American Greetings Announces Record First Quarter Earnings Per Share
By American Greetings Corporation, PRNETuesday, June 29, 2010
CLEVELAND, June 30, 2010 - American Greetings Corporation (NYSE: AM) today announced its results for
the first fiscal quarter ended May 28, 2010.
First Quarter Results
For the first quarter of fiscal 2011, the Company reported total revenue
of US$396.3 million, pre-tax income of US$51.0 million, and net income of
US$30.8 million or 75 cents per share (all per-share amounts assume
dilution).
For the first quarter of fiscal 2010, the Company reported total revenue
of US$412.9 million, pre-tax income of US$16.9 million, and net income of
US$10.0 million or 25 cents per share. During the first quarter of fiscal
2010, American Greetings sold its retail store operations. The Retail
Operations segment reported revenue of US$11.7 million and a segment loss of
US$34.8 million (after-tax of approximately US$21.3 million), which reduced
earnings per share by approximately 54 cents during the quarter.
Management Comments and Outlook
Chief Executive Officer Zev Weiss said, "I am pleased that our earnings
per share of 75 cents were the highest we have ever achieved in a first
quarter. Our first quarter EPS benefited from several factors including the
solid performance in our core business units, the changes we made over the
last eighteen months to our portfolio of businesses, and the shares we
repurchased over the last several years. We believe our refined business
portfolio, which focuses on our core greeting card business, along with the
changes we have made to our capital structure over the last several years,
position the Company well for the opportunities and challenges ahead."
"The refined portfolio is contributing to the solid EPS for the quarter.
Eliminating the earnings drag of our retail operations has added meaningfully
to our earnings swing quarter on quarter. In addition, we continue to believe
that by the end of this fiscal year, the integration of both Recycled Paper
Greetings and Papyrus will enhance our operating income by US$15 to 20
million on an annual run rate," Weiss added.
For fiscal year 2011, the Company continues to anticipate cash flow from
operating activities of about US$165 million and capital expenditures of
approximately US$40 million resulting in cash flow from operating activities
minus capital expenditures of approximately US$125 million.
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 investors.americangreetings.com. A replay of the call will
be available on the site.
About American Greetings Corporation
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 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 provides a one-stop source for online graphics and
animations 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 US$1.6 billion, and its
products can be found in retail outlets worldwide. For more information on
the Company, visit corporate.americangreetings.com.
Non-GAAP Measures
Certain after-tax, earnings per share, and liquidity amounts included in
this release may be considered non-GAAP measures under the Securities and
Exchange Commission's Regulation G. The prior year after-tax amounts were
calculated based on the Company's statutory tax rate of approximately 38.9%.
Management believes that after-tax and earnings per share information are
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;
- the ability to achieve both the desired benefits from the
transaction with Amscan as well as ensuring a seamless transition for
affected retail customers and consumers;
- the Company's successful transition of the Retail Operations
segment to its buyer, Schurman Fine Papers, and Schurman Fine Papers'
ability to successfully operate its retail operations and satisfy its
obligations to the Company;
- the Company's ability to successfully integrate both Recycled
Paper Greetings and Papyrus;
- retail consolidations, acquisitions and bankruptcies, including
the possibility of resulting adverse changes to retail contract terms;
- the ability to achieve the desired benefits associated with the
Company's cost reduction efforts;
- competitive terms of sale offered to customers;
- the Company's ability to comply with its debt covenants;
- 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 implement, or achieve the desired
benefits associated with, any information systems refresh the Company
may implement;
- the Company's ability to achieve the desired accretive effect
from any share repurchase programs;
- 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, 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 10-K.
(All amounts in U.S. dollars unless otherwise noted)
AMERICAN GREETINGS CORPORATION
FIRST QUARTER CONSOLIDATED STATEMENT OF INCOME
FISCAL YEAR ENDING FEBRUARY 28, 2011
(In thousands of dollars except share and per share amounts)
(Unaudited)
Three Months Ended
------------------
May 28, 2010 May 29, 2009
------------ ------------
Net sales $392,105 $409,277
Other revenue 4,203 3,645
----- -----
Total revenue 396,308 412,922
Material, labor and other
production costs 158,013 167,169
Selling, distribution and
marketing expenses 117,551 132,217
Administrative and general
expenses 66,032 63,151
Other operating (income)
expense -net (594) 27,773
---- ------
Operating income 55,306 22,612
Interest expense 6,202 6,987
Interest income (213) (276)
Other non-operating income -
net (1,700) (1,042)
------ ------
Income before income tax
expense 51,017 16,943
Income tax expense 20,178 6,982
------ -----
Net income $30,839 $9,961
======= ======
