American Greetings lowers full-year cash flow projections, plans to build new headquarters

By Lisa Kerner

Charlotte, N.C., Dec. 22 - American Greetings Corp. lowered its 2012 cash flow projections to around $90 million to $110 million from $125 million to $145 million previously.

Net income fell by 37% to $20.2 million in the fiscal third quarter ended Nov. 25 from $32.16 million in the prior-year period.

Total revenue, however, increased to $463.6 million for the fiscal third quarter, an increase of $33.5 million, or about 8%, from the prior-year period.

During an earnings call on Thursday, chief executive officer Zev Weiss said he was pleased with the revenue growth for the quarter and expressed confidence in American Greetings' ability to hit or surpass the full-year revenue growth target of 3%.

During the fiscal third quarter, American Greetings purchased about 2 million shares of its common stock for about $34.5 million under its $75 million share repurchase program.

Weiss said the company's use of capital going forward could include growth options, world headquarters, information systems and dividends. The company closed on a refinancing of its public notes after the close of the quarter and will therefore not the see the effects of that refinancing until the fourth quarter. According to Weiss, the refinancing offered better terms and conditions at the same coupon.

The systems refresh project is still in its early phases, with no project cost or timing.

American Greetings will keep its headquarters location in Ohio now that the state has offered to provide $93.5 million of incentives. Weiss explained that it is more cost-effective to construct and move into a new right-sized building than to repair and maintain the current location.

While some low-cost financing has been lined up for the construction of the new headquarters, Weiss said the Cleveland-based greeting card company will continue to evaluate financing alternatives.

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