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American Greetings Announces First-Quarter Results
CLEVELAND, Jun 29, 2004 /PRNewswire-FirstCall via COMTEX/ -- American Greetings Corporation (NYSE: AM) today announced its first-quarter results for the fiscal year ending Feb. 28, 2005. Despite soft sales, the Corporation slightly exceeded its earnings estimate due in part to a stronger-than-expected earnings contribution from its outbound licensed properties. The Corporation reported net income of $4.2 million, or 6 cents per basic share, on net sales of $445.7 million, for the fiscal 2005 first quarter ended May 31, 2004. This compares to reported net income of $19.7 million, on net sales of $454.3 million, for the fiscal 2004 first quarter ended May 31, 2003. Included in the fiscal 2005 results are $39.0 million in pretax costs ($23.9 million after tax) incurred during the quarter for debt repurchases totaling $186.2 million. Last year's results include $4.6 million of pretax costs ($2.8 million after tax) associated with the early pay down of $118.0 million of term debt. Excluding after-tax costs associated with debt repurchases from both periods, American Greetings would have achieved net income of $28.1 million this year, compared to $22.5 million in the first quarter last year. The Corporation believes its results excluding these costs are useful for the purpose of providing a comparable analysis of operating results for the two periods. Tender offer completed During the quarter, American Greetings successfully completed a tender offer for $186.2 million of its $196.4 million outstanding 11.75 percent senior subordinated notes due July 2008. While this initiative reduced net income in the quarter, it will reduce its future interest expense and increase its strategic and financial flexibility. On May 11, 2004, the Corporation amended and restated its credit agreement to reflect its improved credit profile. With the completion of the tender offer and earlier debt reductions, the Corporation has reduced debt a total of $368 million within a 13-month period. The pay down of this debt reduces annual interest expense by about $38 million. Management comments and second quarter estimate Chief Executive Officer Zev Weiss said the first quarter continued the recent trends of both supply chain improvements and healthy earnings from licensing. "Our cost-reduction efforts were on track in the quarter, and our licensing results were better than expected," Weiss said. "Cash flow was strong once again, as we continue to focus on improving our balance sheet. "For the fiscal year, our estimate of $1.63 to $1.68 per share is now equivalent to $1.46 to $1.51 per share taking into account the costs and benefits from our tender offer," Weiss said. "For the second fiscal quarter, we are projecting our earnings per basic share to be about breakeven," Weiss said. The second quarter is one in which American Greetings has historically reported a net loss due to the seasonal nature of its business. Last year, the Corporation reported a net loss of 15 cents per basic share for the second quarter. Retail executive joins board American Greetings also announced that Joseph Hardin has been elected to its board of directors. Hardin fills a vacancy on the board with a term that expires in 2006. Hardin, 59, most recently served as chief executive officer of Kinko's Inc., a digital document solutions provider, from May 1997 until his retirement in January 2001. Prior to joining Kinko's, he was president and chief executive officer of SAM'S CLUB, the wholesale division of Wal-Mart Stores, Inc. "Joe Hardin's retail background and supply chain experience make him a valuable member of our board of directors," Weiss said. 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, including statements regarding expected savings from debt-reduction initiatives and estimates of results for future periods, are forward-looking statements. Forward-looking statements are generally identified by words such as "believes," "anticipates," "expects," "plans," "should," "estimates" and similar expressions. These forward-looking statements involve risks and uncertainties. Factors that could cause actual results to differ materially from those stated or implied in our forward-looking statements, include but are 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
