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| 8-K - FORM 8-K - AMERICAN GREETINGS CORP | d272547d8k.htm |
Exhibit 99.1
AMERICAN GREETINGS ANNOUNCES THIRD QUARTER EARNINGS
CLEVELAND (December 22, 2011) – American Greetings Corporation (NYSE: AM) today announced its results for the third fiscal quarter ended November 25, 2011.
Third Quarter Results
For the third quarter of fiscal 2012, the Company reported total revenue of $463.6 million, pre-tax income of $29.7 million, and net income of $20.2 million or 50 cents per share (all per-share amounts assume dilution). Compared to the prior year, revenue increased approximately $33.5 million, or about eight percent.
Last year, for the third quarter of fiscal 2011, the Company reported total revenue of $430.1 million, pre-tax income of $51.5 million, and net income of $32.2 million or 78 cents per share.
Management Comments
Chief Executive Officer Zev Weiss said, “I am delighted with our revenue growth this quarter in both our domestic and international businesses. We believe that our commitment to our product leadership strategy continues to be successful, our investments are helping to drive revenue, and we feel good about our overall momentum in the marketplace. With our strong revenue growth this quarter, we feel more confident regarding our ability to hit or surpass the full year revenue growth target of three percent.”
Outlook
Previously, for fiscal year 2012, the Company projected revenue to grow approximately 3 percent compared to fiscal year 2011. The Company projected cash flow from operating activities to fall within the range of $125 million to $145 million and capital expenditures between $45 million and $50 million, resulting in cash flow from operating activities minus capital expenditures of $80 million to $100 million.
As a result of the additional expenses and investments to support the Company’s product leadership strategy and its expanded customer relationships, as well as the information systems refresh project, the Company now expects fiscal year 2012 cash flow from operating activities, less capital expenditures, to be lower than previously estimated. The Company estimates cash flow from operating activities to be around $90 million to $110 million and capital expenditures to be around $55 million to $70 million, resulting in cash flow from operating activities minus capital expenditures of roughly $35 million to $50 million. As part of that estimate, and in order to support revenue growth, the Company expects a meaningful use of cash for balance sheet items such as working capital.
Financing Activities
Under the Company’s $75 million share repurchase program, during the third fiscal quarter the Company purchased approximately 2.0 million shares of its common stock for about $34.5 million. These repurchases complete the sixth share repurchase program announced in January, 2009. The
share repurchases this third fiscal quarter are a continuation of a multi-year effort under which the Company has reduced its diluted share count by about 50 percent over the past seven years.
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 Investors section of the American Greetings Web site at http://investors.americangreetings.com. A replay of the call will also be available on the site.
About American Greetings Corporation
For more than 100 years, American Greetings Corporation (NYSE: AM) has been a creator and manufacturer of innovative social expression products that assist consumers in enhancing their relationships to create happiness, laughter and love. The Company’s major greeting card lines are American Greetings, Carlton Cards, Gibson, Recycled Paper Greetings and Papyrus, and other paper product offerings include DesignWare party goods and American Greetings and Plus Mark gift-wrap and boxed cards. American Greetings also has one of the largest collections of greetings on the Web, including greeting cards available at Cardstore.com and electronic greeting cards available at AmericanGreetings.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 $1.6 billion, and its products can be found in retail outlets worldwide. For more information on the Company, visit http://corporate.americangreetings.com.
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CONTACT:
Gregory M. Steinberg
Treasurer and Executive Director of Investor Relations
American Greetings Corporation
216-252-4864
investor.relations@amgreetings.com
Non-GAAP Measures
Certain liquidity amounts included in the earnings release may be considered non-GAAP measures under the Securities and Exchange Commission’s Regulation G. Management believes that cash flow from operating activities minus capital expenditures provides a liquidity measure that is useful to investors in analyzing the cash generation of the Company.
