CLEVELAND, April 28, 2009 /PRNewswire-FirstCall via COMTEX/ -- American Greetings Corporation (NYSE: AM) today announced its fourth quarter results for the fiscal quarter ended February 28, 2009.
Fourth Quarter Results
For the fourth quarter of fiscal 2009, the Company reported total revenue of $422.5 million, a pre-tax loss from continuing operations of $67.9 million, and a loss from continuing operations of $50.1 million or $1.13 per share (all per-share amounts assume dilution). For the fourth quarter of fiscal 2008, the Company reported total revenue of $493.2 million, pre-tax income from continuing operations of $12.7 million, and income from continuing operations of $15.6 million or 31 cents per share.
During the fourth quarter of fiscal 2009, the Company recognized non-cash pre-tax goodwill impairment charges of $47.3 million (after-tax of approximately $42.6 million) that reduced earnings per share by 97 cents during the quarter.
In addition, the Company recognized expenses in its licensing business primarily due to changes in market conditions that caused a change in ultimate revenues related to animated video productions of $16.4 million (after-tax of approximately $10.0 million) that reduced earnings per share by 23 cents during the quarter.
The Company recorded a non-cash pre-tax long-lived asset impairment charge within the Retail Operations segment of $1.5 million (after-tax of approximately $0.9 million) that reduced earnings per share by 2 cents during the quarter.
The Company also announced on December 9, 2008, the elimination of approximately 275 positions as part of a cost reduction effort. As a result of those and other position eliminations during the quarter, the Company recognized a pre-tax severance charge of $7.5 million (after-tax of approximately $4.6 million) that reduced earnings per share by 10 cents.
Management Comments and Outlook
Chief Executive Officer Zev Weiss said, "This fiscal year we faced a challenging retail environment as a result of the steep economic downturn. We will continue to be even more vigilant in managing our supply chain and becoming more cost efficient. Our focus on efficiency, we believe, will help us drive a substantial improvement in cash flow next year and we are projecting cash flow from operating activities less capital expenditures to be at least $70 million. We are also excited about the recent acquisitions of Recycled Paper Greetings and the Papyrus brand, and satisfied that the sale of our Carlton Retail stores best positions our Company and those stores for success."
Financing Activities
Under the Company's $75 million share repurchase program, during the fourth quarter the Company purchased approximately 4.9 million shares of its common stock for $24.2 million.
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 manufacturer and retailer of innovative social expression products that assist consumers in enhancing their relationships. The Company's major greeting card brands are American Greetings, Carlton Cards, Gibson, Recycled Paper Greetings and Papyrus, and other paper product offerings include DesignWare party goods, American Greetings and Plus Mark gift-wrap and boxed cards and DateWorks calendars. American Greetings also has the largest collection of electronic greetings on the Web, including cards available at AmericanGreetings.com through AG Interactive, Inc. (the Company's online division). AG Interactive also offers digital photo sharing and personal publishing at PhotoWorks.com and Webshots.com and a one-stop source for online graphics and animations at Kiwee.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 $1.7 billion, and its products can be found in retail outlets domestically and worldwide. For more information on the Company, visit http://corporate.americangreetings.com.
Certain statements in this release 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;
- the ability to successfully integrate acquisitions, including the recent
acquisitions of Recycled Paper Greetings and the Papyrus brand;
- the Company's ability to successfully complete the proposed sale of
the Strawberry Shortcake and Care Bears properties;
- the Company's successful transition of the Retail Operations segment
to its buyer, Schurman Fine Papers, and the ability to achieve the
desired benefits associated with this and other dispositions;
- retail consolidations, acquisitions and bankruptcies, including the
possibility of resulting adverse changes to retail contract terms;
- the ability to achieve the desired benefits associated with its cost
reduction efforts;
- competitive terms of sale offered to customers;
- the Company's ability to comply with its debt covenants;
- 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;
