Exhibit 99.1
AMERICAN GREETINGS ANNOUNCES THIRD QUARTER RESULTS
CLEVELAND (December 20, 2007) — American Greetings Corporation (NYSE: AM) today announced its third quarter results for the fiscal quarter ended November 23, 2007 and announced a 10 cent per share cash dividend.
Third Quarter Results
For the third quarter of fiscal 2008, the Company reported total revenue of $485.7 million, pre-tax income from continuing operations of $44.5 million, and income from continuing operations of $29.5 million or 53 cents per share (all per-share amounts assume dilution).
For the third quarter of fiscal 2008, the Company reported total revenue of $485.7 million, pre-tax income from continuing operations of $44.5 million, and income from continuing operations of $29.5 million or 53 cents per share (all per-share amounts assume dilution).
In the prior year’s third fiscal quarter, the Company reported total revenue of $521.2 million, pre-tax income from continuing operations of $68.1 million, and income from continuing operations of $47.0 million or 79 cents per share. Included in the prior year’s results is a $20 million pre-tax gain the Company recognized as a result of retailer consolidations and the effect the consolidations had on several long-term supply agreements between the Company and the affected retailers. The prior year’s third quarter also included approximately $14 million of revenue associated with product lines that have since been divested.
Management Comments and Outlook
Chief Executive Officer Zev Weiss said, “During the third quarter, we continued to see improved performance at retail as a result of our strategic card initiative. We continue to receive positive feedback from our retail partners regarding the improvements in cards and are pleased with the card initiative.”
Chief Executive Officer Zev Weiss said, “During the third quarter, we continued to see improved performance at retail as a result of our strategic card initiative. We continue to receive positive feedback from our retail partners regarding the improvements in cards and are pleased with the card initiative.”
During the third quarter, the Company also announced that it acquired Webshots and that it entered into an agreement to acquire PhotoWorks, two Internet based digital photo sharing businesses. Weiss said, “The acquisition of Webshots gives us the opportunity to expand our current product offerings of online social expressions into the adjacent area of online photo sharing, while PhotoWorks is expected to bring together both the digital and physical products that we believe consumers desire. These transactions provide the opportunity to establish a leadership position in this growing channel of the social expression industry.”
Weiss affirmed the Company’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 we believe that the earnings guidance provided in April of this year is still appropriate, considering the balance of risks and opportunities it is possible that we will perform around the higher end of the range,” added Weiss.
Investing and Financing Activities
The Company used $45.2 million of cash during the quarter to acquire Webshots.
The Company used $45.2 million of cash during the quarter to acquire Webshots.
Under the Company’s $100 million share repurchase program, during the third quarter, the Company purchased approximately 1.7 million shares of its Class A common stock for about
$41 million. The Company has reduced its diluted share count by about 35% over the past 30 months.
The Company’s Board of Directors authorized a cash dividend of 10 cents per share to be paid on January 14, 2008 to shareholders of record at the close of business on January 4, 2008.
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.
