Exhibit 99.1
AMERICAN GREETINGS ANNOUNCES IMPROVED FIRST QUARTER EARNINGS AND REPURCHASE OF
2 MILLION SHARES
- Earnings per share ahead of prior year
- Company repurchases approximately 2 million shares under $200 million
program
CLEVELAND, June 30 /PRNewswire-FirstCall/ -- American Greetings
Corporation (NYSE: AM) today announced its first quarter results for the
fiscal quarter ended May 31, 2005.
For the first quarter of fiscal 2006, the Company reported net sales of
$443.3 million, pretax income of $43.1 million and net income of $26.4 million
or 35 cents per share (all per-share amounts assume dilution). Included in
these results are $4.1 million of pretax expenses recognized during the
quarter for both the previously announced plant closure and the call of $10.2
million of outstanding 11.75% notes.
This year's first quarter reported results compare to net sales of $433.5
million, pretax income of $4.8 million and income from continuing operations
of $2.9 million or 4 cents per share for the first quarter of fiscal 2005. The
prior year's first quarter included $39.0 million of pretax expenses
associated with the retirement of $186.2 million of debt and $3.1 million of
income from the gain on the sale of a marketable security.
Management Comments and Outlook
Chief Executive Officer Zev Weiss said, "We are off to a good start this
fiscal year as we are seeing the very early stages of the benefit of
additional focus on our core consumer. We have been concentrating our
resources on efforts to increase our point of sale results while maintaining a
relentless focus on cost containment to help support margins."
The Company updated its fiscal year earnings per share estimate due to
both the Securities and Exchange Commission's April 2005 decision to delay the
implementation of new rules on the expensing of employee stock options as well
as the effects of share repurchases. The Company's fiscal year estimate
provided in April was $1.46 to $1.51 per share. The Company previously
anticipated adopting Financial Accounting Standard 123R during its third
fiscal quarter. The delay in adoption of the new accounting rules until March
of 2006 causes the previous estimate to be increased by 4 cents per share. In
addition, share repurchases through the end of the first quarter, net of lost
interest income during the year, will add approximately 2 cents to the
Company's estimate. The combination of the change in adoption date of the
accounting rules as well as the effects from the first quarter share
repurchases increase the range of estimated earnings per share by 6 cents for
fiscal 2006 from $1.46 to $1.51 up to $1.52 to $1.57.
The second quarter is one in which American Greetings has historically
reported a net loss due to the seasonal nature of its business. For the
second quarter of fiscal 2006, the Company is projecting earnings per share to
be between a loss of 6 cents and a loss of 1 cent. This estimate would
compare to income from continuing operations of 9 cents per share in the prior
year's second quarter. Included in the 9 cents of earnings per share was a
pretax gain of $10 million resulting from the modification of certain
agreements for the Company's licensing activities.
Financing Activities
The Company purchased more than 1.9 million shares of common stock for
$45.5 million during the first fiscal quarter of 2006 under its previously
announced $200 million share repurchase program.
During the quarter, the Company provided notice to bondholders that the
remaining $10.2 million of debt with a coupon of 11.75% would be called during
the second quarter. Once repurchased, the entire original issuance of $260
million of 11.75% notes will have been prepaid over the previous two-year
period.
The Company's Board of Directors authorized a cash dividend of 8 cents per
share to be paid on August 1, 2005 to shareholders of record at the close of
business on July 20, 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://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, 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 Company,
visit http://corporate.americangreetings.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: 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; the Company's
ability to comply with its debt covenants; 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; escalation in the cost
of providing employee health care; 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 and the
public's acceptance of online greetings and other social expression products
and the ability of the mobile division to compete effectively in the wireless
content aggregation market.
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.
