Ohio | 1-13859 | 34-0065325 | ||
(State or other jurisdiction of incorporation) |
(Commission File Number) | (I.R.S. Employer Identification No.) |
One American Road | ||
Cleveland, Ohio | 44144 | |
(Address of principal executive offices) | (Zip Code) |
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 Results of Operations and Financial Condition | ||||||||
Item 9.01 Financial Statements and Exhibits | ||||||||
SIGNATURES | ||||||||
EX-99.1 |
Exhibit | Description | |
Exhibit 99.1
|
Press Release reporting results for the quarter ended November 23, 2007. |
2
American Greetings Corporation (Registrant) |
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By: | /s/ Joseph B. Cipollone | |||
Joseph B. Cipollone, Vice President, | ||||
Corporate Controller and Chief Accounting Officer |
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3
| retail consolidations, acquisitions and bankruptcies, including the possibility of resulting adverse changes to retail contract terms; | ||
| the Companys 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 timing and impact of converting customers to a scan-based trading model; | ||
| the ability to execute share repurchase programs or the ability to achieve the desired accretive effect from such repurchases; | ||
| the ability to successfully complete the proposed acquisition of PhotoWorks and the ability to successfully integrate acquisitions; | ||
| the Companys 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 Companys 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; and | ||
| the outcome of any legal claims known or unknown. |
(Unaudited) | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
November 23, | November 24, | November 23, | November 24, | |||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
Net sales |
$ | 474,995 | $ | 510,102 | $ | 1,258,829 | $ | 1,271,755 | ||||||||
Other revenue |
10,751 | 11,052 | 24,309 | 26,537 | ||||||||||||
Total revenue |
485,746 | 521,154 | 1,283,138 | 1,298,292 | ||||||||||||
Material, labor and other production costs |
223,329 | 245,187 | 547,509 | 593,232 | ||||||||||||
Selling, distribution and marketing expenses |
159,420 | 157,364 | 444,695 | 451,419 | ||||||||||||
Administrative and general expenses |
60,481 | 65,287 | 178,291 | 183,516 | ||||||||||||
Other operating income net |
(127 | ) | (20,541 | ) | (807 | ) | (20,963 | ) | ||||||||
Operating income |
42,643 | 73,857 | 113,450 | 91,088 | ||||||||||||
Interest expense |
4,835 | 6,951 | 14,431 | 27,024 | ||||||||||||
Interest income |
(2,115 | ) | (1,258 | ) | (5,834 | ) | (6,716 | ) | ||||||||
Other non-operating (income) expense net |
(4,582 | ) | 91 | (7,478 | ) | (2,811 | ) | |||||||||
Income from continuing operations
before income tax expense |
44,505 | 68,073 | 112,331 | 73,591 | ||||||||||||
Income tax expense |
15,017 | 21,058 | 43,495 | 22,583 | ||||||||||||
Income from continuing operations |
29,488 | 47,015 | 68,836 | 51,008 | ||||||||||||
(Loss) income from discontinued
operations, net of tax |
(472 | ) | 2,692 | (1,395 | ) | 3,593 | ||||||||||
Net income |
$ | 29,016 | $ | 49,707 | $ | 67,441 | $ | 54,601 | ||||||||
Earnings per share basic: |
||||||||||||||||
Income from continuing operations |
$ | 0.54 | $ | 0.79 | $ | 1.25 | $ | 0.87 | ||||||||
(Loss) income from discontinued operations |
(0.01 | ) | 0.05 | (0.03 | ) | 0.06 | ||||||||||
Net income |
$ | 0.53 | $ | 0.84 | $ | 1.22 | $ | 0.93 | ||||||||
Earnings per share assuming dilution: |
||||||||||||||||
Income from continuing operations |
$ | 0.53 | $ | 0.79 | $ | 1.24 | $ | 0.82 | ||||||||
(Loss) income from discontinued operations |
(0.01 | ) | 0.04 | (0.03 | ) | 0.06 | ||||||||||
Net income |
$ | 0.52 | $ | 0.83 | $ | 1.21 | $ | 0.88 | ||||||||
Average number of common shares outstanding |
55,022,689 | 59,502,276 | 55,350,736 | 58,590,857 | ||||||||||||
