Exhibit 99(a)
AMERICAN GREETINGS ANNOUNCES IMPROVED RESULTS
- Company reports third quarter EPS of 78 cents versus 60 cents in prior
year period
- Continuing Operations exceeds Company's estimate
- Announces sale of Magnivision for $77 million. Substantial gain boosts
quarterly Net Income and EPS
- Company declares quarterly cash dividend of 6 cents per share
CLEVELAND, Dec. 23 /PRNewswire-FirstCall/ -- American Greetings Corporation
(NYSE: AM) today announced its financial results for the third fiscal quarter
ended November 30, 2004. The Corporation exceeded its prior year earnings per
share results due primarily to a substantial gain on the sale of its Magnivision
subsidiary. The Corporation declared a quarterly cash dividend of 6 cents per
share.
Third Quarter
As a result of the announced sale of the Magnivision subsidiary, that
business unit has been classified as a discontinued operation. The Corporation
has presented financial results on continuing operations as well as net results
of discontinued operations. For the fiscal 2005 third quarter ended November 30,
2004, the Corporation reported net income from continuing operations of $40.3
million or 51 cents per share compared to $45.1 million or 58 cents per share
for continuing operations in the prior year (all per-share amounts assume
dilution). Discontinued operations contributed $22.4 million of net income or 27
cents per share to the third quarter of fiscal 2005 primarily due to the gain on
the sale of Magnivision. In the prior year's third quarter, discontinued
operations contributed $1.3 million of net income or 2 cents per share.
Within this year's third quarter, the Company realized a $35.5 million
pre-tax gain on the sale of Magnivision. This gain was reflected in discontinued
operations. The Company also recorded $16.6 million of expense associated with a
300 person overhead reduction program, $13.0 million of expense to reflect a
change in timing for greeting card returns associated with a revised
merchandising strategy and $8.2 million of expense associated with a plant
closure. These expenses were all reflected in continuing operations for the
third quarter.
On a consolidated basis, for the third quarter of fiscal 2005, American
Greetings reported net income of $62.8 million or 78 cents per share, on net
sales of $586 million. In the third fiscal quarter of 2004, the Company reported
net income of $46.4 million or 60 cents per share on net sales of $604 million.
In the prior year's third fiscal quarter, the Company incurred $13.8 million of
pre-tax costs associated with a repurchase of the Company's bonds and these
costs were included in continuing operations.
Net sales were down versus the prior period's third quarter as lower
revenues in both the retail segment and seasonal gift wrap business were
combined with the $13.0 million non-cash accrual to reflect an adjusted
merchandising strategy for seasonal product. These reductions to sales were
partially offset by incremental revenue from acquisitions in the AG Interactive
segment and favorable foreign exchange movements.
Year-to-Date Results
The Corporation reported net income of $73.9 million or 97 cents per share,
on net sales of $1.41 billion, for the first three quarters of fiscal 2005.
Included in the year-to-date results are $39 million of pre-tax costs incurred
(during the first quarter) for debt repurchases. In fiscal 2004, the Corporation
reported net income of $56.4 million or 78 cents per share, on net sales of
$1.44 billion. The prior year's results include $18.4 million of pre- tax costs
incurred for debt repurchases (in both the first and third quarters).
Management Comments and Outlook
Zev Weiss, Chief Executive Officer said, "In the third quarter, we continued
to focus on reducing our costs in both our supply chain and in our overhead
structure. While never a pleasant task, we recognize the necessity of taking
these actions due to the continuing changes in our business. The savings
resulting from these actions will be reinvested into our business in fiscal
2006. Without these costs, we surpassed our estimate for the quarter." Weiss
added, "Within the quarter, we closed on the Magnivision sale. We felt that our
Magnivision subsidiary would be a better fit under an owner with a strategic
focus on glasses. Given the sale price, we are pleased with the value provided
to our shareholders."
Weiss continued, "After quarter end, we entered into an agreement with The
Hatchery, a family entertainment and property-development firm. Through
continued investment, we are committed to enhancing the licensing business model
that we have grown over the last few years."
"For the full year, we are projecting our earnings per share from continuing
operations to be between $1.02 and $1.07. This estimate is in line with previous
guidance of $1.46 to $1.51 per share when adjusted for the full year impact of
the three programs described above," Weiss said.
Dividend Declaration
The Corporation's Board of Directors authorized the declaration of a
quarterly cash dividend of 6 cents per share for shareholders of record at the
close of business on January 12, 2005, payable to those shareholders on January
24, 2005.
