Exhibit 99(a)
American Greetings Announces First-Quarter Results
* Licensing contribution stronger than expected
* Tender offer for high-yield debt successfully completed; will generate
ongoing interest expense savings
* Corporation adjusts EPS estimate for tender impact
CLEVELAND, June 29 /PRNewswire-FirstCall/ -- American Greetings
Corporation (NYSE: AM) today announced its first-quarter results for the
fiscal year ending Feb. 28, 2005. Despite soft sales, the Corporation slightly
exceeded its earnings estimate due in part to a stronger-than-expected
earnings contribution from its outbound licensed properties.
The Corporation reported net income of $4.2 million, or 6 cents per basic
share, on net sales of $445.7 million, for the fiscal 2005 first quarter ended
May 31, 2004. This compares to reported net income of $19.7 million, on net
sales of $454.3 million, for the fiscal 2004 first quarter ended May 31, 2003.
Included in the fiscal 2005 results are $39.0 million in pretax costs ($23.9
million after tax) incurred during the quarter for debt repurchases totaling
$186.2 million. Last year's results include $4.6 million of pretax costs ($2.8
million after tax) associated with the early pay down of $118.0 million of
term debt. Excluding after-tax costs associated with debt repurchases from
both periods, American Greetings would have achieved net income of $28.1
million this year, compared to $22.5 million in the first quarter last year.
The Corporation believes its results excluding these costs are useful for the
purpose of providing a comparable analysis of operating results for the two
periods.
Tender offer completed
During the quarter, American Greetings successfully completed a tender
offer for $186.2 million of its $196.4 million outstanding 11.75 percent
senior subordinated notes due July 2008. While this initiative reduced net
income in the quarter, it will reduce its future interest expense and increase
its strategic and financial flexibility. On May 11, 2004, the Corporation
amended and restated its credit agreement to reflect its improved credit
profile.
With the completion of the tender offer and earlier debt reductions, the
Corporation has reduced debt a total of $368 million within a 13-month period.
The pay down of this debt reduces annual interest expense by about $38
million.
Management comments and second quarter estimate
Chief Executive Officer Zev Weiss said the first quarter continued the
recent trends of both supply chain improvements and healthy earnings from
licensing. "Our cost-reduction efforts were on track in the quarter, and our
licensing results were better than expected," Weiss said. "Cash flow was
strong once again, as we continue to focus on improving our balance sheet.
"For the fiscal year, our estimate of $1.63 to $1.68 per share is now
equivalent to $1.46 to $1.51 per share taking into account the costs and
benefits from our tender offer," Weiss said.
"For the second fiscal quarter, we are projecting our earnings per basic
share to be about breakeven," Weiss said. The second quarter is one in which
American Greetings has historically reported a net loss due to the seasonal
nature of its business. Last year, the Corporation reported a net loss of 15
cents per basic share for the second quarter.
Retail executive joins board
American Greetings also announced that Joseph Hardin has been elected to
its board of directors. Hardin fills a vacancy on the board with a term that
expires in 2006.
Hardin, 59, most recently served as chief executive officer of Kinko's
Inc., a digital document solutions provider, from May 1997 until his
retirement in January 2001. Prior to joining Kinko's, he was president and
chief executive officer of SAM'S CLUB, the wholesale division of Wal-Mart
Stores, Inc.
"Joe Hardin's retail background and supply chain experience make him a
valuable member of our board of directors," Weiss said.
Conference call on the Web
American Greetings will broadcast its conference call live on the Internet
at 9:30 a.m. Eastern time today. The conference call will be accessible
through the Investor Relations section of the American Greetings Web site
at http://corporate.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, reading glasses, candles,
stationery, calendars, educational products, ornaments and electronic
greetings. Located in Cleveland, Ohio, American Greetings generates annual net
sales of approximately $2 billion. For more information on the Corporation,
visit http://corporate.americangreetings.com .
The statements contained in this release that are not historical facts,
including statements regarding expected savings from debt-reduction
initiatives and estimates of results for future periods, are forward-looking
statements. Forward-looking statements are generally identified by words such
as "believes," "anticipates," "expects," "plans," "should," "estimates" and
similar expressions. These forward-looking statements involve risks and
uncertainties. Factors that could cause actual results to differ materially
from those stated or implied in our forward-looking statements, include but
are not limited to: retail bankruptcies and consolidations, successful
integration of acquisitions, successful transition of management, 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, successfully implementing supply chain improvements and
achieving projected cost savings from those improvements, and the
Corporation's ability to comply with its debt covenants. Risks pertaining
specifically to the Corporation's interactive business segment include the
viability of online advertising and 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 Corporation's periodic
filings with the Securities and Exchange Commission.
