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American Greetings (AM)

Q1 2012 Earnings Call

June 29, 2011 9:00 am ET

Executives

Stephen Smith - Chief Financial Officer and Senior Vice President

Zev Weiss - Chief Executive Officer, Director and Member of Executive Committee

Gregory Steinberg - Director of Investor Relations and Treasurer

Analysts

Sean O'Malley

Jeffery Stein - Ticonderoga Securities LLC

Hugh Denison

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the American Greetings Corporation First Quarter Fiscal 2012 Earnings Conference Call. Today's conference is being recorded. Now for opening remarks and introduction, I'll turn the call over to Mr. Gregory Steinberg. Please go ahead, sir.

Gregory Steinberg

Good morning, everyone, and welcome to our first quarter conference call. I'm Greg Steinberg, the company's Treasurer and Director of Investor Relations. Joining me today on the call are Zev Weiss, our CEO; Jeff Weiss, our COO; and Steve Smith, our CFO.

We released our earnings for the first quarter fiscal 2012 this morning. If you do not yet have our first quarter press release, you can find a copy within the Investors section of the American Greetings website at investors.americangreetings.com.

As you may expect, some of our comments today include statements about projections for the future. Those projections involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. We cannot guarantee the accuracy of any forecasts or estimates, and we do not plan to update any forward-looking statements.

If you would like more information on our risks involved in the forward-looking statements, please see our annual report or SEC filings. Previous earnings releases as well as our 10-Qs, 10-Ks and annual report are available on the Investors section of the American Greetings website.

We will now proceed with comments from both our CEO and CFO followed by a question-and-answer session. Zev?

Zev Weiss

Thank you, Greg, and good morning, everyone. Despite the continuing erratic economic environment, we achieved a record level of earnings per share for our first quarter, driven by a combination of the changes we made to our portfolio of businesses in recent years, our growing market share in North America and a continuation of good expense management.

Now let me share a few comments on our product leadership initiative and our outlook for the balance of fiscal year 2012, and then I'll turn it over to Steve to walk through our financials for the quarter.

Our focus on product leadership continues to be recognized in our industry. This past May, during the 23rd Annual International Greeting Card Awards, American Greetings was honored with 6 awards. Of the awards we won, one was the highest given out at the event, the Card of the Year award. This was the second consecutive year we have won this award.

This year's award-winning card is part of our Yakety Yaks line of cards that turn everyday objects into characters with funny songs and entertaining faces. The card is designed to look like a hamburger that, after the press of a button, moves and sings to deliver a birthday message. It is a great example of how we bring technology to greeting cards to create an innovative and unexpected consumer experience and an experience that industry critics recognize as the best the industry has to offer.

However, not all product innovation requires technology embedded in the cards. Based on our research over the last few years, we have developed a new greeting card line designed to help our younger consumers connect with each other in innovative ways. We call this new line of cards justWink, which includes more than 200 designs of paper greeting cards that engage younger generations by connecting paper cards with the digital world. Consumers are able to download an app for their smartphones and scan the Quick Response, or QR code, that's included on the back of each paper greeting card. This QR scan allows consumers to extend their greeting card experience into the digital world with additional content for them to enjoy and share with friends and family.

We will continue to execute product innovations in a way that is designed to drive interest and excitement in the category as well as meet the changing needs of today's consumers in retail stores or online. This strategy supports our retail partner strategies, strengthens our industry-leading portfolio of products and ultimately helps consumers connect with each other in a special and differentiated way.

Last quarter, we shared our outlook for revenue and cash flows for fiscal year 2012, and our first quarter performance was in line with our own internal expectations. At this time, we are still comfortable with those full year projections. We expect our revenues for fiscal year 2012 to increase about 5% compared to the prior year and our full year cash flow from operating activities less capital expenditures to be between $80 million and $100 million.

This cash flow estimate includes approximately $5 million to $15 million use of cash with a combination of working capital, deferred costs and taxes. We expect our capital expenditures will be between $45 million and $50 million. I will now turn the call over to Steve to walk through our financials for the quarter. Steve?

Stephen Smith

Thanks, Zev. I have 3 components to my prepared remarks for today. I will start with comments on a few larger items that impacted our consolidated financial results this quarter, then move to a review of our reported segments and, finally, a quick walk-through of a few key items of our financials. We will then open the line for questions.

Read the rest of this transcript for free on seekingalpha.com