AMERICAN GREETINGS CORPORATION
FIRST QUARTER CONSOLIDATED STATEMENT OF INCOME
FISCAL YEAR ENDING FEBRUARY 28, 2006
(In thousands of dollars except share and per share amounts)
(Unaudited)
Three Months Ended
May 31,
-------------------------------
2005 2004
-------------- --------------
Net sales $ 443,276 $ 433,541
Costs and expenses:
Material, labor and other
production costs 180,473 181,615
Selling, distribution and
marketing 155,274 146,652
Administrative and general 63,128 64,137
Interest expense 9,682 52,694
Other income - net (8,371) (16,346)
400,186 428,752
Income from continuing operations
before income tax expense 43,090 4,789
Income tax expense 16,676 1,853
Income from continuing operations 26,414 2,936
Income from discontinued operations,
net of tax - 1,302
Net income $ 26,414 $ 4,238
Earnings per share - basic:
Income from continuing operations $ 0.39 $ 0.04
Income from discontinued operations - 0.02
Net income $ 0.39 $ 0.06
Earnings per share - assuming
dilution:
Income from continuing operations $ 0.35 $ 0.04
Income from discontinued operations - 0.02
Net income $ 0.35 $ 0.06
Average number of common shares
outstanding 68,595,786 68,000,691
Average number of common shares
outstanding - assuming dilution 81,952,895 68,846,170
Dividends declared per share $ 0.08 $ -
AMERICAN GREETINGS CORPORATION
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FISCAL YEAR ENDING FEBRUARY 28, 2006
(In thousands of dollars)
(Unaudited)
May 31,
-------------------------------
2005 2004
-------------- --------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 214,273 $ 115,850
Short-term investments 208,750 -
Trade accounts receivable, net 196,210 241,656
Inventories 233,933 254,035
Deferred and refundable income taxes 165,123 154,713
Assets of businesses held for sale - 37,905
Prepaid expenses and other 210,043 220,773
Total current assets 1,228,332 1,024,932
GOODWILL 263,823 220,316
OTHER ASSETS 625,847 663,449
PROPERTY, PLANT AND EQUIPMENT - NET 331,234 346,538
$ 2,449,236 $ 2,255,235
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Debt due within one year $ 10,184 $-
Accounts payable 117,247 112,294
Accrued liabilities 120,192 113,329
Accrued compensation and benefits 65,514 62,921
Income taxes 31,178 15,731
Liabilities of businesses held for sale - 4,635
Other current liabilities 112,575 69,862
Total current liabilities 456,890 378,772
LONG-TERM DEBT 476,159 483,783
OTHER LIABILITIES 124,058 94,149
DEFERRED INCOME TAXES 34,612 27,300
SHAREHOLDERS' EQUITY
Common shares - Class A 63,365 63,502
Common shares - Class B 4,213 4,603
Capital in excess of par value 376,586 340,608
Treasury stock (487,563) (435,112)
Accumulated other comprehensive
income 14,894 13,591
Retained earnings 1,386,022 1,284,039
Total shareholders' equity 1,357,517 1,271,231
$ 2,449,236 $ 2,255,235
AMERICAN GREETINGS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
FISCAL YEAR ENDING FEBRUARY 28, 2006
(In thousands of dollars)
(Unaudited)
Three Months Ended
May 31,
-------------------------------
2005 2004
-------------- --------------
OPERATING ACTIVITIES:
Net income $ 26,414 $ 4,238
Income from discontinued operations - 1,302
Income from continuing operations 26,414 2,936
Adjustments to reconcile to net cash
provided by operating activities:
Gain on sale of investment - (3,090)
Loss (gain) on fixed assets 944 (21)
Loss on extinguishment of debt 862 39,024
Depreciation and amortization 14,646 14,091
Deferred income taxes 7,740 (7,192)
Changes in operating assets and
liabilities, net of acquisitions:
Increase in trade accounts receivable (10,895) (13,216)
Increase in inventories (13,947) (17,174)
Decrease in other current assets 14,360 7,946
Decrease in deferred costs - net 25,147 33,274
Decrease in accounts payable
and other liabilities (48,193) (28,145)
Other - net 654 (4,882)
Cash Provided by Operating Activities 17,732 23,551
INVESTING ACTIVITIES:
Proceeds from sale of short-term
investments 575,785 -
Purchases of short-term investments (575,795) -
Property, plant & equipment additions (8,607) (4,403)
Proceeds from sale of fixed assets 36 104
Investment in corporate owned life
insurance 1,614 1,098
Other - net (1,205) 26,879
Cash (Used) Provided by
Investing Activities (8,172) 23,678
FINANCING ACTIVITIES:
Reduction of long-term debt - (216,417)
Sale of stock under benefit plans 8,511 12,035
Purchase of treasury shares (45,533) (9,299)
Dividends to shareholders (5,500) -
Cash Used by Financing Activities (42,522) (213,681)
Cash Used by Discontinued Operations - (1,342)
EFFECT OF EXCHANGE RATE CHANGES ON CASH (3,032) (1,806)
DECREASE IN CASH AND CASH EQUIVALENTS (35,994) (169,600)
Cash and Cash Equivalents at
Beginning of Year 250,267 285,450
Cash and Cash Equivalents at End
of Period $ 214,273 $ 115,850
SOURCE American Greetings Corporation
-0- 06/30/2005
/CONTACT: Stephen J. Smith, VP, Treasurer and Investor Relations of
American Greetings Corporation, +1-216-252-4864, or
investor.relations@amgreetings.com/
/Company News On-Call: http://www.prnewswire.com/comp/044150.html/
/Web site: http://corporate.americangreetings.com
http://investors.americangreetings.com/
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