Exhibit 99.1
AMERICAN GREETINGS ANNOUNCES IMPROVED FOURTH QUARTER RESULTS
CLEVELAND (April 17, 2008) – American Greetings Corporation (NYSE: AM) today announced its results for the fourth quarter and fiscal year ended February 29, 2008.
Fourth Quarter Results
For the fourth quarter of fiscal 2008, the Company reported total revenue of $493.2 million, pre-tax income from continuing operations of $12.7 million, and income from continuing operations of $15.6 million or 31 cents per share (all per-share amounts assume dilution).
In the prior year’s fourth fiscal quarter, the Company reported total revenue of $495.9 million, a pre-tax loss from continuing operations of $6.9 million, and a loss from continuing operations of $9.8 million or 18 cents per share. In the prior period, the Company sold its candle product lines and recorded a pre-tax loss of $16 million or approximately 18 cents per share within continuing operations. Also in the prior period, the Company incurred exit costs in connection with the closure of 60 of its retail stores resulting in a pre-tax loss of $6.5 million or approximately 7 cents per share.
Full Year Results
For the fiscal year ended February 29, 2008, the Company reported total revenue of $1,776.5 million, pre-tax income from continuing operations of $124.0 million, and income from continuing operations of $83.3 million or $1.53 per share.
For the prior fiscal year ended February 28, 2007, the Company reported total revenue of $1,794.3 million, pre-tax income from continuing operations of $65.4 million, and income from continuing operations of $39.9 million or 67 cents per share. Included in these results are a pre-tax loss on the sale of the Company’s candle product lines of $16 million or approximately 16 cents per share, a pre-tax loss associated with the closure of 60 stores within the retail operations segment of $6.5 million or approximately 7 cents per share, and a pre-tax gain of $20 million or approximately 20 cents per share 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.
Management Comments and Outlook
Chief Executive Officer Zev Weiss said, “I am pleased that we were able to achieve earnings within our forecasted range and exceed our cash flow guidance. Our strong cash flow allowed us to make two acquisitions in the digital photo space, repurchase shares, and raise the dividend this past year.” Weiss added, “While we are expecting a more challenging economy, in fiscal 2009 we are projecting earnings per share increasing to between $1.60 and $1.85, and cash flow from operating activities less capital expenditures between $60 million and $80 million.”
Financing Activities
The Company purchased 4.7 million shares of its common stock for $97.3 million during the fourth quarter of fiscal 2008. During the fiscal year, the Company repurchased a total of 6.7 million shares for a total of $149.1 million under two share repurchase programs. The Company has reduced its total share count by about 40% over the past three years.
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.
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 $1.8 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
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; |
• | retail consolidations, acquisitions and bankruptcies, including the possibility of resulting adverse changes to retail contract terms; |
• | competitive terms of sale offered to customers; |
• | 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; |
• | 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 integrate acquisitions; |
• | the ability to successfully implement, or achieve the desired benefits associated with any information systems refresh the Company may implement; |
• | the ability to execute share repurchase programs or the ability to achieve the desired accretive effect from such repurchases; |
• | the Company’s ability to comply with its debt covenants; |
• | the Company’s ability to successfully complete, or achieve the desired benefits associated with, dispositions; |
• | 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, the public’s acceptance of online greetings and other social expression products, and the ability to gain a leadership position in 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 for the fiscal year ended February 28, 2007.
