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American Greetings Corporation (AM)
F4Q10 Earnings Call
April 22, 2010 9:00 am ET
Greg Steinberg – Treasurer and Director of Investor Relations
Zev Weiss – Chief Executive Officer
Steve Smith – Chief Financial Officer
Jeff Stein – Soleil Securities
Mimi Noel – Sidoti and Company
Robert Haley – Gabelli and Company
Previous Statements by AM
» American Greetings Corporation F3Q10 (Qtr End 11/27/09) Earnings Call Transcript
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» American Greetings Corporation F1Q10 (Qtr End 05/29/09) Earnings Call Transcript
Thank you. Good morning, everyone, and welcome to our fourth quarter conference call. I am Greg Steinberg, the company's treasurer; and I help manage our 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 fourth quarter fiscal 2010 this morning. If you do not yet have our fourth 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 forward-looking statements, please see our annual report or our 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.
Thank you, Greg, and good morning everyone. Today I will cover three different topics. First, I will share a few thoughts on our fiscal 2010 performance. Second, I will provide a brief update on the status of the integration with and benefits from Recycled Paper Greetings and Papyrus. Finally, I will offer a few comments on our outlook for fiscal year 2011. Steve will then present more details behind our financial results.
I am delighted with our fourth quarter performance as it was the culmination of a successful year, a year in which we realized revenue growth of everyday greeting cards; and we made both operational and strategic changes which have already improved and which we expect will continue to improve our business model. Better yield management, aggressive cost cutting, and portfolio changes were the three largest elements that were adjusted during the year to improve the business model.
As we stated in previous quarters, operationally we continued to better match our production and shipment levels to consumer demand, which removed significant costs from our supply chain and resulted in better yield. We developed and enhanced processes and controls in an effort to sustain these improvements and potentially increase our yield in future years.
A year ago, as the economy faltered, we were extremely aggressive on cost cutting and kept a lid on those costs throughout this fiscal year. We redesigned business processes in order to allow us to operate at a leaner level going forward. Secondly and importantly, the changes we made to our portfolio of businesses and product lines have allowed us to be more focused on our core business. This improved business model contributed to significant margin and cash flow improvements compared to the prior fiscal year.
I am pleased to report that while our full year revenues, holding aside the effects of foreign exchange and the portfolio changes, were essentially flat compared to fiscal 2009, our cash flow from operations less capital expenditures of $171 million more than doubled our initial expectations for the year. Steve will get into details on the numbers in just a few minutes.
Over the last several years, we have reinvested some of our cash flow into our core card business. We believe that the strategic organic investments we made over those several years have enhanced our leadership position in the greeting card category. Some of you will recall that we began investments with in-depth research to understand how and where our consumers liked to shop. We then created products specifically to reflect distinct lifestyles and deliver the product in new formats to make it easier for consumers to find the perfect card.
These organic investments have been critical to our recent performance in retail. We have and will continually develop new products that meet or exceed consumers' expectations when they shop the greeting card aisle. Let me share with you a few examples of the type of investments we have made and how those investments are appearing at retail.
Over the past year, we shared with you how we have expanded our use of technology in greeting cards to further engage the consumer. We have taken the use of music in cards to the next level. Examples include recordable greeting cards that allow the consumer to personalize the greeting by adding their own voice message on high quality audio cards whose music is synchronized with lights and small motions in order to engage the recipient's multiple senses.
Our team also brought to market what we believe is the first ever digital slide show greeting card that includes a small LCD screen that holds up to 50 digital images. We piloted this digital slide show greeting card during the Christmas season, and the retailer and consumer response was excellent.