American Greetings Corp. Reports Operating Results (10-Q)
American Greetings Corp. has a market cap of $727.8 million; its shares were traded at around $18.43 with a P/E ratio of 7.3 and P/S ratio of 0.4. The dividend yield of American Greetings Corp. stocks is 3%.AM is in the portfolios of Michael Price of MFP Investors LLC, Kenneth Fisher of Fisher Asset Management, LLC, Jim Simons of Renaissance Technologies LLC, Steven Cohen of SAC Capital Advisors.
Highlight of Business Operations:For the three months ended May 28, 2010, consolidated net sales decreased 4.2%, or approximately $17 million, from $409.3 million in the prior year first quarter to $392.1 million in the current three months. This decrease was primarily the result of lower net sales in our North American Social Expression Products segment and our Retail Operations segment (sold in April 2009) of approximately $14 million and $12 million, respectively. These decreases were partially offset by increased net sales in our International Social Expression Products segment and the favorable impact of foreign currency translation of approximately $7 million.
Material, labor and other production costs for the three months ended May 28, 2010 were $158.0 million, approximately $9 million less than the prior year three months. As a percentage of total revenue, these costs were 39.9% in the current period compared to 40.5% for the three months ended May 29, 2009. Approximately $4 million of the decrease was the result of the divestiture of the retail store operations. The remaining approximately $5 million improvement was attributable to a combination of lower inventory scrap expense, product related display and point-of-sales material costs, and product content costs. In addition, a favorable volume variance of approximately $2 million, as a result of the lower net sales discussed above, was offset by unfavorable foreign currency translation impacts of approximately $2 million.
Selling, distribution and marketing (SDM) expenses for the three months ended May 28, 2010 were $117.6 million, decreasing from $132.2 million for the comparable period in the prior year. Most of the $15 million decrease was driven by the divestiture of our retail store operations, which reduced SDM by approximately $12 million compared to the prior year period. The remaining improvement was attributable to reduced spending on supply chain costs of approximately $5 million, specifically freight and distribution costs, and lower field sales and merchandiser costs. These improvements were partially offset by the impact of unfavorable foreign currency translation of approximately $2 million.
Administrative and general expenses were $66.0 million for the three months ended May 28, 2010, compared to $63.2 million for the prior year period. The increase of approximately $3 million was due to increased spending of approximately $2 million and unfavorable foreign currency translation impacts of approximately $1 million. The increase in spending was attributable to variable compensation expense, including bonus, profit-sharing and stock compensation expense of approximately $3 million and integration costs associated with our recent acquisitions of Recycled Paper Greetings (RPG) and the Papyrus brand and its related wholesale business (Papyrus) from Schurman Fine Papers (Schurman) of approximately $3 million. These increases were partially offset by the
Investing activities provided $19.1 million of cash during the three months ended May 28, 2010, compared to using $25.1 million in the prior year period. The source of cash in the current three months was primarily related to $24.5 million received for the sale of certain assets, equipment and processes of the DesignWare party goods product lines in conjunction with the transaction completed in the prior year fourth quarter. This cash was held in escrow at February 28, 2010. Partially offsetting this source of cash were cash payments for capital expenditures of $6.0 million.
Substantial credit sources are available to us. In total, we had available sources of approximately $530 million at May 28, 2010. This included our $450 million senior secured credit facility (the Original Credit Agreement) and our $80 million accounts receivable securitization facility. Borrowings under the accounts receivable securitization facility are limited based on our eligible receivables outstanding. At May 28, 2010, we had $99.0 million outstanding under the term loan facility, and no borrowings outstanding under the accounts receivable securitization facility or the revolving credit facility. In addition, we had, in the aggregate, $46.2 million outstanding under letters of credit, which reduces the total credit availability thereunder.
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