American Greetings Announces Improved First Quarter Results

CLEVELAND, June 21 /PRNewswire/ --

American Greetings Corporation (NYSE: AM) today announced its first quarter results for the fiscal quarter ended May 25, 2007.

First Quarter Results

For the first quarter of fiscal 2008, the Company reported net sales of US$418.0 million, pre-tax income from continuing operations of US$54.9 million, and income from continuing operations of US$30.6 million or 55 cents per share (all per-share amounts assume dilution). For the first quarter of fiscal 2007, the Company reported net sales of US$404.2 million, pre-tax income from continuing operations of US$19.4 million, and income from continuing operations of US$16.6 million or 26 cents per share.

Management Comments and Outlook

Chief Executive Officer Zev Weiss said, "I am pleased with our performance this quarter as it was ahead of our expectations. We had improved performance of everyday cards within North America. Our first quarter results suggest that the improved performance is the result of the actions we have taken over the past year."

Weiss also reaffirmed the Corporation's previously announced estimate of earnings per share from continuing operations to be between US$1.35 to US$1.55 per share. "While I am happy with our first quarter results, it is still early in the year and as such, we remain comfortable with our earnings guidance for the full year," added Weiss.

Financing Activities

The Company purchased 135,000 shares of its common stock, under its US$100 million share repurchase program, for US$3.4 million during the first quarter of fiscal 2008. Since February 2005, the Company has repurchased 21.5 million of its shares for approximately US$500 million.

The Company's Board of Directors is scheduled to meet June 22, 2007 at which time it will review the Company's quarterly cash dividend. The Board of Directors is expected to maintain the Company's dividend policy. After the Board has met, a press release will be issued regarding the status of the dividend.

Conference Call on the Web

American Greetings will broadcast its conference call live on the Internet at 9:00 a.m. Eastern time today. The conference call will be accessible through the Investor Relations section of the American Greetings Web site at http://investors.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, stationery, calendars, ornaments and electronic greetings. Located in Cleveland, Ohio, American Greetings generates annual net sales of approximately US$1.7 billion. For more information on the Company, visit http://corporate.americangreetings.com.

Certain statements in this release, including those under "Management Comments and Outlook" and "Financing Activities" 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 Company's operations and business environment, which are difficult to predict and may be beyond the control of the Company. Important factors that could cause actual results to differ materially from those suggested by these forward-looking statements, and that could adversely affect the Company's future financial performance, include, but are not limited to, the following:

-- retail consolidations, acquisitions and bankruptcies, including the possibility of resulting adverse changes to retail contract terms; -- the Company's ability to successfully implement its strategy to invest in its core greeting card business; -- the timing and impact of investments in new retail or product strategies as well as new product introductions and achieving the desired benefits from those investments; -- the ability to execute share repurchase programs or the ability to achieve the desired accretive effect from such repurchases; -- the Company's ability to successfully complete, or achieve the desired benefits associated with, dispositions; -- 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; -- successful implementation of supply chain improvements and achievement of projected cost savings from those improvements; -- increases in the cost of material, energy, freight, and other production costs; -- the Company's ability to comply with its debt covenants; -- fluctuations in the value of currencies in major areas where the Company operates, including the U.S. Dollar, Euro, U.K. Pound Sterling, and Canadian Dollar; -- escalation in the cost of providing employee health care; -- successful integration of acquisitions; 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.

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 Company's periodic filings with the Securities and Exchange Commission, including the "Risk Factors" section of the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 2007.

