American Greetings Announces Earnings Per Share
for Fiscal 2004 in Line with Projections
* Cash flow from operating and investing activities of $259 million
substantially exceeds estimate
* Corporation announces intent to make tender offer for 11.75 percent
notes
* Including tender, debt reduction over 13 months expected to total
nearly $400 million
CLEVELAND, March 31 /PRNewswire-FirstCall/ -- American Greetings
Corporation (NYSE: AM) today announced results in line with its December
estimate for the fiscal year ended Feb. 29, 2004. The Corporation also
announced its intent to make a tender offer for its 11.75 percent senior
subordinated notes due 2008.
American Greetings reported net income of $48.3 million, or 62 cents per
share, on net sales of $535.0 million, for the fiscal 2004 fourth quarter
ended Feb. 29, 2004 (all per-share amounts assume dilution). These results
compare to net income of $45.4 million, or 60 cents per share, on net sales of
$525.9 million in the fourth quarter last year.
For the full year, the Corporation reported net income of $104.7 million,
or $1.40 per share, on net sales of $2.0 billion. Included in the 2004 year-
to-date results are $18.4 million in pretax costs ($10.4 after taxes) incurred
in the first and third quarters for debt repurchases totaling $181.6 million.
Excluding these costs, American Greetings realized earnings per share of $1.53
on net income of $112.2 million for the full year. The Corporation believes
its results excluding these costs are useful for the purpose of providing a
comparable analysis to the prior year. Last year, the Corporation reported net
income of $121.1 million, or $1.63 per share, on net sales of $2.0 billion for
the same period. Last year's results included a $12.0 million pretax gain from
the sale of an equity investment.
Tender offer
American Greetings announced its intent to make a cash tender offer for
all of its $196.4 million outstanding 11.75 percent senior subordinated notes
due July 2008. The Corporation is undertaking this initiative in an effort to
reduce its future interest expense and to increase its financial flexibility.
The offer is subject to an amendment of the credit agreement for the
Corporation's revolving credit facility. American Greetings anticipates
receiving this amendment by the expiration date of the tender offer. The
expected commencement date of this offer is April 14, 2004, and the expected
expiration date is May 12, 2004. This press release constitutes neither an
offer to purchase nor a solicitation of an offer to sell the notes. Additional
details related to the intended tender offer are available in the
Corporation's Form 8-K furnished on March 31, 2004.
Management comments and fiscal year 2005 outlook
Chief Executive Officer Zev Weiss said fiscal 2004 was a year in which
American Greetings made substantial progress toward its long-term goals. "We
are pleased that we achieved our revised earnings per share estimate and
generated cash flow from operating and investing activities of $259 million,"
Weiss said. "Our exceptional cash flow enabled us to pay down $182 million of
debt during fiscal 2004 and has left us with sufficient cash to eliminate our
high-yield debt in the first quarter. With our tender offer, we expect to have
reduced debt nearly $400 million within a 13-month period, which will result
in long-term benefits in the form of interest expense savings."
Weiss said the Company's focus on executing its strategic initiatives will
remain its top priority. "While we have made meaningful improvements in our
business over the past year, we will continue to focus on driving costs out of
our supply chain in fiscal 2005," Weiss said. "We will also refine our longer-
term strategy for growing our top line and will begin to implement some of our
initial growth programs during the year."
American Greetings anticipates its earnings per share for the first
quarter of fiscal year 2005 will be between 29 and 34 cents. For the full
year, the Corporation projects its earnings per share to be between $1.63 and
$1.68. The Corporation has not included an estimate for the costs associated
with its bond tender offer in its first-quarter or full-year projections. The
Corporation also projects cash flow from operating and investing activities of
approximately $200 million in fiscal year 2005.
Planned stock sale by Chairman
American Greetings announced that Morry Weiss, chairman of the board, has
advised the Corporation that he may sell up to 800,000 shares of American
Greetings class A and B stock, including shares subject to options, some of
which the Corporation may buy back and place into treasury stock. Weiss, age
63, is considering these sales as part of a multiyear estate planning
strategy. As reported in the Corporation's proxy, Weiss held 1.8 million
shares and options in June of 2003. Weiss has also advised the Company that he
may enter into a 10b5-1 plan to assist in the execution of this estate-
planning strategy.
Conference call on the Web
American Greetings will broadcast its conference call live on the Internet
at 9:30 a.m. Eastern time today. The conference call will be accessible
through the Investor Relations section of the American Greetings Web site
at http://corporate.americangreetings.com/ . A replay of the call will be
available on the site.
About American Greetings Corporation
American Greetings Corporation (NYSE: AM) is one of the world's largest
manufacturers of social expression products. Along with greeting cards, its
product lines include gift wrap, party goods, reading glasses, candles,
stationery, calendars, educational products, ornaments and electronic
greetings. Located in Cleveland, Ohio, American Greetings generates annual net
sales of approximately $2 billion. For more information on the Corporation,
visit http://corporate.americangreetings.com/ .
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 that could cause actual results to differ
materially from the forward-looking statements, including but not limited to:
retail bankruptcies and consolidations, successful integration of
acquisitions, successful transition of management, a weak retail environment,
consumer acceptance of products as priced and marketed, the impact of
technology on core product sales, competitive terms of sale offered to
customers, successfully implementing supply chain improvements and achieving
projected cost savings from those improvements, and the Corporation's ability
to comply with its debt covenants. Risks pertaining specifically to the
Corporation's interactive business segment include the viability of online
advertising and subscriptions as revenue generators and the public's
acceptance of online greetings and other social expression products.