Average number of common shares outstanding -
assuming dilution |
55,466,351 | 59,902,127 | 55,726,990 | 64,361,644 | ||||||||||||
Dividends declared per share |
$ | 0.10 | $ | 0.08 | $ | 0.30 | $ | 0.24 |
(Unaudited) | ||||||||
November 23, | November 24, | |||||||
2007 | 2006 | |||||||
ASSETS |
||||||||
CURRENT ASSETS |
||||||||
Cash and cash equivalents |
$ | 71,117 | $ | 86,216 | ||||
Trade accounts receivable, net |
205,702 | 239,207 | ||||||
Inventories |
239,209 | 244,181 | ||||||
Deferred and refundable income taxes |
76,568 | 160,983 | ||||||
Assets of businesses held for sale |
2,216 | 13,310 | ||||||
Prepaid expenses and other |
213,529 | 295,866 | ||||||
Total current assets |
808,341 | 1,039,763 | ||||||
GOODWILL |
267,308 | 219,093 | ||||||
OTHER ASSETS |
389,324 | 459,269 | ||||||
DEFERRED AND REFUNDABLE INCOME TAXES |
111,959 | | ||||||
Property, plant and equipment at cost |
975,721 | 968,755 | ||||||
Less accumulated depreciation |
684,170 | 668,524 | ||||||
PROPERTY, PLANT AND EQUIPMENT NET |
291,551 | 300,231 | ||||||
$ | 1,868,483 | $ | 2,018,356 | |||||
LIABILITIES AND SHAREHOLDERS EQUITY |
||||||||
CURRENT LIABILITIES |
||||||||
Debt due within one year |
$ | 46,490 | $ | 142,000 | ||||
Accounts payable |
131,099 | 126,956 | ||||||
Accrued liabilities |
89,751 | 91,108 | ||||||
Accrued compensation and benefits |
58,969 | 58,720 | ||||||
Income taxes |
31,255 | 17,412 | ||||||
Liabilities of businesses held for sale |
1,383 | 1,629 | ||||||
Other current liabilities |
96,896 | 91,162 | ||||||
Total current liabilities |
455,843 | 528,987 | ||||||
LONG-TERM DEBT |
200,975 | 223,985 | ||||||
OTHER LIABILITIES |
149,869 | 101,003 | ||||||
DEFERRED INCOME TAXES AND
NONCURRENT INCOME TAXES PAYABLE |
31,877 | 25,306 | ||||||
SHAREHOLDERS EQUITY |
||||||||
Common shares Class A |
49,929 | 53,775 | ||||||
Common shares Class B |
3,442 | 4,224 | ||||||
Capital in excess of par value |
443,326 | 417,444 | ||||||
Treasury stock |
(780,044 | ) | (643,540 | ) | ||||
Accumulated other comprehensive income |
22,982 | 36,067 | ||||||
Retained earnings |
1,290,284 | 1,271,105 | ||||||
Total shareholders equity |
1,029,919 | 1,139,075 | ||||||
$ | 1,868,483 | $ | 2,018,356 | |||||
(Unaudited) | ||||||||
Nine Months Ended | ||||||||
November 23, | November 24, | |||||||
2007 | 2006 | |||||||
OPERATING ACTIVITIES: |
||||||||
Net income |
$ | 67,441 | $ | 54,601 | ||||
Loss (income) from discontinued operations |
1,395 | (3,593 | ) | |||||
Income from continuing operations |
68,836 | 51,008 | ||||||
Adjustments to reconcile to net cash provided (used) by
operating activities: |
||||||||
Net (gain) loss on disposal of fixed assets |
(481 | ) | 754 | |||||
Loss on extinguishment of debt |
| 5,055 | ||||||
Depreciation and amortization |
36,002 | 37,229 | ||||||
Deferred income taxes |
(7,994 | ) | 5,827 | |||||
Other non-cash charges |
5,719 | 9,180 | ||||||
Changes in operating assets and liabilities,
net of acquisitions and dispositions: |
||||||||
Increase in trade accounts receivable |
(99,268 | ) | (92,821 | ) | ||||
Increase in inventories |
(49,911 | ) | (27,202 | ) | ||||
Decrease (increase) in other current assets |
18,090 | (96,250 | ) | |||||
Decrease in deferred costs net |
29,338 | 110,076 | ||||||
Increase (decrease) in accounts payable and other liabilities |
38,295 | (5,894 | ) | |||||
Other net |
4,718 | (6,265 | ) | |||||
Cash Provided (Used) by Operating Activities |
43,344 | (9,303 | ) | |||||
INVESTING ACTIVITIES: |
||||||||
Proceeds from sale of short-term investments |
692,985 | 1,026,280 | ||||||
Purchases of short-term investments |
(692,985 | ) | (817,540 | ) | ||||
Property, plant and equipment additions |
(37,394 | ) | (29,600 | ) | ||||
Cash payments for business acquisitions, net of cash acquired |
(51,256 | ) | (11,154 | ) | ||||
Cash receipts related to discontinued operations |
