Business News

American Greetings Announces Fourth Quarter Earnings

Thursday 28. April 2011 - Earnings improvement over prior year; Cash flow exceeds expectations

American Greetings Corporation (NYSE: AM) today announced its financial results for both the fiscal fourth quarter and year ended February 28, 2011.
Management Comments and Outlook
Chief Executive Officer Zev Weiss said, “I am quite pleased with our overall performance this year. Our business is running well, our financial results exceeded our expectations, and the team had a great performance in an otherwise challenging year. We successfully completed the integrations of Papyrus and Recycled Paper Greetings and have established what we believe to be the industry-leading portfolio of products. Our earnings increased compared to the previous year, enabled by our refined portfolio, good expense management, and changed capital structure. Our cash flow from operating activities minus capital expenditures was $143 million and exceeded our original guidance by 14%. I want to thank our associates around the world for their continued commitment and teamwork.”
For fiscal 2012, the Company expects revenue to grow approximately 5% compared to fiscal 2011, driven equally by organic revenue growth and the acquisition of Watermark Publishing in the United Kingdom. The Company expects cash flow from operating activities to fall within the range of $125 million to $145 million and capital expenditures between $45 million and $50 million, resulting in cash flow from operating activities minus capital expenditures of $80 million to $100 million.
Fourth Quarter Results
For the fourth quarter of fiscal 2011, the Company reported total revenue of $423.3 million, pre-tax income of $36.4 million, and net income of $15.5 million or 37 cents per share (all per-share amounts assume dilution). Several items impacted revenue and income during the quarter. Compared to the prior year, quarterly revenue was $5.0 million lower as a result of the party goods transaction that occurred in the fourth quarter of fiscal 2010. Revenue was $7.1 million lower as a result of scan-based trading conversions that occurred during the quarter. The pre-tax income impact of the scan-based trading conversions was $5.5 million (after-tax $3.4 million, reducing earnings per share by about 8 cents). 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).
For the fourth quarter of fiscal 2010, the Company reported total revenue of $426.4 million, pre-tax income of $31.8 million, and net income of $18.8 million or 46 cents per share. The Company recorded costs of $12.3 million (after-tax $8.6 million, reducing earnings per share by about 21 cents) related to the wind down of its operations in Mexico. Other costs included $19.0 million for the settlement of a lawsuit (after-tax $11.6 million, reducing earnings per share by about 29 cents) and $5.9 million for severance (after-tax $3.6 million, reducing earnings per share by about 9 cents). These costs were partially offset by a $21.2 million net benefit from the party goods transaction (after-tax $12.9 million, increasing earnings per share by about 33 cents). The Company also recognized a $3.3 million gain related to the liquidation of a business in France (the after-tax amount was also about $3.3 million, increasing earnings per share by about 8 cents).
Full Year Results
For the full year fiscal 2011, the Company reported total revenue of $1,592.6 million, pre-tax income of $156.0 million, and net income of $87.0 million or $2.11 per share. Compared to the prior year, revenues were $11.7 million lower as a result of the sale of the retail store operations in the first quarter of fiscal 2010 and $31.2 million lower as a result of the party goods transaction that occurred in the fourth quarter of fiscal 2010. Scan-based trading conversions during the year further reduced revenue by $7.2 million. The pre-tax income impact of the scan-based trading conversions was $5.7 million (after-tax $3.5 million, reducing earnings per share by about 9 cents). 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 by 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). Both the buildings sales and the dividend were reported as other non-operating income. 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).
For fiscal 2010, the Company reported total revenue of $1,635.9 million, pre-tax income of $121.0 million, and net income of $81.6 million or $2.03 per share. The Company recorded costs of approximately $18.2 million (after-tax $6.5 million, reducing earnings per share by about 16 cents) related to the wind down of its operations in Mexico. The Company also incurred a $24.0 million charge for the settlement of a lawsuit (after-tax $14.7 million, reducing earnings per share by about 37 cents), severance expense of $9.4 million (after-tax $5.8 million, reducing earnings per share by about 14 cents) and a $28.3 million charge related to the divestiture of our retail business early in the year (after-tax $17.3 million, reducing earnings per share by about 43 cents). These costs were partially offset by a $21.2 million net benefit related to the party goods transaction (after-tax $12.9 million, increasing earnings per share by about 33 cents), a $3.3 million gain related to the liquidation of a business in France (the after-tax amount was also about $3.3 million, increasing earnings per share by about 8 cents) and a $7.9 million benefit associated with a legacy insurance program (after-tax $7.6 million, increasing earnings per share by about 19 cents).