Earnings per share - basic $0.78 $0.25
Earnings per share -assuming
dilution $0.75 $0.25
Average number of common shares
outstanding 39,638,568 39,608,947
Average number of common shares
outstanding -
assuming dilution 40,849,429 39,608,947
Dividends declared per share $0.14 $-
AMERICAN GREETINGS CORPORATION
FIRST QUARTER CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FISCAL YEAR ENDING FEBRUARY 28, 2011
(In thousands of dollars)
(Unaudited)
-----------
May 28, 2010 May 29, 2009
------------ ------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $186,775 $87,611
Trade accounts receivable, net 110,085 120,964
Inventories 157,913 172,977
Deferred and refundable income
taxes 74,951 65,217
Assets held for sale 12,936 23,328
Prepaid expenses and other 118,047 157,471
------- -------
Total current assets 660,707 627,568
GOODWILL 30,238 25,921
OTHER ASSETS 413,236 377,973
DEFERRED AND REFUNDABLE INCOME
TAXES 150,207 172,672
Property, plant and
equipment -at cost 839,928 856,723
Less accumulated
depreciation 600,087 589,614
------- -------
PROPERTY, PLANT AND EQUIPMENT -
NET 239,841 267,109
------- -------
$1,494,229 $1,471,243
========== ==========
LIABILITIES AND SHAREHOLDERS'
EQUITY
CURRENT LIABILITIES
Debt due within one year $99,000 $27,325
Accounts payable 80,205 85,483
Accrued liabilities 75,572 84,074
Accrued compensation and benefits 35,472 37,274
Income taxes payable 25,390 2,937
Other current liabilities 93,405 108,863
------ -------
Total current liabilities 409,044 345,956
LONG-TERM DEBT 230,973 409,455
OTHER LIABILITIES 163,969 125,668
DEFERRED INCOME TAXES AND
NONCURRENT INCOME TAXES PAYABLE 30,548 30,292
SHAREHOLDERS' EQUITY
Common shares - Class A 37,064 35,921
Common shares - Class B 2,926 3,497
Capital in excess of par
value 478,676 450,059
Treasury stock (951,830) (941,063)
Accumulated other comprehensive
loss (40,257) (43,276)
Retained earnings 1,133,116 1,054,734
--------- ---------
Total shareholders' equity 659,695 559,872
------- -------
$1,494,229 $1,471,243
========== ==========
AMERICAN GREETINGS CORPORATION
FIRST QUARTER CONSOLIDATED STATEMENT OF CASH FLOWS
FISCAL YEAR ENDING FEBRUARY 28, 2011
(In thousands of dollars)
(Unaudited)
Three Months Ended
------------------
May 28, 2010 May 29, 2009
------------ ------------
OPERATING ACTIVITIES:
Net income $30,839 $9,961
Adjustments to reconcile net
income to
cash flows from operating
activities:
Loss on disposition of retail
stores - 28,333
Net (gain) loss on disposal of
fixed assets (151) 199
Depreciation and amortization 10,294 12,393
Deferred income taxes (535) 17,158
Other non-cash charges 3,385 2,657
Changes in operating assets and
liabilities,
net of acquisitions and
dispositions:
Trade accounts receivable 19,576 (43,770)
Inventories 4,483 11,926
Other current assets (2,878) (1,243)
Income taxes 15,830 (849)
Deferred costs - net 13,802 (2,846)
Accounts payable and other
liabilities (66,362) (29,548)
Other - net 4,256 4,358
----- -----
Total Cash Flows From Operating
Activities 32,539 8,729
INVESTING ACTIVITIES:
Property, plant and equipment
additions (5,965) (8,909)
Cash payments for business
acquisitions, net of cash
acquired - (16,286)
Proceeds from sale of fixed
assets 555 113
Proceeds from escrow related to
party goods transaction 24,523 -
------ ---
Total Cash Flows From Investing
Activities 19,113 (25,082)
FINANCING ACTIVITIES:
Net (decrease) increase in
long-term debt (250) 19,800
Net increase in short-term
debt - 26,325
Sale of stock under benefit
plans 19,087 30
Purchase of treasury shares (12,979) (5,877)
Dividends to shareholders (5,525) (4,865)
------ ------
Total Cash Flows From Financing
Activities 333 35,413
EFFECT OF EXCHANGE RATE CHANGES
ON CASH (3,159) 8,335
------ -----
INCREASE IN CASH AND CASH
EQUIVALENTS 48,826 27,395
Cash and Cash Equivalents at
Beginning of Year 137,949 60,216
------- ------
Cash and Cash Equivalents at
End of Period $186,775 $87,611
======== =======
AMERICAN GREETINGS CORPORATION
FIRST QUARTER CONSOLIDATED SEGMENT DISCLOSURES
FISCAL YEAR ENDING FEBRUARY 28, 2011
(In thousands of dollars)
(Unaudited)
Three Months Ended
------------------
May 28, 2010 May 29, 2009
------------ ------------
Total Revenue:
North American Social
Expression Products $304,168 $323,813
Intersegment items - (5,104)
Exchange rate adjustment 4,141 370
----- ---
Net 308,309 319,079
International Social Expression
Products 57,801 56,051
Exchange rate adjustment (228) (3,289)
---- ------
Net 57,573 52,762
Retail Operations - 11,727
Exchange rate adjustment - 112
--- ---
Net - 11,839
AG Interactive 18,666 18,949
Exchange rate adjustment (112) (104)
---- ----
Net 18,554 18,845
Non-reportable segments 11,872 10,397
$396,308 $412,922
======== ========
Segment Earnings (Loss):
North American Social
Expression Products $68,107 $77,986
Intersegment items - (3,511)
Exchange rate adjustment 1,942 81
----- ---
Net 70,049 74,556
International Social Expression
Products 2,834 513
Exchange rate adjustment - (174)
--- ----
Net 2,834 339
Retail Operations - (34,830)
Exchange rate adjustment - (285)
--- ----
Net - (35,115)
AG Interactive 2,474 1,796
Exchange rate adjustment (102) (82)
---- ---
Net 2,372 1,714
Non-reportable segments 2,152 (129)
Unallocated (26,399) (24,852)
Exchange rate adjustment 9 430
--- ---
Net (26,390) (24,422)
$51,017 $16,943
======= =======
Gregory M. Steinberg, Treasurer and Executive Director of Investor Relations of American Greetings Corporation, +1-216-252-4864, investor.relations at amgreetings.com
Tags: American Greetings Corporation, Cleveland, June 30, Ohio, United Kingdom
