PRN: American Greetings Announces Fourth Quarter and Full Year Earnings

26/apr/2012 13.30.18 PR Newswire Turismo Contatta l'autore

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American Greetings Announces Fourth Quarter and Full Year Earnings

 
[26-April-2012]
 

CLEVELAND, April 26, 2012 /PRNewswire/ -- American Greetings Corporation (NYSE: AM) today announced its financial results for both the fiscal fourth quarter and year ended February 29, 2012.

Management Comments

Chief Executive Officer Zev Weiss said, "I am pleased with our overall performance. We achieved a 6% revenue increase for the year as we remained focused on our product leadership strategy and many of our customers performed better than our expectations."

Fourth Quarter Results

For the fourth quarter of fiscal 2012, the Company reported total revenue of $456.2 million, a pre-tax loss of $7.6 million, and a net loss of $10.1 million or 27 cents per share (all per-share amounts assume dilution). Compared to the prior year, revenue increased approximately $32 million, or about 7%. The increase includes approximately $18 million of organic growth, approximately $13 million of revenue resulting from the Watermark acquisition in the U.K., and a benefit from foreign exchange of about $1 million. During the quarter, the Company recognized non-cash pre-tax goodwill impairment charges, a portion of which were not tax deductible, of $27.2 million (after-tax $19.0 milli! on, reducing earnings per share by about 50 cents). There were pre-tax goodwill impairment charges of $21.3 million recorded within the North American Social Expression Products segment and $5.9 million recorded within the International Social Expression Products segment. Also incurred within the quarter were costs associated with scan-based trading conversions of $2.7 million (after-tax $1.7 million, reducing earnings per share by about 4 cents), severance costs of $4.1 million (after-tax $2.5 million, reducing earnings per share by about 7 cents) and costs associated with the Company's debt refinancing of $30.8 million (after-tax $18.8 million, reducing earnings per share by about 50 cents).

For the fourth quarter of fiscal 2011, the Company reported total revenue of $424.6 million, pre-tax income of $36.4 million, and net income of $15.5 million or 37 cents per share. The Company recorded costs of $5.5 million (after-tax $3.4 million, reducing earnings per share by about 8 cents) as a result of scan-based trading conversions. The Company also recorded severance costs of $4.0 million (after-tax $2.4 million, reducing earnings per share by about 6 cents) and costs associated with the integrations of Papyrus and Recycled Paper Greetings of $0.7 million (after-tax $0.4 million, reducing earnings per share by ! about 1 cent). These costs were partially offset by a $2.8 million gain associated with a building sale (after-tax $1.7 million, increasing earnings per share by about 4 cents) and $1.3 million of dividend income (after-tax $0.8 million, increasing earnings per share by about 2 cents). Both the building sale and the dividend were reported as other non-operating income. The Company also effectively settled ten years of domestic tax audits which increased income tax expense by $6.9 million (reducing earnings per share by about 17 cents).

Full Year Results

For the full year fiscal 2012, the Company reported total revenue of $1,695.1 million, pre-tax income of $97.8 million, and net income of $57.2 million or $1.42 per share. Compared to the prior year, revenues were approximately $97 million higher, or about 6%. The increase includes approximately $43 million of revenue resulting from the Watermark acquisition, organic growth of approximately $32 million, and a benefit from foreign exchange of about $22 million. The Company recognized non-cash pre-tax goodwill impairment charges of $27.2 million (after-tax $19.0 million, reducing earnings per share by 47 cents). Scan-based trading conversions during ! the year had a pre-tax income impact of $5.8 million (after-tax $3.5 million, reducing earnings per share by about 9 cents). The Company incurred roll-out costs associated with expanded distribution of $12.3 million (after-tax $7.5 million, reducing earnings per share by about 19 cents).The Company also recorded severance costs of $5.2 million (after-tax $3.2 million, reducing earnings per share by about 8 cents) and costs associated with its debt refinancing of $30.8 million (after-tax $18.8 million, reducing earnings per share by about 47 cents). These costs were partially offset by a pre-tax benefit from the sale of c! ertain minor characters in our intellectual property portfolio! of $4.5 million (after-tax $2.8 million, increasing earnings per share by about 7 cents per share).

