American Greetings Reports Second Quarter Financial
Results in Line with Projections
Corporation declares 200th consecutive dividend
CLEVELAND, Sept. 20 /PRNewswire/ -- American Greetings Corporation
(NYSE: AM)
today reported operating results in line with projections for the
second quarter of fiscal 2002.
The Corporation realized a net loss before one-time special charges
of $28.2 million, or 44 cents per share, for the second quarter
ended Aug. 31, 2001. Including the net impact of after-tax one-time
special charges of $7.5 million ($12.0 million pre-tax), or 12 cents
per share, on the quarter, American Greetings reported a net loss
of $35.7 million, or 56 cents per share. These results compare to
a net loss of $35.5 million, or 55 cents per share, for the same
period last year.
The $7.5 million in one-time after-tax special charges in the second
quarter consists primarily of costs related to the Corporation's
previously announced reorganization of its core business.
Reported sales in the second quarter were $488.2 million, compared
to $493.7 million in the second quarter last year.
Morry Weiss, chairman and chief executive officer of American Greetings,
said the successful integration of two recent acquisitions, Gibson
Greetings and CPS Corporation, will help the Corporation achieve
expectations for the year. "We are seeing the positive impact of
the integration of Gibson and CPS on our operating margins," Weiss
said.
"We are also happy to report that we completed our refinancing and
that our organizational restructuring continues to be on track,"
Weiss added. "We are confident that we will achieve the $90 million
in cost savings outlined in our restructuring plan in fiscal 2003."
The Corporation reported a net loss before one-time special charges
of $9.8 million, or 15 cents per share, for the first six months
of fiscal 2002. This compares to last year's loss before the cumulative
effect of accounting changes of $2.4 million, or 3 cents per share,
excluding a one-time gain on the sale of an asset.
Including one-time special charges, American Greetings reported
a net loss of $115.8 million, or $1.82 per share, for the first
six months of fiscal 2002, compared to income before the cumulative
effect of accounting changes of $3.0 million, or 5 cents per share,
in the same period last year.
Net sales for the first six months were $994.0 million, compared
to $1.089 billion for the first half of fiscal 2000. The decrease
in net sales reflects the impact of the Corporation's retail inventory
reduction initiative, the rollout of its new value pricing strategy
and the
implementation of its scan-based trading business model. The Corporation
believes the pricing reset and inventory reduction projects are
both complete as of the end of the second quarter.
American Greetings also reaffirmed its previously stated earnings
per share projections of $1.10 to $1.20 for the full year, excluding
one-time special charges and prior to the impact of any dilution.
Dividend Declared
The Board of Directors of American Greetings declared a regular
quarterly dividend of 10 cents per share. The dividend, payable
to holders of both Class A and Class B Common Shares, will be paid
on Dec. 7, 2001 to shareholders of record as of Nov. 21, 2001. This
will be the 200th consecutive quarter that American Greetings has
paid a dividend.
Conference Call on the Web
American Greetings will broadcast its second quarter conference
call live on the Internet at 10:30 a.m. Eastern time on Thursday,
Sept. 20, 2001.
The conference call will be accessible through the Investor Relations
section of the American Greetings corporate Web site at
http://corporate.americangreetings.com/
. Minimum requirements to listen to the Web cast are Windows Media
Player software (available free at http://www.microsoft.com/),
audio capabilities, and at least a 14.4Kbps connection to the Internet.
A replay of the call will also be available on the site.
About American Greetings
American Greetings Corporation (NYSE: AM)
is the world's largest publicly held creator, manufacturer and distributor
of greeting cards and social expression products. Its staff of artists,
designers and writers comprises one of the largest creative departments
in the world and helps consumers "say it best" by supplying more
than 15,000 greeting card designs to retail outlets in nearly every
English-speaking country. Located in Cleveland, Ohio, American Greetings
generates annual sales of more than $2.5 billion. For more information
on the Corporation, visit http//www.americangreetings.com on the
World Wide Web.
The statements contained in this release that are not historical
facts are forward-looking statements. Actual results may differ
materially from those projected in the forward-looking statements.
These forward-looking statements involve risks and uncertainties,
including but not limited to, the following risks: retail bankruptcies
and consolidations, successful integration of acquisitions and implementation
of the Corporation's restructuring plan, a weak retail environment
and competitive terms of sale offered to customers to
expand or maintain business. Risks pertaining specifically to the
Corporation's electronic marketing business include the ability
of
AmericanGreetings.com to attract strategic partners as investors,
the viability of online advertising as a revenue generator, and
the public's acceptance of online greetings.