4,283 | 12,559 | ||||||
Proceeds from sale of fixed assets |
2,656 | 695 | ||||||
Cash (Used) Provided by Investing Activities |
(81,711 | ) | 181,240 | |||||
FINANCING ACTIVITIES: |
||||||||
Increase in long-term debt |
| 200,000 | ||||||
Reduction of long-term debt |
| (440,588 | ) | |||||
Increase in short-term debt |
23,800 | 142,000 | ||||||
Sale of stock under benefit plans |
26,198 | 5,630 | ||||||
Purchase of treasury shares |
(74,572 | ) | (186,331 | ) | ||||
Dividends to shareholders |
(16,657 | ) | (13,909 | ) | ||||
Debt issuance costs |
| (8,344 | ) | |||||
Cash Used by Financing Activities |
(41,231 | ) | (301,542 | ) | ||||
DISCONTINUED OPERATIONS: |
||||||||
Cash used by operating activities from discontinued operations |
(839 | ) | (2,377 | ) | ||||
Cash provided by investing activities from discontinued operations |
| 1,656 | ||||||
Cash Used by Discontinued Operations |
(839 | ) | (721 | ) | ||||
EFFECT OF EXCHANGE RATE CHANGES ON CASH |
6,841 | 2,929 | ||||||
DECREASE IN CASH AND CASH EQUIVALENTS |
(73,596 | ) | (127,397 | ) | ||||
Cash and Cash Equivalents at Beginning of Year |
144,713 | 213,613 | ||||||
Cash and Cash Equivalents at End of Period |
$ | 71,117 | $ | 86,216 | ||||
(Unaudited) | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
November 23, | November 24, | November 23, | November 24, | |||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
Total Revenue: |
||||||||||||||||
North American Social
Expression Products |
$ | 339,543 | $ | 371,726 | $ | 892,518 | $ | 908,909 | ||||||||
Intersegment items |
(19,423 | ) | (14,953 | ) | (41,532 | ) | (47,811 | ) | ||||||||
Exchange rate adjustment |
2,972 | 218 | 4,318 | 325 | ||||||||||||
Net |
323,092 | 356,991 | 855,304 | 861,423 | ||||||||||||
International Social
Expression Products |
80,604 | 82,526 | 199,648 | 209,019 | ||||||||||||
Exchange rate adjustment |
8,606 | 794 | 17,958 | (1,527 | ) | |||||||||||
Net |
89,210 | 83,320 | 217,606 | 207,492 | ||||||||||||
Retail Operations |
39,550 | 42,252 | 115,856 | 125,206 | ||||||||||||
Exchange rate adjustment |
2,467 | 178 | 3,540 | 299 | ||||||||||||
Net |
42,017 | 42,430 | 119,396 | 125,505 | ||||||||||||
AG Interactive |
18,912 | 21,663 | 55,964 | 62,151 | ||||||||||||
Exchange rate adjustment |
(2 | ) | 31 | (1 | ) | 76 | ||||||||||
Net |
18,910 | 21,694 | 55,963 | 62,227 | ||||||||||||
Non-reportable segments |
12,486 | 16,679 | 34,754 | 41,510 | ||||||||||||
Unallocated |
31 | 40 | 115 | 135 | ||||||||||||
$ | 485,746 | $ | 521,154 | $ | 1,283,138 | $ | 1,298,292 | |||||||||
Segment Earnings (Loss): |
||||||||||||||||
North American Social
Expression Products |
$ | 64,549 | $ | 98,533 | $ | 192,288 | $ | 182,111 | ||||||||
Intersegment items |
(14,481 | ) | (10,296 | ) | (31,203 | ) | (34,125 | ) | ||||||||
Exchange rate adjustment |
1,557 | 80 | 2,360 | 129 | ||||||||||||
Net |
51,625 | 88,317 | 163,445 | 148,115 | ||||||||||||
International Social
Expression Products |
10,037 | 6,092 | 11,470 | 7,148 | ||||||||||||
Exchange rate adjustment |
1,117 | (30 | ) | 1,464 | 34 | |||||||||||
Net |
11,154 | 6,062 | 12,934 | 7,182 | ||||||||||||
Retail Operations |
(5,833 | ) | (5,056 | ) | (15,098 | ) | (21,428 | ) | ||||||||
Exchange rate adjustment |
86 | 4 | 83 | 1 | ||||||||||||
Net |
(5,747 | ) | (5,052 | ) | (15,015 | ) | (21,427 | ) | ||||||||
AG Interactive |
2,194 | 2,249 | 8,667 | 5,498 | ||||||||||||
Exchange rate adjustment |
15 | (18 | ) | (2 | ) | (17 | ) | |||||||||
Net |
2,209 | 2,231 | 8,665 | 5,481 | ||||||||||||
Non-reportable segments |
636 | 3,668 | 3,598 | 8,308 | ||||||||||||
Unallocated |
(15,312 | ) | (27,157 | ) | (61,161 | ) | (73,919 | ) | ||||||||
Exchange rate adjustment |
(60 | ) | 4 | (135 | ) | (149 | ) | |||||||||
Net |
(15,372 | ) | (27,153 | ) | (61,296 | ) | (74,068 | ) | ||||||||
$ | 44,505 | $ | 68,073 | $ | 112,331 | $ | 73,591 | |||||||||