For the full year fiscal 2011, the Company reported total revenue of $1,597.9 million, pre-tax income of $156.0 million, and net income of $87.0 million or $2.11 per share. The Company recorded pre-tax costs of $5.7 million (after-tax $3.5 million, reducing earnings per share by about 9 cents) as a result of scan-based trading conversions. The Company also recorded $10.3 million of costs associated with the integrations of Papyrus and Recycled Paper Greetings (after-tax $6.3 million, reducing earnings per share by about 15 cents) and severance costs of $6.9 million (after-tax $4.2 million, reducing earnings per share b! y about 10 cents). These costs were partially offset by a $3.8 million gain associated with the sales of two buildings (after-tax $2.3 million, increasing earnings per share by about 5 cents) and $1.3 million of dividend income (after-tax $0.8 million, increasing earnings per share by about 2 cents). During fiscal 2011, the Company also effectively settled ten years of domestic tax audits which increased income tax expense by $6.9 million (reducing earnings per share by about 17 cents).

Financing Activities

Under the Company's previously authorized $75 million share repurchase program, the Company purchased approximately 1.9 million shares of its common stock for about $28.0 million during the fourth fiscal quarter.

Outlook

For fiscal 2013, the Company expects its revenues to be flat compared to fiscal 2012. The Company expects cash flow from operating activities of approximately $145 million to $165 million and capital expenditures between $85 million and $110 million, resulting in cash flow from operating activities minus capital expenditures of approximately $45 million to $65 million. The increased level of capital expenditures compared to prior year is expected to be driven primarily by incremental investments in our information technology systems refresh project as well as by some capital investments associated with the new world headquarters project. The cash flow estimate includes a modest benefit from the combination of working capital, deferred costs, and taxes.

Conference Call on the Web

American Greetings will broadcast its conference call live on the Internet at 9:00 a.m. Eastern Time today. The conference call will be accessible through the Investors section of the American Greetings Web site at http://investors.americangreetings.com. A replay of the call will also be available on the site.

About American Greetings Corporation

For more than 100 years, American Greetings Corporation (NYSE: AM) has been a creator and manufacturer of innovative social expression products that assist consumers in enhancing their relationships to create happiness, laughter and love. The Company's major greeting card lines are American Greetings, Carlton Cards, Gibson, Recycled Paper Greetings and Papyrus, and other paper product offerings include DesignWare party goods and American Greetings and Plus Mark gift-packaging and boxed cards. American Greetings also has one of the largest collections of greetings on the Web, including greeting cards available at Cardstore.com and electronic greeting cards available at AmericanGreetings.com. In addition to its product lines, American Greetings creates and licenses popular character brands through the American Greetings Properties group. Headquartered in Cleveland, Ohio, American Greetings generates annual revenue of approximately $1.7 billion, and its products can be found in retail outlets worldwide. For more information on the Company, visit http://corporate.americangreetings.com.

Non-GAAP Measures

Certain after-tax and liquidity amounts included in the earnings release may be considered non-GAAP measures under the Securities and Exchange Commission's Regulation G. The after-tax amounts were calculated based on the Company's statutory tax rate of approximately 38.9% for U.S. based items and the appropriate rates for international jurisdictions. Management believes that after-tax information is useful in analyzing the Company's results and that cash flow from operating activities minus capital expenditures provides a liquidity measure useful to investors in analyzing the cash generation of the Company.

Factors That May Affect Future Results

Certain statements in this release, including those under Management Comments and 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 Company's operations and business environment, which are difficult to predict and may be beyond the control of the Company. Important factors that could cause actual results to differ materially from those suggested by these forward-lo! oking statements, and that could adversely affect the Company's future performance, include, but are not limited to, the following:

  • a weak retail environment and general economic conditions;
  • the loss of one or more retail customers and/or retail consolidations, acquisitions and bankruptcies, including the possibility of resulting adverse changes to retail contract terms;
  • competitive terms of sale offered to customers, including costs and other terms associated with new and expanded customer relationships;
  • the timing and impact of expenses incurred and investments made to support new retail or product strategies, including increased marketing expenses, as well as new product introductions and achieving the desired benefits from those investments;
  • the timing of investments in, together with the ability to successfully implement or achieve the desired benefits and cost savings associated with, any information technology systems refresh the Company may implement;
  • the timing and impact of converting customers to a scan-based trading model;
  • !
  • the ability to achieve the desired benefits associated with the Company's cost reduction efforts;
  • Schurman Fine Papers' ability to successfully operate its retail operations and satisfy its obligations to the Company;
  • consumer demand for social expression products generally, shifts in consumer shopping behavior, and consumer acceptance of products as priced and marketed including the success of new and expanded advertising and marketing efforts, such as the Company's on-line efforts through Cardstore.com;
  • the impact and availability of technology, including social media, on product sales;
  • escalation in the cost of providing employee health care;
  • the Company's ability to achieve the desired accretive effect from any share repurchase programs;
  • the Company's ability to comply with its debt covenants;
  • fluctuations in the value of currencies in major areas where the Company operates, including! the U.S. Dollar, Euro, U.K. Pound Ste! rling, and Canadian Dollar; 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 ability to adapt to rapidly changing social media and the digital photo sharing space.