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 performance, include, but are not limited to, the following:
| • | a weak retail environment and general economic conditions; |
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| • | competitive terms of sale offered to customers, including costs and other terms associated with new and expanded customer relationships; |
| • | the loss of one or more retail customers and/or retail consolidations, acquisitions and bankruptcies, including the possibility of resulting adverse changes to retail contract terms; |
| • | the timing and impact of expenses incurred and investments made to support new retail or product strategies as well as new product introductions and achieving the desired benefits from those investments; |
| • | the timing of investments in, together with the ability to successfully implement or achieve the desired benefits associated with, any information systems refresh the Company may implement; |
| • | the timing and impact of converting customers to a scan-based trading model; |
| • | the ability to achieve the desired benefits associated with the Company’s cost reduction efforts; |
| • | Schurman Fine Papers’ ability to successfully operate its retail operations and satisfy its obligations to the Company; |
| • | consumer acceptance of products as priced and marketed including the success of new and expanded advertising and marketing efforts, such as the Company’s on-line efforts through Cardstore.com; |
| • | the impact and availability of technology, including social media, on product sales; |
| • | escalation in the cost of providing employee health care; |
| • | the Company’s ability to achieve the desired accretive effect from any share repurchase programs; |
| • | 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; 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 ability to adapt to rapidly changing social media and 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; however the risks and uncertainties identified above are not the only risks the Company faces. Additional risks and uncertainties not presently known to the Company or that the Company believes to be immaterial also may adversely affect American Greetings. Should any known or unknown risks or uncertainties develop into actual events, or underlying assumptions prove inaccurate, these developments could have a material adverse effect on our business, financial condition and results of operations. 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 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 Fiscal 2011 Annual Report on Form 10-K.
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AMERICAN GREETINGS CORPORATION
THIRD QUARTER CONSOLIDATED STATEMENT OF INCOME
FISCAL YEAR ENDING FEBRUARY 29, 2012
(In thousands of dollars except share and per share amounts)
| (Unaudited) | ||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| November 25, 2011 |
November 26, 2010 |
November 25, 2011 |
November 26, 2010 |
|||||||||||||
| Net sales |
$ | 457,143 | $ | 421,990 | $ | 1,213,660 | $ | 1,147,434 | ||||||||
| Other revenue |
6,472 | 8,148 | 21,097 | 21,831 | ||||||||||||
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| Total revenue |
463,615 | 430,138 | 1,234,757 | 1,169,265 | ||||||||||||
| Material, labor and other production costs |
230,572 | 199,177 | 546,699 | 502,903 | ||||||||||||
| Selling, distribution and marketing expenses |
140,110 | 117,314 | 388,491 | 347,183 | ||||||||||||
| Administrative and general expenses |
60,510 | 58,725 | 186,734 | 186,950 | ||||||||||||
| Other operating income - net |
(813 | ) | (1,048 | ) | (6,858 | ) | (2,578 | ) | ||||||||
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| Operating income |
33,236 | 55,970 | 119,691 | 134,807 | ||||||||||||
| Interest expense |
5,821 | 6,221 | 17,708 | 19,141 | ||||||||||||
| Interest income |
(207 | ) | (176 | ) | (838 | ) | (586 | ) | ||||||||
| Other non-operating income - net |
(2,078 | ) | (1,618 | ) | (2,622 | ) | (3,321 | ) | ||||||||
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| Income before income tax expense |
29,700 | 51,543 | 105,443 | 119,573 | ||||||||||||
