and other
     production costs                  157,929         158,013
    Selling, distribution and
     marketing expenses                123,292         117,551
    Administrative and general
     expenses                           65,298          66,032
    Other operating income - net          (923)           (594)
                                          -----           -----

    Operating income                    56,753          55,306

    Interest expense                     6,124           6,202
    Interest income                       (321)           (213)
    Other non-operating expense
     (income) - net                        160          (1,700)
                                           ---          ------

    Income before income tax
     expense                            50,790          51,017
    Income tax expense                  18,197          20,178
                                        ------          ------

    Net income                         $32,593         $30,839
                                       =======         =======

    Earnings per share - basic           $0.80           $0.78

    Earnings per share -assuming
     dilution                            $0.78           $0.75

    Average number of common
     shares outstanding             40,500,357      39,638,568

    Average number of common
     shares outstanding -
      assuming dilution             41,799,366      40,849,429

    Dividends declared per share         $0.15           $0.14

                FISCAL YEAR ENDING FEBRUARY 29, 2012

                     (In thousands of dollars)

                                            May 27, 2011     May 28, 2010
                                            ------------     ------------    ASSETS
      Cash and cash equivalents                $211,139         $186,775
      Trade accounts receivable, net            137,213          110,085
      Inventories                               203,346          157,913
      Deferred and refundable income taxes       46,686           74,951
      Assets held for sale                        7,180           14,680
      Prepaid expenses and other                117,315          118,046
                                                -------          -------
        Total current assets                    722,879          662,450

    GOODWILL                                     29,701           30,238
    OTHER ASSETS                                431,472          413,237
    DEFERRED AND REFUNDABLE INCOME TAXES        127,731          150,207

    Property, plant and equipment -at
     cost                                       859,189          835,707
    Less accumulated depreciation               616,706          597,610
                                                -------          -------
    PROPERTY, PLANT AND EQUIPMENT - NET         242,483          238,097
                                                -------          -------
                                             $1,554,266       $1,494,229
                                             ==========       ==========

      Debt due within one year                       $-          $99,000
      Accounts payable                           98,641           80,205
      Accrued liabilities                        65,527           61,425
      Accrued compensation and benefits          35,163           35,472
      Income taxes payable                       18,752           25,390
      Other current liabilities                 100,107           91,878
                                                -------           ------
        Total current liabilities               318,190          393,370

    LONG-TERM DEBT                              233,298          230,973
    OTHER LIABILITIES                           186,484          179,643
      NONCURRENT INCOME TAXES PAYABLE            32,132           30,548

      Common shares - Class A                    37,942           37,064
      Common shares - Class B                     2,803            2,926
      Capital in excess of par value            502,131          478,676
      Treasury stock                           (951,643)        (951,830)
      Accumulated other comprehensive
       income (loss)                              2,121          (40,257)
      Retained earnings                       1,190,808        1,133,116
                                              ---------        ---------
        Total shareholders' equity              784,162          659,695
                                                -------          -------
                                             $1,554,266       $1,494,229
                                             ==========       ==========

              FISCAL YEAR ENDING FEBRUARY 29, 2012
                   (In thousands of dollars)

                                                    Three Months Ended
                                              May 27, 2011     May 28, 2010
                                              ------------     ------------    OPERATING ACTIVITIES:
      Net income                                   $32,593        $30,839
      Adjustments to reconcile net income to
          cash flows from operating activities:
        Stock-based compensation                     2,662          2,650
        Net loss (gain) on disposal of fixed
         assets                                         86           (151)
        Depreciation and amortization                9,929         10,294
        Deferred income taxes                        1,147           (535)
        Other non-cash charges                         872            735
        Changes in operating assets and
              net of acquisitions and dispositions:
          Trade accounts receivable                (12,389)        19,576
          Inventories                              (18,750)         4,483
          Other current assets                       2,442         (2,878)
          Income taxes                               7,596         15,830
          Deferred costs - net                      13,099         13,802
          Accounts payable and other liabilities   (27,922)       (66,362)
          Other - net                                  597          4,256
                                                       ---          -----
        Total Cash Flows From Operating
         Activities                                 11,962         32,539

      Property, plant and equipment additions       (8,891)        (5,965)
      Cash payments for business
       acquisitions, net of cash acquired           (5,992)             -
      Proceeds from sale of fixed assets                24            555
      Proceeds from escrow related to party
       goods transaction                                 0         24,523
                                                        ---         ------
        Total Cash Flows From Investing
         Activities                                (14,859)        19,113

      Net decrease in long-term debt                     -           (250)
      Sale of stock under benefit plans             12,000         19,087
      Purchase of treasury shares                   (9,942)       (12,979)
      Dividends to shareholders                     (6,062)        (5,525)
                                                    -------         ------
        Total Cash Flows From Financing
         Activities                                 (4,004)           333

    EFFECT OF EXCHANGE RATE CHANGES ON CASH          2,202         (3,159)
                                                     -----         ------

     EQUIVALENTS                                    (4,699)        48,826

        Cash and Cash Equivalents at Beginning
         of Year                                   215,838        137,949
                                                   -------        -------
        Cash and Cash Equivalents at End of
         Period                                   $211,139       $186,775
                                                  ========       ========

              FISCAL YEAR ENDING FEBRUARY 29, 2012
                    (In thousands of dollars)
                                                Three Months Ended
                                           May 27, 2011    May 28, 2010
                                           ------------    ------------
    Total Revenue:
    North American Social Expression
     Products                                $303,228       $308,309

    International Social Expression
     Products                                  70,205         57,573

    AG Interactive                             16,717         18,554

    Non-reportable segments                    12,199         11,872

                                             $402,349       $396,308
                                             ========       ========

    Segment Earnings (Loss):
    North American Social Expression
     Products                                 $59,618        $64,063

    International Social Expression
     Products                                   3,303          2,834

    AG Interactive                              2,312          2,372

    Non-reportable segments                     4,606          2,152

    Unallocated                               (19,049)       (20,404)

                                              $50,790        $51,017
                                              =======        =======

Gregory M. Steinberg, Treasurer and Executive Director of Investor Relations, American Greetings Corporation, +1-216-252-4864, investor.relations at

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