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, 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 the Corporation's ability to reduce costs 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
THIRD QUARTER CONSOLIDATED STATEMENT OF OPERATIONS
FISCAL YEAR ENDING FEBRUARY 28, 2005
(In thousands of dollars except share and per share amounts)
(Unaudited) (Unaudited)
Three Months Ended Nine Months Ended
November 30, November 30,
----------------------------- -----------------------------
2004 2003 2004 2003
------------- ------------- ------------- -------------
Net sales $ 586,165 $ 603,754 $ 1,411,790 $ 1,435,542
Costs and expenses:
Material, labor and
other production costs 292,737 290,363 661,069 665,080
Selling, distribution
and marketing 173,735 167,362 466,690 463,773
Administrative
and general 64,476 55,564 186,118 174,511
Interest expense 8,744 30,587 70,601 70,924
Other (income) - net (19,341) (13,459) (52,917) (25,576)
520,351 530,417 1,331,561 1,348,712
Income before
income tax expense 65,814 73,337 80,229 86,830
Income tax expense 25,470 28,246 31,049 33,603
Income from
continuing operations 40,344 45,091 49,180 53,227
Income from discontinued
operations, net of tax 22,417 1,271 24,729 3,145
Net income $ 62,761 $ 46,362 $ 73,909 $ 56,372
Earnings per share - basic:
Income from
continuing operations 0.58 0.68 0.72 0.80
Income from
discontinued operations 0.33 0.02 0.36 0.05
Net income $ 0.91 $ 0.70 $ 1.08 $ 0.85
Earnings per share -
assuming dilution:
Income from
continuing operations 0.51 0.58 0.67 0.74
Income from
discontinued operations 0.27 0.02 0.30 0.04
Net income $ 0.78 $ 0.60 $ 0.97 $ 0.78
Average number of common
shares outstanding 68,753,922 66,699,848 68,391,128 66,309,827
Average number of common
shares outstanding -
assuming dilution 82,397,633 80,478,413 81,874,590 79,817,702
AMERICAN GREETINGS CORPORATION
THIRD QUARTER CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FISCAL YEAR ENDING FEBRUARY 28, 2005
(In thousands of dollars)
(Unaudited)
November 30,
---------------------------
2004 2003
------------ ------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 221,744 $ 51,694
Trade accounts receivable,
less allowances for seasonal
sales returns of
$83,169 ($91,271 in 2003) and
for doubtful accounts of $17,419
($23,519 in 2003) 415,113 453,374
Inventories 263,482 299,267
Deferred and refundable income taxes 165,810 181,029
Assets of businesses held for sale - 39,204
Prepaid expenses and other 213,692 244,740
Total current assets 1,279,841 1,269,308
GOODWILL 247,836 217,982
OTHER ASSETS 606,985 696,236
PROPERTY, PLANT AND EQUIPMENT - NET 333,278 361,539
$ 2,467,940 $ 2,545,065
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Debt due within one year $ - $ 85,414
Accounts payable 138,073 138,179
Accrued liabilities 118,519 156,215
Accrued compensation and benefits 78,463 69,871
Income taxes 55,020 51,114
Liabilities of businesses held for sale - 5,046
Other current liabilities 80,197 69,218
Total current liabilities 470,272 575,057
LONG-TERM DEBT 483,988 665,554
OTHER LIABILITIES 102,216 110,026
DEFERRED INCOME TAXES 26,963 8,434
SHAREHOLDERS' EQUITY
Common shares - Class A 64,663 62,241
Common shares - Class B 4,366 4,592
Capital in excess of par value 364,423 322,643
Treasury stock (440,101) (438,655)
Accumulated other comprehensive
income (loss) 42,803 (2,954)
Retained earnings 1,348,347 1,238,127
Total shareholders' equity 1,384,501 1,185,994
$ 2,467,940 $ 2,545,065
AMERICAN GREETINGS CORPORATION
THIRD QUARTER CONSOLIDATED STATEMENT OF CASH FLOWS
FISCAL YEAR ENDING FEBRUARY 28, 2005
(In thousands of dollars)
(Unaudited)
Nine Months Ended
November 30,
---------------------------
2004 2003
------------ ------------
OPERATING ACTIVITIES:
Net income $ 73,909 $ 56,372
Income from discontinued operations 24,729 3,145
Income from continuing operations 49,180 53,227
Adjustments to reconcile to net cash
provided (used) by operating activities:
Gain on sale of investment (3,095) -
Loss on sale of fixed assets 1,817 1,191
Loss on extinguishment of debt 39,056 18,389
Depreciation and amortization 42,425 44,680
Deferred income taxes (18,953) (8,110)
Changes in operating assets and
liabilities, net of acquisitions:
Increase in trade accounts receivable (169,293) (151,429)
Increase in inventories (19,852) (19,755)
Decrease in other current assets 8,972 27,600
Decrease in deferred costs - net 98,314 25,718
Increase (decrease) in accounts
payable and other liabilities 21,765 (28,829)
Other - net 3,469 (12,751)
Cash Provided (used)
by Operating Activities 53,805 (50,069)
INVESTING ACTIVITIES:
Proceeds from the sale of
discontinued operations 77,000 -
Property, plant & equipment additions (25,745) (23,595)
Proceeds from sale of fixed assets 3,545 2,140
Investment in corporate owned
life insurance (2,142) 8,943
Other - net 31,903 3,446
Cash Provided (used) by Investing
Activities 84,561 (9,066)
FINANCING ACTIVITIES:
Reduction of long-term debt (216,417) (68,673)
Decrease in short-term debt - (47,135)
Sale of stock under benefit plans 35,875 10,478
Purchase of treasury shares (18,263) (439)
Dividends to shareholders (4,125) -
Cash Used by Financing Activities (202,930) (105,769)
Cash (Used) provided by Discontinued
Operations (2,395) 4,046
EFFECT OF EXCHANGE RATE CHANGES ON CASH 3,253 4,089
DECREASE IN CASH AND CASH EQUIVALENTS (63,706) (156,769)
Cash and Cash Equivalents at
Beginning of Year 285,450 208,463
Cash and Cash Equivalents at End of
Period $ 221,744 $ 51,694
SOURCE American Greetings Corporation
-0- 12/23/2004
/CONTACT: Stephen J. Smith, VP, Treasurer and Investor Relations of
American Greetings Corporation, +1-216-252-4864, or
investor.relations@amgreetings.com /
/Web site: http://corporate.americangreetings.com /