American Greetings Reports Financial Results for
Fiscal 2002 in Line with Projections
Corporation projects significant EPS and EBITDA improvements
in fiscal 2003
CLEVELAND, March 27 /PRNewswire-FirstCall/ -- American Greetings
Corporation (NYSE: AM)
today reported operating results in line with its projections for
the fourth quarter and 2002 fiscal year.
The Corporation achieved after-tax earnings before special charges
of $41.9 million, or 67 cents per share (58 cents per share assuming
dilution), for the fourth quarter ended Feb. 28, 2002.
These results compare to net income before special charges of $48.4
million, or 76 cents per share from the fourth quarter last year.
Including the after-tax impact of special charges amounting to $55.2
million ($88.3 million pre-tax), or 87 cents per share, for the
quarter, American Greetings reported a net loss of $13.1 million,
or 20 cents per share. That compares to a reported net loss of $127.7
million, or $2.01 per share, for the fourth quarter last year. Last
year's fourth quarter results included one- time, after-tax non-cash
charges of $176 million, or $2.77 per share, related to the write-down
of the Corporation's equity investment in Egreetings
Network, Inc., and its recording of a liability related to potential
tax exposure on deductions claimed for corporate-owned life insurance
(COLI) plans.
Special charges for the fourth quarter ended Feb. 28, 2002 include
the following:
Pre-tax (Loss)/
(loss)/ earnings per
income share
(millions) (after-tax)
Reported results $(21.1) $(.20)
Impact of special charges:
Scan-based trading 4.2 .04
Business reorganization 84.1 .83
Earnings before special charges $ 67.2 $ .67
Reported net sales in the fourth quarter were $656.3 million, compared to
$663.2 million in the same period last year. After removing the impact of the
Corporation's brand and product line size reduction initiatives, net sales for
the quarter were flat compared to the same period in fiscal 2001.
Morry Weiss, chairman and chief executive officer of American Greetings,
said fiscal 2002 was a year of transition for the Corporation. "Our primary
goal in the past year was to achieve the cost savings and process improvements
outlined in our restructuring plan, which we have accomplished," Weiss said.
"We are happy to have finished 2002 slightly above our earnings projections,
with stronger cash flow, lower-than-expected debt levels and better levels of
inventory and receivables than we anticipated. We achieved those results while
contending with challenging retail conditions, as well as the amount of
resources dedicated to our restructuring."
The Corporation achieved after-tax earnings before special charges of
$73.6 million, or $1.16 per share ($1.09 assuming dilution), for the year,
compared to $83.5 million, or $1.31 per share, last year. Including the after-
tax impact of special charges amounting to $195.9 million ($314.4 million pre-
tax), or $3.08 per share, for the year, the Corporation reported a net loss of
$122.3 million, or $1.92 per share. These results compare to a reported net
loss of $113.8 million, or $1.79 per share, last year. Last year's results
include the aforementioned $176 million in after-tax non-cash charges related
to the Corporation's Egreetings write-down and its COLI liability.
Special charges for the year ended Feb. 28, 2002 include the following:
Pre-tax (Loss)/
(loss)/ earnings per
income share
(millions) (after-tax)
Reported results ($196.3) ($1.92)
Impact of special charges:
Scan-based trading 88.6 .87
Business reorganization 208.1 2.04
Internet contract changes 17.7 .17
Earnings before special charges $118.1 $1.16
Net sales for the fiscal year ended Feb. 28, 2002, were $2.36 billion,
compared to $2.52 billion a year ago. The decrease in net sales reflects the
impact of the Corporation's retail inventory reduction initiative in the first
half of the year, as well as the rollout of its new value pricing strategy,
the implementation of its scan-based trading business model, and its brand and
product line size reduction initiatives. In addition, soft foreign exchange
rates negatively impacted the Corporation's sales results.
Earnings before interest, taxes, depreciation and amortization adjusted to
exclude special charges (adjusted EBITDA) were $109.4 million for the fourth
quarter. EBITDA adjusted to exclude special charges was $278.6 million for the
trailing twelve months and the fiscal year.
Weiss said American Greetings absorbed the impact of Kmart's recent
Chapter 11 filing without a material negative effect on the Corporation's
performance this year, due in part to its conversion to a scan-based trading
business model at Kmart, which greatly reduces its working capital investment.