AMERICAN GREETINGS CORPORATION
FIRST QUARTER REPORT OF CONSOLIDATED OPERATIONS
FISCAL YEAR ENDING FEBRUARY 28, 2005
(In thousands of dollars except share and per share amounts)
(Unaudited)
Three Months Ended
May 31,
2004 2003
Net sales $445,671 $454,306
Costs and expenses:
Material, labor and other production costs 187,212 184,983
Selling, distribution and marketing 150,278 149,858
Administrative and general 65,499 66,125
Interest expense 52,694 22,800
Other (income) - net (16,925) (2,138)
438,758 421,628
Income before income tax expense 6,913 32,678
Income tax expense 2,675 12,973
Net income $4,238 $19,705
Earnings per share $0.06 $0.30
Earnings per share - assuming dilution $0.06 $0.27
Average number of common shares outstanding 68,000,691 65,913,680
Average number of common shares
outstanding - assuming dilution 68,846,170 79,003,300
AMERICAN GREETINGS CORPORATION
FIRST QUARTER STATEMENT OF FINANCIAL POSITION
FISCAL YEAR ENDING FEBRUARY 28, 2005
(In thousands of dollars)
(Unaudited)
May 31,
2004 2003
ASSETS
CURRENT ASSETS
Cash and cash equivalents $115,850 $113,274
Trade accounts receivable, less
allowances for sales returns of
$86,773 ($82,963 in 2003) and
for doubtful accounts of $20,562
($27,480 in 2003) 258,450 293,730
Inventories 263,118 312,362
Deferred and refundable income taxes 155,517 173,365
Prepaid expenses and other 222,356 224,687
Total current assets 1,015,291 1,117,418
GOODWILL 225,574 213,501
OTHER ASSETS 665,101 768,403
PROPERTY, PLANT AND EQUIPMENT - NET 357,747 382,848
$2,263,713 $2,482,170
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Debt due within one year $- $5,352
Accounts payable 115,186 135,136
Accrued liabilities 113,391 157,050
Accrued compensation and benefits 62,921 56,936
Income taxes 15,732 66,545
Other current liabilities 78,404 96,758
Total current liabilities 385,634 517,777
LONG-TERM DEBT 483,783 726,930
OTHER LIABILITIES 94,149 107,113
DEFERRED INCOME TAXES 28,916 10,715
SHAREHOLDERS' EQUITY
Common shares - Class A 63,502 61,370
Common shares - Class B 4,603 4,596
Capital in excess of par value 340,608 311,658
Treasury stock (435,112) (438,726)
Accumulated other comprehensive
income (loss) 13,591 (20,839)
Retained earnings 1,284,039 1,201,576
Total shareholders' equity 1,271,231 1,119,635
$2,263,713 $2,482,170
AMERICAN GREETINGS CORPORATION
FIRST QUARTER STATEMENT OF CASH FLOWS
FISCAL YEAR ENDING FEBRUARY 28, 2005
(In thousands of dollars)
(Unaudited)
Three Months Ended
May 31,
2004 2003
OPERATING ACTIVITIES:
Net income $4,238 $19,705
Adjustments to reconcile net income to
net cash provided by operating activities:
Restructuring (277) (823)
Gain on sale of marketable security (3,090) -
(Gain) loss on sale of fixed assets (21) 732
Loss on extinguishment of debt 39,024 4,639
Depreciation and amortization 15,161 15,980
Deferred income taxes (7,192) (281)
Changes in operating assets and liabilities:
(Increase) decrease in trade
accounts receivable (9,454) 18,799
Increase in inventories (18,700) (29,596)
Decrease in other current assets 6,533 32,412
Decrease (increase) in deferred
costs - net 33,543 (2,140)
Decrease in accounts payable
and other liabilities (33,302) (31,299)
Other - net (4,882) (3,199)
Cash Provided by Operating Activities 21,581 24,929
INVESTING ACTIVITIES:
Property, plant & equipment additions (5,334) (5,334)
Proceeds from sale of fixed assets 104 36
Investment in corporate owned life insurance 2,570 11,445
Other - net 26,981 1,551
Cash Provided by Investing Activities 24,321 7,698
FINANCING ACTIVITIES:
Reduction of long-term debt (216,417) (2,322)
Decrease in short-term debt - (128,226)
Sale of stock under benefit plans 12,035 766
Purchase of treasury shares (9,299) (92)
Cash Used by Financing Activities (213,681) (129,874)
EFFECT OF EXCHANGE RATE CHANGES ON CASH (1,821) 2,058
DECREASE IN CASH AND CASH EQUIVALENTS (169,600) (95,189)
Cash and Cash Equivalents at
Beginning of Year 285,450 208,463
Cash and Cash Equivalents at End
of Period $115,850 $113,274
SOURCE American Greetings Corporation
-0- 06/29/2004
/CONTACT: David D. Poplar, Investor Relations Manager of American
Greetings Corporation, +1-216-252-4864, or david.poplar@amgreetings.com /
/Company News On-Call: http://www.prnewswire.com/comp/044150.html /
/Web site: http://corporate.americangreetings.com /
(AM)
CO: American Greetings Corporation
ST: Ohio
IN: HOU REA
SU: ERN ERP CCA MAV PER