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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 ability to successfully complete the proposed acquisition of PhotoWorks and the ability to successfully integrate acquisitions; | ||
• | 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; 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
THIRD QUARTER CONSOLIDATED STATEMENT OF INCOME
FISCAL YEAR ENDING FEBRUARY 29, 2008
THIRD QUARTER CONSOLIDATED STATEMENT OF INCOME
FISCAL YEAR ENDING FEBRUARY 29, 2008
(In thousands of dollars except share and per share amounts)
(Unaudited) | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
November 23, | November 24, | November 23, | November 24, | |||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
Net sales | $ | 474,995 | $ | 510,102 | $ | 1,258,829 | $ | 1,271,755 | ||||||||
Other revenue | 10,751 | 11,052 | 24,309 | 26,537 | ||||||||||||
Total revenue | 485,746 | 521,154 | 1,283,138 | 1,298,292 | ||||||||||||
Material, labor and other production costs | 223,329 | 245,187 | 547,509 | 593,232 | ||||||||||||
Selling, distribution and marketing expenses | 159,420 | 157,364 | 444,695 | 451,419 | ||||||||||||
Administrative and general expenses | 60,481 | 65,287 | 178,291 | 183,516 | ||||||||||||
Other operating income — net | (127 | ) | (20,541 | ) | (807 | ) | (20,963 | ) | ||||||||
Operating income | 42,643 | 73,857 | 113,450 | 91,088 | ||||||||||||
Interest expense | 4,835 | 6,951 | 14,431 | 27,024 | ||||||||||||
Interest income | (2,115 | ) | (1,258 | ) | (5,834 | ) | (6,716 | ) | ||||||||
Other non-operating (income) expense — net | (4,582 | ) | 91 | (7,478 | ) | (2,811 | ) | |||||||||
Income from continuing operations before income tax expense | 44,505 | 68,073 | 112,331 | 73,591 | ||||||||||||
Income tax expense | 15,017 | 21,058 | 43,495 | 22,583 | ||||||||||||
Income from continuing operations | 29,488 | 47,015 | 68,836 | 51,008 | ||||||||||||
(Loss) income from discontinued operations, net of tax | (472 | ) | 2,692 | (1,395 | ) | 3,593 | ||||||||||
Net income | $ | 29,016 | $ | 49,707 | $ | 67,441 | $ | 54,601 | ||||||||
Earnings per share — basic: | ||||||||||||||||
Income from continuing operations | $ | 0.54 | $ | 0.79 | $ | 1.25 | $ | 0.87 | ||||||||
(Loss) income from discontinued operations | (0.01 | ) | 0.05 | (0.03 | ) | 0.06 | ||||||||||
Net income | $ | 0.53 | $ | 0.84 | $ | 1.22 | $ | 0.93 | ||||||||
Earnings per share — assuming dilution: | ||||||||||||||||
Income from continuing operations | $ | 0.53 | $ | 0.79 | $ | 1.24 | $ | 0.82 | ||||||||
(Loss) income from discontinued operations | (0.01 | ) | 0.04 | (0.03 | ) | 0.06 | ||||||||||
Net income | $ | 0.52 | $ | 0.83 | $ | 1.21 | $ | 0.88 | ||||||||
Average number of common shares outstanding | 55,022,689 | 59,502,276 | 55,350,736 | 58,590,857 | ||||||||||||
Average number of common shares outstanding - assuming dilution | 55,466,351 | 59,902,127 | 55,726,990 | 64,361,644 | ||||||||||||
Dividends declared per share | $ | 0.10 | $ | 0.08 | $ | 0.30 | $ | 0.24 |
AMERICAN GREETINGS CORPORATION
THIRD QUARTER CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FISCAL YEAR ENDING FEBRUARY 29, 2008
THIRD QUARTER CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FISCAL YEAR ENDING FEBRUARY 29, 2008
(In thousands of dollars)
(Unaudited) | ||||||||
November 23, | November 24, | |||||||
2007 | 2006 | |||||||
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Cash and cash equivalents | $ | 71,117 | $ | 86,216 | ||||
Trade accounts receivable, net | 205,702 | 239,207 | ||||||
Inventories | 239,209 | 244,181 | ||||||
Deferred and refundable income taxes | 76,568 | 160,983 | ||||||
Assets of businesses held for sale | 2,216 | 13,310 | ||||||
Prepaid expenses and other | 213,529 | 295,866 | ||||||
Total current assets | 808,341 | 1,039,763 | ||||||