Restructuring accomplishments
American Greetings announced that it has successfully implemented its
restructuring plan on schedule. "The reorganization of the Corporation's core
business has resulted in ongoing efficiencies characteristic of a streamlined,
efficient, process-driven organization that is aligned with the marketplace,"
Weiss said. "While we had to make some difficult decisions in fiscal 2002, we
have not only established a platform for future growth, we've taken out costs
and complexity from our operations and reinvigorated a business that had been
generating unacceptable results."
Fiscal year 2003 projections
American Greetings expects its earnings per share for fiscal 2003 to be
between $1.75 and $1.85 ($1.45 and $1.55 per share assuming dilution) and
earnings before interest, taxes, depreciation and amortization (adjusted
EBITDA) to be between $340 million and $350 million for the full year. These
projections reflect the impact from Kmart's recent Chapter 11 filing and
subsequent store closing plan, anticipated account gains and losses, as well
lower volatility in both pricing and retailer inventory levels.
"With our period of restructuring behind us, we look toward fiscal 2003 as
a year of improvement across our entire business," Weiss continued. "We will
focus on generating sales, improving profit margins and maximizing return on
assets. An additional priority throughout the year will be to identify growth
opportunities that will continue to improve our top-line performance and
profitability in fiscal year 2004 and beyond."
Leadership transition
American Greetings announced the planned retirement, effective April 2003,
of William S. Meyer, 55, senior vice president and chief financial officer.
"We are grateful for Bill's skilled leadership over the last 20 years," Weiss
said. "Since Bill became our chief financial officer in 1995, the Company and
its shareholders have benefited from his guidance through years of sales and
earnings growth, as well as the expansion of our business portfolio."
Meyer will continue in his current capacity as chief financial officer
during a transition over the next year. The Corporation has retained
Korn/Ferry International, the world's leader in senior-level executive
recruitment, to conduct an extensive search for a replacement.
Conference Call on the Web
American Greetings will broadcast its fourth quarter conference call on
the Internet at 10:30 a.m. Eastern time on Wednesday, March 27, 2002. The live
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 a 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 net sales of more than $2 billion. For more
information on the Corporation, visit http://corporate.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: retail
bankruptcies and consolidations, successful implementation of the
Corporation's restructuring, a weak retail environment, consumer acceptance of
products as priced and marketed, the impact of technology on core product
sales and competitive terms of sale offered to customers. Risks pertaining
specifically to the Corporation's electronic marketing business include the
viability of online advertising as a revenue generator and the public's
acceptance of online social expression products and subscriptions thereto.
AMERICAN GREETINGS CORPORATION
FOURTH QUARTER REPORT OF CONSOLIDATED OPERATIONS
FISCAL YEAR ENDED FEBRUARY 28, 2002
(In thousands of dollars except share and per share amounts)
(Unaudited)
Three Months Ended
February 28,
2002 2001
Net sales $656,342 $663,246
(Loss) income before income tax
(benefit) expense (21,065) 43,610
Income tax (benefit) expense (7,942) 171,299
Net loss (13,123) (127,689)
Loss per share and loss per share -
assuming dilution $(0.20) $(2.01)
Average number of common
shares outstanding 63,753,680 63,486,767
AMERICAN GREETINGS CORPORATION
FOURTH QUARTER REPORT OF CONSOLIDATED OPERATIONS
FISCAL YEAR ENDED FEBRUARY 28, 2002
(In thousands of dollars except share and per share amounts)
Twelve Months Ended
February 28,
2002 2001
Net sales $2,355,740 $2,518,814
(Loss) income before income tax
(benefit) expense and cumulative effect
of accounting change $(196,324) $98,633
Income tax (benefit) expense (74,014) 191,306
Loss before cumulative
effect of accounting change (122,310) (92,673)
Cumulative effect of accounting
change, net of tax -- (21,141)
Net loss $(122,310) $(113,814)
Loss per share and loss per
share - assuming dilution:
Before cumulative effect of
accounting change $(1.92) $(1.46)
Cumulative effect of accounting
change, net of tax -- (0.33)
Loss per share and loss per share -
assuming dilution $(1.92) $(1.79)
Average number of common
shares outstanding 63,615,193 63,646,405
AMERICAN GREETINGS CORPORATION
FOURTH QUARTER REPORT OF CONSOLIDATED OPERATIONS
FISCAL YEAR ENDED FEBRUARY 28, 2002
(In thousands of dollars except share and per share amounts)
(Unaudited)
Three Months Ended Twelve Months Ended
