 American
Greetings Announces Record Cash Flow,
$200 Million Share Repurchase Program and Increase to Dividend
- Record Cash Flow highest in 98-year history
- Share Repurchase program of $200 million to start immediately
- Company increases quarterly cash dividend 33% to 8 cents per
share
- Continuing Operations exceed Company estimate for the fourth
quarter
CLEVELAND, April 5 /PRNewswire-FirstCall/ -- American Greetings
Corporation (NYSE: AM) today announced its financial results for
the fourth fiscal quarter and fiscal year ended February 28, 2005,
the initiation of $200 million share repurchase program and a 33%
increase to its quarterly cash dividend.
Fourth Quarter
On net sales of $490.9 million for the fiscal 2005 fourth quarter
ended February 28, 2005, American Greetings reported pretax income
of $28.0 million and income from continuing operations of $21.4
million or 28 cents per share (all per-share amounts assume dilution).
Included in these results are $6.4 million of pretax expense for
a previously announced plant closure, $29.8 million of pretax expense
related to the conversion of two accounts to scan based trading
and a $4.9 million pretax expense for a correction in the accounting
treatment for certain operating leases. After-tax results were temporarily
improved by a net tax benefit of $4.2 million that was primarily
due to a change in tax laws. Without these expenses, American Greetings
would have achieved pretax income of $69.0 million. The Company
believes providing its results excluding these expenses is useful
for investors who are calculating comparability to prior years and
estimates. These results compare to fiscal 2004 fourth quarter net
sales of $518.2 million, pretax income of $73.0 million and income
from continuing operations of $44.8 million or 58 cents per share.
The Company's December earnings per share estimate of 45 cents for
the fourth quarter (which excluded only the plant closure charge)
equated to $57.2 million of pretax income.
Full Year Results
For the full year of fiscal 2005, on net sales of $1.90 billion,
the Corporation's continuing operations reported pretax income of
$108.2 million and income of $70.6 million or 95 cents per share.
Included in the 2005 results were $118.3 million of pretax expenses
for the following activities: debt repurchases, the conversion of
accounts to scan based trading, a 300 person overhead reduction
program, a change in timing for certain greeting card terms associated
with a revised merchandising strategy, a plant closure and a correction
to accounting for leases. Also included in the 2005 results was
a net tax benefit of $4.2 million.
In the prior fiscal year, the Corporation's continuing operations
generated net sales of $1.95 billion, pretax income of $159.9 million
and net income of $98.0 million or $1.32 per share. Included in
the 2004 results were $18.4 million of pretax expenses for debt
repurchases.
Management Comments
Chief Executive Officer Zev Weiss said, "I am pleased with the
exceptional cash flow we were able to generate this year. The cash
flow from the past three years has allowed us to reduce our net
debt by approximately $1 billion from its highest point in November
2001. Our significantly improved financial position permits us to
not only return capital to our shareholders by repurchasing shares
and increasing the dividend but also to support continued business
development."
Outlook
For the first quarter of fiscal 2006, American Greetings anticipates
its continuing operations' revenues will be flat to up slightly
versus the prior year with earnings per share between 25 cents and
30 cents. For the full fiscal year 2006, the Corporation projects
its revenues to be up approximately 1% with earnings per share to
be between $1.46 and $1.51. The Corporation projects the combination
of cash flow from operating activities and cash flow from investing
activities to be approximately $200 million during fiscal year 2006
(excluding any net changes in short-term investments). The Corporation
has not included in its estimate the effects of any share repurchase
activity or the transitional effect of the adoption of Financial
Accounting Standard 123R -- Share-Based Payment (but has included
the effect of options granted after the adoption of 123R).
Share Repurchase
American Greetings announced that its Board of Directors has authorized
a program to repurchase up to $200 million of the class A common
shares of its stock over the next 12 months. These repurchases will
be made through a 10b5-1 program in open market or privately negotiated
transactions in compliance with the SEC's Rule 10b-18, subject to
market conditions, applicable legal requirements and other factors.
Dividend Declaration
The Corporation's Board of Directors authorized an increase to
the quarterly dividend. The Company announced an increase to the
quarterly cash dividend of 2 cents per share. A cash dividend of
8 cents per share will be paid on May 5, 2005 to shareholders of
record at the close of business on April 25, 2005.
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,
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
.
Certain statements in this release, including those under "Outlook,"
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
Corporation's operations and business environment, which are difficult
to predict and may be beyond the control of the Corporation. Important
factors that could cause actual results to differ materially from
those suggested by these forward- looking statements, and that could
adversely affect the Corporation's future financial performance,
include, but are not limited to, the following: 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; the Corporation's
ability to comply with its debt covenants; fluctuations in the value
of currencies in major areas where the Corporation operates, including
the U.S. Dollar, Euro, U.K. Pound Sterling, and Canadian Dollar;
escalation in the cost of providing employee health care; 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 and the public's acceptance of online greetings
and other social expression products and the ability of the mobile
division to compete effectively in the wireless content aggregation
market.
