American Greetings says it may buy Recycled Paper Greetings, faces third-quarter pressures

By Jennifer Lanning Drey

Portland, Ore., Dec. 23 - American Greetings Corp. is in discussions with Recycled Paper Greetings regarding options to restructure its balance sheet, which include the possibility of American Greetings purchasing the company, Zev Weiss, chief executive officer of American Greetings Corp., said Tuesday during the company's quarterly earnings call.

"However, we believe they are investigating a variety of alternatives," Weiss noted.

As previously reported, American Greetings acquired $44 million of Recycled Paper's first-lien debt in September.

At the time, Recycled Paper said the action represented a clear violation of a written confidentiality agreement executed as an overture by American Greetings.

In addition to purchasing the first-lien debt, American Greetings' other uses of capital during the third quarter of fiscal 2009 included $5 million used to complete its current share repurchase program.

The company will continue to assess growth options versus the opportunity to repurchase shares, Weiss said.

American Greetings had cash and cash equivalents of $55.6 million at the Nov. 28 end of the third quarter of fiscal 2009.

The company spent $44 million on capital expenditures in the first nine months of the fiscal year.

Pressure worse than expected

Economic pressures put significant pressure on American Greetings' domestic and international sales during the third quarter of fiscal 2009, cutting into earnings performance more than previously expected, Weiss said during the call.

"Our results have been impacted by the downturn in the economy. With decreased foot traffic at retail we saw a decline in revenues for the first time in several quarters. In addition, margins were also depressed," Weiss said.

The company posted total revenue of $454.1 million for the third quarter of fiscal 2009, down from total revenue of $485.8 million in the comparable prior-year period.

During the fourth quarter, American Greetings will evaluate its retail store base in light of the deteriorating foot traffic, Stephen J. Smith, chief financial officer of the company, said during the call.

At the start of the fiscal year, American Greetings projected closing 25 to 30 stores in fiscal 2009. Now, based on its recent performance the company now expects to close at least 60 stores during the fiscal year.

American Greetings posted a loss from continuing operations of $193.3 million, compared to income from continuing operations of $29.1 million in the 2007 period.

The primary reason for the net loss was a $243 million non-cash pre-tax goodwill and other asset impairment charge.

Pending asset sale

During the call, Weiss also said the company is looking to complete the sale of its Care Bears and Strawberry Shortcake properties by the end of the fiscal year.

The company announced a transaction in July under which Cookie Jar Entertainment agreed to buy the assets for $195 million. However, since that time, Cookie Jar has been unable to obtain financing to complete the transaction, Weiss said.

American Greetings is now exercising its right under the terms of the agreement to solicit offers from other parties, Weiss said.

American Greetings is a Cleveland-based designer, manufacturer and seller of greeting cards and other social expression products.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.