American Greetings Announces Second Quarter Earnings
By American Greetings Corporation, PRNETuesday, September 28, 2010
CLEVELAND, September 29, 2010 - American Greetings Corporation (NYSE: AM) today announced its results for
the second fiscal quarter ended August 27, 2010.
Second Quarter Results
For the second quarter of fiscal 2011, the Company reported total revenue
of US$342.8 million, pre-tax income of US$17.0 million, and net income of
US$8.5 million or 21 cents per share (all per-share amounts assume dilution).
Compared to the prior year, revenue was down approximately US$13.6 million.
Approximately US$10.2 million of the revenue decline was a result of the
party goods transaction that occurred in December 2009. Holding aside the
effect of the party goods transaction, revenue declined about US$3.4 million
or approximately one percent. Also during the quarter, the Company incurred
pre-tax costs associated with the integrations of Papyrus and Recycled Paper
Greetings of US$5.2 million (after tax of approximately US$3.2 million) or
approximately 8 cents per share.
For the second quarter of fiscal 2010, the Company reported total revenue
of US$356.4 million, pre-tax income of US$34.1 million, and net income of
US$23.1 million or 59 cents per share. Included within these results was a
pre-tax benefit from an insurance program of US$7.9 million (after tax of
approximately US$7.6 million) or approximately 19 cents per share.
Management Comments and Outlook
Chief Executive Officer Zev Weiss said, "I am pleased with our overall
performance in the first half of this year. While we continue to see an
erratic recovery in the economy and its effect on our top line, our team has
executed well on cost containment and that execution has directly led to
healthy cash flow. Our cash flow from operations minus capital expenditures
of US$74 million in the first half gets us more than halfway to our full year
forecast of approximately US$125 million."
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 revenue, 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 after-tax amounts were
calculated based on the Company's statutory tax rate of approximately 38.9%.
Management believes that providing adjusted revenue information is useful to
investors as it explains the impact of the party goods transaction on the
Company's total revenue. In addition, Management believes that providing
after-tax and earnings per share information is useful to investors 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 ability to successfully implement, or achieve the desired benefits
associated with, any information systems refresh the Company may
implement;
- 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 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 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 US dollars unless otherwise noted.)
AMERICAN GREETINGS CORPORATION
SECOND 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 Six Months Ended
------------------ ----------------
August 27, August 28, August 27, August 28,
2010 2009 2010 2009
----------- ----------- ----------- -----------
Net
sales $333,339 $348,639 $725,444 $757,916
Other
revenue 9,480 7,711 13,683 11,356
----- ----- ------ ------
Total
revenue 342,819 356,350 739,127 769,272
Material,
labor and
other
production
costs 145,713 153,248 303,726 320,417
Selling,
distribution
and
marketing
expenses 112,318 117,531 229,869 249,748
Administrative
and
general
expenses 62,193 48,483 128,225 111,634
Other
operating
(income)
expense
-net (936) (1,397) (1,530) 26,376
---- ------ ------ ------
Operating
income 23,531 38,485 78,837 61,097
Interest
expense 6,718 6,671 12,920 13,658
Interest
income (197) (989) (410) (1,265)
Other
non-
operating
income -
net (3) (1,291) (1,703) (2,333)
--- ------ ------ ------
Income
before
income
tax
expense 17,013 34,094 68,030 51,037
Income
tax
expense 8,481 10,972 28,659 17,954
----- ------ ------ ------
Net
income $8,532 $23,122 $39,371 $33,083
====== ======= ======= =======
Earnings
per
share -
basic $0.21 $0.59 $0.99 $0.84
Earnings
per
share -
assuming
dilution $0.21 $0.59 $0.96 $0.84
Average
number
of
common
shares
outstanding 40,026,649 39,407,532 39,832,609 39,508,240
Average
number
of
common
shares
outstanding
- assuming
dilution 40,875,329 39,407,532 40,861,761 39,508,240
Dividends
declared
per share $0.14 $0.12 $0.28 $0.12
AMERICAN GREETINGS CORPORATION
SECOND QUARTER CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FISCAL YEAR ENDING FEBRUARY 28, 2011
(In thousands of dollars)
(Unaudited)
-----------
August 27, August 28,
2010 2009
----------- -----------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $133,834 $49,903
Trade accounts receivable,
net 89,408 92,167
Inventories 189,366 199,941
Deferred and refundable
income taxes 61,742 59,082
Assets held for sale 11,868 23,188
Prepaid expenses and other 113,112 148,868
------- -------
Total current assets 599,330 573,149
GOODWILL 29,929 26,393
OTHER ASSETS 413,809 367,574
DEFERRED AND REFUNDABLE
INCOME TAXES 153,775 171,419
Property, plant and
equipment -at cost 850,025 859,695
Less accumulated
depreciation 609,901 595,757
------- -------
PROPERTY, PLANT AND