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 CONSOLIDATED STATEMENT OF INCOME
FISCAL YEAR ENDED FEBRUARY 28, 2005
(In thousands of dollars except share and per share amounts)
(Unaudited)
Three Months Ended Twelve Months Ended
February 28, February 29, February 28, February 29,
2005 2004 2005 2004
Net sales $490,937 $518,187 $1,902,727 $1,953,729
Costs and expenses:
Material, labor and
other production costs 244,132 247,625 905,201 912,705
Selling, distribution
and marketing 187,712 171,451 654,402 635,224
Administrative and
general 66,504 44,858 252,622 219,369
Interest expense 8,925 14,904 79,526 85,828
Other (income) - net (44,355) (33,672) (97,272) (59,248)
462,918 445,166 1,794,479 1,793,878
Income before income tax
expense 28,019 73,021 108,248 159,851
Income tax expense 6,649 28,259 37,698 61,862
Income from continuing
operations 21,370 44,762 70,550 97,989
Income from discontinued
operations, net of tax - 3,536 24,729 6,681
Net income $21,370 $48,298 $95,279 $104,670
Earnings per share -
basic:
Income from continuing
operations $0.31 $0.67 $1.03 $1.47
Income from discontinued
operations - 0.05 0.36 0.10
Net income $0.31 $0.72 $1.39 $1.57
Earnings per share -
assuming dilution:
Income from continuing
operations $0.28 $0.58 $0.95 $1.32
Income from discontinued
operations - 0.04 0.30 0.08
Net income $0.28 $0.62 $1.25 $1.40
Average number of common
shares outstanding 69,008,342 67,107,847 68,545,432 66,509,332
Average number of common
shares outstanding -
assuming dilution 82,494,966 80,884,171 82,016,835 80,088,377
AMERICAN GREETINGS CORPORATION
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FISCAL YEAR ENDED FEBRUARY 28, 2005
(In thousands of dollars)
February 28, February 29,
2005 2004
ASSETS
CURRENT ASSETS
Cash and cash equivalents $250,267 $285,450
Short-term investments 208,740 -
Trade accounts receivable,
less allowances for seasonal
sales returns of $94,672
($85,638 in 2004) and for
doubtful accounts of $16,684
($17,871 in 2004) 200,408 238,473
Inventories 222,874 238,612
Deferred and refundable income taxes 193,497 157,886
Assets of businesses held for sale - 40,815
Prepaid expenses and other 205,853 237,809
Total current assets 1,281,639 1,199,045
GOODWILL 270,057 223,697
OTHER ASSETS 644,140 706,898
PROPERTY, PLANT AND EQUIPMENT - NET 339,792 354,373
$2,535,628 $2,484,013
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $143,041 $125,816
Accrued liabilities 118,090 129,773
Accrued compensation and benefits 96,789 70,896
Income taxes 38,777 14,513
Liabilities of businesses held for sale - 5,338
Other current liabilities 90,970 78,243
Total current liabilities 487,667 424,579
LONG-TERM DEBT 486,099 665,874
OTHER LIABILITIES 137,868 96,325
DEFERRED INCOME TAXES 37,214 29,695
SHAREHOLDERS' EQUITY
Common shares - Class A 64,867 62,880
Common shares - Class B 4,160 4,588
Capital in excess of par value 368,777 331,765
Treasury stock (445,618) (438,612)
Accumulated other comprehensive income 29,039 20,638
Retained earnings 1,365,555 1,286,281
Total shareholders' equity 1,386,780 1,267,540
$2,535,628 $2,484,013
AMERICAN GREETINGS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
FISCAL YEAR ENDED FEBRUARY 28, 2005
(In thousands of dollars)
Twelve Months Ended
February 28, February 29,
2005 2004
OPERATING ACTIVITIES:
Net income $95,279 $104,670
Income from discontinued operations 24,729 6,681
Income from continuing operations 70,550 97,989
Adjustments to reconcile to net cash
provided by operating activities:
Gain on sale of investment (3,095) -
Loss on sale of fixed assets 7,544 4,455
Loss on extinguishment of debt 39,056 18,389
Depreciation and amortization 57,045 59,600
Deferred income taxes (9,454) 56,853
Changes in operating assets and
liabilities, net of acquisitions:
Decrease in trade accounts receivable 50,581 65,507
Decrease in inventories 23,311 42,461
(Increase) decrease in other
current assets (15,181) 6,577
Decrease in deferred costs - net 107,660 34,875
Increase (decrease) in accounts
payable and other liabilities 31,768 (99,474)
Other - net (1,371) (4,109)
Cash Provided by Operating Activities 358,414 283,123
INVESTING ACTIVITIES:
Proceeds from sale of
discontinued operations 77,000 -
Cash payments for business
acquisitions (25,178) -
Proceeds from sale of short-term
investments 297,660 -
Purchases of short-term investments (506,400) -
Property, plant & equipment additions (47,497) (32,544)
Proceeds from sale of fixed assets 5,848 198
Investment in corporate owned life
insurance 603 7,808
Other - net 10,934 (5,688)
Cash Used by Investing Activities (187,030) (30,226)
FINANCING ACTIVITIES:
Reduction of long-term debt (216,417) (80,954)
Decrease in short-term debt - (128,693)
Sale of stock under benefit plans 40,114 18,466
Purchase of treasury shares (24,080) (828)
Dividends to shareholders (8,264) -
Cash Used by Financing Activities (208,647) (192,009)
Cash (Used) Provided by Discontinued
Operations (2,397) 5,987
EFFECT OF EXCHANGE RATE CHANGES ON CASH 4,477 10,112
(DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS (35,183) 76,987
Cash and Cash Equivalents at
Beginning of Year 285,450 208,463
Cash and Cash Equivalents at End of
Year $250,267 $285,450
CONTACT:
Stephen J. Smith
VP, Treasurer and Investor Relations
American Greetings Corporation
216-252-4864
investor.relations@amgreetings.com
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