AMERICAN GREETINGS CORPORATION FIRST QUARTER CONSOLIDATED STATEMENT OF INCOME FISCAL YEAR ENDING FEBRUARY 29, 2008 (In thousands of dollars except share and per share amounts) (All currency expressed in US dollars unless otherwise noted) (Unaudited) Three Months Ended ------------------------------- May 25, 2007 May 26, 2006 -------------- -------------- Net sales $ 418,013 $ 404,170 Costs and expenses: Material, labor and other production costs 161,128 175,237 Selling, distribution and marketing 140,691 142,580 Administrative and general 61,871 61,348 Interest expense 4,757 12,464 Other income - net (5,347) (6,860) -------------- -------------- 363,100 384,769 -------------- -------------- Income from continuing operations before income tax expense 54,913 19,401 Income tax expense 24,291 2,851 -------------- -------------- Income from continuing operations 30,622 16,550 Loss from discontinued operations, net of tax (572) (1,158) -------------- -------------- Net income $ 30,050 $ 15,392 ============== ============== Earnings per share - basic: Income from continuing operations $ 0.55 $ 0.28 Loss from discontinued operations (0.01) (0.02) -------------- -------------- Net income $ 0.54 $ 0.26 ============== ============== Earnings per share - assuming dilution: Income from continuing operations $ 0.55 $ 0.26 Loss from discontinued operations (0.01) (0.02) -------------- -------------- Net income $ 0.54 $ 0.24 ============== ============== Average number of common shares outstanding 55,262,716 58,137,230 Average number of common shares outstanding - assuming dilution 55,650,033 71,077,312 Dividends declared per share $ 0.10 $ 0.08

AMERICAN GREETINGS CORPORATION FIRST QUARTER CONSOLIDATED STATEMENT OF FINANCIAL POSITION FISCAL YEAR ENDING FEBRUARY 29, 2008 (In thousands of dollars) (Unaudited) ------------------------------- May 25, 2007 May 26, 2006 -------------- -------------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 132,582 $ 205,468 Short-term investments 28,325 83,100 Trade accounts receivable, net 119,145 119,729 Inventories 192,399 233,155 Deferred and refundable income taxes 76,892 163,051 Assets of businesses held for sale 2,507 23,621 Prepaid expenses and other 215,867 211,354 -------------- -------------- Total current assets 767,717 1,039,478 GOODWILL 225,318 206,137 OTHER ASSETS 397,567 527,630 DEFERRED AND REFUNDABLE INCOME TAXES 102,060 -- Property, plant and equipment - at cost 947,156 965,588 Less accumulated depreciation 666,651 661,383 -------------- -------------- PROPERTY, PLANT AND EQUIPMENT - NET 280,505 304,205 -------------- -------------- $1,773,167 $ 2,077,450 ============== ============== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Debt due within one year $ -- $ 159,122 Accounts payable 100,914 124,789 Accrued liabilities 77,837 72,781 Accrued compensation and benefits 43,656 45,056 Income taxes 29,878 25,228 Liabilities of businesses held for sale 1,253 3,697 Other current liabilities 84,622 94,324 -------------- -------------- Total current liabilities 338,160 524,997 LONG-TERM DEBT 223,800 239,838 OTHER LIABILITIES 146,384 98,729 DEFERRED INCOME TAXES AND NONCURRENT INCOME TAXES PAYABLE 27,184 25,041 SHAREHOLDERS' EQUITY Common shares - Class A 51,148 53,386 Common shares - Class B 4,340 4,225 Capital in excess of par value 424,201 401,644 Treasury stock (712,147) (732,890) Accumulated other comprehensive income 6,030 23,952 Retained earnings 1,264,067 1,438,528 -------------- -------------- Total shareholders' equity 1,037,639 1,188,845 -------------- -------------- $1,773,167 $ 2,077,450 ============== ==============

