Exhibit 99.1
AMERICAN GREETINGS ANNOUNCES FIRST QUARTER RESULTS
CLEVELAND (June 24, 2009) – American Greetings Corporation (NYSE: AM) today announced its results for the first fiscal quarter ended May 29, 2009.
First Quarter Results
For the first quarter of fiscal 2010, the Company reported total revenue of $412.9 million, pre-tax income of $16.9 million, and net income of $10.0 million or 25 cents per share (all per-share amounts assume dilution).
As previously announced, during the first quarter of fiscal 2010, American Greetings sold its retail store operations to Schurman Fine Papers (“Schurman”), which operates card and gift retail stores under the name Papyrus. American Greetings recognized a preliminary non-cash loss on the disposition, recorded within the Retail Operations segment, of $28.3 million (after-tax of approximately $17.4 million) that reduced earnings per share by approximately 44 cents during the quarter. At the time of the sale of the retail stores, American Greetings also purchased the wholesale division of Schurman which supplies Papyrus brand greeting cards primarily to leading specialty, mass, grocery and drug store channels and purchased a fifteen percent equity interest in Schurman.
For the first quarter of fiscal 2009, the Company reported total revenue of $428.3 million, pre-tax income of $19.2 million, and net income of $13.3 million or 27 cents per share.
Management Comments and Outlook
Chief Executive Officer Zev Weiss said, “I am very pleased with our performance this quarter. Specifically, sales of greeting cards increased primarily as a result of the additions of Recycled Paper Greetings and Papyrus as well as strength in our overall North American business despite weak economic conditions. We also realized improved margins as a result of our cost reduction activities last year and we will continue to focus on efficiencies this year. We currently anticipate cash flow from operating activities less capital expenditures to be greater than $70 million this fiscal year. We are diligently working through the integration planning processes for Recycled Paper Greetings, the acquired Papyrus wholesale business, and the transition of our former retail operations to Schurman Fine Papers.”
Financing Activities
Under the Company’s $75 million share repurchase program, during the first fiscal quarter the Company purchased approximately 1.1 million shares of its common stock for $4.3 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 athttp://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 manufacturer and retailer of innovative social expression products that assist consumers in enhancing their relationships. The Company’s major greeting card brands are American Greetings, Carlton Cards, Gibson, Recycled Paper Greetings and Papyrus, and other paper product offerings include DesignWare party goods, American Greetings and Plus Mark gift-wrap and boxed cards and DateWorks calendars. American Greetings also has the largest collection 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 $1.7 billion, and its products can be found in retail outlets worldwide. 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
Non-GAAP Measures
Certain after-tax amounts included in this earnings release may be considered non-GAAP measures in accordance with Regulation G and were calculated based on the Company’s statutory tax rate of approximately 38.7%. Management believes that after-tax information is useful in analyzing the Company’s results.
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; |
• | the ability to successfully integrate acquisitions, including the recent acquisitions of Recycled Paper Greetings and the Papyrus brand; |
• | the Company’s ability to successfully complete the sale of the Strawberry Shortcake and Care Bears properties; |
• | the Company’s successful transition of the Retail Operations segment to its buyer, Schurman Fine Papers, and the ability to achieve the desired benefits associated with this and other dispositions; |
• | 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 its cost reduction efforts; |
• | competitive terms of sale offered to customers; |
• | the Company’s ability to comply with its debt covenants; |
• | 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 implement, or achieve the desired benefits associated with, any information systems refresh the Company may implement; |
• | the Company’s ability to achieve the desired accretive effect from any share repurchase programs; |
• | 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.