- consumer acceptance of products as priced and marketed;
- the impact of technology on core product sales;
- the timing and impact of converting customers to a scan-based trading
model;
- escalation in the cost of providing employee health care;
- the ability to successfully implement, or achieve the desired benefits
associated with, any information systems refresh the Company may
implement;
- the Company's ability to achieve the desired accretive effect from
any share repurchase programs;
- 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, the public's acceptance of online greetings and other social expression products, and the ability to gain a leadership position in 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
FOURTH QUARTER CONSOLIDATED STATEMENT OF OPERATIONS
FISCAL YEAR ENDED FEBRUARY 28, 2009
(In thousands of dollars except share and per share amounts)
(Unaudited)
Quarter Ended Year Ended
------------- ----------
Feb. 28, Feb. 29, Feb. 28, Feb. 29,
2009 2008 2009 2008
--------- --------- --------- ---------
Net sales $403,467 $471,875 $1,646,399 $1,730,784
Other revenue 19,052 21,358 44,339 45,667
------ ------ ------ ------
Total revenue 422,519 493,233 1,690,738 1,776,451
Material, labor and
other production
costs 223,288 233,262 809,956 780,771
Selling,
distribution and
marketing expenses 153,818 176,778 618,899 621,478
Administrative and
general expenses 55,753 67,261 226,317 246,722
Goodwill and other
intangible assets
impairment 47,277 - 290,166 -
Other operating
income - net (67) (518) (1,396) (1,325)
--- ---- ------ ------
Operating (loss)
income (57,550) 16,450 (253,204) 128,805
Interest expense 5,881 5,575 22,854 20,006
Interest income (447) (1,903) (3,282) (7,758)
Other non-operating
expense (income) -
net 4,883 67 2,157 (7,411)
----- -- ----- ------
(Loss) income from
continuing operations
before income tax
(benefit) expense (67,867) 12,711 (274,933) 123,968
Income tax
(benefit) expense (17,789) (2,851) (47,174) 40,648
------- ------ ------- ------
(Loss) income from
continuing
operations (50,078) 15,562 (227,759) 83,320
Loss from
discontinued
operations, net of
tax - - - (317)
----- ----- ----- -----
Net (loss) income $(50,078) $15,562 $(227,759) $83,003
======== ======= ========= =======
(Loss) earnings per
share - basic:
(Loss) income from
continuing
operations $(1.13) $0.31 $(4.89) $1.54
Loss from
discontinued
operations - - - (0.01)
----- ----- ----- -----
Net (loss) income $(1.13) $0.31 $(4.89) $1.53
====== ===== ====== =====
(Loss) earnings per share
- assuming dilution:
(Loss) income from
continuing
operations $(1.13) $0.31 $(4.89) $1.53
Loss from
discontinued
operations - - - (0.01)
----- ----- ----- -----
Net (loss) income $(1.13) $0.31 $(4.89) $1.52
====== ===== ====== =====
Average number of
common shares
outstanding 44,144,203 50,895,638 46,543,780 54,236,961
Average number of
common shares
outstanding -
assuming dilution 44,144,203 50,972,834 46,543,780 54,506,048
Dividends declared
per share $0.24 $0.10 $0.60 $0.40
AMERICAN GREETINGS CORPORATION
FOURTH QUARTER CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FISCAL YEAR ENDED FEBRUARY 28, 2009
(In thousands of dollars)
(Unaudited)
-----------
February 28, February 29,
2009 2008
-------- --------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $60,216 $123,500
Trade accounts receivable,
net 63,281 61,902
Inventories 203,873 216,671
Deferred and refundable
income taxes 71,850 72,280
Prepaid expenses and other 162,175 195,017
------- -------
Total current assets 561,395 669,370
GOODWILL 26,871 285,072
OTHER ASSETS 368,958 420,219
DEFERRED AND REFUNDABLE
INCOME TAXES 178,785 133,762
Property, plant and
equipment - at cost 958,081 974,073
Less accumulated depreciation 660,302 678,068
------- -------
PROPERTY, PLANT AND
EQUIPMENT - NET 297,779 296,005
---------- ----------
$1,433,788 $1,804,428
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Debt due within one year $750 $22,690
Accounts payable 117,504 123,713
Accrued liabilities 75,673 79,345
Accrued compensation and
benefits 32,198 68,669
Income taxes payable 11,743 29,037
Other current liabilities 105,537 108,867
------- -------
Total current liabilities 343,405 432,321
LONG-TERM DEBT 389,473 220,618
OTHER LIABILITIES 149,820 181,720
DEFERRED INCOME TAXES AND
NONCURRENT INCOME TAXES
PAYABLE 21,901 26,358
SHAREHOLDERS' EQUITY
Common shares - Class A 37,043 45,324
Common shares - Class B 3,499 3,434
Capital in excess of par
value 449,085 445,696
Treasury stock (938,086) (872,949)
Accumulated other
comprehensive (loss)
income (67,278) 21,244
Retained earnings 1,044,926 1,300,662
---------- ----------
Total shareholders'
equity 529,189 943,411
---------- ----------
$1,433,788 $1,804,428
========== ==========
