American Greetings Corporation

American Greetings Announces Improved Results

    Cleveland (ots/PRNewswire) -

    - Company reports third quarter EPS of 78 cents versus 60 cents in prior year period

    - Continuing Operations exceeds Company's estimate

    - Announces sale of Magnivision for US$77 million. Substantial gain boosts quarterly Net Income and EPS

    - Company declares quarterly cash dividend of 6 cents per share

    American Greetings Corporation (NYSE: AM) today announced its financial results for the third fiscal quarter ended November 30, 2004. The Corporation exceeded its prior year earnings per share results due primarily to a substantial gain on the sale of its Magnivision subsidiary. The Corporation declared a quarterly cash dividend of 6 cents per share.

    Third Quarter

    As a result of the announced sale of the Magnivision subsidiary, that business unit has been classified as a discontinued operation. The Corporation has presented financial results on continuing operations as well as net results of discontinued operations. For the fiscal 2005 third quarter ended November 30, 2004, the Corporation reported net income from continuing operations of US$40.3 million or 51 cents per share compared to US$45.1 million or 58 cents per share for continuing operations in the prior year (all per-share amounts assume dilution). Discontinued operations contributed US$22.4 million of net income or 27 cents per share to the third quarter of fiscal 2005 primarily due to the gain on the sale of Magnivision. In the prior year's third quarter, discontinued operations contributed US$1.3 million of net income or 2 cents per share.

    Within this year's third quarter, the Company realized a US$35.5 million pre-tax gain on the sale of Magnivision. This gain was reflected in discontinued operations. The Company also recorded US$16.6 million of expense associated with a 300 person overhead reduction program, US$13.0 million of expense to reflect a change in timing for greeting card returns associated with a revised merchandising strategy and US$8.2 million of expense associated with a plant closure. These expenses were all reflected in continuing operations for the third quarter.

    On a consolidated basis, for the third quarter of fiscal 2005, American Greetings reported net income of US$62.8 million or 78 cents per share, on net sales of US$586 million. In the third fiscal quarter of 2004, the Company reported net income of US$46.4 million or 60 cents per share on net sales of US$604 million. In the prior year's third fiscal quarter, the Company incurred US$13.8 million of pre-tax costs associated with a repurchase of the Company's bonds and these costs were included in continuing operations.

    Net sales were down versus the prior period's third quarter as lower revenues in both the retail segment and seasonal gift wrap business were combined with the US$13.0 million non-cash accrual to reflect an adjusted merchandising strategy for seasonal product. These reductions to sales were partially offset by incremental revenue from acquisitions in the AG Interactive segment and favorable foreign exchange movements.

    Year-to-Date Results

    The Corporation reported net income of US$73.9 million or 97 cents per share, on net sales of US$1.41 billion, for the first three quarters of fiscal 2005. Included in the year-to-date results are US$39 million of pre-tax costs incurred (during the first quarter) for debt repurchases. In fiscal 2004, the Corporation reported net income of US$56.4 million or 78 cents per share, on net sales of US$1.44 billion. The prior year's results include US$18.4 million of pre-tax costs incurred for debt repurchases (in both the first and third quarters).

    Management Comments and Outlook

    Zev Weiss, Chief Executive Officer said, "In the third quarter, we continued to focus on reducing our costs in both our supply chain and in our overhead structure. While never a pleasant task, we recognize the necessity of taking these actions due to the continuing changes in our business. The savings resulting from these actions will be reinvested into our business in fiscal 2006. Without these costs, we surpassed our estimate for the quarter." Weiss added, "Within the quarter, we closed on the Magnivision sale. We felt that our Magnivision subsidiary would be a better fit under an owner with a strategic focus on glasses. Given the sale price, we are pleased with the value provided to our shareholders."

    Weiss continued, "After quarter end, we entered into an agreement with The Hatchery, a family entertainment and property-development firm. Through continued investment, we are committed to enhancing the licensing business model that we have grown over the last few years."