In addition, this release contains time-sensitive information that reflects management's best analysis as of the date of this release; however the risks and uncertainties identified above are not the only risks the Company faces. Additional risks and uncertainties not presently known to the Company or that the Company believes to be immaterial also may adversely affect American Greetings. Should any known or unknown risks or uncertainties develop into actual events, or underlying assumptions prove inaccurate, these developments could have a material adverse effect on our business, financial condition and results of operations. 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 performance related to forward-looking statements can be found in the! Company's periodic filings with the Securities and Exchange Commission, including the "Risk Factors" section of the Company's Annual Report on Form 10-K.


AMERICAN GREETINGS CORPORATION

FOURTH QUARTER CONSOLIDATED STATEMENT OF OPERATIONS

FISCAL YEAR ENDED FEBRUARY 29, 2012



(In thousands of dollars except share and per share amounts)



(Unaudited)






Three Months Ended


Year Ended



February 29,
2012


February 28,
2011


February 29,
2012


February 28,
2011










Net sales


$  445,481


$  414,065


$1,663,281


$1,565,539

Other revenue


10,766


10,524


31,863


32,355

Total revenue


456,247


424,589


1,695,144


1,597,894










Material, labor and other production costs


194,946


179,465


741,645


682,368

Selling, distribution and marketing expenses


141,197


132,329


533,827


483,553

Administrative and general expenses


63,957


73,526


250,691


260,476

Goodwill impairment


27,154


-


27,154


-

Other operating income - net


(880)


(627)


(7,738)


(3,205)










Operating income


29,873


39,896


149,565


174,702










Interest expense


35,365


6,248


53,073


25,389

Interest income


(144)


(267)


(982)


(853)

Other non-operating expense (income) - net


2,280


(2,519)


(341)


(5,841)










(Loss) Income before income tax expense


(7,628)


36,434


97,815


156,007

Income tax expense 


2,489


20,950


40,617


68,989










Net (loss) income


$  (10,117)


$   15,484


$   57,198


$   87,018



















(Loss) earnings per share - basic


$    (0.27)


$    0.39


$    1.44


$    2.18



















(Loss) e! arnings per share - assuming dilution


$    (0.27)


$    0.37


$    1.42


$    2.11



















Average ! number o f common shares outstanding


37,820,659


40,194,003


39,624,694


39,982,784










Average number of common shares outstanding -assuming dilution


37,820,659


41,479,079


40,288,189


41,244,903










Dividends declared per share                        


$    0.15


$    0.14


$    0.60


$    0.56





















AMERICAN GREETINGS CORPORATION

FOURTH QUARTER CONSOLIDATED STATEMENT OF FINANCIAL POSITION

FISCAL YEAR ENDED FEBRUARY 29, 2012


(In thousands of dollars)





(Unaudited)


February 29,
2012


February 28,
2011





ASSETS




CURRENT ASSETS




Cash and cash equivalents

$  132,438


$  215,838

Trade accounts receivable, net

113,840


119,779

Inventories

208,945


179,730

Deferred and refundable income taxes

58,118


64,898

Assets held for sale

-


7,154

Prepaid expenses and other

127,618


128,372

Total current assets

640,959


715,771





GOODWILL 

-


28,903

OTHER ASSETS

509,680


436,137

DEFERRED AND REFUNDABLE INCOME TAXES

121,228


124,789





Property, plant and equipment - at cost

900,779


849,552

Less accumulated depreciation

623,182


607,903

PROPERTY, PLANT AND EQUIPMENT - NET

277,597


241,649


$1,549,464


$1,547,249









LIABILITIES AND SHAREHOLDERS' EQUITY




CURRENT LIABILITIES




Accounts payable 

$   86,166


$   87,105

Accrued liabilities

58,657


58,841

Accrued compensation and benefits

68,317


72,379

Income taxes payable

7,409


10,951

Deferred revenue

35,519


37,108

Other current liabilities

49,013


65,178

Total current liabilities

305,081


331,562





LONG-TERM DEBT

225,181


232,688

OTHER LIABILITIES

269,367


187,505

DEFERRED INCOME TAXES AND




  NONCURRENT INCOME TAXES PAYABLE

22,377


31,736





SHAREHOLDERS' EQUITY




Common shares - Class A

34,011


37,470

Common shares - Class B

2,842


2,937

Capital in excess of par value

513,163


492,048

Treasury stock

(1,020,838)