GOODWILL | 267,308 | 219,093 | ||||||
OTHER ASSETS | 389,324 | 459,269 | ||||||
DEFERRED AND REFUNDABLE INCOME TAXES | 111,959 | — | ||||||
Property, plant and equipment — at cost | 975,721 | 968,755 | ||||||
Less accumulated depreciation | 684,170 | 668,524 | ||||||
PROPERTY, PLANT AND EQUIPMENT — NET | 291,551 | 300,231 | ||||||
$ | 1,868,483 | $ | 2,018,356 | |||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
CURRENT LIABILITIES | ||||||||
Debt due within one year | $ | 46,490 | $ | 142,000 | ||||
Accounts payable | 131,099 | 126,956 | ||||||
Accrued liabilities | 89,751 | 91,108 | ||||||
Accrued compensation and benefits | 58,969 | 58,720 | ||||||
Income taxes | 31,255 | 17,412 | ||||||
Liabilities of businesses held for sale | 1,383 | 1,629 | ||||||
Other current liabilities | 96,896 | 91,162 | ||||||
Total current liabilities | 455,843 | 528,987 | ||||||
LONG-TERM DEBT | 200,975 | 223,985 | ||||||
OTHER LIABILITIES | 149,869 | 101,003 | ||||||
DEFERRED INCOME TAXES AND NONCURRENT INCOME TAXES PAYABLE | 31,877 | 25,306 | ||||||
SHAREHOLDERS’ EQUITY | ||||||||
Common shares — Class A | 49,929 | 53,775 | ||||||
Common shares — Class B | 3,442 | 4,224 | ||||||
Capital in excess of par value | 443,326 | 417,444 | ||||||
Treasury stock | (780,044 | ) | (643,540 | ) | ||||
Accumulated other comprehensive income | 22,982 | 36,067 | ||||||
Retained earnings | 1,290,284 | 1,271,105 | ||||||
Total shareholders’ equity | 1,029,919 | 1,139,075 | ||||||
$ | 1,868,483 | $ | 2,018,356 | |||||
AMERICAN GREETINGS CORPORATION
THIRD QUARTER CONSOLIDATED STATEMENT OF CASH FLOWS
FISCAL YEAR ENDING FEBRUARY 29, 2008
(In thousands of dollars)
THIRD QUARTER CONSOLIDATED STATEMENT OF CASH FLOWS
FISCAL YEAR ENDING FEBRUARY 29, 2008
(In thousands of dollars)
(Unaudited) | ||||||||
Nine Months Ended | ||||||||
November 23, | November 24, | |||||||
2007 | 2006 | |||||||
OPERATING ACTIVITIES: | ||||||||
Net income | $ | 67,441 | $ | 54,601 | ||||
Loss (income) from discontinued operations | 1,395 | (3,593 | ) | |||||
Income from continuing operations | 68,836 | 51,008 | ||||||
Adjustments to reconcile to net cash provided (used) by operating activities: | ||||||||
Net (gain) loss on disposal of fixed assets | (481 | ) | 754 | |||||
Loss on extinguishment of debt | — | 5,055 | ||||||
Depreciation and amortization | 36,002 | 37,229 | ||||||
Deferred income taxes | (7,994 | ) | 5,827 | |||||
Other non-cash charges | 5,719 | 9,180 | ||||||
Changes in operating assets and liabilities, net of acquisitions and dispositions: | ||||||||
Increase in trade accounts receivable | (99,268 | ) | (92,821 | ) | ||||
Increase in inventories | (49,911 | ) | (27,202 | ) | ||||
Decrease (increase) in other current assets | 18,090 | (96,250 | ) | |||||
Decrease in deferred costs — net | 29,338 | 110,076 | ||||||
Increase (decrease) in accounts payable and other liabilities | 38,295 | (5,894 | ) | |||||
Other — net | 4,718 | (6,265 | ) | |||||
Cash Provided (Used) by Operating Activities | 43,344 | (9,303 | ) | |||||
INVESTING ACTIVITIES: | ||||||||
Proceeds from sale of short-term investments | 692,985 | 1,026,280 | ||||||
Purchases of short-term investments | (692,985 | ) | (817,540 | ) | ||||
Property, plant and equipment additions | (37,394 | ) | (29,600 | ) | ||||
Cash payments for business acquisitions, net of cash acquired | (51,256 | ) | (11,154 | ) | ||||
Cash receipts related to discontinued operations | 4,283 | 12,559 | ||||||
Proceeds from sale of fixed assets | 2,656 | 695 | ||||||
Cash (Used) Provided by Investing Activities | (81,711 | ) | 181,240 | |||||
FINANCING ACTIVITIES: | ||||||||
Increase in long-term debt | — | 200,000 | ||||||
Reduction of long-term debt | — | (440,588 | ) | |||||
Increase in short-term debt | 23,800 | 142,000 | ||||||