    "For the full year, we are projecting our earnings per share from continuing operations to be between US$1.02 and US$1.07. This estimate is in line with previous guidance of US$1.46 to US$1.51 per share when adjusted for the full year impact of the three programs described above," Weiss said.

    Dividend Declaration

    The Corporation's Board of Directors authorized the declaration of a quarterly cash dividend of 6 cents per share for shareholders of record at the close of business on January 12, 2005, payable to those shareholders on January 24, 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 US$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 the Corporation's ability to reduce costs 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.

@@start.t1@@                                         AMERICAN GREETINGS CORPORATION
                         THIRD QUARTER CONSOLIDATED STATEMENT OF OPERATIONS
                                    FISCAL YEAR ENDING FEBRUARY 28, 2005
                 (In thousands of US dollars except share and per share amounts)
                                                         (Unaudited)                    (Unaudited)
                                                    Three Months Ended         Nine Months Ended
                                                         November 30,                  November 30,
                                                        2004            2003          2004          2003
      Net sales                              $586,165      $603,754  $1,411,790  $1,435,542
      Costs and expenses:
          Material, labor and
            other production costs      292,737        290,363        661,069      665,080
          Selling, distribution
            and marketing                    173,735        167,362        466,690      463,773
          Administrative
            and general                         64,476         55,564        186,118      174,511
          Interest expense                    8,744         30,587         70,601        70,924
          Other (income) - net          (19,341)      (13,459)      (52,917)    (25,576)
                                                      520,351        530,417    1,331,561  1,348,712
      Income before
        income tax expense                  65,814         73,337         80,229        86,830
      Income tax expense                    25,470         28,246         31,049        33,603
      Income from
        continuing operations              40,344         45,091         49,180        53,227
      Income from discontinued
        operations, net of tax            22,417          1,271         24,729         3,145
      Net income                                $62,761        $46,362        $73,909      $56,372
      Earnings per share - basic:
          Income from
            continuing operations            0.58            0.68            0.72          0.80
          Income from
            discontinued operations         0.33            0.02            0.36          0.05
          Net income                              $0.91          $0.70          $1.08         $0.85
      Earnings per share -
        assuming dilution:
          Income from
            continuing operations            0.51            0.58            0.67          0.74
          Income from
            discontinued operations         0.27            0.02            0.30          0.04
          Net income                              $0.78          $0.60          $0.97         $0.78
      Average number of common
        shares outstanding            68,753,922  66,699,848  68,391,128 66,309,827
      Average number of common
        shares outstanding -
        assuming dilution              82,397,633  80,478,413  81,874,590 79,817,702
                                        AMERICAN GREETINGS CORPORATION
                 THIRD QUARTER CONSOLIDATED STATEMENT OF FINANCIAL POSITION
                                  FISCAL YEAR ENDING FEBRUARY 28, 2005
                                            (In thousands of dollars)
                                                                                          (Unaudited)
                                                                                          November 30,
                                                                                  2004                      2003
      ASSETS
      CURRENT ASSETS
          Cash and cash equivalents                            $221,744                 $51,694
          Trade accounts receivable,
            less allowances for seasonal
            sales returns of
            $83,169 ($91,271 in 2003) and
            for doubtful accounts of $17,419
            ($23,519 in 2003)                                         415,113                 453,374
          Inventories                                                    263,482                 299,267
          Deferred and refundable income taxes            165,810                 181,029
          Assets of businesses held for sale                         -                  39,204
          Prepaid expenses and other                            213,692                 244,740
              Total current assets                                1,279,841              1,269,308
      GOODWILL                                                              247,836                 217,982
      OTHER ASSETS                                                        606,985                 696,236
      PROPERTY, PLANT AND EQUIPMENT - NET                  333,278                 361,539
                                                                            $2,467,940            $2,545,065
      LIABILITIES AND SHAREHOLDERS' EQUITY
      CURRENT LIABILITIES
          Debt due within one year                          $            -                 $85,414
          Accounts payable                                            138,073                 138,179
          Accrued liabilities                                        118,519                 156,215
          Accrued compensation and benefits                  78,463                  69,871
          Income taxes                                                    55,020                  51,114