EQUIPMENT -NET 240,124 263,938
------- -------
$1,436,967 $1,402,473
========== ==========
LIABILITIES AND
SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Debt due within one year $- $1,000
Accounts payable 88,668 96,279
Accrued liabilities 74,129 82,082
Accrued compensation and
benefits 48,287 50,925
Income taxes payable 23,052 2,856
Other current liabilities 89,111 94,462
------ ------
Total current liabilities 323,247 327,604
LONG-TERM DEBT 231,525 335,372
OTHER LIABILITIES 174,372 127,066
DEFERRED INCOME TAXES AND
NONCURRENT INCOME TAXES
PAYABLE 32,194 30,434
SHAREHOLDERS' EQUITY
Common shares - Class A 37,137 35,923
Common shares - Class B 2,923 3,477
Capital in excess of par
value 482,035 451,328
Treasury stock (951,682) (941,198)
Accumulated other
comprehensive loss (30,815) (40,562)
Retained earnings 1,136,031 1,073,029
--------- ---------
Total shareholders' equity 675,629 581,997
------- -------
$1,436,967 $1,402,473
========== ==========
AMERICAN GREETINGS CORPORATION
SECOND QUARTER CONSOLIDATED STATEMENT OF CASH FLOWS
FISCAL YEAR ENDING FEBRUARY 28, 2011
(In thousands of dollars)
(Unaudited)
Six Months Ended
----------------
August 27, August 28,
2010 2009
----------- -----------
OPERATING ACTIVITIES:
Net income $39,371 $33,083
Adjustments to reconcile net
income
to cash flows from operating
activities:
Net (gain) loss on
dispositions (254) 27,696
Net (gain) loss on disposal of
fixed assets (1,268) 9
Depreciation and intangible
assets amortization 20,463 23,466
Deferred income taxes 10,618 26,708
Other non-cash charges 8,210 4,622
Changes in operating assets and
liabilities,
net of acquisitions and
dispositions:
Trade accounts receivable 44,279 (10,877)
Inventories (24,908) (15,714)
Other current assets (2,169) 12,801
Income taxes 15,125 (2,376)
Deferred costs - net 27,905 11,885
Accounts payable and other
liabilities (54,639) (20,439)
Other - net 5,814 (6,698)
----- ------
Total Cash Flows From Operating
Activities 88,547 84,166
INVESTING ACTIVITIES:
Property, plant and equipment
additions (14,128) (15,447)
Cash payments for business
acquisitions, net of cash
acquired - (19,300)
Proceeds from sale of fixed
assets 2,997 729
Proceeds from escrow related to
party goods transaction 25,151 -
Other - net - 3,063
--- -----
Total Cash Flows From Investing
Activities 14,020 (30,955)
FINANCING ACTIVITIES:
Net decrease in long-term
debt (98,250) (54,750)
Net decrease in short-term
debt (1,000) -
Sale of stock under benefit
plans 19,025 91
Purchase of treasury shares (13,052) (6,176)
Dividends to shareholders (11,127) (9,593)
Debt issuance costs (2,917) -
Total Cash Flows From Financing
Activities (107,321) (70,428)
EFFECT OF EXCHANGE RATE CHANGES
ON CASH 639 6,904
--- -----
DECREASE IN CASH AND CASH
EQUIVALENTS (4,115) (10,313)
Cash and Cash Equivalents at
Beginning of Year 137,949 60,216
------- ------
Cash and Cash Equivalents at End
of Period $133,834 $49,903
======== =======
AMERICAN GREETINGS CORPORATION
SECOND QUARTER CONSOLIDATED SEGMENT DISCLOSURES
FISCAL YEAR ENDING FEBRUARY 28, 2011
(In thousands of dollars)
(Unaudited)
Three Months Ended Six Months Ended
------------------ ----------------
August 27, August 28, August 27, August 28,
2010 2009 2010 2009
----------- ----------- ----------- -----------
Total Revenue:
North American
Social
Expression
Products $248,723 $266,886 $552,891 $590,699
Intersegment
items - - - (5,104)
Exchange rate
adjustment 3,435 2,043 7,576 2,413
----- ----- ----- -----
Net 252,158 268,929 560,467 588,008
International
Social
Expression
Products 54,962 54,590 112,763 110,641
Exchange rate
adjustment (226) 2,150 (454) (1,139)
---- ----- ---- ------
Net 54,736 56,740 112,309 109,502
Retail
Operations - - - 11,727
Exchange rate
adjustment - - - 112
--- --- --- ---
Net - - - 11,839
AG Interactive 18,260 18,401 36,926 37,350
Exchange rate
adjustment (93) 96 (205) (8)
--- --- ---- ---
Net 18,167 18,497 36,721 37,342
Non-reportable
segments 17,758 11,964 29,630 22,361
Unallocated - 220 - 220
$342,819 $356,350 $739,127 $769,272
======== ======== ======== ========
Segment Earnings
(Loss):
North American
Social
Expression
Products $33,613 $42,780 $101,720 $120,766
Intersegment
items - - - (3,511)
Exchange rate
adjustment 1,501 991 3,443 1,072
----- --- ----- -----
Net 35,114 43,771 105,163 118,327
International
Social
Expression
Products 1,361 2,310 4,195 2,823
Exchange rate
adjustment (36) 5 (36) (169)
--- --- --- ----
Net 1,325 2,315 4,159 2,654
Retail
Operations - - - (34,830)
Exchange rate
adjustment - - - (285)
--- --- --- ----
Net - - - (35,115)
AG Interactive 2,945 1,903 5,419 3,699
Exchange rate
adjustment (59) 28 (161) (54)
--- --- ---- ---
Net 2,886 1,931 5,258 3,645
Non-reportable
segments 3,317 367 5,469 238
Unallocated (25,764) (14,191) (52,163) (39,043)
Exchange rate
adjustment 135 (99) 144 331
--- --- --- ---
Net (25,629) (14,290) (52,019) (38,712)
$17,013 $34,094 $68,030 $51,037
======= ======= ======= =======
Gregory M. Steinberg, Treasurer and Executive Director of Investor Relations, American Greetings Corporation, +1-216-252-4864, investor.relations at amgreetings.com
Tags: American Greetings Corporation, Cleveland, Ohio, September 29, United Kingdom