Sale of stock under benefit plans | 26,198 | 5,630 | ||||||
Purchase of treasury shares | (74,572 | ) | (186,331 | ) | ||||
Dividends to shareholders | (16,657 | ) | (13,909 | ) | ||||
Debt issuance costs | — | (8,344 | ) | |||||
Cash Used by Financing Activities | (41,231 | ) | (301,542 | ) | ||||
DISCONTINUED OPERATIONS: | ||||||||
Cash used by operating activities from discontinued operations | (839 | ) | (2,377 | ) | ||||
Cash provided by investing activities from discontinued operations | — | 1,656 | ||||||
Cash Used by Discontinued Operations | (839 | ) | (721 | ) | ||||
EFFECT OF EXCHANGE RATE CHANGES ON CASH | 6,841 | 2,929 | ||||||
DECREASE IN CASH AND CASH EQUIVALENTS | (73,596 | ) | (127,397 | ) | ||||
Cash and Cash Equivalents at Beginning of Year | 144,713 | 213,613 | ||||||
Cash and Cash Equivalents at End of Period | $ | 71,117 | $ | 86,216 | ||||
AMERICAN GREETINGS CORPORATION
THIRD QUARTER CONSOLIDATED SEGMENT DISCLOSURES
FISCAL YEAR ENDING FEBRUARY 29, 2008
(In thousands of dollars)
THIRD QUARTER CONSOLIDATED SEGMENT DISCLOSURES
FISCAL YEAR ENDING FEBRUARY 29, 2008
(In thousands of dollars)
(Unaudited) | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
November 23, | November 24, | November 23, | November 24, | |||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
Total Revenue: | ||||||||||||||||
North American Social Expression Products | $ | 339,543 | $ | 371,726 | $ | 892,518 | $ | 908,909 | ||||||||
Intersegment items | (19,423 | ) | (14,953 | ) | (41,532 | ) | (47,811 | ) | ||||||||
Exchange rate adjustment | 2,972 | 218 | 4,318 | 325 | ||||||||||||
Net | 323,092 | 356,991 | 855,304 | 861,423 | ||||||||||||
International Social Expression Products | 80,604 | 82,526 | 199,648 | 209,019 | ||||||||||||
Exchange rate adjustment | 8,606 | 794 | 17,958 | (1,527 | ) | |||||||||||
Net | 89,210 | 83,320 | 217,606 | 207,492 | ||||||||||||
Retail Operations | 39,550 | 42,252 | 115,856 | 125,206 | ||||||||||||
Exchange rate adjustment | 2,467 | 178 | 3,540 | 299 | ||||||||||||
Net | 42,017 | 42,430 | 119,396 | 125,505 | ||||||||||||
AG Interactive | 18,912 | 21,663 | 55,964 | 62,151 | ||||||||||||
Exchange rate adjustment | (2 | ) | 31 | (1 | ) | 76 | ||||||||||
Net | 18,910 | 21,694 | 55,963 | 62,227 | ||||||||||||
Non-reportable segments | 12,486 | 16,679 | 34,754 | 41,510 | ||||||||||||
Unallocated | 31 | 40 | 115 | 135 | ||||||||||||
$ | 485,746 | $ | 521,154 | $ | 1,283,138 | $ | 1,298,292 | |||||||||
Segment Earnings (Loss): | ||||||||||||||||
North American Social Expression Products | $ | 64,549 | $ | 98,533 | $ | 192,288 | $ | 182,111 | ||||||||
Intersegment items | (14,481 | ) | (10,296 | ) | (31,203 | ) | (34,125 | ) | ||||||||
Exchange rate adjustment | 1,557 | 80 | 2,360 | 129 | ||||||||||||
Net | 51,625 | 88,317 | 163,445 | 148,115 | ||||||||||||
International Social Expression Products | 10,037 | 6,092 | 11,470 | 7,148 | ||||||||||||
Exchange rate adjustment | 1,117 | (30 | ) | 1,464 | 34 | |||||||||||
Net | 11,154 | 6,062 | 12,934 | 7,182 | ||||||||||||
Retail Operations | (5,833 | ) | (5,056 | ) | (15,098 | ) | (21,428 | ) | ||||||||
Exchange rate adjustment | 86 | 4 | 83 | 1 | ||||||||||||
Net | (5,747 | ) | (5,052 | ) | (15,015 | ) | (21,427 | ) | ||||||||
AG Interactive | 2,194 | 2,249 | 8,667 | 5,498 | ||||||||||||
Exchange rate adjustment | 15 | (18 | ) | (2 | ) | (17 | ) | |||||||||
Net | 2,209 | 2,231 | 8,665 | 5,481 | ||||||||||||
Non-reportable segments | 636 | 3,668 | 3,598 | 8,308 | ||||||||||||
Unallocated | (15,312 | ) | (27,157 | ) | (61,161 | ) | (73,919 | ) | ||||||||
Exchange rate adjustment | (60 | ) | 4 | (135 | ) | (149 | ) | |||||||||
Net | (15,372 | ) | (27,153 | ) | (61,296 | ) | (74,068 | ) | ||||||||
$ | 44,505 | $ | 68,073 | $ | 112,331 | $ | 73,591 | |||||||||