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

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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  • 30.07.2004 – 19:25

    American Greetings Announces Sale of Magnivision

    Cleveland, Ohio (ots/PRNewswire) - American Greetings Corp. (NYSE: AM) today announced it has signed a letter of agreement to sell its Magnivision nonprescription reading glasses subsidiary to an affiliate of AAi.FosterGrant in a cash transaction. Terms of the deal were not disclosed. Zev Weiss, chief executive officer of American Greetings, said the sale of Magnivision reflects the Corporation's strategy of ...