          Liabilities of businesses held for sale                 -                    5,046
          Other current liabilities                                80,197                  69,218
              Total current liabilities                          470,272                 575,057
      LONG-TERM DEBT                                                    483,988                 665,554
      OTHER LIABILITIES                                                102,216                 110,026
      DEFERRED INCOME TAXES                                          26,963                    8,434
      SHAREHOLDERS' EQUITY
          Common shares - Class A                                  64,663                  62,241
          Common shares - Class B                                    4,366                    4,592
          Capital in excess of par value                      364,423                 322,643
          Treasury stock                                              (440,101)              (438,655)
          Accumulated other comprehensive
            income (loss)                                                 42,803                  (2,954)
          Retained earnings                                        1,348,347              1,238,127
              Total shareholders' equity                      1,384,501              1,185,994
                                                                            $2,467,940            $2,545,065
                                        AMERICAN GREETINGS CORPORATION
                        THIRD QUARTER CONSOLIDATED STATEMENT OF CASH FLOWS
                                  FISCAL YEAR ENDING FEBRUARY 28, 2005
                                            (In thousands of dollars)
                                                                                          (Unaudited)
                                                                                      Nine Months Ended
                                                                                            November 30,
                                                                                    2004                    2003
      OPERATING ACTIVITIES:
         Net income                                                         $73,909                $56,372
         Income from discontinued operations                  24,729                  3,145
         Income from continuing operations                      49,180                 53,227
         Adjustments to reconcile to net cash
          provided (used) by operating activities:
            Gain on sale of investment                              (3,095)                        -
            Loss on sale of fixed assets                            1,817                  1,191
            Loss on extinguishment of debt                        39,056                 18,389
            Depreciation and amortization                         42,425                 44,680
            Deferred income taxes                                    (18,953)                (8,110)
            Changes in operating assets and
              liabilities, net of acquisitions:
                Increase in trade accounts receivable      (169,293)            (151,429)
                Increase in inventories                              (19,852)              (19,755)
                Decrease in other current assets                  8,972                 27,600
                Decrease in deferred costs - net                 98,314                 25,718
                Increase (decrease) in accounts
                 payable and other liabilities                    21,765                (28,829)
                Other - net                                                    3,469                (12,751)
                Cash Provided (used)
                 by Operating Activities                              53,805                (50,069)
      INVESTING ACTIVITIES:
         Proceeds from the sale of
          discontinued operations                                    77,000                         -
         Property, plant & equipment additions              (25,745)              (23,595)
         Proceeds from sale of fixed assets                      3,545                  2,140
         Investment in corporate owned
          life insurance                                                  (2,142)                 8,943
         Other - net                                                         31,903                  3,446
              Cash Provided (used) by Investing
                Activities                                                    84,561                 (9,066)
      FINANCING ACTIVITIES:
         Reduction of long-term debt                            (216,417)              (68,673)
         Decrease in short-term debt                                      -                 (47,135)
         Sale of stock under benefit plans                      35,875                 10,478
         Purchase of treasury shares                              (18,263)                  (439)
         Dividends to shareholders                                  (4,125)                    -
          Cash Used by Financing Activities                 (202,930)            (105,769)
      Cash (Used) provided by Discontinued
        Operations                                                            (2,395)                 4,046
      EFFECT OF EXCHANGE RATE CHANGES ON CASH                 3,253                  4,089
      DECREASE IN CASH AND CASH EQUIVALENTS                 (63,706)            (156,769)
          Cash and Cash Equivalents at
            Beginning of Year                                          285,450                208,463
          Cash and Cash Equivalents at End of
            Period                                                          $221,744                $51,694@@end@@

    Web site: http://corporate.americangreetings.com

ots Originaltext: American Greetings Corporation
Im Internet recherchierbar: http://www.newsaktuell.ch

Contact:
Stephen J. Smith, VP, Treasurer and Investor Relations of American
Greetings Corporation, +1-216-252-4864, or
investor.relations@amgreetings.com



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