American Greetings Reports 4Q Results
American Greetings announced its financial results for the fourth quarter and fiscal year ended February 28, 2005…
…the initiation of $200 million share repurchase program and a 33% increase to its quarterly cash dividend.
On net sales of $490.9 million for the fiscal 2005 fourth quarter ended February 28, 2005, American Greetings reported pretax income of $28.0 million and income from continuing operations of $21.4 million or 28 cents per share (all per-share amounts assume dilution). Included in these results are $6.4 million of pretax expense for a previously announced plant closure, $29.8 million of pretax expense related to the conversion of two accounts to scan based trading and a $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 $4.2 million that was primarily due to a change in tax laws. Without these expenses, American Greetings would have achieved pretax income of $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 $518.2 million, pretax income of $73.0 million and income from continuing operations of $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 $57.2 million of pretax income.
Full Year Results
For the full year of fiscal 2005, on net sales of $1.90 billion, the Corporation’s continuing operations reported pretax income of $108.2 million and income of $70.6 million or 95 cents per share. Included in the 2005 results were $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 $4.2 million.
In the prior fiscal year, the Corporation’s continuing operations generated net sales of $1.95 billion, pretax income of $159.9 million and net income of $98.0 million or $1.32 per share. Included in the 2004 results were $18.4 million of pretax expenses for debt repurchases.
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 $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.”
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 $1.46 and $1.51. The Corporation projects the combination of cash flow from operating activities and cash flow from investing activities to be approximately $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).
American Greetings announced that its Board of Directors has authorized a program to repurchase up to $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.
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.
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