American Greetings Announces Third Quarter Earnings
By American Greetings Corporation, PRNETuesday, December 21, 2010
CLEVELAND, December 22, 2010 - American Greetings Corporation (NYSE: AM) today announced its results for
the third fiscal quarter ended November 26, 2010.
Third Quarter Results
For the third quarter of fiscal 2011, the Company reported total revenue
of $430.1 million, pre-tax income of $51.5 million, and net income of $32.2
million or 78 cents per share (all per-share amounts assume dilution).
Compared to the prior year, revenue was down approximately $10.0 million.
Approximately $8.6 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 $1.4 million.
For the third quarter of fiscal 2010, the Company reported total revenue
of $440.2 million, pre-tax income of $38.1 million, and net income of $29.7
million or 75 cents per share. Included within these results were pre-tax
costs related to the wind down of the Mexican operations of $5.9 million
(after-tax of approximately $5.7 million) or approximately 14 cents per share
as well as incremental variable compensation expense of approximately $12.1
million (after-tax of approximately $7.4 million) or approximately 19 cents
during the quarter.
Management Comments and Outlook
Chief Executive Officer Zev Weiss said, "I am pleased with our overall
performance in the third fiscal quarter. We have managed to continuously
develop new and innovative products while tightly managing expenses, which
has resulted in solid earnings for the quarter. During the fourth fiscal
quarter, we will face the traditional risk of Christmas and Valentines Day
holidays, and this year we face the additional uncertainty of the pace of the
economic recovery, which makes consumer buying patterns more difficult to
predict. However, we believe our refined business portfolio, 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. We
expect to at least meet our projected cash flow from operations minus capital
expenditures goal of $125 million with upside to this estimate based on
further improvements to the balance sheet and lower than anticipated capital
expenditures."
Previously, for fiscal year 2011, the Company projected cash flow from
operating activities of about $165 million and capital expenditures of
approximately $40 million resulting in cash flow from operating activities
minus capital expenditures of approximately $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 one of the largest collections 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 $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%
for U.S. based items and the appropriate statutory rates for international
jurisdictions. 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;
- competitive terms of sale offered to customers;
- 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;
- 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;
- the timing and impact of converting customers to a scan-based trading
model;
- the Company's ability to successfully integrate both Recycled Paper
Greetings and Papyrus;
- 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 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;
- 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.
AMERICAN GREETINGS CORPORATION
THIRD 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 Nine Months Ended
------------------ -----------------
November November November November
26, 27, 26, 27,
2010 2009 2010 2009
---- ---- ---- ----
Net sales $421,990 $431,512 $1,147,434 $1,189,428
Other revenue 8,148 8,654 21,831 20,010
----- ----- ------ ------
Total revenue 430,138 440,166 1,169,265 1,209,438
Material, labor and
other production
costs 199,177 204,997 502,903 525,414
Selling,
distribution and
marketing expenses 117,314 124,167 347,183 373,915
Administrative and
general expenses 58,725 69,233 186,950 180,867
Other operating
(income) expense -
net (1,048) (575) (2,578) 25,801
------ ---- ------ ------
Operating income 55,970 42,344 134,807 103,441
Interest expense 6,221 6,331 19,141 19,989
Interest income (176) (299) (586) (1,564)
Other non-operating
income - net (1,618) (1,827) (3,321) (4,160)
------ ------ ------ ------
Income before income
tax expense 51,543 38,139 119,573 89,176
Income tax expense 19,380 8,444 48,039 26,398
------ ----- ------ ------
Net income $32,163 $29,695 $71,534 $62,778
======= ======= ======= =======
Earnings per share -
basic $0.80 $0.75 $1.79 $1.59
Earnings per share -
assuming dilution $0.78 $0.75 $1.75 $1.59
Average number of
common shares
outstanding 40,071,916 39,391,399 39,912,378 39,469,293
Average number of
common shares
outstanding -
assuming dilution 40,985,909 39,755,233 40,911,964 39,495,247
Dividends declared
per share $0.14 $0.12 $0.42 $0.24
AMERICAN GREETINGS CORPORATION
THIRD QUARTER CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FISCAL YEAR ENDING FEBRUARY 28, 2011
(In thousands of dollars)
(Unaudited)
-----------
November November
26, 27,
2010 2009
---- ----
ASSETS
CURRENT ASSETS
Cash and cash equivalents $93,899 $50,563
Trade accounts receivable, net 206,286 208,964
Inventories 181,511 168,103
Deferred and refundable income taxes 70,847 59,791
Assets held for sale 12,325 21,931
Prepaid expenses and other 127,598 151,842
------- -------