| Income tax expense |
9,454 | 19,380 | 38,128 | 48,039 | ||||||||||||
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| Net income |
$ | 20,246 | $ | 32,163 | $ | 67,315 | $ | 71,534 | ||||||||
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| Earnings per share - basic |
$ | 0.51 | $ | 0.80 | $ | 1.67 | $ | 1.79 | ||||||||
| Earnings per share - assuming dilution |
$ | 0.50 | $ | 0.78 | $ | 1.63 | $ | 1.75 | ||||||||
| Average number of common shares outstanding |
39,480,798 | 40,071,916 | 40,226,039 | 39,912,378 | ||||||||||||
| Average number of common shares outstanding - assuming dilution |
40,436,865 | 40,985,909 | 41,381,157 | 40,911,964 | ||||||||||||
| Dividends declared per share |
$ | 0.15 | $ | 0.14 | $ | 0.45 | $ | 0.42 | ||||||||
AMERICAN GREETINGS CORPORATION
THIRD QUARTER CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FISCAL YEAR ENDING FEBRUARY 29, 2012
(In thousands of dollars)
| (Unaudited) | ||||||||
| November 25, 2011 |
Restated November 26, 2010 |
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| ASSETS |
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| CURRENT ASSETS |
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| Cash and cash equivalents |
$ | 85,661 | $ | 93,899 | ||||
| Trade accounts receivable, net |
235,318 | 206,286 | ||||||
| Inventories |
214,412 | 181,511 | ||||||
| Deferred and refundable income taxes |
57,400 | 85,694 | ||||||
| Assets held for sale |
— | 14,148 | ||||||
| Prepaid expenses and other |
127,376 | 127,597 | ||||||
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| Total current assets |
720,167 | 709,135 | ||||||
| GOODWILL |
27,713 | 31,686 | ||||||
| OTHER ASSETS |
422,765 | 403,815 | ||||||
| DEFERRED AND REFUNDABLE INCOME TAXES |
128,595 | 146,767 | ||||||
| Property, plant and equipment - at cost |
882,709 | 847,085 | ||||||
| Less accumulated depreciation |
624,669 | 612,166 | ||||||
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| PROPERTY, PLANT AND EQUIPMENT - NET |
258,040 | 234,919 | ||||||
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| $ | 1,557,280 | $ | 1,526,322 | |||||
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| LIABILITIES AND SHAREHOLDERS’ EQUITY |
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| CURRENT LIABILITIES |
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| Accounts payable |
$ | 108,254 | $ | 97,899 | ||||
| Accrued liabilities |
67,596 | 66,797 | ||||||
| Accrued compensation and benefits |
58,411 | 59,128 | ||||||
| Income taxes payable |
26,626 | 39,593 | ||||||
| Other current liabilities |
90,440 | 85,156 | ||||||
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| Total current liabilities |
351,327 | 348,573 | ||||||
| LONG-TERM DEBT |
234,642 | 232,078 | ||||||
| OTHER LIABILITIES |
182,565 | 188,226 | ||||||
| DEFERRED INCOME TAXES AND |
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| NONCURRENT INCOME TAXES PAYABLE |
21,769 | 32,824 | ||||||
| SHAREHOLDERS’ EQUITY |
||||||||
| Common shares - Class A |
35,562 | 37,199 | ||||||
| Common shares - Class B |
2,778 | 2,905 | ||||||
| Capital in excess of par value |
509,999 | 486,399 | ||||||
| Treasury stock |
(995,338 | ) | (952,183 | ) | ||||
| Accumulated other comprehensive loss |
(14,293 | ) | (27,114 | ) | ||||
| Retained earnings |
1,228,269 | 1,177,415 | ||||||
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| Total shareholders’ equity |
766,977 | 724,621 | ||||||
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| $ | 1,557,280 | $ | 1,526,322 | |||||
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AMERICAN GREETINGS CORPORATION
THIRD QUARTER CONSOLIDATED STATEMENT OF CASH FLOWS
FISCAL YEAR ENDING FEBRUARY 29, 2012
(In thousands of dollars)
| (Unaudited) | ||||||||
| Nine Months Ended | ||||||||
| November 25, 2011 |
November 26, 2010 |
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| OPERATING ACTIVITIES: |
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| Net income |
$ | 67,315 | $ | 71,534 | ||||
| Adjustments to reconcile net income to cash flows from operating activities: |
||||||||
| Stock-based compensation |
8,038 | 9,735 | ||||||
