Exhibit 99.1
AMERICAN GREETINGS ANNOUNCES SECOND QUARTER RESULTS
CLEVELAND (September 26, 2008)—American Greetings Corporation (NYSE: AM) today announced its second quarter results for the fiscal quarter ended August 29, 2008.
Second Quarter Results
For the second quarter of fiscal 2009, the Company reported total revenue of $385.8 million, pre-tax income from continuing operations of $2.4 million, and income from continuing operations of $2.3 million or 5 cents per share (all per-share amounts assume dilution). For the second quarter of fiscal 2008, the Company reported total revenue of $377.5 million, pre-tax income from continuing operations of $12.6 million, and income from continuing operations of $8.4 million or 15 cents per share.
Management Comments and Outlook
Chief Executive Officer Zev Weiss said, “I am pleased with our revenue performance, particularly given current economic conditions. We believe the changes we have made to our products the last couple of years are showing up in our revenue growth. Increasing the quality of our product to achieve that revenue growth has come at a cost, especially in this time of inflation. We remain committed to mitigating the increasing cost structure while simultaneously continuing to delight the consumer.”
The Company reaffirmed its previously announced fiscal 2009 estimate of earnings per share from continuing operations to be between $1.60 to $1.85 per share and cash flow from operations minus capital expenditures to be between $60 million and $80 million.
Weiss continued, “Due to the seasonality of our business, the majority of our earnings are typically earned in the second half of the fiscal year. During the second half, we are increasing our efforts on productivity improvement projects to help offset the margin pressure we experienced in the first half. The combination of both the challenging economic conditions and the risk inherent in a seasonal business could cause us to finish the year near the lower end of our earnings guidance.”
Financing Activities
Under the Company’s $100 million share repurchase program, during the second quarter, the Company purchased approximately 3.1 million shares of its common stock for $46.0 million. The Company has reduced its diluted share count by forty two percent over the past three and one half years.
The Company’s Board of Directors authorized a cash dividend of 12 cents per share to be paid on October 27, 2008 to shareholders of record at the close of business on October 15, 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.
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 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 identify, complete, or achieve the desired benefits associated with productivity improvement projects; |
| • | | 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, including the sale of the Strawberry Shortcake and Care Bears properties; |
| • | | 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 29, 2008.
AMERICAN GREETINGS CORPORATION
SECOND QUARTER CONSOLIDATED STATEMENT OF INCOME
FISCAL YEAR ENDING FEBRUARY 28, 2009
(In thousands of dollars except share and per share amounts)
| | | | | | | | | | | | | | | | |
| | (Unaudited) | |
| | Three Months Ended | | | Six Months Ended | |
| | August 29, 2008 | | | August 24, 2007 | | | August 29, 2008 | | | August 24, 2007 | |
Net sales | | $ | 372,942 | | | $ | 365,878 | | | $ | 798,405 | | | $ | 783,894 | |
Other revenue | | | 12,893 | | | | 11,607 | | | | 15,730 | | | | 13,558 | |
| | | | | | | | | | | | | | | | |
Total revenue | | | 385,835 | | | | 377,485 | | | | 814,135 | | | | 797,452 | |
| | | | |
Material, labor and other production costs | | | 170,112 | | | | 163,052 | | | | 363,454 | | | | 324,180 | |
Selling, distribution and marketing expenses | | | 154,387 | | | | 144,586 | | | | 305,262 | | | | 285,280 | |