Total current assets 692,466 661,194
GOODWILL 31,686 38,177
OTHER ASSETS 403,815 349,284
DEFERRED AND REFUNDABLE INCOME TAXES 146,767 173,847
Property, plant and equipment - at cost 851,636 860,670
Less accumulated depreciation 614,894 602,863
------- -------
PROPERTY, PLANT AND EQUIPMENT - NET 236,742 257,807
------- -------
$1,511,476 $1,480,309
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Debt due within one year $- $1,000
Accounts payable 97,899 86,835
Accrued liabilities 80,744 91,469
Accrued compensation and benefits 59,128 74,770
Income taxes payable 39,593 10,479
Other current liabilities 86,419 87,221
------ ------
Total current liabilities 363,783 351,774
LONG-TERM DEBT 232,078 355,974
OTHER LIABILITIES 173,017 129,517
DEFERRED INCOME TAXES AND NONCURRENT INCOME TAXES
PAYABLE 32,824 31,633
SHAREHOLDERS' EQUITY
Common shares - Class A 37,199 36,111
Common shares - Class B 2,905 3,232
Capital in excess of par value 486,399 456,478
Treasury stock (952,183) (946,569)
Accumulated other comprehensive loss (27,114) (35,824)
Retained earnings 1,162,568 1,097,983
--------- ---------
Total shareholders' equity 709,774 611,411
------- -------
$1,511,476 $1,480,309
========== ==========
AMERICAN GREETINGS CORPORATION
THIRD QUARTER CONSOLIDATED STATEMENT OF CASH FLOWS
FISCAL YEAR ENDING FEBRUARY 28, 2011
(In thousands of dollars)
(Unaudited)
Nine Months Ended
-----------------
November November
26, 27,
2010 2009
---- ----
OPERATING ACTIVITIES:
Net income $71,534 $62,778
Adjustments to reconcile net
income to cash flows from
operating activities:
Net (gain) loss on dispositions (254) 27,671
Net (gain) loss on disposal of
fixed assets (1,599) 163
Depreciation and intangible
assets amortization 30,336 34,121
Deferred income taxes 3,957 20,133
Other non-cash charges 12,351 7,096
Changes in operating assets and
liabilities, net of acquisitions
and dispositions:
Trade accounts receivable (71,336) (124,205)
Inventories (16,461) 16,651
Other current assets (694) 16,927
Income taxes 36,187 17,711
Deferred costs - net 19,365 1,904
Accounts payable and other
liabilities (31,541) (10,636)
Other - net 5,896 3,886
----- -----
Total Cash Flows From Operating
Activities 57,741 74,200
INVESTING ACTIVITIES:
Property, plant and equipment
additions (19,660) (21,368)
Cash payments for business
acquisitions, net of cash
acquired - (19,300)
Proceeds from sale of fixed
assets 3,835 886
Proceeds from escrow related to
party goods transaction 25,151 -
Other - net - 4,713
--- -----
Total Cash Flows From Investing
Activities 9,326 (35,069)
FINANCING ACTIVITIES:
Net decrease in long-term debt (98,250) (34,600)
Net decrease in short-term debt (1,000) -
Sale of stock under benefit plans 19,831 3,683
Purchase of treasury shares (13,439) (11,826)
Dividends to shareholders (16,737) (14,327)
Debt issuance costs (3,178) -
------ ---
Total Cash Flows From Financing
Activities (112,773) (57,070)
EFFECT OF EXCHANGE RATE CHANGES
ON CASH 1,656 8,286
----- -----
DECREASE IN CASH AND CASH
EQUIVALENTS (44,050) (9,653)
Cash and Cash Equivalents at
Beginning of Year 137,949 60,216
------- ------
Cash and Cash Equivalents at End
of Period $93,899 $50,563
======= =======
AMERICAN GREETINGS CORPORATION
THIRD QUARTER CONSOLIDATED SEGMENT DISCLOSURES
FISCAL YEAR ENDING FEBRUARY 28, 2011
(In thousands of dollars)
(Unaudited)
Three Months Ended Nine Months Ended
------------------ -----------------
November November November November
26, 27, 26, 27,
2010 2009 2010 2009
---- ---- ---- ----
Total Revenue:
North American
Social
Expression
Products $312,773 $329,869 $865,664 $920,568
Intersegment
items - - - (5,104)
Exchange rate
adjustment 4,748 2,761 12,324 5,174
----- ----- ------ -----
Net 317,521 332,630 877,988 920,638
International
Social
Expression
Products 77,601 73,972 190,364 184,613
Exchange rate
adjustment 2,502 2,736 2,048 1,597
----- ----- ----- -----
Net 80,103 76,708 192,412 186,210
Retail Operations - - - 11,727
Exchange rate
adjustment - - - 112
--- --- --- ---
Net - - - 11,839
AG Interactive 19,234 19,393 56,160 56,743
Exchange rate
adjustment (1) 84 (206) 76
--- --- ---- ---
Net 19,233 19,477 55,954 56,819
Non-reportable
segments 13,281 11,185 42,911 33,546
Unallocated - 166 - 386
$430,138 $440,166 $1,169,265 $1,209,438
======== ======== ========== ==========
Segment Earnings
(Loss):
North American
Social
Expression
Products $54,277 $46,675 $155,997 $167,441
Intersegment
items - - - (3,511)
Exchange rate
adjustment 2,218 1,246 5,661 2,318
----- ----- ----- -----
Net 56,495 47,921 161,658 166,248
International
Social
Expression
Products 10,001 9,404 14,196 12,227
Exchange rate
adjustment (19) 154 (55) (15)
--- --- --- ---
Net 9,982 9,558 14,141 12,212
Retail Operations - - - (34,830)
Exchange rate
adjustment - - - (285)
--- --- --- ----
Net - - - (35,115)
AG Interactive 5,134 1,510 10,553 5,209
Exchange rate
adjustment 1 61 (160) 7
--- --- ---- ---
Net 5,135 1,571 10,393 5,216
Non-reportable
segments 1,438 1,634 6,907 1,872
Unallocated (21,761) (22,507) (73,924) (61,550)
Exchange rate
adjustment 254 (38) 398 293
Net (21,507) (22,545) (73,526) (61,257)
$51,543 $38,139 $119,573 $89,176
======= ======= ======== =======
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, December 22, Ohio, United Kingdom