AMERICAN GREETINGS CORPORATION FIRST QUARTER CONSOLIDATED STATEMENT OF CASH FLOWS FISCAL YEAR ENDING FEBRUARY 29, 2008 (In thousands of dollars) (Unaudited) Three Months Ended ------------------------------- May 25, 2007 May 26, 2006 ------------- --------------- OPERATING ACTIVITIES: Net income $ 30,050 $ 15,392 Loss from discontinued operations 572 1,158 -------------- ------------- Income from continuing operations 30,622 16,550 Adjustments to reconcile to net cash provided by operating activities: Net gain on disposal of fixed assets (116) (79) Loss on extinguishment of debt -- 4,963 Depreciation and amortization 11,989 11,764 Deferred income taxes 4,466 (1,934) Other non-cash charges 1,979 3,926 Changes in operating assets and liabilities, net of acquisitions and dispositions: (Increase) decrease in trade accounts receivable (14,750) 22,579 Increase in inventories (7,389) (17,313) Decrease (increase) in other current assets 646 (8,708) Decrease in deferred costs - net 11,691 12,722 Decrease in accounts payable and other liabilities (21,753) (24,245) Other - net 4,236 5,575 -------------- ------------- Cash Provided by Operating Activities 21,621 25,800 INVESTING ACTIVITIES: Proceeds from sale of short-term investments 134,900 448,320 Purchases of short-term investments (163,225) (322,680) Property, plant and equipment additions (5,875) (9,591) Cash payments for business acquisitions, net of cash acquired (6,056) -- Cash receipts related to discontinued operations 2,344 -- Proceeds from sale of fixed assets 890 182 -------------- ------------- Cash (Used) Provided by Investing Activities (37,022) 116,231 FINANCING ACTIVITIES: Increase in long-term debt -- 200,000 Reduction of long-term debt -- (281,363) Sale of stock under benefit plans 9,358 1,052 Purchase of treasury shares (3,568) (59,529) Dividends to shareholders (5,536) (4,605) Debt issuance costs -- (7,276) -------------- ------------- Cash Provided (Used) by Financing Activities 254 (151,721) DISCONTINUED OPERATIONS: Cash used by operating activities from discontinued operations (542) (2,540) Cash provided by investing activities from discontinued operations -- 1,644 -------------- ------------- Cash Used by Discontinued Operations (542) (896) EFFECT OF EXCHANGE RATE CHANGES ON CASH 3,558 2,441 -------------- ------------- DECREASE IN CASH AND CASH EQUIVALENTS (12,131) (8,145) Cash and Cash Equivalents at Beginning of Year 144,713 213,613 -------------- ------------- Cash and Cash Equivalents at End of Period $ 132,582 $ 205,468 ============== =============

AMERICAN GREETINGS CORPORATION FIRST QUARTER CONSOLIDATED SEGMENT DISCLOSURES FISCAL YEAR ENDING FEBRUARY 29, 2008 (In thousands of dollars) (Unaudited) Three Months Ended ------------------------------- May 25, 2007 May 26, 2006 -------------- -------------- Net Sales: North American Social Expression Products $ 297,066 $ 292,950 Intersegment items (8,167) (17,548) Exchange rate adjustment 5 (63) -------------- -------------- Net 288,904 275,339 International Social Expression Products 59,145 63,865 Exchange rate adjustment 4,057 (2,251) -------------- -------------- Net 63,202 61,614 Retail Operations 38,924 43,501 Exchange rate adjustment 4 (62) -------------- -------------- Net 38,928 43,439 AG Interactive 19,894 19,960 Exchange rate adjustment 3 5 -------------- -------------- Net 19,897 19,965 Non-reportable segments 7,082 3,813 -------------- -------------- Consolidated $ 418,013 $ 404,170 ============== ============== Segment Earnings (Loss): North American Social Expression Products $ 86,940 $ 68,161 Intersegment items (6,255) (12,910) Exchange rate adjustment 5 (33) -------------- -------------- Net 80,690 55,218 International Social Expression Products 40 497 Exchange rate adjustment 147 46 -------------- -------------- Net 187 543 Retail Operations (2,781) (7,301) Exchange rate adjustment -- 2 -------------- -------------- Net (2,781) (7,299) AG Interactive 3,296 2,041 Exchange rate adjustment (9) (1) -------------- -------------- Net 3,287 2,040 Non-reportable segments 927 (2,095) Unallocated (27,393) (28,906) Exchange rate adjustment (4) (100) -------------- -------------- Net (27,397) (29,006) -------------- -------------- Consolidated $ 54,913 $ 19,401 ============== ============== Web site: http://corporate.americangreetings.com http://investors.americangreetings.com