AMERICAN GREETINGS CORPORATION
FIRST QUARTER CONSOLIDATED STATEMENT OF INCOME
FISCAL YEAR ENDING FEBRUARY 28, 2010
(In thousands of dollars except share and per share amounts)
(Unaudited) Three Months Ended | ||||||||
May 29, 2009 | May 30, 2008 | |||||||
Net sales | $ | 409,277 | $ | 425,463 | ||||
Other revenue | 3,645 | 2,837 | ||||||
Total revenue | 412,922 | 428,300 | ||||||
Material, labor and other production costs | 167,169 | 193,342 | ||||||
Selling, distribution and marketing expenses | 132,217 | 150,875 | ||||||
Administrative and general expenses | 63,151 | 62,561 | ||||||
Other operating expense (income) - net | 27,773 | (727 | ) | |||||
Operating income | 22,612 | 22,249 | ||||||
Interest expense | 6,987 | 4,905 | ||||||
Interest income | (276 | ) | (990 | ) | ||||
Other non-operating income - net | (1,042 | ) | (901 | ) | ||||
Income before income tax expense | 16,943 | 19,235 | ||||||
Income tax expense | 6,982 | 5,902 | ||||||
Net income | $ | 9,961 | $ | 13,333 | ||||
Earnings per share - basic | $ | 0.25 | $ | 0.27 | ||||
Earnings per share - assuming dilution | $ | 0.25 | $ | 0.27 | ||||
Average number of common shares outstanding | 39,608,947 | 48,800,941 | ||||||
Average number of common shares outstanding - assuming dilution | 39,608,947 | 48,833,108 | ||||||
Dividends declared per share | $ | — | $ | 0.12 |
AMERICAN GREETINGS CORPORATION
FIRST QUARTER CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FISCAL YEAR ENDING FEBRUARY 28, 2010
(In thousands of dollars)
(Unaudited) | ||||||||
May 29, 2009 | May 30, 2008 | |||||||
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Cash and cash equivalents | $ | 87,611 | $ | 108,192 | ||||
Trade accounts receivable, net | 110,743 | 59,789 | ||||||
Inventories | 181,425 | 211,125 | ||||||
Deferred and refundable income taxes | 69,800 | 67,604 | ||||||
Assets held for sale | 1,515 | 2,483 | ||||||
Prepaid expenses and other | 153,374 | 183,865 | ||||||
Total current assets | 604,468 | 633,058 | ||||||
GOODWILL | 25,921 | 300,323 | ||||||
OTHER ASSETS | 373,622 | 408,228 | ||||||
DEFERRED AND REFUNDABLE INCOME TAXES | 168,391 | 133,118 | ||||||
Property, plant and equipment - at cost | 890,173 | 980,376 | ||||||
Less accumulated depreciation | 601,251 | 683,192 | ||||||
PROPERTY, PLANT AND EQUIPMENT - NET | 288,922 | 297,184 | ||||||
$ | 1,461,324 | $ | 1,771,911 | |||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
CURRENT LIABILITIES | ||||||||
Debt due within one year | $ | 27,325 | $ | 35,835 | ||||
Accounts payable | 85,483 | 110,394 | ||||||
Accrued liabilities | 73,852 | 73,281 | ||||||
Accrued compensation and benefits | 37,274 | 39,582 | ||||||
Income taxes payable | 2,937 | 23,348 | ||||||
Other current liabilities | 108,864 | 117,160 | ||||||
Total current liabilities | 335,735 | 399,600 | ||||||
LONG-TERM DEBT | 409,455 | 235,541 | ||||||
OTHER LIABILITIES | 125,668 | 157,610 | ||||||
DEFERRED INCOME TAXES AND NONCURRENT INCOME TAXES PAYABLE | 30,594 | 26,986 | ||||||
SHAREHOLDERS’ EQUITY | ||||||||
Common shares - Class A | 35,921 | 45,345 | ||||||
Common shares - Class B | 3,497 | 3,495 | ||||||
Capital in excess of par value | 450,059 | 446,075 | ||||||
Treasury stock | (941,063 | ) | (871,379 | ) | ||||
Accumulated other comprehensive (loss) income | (43,276 | ) | 20,746 | |||||
Retained earnings | 1,054,734 | 1,307,892 | ||||||
Total shareholders’ equity | 559,872 | 952,174 | ||||||
$ | 1,461,324 | $ | 1,771,911 | |||||
AMERICAN GREETINGS CORPORATION
FIRST QUARTER CONSOLIDATED STATEMENT OF CASH FLOWS
FISCAL YEAR ENDING FEBRUARY 28, 2010
(In thousands of dollars)
(Unaudited) Three Months Ended | ||||||||
May 29, 2009 | May 30, 2008 | |||||||
OPERATING ACTIVITIES: | ||||||||