AMERICAN GREETINGS CORPORATION
SECOND QUARTER REPORT OF CONSOLIDATED OPERATIONS
FISCAL YEAR ENDING FEBRUARY 28, 2002
(In thousands of dollars except per share amounts)
(Unaudited)
Three Months Ended
August 31,
2001 2000
Net sales $488,225 $493,732
Loss before income taxes (57,329) (55,842)
Income tax benefit (21,613) (20,337)
Net loss (35,716) (35,505)
Loss per share and loss per share
assuming dilution $(0.56) $(0.55)
Average number of common
shares outstanding 63,502,624 63,088,531
AMERICAN GREETINGS CORPORATION
SECOND QUARTER REPORT OF CONSOLIDATED OPERATIONS
FISCAL YEAR ENDING FEBRUARY 28, 2002
(In thousands of dollars except per share amounts)
(Unaudited)
Six Months Ended
August 31,
2001 2000
Net sales $993,965 $1,089,473
(Loss) income before restructure
charges, income taxes and cumulative
effect of accounting change (132,969) 4,702
(Loss) income before income taxes
and cumulative effect of
accounting change (185,894) 4,702
Income tax (benefit) expense (70,082) 1,701
(Loss) income before cumulative
effect of accounting change (115,812) 3,001
Cumulative effect of accounting
change, net of tax -- (21,141)
Net loss $(115,812) $(18,140)
(Loss) earnings per share:
Before cumulative effect of
accounting change $(1.82) $0.05
Cumulative effect of accounting
change, net of tax -- (0.33)
Total $(1.82) $(0.28)
Average number of common
shares outstanding 63,500,674 63,796,233
AMERICAN GREETINGS CORPORATION
SECOND QUARTER REPORT OF CONSOLIDATED OPERATIONS
FISCAL YEAR ENDING FEBRUARY 28, 2002
(In thousands of dollars except per share amounts)
(Unaudited) (Unaudited)
Three Months Ended Six Months Ended
August 31, August 31,
2001 2000 2001 2000
Net sales $488,225 $493,732 $993,965 $1,089,473
Costs and expenses:
Material, labor and
other production costs 186,401 195,111 438,017 398,435
Selling, distribution
and marketing 259,365 269,199 514,264 532,756
Administrative and
general 77,429 69,815 143,198 138,570
Restructure charges -- -- 52,925 --
Interest expense 22,089 13,808 35,525 24,583
Other expense (income)
- net 270 1,641 (4,070) (9,573)
Total 545,554 549,574 1,179,859 1,084,771
(Loss) income before
income taxes and
cumulative effect of
accounting change (57,329) (55,842) (185,894) 4,702
Income tax (benefit)
expense (21,613) (20,337) (70,082) 1,701
(Loss) income before
cumulative effect of
accounting change (35,716) (35,505) (115,812) 3,001
Cumulative effect of
accounting change,
net of tax -- -- -- (21,141)
Net loss $(35,716) $(35,505) $(115,812) $(18,140)
(Loss) earnings per share:
Before cumulative
effect of accounting
change $(0.56) $(0.55) $(1.82) $0.05
Cumulative effect of
accounting change,
net of tax -- -- -- (0.33)
Loss per share and loss
per share assuming
dilution $(0.56) $(0.55) $(1.82) $(0.28)
Average number of common
shares outstanding 63,502,624 63,088,531 63,500,674 63,796,233
AMERICAN GREETINGS CORPORATION
SECOND QUARTER REPORT OF CONSOLIDATED SALES AND INCOME
FISCAL YEAR ENDING FEBRUARY 28, 2002
(In thousands of dollars except per share amounts)
Note A: Seasonal Nature of Business: The Corporation's business is
seasonal in nature. Therefore, the results of operations for
interim periods are not necessarily indicative of the results for
the fiscal year taken as a whole.
Note B: Reclassifications: Certain amounts in the prior year financial
statements have been reclassified to conform to the 2001
presentation.
Note C: Cumulative Effect of Accounting Change: In December 1999, the
Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101, "Revenue Recognition in Financial Statements"
(SAB 101), which among other guidance, clarifies the Staff's
views on various revenue recognition and reporting matters. As a
result, effective March 1, 2000, the Corporation adopted a change
in its method of accounting for certain shipments of seasonal
product. Under the new accounting method, the Corporation
recognizes revenue on these seasonal shipments at the approximate
date the merchandise is received by the customer and not upon
shipment from the distribution facility. Customer receipt is a
more preferable method of recording revenue due to the large
volumes of seasonal product shipment activity and the time
required to achieve customer requested delivery dates. The
implementation of this change was accounted for as a change in
accounting principle and applied cumulatively as if the change
occurred at March 1, 2000. The effect of the change was a one-
time reduction to the Corporation's earnings of $21,141, which is
included in operations for the six months ended August 31, 2000.
Note D: Acquisitions: On March 9, 2000, the Corporation completed the
acquisition of all outstanding shares of Gibson Greetings, Inc.
("Gibson") in a cash transaction. The consolidated results
include the results of Gibson from the date of acquisition
forward.
Note E: Deferred Costs: The major components of prepaid expenses and
other and other assets are deferred costs relating to agreements
with certain customers. Total commitments under the agreements
are capitalized as deferred costs and future payment commitments,
if any, are recorded as liabilities when the agreements are
consummated. Deferred costs are charged to operations on a
straight-line basis over the effective period of each agreement,
generally three to six years. Deferred costs estimated to be
charged to operations during the next twelve months are
classified with prepaid expenses and other.