| Net gain on dispositions |
(4,500 | ) | (254 | ) | ||||
| Net gain on disposal of fixed assets |
(807 | ) | (1,599 | ) | ||||
| Depreciation and intangible assets amortization |
29,719 | 30,336 | ||||||
| Deferred income taxes |
6,412 | 3,957 | ||||||
| Other non-cash charges |
2,747 | 2,616 | ||||||
| Changes in operating assets and liabilities, net of acquisitions: |
||||||||
| Trade accounts receivable |
(117,419 | ) | (71,336 | ) | ||||
| Inventories |
(30,939 | ) | (16,461 | ) | ||||
| Other current assets |
5,993 | (694 | ) | |||||
| Income taxes |
3,362 | 36,187 | ||||||
| Deferred costs - net |
(3,838 | ) | 19,365 | |||||
| Accounts payable and other liabilities |
3,528 | (31,541 | ) | |||||
| Other - net |
(1,576 | ) | 5,896 | |||||
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| Total Cash Flows From Operating Activities |
(31,965 | ) | 57,741 | |||||
| INVESTING ACTIVITIES: |
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| Property, plant and equipment additions |
(43,531 | ) | (19,660 | ) | ||||
| Cash payments for business acquisitions, net of cash acquired |
(5,899 | ) | — | |||||
| Proceeds from sale of fixed assets |
9,046 | 3,835 | ||||||
| Proceeds from escrow related to party goods transaction |
— | 25,151 | ||||||
| Proceeds from sale of intellectual properties |
4,500 | — | ||||||
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| Total Cash Flows From Investing Activities |
(35,884 | ) | 9,326 | |||||
| FINANCING ACTIVITIES: |
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| Net decrease in long-term debt |
— | (98,250 | ) | |||||
| Net decrease in short-term debt |
— | (1,000 | ) | |||||
| Sale of stock under benefit plans |
12,293 | 17,173 | ||||||
| Excess tax benefits from share-based payment awards |
2,380 | 2,658 | ||||||
| Purchase of treasury shares |
(55,304 | ) | (13,439 | ) | ||||
| Dividends to shareholders |
(18,146 | ) | (16,737 | ) | ||||
| Debt issuance costs |
— | (3,178 | ) | |||||
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| Total Cash Flows From Financing Activities |
(58,777 | ) | (112,773 | ) | ||||
| EFFECT OF EXCHANGE RATE CHANGES ON CASH |
(3,551 | ) | 1,656 | |||||
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| DECREASE IN CASH AND CASH EQUIVALENTS |
(130,177 | ) | (44,050 | ) | ||||
| Cash and Cash Equivalents at Beginning of Year |
215,838 | 137,949 | ||||||
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| Cash and Cash Equivalents at End of Period |
$ | 85,661 | $ | 93,899 | ||||
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AMERICAN GREETINGS CORPORATION
THIRD QUARTER CONSOLIDATED SEGMENT DISCLOSURES
FISCAL YEAR ENDING FEBRUARY 29, 2012
(In thousands of dollars)
| (Unaudited) | ||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| November 25, 2011 |
November 26, 2010 |
November 25, 2011 |
November 26, 2010 |
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| Total Revenue: |
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| North American Social Expression Products |
$ | 331,913 | $ | 317,521 | $ | 898,193 | $ | 877,988 | ||||||||
| International Social Expression Products |
103,352 | 80,103 | 249,448 | 192,412 | ||||||||||||
| AG Interactive |
16,878 | 19,233 | 49,664 | 55,954 | ||||||||||||
| Non-reportable segments |
11,472 | 13,281 | 37,452 | 42,911 | ||||||||||||
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| $ | 463,615 | $ | 430,138 | $ | 1,234,757 | $ | 1,169,265 | |||||||||
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| Segment Earnings (Loss): |
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| North American Social Expression Products |
$ | 28,016 | $ | 51,098 | $ | 113,009 | $ | 143,788 | ||||||||
| International Social Expression Products |
9,537 | 9,982 | 15,308 | 14,141 | ||||||||||||
| AG Interactive |
3,737 | 5,135 | 10,970 | 10,393 | ||||||||||||
| Non-reportable segments |
2,368 | 1,438 | 17,467 | 6,907 | ||||||||||||
| Unallocated |
(13,958 | ) | (16,110 | ) | (51,311 | ) | (55,656 | ) | ||||||||
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| $ | 29,700 | $ | 51,543 | $ | 105,443 | $ | 119,573 | |||||||||
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