February 28, February 28,
2002 2001 2002 2001
Net sales $656,342 $663,246 $2,355,740 $2,518,814
Costs and expenses:
Material, labor and
other production costs 240,716 244,978 992,245 999,271
Selling, distribution
and marketing 260,043 258,460 1,059,092 1,068,543
Administrative and
general 99,167 71,306 313,655 280,202
Restructure charges 3,790 -- 56,715 --
Interest expense 19,455 15,738 78,599 55,387
Other expense - net 54,236 29,154 51,758 16,778
Total 677,407 619,636 2,552,064 2,420,181
Income (loss) before
income tax (benefit)
expense and cumulative
effect of accounting
change (21,065) 43,610 (196,324) 98,633
Income tax (benefit)
expense (7,942) 171,299 (74,014) 191,306
Loss before cumulative
effect of accounting
change (13,123) (127,689) (122,310) (92,673)
Cumulative effect of
accounting
change, net of tax -- -- -- (21,141)
Net loss $(13,123) $(127,689) $(122,310) $(113,814)
Loss per share and loss
per share - assuming
dilution:
Before cumulative
effect of accounting
change $(0.20) $(2.01) $(1.92) $(1.46)
Cumulative effect of
accounting change,
net of tax -- -- -- (0.33)
Loss per share and
loss per share -
assuming dilution $(0.20) $(2.01) $(1.92) $(1.79)
Average number of common
shares outstanding 63,753,680 63,486,767 63,615,193 63,646,405
AMERICAN GREETINGS CORPORATION
FOURTH QUARTER REPORT OF CONSOLIDATED OPERATIONS
FISCAL YEAR ENDED 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 2002
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, clarified
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 this accounting
method, the Corporation recognizes revenue on these seasonal
shipments at the approximate date the merchandise is received
by the customer, commonly referred to in the industry as the
ship-to-arrive date ("STA"), and not upon shipment from the
distribution facility. STA is a more preferable method of
recording revenue due to the large volumes of seasonal product
shipment activity and the lead 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 (net of tax of $12,564)
or approximately $0.33 per share, which is included in
operations for the year ended February 28, 2001.
Note D: Acquisitions: On September 12, 2001, the Corporation
completed the acquisition of the BlueMountain.com division of
At Home Corporation in a cash transaction. The consolidated
results include the results of BlueMountain.com from the date
of acquisition.
On March 19, 2001, the Corporation completed the acquisition
of all outstanding shares of Egreetings Network, Inc.
("Egreetings") in a cash transaction. The Corporation had
previously held a minority interest in Egreetings. The
consolidated results include the results of Egreetings from
the date of acquisition.
On July 13, 2000, the Corporation completed its acquisition of
CPS Corporation ("CPS") for cash and shares of the
Corporation's common stock.
The consolidated results include the results of CPS from the
date of acquisition.
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.
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 relating to
these agreements are charged to operations on a straight-line
basis over the effective period of each agreement. The
Corporation generally enters into these agreements for an
initial estimated period of five to six years. The majority
of individual agreements include a minimum purchase commitment
to the Corporation on the part of the customer. In those
cases, the Corporation periodically reviews the progress
toward the commitment and adjusts the estimated amortization
period accordingly. Deferred costs estimated to be charged to
operations during the next twelve months are classified with
prepaid expenses and other.
Note F: Restructure and Special Charges: During the year ended
February 28, 2002, the Corporation recorded a pre-tax
restructuring charge of $56,715 ($35,333 net of tax, or
earnings per share of $0.56). This charge was for costs
associated with the consolidation and rationalization of
certain of the Corporation's domestic and foreign
manufacturing and distribution operations, including employee
severance and benefit termination costs. The Corporation also
recorded a pre-tax impairment charge of $37,000 to write-down
goodwill related to its operating unit in Australasia. This
amount is included in other expense _ net. In addition, the
Corporation recorded a pre-tax charge of $49,082 included in
material, labor and other production costs and a $16,206
reduction of net sales associated with a product line size
reduction and the elimination of the Corporation's Forget Me
Not greeting card brand. The Corporation also incurred pre-tax
costs of $66,838 for other project-related expenses. The
total pre-tax impact of the restructuring and inventory
charges was $225,841 ($140,699 net of tax), or $2.21 per
share.
Also during the period, the Corporation implemented its scan-
based trading business model with certain of its retailers.