(952,206)

Accumulated other comprehensive loss

(11,830)


(2,346)

Retained earnings

1,210,110


1,185,855

Total shareholders' equity

727,458


763,758




$1,549,464


$1,547,249





















AMERICAN GREETINGS CORPORATION

FOURTH QUARTER CONSOLIDATED STATEMENT OF CASH FLOWS

FISCAL YEAR ENDED FEBRUARY 29, 2012

(In thousands of dollars)




(Unaudited)


Year Ended


February 29,
2012


February 28,
2011





OPERATING ACTIVITIES:




Net income 

$     57,198


$     87,018

Adjustments to reconcile net income




to cash flows from operating activities:




Goodwill impairment

27,154


-

Stock-based compensation

10,982


13,017

Net gain on dispositions

(4,500)


(254)

Net gain on disposal of fixed assets

(461)


(3,463)

Loss on extinguishment of debt

30,812


-

Depreciation and intangible assets amortization

39,225


41,048

Deferred income taxes

15,391


28,642

Fixed asset impairments

-


119

Other non-cash charges

3,034


3,663

Changes in operating assets and liabilities,




    net of acquisitions:




Trade accounts receivable

9,271


15,296

Inventories

(23,321)


(13,097)

Other current assets

6,392


(1,922)

Income taxes

(11,411)


19,947

Deferred costs - net

(31,254)


14,262

Accounts payable and other liabilities

(13,560)


(31,015)

Other - net

1,586


6,538

Total Cash Flows From Operating Activities

116,538


179,799





INVESTING ACTIVITIES:




Property, plant and equipment additions

(70,943)


(36,346)

Cash payments for business acquisitions, net of cash acquired

(5,899)


(500)

Proceeds from sale of fixed assets

9,310


14,242

Proceeds from escrow related to party goods transaction

-


25,151

Proceeds from sale of intellectual properties

4,500


-

Other - net

-


5,663

Total Cash Flows From Investing Activities

(63,032)


8,210





FINANCING ACTIVITIES:




Increase in long-term debt

225,000


-

Payments associated with reduction of long-term debt

(263,787)


(98,250)

Decrease in short-term debt

-


(1,000)

Sale of stock under benefit plans

10,153


16,620

Excess tax benefits from share-based payment awards

3,468


4,512

Purchase of treasury shares

(82,459)


(13,521)

Dividends to shareholders

(23,893)


(22,354)

Debt issuance costs

(5,391)


(3,199)

Total Cash Flows From Financing Activities

(136,909)


(117,192)





EFFECT OF EXCHANGE RATE CHANGES ON CASH

3


7,072





(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

(83,400)


77,889





Cash and Cash Equivalents at Beginning of Year

215,838


137,949

Cash and Cash Equivalents at End of Year

$   132,438


$   215,838













AMERICAN GREETINGS CORPORATION

FOURTH QUARTER CONSOLIDATED SEGMENT DISCLOSURES

FISCAL YEAR ENDED FEBRUARY 29, 2012

(In thousands of dollars)






(Unaudited)



Three Months Ended


Year Ended



February 29,
2012


February 28,
2011


February 29,
2012


February 28,
2011

Total Revenue:









North American Social Expression Products


$  326,215


$  314,781


$1,228,548


$1,196,809










International Social Expression Products


98,418


69,300


347,866


261,712










AG Interactive


18,850


22,252


68,514


78,206










Non-reportable segments


12,764


18,256


50,216


61,167












$  456,247


$  424,589


$1,695,144


$1,597,894



















Segment Earnings (Loss) Before Tax:









North American Social Expression Products


$   36,646


$   50,411


$  149,655


$  194,199










International Social Expression Products


4,968


5,431


20,276


19,572










AG Interactive


2,972


3,598


13,942


13,991










Non-reportable segments


(433)


2,570


17,034


9,477










Unallocated 


(51,781)


(25,576)


(103,092)


(81,232)












$   (7,628)


$   36,434


$   97,815


$  156,007























Company Codes: NYSE:AM
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