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.
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.”
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.
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 athttp://investors.americangreetings.com. A replay of the call will be available on the site.
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 athttp://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, visithttp://corporate.americangreetings.com.
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, visithttp://corporate.americangreetings.com.
###
CONTACT:
Gregory M. Steinberg
Treasurer and Director of Investor Relations
American Greetings Corporation
216-252-4864
investor.relations@amgreetings.com
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
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
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)
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)
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 | ||||||||