FIRST QUARTER REPORT OF CONSOLIDATED OPERATIONS
FISCAL YEAR ENDING FEBRUARY 28, 2005
(In thousands of dollars except share and per share amounts)
(Unaudited)
Three Months Ended
May 31,
2004 2003
Net sales $445,671 $454,306
Costs and expenses:
Material, labor and other production costs 187,212 184,983
Selling, distribution and marketing 150,278 149,858
Administrative and general 65,499 66,125
Interest expense 52,694 22,800
Other (income) - net (16,925) (2,138)
438,758 421,628
Income before income tax expense 6,913 32,678
Income tax expense 2,675 12,973
Net income $4,238 $19,705
Earnings per share $0.06 $0.30
Earnings per share - assuming dilution $0.06 $0.27
Average number of common shares outstanding 68,000,691 65,913,680
Average number of common shares
outstanding - assuming dilution 68,846,170 79,003,300
AMERICAN GREETINGS CORPORATION
FIRST QUARTER STATEMENT OF FINANCIAL POSITION
FISCAL YEAR ENDING FEBRUARY 28, 2005
(In thousands of dollars)
(Unaudited)
May 31,
2004 2003
ASSETS
CURRENT ASSETS
Cash and cash equivalents $115,850 $113,274
Trade accounts receivable, less
allowances for sales returns of
$86,773 ($82,963 in 2003) and
for doubtful accounts of $20,562
($27,480 in 2003) 258,450 293,730
Inventories 263,118 312,362
Deferred and refundable income taxes 155,517 173,365
Prepaid expenses and other 222,356 224,687
Total current assets 1,015,291 1,117,418
GOODWILL 225,574 213,501
OTHER ASSETS 665,101 768,403
PROPERTY, PLANT AND EQUIPMENT - NET 357,747 382,848
$2,263,713 $2,482,170
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Debt due within one year $- $5,352
Accounts payable 115,186 135,136
Accrued liabilities 113,391 157,050
Accrued compensation and benefits 62,921 56,936
Income taxes 15,732 66,545
Other current liabilities 78,404 96,758
Total current liabilities 385,634 517,777
LONG-TERM DEBT 483,783 726,930
OTHER LIABILITIES 94,149 107,113
DEFERRED INCOME TAXES 28,916 10,715
SHAREHOLDERS' EQUITY
Common shares - Class A 63,502 61,370
Common shares - Class B 4,603 4,596
Capital in excess of par value 340,608 311,658
Treasury stock (435,112) (438,726)
Accumulated other comprehensive
income (loss) 13,591 (20,839)
Retained earnings 1,284,039 1,201,576
Total shareholders' equity 1,271,231 1,119,635
$2,263,713 $2,482,170
AMERICAN GREETINGS CORPORATION
FIRST QUARTER STATEMENT OF CASH FLOWS
FISCAL YEAR ENDING FEBRUARY 28, 2005
(In thousands of dollars)
(Unaudited)
Three Months Ended
May 31,
2004 2003
OPERATING ACTIVITIES:
Net income $4,238 $19,705
Adjustments to reconcile net income to
net cash provided by operating activities:
Restructuring (277) (823)
Gain on sale of marketable security (3,090) -
(Gain) loss on sale of fixed assets (21) 732
Loss on extinguishment of debt 39,024 4,639
Depreciation and amortization 15,161 15,980
Deferred income taxes (7,192) (281)
Changes in operating assets and liabilities:
(Increase) decrease in trade
accounts receivable (9,454) 18,799
Increase in inventories (18,700) (29,596)
Decrease in other current assets 6,533 32,412
Decrease (increase) in deferred
costs - net 33,543 (2,140)
Decrease in accounts payable
and other liabilities (33,302) (31,299)
Other - net (4,882) (3,199)
Cash Provided by Operating Activities 21,581 24,929
INVESTING ACTIVITIES:
Property, plant & equipment additions (5,334) (5,334)
Proceeds from sale of fixed assets 104 36
Investment in corporate owned life insurance 2,570 11,445
Other - net 26,981 1,551
Cash Provided by Investing Activities 24,321 7,698
FINANCING ACTIVITIES:
Reduction of long-term debt (216,417) (2,322)
Decrease in short-term debt - (128,226)
Sale of stock under benefit plans 12,035 766
Purchase of treasury shares (9,299) (92)
Cash Used by Financing Activities (213,681) (129,874)
EFFECT OF EXCHANGE RATE CHANGES ON CASH (1,821) 2,058
DECREASE IN CASH AND CASH EQUIVALENTS (169,600) (95,189)
Cash and Cash Equivalents at
Beginning of Year 285,450 208,463
Cash and Cash Equivalents at End
of Period $115,850 $113,274
David D. Poplar, Investor Relations Manager of American Greetings Corporation, +1-216-252-4864, or david.poplar@amgreetings.com |