AMERICAN GREETINGS CORPORATION
FOURTH QUARTER CONSOLIDATED STATEMENT OF OPERATIONS
FISCAL YEAR ENDED FEBRUARY 29, 2008
(In thousands of dollars except share and per share amounts)
(Unaudited) | ||||||||||||||||
Quarter Ended | Year Ended | |||||||||||||||
February 29, 2008 | February 28, 2007 | February 29, 2008 | February 28, 2007 | |||||||||||||
Net sales | $ | 471,875 | $ | 472,969 | $ | 1,730,784 | $ | 1,744,798 | ||||||||
Other revenue | 21,358 | 22,955 | 45,667 | 49,492 | ||||||||||||
Total revenue | 493,233 | 495,924 | 1,776,451 | 1,794,290 | ||||||||||||
Material, labor and other production costs | 233,262 | 233,559 | 780,771 | 826,791 | ||||||||||||
Selling, distribution and marketing expenses | 176,778 | 176,493 | 621,478 | 627,940 | ||||||||||||
Administrative and general expenses | 67,261 | 68,179 | 246,722 | 253,035 | ||||||||||||
Goodwill impairment | — | 2,196 | — | 2,196 | ||||||||||||
Other operating (income) expense—net | (518 | ) | 15,711 | (1,325 | ) | (5,252 | ) | |||||||||
Operating income (loss) | 16,450 | (214 | ) | 128,805 | 89,580 | |||||||||||
Interest expense | 5,575 | 7,962 | 20,006 | 34,986 | ||||||||||||
Interest income | (1,903 | ) | (1,401 | ) | (7,758 | ) | (8,135 | ) | ||||||||
Other non-operating expense (income)—net | 67 | 130 | (7,411 | ) | (2,682 | ) | ||||||||||
Income (loss) from continuing operations before income tax (benefit) expense | 12,711 | (6,905 | ) | 123,968 | 65,411 | |||||||||||
Income tax (benefit) expense | (2,851 | ) | 2,886 | 40,648 | 25,473 | |||||||||||
Income (loss) from continuing operations | 15,562 | (9,791 | ) | 83,320 | 39,938 | |||||||||||
(Loss) income from discontinued operations, net of tax | — | (2,432 | ) | (317 | ) | 2,440 | ||||||||||
Net income (loss) | $ | 15,562 | $ | (12,223 | ) | $ | 83,003 | $ | 42,378 | |||||||
Earnings (loss) per share—basic: | ||||||||||||||||
Income (loss) from continuing operations | $ | 0.31 | $ | (0.18 | ) | $ | 1.54 | $ | 0.69 | |||||||
(Loss) income from discontinued operations | — | (0.04 | ) | (0.01 | ) | 0.04 | ||||||||||
Net income (loss) | $ | 0.31 | $ | (0.22 | ) | $ | 1.53 | $ | 0.73 | |||||||
Earnings (loss) per share—assuming dilution: | ||||||||||||||||
Income (loss) from continuing operations | $ | 0.31 | $ | (0.18 | ) | $ | 1.53 | $ | 0.67 | |||||||
(Loss) income from discontinued operations | — | (0.04 | ) | (0.01 | ) | 0.04 | ||||||||||
Net income (loss) | $ | 0.31 | $ | (0.22 | ) | $ | 1.52 | $ | 0.71 | |||||||
Average number of common shares outstanding | 50,895,638 | 56,035,238 | 54,236,961 | 57,951,952 | ||||||||||||
Average number of common shares outstanding—assuming dilution | 50,972,834 | 56,035,238 | 54,506,048 | 62,392,794 | ||||||||||||
Dividends declared per share | $ | 0.10 | $ | 0.08 | $ | 0.40 | $ | 0.32 |
AMERICAN GREETINGS CORPORATION
FOURTH QUARTER CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FISCAL YEAR ENDED FEBRUARY 29, 2008
(In thousands of dollars)
(Unaudited) | ||||||||
February 29, 2008 | February 28, 2007 | |||||||
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Cash and cash equivalents | $ | 123,500 | $ | 144,713 | ||||
Trade accounts receivable, net | 61,902 | 104,000 | ||||||
Inventories | 216,671 | 182,618 | ||||||
Deferred and refundable income taxes | 72,280 | 135,379 | ||||||
Assets of businesses held for sale | — | 2,810 | ||||||
Prepaid expenses and other | 195,017 | 227,496 | ||||||
Total current assets | 669,370 | 797,016 | ||||||
GOODWILL | 285,072 | 224,105 | ||||||
OTHER ASSETS | 420,219 | 419,071 | ||||||
DEFERRED AND REFUNDABLE INCOME TAXES | 133,762 | 52,869 | ||||||