Administrative and general expenses | | | 57,162 | | | | 56,351 | | | | 119,723 | | | | 118,586 | |
Other operating income—net | | | (111 | ) | | | (320 | ) | | | (838 | ) | | | (680 | ) |
| | | | | | | | | | | | | | | | |
| | | | |
Operating income | | | 4,285 | | | | 13,816 | | | | 26,534 | | | | 70,086 | |
| | | | |
Interest expense | | | 5,434 | | | | 4,839 | | | | 10,339 | | | | 9,596 | |
Interest income | | | (898 | ) | | | (2,234 | ) | | | (1,888 | ) | | | (3,733 | ) |
Other non-operating income—net | | | (2,617 | ) | | | (1,353 | ) | | | (3,518 | ) | | | (2,896 | ) |
| | | | | | | | | | | | | | | | |
| | | | |
Income from continuing operations before income tax expense | | | 2,366 | | | | 12,564 | | | | 21,601 | | | | 67,119 | |
Income tax expense | | | 69 | | | | 4,189 | | | | 5,971 | | | | 28,481 | |
| | | | | | | | | | | | | | | | |
| | | | |
Income from continuing operations | | | 2,297 | | | | 8,375 | | | | 15,630 | | | | 38,638 | |
Loss from discontinued operations, net of tax | | | — | | | | — | | | | — | | | | (213 | ) |
| | | | | | | | | | | | | | | | |
| | | | |
Net income | | $ | 2,297 | | | $ | 8,375 | | | $ | 15,630 | | | $ | 38,425 | |
| | | | | | | | | | | | | | | | |
Earnings per share—basic: | | | | | | | | | | | | | | | | |
Income from continuing operations | | $ | 0.05 | | | $ | 0.15 | | | $ | 0.32 | | | $ | 0.69 | |
Loss from discontinued operations | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | |
Net income | | $ | 0.05 | | | $ | 0.15 | | | $ | 0.32 | | | $ | 0.69 | |
| | | | | | | | | | | | | | | | |
Earnings per share—assuming dilution: | | | | | | | | | | | | | | | | |
Income from continuing operations | | $ | 0.05 | | | $ | 0.15 | | | $ | 0.32 | | | $ | 0.69 | |
Loss from discontinued operations | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | |
Net income | | $ | 0.05 | | | $ | 0.15 | | | $ | 0.32 | | | $ | 0.69 | |
| | | | | | | | | | | | | | | | |
| | | | |
Average number of common shares outstanding | | | 47,769,594 | | | | 55,766,802 | | | | 48,285,267 | | | | 55,514,759 | |
| | | | |
Average number of common shares outstanding—assuming dilution | | | 47,807,313 | | | | 56,180,165 | | | | 48,328,659 | | | | 55,902,189 | |
| | | | |
Dividends declared per share | | $ | 0.12 | | | $ | 0.10 | | | $ | 0.24 | | | $ | 0.20 | |
AMERICAN GREETINGS CORPORATION
SECOND QUARTER CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FISCAL YEAR ENDING FEBRUARY 28, 2009
(In thousands of dollars)
| | | | | | | | |
| | (Unaudited) | |
| | August 29, 2008 | | | August 24, 2007 | |
ASSETS | | | | | | | | |
CURRENT ASSETS | | | | | | | | |
Cash and cash equivalents | | $ | 84,040 | | | $ | 192,450 | |
Trade accounts receivable, net | | | 62,918 | | | | 71,199 | |
Inventories | | | 260,845 | | | | 248,176 | |
Deferred and refundable income taxes | | | 54,149 | | | | 66,399 | |
Prepaid expenses and other | | | 182,526 | | | | 215,375 | |
| | | | | | | | |
Total current assets | | | 644,478 | | | | 793,599 | |
| | |
GOODWILL | | | 289,662 | | | | 226,920 | |
OTHER ASSETS | | | 437,633 | | | | 405,283 | |
DEFERRED AND REFUNDABLE INCOME TAXES | | | 133,827 | | | | 98,968 | |
| | |
Property, plant and equipment—at cost | | | 983,723 | | | | 950,385 | |
Less accumulated depreciation | | | 682,025 | | | | 672,642 | |
| | | | | | | | |
PROPERTY, PLANT AND EQUIPMENT—NET | | | 301,698 | | | | 277,743 | |
| | | | | | | | |
| | $ | 1,807,298 | | | $ | 1,802,513 | |
| | | | | | | | |
| | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | | |
CURRENT LIABILITIES | | | | | | | | |
Debt due within one year | | $ | 209,645 | | | $ | 22,690 | |
Accounts payable | | | 125,648 | | | | 126,376 | |
Accrued liabilities | | | 66,007 | | | | 70,903 | |
Accrued compensation and benefits | | | 39,378 | | | | 50,397 | |