The impacts of its implementation were reductions in its net
sales and material, labor and other production costs of
$64,901 and $8,599, respectively. In addition, the
Corporation incurred implementation and other costs of $32,305
for a total pre-tax impact of $88,607 ($55,203 net of tax), or
$0.87 per share.
The total pre-tax impact of special charges and the
implementation of the scan-based trading business model was
$314,448, or $3.08 per share.
AMERICAN GREETINGS CORPORATION
FOURTH QUARTER REPORT OF CONSOLIDATED FINANCIAL POSITION
FISCAL YEAR ENDED FEBRUARY 28, 2002
(In thousands of dollars)
February 28,
2002 2001
ASSETS
CURRENT ASSETS
Cash and cash equivalents $100,979 $51,691
Accounts receivable, less allowances
of $137,121 and $184,799, respectively
(principally for sales returns) 288,986 387,534
Inventories 290,804 365,221
Deferred and refundable income taxes 200,206 190,241
Prepaid expenses and other 185,207 211,049
Total current assets 1,066,182 1,205,736
GOODWILL - NET 199,195 229,802
OTHER ASSETS 933,133 799,348
PROPERTY, PLANT AND EQUIPMENT - NET 416,485 477,188
Total $2,614,995 $2,712,074
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Debt due within one year $11,720 $378,904
Accounts payable and accrued liabilities 318,957 304,063
Accrued compensation and benefits 109,004 89,936
Dividends payable -- 12,732
Income taxes 150,588 192,936
Other current liabilities 125,771 132,710
Total current liabilities 716,040 1,111,281
LONG-TERM DEBT 853,113 380,124
OTHER LIABILITIES 115,795 146,187
DEFERRED INCOME TAXES 27,628 27,292
SHAREHOLDERS' EQUITY
Common shares - Class A 59,153 58,860
Common shares - Class B 4,608 4,629
Capital in excess of par value 286,158 286,054
Treasury stock (438,824) (447,127)
Accumulated other comprehensive loss (69,614) (58,179)
Retained earnings 1,060,938 1,202,953
Total shareholders' equity 902,419 1,047,190
Total $2,614,995 $2,712,074
AMERICAN GREETINGS CORPORATION
FOURTH QUARTER REPORT OF CONSOLIDATED CASH FLOWS
FISCAL YEAR ENDING FEBRUARY 28, 2002
(In thousands of dollars)
Twelve Months Ended
February 28,
2002 2001
OPERATING ACTIVITIES:
Net loss $(122,310) $(113,814)
Adjustments to reconcile to net cash
provided by operating activities:
Cumulative effect of accounting
change, net of tax -- 21,141
Restructure charges 37,510 --
Impairment charge 37,000 --
Write-down of equity investment -- 32,554
Depreciation and amortization 84,308 98,057
Deferred income taxes (3,463) 61,227
Changes in operating assets and
liabilities, net of effects from
acquisitions:
Decrease in trade accounts
receivable 94,906 29,201
Decrease (increase) in
inventories 63,942 (46,587)
Decrease (increase) in other
current assets 7,569 (67,292)
(Increase) decrease in deferred
cost - net (124,798) 4,110
(Decrease) increase in accounts
payable and other liabilities (37,176) 87,256
Other - net (1,137) 3,947
Cash Provided by Operating
Activities 36,351 109,800
INVESTING ACTIVITIES:
Business acquisitions and
divestitures (22,500) (179,993)
Property, plant & equipment additions (28,969) (74,382)
Proceeds from sale of fixed assets 4,020 22,294
Investment in corporate owned life
insurance (8,927) 181
Other - net (16,768) 33,944
Cash Used by Investing Activities (73,144) (197,956)
FINANCING ACTIVITIES:
Increase in long-term debt 554,398 --
Reduction of long-term debt (81,122) (80,431)
(Decrease) increase in short-term debt (363,437) 257,541
Sale of stock under benefit plans 2,929 --
Purchase of treasury shares (121) (45,530)
Dividends to shareholders (26,566) (52,743)
Cash Provided by Financing Activities 86,081 78,837
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 49,288 (9,319)
Cash and Cash Equivalents at
Beginning of Year 51,691 61,010
Cash and Cash Equivalents at End
of Year $100,979 $51,691
MAKE YOUR OPINION COUNT - Click Here
http://tbutton.prnewswire.com/prn/11690X82118201
SOURCE American Greetings Corporation
|