Property, plant and equipment—at cost | 974,073 | 944,646 | ||||||
Less accumulated depreciation | 678,068 | 659,493 | ||||||
PROPERTY, PLANT AND EQUIPMENT—NET | 296,005 | 285,153 | ||||||
$ | 1,804,428 | $ | 1,778,214 | |||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
CURRENT LIABILITIES | ||||||||
Debt due within one year | $ | 42,790 | $ | — | ||||
Accounts payable | 123,713 | 118,250 | ||||||
Accrued liabilities | 79,345 | 80,389 | ||||||
Accrued compensation and benefits | 68,669 | 61,192 | ||||||
Income taxes payable | 29,037 | 26,386 | ||||||
Liabilities of businesses held for sale | — | 674 | ||||||
Other current liabilities | 108,867 | 84,897 | ||||||
Total current liabilities | 452,421 | 371,788 | ||||||
LONG-TERM DEBT | 200,518 | 223,915 | ||||||
OTHER LIABILITIES | 181,720 | 163,623 | ||||||
DEFERRED INCOME TAXES AND NONCURRENT INCOME TAXES PAYABLE | 26,358 | 6,314 | ||||||
SHAREHOLDERS' EQUITY | ||||||||
Common shares—Class A | 45,324 | 50,839 | ||||||
Common shares—Class B | 3,434 | 4,283 | ||||||
Capital in excess of par value | 445,696 | 414,859 | ||||||
Treasury stock | (872,949 | ) | (710,414 | ) | ||||
Accumulated other comprehensive income (loss) | 21,244 | (1,013 | ) | |||||
Retained earnings | 1,300,662 | 1,254,020 | ||||||
Total shareholders' equity | 943,411 | 1,012,574 | ||||||
$ | 1,804,428 | $ | 1,778,214 | |||||
AMERICAN GREETINGS CORPORATION
FOURTH QUARTER CONSOLIDATED STATEMENT OF CASH FLOWS
FISCAL YEAR ENDED FEBRUARY 29, 2008
(In thousands of dollars)
(Unaudited) Year Ended | ||||||||
February 29, 2008 | February 28, 2007 | |||||||
OPERATING ACTIVITIES: | ||||||||
Net income | $ | 83,003 | $ | 42,378 | ||||
Loss (income) from discontinued operations | 317 | (2,440 | ) | |||||
Income from continuing operations | 83,320 | 39,938 | ||||||
Adjustments to reconcile to net cash provided by operating activities: | ||||||||
Goodwill impairment | — | 2,196 | ||||||
Net loss on disposal of fixed assets | 961 | 1,726 | ||||||
Loss on extinguishment of debt | — | 5,055 | ||||||
Loss on disposal of product lines | — | 15,969 | ||||||
Depreciation and amortization | 48,535 | 49,412 | ||||||
Deferred income taxes | (7,562 | ) | (16,277 | ) | ||||
Other non-cash charges | 9,303 | 13,891 | ||||||
Changes in operating assets and liabilities, net of acquisitions and dispositions: | ||||||||
Decrease in trade accounts receivable | 41,758 | 42,206 | ||||||
(Increase) decrease in inventories | (28,456 | ) | 22,227 | |||||
Decrease (increase) in other current assets | 27,970 | (36,082 | ) | |||||
Decrease in deferred costs—net | 53,438 | 128,752 | ||||||
Increase in accounts payable and other liabilities | 18,934 | 553 | ||||||
Other—net | (4,664 | ) | (4,836 | ) | ||||
Cash Provided by Operating Activities | 243,537 | 264,730 | ||||||
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 | (56,623 | ) | (41,716 | ) | ||||
Cash payments for business acquisitions, net of cash acquired | (76,338 | ) | (13,122 | ) | ||||
Cash receipts related to discontinued operations | 4,283 | 12,559 | ||||||
Proceeds from sale of fixed assets | 3,104 | 4,847 | ||||||
Other—net | — | 6,160 | ||||||
Cash (Used) Provided by Investing Activities | (125,574 | ) | 177,468 | |||||
FINANCING ACTIVITIES: | ||||||||
Increase in long-term debt | — | 200,000 | ||||||
Reduction of long-term debt | — | (440,588 | ) | |||||
Net increase in short-term debt | 20,100 | — | ||||||
Sale of stock under benefit plans | 27,156 | 6,834 | ||||||
Purchase of treasury shares | (172,328 | ) | (257,817 | ) | ||||