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 Corporation's periodic
filings with the Securities and Exchange Commission.
AMERICAN GREETINGS CORPORATION
FOURTH QUARTER REPORT OF CONSOLIDATED OPERATIONS
(In thousands of dollars except share and per share amounts)
(Unaudited)
Three Months Ended Twelve Months Ended
Feb. 29, Feb. 28, Feb. 29, Feb. 28,
2004 2003 2004 2003
Net sales $535,045 $525,906 $2,008,943 $1,995,860
Costs and expenses:
Material, labor and other
production costs 254,870 216,386 937,619 881,771
Selling, distribution
and marketing 174,982 162,914 649,679 620,885
Administrative and
general 45,870 59,352 225,400 240,129
Interest expense 14,904 19,731 85,828 79,095
Other (income) - net (34,371) (7,763) (60,334) (26,858)
456,255 450,620 1,838,192 1,795,022
Income before income
tax expense 78,790 75,286 170,751 200,838
Income tax expense 30,492 29,888 66,081 79,732
Net income $48,298 $45,398 $104,670 $121,106
Earnings per share $0.72 $0.70 $1.57 $1.85
Earnings per share -
assuming dilution $0.62 $0.60 $1.40 $1.63
Average number of common
shares outstanding 67,107,847 65,882,451 66,509,332 65,636,621
Average number of common
shares outstanding -
assuming dilution 80,884,171 79,268,277 80,088,377 78,980,830
AMERICAN GREETINGS CORPORATION
STATEMENT OF FINANCIAL POSITION
(In thousands of dollars)
February 29, February 28,
2004 2003
ASSETS
CURRENT ASSETS
Cash and cash equivalents $285,450 $208,463
Trade accounts receivable, less allowances
for sales returns of $85,638
($86,318 in 2003) and for doubtful
accounts of $18,183 ($35,595 in 2003) 250,554 309,967
Inventories 246,171 278,807
Deferred and refundable income taxes 158,689 202,485
Prepaid expenses and other 236,104 234,766
Total current assets 1,176,968 1,234,488
GOODWILL 228,955 209,664
OTHER ASSETS 708,957 748,540
PROPERTY, PLANT AND EQUIPMENT - NET 369,133 391,428
$2,484,013 $2,584,120
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Debt due within one year $ - $133,180
Accounts payable 129,362 167,195
Accrued liabilities 129,785 146,050
Accrued compensation and benefits 70,896 82,782
Income taxes 14,513 57,813
Other current liabilities 78,407 112,377
Total current liabilities 422,963 699,397
LONG-TERM DEBT 665,874 726,531
OTHER LIABILITIES 96,325 66,379
DEFERRED INCOME TAXES 31,311 14,349
SHAREHOLDERS' EQUITY
Common shares - Class A 62,880 61,299
Common shares - Class B 4,588 4,600
Capital in excess of par value 331,765 310,872
Treasury stock (438,612) (438,704)
Accumulated other comprehensive income (loss) 20,638 (42,494)
Retained earnings 1,286,281 1,181,891
Total shareholders' equity 1,267,540 1,077,464
$2,484,013 $2,584,120
AMERICAN GREETINGS CORPORATION
STATEMENT OF CASH FLOWS
(In thousands of dollars)
Twelve Months Ended
February 29, February 28,
2004 2003
OPERATING ACTIVITIES:
Net income $104,670 $121,106
Adjustments to reconcile net income
to net cash provided by operating activities:
Restructure charges (2,676) (15,603)
Gain on sale of marketable security - (12,027)
Loss on sale of fixed assets 4,943 776
Loss on extinguishment of debt 18,389 -
Depreciation and amortization 64,069 64,810
Deferred income taxes 57,159 (24,519)
Changes in operating assets and liabilities:
Decrease (increase) in trade
accounts receivable 69,329 (15,636)
Decrease in inventories 42,536 18,260
Decrease in other current assets 10,387 5,933
Decrease in deferred costs - net 34,356 39,741
Decrease in accounts payable
and other liabilities (107,174) (106,133)
Other - net (4,109) 330
Cash Provided by Operating
Activities 291,879 77,038
INVESTING ACTIVITIES:
Property, plant & equipment additions (35,826) (31,299)
Proceeds from sale of fixed assets 198 1,613
Investment in corporate owned life insurance 7,808 10,017
Other - net (5,274) 32,940
Cash (Used) Provided by
Investing Activities (33,094) 13,271
FINANCING ACTIVITIES:
Reduction of long-term debt (80,954) (124,833)
(Decrease) increase in short-term debt (128,693) 116,747
Sale of stock under benefit plans 18,466 21,487
Purchase of treasury shares (828) (83)
Cash (Used) Provided by Financing
Activities (192,009) 13,318
EFFECT OF EXCHANGE RATE CHANGES ON CASH 10,211 3,857
INCREASE IN CASH AND CASH EQUIVALENTS 76,987 107,484
Cash and Cash Equivalents at
Beginning of Year 208,463 100,979
Cash and Cash Equivalents at End
of Period $285,450 $208,463
SOURCE American Greetings Corporation
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