Net income | $ | 9,961 | $ | 13,333 | ||||
Adjustments to reconcile net income to cash flows from operating activities: | ||||||||
Loss on disposition of retail stores | 28,333 | — | ||||||
Net loss on disposal of fixed assets | 199 | 168 | ||||||
Depreciation and amortization | 12,393 | 12,785 | ||||||
Deferred income taxes | 17,158 | 5,459 | ||||||
Other non-cash charges | 2,657 | 1,718 | ||||||
Changes in operating assets and liabilities, net of acquisitions and dispositions: | ||||||||
Trade accounts receivable | (43,770 | ) | 5,186 | |||||
Inventories | 12,360 | 6,495 | ||||||
Other current assets | 11,942 | 1,260 | ||||||
Deferred costs - net | (2,846 | ) | 1,253 | |||||
Accounts payable and other liabilities | (43,494 | ) | (57,606 | ) | ||||
Other - net | 3,836 | (1,938 | ) | |||||
Total Cash Flows From Operating Activities | 8,729 | (11,887 | ) | |||||
INVESTING ACTIVITIES: | ||||||||
Property, plant and equipment additions | (8,909 | ) | (10,088 | ) | ||||
Cash payments for business acquisitions, net of cash acquired | (16,286 | ) | (15,625 | ) | ||||
Proceeds from sale of fixed assets | 113 | 265 | ||||||
Total Cash Flows From Investing Activities | (25,082 | ) | (25,448 | ) | ||||
FINANCING ACTIVITIES: | ||||||||
Net increase in long-term debt | 19,800 | 14,900 | ||||||
Net increase in short-term debt | 26,325 | 13,145 | ||||||
Sale of stock under benefit plans | 30 | 363 | ||||||
Purchase of treasury shares | (5,877 | ) | (38 | ) | ||||
Dividends to shareholders | (4,865 | ) | (5,852 | ) | ||||
Total Cash Flows From Financing Activities | 35,413 | 22,518 | ||||||
EFFECT OF EXCHANGE RATE CHANGES ON CASH | 8,335 | (491 | ) | |||||
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 27,395 | (15,308 | ) | |||||
Cash and Cash Equivalents at Beginning of Year | 60,216 | 123,500 | ||||||
Cash and Cash Equivalents at End of Period | $ | 87,611 | $ | 108,192 | ||||
AMERICAN GREETINGS CORPORATION
FIRST QUARTER CONSOLIDATED SEGMENT DISCLOSURES
FISCAL YEAR ENDING FEBRUARY 28, 2010
(In thousands of dollars)
(Unaudited) Three Months Ended | ||||||||
May 29, 2009 | May 30, 2008 | |||||||
Total Revenue: | ||||||||
North American Social Expression Products | $ | 323,884 | $ | 298,177 | ||||
Intersegment items | (5,104 | ) | (13,306 | ) | ||||
Exchange rate adjustment | 299 | 3,416 | ||||||
Net | 319,079 | 288,287 | ||||||
International Social Expression Products | 47,006 | 47,914 | ||||||
Exchange rate adjustment | 5,756 | 23,046 | ||||||
Net | 52,762 | 70,960 | ||||||
Retail Operations | 11,727 | 38,477 | ||||||
Exchange rate adjustment | 112 | 3,506 | ||||||
Net | 11,839 | 41,983 | ||||||
AG Interactive | 18,634 | 19,899 | ||||||
Exchange rate adjustment | 211 | 662 | ||||||
Net | 18,845 | 20,561 | ||||||
Non-reportable segments | 10,397 | 6,509 | ||||||
$ | 412,922 | $ | 428,300 | |||||
Segment Earnings (Loss): | ||||||||
North American Social Expression Products | $ | 77,877 | $ | 52,183 | ||||
Intersegment items | (3,511 | ) | (10,177 | ) | ||||
Exchange rate adjustment | 190 | 505 | ||||||
Net | 74,556 | 42,511 | ||||||
International Social Expression Products | 333 | 1,773 | ||||||
Exchange rate adjustment | 6 | 1,032 | ||||||
Net | 339 | 2,805 | ||||||
Retail Operations | (34,830 | ) | (3,351 | ) | ||||
Exchange rate adjustment | (285 | ) | (62 | ) | ||||
Net | (35,115 | ) | (3,413 | ) | ||||
AG Interactive | 1,652 | (1,335 | ) | |||||
Exchange rate adjustment | 62 | 274 | ||||||
Net | 1,714 | (1,061 | ) | |||||
Non-reportable segments | (129 | ) | (1,966 | ) | ||||
Unallocated | (24,311 | ) | (19,695 | ) | ||||
Exchange rate adjustment | (111 | ) | 54 | |||||
Net | (24,422 | ) | (19,641 | ) | ||||
$ | 16,943 | $ | 19,235 | |||||