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American Greetings Corporation

American Greetings Announces Record Cash Flow, US$200 Million Share Repurchase Program and Increase to Dividend

Cleveland (ots/PRNewswire)

- Record Cash Flow highest in 98-year history
    - Share Repurchase program of US$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
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 US$200 million share repurchase
program and a 33%  increase to its quarterly cash dividend.
Fourth Quarter
On net sales of US$490.9 million for the fiscal 2005 fourth
quarter ended February 28, 2005, American Greetings reported pretax
income of US$28.0 million and income from continuing operations of
US$21.4 million or 28 cents per share (all per-share amounts assume
dilution). Included in these results are US$6.4 million of pretax
expense for a previously announced plant  closure, US$29.8 million of
pretax expense related to the conversion of two accounts to scan
based trading and a US$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 US$4.2
million that was primarily due to a change in tax laws. Without these
expenses, American Greetings would have achieved pretax income of
US$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 US$518.2 million, pretax
income of US$73.0 million and income from continuing operations of
US$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 US$57.2 million of
pretax income.
Full Year Results
For the full year of fiscal 2005, on net sales of US$1.90 billion,
the Corporation's continuing operations reported pretax income of
US$108.2 million and income of US$70.6 million or 95 cents per share.
Included in the 2005 results were US$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 US$4.2 million.
In the prior fiscal year, the Corporation's continuing operations
generated net sales of US$1.95 billion, pretax income of US$159.9
million and net income of US$98.0 million or US$1.32 per share.
Included in the 2004 results were US$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 US$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 US$1.46 and US$1.51. The Corporation projects the
combination of cash flow from operating activities and cash flow from
investing activities to be approximately US$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 US$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 US$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.
    All Figures are in USD.
                          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
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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