Business News
American Greetings Announces Third Quarter Results
Tuesday 23. December 2008 - American Greetings Corporation (NYSE:AM) today announced its third quarter results for the fiscal quarter ended November 28, 2008.
Third Quarter Results
For the third quarter of fiscal 2009, the Company reported total revenue of $454.1 million, a pre-tax loss from continuing operations of $228.7 million, and a loss from continuing operations of $193.3 million or $4.25 per share (all per-share amounts assume dilution). For the third quarter of fiscal 2008, the Company reported total revenue of $485.8 million, pre-tax income from continuing operations of $44.1 million, and income from continuing operations of $29.1 million or 52 cents per share.
On December 9, 2008, the Company announced that as a result of the recent deterioration in the global economic environment, indicators arose during the third quarter requiring the Company to accelerate the process of reviewing its goodwill and other long-lived assets for impairment. As a result of this accelerated review, the Company recorded, within the International Social Expression Products and AG Interactive segments, estimated non-cash pre-tax goodwill and other asset impairment charges of $242.9 million (after-tax of approximately $202.6 million) that reduced earnings per share by $4.46 during the quarter.
The Company also reviewed its long-lived assets within the Retail Operations segment. As a result of that review, the Company recorded a non-cash pre-tax long-lived asset impairment charge of $3.9 million (after-tax of approximately $2.7 million) that reduced earnings per share by 6 cents during the quarter.
The Company also announced on December 9, 2008, the elimination of approximately 275 positions as part of a cost reduction effort. As a result of those position eliminations, the Company recognized a pre-tax severance charge of $7.0 million (after-tax of approximately $4.7 million) that reduced earnings per share by 10 cents. Partially offsetting these charges was a reduction of variable compensation expense of $11.1 million (after-tax of approximately $7.5 million), which increased the Company’s earnings per share by 17 cents.
Chief Executive Officer Zev Weiss said, “The rapidly deteriorating economy has significantly impacted our business in the third fiscal quarter. We are currently focused on taking additional steps to reduce our cost structure in order to position our business during this difficult economic period.”
Outlook
As a result of the rapid changes in the economy and the uncertainty of the impact those changes will have on the business, the potential for additional retail store closures, and the finalization of the goodwill impairment tests, the Company is currently unable to provide definitive earnings guidance for the balance of this fiscal year.
Financing Activities
During the third quarter, the Company purchased approximately 300,000 shares of its common stock for $5.0 million completing the Company’s $100 million share repurchase program announced in January 2008. The Company has reduced its diluted share count by approximately 45 percent over the past four years.