Income taxes payable | | | 7,729 | | | | 1,456 | |
Other current liabilities | | | 113,379 | | | | 97,766 | |
| | | | | | | | |
Total current liabilities | | | 561,786 | | | | 369,588 | |
| | |
LONG-TERM DEBT | | | 200,689 | | | | 200,988 | |
OTHER LIABILITIES | | | 147,906 | | | | 148,721 | |
DEFERRED INCOME TAXES AND NONCURRENT INCOME TAXES PAYABLE | | | 23,343 | | | | 29,930 | |
| | |
SHAREHOLDERS’ EQUITY | | | | | | | | |
Common shares—Class A | | | 42,208 | | | | 51,497 | |
Common shares—Class B | | | 3,494 | | | | 4,291 | |
Capital in excess of par value | | | 447,502 | | | | 439,985 | |
Treasury stock | | | (914,262 | ) | | | (720,027 | ) |
Accumulated other comprehensive (loss) income | | | (9,711 | ) | | | 10,690 | |
Retained earnings | | | 1,304,343 | | | | 1,266,850 | |
| | | | | | | | |
Total shareholders’ equity | | | 873,574 | | | | 1,053,286 | |
| | | | | | | | |
| | $ | 1,807,298 | | | $ | 1,802,513 | |
| | | | | | | | |
AMERICAN GREETINGS CORPORATION
SECOND QUARTER CONSOLIDATED STATEMENT OF CASH FLOWS
FISCAL YEAR ENDING FEBRUARY 28, 2009
(In thousands of dollars)
| | | | | | | | |
| | (Unaudited) Six Months Ended | |
| | August 29, 2008 | | | August 24, 2007 | |
OPERATING ACTIVITIES: | | | | | | | | |
Net income | | $ | 15,630 | | | $ | 38,425 | |
Loss from discontinued operations | | | — | | | | 213 | |
| | | | | | | | |
Income from continuing operations | | | 15,630 | | | | 38,638 | |
Adjustments to reconcile income from continuing operations to cash flows from operating activities: | | | | | | | | |
Net loss (gain) on disposal of fixed assets | | | 385 | | | | (41 | ) |
Depreciation and amortization | | | 25,324 | | | | 23,930 | |
Deferred income taxes | | | 15,394 | | | | 14,335 | |
Other non-cash charges | | | 3,379 | | | | 3,861 | |
Changes in operating assets and liabilities, net of acquisitions and dispositions: | | | | | | | | |
Trade accounts receivable | | | (584 | ) | | | 33,389 | |
Inventories | | | (47,606 | ) | | | (61,980 | ) |
Other current assets | | | (55 | ) | | | (2,641 | ) |
Deferred costs—net | | | 14,654 | | | | 28,451 | |
Accounts payable and other liabilities | | | (69,511 | ) | | | (23,376 | ) |
Other—net | | | (10,684 | ) | | | 2,784 | |
| | | | | | | | |
Total Cash Flows From Operating Activities | | | (53,674 | ) | | | 57,350 | |
| | |
INVESTING ACTIVITIES: | | | | | | | | |
Proceeds from sale of short-term investments | | | — | | | | 480,630 | |
Purchases of short-term investments | | | — | | | | (480,630 | ) |
Property, plant and equipment additions | | | (28,545 | ) | | | (13,577 | ) |
Cash payments for business acquisitions, net of cash acquired | | | (15,625 | ) | | | (6,056 | ) |
Cash receipts related to discontinued operations | | | — | | | | 3,419 | |
Proceeds from sale of fixed assets | | | 275 | | | | 1,105 | |
Other—net | | | (44,153 | ) | | | — | |
| | | | | | | | |
Total Cash Flows From Investing Activities | | | (88,048 | ) | | | (15,109 | ) |
| | |
FINANCING ACTIVITIES: | | | | | | | | |
Reduction of long-term debt | | | (22,509 | ) | | | — | |
Net increase in short-term debt | | | 189,545 | | | | — | |
Sale of stock under benefit plans | | | 434 | | | | 24,250 | |
Purchase of treasury shares | | | (46,137 | ) | | | (11,883 | ) |
Dividends to shareholders | | | (11,667 | ) | | | (11,115 | ) |
| | | | | | | | |
Total Cash Flows From Financing Activities | | | 109,666 | | | | 1,252 | |
| | |
DISCONTINUED OPERATIONS: | | | | | | | | |
Operating cash flows from discontinued operations | | | — | | | | (59 | ) |
| | | | | | | | |
Total Cash Flows from Discontinued Operations | | | — | | | | (59 | ) |
| | |
EFFECT OF EXCHANGE RATE CHANGES ON CASH | | | (7,404 | ) | | | 4,303 | |
| | | | | | | | |
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | | | (39,460 | ) | | | 47,737 | |
Cash and Cash Equivalents at Beginning of Year | | | 123,500 | | | | 144,713 | |