AMERICAN GREETINGS CORPORATION
FOURTH QUARTER CONSOLIDATED STATEMENT OF CASH FLOWS
FISCAL YEAR ENDED FEBRUARY 28, 2009
(In thousands of dollars)
(Unaudited)
Year Ended
----------
February February
28, 29,
2009 2008
-------- --------
OPERATING ACTIVITIES:
Net (loss) income $(227,759) $83,003
Loss from discontinued
operations - 317
------- ------
(Loss) income from continuing
operations (227,759) 83,320
Adjustments to reconcile (loss)
income from continuing
operations to cash flows
from operating activities:
Goodwill and other intangible
assets impairment 290,166 -
Net loss on disposal of fixed
assets 1,215 961
Depreciation and intangible
assets amortization 50,016 48,535
Deferred income taxes (29,438) (7,562)
Other non-cash charges 13,735 9,303
Changes in operating assets
and liabilities, net of
acquisitions and dispositions:
Trade accounts receivable (6,413) 41,758
Inventories 924 (28,456)
Other current assets 17,986 27,970
Deferred costs - net 27,596 53,438
Accounts payable and other
liabilities (67,542) 18,934
Other - net 2,554 (4,664)
------ ------
Total Cash Flows From
Operating Activities 73,040 243,537
INVESTING ACTIVITIES:
Proceeds from sale of short-
term investments - 692,985
Purchases of short-term
investments - (692,985)
Property, plant and equipment
additions (55,733) (56,623)
Cash payments for business
acquisitions, net of cash
acquired (37,882) (76,338)
Cash receipts related to
discontinued operations - 4,283
Proceeds from sale of fixed
assets 433 3,104
Other - net (44,153) -
------- -------
Total Cash Flows From
Investing Activities (137,335) (125,574)
FINANCING ACTIVITIES:
Increase in long-term debt 141,500 20,100
Reduction of long-term debt (22,509) -
Sale of stock under benefit
plans 525 27,156
Purchase of treasury shares (73,983) (172,328)
Dividends to shareholders (22,566) (21,803)
------- -------
Total Cash Flows From
Financing Activities 22,967 (146,875)
DISCONTINUED OPERATIONS:
Operating cash flows from
discontinued operations - (59)
------- -------
Total Cash Flows from
Discontinued Operations - (59)
EFFECT OF EXCHANGE RATE CHANGES
ON CASH (21,956) 7,758
------- -------
DECREASE IN CASH AND CASH
EQUIVALENTS (63,284) (21,213)
Cash and Cash Equivalents at
Beginning of Year 123,500 144,713
------- -------
Cash and Cash Equivalents at
End of Year $60,216 $123,500
======= ========
AMERICAN GREETINGS CORPORATION
FOURTH QUARTER CONSOLIDATED SEGMENT DISCLOSURES
FISCAL YEAR ENDED FEBRUARY 28, 2009
(In thousands of dollars)
(Unaudited)
Quarter Ended Year Ended
------------- ----------
February February February February
28, 29, 28, 29,
2009 2008 2009 2008
-------- -------- -------- --------
Total Revenue:
North American Social
Expression
Products $272,595 $286,948 $1,159,162 $1,187,520
Intersegment items (9,136) (13,788) (57,547) (57,210)
Exchange rate
adjustment (4,281) 1,178 (6,167) (668)
------- ------- --------- ---------
Net 259,178 274,338 1,095,448 1,129,642
International Social
Expression
Products 77,401 92,520 299,830 307,959
Exchange rate
adjustment (19,526) 1,200 (29,103) 3,367
------- ------ ------- -------
Net 57,875 93,720 270,727 311,326
Retail Operations 64,879 77,348 183,913 198,271
Exchange rate
adjustment (3,813) 605 (5,101) (922)
------ ------ ------ -------
Net 61,066 77,953 178,812 197,349
AG Interactive 21,756 22,690 84,254 78,652
Exchange rate
adjustment (551) 62 (841) 63
------ ------ ------ ------
Net 21,205 22,752 83,413 78,715
Non-reportable
segments 23,195 24,522 62,338 59,356
Unallocated - (52) - 63
-------- -------- ---------- ----------
$422,519 $493,233 $1,690,738 $1,776,451
======== ======== ========== ==========
Segment (Loss) Earnings:
North American Social
Expression
Products $(22,160) $23,417 $114,395 $220,285
Intersegment items (6,821) (10,304) (42,535) (42,953)
Exchange rate
adjustment (732) 670 (1,909) (104)
------ ------ ------ -------
Net (29,713) 13,783 69,951 177,228
International Social
Expression
Products (1,866) 11,569 (81,616) 24,223
Exchange rate
adjustment (855) 233 3,947 513
------ ------ ------ ------
Net (2,721) 11,802 (77,669) 24,736
Retail Operations 549 11,372 (19,123) (3,772)
Exchange rate
adjustment (148) (10) (108) 119
---- ------ ------ -----
Net 401 11,362 (19,231) (3,653)
AG Interactive (259) (1,909) (161,503) 6,755
Exchange rate
adjustment (318) (301) (188) (300)
---- ----- ------- -----
Net (577) (2,210) (161,691) 6,455
Non-reportable
segments (9,816) 1,181 (7,627) 3,779
Unallocated (24,473) (23,372) (76,590) (84,183)
Exchange rate
adjustment (968) 165 (2,076) (394)
------ ------ ------ ------
Net (25,441) (23,207) (78,666) (84,577)
-------- ------- --------- --------
$(67,867) $12,711 $(274,933) $123,968
======== ======= ========= ========
SOURCE American Greetings Corporation
http://corporate.americangreetings.com