Note F: Special Charges: During the six months ended August 31, 2001,
the Corporation recorded a pre-tax restructuring charge of
$52,925. The primary components of this charge were costs
associated with the shutdown of certain of the Corporation's
domestic and foreign manufacturing and distribution operations,
including employee severance and benefit termination costs. The
Corporation's Internet unit also recorded a pre-tax charge to
write off the value of a partner contract in the amount of
$17,727. In addition, the Corporation recorded a pre-tax charge
of $54,014 during the period to write down inventory in its
domestic operations to net realizable value associated with its
previously-announced one-time efforts. This amount is classified
as material, labor, and other production costs. The Corporation
also incurred pre-tax costs of $9,806 for other project-related
expenses. The total pre-tax impact of the restructuring and
inventory charges was $116,745 ($72,732 net of tax), or $1.15 per
share.
Also during the period, the Corporation began implementing its
scan-based trading business model with certain of its retailers.
The impact of its implementation were reductions in its net sales
and material, labor and other production costs of $56,207 and
$10,068, respectively. In addition, the Corporation incurred
implementation costs of $7,216 for a total pre-tax impact of
$53,355 ($33,241 net of tax), or $0.52 per share.
AMERICAN GREETINGS CORPORATION
SECOND QUARTER REPORT OF CONSOLIDATED FINANCIAL POSITION
FISCAL YEAR ENDING FEBRUARY 28, 2002
(In thousands of dollars except per share amounts)
(Unaudited)
August 31,
2001 2000
ASSETS
CURRENT ASSETS
Cash and cash equivalents $74,883 $66,147
Accounts receivable, less allowances
of $143,725 and $91,392, respectively
(principally for sales returns) 369,544 363,690
Inventories 429,657 434,213
Deferred and refundable income taxes 164,924 226,546
Prepaid expenses and other 215,298 232,649
Total current assets 1,254,306 1,323,245
GOODWILL - NET 227,202 211,593
OTHER ASSETS 906,291 837,994
PROPERTY, PLANT AND EQUIPMENT - NET 454,587 472,023
Total $2,842,386 $2,844,855
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Debt due within one year $141,311 $509,758
Accounts payable and accrued
liabilities 350,914 292,519
Accrued compensation and benefits 86,667 74,533
Dividends payable 6,367 13,105
Other current liabilities 260,317 132,709
Total current liabilities 845,576 1,022,624
LONG-TERM DEBT 850,250 398,902
OTHER LIABILITIES 199,585 210,324
DEFERRED INCOME TAXES 23,005 53,805
SHAREHOLDERS' EQUITY
Common shares - Class A 58,877 58,956
Common shares - Class B 4,626 4,647
Capital in excess of par value 286,054 304,970
Treasury stock (447,124) (445,509)
Accumulated other comprehensive loss (58,844) (57,063)
Retained earnings 1,080,381 1,293,199
Total shareholders' equity 923,970 1,159,200
Total $2,842,386 $2,844,855
AMERICAN GREETINGS CORPORATION
SECOND QUARTER REPORT OF CONSOLIDATED CASH FLOW
FISCAL YEAR ENDING FEBRUARY 28, 2002
(In thousands of dollars except per share amounts)
(Unaudited)
Six Months Ended
August 31,
2001 2000
OPERATING ACTIVITIES:
Net loss $(115,812) $(18,140)
Adjustments to reconcile to net
cash provided by operating activities:
Cumulative effect of accounting
change, net of tax -- 21,141
Restructure charges 50,264 --
Depreciation and amortization 42,401 46,069
Deferred and refundable income
taxes 27,170 (3,770)
Changes in operating assets and
liabilities, net of effects from
acquisitions:
Decrease in trade accounts receivable 18,717 55,368
Increase in inventories (64,399) (107,589)
Increase in other current assets (2,287) (12,005)
(Increase) decrease in
deferred cost - net (60,555) 28,861
Decrease in accounts payable
and other liabilities (71,266) (63,568)
Other - net 7,344 (7,444)
Cash Used by Operating
Activities (168,423) (61,077)
INVESTING ACTIVITIES:
Business acquisitions -- (168,575)
Property, plant & equipment
additions (20,988) (33,804)
Proceeds from sale of fixed assets 164 22,888
Investment in corporate owned life
insurance 2,467 93
Other - net (4,449) (8,700)
Cash Used by Investing Activities (22,806) (188,098)
FINANCING ACTIVITIES:
Increase in long-term debt 540,555 --
Reduction of long-term debt (78,402) (49,785)
(Decrease) increase in short-term
debt (234,580) 373,781
Sale of stock under benefit plans 137 --
Purchase of treasury shares (214) (43,596)
Dividends to shareholders (13,075) (26,088)
Cash Provided by Financing Activities 214,421 254,312
INCREASE IN CASH AND EQUIVALENTS 23,192 5,137
Cash and Equivalents at
Beginning of Year 51,691 61,010
Cash and Equivalents at End of Period $74,883 $66,147
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