Dividends to shareholders | (21,803 | ) | (18,418 | ) | ||||
Debt issuance costs | — | (8,533 | ) | |||||
Cash Used by Financing Activities | (146,875 | ) | (518,522 | ) | ||||
DISCONTINUED OPERATIONS: | ||||||||
Cash (used) provided by operating activities from discontinued operations | (59 | ) | 1,283 | |||||
Cash provided by investing activities from discontinued operations | — | 1,634 | ||||||
Cash (Used) Provided by Discontinued Operations | (59 | ) | 2,917 | |||||
EFFECT OF EXCHANGE RATE CHANGES ON CASH | 7,758 | 4,507 | ||||||
DECREASE IN CASH AND CASH EQUIVALENTS | (21,213 | ) | (68,900 | ) | ||||
Cash and Cash Equivalents at Beginning of Year | 144,713 | 213,613 | ||||||
Cash and Cash Equivalents at End of Year | $ | 123,500 | $ | 144,713 | ||||
AMERICAN GREETINGS CORPORATION
FOURTH QUARTER CONSOLIDATED SEGMENT DISCLOSURES
FISCAL YEAR ENDED FEBRUARY 29, 2008
(In thousands of dollars)
(Unaudited) | ||||||||||||||||
Quarter Ended | Year Ended | |||||||||||||||
February 29, 2008 | February 28, 2007 | February 29, 2008 | February 28, 2007 | |||||||||||||
Total Revenue: | ||||||||||||||||
North American Social Expression Products | $ | 286,443 | $ | 297,452 | $ | 1,178,961 | $ | 1,206,361 | ||||||||
Intersegment items | (13,204 | ) | (11,995 | ) | (54,736 | ) | (59,806 | ) | ||||||||
Exchange rate adjustment | 1,099 | (579 | ) | 5,417 | (254 | ) | ||||||||||
Net | 274,338 | 284,878 | 1,129,642 | 1,146,301 | ||||||||||||
International Social Expression Products | 86,010 | 70,826 | 285,658 | 279,845 | ||||||||||||
Exchange rate adjustment | 7,710 | 3,412 | 25,668 | 1,885 | ||||||||||||
Net | 93,720 | 74,238 | 311,326 | 281,730 | ||||||||||||
Retail Operations | 74,293 | 82,235 | 190,149 | 207,441 | ||||||||||||
Exchange rate adjustment | 3,660 | (554 | ) | 7,200 | (255 | ) | ||||||||||
Net | 77,953 | 81,681 | 197,349 | 207,186 | ||||||||||||
AG Interactive | 22,087 | 23,196 | 78,051 | 85,347 | ||||||||||||
Exchange rate adjustment | 665 | 25 | 664 | 101 | ||||||||||||
Net | 22,752 | 23,221 | 78,715 | 85,448 | ||||||||||||
Non-reportable segments | 24,522 | 31,857 | 59,356 | 73,441 | ||||||||||||
Unallocated | (52 | ) | 49 | 63 | 184 | |||||||||||
$ | 493,233 | $ | 495,924 | $ | 1,776,451 | $ | 1,794,290 | |||||||||
Segment Earnings (Loss): | ||||||||||||||||
North American Social Expression Products | $ | 24,066 | $ | 21,968 | $ | 216,354 | $ | 204,079 | ||||||||
Intersegment items | (9,864 | ) | (8,592 | ) | (41,067 | ) | (42,717 | ) | ||||||||
Exchange rate adjustment | (419 | ) | (216 | ) | 1,941 | (87 | ) | |||||||||
Net | 13,783 | 13,160 | 177,228 | 161,275 | ||||||||||||
International Social Expression Products | 10,738 | 2,286 | 22,208 | 9,434 | ||||||||||||
Exchange rate adjustment | 1,064 | 225 | 2,528 | 259 | ||||||||||||
Net | 11,802 | 2,511 | 24,736 | 9,693 | ||||||||||||
Retail Operations | 10,616 | 5,013 | (4,482 | ) | (16,415 | ) | ||||||||||
Exchange rate adjustment | 746 | (23 | ) | 829 | (22 | ) | ||||||||||
Net | 11,362 | 4,990 | (3,653 | ) | (16,437 | ) | ||||||||||
AG Interactive | (2,344 | ) | 315 | 6,323 | 5,813 | |||||||||||
Exchange rate adjustment | 134 | (22 | ) | 132 | (39 | ) | ||||||||||
Net | (2,210 | ) | 293 | 6,455 | 5,774 | |||||||||||
Non-reportable segments | 1,181 | 4,837 | 3,779 | 11,852 | ||||||||||||
Unallocated | (22,704 | ) | (32,643 | ) | (83,939 | ) | (106,544 | ) | ||||||||
Exchange rate adjustment | (503 | ) | (53 | ) | (638 | ) | (202 | ) | ||||||||
Net | (23,207 | ) | (32,696 | ) | (84,577 | ) | (106,746 | ) | ||||||||
$ | 12,711 | $ | (6,905 | ) | $ | 123,968 | $ | 65,411 | ||||||||