American Greetings Announces First Quarter Earnings
CLEVELAND, June 29, 2011 /PRNewswire/ --
American Greetings Corporation (NYSE: AM) today announced its results for the first fiscal quarter ended May 27, 2011.
First Quarter Results
For the first quarter of fiscal 2012, the Company reported total revenue of $402.3 million, pre-tax income of $50.8 million, and net income of $32.6 million or 78 cents per share (all per-share amounts assume dilution). Revenue was reduced by $1.9 million as a result of scan-based trading conversions that occurred during the quarter. The pre-tax income impact of the scan-based trading conversions was $2.3 million (after-tax $1.4 million, reducing earnings per share by about 3 cents).
For the first quarter of fiscal 2011, the Company reported total revenue of $396.3 million, pre-tax income of $51.0 million, and net income of $30.8 million or 75 cents per share. The Company incurred pre-tax costs associated with the integrations of Papyrus and Recycled Paper Greetings of $3.4 million (after-tax of $2.1 million, reducing earnings per share by about 5 cents).
Management Comments and Outlook
Chief Executive Officer Zev Weiss said, "Despite the continuing erratic economic environment, we achieved a record level of earnings per share in the first quarter driven by the combination of the changes we made to our portfolio of businesses in recent years, our growing market share in North America, and the continuation of good expense management."
For fiscal 2012, the Company expects revenue to grow approximately 5% compared to fiscal 2011. The Company expects 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. This cash flow estimate includes an aggregate use of cash of approximately $5 million to $15 million for the combination of working capital, deferred costs, and taxes.
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 at http://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 creator and manufacturer of innovative social expression products that assist consumers in enhancing their relationships. 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 electronic greetings on the Web, including cards available at AmericanGreetings.com through AG Interactive, Inc. (the Company's online division). 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.
Non-GAAP Measures
Certain after-tax and liquidity amounts included in this earnings release may be considered non-GAAP measures under the Securities and Exchange Commission's Regulation G. The after-tax amounts were calculated based on the Company's statutory tax rate of approximately 38.9%. Management believes that after-tax information is useful in analyzing the Company's results and that cash flow from operating activities minus capital expenditures provides a liquidity measure 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 financial performance, include, but are not limited to, the following:
- a weak retail environment and general economic conditions;
- competitive terms of sale offered to customers;
- retail consolidations, acquisitions and bankruptcies, including the possibility of resulting adverse changes to retail contract terms;
- 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;
- 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;
- the ability to successfully implement or achieve the desired benefits associated with any information systems refresh the Company may implement;
- 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;
- the impact of technology, including social media, on core 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. 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 29, 2012
(In thousands of dollars except share and per share amounts)
(Unaudited)
Three Months Ended
------------------
May 27, 2011 May 28, 2010
------------ ------------ Net sales $396,776 $392,105
Other revenue 5,573 4,203
----- -----
Total revenue 402,349 396,308
Material, labor and other
production costs 157,929 158,013
Selling, distribution and
marketing expenses 123,292 117,551
Administrative and general
expenses 65,298 66,032
Other operating income - net (923) (594)
----- -----
Operating income 56,753 55,306
Interest expense 6,124 6,202
Interest income (321) (213)
Other non-operating expense
(income) - net 160 (1,700)
--- ------
Income before income tax
expense 50,790 51,017
Income tax expense 18,197 20,178
------ ------
Net income $32,593 $30,839
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Earnings per share - basic $0.80 $0.78
Earnings per share -assuming
dilution $0.78 $0.75