| | | | | | | | |
Cash and Cash Equivalents at End of Period | | $ | 84,040 | | | $ | 192,450 | |
| | | | | | | | |
AMERICAN GREETINGS CORPORATION
SECOND QUARTER CONSOLIDATED SEGMENT DISCLOSURES
FISCAL YEAR ENDING FEBRUARY 28, 2009
(In thousands of dollars)
| | | | | | | | | | | | | | | | |
| | (Unaudited) | |
| | Three Months Ended | | | Six Months Ended | |
| | August 29, 2008 | | | August 24, 2007 | | | August 29, 2008 | | | August 24, 2007 | |
Total Revenue: | | | | | | | | | | | | | | | | |
North American Social Expression Products | | $ | 261,296 | | | $ | 258,141 | | | $ | 563,714 | | | $ | 558,085 | |
Intersegment items | | | (14,736 | ) | | | (14,582 | ) | | | (29,380 | ) | | | (23,085 | ) |
Exchange rate adjustment | | | 262 | | | | (279 | ) | | | 775 | | | | (2,788 | ) |
| | | | | | | | | | | | | | | | |
Net | | | 246,822 | | | | 243,280 | | | | 535,109 | | | | 532,212 | |
| | | | |
International Social Expression Products | | | 63,191 | | | | 64,071 | | | | 133,064 | | | | 128,488 | |
Exchange rate adjustment | | | 133 | | | | 576 | | | | 1,220 | | | | (92 | ) |
| | | | | | | | | | | | | | | | |
Net | | | 63,324 | | | | 64,647 | | | | 134,284 | | | | 128,396 | |
| | | | |
Retail Operations | | | 37,547 | | | | 39,072 | | | | 79,040 | | | | 79,611 | |
Exchange rate adjustment | | | 117 | | | | (621 | ) | | | 607 | | | | (2,232 | ) |
| | | | | | | | | | | | | | | | |
Net | | | 37,664 | | | | 38,451 | | | | 79,647 | | | | 77,379 | |
| | | | |
AG Interactive | | | 20,975 | | | | 17,155 | | | | 41,502 | | | | 37,054 | |
Exchange rate adjustment | | | (3 | ) | | | 2 | | | | 31 | | | | (1 | ) |
| | | | | | | | | | | | | | | | |
Net | | | 20,972 | | | | 17,157 | | | | 41,533 | | | | 37,053 | |
| | | | |
Non-reportable segments | | | 17,053 | | | | 13,942 | | | | 23,562 | | | | 22,327 | |
Unallocated | | | — | | | | 8 | | | | — | | | | 85 | |
| | | | | | | | | | | | | | | | |
| | $ | 385,835 | | | $ | 377,485 | | | $ | 814,135 | | | $ | 797,452 | |
| | | | | | | | | | | | | | | | |
Segment Earnings (Loss): | | | | | | | | | | | | | | | | |
North American Social Expression Products | | $ | 34,364 | | | $ | 41,984 | | | $ | 88,059 | | | $ | 130,846 | |
Intersegment items | | | (10,750 | ) | | | (10,955 | ) | | | (21,993 | ) | | | (17,477 | ) |
Exchange rate adjustment | | | (14 | ) | | | 101 | | | | 45 | | | | (1,549 | ) |
| | | | | | | | | | | | | | | | |
Net | | | 23,600 | | | | 31,130 | | | | 66,111 | | | | 111,820 | |
| | | | |
International Social Expression Products | | | (2,134 | ) | | | 1,574 | | | | 728 | | | | 1,750 | |
Exchange rate adjustment | | | (24 | ) | | | 19 | | | | (81 | ) | | | 30 | |
| | | | | | | | | | | | | | | | |
Net | | | (2,158 | ) | | | 1,593 | | | | 647 | | | | 1,780 | |
| | | | |
Retail Operations | | | (6,669 | ) | | | (6,561 | ) | | | (10,076 | ) | | | (9,330 | ) |
Exchange rate adjustment | | | (7 | ) | | | 74 | | | | (13 | ) | | | 62 | |
| | | | | | | | | | | | | | | | |
Net | | | (6,676 | ) | | | (6,487 | ) | | | (10,089 | ) | | | (9,268 | ) |
| | | | |
AG Interactive | | | 759 | | | | 3,163 | | | | (337 | ) | | | 6,442 | |
Exchange rate adjustment | | | 2 | | | | 6 | | | | 37 | | | | 14 | |
| | | | | | | | | | | | | | | | |
Net | | | 761 | | | | 3,169 | | | | (300 | ) | | | 6,456 | |
| | | | |
Non-reportable segments | | | 2,541 | | | | 1,772 | | | | 575 | | | | 2,335 | |
| | | | |
Unallocated | | | (15,558 | ) | | | (18,531 | ) | | | (35,191 | ) | | | (45,883 | ) |
Exchange rate adjustment | | | (144 | ) | | | (82 | ) | | | (152 | ) | | | (121 | ) |
| | | | | | | | | | | | | | | | |
Net | | | (15,702 | ) | | | (18,613 | ) | | | (35,343 | ) | | | (46,004 | ) |
| | | | | | | | | | | | | | | | |
| | $ | 2,366 | | | $ | 12,564 | | | $ | 21,601 | | | $ | 67,119 | |
| | | | | | | | | | | | | | | | |