Average number of common
shares outstanding 40,500,357 39,638,568
Average number of common
shares outstanding -
assuming dilution 41,799,366 40,849,429
Dividends declared per share $0.15 $0.14
AMERICAN GREETINGS CORPORATION
FIRST QUARTER CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FISCAL YEAR ENDING FEBRUARY 29, 2012
(In thousands of dollars)
(Unaudited)
-----------
May 27, 2011 May 28, 2010
------------ ------------ ASSETS
CURRENT ASSETS
Cash and cash equivalents $211,139 $186,775
Trade accounts receivable, net 137,213 110,085
Inventories 203,346 157,913
Deferred and refundable income taxes 46,686 74,951
Assets held for sale 7,180 14,680
Prepaid expenses and other 117,315 118,046
------- -------
Total current assets 722,879 662,450
GOODWILL 29,701 30,238
OTHER ASSETS 431,472 413,237
DEFERRED AND REFUNDABLE INCOME TAXES 127,731 150,207
Property, plant and equipment -at
cost 859,189 835,707
Less accumulated depreciation 616,706 597,610
------- -------
PROPERTY, PLANT AND EQUIPMENT - NET 242,483 238,097
------- -------
$1,554,266 $1,494,229
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Debt due within one year $- $99,000
Accounts payable 98,641 80,205
Accrued liabilities 65,527 61,425
Accrued compensation and benefits 35,163 35,472
Income taxes payable 18,752 25,390
Other current liabilities 100,107 91,878
------- ------
Total current liabilities 318,190 393,370
LONG-TERM DEBT 233,298 230,973
OTHER LIABILITIES 186,484 179,643
DEFERRED INCOME TAXES AND
NONCURRENT INCOME TAXES PAYABLE 32,132 30,548
SHAREHOLDERS' EQUITY
Common shares - Class A 37,942 37,064
Common shares - Class B 2,803 2,926
Capital in excess of par value 502,131 478,676
Treasury stock (951,643) (951,830)
Accumulated other comprehensive
income (loss) 2,121 (40,257)
Retained earnings 1,190,808 1,133,116
--------- ---------
Total shareholders' equity 784,162 659,695
------- -------
$1,554,266 $1,494,229
========== ==========
AMERICAN GREETINGS CORPORATION
FIRST QUARTER CONSOLIDATED STATEMENT OF CASH FLOWS
FISCAL YEAR ENDING FEBRUARY 29, 2012
(In thousands of dollars)
(Unaudited)
Three Months Ended
------------------
May 27, 2011 May 28, 2010
------------ ------------ OPERATING ACTIVITIES:
Net income $32,593 $30,839
Adjustments to reconcile net income to
cash flows from operating activities:
Stock-based compensation 2,662 2,650
Net loss (gain) on disposal of fixed
assets 86 (151)
Depreciation and amortization 9,929 10,294
Deferred income taxes 1,147 (535)
Other non-cash charges 872 735
Changes in operating assets and
liabilities,
net of acquisitions and dispositions:
Trade accounts receivable (12,389) 19,576
Inventories (18,750) 4,483
Other current assets 2,442 (2,878)
Income taxes 7,596 15,830
Deferred costs - net 13,099 13,802
Accounts payable and other liabilities (27,922) (66,362)
Other - net 597 4,256
--- -----
Total Cash Flows From Operating
Activities 11,962 32,539
INVESTING ACTIVITIES:
Property, plant and equipment additions (8,891) (5,965)
Cash payments for business
acquisitions, net of cash acquired (5,992) -
Proceeds from sale of fixed assets 24 555
Proceeds from escrow related to party
goods transaction 0 24,523
--- ------
Total Cash Flows From Investing
Activities (14,859) 19,113
FINANCING ACTIVITIES:
Net decrease in long-term debt - (250)
Sale of stock under benefit plans 12,000 19,087
Purchase of treasury shares (9,942) (12,979)
Dividends to shareholders (6,062) (5,525)
------- ------
Total Cash Flows From Financing
Activities (4,004) 333
EFFECT OF EXCHANGE RATE CHANGES ON CASH 2,202 (3,159)
----- ------
(DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS (4,699) 48,826
Cash and Cash Equivalents at Beginning
of Year 215,838 137,949
------- -------
Cash and Cash Equivalents at End of
Period $211,139 $186,775
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AMERICAN GREETINGS CORPORATION
FIRST QUARTER CONSOLIDATED SEGMENT DISCLOSURES
FISCAL YEAR ENDING FEBRUARY 29, 2012
(In thousands of dollars)
(Unaudited)
Three Months Ended
------------------
May 27, 2011 May 28, 2010
------------ ------------
Total Revenue:
North American Social Expression
Products $303,228 $308,309
International Social Expression
Products 70,205 57,573
AG Interactive 16,717 18,554
Non-reportable segments 12,199 11,872
$402,349 $396,308
======== ========
Segment Earnings (Loss):
North American Social Expression
Products $59,618 $64,063
International Social Expression
Products 3,303 2,834
AG Interactive 2,312 2,372
Non-reportable segments 4,606 2,152
Unallocated (19,049) (20,404)
$50,790 $51,017
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